In granting such license the commission shall have authority to inquire into all matters touching the mining and shipping of bituminous coal by the pool and its members and to fix the maximum prices to be charged in the operation of the pool, which maximum price may be changed from time to time. Any member of the pool may withdraw upon notice, provided that if the withdrawing member be a corporation it remains subject to the other provisions of the act.

The bill is intended to deal only with corporations, but natural persons are given the right to join the pool on the same terms as a corporation in order to avoid the charge that the natural citizen was thus discriminated against in the matter of price fixing. He can join or withdraw at his pleasure. If he joins, it is on the same terms as the corporation.

The legal ground for according such privilege to a special industry has been considered above, in relation to class legislation.

The provision for maximum prices is further provided for in section 5, in which connection it will be more fully discussed.

(2) Section. 3. Mergers, combinations, and consolidations.-Section 3 provides that no merger, consolidation, or combination of two or more corporations engaged in the production and shipment of bituminous coal in interstate commerce shall be lawful without a license be granted by the commission, and this license is conditioned upon the acceptance of the act and the rules of the commission made to carry the act into effect.

It is said that such mergers and consolidations are now lawful as against the Sherman Act, if they do not violate the rule of reason; and that this provision prevents such corporations from exercising rights in relations to mergers and combinations that they may now lawfully assert. As far as this suggests a legal objection to the section it is open to a twofold answer: First, the bill can regulate mergers and combinations of corporations if Congress has the power over such corporations, as before demonstrated. Any sovereignty can regulate the merger or consolidation of domestic or foreign corporations. Statutes to that effect are frequent. In Ashley v. Ryan (153 U. S. 436, p. 442), the court said:

"The power of corporations of other States to become corporations, or to constitute themselves a consolidated corporation under the Ohio statutes, and thus avail of the rights given thereby, is as completely dependent on the will of that State as is the power of its individual citizens to become a corporate body, or the power of corporations of its own creation to consolidate under its laws. * * *

"It follows from these principles that a State, in granting a corporate privilege to its own citizens, or what is equivalent thereto, in permitting a foreign corporation to become one of the constituent elements of a consolidated corporation organized under its laws, may impose such conditions as it deems proper, and that the acceptance of the franchise in either case implies a submission to the conditions without which the franchise could not have obtained." Second, that the Sherman Act, as construed by the rule of reason laid down in the Standard Oil case (221 U. S.), permits such mergers when not actual monopolies, does not determine the power of Congress over the subject matter. From 1890 to 1911, the Sherman Act was construed as forbidding combinations or transactions that had a tendency to restrain interstate commerce. Certainly bituminous coal producers and shippers are in some degree competitors. Moreover, as we have seen above, Congress has imposed special restraints upon the specific industry of meat packers. There appears to be no legal objection to Congress dealing with corporations engaged in interstate commerce in soft coal, to the end that these corporations may pool together for fixing prices, or may merge or consolidate under certain determined conditions.

(3) Section 4. General visitatorial authority.-Section 4 provides for general visitatorial power to be exercised by the commission over applicants for a primary license to form marketing pools or mergers. The Federal Government undoubtedly has such visitatorial power now if the corporation be engaged in interstate commerce. It is further provided in this section that the commission shall inquire as to the preparation of applicants for maintaining and their ability to maintain direct selling agencies in their principal consuming markets, and shall provide reasonable regulations requiring the maintenance of such agencies of direct sale to the consumer."

The reason for this provision is obvious to the committee. One of the curious facts developed by the inquiry was the spread of profits between the price of

28181-29-PT 2—17

coal at the pit mouth and the cost to the domestic consumer. This spread of profits was due to the parasitical retail system that had overgrown the distempered industry. Domestic coal too often passes through many hands-wholesalers, brokers, and retailers. By the admission of the retailers' own representative their business is profitable, while the producer is losing money. Furthermore, the disorganization of the coal market is due in part to the reckless shipping of indefinitely consigned coal. Millions of tons are annually sold at scalping prices for demurrage. The above is a reasonable and definite authority conferred on the commission with respect to a subject vitally involved in any process for stabilizing the industry.

(4) Section 5. Maximum prices. By section 5 the commission is given authority to fix the maximum prices which may be agreed upon or charged by the marketing pool or merger. This maximum price shall be fixed with due regard to fair wages paid for production and a fair return on the capital invested. Maximum prices may be changed from time to time on hearing. The scale of maximum prices shall be made with reference to the different grades, kinds, and quality of coals marketed by the licensee in interstate commerce. If any licensee feels that the maximum price is unreasonable or confiscatory, he may apply to the Federal court for relief, as set out in this section.

The purpose of the maximum price control, is to prevent the l'censee from exploiting the public under the special privileges granted it. Minimum prices are not compelled. There is no price fixing at all except as to the maximum. This maximum differs with the k nds, grades, and quality of coal and is fixed with due regard to fair wages and a fair return to the corporation.

It is argued that this provision is unconstitutional as an interference with freedom of contract. If a corporation shipping soft coal does not desire to come within the provisions permitting pools and mergers, it is not required to do so. Only when it seeks the privilege granted a primary licensee, is it required to surrender a right to charge undue prices—a right which is manifestly the result of the privilege. It is obvious that the special privilege can be granted (when not compulsory) with proper limitation upon its exercise.

66

In the packers and stockyards act of 1921 (c. 64, sec. 306, 42 Stat. 164), the law requires the stockyards (clause b) to publish its rates, charges, rules, and regulations; and in clause "e" that the Secretary of Agriculture may have a hearing I concerning the lawfulness of such rate, charge, regulation, or prod uct;" and "make such order with reference thereto as would be proper in a proceeding initiated after it had become effective." The section was intended to give the Secretary control over maximum commission and yard service charges a control which he actually exercises, and which has been sustained by the district court at Omaha in a decision rendered December 18, 1928. It may be said that a stockyard is impressed with a public use as a market; but reference to the act of February 18, 1922, providing for marketing pools among producers of agriculture and kindred products, will show that a similar restraint (though exercised in a different manner) is vested in the Secretary with reference to the prices fixed by such pool.

** * *

The first section provides that these producers "may act together in associations, corporate or otherwise, with or without capital stock, in keting in interstate or foreign commerce.

mar

The second section provides that if the Secretary have reason to believe that any such association monopolizes or restrains trade in interstate commerce to such an extent that the " price of any agricultural product is unduly enhanced' he shall serve a notice and have a hearing thereon, and if the pool or association does not desist he shall file in the district court a certified copy of his order and proceeding with a petition asking that the order be enforced; the district court to have jurisdiction to affirm, modify, or set aside the order; and the facts found by the Secretary shall be prima facie evidence of the facts.

As the agricultural association is formed to fix prices, it is obvious that this power of the Secretary is to review these prices; and it is plain that his findings and orders involve a fixing of the reasonableness of a maximum rate. The only difference between this provision in the agricultural marketing act and the one in the pending bill is that the burden of initiating the judicial review is here thrown upon the primary licensee. It is also plain that the agricultural producers are allowed to combine to agree upon prices which they will charge; that the right to exercise this privilege is conditioned; and that by reason of the privilege they are not given entire freedom to contract with the consuming public but are limited in respect to that so-called freedom of contract.

In short, in either case the right to forestall the market is limited by the agencies of the Government, subject to court review.

Opponents have cited the gasoline case, Williams v. Standard Oil, decided by the United States Supreme Court January 2, 1929, in which it was held that Louisiana could not fix the price to be charged for gasoline. The following from the decision will show that the question involved was not the question presented by the pending bill:

The statute was adopted in 1927. Its purpose and effect are to fix prices at which gasoline may be sold within the State.

* * *

"The principal ground of attack, and the only one we need to consider here, is that the legislature is without power to authorize agencies of the State to fix prices at which gasoline may be sold in the State, because the effect will be to deprive the vendors of such gasoline of their property without due process of law in violation of the fourteenth amendment.

**

"It is settled by recent decisions of this court that a State legislature is without constitutional power to fix prices at which commodities may be sold, services rendered, or property used, unless the business or property involved is affected with a public interest."

In that case the power asserted was price fixing. In the pending bill corporations permitted to form marketing pools or mergers are allowed to fix their own prices except that they may not exercise this privilege to act beyond a maximum price to be determined by the commission, with the right to have that maximum price set aside if it be unreasonable or confiscatory. As we have shown, the agricultural marketing association act provides for a similar restraint as a condition of the privilege granted by the law; and the whole proposition rests upon an entirely different basis from the mere regulation of prices. The right to sell a commodity at any price rests upon the legal right and freedom that the seller has to contract with the purchaser. But this does not presuppose a combination between members of a price-fixing pool or merger of competing corporations for the purpose of greater contracting power. If these privileges are granted corporations the grant may be in a form that modified its potentiality.

(5) Section 6-Primary licensee.-Section 6 provides that no new corporate bodies shall ship soft coal in interstate commerce without a license granted upon the applicants' acceptance of the act and authority of the commission; that any corporation now engaged in shipping soft coal may receive such primary license, provided it makes its application therefor within three months after the act goes into effect.

The purpose of this section is to require new corporate entities to take out a primary license before shipping coal, on the ground that they have acquired no rights by acquiescence in their interstate commerce and are subject as foreign corporations to license and regulation. Existing corporations are permitted to do this, but are required to make application within a fixed time to the end that they may not elect to engage in litigation over the act with the view of ultimately accepting it if it be held valid. Similar provisions have been sustained in many statutes creating public service commissions, in which the public utility was given a limited time within which to surrender its franchise contracts with municipalities in exchange for an indeterminate franchise from the State.

(6) Section 7. Relation of the commission to business of primary licensee.Section 7 provides that the commission shall promote and encourage the business of the primary licensees, regulating, analyzing, and grading of its coals shipped in commerce, and furnish information of such graded coals to purchasers and consular agents. That it may inspect the mines and recommend methods for increasing the safety of miners and in developing mining economies; recommend to departments and agencies of the Government the coals of the licensees; encourage the economical distribution of markets and joint or collective selling agencies, yards, and docks; study the question of export coal and ship bunkering and promote the same; investigate the fuel service of railroads and make reasonable rules therefor to prevent discrimination between coal mines and coal fields.

It is plain that the authority of the commission is not intended to interfere with the business management of the licensees. In the first sentence of this section, to wit, "the mining and interstate and foreign commerce of such licensees shall be supervised, encouraged, and promoted by said commission," the word "supervised" has led to the argument that the bill contemplates the commission superseding the directors and officers of the corporation in the

control of its business affairs. To avoid this inference we suggest that the word " supervise" should be taken out.

The final paragraph of this section provides that in making wage agreements the licensees may negotiate through an operators' association "and the employees shall be entitled to deal collectively by representatives of their own choosing without interference, influence, or coercion exercised by their employers. No such licensee shall make it a condition of employment that the employee shall not join the labor union, but the right of the mine workers employed by such corporation to organize and maintain their union shall not be denied or abridged."

The bill permits primary licensees to enormously strengthen their economic bargaining power by cooperation. This strength can be manifested not only in the matter of prices but of wages. Mine labor constitutes more than 75 per cent of production cost. It is peculiarly subject to deflation, and its only resistance lies in its right and power to collectively bargain through an organization. The miners' union was the proponent of the investigation and of the bill. It recognized that the wages and working conditions of miners depend on the prosperity of the capital side of the structure; but it is unwilling to have itself left defenseless under the all-pervading policy of bituminous-coal companies to exact what is called the yellow-dog contract of individual service, which is the utter defeat of collective bargaining. It has been said that the bill turns the industry, or, at least, its labor, over to the miners' union. Nothing is more untrue, because under the bill the employees can have any union or organization they desire, even the company union, though the company union would still leave mine labor open to exploitation because of the impotency of such organizations to secure standard or uniform scales. The only hope of the miners' union or of any general organization of miners to negotiate wage agreements under this bill would lie in the argument that it could make that miners should associate themselves with a general organization as a means of effectually protecting their commond standard of wages and working conditions. But the bill does not require this.

The above provision that the primary licensee shall not make it a condition of employment that his employees shall not join a labor union has been attacked as destroying freedom of contract. As we have repeatedly stated, the privilege granted primary licensees justifies the conditions imposed, and the condition directly relates to the privilege.

The subcommittee of the Judiciary Committee of the Senate, drafting its own code on labor injunctions, has undertaken to outlaw the "yellow-dog" contract, in so far as its enforceability by Federal injunctions is concerned. In committee print of S. 1482, in section 2 of the subcommittee's proposed bill, the following is stated as its justification:

"Whereas under prevailing economic conditions, developed with the aid of governmental authority for owners of property to organize in the corporate and other forms of ownership association, the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment, wherefore it is necessary that he have full freedom of association, self-organization, and designation of representatives of his own choosing to negotiate the terms and conditions of his employment, and that he shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-oganization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection."

In American Foundries v. Tri-City Council (257 U. S. 202, p. 208) the court said:

"Labor unions are recognized by the Clayton Act as legal when instituted for mutual help and lawfully carrying out their legitimate objects. They have long been thus recognized by the courts. They were organized out of the necessities of the situation. A single employee was helpless in dealing with an employer. He was dependent ordinarily on his daily wage for the maintenance of himself and family. If the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave the employ and to resist arbitrary and unfair treatment. Union was essential to give laborers opportunity to deal on equality with their employers. They united to exert influence upon him and to leave him in a body in order by this inconvenience to induce him to make better terms with them. They were withholding their labor of economic value to make him pay what they thought it was worth. The

right to combine for such a lawful purpose has in many years not been denied by any court. The strike becomes a lawful instrument in a lawful economic struggle or competition between employer and employee as to the share or division between them of the joint product of labor and capital. To render this combination at all effective employees must make their combination extend beyond one shop."

This statement recognizes a public policy, so far as the judicial branch may do so. That the so-called "freedom of contract" must give way to public policy has often been declared. Here the freedom of the corporation to contract conflicts with the freedom of the employee to contract-that is, to agree with his fellow workmen-and the right asserted by the corporation is only an attempt to abridge the right of its employees. Besides, we repeat, the pending bill deals with corporations. In Prudential Ins. Co. v. Cheek (259 U. S. 530, p. 536) the Supreme Court said:

"That freedom in the making of contracts of personal employment, by which labor and other services are exchanged for money or other forms of property, is an elementary part of the rights of personal liberty and private property, not to be struck down directly, or arbitrarily interfered with, consistently with the due process of law guaranteed by the fourteenth amendment, we are not disposed to question. This court has affirmed the principle in recent cases. (Citing Adair and Coppage cases.)

But the right to conduct business in the form of a corporation, and, as such, to enter into relations of employment with individuals, is not a natural or fundamental right. It is a creature of the law; and a State, in authorizing its own corporations or those of other States to carry on business and employ men within its borders, may qualify the privilege by imposing such conditions and duties as reasonably may be deemed expedient in order that the corporation's activities may not operate to the detriment of the rights of others with whom it may come in contact."

(7) Sections 7 and 8. Revocation, penalty, and suggested amendments.— Section 8 provides for revocation of the primary license upon notice. Of course, as in all such cases, the primary licensee would have a right to resist the revocation in court.

Section 9 provides the penalty for illegal shipments. This has been criticized as vague and indefinite. The purpose was to make it illegal for the corporation to ship its coal without the license provided for in the same manner as the offense is described in section 10. Therefore the following amendment of section 9 is suggested:

SEC. 9. No corporation coming within the foregoing provisions of this act shall engage in the shipment of bituminous coal in interstate or foreign commerce without securing a license as above provided, and any shipment made by such corporation without such license shall be illegal, and upon conviction thereof such corporation shall be fined for each day's illegal shipment in a sum not less than $1,000 nor more than $5,000."

(8) Sec. 10. Secondary license of existing corporations.-The fact that a foreign corporation has been admitted to do business in a State does not prevent the State from later excluding or requiring it to be licensed and regulated. And since the power of the National sovereignty must be analogous to that of State sovereignty, Congress has not lost the right to regulate and impose conditions upon corporations that have heretofore been allowed, without regulation or license, to ship coal in interstate commerce.

In Connecticut Mutual Ins. Co. v. Spratley (172 U. S. 602), at page 621, the court said:

"Having the right to impose such terms as it may see fit upon a corporation of this kind as a condition upon which it will permit the corporation to do business within its borders, the State is not thereafter and perpetually confined to those conditions which it made at the time that a foreign corporation may have availed itself of the right given by the State, but it may alter them at its pleasure."

The bill, however, has been drawn with a tender regard for corporations that have been permitted to engage in interstate commerce at the time the law goes into effect. They are required to take out a secondary license, subject only to the following condition:

"If any such corporation desire to employ only nonunion mine workers, its employees shall be free to terminate their employment and join a labor union at will, and no contract of employment which is intended to impair this right shall be lawful; said employees shall have the right of assemblage for the