but much depends upon the promptness and effectiveness of its administration. This is demonstrated not only by experiences abroad, but by our experiences during the World War when, although controls were instituted late and were not, except in the case of food and fuel, supported by appropriate authority and sanctions, controls did serve in good measure to stabilize price levels. A noted' economist and a principal figure in the price control effort, observed:

"Food and fuel prices were prevented from fluctuating as widely and soaring as high as they would have done in the absence of regulation. A result of the same kind, and apparently not less in extent, was secured for other priceregulated articles." 25

(3) Investigations and reports of congressional committees and commission: The experiences of the United States during the World War have been studied during the years by congressional committees, which have uniformly recognized the importance of equalizing the burdens of war, of controlling and stabilizing prices, and of conferring power to establish maximum prices.

Various bills have been introduced in Congress since 1922 when the CapperJohnson bill was introduced at the request of the American Legion.20 Without examining their provisions in detail, it is sufficient for present purposes to note that these bills projected extensive programs for war emergencies, including provisions for drafting manpower and material resources, for excess-profits taxation, and also provisions containing authority for setting maximum-price ceilings. We may restrict our consideration here to the investigations, hearings, and reports, which constitute a body of expert opinion and organized data upon the problem of price control in relation to national defense, and which supplements other expert study and comment conducted under Government and private auspices.

27

The first congressional inquiry specifically directed against general problems of price control, as distinguished from inquiries into the wastefulness of spending during the World War, was undertaken in 1924 by the House Committee on Military Affairs. That committee held preliminary hearings on House Joint Resolution 128 (60th Cong., 1st sess.), which proposed the creation of a commission to study the problem of neutral distribution of burdens in time of war. In its report, the committee endorsed in principle the necessity of price control to meet the problems which had been presented during the World War (H. Rept. No. 764, 68th Cong., 1st sess.). In recommending the creation of an investigating commission, the committee said, inter alia (p. 2):

"A vote for the creation of this proposed commission is merely an expression of approval of the general principal that 'In war, as among the citizens of America, there should be equal service and equal sacrifice for all and special profits to none.'

"As a well-nigh ideal program of effective preparedness, the proposition will appeal to all seeking to insure national defense. It will mean that on the outbreak of war our skeleton organization for the human, material, and financial resources of the country is ready-made. There will be universal cooperation, and we will be able to strike an instant and concentrated blow with the vast powers of the entire Nation, insuring speedy and complete victory.

"Again, in the event of an inevitable, unpreventable war of national defense there will also be harmonious spiritual cooperation among all citizens, because all become defenders, whether in uniform or not, and some will not feel a sense of injustice and unfairness arising from inequality."

Action on this proposal was delayed until 1931, when, pursuant to Public Resolution No. 98 (71st Cong.), there was established the War Policies Commission, consisting of four Members of the House of Representatives, four Mem

Taussig, F. W., Price Fixing as Seen by a Price-Fixer, Thirty-three Quarterly Journal of Economics, 205, 240 (February 1919).

Among the bills which have been introduced are the following: 67th Cong., H. R. 13201; 68th Cong., H. R. 4841; 69th Cong., H. R. 4800 70th Cong., H. R. 455, H. R. 8313; 71st Cong., H. R. 6995, H. R. 8981; 74th Cong., H. R. 3; 75th Cong., H. R. 2, H. R. 272, H. R. 4014, H. R. 5529, H. R. 6704, H. R. 9604, S. 25; 76th Cong., S. 2160, S. 4141.

Among the authoritative works on the subject are: Garett: Government Control Over Prices (published by the War Trade Board in cooperation with the War Industries Board, Government Printing Office, 1920). Litman: Prices and Price Control in Great Britain and United States During the World War (Carnegie Endownment for International Peace. Preliminary Economic Studies of the War, No. 19, 1920). Stein Government Price Policy in the United States During the World War (Williams College, 1939). Hardy: Wartime Control of Prices, Brookings Institution, 1940.

bers of the Senate, and six members of the Cabinet. The Commission held hearings and built up a record of 893 pages of testimony and exhibits, summarized in House Document No. 271 (72d Cong., 1st sess.). The summary findings and recommendations of the Commission were filed on March 3, 1932 (H. Doc. No. 264, 72d Cong., 1st sess.).

The Commission outlined and recommended a complete program for war emergency. As an integral part of its program, "to minimize the profits of war and to distribute its burden and sacrifices equitably," the War Policies Commission recommended, in addition to commandeering and excess-profits taxation, etc., that "Congress should empower the President, in the event of war, to institute a program under which prices may be stabilized and thereafter adjusted at such levels as will minimize inflation and will secure to the Government the use of any private property needed in the prosecution of the war without affording the owner thereof profit due to the war."

As was later stated in a report of the House Committee on Military Affairs: * "When the War Policies Commission recommended that prices 'should be' stabilized, it meant 'all prices of all commodities,' and not 'some prices of some commodities'."

Before considering the hearings and reports which developed in 1935, it is appropriate to note that the War Department, pursuant to statutory provisions authorizing it to conduct studies which will provide "assurance of adequate provisions for the mobilization of material and industrial organizations essential to wartime needs," " has prepared documented studies analyzing the World War experiences, and considering, inter alia, the importance of price control to the objective of achieving industrial mobilization for defense."

29

20

In his annual report to the President (December 6, 1925), Secretary of War Davis stated:

"That drastic control over all the essential elements of industry is necessary in war was proved in this country and all others engaged in the World War, This control, to be effective, must be exercised promptly. That our resources may be used to support our combatant forces and supply the essential needs of our civil population, authoritative priorities must be enforced. It is vital that there be a control over prices that affect the cost of war materials and especially over prices that affect the living expenses of our people who must produce supplies required in war."

The Industrial Mobilization Plans prepared by the War Department, although differing in various aspects, having constantly recognized that the process of adjusting the industrial machine to the production of the items needed by the fighting forces violently disturb the price structure A typical statement, contained in the 1933 plan (p. 63) comments as follows:

31

"The great bulk of the business and popular opinion in the United States favors the principle that individuals should not be permitted to reap undue profits at the expense of the people and the Government during times of a national emergency. Any effort looking to the curtailment of excess profits must include some means of controlling or regulating the prices at which commodities and services may be sold. Stable prices are also essential to the success of the industrial effort. No business can be conducted satisfactorily if it cannot ascertain its own costs and prices with reasonable accuracy in advance."

In the Seventy-fourth Congress, first session, there was extensive consideration of the problem. A comprehensive investigation into the World War experience with price control was conducted by a select committee of the Senate, appointed to investigate the munitions industry, pursuant to Senate Resolution 206 (73d Cong.).32

28 H. Rept. No. 119, 74th Cong., 1st sess.. p. 9.

20 Sec. 5a of the National Defense Act of June 3, 1916, U. S. C., sec. 1193.

20 Industrial Mobilization Plan, 1931, War Policies Commission hearings, H. Doc. 271, 72d Cong., pp. 393 et seq. Industrial Mobilization Plan. Revision of 1933, Senate committee print No. 2, Senate Munitions Committee, 74th Cong. Industrial Mobilization Plan, Revision of 1936, Government Printing Office, 1936. Industrial Mobilization Plan, Revision of 1939, S. Doc. No. 139, 76th Cong., 2d sess.

See e. g. Industrial Mobilization Plan, 1933, p. 1.

32 The committee published many of the basic documents relating to the role of the Government in fixing maximum prices during the World War, including the final report of the Chairman of the War Industries Board to the President submitted in February 1919 (Senate committee print No. 3, 74th Cong., 1st sess.), and the Minutes of the Price Fixing Committee of the War Industries Board, from March 4, 1918, to December 30, 1918 (Senate committee print No. 5, 74th Cong., 2d sess.).

At the same session, the House Committee on Military Affairs favorably reported H. R. 5529 which authorized the President to put into effect what is commonly known as the Baruch plan, a fixing of a ceiling of prices for all commodities at a level which existed on some date prior to the outbreak of the war, with provision made for later upward or downward revision of the ceilings for each commodity. In its report (H. Rept. No. 119, 74th Cong., 1st sess.), the House committee acknowledged its appreciation for the comments and insight of Bernard Baruch who had explained (p. 8) “how the profits may be taken out of war and how war may be conducted more effectively from an economic and an industrial standpoint, by a practical and reasonable control of prices, and by the exercise of the power of priority and licensing."

The committee referred at length to all the previous reports and resolutions, took account of the great extent by which profiteering had increased the cost of the World War (p. 32) and in approving the bill said (pp. 1, 2):

"This bill is a statement of broad policies, and is deliberately intended to avoid the mistake of seeking to legislate as to details so far in advance of the possible outbreak of war. * * * All of us have our special and personal ideas and plans about how to make applications of the broad principles of price control, and for the drafting of the manpower and the commandeering of the material resources of the Nation in the event of war, so that the burdens of war may more equitably and justly be distributed among the citizens of the Nation. But it would be a serious mistake to seek now to legislate as to details, perhaps many years in advance of the outbreak of war, when the conditions, economic and social, that may be prevailing at that time, cannot now be foreseen.

*

"But we must not be led astray by purely idealistic and impractical theories about a complete equalization of the burdens of war. We know that such total equalization of the hardships and inconveniences and sufferings and sacrifices of war is impossible. However, since we cannot attain completely the ideal, we must not be deterred from an honest effort to prevent the conscienceless, wasteful, and outrageously extravagant profiteering that went on during the World War period, when more than 22,000 individuals climbed out of financial obscurity into the class of millionaires, and hundreds of those who were already millionaires saw their fortunes mount higher and higher by the tens of millions, and even hundreds of millions."

H. R. 5529 passed the House by a vote of 368 to 15. It was then referred to the Senate Munitions Committee, which reported favorably a substitute bill, differing in many particulars from the House bill. Although the Senate Munitions Committee took issue with the Baruch plan, it did not deny the desirability of price-control legislation. The committee was of the opinion that the problem was more than one of merely fixing prices and controlling profits, but it agreed that price-fixing powers should be contained in any program (p. 9) and that the power would prove effective. The committee said (p. 26):

"The bill gives the President the power to fix prices. This will prove effective in the prevention of speculative price rises and runaway markets. The commodity-control provisions will have a similar effect. The committee does not feel, however, that these devices by themselves will prevent inflation."

The Seventy-fourth Congress concluded without final action on H. R. 5529. The Special Senate Munitions Committee prepared a report dealing in detail with the question of price control in relation to national defense (S. Rept. No. 944, pt. 2, 74th Cong., 1st sess.). Although this report was devoted in large part to criticism of the methods of price-control administration during the World War, and in particular to the utilization of the "bulk-line principle," it recognized the beneficial effects, in a time of mobilization of resources for production of armament effort, of price regulation and stabilization. (See p. 128 et seq.)

In the Seventy-fifth Congress, three bills similar to the House version of H. R. 5529 were favorably reported by congressional committees. The passage of H. R. 6704 was recommended by the House Committee on Military Affairs. The committee in its report (H. Rep. No. 808, 75th Cong., 1st sess.) said that in seeking "a plan to mobilize effectively the resources of the Nation for war which shall eliminate wartime profiteering, prevent wartime inflation, and equalize wartime burdens," it felt that the proposal to fix price ceilings was sound. Views in favor of price control as a means of furthering national defense were also stated by the House Committee on Military Affairs in its report on H. R. 9604 (H. Rep. No. 1870, 75th Cong., 3d sess.) and the Senate

Committee on Military Affairs in its report on S. 25 (S. Rept. No. 480, 75th Cong., 1st sess.).

The findings of the congressional committees lay at rest any doubt that price control is vital to the national defense, and that the passage of price-control legislation is an appropriate exercise of the national-defense power. This conclusion is in no degree vitiated by the fact that Congress failed to enact the bills then introduced. Reluctance to adopt legislation on so vital an issue in advance of the factual circumstances requiring the action is understandable. Congress had before it the opinion of Attorney General Mitchell, rendered to the War Policies Commission (H. Doc. No. 271, 72d Cong., 1st sess., p. 37), that:

"The support for the validity of measures of this type is found mainly in the conclusion of Congress as to their reasonable necessity. It is desirable to have back of such measures the judgment of Congress exercised in the face of an emergency and under conditions existing at the time the legislation is enacted. This subject is well dealt with in the memorandum of the Solicitor General. For Congress to pass legislation at this time providing for price legislation during the next war would leave the legislation without the support which comes from the exercise of the judgment of Congress upon actual conditions."

The reports of the congressional committees make it clear, however, that their primary purpose was to clarify the experience of the World War so as to facilitate action by Congress in enacting price-control legislation when and if an emergency arose requiring once again the full mobilization of the country's resources for defense.

(4) Foreign experience: In testing the constitutionality of legislation adopted to solve domestic problems, the Supreme Court will look to the measures pursued by foreign governments in dealing with similar situations. Wherever possible

the courts will seek to base judgment on experience and not on theory (Tanner v. Little, 240 U. S. 369). Thus, in upholding the District of Columbia Rent Control Act, passed to meet the emergency housing shortage created by the war and the expanded functions of government, Mr. Justice Holmes referred to similar legislation in effect in foreign countries. The opinion in Block v. Hirsh (256 U. S. 135, 156) declared:

"In this instance Congress stated a publicly notorious and almost world-wide fact. That the emergency did exist must be assumed, and the question is whether Congress was incompetent to meet it in the way in which it has been met by most of the civilized countries of the world."

Since the outbreak of the current war on September 5, 1939, most countries, whether belligerents or neutrals, have either introduced far-reaching systems of price control or have extended the system which existed before. Price controls are not limited to totalitarian countries, where they have been in effect for years prior to 1939; but they are also in effect in most of the remaining democratic countries in Europe and in a number of countries in other continents.

A thumbnail sketch of the price statutes and regulations in effect in Germany and England today will outline the different approaches adopted.

Germany: Price control in Germany was ushered in with the law of October 29, 1936, for carrying out Goering's 4-year plan, providing for "the appointment of a Reich commissar for price formation." The price commissar, appointed on November 22, 1936, issued the price-stop decree of November 26, 1936, which forbade any price rises whatsoever through the Reich on and after October 18, 1936. Adjustments were grudgingly issued in certain cases where costs rose, as with rising prices of imports, and price increases were deemed absolutely necessary. Upon the outbreak of war few changes were made in the program. The War Economic Ordinance of September 4, 1939, made it the duty of entrepreneurs to establish prices upon the basis of a war economy. This ordinance requires downward adjustment. For example, a producer making higher profits as a result of the war will be required to reduce prices until those profits are absorbed.

England. In England price control stems from two basic statutes: The "Emergency Powers (Defense) Act, 1939," and the "Prices of Goods Act, 1939." The Emergency Powers Act has been supplemented by "Defense Regulations," which have the force of a statute. The Prices of Goods Act was recently amended.

The Emergency Powers Act provides:

"(1) Subject to the provisions of this section, His Majesty may by order in council make such regulations (in this act referred to as defense regula

tions) as appear to him to be necessary or expedient for securing the public safety, the defense of the realm, the maintenance of public order, and the efficient prosecution of any war in which His Majesty may be engaged, and for maintaining supplies and services essential to the life of the community." The Defense Regulations provide, inter alia:

"55. (1) A competent authority, so far as appears to that authority to be necessary in the interests of the defense of the realm or the efficient pros ecution of the war, or for maintaining supplies and services essential to the life of the community, may by order provide

(a) For regulating or prohibiting the production, treatment, keeping, storage, movement, transport, distribution, disposal, acquisition, use, or consumption of articles of any description, and, in particular, for controlling the prices at which such article may be sold.

(b) For regulating the carrying on of any undertaking engaged in essential work, and, in particular, for controlling the charges which may be made by the undertakers in respect of the doing of any work by them.

11*

Section 55 further authorizes a "competent authority" to require keeping of books and records and production thereof, to inspect premises, and alsomake such provisions as the competent authority thinks necessary or expedient for facilitating the introduction and operation of a scheme of control under this regulation; and an order under this regulation may prohibit the doing of anything regulated by the order except under the authority of a license granted by such authority or person as may be specified in the undertakings generally or to any particular person or undertaking or class of persons or undertakings, and so as to have effect either generally or in any particular area."

The Prices of Goods Act extends to such goods as are specified by the board of trade. The board of trade may make arrangements not to designate goods handled under the Defense Regulations Act by the Ministry of Foods (food) or by the Ministry of Supplies (raw materials). The board of trade has issued an increasingly large list of price-regulated goods.

The act makes it unlawful to sell the goods at a price which exceeds the permitted price. The permitted price is the basic price, the price at which the goods were sold in the ordinary course of trade on August 21, 1939, plus a permitted increase which may be granted in view of increases in expenses. In Canada, a separate order-in-council, passed early in September 1939, provided a basis for price regulation. In Sweden, a basic price control statute (the maximum price bill) was adopted in the spring of 1939 and authorized the Government to exercise powers over prices dislocated because of war or conditions arising from war. Price control by governmental fiat has been used in Japan, following German example, since 1939.

The price controls utilized in foreign countries, whether of an over-all character as in Germany or of a more selective character as in England, have been directed toward preserving a price equilibrium based upon a price relationship of a selected prewar period, adjusted to compensate for rises in the costs of production. The programs have not all had a uniform success. In some cases, and particularly in the case of Japan, dependence on imports not subject to governmental price regulation forces costs upward in spite of price controls. To a certain extent, the deficiencies in price control are traceable to lack of experience with the task and failure to take necessary steps in time. Difficulties in administration have permitted prices to advance while the techniques of price control have been mastered. A considerable amount of time and experience is required to develop a practical method of price control which will prevent price rises without burdening the actual course of production and distribution. The English experience, in particular, shows that the translation of a price-control program from a legislative mandate into effective administrative performance may entail a delay of a year or more during which prices advance unchecked, with a resultant loss of efficiency and an added problem of administration due to the advance in the price level. But price regulation is recognized the world over as a necessary solution to check the economic dislocations arising from war.

B. TO A CONSIDERABLE EXTENT, THE PROPOSED LEGISLATION IS VALID UNDER THE

COMMERCE POWER

Although the proposed legislation is a measure in the interest of national defense, and is valid under the national-defense powers of Congress, an inde