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FEDERAL ALCOHOL CONTROL ADMINISTRATION
WASHINGTON, D. C.
LEGISLATIVE HISTORY
OF THE FEDERAL ALCOHOL
ADMINISTRATION ACT
(PUBLIC No. 401, SEVENTY-FOURTH CONGRESS)
(H. R. 8870)
OFFICE OF THE GENERAL COUNSEL SEPTEMBER 15, 1935
FEDERAL ALCOHOL CONTROL ADMINISTRATION
WASHINGTON, D. C.
LEGISLATIVE HISTORY
OF THE FEDERAL ALCOHOL
ADMINISTRATION ACT
(PUBLIC No. 401, SEVENTY-FOURTH CONGRESS)
(H. R. 8870)
OFFICE OF THE GENERAL COUNSEL SEPTEMBER 15, 1935
CONTENTS
Page
Chronological table ▼
Table of sources vn
Introductory note EC
Act in full 1 1
Act by sections. 17
Section 1. short title 17
Section 2. Federal Alcohol Administration 18
Section 3. Unlawful businesses without permit 28
Section 4. Permits 40
Section 5. Unfair competition and unlawful practices 51
(a) Exclusive outlet 54
(b) Tied house 57
(c) Commercial bribery 62
(d) Consignment 63
(e) Labeling 65
(f) Advertising 77
Section 6. Bulk sales and bottling 85
Section 7. Penalties : 94
Section 8. Interlocking directorates 96
Section 9. Disposal of forfeited alcoholic beverages 102
Section 10. Federal Alcohol Control Administration 106
Section 11. Amendment to internal revenue laws applicable to citrus- fruit wines 107
Section 12. Amendment to internal revenue laws providing for the
fortification of citrus-fruit wines 109
Section 13. Amendment to internal revenue laws relating to tax on
fortified citrus-fruit wines 110
Section 14. Amendment to internal revenue laws providing for the use
of citrus-fruit brandy and fortified citrus-fruit wines 110
Section 15. Amendment to internal revenue laws relating to exemp- tions for producers of citrus-fruit brandy 111
Section 16. Amendment to internal revenue laws relating to general
and special bonded warehouses 112
Section 17. Miscellaneous *._ 113
(a) Definitions 113
(b) Amendments or repeal 118
(c) Separability 118
(ni)
rv*
APPENDICES
Page Appendix I. H. R. 8870 as reported to the House by the Committee on
Ways and Means. ■ — 119
Appendix II. Report of the Committee on W,ays and Means on H. R. 8870_ 132 Appendix III. H. R. 8870 as reported to the Senate by the Committee on
Finance — 1*9
Appendix IV. Report of the Committee on Finance on H. R. 8870 164
Appendix V. H. R. 8870 as passed by the Senate, with the amendments of
the Senate numbered 172
Appendix VI. Conference report and statement of the managers on the part
of the House on H. R. 8870 T . 192
CHRONOLOGICAL TABLE
1935 June 18
June 19 and 20 July 16
July 17
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July 23 |
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July 24 |
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July 25 |
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July 26, |
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27, and |
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29 |
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Aug. 9 |
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Aug. 12 |
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Aug. 13 |
Aug. 14 Aug. 23 Aug. 24
[74th Cong., 1st Sess.]
H. R. 8539 introduced by Mr. Doughton and referred to the Commit- tee on Ways and Means. (Cong. Rec. June 18, Vol. 79, No. 125, p. 9994.)
Hearings before the Committee on "Ways and Means on H. R. 8539..
H. R. 8870 introduced by Mr. Cullen and referred to the Committee on Ways and Means. (Cong. Rec. Vol. 79, No. 145, p. 11726.)
H. R. 8870 reported out to the House by Mr. Cullen without amend- ment and referred to the Committee of the Whole House on the State of the Union. House Report No. 1542, Federal Alcohol Con- trol Bill (Cong. Rec, Vol. 79, No. 146, p. 11797).
H. R. 8870 made special order by H. Res. 305 and debated by the Committee of the Whole. (Cong. Rec, Vol. 79, No. 151, pp. 12176- 12203.)
Debate continued by the Committee of the Whole, H. R. 8870 re- ported to the House with amendments, passed by House and ordered engrossed. (Cong. Rec, Vol. 79, No. 151, pp. 12259-12272.)
House notified Senate of passage of H. R. 8870 and requested Sen- ate's concurrence. Bill referred to Committee on Finance. (Cong. Rec, Vol. 79, No. 153, pp. 12295 and 12296.)
Hearings on H. R. 8870 before the Committee on Finance.
H. R. 8870 reported out to the Senate by Mr. George with amend- ments, Senate Report No. 1215, Federal Alcohol Control Act. (Cong. Rec, Vol. 79, No. 165, p. 13234.)
Senate commenced consideration of H. R. 8870 with proposed amend- ments. (Cong. Rec, Vol. 79, No. 166, p. 13354.)
Senate continued debate on H. R. 8870 with proposed amendments; passed bill ; insisted on amendments ; asked for a conference : and appointed conferees. (Cong. Rec, Vol. 79, No. 167, pp. 13395- 13419.)
House disagreed with Senate amendments, agreed to a conference and appointed managers on the part of the House at the conference. (Cong. Rec, Vol. 79, No. 168, pp. 13511 and 13617.)
Mr. Doughton presented the conference report and statement of the Managers to the House, House Report No. 1898 Revenue From Distilled Spirits. (Cong. Rec, Vol. 79, No. 176. pp. 14672-14676.)
Conference Report on H. R. 8870 debated in House and adopted. (Cong. Rec, Vol. 79, No. 177, pp. 14806-14810.) H. R. 8870 en- rolled and signed by Speaker (id. p. 14900). Senate notified that House had agreed to conference report (id. 14947). Conference re- port submitted to Senate, debated and agreed to (id. pp. 14948- 14953).
(V)
VI
Aug. 26 Senate notified Vice President had signed Enrolled Bill H. R. 8870.
(Cong. Rec., Vol. 79, No. 178, p. 15036.) Committee on Enrolled
Bills presented H. R. 8870 to the President for his approval (id.
p. 15034). Aug. 29 Enrolled Bill H. R. 8870 (Public No. 401) approved by the President ' of the United States. (Cong. Rec., Sept. 10, Vol. 79, No. 180, p.
15434.)
TABLE OF SOURCES
[All materials refer to 74th Cong., 1st SessJ
1. Prints of Act:
(a) H. R. 8539. In the House of Representatives; June 18, 1935. (Bill
as introduced by Mr. Doughton, referred to Ways and Means Committee and ordered to be printed ; see Cong. Rec. Vol. 79, No. 125, p. 9994.)
(b) H. R. 8870. In the House of Representatives, July 16, 1935. (Bill
as introduced by Mr. Cullen, referred to Ways and Means Com- mittee and ordered to be printed; see Cong. Rec. Vol. 79, No. 145, p. 11726.)
(c) H. R. 8870, bearing Union Calendar No. 544. In the House of
Representatives, July 17, 1935. • (Bill as committed to the Com- mittee of the Whole House on the State of the Union and ordered to be printed; see Cong. Rec. Vol. 79, No. 146, p. 11797).
(d) H. R. 8870. In the Senate of the United States, May 13 (calendar
day July 25), 1935. (Bill as read twice and referred to the Committee on Finance; see Cong. Rec. 179, No. 153, p. 12296.)
(e) H. R. 8870, bearing calendar No. 1265. In the Senate of the United
States, July 29 (calendar day, August 9), 1935. (Bill as reported by Mr. George, with amendments; see Cong. Rec. Vol. 79, No. 165, p. 13234.)
(f) H. R. 8870. In the Senate of the United States, July 29 (calendar
day, August 13), 1935. (Bill as ordered to be printed with the amendments of the Senate numbered; see Cong. Rec. Vol. 79, No. 167, p. 13419.)
(g) (H. R. 8870) Public, No. 401, Seventy-fourth Congress. " Federal
Alcohol Administration Act" (as approved by the President of the United States on August 29, 1935 (Slip Law).)
2. Records of Committee Hearings:
(a) Federal Alcohol Control Act. Hearings before the Committee on
Ways and Means, House of Representatives, on H. R. 8539. June 19 and 20, 1935.
(b) Federal Alcohol Control Act Hearings before the Committee on
Finance, United States Senate on H. R. 8870, July 26. 27, and 29, 1935.
3. Reports of Committees:
(a)T House of Representatives, Report No. 1542, Federal Alcohol Control Bill.* Report submitted by Mr. Cullen, from the Committee on Ways and Means (to accompany H. R. 8870).
(b) Senate, Report No. 1215, bearing Calendar No. 1265, Federal Alcohol
Control Act. Report submitted by Mr. George, from the Committee on Finance (to accompany H. R. 8870).
(c) House of Representatives, Report No. 1898, Revenue From Distilled
Spirits. Report submitted by Mr. Doughton from the committee of conference. Conference Report (to accompany H. R. S870) and Statement of the Managers on the Part of the House, (vn)
vm
4. Debates in Congress:
(a) Debate on H. R. 8S70 as reported to the House of Representatives
by the Committee on Ways and Means.
July 23, 1935, Congressional Record, Vol. 79, No. 151, pages
12176-12203. July 24, 1935, Congressional Record, Vol. 79, No. 152, pages
12259-12272.
(b) Debate on H. R. 8870 as reported to the Senate by the Committee on
Finance.
August 12, 1935, Congressional Record, Vol. 79, No. 166, page"
13354. August 13, 1935, Congressional Record, Vol. 79, No. 167, pages
13395-13419.
(c) Debate on, and agreement to, Conference Report on H. R. 8870.
House of Representatives, August 24, 1935, Congressional Rec- ord, Vol. 79, No. 177, pages 14806-14810.
Senate, August 24, 1935, Congressional Record, VoL 79, No. 177, page 14947 and pages 14948-14953.
INTRODUCTORY NOTE
The Federal Alcohol Administration Act, passed by the first session of the Seventy-fourth Congress and approved by the Presi- dent on August 29, 1935, was drawn to perpetuate the control of the alcoholic beverage industries formerly exercised through the Federal Alcohol Control Administration. This control was founded on pro- visions placed in the several codes of fair competition for these industries. The codes were established under title I of the National Industrial Recovery Act of June 16, 1933, and the Federal Alcohol Control Administration was set up by a Presidential Executive order to administer them. This method of control existed from the effec- tive date of the twenty-first amendment to the Constitution repealing prohibition, December 5, 1933, until May 27, 1935, when the Supreme Court of the United States handed down its decision in the case of Schechter Poultry Corporation v. United States. With the latter date the codes, for practical purposes, ceased to exist and their provi- sions were no longer enforced.
A summary of the former code system, the need for additional Federal legislation, the national scope of the industries, and of the aims of the act itself will be found on pages 1, 2, and 3 of the report, no. 1542, on the act (H. R. 8870) of the Committee on Ways and Means of the House of Representatives. This report is annexed hereto as appendix I.
The following memorandum deals with the act, section by section. Notes are annexed to each section referring to related material found in the hearings before the Congressional committees, the various committee reports, and the debates thereon in Congress. Where this material appeared to the editor to be of unusual importance as having interpretative or explanatory value, it has been quoted in the note. For ready reference, copies of the act as reported out by the com- mittees, together with the accompanying committee reports, and the conference report, are annexed in full as appendixes.
This memorandum was prepared by W. A. Russell of the Office of the General Counsel of the Federal Alcohol Control Administration. Although the greatest care was exercised in examining the documents in the table of sources and in selecting excerpts therefrom, it is felt that some material may possibly have been overlooked and that errors may unavoidably have been made. It is requested therefore that any omissions, errors, or corrections be brought to the attention of the Administration.
Frederic P. Lee,
General Counsel.
(IX)
LEGISLATIVE HISTORY OF THE FEDERAL ALCOHOL ADMINISTRATION ACT
ACT IN FULL
[Public — No. 401 — 74th Congress]
[H. R. 8870]
AN ACT
To further protect the revenue derived from distilled spirits, wine, and malt beverages, to regulate interstate and foreign commerce and enforce the postal laws with respect thereto, to enforce the twenty-first amendment, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the " Federal Alcohol Administration Act."
FEDERAL ALCOHOL ADMINISTRATION
Sec. 2. (a) There is hereby created the Federal Alcohol Adminis- tration as a division in the Treasury Department.
(b) The Administration shall be headed by an Administrator, who shall be appointed by the President, by and with the advice and consent of the Senate. The Administrator shall for his services receive compensation at the rate of $10,000 per annum, together with actual and necessary traveling and subsistence expenses while engaged in the exercise of his powers and duties outside the District of Columbia. No person shall be eligible to appointment, or continue in office, as Administrator if he is engaged or financially interested in, or is an officer or director of or employed by a corporation en- gaged in, the production or sale or other distribution of alcoholic leverages, or the financing thereof.
(c) The Administrator shall, without regard to the civil-service laws and the Classification Act of 1923, as amended, appoint and fix the compensation and duties of such officers and employees as he deems necessary to carry out his powers and duties, but the compen- sation so fixed shall be subject to the approval of the Secretary of the Treasury. The Administrator is authorized to adopt an official seal, which shall be judicially noticed.
(d) The Administrator is authorized and directed to prescribe such rules and regulations as may be necessary to carry out his powers and duties. All rules and regulations prescribed by the Administra- tor shall be.subject to the approval of the Secretary of the Treasury.
(e) Appropriations to carry out powers and duties of the Admin- istrator shall be available for expenditures, among other purposes.
(1)
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for personal services and rent in the District of Columbia and else- where, expenses fbr travel and subsistence, for law books, books of reference, magazines, periodicals, and newspapers, for contract steno- graphic reporting services, for subscriptions for library services, for purchase of samples for analysis or use as evidence, and for holding conferences of State and Federal liquor control officials.
(f ) The Administrator may, with the consent of the department or agency affected, utilize the services of any department or other agency of the Government to the extent necessary to carry out his powers and duties and authorize officers and employees thereof to act as his agents.
(g) The provisions, including penalties, of sections 9 and 10 of the Federal Trade Commission Act, as now or hereafter amended, shall be applicable to the jurisdiction, powers, and duties of the Admin- istrator, and to any person (whether or not a corporation) subject to the provisions of laws administered by the Administrator.
(h) The Administrator is authorized to require, in such manner and form as he shall prescribe, such reports as are necessary to carry out his powers and duties.
(i) The Administrator shall make a report to Congress, at the beginning of each regular session, of the administration of the func- tions with which he is charged, and shall include in such report the names and compensation of all persons employed by the Adminis- tration.
UNLAWFUL BUSINESSES WITHOUT PERMIT
Sec. 3. In order effectively to regulate interstate and foreign com- merce in distilled spirits, wine, and malt beverages, to enforce the twenty-first amendment, and to protect the revenue and enforce the postal laws with respect to distilled spirits, wine, and malt beverages :
(a) It shall be unlawful, except pursuant to a basic permit issued under this Act by the Administrator —
(1) to engage in the business of importing into the United States distilled spirits, wine, or malt beverages ; or
(2) for any person so engaged to sell, offer or deliver for sale, contract to sell, or ship, in interstate or foreign commerce, directly or indirectly or through an affiliate, distilled spirits, wine, or malt beverages so imported.
This subsection shall take effect sixty days after the date upon which the Administrator first appointed under this Act takes office.
(b) It shall be unlawful, except pursuant to a basic permit issued under this Act bv the Administrator —
(1) to engage in the business of distilling distilled spirits, pro- ducing wine, rectifying or blending distilled spirits or wine, or bottling, or warehousing and bottling, distilled spirits: or
(2) for any person so engaged to sell, offer or deliver for sale, contract to sell, or ship, in interstate or foreign commerce, directly or indirectly or through an affiliate, distilled spirits or wine so distilled, produced, rectified, blended, or bottled, or warehoused and bottled.
This subsection shall take effect sixty days after the date upon which the Administrator first appointed under this Act takes office.
3 Act
(c) It shall be unlawful, except pursuant to a basic permit issued under this Act by the Administrator —
(1) to engage in the business of purchasing for resale at whole- sale distilled spirits, wine, or malt beverages; or
(2) for any person so engaged to receive or to sell, offer or deliver for sale, contract to sell, or ship, in interstate or foreign commerce, directly or indirectly or through an affiliate, distilled spirits, wine, or malt beverages so purchased.
This subsection shall take effect March 1, 1936.
This section shall not apply to any agency of a State or political subdivision thereof or any officer or employee of any such agency, and no such agency or officer or employee shall be required to obtain a basic permit under this Act.
PERMITS
Sec. 4. (a) The following persons shall, on application therefor, be entitled to a basic permit :
(1) Any person who, on May 25, 1935, held a basic permit as distiller, rectifier, wine producer, or importer issued by an agency of the Federal Government.
(2) Any other person unless the Administrator finds (A) that such person (or in case of a corporation, any of its officers, direc- tors, or principal stockholders) has, within five years prior to date of application, been convicted of a felony under Federal or State law or has, within three years prior to date of application, been convicted of a misdemeanor under any Federal law relating to liquor, including the taxation thereof; or (B) that such person isr by reason of his business experience, financial standing, or trade connections, not likely to commence operations within a reasonable period or to maintain such operations in conformity with Federal law; or (C) that the operations proposed to be conducted by such person are in violation of the law of the State in which they are to be conducted.
(b) If upon examination of any application for a basic permit the Administrator has reason to believe that the applicant is not entitled to such permit, he shall notify the applicant thereof and, upon request by the applicant, afford him due notice and opportunity for hearing on the application. If the Administrator, after affording such notice and opportunity for hearing, finds that the applicant is not entitled to a basic permit hereunder, he shall by order deny the application stating the findings which are the basis for his order.
(c) The Administrator shall prescribe the manner and form of all applications for basic permits (including the facts to be set forth therein) and the form of all basic permits, and shall specify in any basic permit the authority conferred by the permit and the condi- tions thereof in accordance with the provisions of this Act. To the extent deemed necessary by the Administrator for the efficient ad- ministration of this Act, separate applications and permits shall be required bv the Administrator with respect to distilled spirits. winer and malt beverages, and the various classes thereof, and with respect to the various classes of persons entitled to permits hereunder. The issuance of a basic permit under this Act shall not operate to deprive the United States of .its remedy for any violation of law.
Act 4
a) A basic permit shall be conditioned upon compliance with the '"•j-ijuiremeiits of section 5 (relating to unfair competition and unlawful practices) and of section 6 (relating to bulk sales and bottling), with the twenty-first amendment and laws relating to the enforcement thereof, and with all other Federal laws relating to distilled spirits, wine, and malt beverages, including taxes with respect thereto.
(e) A basic permit shall by order of the Administrator, after due notice and opportunity for hearing to the permittee, (1) be revoked, or suspended for such period as the Administrator deems appro- priate, if the Administrator finds that the permittee has willfully violated any of the conditions thereof, provided that for a first viola- tion of the conditions thereof the permit shall be subject to suspen- sion only: or (2) be revoked if the Administrator finds that the permittee has not engaged in the operations [authorized by the permit for a period of more than tvo years; or (3) be annulled if the Administrator finds that the permit was procured through fraud, or misrepresentation, or concealment of material fact. The order shall state the findings which are the basis for the order.
(f) Orders of the Administrator with respect to any denial of application, suspension, revocation, annulment, or other proceedings, shall be served (1) in person by any officer or employee of the Administration designated by the Administrator or any internal revenue or customs officer authorized by the Administrator for the purpose, or (2) by mailing the order by registered mail, addressed to the applicant or respondent at his last known address in the records of the Administrator.
(g) A basic permit shall continue in effect until suspended, revoked, or annulled as provided herein, or voluntarily surrendered ; except that (1) if leased, sold or otherwise voluntarily transferred, the permit shall be automatically terminated thereupon, and (2) if transferred by operation of law or if actual or legal control of the permittee is acquired, directly or indirectly, whether by stock-owner- ship or in any other manner, by any person, then such permit shall be automatically terminated at the expiration of thirty days there- after: Provided, That if within such thirty-day period application for a new basic permit is made by the transferee or permittee, respectively, then the outstanding basic permit shall continue in effect until such application is finally acted on by the Administrator.
(h) An appeal may be taken by the permittee or applicant for a permit from any order of the Administrator denying an application for, or suspending, revoking, or annulling, a basic permit. Such appeal shall be taken by filing, in the circuit court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, within sixty days after the entry of such order, a written petition praying that the order of the Administrator be modified or set asiae in whole or in part. A copy of such petition shall be forthwith served upon the Admin- istrator, or upon any officer designated by him for that purpose, and thereupon the Administrator shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript such court shall have
5 Act
exclusive jurisdiction to affirm, modify, or set aside 'such order, in whole or in part. No objection to the order of the Administrator shall be considered by the court unless such objection shall have been urged before the Administrator or unless there were reasonable grounds. for failure so to do. The finding of the Administrator as to the facts, if supported by substantial evidence, shall be conclusive. If any party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceeding before tile Administrator, the court may order such additional evidence to be taken before the Administrator and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Administrator may modify his find- ings as to the facts by reason of the additional evidence so taken, and he shall file with the court such modified or new findings, which, if supported by substantial evidence, shall be conclusive, and his recom- mendation, if any, for the modification or setting aside of the original order. The judgment and decree of the court affirming, modifying, or setting aside, in whole or in part, any such order of the Admin- istrator shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in sections 239 and 240 of the Judicial Code, as amended (U. S. C., title 28, sees. 346 and 347)- The commencement of proceedings under this subsection shall, unless specifically ordered by the court to the contrary, operate as a stay of the Administrator's order.
(i) No proceecling for the suspension or revocation of a basic permit for violation of any condition thereof relating to com- pliance with Federal law shall be instituted by the Administrator more than eighteen months after conviction of the violation of Federal law, or, if no conviction has been had; more than three years after the violation occurred; and no basic permit shall be suspended or revoked for a violation of any such condition thereof if the alleged violation of Federal law has been compromised by any officer of the Government authorized to compromise such violation.
UNFAIB COMPETITION AND UNLAWFUL PRACTICES
Sec. 5. It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages, or as a bottler, or warehouseman and bottler, of distilled spirits, directly or indirectly or through an affiliate :
(a) Exclusive outlet; To require, by agreement or otherwise, that any retailer engaged in the sale of distilled spirits, wine, or malt bev- erages, purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such requirement is made in the course of interstate or foreign commerce, or if such person engages in such practice to such an ex- tent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of
Act 6
=u< h requirement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce; or
(b) " Tied house " : To induce through any of the following means, any retailer, engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of inter- state or. foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as sustantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce: (1) By acquiring or holding (after the expira- tion of any existing license) any interest in any license with re- spect to the premises of the retailer; or (2) by acquiring any inter- est in real or personal property owned, occupied, or used by the retailer in the conduct of his business; or (3) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, supplies, money, services, or other thing of value, subject to such exceptions as the Administrator shall by regulation pre- scribe, having due regard for public health, the quantity and value of articles involved, established trade customs not contrary to the public interest and the purposes of this subsection; or (4) by pay- ing or crediting the retailer for any advertising, display, or distribu- tion service; or (5) by guaranteeing any loan or the repayment of any financial obligation of the retailer; or (6) by extending to the retailer credit for a period in excess of the credit period usual and customary to the industry for the particular class of transactions, as ascertained by the Administrator and prescribed by regulations by him; or (T) by requiring the retailer to take and dispose of a certain quota of any of such products ; or
(c) Commercial bribery : To induce through any of the following means, any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of inter- state or foreign commerce, or if such person engages in the practice of using such, means, or any of them, to such an extent as substan- tially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such in- ducement is to prevent, deter, hinder, or restrict other persons from celling or offering for sale any such products to such, trade buyer in interstate or foreign commerce: (1) By commercial bribery; or (2) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative of the trade buyer; or
(d) Consignment sales: To sell, offer for sale, or contract to sell to any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, or for any such trade buyer to purchase, offer to purchase, or contract to purchase, any such products on consignment
7 Act
or under conditional sale or with the privilege of return or on any ba^is otherwise than a bona fide sale, or where any part of such transaction involves, directly or indirectly, the acquisition by such person from the trade buyer or his agreement to acquire from the trade buyer other distilled spirits, wine, or malt beverages — if such sale, purchase, offer, or contract is made in the course of interstate or foreign commerce, or if such person or trade buyer engages in such practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such sale, purchase, offer, or contract is to prevent, deter, hinder, or restrict other persons from selling or offer- ing for sale any such products to such trade buyer in interstate or foreign commerce: Provided, That this subsection shall not apply to transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the mer- chandise has been sold ; or
(e) Labeling. — To sell or ship or deliver for sale or shipment, or otherwise introduce in interstate or foreign commerce, or io receive therein, or to remove from customs custody for consumption, any distilled spirits, wine, or malt beverages in bottles, unless such products are bottled, packaged, and labeled in conformity with such regulations, to be prescribed by the Administrator, with respect to packaging, marking, branding, and labeling and size and fill of container (1) as will prohibit deception of the consumer with respect to such products or the quantity thereof and as will prohibit, irre- spective of falsity, such statements relating to age. manufacturing processes, analyses, guarantees, and scientific or irrelevant matters as the Administrator finds to be likely to mislead the consumer; (2) as will provide the consumer with adequate information as to the identity and quality of the products, the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages are hereby pro- hibited unless required by State law and except that, in case of wines, statements of alcoholic content shall be required only for wines containing more than 14 per centum of alcohol by volume), the net contents of the package, and the manufacturer or bottler or importer of the product; (3) as will require an accurate statement, in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, if neutral spirits have been used In the production thereof, informing the consumer of the percentage of neutral spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in case of neutral spirits or of gin produced by a process of con- tinuous distillation, the name of the commodity from which dis- tilled; (4) as will prohibit statements on the label that are dis- paraging of a competitor's products or are false, misleading, obscene, or indecent; and (5) as will prevent deception of the consumer by use of a trade or brand name that is the name of any living indi- vidual of public prominence, or existing private or public organiza- tion, or is a name that is in simulation or is an abbreviation thereof, and as will prevent the use of a graphic, pictorial, or emblematic representation of any such individual or organization, if the use of
Act 8
such name or representation is likely falsely to lead the consumer to believe that the product has been indorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of, such individual or organization : Provided, That this clause shall not apply to the use of the name of any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer, wholesaler, retailer, bottler, or ware- houseman, of distilled spirits, wine, or malt beverages, nor to the use by any person of a trade or brand name used by him or his pred- ecessor in interest prior to the date of the enactment of this Act : including regulations requiring, at time of release from customs custody, certificates issued by foreign governments covering origin, age. and identity of imported products: Provided, farther, That nothing herein nor any decision, ruling, or regulation of any Depart- ment of the Government shall deny the right of any person to use any trade name or brand of foreign origin not presently effectively registered in the United States Patent Oilice which has been used by such person or predecessors in the United States for a period of at least rive years last past, if the use of such name or brand is qualified by the name of the locality in the United States in which the product is produced, and, in the case of the use of such name or brand on any label or in any advertisement, if such qualification is as con- spicuous as such name or brand.
It .-hall be unlawful for any person to alter, mutilate, destroy, obliterate, or remove any mark, brand, or label upon distilled spirits, wine, or malt beverages held for sale in interstate or foreign com- merce or after shipment therein, except as authorized by Federal law or except pursuant to regulations of the Administrator author- izing relabeling for purposes of compliance with the requirements of this subsection or of State law.
In order to prevent the sale or shipment or other introduction of distilled spirits, wine, or malt beverages in interstate or foreign commerce, if bottled, packaged, or labeled in violation of the requirements of this subsection, no bottler, or importer of distilled spirits, wine, or malt beverages, shall, after such date as the Admin- istrator fixes as the earliest practicable date for the application of the provisions of this subsection .to any class of such persons (but not later than March 1, 1936, and only after thirty days' public notice), bottle or remove from customs custody for consumption distilled spirits, wine, or malt beverages, respectively, unless the bottler or importer, upon application to the Administrator, has obtained and has in his possession a certificate of label approval covering the distilled spirits, wine, or malt beverages, issued by the Administrator in such manner and form as lie shall by regulations pri-scribe: Provided. That any such bottler shall be exempt from the requirements of this subsection it' the bottler, upon application to the Administ rator, shows to the satisfaction of the Administrator that the, distilled spirits, wine, or malt beverages to be bottled by the applicant are not to be sold, or offered' for sale, or shipped or delivered for shipment, or otherwise introduced, in interstate or foreign commerce. Officers of internal revenue and customs are authorized and directed to withhold the release of such products
9 Act
from the bottling plant or customs custody unless such certificates have been obtained, or unless the application of the bottler for exemption has been granted by the Administrator. The district courts of the United States, the Supreme Court of the District of Columbia, and the United States court for any Territory, shall have jurisdiction of suits to enjoin, annul, or suspend in whole or in part any final action by the Administrator upon any application under this subsection; or
(f) Advertising: To publish or disseminate or cause to be pub- lished or disseminated by radio broadcast, or in any newspaper, periodical or .other publication or by any sign or outdoor advertise- ment or any other printed or graphic matter, an}' advertisement of distilled spirits, wine, or malt beverages, if such advertisement is in, or is calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail, unless such advertisement is in con- formity with such regulations, to be prescribed by the Administrator, (1) as will prevent deception of the consumer with respect to the products advertised and as will prohibit, irrespective of falsity, such statements relating to age, manufacturing processes, analyses, guar- anties, and scientific or irrelevant matters as the Administrator finds to be likely to mislead the consumer; (2) as will provide the con- sumer with adequate information as to the identity and quality of the products advertised, the alcoholic content thereof (except that statements of, or statements likely to be considered as statements of, alcoholic content of malt beverages are prohibited and except that, in case of wines, statements of alcoholic content shall be required only for wines containing more than 14 per centum of alcohol by volume), and the person responsible for the advertisement; (3) as will require an accurate statement, in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, if neutral spirits have been used in the production thereof, informing the consumer of the percentage of neutral spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in case of neutral spirits or of gin produced by a process of continuous distillation, the name of the commodity from which distilled; (4) as will prohibit statements that are disparaging of a competitor's products or are false, misleading, obscene, or indecent; (5) as will prevent statements inconsistent with any statement on the labeling of the products advertised. This sub- section shall not apply to outdoor advertising in place on June 18, 1935, but shall apply upon replacement, restoration, or renovation of any such advertising. The prohibitions of this subsection and regulations thereunder shall not apply to the publisher of any news- paper, periodical, or other publication, or radio broadcaster, unless such publisher or radio broadcaster is engaged in business as a dis- tiller, brewer, rectifier, or other producer, or as an importer or whole- saler, of distilled spirits, wine, or malt beverages, or as a bottler, or warehouseman and bottler, of distilled spirits, directly or indi- rectly or through an affiliate.
The provisions of subsections (a), (b), and (c) shall not apply to any act done by an agency of a State or political subdivision thereof, or by any officer or employee of such agency.
Act 10
In the case of malt beverages, the provisions of subsections (a)r (b), (c), and (d) shall apply to transactions between a retailer or trade buyer in any State and a brewer, importer, or wholesaler of malt beverages outside such State only to the extent that the law of such State imposes similar requirements with respect to similar trans- actions between a retailer or trade buyer in such State and a brewer, importer, or wholesaler of malt beverages in such State, as the case may be. In the case of malt beverages, the provisions of subsections (e) and (f) shall apply to the labeling of malt beverages sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, or tiie adver- tising of malt beverages intended to be sold or shipped or delivered for shipment or otherwise introduced into or received in any State from any place outside thereof, only to the extent that the law of such State imposes similar requirements with respect to the labeling or advertising, as the case may be, of malt beverages not sold or shipped or delivered for shipment or otherwise introdued into or received in such State from any place outside thereof.
The Administrator shall give reasonable public notice, and afford to interested parties opportunity for hearing, prior to prescribing regulations to carry out the provisions of this section.
BULK SALES AND BOTTLING
Sec. 6. (a) It shall be unlawful for any person —
(1) To sell or offer to sell, contract to sell, or otherwise dispose of distilled spirits in bulk except, under regulations of the Ad- ministrator, for export or to the following, or to import distilled spirits in bulk except, under such regulations, for sale to or for use by the following: A distiller, rectifier of distilled spirits, per- son operating a bonded warehouse qualified under the internal- revenue laws or a class 8 bonded warehouse qualified under the customs laws, a winemaker for the fortification of wines, a pro- prietor of an industrial alcohol plant, or an agency of the United States or any State or political subdivision thereof.
(2) To sell or offer to sell, contract to sell, or otherwise dispose of warehouse receipts for distilled spirits in bulk unless such v^are- house receipts require that the warehouseman shall package such distilled spirits, before delivery, in bottles labeled and marked in accordance with law, or deliver such distilled spirits in bulk only to persons to whom it is lawful to sell or otherwise dispose of distilled spirits in bulk.
(3) To bottle distilled spirits unless the bottler is a person to whom it is lawful to sell or otherwise dispose of distilled spirits in bulk.
(b) Any person who violates the requirements of this section shall,, upon conviction thereof, be fined not more than $5,000 or imprisoned for not more than one year or both, and shall forfeit to the United States all distilled spirits with respect to which the violation occurs and the containers thereof.
(c) The term " in bulk " means in containers having a capacity in excess of one wine gallon.
11 Act
PENALTIES
Sec. 7. The District Courts of the United States, the Supreme Court of the District of Columbia, and the United States court for any Territory, of the District where the otfense is committed or threatened or of which the offender is an inhabitant or has his prin- cipal place of business, are hereby vested with jurisdiction of any suit brought by the Attorney General in the name of the United States, ro prevent and restrain violations of any of the provisions of this Act. Any person violating any of the provisions of sections 3 or 5 shall be guilty of a misdemeanor and upon conviction thereof be fined not more than $1,000 for each offense. Subject to the ap- proval of the Attorney General, the Administrator is authorized. with respect to any violation of this Act, to compromise the liability arising with respect to such violation (1) upon payment of a sum not in excess of $500 for each offense, to be collected by the Administrator and to be paid into the Treasury as miscellaneous receipts, and (2) in case of repetitious violations and in order to avoid multiplicity of criminal proceedings, upon agreement to a stipulation that the United States may, on its own motion upon five days' notice to the violator, cause a consent decree to be entered by any court of com- petent jurisdiction enjoining the repetition of such violation.
interlocking directorates
Sec. 8. (a) Except as provided in subsection (b), it shall be unlawful for any individual to take office, after the date of the enact- ment of this Act, as an officer or director of any company, if his doing so would make him an officer or director of more than one company engaged in business as a distiller, rectifier, or blender of distilled spirits, or of any such company and of a company which is an affiliate of any company engaged in business as a distiller, rectifier, or blender of distilled spirits, or of more than one company which is an affiliate of any company engaged in business as a distiller, rectifier, or blender of distilled spirits, unless, prior to taking such office, appli- cation made by such individual to the Administrator has been granted and after due showing has been made to him that service by such individual as officer or director of all the foregoing companies of which he is an officer or director together with service in the com- pany with respect to which application is made will not substan- tially restrain or prevent competition in interstate or foreign com- merce in distilled spirits. The Administrator shall, by order, grant or deny such application on the basis of the proof submitted to him and his finding thereon. The District Courts of the United States, the Supreme Court of the District of Columbia, and the United States court for any Territory shall have jurisdiction of suits to enjoin, annul, or suspend in whole or in part any final action by the Administrator upon any application under this subsection.
(b) An individual may, without regard to the provisions of sub- section (a), take office as an officer or director of a company described in subsection (a) while holding the position of officer or director of
Act 12
any other such company if such companies are affiliates at the time of his taking office and if —
(1) Such companies are affiliates on the date of the enactment of this Act; or
(2) Each of such companies has been organized under the law of ii State to comply with a requirement thereof under which, as a condition of doing business in such State, such company must be organized under the law of such State; or
(3) One or more such companies has been organized under the law of a State to comply with a requirement thereof under which, as a condition of doing business in such State, such company must be organized under the laws of such State, and the other one or more of such companies not so organized, is in existence on the date of the enactment of this Act ; or
(4) One or more of such companies has been organized under the law of a State to comply with a requirement thereof under which, as a condition of doing business in such State, such com- pany must be organized under the law of such State, and not more than one of such companies is a company which has not been so organized and which has been organized after the date of the enactment of this Act.
(c) As used in this section, the term " company " means a cor- poration, joint stock company, business trust, or association, but does not include any agency of a State or political subdivision thereof or any officer or employee of any such agency.
(d) Any individual taking office in violation of this section shall be punished by a fine of not exceeding $1,000.
DISPOSAL OF FORFEITED ALCOHOLIC BEVERAGES
Sec. 9. (a) All distilled spirits, wine, and malt beverages for- feited, summarily or by order of court, under any law of the United States, shall be delivered to the Secretary of the Treasury to be disposed of as hereinafter provided.
(b) The Secretary of the Treasury shall dispose of all distilled spirits, wine, and malt beverages which have been delivered to him pursuant to subsection (a) —
(1) By delivery to such Government agencies as, in his opinion, have a need for such distilled spirits, wine, or malt beverages for medicinal, scientific, or mechanical purposes; or
(2) By gift to such eleemosynary institutions as, in his opinion, have a need for such distilled spirits, wine, or malt beverages for medicinal purposes; or
(3) By destruction.
(c) No distilled spirits, wine, or malt beverages which have been seized under any law of the United States, may be disposed of in any manner whatsoever except after forfeiture and as provided in this section.
(d) The Secretary of the Treasury is authorized to make all rules and regulations necessary to carry out the provisions of this section.
13 Act
FEDERAL ALCOHOL CONTROL ADMINISTRATION
Sec 10. The Federal Alcohol Control Administration established by Executive order under the provisions of Title I of the National Industrial Recovery Act is hereby abolished. All papers, records, and property of such Federal Alcohol Control Administration are hereby transferred to the Administrator. This section shall take effect on the date that the Administrator first appointed under this Act takes office.
Sec. • 11. Section 610 of the Revenue Act of 1918, as amended (U. S.'C, Supp. VII, title 26, sec. 1310), is amended by adding at the end thereof the following new paragraph :
" The provisions of the internal-revenue laws applicable to natural wine shall apply in the same manner and to the same extent to citrus- fruit wines which are the product of normal alcoholic fermentation of the juice of sound ripe citrus fruit (except lemons and limes), with or without the addition of dry cane, beet, or dextrose sugar (containing, respectively, not less than 95 per centum of actual sugar, calculated on a dry basis) for the purpose of perfecting the product according to standards, but without the addition .or abstraction of other substances, except as may occur in the usual cellar treatment of clarifying or aging."
Sec. 12. S^'ion 612 of the Revenue Act of 1918, as amended (U. S. C, Supp. VII, title 26, sec. 1301), is amended to read as fol- lows:
" Sec. 612. That under such regulations and official supervision and upon the giving of such notices, entries, bonds, and other security as the Commissioner, with the approval of the Secretary, may pre- scribe, any producer of wines defined under the provisions of this title may withdraw from any fruit distillery or special bonded ware- house grape brandy, or wine, spirits, for the fortification of such wines on the premises where actually made, and any producer of citrus-fruit wines may similarly withdraw citrus-fruit brandy for the fortification of citrus-fruit wines on the premises where actually made : Provided, That there shall be levied and assessed against the producer of such wines or citrus-fruit wines a tax (in lieu of the internal-revenue tax now imposed thereon by law) of 20 cents per proof gallon of grape brandy, citrus-fruit brandy, or wine spirit whenever withdrawn and hereafter so used by him in the fortification of such wines or citrus-fruit wines during the preceding month, which assessment shall be paid by him within ten months from the date of notice thereof: Provided further. That nothing contained in this section shall be construed as exempting any wines, citrus-fruit wines, cordials, liqueurs, or similar compounds from the payment of any tax provided for in this title.
"Any such wines or citrus-fruit wines may, under such regulations as the Secretary may prescribe, be sold or removed tax free for the manufacture of vinegar, or for the production of dealcoholized wines containing less than one-half of 1 per centum of alcohol by volume.
" The taxes imposed by this section shall not apply to dealcoholized wines containing less than one-half of 1 per centum of alcohol by volume."
Act 14
Sec. 13. Section 613 of the Revenue Act of 1918, as amended (U. S. C, Supp. VII, title 26, sec. 1300 (a) (2)), is amended by inserting after "grape brandy" a comma and the following: "or containing citrus-fruit wine fortified with citrus-fruit brandy ".
Sec. 14. Section 42 of the Act entitled "An Act to reduce the reve- nue and equalize duties on imports, and for other purposes ", ap- proved October 1, 1890, as amended (U. S. C, Supp. VII, title 26, sec. 1302 (a)), is amended by inserting at the end thereof the follow- ing new paragraph :
"The provisions of this section and section 43 shall apply to the use of citrus-fruit brandy in the preparation of fortified citrus- fruit wines in the same manner and to the same extent as such pro- visions apply to the use of wine spirits in the fortification of sweet wines, except that no brandy (other than a citrus-fruit brandy) may be used in the fortification of citrus-fruit wine and a citrus-fruit brandy prepared from one kind of citrus fruit may not be used for the fortification of a citrus-fruit wine prepared from another kind of citrus fruit or for the fortification of a wine prepared from any fruit other than citrus fruit."
Sec. 15. Section 3255 of the Kevised Statutes, as amended (U. S. C, Supp. VII, title 26, sec. 1176), is amended to read as follows :
"Sec. 3255. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may exempt distillers of brandy made exclusively from apples, peaches, grapes, oranges, pears, pineapples, apricots, berries, plums, pawpaws, persimmons, prunes, figs, cherries, dates, or citrus -fruits (except lemons and limes) from any provision of the internal-revenue laws relating to the manufac- ture of spirits, except as to the tax thereon, when in his judgment it may seem expedient to do so : Provided, That where, in the manu- facture of wine or citrus-fruit wine, artificial sweetening has been used, the wine, or the fruit pomace residuum thereof, or the citrus- fruit wine may be used in the distillation of brandy or citrus-fruit brandy, as the case may be, and such use shall not prevent the Com- missioner of Internal Revenue, with the approval of the Secretary of the Treasury, from exempting such distiller from any provision of the internal-revenue laws relating to the manufacture of spirits, except as to the tax thereon, when in his judgment it may seem expe- dient to do so: And provided further, That the distillers mentioned in this section may add to not less than five hundred gallons (ten barrels) of grape cheese not more than five hundred gallons of a sugar solution made from cane, beet, starch, or corn sugar, 95 per centum pure, such solution to have a saccharine strength of not to exceed 10 per centum, and may ferment the resultant mixture on a winery or distillery premises, and such fermented product shall be regarded as distilling material."
Sec. 16. (a) Section 1 of the Act of March 3, 1877, as amended (U. S. C, Supp. VII, sec. 1250), is amended by striking out "not exceeding ten in numbers in any one collection-district," and by inserting at the end of such section the following new paragraph:
"The Commissioner of Internal Revenue, under such regulations as he may promulgate from time to time with the approval of the
15 Act
Secretary of the Treasury, may, in his discretion, establish such warehouses adjacent to distilleries, and may, in his discretion, permit the removal of brandy directly from the distillery to such warehouses, and from such warehouses to the distillery warehouse of the producing distiller."
(b) Section 51 of the Act of August 27, 1894, as amended (U. S. C, Supp. VII, sec. 1265), is amended by striking out "not exceed- ing ten in number in any one collection district," and by inserting at the end of such section the following new paragraph:
" The Commissioner of Internal Revenue, under such regulations as he may promulgate from time to time with the approval of the Secretary of the Treasury, may, in his discretion, establish such warehouses adjacent to distilleries, and may, in his discretion, per- mit the removal of spirits directly from the distillery to such ware- houses, and from such warehouses to the distillery warehouse of the producing distiller."
MISCELLANEOUS
Sec. 17. (a) As used in this Act-*-
(1) The term "Administrator" means the head of the Federal Alcohol Administration.
(2) The term "United States" means the several States and Territories and the District of Columbia ; the term " State " includes a Territory and the District of Columbia; and the term " Territory " means Alaska, Hawaii, and Puerto Rico.
(3) The term "interstate or foreign commerce" means commerce between any State and any place outside thereof, or commerce within any Territory or the District of Columbia, or between points within the same State but through any place outside thereof.
(4) The term " person " means individual, partnership, joint stock company, business trust, association, corporation, or other form of business enterprise, including a receiver, trustee, or liquidating agent and including an officer or employee of any agency of a State or political subdivision thereof ; and the term " trade buyer " means any person who is a wholesaler or retailer.
(5) The term " affiliate " means any one of two or more persons if one of such persons has actual or legal control, directly or indi- rectly, whether by stock ownership or otherwise, of the other or others of such persons; and any one of two or more persons subject to common control, actual or legal, directly or indirectly, whether by stock ownership or otherwise.
(6) The term " distilled spirits " means ethyl alcohol, nydrated oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin, and other distilled spirits, including all dilutions and mixtures thereof, for non-industrial use.
(7) The term "wine" means (1) wine as defined in section 610 and section 6171 of the Revenue Act of 1918, (U. S. C, title 26, sees. 441 and 444) as now in force or hereafter amended, and (2) other alcoholic beverages not so denned, but made in the manner of wine, including sparkling and carbonated wine, wine made from condensed grape must, wine made from other agricultural products than the juice of sound, ripe grapes, imitation wine, compounds sold as wine,
Act 16
vermouth, cider, perry and sake ; in each instance only if containing not less than 7 per centum and not more than 24 per centum of alco- hol by volume, and if for non-industrial use.
(8) The term " malt beverage " means a beverage made by the alcoholic fermentation of an infusion or decoction, or combination of both, in potable brewing water, of malted barley with hops, or their parte, or their products, and with or without other malted cereals, and with or without the addition of unmalted or prepared cereals, other carbohydrates or products prepared therefrom, and with or without the addition of carbon dioxide, and with or without other wholesome products suitable for human food consumption.
(9) The term " bottle " means any container, irrespective of the material from which made, for use for the sale of distilled spirits, wine, or malt beverages at retail.
(b) The right to amend or repeal £he provisions of this Act is expressly reserved.
(c) If any provision of this Act, or the application of such pro- vision to any person or circumstance,' is held invalid, the remainder of the Act and the application of such provision to persons or cir- cumstances other than those as to which it is held invalid, shall not be affected thereby.
Approved, August 29, 1935.
ACT BY SECTIONS
AN ACT
To further protect the revenue derived from distilled
spirits, wine, and malt beverages, to regulate interstate
and foreign commerce and enforce the postal laws with
respect thereto, to enforce the twenty-first amendment,
and for other purposes.
Note. — Title of the Act was amended on the floor of the Senate to eliminate the mention of malt beverages; see note to section 3 (Cong. Kec., vol. 79, no. 167, p. 13419).
Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress as- sembled, That this act may be cited as the " Federal Alcohol Administration Act. ' '
Note. — In the bill as originally introduced in the House (H. R. S539) the first section provided for the levying of an occupational tax of $10 per annum on importers, sellers of liquor in interstate or foreign commerce, distillers, wine producers, brewers, rectifiers, blenders, wholesalers, and other holders Of permits provided for in the bill. The provisions of law relating to the levy, collection, and payment of existing occupational taxes were made to apply to the taxes imposed by the section (H. R. 8539, print dated June 18, 1935, pp. 1-3). Mr. Choate, Director of the Federal Alcohol Control Ad- ministration, while testifying at the hearings before the House Ways and Means Committee on the proposed bill raised two objections to this section; first, that it was a flat tax imposing no greater burden upon the largest industry member than upon the smallest member of the smallest industry ; and second, that the revenue raised by the tax would be entirely insufficient to maintain the Federal agency created by the act (record of Ways and Means Committee hearing on H. R. 8539, p. 8). At a later session of the same hearings Con- gressman Celler of New York, appearing as a witness, raised the objection that occupational taxes had already been levied on dis- tillers, rectifiers, brewers, and wholesalers, and that therefore the section would cause a duplication of taxes (id. p. 88). The section appeared in the bill as introduced by Congressman Cullen (H. R. 8870, print dated July 16, 1935). The bill as reported out by the Ways and Means Committee still contained the occupational tax pro- vision (H. R. 8870, print dated July 17, 1935, bearing Union Cal-
(17)
Sec. 2a 18
endar So. ;>44-), and this section is referred to in the committee's report (H. Kept. Xo. 1542. Federal Alcoholic Control Bill. p. 4). In the discussion of the bill before the House sitting as the Committee of the Whole. Congressman Cullen informed Congressman Celler that the section would be eliminated by amendment (Cong. Rec, vol. 79. no. 151, p. 12182. July 23. 1935).' Congressman McCormack, a member of the committee, ottered an amendment which he stated lie understood to be agreeable to the committee striking out this section. The amendment was agreed to after a short discussion as to the reason for the incorporation of the section of the bill. Mr. Cullen offered the present language in lieu of the matter stricken nut by Mr. McCormack's amendment (id. p. 1219',). and p. 12191).
This section was read in the Senate in its present form (H. II. SS70. print dated July '1~>. 1935). In view of the fact that the Sen- ate Finance Committee recommended that the bill be administered bv a commission rather than by an administration, the Senate amended the short title of the bill to *' Federal Alcohol Control Act " (H R. 8870. print dated Aug. 9. bearing Calendar Xo. 1265; S. Rept. Xo. 1215. Federal Alcoholic Control Act; Cong. Rec. vol. 79. no. 107. p. 13395). The former wording was replaced due to the Sen- ate's receding from its amendment at the suggestion of the con- ferees. (H. Rept. Xo. 1898. Revenue From Distilled Spirits, p. 1 and P- 8).
FEDERAL ALCOHOL ADMINISTRATION
Sec. 2. (a) There is hereby created the Federal Alcohol Administration as a division in the Treasury Department.
Xote. — It was recommended by the F. A. C. A. that an independent agency be created to administer the act. Mr. Choate, in testifying before the "Ways and Means Committee of the House, gave the following arguments for his belief that an independent agency should be established: First, that the administrative officer was en- dowed by the bill with complete responsibility for the execution of the powers and duties imposed by the bill and should also be given complete and final authority to carry out his powers; second, that the Treasury's function has always been the collection of the revenue and that it is not suited to the regulation of the liquor industry for the correction of social evils, governmental problems, and the indus- try's own economic welfare; third, that the Secretary of the Treas- ury wotdd be subjected to great pressure to give the final decision on questions he could not be qualified to answer: fourth, that agencies of the Government with quasijudicial functions should be, and generally are. independent and are not subjected to executive con- trol; and fifth, that the authority and prestige of the agency over the industry, through suggestions and advice, would be curtailed.
Mr. Vinson, a member of the committee, in support of the com- mittee's position stated that the bill was, at least in part, concerned with the protection of the revenue, that all regulation of the liquor industry should issue from one department and that conflicting regulations and rulings would be avoided and the other benefits re- sulting from a united control would be secured by putting the new
19 Sec. 2a
act in the Treasury Department (record of hearing on H. R. 8539, pp. 13-20. 22-24). The Secretary of the Treasury was of the opinion that the duties imposed on the new agency were such that it should not be made a part of the Treasury Department (id. Mr. Graves, Assistant to the Secretary of the/ Treasury, pp. 29-31. Mr. Hester of the Treasury Department, pp/ 42-^13). At these same hearings Congressman O'Malley, appearing as a witness, said that he favored placing the new agency in the Treasury to get rid of " a lot of red tape and cockeyed regulations ", to get liquor down to a reason- able price, and to enable small units to get into the liquor industry (id. p. 98). The committee referred to the creation of the new agency in its report as follows:
Section 2 establishes a Federal Alcohol Administration which is to be a division in the Treasury Department. The name of the organization is fixed so as to avoid confusion with the Fed- eral Alcohol Control Administration created under the author- ity of the National Industrial Recovery Act. The latter organi- zation is abolished under section 8 of the bill, and its papers, records, and property are transferred to the new agency. The abolition and transfer are postponed, however, until the Ad- ministrator who is to head the new organization takes office (H. Kept. No. 1542, Federal Alcohol Control Bill, p. 5).
At the hearings before the Senate Finance Committee, Mr. Choate again objected to the incorporation of the new agency into the Treas- ury Department (record of Senate Finance Committee hearings on H. R. 8870, pp. 1-5). He stated that no economies would be ef- fectuated by this plan and also seemed to favor an agency headed by a commission or board rather than by a single man. Mr. Choate's position was supported by Mr. Lourie, executive secretary of the National Association of Alcoholic Beverage Importers. Because of the enormous powers given to the Administrator and because the functions of the new agency are so far separated from those of the Secretary of the Treasury 'he stated that the responsibility should be placed in a separate organization responsible only to the Presi- dent and to the Congress (id. p. 102). The Senate' Finance Com- mittee in its report recommended the establishment of an independ- ent agency headed by a commission and gave the following reasons for its position:
The House bill (sec. 2) established the Federal Alcohol Ad- ministration as a division of the Treasury Department. The Administrator was to be appointed by the President, by and with the advice and consent of the Senate, but his rules and regulations were subject to the approval of the Secretary of the Treasury. The compensation of his employees was sub- ject to like approval. Both the Treasury Department and the Federal Alcohol Control Administration vigorously opposed these provisions on the ground that while the provisions of the bill would be of great assistance in preventing evasion of taxes and facilitating collection of the revenue, the provisions did not involve the levying and collection of taxes which is the Treasury Department's sole function with regard to liquor. The provisions of the House bill were also opposed on the
ec. 2a 20
ground that authority and responsibility were divorced under the set-up proposed and that thereby sound and efficient ad- ministration would be seriously hampered (S. Kept. No. 1215,. Federal Alcohol Control Act, pp. 3-^1).
The Finance Committee recommended that subsections 2 (a) b) (c) and (d) of the House bill (H. K. 8870) be amended to read .s follows :
FEDERAL ALCOHOL COMMISSION
Sec 2. (a) There is hereby established a commission to be known as the Federal Alcohol Commission, to be composed of three commissioners, who shall be appointed by the President by and with the advice and consent of the Senate. The terms of office of the commissioners first taking office shall expire, as designated by the President at the time of nomination, one at the end of the first year, one at the end of the second year, and one at the end of the third year after the date of the enactment of this Act. A successor shall have a term of office expiring 3 years from the date of expiration of the term for which his predecessor was appointed, except that a person appointed to fill a vacancy occurring prior to the expiration of such term shall be appointed for the remainder of such term. No person shall be eligible for appointment as a commissioner or continue in office as a commis- sioner if he is engaged or financially interested in, or is an officer or director of or employed by a company engaged in, the produc- tion or sale of alcoholic beverages or the financing thereof. Each commissioner shall, for his services; receive compensation at the rate of $10,000 per annum, together with actual and neces- sary traveling and subsistence expenses while engaged in the- performance of his duties as commissioner outside the District of Columbia.
(b) As designated by the President at the time of nomination : One of the commissioners shall be chairman of the commission and shall be the chief executive officer of the commission; an- other of the commissioners shall be vice chairman of the com- mission and shall perform the functions and duties of the chair- man in his absence or in the event of his incapacity caused by ill- ness; and the third commissioner, who shall be a lawyer, shall be general counsel of the commission. The commission may function notwithstanding vacancies, and a majority of the com- missioners in office shall constitute a quorum. The commission shall meet at the call of the chairman or a majority of its mem- bers. The commission is authorized to adopt an official seal, which shall be judicially noticed. The commission shall be entitled to free use of the United States mails in the same man- ner as the Executive departments.
(c) The commission shall, without regard to the civil-service laws, but subject to the Classification Act of 1923, as amended,, appoint and fix the compensation and prescribe the duties of such officers and employees as may be necessary to carry out its- powers and duties; except that any such officer or employee
21 Sec. 2a
receiving a salary at the rate of $5,000 or more per annum shall be appointed by the President, by and with the advice and consent of the Senate.
(d) The commission is authorized and directed to prescribe such rides and regulations as may be necessary to carry out its powers and duties.
The committee's suggested amendment was adopted by the Senate with two minor changes. Senator McXary offered an amendment, which was adopted without discussion, to insert after the first sentence of the amended subsection 2 (a) the sentence ;; Xot more than two members of the Commission shall be members of the same political party" (Gong. Rec, vol. 79, no. 167, pp. 13413-13414). Senator George, of the Finance Committee, suggested that after the words " or sale " in the fourth sentence of the amended sub- section 2 (a) be inserted the words " or other distribution." This amendment was also adopted without discussion (id., pp. 13395- 13396). The Senate's changing the agency from an administrator subject to the Treasury to an independent commission necessitated numerous other changes of a purely clerical nature. These changes will not be discussed here, as they involve the form of the bill alone and are not matters of substance (H. R. 8870, print dated Aug. 13, 1935, with Senate amendments numbered). The conferees agreed that the Senate should recede from its amendments relating to an independent agency. The following excerpt from the statement of the Managers on the Part of the House shows the result of the conference with respect to this matter :
Amendment no. 2 : The House bill created the Federal Al- cohol Administration as a division in the Treasury Depart- ment. The Administration was to be headed by an Adminis- trator appointed by the President, by and with "the advice and consent of the Senate. Appointments of officers and employees by the Administrator were to be made without regard to the civil-service laws and the Classification Act of 1923, as amended, but their compensation was subject to the approval of the Sec- retary of the Treasury. All rules and regulations prescribed by the Administrator were subject to the approval of the Secre- tary of the Treasury. The Senate amendment establishes in lieu of the Federal Alcohol Administration provided in the House bill an -independent agency to be known as the " Federal Alcohol Commission ", to be composed of three commissioners appointed by the President, by and with the advice and con- sent of the Senate. It provides that not more than two mem- bers of the Commission shall be members of the same political party. The amendment further provides that one of the Com- missioners shall be chairman of the Commission, and shall be its chief executive officer: another Commissioner shall be vice chair- man of the Commission: and a third Commissioner, who shall be a lawyer, shall be general counsel of the Commission. Under the Senate amendment, appointments by the Commission are made without regard to the civil-service laws but subject to the Classification Act of 1923, as amended, and any officer or em- ployee receiving a salary at the rate of $5,000 or more per annum
Sec. 2b 22
is required to be appointed by the President, by and with the advice and consent of the Senate. All officers and employees of the Commission receiving less salary are to be appointed by the Commission and the Commission is to prescribe the duties of all its officers and employees irrespective of their method of appointment. The Senate recedes.
Amendments nos. 3. 5, 6, 7, 8, 9, 10, 11, 12, 17, 21, 23, 27, 29, 30, 31, 32, 33. 34, 35, 36, 14, 45, 46, 47, 48, 50, 51, 52, 53, 54, 56, 58, 59, 60, 61, 62. 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 74, 76, 77, 87, 95, 96, 107, 110, 113, 115, 116. 117, 118, 120, 122, 124, 125, 131, 134, 136, 138, 139, 140, 141, 142, 145, 148, 149, and 154 : These amendments are clerical amendments made necessary by reason of Senate amendment no. 2. The Senate recedes in con- formity with the action on amendment no. 2 (H. Rept. No. 1898, Revenue From Distilled Spirit, pp. 8 and 9, numbers refer to numbered amendments' in H. R. 8870, print dated Aug. 13 with Senate amendments numbered).
In the discussion of the conference report before the House, Congressman Doughton, Chairman of the Ways and Means Com- mittee and one of the House Managers, stated :
The setting up of an independent agency was one of the im- portant changes made in the bill by the Senate. The House put the administration of the law in the Treasury Department, and the Senate put it under an independent agency. That was one provision in the House bill that the House conferees insisted on. Every member of the Committee on Ways and Means was insistent on that provision. The Senate very reluctantly yielded on that vital amendment (Cong. Rec, vol. 79, no. 177, p. 14808, Aug. 24, 1935).
(b) The Administration shall be headed by an Adminis- trator, who shall be appointed by the President, by and with the advice and consent of the Senate. The Adminis- trator shall for his services receive compensation at the rate of $10,000 per annum, together with actual and neces- sary traveling and subsistence expenses while engaged in the exercise of his powers and duties outside the District of Columbia. No person shall be eligible to appointment, or continue in office, as Administrator if he is engaged or Linancially interested in, or is an officer or director of or thiployed by a corporation engaged in, the production or sale or other distribution of alcoholic beverages, or the financing thereof.
Note. — In the original bill introduced before the House on June 18, 1935, by Congressman Dougluon (H. R. 8539, print dated June 18, 1935), the words "payable monthly" appeared after the phrase "compensation at the rate of $1C J00 per annum." These words are
23 Sec. 2c
not found in the bill introduced by Congressman Cullen on July 16, 1935 (H. R. 8870, print dated July 16, 1935), nor do they appear in any of the other prints of this bill.
(c) The Administrator shall, without regard to the civil-service laws and the ' Classification Act of 1923, as amended, appoint and fix the compensation and duties of such officers and employees as he deems necessary to carry out his powers and duties, but the compensation so fixed shall be subject to the approval of the Secretary of the Treasury. The Administrator is authorized to adopt an official seal, which shall be judicially noticed.
Note. — This subsection appeared in the bill as originally intro- duced in the following form :
(c) The Administrator shall, with the approval of the Sec- retary of the Treasury, but without regard to the civil service laws and the Classification Act of 1923, as amended, appoint and fix the compensation and duties of such officers and employees as he deems necessary to carry out his powers and duties (H. R. 8539, print dated June 18, 1935).
The subsection appeared in its present form in the bill as intro- duced by Congressman Cullen on July 16, 1935 (H. R. 8870, print dated July 16, 1935).
At the hearing before the House Ways and Means Committee on June 20, 1935, Congressman O'Malley, of Wisconsin, appearing as a witness, stated that he would like to see the Administration's em- ployees amenable to the Civil Service Act and have Congress and not the Administrator fix their salaries (record of Ways and Means Committee hearing on H. R. 8539, p. 96).
When the report of the committee was considered on the floor of the House, Congressman Mapes, of Michigan, proposed an amendment placing the employees under the Classification Act and the civil service. He argued that favoritism would thus be avoided and the Administrator would be protected from criticism in the choice of his employees. In the liquor field employees should not be chosen through patronage *or for other political reasons. Congressman Vin- son of the committee pointed out that a civil-service requirement would bar all of the persons employed by the F. A. C. A. In this connection Mr. Doughton said : '
Mr. Chairman, I trust the amendment of the gentleman from Michigan will not prevail. No doubt his motive is good, but the effect of his amendment would be bad; there is not any question about that.
The Alcohol Control Administration, under Mr. Joseph Choate, a distinguished gentleman from New York, a Republi- can, has built up an organization composed of both Democrats and Republicans, I have been reliably informed.
That personnel has been very carefully selected, and those employees who have not been found capable and efficient have
Sec. 2d 24
been discharged and removed and only those retained who have proven their qualifications, efficiency, and capability.
In this particular work, to set up a system whereby all of this trained personnel and all of these trained people, which has cost the Government much money to train, would be lost to the Government, I am quite sure would be something my friend would hardly be willing to take the responsibility for. The Bureau would have to be manned with new people picked up from various departments. Of course, they would have edu- cation and knowledge, but they would have no experience in this particular work (Cong. Rec, vol. 79, no. 151, p. 12192, July 23, 1935). Congressman McCormack, of Massachusetts, also a member of the committee, added :
Mr. Chairman, in addition to the argument of the gentleman from North Carolina as to the efficiency of the present personnel, which I think the gentleman from Michigan (Mr. Mapes) recog nizes, and this being a permanent set-up which he also recognizes, the President has the power by Executive order to bracket the personnel that should be included and taken over by the Federal alcohol set-up. They may take the persons with the experience which the Government ought to have in this new set-up in the Treasury Department. The power is there already under- gen- eral law to bracket them under the civil service by a general order (id. p. 12193).
After some further discussion the amendment of Mr. Mapes was voted down 103 to 42.
In discussing the advisability of creating an independent agency before the Senate Finance Committee, Mr. Choate stated that he believed that the staff of the F. A. C. A., " the only people in the country who do know the business ", should be carried over into the new agency, and that the creation of a new staff and the confusion in the industry during its training should thus be avoided. The creation of a new staff in the Treasury Department would not result in economy but in the reverse. He also said :
No one would more strongly advocate than I would the even- tual bringing of this organization into the civil-service fold, but while it is performing specialized services for which it has a trained staff, which cannot be replaced outside, I would say it would be unwise to apply those regulations. (Record of Finance Committee hearings on H. R. 8870, p. 4.)
The Senate's amendment of this section appears above, but the conferees suggested that the Senate yield on this point (see quotation from statement of managers contained in footnote to sec. 2 (a) supra). Congressman Mapes noted the retention of the House pro- vision when the conference report was considered by the House (Cong. Rec, vol. 76, no. 177, p. 14806, Aug. 24, 1935).
(d) The Administrator is authorized and directed to prescribe such rules and regulations as may. be necessary
25 Sec. 2e, f
to carry out his powers and duties. All rules and regula- tions prescribed by the Administrator shall be subject to the approval of the Secretary of the Treasury.
Note. — This subsection appeared in the same form in the bill as introduced by Congressman Doughton on June 18, 1935, and was never amended by the House. Though the Senate struck out the last sentence in view of its contention that a separate agency be established, it receded as a result of the conference report, and the subsection was passed in its original form, (see quotation from State- ment of the Managers in note to section 2 (a) supra).
(e) Appropriations to carry out powers and duties of the Administrator shall be available for expenditure, among other purposes, for personal services and rent in the District of Columbia and elsewhere, expenses for travel and subsistence, for law books, books of reference, maga- zines, periodicals, and newspapers, for contract steno- graphic reporting services, for subscriptions for library services, for purchase of samples for analysis or use as evidence, and for holding conferences of State and Federal liquor control officials.
Note. — Except for the correction of a clerical error (changing the word " conference " to " conferences ") and the clerical changes in- volved by the Senate's desire for control through a commission, this subsection remained as it appeared in the bill introduced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935). An appropriation of $300,000 for the purpose of carrying out the provisions of the Act for the fiscal year 1936 was attached by amend- ment proposed by Senator Adams of Colorado, to the Third Defi- ciency Bill (74th Cong., 1st sess., H. R. 9215) (Cong. Rec, vol. 79, no. 177, p. 11922) . This deficiency bill failed to pass the Senate prior to the adjournment of the Congress. The Ways and Means Com- mittee report refers, to this subsection as follows :
The usual objects of expenditure of appropriations are author- ized by subsection (e) of section 2, but provision is specifically made by which the Administrator may acquire magazines, period- icals, and newspapers so that he may effectively carry out his powers relating to advertising contained in section 5, and specific provision is made under which expenditure may be made for the purchase of samples for analysis and use as evidence (H. Kept. 1542, Federal Alcohol Control Bill. p. 5).
(f) The Administrator may, with the consent of the department or agency affected, utilize the services of any department or other agency of the Government to the ex-
Sec. 2g, h, i 26
tent necessary to carry out his powers, and duties and
authorize officers and employees thereof to act as his
agents.
Note. — This subsection remained as it appeared in the bill intro- duced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935), except for clerical amendments, afterward deleted, involved in the Senate's proposal to establish a Commission in lieu of an Administrator. The subsection is merely mentioned in the report of the Ways and Means Committee (H. Eept. 1512, Federal Alcohol Control Bill, p. 5).
(g) The provisions, including penalties, of sections 9 and 10 of the Federal Trade Commission Act, as now or hereafter amended, shall be applicable to the jurisdiction, powers, and duties of the Administrator, and to any per- son (whether or not a corporation) subject to the provi- sions of laws administered by the Administrator.
N0TE. — This subsection appeared in the same form in the bill intro- duced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935), and, except for clerical changes due to the Senate's amendment relating to the establishment of a Commission, is found in the other prints of the bill. The Ways and Means Committee in its report referred to it briefly :
Subsection (g) applies the procedural provisions of law relat- ing to Federal Trade Commission investigations to the exercise of the Administrator's powers (H. Rept. 1542, Federal Alcohol Control Bill, p. 5).
(h) The Administrator is authorized to require, in such manner and form as he shall prescribe, such reports as are necessary to carry out his powers and duties.
Note. — The language is the same as in the bill introduced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935), and except for clerical changes in the Senate, remained the same until the bill was passed. The subsection is merely mentioned in the report of the Ways and Means Committee (H. Rept. 1542, Federal Alcohol Control Bill, p. 5).
(i) The Administrator shall make a report to Congress, at the beginning of each regular session, of the adminis- tration of the functions with which he is charged, and shall include in such report the names and compensation of all persons employed by the Administration.
Note. — The Senate Finance Committee proposed that a new sub- section be inserted in this section authorizing the Commission to
27 Sec. 2i
make investigations and studies and to report thereon to the Presi- dent and to the Congress (H. R. 8870, print dated Aug. 9, 1935). This subsection was passed by the Senate (Cong. Rec, vol. 79, no. 167, p. 13396) and read:
(i) The commission is authorized to make investigations and studies and to report thereon from time to time to the Presi- dent and to the Congress, together with recommendations, with respect to matters necessary for the proper performance of the powers and duties conferred upon the commission, and with respect to the production, distribution, and consumption of alcoholic beverages, including monopolistic practices, unfair methods of competition, and concentration of ownership in the alcoholic beverages industries, and control of retail outlets and prices; advertising, labeling, and merchandising methods with respect to alcoholic beverages, including standards of identity, quality, and size and fill of container therefor; and enforce- ment of the twenty-first amendment, State and Federal coopera- tion in the administration of alcoholic beverage control laws, and methods of promoting temperance. The commission, when- ever in its judgment such action will be in the public interest, may publish the results of such investigations and studies (H. R. 8870, print dated Aug. 13, 1935). At the hearing before the Ways and Means Committee on June 19, Mr. Choate suggested that a similar section be incorporated into the bill on the ground that it was necessary that some one in the Govern- ment be definitely charged with observing the problems of the in- dustry and with furnishing information and making recommenda- tions with respect thereto. Congressman McCormack criticized the section proposed by Mr. Choate as it referred to methods of pro- moting temperance and this might be considered paternalistic (Rec- ord of Ways and Means Committee hearing on H. R. 8539. pp. 24 and 25). With respect to this proposed amendment the Finance Committee stated in its report:
The amendment recommended by the committee also author- izes the commission to make certain investigations and studies and report thereon to the President and to the Congress. It is believed that such investigations and studies and voluntary activities of the commission in connection therewith will prove as valuable in 6btaining law observance by the alcohol beverage industries as the regulatory provisions of the bill (S. Rept. No. 1215, Federal Alcohol Control Act, p. 4). The Senate, however, receded from this amendment as a result of the conference (H. Rept. 1898. Revenue From Distilled Spirits, p. 9). This subsection did not appear in the print of the bill while it was before the House. It was added as subsection (j) as a committee amendment by the Senate (H. R. 8870. print dated Aug 9. 193o; S. Rept. No. '1215, Federal Alcohol Control Act, p. 4: Cong. Rec. vol. 79, no. 167, p. 13396). As a result of the managers' statement the House acceded to the incorporation of this subsection as. passed by the Senate with only minor clerical changes (H. Rept. Ib98, Revenue From Distilled Spirits, p. 9).
Sec. 3 28
UNLAWFUL BUSINESSES WITHOUT PERMIT
Sec. 3. In order effectively to regulate interstate and foreign commerce in distilled spirits, wine, and malt beverages, to enforce the! twenty-first amendment, and to protect the revenue and enforce the postal laws with respect to distilled spirits, wine, and malt beverages :
Note. — In connection with the control of the liquor industries by means of a permit system the Ways and Means Committee stated in its report on the bill :
A permit or license system has been a customary method of administering and enforcing liquor laws. At the present time by act of Congress distillers of alcohol for industrial purposes and brewers of beer of an alcoholic content of 3.2 by weight or less operate under Federal permits. The permit system was used under the codes.
Enforcement of liquor laws is an exceptionally difficult en- forcement problem. Many factors not common to other indus- tries exist in the liquor industry and present enforcement diffi- culties not commonly met with in the enforcement of other laws. The racketeering element present in the industry during prohi- bition is not wholly eliminated. Internal revenue taxes and cus- toms duties afford an economic inducement to operate outside of both liquor tax and liquor control laws. The industry has been newly reestablished and is unstable in its personnel and prac- tices. This, together with the tradition of past practices, par- ticularly corruption and interference in politics and efforts to stimulate consumption through the u tied house " and control of retail channels, afford a poor groundwork for reliance on law observance through voluntary action or through the customary methods of enforcement. The history of the enforcement of liquor laws in this country has been characterized by widespread violations and evasions. The ease with which the products of the industry are adulterated, sophisticated, and misbranded; their relatively high value; the perishable character of many wines and malt beverages; the large distribution costs — all are extraordinary incentives to ignore requirements of law. The mobility of products of the industry makes all channels of inter- state and foreign commerce readily available for illegal trans- actions. Relatively drastic enforcement methods, such as the permit system, therefore become necessary (H. Rept. 1542, Fed- eral Alcohol Control Bill, pp. 5 and 6).
And with respect to the scope of the permit system :
Scope of permit system. — The bill (sec. 3) requires permits for all distillers; wine producers; rectifiers or blenders of dis- tilled spirits or wine; bottlers or warehousemen and bottlers of distilled spirits; importers of distilled spirits, wine, or malt beverages; and wholesalers of distilled spirits, wine, or malt beverages. The permit does not authorize the industry member
29 Sec. 3
to engage in operations which are prohibited by State laws. No permits are provided for brewers or retailers. No permit is required for any State liquor control monopoly, board, or similar agency, or the members thereof.
A distiller, blender, or rectifier, or other producer of distilled spirits or wine, or an importer of distilled spirits, wine, or malt beverages, or a wholesaler of such products, would, under his permit as such, be in addition authorized, either directly or indirectly or through an affiliate, to sell or otherwise dispose of in interstate or foreign commerce, at wholesale or retail, goods produced by him, imported by him, or purchased by him, re- spectively. No permit authority is required for sale or other disposition in intrastate commerce or for warehousing, except in connection with bottling of distilled spirits.
The permit would also include authority to the producer, importer, or wholesaler to bottle, with or without reduction in proof, either directly or indirectly, or through an affiliate, bulk goods produced, imported, or purchased, respectively, by the permittee; subject to the limitations of section 4 (e) (2) which restricts the privilege of bottling in case of distilled spirits. Puerto Rico is not included in the restriction inasmuch as the internal-revenue laws do not apply within Puerto Rico. In accordance with these restrictions, a distiller could, under his permit, bottle in a distiller}7 bonded warehouse all distilled spirits of his own production, and if his warehouse is designated as a concentration warehouse or if he operates an alcohol bonded warehouse, he may also bottle distilled spirits produced by others either on his own account or for hire. Such bottling operations may be undertaken on the tax-paid premises in connection with any such warehouse, and the permittee may sell or otherwise dispose of at wholesale or retail in interstate or foreign com- merce the distilled spirits so bottled. A blender or rectifier of distilled spirits could under his permit bottle on his rectifier's premises distilled spirits blended or rectified by him or acquired by him from any other person, whether for his own account or for hire, and sell or otherwise dispose of at wholesale or retail in interstate or foreign commerce the distilled spirits so bottled.
A warehouseman, who is not a distiller or rectifier, could under his permit bottle distilled spirits acquired by him from any other person, whether for his own account or for hire, if the warehouseman is operating a general or special or alcohol bonded warehouse qualified under the internal revenue laws or a class 8 bonded warehouse qualified under the customs laws, and if the bottling operations occur on the bonded premises of such ware- house or the tax-paid premises in connection therewith; and could under his permit sell or otherwise dispose of at wholesale or retail in interstate or foreign commerce the distilled spirits so bottled. An importer or wholesaler would have no privilege of bottling distilled spirits for sale or resale unless he qualified as a rectifier under the internal-revenue laws.
The permit provisions apply to all members of the specified industries, irrespective of whether the permittee's operations
Sec. 3 30
are intrastate or interstate in character. Apart from the more effective enforcement of revenue and postal laws, which apply as well to intrastate as to interstate operations, laws relating to the enforcement of the twenty-first amendment and to interstate commerce require that the permit system extend to all intrastate operations in order that the permit system may be an effective means of preventing evasion of these laws. The intricacies of corporate set-ups, the establishment of branch houses and sales corporations, the use of rectifiers, blenders, and wholesalers as interstate distribution conduits, and the disposal of stocks through sale of warehouse receipts, make it necessary that all industry members of the specified industries operate under per- mits, irrespective of the character of their operations at any time, if the permit system is to prove adequate in more effectively enforcing the revenue and postal laws and laws relating to inter- state commerce and the twenty-first amendment (id. pp. 6 and 7).
One of the most debated questions in the drafting of the Act concerned the position of the brewers under it. In the draft of the bill discussed at the "Ways and Means Committee hearings on June 19 and 20, 1935 (H. R. 8539, print dated June 18, 1935), the brewing industry was subjected to the permit system. Clause num- bered (1) of subsection 3 (b) provided that it shall be unlawful, except pursuant to a basic permit issued under the act by the Administrator —
to engage in the business of distilling distilled spirits, produc- ing wine, producing malt beverages, rectifying or blending dis- tilled spirits or wine, or bottling, or warehousing and bottling, distilled spirits, or (id. p. 6, italics ours).
This provision excited considerable opposition at the hearings. Mr. Nicholson, a representative of the Ruppert brewery, who, it was stated, spoke for a committee representing 496 brewers, appeared in order to contest the subjection of brewers to a permit system. He objected as a matter of principle and because he believed the pro- vision unnecessary. He believed that all the benefits of the N. R A. could be best preserved through voluntary agreements among brew- ers, since their business was largely intrastate in character, through State cooperation (Record of Ways and Means Committee hearing on H. R. 8539, pp. 61-63). Mr. Paul Esselborn, a Cincinnati brewer, read to the committee a statement submitted by Mr. John C. Bruckmann, former chairman of the Brewers' Code Authority under the F. A. C. A. Brewers' Code of Fair Competition. This statement also opposed a permit system for brewers and pointed out the fact that brewers alone of the alcoholic beverage industries had operated under a voluntary and not an imposed code, and that their code contained no permit provisions. He further stated that during the drafting of this code Government officials had attempted to write in permit requirements, and that after the refusal of the brewers to accept the provision and after considerable study the Government came to the decision that the brewers were right (id. pp. 64 and 65). Congressman O'Malley, of Wisconsin, appearmg as a witness, also objected to the inclusion of malt beverages in
31 Sec. 3
the bill, since brewers had operated very satisfactorily in the past without any permit system (id. pp. 95 and 96). A brief filed with the committee by Charles R. Lipsett, publisher of the trade journal, " Brewers News ", in addition to the above arguments, stated that, since beer is not considered intoxicating, it should be strictly differentiated from hard liquor and should not be subjected to the same rigorous supervision and that State control alone should be sufficient (id. p. 131). This argument was also proffered by Mr. Nicholson (supra).
In testifying at the hearing, Mr. Choate stated in this connection that it was logical, if one industry was under permits, that the rest of them should be also, but that the F.A.C.A. got along " fairly well " with the brewers not under permits (id., p. 28).
The former supervisor of the Beer Division of the Wholesale Code Authority, Mr. A. D. O'Connor, strongly urged that all of the alco- holic beverage industries be placed under permits and that, if the brewers were excepted from the provision, the permit system should be entirely eliminated. He stated that the beer wholesalers were the largest of the alcoholic beverage industries in number, about 9,000 distributors. He also submitted a letter from his division of the Code Authority to the F.A.C.A. requesting that the brewers' code be amended to provide for permits (id., p. 116).
In the bill introduced by Mr. Cullen on July 16, 1935 (H. R. 8870, print dated July 16, 1935), the phrase " producing malt beverages ", which appeared in clause (1) of subsection 3 (b) of H. R. 8539, was deleted and the brewers were thereby removed from the permit system.
Considerable additional testimony relating to the position of brew- ers under the act was offered at the hearings on July 26, 27, and 29, 1935, before the Senate Finance Committee. Mr. M. J. Donnelly, of Chicago, representing the brewers shipping in interstate commerce, made a very strong plea for the complete omission of brewers from the Act. His argument raised the following points: (1) The Act does not protect the revenue derived from the manufacture of malt beverages; (2) a separate agency need not be created to enforce the postal laws and the twenty-first amendment since the Department of Justice already has supervision of these matters; (3) the Act is an attempt to legislate code provisions that have already been declared unconstitutional by the Supreme Court; (4) the brewing industry, already subject to* numerous regulatory bodies, will be unnecessarily burdened by having to comply with the regulations and rulings of another one. He differentiated beer from distilled spirits by stating that, while 90 percent of distilled spirits ir shipped in interstate commerce, only 20 percent of beer is so shipped. The shipping brewer is in continual competition with local brewers and would be discriminated against if forced to comply with Federal restrictions to which local brewers doing an intrastate business were not subject. The present act would not reach intrastate brewers (citing Ward Baking Co. v. Fed. Trade Comm., 264 Fed. 330; Schechter Poultry Corp. v. V. £., 55 S. Ct. Rep. 837 ; and Fed. Trade Comm. v. Sinclair Refining Co., 261 U. S. 463). He adduced the falsity of the theory that the evils which caused prohibition were due to the control of
Sec. 3 32
retail outlets by brewers (hearings of Senate Finance Committee on H. R. 8870, pp" 113-122).
Mr. Walter D. Corrigan, representing the Wisconsin State Brew- ers Association, stated his association, as well as 450 brewers in con- vention at Chicago, had requested that they work out their problems by voluntary agreements and cooperation. He argued that beer was non intoxicating and that it was illogical to group it in legislation with distilled spirits. (See discussion with Senator Barkley, Hear- ing Record, pp. 123 and 121.) He pointed out that there is at present little or no bootlegging in beer and therefore no great need of strin- gent control. He argued that in order to effectuate the " very fine pur- poses " recited in the bill the Administrator must apply its provisions to local breweries and if he did so, the act would be clearly uncon- stitutional. Senator Connally pointed out that in that event the application, and not the act, would be bad (id., p. 126) . The discrim- ination against the interstate brewer would cause him to stop ship- ping interstate and, by selling his product locally, force the smaller brewers to the wall (id. 128).
Mr. O'Connor testified again that the exemption of the brewers from the permit system would leave the Government powerless to enforce most of the provisions of the bill. The brewers are more vitally concerned with the fair trade practice provisions than the other industries but without a permit system applicable to brewers it will be difficult to enforce these provisions (id. 138-141).
The Finance Committee proposed that malt beverages be elimi- nated from the act and suggested the necessary clerical and substan- tial amendments to accomplish this result (H. R. 8870, print dated Aug. 9, 1935). The reasons given for these amendments are stated in the committee's report to be :
Under the House bill the various branches of the malt-bever- age industry were subjected to varying degrees of regulation. Importers and wholesalers, for instance, of malt beverages were required to obtain basic permits before doing business; and the provisions against unfair competition and unlawful practices applied to brewers and importers and wholesalers of malt bever- ages. It was emphasized before your committee that a com- paratively small percentage of brewers distributed their pro- ducts in interstate or foreign commerce, and the power to regu- late such commerce afforded the constitutional basis for the provisions relating to unfair competition and unlawful- prac- tices. It may be observed in this connection that the brewing industry operated under a voluntary code under the code sys- tem, whereas the President imposed codes upon the other al- coholic beverage industries, namely, the distillers, rectifiers, im- porters, wholesalers, and wine producers. Aside from these facts, however, your committee took the position that the appli- cation of the bill should be limited to distilled spirits and wines (S. Jlept. 1215, Federal Alcohol Control Bill, p. 6).
The Senate agreed to this amendment without discussion and the bill as passed bv the Senate on August 13 (Cong. Rec. Vol. 79, No. 167, p. 13396; H. R. 8870 print dated Aug. 13) does not refer to malt beverages.
33 Sec.3
Tiiis major change in the bill made necessary many clerical amend- ments in other sections. Since these changes raise no questions other than those discussed above they will be overlooked or merely men- tioned in the consideration of later sections of the Act.
The conferees suggested that the Senate recede from its amend- ments eliminating malt beverages from the bill and that a compro- mise provision be added dealing with the fair-trade provisions. This compromise will be considered later. The statement of the mana- gers summarizes the matter below:
Amendments nos. 15, 16, 18, 19, 24, 25, 37, 39, 78, 79, 80, 81, 82, 83, 89, 90, 91, 92, 94, 97, 101, 102, 106, 108, 109, 112, 114, 119, 123, 126, 155, and 157: The House bill covered beer and other malt beverages, and its provisions applied to brewers and im- porters and wholesale distributors of such malt beverages, except that brewers were exempt from the provisions of the House bill requiring basic permits. The effect of these Senate amendments is to exempt brewers, importers, and wholesale distributors of malt beverages from all provision of the bill.
The conference agreement retains the provision of the House bill under which importers and wholesalers of malt beverages are required to have permits. The conference agreement applies the trade practices provisions of the bill to malt beverages with a modification under which such provisions are to apply to trans- actions between a brewer or other distributor outside a State and a retailer or trade buyer in a State only to the extent that the State imposes similar requirements on the same classes of per- sons and with respect to the same transactions within the State, and under which the requirements of the bill with respect to labeling and advertising are to apply to persons outside the State in respect to their products shipped into or advertised in a State only to the extent that the State imposes similar require- ments in similar cases within the State, The conference action to accomplish this result consists of the House receding with an amendment on amendment no. 79 and the Senate receding on all the other amendments. (BL Kept. No. 1898, Revenue From Dis- tilled Spirits, p. 9, the numbers refer to the print of H. R- 8870 dated August 13, 1935, with Senate amendments numbered.) In the discussion of the conference report before the House. Con- gressman Fuller of Arkansas, a member of the Ways and Means Committee, stated :
Mr. Speaker, I know it is useless to seek to kill a conference report in the closing hours of a session, but I think in this case the House conferees have made an absolute surrender. It is an instance in which the voices of the majority of the members on the committee were not taken into consideration as well as the sentiment of the House. This bill, as it passed the House, was not the same instrument now pending before us. It is a sur- render to the liquor and to the glass-bottle lobby of the United States as well as to the brewers.
We seek to have an alcohol control board created to regulate the liquors of this country, including whisky and beer, but the
Sec 3 34
brewers with their influence and power are exempted from this bill. The brewers, as everyone knows, are the ones who have caused the greatest trouble in the past. It is common knowl- edge that in the old days on almost every street corner in the big cities the brewers equipped saloons,, and dominated them. Un- der this law they cannot be regulated at all. .According to the Senate amendment, which the House agreed to in conference, they cannot be regulated (Cong. Rec. Aug. 24, Vol. 79, No. 177, p. 14806). In this same connection the following discussion occurred:
Mr. Celler. Do I understand from this conference report that the brewers are not going to be regulated, that they may continue their system of tied houses?
Mr. Fuller. Absolutely.
Mr. Celler. That is wrong.
Mr. Fuller. They concurred in the Senate amendment. They say that " tied houses " may be regulated in the various States. If the States are to regulate breweries, why not the States also regulate the distillers in their unfair practices and save the Federal Government the expense? Why separate them when one needs regulation as much as the other? In other words, if New York wants to buy Milwaukee beer, the Federal control can regulate that interstate transaction. Eighty percent of the beer is sold in the States where brewed.
Mr. Celler. There are only a few interstate sales.
Mr. Fuller. Yes; just a few. This bill ought to be- branded and known as the " brewery bill from Milwaukee." That is how it ought to be known. If there is any use for the mainte- nance of alcoholic control in the United States, the Board ought to have something to do, but under the terms and provisions of this bill the employers will have absolutely nothing to do. It simply means the continuation of jobs for two or three hundred people with nothing to do under the terms and provisions of this biD.
Mr. McFarlane. Will the gentleman yield?
Mr. Fuller. I yield to the gentleman from Texas.
Mr. McFarlane. The platform provides —
We urge the enactment of such measures by the several States as will actually promote temperance and effectively prevent the return of the saloon.
Does this bill do that?
Mr. Fuller. No.
Mr. McFarlane. Will not this bill tend to put an open saloon on every street corner?
Mr. Fuller. It will have a tendency toward the days before prohibition.
Mr. Hoepfel. Will the gentleman yield?
Mr. Fuller. I yield to the gentleman from California.
Mr. Hoeppel. May I state that I am going to support the gentleman's argument, because only last Monday there were 225 drunks arraigned in the courts of the District of Columbia. I concur with the gentleman's views on temperance, but fear
35 Sec. 3a
the liquor business, controlled as it appears to be by the Whisky Trust and the brewers, will ultimately lead to the preprohibi- tion excesses. The Government should exercise positive and complete control of the liquor business in the interests of morals and the elimination of political dominance by the whisky interests.
Mr. Fuller. Some of the Members of this House may not be well enough informed to know the powerful influences of the liquor organization in this country. This powerful organiza- tion is absolutely controlling and dictating the terms and pro- visions of this bill, as well as all legislation and all rules and regulations which come out of the Alcohol Control Division of the Treasury Department affecting liquor. The Board and this division is controlled absolutely, lock, stock, and barrel, by the biggest monopoly that has ever been known in this coun- try. If we do not stop this we will go back to the time before prohibition.
Mr. Celler. I will be happy to cooperate, as will many Mem- bers of the House, in any kind of legislation to come out of the Ways and Means Committee controlling the breweries. Will the gentleman cooperate?
Mr. Fuller. Certainly I will. The House Ways and Means Committee put the breweries under control just like the dis- tilleries, one of them violates the law no more than the other. The " tied houses " will be tied to the breweries the same as be- fore prohibition, with no Federal regulation. Such a com- promise is a shame and brought about by the powerful influ- ence of the brewers and distillers.
Mr. Speaker, I have no distilleries in my State, nor have I any breweries. This lobby is influencing newspapers by ad- vertising and propaganda^ Why, they are even making the good women of the W. C. T. U. believe they are pulling strong for prohibition in this country. If we follow them we will go back to the old bootleg policies and they will be running the temperance cause of this country (Cong. Rec. Aug. 24, 1935, Vol. 79, No. 177, pp. 14806 and 14807). The act therefore represents a compromise between the position taken by the Ways and Means Committee and the House that the brewing industry should be subjected to the same restrictions as the other alcoholic beverage industries, except for permit requirements, and the stand taken by the Finance Committee and the benate that malt beverages and the brewing industry be excluded from the act.
(a) It shall be unlawful, except 'pursuant to a basic permit issued under this Act by the Administrator—
(1) to engage in the business of importing into the United States distilled spirits, wine, or malt bever- ages; or
(2) for any person so engaged to sell, offer, or deliver for sale, contract to sell, or ship, in interstate
Sec. 3b 36
or foreign commerce, directly or indirectly, or through
an affiliate, distilled spirits, wine, or malt beverages
so imported.
This subsection shall take effect sixty days after the date
upon which the Administrator first appointed under this
Act takes office.
Note. — In view of the Senate's position that the act should be ad- ministered by a commission ami that malt beverages should not be subject to it. clerical amendments were made in the bill by the Senate (H. R. SS70, prints dated Aug. 9. 1935, and Aug. 13, 1935). Except for the last sentence the subsection was restored to its original form by the conferees (H. R. 8539, print dated June 18, 1935).
In the bill as introduced by Mr. Doughton on June 18, 1935 (H. R. 8539) , the last sentence of this subsection read : " This subsection shall take effect sixty days after the enactment of this act." The Senate Finance Committee proposed that the sentence be amended to read : " This subsection shall take effect sixty days after a majority of the commissioners first appointed take office " (H. R. 8870, print dated Aug. 9, 1935). This passed the Senate without discussion (H. R. 8870, print dated Aug. 13, 1935, Cong. Rec, Aug. 13, 1935, vol. 79, no. 167, p. 13396). The conferees suggested the language in the act (H. Rept. No. 1898, Revenue From Distilled Spirits, pp. 2 and 9).
Amendments nos. 20 and 22 : Under the House bill the require- ment that importers and persons engaged in the business of distilling spirits, producing wine, rectifying or blending distilled spirits or wine, or bottling or warehousing and bottling distilled spirits, must have a basic permit to engage in operations, became effective 60 days after the enactment of the act. The Senate amendment provides that these requirements shall be effective 60 days after such date as the majority of the commission first appointed takes office. The House recedes on both amendments with amendments changing " Commission " to " Administrator " (H. Rept. No. 1898, p. 9).
(b) It shall be unlawful, except pursuant to a basic permit issued under this Act by the Administrator —
(1) to engage in the business of distilling distilled spirits, producing wine, rectifying or blending dis- tilled spirits or wine, or bottling, or warehousing and bottling, distilled spirits; or
(2) for any person so engaged to sell, offer or deliver for sale, contract to sell, or ship, in interstate or foreign commerce, directly or indirectly or through an affiliate, distilled spirits or wine so distilled, pro-
37 Sec. 3c
duced, rectified, blended, or bottled, or warehoused
and bottled. This subsection shall take effect sixty days after the date upon which the Administrator first appointed under this Act takes office.
Note. — See note to subsection 3 (a) above and note to section 3 above as to the inclusion of producers of malt beverages under this section in the bill as introduced by Mr. Doughton (H. R. 8539, print dated June 18, 1935).
(c) It shall be unlawful, except pursuant to a basic permit issued under this Act by the Administrator —
(1) to engage in the business of purchasing for resale, at wholesale, distilled spirits, wine, or malt beverages; or
(2) for any person so engaged to receive or to sell, offer or deliver for sale, contract to sell, or ship, in interstate or foreign commerce, directly or indirectly or through an affiliate, distilled spirits, wine, or malt beverages so purchased.
This subsection shall take effect March 1, 1936.
Note. — See note to subsection 3 (a) above. In the bill introduced by Mr. Doughton (H. R. 8539) and the bill introduced by Mr. Cullen (H. R. 8870) the date appearing in the last sentence of this subsection was "January 1, 1936/' March 1, 1936, was suggested by the Finance Committee as the effective date of this subsection (H. R. 8870, print dated Aug. 9, 1935) and received the approval of the Senate (H. R. 8870, print dated Aug. 13, 1935). The conferees recommended that the House recede:
The House bill provided that the requirement that wholesale distributors must have a basic permit to engage in operations should take effect January 1, 1936. The Senate amendment provides that "this requirement shall take effect March 1, 1936. The House recedes (Statement of Managers, H. Rept. No. 1898, Revenue From Distilled Spirits, Aug. 23, 1935, pp. 9 and 10) .
This section shall not apply to any agency of a State or political subdivision thereof or any officer or employee of any such agency, and no such agency or officer or employee shall be required to obtain a basic permit under this Act.
Note. — This sentence did not appear in the bill introduced bv Mr. Doughton on June 18, 1935 (H. R. 8539). At the Ways and Means Committee hearing on June 19, Mr. George E. Eppley, a
Sec. 3c 38
member of the Ohio State Liquor Board, requested that Ohio and other States engaged in the liquor business under a State monopoly system be specifically exempted from this section of the act. He argued that States should not be required to apply to the Federal Government for permission to engage in the liquor industries. He assented to regulation under the other sections of the act. After some discussion with members of the committee as to whether a State liquor monopoly is subject to Federal regulation, Congress- man Hill stated that a sovereign State ought not to have come to the Federal Government to get a permit to do that which is lawful within the State. Congressman Dingell, through questioning, ascer- tained that the Ohio board was permitted to sell only within the State of Ohio and not outside the State (record of Ways and Cleans Committee hearings on H. R. 8539, pp. 5-4—58).
Mr. Choate was consulted as to the advisability of exempting State monopolies from the permit section :
Mr. Vinson. Mr. Chairman, would it be asking too much just at this point for Mr. Choate to make a statement of his views in regard to the State control board i
Mr. Choate. You referred to the statement in regard to what, Mr. Vinson \
Mr. Vinson. The testimony of the witness, as to exempting a State liquor board from the operation of this statute.
Mr. Choate. I see really no serious objection to exempting them, if they want to be exempted. I think they ought to be under the regulations, both of the statute and of the regula- tions imposed under the statute, but I think the permit, in the case of the State, would offer no substantial additional means of enforcement. If a State wants to violate the rules, I think they will violate them. I do not expect the State to want to violate them.
Mr. Vinson. So far as you are concerned, then, and so far as it applies to the permit, the statute might exempt State agencies such as the State Liquor Board of Ohio.
Mr. Choate. I should think so, without great difficulty, al- though I agree with you that when the State engages in the business it is a private business and is subject to regulation, if anybody wants to regulate it (Record of Ways and Means Committee hearings on H. R. 8539, pp. 5S and 59).
Later in the hearings, in discussing the practice of some State monopolies of forcing distillers to sell on consignment or accept exchanges of '; dead stock " for merchandise, Mr. Choate made it clear that he did not advocate that the States be entirely exempted from the act and that he did not believe an exemption from the permit section above would have this result:
Mr. Vinson. With those practices admitted, do you not think that this agency of the State, which certainly is not an essential governmental function, should be treated as any other person or agency ?
Mr. Choate. There is no question in my mind that the same rules ought to apply to the States as to the individuals, except that I have some doubt as to whether in case of the State the
39 Sec. 3c
permit system adds any such power of enforcement as it does in the case of the individual.
Mr. Vinson. It cannot hurt anything, can it?
Mr. Choate. I doubt if it can hurt anything much.
Mr. Vinson. As I understand it, we Tvant control; if I read the papers correctly, we want control of the liquor business to some degree, within bounds.
Mr. Choate. Within the bounds suggested in this bill.
Mr. Vinson. You would not have any objection to causing the State monopoly or State stores to put in the permit system ?
Mr. Choate. No; but at the same time I think it is a de- batable question as to whether it is worth while to injure the State feelings, if they have such feelings, when as a matter of fact, if we revoke the permit, we could not do anything to a State who chose to defy us.
Mr. McCormack. Could you not control that situation by a permit to the distiller, so that they can take that back ?
Mr. Choate. Yes ; but the difficulty is that it enables the State to coerce the distiller. All these transactions were in violation of the distillers' code, but the distillers, with an enormous cus- tomer like the State of Pennsylvania facing them, could not as a practical matter refuse to violate the code, when the State of Pennsvlvania told them to.
Mr. McCormack. It was not fair to put them in the position of fighting a sovereign State.
Mr. Choate. We thought so (id. pp. 85 and 86).
The sentence appeared in its present form in the bill introduced by Mr. Cullen on July 16, 1935 (H. K. 8870) and it was not amended by the House or Senate, The Ways and Means Committee report
No permit is required for any State liquor monopolv, board,
or similar agency, or the members thereof (H. Kept. No. 1542,
Federal Alcohol Control Bill, July 17, 1935, p. 6).
At the Finance Committee hearings Judge Marion De Vries made
a well-documented plea for subjecting State monopolies to permit
requirements based on the status under Federal laws of State
agencies engaged in functions that are not essentially governmental
(record of Senate Finance Committee hearings on H. K. 8870, pp.
131-136). _ , _ . .,
Congressman Tarver, of Georgia, offered an amendment when tne bill was discussed on the floor of the House after being reported out by the committee, to insert a new subsection in section 3, providing that it be unlawful to transport or import into any State, Territory, or possession of the United States for delivery or use therein, intoxi- cating liquors in violation of the laws thereof. Mr. Cullen pointed out that a bill to enforce the twenty-first amendment was at that time before the Judiciary Committee of the House and that the provision suggested by Mr. Tarver had no place in the- bill. After some discussion Mr. tarver's amendment was voted down 69 to 66 (Cong. Rec, July 23, 1935, vol. 79, no. -151, pp. 12183, 12194, and 12195).
Sec. 4a 40
Congressman Gilchrist, of Iowa, offered an amendment providing that it would be unlawful for any person to use imported molasses in the manufacture of alcohol or distilled spirits. After considerable discussion as to the use of blackstrap molasses in rectifying whiskey and in manufacturing gin, Mr. Doughton pointed out that the Act was not a farm relief bill nor a bill dealing with imports and that, therefore, although the farmers might be helped by the suggested amendment, it had no place in the Act. Some discussion followed as to whether or not the amendment was germane to the bill. On a vote the amendment was voted down 65 to 74 (Cong. Rec, vol. 79, no. 151, pp. 12195-12197).
PERMITS
Sec. 4. (a) The following persons shall, on application therefor, be entitled to a basic permit:
(1) Any person who, on May 25, 1935, held a basic permit as distiller, rectifier, wine producer, or im- porter issued by an agency of the Federal Govern- ment.
Xote. — In the original bill introduced by Mr. Doughton on June 18, 1935, the word "brewer" appeared in clause (1) of subsection 4 (a) ; see note to section 3. Aside from this minor change the phrasing remains as it appeared in the original bill. The following excerpt from the Ways and Means Committee's report is explanatory of clause (1) :
All persons who held a basic permit issued under the code system and in full force and effect at the time of the termina- tion of that system as a result of the decision in the S cheekier case, are, under the bill, entitled as a matter of right to permits issued under the new law when enacted, except in the case of wholesalers (sec. 4 (a) (1)). Wholesalers held only temporary basic permits at the time of the termination of the code system. The temporary basic permits were issued without the usual investigation. The other permittees under the code system were issued permits after they demonstrated that they did not have records as law violators and that by reason of their previous experience, financial standing, and trade connections they were potential legal members of the industry (H. Rept. 1542, Federal Alcohol Control Bill, July 17, 1935, p.' 8).
(2) Any other person unless the Administrator finds (A) that such person (or in case of a corpora- tion, any of its officers, directors, or principal stock- holders) has, within five years prior to date of appli- cation, been convicted of a felony under Federal or
41 Sec. 4a
State law or has, within three years prior to date of application, been convicted of a misdemeanor under any Federal law relating to liquor, including the taxa- tion thereof; or (B) that such person is, by reason of his business experience, financial standing, or trade connections, not likely to commence operations within a reasonable period or to maintain such opera- tions in conformity with Federal law; or (C) that the operations proposed to be conducted by such person are in violation of the law of the State in which they are to be conducted.
X0TE. — At the Ways and Means Committee hearing, Congressman Celler of Xew York, appearing as a witness, objected to the language of this section as being too vague, as permitting arbitrary rulings, and stated that the Volstead Act contained no such rigid restrictions. Congressman McCormack, of the committee, stated in reference to this objection :
May I say this in regard to page 7. that I think you have placed a construction upon the language that the committee— I know some of the members of the committee, at least— never intended. They did not want to have too drastic requirements, and they limited it to three directions (Report of Ways and Means Committee hearing on H. R. 8539, p. 90). While Mr. Choate was testifying at the Ways and Means Com- mittee hearings on the bill, Congressman Dinged of Michigan asked him about this section:
Mr. Dixgeix. Right at this point, may I ask a question or two regarding what appears to me as an excess of power — right now, in this bill, page 7 ?
In line 13. section (b). it grants the Administrator the power to withold a permit, if he presupposes that the applicant is a person who, bv reason of his business experience, financial stand- ing, or trade 'connections, is not likely to commence operations within a reasonable period or to maintain such operations .in con- formity with Federal law. Is not that giving an Administrator an unusual amount of power, to presuppose and presume that a man may or may not make good in the business, and on that supposition to deny a permit ?
Mr. Choate. I would not say it was a question ot presupposi- tion. It is a question of the interpretation of the man's record. You cannot keep out of the business the men who ought to be kept out of the business, unless you use. in your permit section, thoroughlv general language of that sort.
Mr. Dingell. But it is giving you a great deal of latitude to determine that matter.
.:. ib 42
M:. Oiojlte. It does give a good deal of latitude. There is • ; ij -e questioning that. It is the very power we have been exercising for a vear and a half (record of hearing on H. R. 8539, pp. 20 and 21).
Congressman O'Malley, of "Wisconsin, appearing as a witness, criti- H ed this section as not telling applicants just what conditions must ; met to obtain a permit. He stated that the provision makes it m ibsolute one man dictatorship (id. pp. 96 and 97).
1 he committee's report contains the following statement in regard to this clause:
Under the bill, wholesalers and new applicants are entitled to permits, unless the Administrator after notice and hearing makes certain specific findings (sec. 4 (a) (2) ). Thus, in order to deny an application, the Administrator must find that the applicant, within 5 years prior to his application, has been convicted of a felony under Federal or State law, or that the applicant is, by reason of his business experience, financial standing, or trade connections, not likely to commence operations within a rea-v sonable period or to maintain such operations in conformity with Federal law, or that the operations proposed to be con- ducted under the permit are in violation of the laws of the State in which they are to take place.
These requirements are designed to exclude from the indus- tries persons who would be likely to violate the provisions of the bill and other Federal or State laws. Such requirements are, in the judgment of the committee, fair and reasonable, and bear a real and substantial relation to the adequate enforcement of provisions of Federal law heretofore enacted or enacted in the accompanying bill (H. Kept. no. 1542, Federal Alcohol Control Bill, p. 8).
The remainder of clause (A) after the phrase " been convicted of a felony under Federal or State law, or" is not found in the original bill or in the bill as reported to, and passed by the House (H. R. 8539, H. R. 8870 prints dated July 16, July 17, and July 25, 1935).
The Finance Committee suggested and the Senate passed the fol- lowing amendment, " or of a violation of any Federal law relating to liquor, including the taxation thereof." (H. R. 8870 prints dated Aug. 9 and Aug. 13, 1935.) The present language was suggested by the conferees. (H. Rept. no. 1898, Revenue From Distilled Spirits, Aug. 23, 1935, pp. 2 and 10.)
(b) If upon examination of any application for a basic permit the Administrator has reason to believe that the applicant is not entitled to such permit, he shall notify the applicant thereof and, upon request by the applicant, afford him due notice and opportunity for hearing on the application. If the Administrator, after affording such notice and opportunity for hearing, finds that the appli-
43 Sec. 4c, d
cant is not entitled to a basic permit hereunder, he shall by order deny the application stating the findings which are the basis for his order.
Note. — This subsection appeared in the original bill introduced by Mr. Doughton (H. R. 8539) and except for clerical changes in the Senate retained its original form until enactment.
(c) The Administrator shall prescribe the manner and form of all applications for basic permits (including the facts to be set forth therein)' and the form of all basic permits, and shall specify in any basic permit the authority conferred by the permit and the conditions thereof in ac- cordance with the provisions of this Act. To the extent deemed necessary by the Administrator for the efficient administration of this Act, separate applications and per- mits shall be required by the Administrator with respect to distilled spirits, wine, and malt beverages, and the various classes thereof, and -with respect to the various classes of persons entitled to permits hereunder. The issuance of a basic permit under this Act shall not operate to deprive the United States of its remedy for any violation of law. .
Note. — This subsection appeared in the bill introduced by Mr. Doughton (H. R. 8539) and except for clerical changes by the Senate retained its original language until enactment.
(d) A basic permit shall be conditioned upon compliance with the requirements of section 5 (relating to unfair competition and unlawful practices) and of section 6 (re- lating to bulk sales and bottling), with the twenty-first amendment and laws relating to the enforcement thereof, and with all other Federal laws relating to distilled spirits, wine, and malt beverages, including taxes with respect thereto.
.Note.— This subsection of the bill as originally introduced by Mr. Doughton read as follows:
(d) A basic permit shall be conditioned upon compliance with the requirements of section 5 (relating to unlawful practices), with the Twenty-first Amendment and laws relating to the en- forcement thereof, and with all other Federal laws relating to distilled spirits, wine, and malt beverages, including taxes with respect thereto (H. R. 8539, print dated June 18, 1935, p. 8)
Sec. 4e 44
In the bill as introduced by Mr. Cullen on July 16, 1935, the words "unfair competition and to " were inserted in the parenthetical phrase as it now appears.
The Senate Finance Committee recommended, and the Senate approved of, the insertion of the reference to section 6, which was a new section proposed at the same time. Since the. House receded from its position with respect to section 6 it also permitted this reference to it (H. Kept. no. 1898, Revenue From Distilled Spirits, pp. 1 and 10).
The following statement with respect to this subsection is found in the Ways and Means Committee's report :
Caad'/twris of permit. — The only conditions which attach to a validly issued permit (other than revocation because of nonuse for more than 1 year or termination in the event of transfer) are: (1) Compliance with the provisions of the bill relating to unlawful practices involving interestate or foreign commerce and in some instances involving enforcement of the postal laws; (2) compliance with the twenty- first amendment and laws relating to the enforcement thereof (which would include the provisions of H. R. 8368, if enacted *), and (3) compliance with all other Federal laws now in force or hereafter enacted relating to dis- tilled spirits, wine and malt beverages, including taxing laws, postal laws, and such interstate commerce laws as the Reed amendment (sec. 4 (d)). The permittee is thus left free under the bill to conduct his business as he sees fit, subject only to compliance with Federal laws of unquestionable validity. It follows, therefore, that the permit provisions constitute an exer- cise by Congress of its power to use such means as are " necessary and proper " in order more effectively to carry out its powers to collect taxes, regulate interstate and foreign commerce, enforce the twenty-first amendment, and administer the postal laws, as exercised in the provisions of the present bill relating to unlaw- ful practices and enforcement of the twenty-first amendment, in laws hereafter enacted to enforce the twenty-first amendment, and in the provisions of existing law. (H. Rept. 1542, Federal Alcohol Control Bill, pp. 7 and 8.)
* Ed. note.— H. R. 8368 failed to pass the 74th Congress at its first session.
(e) A basic permit shall by order of the Administrator, after due notice and opportunity for hearing to the per- mittee, (1) be revoked, or suspended for such period as the Administrator deems appropriate, if the Administrator finds that the permittee has willfully violated any of the conditions thereof, provided that for a first violation of the conditions thereof the permit shall be subject to sus- pension only; or (2) be revoked if the Administrator finds that the permittee has not engaged in the operations au-
45 Sec. 4f
thorized by the permit for a period of more than two years ; or (3) be annulled if the Administrator finds that the permit was procured through fraud, or misrepresentation, or concealment of material fact. The order shall state the findings which are the basis for the order.
Note. — This provision appears in the bill introduced by Mr. Doughton (H. R. 8539) as section 4 (g). In the bill introduced by Mr. Cullen (H. R. 8870) it is numbered section 4 (f ) .
By an amendment offered by Congressman O'Neal of Kentucky, the period appearing in clause (2) of this subsection was changed from 1 to 2 years. The amendment was passed without discussion. Aside from this slight amendment and clerical changes made by the Senate, from which it later receded, the original language in Mr. Doughton's bill was retained (Cong. Rec, vol. 79, no. 152, p. 12265, H. R. 8539, sec. 4 (g), p. 9).
The Ways and Means Committee report contains the following statement relative to this subsection:
A permit is subject to revocation or suspension for willful violation of its conditions or to revocation for nonuse, or to annulment if obtained through fraud, misrepresentation, or con- cealment of material fact (sec. 4 (f)). For a first offense, in- volving a violation of the conditions of a permit, the Admin- istrator may not revoke, but only suspend, the permit. The requirements as to issuance and as to revocation, suspension, or annulment of a permit provide definite standards to be applied by the Administrator. The Administrator's determination must be embodied in findings made after due notice and opportunity for hearing. The bill fulfills all legal requirements as to both standards and findings (H. Rept. No. 1542, Federal Alcohol Con- trol BUI, p. 8).
(f) Orders of the Administrator with respect to any denial of application, suspension, revocation, annulment, or other proceedings, shall be served (1) in person by any officer or employee of the Administration designated by the Administrator or any internal revenue or customs officer authorized by the Administrator for the purpose, or (2) by mailing the order by registered mail, addressed to the. applicant or respondent at his last known address in the records of the Administrator.
Note.— Except for clerical changes, this subsection remained as it appeared in Mr. Doughtbn's bill (H. R. 8539). It was numbered in that bill as section 4 (h) and in Mr. Cullen's bill (H. R. 8870), until reported to the Senate by the Finance Committee, as section
4 (g).
Sec. 4g 46
In considering this subsection, the following excerpt from, the re- port of the Ways and Means Committee should be noted :
Provision is made in connection with the administrator's power to deny a permit or to revoke, suspend, or annul a permit that his action be by formal order stating therein the finding upon which the order is based (sec. 4 (b) and sec. 4 (f) ). This requirement is inserted in order that the applicant or permittee may be informed of the substance of the reasons for the ad- ministrator's action (though this provision does not have the effect of invalidating the order if the reasons stated are inade- quate but the record discloses adequate reasons). The speci- fication that the action of the administrator, even in case of denial of an application for a permit, be by order permits the reviewing court to have something before it to review so that jurisdiction will not be denied on the ground that the action of the administrator is negative (H. Kept. No. 1542, Federal Alcohol Control Bill, pp. 8 and 9) .
(g) A basic permit shall continue in effect until sus- pended, revoked, or annulled as provided herein, or voluntarily surrendered; except that (1) if leased, sold or otherwise voluntarily transferred, the permit shall be automatically terminated thereupon, and (2) if trans- ferred by operation of law or if actual or legal control of the permittee is acquired, directly or indirectly, whether by stock-ownership or in any other manner, by any per- son, then such permit shall be automatically terminated at the expiration of thirty days thereafter: Provided, That if within such thirty-day period application for a new basic permit is made by the transferee or permittee, re- spectively, then the outstanding basic permit shall con- tinue in effect until such application is finally acted on by the Administrator.
Note. — Except for a clerical change, this subsection remained as it appeared in Mr. Doughton's bill (H. R. 8539). It was there numbered as section 4 (i) and in Mr. Cullen's bill (H. R. 8870) , until reported to the Senate by the Finance Committee, it was numbered as section 4 (h). With respect to this subsection, the report of the Ways and Means Committee states:
The bill prohibits the lease, sale, or other voluntary transfer ot any permit (sec. 4 (h) ). This prohibition does not, however, prohibit the sale or other transfer of the assets of a permittee. A distiller, for instance, may sell his distillery but not his per- mit. The purchaser in such case is required to obtain a new Eermit. In order to provide continuity of operation of the usiness, in case of a sale, it lies within, the power of the parties
47 Sec. 4h.
to condition the transfer of title upon the prospective purchaser's obtaining a new permit. For the purpose of caring for situa- tions that arise through transfers by operation of law or through acquisition, for instance, of control of an existing permittee by acquisition of its stock, provision is made for .he continuance of the old permit, but only for a limited time, pending applica- tion for a new permit and action by the Administrator thereon. This, the committee believes, is necessary in order to prevent the permits from falling into the hands of bootleggers and other law violators who would not have been entitled to a permit in the first instance (H. Kept. No. 1542, Federal Alcohol Control Bill, pp. 9 and 10).
(h) An appeal may be taken by the permittee or appli- cant for a permit from any order of the Administrator denying an application for, or suspending, revoking, or annulling, a basic permit. Such appeal shall be taken by filing, in the circuit court of appeals of the United States within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, within sixty days after the entry of such order, a written petition praying that the order of the Administrator be modified or set aside in whole or in part. A copy of such petition shall be forthwith served upon the Administrator, or upon any officer designated by him for that purpose, and thereupon the Administrator shall certify and file in the court a transcript of the record upon which the order complained of was entered. Upon the filing of such transcript such court shall have exclusive jurisdiction to affirin, modify, or set aside such order, in whole or in part. No objection to the order of the Administrator shall be considered by the court unless such objection shall have been urged be- fore the Administrator or unless there were reasonable grounds for failure so to do. The finding of the Adminis- trator as to the facts, if supported by substantial evidence, shall be conclusive. If any party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceeding before the Administrator, the court may order such additional
Sec. 4h 48
evidence to be taken before the Administrator and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Administrator may modify his findings as to the facts by reason of the additional evidence so taken, and he shall file with the court such modified or new findings, which, if supported by substantial evidence, shall be conclusive, and his recommendation, if any, for the modification or setting aside of the original order. The judgment and decree of the court affirming, modifying, or setting aside, in whole or in part, any such order of the Administrator shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in sec- tions 239 and 240 of the Judicial Code, as amended (U. S. C, title 28, sees. 346 and 347). The commencement of proceedings under this subsection shall, unless speci- fically ordered by the Court to the contrary, operate as a stay of the Administrator's order.
Note. — This subsection, except for one minor amendment, is in the same form in which it appeared in Mr. Doughton's bill (H. R. 8539). Except for clerical changes made by the Senate and later removed, the subsection retained its original form until enactment. In H. R. 8539 it appeared as section 4 (j) and in H. R. 8870 until reported out by the Finance Committee it was designated section 4 (i). The Ways and Means Committe commented on this section in its report :
This provision is inserted in order to comply with the consti- tutional requirement that a man's right to do business may not be denied administratively, even in pursuance of a Federal power, without his having his day in court. The provision of the bill is similar to that contained in the Packers and Stock- yards Act, the Communications Act, the Securities Act, and the Securities Exchange Act as well as the provision in the internal revenue laws under which appeals are taken from the Board of Tax Appeals. Review is granted in the United States Court of Appeals for the District of Columbia or the Circuit Court of Appeals of the United States where the person resides or has his principal place of business, at his election. Review in the circuit court is thought to be more desirable than review in the district court in order that there may not be the delay and ex- pense consequent upon a lawsuit in the district court and appeal from that court's action to the circuit court of appeals. Further, review of the order is in substance an appellate function which is not within the usual scope of district court jurisdiction but rather within that of the circuit court of appeals. Review is limited to questions of law as required by the Constitution in
49 Sec. 4h
the case of a constitutional court in accordance with the prin- ciples laid down in Old Colony Trvist Co. v. Commissioner of Internal Revenue (1929) (279 TJ. S. 716) ; Federal Radio Co-mmis- sion v. General Electric Co. (1930) (281 U. S. 464) ; and Federal Radio Commission v. Nelson Brothers Bond & Mortgage Co. (1933) (289 U. S. 266). Provision is made, however, by which additional evidence may be adduced before the Administrator even after the case is in court. Appeal from the decision of the court of appeals may be had by certification or certiorari to the Supreme Court of the United States. The court proceedings are to operate as a stay of the order of the Administrator unless the court otherwise directs (H. Kept. 1542, Federal Alcohol Con- troll Bill, p. 9). At the Ways and Means Committee hearings, Mr. Dingell of the committee criticized this subsection on the grounds that the dis- trict courts were not open to appellants. Mr. Choate stated that going straightway to the circuit court of appeals shortened the pro- ceedings ; that it was a compromise between making appellants come to Washington to sue and letting them delay proceedings indefinitely (record of hearings, pp. 21 and 22). Congressman Celler, appear- ing as a witness, raised the same point and urged the procedure used in the Volstead Act of reviews by writs in equity to the district courts. Appellants should not have to pay the higher costs and the increased traveling expenses involved in going to the circuit courts of appeal (record of hearings, pp. 91-93). He raised the same plea at the Finance Committee hearings supported by a letter from the Department of Justice and the additional argument of not crowding the secondary courts (record of Finance Committee hear- ings, pp. 143-145) . An amendment offered by Mr. Celler on the floor of the House in this connection was, after considerable debate be- tween Mr. Celler and Mr. Vinson, rejected (Cong. Rec, vol. 79, no. 152, pp. 12262-12264).
Senator Copeland, of New York, inquired, when the bill was de- bated in the Senate, whether the committee had considered the advisability of having appeals taken to the district court instead of to the court of appeals:
Mr. George. Mr. President, I may say that none of the com- mittee amendments deals with the precise question now raised by the distinguished Senator from New York, but the question he raises was presented to the committee by Representative Celler, of New York, and the committee gave due consideration to it. There is some force in the suggestion ; but it was the view of the committee, at least at the time, that the jurisdiction to consider and to review any action taken by the Federal Alcohol Commission denying to a permittee or an applicant a permit, or modifying or changing or revoking it, should be vested in the circuit court of appeals, notwithstanding some slight increase in cost to the litigant, because it was deemed advisable to leave the jurisdiction in that particular court in order that we might remove as far as possible from local influences the decision of matters of this character involved in the regulation of the manu- facture and sale of distilled spirits.
Sec. 41i 50
Mr. Harrison. Mr. President, will the Senator yield?
Mr. Copeland. I yield.
Mr. Harrison. In further answer to the Senator from New York in connection with this question, I may say that with reference to appeals in the cases involved here the committee followed the same policy which was adopted in the case of the Packers and Stockyards Act, the Communications Act, the Se- curities Act, and the Securities Exchange Act. The committee did not believe it would involve very great additional expense and thought probably the district courts were so clogged with litigation that a man who might wish to appeal could secure quicker action in this way.
Mr. Copeland. I take it, then, that the feeling of the com- mittee is that the procedure recommended here is parallel with the procedure in reference to appeals from other governmental agencies.
Mr. George. As recently decided and determined by the Congress.
Mr. Copeland. The point which was raised involved not alone the question of the expense of going to the circuit courts of appeals, but the suggestion was made to me that the district courts are more readily accessible at all times of the year than are the circuit courts of appeals.
Mr. George. I think it will be found that appeals of this character could be decided more quickly and finally determined if jurisdiction should be vested in the circuit courts of appeals ; and for most purposes, and in most districts, they are as readily available as are the district courts themselves (Cong. Rec, vol. 79, no. 167, p. 13398).
Mr. Dingell also criticized the sixth sentence in this subsection providing that the Administrator's findings of fact shall be con- clusive, as too extreme and as giving the Administrator " an un- godly lot of power which should be curbed." Mr. Choate stated that such a provision was usual on appeal from a fact-finding agency. Mr. Vinson, of the committee, pointed out if the appellant wasn't satisfied that the record was complete he could go back and introduce additional evidence before the Administrator and then appeal (record of hearing, pp. 21 and 22). Mr. Celler took up this point in his testimony before the committee as follows :
Furthermore, I will ask you to look through all your records and all the statutes, and ask you whether you will find anything like this, that the finding of the administrator as to the facts, if supported by substantial evidence, shall be conclusive. I have searched and searched since I have seen this bill, to find any such provision, and I say that if you keep it in — and I say it as one who has studied these propositions as a member of the Judiciary Committee — you will be doing something highly unfair. I doubt very- much whether it would stand the test of any court. You would destroy the efficacy of the appeal, because what the Ad- ministrator would say with reference to all matters which con- stitute a code, with reference to the granting or withholding of permits, on good grounds or " coffee grounds ", would be abso-
51 Sees. 4, i and 5
lutely abortive, and you would give the permittee an empty right. I ask you, gentlemen, to think twice before you leave that provision in the statute (record of Ways and Means Committee hearing, p. 93).
In reply it was pointed out that the same provision was found in several recent acts (see quotation from Congressional Record in pre- ceding note) .
The words " to the contrary " in the last sentence of the subsection were inserted at the recommendation of the Senate Finance Com- mittee (H. R. 8870, print dated Aug. 9, 1935), passed bv the Senate (H. R. 8870, print dated Aug. 13, 1935 ; Cong. Rec, vol. 79, no. 167, p. 13398), and retained by the conferees (H. Rept. 1898, Revenue From Distilled Spirits, pp. 1 and 11).
(i) No proceeding for the suspension or revocation of a basic permit for violation of any condition thereof relat- ing to compliance with Federal law shall be instituted by the Administrator more than eighteen months after con- viction of the violation of Federal law, or, if no conviction has been had, more than three years after the violation occurred; and no basic permit shall be suspended or re- voked for a violation of any such condition thereof if the alleged violation of Federal law has been compromised by any officer of the Government authorized to compromise such violation.
Note. — This subsection did not appear in Mr. Doughton's bill, but originated in Mr. Cullen's bill (H. R. 8870, print dated July 16, 1935, p. 14 y as section 4 (j). The subsection is merely restated in the Ways and Means Committee's report (H. Rept. No. 1542, p. 9).
The Senate Finance Committee recommended that the words " or agency " be inserted immediately after the phrase " compro- mised by any officer " in the last portion of this subsection (H. R. 8870, print dated Aug. 9, p. 17) . This change was approved by the Senate (H. R. 8870, print dated Aug. 13, p. 17), but was not accepted by the managers for the House. (H. Rept. No. 189S, Revenue From Distilled Spirits, p. 1).
UNFAIR COMPETITION AND UNLAWFUL PRACTICES
Sec. 5. It shall be unlawful for any person engaged in business as a distiller, brewer, rectifier, blender, or other producer, or as an importer or wholesaler, of distilled spirits, wine, or malt beverages, or as a bottler, or ware- houseman and bottler, of distilled spirits, directly or in- directly or through an affiliate :
Sec. 5 52
Note.— At the hearings before the Ways and Means Committee on H. R. 8539, Mr. James R. Nicholson representing the Ruppert Brewery and presenting the views of a committee elected by a con- vention of 496 brewers, opposed the incorporation of fair trade practice provisions into the Act on the ground that conditions in the brewing industry were still so unsettled that it. was impossible to tell just "what provisions would be found equitable and maintain- able. He pointed out that similar provisions in the Brewers Code of Fair Competition were repeatedly amended. Penalties for vio- lation of these provisions hit the brewers doubly hard since pro- ducing malt beverages is a continuous process and the shutting down of a plant for even a short time would result in great loss (Record of Hearings pp. 61-63). A brief submitted by Mr. John C. Bruck- mann, former chairman of the Brewers' Code Authority, stated a similar position and presented the additional objection that the brewers had had no contact with the drafting of the bill. He sug- gested that the brewers be given a year to offer concrete suggestions relative to fair trade practice provisions to be written into a statute (id. pp. 64-65). The provisions of section 5 are, in the main, derived from similar prohibited practices in the various codes of fair compe- tition for the alcoholic beverage industries.
The following quotation from Mr. Cullen's remarks when he sub- mitted the bill, has reference to these provisions in the act.
This bill provides for Federal regulation of the liquor in- dustry. It has as its major objectives the protection of the Federal revenue and the prevention of the recurrence of those evils in the 'liquor traffic which existed prior to and after pro- hibition. No provision of the bill is violative of the Constitu- tion either because it denies a fundamental right secured by the Constitution or because it invades a field of regulation reserved by the Constitution to the States. Further, wherever power is granted by the bill to put into effect a policy contemplated by the bill, discriminating language has been used, so that the bill,, if enacted, will not suffer from the infirmity of invalid delega- tion of legislative power.
The Ways and Means Committee held hearings on the subject matter of the bill. These hearings and previous hearings on the Liquor Taxing Act and the studies and reports in connection therewith, and hearings on H. R. 8001 and on the N. R. A. ex- tension bill, furnished a basis upon which deliberate and thoughtful consideration could be devoted to the problems which this bill is designed to meet.
The committee sessions disclosed that it is necessary by some method of Federal control to provide means by which unscrupu- lous racketeers may be prohibited from entering or remaining in the liquor business. Until we can do that the Government's efforts to collect the revenue to which it is entitled will be frustrated at least in part. Further, we must do something to prevent the unfair trade activities of those in the industry who chisel and take advantage of the ignorance of the consumer by dishonest labeling and advertising and by preying on the weakness of others in the industry. Finally, we must do something to supple-
53 Sec. 5
ment legislation by the States to carry out their own policies. The liquor industry is too big and the constitutional and prac- tical limitations on the States are so considerable that they alone cannot do the whole job (Cong. Rec. Vol. 79, No. 151, p. 12178.) *******
The committee felt that the experience under the voluntary N. R. A. codes with the brewers was sufficient to warrant the hope and expectation that they would conduct their business in such a fashion that, for at least an experimental period, the drastic requirement that they have a license or permit prior to engaging in business need not be imposed upon them at this
time (ib.).
*******
Unfair and unlawful trade practices are prohibited by the bill. This control extends to prohibition on the ;; tied house ", exclusive outlets, dishonest payments to buyers which amount to bribes, deceptive names, and consignment sales, and to label- ing and advertising requirements designed to prevent deception of the consumer.
Adequate court review of action of the Administrator in con- nection with permits and prohibitions on unfair and unlawful practices is provided for.
It is believed that this bill will furnish a systematic and care- fully conceived basis for proper Federal control of those matters connected with the liquor industry which imperatively require supervision by the United States. It is also believed that proper machinery has been provided in it by which administration will be easy and workable. Finally, no hardship will be imposed on legitimate industry by the bill. Nothing in it is unfair or dis- criminates against the honest business man who is trying to conduct his business in a fair and reasonable manner (id., p. 12179). The scope of section 5 is mentioned in the Ways and Means Com- mittee's report:
Section 5 of the bill enumerates six specifically defined un- lawful practices. The prohibition of these practices is based primarily on the commerce clause and in some instances on the twenty-first amendment and the postal power. The section ap- plies to distillers, rectifiers, blenders, and other producers of dis- tilled spirits, wine, or malt beverages, importers and wholesalers of distilled spirits, wine, or malt beverages, and bottlers and warehousemen and bottlers of distilled spirits. The provisions are applicable to the persons engaged in such businesses whether the unlawful practices are engaged in directly by them or en- gaged in indirectlv or through an affiliate as defined in the bill. (H. Rept. no. 1512, Federal Alcohol Control Bill, p. 10.)
The Finance Committee in its report referred briefly to the back- ground that made the inclusion of fair trade practice provisions seem advisable :
The House bill (sec. 5) prohibited two classes of trade prac- tices. The first class of these prohibited practices were those
Sec. 5a 54
which tended to produce monopolistic control' of retail outlets, such as arrangements for exclusive outlets, creation of tied houses, commercial bribery, and sales on consignment or with the privilege of return. The reports of the National Commis- sion on Law Observance and Enforcement (Wickersham Com- mission) and of other agencies that conducted surveys of liquor enforcement problems, all indicated that control by producers and wholesalers of retail outlets through the various devices such as those prohibited by the bill has been productive not only of monopoly but also of serious social and political evils which were in large measure responsible for bringing on prohibition. The bill seeks to prevent the recurrence of these evils in the fields that cannot be reached by the States, provided the evils occur in interstate commerce or reach such an extent in the par- ticular case that they constitute a substantial restraint on inter- state commerce or deterrent to the free flow of interstate com- merce in distilled spirits and wines (S. Rept. No. 1215, Federal Alcohol Control Act, pp. 6 and 7).
In its original form in. H. R. 8539 the introductory clause in sec- tion 5 read as follows:
Sec. 5. It shall be unlawful for any distiller, brewer, rectifier, blender, or other producer, or any importer or wholesaler, of distilled spirits, wine, or malt beverages, or any bottler, or ware- houseman and bottle, of distilled spirits, directly or indirectly or through an affiliate (H. R. 8539, print dated June 18, 1935).
The present language appeared in H. R. 8870 when introduced by Mr. Cullen (H. R. 8870, print dated July 16, 1935), and, except for clerical changes made by the Senate and later withdrawn, it was not changed while it was before Congress.
(a) Exclusive outlet: To require, by agreement or otherwise, that any retailer engaged in the sale of dis- tilled spirits, wine, or malt beverages, purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such requirement is made in the course of interstate or foreign commerce, or if such person engages in such practice to such an extent as substantially to re- strain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such requirement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce ; or
55 Sea 5a
Note.— This subsection appeared in the same form in Mr. Dough- ton's bill (H. R. 8539), the onlv difference being that the word " actual " was used in place of the word " direct " as limiting the phrase "effect of such requirement" in the last clause. It ap- peared in its present form in Mr. Cullens bill (I- R. 8870) and. except for clerical changes in the Senate due to the elimination of malt beverages from the bill, retained its original form.'
With reference to the type of commerce affected by the unfair practices prohibited by section 5 of the act, the Ways and Means Committee's report contains the following statement : / . .
It should be noted in each instance that the unfair practices above referred to are prohibited only under those circumstances where they occur in the course of interstate or foreign com- merce, or are engaged in to such an extent as substantially to restrain or prevent transactions in interstate or foreign com- merce, or where the direct effect of the practices is to prevent, deter, hinder, or restrict other persons from selling or offering for sale their products in interstate or foreign commerce. The practices here involved are analogous to those prohibited by the antitrust laws (H. Rept. No. 1542, Federal Alcohol Control Bill, p. 12). The intent of Congress to closely limit the application of the act to the field of interstate commerce is demonstrated in both com- mittee reports. The following excerpt from the report of the Fin- ance Committee is also to be found in the report of the Ways and Means Committee (H. Rept. No. 1542, Federal Alcohol Control Bill, pp. 1-3).
The bill is foimded on the principle that, for the protection of the public and adequate conservation of the revenue, Federal regulation is necessary. These industries are Nation-wide in their extent, profoundly affect many phases of national life, and present problems national in their scope. State regulation is inadequate, by reason of practical and constitutional limitations, to meet the problems presented. Federal regulation, in the field in which the Constitution permits the exercise of Federal authority, is necessary to deal with these problems.
Experience prior to prohibition demonstrated that the indi- vidual States, by reason of the diversity of their laws and the fact that praotically all alcoholic beverage producers and large- scale distributors did an interstate business, could not alone pro- vide those safeguards necessary for the protection of the revenue of the United States, prevent the use of the facilities of inter- state and foreign commerce and the mails to carry on unlawful and deceptive practices, and protect their own citizens from the evils which are always present in an inadequately regulated liquor traffic. That situation holds true today. Further, dur- ing prohibition, unscrupulous persons entered into the liquor business with the consequences known to all. The bootlegger and the racketeer have not yet disappeared from our national life. Under existing Federal law there is no means of keeping the criminal from entering the legalized liquor field. The execu- tive branch of the Government (except to a limited extent in
Sec. 5a oti
the case of distilleries) is powerless to prevent the most notorious criminal from entering into the business of. production or dis- tribution of alcoholic beverages. The revenue cannot be ade- quately protected, the " tied-house " control cannot be curbed, the public cannot be protected front unscrupulous advertising, the consumer cannot be protected from deceptive labeling prac- tices: in short, the legalized liquor traffic cannot be effectively regulated, if the door is left open for highly financed gangs of criminals and racketeers to enter into the business of liquor production and distribution.
Even if the present Federal law were adequate to prevent the criminal from entering the liquor field, there would still remain the problem of control of the unethical minority in the business, the activities of which are beyond State power and require regu- lation in the public interest. The internal revenue. Federal trade, and food and drug laws are insufficient for this purpose. Protection of the consumer and the elimination of improper practices in this industry are imperative, and additional legis- lation to accomplish these purposes is necessary (8. Rept. No. 1215, Federal Alcohol Control Act, pp. 1 and 2).
During Mr. Choate's testimony before the Ways and Means Com- mittee, Congressman Duncan of the committee questioned Mr. Choa'e on the applicability of this section in intrastate transactions:
Mr. Duncan. Mr. Chairman, L would like to ask Mr. Choate a question on page 14 of the bill, with respect to unfair trade practices. Apparently, of course, it is the intention that that will only apply to interstate commerce?
Mr. Choate. Yes.
Mr. Duncan. And is it the intention of the administration, however it may be set up, to control intrastate commerce or business through the licensing provisions of the bill?
Mr. Choate. No. except to this extent, that the permit sections are in a measure independent of the interstate commerce feature. As a means of keeping industry clean, that is, making the indus- try the kind of industry which will obey the revenue laws and the twenty-first amendment, the permit provisions can properly operate irrespective of interstate commerce, but if you will notice, it is only the sales in interstate commerce which are covered by the permit provision, engaging in the business of manufacturing and selling in interstate commerce.
Mr. Duncan. In paragraph (b), line 15, on page 14 —
Mr. Choate. Of course, that is not in the permit provisions at all. You are now dealing with the unfair competition pro- vision.
Mr. Duncan. Unfair competition, yes, but of course your juris- diction would also go to interstate transactions?
Mr. Choate. Yes.
Mr. Duncan. Unless you did control through the permit pro- vision.
Mr. Choate. Yes, sir.
Mr. Duncan. Now, with respect to breweries or distilleries or liquor dealers, furnishing fixtures or signs, or financing retailers,
57 Sec. 5b
supposing the breweries or distillers are located in States having1 a number of large cities, where there would be no interstate features, what would be the effect on those breweries or distil- leries, Jjecoming interested in the retail or outlet store?
Mr. Choate. That would have to be taken care of entirely by the State legislation.
Mr. Duncan. So. if a brewery in a large State saw tit to lease or furnish fixtures or equipment to the retailers, they would have a permit, right under this act, to do that \
Mr. Choate. Yes. I do not think any Federal legislation can prevent that, but in order to make the State's own legislation of that kind effective, you must have Federal legislation to prevent the brewer or the seller in the State next door tying up the house within the State in question (Record of Ways and Means Com- mittee hearings on H. R. 8539, pp. 26 and 27).
A brief discussion of the application of the unfair competition provisions to intrastate transactions took place between Mr. Corrigan. representing the Wisconsin State Brewers Association, and Senator Connally. of the Senate Finance Committee, at the hearings on the bill (Record of hearing on H. R. 8870. pp. 124-127).
(b) "Tied house": To induce through any of the fol- lowing means, any retailer, engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of in- terstate or foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from sell- ing or offering. for sale any such products to such retailer in interstate or foreign commerce :
Xote. — The introductory portion of the subsection is just as it appeared in Mr. Doughtoirs bill (H. R. 8539) except the word " ac- tual " was here used instead of the word " direct " as limiting " effect of such restriction." Only clerical changes were suggested by the Finance Committee and Senate.
With respect to this subsection the report of the Ways and Means Committee contains the following paragraph :
The foregoing practices [note, those prohibited by this subsec- tion] have in this industry constituted the principal abuses wherebv interstate and foreign commerce have been restrained
Sec. 5b 58
and monopolistic control has been accomplished or attempted. The most effective means of preventing monopolies and restraints of trade in this industry is by prohibiting such practices, thereby striking at the causes for restraints of trade and monopolistic conditions and dealing with such conditions in their incipiency. Furthermore, such abuses were so prevalent before prohibition that they were regarded in a large measure as responsible for the evils' which led to prohibition. (See report of the National Commission on Law Observance and Enforcement (1931), H. Doc. No. 722, 71st Cong.. 1st sess., p. 6: and Fosdick and Scott, Toward Liquor Control (1933), pp. 42-43.) The prohibition of these practices will, accordingly, not only prevent monopoly and restraint of interstate trade but will also tend to eliminate or mitigate certain incidental social evils, such as those which have necessarily followed the forced increase in alcoholic-beverage sales resulting from the " tied house." The majority of the in- dustry members have come to accept the view that it is unfair for any of their number to resort to practices which result in such social evils, since other members of the industry are there- upon compelled likewise to engage in such practices if they are to retain their business, and as a result the entire industry is brouirht into disrepute. (H. Kept. No. 1542, Federal Alcohol Control Bill, pp. 11 and 12).
Congressman Treadway, of Massachusetts, representing the mi- nority members of the Ways and Means Committee in the discussion of the reported bill on the floor of the House, said inter alia :
Now, there are two provisions in the measure to which I want very briefly to refer. One is found on page 15, subsection (b). Probably some of the Members wondered what the meaning may be of " tied house ", the first two words under (b) . To my mind that is one of the best features in this bill if it accom- plishes what it is intended to accomplish. Subsection (b) is intended to prevent distillers, brewers, and wholesalers controll- ing the dispensation of whisky or beer, as the case may be, by exercising dominion and control over the place at which the liquor is sold. ,
I think that is extremely desirable, and I commend the com- mittee for having written in that provision which I hope the administrator later on can enforce. I feel that the method whereby the distiller and brewer controlled the dispensing of liquor and beer was one of the great reasons that brought on prohibition. We certainly do not want to see that repeated. So I thoroughly approve of that section. (Cong. Rec, vol. 79, no. 151, pp. 12181 and 12182).
Some consideration of the application of this subsection to brewers doing an intrastate business will be found in the testimony of Mr. Donnelly, representing the shipping brewers, before the Finance Committee (Record of Senate Finance Committee Hearings on H. R. 8870, pp. 115 and 116). Additional consideration is given in the memorandum filed with the committee by George R. Beneman, representing the United States Brewers Association (id. pp. 97 and 98).
59 Sec. 5b (1), (2)
The following statement relating to the class of retailers affected by this subsection appears in the Finance Committee report :
The tied-house provisions, it should be noted, relate to the acquisition by industry members of control o r theretofore independent retail establishments and do not prohibit industry members from continuing- to operate retail outlets heretofore established by them and wholly owned and operated by them, nor the establishment by industry members of new retail outlets of such character (S. Kept. No." 1215, Federal Alcohol Control Act, p. 7).
(1) By acquiring or holding (after the expiration of any existing license) any interest in any license with respect to the premises of the retailer ; or
Xote. — This clause appeared in Mr. Doughton's bill (H. R. 8530) and was not amended by either House of the Congress. At the hear- ings before the Finance Committee Judge Marion De Yries, repre- senting the Wine Institute, suggested that this clause and the rest of the subsection be amended so that it restricted only the "tying " of retailers selling for consumption on the premises and allowed in- dustry members to engage in the sale of their products for con- sumption off the premises" (Record of Hearings of Senate Finance Committee on H. R, 88T0, pp. 130 and 131). A similar suggestion has been made bv Frank A. Coleman, president of the National Wholesale Wine and Liquor Dealers Association (Record of Way? and Means Committee Hearings on H. R. 8539, p. 67). Mr. Vinson
stated:
Mr. Vinson. You would not advocate an abolition ot that section dealing with tied houses, going back to all the abuses in the preprohibition davs?
Mr. Coleman. I would object to it in the way it is written here. If I remember rightly, it merely mentions the retailer.
Mr. Vinson. The retailer 'is the fellow whose house is tied in with the brewerv or distillery?
Mr. Coleman. There is a distinction between the retailer tor consumption on the premises and a retailer for bottling-house
izoods. . ,
" Mr. Vinson. You know what the purpose of the tied hoii-H? ;>c
Mr. Coleman. Yes. sir.
Mr. Vinson. It is to control the abuses that had a lot to do with bringing on prohibition. Is not that true?
Mr. Coleman. That is correct (id. p. 71).
(2) by acquiring any interest in real or personal prop- erty owned, occupied, or used by the retailer in the conduct of his business; or
Xote.— In H. R. 8539. as introduced by Mr. Doughton. this clause read "(2) bv acquiring any interest in any premises of the retailer: or.'' The above wording was offered as a committee amendment by
Sec. 5b (3) GO
Congressman Buck of California, a member of the Ways and Means Committee, and agreed to bv the House. (Cong. Rec. vol. 79. X<>. 152, p. 12267).
(3) by furnishing, giving, renting, lending, or selling to the retailer, any equipment, fixtures, signs, supplies, money, services, or other thing of value, subject to such exceptions as the Administrator shall by regulation pre- scribe, having due regard for public health, the quantity and value of articles involved, established trade customs not contrary to the public interest and the purposes of this subsection; or
Xote. — In H. R. 8539 this clause read :
(3) by furnishing, giving, renting, lending, or selling to the retailer any equipment, fixtures, signs, supplies, money or other thing of value, except advertising specialties; or (H. R. 8539. print dated June 18, 1935).
The present language first appeared in the bill introduced bv Mr. Cullen (H. R. 8870, print dated July 16, 1935). Congressman Buck suggested, as a committee amendment, the insertion of the word " services " after the word " money ", and the House agreed to the amendment (Cong. Rec, vol. 79, no. 152, p. 12267).
At the hearings on the bill before the Congressional committees there was considerable discussion concerning the interpretation of the prohibition placed on the furnishing of signs. Dr. Doran. in the brief filed at the hearing of the Ways and Means Committee (record of hearings, p. Ill), suggested the section be clarified to show clearly that ordinary advertising material might be furnished with impunity. Congressman O'Malley, of Wisconsin, offered on the floor of the House an amendment allowing the furnishing of signs costing collectively not more than $100 per year per retail outlet. (Cong. Rec, vol. 79, no. 152, p. 12267.) The amendment, he said, would protect the little brewer against the big brewer who could spend almost unlimited sums in advertising. It would also prevent the Administrator from barring the furnishing of signs- altogether and thereby injuring the sign industry. He said, in part :
I have sought enlightenment upon what this section does from many members of the committee, and everyone I have talked to has agreed that, as this section is written, no limitation is placed on the amount of advertising material which may be furnished retailers by brewers and distillers so long as no agree- ment is entered into for exclusive outlet. If the chairman were to tell what transpired in the committee he would agree with me that there was a very sharp division on this particular point. and I am reliably informed that this very proposition contained in my amendment lost in committee by only one vote. I think we should take out of here by the adoption of my amendment the possibility of discrimination and hardship in the use of
61 Sec. 5b (4), (5), (6)
advertising that this section works upon the small producer who certainly needs some help and not hindrance in endeavoring to compete for the sale of his produce (id., p. 12268).
The amendment was bitterly opposed by Congressman Vinson of the committee, who said it would encourage the evils of the tied house. The amendment was rejected by the House (id. p. 12269). Mr. Beneman filed a brief at the Finance Committee hearings sug- gesting that the clause be revised to permit the furnishing of any- thing permitted to be furnished by State law. (Record of Finance Committee hearing on H. R. 8870, p. 99.) Mr. Hodges, repre- senting the Advertising Metal Sign and Display Manufacturers Association, testified at the latter hearings that his industry would feel more secure if the provision allowed industry members to fur- nish retailers up to $100 worth of signs in any one year (id. pp. 63-65). Mr. O'Connor, of the Beer Division of the Wholesale Code Authority, expressed himself as being in favor of an absolute pro- hibition against the furnishing of anything (id. p. 140). The Finance Committee proposed, and the Senate agreed to, amendments to this section specifically excepting " signs not exceeding $100 in aggregate value to any retailer in any calendar year " and " adver- tising specialties and graphic arts advertising items of paper or paper-like substance" (H. R. 8870, prints dated Aug. 9 and Aug. 13, 1935). The Senate receded from these amendments as a result of the conference (H. Rept. No. 1898, Revenue From Distilled Spirits, p. 11).
(4) by paying or crediting the retailer for any adver- tising, display, or distribution service ; or
Note. — This clause appeared in the same form in H. R. 8539 as introduced by Mr. Doughton and was not changed or amended.
(5) by guaranteeing any loan or the repayment of any
financial obligation of the retailer; or
Note. — This clause appeared in the same form in H. R. 8539 as introduced by Mr. Doughton and was not changed or amended.
(6) by extending to the retailer credit for a period in excess of the credit period usual and customary to the industry for the particular class of transactions, as ascer- tained by the Administrator and prescribed by regulations by him ; or
Note. — This clause appeared in the same form in H. R. 8539 as introduced by Mr. Doughton. When H. R. 8870 (Mr. Culleirs bill) was debated oh the floor of the Senate, Senator Tydings of Mary- land offered an amendment striking out the words " to the industry ", changing the comma after " transactions " to a period, and striking out the remainder of the clause. He stated the purpose of the amend- ment to be " to change the wording so that the act may be adminis- tered in line with the practices of the business '\ and further stated that he understood that Mr. Choate was not opposed to the amend-
Sec. 5b (7) and c 62
ment. (Cong. Rec. vol. 79, no. 167, p. 13402.) The amendment was agreed to by the Senate but the Senate receded as a result of the conference (H. Kept. No. 1898, Revenue From Distilled Spirits, pp. 1 and 11). The amendment was originally suggested in the brief filed with the Finance Committee by George R. Beneman repre- senting the United States Brewers Association (Record of Finance Committee hearings on H. R. 8870, p. 99). A similar amendment was suggested by Fred A. Caskey, representing the League of Dis- tilled Spirits Rectifiers Inc., in a letter to Senator Harrison dated July 27, 1935, and included in the Record of the Hearing (id. 148).
(7) by requiring the retailer to take and dispose of a certain quota of any of such products ; or
Note. — This clause was offered as an amendment by Congressman Lewis, of Colorado, when the bill, as reported by the Ways and Means Committee, was debated before the House in session as the Committee of the Whole. Mr. Lewis made the following statement in connection with the amendment :
Mr. Lewis, of Colorado. Mr. Chairman, this is a further restriction on the so-called " tied house " which is regulated under section 5 (b) of this bill. Before prohibition, in our part of the country at least, one of the evils of the liquor traffic was that a retailer was required by the brewer or distiller to take a certain quota of beer or spirits of some private brand as a condition to being allowed to retail that brand. The temptation was often irresistible for the retailer to induce cus- tomers to buy drinks when they had already had quite enough. This was a very great evil, as I believe the members of the committee will concede. I think this is an important amend- ment to this bill. I hope the committee will accept the amendment.
The Chairman. The question is on the amendment offered by the gentleman from Colorado (Mr. Lewis). The amend- ment was agreed to (Cong. Rec, vol. 79, no. 152, p. 12270).
(c) Commercial bribery : To induce through any of the following means, any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of interstate or foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent trans- actions in interstate or foreign commerce in any such products, or if the direct effect of such inducement is to
63 Sec. 5d
prevent, deter, hinder, or restrict other persons from sell- ing or offering for sale any such products to such trade buyer in interstate or foreign commerce: (1) By com- mercial bribery; or (2) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative of the trade buyer; or
Note. — This subsection appears in the same form in the bill as introduced by Mr. Doughton (H. R. 8539, print dated June 18, 1935) except that' in the phrase "direct effect of such inducement" the word " direct " has been substituted for the word i4 actual." Al- though clerical amendments were made by the Senate, these were withdrawn as a result of the conference report.
As to type of commerce affected by this subsection, see note to subsection (a) of section 5 above.
(d) Consignment sales: To sell, offer for sale, or con- tract to sell to any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, or for any such trade buyer to purchase, offer to purchase, or contract to purchase, any such products on consignment or under con- ditional sale or with the privilege of return or on any basis otherwise than a bona fide sale, or where any part of such transaction involves, directly or indirectly, the acquisition by such person from the trade buyer or his agreement to acquire from the trade buyer other distilled spirits, wine, or malt beverages — if such sale, purchase, offer, or con- tract is made in the course of hiterstate or foreign com- merce, or if such person or trade buyer engages in such practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such sale, purchase, offer, or contract is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce : Provided, That this subsection shall not apply to transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold ; or
Note. — This subsection appeared in H. R. 8539 as introduced by Mr. Doughton in the following form :
Sec. 5d G4
(d) Consignment sal<$. — To sell, offer for sale, or contract to sell to any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, any such products on consignment or conditionally or with the privilege of return or on any basis otherwise than a bona fide sale, if such person makes such sale, offer, or contract in the course of interstate or foreign commerce, or if such person engages in such practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the actual effect of such sale, offer, or contract is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce: or (H. R. 8539, pp. 15 and 16).
At the Ways and Means Committee hearing Frank A. Coleman, president of the National Wholesale Liquor Dealers Association, ob- jected to this provision on the ground that, if not rigorously enforced, the law-abiding industry member would suffer at the hands of less scrupulous competitors (Record of Wavs and Means Committee hear- ing on H. R. 8539, pp. 71 and 72).
Morris O. Alprin. testifying before the committee as counsel for the Wholesale Wine and Spirits Merchants Association of New York, stated that some of the State agencies were " practically coercing " members to take unsalable merchandise produced by others in part payment of their bills, or as condition to the offering of further orders. He further stated that one State agency would only purchase on a basis that was "practically" a consignment sale. At the re- quest of Mr. Doughton, Mr. Choate substantiated Mr. Alprin's state- ment and said that the same rules ought to apply to States as to individuals (id. 80-88).
The following excerpt from the report of the Ways and Means Committee relates to this subsection :
In connection with the prohibition on consignment sales (sec. 5 (d)) it is to be noted that the provision relates to the buyer as well as the seller. The other provisions discussed above relate only to conduct by the seller. It has been brought to the attention of the committee that certain large buyers are in such a strategic position with respect to sellers that they often have sufficient eco- nomic power to compel the sellers to deal with them on a con- signment or return basis. Buyers less powerful are unable to exact such terms from the seller. Such situations are in practical effect not essentially different from the exaction of price dis- criminations In favor of the large trade buyer. Accordingly the committee felt that the trade buyer ought to be included within the consignment-sale prohibition. The provision is broad enough to include not only the case where the seller agrees in a single transaction to take back undesirable goods in consideration for the sale of other goods but also cases in which, in form, separate transactions have occurred but which are in substance one trans- action. The consignment sale provision is made to apply to sales and purchases by State agencies. The constitutionality of apply- ing such regulation to State agencies is sustained by the cases of
65 Sec. 5e
South Carolina v. U. S. (1905) (199 U. S. 437) : Ohio v. Helverinrj (1934) (292 U. S. 360): and H el wring v. /W-ers (1934) (293 U. S. 214) (H. Kept, No. 1542, Federal Alcohol Control Bill, p. 11)
In the bill introduced by Mr. Culleii (H. R. 8870, print dated July 16. 1935), the subsection appeared in its present form except that the proviso at the end was omitted.
At the hearing; before the Finance Committee, Howard T. Jones, counsel for the Distilled Spirits Institute, Inc., filed a memorandum in letter form which contained the suggestion that a similar proviso be added at the end of the subsection since normal commercial inter- course sometimes necessitates the return of merchandise (record < f hearings before the Finance Committee on H. R. S870. p. 88). The proviso at the end of the subsection was added without discussion by an amendment offered by Senator Tydings, of Maryland, during the debate in the Senate on the bill after it was reported out by the Finance Committee (Cong. Rec. vol. 79, no. 167. p. 13402). The con- ferees agreed to its incorporation in the act (H. Rept. Xo. 1898. Rev- enue From Distilled Spirits, pp. 1 and 11).
'(e) Labeling. — To sell or ship or deliver for sale or shipment, or otherwise introduce in interstate or foreign commerce, or to receive therein, or to remove from customs custody for consumption, any distilled spirits, wine, or malt beverages in bottles, unless such products are bottled, packaged, and labeled in conformity with such regulations, to be prescribed by the Administrator, with respect to packaging, marking, branding, and labeling and size and fill of container (1) as will prohibit deception of the consumer with respect to such products or the quautity thereof and as will prohibit, irrespective of falsity, such statements relating to age, manufacturing processes, analyses, guarantees, and scientific or irrelevant matters as the Administrator rinds to be likely to mislead the consumer ;
Xote. — The language of the introductory portion of thi- subsection and of clause (1) remained as they appeared in H. R. 8539 as intro- duced by Mr. Doughton on June 18. 1935, except for clerical changes, afterwards withdrawn, made in the Senate. Mr. Choate made the following statement as to the general purpose of this, and the sub- section immediately following, at the hearings before the Way- and Means Committee on H. R. 853*9 :
Xow. the provisions of this bill show that the purpose was to carry that regulation into certain particular fields in which con- trol of interstate commerce in liquors was paramount and neces- sary. The purpose was to provide such regulations, not laid down
Sec. 5e (2) 66
in statute, so as to be inflexible, but laid down under the guidance of Congress, under general principles, by a "body which could change them as changes were found necessary.
Those regulations were intended to insure that the purchaser should get what he thought he was getting, that representations both in labels and in advertising should be honest and straight- forward and truthful. They should not be confined, as the pure- food regulations have been confined, to prohibitions of falsity, but they should also provide for the information of the consumer, that he should be told what was in the bottle, and all the im- portant factors which were of interest to him about what was in the bottle (Record of hearing, p. 10).
A general summary of these subsections and of the scope of the regulations issued pursuant thereto is found in the report of the Ways and Means Committee on H. R. 8870:
The labeling and advertising provisions (sec. 5 (e) and (f ) ) prohibit the use of interstate channels when labeling or adver- tising of distilled spirits, wine, or malt beverages does not conform to regulations, with the force and effect of law, pre- scribed by the Administrator. Definite standards are laid down for these regulations. The regulations are not only required to prohibit labeling and advertising that is false, misleading, obscene, or indecent, or that disparages competitors' products, but must also provide for the prevention of deception of the consumer with respect to the product or its quality. They must also prohibit, regardless of their truth, statements relating to age, manufacturing process, analyses, guaranties, and scientific or irrelevant matters that the Administrator finds likely to mis- lead the consumer, and must make provision for informing the consumer adequately as to the identity and quality of the product, its alcoholic content, the net contents of the package. and the person responsible for the package or the advertise- ment (H. Kept. No. 1542, Federal Alcohol Control Bill, p. 12).
It was suggested at the Ways and Means Committee hearings that clause (1) be revised to cut out the phrase "as the Admin- istrator finds will be likely to " and insert in lieu thereof " as will be likely to " (letter of Rectifiers' and Blenders' Association of New Jersey, Inc., brief filed by Mr. Caskey, record of hearing, p. 115). The same suggestion was made in the brief of George R. Beneman, representing United States Brewers Association, filed at the hear- ings of the Finance Committee (record of hearings on H. R. 8870, p. 99). The purpose of the change was stated to be to prevent arbi- trary rulings by the Administrator and to open the courts to ap- pellants on the question as to whether the labels were in fact misleading. The suggested change was not adopted by either of the committees.
(2) as will provide the consumer with adequate infor- mation as to the identity and quality of the products, the alcoholic content thereof (except that statements of, or
67 > Sec. 5e (2)
statements likely to be considered as statements of, alcoholic content of malt beverages are hereby prohibited unless required by State law and except that, in case of wines, statements of alcoholic content shall be required only for wines containing more than 14 per centum of alcohol by volume), the net contents of the package, and the manufacturer or bottler or importer of the product;
Note.— In H. R. 8539 introduced by Mr. Doughton on June 18, 1935, clause (2) of subsection 5 (e) reads as follows:
(2) as will provide the consumer with, adequate information as to the identity and quality of the products, the alcoholic content thereof (except in case of wines, and except that state- ments of, or statements likely to be considered as statements of, alcoholic content of malt beverages are hereby prohibited unless required by State law), the net contents of the package, and the manufacturer or bottler or importer of the product (H. R. 8539, print elated June 18, 1935, pp. 16 and 17).
At the hearings before the Ways and Means Committee. Mr. Lourie, representing the Association of Alcoholic Beverage Importers, sug- gested in his brief that the exception with respect to the statement of alcoholic content on wine labels be modified to require a state- ment on wines containing more than 14 percent of alcohol so^ that the consumer may differentiate readily between " light wines " and "fortified wines" (record of hearings on H. R. 8539. pp. 112 and 113). This suggestion was followed in the drafting of Mr. Cullen's bill (H. R. 8870) and the exception appeared in that bill in the form finally enacted. The report of the Ways and Means Committee contains the following statement with respect to clause (2) :
Alcoholic content is required to be stated in connection with wines only if alcoholic content is above 14 percent by volume, and is optional in case of other wines. Alcoholic content is pro- hibited from being stated in the case of malt beverages. Malt beverages should not be sold on the basis of alcoholic content. The variation of alcoholic content has little consumer importance and the industry recognizes that attempts to sell beer and other malt beverages on the basis of alcoholic content are attempts to take advantage of the ignorance of the consumer and of the psychology created by prohibition experiences.
Legitimate members of the industry have suffered seriously from unfair competition resulting from labeling and advertis- ing that uses such terms as " strong ". " extra strength. "', "high- test ", " high proof ". " prewar strength ". " 14 percent original extract ", and from brand names or other statements or refer- ences which include conspicuous numerals or symbols intending to suggest that the numerals or symbols represent the alcoholic content. Usually such respresentations of excess alcoholic con- tent are false, but irrespective of their falsity, their abuse has grown to such an extent since repeal that the prohibition of all
Sec. 5e (3) 68
such statements is in the interest of the consumer and the pro- motion of fair competition (H. Rept. No. 1512, Federal Alco- hol Control Bill, pp. 1-2 and 13).
In briefs tiled with the Senate Finance Committee at the hearings on H. R. 8S70, it was suggested by Mr. Beneman, representing the United States Brewers' Association, and by Mr. Jon.es, counsel for the Distilled Spirits Institute, that the words " or distributor " be added after the word "manufacturer'' in the latter part of clause (2) to protect trade marks and private brands of distributors. The Finance Committee suggested, and the Senate agreed to, the elimination of the words " importer of the product and the incorporation of "distributor of domestically bottled products and the manufacturer and importer of imported products."' The Senate also eliminated all reference to malt beverages in the clause. The Senate receded on both amendments as a result of the conference (H. Rept. Xo. 1898, Revenue From Distilled Spirits, pp. 1 and 11).
(3) as will require an accurate statement, in the case of distilled spirits (other than cordials, liqueurs, and specialties) produced by blending or rectification, ' if neutral spirits have been used in the production thereof, informing the consumer of the percentage of neutral spirits so used and of the name of the commodity from which such neutral spirits have been distilled, or in case of neutral spirits or of gin produced by a process of con- tinuous distillation, the name of the commodity from which distilled;
Xote. — As it appeared in the bill introduced by Mr. Doughton. clause <:>>) omitted the parenthetical expression '"(other than cordials, liqueurs, and specialties)" and ended with the phrase "the commod- ity from which such neutral spirits have been distilled."
In the brief filed with the Ways and Means Committee at the hearings on H. R. 8539. Mr. Lourie, representing the Associa- tion of Alcoholic Beverage Importers, stated that the percentage of neutral spirits used and the commodity from which such neutral spirits were produced should not have to appear on labels of gin. cordials, and Liqueurs since such products are commonly recognized as always being made from neutral spirits, plus additional flavors (record <>f hearings before the Ways and Means Committee on H. R. 8539. p. 112). Fied A. Caskey. representing the League of Dis- tilled Spirits Rectifiers, Inc., made a similar recommendation (id. pp. Ill and 115).
The parenthetical expression was inserted in clause (3) in H. R. R870 a» introduced by Mr. Cullen on July 16, 1935. The Ways and Means Committee's report with respect to this clause reads:
The labeling and advertising requirements also compel state- ments as t<> the percentage of neutral spirits used in distilled spirits (including gin), except in case of liqueurs, cordials, cock-
69 Sec. 5e (3)
tails, gin fizzes, highballs, bitters, and other specialties. This is for the purpose of informing the consumer of the fact that he is purchasing a product which contains neutral spirits whereas he might think he was obtaining one in which no such spirits were used. Since there is in some cases a consumer preference for neutral spirits made out of grain rather than other products, the labeling and advertising provisions require, where neutral spirits have been used, a statement of which commodity (whether •Train, sugarcane and it> products, fruit, or whatever the com- modity may be) has been distilled to produce the neutral spirits used (H. Rept. no. 154-2. Federal Alcohol Control Bill. p. 13).
When the bill was debated before the House in session a> the Committee of the Whole, the following discussion on this clause occurred :
Mr. Gilchrist. On page 19, that is not the language that was in the former bill. It provided that the label shall contain an accurate statement informing the customer of the presence of neutral spirits, and naming the commodity from which the spirits have been distilled. Does that refer to whisky? Of course, it would not refer to whisky that is not blended.
Mr. Cullen. Whisky that is not blended is labeled in the bonded warehouse and sent into the market as bonded liquor.
Mr. Gilchrist. But it does not contain the name of the com- modity from which it was distilled.
Mr. Cullen. No. The propose of labeling the bottle with its ingredients is to show to the consumer that he is at least getting pure material insofar as it relates to liquor.
Mr. Gilchrist. That is all right. I am not finding any fault. That is, except to say that I think that clause 3 ought to go further than it does here, and apply to all distilled liquors in- stead of those that are merely blended or rectified.
Mr. Cullen. That is a matter of opinion.
Mr. Gilchrist. What does the gentleman say about that (
Mr. Cullen. The committee went into that and decided that that is as far as they can go.
Mr. Gilchrist. Does that apply to gin ?
Mr. Cullen. Gin is stricken out.
Mr. Gilchrist. Suppose I was putting gin in a bottle and selling it. would I have to state on the bottle the commodity from which it was distilled ?
Mr. Cullen. On the label, yes: and gin is very potent, let me tell the gentleman.
Mr. Gilchrist. It is a distilled, blended liquor.
Mr. Cullen. Sometimes it is made from aniseed and some- times it is made from everything (Cong. Rec. vol. TO. no. 151, pp. 1:2180 and 12181).
Congressman Buck, as a committee amendment, suggested the in- sertion of the phrase "or in case of gin. whether or not produced by blending or rectification " after the word '* rectification '* in the first part of the clause (Cong. Rec. vol. 79. no. 152. p. 12267).
At the hearings before the Finance Committee. Mr. Jones, counsel for the Distilled Spirits Institute, recommended the elimination of
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this latter amendment since it would not require all types of gin .to be labeled with the commodity from which it was produced (record of hearings, p. 88). The Finance Committee recommended the elimi- nation of that amendment and the addition of the phrase which now appears at the end of clause (3), i. e., "or in case of neutral spirits or of gin produced by a process of continuous distillation, the name of the commodity from which distilled." The report of the Finance Committee contains the following statement with respect to this pro- posed amendment.
The committee has recommended the insertion of a new pro- vision in the false-labeling and false-advertising provisions so as to make it clear that in the case of gin, whether produced by a process of original distillation in a distillery or by blending or rectification in a rectifying plant, the gin shall show the pr- centage of the neutral spirits contained therein that are derived from each of the respective raw material sources, such as grain, fruit, and sugarcane and its products such as molasses. The amendment also provides similar requirements as to. the source of neutral spirits sold straight without blending. The require- ment of the House bill that other blended and rectified distilled spirits, except cordials, liqueurs, and specialties, shall be labeled so as to inform the consumer of the percentage of neutral spirits contained therein and the percentage of such neutral spirits de- rived from each of the respective commodity sources, is retained without change. (S. Rept. No. 1215, Federal Alcohol Control Act, p. 7). Senator Murphy, of Iowa, introduced an amendment on the floor of the Senate, striking out the above clause entirely and inserting at the end of the paragraph the following :
The regulations of the commission shall prohibit the designa- tion of any product as neutral spirits, or as any type of whisky or gin, for nonindustrial use, if the neutral spirits contained therein are distilled from materials other than grain. Such regulations shall also require that the labels of all distilled spirits (other than cordials, liqueurs, and specialties) to which neutral spirits have been added by blending or rectification, and that the labels of all neutral spirits and of gin, for nonindustrial use, whether produced by blending or rectification or by .a process of continuous distillation, shall state thereon the percentage of neutral spirits contained therein, the name of the commodity or commodities from which such neutral spirits have been dis- tilled, and the percentage thereof derived from each such com- modity. As used herein, the term " neutral spirits " includes ethyl alcohol (Cong. Rec. vol. 79, no. 167, p. 13418).
This amendment was agreed to by the Senate, but later eliminated as a result of the conference. The statement of the managers on the part of the House contains the following summary of the posi- tions taken by the House and the Senate with respect to this clause :
The House bill provided that the regulations of the enforce- ment agency with regard to the informative labeling and ad- vertising of distilled spirits provide that in the cases of dis^
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tilled spirits (other than cordials, liqueurs, and specialties) there be stated on the label or in the advertisement, as the case might be, the percentage of the neutral spirits used in the pro- duction thereof and the name of the commodity from which the neutral spirits were distilled. The provision applied to dis- tilled spirits produced by blending or rectification and to gin, whether produced by blending or rectification or by process of continuous distillation. The provisions did not apply to straight neutral spirits or alcohol produced by process of continuous dis- tillation. The Senate amendments incorporate clarifying pro- visions making it certain that the informative requirements ap- ply to gin produced by process of continuous distillation as well as by blending or rectification and also extend the requirements to straight neutral spirits or alcohol produced by process of continuous distillation. In addition, the Senate amendment makes it clear that it is mandatory upon the enforcement agency to issue regulations of this informative character and that in case neutral spirits made from two different commodities are included in the product then the percentage made from each such commodity shall be stated.
Senate amendment no. 105 further provides that the regula- tions of the Commission with respect to labeling and standards of identity shall prohibit the designation of any product as neutral spirits or as any type of whisky or gin, or * nonindustrial use, if the neutral spirits used in making the product are dis- tilled from materials other than grain. This requirement ap- plies to neutral spirits, whisky and gin produced by a process of continuous distillation, as well as to gin or any type of blended or other whisky produced by blending or rectification. The Senate amendment further provides by definition that the term " neutral spirits ", where used throughout the act, is synon- omous with ethyl alcohol.
The Senate recedes on amendments nos. 105 and 129 which make the regulations mandatory and which prohibit designation of whisky, neutral spirits, or gin, as such, unless produced from grain. The Senate recedes on amendments nos. 100 and 128 which make changes in numbers in connection with amendments nos. 105 and 129. The effect of the conference agreement is to insert the substance of the House provisions with the addition thereto of provisions similar to those in Senate amendments nos. 105 and 129 under which the requirement is imposed that there be a statement of the commodity from which neutral spirits or gin produced by continuous distillation is produced (H. Kept. No. 1898, Revenue From Distilled Spirits, pp. 11 and . 12).
At the debate before the House. Congressman Gilchrist of Iowa