THE

STATUTE IS NOT

UNCONSTITUTIONAL ON THE GROUND THAT IT DOES NOT GUARANTEE A PROFIT TO EACH PRODUCER

It has been shown elsewhere that the proposed legislation satisfies all the requirements of the fifth amendment. But separate note may be taken of the argument, although its refutation is clear in view of the principles already discussed, that a maximum price statute cannot be valid unless it guarantees to each producer "just compensation," "a fair return on fair value," "cost plus a reasonable profit." It may be argued that a schedule prescribing maximum prices which do not exceed the costs for every producer, including marginal producers, is unconstitutional. Notwithstanding these arguments it is plain that the proposed legislation is constitutional.

A. THE ALLEGED CONSTITUTIONAL OBJECTION IS MOOT AND THEORETICAL RELATING NOT TO THE STATUTE BUT TO A POSSIBLE EXECUTIVE APPLICATION WHICH WILL BE REVIEWABLE IN COURT UPON THE BASIS OF THE ACTUAL FACTS

1. The constitutional question under discussion is wholly theoretical and specutive. The proposed statute neither requires nor prohibits the prescribing of maximum prices sufficient to cover the costs of all producers and every producer. It provides for maximum prices which (i) are generally fair and equitable to buyers and sellers of the commodity involved; and (ii) will effectuate the purposes of the act. The only possible constitutional objection is to the possible executive application of the statute. But that executive application cannot be forecast now, nor can we conjure up the hard facts in which the price regulations will be forged, and upon the basis of which constitutional determinations are made. Any price-ceiling regulation is subject to court review. If a particular price ceiling does violate the Constitution the courts will set it aside, and thereafter the question will not arise. These judicial determinations will, as stated above, be determined in the light of the actual facts and circumstances prompting the price ceilings. There is no occasion to speculate at this time about a possible unconstitutional application, in a hypothetical state of facts, of a clearly constitutional statute. If a substantial constitutional question arises it should, and under the proposed legislation it will, be determined by the courts upon the basis of the actual operative facts.

2. In emphasizing the wholly conjectural nature of a possible constitutional objection to an unborn executive regulation it is important to bear in mind that under the statute the President may make special provision for high-cost producers and that in fact the President will make every effort to do so.

Ceiling prices will be prescribed so as to be generally fair and equitable to buyers and sellers and to effectuate the purposes of the act. The purposes of the act include not only the general purpose of stabilizing prices, preventing price spirals and inflation, but also various specific purposes, including the purpose of obtaining high-cost production without excessive profits to low-cost producers. The President may prescribe such classifications and differentiations in the price ceilings as in his judgment are necessary to effectuate the purposes of the act. Plainly, the President has authority to prescribe a higher maximum price for a producer with higher costs.

Moreover, under the proposed legislation, the President may buy commodities upon such terms as he shall deem necessary to obtain supplies from marginal or high-cost producers without causing general price increases, or otherwise to avoid price increases, inconsistent with the purposes of the legislation. This provision not only authorizes, it contemplates, that the President will pay higher prices than those generally prevailing to high-cost producers and thus obtain their production at prices covering their costs without permitting the entire price structure to be affected.

THE STANDARDS OF THE BILL PROPOSING THE EMERGENCY PRICE CONTROL ACT OF 1941 ARE SUFFICIENTLY DEFINITE TO MEET ALL CONSTITUTIONAL REQUIREMENTS

The proposed Emergency Price Control Act of 1941 authorizes the President to stabilize prices and rents by the establishment of price and rent ceilings. To guide the discretion of the President in exercising the authority granted, the policy of Congress is set forth at length and numerous standards are specified. The proposed bill bears the title: "A bill to further the national defense and security by checking speculative and excessive price rises, price dislocations, and inflationary tendencies, and for other purposes." Section 1 (a) states that

"It is hereby declared that it is in the interest of the national defense and security and that the purposes of this Act are (1) to preserve the value of the national currency and to protect the Federal Reserve System and the national banking and commercial and consumer credit structure against the consequences of price and credit inflation; (2) to stabilize prices and to prevent speculative, unwarranted, and abnormal increases in prices and rents; (3) to prevent economic disturbances, labor disputes, burdens upon interstate and foreign commerce, interference with the effective use of the Nation's resources for defense, and impairment of national unity and morale, which would result from unwarranted increases in prices, rents, and the cost of living; (4) to eliminate and prevent profiteering, hoarding, manipulation, speculation, and other disruptive practices resulting from abnormal market conditions or scarcities caused by or contributing to the national emergency; (5) to prevent prospects of price rises from encouraging the accumulation and withholding of materials needed for national defense, and from impeding long-term commitments for production; (6) to assure that defense appropriations are not dissipated by excessive prices; (7) to obtain the maximum necessary production without undue profits to low-cost producers, (8) to protect persons with relatively fixed and limited incomes, investors, and persons dependent on life insurance, annuities, and pensions, from undue impairment of their standard of living; (9) to prevent a post-emergency collapse of values, and the reappearance of price and cost disparities for farmers and other primary producers; and (10) to provide procedures for administration and review which will fairly protect the interests of those subject to this Act, without endangering the dominant public interest in the accomplishment of the foregoing purposes

""

Section 3 (a) provides that-

"Whenever in the judgment of the President the price or prices of a commodity have risen or threaten to rise to an extent or in a manner inconsistent with the purposes of this Act, he shall by regulation or order establish such ceiling or ceilings as in his judgment will be generally fair and equitable to buyers and sellers of such commodity and will effectuate the purposes of this act. So far as practicable, in establishing any ceiling for any specified commodity, the President shall ascertain and give due consideration to the prices prevailing for the commodity on or about June 30, 1941, and shall make adjustments for such relevant factors in respect thereof as he may determine and deem to be of general applicability, including the following: Speculative fluctuations, general increases or decreases in costs of production and transportation, and general increases or decreases in profits earned by sellers of the commodity, during and subsequent to the year ending June 30, 1941. Every regulation or order establishing any ceiling under this subsection shall be accompanied by a statement of the considerations involved in the issuance of such regulation or order.

It is the purpose of this memorandum to show that these standards are sufficiently definite to meet all constitutional requirements. The argument may conveniently be taken up in the form of the following considerations:

(1) The standards set forth in the bill are fully as definite as those enunciated in comparable legislation which has been upheld by the Supreme Court, even in the absence of a national emergency, against attack on the ground of invalid delegation of legislative powers.

(2) In any event the standards set forth in the bill are well within the broader delegation which may properly be permitted during a national defense emergency.

A. THE STANDARDS SET FORTH IN THE BILL ARE FULLY AS DEFINITE AS THOSE ENUNCIATED IN COMPARABLE LEGISLATION WHICH HAS BEEN UPHELD BY THE Supreme Court, Even in the Absence oF A NATIONAL EMERGENCY, AGAINST ATTACK ON THE GROUND OF INVALID DELEGATION OF LEGISLATIVE POWERS

The rule prohibiting the delegation of legislative power to executive has been stated by the Supreme Court in the following words:

"The Constitution provides that 'All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives' (art. I, sec. 1). And the Congress is authorized 'To make all laws which shall be necessary and proper for carrying into execution' its general powers (art. I, sec. 8, par. 18). The Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested. We have repeatedly recognized the necessity of adapting legislation to complex conditions involving a host of details with which the National Legislature cannot deal directly. We pointed out in the Panama Refining Co. case that the Constitution has never been regarded as denying to Congress_the necessary resources of flexibility and practicality, which will enable it to perform its function in laying down policies and establishing standards, while leaving to selected instrumentalities the making of subordinate rules within prescribed limits and the determination of facts to which the policy as declared by the legislature is to apply. But we said that the constant recognition of the necessity and validity of such provisions, and the wide range of administrative authority which has been developed by means of them, cannot be allowed to obscure the limitations of the authority to delegate, if our constitutional system is to be maintained (Id., 293 U. S. 388, p. 421)." (Schechter Corp. v. United States, 295 U. S. 495, 529-530.)

Thus the Constitution, while requiring the Congress to exercise the "essential legislative function" of establishing the basic policy of the legislation, permits the delegation to the executive of broad powers to make concrete application of that policy to varying situations. Indeed, as the Supreme Court points out, only through such procedure can legislative control be effectively applied to numerous complex social and economic problems with which the legislature is constantly confronted today.

This is nowhere better illustrated than in the case of price-fixing legislation. The legislature can, and must, establish the basic standard by which prices are to be determined. But as a practical matter it cannot, and as a constitutional matter it need not, apply that standard to the multitudinous and complex situations in which the powers conferred by the statute are to be invoked. The constitutional requirements are met if the legislature clearly sets forth the policy and establishes the standards for its application under varying factual conditions.

The proposed bill meets these requirements. The policy of Congress is plainly stated. And the occasions when the powers conferred by the act are to be invoked, together with specific standards to guide their application, are carefully set forth.

That the scope of executive power conferred by the bill lies well within the traditional rules of delegation is perhaps best illustrated by a somewhat detailed analysis of several recent cases raising closely similar issues.

In United States v. Rock Royal Cooperative (307 U. S. 533) and in H. P. Hood & Sons v. United States (307 U. S. 588) the Supreme Court sustained the Agricultural Marketing Act of 1937 (7 U. S. C., secs. 601-659), against the specific contention that the act constituted an invalid delegation of legislative power. The policy of the act was set forth in section 2:

"It is hereby declared to be the policy of Congress

"(1) Through the exercise of the powers conferred upon the Secretary of Agriculture under this chapter, to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. The base period in the case of all agricultural commodities except tobacco and potatoes shall be the prewar period, August 1909-July 1914. *

*

*

(2) To protect the interest of the consumer by (a) approaching the level of prices which it is declared to be the policy of Congress to establish in subsection (1) of this section by gradual correction of the current level at as rapid a rate as the

Secretary of Agriculture deems to be in the public interest and feasible in view of the current consumptive demand in domestic and foreign markets, and (b) authorizing no action under this title which has for its purpose the maintenance of prices to farmers above the level which it is declared to be the policy of Congress to establish in subsection (1) of this section."

section 8c provided:
* * Whenever the Secretary finds, *

"(18) *

To fulfill this general policy the Secretary of Agriculture was authorized to issue the necessary orders. In the case of milk, for example, subsection (18) of that the prices that will give such commodities a purchasing power equivalent to their purchasing power during the base period as determined pursuant to section 2 and section 8e of this title are not reasonable in view of the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk and its products in the marketing area to which the contemplated agreement, order, or amendment relates, he shall fix such prices as he finds will reflect such factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest. Thereafter, as the Secretary finds necessary on account of changed circumstances, he shall, after due notice and opportunity for hearing, make adjustments in such prices.”

The Secretary of Agriculture was thus authorized to determine whether certain prices were "reasonable," and to establish milk prices, for example, which would "reflect" certain stated factors and "be in the public interest."

In considering whether or not the powers granted were so ill-defined as to render the statute invalid, the Court declared;

"From the earliest days the Congress has been compelled to leave to the administrative officers of the Government authority to determine facts which were to put legislation into effect and the details of regulations which would implement the more general enactments. It is well settled, therefore, that it is no argument against the constitutionality of an act to say that it delegates broad powers to executives to determine the details of any legislative scheme. This necessary authority has never been denied. In dealing with legislation involving questions of economic adjustment, each enactment must be considered to determine whether it states the purpose which the Congress seeks to accomplish and the standards by which that purpose is to be worked out with sufficient exactness to enable those affected to understand those limits. Within these tests the Congress needs specify only so far as is reasonably practicable. The present act, we believe, satisfies these tests." (United States v. Rock Royal Co-operative, 307 U. S. 533 at p. 574).

The Court specifically approved not only the standards relating to parity prices but the still broader standards set forth in subsection (18) of section 8c:

*

"If he [the Secretary] finds the price so determined unreasonable, it is to be fixed at a level which will reflect such [parity] factors, provide adequate quantities of wholesome milk and be in the public interest. This price cannot be determined by mathematical formula but the standards give ample indications of the various factors to be considered by the Secretary" (p. 577).

*

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"While it is true that the determination of price under this section has a less definite standard than the parity tests of sections 2 and 8e, we cannot say that it is beyond the power of the Congress to leave this determination to a designated administrator with the standards named" (pp. 576-577).

*

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The parallel between the Agricultural Marketing Act of 1937 and the proposed bill for emergency price control is striking. Both relate to the delicate process of price administration, the former to correct a previous maladjustment, the latter to preserve an established equilibrium. The objective of the one was to achieve "parity prices," of the other to prevent inflationary prices. In both cases the general legislative policy is stated in terms of broad purposes, and to the Secretary of Agriculture in the one and to the President in the other, is given the task of clothing the bare bones of the policy with the living flesh of administrative determinations.

Another recent case analyzing legislative standards for executive discretion in price fixing is Sunshine Anthracite Coal Co. v. Adkins (310 U. S. 381), upholding the Bituminous Coal Act of 1937. By its provisions the National Bituminous Coal Commission was empowered to exercise a broad range of discretion in determining both minimum and maximum prices for bituminous coal, which were to be, among other things, "just and equitable, and not unduly prejudicial or preferential.' The Court held, in rejecting the argument that the standards of the

act were virtually meaningless, that they were no broader than the "just and reasonable" rate standard applied in Tagg Bros. & Moorhead v. U. S. (280 U. S. 420), or the widely approved standard of "public interest," or that of "unreasonable obstruction.' The Court said:

*

"Certainly in the hands of experts the criteria which Congress has supplied are wholly adequate for carrying out the general policy and purpose of the act. But the effectiveness of both the legislative and administrative processes would become endangered if Congress were under the constitutional compulsion of filling in the details beyond the liberal prescription here. Then the burdens of minutiae would be apt to clog the administration of the law and deprive the agency of the flexibility and dispatch which are its salient virtues" (p. 398).

A third instance in which the Supreme Court has recently sustained a broad framework of legislative policy, within which the executive is to exercise discretion under certain standards, is found in Opp Cotton Mills v. Administrator (61 Sup. Ct. 524), upholding the Fair Labor Standards Act. That statute provided for the application by the Administrator of minimum wages to different industries, it being stipulated that the prescribed wage should not substantially curtail employment and should be based upon such factors as competitive conditions, as affected by transportation, living, and other costs, and upon any wage scale established by collective bargaining. The statute made no attempt to prescribe the relative importance to be assigned the various factors but left the Administrator full discretion in weighing them.

The court pointed out that the Administrator was permitted to "exercise judgment" in determining the proper wage but ruled that the limits set forth in the act were sufficiently definite to satisfy constitutional requirements:

"In an increasingly complex society Congress obviously could not perform its functions if it were obliged to find all the facts subsidiary to the basic conclusions which support the defined legislative policy in fixing, for example, a tariff rate, a railroad rate, or the rate of wages to be applied in particular industries by a minimum wage law. The Constitution, viewed as a continuously operative charter of government, is not to be interpreted as demanding the impossible or the impracticable. The essentials of the legislative function are the determination of the legislative policy and its formulation as a rule of conduct. Those essentials are preserved when Congress specifies the basic conclusions of fact upon ascertainment of which, from relevant data by a designated administrative agency, it ordains that its statutory command is to be effective.

"The present statute satisfies those requirements. The basic facts to be ascertained administratively are whether the prescribed wage as applied to an industry will substantially curtail employment, and whether to attain the legislative end there is need for wage differentials, applicable to classes in industry. The factors to be considered in arriving at these determinations, both those specified and 'other relevant factors,' are those which are relevant to or have a bearing on the statutory objective. The fact that Congress accepts the administrative judgment as to the relative weights to be given to these factors in each case when that judgment in other respects is arrived at in the manner prescribed by the statute, instead of attempting the impossible by prescribing their relative weight in advance for all cases, is no more an abandonment of the legislative function than when Congress accepts and acts legislatively upon the advice of experts as to social or economic conditions without reexamining for itself the data upon which that advice is based" (pp. 532-533).

The Court also noted with approval the provision in the Fair Labor Standards Act requiring the Administrator to record the basis for his decisions:

16* * * where, as in the present case, the standards set up for the guidance of the administrative agency, the procedure which it is directed to follow and the record of its action which is required by the statute to be kept or which is in fact preserved, are such that Congress, the courts, and the public can ascertain whether the agency has conformed to the standards which Congress has prescribed, there is no failure of performance of the legislative function" (p. 532).

In a similar manner the proposed bill provides that every regulation or order prescribing a ceiling price shall be accompanied by a statement of the considerations involved in the issuance of such regulation or order. Thus, in the proposed bill, as in the Fair Labor Standards Act, it is possible for Congress, the courts and the public to "ascertain whether the agency has conformed to the standards which Congress has prescribed" and consequently there is "no failure of performance of the legislative function."