The above points may be illustrated by the case of cotton and rayon textiles where control over prices of finished fabrics and articles of apparel made from such fabrics becomes more necessary with each passing week. Higher prices of grey goods are now being reflected in the prices of finished goods coming into the market and due to come in steadily for the fall trade.

As wholesalers and manufacturers increase prices charged to retailers the latter in turn mark up their merchandise to compensate. Frequently, in maintaining customary price brackets, or in applying customary percentage -markups, increases in retail margins exceed considerably the amount of the wholesaler's or manufacturer's markup. The result of this pyramiding of margins is that many retail prices are raised sharply to levels out of line with actual cost advances. As for compliance, it seems unlikely that mere persuasion, suggestion, and warning will suffice in coming months to keep under control this dangerous tendency of wholesale and retail prices of fabricated goods to leap up suddenly and markedly. Control of the apparel trades and retailing, as well as other trades, involves thousands of firms, and the present powers of the Price Division are woefully inadequate to deal with markets in which sellers are numerous. Compliance in all areas is likely to be rendered far more difficult by the shifting attitudes of businessmen, as their volume ceases to expand as it has in recent months and their profits begin to be pinched. Until now many concerns have been able to maintain steady prices and still enjoy enlarged profits despite somewhat increased costs of labor and materials. This is because expanding volume has brought the lower unit costs of large-scale output. As volume ceases to expand, or actually shrinks as a result of priorities, the clamor for "fair prices" (generally higher ones) will become louder, and the willing cooperation heretofore secured by the Price Division in many cases will give way to growing opposition. Emphasis upon problems of controlling prices directly should not be allowed to obscure the importance of indirect methods of influencing prices, strengthening the defense program, and relieving civilians of unnecessary hardship. Unceasing efforts must be maintained to expand supply by encouraging imports, restricting exports, fostering the full and most efficient use of existing capacity, and stimulating the construction of additional capacity where needed. Beyond this, conservation and substitution as a means of alleviating specific shortages will grow ever more important. An important function of the Office of Price Administration and Civilian Supply in coming months must be that of educating consumers to the best use of supplies and encouraging intelligent sacrifices.

The trend of developments is clearly demonstrated by three types of press report, correspondence, and other communications received by the Price Division off cials in recent weeks: (1) Reports on violations of existing price ceilings; (2) vigorous complaints of injury to cooperative trade members by unscrupulous violators, and urgent pleas for the Government to take vigorous action to enforce present schedules; and (3) indications that inflationary price movements are spreading rapidly to new areas, along with emphatic requests that the Government do something about it.

The first type of development-flagrant violations of existing ceiling schedules-is illustrated by appended copies of newspaper reports. The New York Times reported on June 8, for example, that:

"The bootlegging of scrap metals at prices substantially above the ceiling levels established by the Government has practically cut off the supply of such materials from legitimate material dealers, they reported here yesterday."

Daily a procession of businessmen visits the Price Division of the Office of Price Administration and Civilian Supply with reports of violations. One typical objector wrote on June 21:

"The disorder created by chiselers in the scrap industry is becoming too acute, and remedies must be found immediately to solve this situation.

"Price fixing and ceilings are not being lived up to. Classifications do not mean anything. Regular auction sales are taking place. Prices are being boosted way above the schedule. I feel that the mills as well as the brokers are to blame for these conditions."

Another states:

"The automobile dealers do not support the principle of a price stabilization and refuse cooperation necessitated by the creation of your new price schedule." A dealer in hides and skins writes to Mr. Henderson:

"We wish to inform you that Wall Street brokers are urging the speculative purchase of hides and other commodities. They are pointing out laughingly that, in spite of your and other Government officials' statements, commodity prices are continuing to rise to new high levels. They try to impress us and the public that steps so far taken by your good office are ineffective."

The second type of communication-complaints of injury and pleas for vigorous action are increasing rapidly in number. Moreover, producers of raw materials whose prices are fixed, are now complaining that it is unfair to fix their prices without at the same time curbing profiteering by fabricators and distributors. Usually these complainants express great sympathy with the price program and willingness to cooperate if others are also forced to participate. Cotton textile producers, packers and country butchers, for example, have already expressed their resentment at the placing of formal ceilings over prices of their products while converters, cutters up, garment makers, tanners, shoe manufacturers and retail stores are left largely uncontrolled.

Complainants against violators, as well as editors of trade publications, have advocated greater price powers and more vigorous enforcement. Not infrequently they propose specific programs of enforcement, but these usually en.ail actions beyond the present powers of OPACS. For example, an editorial of the American Metal Market stated on April 16, 1941:

"We have already seen signs of the need for legislation giving N. D. A. C. the power to compel compliance at the risk of penalty, real penalties. If that sounds like the Blue Eagle days, remember this is national emergency, not a time for slogans."

Finally, the third type of communication-complaints of unwarranted price advances in uncontrolled goods, especially semi-finished and finished-has been received in enlarging volume from industrial purchasing agents, State government officials, labor groups, and individual consumers.

A producer of metal items wrote on June 18 listing 39 fabricated items purchased by him regularly whose prices have been advanced in recent months anywhere from 5 to 52 percent. He objected especially to a sharp advance in the price of copper magnet wire, the main ingredient of which has been stable in price for 9 months. He stated:

"We say that if OPACS is worth its salt, if it has any place in the present picture, it must prevent 25 percent increases such as shown below."

CONCLUSION

The task of avoiding serious price disruption and inflation during the period immediately ahead is exceedingly complex and becomes more difficult each day. The first waves of a potential inflation are already surging through the channels of manufacture and pounding against retail counters. Every week it becomes imperative that an increasing number of industries and commodities be brought within range of effective price control if disastrous consequences are to be avoided. The problems are intensified because the industries which must increasingly be brought under control are those with numerous sellers and unstandardized goods which do not lend themselves easily to control. One major tool of effective price control is woefully lacking: adequate power to secure compliance with ceiling schedules. Without such power the price situation will soon be dangerously out of hand. Time is of the essence. Price increases must be prevented before they occur. Any widespread scaling down of prices once they have risen is impossible.

THE PROPOSED LEGISLATION DOES NOT CONTRAVENE THE FIFTH AMENDMENT

A.

MEASURES RELATED TO A PURPOSE IN THE INTEREST OF NATIONAL DEFENSE ARE NOT REPUGNANT TO THE DUE PROCESS CLAUSE UNLESS THEY ARE UNWARRANTABLY ARBITRARY OR OPPRESSIVE

The fifth amendment of the Constitution provides: "Nor shall any person * * * be deprived of life, liberty, or property without due process of law; nor shall private property be taken for public use, without just compensation." The power of Congress to legislate for the national defense is, of course, limited by this provision of the fifth amendment. "The war power of the United States, like its other powers and like the police power of the States, is subject to applicable constitutional limitations." Hamilton v. Kentucky Distilleries Co. (251 U. S. 146, 156). See also Ex parte Milligan (71 U. S. (4 Wall.) 2, 121); United States v. Cohen Grocery Co. (255 U. S. 81, 88); Highland v. Russell Car Co. (279 U. S. 253, 261-262).

The criterion for determining the validity under the fifth amendment of Congressional action seeking to promote the national defense is simply whether the legislation is reasonably related to the end sought to be achieved or whether it is arbitrary, unreasonable, or capricious. Thus, in Virginian Ry. Co. v. System Federation No. 40 (300 U. S. 515), the Supreme Court said:

* * *

"Even though Congress, in the choice of means to effect a permissible regulation of commerce, must conform to due process, it is evident that where, as here, the means chosen are appropriate to the permissible end, there is little scope for the operation of the due process clause" (p. 558).

And in Nebbia v. New York (291 U. S. 502) the Supreme Court, dealing with application of the fourteenth amendment-which imposes a corresponding limitation upon State action-stated the rule, with express reference to price-fixing legislation, in the following terms:

"The Constitution does not secure to anyone liberty to conduct his business in such fashion as to inflict injury upon the public at large, or upon any substantial group of the people. Price control, like any other form of regulation, is unconsti tutional only if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt, and hence an unnecessary and unwarranted inter ference with individual liberty" (pp. 538-539).

The power of Congress to legislate without infringing the limitations of the fifth amendment is particularly broad when the legislation is in exercise of nationaldefense powers. As Charles Evans Hughes said in his address The Fighting Powers of the United States Under the Constitution:1

"The framers of the Constitution did not contrive an imposing spectacle of impotency. One of the objects of 'a more perfect union' was 'to provide for the common defense.' A nation which could not fight would be powerless to secure "the blessings of liberty to ourselves and our posterity.' Self-preservation is the first law of national life, and the Constitution itself provides the necessary powers in order to defend and preserve the United States. Otherwise, as Mr. Justice Story said, 'the country would be in danger of losing both its liberty and its sovereignty from its dread of investing the public councils with the power of defending it. He would be more willing to submit to foreign conquest than to domestic rule.'"

Addressing himself to the question of the extent to which the national-defense power of Congress is limited by the fifth amendment, he continued:

"That power explicitly conferred and absolutely essential to the safety of the Nation is not destroyed or impaired by any later provision of the Constitution or by any one of the amendments. These may all be construed so as to avoid making the Constitution self-destructive, so as to preserve the rights of the citizen from

155 Congressional Record, pt. 8, pp. 551, 555.

unwarrantable attack, while assuring beyond all hazard the common defense and the perpetuity of our liberties. These rest upon the preservation of the Nation." And, in fact, the Supreme Court has so construed the fifth amendment as to give full effect to every measure enacted by Congress in the interest of national defense. In no instance has the Court held an exercise of the national-defense power invalid on substantive grounds of due process.

In considering the validity of the proposed price statute, therefore, we commence with the rule that the due-process clause is not violated unless the particular statute.can be shown to be a manifest abuse of the discretion of Congress, in essence violating principles of government so basic that they prevail throughout any emergency.

B. THE PROPOSED LEGISLATION IS NOT UNREASONABLE, ARBITRARY, OR CAPRICIOUS AND DOES NOT GO BEYOND THE PURPOSES OF NATIONAL DEFENSE

1. THE PRINCIPLE OF FIXING MAXIMUM PRICES FOR COMMODITIES DOES NOT VIOLATE THE DUE-PROCESS CLAUSE

(a) Judicial precedents.

Objections based upon the due-process clause have in the past been leveled against price-fixing statutes principally upon the ground that the authority to fix maximum prices was so drastic that by its very nature it was inconsistent with our form of government except as applied to a limited class of commodities deemed "affected with a public interest." And it is true that in Tyson v. Banton (273 U. S. 418) and Ribnick v. McBride (277 U. S. 350) the Supreme Court stated that governmental price regulation was constitutionally restricted to a limited number of businesses deemed affected with a public interest. However, the more recent decisions of the Supreme Court in Nebbia v. New York (291 U. S. 502) and Olsen v. Nebraska (61 Sup. Ct. 682) demonstrate that such objections are completely without merit and that price-fixing legislation is not contrary to the fifth amendment. The Nebbia case has already been mentioned. The Olsen case, in which the Supreme Court specifically overruled the Ribnick case, likewise conclusively disposes of the issue. In a unanimous opinion, the Court upheld the power of a State to regulate charges made by employment agencies. The Court rested its decision on broad grounds, expressly rejecting the limitation on regulation to businesses affected with a public interest and upholding the power of the States to regulate prices wherever they deemed such regulation to be required. Summarizing the decisions since 1930, in which it had considered price-fixing measures, both State and Federal, the Supreme Court said:

"The drift away from Ribnik v. McBride, supra, has been so great that it can no longer be deemed a controlling authority. It was decided in 1928. In the following year this Court held that Tennessee had no power to fix prices at which gasoline might be sold in the State, Williams v. Standard Oil Co. (278 U. S. 235). Save for that decision and Morehead v. People of State of New York ex rel. Tipaldo (298 U. S. 587), holding unconstitutional a New York statute authorizing the fixing of women's wages, the subsequent cases in this Court have given increasingly wider scope to the price-fixing powers of the States and of Congress. Tagg Bros. & Moorhead v. United States (280 U. S. 420), decided in 1930, upheld the power of the Secretary of Agriculture under the Packers and Stockyards Act to determine the just and reasonable charges of persons engaged in the business of buying and selling in interstate commerce livestock at a stockyard on a commission basis. In 1931 a New Jersey statute limiting commissions of agents of fire insurance companies was sustained by O'Gorman & Young, Inc. v. Hartford Fire Ins. Co. (282 U. S. 251). A New York statute authorizing the fixing of minimum and maximum retail prices for milk was upheld in 1934, Nebbia v. New York, (291 U. S. 502). * * * In 1937 Adkins v. Children's Hospital (261U. S. 525), was overruled and a statute of Washington which authorized the fixing of minimum wages for women and minors was sustained, West Coast Hotel Co. v. Parrish (300 U. S. 379). In the same year Townsend v. Yeomans (301 U. S. 441) upheld a Georgia statute fixing maximum warehouse charges for the handling and selling of leaf tobacco. * * * The power of Congress under the commerce clause to authorize the fixing of minimum prices for milk was upheld in United States v. Rock Royal Co-Operative, Inc. (307 U. S. 533), decided in 1939. The next year the price-fixing provisions of the Bituminous Coal Act of 1937 (15 U. S. C. A., secs. 828-851), were sustained, Sunshine Anthracite Coal Co. v. Adkins (310 U. S. 381). And at this term we upheld the minimum-wage and maximum-hour provisions

of the Fair Labor Standards Act of 1938 (29 U. S. C. A., sec. 201 et seq.; United States v. F. W. Darby Lumber Co., 312 U. S. 100). These cases represent more than scattered examples of constitutionally permissible price-fixing schemes. They represent in large measure a basic departure from the philosophy and approach of the majority in the Ribnik case. The standard there employed, following that used in Tyson & Brother v. Banton (273 U. S. 418), was that the constitutional validity of price-fixing legislation, at least in absence of a so-called emergency [citing Highland v. Russell Car & Snow Plow Co., 279 U. S. 253] was dependent on whether or not the business in question was 'affected with a public interest.' (Cf. Brazee v. Michigan, 241 U. S. 340.) It was said to be affected if it had been 'devoted to the public use' and if 'an interest in effect' had been granted 'to the public in that use' (Ribnik v. McBride, supra, 277 U. S., at page 355). That test, labelled by Mr. Justice Holmes in his dissent in the Tyson case (273 U. S., at page 446), as 'little more than a fiction,' was discarded in Nebbia v. New York, supra (291 U. S., at pages 531-539). It was there stated that such criteria 'are not susceptible of definition and form an unsatisfactory test of the constitutionality of legislation directed at business practices or prices,' and that the phrase 'affected with a public interest' can mean 'no more than that an industry, for adequate reason, is subject to control for the public good.' (Id., 291 U. S., at page 536.) And see the dissenting opinion in Ribnik v. McBride, supra (277 &

S., at page 350).

"The Ribnik case, freed from the test which it employed, can no longer survive" (pp. 864-865).

The Supreme Court also dismissed the argument that the legislature can act to fix prices only where the State makes a showing of evils resulting from the "price" situation requiring such action. The Court said:

"We are not concerned, however, with the wisdom, need, or appropriateness of the legislation. Differences of opinion on that score suggest a choice which 'should be left where * * * it was left by the Constitution-to the States and to Congress.' Ribnik v. McBride, supra (277 U. S., at page 375), dissenting opinion. There is no necessity for the State to demonstrate before us that evils persist despite the competition which attends the bargaining in this field. In final analysis, the only constitutional prohibitions or restraints which respondents have suggested for the invalidation of this legislation are those of public policy embedded in earlier decisions of this Court, but which, as Mr. Justice Holmes long admonished, should not be read in to the Constitution. * * ** Since they do not find expression in the Constitution, we cannot give them continuing vitality as standards by which the constitutionality of the economic and social programs of the States is to be considered" (pp. 865-866). The power of Congress to legislate for the national defense is subject to no greater limitations under the due-process clause than is the police power of the States (Hamilton v. Kentucky Distilleries Co., 251 U. S. 146). Accordingly, the Olsen case eliminates all doubt as to the power of Congress to regulate maximum prices for any commodities or businesses which it may deem necessary in the interest of national defense.

The only reason for further discussion of the problem arises from a legal question raised during the proceedings of the War Policies Commission in 1931. In its final recommendations, the Commission advocated a constitutional amendment "to eliminate all doubt concerning the extent of the power of Congress to prevent profiteering and to stabilize prices in time of war." The "doubt" referred to as expressed by the Commission's legal staff 2 and was later repudiated by Attorney General Mitchell, Solicitor General Thatcher, and other eminent attorneys.3 The Commission referred to the doubt largely at the instance of a member who 2 See H. Doc. 271, 72d Cong., 1st sess., p. 41.

See H. Doc. 271, 72d Cong., 1st sess., pp. 34 et seq.