Mr. WELLS. Well, I do not know about that.

The CHAIRMAN. Have there been any complaints on the part of packers or commission men against the Minnesota act?

Mr. WELLS. Yes, sir; there were complaints made against the act, but not against our commission. There are two cases pending in the courts now, for about $200,000, awaiting a decision by the Supreme Court. We fixed the commission charges, and when I say "we," I mean the railroad and warehouse commission, we fixed the amount to be charged upon the selling and buying of live stock. We fixed the same on the basis of a comparative sheet of all the markets in the West. We took all the commission charges of all the markets and from them made a comparative sheet and found that the South St. Paul yards were about $2 higher than any other market, so we reduced that $2 a car.

The CHAIRMAN. What was the commission before?

Mr. WELLS It runs along about $14 to $20, or, I should say, $14 to $18 a car. The commission men raised the question that they were under the Lever bill, they so drew their pleadings in their action in the courts, setting up the contention that the State had no jurisdiction whatever over them. In that respect the situation at South St. Paul is peculiar. At Kansas City and Chicago there are suits pending in the courts, and they deny that they are under any Government control whatever. But in South St. Paul they set up the contention that they are under Government control. That suit is being tried in the Supreme Court now.

They afterwards applied to the Secretary of Agriculture, or to the Bureau of Markets, for leave to raise their commission. The bureau, or the Secretary, denied their request. That placed them outside the Government, and they were outside the State before. Nevertheless, they went on and raised their charges from $2 to $8 a car, and those are the rates they are charging to-day. Under our stipulation as filed in the courts all those moneys are deposited in banks subject to the decision of the court.

Mr. KINCHELOE. That is, the amount of the overcharge?
Mr. WELLS. The excess charges.

The CHAIRMAN. You spoke of speculators. Have you any regulations as to such transactions?

Mr. WELLS. Every one of them is licensed since the last legislature. Every one is under bond to the State of Minnesota, the same as the commission men, and are licensed by the railroad and warehouse commission.

The CHAIRMAN. Have you any regulation as to selling direct to a country buyer?

Mr. WELLS. We have now. We have just passed what we call the open market bill. That bill provides that any exchange that attempts to enforce any rule of their exchange whereby they fine a member for dealing with any outside party, is guilty of an offense against the laws of the State of Minnesota, and it becomes the duty of the attorney general of the State to bring an action to dissolve the exchange. I notice since I came down here that they have brought a test case, and the same is now in court.

The CHAIRMAN. I understood you to say that about 25 per cent of all cattle coming into the South St. Paul stockyards are sold direct to the country?

Mr. WELLS. Yes, sir.

The CHAIRMAN. Do you know of any regulation as to that, or do you need any? The contention is that the practice in some markets is not to sell direct to the country buyer, but that the cattle must go through a speculator. Have you anything of that kind in your yards?

Mr. WELLS. The speculator, you know, is a member of the exchange up there, so the same law would apply to him. They are allowed to deal with any person they want to without fear of being fined.

The CHAIRMAN. That is not covered by a regulation of your commission?

Mr. WELLS. No, sir; it is covered by law.

The CHAIRMAN. You have no authority to regulate them in that respect?

Mr. WELLS. No, sir; except that the State law regulates that mat

ter now.

The CHAIRMAN. Have you a copy of that?

Mr. WELLS. Yes, sir; and it has been put in the record.

Mr. VOIGT. Can a stranger come into your yard there and buy cattle?

Mr. WELLS. Yes, sir; or any stranger can come in and sell cattle. Mr. VOIGT. I mean must he execute his business through some broker, or can he go right in there and make his purchase and turn his money over to the owner of the cattle?

Mr. WELLS. Certainly. That is what we call the open market bill. That is one that has just been passed by the State legislature. It allows any person to go in there and deal with any member of the exchange without being fined. You understand the situation now perhaps, and it is this: Here are commission men and speculators who all form a combination I might say on the exchange. Their rules provide that any man who deals with anybody outside will result in a fine being imposed on the speculator of from $250 to $1,000, and their exchange membership forfeited. That makes a close, tight wire fence around that body. Say you are a farmer, and you come in there and you unload your cattle. Say you have put in four years in building up a carload of cattle to ship to the market. You come in there and find that half of your carload of cattle are killers that the packers want and the other half are stockers and feeders. Under their plan you could not deal with any man on that market, unless you might find a farmer outside that you could deal with. And if you did they would not now dare deal with you. Mr. THOMPSON. But this open market law that has been passed prevents all that?

Mr. WELLS. Yes; you can put half of your cattle, perhaps feeders, into a pen and sell them.

Mr. KINCHELOE. That is the law that they are testing now?

Mr. WELLS. Yes, sir.

Mr. VOIGT. Is the shrinkage an arbitrary amount that is taken off an animal after it has been put over the scales?

Mr. WELLS. Yes, sir.

Mr. VOIGT. Is it the same for all animals of a given class?

Mr. WELLS. Yes, sir.

Mr. KINCHELOE. Regardless of how long they have been in the yards?

Mr. WELLS. Oh, they are never in the yards but one day. The yards are cleaned up each day, of hogs.

Mr. THOMPSON. Who fixes that shrinkage?

Mr. WELLS. Our State commission and the packers and the shippers agree. In case of a failure to agree there is an appeal to the appeal board.

Mr. THOMPSON. Suppose a hog scales 200 pounds actual weight? Mr. WELLS. All right.

Mr. THOMPSON. Then the man who ships that hog is not paid for 200 pounds but is paid for a less amount?

Mr. WELLS. Yes, sir.

Mr. TEN EYCK. That is to balance the difference between the live and dead weights?

Mr. WELLS. Yes. But there is no question about that. You take a hog in a certain condition and he will not dress out.

Mr. CLAGUE. I do not think Mr. Wells has made that matter

clear to you. He meant only on certain hogs.

The CHAIRMAN. How do you fix that shrinkage?

Mr. WELLS. I mean this, that if a certain class of hogs come in there, for instance one or two in a carload, it is the duty of the inspector to let it go through without shrinkage or to shrink it according to his judgment.

The CHAIRMAN. And if the packer is not satisfied with that decision he has the right of appeal?

Mr. WELLS. Yes, sir.

The CHAIRMAN. All right.

Mr. WELLS. If there is nothing further I thank you very much indeed for your hearing of me.

The CHAIRMAN. And we wish to thank you for the information which you have given us.

Mr. WELLS. Mr. Chairman, Mr. Sullivan is going to St. Paul to-night, and if you could hear him for about five minutes I would thank you. One of the gentlemen present here has asked me to correct the record so that it will show that the packers are not members of the exchange at South St. Paul. That is true.

The CHAIRMAN. We will be very glad to hear Mr. Sullivan.

STATEMENT OF MR. GEORGE H. SULLIVAN, OF STILLWATER, MINN.

Mr. SULLIVAN. Mr. Chairman and gentlemen of the committee, as indicated by Mr. Wells our only interest in the pending legisla tion is that we may be permitted to preserve intact the system of stockyards regulation now provided by the laws of the State of Minnesota.

The reasons for that request are (1) that the farmers and shippers of the State have confidence in the local system of the regulation of our stockyards. (2) It appears also that the commission men have recognized that there is some advantage to them in this regulation, because they have now commenced to advertise the fact that the South St. Paul stockyards are under the regulation of the State of Minnesota. They have no doubt that because of that situation there is an advantage, for where a shipper has an opportunity to ship to one of two markets by reason of existing freight rates, they find the

shippers prefer the South St. Paul stockyards or a stockyards that has this regulation.

As indicated by the many instances given to you by Mr. Wells, you can see that the shipper is benefited in many ways. Some of these benefits perhaps are not very great in themselves, but in the aggregate the shipper goes to that market feeling that he is under the protection of the State and that there is a State official there to aid him in the solution of any and every difficulty that arises. It has produced a great improvement in the actual conduct of the yards from the shipper's standpoint.

As alluded to by Mr. Wells, there has been a great cooperative movement going on in the State of Minnesota, the idea of which is to permit the farmers of Minnesota to market their products and to absorb as much as possible of what they have heretofore thought was too great a spread between the selling price by the producer of his product and the selling price by the middle man, and the final selling price to the consumer.

We passed a number of laws during the last session of the legislature for the purpose of furthering the cooperative movement. It is the idea of many of our leading people who have studied cooperative farm movements, particularly with reference to marketing products, that there is room for a vast improvement in the marketing of live stock of all kinds. It is thought that cooperation, that the cooperative movement, may go much further than it is to-day. We believe that we can solve the problem of bringing the farmer closer to the packer and of making a better feeling exist between them if our local regulations are permitted to remain intact.

We have not been led to increase our confidence in Federal regulation where local regulation is permissible and can adequately cover the subject, by reason of our experience, particularly in the grading of spring wheat. That is a subject that has been taken over for the last four years at least by the Bureau of Markets of the Department of Agriculture, and the way they have handled it is very unsatisfactory to us.

And our State and the States of North and South Dakota are practically a unit to-day against the existing grades established by the Bureau of Markets. We have come down here and begged that bureau and begged the Secretary of Agriculture to give us some relief toward a simplification of those grades.

I merely allude to that because it is indicative of the fears we in Minnesota have that if you deprive us of our State control, or if you go on and regulate the stockyards in our State by Federal regulation, it may have a somewhat similar result.

We believe that our bureau, at the head of which stands Mr. Wells, understands the problem of regulating the stockyards of Minnesota, understands the needs of our farmers and shippers, and in that respect would handle the situation better than could any bureau established in Washington. And we wish you would give earnest consideration to the adoption of the amendment suggested by Mr. Wells as drafted by Representative Anderson.

Mr. TINCHER. Before you passed any law regulating the stockyards at South St. Paul the conditions were practically intolerable there, weren't they?

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Mr. SULLIVAN. Yes; they were.

Mr. TINCHER. If that be true of the situation in the Nation to-day, except for the State of Minnesota, then perhaps that State should be unselfish enough to spare Mr. Wells to some national institution and let him regulate all of them.

Mr. SULLIVAN. I understand. But you have done the same thing with our system of grain inspection. We had the best system in the United States, and perhaps the best in the world. Now it is well on its way to extinction because as you very well know when the Federal Government takes jurisdiction of a subject the result is as they used to say of the United States courts many years ago, hungry for jurisdiction, and it has extended its tentacles and entwined them around every activity of the State until they died. They could not live any longer. We know that we can not put up any of our State grades and have them stand alongside the Federal grades. One wipes out the other.

Mr. TINCHER. Speaking about Federal and State laws, this committee has had under consideration for a week a bill to regulate trading in grain futures. Do you think that a subject that ought to be treated in a national way or that it ought to be left to the States?

Mr. SULLIVAN. I think it is impracticable to handle that subject by State laws. I express no opinion, however, as to what benefits can be secured under that legislation, although I think some can if if you do not go too far.

Mr. TINCHER. Your State legislature passed a State law?

Mr. SULLIVAN. We did.

Mr. TINCHER. Mr. Kenning, I believe, was the name of the man who represented himself as being the real lawmaker of your State, though he holds no official position, he telling the legislature what to do, says that a law was passed for the purpose of fooling the farmers.

Mr. SULLIVAN. Well, I suppose Mr. Kenning can be considered the greatest legislative authority in Minnesota.

Mr. TINCHER. Well, he at least admits it.

Mr. SULLIVAN. I have heard him a great many times, but we do not pay much attention to what he says.

Mr. WILLIAMS. He claimed he was instrumental in having this law passed.

Mr. SULLIVAN. Well, if it was a law passed with the intent of fooling somebody that may be true, but really I do not know about that.

But, seriously, we are very much interested about our situation. We do not want to deprive any other State, or any part of the United States, of any benefits of regulation. But you know that it has been the lot of the State of Minnesota to be the pioneer in much regulatory legislation, particularly of railroads, and you know what they have done to us along that line. Our railroad and warehouse commission now has about as much to say about railroads as it does about what happens in Siam. And yet that may be absolutely necessary on account of the character of the subject. Here it is not. Let our railroad and warehouse commission remain in active control of the situation between the shippers and the stockyards. Let us see if we can not make that relation even a better one, a closer one, whereby all will get better results. I believe that as much as possible the Federal Government ought to permit the States to regulate such mat