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shall have authority to inquire into all matters relative to the mining and shipping of coal by said applicants, including the quality of coal to be marketed, the wages paid miners, general production and distribution costs, capital invested, and the reasonableness of the prices which may be fixed at any time by such pool, association, merger, combination, or consolidation.
As I understand, the question raised by the other side was whether or not that implied the power to fix those wages after making the inquiry.
Mr. WARRUM. Why, no, Mr. Chairman. There is nothing in there to that effect. On the contrary, the section expressly provides that the wages shall be negotiated between the parties. But let me give you a situation.
Senator COUZENS (presiding). Then, after making the inquiry which this bill gives them the right to make, they have not any authority to use that information that they secure from the inquiry; have they?
Mr. WARRUM. Why not?
Mr. WARRUM. All right. Now, here is the situation: It is inconceivable that any other situation ought to be created by law or allowed by law.
They come together and form a pool in the smokeless field or in some other field, or a combination, and they come to the commission and they say, “ We want a license to form a marketing pool or merger or combination." Very well. Somewhere, in some governmental commission, ought to be lodged discretion as to whether or not they shall be licensed.
Senator WHEELER. Do you mean licensed or permitted ?
Mr. WARRUM. Licensed to do that particular thing—that is, permitted to form these associations that are free from the oridnary restraints of the Sherman Act.
How would the commission go about determining whether or not the application for a license ought to be granted?
They say they want to charge a certain price. The power is given only to fix a maximum price. The price is determined by these gentlemen themselves before they go to the commission. They want to fix a certain price for their product at Columbus or Cleveland or whatever it may be. One of the first things the commission would have to do is to find out how much it costs them. Eighty per cent of the cost is the wage cost-the labor productive cost. If the commission could not inquire into that for the purpose of determining whether or not a license ought to be granted to them, why have a commission at all, or why have a license? Why not just throw the reins over the neck of the horse and allow them to run wild in the markets of this country?
There has to be some restraint upon them; and for the purpose of an intelligent restraint by the commission in determining the propriety or advisability of permitting this or that pool to operate they must be able to inquire into the capitalization cost, interest, taxesthere may be a lot of things enumerated.
Senator WHEELER. Let me ask you this question: When they go, for instance, to the Federal Trade Commission at the present time
Mr. WARRUM. They lay all those things before them.
Senator WHEELER. I was going to say, when they go to the Federal Trade Commission at the present time, and they want–because I
happen to know of an instance where they did—where they want to create, for instance, an export corporation, or where they are afraid they may be on the ragged edge of violating the Sherman antitrust law, and they go to the Attorney General of the United States and to the Federal Trade Commission, they say, “ Here; this is what it costs us for the production of our product," and try to bring themselves within the rule of reason laid down by the Supreme Court, and show to the Federal Trade Commission the reasons why they should be permitted to do what they are seeking to do in order to let their business go on.
Mr. WARRUM. That is true.
Senator COUZENS (presiding). I am not making any objection to that, remember. I am stating the contention made by the other side as to whether it is mandatory—and this language does not seem to make it mandatory—that they take into consideration all of these elements of cost.
Mr. WARRUM. Why, man after man will argue here, lawyer after lawyer has argued to you here for a length of time, Senator Couzens, that the great, the grievous fault of this bill is that it does not fix any standard by which the commission acts.
Senator CoužENS (presiding). That is the point I wanted to ask Mr. WARRUM. And when we undertake to fix standards, they quarrel with the fixing of the standards. There is not anything we can do that will satify them:
Senator COUZENS (presiding). I am not particularly concerned about what they quarrel about. I am concerned about what I understand the bill.to mean.
Mr. WARRUM. The bill does require the commission to do those things, to take those things into consideration.
Senator BLACK. That is in fixing the maximum price only, as I understand.
Mr. WARRUM. Yes; and in granting a license to these parties to operate.
Senator BLACK. Whether or not their offer is fair?
Senator WHEELER. I do not think you quite understand Senator Couzens' thought about the matter.
Mr. WARRUM. Well, it is mandatory; yes. Those things can be inquired into and should be inquired into by the commission if it acts in accordance with this bill. They should be considered in passing upon the license. All those things are proper, in my judgment.
Senator BLACK. And if you permit them to reduce the field of competition, there must be some method, of course, of regulating the cost to the consumer.
Mr. WARRUM. Certainly.
Senator BLACK. Otherwise, you have all the evils without any restraining influence.
Mr. WARRUM. Absolutely. It is a privilege, as I say. The door is open for them. They do not have to come in. They can still function under the secondary license.
Senator WHEELER. I think the point Senator Couzens brought up was this: The bill says (reading]:
In considering the request for such licenses said commission shall have authority to inquire into all matters relative to the mining and shipping of coal by said applicants-
And so forth. Your idea was that that does not compel the commission to inquire !
Mr. WARRUM. Is that the idea?
Senator CouZENS (presiding). That is one of the ideas; and after having done that it does not require the commission to take any cognizance of them, after having gotten these facts through inquiry. I mean, this language does not say that.
Mr. WARRUM. Perhaps only by indirection.
Senator COUZENS (presiding). Under this language the commission may ignore any one of those things they please. In other words, the wages may be inadequate, and yet the bill does not require the commission to take any cognizance of that fact if it does not wani to. It may find that the return on capital is too much, and it is not required to take any cognizance of that if it does not want to.
Mr. WARRUM. Except by the rejection of the application for license.
Senaor COUZENS (presiding). But they still grant the license, if they choose, even after making inquiry. In other words, when you have come to arrive at the valuation of a railroad or a public utility. it is required under some statutes that they be compelled to take into consideration the original cost, prudent investment, reproduction, and all of those elements. This does not require the commission, as I understand the language, to take into consideration any of these things in granting the license.
Mr. WARRUM. Then it ought to be amended; and that is what one would term the machinery or the administrative feature of this bill. It ought to be amended so to do.
Senator COUZENS (presiding). That is the question I am trying to raise. I want to understand the bill.
Mr. WARRUM. I think the purpose of the bill
Senator COUZENS (presiding). I understand the purpose, but I want to know whether it is carried out.
Mr. WARRUM. The purpose of the bill is to enable the commission to consider those things in granting the license. They must consider them.
Senator COUZENS (presiding). It does not say that.
Senator COUZENS (presiding). Yes; that must have been the idea, but in my judgment it leaves too much discretion to the commission to ignore any of those elements if it chooses.
Senator GLENN. The next sentence says:
Senator COUZENS (presiding). Yes; but after having made the inquiry, what shall it do?
Mr. WARRUM. All right. Now, either we can prepare an amendment along that line
Senator GLENN. Your idea is that it should be mandatory that they make such inquiry and take it into consideration in fixing their price?
Senator COUZENS (presiding). Yes. This language simply says they have authority. It does not compel them to exercise it.
Mr. WARRUM. I think it is weak in that respect, because those are the standards by which they grant or refuse the license.
Senator CoužENS (presiding). I think the intent of the bill is understood, but I do not believe the language carries out the intent.
Mr. WARRUM. I think you are right about that; and I want to say here, if it is necessary to say it in apology, that we have had no help from anyone in drafting this bill. We realize that in a great many respects it impinges upon the activities and what they regard as the peculiar privilege of the operator; but not an operator's attorney has come to us and suggested that this ought to be modified or that modified. We are definite upon the question of our labor rights. We have tried, as I said yesterday, to spread the feast for the operators under this primary license. Now, if there is something in the wording of the bill, or in its machinery, or in its administrative functions, that ought to be amended-and I think that is one of them—we are willing to do it at the direction of the committee, or willing to discuss it if it is offered by any one else.
Do you suggest that we make an amendment or rewrite that section?
Senator COUZENS (presiding). I think you should change the language to carry out the intent.
Now just take the next section, and let me make a hypothetical
And so forth. You have referred to that. Now, assuming, for instance, that they form a pool in West Virginia, and they form a pool in Pennsylvania, and they fix the maximum price the commission will permit them to charge, then there is a contest on between Pennsylvania and West Virgina for the Great Lakes business. What is to prevent them from cutting, still having a buyer's market, as you call it, and competing with each other, and ruining the whole intent of the bill?
Mr. WARRUM. There is not anything. I do not know just exactly how we could reach that. We can not fix a minimum price.
Senator WHEELER. You can fix a maximum price?
Senator COUZENS (presiding). When you come to fix the maximum price there is nothing to prevent them from competing with each other the same as they are doing now.
Mr. WARRUM. That is true. The only thing it does do, as I say, is to place them under the direction of a commission that will perhaps be in constant touch with them just like a great many industries have appointed their own private czars and formed institutes that are extralegal, we will say, extrastatutory, and formulated codes, and gradually have gotten out of the slough of cutthroat competition and gotten upon some sort of a rational basis.
We hope this may occur in the coal industry. I do not know whether it will or not, Senator.
With the functioning of an intelligent commission, and the granting of these privileges, and the bringing together of these men, we do hope that this could be done, and I think perhaps it could be done: That two pools might still undersell each other, but I believe that the members of one pool could, under a rule adopted by the commission, be required to maintain the price that that pool agreed upon.
But the elimination of competition is not supposed to be attained by this bill. It is the encouragement of some sort of a stabilization of the industry.
If the bill is to be measured by the perfect results that it will achieve in an industry that has been demoralized for 50 years or more, that is as rotten as this industry is now, I could not have the nerve to come and present it to this committee, nor to argue it. I do not believe that a bill can be drafted over the opposition that you have heard here for the last week as to the constitutionality and the lack of enonomic justice, directed against every line and letter of the bill—I do not believe that you can draft a bill meeting a situation of that kind and expect it at once to blossom out into a perfect tree that will furnish shelter for this industry and solve all of its problems.
As I said yesterday, the Interstate Commerce Commission was created in 1885, and my recollection is that for 15 years all they did was to draw their salaries; but the time came when that body became the most efficient governmental agency created by Congress and functioning in this country.
Senators, I do respectfully beg that this bill, and our efforts to đo something in the way of legislation, be not measured by whether or not we have attained an ideal and have absolutely solved a problem.
Senator BLACK. Let me ask you this question in line with that:
After the license has been granted, and they have investigated ihe salaries and the work and the coal and the conditions, and have granted a license, what continuing power do you clearly give the commission with reference to the revocation of those licenses, a reinvestigation of salaries, and a reinvestigation of working conditions and economic affairs in general?
Mr. WARRUM. Section 8 attempts to deal with that situation:
Senator BLACK. That would have a direct bearing on what the Senator asked, if there were any unfair methods adopted by them, I should think-a continuing influence, a continuing power.
Mr. WARRUM. Assuming that the commission could, as incidental to its power to license these marketing pools, adopt a rule
Senator BLACK. Conditions might change, and the maximum might be wrong.
Mr. WARRUM. They can have that readjusted, I think, from time to time.
Senator BLACK. That would be a continuing power?