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urge against the price-fixing features are valid, probably the rest of title I would fall and for the same reasons. Just as frankly, however, my client would not have appeared in the list of opponents to this bill were it not for the price-fixing features. So far as title II is concerned, my client has no interest, one way or the other, and takes no position with respect to it.
PART I. THE INJUSTICE OF THE MINIMUM-PRICE-FIXING PROVISIONS
To appreciate the injustices threatened by the minimum-price-fixing features of the Guffey-Snyder bill in its present form, we must analyze its provisions and attempt to piece them together into a connected story. With all due respect to those who drafted this portion of the bill—and I fully realize that it was a difficult task-it is unusually complicated, somewhat confusing, and in some respects self-contradictory. I venture to say that its real significance is not generally understood either by the consuming public or by a large proportion of the operators, large as well as small. This conclusion is, I think, confirmed by some of the interpretations which have been given it by witnesses at this hearing.
There nas been a tendency, both inside and outside this hearing room, to picture the proposed system of regulation as a miniature National Recovery Administration limited to the bituminous coal-mining industry, or at least, to assert that it goes no further and sets up nothing more rigorous than did the National Recovery Administration code for this same industry. Nothing could be more inaccurate. Title I of this bill subjects the entire industry to a drastic license system of regulation, rather thinly veiled over with phraseology borrowed from the Federal taxing power. I cannot conceive that any one would seriously contend the contrary, or that the matter of acceptance or rejection of the so-called "code" set forth in section 4 has any element of free choice. Once this bill is passed, no one may engage in the bituminous coal-mining business without filing an acceptance of the code with a newly created Federal commission in Washington. This is the prescribed way to obtain a license to engage in the business. The alternative, given by section 3, of paying of 25-percent tax on the sales price of all coal sold or otherwise disposed of is not an alternative; it is a penalty for engaging in the business without a license. With this sword of Damocles dangling over the producer's head, it was hardly necessary to throw in section 13 requiring that any corporate producer which ships its coal in interstate commerce, or which uses the mails or other means of communication in interstate commerce to dispose of such coal (including, I suppose, the telegraph, the telephone, and radio advertising), is required to file its acceptance with the Commission and is automatically subject to the provisions of title I, subject to the penalty not only of the 25-percent tax but also the loss of its right to engage in interstate transactions, whatever that means. Nor was it necessary to add section 14 with regard to Government purchases of coal and Government contracts, designed to bring about a boycott of all nonconformers.
After the bituminous-coal producer has obtained his license to carry on his own business by filing an acceptance of this voluntary code, he must obey every provision of the code, as well as an undefined lot of rules, regulations, and orders promulgated by this new commission and 22 district boards. If he does not, his license is revoked by the typical orthodox commission method in which legislator, prosecutor, and judge are rolled into one, with a minimum of recourse to the courts for protection against arbitrary and capricious action. If he is found guilty, his punishment consists in a forced return to his state of original sin and the penalty of this 25 percent tax; in other words, exile from the coal-mining business and loss of his investment-unless some astute lawyer devises a method of evasion, such as incorporation under a new name. Unless the producer finds some such device that is successful, he cannot thereafter purge himself of his state of sin without paying the tax for the full period of noncompliance; consequently, in many cases the offender will be forevermore ineligible to earn his livelihood in the coal-mining business. Remember that all this may be done for selling coal for 5 cents less than the prescribed minimum price; in other words, for duplicating what the New Jersey tailor did in pressing pants for 30 cents instead of 35 cents. Yet all that happened or could happen to the New Jersey tailor under the code was a comparatively small fine. The coal operator loses his right to earn his living. What is today, and always has been, a constitutional right to engage in an honorable and useful calling becomes overnight a mere privilege held at the mercy of a commission in Washington and one or more of the 22 district boards.
I do not mention all this for the purpose of arguing the constituional point at this juncture. I do it to show how inaccurate it is to say that this is merely a continuance of the National Recovery Act code. The section in the National Industrial Recovery Act which authorized the President to subject industries to the license system was limited to 1 year. During that year it was never invoked, much less applied to the bituminous coal-mining industry. I wonder if the operators who have evidenced support of this bill realize that they are asking the Government to assume a far greater measure of control over them than was ever imposed under the National Recovery Act and that, with the exception of a few special cases such as radio stations, grain exchanges, and security exchanges, the bituminous coal-mining industry would be the first to be subjected to a Nationwide license system in peace time. It is a momentous step and, I am inclined to think, a step backward to the days of the ancient guilds in England.
As we examine the machinery provided in this bill for fixing minimum prices, let us keep in mind that failure to comply with the inevitably complicated price schedules will entail the most severe penalty short of capital punishment-deprivation of the right to continue in business and the loss of source of livelihood. Let me say in advance that I propose, by analyzing these minimum price provisions, to demonstrate that as now drawn they will inevitably result
1. In higher prices to the consumer, to some extent everywhere, but particularly in areas favorably located in proximity to producing fields;
2. In loss of business and, in many cases, ruin to the producer, large or small, whose mines are in such fields; and
3. In serious and continuous prejudice to the small producer everywhere.
If I can demonstrate this to you, it is unnecessary to go further and show the inevitable corollary consequence, the loss of business to competing fuels such as oil and gas, the dislocation of businesses and population centers which have been built and geared to favorable transportation situations with respect to fuel, and the shipping of prosperity from one part of the country to another by a commission which, after all, is not going to be immune to political considerations.
Territorial subdivision of the United States.—The minimum-price machinery set up in this bill is predicated on a subdivision of the United States into 22 districts and 9 so-called “minimum-price areas. A list of these districts, by metes and bounds, appears in an annex to the bill. These districts are, in turn, erected into 9 so-called "minimum-price areas", listed and described in a table in section 4. These minimum-price areas are vastly different in size. Minimum-price area no. 1, for example, comprises 11 entire districts and a part of a twelfth, out of the total of 22 districts. It comprises all of the United States east of the Mississippi save for a limited area in the Southeast, and extends west of the Mississippi to include the entire State of Iowa. Illinois is district no. 9 and is part of minimum-price area no. 1.
Let me digress here to say that under the operation of the National Recovery Act code, in actual practice Illinois was not treated as a unit for price-fixing purposes. Illinois, together with Iowa and Indiana, constituted District No. 2, under a divisional code authority which did not try to exercise any price-fixing authority. Each of these States had its own subdivisional code authority but in Illinois even this board did not originate the prices. Illinois contained four marketing units, commonly called the “southern Illinois, the Belleville, the central Illinois, and the northern Illinois agencies," respectively. These were the units that calculated their own costs and originated their own minimum prices for their respective areas, subject to the approval of the subdivisional code authority of Illinois. The latter's contact was directly with the National Recovery Administration in Washington. In other words, the producers in the south half of the State could not fix prices for the northern Illinois fields. The most they could do, through control of the subdivisional code authority of Illinois, was to veto prices proposed by the northern Illinois group which thus always had a voice in the matter. Much less could producers in other States have any voice or control in fixing these prices. We cannot agree, therefore, with the statements made to this committee implying that this bill merely continues the price-fixing machinery of the code.
Under this bill, the basic territorial unit for the fixing of minimum prices is the minimum-price area, particularly with respect to an important common consuming market area such as Chicago. As I have said, almost all of the United States east of the Mississippi and the State of Iowa are to be thrown together into one such area.
The next most important unit is the district which, for oůr purposes, is the entire State of Illinois. The inevitable effect of using such large territorial units can, I am confident, be demonstrated from the face of the bill itself. The lower transportation costs of producers with mines close to the consuming market
area are to be neutralized by imposing minimum prices much higher than their cost so that distant producers can sell to advantage in that market; the nearby producers are to have all or a part of their trade taken from them and handed over to more distant producers; the consumers in such areas are to be heavily taxed in order to subsidize those more distant producers; and the industries in such areas are to be handicapped as against industries which are not located in common consuming market areas.
It will be helpful to consider the matter in the light of concrete facts, and for this purpose I shall take the situation of the Northern Illinois Coal Corporation with reference to its principal market, Chicago. I am confident that its situation can be reproduced many times over throughout the country, with differences only in degree. The Wilmington mines are 50 miles from Chicago, and the freight rate is $1.25 per ton. The Illinois mines farthest from Chicago are those of the southern Illinois fields, at a distance of 300 miles, with a freight rate of $2.10 a ton; that is, 85 cents higher. Altogether, in Illinois there are 10 freightrate groups to Chicago, varying between these two extremes. They are shown on a map, copies of which have been handed you. This map also shows the location of coal fields in Indiana and western Kentucky and the freight rates from those fields. We might have carried the matter further and have shown the transportation costs in detail from the coal fields in Pennsylvania and West Virginia, which, needless to say, are substantially higher; but it will be sufficient for our purposes to take the figure of $3.24, which is the freight rate from western Pennsylvania to Chicago.
Suppose the grades of coal produced in all these fields were all exactly the same and that the minimum prices f. o. b. at the mines were fixed at exactly the same figure, based on a reasonable average-cost figure. I assume that the consumer would have no serious cause for complaint. His minimum price would be the operator's minimum price plus transportation charges. But if, as the result of this bill, the Chicago consumer has to pay an additional 85 cents for coal from the northern Illinois mines, or any part thereof, to counteract the transportation costs from the other and more distant mines in Illinois, you will readily agree that the consumer is being badly imposed on. And if he has to pay an additional $1.99 to counteract the transportation costs from western Pennsylvania, the imposition assumes enormous proportions.
The subject is much more complicated than the simple facts I have assumed. There are endless varieties of coal in quality and sizes, and no two regions bave exactly the same range of varieties. Northern Illinois coal, for example, is of a lower grade than coal from other parts of the State and, to attract the consumer, must sell at a correspondingly lower price.
Powers of the district boards.—The most important cog in the machinery for fixing minimum prices is the district board, to which very important legislative powers are delegated. Among these powers may be mentioned the following:
1. The district board ascertains the weighted average of the total costs of the tonnage produced in the district, on the basis of which the Commission ascertains the weighted average of the total costs of the tonnage for each minimum-price
This weighted average is to be taken as the basis for the establishment of minimum prices to be effective until changed by the Commission (H. R. 8479, p. 13, line 8, to p. 14, line 1; S. 2481, p. 12, line 16, to p. 14, line 2).
2. The district board, either on its own motion or when directed by the Commission, establishes minimum prices f. o. b. at the mines for kinds, qualities, and sizes of coal produced in its district. The bill provides that these prices shall be established so as to yield a net return per net ton for each district in a minimumprice area not less than the weighted average of the total costs per net ton of the tonnage of such minimum-price area (H. R. 8479, p. 11, lines 3-14; S. 2481, p. 10, lines 13–22). True, it is also provided that the prices shall be established so that the return for the district will “equal as nearly as mathematically possible" this weighted cost average, but we shall presently see how little this means. The only definite limitation placed by this bill is that the minimum prices established for the district shall, as a whole, return not less than the weighted average cost for the minimum-price area. There is another limitation which may operate further to raise the minimum prices. The bill provides in two places that no minimum price shall be established that permits dumping” (H. R. 8479, p. 13, lines 6-7, p. 15, lines 23–24 S. 2481, p. 12, lines 1415, p. 15, lines 18-19). Dumping ordinarily means sale below cost. These provisions may easily be interpreted to mean that no minimum price shall be fixed for any mine that would permit sale below its cost, even though that mine have a cost greatly exceeding the weighted average cost for the district or for the minimum-price area.
3. The district board is given “full authority, in establishing such minimum prices, to make such classification of coal
as it may deem necessary (H. R. 8479, p. 10, line 25, to p. 11, line 3; S. 2481, lines 10-13). In this connection, the bill provides that "the minimum prices so established shall reflect, as nearly as possible, the relative market value of the various kinds, qualities, and sizes of coal" (H. R. 8479, p. 12, lines 9–11; S. 2481, p. 11, lines 17-19). By these provisions the district board is obviously given very broad power to depart from the standard of weighted average cost, to fix prices for the various grades of coal, and, either by its method of classification or by the prices it fixes, to favor one grade of coal over another, one mine over another, and one producing field over another.
4. The district board is further given “full authority in establishing such minimum prices, to make such
price variations as to mines and consuming market areas as it may deem necessary and proper” (H. R. 8479, p. 10, line 25, to p. 11, line 3; S. 2481, p. 10, lines 10-13). A little further on the bill provides that "the minimum prices só established
shall be just and equitable as between producers within the district” (H. R. 8479, p. 12, lines 9-12; s. 2481, p. 11, lines 17-20). The full significance of these provisions will not be appreciated until we come to the provisions for coordinating prices, but it is obvious from what I have quoted that there is no real limitation on the district board's power to establish different minimum prices for different mines for exactly the same grade of coal, and even to establish different minimum prices for the same mine on the same grade of coal for two or more different consuming market areas. I have studied the bill microscopically, and I find no legislative standard of any kind prescribed to guide the district boards in these discriminations between mines and between consuming market areas. The standard of weighted average cost is completely thrown overboard; its only significance is to prescribe the minimum total return for the entire district. Remember that the minimum prices are to be established f. o. b. at the mines. What is the distriet board to take into consideration when it departs from the average-cost theory and fixes the prices on some other basis? Obviously it will be transportation costs, although this portion of the bill is silent on the subject. It does not provide how much of the transportation costs are to be neutralized, nor on what. theory, not under what standard.
5. The district board “shall, on its own motion or when directed hy the Commission, establish reasonable rules and regulations incidental to the sale and distribution of coal by code members within the district” (H. R. 8479, p. 14, lines 9-12; S. 2481, p. 14, lines 3–6). It is further provided that "such rules and regulations shall not be inconsistent with the requirements" of section 4 and "shall conform to the standards of fair competition hereinafter established" (H. R. 8479, p. 14, lines 12–15; S. 2481, p. 14, lines 6-9). Otherwise there is no limitation or standard as to what these rules shall be (except the reviewing power given to the Commission). While the bill does not expressly so state, I think it is fairly implied that a violation of one of these rules is a violation of the code and subjects the offender to loss of his license. In other words, the district board is given power to make regulations having the force and effect of law.
6. The district boards are given authority, under rules and regulations to be established by the Commission to "coordinate in common consuming market areas upon a fair competitive basis the minimum prices and the rules and regulations established by them, respectively, under subsection (a) hereof” (H. R. 8479, p. 14, lines 21-25; S. 2481, p. 14, lines 15–19).
What does the bill mean when it directs the district boards to "coordinate" prices? Obviously, by itself it means to change the prices as originally determined, so as to make them higher in one district and lower in another with reference to coal to be sold in a common consuming market area such as Chicago. But the bill goes on to provide that the prices may not be revised downward, only upward. It stipulates
"The minimum prices established as a result of such coordination shall not substantially reduce as to any district the return per net ton upon all the coal produced therein below the minimum return as provided in subsection (a) of this section” (H. R. 8479, p. 15, lines 7-11; S. 2481, p. 15, lines 1-5).
True, the bill further stipulates that the coordinated prices shall not "increase such return per net ton by an amount greater than necessary to accomplish such coordination", etc., etc., but the very positive instruction given in the first clause quoted leaves no room for doubt as to the direction in which the prices will move. This portion of the bill also commands that “no minimum price
shall be established that permits dumping”; in other words, sale below cost by any operator (H. R. 8479, p. 15, lines 18-19; S. 2481, p. 15, lines 23-24).
Besides this low limit on the minimum prices to be established by coordination, what standard is provided to guide the district boards? This time we do not have to read between the lines to learn of some of the considerations which they not only can but must take into account. Listen to the following:
“Such coordination, among other factors, but without limitation, shall take into account the various kinds, qualities, and sizes of coal, and transportation charges upon coal. All minimum prices established for any kind, quality, or size of coal for shipment into any consuming market area shall be just and equitable, and not unduly prejudicial or preferential, as between and among districts" (H. R. 8479, p. 14, line 25 to p. 15, line 7; S. 2481, p. 14, line 19, to P. 15, line 1).
The one thing that is clear in what I have just read is that these district boards may get together and juggle prices so that a producer or a group of producers in one district will be subjected to higher minimum prices, way above the average cost figure, in order to permit another producer or group of producers in another district to absorb large transportation costs and sell in the same market. If this is not the meaning, I challenge the proponents of this bill to give an intelligible interpretation to the language I have read. It is true that the language requires that the prices be just and equitable, and not unduly prejudicial or preferential, as between and among the districts (whether this means something favorable or unfavorable, I confess I don't know). Unlike the earlier portion of the bill relating to the minimum prices for this district, it omits to require that the prices be just and equitable as between producers in different districts. The earlier portion of the bill, on the other hand, omits to require that the prices be not unduly prejudicial or preferential as between producers in the same district. It is possible that in this coordination of prices the Illinois district as a whole, will be protected, particularly since its district board has to take part in the process of coordination. But its district board can sacrifice individual producers and the consuming public almost at will, and the majority of tonnage controlling the board can see to it that the minority (in this case, the northern Illinois operators) are selected for the sacrifice.
What language, if any, is to be found in these minimum-price-fixing provisions to serve as a standard for protecting the consuming public? If the theory of prices f. o. b. the mines, based on the average cost, had been really followed, it would have provided some measure of protection; but, as we have seen, that theory is followed only to the extent of fixing the rock-bottom total return for any district. The only other language is the tiny and innocuous phrase, tucked away in an inconspicuous part of section 4, that the minimum prices "shall have due regard to the interest of the consuming public" (H. R. 8479, p. 12, lines 12–13; S. 2481, p. 11, lines 20-21). I submit that, in the first place, this phrase means exactly nothing because of its generality; and in the second place, any wholesome meaning it might have is completely neutralized by the specific language of the bill to which I have called attention.
7. The district board has, in effect, the power to levy and collect taxes, to meet the expense of administering the code, on the persons subject to the code (H. R. 8479, p. 9, lines 7-12; S. 2481, p. 9, lines 10–17). Again, there is no standard to govern the exercise of this important legislative power. While the assessment is to be apportioned on a tonnage basis, there is no limit to the total amount.
Such are the powers of these district boards. It is true that the exercise of powers is, in large measure, subject to approval, disapproval, or modification by the Commission, and, in certain instances, must be exercised in accordance with rules and regulations made or approved by the Commission. The fact remains, however, that for most purposes the district boards are the agencies to which these important legislative powers are delegated. The commission act only as sort of an appellate legislative tribunal, bound, or at least somewhat limited by, the record submitted to it, and subject to the same legislative standards or lack thereof as the district boards. The Commission's relation to the boards can be found duplicated over and over again in existing Government departments and commissions where an inferior administrative tribunal or official has legislative powers subject to a higher administrative tribunal or official-with one very vital difference.
In this bill the inferior tribunals are not composed of Government officials; they are not to be paid by the Government; they take no oath of office either to abide by the Constitution or faithfully to execute the law. Yet they are to be given vast legislative power which will determine the rights, the duties, and the