One set of owners determine not only the extent of use but the kind of use which another set of owners may make of their property. In what way is the public safety, convenience, or welfare served by conferring such power? The statute and ordinance, while conferring the power on some property holders to virtually control and dispose of the proper rights of others, creates no standard by which the power thus given is to be exercised; in other words, the property holders who desire and have the authority to establish the line may do so solely for their own interest or even capriciously. In this case one marketing association confederated for offensive and defensive purposes (continuing): having a two-thirds ownership of a block may have that power against a number having a less collective ownership * * The case requires no further comment. * I merely mention that at the outset as indicative of the fact that it is wholly impossible to believe there is even a remote chance that that aspect of this bill would be sustained against attack by those who sought to exercise their own proper right of direct negotiation concerning matters of that sort. It has emphasis in our case obviously on account of the impossibility of consenting to a 6-hour day. The State of Alabama, or division 3, produces only about 3 percent of the tonnage. It is entirely conceivable that the great volume of tonnage represented by the mechanized mines and the large seams to the north might well have 75 percent. And if they are able to operate their properties on a 6-hour-a-day basis, this bill would make their agreement obligatory through the Nation; whereas, it would be destructive in the area where the thin seams and the more difficult mining conditions, at the extreme end of the Appalachian Range, are to be encountered. Mr. Chairman, as I have stated, it is our position that the theory on which the act is framed is not tenable; that it amounts to a regulation of production and not of commerce; that even as to those aspects which involve interstate commerce the action is not regulation of commerce, but regulation of management; that the penalty of 24.75 percent ad valorem on coal sales is void, and inseparable from the remaining one-fourth of 1 percent; that the price fixing is unenforceable; that the wage and hours of labor provisions are likewise invalid. And as to the fact of the price fixing being unenforceable, it is unenforceable both as to its interstate features and obviously as to the intrastate sales without which, I assume, it is conceded that the act should not be considered. I shall certainly not, in any sense, attempt to restate the argument which has been made, and which I have read, for the purpose of avoiding any possible duplication; such as has been already presented by Mr. Norman, and I also had the pleasure of reading the pamphlet submitted by Judge Emery. As to the views thus expressed, I am in entire accord and shall confine my comment to the matters under consideration, approaching them from a slightly different angle. The theory of the Guffey bill, if you gentlemen recall, was the most naive one, that coal could be declared a public utility and that there was some right of the owners and the producers to a fair return. I have never understood that was the situation, even with reference to a common carriers. They have a right to be immune from legislation by the Congress of the United States which in and of itself would prohibit them from earning a fair return, but I know of no such principle that the owners of property are entitled to a fair return on it. Mr. VINSON. What about section 15-a of the Transportation Act; what does that do? Mr. JOHNSTON. Section 15-a admonished the Commission Mr. VINSON. Was it more than an admonition? It has been some time since I have seen it, but is it not a direction to the Commission to see to it that that return- Mr. JOHNSTON. That is a matter of policy, not of constitutional right. Mr. VINSON. I am not speaking of constitutional right. I am speaking of the result that obtains under Federal legislation. Mr. JOHNSTON. What confronted the common carriers? Mr. VINSON. Am I right or wrong about that? Mr. JOHNSTON. It was an admonition to the Commission so to adjust the rates from time to time as that in the aggregate a fair and reasonable return would be made by the carriers. Mr. VINSON. Was it just an admonition or a direction? Mr. JOHNSTON. Of course, it was an admonition, and the Commission, it was to be assumed, would proceed with that in view. As a matter of fact, they never produced it. It was a direction to the Commission to proceed to do what they could, but they ran into an economic situation. They could not do the impossible. Mr. HILL. They fixed the rates on a basis that, in their judgment, would bring that return. But the fact is that it did not bring the return. Mr. JOHNSTON. It did not bring it. Mr. VINSON. That does not change the legal status. My recollection is that in that statute you had a direction to the Interstate Commerce Commission that they should so adjust the rates as to return 5%1⁄2 percent plus 1 percent for rehabilitation. Mr. JOHNSTON. That is correct, Mr. Congressman. I was speaking of the idea that coal could be declared a utility, and also with respect to its right to a reasonable return, and what that would mean. That is mere language. What is the conception of a reasonable return? On what? On the investment put in solely as the result of private judgment as to what property should be held in reserve and what should be utilized? It is an unworkable term and an inaccurate theory to underlie the act. It appears to have been dropped in the evolution of the present draft, and also the term, employed in the original Guffey bill, that the bituminous-coal industry would be regulated as a public utility. But the sole power of Congress in this situation at all is the commerce clause to regulate. It has no vague power to bring about returns to any particular class of property owners. The question is whether or not, under the commerce clause of the Constitution, authorizing the regulation of commerce in general they have the power to take charge, to assume the functions of management in connection with this industry. They have the power to regulate commerce itself; not production, not dividends, not social or employee relations, not directly affecting interstate commerce; nor other State functions, reserved to the States and the people under the tenth amendment. The distinction between carriers and utilities engaging in interstate commerce is that by immemorial acceptation they have undertaken a duty and regulation extends to a great variety of their functions plainly necessary to the performance of the duty thus assumed and promotive of their efficiency as interstate carriers. A common carrier or a utility which has once devoted its property to the public service may not attempt to withdraw without the consent of the regulating authority; the States, in the case of intrastate matters, and the Federal Government, by the necessary operation of the commerce clause of the Constitution, in relation to interstate carriers. And they have a continuing duty to perform that service. It is within the scope of regulation to see to it that they encumber themselves with no financial obligations; that they are not encrusted with any forms of contracts that would disenable them from the continuing performance of that duty. No such situation as that is, or could be, brought about, in connection with the coal industry. There is no doubt about it, that any coal operator, under any conceivable circumstances, could close down his mine and if a function of the Federal Government would be subserved by its continued operation, there is no method by which its continued functioning for national purposes could be brought about other than by the exercise of the right of eminent domain by which the property should be taken, or its use should be taken, as was the case during the war with a large variety of industries. There has been so much discussion about the Schechter case that I am not going to take the time, except to call to the attention of the committee this significant fact. Mr. VINSON. Before you do that, would you permit me to read a section of the statute into the record? Mr. JOHNSTON. Certainly. Mr. VINSON. As I understood you, you stated that Congress had never been interested in the return on investments, which brought about the colloquy referring to the Transportation Act, section 15 (a), as to whether it was an admonition or a direction. I will read from the section, section 15 (a), subsection 2: In the exercise of its power to prescribe just and reasonable rates the Commission shall initiate, modify, establish, or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the Commission may from time to time designate) will, under honest, efficient, and economical management and reasonable expenditures for maintenance of way, structures and equipment, earn an aggregate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation: Provided, That the Commission shall have reasonable latitude to modify or adjust any particular rate which it may find to be unjust or unreasonable and to prescribe different rates for different sections of the country. Now, there is another section. Mr. JOHNSTON. That is the substance of it. Mr. VINSON. I want to get to the question of the 5% percent. But I am certain that is correct. Mr. JOHNSTON. That is correct. And one-half percent additional for rehabilitation. Mr. VINSON. I do not put my finger on that portion of it. But in that instance it was more than admonition, as I see it; it is a mandatory direction. Mr. JOHNSTON. Mr. Vinson, since I personally appeared before the Interstate Commerce Committee of the House in advocacy of the section in its terms and gave my opinion at the time as to its constitutionality, I should be very far from failing to remember definitely something which I had urged Congress to bring about. Mr. VINSON. You did not say that it was an admonition, did you? Mr. JOHNSTON. At that time it was asserted to be a guarantee, and I took exception to the suggestion that it was a guarantee, and the courts so held, and the administration of the act proved that I was correct in asserting that it was not a guarantee. Whether you call it a mandate or not, any board functioning as a legislative body under this Congress is going to administer it to the best of its ability. My statement was this, that there was no constitutional right of a carrier, point blank, to a fair return. Mr. VINSON. We were not discussing that. I am directing my remarks to your statement that Congress has never been interested in the return on an investment. Mr. JOHNSTON. I am sure I did not make that statement. Mr. VINSON. But as I caught your remark, you said that Congress had never been concerned with the yield received by its citizens, and I immediately called your attention to section 15 (a), and then you said it was an admonition. Mr. JOHNSTON. I regret if my language gave that impression. I am sure that Congress is very acutely concerned with a fair return for all industry, from agriculture on, and I would regret it if my remarks should be construed as you think they may be. My point was in particular that the theory of the act that the coal industry was entitled, as a matter of right, as a matter of constitutional right, to have a fair return on that sort of an investment was a misapprehension that it was not a utility and could not be made one without a violation of the fifth amendment. This com I was commenting on the question in the Schechter case. mittee has before it not merely that end of the equation which was before the Court directly for consideration in the Schechter case, which involved distribution after the interstate commodity had come to rest in the State, but there was excluded by the Department of Justice the other end of it, represented by the Belcher case. The Schechter case was carried up because it was conceived that it was more nearly related to the stream of commerce, that depression in the price of the product at the distributing end and consequent backlash upon the interstate price for the commodity would establish its fancied direct relationship to and direct affectation of interstate commerce so as to give jurisdiction to the Congress. They rejected the other end of it as being an inadequate or unfavorable case on which to make a test, because the Belcher case was a case on which this question of wages and hours was directly involved in the producing end. It was by the voluntary action of the Department of Justice that the Schechter case, and not the Belcher case, was presented, as a decisive test of the validity of the N. R. A. There is one sentence in the Schechter case which is utterly impossible to be ignored as being a generality, which unquestionably, in our opinion, disposed of those facts in this matter, or related facts in this matter, unless there is some explosive or emergency situation as to take them clearly out of the scope of the decision. The court said—and of course it was deciding this particular case, but its language was undoubtedly general: If the cost of doing an intrastate business is in itself the permitted object of Federal control, the extent of the regulation of cost would be a question of dis⚫cretion and not of power. We are of the opinion *** Getting down to the final basis of the decision that the attempt through the provisions of the code to fix the hours and wages of employees of defendants in their intrastate business was not a valid exercise of such power. Then it must be borne in mind that the author of the decision in the Shreveport case was the author of the opinion in the Schechter case. Both opinions distinguished between ordinary industries and those which are subject to the duty of continuous performance of their functions. With reference to that class of property owners the Court said: We have held that, in dealing with common carriers engaged in interstate and intrastate commerce, the dominant authority of Congress necessarily embraces the right to control their intrastate operations in all matters having such a close and substantial relation to interstate traffic that the control is essential or appropriate to secure the freedom of that traffic from interference or unjust discrimination and to promote the efficiency of the interstate service. There is no suggestion there that congressional control is to promote vague relationships, or those relationships that do not have a direct bearing upon the performance of the duty and the efficiency of the service, the duty which must, as a matter of right, be rendered by the interstate railroad. As I have said, there is not such a duty, and it could not be imposed consistently with the Constitution, upon the owners of coal properties. It is not necessary that a business or a commodity be affected with a public interest to give rise to the power to regulate the commerce itself, but that regulation is confined to the commerce itself and does not extend to the person or preliminary business of the manufacturer, who owes no duty to ship his commodities in interstate commerce or to perform any service whatsoever to the public. This cuts out that broad band of affirmative or mandatory powers directed at the credit, securities, management, production, and employee relations, that lie within the scope of the power to regulate a carrier which has assumed a continuing duty to carry on the business. So far as coal production is concerned and all functions preliminary to commerce, they are absolutely exempt from Federal regulation by direct mandate or by penalties. I repeat, even as to carriers who have assumed the perpetual duty of interstate service, the power to regulate relates only to those functions "affecting the due fulfillment of the railroads' duty." I quote those words from the railroad pension case. Mr. HILL. Have you the citation? Mr. JOHNSTON. I will supply the citation. The case was decided May 6, 1935, 79 Adv. Op. L. ed. 803. As I said, the power to regulate relates only to those functions "affecting the due fulfillment of the railroads' duty", or promotive of "the efficiency of interstate service" (Schechter case, p. 20). |