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Senator McGILL. He would receive a license? He would not be denied that license unless he violated the provisions of the act?
Mr. LEE. Of course, whether you are requested to have a license would be left to the regulation of the Secretary, and the penalty is not against operating without a license, but it is operating without a license when one is required by regulation of the Secretary.
Senator NORRIS. Suppose a man were engaged in operating a mill, selling his products abroad or across a State line; he would have to have a license to operate, would he not?
Mr. LEE. If it had been required by the Secretary. The act does not itself require all processors or distributors to have a license, but he can not operate without one if it is required by regulation.
Senator NORRIS. Would not that be the practical result? Would not the Secretary, as a matter of self-defense, have to require everybody to take out a license by his regulations?
Mr. LEE. I would not suppose so, Senator, unless he found that in the distribution of a particular commodity there were such practices occurring that the operation of the act was being defeated; then he would require licenses in order to further control the marketing situation and prevent the defeat of the operation of the act and the other powers that he was exercising thereunder.
Senator NORRIS. As a practical matter, would it not have to come to that? In other words, if a man did not take out a license, he would not be subject to any regulation or control of any kind; he could get the benefit, however, of any increased price that would be brought about, but he would not be liable for anything if he did not have a license; and in order to protect those who did take out licenses would not the Secretary as a practical result have to compel everybody to take out a license?
Mr. LEE. I do not think you can predict that, Senator. If I were to hazard a guess, I would say that in any particular commoditywe will say wheat, for instance-if it was found that through operation of the distributing agencies there were practices being engaged in that prevented, we will say, a fair portion of the increased price being returned to the farmer, then the Secretary would license probably all agencies engaged in the distribution of that commodity, or perhaps all processors engaged in the distribution of that commodity.
Senator BANKHEAD. Mr. Lee, is it not further true that in the case of some individual producers or production agencies it might be necessary to deal with him by a license ?
Mr. LEE. No; the authority here does not permit the licensing of individuals.
Senator BANKHEAD. But when you do apply your plan that way, then no license would be required?
Mr. LEE. That would be correct.
Senator McGILL. You could hardly make this applicable to the wheat country without requiring a license of all processors of that commodity.
Mr. LEE. I would not suppose that would be necessary, Senator. It would depend on how circumstances developed. If through the reduction in acreage and the benefit payments made, or other powers exercised, the price of wheat was being raised from those operations sufficiently without undue burden to the consumer, then I would sup
pose no license would be necessary, but if those operations and the exercise of those powers was going on and it was found that through trade practices or charges the producer was not receiving a fair return of the money involved, or the consumer was being charged excessive distributing costs as a result of the operations, then the licensing system might be brought into play. It is not something that I personally would feel that the Secretary would automatically, when the act went into effect, make immediate use of. It is more in the nature of an additional remedy to care for situations that may develop, that tend to embarrass the operation of the act.
Secretary WALLACE. It would follow the commodity councils very rapidly, would it not, in all probability ?
Mr. LEE. If you had the commodity council. Secretary WALLACE. Yes. Mr. EZEKIEL. If I may suggest, the commodity council might substitute a voluntary agreement in place of enforced regulation through the license in industries where the commodity council and agreements under those provisions gave effective control; then the compulsory license would not be required.
Mr. LEE. That would be my judgment, Mr. Secretary, as Mr. Ezekiel has stated, that the agreement to such provisions would be sufficient to care for your commodity councils, I think under most circumstances, without the additional aid of the licensing provision.
Senator McNARY. We have had lots of measures here for farm relief, and personally I think this is a complicated section. I do not see that it has any particular value. Most people would have to obtain a license or you would have conflicts between the man that has the license and the man that has not. I do not see why you have it in the bill. I can see no use or purpose it would serve in connection with the plan that you have here. Your explanation has not explained it to me.
Senator WHEELER. Excepting this: It seems to me that it would give the Secretary the power, in the event that there were unfair trade practices, to simply say to everybody: “Now, you have got to have a license if you are going to do business," and that would shut out unfair trade practices when he had that power to prevent somebody from carrying on unfair trade practices.
Senator McNARY. Will you give us an illustration?
Senator McNARY. The law of supply and demand, with the advance in the price levels, would correct that situation or prevent it coming into existence. When you start to license—this is a voluntary scheme; one man can take out a license and the other need not. There is no way to compel them all to be licensed. It is not a power which you can exercise against one group or one individual or the other, because it is voluntary to come in. The license theory is questionable, anyhow, and should not be imposed upon a group of producers or processors unless absolutely essential and necessary in the structure of the bill.
Senator WHEELER. I am assuming that he is not going to use the license system unless he finds it is absolutely necessary.
The CHAIRMAN. May I ask this question? In contemplation of a license being issued, anyone who has a license and violates the provisions of it, he is then estopped from any protection or any distribution ? May I ask Mr. Lee if your interpretation of the licensing feature is that once he is compelled by the Secretary to take out a license and he violates the terms of the license, then he is forbidden to produce or to manufacture?
Mr. LEE. It would be within the power of the Secretary to suspend or revoke the license, and if it was suspended or revoked, then he could not operate further in distribution without subjecting himself to the criminal penalty. But the licensing provisions, Senator, may I say once more, do not apply to individual producers, as I understood your inquiry to imply.
Senator ČAPPER. I would like to ask Mr. Lee under what conditions he thinks the use of this license machinery might be necessary in order to protect the farmer or producer?
The CHAIRMAN. Can you give an illustration ?
Senator WHEELER. It seems to me, for instance, you could take the grain trade in Minneapolis, and we have had innumerable instances in the past, as everybody in North Dakota and South Dakota and in the big wheat-producing States knows, where there have been actually unfair trade practices that absolutely robbed the farmers in the grading of wheat. For instance, they have taken wheat that was no. 1 wheat and graded it as no. 4 wheat, and so on and so forth. I think that Senator Frazier can testify to that. In the event that you had a situation of that kind, where these producers or these processors were doing that sort of thing, then you could go to work and say: “Now, before you can carry on, you have got to have a license to do business.” Then you would have a club over their heads and you could say: "Now, unless you take out a license, you are not going to be permitted to carry on.
Senator McNary. Is that the language of this bill?
To issue licenses permitting processors, associations of producers, and other agencies to engage in the handling.
Senator McNARY. Then your idea is that everybody, processors Senator WHEELER (interposing). Can be made to take out a license.
Senator McNARY (continuing). Or associations of producers can be forced to take out a license before they can do business?
Senator WHEELER. I think so.
Senator WHEELER. No; that could not be a voluntary situation, not at all, I mean so far as that particular group is concerned. But I am not worrying about whether it is voluntary or not; I am worrying about giving the Secretary of Agriculture something to protect the producers in the wheat section against the unfair trade practices that we all know have been carried on by the Minneapolis and St. Paul and Chicago crowd.
Senator CAPPER. I am asking for information. I recognize that there are vicious practices, as you suggest, that are very harmful to the producers out in my section, around the Kansas City grain market and other markets.
Senator McNary. Under this bill, this language, could you compel producers of milk or creamery products to take out a license? Otherwise, they would not be permitted to do business? Mr. LEE. You could compel associations of producers of milk to
license if it Senator McNARY. Take the Beatrice Creamery Co., one of the largest in the country, if not the largest, and suppose that institution would not come to the Secretary and ask for a marketing agreement, could you prevent the operation of that concern in the sale of its products?
Mr. LEE. No; you could require them to take out a license if they were engaging in unfair practices of such a character that they were injurious to the producers.
Senator NORRIS. I notice on page 7, where you come to the penalty,
Any agency engaged in such handling without a license as required by the Secretary under this section shall be subject to a fine of not more than $1,000 for each day during which the violation continues.
Does not that really mean that every processor or handler of these products must take out a license or be liable to a fine if he does not?
Mr. LEE. Only if the licenses have been required by the Secretary.
Senator McNARY. Then is it not a condition precedent that every processor of milk or wheat or cotton is required to take out a license before he can conduct his business?
Mr. LEE. It is not. He is only required to take it out when the Secretary has so required by regulation, as a result of his investigation, finding that unfair practices have been engaged in that are interfering with the operation of the act.
Secretary WALLACE. Lines 2 and 3, page 7, Senator.
Mr. LEE. I might illustrate by this situation, where it will protect not only the public but the consumers. Supposing, for instance, that in the increase in the price of wheat you found that 2 cents was being passed on to the consumer, and that there was an unfair practice there-namely, that of pyramiding the tax—then the Secretary might well say that the operation of this act was being interfered with and he would require licenses from those who distribute flour in the grain trade. Under those circumstances, when he so requires, then the distributors would have to have the license.
The CHAIRMAN. In other words, if a processor of wheat, in the judgment of the Secretary, was conforming to the purposes of this bill, he would not be required to take out a license?
Mr. LEE. That is my understanding.
The CHAIRMAN. But when he begins—when it becomes evident that he is following such practices in his concern as are violative of the intent and purpose of the act, then he must get a license?
Mr. LEE. If the Secretary so requires.
Senator MOGILL. And if the Secretary so requires he has the power to compel him to take it?
Mr. LEE. Yes.
Senator McGILL. Otherwise he will be subject to the penalty.
Senator BANKHEAD. It seems to me this whole requirement is. aimed at producers and processors who engage in unfair trade practices; and that is not a new principle with this Congress, because we adopted a bill just before I came here, requiring licenses to control unfair trade practices in perishable fruits and vegetables moving in interstate commerce.
Senator NORRIS. What would be the inducement, Mr. Lee, for one of these processors to take out a license? It seems to me there must be some advantage or inducement to get him to ask for a license in the first place.
Mr. LEE. He would not have to ask for a license.
Senator NORRIS. I know he would not, but ought he not to have, by taking out a license, some advantage that he would not otherwise possess so as to induce him to take out one?
Mr. LEE. That is not the theory on which this bill is drafted.
Senator NORRIS. If the man who does not take out a license has an advantage over the fellow who does, everybody will try to avoid taking out a license if he can; and you might have a processor of wheat required by the Secretary to take out a license, while his competitor just across the street would not be required to take out a license, both of them in the same business.
Senator WHEELER. I would assume, Senator, that if you found unfair trade practices, for instance, in the grain trade in Chicago, what you would do would be to require all persons engaged in the business to take out a license.
Senator Norris. Let us see what Mr. Lee says about that.
Mr. LEE. That hardly expresses my understanding. The requirement to take out a license depends upon investigation and finding by the Secretary of the necessity for license; then he requires the licenses to be taken out. I would suppose that the requirements or regulations of the Secretary would, just as Senator Wheeler has said, apply to all people within a given class. It might be that unfair practices in Chicago would apply to all the grain trade there.
Senator NORRIS. Would not this be the result then: That just as soon as you found one man who was not doing the right thing you would compel everybody in that line of business to take out a license
Mr. LEE. The Secretary would have the discretion. If you found an isolated case of unfair practice, I would suppose that should probably be handled without putting into effect the license system at all.
Senator NORRIS. How would he handle it? What control would he have over it?
Mr. LEE. There are many other acts of Congress on the books that might possibly cover the situation. It might be a little moral suasion could be used on the gentleman effectively.
Senator NORRIS. A man engaged in a good many of these practices does not care much about morality.
Mr. LEE. Well, to answer the Senator squarely as to what would be within the legal power of the Secretary, I suppose that I must say frankly that the Secretary could require only one processor to take out a license, but I do not believe that the Secretary contemplates that situation.