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No. 11 "The National Recovery Administration: A Review of its Past and Recommendations for its Future" January 21, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_11 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 11 "The National Recovery Administration: A Review of its Past and Recommendations for its Future" January 21, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. he impose a burden upon interstate commerce, therefore he is not subject to Federal regulation. In a hardwood lumber case (Mississippi Valley Hardwood Company, Inc., v. McClanahan, United States Attorney et al.) the Federal District Court enjoined the United States District Attorney from enforcing the price fixing provisions of the code on the ground that no authority for price fixing exists in the law. The Court held that while the Act authorizes the formulation of codes of fair competition, the definitions of "fair competition" do not include price fixing. In a lumber case in a different judicial district a similar ruling was given. In another lumber case (United States v. McGraw-Curran et al.) the Federal District Judge in denying an injunction restraining violation of code price provisions stated that mere underselling of competitors is not unfair competition. No proof was given that the sales price was below the cost of production and nothing in the National Industrial Recovery Act indicates, the Court held, that a specific price should be set as the cost of production throughout large areas of the country. Production control is involved in a number of cases considered by the Federal courts. In addition to the oil cases to which reference has already been made, the Lumber, Silk Textile, Rayon Silk Dyeing, Printing, Hosiery, Underwear and Allied Products, Ice and Cotton Textile codes account for other court cases affecting production control. In the litigation that has arisen concerning the trade practice provisions of codes many cases have related to regulations in the Motor Vehicle Retail Code. These regulations primarily concern trade-in allowances for used cars and accurate mileage records. Provisions of the Petroleum Code prohibiting the giving of premiums with sales of gasoline were the cause of several cases. The Funeral Supply, Retail, Brewing, Commercial and Breeder Hatchery, Silk Textile and Millinery codes account for other trade practice cases in the courts. There are several instances where decisions have been rendered adverse to the enforcement of trade practice provisions. In two cases relating to petroleum code restrictions on premiums the Court held that it was a regulation of intrastate commerce. The American Liberty League expects to submit additional comments of a specific character after the administration offers its recommendations for legislation. The declaration by S. Clay Williams, Chairman of the National Industrial Recovery Board, in an address January 17, that any extension of the Act should be for "a further trial period of from one to two years" rather than as permanent law is a favorable indication of the trend within the present governing body. The National Recovery Administration A Review of its Past and Recommendations for its Future AMERICAN LIBERTY LEAGUE National Headquarters National Press Building WASHINGTON, D. C. Document No. 11 January, 1935  I. A TEMPORARY EXTENSION The National Recovery Administration Within less than five months the powers vested in the President under Title I of the National Industrial Recovery Act will lapse. It is obvious that Congress will be called upon to consider new legislation in advance of the expiration date, June 16, 1935. There are certain guiding principles which should be adhered to in the determination of a future program. These are: I. Continuance of any unusual executive authority should be for a limited period. Until the emergency passes there should be no attempt to enact permanent legislation for the control of American industry. The National Industrial Recovery Act is a temporary measure designed to deal with the emergency. Any legislation by the Congress extending its life should contain a definite time limitation. II. The Congress should guard zealously its prerogatives under our plan of government in which there are three coordinate branches, the legislative, the executive, and the judicial. Law-making by executive order is a step toward dictatorship. III. Undue encroachment upon the sovereignty of the states should be avoided. It should be kept in mind that our Constitution set up a dual form of government in which the states were intended to be supreme over such commerce as was not of an interstate character and over matters affecting the private lives of the people. IV. Self-government of industry should be the goal in any plan for concerted action in promoting recovery. There should be a minimum of bureaucratic regulation. Production control, price fixing and other devices which tend to interfere with the normal play of economic forces and to restrict individual initiative should be eliminated so far as possible. Interference with the liberties assured by the Constitution should be guarded against. V. Provisions of law respecting the relations of employers and employees should be fair to both parties. While the workers are entitled to every consideration, the rights of the employers also must be preserved. Requirements as to hours and wages should not be carried to such an extreme as to impose excessive burdens upon industry. VI. Emergency recovery legislation should not be susceptible of use as a vehicle for experimentation with untried theories. In support of these guiding principles the following is offered:  It will be agreed by all that emergency conditions still prevail. There will be ample time in which to plan for permanent legislation after the machinery set up under temporary authority has been tested more thoroughly. There are three chief reasons why it is not desirable to enact permanent legislation at this time. In the first place, the American people are willing to confer emergency powers upon the Executive but they hesitate to write them into permanent law. Secondly, the experience thus far under the National Recovery Administration has not been such as to make possible a final decision as to just what features should be retained permanently. A third reason is that important constitutional questions arising under the administration of the present law are awaiting adjudication in the Supreme Court of the United States. Already the Supreme Court has held to be invalid Section 9 (c), which granted broad power to the President to prohibit the transportation of oil in interstate commerce. The Court's decision, handed down January 7, did not purport to deal with questions involving other parts of the Act. It would be a mistake to proceed with permanent legislation until the legal foundations for the regulation of industry are more firmly established. A realistic view must be taken of the present situation respecting the National Recovery Administration. There are many who hold that it has been a complete failure and that there should be no new legislation. It must be recognized, however, that it is difficult to retrace our steps. We must start from where we are now. Chaos might follow complete abandonment of this industrial experiment. On the assumption that it will be wise to carry forward the best parts of the plan for at least a limited period, there must be an effort to keep it in harmony with the principles of government which have enabled us to attain a preeminent position among the peoples of the world. Whether the new legislation is a modification of the old Act or an entirely new measure, it should be made effective for a fixed period of time rather than for the indefinite continuance of the emergency. Such action will insure at a not too far distant date a congressional review of the many troublesome issues involved. No one will dispute the assertion that the experience of the National Recovery Administration to date has not been such as to point clearly to the next step that should be taken. While a reorganization has recently been in progress, there is no assurance that the present set-up represents the final word as to the most desirable type of administrative machinery. There have been many changes in policy as various theories have proved faulty. Enforcement has been found to be difficult and may prove impossible. The net result has been to show that certain features of the program should be eliminated. More time should be allowed before there is any effort to decide which features should become permanent. In the meantime, the leg- islation should not go beyond a temporary extension of authority. While numerous cases involving the constitutionality of the National Industrial Recovery Act are in the courts, there is little likelihood that all of the important points at issue will be passed upon by the Supreme Court of the United States before the expiration of the present Act. The law declares an emergency to exist sufficient to justify the granting of broad powers to the Executive. Our Constitution, which was written in a period of emergency, makes no special provision for action in an emergency. Chief Justice Hughes in the decision of the Supreme Court in the Minnesota Mortgage Moratorium Law Case last spring pointed out that "while emergency does not create power, emergency may furnish the occasion for the exercise of power." It remains for the Court to rule as to whether various specific grants of authority in the National Industrial Recovery Act, besides the oil clause, are broader than are permitted under the Constitution. In view of the circumstances the Congress should proceed cautiously before attempting to chart a permanent course for industry. II. EXECUTIVE AUTHORITY Under the stress of the serious crisis which confronted this country in the spring of 1933, the Congress gave blanket authority to the Executive in the National Industrial Recovery Act as well as in other emergency measures. It is necessary in a time of emergency to allow the executive branch of the government a greater degree of discretion than might be justified otherwise. New ground was broken in the creation of the National Recovery Administration. It was perhaps well that the Executive had a free hand at the start. A stage has now been reached which makes it desirable that Congress should prescribe more specifically the policies which should prevail hereafter. The experience of the past year and a half offers at least a basis for the writing of certain safeguards into the Act, even though the path is not clear enough to make it wise to frame a permanent measure. It was intended under our Constitution that the legislative branch of the government should define somewhat precisely the course to be pursued by the executive branch and that it should maintain a constant check upon its actions. According to press reports, members of our highest court were startled during the oil case hearing by the extent to which in effect law has been written by orders of the Executive and of other officials under authority of the National Recovery Act. Under the operation of this Act, there have been several hundred executive orders and several thousand administrative orders. The original law authorized the President to establish such agencies and to appoint such officers as he might find necessary and also to prescribe their duties, responsibilities and tenure and to fix their sal- aries. Originally, the President delegated authority to a single National Recovery Administrator. More recently responsibility has been divided among members of a Board. The Congress in a proper exercise of its prerogatives should decide the form of future administrative organization. Provision might properly be made for confirmation by the Senate of presidential appointments of the principal administrative officers. A further check on the executive branch would be given if the Congress were to provide for specific appropriations for the administration of the Act instead of allowing money to be allotted by the President from the Public Works fund. Under the law as it now stands it is not even necessary for the National Recovery Administration to submit an annual report to the Congress as all the regular departments and bureaus are required to do. III. ENCROACHMENT UPON THE STATES The extent to which the Federal Government may exercise control over business of an intrastate character is one of the doubtful questions which requires clarification by the courts. By the device of codes the authority of the National Recovery Administration has been applied to lines of business which have no relation to interstate commerce. It was a mistake to attempt to go so far in this direction. Any new legislation should be limited to businesses engaged in or directly and substantially affecting interstate commerce. In justification for the method used to keep within the Constitution it has been contended that the codes are voluntary agreements entered into by groups of industries. While the presentation of a code may be voluntary on the part of a trade association, compliance with its terms is obligatory upon all within the industry. Witness the jail sentences and fines imposed upon persons whose business has nothing to do with interstate commerce. The original program of the National Recovery Administration was much too broad. The subsequent exemption of small tradesmen in towns of less than 2,500 was a wise move. An instance of the type of emergency power for which there is wide support is the inclusion of maximum hours and minimum wages and prohibition of child labor in present industrial codes. Provisions of this kind cannot constitutionally be written into the law. Any mention of them in the new Act should be only as requirements in connection with codes. While there is reason for sympathy with the social objectives in the industrial control program, matters of this character fall properly within the jurisdiction of the states. IV. SELF-GOVERNMENT OF INDUSTRY The experience under the National Recovery Administration emphasizes the dangers in bureaucratic control of industry. The arbitrary actions by subordi- [S] nate officials, the delays due to red tape and procrastination and the expense and difficulties involved in compliance with the numerous rules and regulations have tended to offset such benefits as may have been derived from provisions of the codes. In framing new legislation provision should be made for government supervision rather than control of industry. To insure self-government by industry the governmental agency should have only the power of approval or veto of rules of fair competition. The industry should formulate the terms of a code. The power of the Executive to impose a code upon an industry as granted in the present law should be withdrawn. Without attempting to bring all American business under codes, their operation should be limited to those groups which obtain actual benefits. The codes have been helpful to certain industries, notably those in the natural resources group. These industries should be allowed to continue with codes. Other industries where it is doubtful that any advantage exists should be allowed to abandon them. In such industries as elect to take advantage of codes, there must necessarily be provision for compelling compliance by a minority. Unwise use of this power offers one of the dangers of encroachment upon individual liberties guaranteed by the Constitution. The provision for elimination of cut-throat competition through codes has been highly beneficial to many industries. Our anti-trust laws have been too rigid in their prohibitions against common action by members of industrial groups. It should be possible to guard against abuses under this authority. The National Recovery Administration in its early days went too far in approval of production control and price control provisions. These have tended to interfere with the flexibility of American industry, to retard recovery and to discourage the exercise of individual initiative. The new law should allow the use of production control or price control only in extraordinary circumstances. Under the present law, penalties for violations of codes are excessive. These should be made more moderate. The penalties are cumulative and on a basis of a maximum of $500 per day may reach huge totals. Furthermore, there should be provision for an appeal to the courts. The law provides methods for prosecution of offenders, but it is silent as to the manner in which a person subject to a code may obtain a judicial review of his situation. While there are ways in which a case may reach the courts, such as by injunction proceedings in which constitutional questions are raised, the process should be simplified. Donald R. Richberg, executive director of the National Emergency Council, has made a commendable suggestion that cases involving activities of trade associations which are in the twilight zone of interpretation should be subject to a declaratory judgment by a court of competent jurisdiction on an appeal from a new National Code Administration.  V. LABOR PROVISIONS The collective bargaining section of the present law has been the occasion of much controversy. Many believe that it has served to increase rather than to lessen industrial strife. A survey by the National Conference Board shows that 60 per cent of the companies interrogated found no change in employer-employee relations under the National Recovery Administration, 15 per cent found relations improved and 25 per cent found them less satisfactory. This provision should be clarified so as to preserve the rights of minority employee groups and to protect them from coercion by other employee groups. Proposed amendments which go so far as to prohibit company unions should be rejected. The life of the National Labor Relations Board and the special boards which were appointed under authority of a joint resolution approved in June, 1934, will end on June 16, 1935, when authority under the National Industrial Recovery Act lapses. In providing for continuance of these or similar boards, the Congress should define their functions more specifically. The Congress should indicate more definitely the manner in which the members of the boards shall be selected. With respect to the hours and wages provisions of codes there is need of greater flexibility, particularly as to maximum hours. Some industries have been too greatly restricted. Advocacy of a 30-hour week is based on a false premise that it is necessary to reduce hours of work to that extent in order to provide employment for all. The Brookings Institution has recently reported that we cannot materially shorten the working day and still produce the quantity of goods and services which the American people aspire to consume. The effect of a mandatory 30-hour week would be to increase costs of industry to such an extent as to necessitate prices so high as to lessen the market for its products. It would mean less rather than more employment. VI. BASIC THEORIES In the initial stages of the National Recovery Administration there was an effort to mix reform with recovery. Experimentation proceeded on the basis of untried economic theories. One of the theories was that an increase in mass purchasing power through higher wage rates and shorter hours would furnish a broader market for industry which in turn would create more employment. Instead, the effect was to increase costs more rapidly than purchasing power. A curtailment rather than an expansion of industry followed. One result of the increased costs imposed upon industry has been to offset recovery efforts of other government agencies such as the Agricultural Adjustment Administration, which has been faced with the problem of rising prices of the commodities which farmers must buy, and the Federal Housing Adminis-  tration, which has been handicapped by higher prices of building materials. It is essential in any extension of the National Recovery Administration that its program be based upon theories which have been tested and proved sound. REVIEW OF NATIONAL RECOVERY ADMINISTRATION Up to this point the discussion has dealt with the future of the National Recovery Administration. What follows is a factual summary of what has taken place under the present law. The National Industrial Recovery Act was approved on June 16, 1933. Title I relates to industrial recovery and contains the sections which form the legal basis for the National Recovery Administration. It is provided that this Title shall cease to be in effect and any agencies established thereunder shall cease to exist at the expiration of two years after the date of enactment, or sooner if the President shall, by proclamation, or Congress shall, by joint resolution, declare that the emergency recognized by Section 1 has ended. Section 1, which contains a declaration of policy, asserts the existence of "a national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare and undermines the standards of living of the American people." It is declared to be the policy of Congress "to remove obstructions to the free flow of interstate and foreign commerce which tend to diminish the amount thereof, and to provide for the general welfare by promoting the organization of industry for the purpose of cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, to avoid undue restriction of production (except as may be temporarily required), to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, to improve standards of labor, and otherwise to rehabilitate industry and to conserve natural resources." The Act does not specifically create a National Recovery Administration. It gives broad power to the President to establish such agencies, to accept and utilize such voluntary and uncompensated services, to appoint without regard to the provisions of civil service laws such officers and employees and to utilize such Federal officers and employees and such state and local officers and employees with the consent of the states as he may find necessary and to prescribe their authorities, duties and responsibilities and tenure and to fix their compensation. The President may delegate any of his functions and powers to the officers, agents and employees appointed by him.  The Act provides a general outline of the machinery for the approval of codes of fair competition. The President may approve a code submitted by a trade, industrial association or group provided: (1) the group is representative of the trade or industry covered by the code and no inequitable restriction is made on admissions to membership and (2) the code is not "designed to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate against them." It is provided that no code shall permit monopolies or monopolistic practices. The Act also states: "The President may, as a condition of his approval of any such code, impose such conditions (including requirements for the making of reports and the keeping of accounts) for the protection of consumers, competitors, employees, and others, and in furtherance of the public interest, and may provide such exceptions to and exceptions from the provisions of such code, as the President in his discretion deems necessary to effectuate the policy herein declared." After a code has been approved by the President, its violation is deemed an unfair method of competition in commerce within the meaning of the Federal Trade Commission Act. United States District Attorneys may institute proceedings in equity in the Federal District Courts to prevent and restrain violations. Any violation of an approved code "in any transaction in or affecting interstate or foreign commerce shall be a misdemeanor and upon conviction thereof an offender shall be fined not more than $500 for each offense, and each day such violation continues shall be deemed a separate offense." After public notice and hearing the President may prescribe a code for a trade or industry if no code exists and if he deems it to be in the public interest. The President may require the United States Tariff Commission to investigate the importation of any article and after a report and hearing may impose limitations upon imports if considered in the interest of the policy of the Act. The President is authorized to enter into or approve voluntary agreements between persons, labor organizations, trade groups and others if in his judgment it will assist in effectuating the policy of the Act. The authority to license businesses in order to make a code effective expired June 16, 1934. No use was made of this authority during the year it was in effect. While the Act continues, any code or action taken to comply with a code or agreement shall be exempt from the provisions of the anti-trust laws. A trade or industry must furnish any information required by the President in order to receive benefits of the Act. The labor requirements are contained in Section 7. The famous Section 7(a) gives assurance of the right of collective bargaining. The collective bargaining provision is not a part of the general law. The Act merely provides that every code of fair competition, agreement and license ap-  Legislation prohibiting child labor has been held to be invalid by the Supreme Court of the United States. The code device, purporting to be a voluntary agreement among employers, has been used to accomplish what could not otherwise be brought about without a constitutional amendment. Inasmuch as all employers within an industry are subject to the terms of the code whether or not they sign it, the requirement with respect to child labor is compulsory. It has been proposed that the legislation extending the National Recovery Administration shall contain a specific requirement for the inclusion in codes of the prohibition against child labor. The Child Labor Amendment to the Constitution, which has been pending for a number of years, has thus far been ratified by twenty states. Favorable action by sixteen additional state legislatures is necessary for ratification. Collective Bargaining One of the most troublesome provisions of the National Industrial Recovery Act has been Section 7 (a) relating to collective bargaining. This provision assured organized labor's support of the original Act. At the beginning the officials of the National Recovery Administration struggled with the interpretation of this highly controversial section. Subsequently what was known as the National Labor Board, or the Wagner Board, was set up by President Roosevelt to deal with labor disputes arising under the Act. This Board was succeeded by the present National Labor Relations Board, appointed by the President under the general authority vested in him by a joint resolution of Congress approved June 19, 1934. The President also appointed special boards to deal with labor problems in the automobile and steel industries and in connection with the longshoremen's strike on the Pacific Coast. The board or boards appointed under authority of the joint resolution retain their authority only until June 16, 193S, the date of the expiration of the National Industrial Recovery Act. Many and varying interpretations have been placed upon the terms of the collective bargaining provision. The precise meaning of the clause which provides that "employees shall have the right to organize and bargain collectively through representatives of their own choice" has been in dispute. On August 23, 1933, General Hugh S. Johnson and Donald R. Richberg, then respectively National Recovery Administrator and General Counsel for the National Recovery Administration, held that "employees can choose any one they desire to represent them, or they can choose to represent themselves. Employers likewise can make collective bargains with organized employees or individual agreements with those who choose to act individually." On October 30, 1933, a White House statement with respect to the settlement of the "captive" coal mine dispute, said that "the representatives chosen by a majority will be given an immediate conference  and separate conferences will be held with any representatives of a substantial minority." An executive order issued by the President on February 1, 1934, was construed as meaning that those selected by a majority of employees in an election to choose representatives for collective bargaining would represent all the employees. An interpretation of this order by Mr. Johnson and Mr. Richberg held that as a practical proposition the National Labor Board would find it impossible to deal with every controversy that might arise between rival groups of employees but that nevertheless the selection of majority representatives did not restrict the right of minority groups to deal with their employers separately. The old National Labor Board ruled on March 2, 1934, in the Denver Tramway Corporation case that the union supported by the majority would set the conditions for all the workers in its negotiations and that the management must recognize it as the exclusive agency of the employees for collective bargaining. President Roosevelt ignored this opinion in his settlement of the threatened automobile strike and approved a plan wherein "the employers agree to bargain collectively with the freely chosen representatives of groups" and that "if there be more than one group, each bargaining committee shall have total membership pro rata to the number of men each member represents." The present National Labor Relations Board in a ruling in the Houde Engineering Corporation case took a position similar to that of the old National Labor Board. In effect it gave any union gaining the adherence of more than a majority of the workers the right to establish the conditions of work of all employees in a plant. The corporation refused to accept this ruling and the Department of Justice instituted action for its prosecution in the courts. As generally interpreted, Section 7(a) does not prohibit the existence of a company union, but employers are prohibited from maintaining or dominating such a union or requiring their employees to join it. Organized labor sought unsuccessfully in the spring of 1934 to obtain legislation which would prohibit company unions. The Weirton case now in court involves company unions. In connection with new legislation organizations of employers are generally in accord in support of minority group recognition in collective bargaining and an explicit right of employees to choose their own representatives free from coercion from any source. CONTROL OF PRICES There has been a widespread reaction against control of prices under the codes. The question of monopolistic prices has occasioned controversy. The so-called Darrow Board was severe in condemning the monopolistic trend. The Consumers Advisory Board has protested against this tendency. [ IS ] The National Industrial Recovery Act contains a proviso that the codes "shall not permit monopolies or monopolistic practices." This wording was substituted for an amendment proposed by Senator William E. Borah and included in the bill as passed by the Senate. The Borah amendment read "Provided, That such code or codes shall not permit combinations in restraint of trade, price fixing, or other monopolistic practices." It is difficult to determine at what point monopoly commences. The sentiment of the American people against extreme price control was evident on such occasions as the sentencing of Jacob Maged, a New Jersey tailor, to 30 days in the county jail in addition to a fine of $100 for charging 35 cents for pressing a suit of clothes instead of a code price of 40 cents. The sentence, which was in the course of enforcement of a state law rather than the Federal law, was remitted after two days. The case was tried in April, 1934. Attempts at price fixing in the service codes have been abandoned by the National Recovery Administration. A study of code provisions and policy statements relating to the control of prices reveals a bewildering assortment of methods and devices to secure stability of prices. Destructive price cutting formed one of the evils with which the National Recovery Administration was confronted at the outset. The establishment of restrictions as to wages and working hours which tended to increase costs caused industries generally to seek methods of protecting their prices. Altogether 569 basic and supplemental codes have contained some form of minimum price provisions. In 12 codes power has been given to the Code Authority to establish minimum prices with the approval of the Recovery Administration. An example of this type of price fixing is in the Bituminous Coal Code. This code declares the selling of coal below a fair market price to be an unfair competitive practice and a violation of the code. Regional marketing agencies are established to determine minimum prices which must be approved by the Presidential member of the Code Authority and may be reviewed by the National Recovery Administration. A second form of price control consists of a prohibition against destructive price cutting. Such a provision is found in 122 codes. A little less than half of the codes containing provisions which prohibit destructive price cutting simply present a general statement without any qualification or means of enforcement. The rest of the codes containing provisions within this classification prohibit "willfully destructive price cutting" and set up a procedure for hearings by the Code Authority and appeals to the Recovery Administration by complainants. About 40 per cent of the codes containing destructive price cutting provisions are in the equipment industry and trade groups. Codes covering manufacturing industries, food, wholesale and retail trades each make up 15 per cent of this classification.  Provisions may be found in more than 200 codes for establishing minimum prices only in cases of emergency. Usually the Code Authority, subject to approval of the Recovery Administration, is authorized to determine when an emergency exists and may establish minimum prices based on the lowest reasonable cost. The Recovery Administration in some instances may declare the existence of an emergency and establish minimum prices. About one-third of the codes containing such a provision are in the equipment trade group and about one-fourth in manufacturing industries. Emergencies have been declared and minimum prices established in the following trades and industries: Agricultural Insecticide and Fungicide, Cast Iron Soil Pipe, Ice, Lumber and Timber Products, Retail Tobacco Trade, Wholesale Tobacco Trade, Tires, Waste Paper and Retail Solid Fuel. In the Ice Industry minimum prices based on an emergency have been set in three marketing areas, New Orleans, San Antonio and New York. Under the Retail Solid Fuel Code approximately 150 emergencies have been declared. Some of the minimum prices established under an emergency provision are still in effect. The order establishing minimum prices for lumber and timber products was suspended on December 22, 1934, after its enforcement had broken down. A prohibition against selling below cost without the declaration of an emergency is a very common provision in the codes. About 420 basic and supplemental codes, of which 32 are distribution codes and 388 non-distribution codes, contain such a provision. Definitions as to what constitutes cost vary. In many instances an individual plant's cost is stated as the limit below which goods may not be sold. In other cases a specific minimum cost is set up for the entire industry. This is usually defined as a "reasonable" cost. Other terms used to define minimum cost are "lowest reasonable," "lowest representative" and "average." In the distribution codes the definitions of cost have other bases such as invoice cost or cost of replacement plus tranportation, wholesalers' or manufacturers' list price. The Retail Code prohibits loss leader sales, but permits sales without a profit provided allowances are included for actual wages of store labor. The Retail Drug Code prohibits the sale of drugs below the wholesale list price in dozen lots. Closely connected with provisions relating to sales below cost are code provisions aiming at the establishment of a uniform cost accounting system for the industry. Nearly all of the codes which prohibit selling below cost also provide for cost finding methods. Up to the present time the Recovery Administration has approved only about 40 cost formulae and systems. Many codes provide exceptions from minimum price restrictions. Some provide that prices of competitors not selling below cost may be met. Others permit an industry to meet prices established by competitors. About 65 codes permit selling below cost to meet competition of certain specified and definitely competitive  products. Exceptions permitting the selling below cost or below minimum prices commonly found relate to substandard goods, "distress" merchandise or goods on special sale. Another form of price control is the so-called open price filing. Under this system each member sends copies of his prices to the Code Authority and any changes in prices must be reported to the Code Authority. After prices are filed no sales may be made at lower prices. About 415 basic and supplemental codes have provisions for price filing. In 295 codes a waiting period is provided for. By the terms of the waiting period a revised schedule of prices may not be placed in operation until a specified time has elapsed after the filing of the revised prices. At the present time the waiting period in nearly 185 codes has been stayed by the National Recovery Administration. Policies with respect to price control are still in a formative stage. From January 9 to 12, 1935, the National Industrial Recovery Board held public hearings on price provisions. At the beginning of these hearings it was stated that "the Board hereby announces as its proposal for this first hearing and as its present position with respect to price fixing that in the usual case it is inconsistent with the most effective functioning of our industrial system to have in or under codes of fair competition price fixing in the form of permanent schedules of minimum prices, with or without mandatory cost systems for the purpose of establishing minimum prices. "That the Board recognizes the value of permissive cost systems, emergency price provisions, and the dangers to the economic structure of destructive price cutting. It also recognizes that minimum prices may be proper for the normal operations of certain types of industry, but, in such cases, government supervision and control would naturally tend to be increased." CONTROL OF PRODUCTION One of the major elements in the economic planning of the National Recovery Administration has been control of production. Just as in the case of price control, the production control schemes have aroused opposition. The tendency has been to hamper individual initiative and to interfere with individual liberties which have been regarded as inherent in our form of government. One example of the production control devices which has attracted attention is the prohibition against any expansion of ice-making facilities without the approval of the Code Authority. The Federal Trade Commission in its recent annual report refers to a complaint issued against an ice company at Lakeland, Florida, which built a new plant and commenced the sale of ice to the public without the approval of the Code Authority for the Ice Industry. Another typical case involving production control is that of the New York woman who found her living taken away from her because of a code prohibition  of the manufacture of artificial flowers in the homes. In about 175 codes some effort is made to place restraints on production by a limitation either on current production or on any increase in productive capacity. Seventy-eight or more codes prohibit any work being carried on in homes, and eleven or more other codes place restrictions on home work. The operation of productive means is sometimes directly limited by specifying the number of hours in which machinery may be operated or by specifying the number of shifts of workers that may be employed. There are twenty or more codes which limit the operation of machines to 80 hours per week, 16 or more codes with a limitation of 40 hours, three or more codes with 35 hours, two or more codes with 36 hours, two or more codes with 144 hours and at least one code each with limits of 27, 52, 63, 70 and 96 hours, respectively. In two other codes it is specified that plants may operate only six days in seven. In thirteen or more codes the "stretch-out" or increase in employee production is forbidden. Other codes require a study of this practice. In three or more codes a system of quotas and allotment of production among the members of the industry is definitely specified. Permission to establish a quota system is given in four or more other codes. One code places limitations on the amount of inventory that may be carried on hand. Definite restrictions on the enlargement of productive capacity are contained in 24 or more codes and a study and report on this subject are found in 13 or more codes. Seventeen or more codes require a registration of productive machinery with the Code Authority and some form of permission must be secured by the individual manufacturer before his productive capacity may be increased. Usually the application to add or enlarge one's productive means is made to the branch or divisional authority. Recommendations are passed on to the Code Authority, and this body passes the request on to the Administrator with recommendations for approval or disapproval. TRADE PRACTICES One of the chief benefits to industry from the National Industrial Recovery Act has been the relaxation of unnecessarily rigid anti-trust laws. Many industries were willing to accept the labor provisions which they regarded as objectionable in order to obtain greater freedom for common action within business groups. Section 5 of the Act provides that action taken under codes, agreements or licenses while the law is in effect shall be exempt from the provisions of the anti-trust laws. Agreements upon trade practices are intended to eliminate injurious cut-throat competition. Under the operation of the law trade practices which the majority in an industry believe unfair are made illegal. The minority who indulge in such practices is required to comply with standards set up for an industry. [ 19 ] The Recovery Act states that after a code of fair competition has been approved by the President its provisions shall be the standards of fair competition for the industry or trade affected by it and that any violation of its standards shall be considered an unfair method of competition in commerce within the meaning of the Federal Trade Commission Act. The Federal District Courts are authorized to enjoin violators. Some of the common provisions included in the codes as unfair trade practices and therefore prohibited are as follows: Misrepresentation Deception in regard to products, services, prices or credit terms is forbidden. Inaccurate labeling Misbranding or marking which tends to deceive the purchaser is prohibited. False advertising It is an unfair trade practice to make or permit to be made false or inaccurate statements through advertising concerning the grade, quality, quantity, etc., tending to mislead customers. Discrimination among customers The extension to certain purchasers of services or privileges not extended to all purchasers under like conditions is prohibited. Coercion -Refusal to sell some goods unless others are purchased is an unfair trade practice. Rebates Allowances in any form, whether by payment of unearned discount and false allowances, or otherwise, are forbidden. Dating of invoices Ante-dating or post-dating of invoices is prohibited. Bribery The presentation of anything of value to a prospective customer or his agents for the purpose of inducing a sale or of preventing a sale to competitors is forbidden. Free goods and services The giving of premiums, prizes, or gifts in connection with the sale of products, or as an inducement by any scheme is prohibited. Sometimes it is specified that extra charges must be made for free samples, advertising material and special services. Prohibition of payment of advertising for others In some codes the payment of any part of the advertising expenses of a customer or prospective customer is prohibited. Cuts and window cards are usually excluded from such a provision. Entertainment expenses Lavish entertainment of customers is often prohibited. Long-term contracts Guarantees or allowances in any form against or as a result of decline in the seller's price are forbidden. In some cases the time within which a person agrees to supply goods at a given price is limited (usually 90 days) and the time of deferred delivery is also set. Interference with another's contracts The members of an industry are prohibited from inducing a breach of contract between a competitor and his customer, or source of supply, or from interfering with the performance of contractual duties or services. Consignment of goods The sending of goods on  consignment or on memorandum is prohibited. Sometimes it is specified that the manufacturer may not store goods on the customer's premises. Espionage Securing confidential information concerning a competitor's business by misrepresentation, false impersonation or bribery is forbidden. Imitation of another's designs The imitation of another's styles, designs, trade name or trade mark, patterns, package, wrapper, label, or slogan which may tend to mislead or deceive prospective customers is prohibited. Threats of lawsuits To threaten unwarranted legal proceedings in order to harass competitors, or to intimidate their customers is an unfair trade practice. Inaccurate reference to competitors Misrepresentation of a competitor's credit, the quality of his work or goods, his ability to perform his contracts or otherwise to misrepresent him or his products with the intention of deceiving prospective customers is an unfair trade practice. Enticing competitor's employees This is forbidden. Lotteries These are prohibited. Profiteering It is sometimes stated that as it is the policy of the Act to increase purchasing power, and as the increases in the price of goods and services would prevent this, price increases should be delayed or, when made, limited to the actual increase in the seller's cost. CONSTITUTIONAL BASIS An examination of the cases involving the National Industrial Recovery Act which have reached the courts shows the uncertainties affecting the legal foundation of the control measures. So many and varied are the doubtful points that a postponement of permanent legislation until the courts pass upon moot questions is highly desirable. In the first section of the Act it is declared to be the policy of the Congress to undertake to remove the depression conditions that are blocking the free flow of interstate and foreign commerce. In addition to facilitating the movement of interstate commerce, conservation of natural resources and assistance in providing for the general welfare are specified as reasons for the enactment of the law. The framers of the Act undoubtedly intended to use the Congressional power to regulate interstate commerce as the chief constitutional basis of the statute. Thus far the courts have never held that the general welfare clause of the Constitution furnishes authority for the exercise of power. Ideas expressed in past decisions of the United States Supreme Court in regard to the regulation of interstate commerce by the Congress would have to be revised in order to include all provisions of the National Industrial Recovery Act and the varying code regulations that have resulted from the Act. The statute is not limited to the regulation of businesses engaged in interstate commerce.  The extent to which the codes are placed on a voluntary basis avoids some legal questions, but the governmental coercion associated with the voluntary agreement does not completely remove the question as to whether or not the various code regulations based on the National Industrial Recovery Act or State Recovery Acts exceed constitutional authority. In cases that have come before the Federal Courts the unconstitutionality of the law has been urged chiefly on the following grounds: First, violation of the first article of Section I of the Constitution which states that all legislative power is vested in the Congress. Second, violation of the "due process" clause of the Fifth Amendment. Third, that the power of the Congress to regulate interstate commerce as expressed in Section VIII of Article I has been exceeded. Other arguments urge that it constitutes an invasion of rights retained by the people and the states as guaranteed by Amendments IX and X; that excessive and cruel punishments are inflicted in violation of the Eighth Amendment; that guarantees against unreasonable searches and seizures are abrogated in violation of Amendment IV; and that self-incrimination is involved in violation of the Fifth Amendment. The decision rendered by the Supreme Court on January 7 invalidating one paragraph of the Act was in the cases of the Panama Refining Company et al., petitioners, vs. Ryan and others; and the Amazon Petroleum Corporation, et al., petitioners, vs. Ryan and others. Section 9 (c), which was held invalid, authorized the President "to prohibit the transportation in interstate and foreign commerce of petroleum and the products thereof produced or withdrawn from storage in excess of the amount permitted to be produced or withdrawn from storage by any state law or valid regulation or order prescribed thereunder, by any board, commission, officer, or other duly authorized agency of a state." This section was the basis of the control exercised over interstate shipments of "hot oil." A pertinent excerpt from the Court's decision follows: "Thus, in every case in which the question has been raised, the Court has recognized that there are limits of delegation which there is no Constitutional authority to transcend. We think that Section 9 (c) goes beyond those limits; as to the transportation of oil production in excess of state permission the Congress has declared no policy, has established no standard, has laid down no rule. There is no requirement, no definition of circumstances and conditions in which the transportation is to be allowed or prohibited. "If Section 9 (c) were held valid, it would be idle to pretend that anything would be left of limitations upon the power of the Congress to delegate its law-making function. The reasoning of the many decisions we have reviewed would be  made vacuous and their distinctions nugatory. Instead of performing its law-making function the Congress could at will and as to such subjects as it chooses transfer that function to the President or other officer or to an administrative body. The question is not of the intrinsic importance of the particular statute before us, but of the constitutional processes of legislation which are an essential part of our system of government." Many cases have reached the Federal courts in which code provisions relating to hours of labor and wage payments are involved. Codes covering a variety of industries figure in these cases, including those dealing with Petroleum, Lumber and Timber Products, Bituminous Coal, Retail Solid Fuel, Cotton Textiles, Coats and Suits, Corrugated and Solid Fibre Shipping Containers, Construction, Motor Vehicle Storage, Boots and Shoes, Knitted Outerwear, Ladies' Handbags, Dress Manufacturing, Business Furniture, Storage Equipment and Filing Supply, Canvas Goods, Wholesale Food and Groceries, Children's and Infants' Wear, Motor Vehicles, and Underwear. In a number of these cases the action was brought by persons seeking to restrain the enforcement of the code provisions. In others the accused either pleaded guilty to violations of the code or consented to a decree without a full trial. In six instances decisions were rendered which were unfavorable to the enforcement of the code. In most cases in which a decision was rendered adverse to the code regulation it was based on a violation of the commerce clause. In one case (Hart Coal Corp. et al. v. Sparks et al.) in which a preliminary injunction was granted restraining the United States Attorney from bringing action for violation of the minimum wage rates set by administrative order for the Western Kentucky bituminous coal field, the Court held that coal mining is not interstate commerce, and therefore beyond the regulation of the Federal government. In United States v. Juvenile Manufacturing Company the Court stated that the regulation of hours and wages does not involve interstate commerce and that the National Industrial Recovery Act and the Children's and Infants' Wear Code are unconstitutional, since they are designed not to regulate interstate commerce but rather to regulate industry in each state. Many cases have reached the courts because of alleged violation of price fixing provisions. The Lumber industry has figured in many cases. There are a number of cases involving the Bituminous Coal industry and other cases affecting the Retail Solid Fuel Code. Other codes in price control cases include the Retail Motor Vehicle, Funeral Supply, Petroleum, Retail Drug, Ice, Rubber and Cigar Manufacturing. In a Colorado case (United States v. Gearhart) the Court held that a mining operator who sells for cash to truckmen at the mine is not engaged in, nor does [ 23 ]