and the authority of the State over its domestic concerns would exist only by the sufferance of the Federal Government.

It might still be argued that the Supreme Court has nevertheless upheld the right of the Government to regulate local matters where a direct effect has been found to extend from such local activities to the flow of interstate commerce. It is, therefore, pertinent to point out that the Supreme Court, in the Schechter case, analyzed the three types of cases in which the regulation of local activities was upheld and distinguished each of the three types from the statute in question which sought to regulate hours, wages, and working conditions in precisely the same way as does the bill under consideration. Thus, the Supreme Court distinguished those cases which involved railroads and instrumentalities of commerce. The court showed that the

regulation in such instances was based on the theory that the relationship of the matters regulated to the free flow of interstate commerce was so direct as actually to be incidental to interstate commerce. The Supreme Court said:

We have held that, in dealing with common carriers engaged in both interstate and intrastate commerce, the dominant authority of Congress necessarily embraces the right to control their intrastate operations in all matters having such a close and substantial relation to interstate traffic that the control is essential or appropriate to secure the freedom of that traffic from interference or unjust discrimination and to promote the efficiency of the interstate service.

Similarly, in considering the cases involving conspiracy in violation of the Antitrust Act, the Court pointed out that not only did these cases merely involve the construction of a statute so that a conspiracy with intent to restrain commerce violated the statute, but in addition the intent and effect of the actions of the defendants in those cases was directly to curtail the flow in interstate commerce of the products in question. Again, in the cases involving the regulation of dealings in grain futures and in the regulation of packers and stockyards, the Court found that the relationship between the activities regulated and the flow of the products with which those activities dealt was so intimately interrelated that there was, in reality, no beginning and no end to the interstate flow, but, on the contrary, there was merely one unbroken stream or current. In this connection the Supreme Court said:

Hence, decisions which deal with a stream of interstate commerce-where goods come to rest within a State temporarily and are later to go forward in interstate commerce-and with the regulations of transactions involved in that practical continuity of movement, are not applicable here.

In view of the well-established law it is therefore not surprising to find an apparent reluctance on the part of the sponsors of the Ellenbogen bill to seek some ground for attempting to uphold the bill other than as a regulation of commerce.

Carrying an impossible assumption one step further, even if Congress has this power, the things sought to be regulated must bear some reasonable relation to what the public interest is alleged to require, and it is obvious that the multifarious restrictions and regulations contemplated in the proposed bill have no reasonable connection with the evils stated to require regulation.

If we concede two legal impossibilities (1) that a "national public interest" exists with which the textile industry may be considered to be "affected", and (2) that Congress may regulate the production of goods, nevertheless the proposed bill is invalid in that the regula

tion proposed bears no reasonable relationship to the public interest asserted to exist. The Supreme Court said in the Wolff Packing Company case that private businesses subject to regulation because affected with a public interest must be regulated in different ways [reading]:

To say that a business is clothed with a public interest is not to determine what regulation may be permissible in view of the private rights of the owner. * * * It is not a matter of legislative discretion solely. It depends on the nature of the business, on the feature which touches the public, and on the abuses reasonably to be feared. To say that a business is clothed with a public interest is not to import that the public may take over its entire management and run it at the expense of the owner.-Wolff Packing Company v. Court of Industrial Relations (262 U. S. 536).

The foregoing quotation has two phases worthy of consideration at this point: First, the regulation must be logical and factually related to the public interest. Secondly, the regulation must not violate other provisions of the Constitution.

First. Consider the regulations proposed by this bill, even in the light of the exaggerated and inflated "findings of fact" which this committee is asked to make. These findings may be summarized as (a) the flow of interstate and foreign commerce in textile products has declined and been diverted by "excessive competition" in all phases of textile production (sec. I (a) (4) and (b) "present unregulated conditions", including wages, hours, conditions of work, and excessive production, constitute a menace to the well-being of the citizens of the United States.

A reading of the above proposed findings might lead one to the conclusion that almost any regulation could be considered "related" to such a broad declared public interest. But, consider some of the regulations comprised in this bill:

1. Payment of wages to striking employees, irrespective of the cause of the strike (sec. 3 (B) (5), in conjunction with sec. 16).

2. The deprivation of the right to use the mails, to borrow from the Government, to register securities, on the part of a stockholder or a part owner of a textile business (sec. 9 (b) and secs. 12, 13, and 14). 3. The regulation of wages to be paid clerical and office employees (sec. 16 (b)).

4. The regulation of the times and methods of paying wages, of purchases at company stores and living in company houses, of the right to make deductions from wages paid employees, of the right to give bonuses or "anything of value" for the purpose of influencing "working conditions" (sec. 16).

5. The regulation of the length of employees' vacations (sec. 16 (1)). 6. Classified minimum wage rates and differentials above minimum wages to be fixed by the Commission (sec. 18).

7. The regulation of hours of labor of clerical and office workers, of the starting and stopping time of the work of female employees, and the requirement of double time for work performed on Sundays and legal holidays (sec. 19).

8. The prohibition of the employment of persons under the age of 16, or under the age of 18 at certain occupations to be fixed by the commission (sec. 21).

9. The imposition of new burdens and penalties for violations of the National Labor Relations Act (sec. 22).

10. Requirements regarding "safety and health conditions"; of notice before discharge for whatever reason; the imposition of speci

Mr. ELLENBOGEN. If the Government goes through with the housing program, there would not be any difficulty about your industry operating at top speed, would there?

Mr. GUTTERSON. It would be very helpful, Mr. Congressman. Mr. ELLENBOGEN. Well, I have one housing bill in.

Mr. SCHNEIDER. Mr. Gutterson, I would like to ask you to what extent your industry meets foreign competition.

Mr. GUTTERSON. Do you mean the importation of foreign fabrics? Mr. SCHNEIDER. Yes; I do.

Mr. GUTTERSON. Under ordinary circumstances we do not have any difficulty with this situation because the importations have been very small. We are now faced with a potential possibility of having serious competition of a foreign nature.

Mr. SCHNEIDER. With what particular country?

Mr. GUTTERSON. If you want me to say one particular country, I would say Japan at the moment. And there is the risk of the possible reciprocal trade agreements being made by the Department of State.

Mr. SCHNEIDER. As to the tariff agreements which are now in effect, do they permit imports under lower rates?

Mr. GUTTERSON. Not any specific fabric. You mean whether the trade agreement has reduced the tariff, do you?

Mr. SCHNEIDER. Yes; that is what I mean.

Mr. GUTTERSON. Not as yet on any absolute fabric that we make. Mr. SCHNEIDER. Then your industry is not menaced by present importations?

Mr. GUTTERSON. Not by present importations. But a country like Japan is equipped with machinery which it can shift from one type of fabric to another very quickly, and at any moment they might undertake to make similar products and bring them in in as large quantity as they now do with the hooked rug, which is highly competitive with our industry.

Mr. WOOD. What was the occasion of these three or four strikes up in your factory there now?

Mr. GUTTERSON. The institute does not deal as a unit in connection with labor questions. It is one of our policies to leave it to the individual mill to handle.

Mr. WOOD. Are you a manufacturer yourself?

Mr. GUTTERSON. No, sir; I am not. I am a lawyer. I have been in the manufacturing business in my life. I have been in the manufacturing business and I had been in a mill

Mr. WOOD. Have you been in this type of manufacturing?

Mr. GUTTERSON. No, sir.

Mr. WOOD. You are an attorney, are you?

Mr. GUTTERSON. Yes, sir, I am.

Mr. WOOD. You don't know about these four or five or six strikes in progress now in the New England States? I am informed that these strikes are in progress due to the fact that there has been a reduction in wages and a stretching of hours in all these plants. Of course, it is perfectly natural that that would be the cause of all these difficulties.

Mr. GUTTERSON. I know that there are some labor difficulties at the present time in one or two isolated spots in our industry, but I do not think, Mr. Congressman, they involve the facts which are

similar conclusions may be reached, "the power to regulate rates is exercised against a business which in every case used tangible property devoted to a public use." Mr. Justice Lamar, dissenting in German Alliance Insurance Co. v. Lewis (233 U. S. 389, at p. 423). Some of the foregoing businesses had monopolies, some franchises, most used public ways or employed property acquired by virtue of the power of eminent domain. With practically no exceptions, they have a direct relationship to the business or facilities of transportation or distribution.

It is hardly necessary to point out that in no case is the regulation of the above industries exercised by the Federal Government under any fancied "public interest", but all the above are instances of State regulation.

(b) Analysis shows that the States have confined the regulation of these industries to the field of rates and charges for the services and products covered. Departures from this general rule have been made. But such departures have been made within a very limited range and the Supreme Court of the United States has indicated the outermost limits of this range. The Court has said that a State may regulate more than rates, if there actually exists a "danger of monopoly" and a "disaster from stoppage." This rule is laid down in the Wolff Packing Co. case, where the court pointed out that regulation in this field had never extended to fixing wages except where the force of competition did not effectively operate. In the light of this explicit limitation, it is interesting to note the proposed findings of fact in the Ellenbogen bill. The bill purports to find that the effects upon interstate commerce

have been caused directly and primarily * * * by excessive competition in lowering such wage rates and other costs, by over-expansion and excessive capacity of the productive equipment in the industry. (sec. I a 4).

* * *

In other words, although the proponents of the bill seek to justify it on the theory that the industry is affected with the public interest, and it is clear that this theory cannot possibly survive without the existence of a practical monopoly to sustain even the least objectionable of the proposed regulations, the above quoted findings of fact themselves on their face indicate that no such practical monopoly exists but that the exact opposite is true. The bill, therefore, by its own terms, shows the absence of a basis jurisdictional requirement and legal prerequisite. And this may be carried one step further by pointing out that some of the regulations proposed in the bill, such as the power of the Textile Commission to curtail production and restrict operations, would tend to create a monopolistic condition. To put it another way, a result of the bill would be to create a situation which, under the legal theory upon which the bill itself is based, must exist before such a power can conceivably be vested or exercised. The proposed action is as far-fetched in principle as would be an endeavor by Congress to compel every manufacturer to ship a portion of his goods into other States and then to assert a right to regulate his business based upon the fact that some of his products are consumed outside the State of origin.

IV. The control of production is sought to be achieved by the imposition of restrictions on the use of the mails and the right of citizens to do business with the Government as a proprietor, despite

as in many other industries, overcapacity is in part the result of shifts from old to newer regions, creating a condition of overcapacity in the declining region. In addition, all industries are confronted with a measure of overcapacity owing to rapid technical strides which render obsolete each year some considerable fraction of the available equipment. Finally, the excessive optimism of competitors with respect to the share of the market which each can get and hold, together with the mistaken judgment of individual units with respect to the size of the available market, are everywhere causes of overcapacity.

Likewise, the losses suffered by a considerable section of the industry even in good years is a characteristic common to all industry. As is shown elsewhere in this report, the cotton-textile industry reveals an array of costs varying from mill to mill and ranging from low through intermediate to very high cost firms. A tendency for weak firms to cause distress competition is present in greater or less degree in all industry. It must, therefore, be frankly recognized that many of the things complained of are basically unavoidable if we are to retain the advantages of competition and the stimulus which it affords.

Mr. WOOD. Why do you read that portion of the report from this committee?

Mr. SMETHURST. For the simple reason that I think it points out definitely that if there is a national public interest relating to any industry it relates to all industries. The textile industry is in no different situation.

Mr. WOOD. What would you say as to the textile industry compared with the coal industry?

Mr. SMETHURST. I am not an economist and am not acquainted with the conditions in the textile industry as related to the coal industry. I am relying upon this Cabinet committee report, which committee did make a very comprehensive study.

Mr. Wood. The Cabinet committee did not deny that the coal industry was one that had a public interest, as well as the textile industry?

Mr. SMETHURST. They were not studying the coal industry, Mr. Wood. This bill relates to the textile industry. And, in order to do no injustice to either industry, I think I should not say anything about a comparison. I think undoubtedly there are many differences. One is certainly a natural-resource industry all the way through.

Mr. WOOD. Do you contend that the manufacture and the distribution of textile goods in these United States is not in any wise connected with a public interest?

Mr. SMETHURST. That is a different thing, Mr. Wood. I am speaking about a public interest in the legal sense, which is the basis of this legislation. A business may be affected with a public interest in a legal sense to justify a certain degree of regulation by a State. And that purports to be the basis of this bill.

Mr. WOOD. If it affects the public interest as an actuality it naturally goes without saying that there are certainly some legal methods we could employ to remedy any practice that might be against the public interest?

Mr. SMETHURST. That is the question, Mr. Wood. We do not deny that there is a public interest in the textile industry. But there is a distinction between the general public interest in an industry and a public interest in the legal sense which justifies regulation of that industry, not by the States, but by the Federal Government. And in order to justify that regulation by the Federal Government you have to find within the Constitution the power so to regulate. I think that that will be developed in these other points.