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explosive situation is concerned, such as was threatened at the time of the adoption of the Adamson Act.
Mr. VINSON. Who is calling this an emergency situation?
Mr. Johnston. I do not know that they are calling it an emergency, but they are saying that there is such an acute situation from the public standpoint as to warrant the transfer of the functions of management from the industry to the Government of the United States.
Mr. Vinson. Nobody contemplates any use of what you term extraordinary powers to exceed constitutional powers.
Mr. JOHNSTON. I am sure of that, Mr. Congressman.
Mr. VINSON. Of course, there has been some thought, I know, concerning men, women, and children in the mining camps, and the conditions that obtain there and will obtain unless some stabilization is had. But I did not know that anyone was considering this as emergency legislation.
Mr. Johnston. That has an important constitutional aspect with relation to the power of Congress to intervene, as I use the term, in the case of an explosive situation, where the public interest itself was directly involved; and my principal comment is to the effect that so far as the general public is concerned, the coal-purchasing public, the interruptions of the free flow of coal in interstate commerce, the lowered price, unfortunate from the standpoint of the industry and the employees in the industry-there is nothing urgent, so far as the movement of coal in the channels of commerce is concerned, there is nothing threatening to justify the extraordinary powers that are proposed to be exercised.
In order that there may be some tangible suggestion of what we have in mind as to what might be accomplished, what might be done by the Congress to facilitate this American effort of self-stabilization, I have suggested hurriedly, understanding that it might be of some interest to the committee, for the consideration of the committee, several things that could be done to facilitate the use of the principles announced in the Appalachian case and the principle that all unfair methods of competition are now within the reach of existing agencies.
Those points are:
1. The Supreme Court has unequivocally asserted that the antitrust acts do not prevent trade association agreements to eliminate unfair methods of competition and unfair practices insofar as interstate commerce is concerned. It is assumed that State laws are not or can be amended so as to be no more rigorous.
2. The Federal Trade Commission has been raised to a position of dignity in the Humphrey case. That condition should be advanced by relieving it of the routine duty of prosecution and the necessity for sitting in judgment upon its own indictments.
3. Its process for hearing and issuing cease and desist orders should be made much more flexible.
4. The Commission should be authorized to grant immunity from criminal prosecution and civil penalties pending review by the courts (if objected to by the Attorney General) of trade association agreements.
5. In flagrant cases of unfair methods of competition the Commission might make a prima facie finding for forfeiture of profits or, if none, for å penalty, to be recovered by suit by the Attorney General,
6. It is by no means certain that this slight mechanical amendment of the Antitrust Act and Federal Trade Commission Act, with an elastic enlargement of personnel, would not accomplish all that should be attempted. If not, an elastic and prompt method of considering and giving sanction to fixed or open prices could be provided without subjecting the industry to the domination of government.
7. This much is certain: There is no justification and no legal basis for the assumption by the Federal Government of the function of management of the coal industry.
Mr. TREADWAY. Mr. Johnson, I am somewhat handicapped in interviewing lawyers like yourself and Judge Warrum, lawyers of ability, not being a lawyer myself. But I am trying to see if I can understand these things from the layman's viewpoint.
As I understand it, your suggestion is some legislation increasing the duties and powers of the Federal Trade Commission.
Mr. JOHNSTON. Speeding it up, making it a little more elastic, and shortening the interval between complaint and action.
Mr. TREADWAY. The thought occurs to me whether, under the decisions that we know so well, there could be any authority given the Federal Trade Commission that would be compulsory, so far as the relations of their duties are concerned, upon the operators and miners? What I have in mind is this. The proponents of this measure set up a so-called “voluntary scheme” to carry out the former code system.
It is so apparent that it is a "compulsory-voluntary” scheme and that the words do not describe what the bill actually intends. It is a“voluntary” code, but if you do not join, you are fined 25 percent of the cost of your coal, and you are prevented from using the United States mails and other means of communication.
So that the use of the word “voluntary” is pretty far-fetched, in Would there be any way, under your scheme, whereby the operators, the miners, and the consumers could be made to abide by the decisions rendered under this suggested law by the Federal Trade Commission?
Mr. JOHNSTON. Insofar as labor relations are concerned—you have that primarily in mind?
Mr. TREADWAY. I have thought of this whole proposition from the viewpoint of the consumer. I know nothing about mining. But I happen to know something about consumption. Unfortunately, in this whole proposition, I have failed to find, except through Members of Congress representing the people, that the consumer gets into this picture at all.
Mr. JOHNSTON. That is the forgotten man.
Mr. TREADWAY. Yes, I think they belong together. This is my point. Does your suggestion bring about a condition whereby the law must be lived up to?
Mr. Johnston. I have not the slightest doubt that any systematic practice that is based on intrinsic unfairness, to the public or to the employees, any effort to capitalize a savage relationship between employer and employee—if that is not an unfair practice, what is? I can only refer you to what I believe is the latest expression of the
court, in the Penny Candy case, if it is of any interest to the committee-and I will supply the citation later. It is reported in Federal Trade Commission v. Keppel, 291 U. S. 304.
The clever vendor of this penny candy would put, in every so many units of his product, a penny. It sold for a penny. It was an attraction to children. By virtue of that practice he was able to monopolize the market.
There was no deception about it. The question came before the Federal Trade Commission as to whether that was an unfair practice of such character as that it could be prohibited.
There was no fraud involved. But the Supreme Court of the United States had no hesitation in sustaining the finding of the Federal Trade Commission that the effect of that would be to force all the others to adopt that same sort of enticement to children, and while in and of itself it was not deceptive, it was an unfair practice within the reach of the commerce clause, and the action of the Government of the United States, and they prohibited it.
While it is perfectly obvious that an ordinary sale below cost could not be treated as an unfair practice, if it is of a commodity of which the owner is in possession-could not be treated in and of itself as an unfair practice--you ask me this question, and on my feet I cannot see why systematic, oppressive conduct by an employer of his employees, in respect of his employee relationships, would not be construed by the court as an unfair practice that would be within reach of consideration by the Federal Trade Commission, giving, as it does, that employer an opportunity, because of that practice, to raid the market of others. Congress has a broad power, subject to judicial review to declare or provide for the determination of “unfair methods of competition” in interstate commerce and is not limited to cases or categories heretofore defined or specifically condemned; but they must, of course, relate to interstate commerce or have a direct and positive bearng on such commerce.
Mr. TREADWAY. In that very connection, coming down to testimony that is before us, we have been told by two different witnesses that this bill, if put into operation, would close the coal fields of southern Illinois and sections of western Kentucky.
From what you say about unfair practices, if the owners of those fields are prevented by legislation or suggested legislation from carrying on their business of operating coal mines and employing thousands of people, whose lands would be bought up and they would be asked to move out-would that be a concrete example, in your mind, of an unfair practice?
Mr. JOHNSTON. By no means; if by that you mean to ask whether low wage scales and low return to industry means that unfair methods are indicated. Let us take a case with which I am familiar and can speak with certain knowledge.
In division 3, and in the State of Alabama particularly, there is no hope, in that field, of adequate return to the producer or of adequate compensation to the miner. It is a marginal industry. But it is one, the continuation of which is most desirable in the public interest.
It not only means the industrial welfare of that region, the center of the interior metallic production of the United States south of Pittsburgh, but it is of the most urgent public interest that it should continue and survive on a healthy basis, and yet, as I told you, because of these competitive conditions in connection with other suels, they cannot hope to more than make ends meet and to remain in a stand-by condition.
There has been a partnership, there is a partnership, between management and labor in that area on a marginal or a very low basis of return.
If, by any sort of national synthesis, or for the purpose of simplifying the national labor equation, you gentlemen react to a measure of this sort in such a way that we are blanketed, as we were by General Johnson's order, effective April 1, 1934, there is no recourse in that industry but to the courts to prevent violation of due process.
That was our one clash with the administration of the N. R. A. in connection with rates and wages, there being a blanket order, because of General Johnson's conception that there was a situation confronting the entire coal field which made it necessary to raise wages $1.20 a day, which would have closed every mine in the State. That is the condition they are confronted with. A scale which may be paid in the vast consuming center to the north, with their thick seams and much more economical methods of mining and high degree of mechanization, and lack of any necessity for washing their product, cannot be paid in the South. To say that under those circumstances Alabama should be blanketed with any such wage scale as that, is simply destructive. But it does not mean that that field should not be permitted to survive. It is in the public interest that it should survive as a going industry. There are 67,000,000,000 tons of coal that are recoverable in that area. There is enough to supply the United States, eliminating the question of transportation, for generations; that is, there is enough in the State of Alabama.
It is highly essential from the standpoint of national defense, from the standpoint of decentralization of industry, from every public standpoint, that they should be encouraged to go forward with the normal and orderly development of that territory.
And I say to you gentlemen that situated as they are, in a most necessitous condition from an economic standpoint, they are not asking this committee and the Congress of the United States to wetnurse them, and to tell them how to adjust themselves. They want to square their shoulders and take what lightning must come, but they want to continue serving a function in the public interest as an industry and not be administered by the Government.
Mr. Vinson. They were very glad to be wet-nursed under the N. R. A., were they not?
Mr. JOHNSTON. Well, we did not ask it.
Mr. Johnston. I am speaking of the Alabama field. They were proceeding at that time with the formation of a marketing agency within the limitation of the Appalachian decision. They suspended it at the time of the adoption of the code, and cooperated, I should say, during the period of the code, more effectively than any other coal field east of the Mississippi; that is to say, there was 100 percent cooperation. There was not pending, during the entire administration of the code, a single complaint from the public as to exorbitant prices, although the prices were improved.
There was pending against division 3 before the N. R. A. no suggestion that they had raided, by reason of their low wage scales, any other territory, or had encroached upon the market of any other distributing area.
As soon as it became inevitable that the code systems had terminated or would terminate, Alabama producers proceeded again with the restoration of the marketing idea and they are now prepared to go forward with the hope that Congress will expedite the agencies which are at hand rather than bring about a period of the utmost chaos pending the inevitable determination of the invalidity of any such scheme as is involved in this pending measure.
With that general preface of our attitude, I shall proceed as rapidly as possible, Mr. Chairman, and attempt with the utmost deference to the gentlemen who have done such excellent work before me
Mr. Hill (interposing). You have already consumed about 50 minutes, Mr. Johnston.
Mr. Johnston. Of course, that is up to the chairman.
Mr. Hill. We want you to proceed and finish, but we want you to hit the high spots, if you will.
Mr. JOHNSTON. Indeed, I shall do that. In order that I may plunge right into the heart of this matter, there is one aspect of the bill
Mr. TREADWAY. Pardon me for interrupting you, Mr. Johnston. Would you prefer not to be interrupted by any member of the committee until you have completed your general statement?
Mr. JOHNSTON. Not at all. That does not bother me in the least. I should be happy to be interrupted because it would emphasize matters which the committee has in mind. And it is my sole function to cover those matters here and not merely to state our own opinion or to show that we have any sharp difference with these gentlemen who are proposing this measure.
I was about to say that one aspect of this bill which I believe will interest the committee is the unusual provision with respect to the hours of labor and the wages which, when approved, on the one hand, by 75 percent of the industry nationally, of producers nationally, and as to wage scales, 75 percent of those of the particular area, that that shall be obligatory upon the remaining 25 percent which have not agreed.
The Supreme Court of the United States, in the case of Eubank v. Richmond, 226 U. S. 137, in the most unmistakable terms, asserted that any such action as that would be violative of the fourteenth amendment or the fifth amendment, according as one or the other might apply.
That question arose in the case of owners of property within the city area under an ordinance which provided that the owners of 75 percent of the frontage in a block might fix the building line as they conceived it to be desirable in their own interest. The question was whether or not, having been established under the ordinance, the line was binding upon the owners who dissented.
Justice McKenna, in writing the opinion of the Court, had this comment to make, and it is so absolutely decisive of the idea that one marketing association which happened to include 75 percent of the producers could impose a contract term upon a minority or those not a member of that association, that I feel warranted in reading an excerpt from the decision.