Mr. SCHUH. Oh, yes. It is an average of 200 gallons per day. Our Milwaukee average-and we have a complete survey in Milwaukeeis 4,800 gallons a month.

Mr. HANCOCK. My point is this: In reaching that average you must have included innumerable very small dealers who do not really go into the gasoline business as their sole means of livelihood.

Mr. SCHUн. You would be surprised how many 3,000-gallon service stations there are that operate strictly as service stations-3,000 gallons a month, or 36,000 gallons a year.

Mr. HANCOCK. And that is their sole means of livelihood?

Mr. SCHUн. That is their sole means of livelihood.

Mr. HEALEY. And they make an average of 2.5 cents a gallon?

Mr. SCHUH. 3.5—an average of 3.5 cents a gallon.

Mr. HEALEY. That is gross?

Mr. SCHUн. These are strictly retailers, and, of course, we establish our own prices, and sometimes we take more and can take more in areas that are not affected by price cutting. In competitive areas we have to keep our prices right down as close as we can. We operated in Milwaukee from January until last month on a 3-cent margin on regular gasoline, and we had 1.5 cents on third grade.

Mr. HEALEY. Is there anything further of this witness? If not, thank you very much.

(The subcommittee thereupon adjourned until Friday, June 23, 1939, at 10 a. m.)

OIL MARKETING DIVORCEMENT

FRIDAY, JUNE 23, 1939

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE No. III OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The subcommittee met at 10 a. m., Hon. Arthur D. Healey (chairman) presiding.

Mr. HEALEY. Gentlemen, the committee will be in order. We will resume the hearings on H. R. 2318. Mr. Dow has presented me a list of witnesses, the first of whom is Mr. Farish, president of the Standard Oil Co. of New Jersey.

Mr. Dow. Mr. Chairman, before Mr. Farish proceeds may I file with the committee a copy of the brief which was filed and referred to yesterday in connection with the hearing before the Senate committee? Mr. HEALEY. Without objection, it will be received. (The document referred to is as follows:)

AMERICAN PETROLEUM INSTITUTE,

New York City, June 19, 1939.

DEAR SIRS: You have asked us for our opinion as to the constitutionality of a bill introduced in the House by the Honorable Vincent F. Harrington, which bears the number H. R. 2318, and is entitled "A bill to divorce the businesses of production, refining, and transporting of petroleum products from that of marketing petroleum products."

Section 2 of the bill defines the terms used, including "marketing" as meaning "the sale and distribution of refined petroleum products, other than the initial sale with transfer of ownership to customers at the refinery."

Section 3 makes it unlawful for any person "to be engaged in commerce in the marketing of refined petroleum products while such person or affiliate of such person is also engaged in one or more of the other three branches of the petroleum industry, namely, production, refining, and transportation."

The statute is penal in nature and provides a fine of not to exceed $10,000 for each offense committed.

In view of the fact that the definition of "marketing" includes sale and distribution, it would appear that the effect of this act is subject to two possible constructions:

First, that section 3 is intended to prohibit any person engaged in production, refining, and transportation, or any one of these occupations, from transporting petroleum products in interstate commerce for any other purpose than his own In other words, that it is a criminal offense to remove refined petroleum products from the refinery in which it is refined, or at least from the States in which the refinery is located, except for the owner's use.

use.

The second possible construction of the act would be that the term "sale and distribtuion" was not intended to prohibit the free transportation of refined petroleum from the refinery or the State in which it was located, but only to prohibit the sale of refined products through a system of distribution under which deliveries are made to the consumer or retailer at the risk and in the equipment of the owner.

If the bill prohibits all transportation of refined products by anyone engaged in any one of the other three phases of the oil business, then surely Congress is seeking to exercise its power to regulate commerce. It is difficult to conceive

of a more definite form of regulation than prohibition. Before adopting such legislation, however, it is the duty of Congress to determine whether the legislation complies with the limitation on its power and the guarantees to those affected by its exercise.

In Railroad Retirement Board v. Alton R. R. Co. (1935; 295 U. S. 330), the Supreme Court has recently said, at page 347:

"All agree that the pertinent provision of the Constitution is article I, section 8, clause 3, which confers power on the Congress "To regulate Commerce among the several States *; and that this power must be exercised in subjection to the guaranty of due process of law found in the fifth amendment.” [Italics supplied.]

See to the same effect: U. S. v. Chicago, etc., R. R. Co. (1931; 282 U. S. 311, 327); Monongahela Nav. Co. v. U. S. (148 U. S. 312, 336); Adair v. U. S. (208 U. S. 161).

The point to which the courts will direct their inquiry in deciding whether or not constitutional limitations have been respected, is to determine whether or not "the means selected shall have a real and substantial relation to the object sought to be attained," by the proposed legislation. Nebbia v. New York (1934; 291 U. S. 502, 525.)

The sole object of this bill, however its language is considered, is to compel the divorcement of marketing operations from refining, production, and transportation activities.

We shall now test the reasonableness of the proposed bill in the light of the two construction of its purpose heretofore outlined. Under the first construction the bill once and for all eliminates a large group of individuals and corporations from selling products which they have produced, refined, or transported, and even blocks transportation of these products into a territory in which they might find a market. The sweeping effect of this language would, it appears, make it incumbent upon Congress to adopt such legislation only in the face of the most persuasive proof that the action taken would be necessary to deal with excep‐ tional circumstances which cried out for immediate and drastic action. In the absence of any such circumstances, it would appear that this bill transcends any and all powers which Congress might properly exercise by virtue of its constitutional power to regulate interstate commerce.

The bill in no way limits the persons whom it affects. Any owner of refined products who may be also a producer, a refiner, or engaged in the transportation of crude oil or its products, is affected by the act. The enacting clause states that the bill seeks "to protect commerce * from the burdens and harmful effects and monopolies," but no distinction is made in the act between innocent traders and those guilty of monopolistic practices or even those practices which could, under all existing definitions of monopoly, have any monopolistic effect on interstate commerce. It would probably be difficult to find a bill which more nearly fits the language of the court in Tyson and Brother v. Benton (273 U. S. 418, 443), in which it held nonpermissible a law which "in effect, spreads an all-inclusive net for the feet of everybody upon the chance that, while the innocent will surely be entangled in its meshes, some wrongdoers also may be caught."

Insofar as the bill aims to suppress monopolies, it is in no sense analogous to the Sherman Anti-Trust Act which, as construed by the courts in Standard Oil Co. v. U. S. (221 U. S. 1) and U. S. v. American Tobacco Co. (221 U. S. 106), only prohibits combinations which unreasonably restrain interstate commerce.

The past history of Federal antitrust legislation clearly evinces a legislative intent to confine the prohibitive features of such legislation only to combinations which might "substantially lessen competition or tend to create a monopoly in any line of (interstate) commerce." Not only does this phraseology appear in section 2 of the original Clayton Act but its reincorporation in the amendatory provisions of the Robinson-Patman Act, following its omission in the bill as originally introduced by Representative Patman, is doubly significant as indicating the true limits of Federal control over interstate commerce.

On the other hand, as heretofore noted, the present bill attempts to penalize all operations of all integrated oil companies, regardless of whether or not an unreasonable restraint of interstate commerce is involved,

That the citizen has the right "to enter into all contracts which may be proper, necessary, and essential to his carrying out to a successful conclusion" the pursuit of "any livelihood or avocation (Allgeyer v. Louisiana, 165 U. S. 582, 589) is the general rule, and Congress in enacting any legislation seeking to prohibit or regulate the exercise of these rights would be justified only

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if such prohibition or regulation were based upon unquestioned power given to it and exceptional circumstances requiring the action taken. As the business of the butcher, the baker, and the tailor are free businesses which the public may enter into and carry out without subjecting itself to public regulation, so the individual or corporation who engages in the sale of gasoline is handling "one of the ordinary commodities of trade the business of dealing in such articles does not come within the phrase 'affected with a public interest.'" Williams v. Standard Oil Co. (278 U. S. 235, 240). If despite the broad and sweeping language of the act it be argued, as is probably the case, that the intent of the framers of this act is to strike at the large integrated oil companies, still Congress would be faced with the same objection, for it is no longer a question of doubt that in this country of great size and great achievements magnitude itself does not justify regulation. In the Williams case, from which we have just quoted, the court said, at page 240:

"In support of the act under review it is urged that gasoline is of widespread use; that enormous quantities of it are sold in the State of Tennessee; and that it has become necessary and indispensable in carrying on commercial and other activities within the State. But we are here concerned with the character of the business, not with its size or the extent to which the commodity is used."

The Supreme Court refused to presume that the milk industry was anything other than the business of producing and selling a commodity, but sustained the New York statute regulating this industry not because it was charged with a public interest, but because the regulations were based upon circumstances so extraordinary as to justify the regulation imposed by the act. (Nebbia v. New York, 1934 291 U. S. 502.) As Congress must exercise the power of regulating private business only where the circumstances require it, so it should be particularly cautious in attempting to prohibit individuals from engaging in any existing business. The act in question is not based upon any specific findings and it is submitted that in view of its far-reaching effect, no such findings could properly be made. Once the act is passed, the Court in examining it is bound by the rule that a presumption exists that the bill was based upon findings making the enactment of the legislation reasonable and proper. This presumption is rebuttable, and a mere assertion in the enacting clause that the bill is necessary in the public interest does not necessarily render the enactment valid. No such presumption, however, exists prior to the enactment of the bill and it is the peculiar province of the Congress to determine the facts on which the act is to rest. The Supreme Court, in Louisville Gas Co. v. Coleman (277 U. S. 32, 37), has said: "Discriminations of an unusual character especially suggest careful consideration to determine whether they are obnoxious to the constitutional provision."

If Congress adopts legislation that merely purports to be based upon a power but in fact does not bear a real and substantial relation to the ends sought, the courts recognize their duties

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* ** to inquire into the real effect of any statute duly challenged (under the due process clause) and to declare it invalid when without substantial relation to some evil within the power of the State to suppress and a clear infringement of private rights." (Fairmont Creamery Co. v. Minnesota, 274 U. S. 1, 11).

See, also, Lochner v. New York (198 U. S. 45, at p. 64):

"It is impossible for us to shut our eyes to the fact that many of the laws of this character while passed under what is claimed to be the police power for the purpose of protecting the public health or welfare, are, in reality, passed from other motives. We are justified in saying so when, from the character of the law and the subject upon which it legislates, it is apparent that the public health or welfare bears but the most remote relation to the law. The purpose of a statute must be determined from the natural and legal effect of the language employed; and whether it is or is not repugnant to the Constitution of the United States must be determined from the natural effect of such statutes when put into operation, and not from their proclaimed purpose. Minnesota v. Barber (136 U. S. 313); Brimmer v. Rebman (138 U. S. 78). The court looks eyond the mere letter of the law in such cases. Yick Wo v. Hopkins (118 U. S. 356)."

Applying this principle, in the Fairmont Creamery case, supra, the court invalidated a State law punishing anyone engaged in the business of buying milk, cream, or butter fat for manufacture or sale, who discriminates between different localities of the State by buying such commodities in one locality at