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It is submitted that this bill in no wise differs in principle or practice from the attempted regulations through codes, and, in fact, as we have pointed out above, embodies the features of codes multiplied by arbitrary shop rules and multifarious proposals which were not even acceptable to the National Recovery Administration.

(B) Some of the outstanding drafting defects and those most strikingly illegal are summarized below.

1. Section 3 (B) (5) defines employees to include "any individual whose work has ceased as a consequence of, or in connection with any current labor dispute.' If this is read in connection with section 16, it follows that striking employees, irrespective of the cause of the strike, must be paid the specified wages during the strike.

2. Section 8 (b) empowers the proposed Commission “to investigate from time to time the organization, business, conduct practices, and

management of any person engaged in the textile industry.' Not only is this broad power granted without reservation or judicial recourse, but if read in conjunction with section 36 (c) of the act, any person who shall "resist, prevent, impede, or interfere with any member of the Commission or any of its agents or agencies in the performance of duties pursuant to this act” may be punished by a fine of $1,000 and imprisonment of 1 year. This provision thus applied clearly contravenes the fourth amendment to the Constitution of the United States.

3. Section 9 (a) renders it unlawful, subject to the enormous penalties imposed by section 36 (a), for any individual to buy, deliver, receive or possess unlicensed textile products. This provision transcends any legislation with which we are familiar, and is more drastic in scope than the most extreme legislation under the eighteenth amendment to the Constitution.

4. Section 9 (b) imposes liability and responsibility upon a person who "holds control through stock ownership of or over another person engaged in interstate commerce.” The traditional legal principles applicable to the corporate set-up are thereby swept away, and all distinctions removed between stockholders and those responsible for the operation of corporations.

5. Section 10 refers to textile products “not eligible for entrance into interstate commerce.” The act nowhere specifies what products are thus "eligible”, and the section has apparently no meaning whatever unless it is intended to refer to products manufactured and consumed entirely within one State. But this situation is apparently envisaged in section 2 of the bill.

6. Section 12 applies by its terms even where textile products are not “eligible” for licenses, and would foreclose the use of the mails to every textile producer whose products were sold only within the State of origin.

7. Section 13 (b) prohibits Government contracts, loans, or grants "with or to any person engaged wholly or partially in the textiles industry who is not licensed by the Commission. It should be noted that all and any contracts, loans or grants are foreclosed to such persons, irrespective of the subject matter. An unlicensed person in the textile industry could not, under this section, make a Government contract for the sale of automobiles or printing, nor obtain a. loan for the development of a mine.

8. Section 13 (d) requires that banks must agree, as a condition of a Government loan, “that it will not enter into any financial transaction with any person engaged wholly or partially in the textile industry who is not licensed by the Commission." Note that here 'again there is no limitation upon the scope of the provision. An unlicensed textile producer is excommunicated from credit facilities of any kind for whatever purpose.

9. Section 15, insofar as it requires the agreement in writing of licenses as a condition precedent to the effectiveness of such license, is inconsistent with section 29 (a) which gives to the Commission the power to issue "general licenses."

10. Section 23 permits the filing with the Commission “by either party of agreements between any license and any bona-fide organization of his employees,” and provides that such agreements "become binding and enforceable in the same manner as if originally contained in the license.” Passing over the flagrant illegality of legislative power here contemplated, it should be noted that the agreements would bind only the employer, inasmuch as the license runs only to the employer.

11. Section 24 (b) would require prior notice of 1 week before discharging or laying off any regular employee in addition to the uncertainty as to who is considered to have been "regularly employed", no exceptions are made for such eventualities as forced lay-offs due to break-downs, accidents, and so forth.

12. Section 24 (d) purports to delegate to the Commission power to prescribe forms of employers' liability or group accident insurance

in the absence of a State law.” This is so clearly beyond the scope of Federal power that we call attention to it on the assumption that it has been included in the bill through inadvertence.

13. Section 27 provides that if any licensee "operates his productive machinery upon a schedule of three shifts,” he shall pay "to all his employees” a weekly bonus equal to 5 percent of their wages. This would require a licensee desiring to operate a “bottle neck” department or machine on a three-shift basis to pay a weekly 5 percent bonus to all his employees.

14. Section 32 purports to compel governmental departments and agencies to comply with an order of the Commission revoking : license, "until such order has been modified or set aside by a court of competent jurisdiction.” Thereby a licensee is deprived of judicial review before the imposition of a penalty.

The foregoing does not purport to be an exhaustive list of the more glaring defects and the more extreme provisions of the bill. It is respectfully submitted that the summary will serve to prove that the bill in its present form is not capable of enforcement wholly apart from its clear unconstitutionality.


The objections to the bill may be summarized by again pointing out that the bill contains the worst features of at least four unconstitutional statutes:

1. The N. I. R. A.: Because it seeks to regulate production and the incidents thereof (Schechter case.)

2. The A. A. A.: Because it seeks to coerce compliance by withholding governmental benefits from noncompliers (Butler case).

3. The Public Utility Holding Company Act: Because it seeks to bar from the mails matter which is not harmful or objectionable per se (American States Public Service Co. case).

4. The Child Labor Law: Because it seeks to deny the facilities of interstate commerce for the purpose of regulating conduct beyond the control of the Federal Government (Hammer v. Dagenhart).

In the light of all the foregoing considerations, and for the other reasons presented to this committee, we submit that the pending bill (H. R. 9072) is unsound in policy and invalid in law, and we respectfully urge this committee to disapprove the bill.



Mr. SCHNEIDER. Will you please state your name?
Mr. CONSTANTINE. My name is Earl Constantine.
Mr. SCHNEIDER. And whom do you represent?

Mr. CONSTANTINE. I represent the National Association of Hosiery Manufacturers.

Mr. Chairman and gentlemen, I have a few general observations which I shall want to make a little bit later on in my remarks, but, at the outset, with your indulgence, I would like to make some references touching the high spots of an analysis or a memorandum which we have prepared, taking up the various findings on which the proposed act is premised, and presenting the facts on each one of those scores to the extent that they are available.

At the conclusion of my reference to this memorandum I propose to present this for your records and for any further study that your committee may choose to make of it.

In the findings I quote the paragraph to this effect, that

In recent years this flow of interstate and foreign commerce in textile products has substantially declined in value and amount, has been subject to severe price instability, has been diverted in large quantities from certain States to other States and from certain mills to other mills by reason of unfair competition in wage rates and other conditions of employment, has been interrupted and greatly burdened by strikes and other forms of industrial unrest, and has otherwise been disorganized and depressed.

I shall not say that some of these elements have not appeared in the picture with regard to the hosiery industry. However, I shall try honestly and frankly to present the facts, showing, in some cases, that those particular conditions do not exist, and, in other cases, I am showing the extent to which we find they do exist. And I shall comment as I go along.

I would like to say one thing on the matter of the value of hosiery shipments and the volume of business done by the industry.

One thing to remember in this connection is that the product that we manufacture is not only a hosiery product but it is a matter of costume and color scheme; it is a part of the clothing. You would, therefore, naturally expect to discover that the facts in the picture reveal that the fluctuation in the picture of the demand is relatively small.

Going back to 1929, the total units sold were approximately 117,000,000 dozens, which is the unit used in our industry.

Mr. SCHNEIDER. What year was that?
Mr. CONSTANTINE. That was 1929.

Mr. SCHNEIDER. How many pairs did you say?

Mr. CONSTANTINE. In 1929, 117,000,000 dozens. I will use rough figures, using close approximations.

In 1930, when the shrinkage of the buying power in the depression was first seriously felt, we went down to approximately 99,000,000 dozen pairs.

In 1931 it showed a trend upward, and went up to approximately 99,500,000 dozen pairs.

In 1932 it had progressed to approximately 102,000,000 dozen pairs.

In 1933, which was the year in which we had the code in effect for part of the year, it went up from 102,000,000 dozens that I mentioned to approximately 105,500,000-dozen pairs.

In 1934, the only full year during which we operated under code conditions, it showed a recession from 105,500,000 dozen pairs to 103,500,000 dozen pairs. I would attribute that recession to the generally accepted fact that beginning with the summer of 1933 and running through the fall there was a considerable amount of abnormal prebuying and that prebuying was done in an effort to anticipate the costs expected to exist under the code, which went, in these instances, I believe, a little beyond an even balance, and it had to be offset in the spring of 1934. And that offset in the spring of 1934 doubtless accounts for the shrinkage in 1934. It would be fairer, if one were making a more careful analysis, to take the 2 years together and split them into four quarters, and study the last four quarters. That would be 4 half years. Then take the second half of 1933 with the two halves of 1934, and then you would probably get a more accurate view as to the level to which the consumption had risen.

In 1935, during which year the code was in effect for roughly 5 months and out of effect for 7 months, the increase went from roughly 103,500,000 dozen pairs to 111,250,000 dozen pairs. There was a very marked jump in consumption during 1935, reflected principally in women's silk goods.

Mr. ELLENBOGEN. On that score, Mr. Constantine, out of the 5 months of 1935 that were under the code, how does that compare with 1934?

Mr. CONSTANTINE. January and February 1935, are usually the most important in our branch of the industry in shipment and demand. However, in January and February 1934, we had an abnormal demand.

Mr. ELLENBOGEN. A very high demand?

Mr. CONSTANTINE. Yes; a very high demand for those 2 months. The result of that was that that was followed in the next 3 or 4 months by poorer months than we would have had normally. We had an offset condition. And if we should refer back to our monthly statistical bulletin those of us who are particularly interested in the hosiery industry will recall that we took note of that abnormal rise in January and February and cautioned the industry that it would be bound to be offset by a fall within the next few months. And that offset took place.

And I might add also that that most important branch using the silk commodity found silk was at a very low level for a considerable period of time. And you can see for the year 1934 and the first half of 1935 the level was approximately $1.35 per pound; beginning with June or July of 1935, silk, for the first time in several years, started to rise quite perceptibly, and it went up, I think late in November, to $2.07 per pound, which, in terms of percentage, was a very extraordinary rise in the commodity. That rise was steady beginning late in July, it was accentuated late in August and also in September and October, and, finally, in November.

Then, of course, there was the usual reaction which comes when a thing of that kind takes place. And that undoubtedly accounts for this phenomenal increase, because it had the same effect there, because of the expected increase in labor costs and other costs in 1933.

There was quite a little pre-buying again in the fall of 1935.

You can see, therefore, that so far as the hosiery industry is concerned, the picture presents not a shrinkage of shipments or of products purchased by our consumers, but the reverse.

Mr. WOOD. Have you any comparisons between the shipments in the first quarter of 1935 and the first quarter of 1932?

Mr. CONSTANTINE. It is not exactly comparable, because, prior to the code, our industry, like most industries, lacked statistical service. The statistics which were secured by the Department of Commerce were secured only from a limited number of firms voluntarily giving the statistics and the setup on which they were published was not exactly a commercial setup. The terms in which they were given

. were not the terms used in the industry.

Mr. Wood. Do you have any comparable figures between the first quarter of 1934 and the first quarter of 1935?

Mr. CONSTANTINE. The first quarter of 1934 and the first quarter of 1935, you say?

Mr. Wood. Yes; those first quarters.

Mr. CONSTANTINE. Yes, sir; I have. I can furnish those. You want shipments and production, do you?

Mr. Wood. Yes; production or shipments.

Mr. CONSTANTINE. I will give you both of them. Do you mean for the first half or the first quarter?

Mr. Wood. The first quarter or the first half, or both.

Mr. CONSTANTINE. I will give both of them. I will have those in the mail by tomorrow.

Now, as to the value of hosiery shipments: These are taken from various sources. At best, I would say that they are honest estimates by the sources. I cannot attach to them any accuracy because of the nature of the matter we are discussing; that is, the dollar value.

In 1929 the value of the product for the industry is estimated at $528,000,000. In 1930 it went down to $450,000,000; in 1931 to $331,000,000; in 1932 to $300,000,000; for 1933 I have no figures; in 1934 it was down to $290,000,000; in 1935 it was up to $318,000,000.

Mr. ELLENBOGEN. Did the tremendous drop in the price of silk have something to do with this?

Mr. CONSTANTINE. Oh, yes; it did.
Mr. ELLENBOGEN. Is that the major cause?
Mr. CONSTANTINE. There were two causes,

In 1929 there were two drops. There was a drop in the commodity-taking the silk end of the industry—and there was a drop in the rates of wages paid. The wage situation improved. It began improving in 1933. The commodity situation remained low, and it picked up again in the fall of 1935.

I would say,

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