STATEMENT OF HERBERT GUTTERSON, PRESIDENT OF THE INSTITUTE OF CARPET MANUFACTURERS OF AMERICA

Mr. GUTTERSON. Mr. Chairman and members of the committee, I am appearing as the president of the Institute of Carpet Manufacturers. I am not going to take the time of the committee by discussing constitutional questions that may be involved in this legislation. Our industry is entirely willing to leave it to the judicial branch of the Government. Neither am I going to discuss the clause in the bill providing for the setting up of a commission. I think it is important from our standpoint to deal with the indictment of conditions as a menace to the citizens of the United States, which appears in the bill as a legislative determination of fact.

Under the definition of "Textile industry," there is specifically included in this bill before us "rugs, carpets, and other floor coverings." As a condition precedent to, or a reason for, the establishment of a National Textile Commission, togther with specific laws and regulations to be applied to the textile industry, there are set forth certain "findings and policies" under two sections. The second section states that the Congress of the United States, as a matter of legislative determination, finds certain facts which are set forth. These facts, in chief, are that at present wages below decent standards, excessive hours, child labor, unhealthy and demoralizing conditions of work, et cetera, prevail in the textile industry, constituting a menace to the welfare of the citizens of the United States. The bill then states that because of the existence of these evils it is the policy of Congress to remove them by this act.

Therefore, it is to be presumed that if the setting up of a commission, and the establishment of certain laws, are for the purpose of eliminating the evils mentioned, your committee is to base a justification of this bill, in respect to the industry I represent, on the premise that you found the conditions outlined existing as facts in the manufacturing operations and activities of the wool carpet and rug mills of the country.

It is our prime purpose, therefore, in appearing before your committee to deal with the question whether there are in this industry such conditions menacing the welfare of the citizens of the United States, and to suggest to you that in the absence of such conditions, the wool carpet and rug industry should not be included in a bill of this nature.

Accordingly, I do not want to take the time of your committee in registering objections we have to the legal provisions of the bill, or the managerial capacities within an industry which Federal agencies would undertake under the establishment of a commission. We believe we can confidently rest our case upon the question as to whether such conditions as are recited in the bill really prevail. If they do not prevail, I respectfully suggest that your committee has no legislative duty other than to strike this industry out of this bill.

As this is a labor bill, chiefly, we would like to refer you to outstanding conditions which exist in that respect, and which, we believe, in themselves must be largely taken into consideration in coming to any factual conclusion as to whether the conditions surrounding the operations of this industry are a menace to the welfare of the citizens of the United States.

The substantive provisions of the licenses are specified in sections 16 through 28 of the bill. Summarized, the provisions are as follows:

Section 16 prescribes certain minimum wage rates which, according to section 17, may be increased by the Commission; section 19 specifies maximum hours; section 21 prohibits employment of individuals under 16 years of age; section 22 restates the basis provisions of the National Labor Relations Act and provides that the unfair labor practices shall be conditions in every license; section 24 specifies certain general labor provisions; section 25 deals with work assignment and requires compulsory arbitration of changes in work assignment; section 26 authorizes the Commission to control and limit productive operations; section 27 requires employers operating on three-shift basis to pay a bonus of 5 percent to their employees; and section 28 specifies that every license shall contain certain fair-trade practices prohibiting misleading advertising, defamation of competitors, secret rebates, and inducing breach of contract. The issuance of general licenses by the Commission is provided for in section 29 of the bill and the procedure for the revocation of licenses by the Commission is outlined in section 31. A license may be revoked by the Commission after notice and hearing, with a right given to the licensee to obtain review of the action of the Commission in the Circuit Court of Appeals of the United States. The findings of the Commission as to the facts, if supported by any evidence, shall be conclusive. Section 31 (g) provides that the commencement of proceedings shall not, unless specifically ordered by the court, operate as a stay of the Commission's order, and section 32 provides that upon refusal to issue a license or upon revocation of any license, the Commission shall notify all agencies of the Government which are thereupon required to accept such notiffication as binding until the order has been set aside by a court. Persons found guilty of an unfair labor practice within the meaning of the National Labor Relations Act may be deprived of their license.

The following are the penalties provided by the act:

Section 12 prohibits the use of the mails for transmission of matter relating to textile products manufactured, processed, or produced not under a license issued by the Commission.

Section 13 prohibits Government purchasers from making contracts with, or loans to, producers, manufacturers, or processors of textile products not licensed by the Commission, and requires all individuals receiving loans or grants from the Government to agree that the grantee will not in the use of such funds contract with a person in the textile industry not licensed by the Commission.

Section 14 prohibits the interstate commerce in all registration of securities of unlicensed textile corporations.

Section 34 provides that any product purchased or shipped in interstate commerce in violation of the act shall be subject to seizure by any public officer or by any officer of the Commission authorized by the Commission, and shall be forfeited to the United States.

Section 36 (a) provides that any violation of the act shall be deemed a misdemeanor and upon conviction an offender shall be fined not more than $100,000 for each offense or imprisoned for not more than 1 year, or both; the district courts of the United States are vested with jurisdiction to restrain violations of the act by injunction; any person wilfully resisting or interfering with any member of the Commission or any of its agencies in the performance of duties.

make this statement because there are very few in our industry who do not earn more than the figures suggested.

As to workers' hours, our code contained the 40-hour week limitation, with several provisions for a limited number above that figure for certain periods, to cover the elasticity necessary in the related and complicated manufacturing operations peculiar to this industry. Since code days, the industry throughout the country has maintained these limitations, and we know of no charges from any source of excessive hour capacity.

When I make that statement I refer to the records of the United States Department of Labor as to the maintenance of hours.

As to the condition of widespread unemployment asserted as a finding of fact, taking in our industry 1932 as the lowest ebb in the number of workers employed, since October of that year, when the upturn started out of the emergency depression, there has been an improvement in the number of workers employed in the amount of 80 percent.

As to overburdensome work assignments, we have as yet not noted in the hearings of this committee any evidence to that effect. in our industry. We sincerely desire no such conditions and are quite certain that they do not exist.

As to excessive production prevailing in the industry, this does not exist, and the evidence for same is to compare the absorption of our goods with other products, in the ratio in which they share the available income and our portion of the consumer dollar. Moreover, any over-production problems in our industry are invariably controlled by competition; also, the results are so extremely fatal to profitable management in our industry on any extreme over-production situation in a mail, that this economic influence exercises a better safeguard on this question than any possible artificial regulation, with the inevitable handicaps that follow upon a well managed mill that is selling all of the fabrics it produces, and employing sufficient workers to produce the consumer demand upon any such mill. May I point out that in our code under the N. R. A., which organization, as you know, paid particular attention to this question, there was inserted no limitation on machine capacity.

On the question of self organization and collective bargaining, the record of the industry is that we have had unusually satisfactory and peaceful conditions over a period of years with our workers, even during the times of extreme depression, and that there is general acceptance of the right of workers to organize. Moreover, there is now a Federal law in connection with this matter, to which we are all subject.

As to child labor, may I say that child labor does not exist as a problem in our industry, either from an economic or social standpoint, as all our mills are located in States which have had and now have legal requirements as to this type of work.

May I add, generally, again, as to a determination by Congress, and accordingly your committee, that, as a matter of fact, there are these stated conditions, set forth in the bill, in the wool floor covering industry as a menace to the welfare of the citizens of the United States, that we know of no incident in the long history of this industry, or since we had a code under the N. R. A., where there has been Federal or State investigation of the industry, involving possible conditions

It might be pointed out that there were only two dissents from the opinion. A legislative declaration purporting to subject the textile industry to legislative regulation "on the basis of a public use" is so clearly within the explicit language of the Supreme Court in that case that no reasonable conclusion is possible except that such a legislative declaration as is proposed here is clearly contrary to the law. The production and sale of textiles is one of the so-called "common callings" to which the Supreme Court referred in the Wolff Packing Co. case:

It has never been supposed, since the adoption of the Constitution, that the business of the butcher, or the baker, the tailor, the wood chopper, the mining operator, or the miner was clothed with such a public interest that the price of his product or his wages could be fixed by State regulation. It is true that in the days of the early common law an omnipotent parliament did regulate prices and wages as it chose, and occasionally a colonial legislature sought to exercise the same power; but nowadays one does not devote one's property or business to the public use or clothe it with a public interest merely because one makes commodities for, or sells to, the public in the common callings of which those above mentioned are instances.

The authority to regulate cannot be created by a mere legislative assertion that such regulation is necessary, nor can a legislature enlarge its powers by declaring existing facts to be nonexistent. The Supreme Court has definitely stated this principle in respect to State legislation as is demonstrated by the opinion of Mr. Justice Holmes in the later phases of the District of Columbia rent cases.

We repeat what was stated in Block v. Hirsh as to the respect due to a declaration of this kind by the legislature so far as it relates to present facts. But, even as to them, a court is not at liberty to shut its eyes to an obvious mistake, when the validity of the law depends upon the truth of what is declared. And still more obviously, so far as this declaration looks to the future, it can be no more than prophecy, and is liable to be controlled by events. A law depending upon the -existence of an emergency or other certain state of facts to uphold it may cease to operate if the emergency ceases or the facts change, even though valid when passed. Chasleton Corporation v. Sinclair (264 U. S. 547, 548).

The difference between the powers of the Federal government and those reserved to the State must be kept in mind. The right to regulate an industry, properly declared to be clothed with a public interest, is limited solely to the State legislatures. The Federal Government has no such right, because none is granted in the Constitution, and none has ever been implied.

Until recent months it has never even been suggested that there is a "national public interest" in the same legal sense as there is indutiably "a public interest" susceptible of regulation by the several States. The phrase is a legal concept justifying certain types of regulation by States Governments, which regulation could otherwise not be imposed. In other words, the phrase "affected with a public interest" has one definite meaning in our law, the recognition by a State legislature of the necessity of regulating a particular industry. We shall examine the types of industries which have been so regulated and it will be seen that not one relates to manufacturing as such. It is therefore clear that, although up to the present time the States themselves have never regulated manufacturing industries under "the public interest" theory, nevertheless it is now proposed in this bill that the Federal Government should exercise an asserted right under a so-called national-public-interest theory. And, in addition, as if this were not a sufficiently extreme departure from basic legal principles and doctrines, it is further proposed that the Federal regulation should

exercise this nonexistent right in a field which, as is demonstrated below, would not be a proper field for the exercise of Federal regulation even if there existed a "national public interest" as a legal concept.

Even if the textile industry could possibly be so considered, Congress has no power of regulation with regard thereto, but the sole and exclusive right to regulate is reserved to the States in view of the fact that the subject matter dealt with is production.

It would seem almost superfluous to state that the Supreme Court of the United States has adopted, repeated, and rigidly adhered to an inescapable legal conclusion that manufacture is not commerce and that the production of food, clothing, and other products is not interstate commerce. It is so well established a principle that repetition. of statements by the United States Supreme Court to this effect would merely cover unnecessary space and take unnecessary time. A few sentences briefly quoted from decisions to that effect may, however, serve to show that no reservations have been attached by the Supreme Court to this general principle.

The making of goods and the mining of coal are not commerce, nor does the fact that these things are to be afterward shipped or used in interstate commerce make their production a part thereof. Hammer v. Degenhart (247 U. S. 251, at p. 272).

Mining is not interstate commerce, but like manufacturing it is a local business, subject to local regulation and taxation. Kidd v. Pearson (128 U. S. 1, at p. 20).

The alleged conspiracy and the acts here complained of spent their intended and direct force upon a local situation-for building is as essentially local as mining, manufacturing, or growing crops-and if, by resulting diminution of the commercial demand, interstate trade was curtailed either generally or in specifie instances, that was a fortuitous consequence so remote and indirect as plainly to cause it to fall outside the reach of the Sherman Act. Industrial Association v. U. S. (268 U. S. 64, at p. 82).

It has been suggested that, despite the established law of the Supreme Court as expressed in the foregoing citations and many other cases, the Federal Government nevertheless has power to regulate production if such production exerts a "direct" and "substantial" effect upon interstate commerce. Such was the argument made by the Government in its attempt to support the validity of the National Industrial Recovery Act. The Court considered the contention at some length and distinguished the cases relied upon by the Government. One excerpt from the decision of the SupremeCourt in the Schechter case effectively disposes of the argument that production may be regulated upon this theory. The court, after quoting the excerpt from the case of the Industrial Association v. United States, supra, and certain cases arising under the Sherman Antitrust Act, said:

While these decisions related to the application of the Federal statute, and not to its constitutional validity, the distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be recognized as a fundamental one, essential to the maintenance of our constitutional system. Otherwise, as we have said, there would be virtually no limit to the Federal Federal power, and for all practical purposes we should have a completely centralized government (Schechter Poultry Corporation v. United States).

If this broad statement required clarification it can be found in the opinion of the Supreme Court in the Schechter case itself as is shown by the following quotation:

If the commerce clause were construed to reach all enterprises and transactions which could be said to have an indirect effect upon interstate commerce. the Federal authority would embrace practically all the activities of the people