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Full text of "Legislative history of the Federal alcohol administration act"

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

WASHINGTON, D. C. 



LEGISLATIVE HISTORY 

OF THE FEDERAL ALCOHOL 

ADMINISTRATION ACT 

(PUBLIC No. 401, SEVENTY-FOURTH CONGRESS) 

(H. R. 8870) 



OFFICE OF THE GENERAL COUNSEL 
SEPTEMBER 15, 1935 




FEDERAL ALCOHOL CONTROL ADMINISTRATION 

WASHINGTON, D. C. 



LEGISLATIVE HISTORY 

OF THE FEDERAL ALCOHOL 

ADMINISTRATION ACT 

(PUBLIC No. 401, SEVENTY-FOURTH CONGRESS) 

(H. R. 8870) 



OFFICE OF THE GENERAL COUNSEL 
SEPTEMBER 15, 1935 




CONTENTS 



Page 

Chronological table ▼ 

Table of sources vn 

Introductory note EC 

Act in full 1 1 

Act by sections. 17 

Section 1. short title 17 

Section 2. Federal Alcohol Administration 18 

Section 3. Unlawful businesses without permit 28 

Section 4. Permits 40 

Section 5. Unfair competition and unlawful practices 51 

(a) Exclusive outlet 54 

(b) Tied house 57 

(c) Commercial bribery 62 

(d) Consignment 63 

(e) Labeling 65 

(f) Advertising 77 

Section 6. Bulk sales and bottling 85 

Section 7. Penalties : 94 

Section 8. Interlocking directorates 96 

Section 9. Disposal of forfeited alcoholic beverages 102 

Section 10. Federal Alcohol Control Administration 106 

Section 11. Amendment to internal revenue laws applicable to citrus- 
fruit wines 107 

Section 12. Amendment to internal revenue laws providing for the 

fortification of citrus-fruit wines 109 

Section 13. Amendment to internal revenue laws relating to tax on 

fortified citrus-fruit wines 110 

Section 14. Amendment to internal revenue laws providing for the use 

of citrus-fruit brandy and fortified citrus-fruit wines 110 

Section 15. Amendment to internal revenue laws relating to exemp- 
tions for producers of citrus-fruit brandy 111 

Section 16. Amendment to internal revenue laws relating to general 

and special bonded warehouses 112 

Section 17. Miscellaneous *._ 113 

(a) Definitions 113 

(b) Amendments or repeal 118 

(c) Separability 118 

(ni) 



rv* 

APPENDICES 

Page 
Appendix I. H. R. 8870 as reported to the House by the Committee on 

Ways and Means. ■ — 119 

Appendix II. Report of the Committee on W,ays and Means on H. R. 8870_ 132 
Appendix III. H. R. 8870 as reported to the Senate by the Committee on 

Finance — 1*9 

Appendix IV. Report of the Committee on Finance on H. R. 8870 164 

Appendix V. H. R. 8870 as passed by the Senate, with the amendments of 

the Senate numbered 172 

Appendix VI. Conference report and statement of the managers on the part 

of the House on H. R. 8870 T . 192 



CHRONOLOGICAL TABLE 



1935 
June 18 



June 19 
and 20 
July 16 

July 17 



July 23 


July 24 


July 25 


July 26, 


27, and 


29 


Aug. 9 


Aug. 12 


Aug. 13 



Aug. 14 
Aug. 23 
Aug. 24 



[74th Cong., 1st Sess.] 

H. R. 8539 introduced by Mr. Doughton and referred to the Commit- 
tee on Ways and Means. (Cong. Rec. June 18, Vol. 79, No. 125, p. 
9994.) 

Hearings before the Committee on "Ways and Means on H. R. 8539.. 

H. R. 8870 introduced by Mr. Cullen and referred to the Committee 
on Ways and Means. (Cong. Rec. Vol. 79, No. 145, p. 11726.) 

H. R. 8870 reported out to the House by Mr. Cullen without amend- 
ment and referred to the Committee of the Whole House on the 
State of the Union. House Report No. 1542, Federal Alcohol Con- 
trol Bill (Cong. Rec, Vol. 79, No. 146, p. 11797). 

H. R. 8870 made special order by H. Res. 305 and debated by the 
Committee of the Whole. (Cong. Rec, Vol. 79, No. 151, pp. 12176- 
12203.) 

Debate continued by the Committee of the Whole, H. R. 8870 re- 
ported to the House with amendments, passed by House and 
ordered engrossed. (Cong. Rec, Vol. 79, No. 151, pp. 12259-12272.) 

House notified Senate of passage of H. R. 8870 and requested Sen- 
ate's concurrence. Bill referred to Committee on Finance. (Cong. 
Rec, Vol. 79, No. 153, pp. 12295 and 12296.) 

Hearings on H. R. 8870 before the Committee on Finance. 



H. R. 8870 reported out to the Senate by Mr. George with amend- 
ments, Senate Report No. 1215, Federal Alcohol Control Act. 
(Cong. Rec, Vol. 79, No. 165, p. 13234.) 

Senate commenced consideration of H. R. 8870 with proposed amend- 
ments. (Cong. Rec, Vol. 79, No. 166, p. 13354.) 

Senate continued debate on H. R. 8870 with proposed amendments; 
passed bill ; insisted on amendments ; asked for a conference : and 
appointed conferees. (Cong. Rec, Vol. 79, No. 167, pp. 13395- 
13419.) 

House disagreed with Senate amendments, agreed to a conference 
and appointed managers on the part of the House at the conference. 
(Cong. Rec, Vol. 79, No. 168, pp. 13511 and 13617.) 

Mr. Doughton presented the conference report and statement of the 
Managers to the House, House Report No. 1898 Revenue From 
Distilled Spirits. (Cong. Rec, Vol. 79, No. 176. pp. 14672-14676.) 

Conference Report on H. R. 8870 debated in House and adopted. 
(Cong. Rec, Vol. 79, No. 177, pp. 14806-14810.) H. R. 8870 en- 
rolled and signed by Speaker (id. p. 14900). Senate notified that 
House had agreed to conference report (id. 14947). Conference re- 
port submitted to Senate, debated and agreed to (id. pp. 14948- 
14953). 

(V) 



VI 

Aug. 26 Senate notified Vice President had signed Enrolled Bill H. R. 8870. 

(Cong. Rec., Vol. 79, No. 178, p. 15036.) Committee on Enrolled 

Bills presented H. R. 8870 to the President for his approval (id. 

p. 15034). 
Aug. 29 Enrolled Bill H. R. 8870 (Public No. 401) approved by the President 
' of the United States. (Cong. Rec., Sept. 10, Vol. 79, No. 180, p. 

15434.) 



TABLE OF SOURCES 

[All materials refer to 74th Cong., 1st SessJ 

1. Prints of Act: 

(a) H. R. 8539. In the House of Representatives; June 18, 1935. (Bill 

as introduced by Mr. Doughton, referred to Ways and Means 
Committee and ordered to be printed ; see Cong. Rec. Vol. 79, No. 
125, p. 9994.) 

(b) H. R. 8870. In the House of Representatives, July 16, 1935. (Bill 

as introduced by Mr. Cullen, referred to Ways and Means Com- 
mittee and ordered to be printed; see Cong. Rec. Vol. 79, No. 145, 
p. 11726.) 

(c) H. R. 8870, bearing Union Calendar No. 544. In the House of 

Representatives, July 17, 1935. • (Bill as committed to the Com- 
mittee of the Whole House on the State of the Union and ordered 
to be printed; see Cong. Rec. Vol. 79, No. 146, p. 11797). 

(d) H. R. 8870. In the Senate of the United States, May 13 (calendar 

day July 25), 1935. (Bill as read twice and referred to the 
Committee on Finance; see Cong. Rec. 179, No. 153, p. 12296.) 

(e) H. R. 8870, bearing calendar No. 1265. In the Senate of the United 

States, July 29 (calendar day, August 9), 1935. (Bill as reported 
by Mr. George, with amendments; see Cong. Rec. Vol. 79, No. 
165, p. 13234.) 

(f) H. R. 8870. In the Senate of the United States, July 29 (calendar 

day, August 13), 1935. (Bill as ordered to be printed with the 
amendments of the Senate numbered; see Cong. Rec. Vol. 79, No. 
167, p. 13419.) 

(g) (H. R. 8870) Public, No. 401, Seventy-fourth Congress. " Federal 

Alcohol Administration Act" (as approved by the President of 
the United States on August 29, 1935 (Slip Law).) 

2. Records of Committee Hearings: 

(a) Federal Alcohol Control Act. Hearings before the Committee on 

Ways and Means, House of Representatives, on H. R. 8539. June 
19 and 20, 1935. 

(b) Federal Alcohol Control Act Hearings before the Committee on 

Finance, United States Senate on H. R. 8870, July 26. 27, and 
29, 1935. 

3. Reports of Committees: 

(a)T House of Representatives, Report No. 1542, Federal Alcohol Control 
Bill.* Report submitted by Mr. Cullen, from the Committee on 
Ways and Means (to accompany H. R. 8870). 

(b) Senate, Report No. 1215, bearing Calendar No. 1265, Federal Alcohol 

Control Act. Report submitted by Mr. George, from the Committee 
on Finance (to accompany H. R. 8870). 

(c) House of Representatives, Report No. 1898, Revenue From Distilled 

Spirits. Report submitted by Mr. Doughton from the committee 
of conference. Conference Report (to accompany H. R. S870) and 
Statement of the Managers on the Part of the House, 
(vn) 



vm 



4. Debates in Congress: 



(a) Debate on H. R. 8S70 as reported to the House of Representatives 

by the Committee on Ways and Means. 

July 23, 1935, Congressional Record, Vol. 79, No. 151, pages 

12176-12203. 
July 24, 1935, Congressional Record, Vol. 79, No. 152, pages 

12259-12272. 

(b) Debate on H. R. 8870 as reported to the Senate by the Committee on 

Finance. 

August 12, 1935, Congressional Record, Vol. 79, No. 166, page" 

13354. 
August 13, 1935, Congressional Record, Vol. 79, No. 167, pages 

13395-13419. 

(c) Debate on, and agreement to, Conference Report on H. R. 8870. 

House of Representatives, August 24, 1935, Congressional Rec- 
ord, Vol. 79, No. 177, pages 14806-14810. 

Senate, August 24, 1935, Congressional Record, VoL 79, No. 
177, page 14947 and pages 14948-14953. 



INTRODUCTORY NOTE 

The Federal Alcohol Administration Act, passed by the first 
session of the Seventy-fourth Congress and approved by the Presi- 
dent on August 29, 1935, was drawn to perpetuate the control of the 
alcoholic beverage industries formerly exercised through the Federal 
Alcohol Control Administration. This control was founded on pro- 
visions placed in the several codes of fair competition for these 
industries. The codes were established under title I of the National 
Industrial Recovery Act of June 16, 1933, and the Federal Alcohol 
Control Administration was set up by a Presidential Executive order 
to administer them. This method of control existed from the effec- 
tive date of the twenty-first amendment to the Constitution repealing 
prohibition, December 5, 1933, until May 27, 1935, when the Supreme 
Court of the United States handed down its decision in the case of 
Schechter Poultry Corporation v. United States. With the latter 
date the codes, for practical purposes, ceased to exist and their provi- 
sions were no longer enforced. 

A summary of the former code system, the need for additional 
Federal legislation, the national scope of the industries, and of the 
aims of the act itself will be found on pages 1, 2, and 3 of the report, 
no. 1542, on the act (H. R. 8870) of the Committee on Ways and 
Means of the House of Representatives. This report is annexed 
hereto as appendix I. 

The following memorandum deals with the act, section by section. 
Notes are annexed to each section referring to related material found 
in the hearings before the Congressional committees, the various 
committee reports, and the debates thereon in Congress. Where this 
material appeared to the editor to be of unusual importance as having 
interpretative or explanatory value, it has been quoted in the note. 
For ready reference, copies of the act as reported out by the com- 
mittees, together with the accompanying committee reports, and the 
conference report, are annexed in full as appendixes. 

This memorandum was prepared by W. A. Russell of the Office of 
the General Counsel of the Federal Alcohol Control Administration. 
Although the greatest care was exercised in examining the documents 
in the table of sources and in selecting excerpts therefrom, it is felt 
that some material may possibly have been overlooked and that 
errors may unavoidably have been made. It is requested therefore 
that any omissions, errors, or corrections be brought to the attention 
of the Administration. 

Frederic P. Lee, 

General Counsel. 

(IX) 



LEGISLATIVE HISTORY OF THE FEDERAL 
ALCOHOL ADMINISTRATION ACT 

ACT IN FULL 

[Public — No. 401 — 74th Congress] 

[H. R. 8870] 

AN ACT 

To further protect the revenue derived from distilled spirits, wine, and malt 
beverages, to regulate interstate and foreign commerce and enforce the postal 
laws with respect thereto, to enforce the twenty-first amendment, and for 
other purposes. 

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may 
be cited as the " Federal Alcohol Administration Act." 

FEDERAL ALCOHOL ADMINISTRATION 

Sec. 2. (a) There is hereby created the Federal Alcohol Adminis- 
tration as a division in the Treasury Department. 

(b) The Administration shall be headed by an Administrator, 
who shall be appointed by the President, by and with the advice 
and consent of the Senate. The Administrator shall for his services 
receive compensation at the rate of $10,000 per annum, together 
with actual and necessary traveling and subsistence expenses while 
engaged in the exercise of his powers and duties outside the District 
of Columbia. No person shall be eligible to appointment, or continue 
in office, as Administrator if he is engaged or financially interested 
in, or is an officer or director of or employed by a corporation en- 
gaged in, the production or sale or other distribution of alcoholic 
leverages, or the financing thereof. 

(c) The Administrator shall, without regard to the civil-service 
laws and the Classification Act of 1923, as amended, appoint and 
fix the compensation and duties of such officers and employees as he 
deems necessary to carry out his powers and duties, but the compen- 
sation so fixed shall be subject to the approval of the Secretary of the 
Treasury. The Administrator is authorized to adopt an official seal, 
which shall be judicially noticed. 

(d) The Administrator is authorized and directed to prescribe such 
rules and regulations as may be necessary to carry out his powers 
and duties. All rules and regulations prescribed by the Administra- 
tor shall be.subject to the approval of the Secretary of the Treasury. 

(e) Appropriations to carry out powers and duties of the Admin- 
istrator shall be available for expenditures, among other purposes. 

(1) 



Act 2 

for personal services and rent in the District of Columbia and else- 
where, expenses fbr travel and subsistence, for law books, books of 
reference, magazines, periodicals, and newspapers, for contract steno- 
graphic reporting services, for subscriptions for library services, for 
purchase of samples for analysis or use as evidence, and for holding 
conferences of State and Federal liquor control officials. 

(f ) The Administrator may, with the consent of the department or 
agency affected, utilize the services of any department or other 
agency of the Government to the extent necessary to carry out his 
powers and duties and authorize officers and employees thereof to 
act as his agents. 

(g) The provisions, including penalties, of sections 9 and 10 of the 
Federal Trade Commission Act, as now or hereafter amended, shall 
be applicable to the jurisdiction, powers, and duties of the Admin- 
istrator, and to any person (whether or not a corporation) subject to 
the provisions of laws administered by the Administrator. 

(h) The Administrator is authorized to require, in such manner 
and form as he shall prescribe, such reports as are necessary to carry 
out his powers and duties. 

(i) The Administrator shall make a report to Congress, at the 
beginning of each regular session, of the administration of the func- 
tions with which he is charged, and shall include in such report the 
names and compensation of all persons employed by the Adminis- 
tration. 

UNLAWFUL BUSINESSES WITHOUT PERMIT 

Sec. 3. In order effectively to regulate interstate and foreign com- 
merce in distilled spirits, wine, and malt beverages, to enforce the 
twenty-first amendment, and to protect the revenue and enforce the 
postal laws with respect to distilled spirits, wine, and malt beverages : 

(a) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator — 

(1) to engage in the business of importing into the United States 
distilled spirits, wine, or malt beverages ; or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to sell, or ship, in interstate or foreign commerce, directly 
or indirectly or through an affiliate, distilled spirits, wine, or malt 
beverages so imported. 

This subsection shall take effect sixty days after the date upon which 
the Administrator first appointed under this Act takes office. 

(b) It shall be unlawful, except pursuant to a basic permit issued 
under this Act bv the Administrator — 

(1) to engage in the business of distilling distilled spirits, pro- 
ducing wine, rectifying or blending distilled spirits or wine, or 
bottling, or warehousing and bottling, distilled spirits: or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to sell, or ship, in interstate or foreign commerce, directly 
or indirectly or through an affiliate, distilled spirits or wine so 
distilled, produced, rectified, blended, or bottled, or warehoused 
and bottled. 

This subsection shall take effect sixty days after the date upon which 
the Administrator first appointed under this Act takes office. 



3 Act 

(c) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator — 

(1) to engage in the business of purchasing for resale at whole- 
sale distilled spirits, wine, or malt beverages; or 

(2) for any person so engaged to receive or to sell, offer or 
deliver for sale, contract to sell, or ship, in interstate or foreign 
commerce, directly or indirectly or through an affiliate, distilled 
spirits, wine, or malt beverages so purchased. 

This subsection shall take effect March 1, 1936. 

This section shall not apply to any agency of a State or political 
subdivision thereof or any officer or employee of any such agency, 
and no such agency or officer or employee shall be required to obtain 
a basic permit under this Act. 

PERMITS 

Sec. 4. (a) The following persons shall, on application therefor, 
be entitled to a basic permit : 

(1) Any person who, on May 25, 1935, held a basic permit as 
distiller, rectifier, wine producer, or importer issued by an agency 
of the Federal Government. 

(2) Any other person unless the Administrator finds (A) that 
such person (or in case of a corporation, any of its officers, direc- 
tors, or principal stockholders) has, within five years prior to date 
of application, been convicted of a felony under Federal or State 
law or has, within three years prior to date of application, been 
convicted of a misdemeanor under any Federal law relating to 
liquor, including the taxation thereof; or (B) that such person is r 
by reason of his business experience, financial standing, or trade 
connections, not likely to commence operations within a reasonable 
period or to maintain such operations in conformity with Federal 
law; or (C) that the operations proposed to be conducted by such 
person are in violation of the law of the State in which they are 
to be conducted. 

(b) If upon examination of any application for a basic permit the 
Administrator has reason to believe that the applicant is not entitled 
to such permit, he shall notify the applicant thereof and, upon request 
by the applicant, afford him due notice and opportunity for hearing 
on the application. If the Administrator, after affording such notice 
and opportunity for hearing, finds that the applicant is not entitled 
to a basic permit hereunder, he shall by order deny the application 
stating the findings which are the basis for his order. 

(c) The Administrator shall prescribe the manner and form of all 
applications for basic permits (including the facts to be set forth 
therein) and the form of all basic permits, and shall specify in any 
basic permit the authority conferred by the permit and the condi- 
tions thereof in accordance with the provisions of this Act. To the 
extent deemed necessary by the Administrator for the efficient ad- 
ministration of this Act, separate applications and permits shall be 
required bv the Administrator with respect to distilled spirits. wine r 
and malt beverages, and the various classes thereof, and with respect 
to the various classes of persons entitled to permits hereunder. The 
issuance of a basic permit under this Act shall not operate to deprive 
the United States of .its remedy for any violation of law. 



Act 4 

a) A basic permit shall be conditioned upon compliance with the 
'"•j-ijuiremeiits of section 5 (relating to unfair competition and 
unlawful practices) and of section 6 (relating to bulk sales and 
bottling), with the twenty-first amendment and laws relating to the 
enforcement thereof, and with all other Federal laws relating to 
distilled spirits, wine, and malt beverages, including taxes with 
respect thereto. 

(e) A basic permit shall by order of the Administrator, after due 
notice and opportunity for hearing to the permittee, (1) be revoked, 
or suspended for such period as the Administrator deems appro- 
priate, if the Administrator finds that the permittee has willfully 
violated any of the conditions thereof, provided that for a first viola- 
tion of the conditions thereof the permit shall be subject to suspen- 
sion only: or (2) be revoked if the Administrator finds that the 
permittee has not engaged in the operations [authorized by the permit 
for a period of more than tvo years; or (3) be annulled if the 
Administrator finds that the permit was procured through fraud, or 
misrepresentation, or concealment of material fact. The order shall 
state the findings which are the basis for the order. 

(f) Orders of the Administrator with respect to any denial of 
application, suspension, revocation, annulment, or other proceedings, 
shall be served (1) in person by any officer or employee of the 
Administration designated by the Administrator or any internal 
revenue or customs officer authorized by the Administrator for the 
purpose, or (2) by mailing the order by registered mail, addressed 
to the applicant or respondent at his last known address in the 
records of the Administrator. 

(g) A basic permit shall continue in effect until suspended, 
revoked, or annulled as provided herein, or voluntarily surrendered ; 
except that (1) if leased, sold or otherwise voluntarily transferred, 
the permit shall be automatically terminated thereupon, and (2) if 
transferred by operation of law or if actual or legal control of the 
permittee is acquired, directly or indirectly, whether by stock-owner- 
ship or in any other manner, by any person, then such permit shall 
be automatically terminated at the expiration of thirty days there- 
after: Provided, That if within such thirty-day period application 
for a new basic permit is made by the transferee or permittee, 
respectively, then the outstanding basic permit shall continue in 
effect until such application is finally acted on by the Administrator. 

(h) An appeal may be taken by the permittee or applicant for a 
permit from any order of the Administrator denying an application 
for, or suspending, revoking, or annulling, a basic permit. Such 
appeal shall be taken by filing, in the circuit court of appeals of 
the United States within any circuit wherein such person resides or 
has his principal place of business, or in the United States Court 
of Appeals for the District of Columbia, within sixty days after 
the entry of such order, a written petition praying that the order 
of the Administrator be modified or set asiae in whole or in part. 
A copy of such petition shall be forthwith served upon the Admin- 
istrator, or upon any officer designated by him for that purpose, and 
thereupon the Administrator shall certify and file in the court a 
transcript of the record upon which the order complained of was 
entered. Upon the filing of such transcript such court shall have 



5 Act 

exclusive jurisdiction to affirm, modify, or set aside 'such order, in 
whole or in part. No objection to the order of the Administrator 
shall be considered by the court unless such objection shall have been 
urged before the Administrator or unless there were reasonable 
grounds. for failure so to do. The finding of the Administrator as 
to the facts, if supported by substantial evidence, shall be conclusive. 
If any party shall apply to the court for leave to adduce additional 
evidence, and shall show to the satisfaction of the court that such 
additional evidence is material and that there were reasonable 
grounds for failure to adduce such evidence in the proceeding before 
tile Administrator, the court may order such additional evidence 
to be taken before the Administrator and to be adduced upon the 
hearing in such manner and upon such terms and conditions as to the 
court may seem proper. The Administrator may modify his find- 
ings as to the facts by reason of the additional evidence so taken, and 
he shall file with the court such modified or new findings, which, if 
supported by substantial evidence, shall be conclusive, and his recom- 
mendation, if any, for the modification or setting aside of the original 
order. The judgment and decree of the court affirming, modifying, 
or setting aside, in whole or in part, any such order of the Admin- 
istrator shall be final, subject to review by the Supreme Court of 
the United States upon certiorari or certification as provided in 
sections 239 and 240 of the Judicial Code, as amended (U. S. C., 
title 28, sees. 346 and 347)- The commencement of proceedings 
under this subsection shall, unless specifically ordered by the court 
to the contrary, operate as a stay of the Administrator's order. 

(i) No proceecling for the suspension or revocation of a basic 
permit for violation of any condition thereof relating to com- 
pliance with Federal law shall be instituted by the Administrator 
more than eighteen months after conviction of the violation of 
Federal law, or, if no conviction has been had ; more than three 
years after the violation occurred; and no basic permit shall be 
suspended or revoked for a violation of any such condition thereof 
if the alleged violation of Federal law has been compromised by 
any officer of the Government authorized to compromise such 
violation. 

UNFAIB COMPETITION AND UNLAWFUL PRACTICES 

Sec. 5. It shall be unlawful for any person engaged in business 
as a distiller, brewer, rectifier, blender, or other producer, or as an 
importer or wholesaler, of distilled spirits, wine, or malt beverages, 
or as a bottler, or warehouseman and bottler, of distilled spirits, 
directly or indirectly or through an affiliate : 

(a) Exclusive outlet; To require, by agreement or otherwise, that 
any retailer engaged in the sale of distilled spirits, wine, or malt bev- 
erages, purchase any such products from such person to the exclusion 
in whole or in part of distilled spirits, wine, or malt beverages sold or 
offered for sale by other persons in interstate or foreign commerce, 
if such requirement is made in the course of interstate or foreign 
commerce, or if such person engages in such practice to such an ex- 
tent as substantially to restrain or prevent transactions in interstate 
or foreign commerce in any such products, or if the direct effect of 



Act 6 

=u< h requirement is to prevent, deter, hinder, or restrict other persons 
from selling or offering for sale any such products to such retailer 
in interstate or foreign commerce; or 

(b) " Tied house " : To induce through any of the following means, 
any retailer, engaged in the sale of distilled spirits, wine, or malt 
beverages, to purchase any such products from such person to the 
exclusion in whole or in part of distilled spirits, wine, or malt 
beverages sold or offered for sale by other persons in interstate or 
foreign commerce, if such inducement is made in the course of inter- 
state or. foreign commerce, or if such person engages in the practice of 
using such means, or any of them, to such an extent as sustantially to 
restrain or prevent transactions in interstate or foreign commerce 
in any such products, or if the direct effect of such inducement is 
to prevent, deter, hinder, or restrict other persons from selling or 
offering for sale any such products to such retailer in interstate or 
foreign commerce: (1) By acquiring or holding (after the expira- 
tion of any existing license) any interest in any license with re- 
spect to the premises of the retailer; or (2) by acquiring any inter- 
est in real or personal property owned, occupied, or used by the 
retailer in the conduct of his business; or (3) by furnishing, giving, 
renting, lending, or selling to the retailer, any equipment, fixtures, 
signs, supplies, money, services, or other thing of value, subject 
to such exceptions as the Administrator shall by regulation pre- 
scribe, having due regard for public health, the quantity and value 
of articles involved, established trade customs not contrary to the 
public interest and the purposes of this subsection; or (4) by pay- 
ing or crediting the retailer for any advertising, display, or distribu- 
tion service; or (5) by guaranteeing any loan or the repayment of 
any financial obligation of the retailer; or (6) by extending to the 
retailer credit for a period in excess of the credit period usual and 
customary to the industry for the particular class of transactions, 
as ascertained by the Administrator and prescribed by regulations 
by him; or (T) by requiring the retailer to take and dispose of a 
certain quota of any of such products ; or 

(c) Commercial bribery : To induce through any of the following 
means, any trade buyer engaged in the sale of distilled spirits, wine, 
or malt beverages, to purchase any such products from such person 
to the exclusion in whole or in part of distilled spirits, wine, or malt 
beverages sold or offered for sale by other persons in interstate or 
foreign commerce, if such inducement is made in the course of inter- 
state or foreign commerce, or if such person engages in the practice 
of using such, means, or any of them, to such an extent as substan- 
tially to restrain or prevent transactions in interstate or foreign 
commerce in any such products, or if the direct effect of such in- 
ducement is to prevent, deter, hinder, or restrict other persons from 
celling or offering for sale any such products to such, trade buyer 
in interstate or foreign commerce: (1) By commercial bribery; or 
(2) by offering or giving any bonus, premium, or compensation to 
any officer, or employee, or representative of the trade buyer; or 

(d) Consignment sales: To sell, offer for sale, or contract to sell 
to any trade buyer engaged in the sale of distilled spirits, wine, 
or malt beverages, or for any such trade buyer to purchase, offer to 
purchase, or contract to purchase, any such products on consignment 



7 Act 

or under conditional sale or with the privilege of return or on any 
ba^is otherwise than a bona fide sale, or where any part of such 
transaction involves, directly or indirectly, the acquisition by such 
person from the trade buyer or his agreement to acquire from the 
trade buyer other distilled spirits, wine, or malt beverages — if such 
sale, purchase, offer, or contract is made in the course of interstate or 
foreign commerce, or if such person or trade buyer engages in such 
practice to such an extent as substantially to restrain or prevent 
transactions in interstate or foreign commerce in any such products, 
or if the direct effect of such sale, purchase, offer, or contract is to 
prevent, deter, hinder, or restrict other persons from selling or offer- 
ing for sale any such products to such trade buyer in interstate or 
foreign commerce: Provided, That this subsection shall not apply 
to transactions involving solely the bona fide return of merchandise 
for ordinary and usual commercial reasons arising after the mer- 
chandise has been sold ; or 

(e) Labeling. — To sell or ship or deliver for sale or shipment, or 
otherwise introduce in interstate or foreign commerce, or io receive 
therein, or to remove from customs custody for consumption, any 
distilled spirits, wine, or malt beverages in bottles, unless such 
products are bottled, packaged, and labeled in conformity with such 
regulations, to be prescribed by the Administrator, with respect 
to packaging, marking, branding, and labeling and size and fill of 
container (1) as will prohibit deception of the consumer with respect 
to such products or the quantity thereof and as will prohibit, irre- 
spective of falsity, such statements relating to age. manufacturing 
processes, analyses, guarantees, and scientific or irrelevant matters 
as the Administrator finds to be likely to mislead the consumer; (2) 
as will provide the consumer with adequate information as to the 
identity and quality of the products, the alcoholic content thereof 
(except that statements of, or statements likely to be considered as 
statements of, alcoholic content of malt beverages are hereby pro- 
hibited unless required by State law and except that, in case of 
wines, statements of alcoholic content shall be required only for 
wines containing more than 14 per centum of alcohol by volume), 
the net contents of the package, and the manufacturer or bottler or 
importer of the product; (3) as will require an accurate statement, 
in the case of distilled spirits (other than cordials, liqueurs, and 
specialties) produced by blending or rectification, if neutral spirits 
have been used In the production thereof, informing the consumer 
of the percentage of neutral spirits so used and of the name of the 
commodity from which such neutral spirits have been distilled, or 
in case of neutral spirits or of gin produced by a process of con- 
tinuous distillation, the name of the commodity from which dis- 
tilled; (4) as will prohibit statements on the label that are dis- 
paraging of a competitor's products or are false, misleading, obscene, 
or indecent; and (5) as will prevent deception of the consumer by 
use of a trade or brand name that is the name of any living indi- 
vidual of public prominence, or existing private or public organiza- 
tion, or is a name that is in simulation or is an abbreviation thereof, 
and as will prevent the use of a graphic, pictorial, or emblematic 
representation of any such individual or organization, if the use of 



Act 8 

such name or representation is likely falsely to lead the consumer to 
believe that the product has been indorsed, made, or used by, or 
produced for, or under the supervision of, or in accordance with the 
specifications of, such individual or organization : Provided, That 
this clause shall not apply to the use of the name of any person 
engaged in business as a distiller, brewer, rectifier, blender, or other 
producer, or as an importer, wholesaler, retailer, bottler, or ware- 
houseman, of distilled spirits, wine, or malt beverages, nor to the use 
by any person of a trade or brand name used by him or his pred- 
ecessor in interest prior to the date of the enactment of this Act : 
including regulations requiring, at time of release from customs 
custody, certificates issued by foreign governments covering origin, 
age. and identity of imported products: Provided, farther, That 
nothing herein nor any decision, ruling, or regulation of any Depart- 
ment of the Government shall deny the right of any person to use 
any trade name or brand of foreign origin not presently effectively 
registered in the United States Patent Oilice which has been used by 
such person or predecessors in the United States for a period of at 
least rive years last past, if the use of such name or brand is qualified 
by the name of the locality in the United States in which the product 
is produced, and, in the case of the use of such name or brand on 
any label or in any advertisement, if such qualification is as con- 
spicuous as such name or brand. 

It .-hall be unlawful for any person to alter, mutilate, destroy, 
obliterate, or remove any mark, brand, or label upon distilled spirits, 
wine, or malt beverages held for sale in interstate or foreign com- 
merce or after shipment therein, except as authorized by Federal 
law or except pursuant to regulations of the Administrator author- 
izing relabeling for purposes of compliance with the requirements 
of this subsection or of State law. 

In order to prevent the sale or shipment or other introduction of 
distilled spirits, wine, or malt beverages in interstate or foreign 
commerce, if bottled, packaged, or labeled in violation of the 
requirements of this subsection, no bottler, or importer of distilled 
spirits, wine, or malt beverages, shall, after such date as the Admin- 
istrator fixes as the earliest practicable date for the application of 
the provisions of this subsection .to any class of such persons (but 
not later than March 1, 1936, and only after thirty days' public 
notice), bottle or remove from customs custody for consumption 
distilled spirits, wine, or malt beverages, respectively, unless the 
bottler or importer, upon application to the Administrator, has 
obtained and has in his possession a certificate of label approval 
covering the distilled spirits, wine, or malt beverages, issued by the 
Administrator in such manner and form as lie shall by regulations 
pri-scribe: Provided. That any such bottler shall be exempt from the 
requirements of this subsection it' the bottler, upon application to 
the Administ rator, shows to the satisfaction of the Administrator 
that the, distilled spirits, wine, or malt beverages to be bottled by 
the applicant are not to be sold, or offered' for sale, or shipped or 
delivered for shipment, or otherwise introduced, in interstate or 
foreign commerce. Officers of internal revenue and customs are 
authorized and directed to withhold the release of such products 



9 Act 

from the bottling plant or customs custody unless such certificates 
have been obtained, or unless the application of the bottler for 
exemption has been granted by the Administrator. The district 
courts of the United States, the Supreme Court of the District of 
Columbia, and the United States court for any Territory, shall have 
jurisdiction of suits to enjoin, annul, or suspend in whole or in part 
any final action by the Administrator upon any application under 
this subsection; or 

(f) Advertising: To publish or disseminate or cause to be pub- 
lished or disseminated by radio broadcast, or in any newspaper, 
periodical or .other publication or by any sign or outdoor advertise- 
ment or any other printed or graphic matter, an}' advertisement of 
distilled spirits, wine, or malt beverages, if such advertisement is in, 
or is calculated to induce sales in, interstate or foreign commerce, 
or is disseminated by mail, unless such advertisement is in con- 
formity with such regulations, to be prescribed by the Administrator, 
(1) as will prevent deception of the consumer with respect to the 
products advertised and as will prohibit, irrespective of falsity, such 
statements relating to age, manufacturing processes, analyses, guar- 
anties, and scientific or irrelevant matters as the Administrator finds 
to be likely to mislead the consumer; (2) as will provide the con- 
sumer with adequate information as to the identity and quality of 
the products advertised, the alcoholic content thereof (except that 
statements of, or statements likely to be considered as statements of, 
alcoholic content of malt beverages are prohibited and except that, 
in case of wines, statements of alcoholic content shall be required 
only for wines containing more than 14 per centum of alcohol by 
volume), and the person responsible for the advertisement; (3) as 
will require an accurate statement, in the case of distilled spirits 
(other than cordials, liqueurs, and specialties) produced by blending 
or rectification, if neutral spirits have been used in the production 
thereof, informing the consumer of the percentage of neutral spirits 
so used and of the name of the commodity from which such neutral 
spirits have been distilled, or in case of neutral spirits or of gin 
produced by a process of continuous distillation, the name of the 
commodity from which distilled; (4) as will prohibit statements that 
are disparaging of a competitor's products or are false, misleading, 
obscene, or indecent; (5) as will prevent statements inconsistent with 
any statement on the labeling of the products advertised. This sub- 
section shall not apply to outdoor advertising in place on June 18, 
1935, but shall apply upon replacement, restoration, or renovation 
of any such advertising. The prohibitions of this subsection and 
regulations thereunder shall not apply to the publisher of any news- 
paper, periodical, or other publication, or radio broadcaster, unless 
such publisher or radio broadcaster is engaged in business as a dis- 
tiller, brewer, rectifier, or other producer, or as an importer or whole- 
saler, of distilled spirits, wine, or malt beverages, or as a bottler, 
or warehouseman and bottler, of distilled spirits, directly or indi- 
rectly or through an affiliate. 

The provisions of subsections (a), (b), and (c) shall not apply 
to any act done by an agency of a State or political subdivision 
thereof, or by any officer or employee of such agency. 



Act 10 

In the case of malt beverages, the provisions of subsections (a) r 
(b), (c), and (d) shall apply to transactions between a retailer or 
trade buyer in any State and a brewer, importer, or wholesaler of 
malt beverages outside such State only to the extent that the law of 
such State imposes similar requirements with respect to similar trans- 
actions between a retailer or trade buyer in such State and a brewer, 
importer, or wholesaler of malt beverages in such State, as the case 
may be. In the case of malt beverages, the provisions of subsections 
(e) and (f) shall apply to the labeling of malt beverages sold or 
shipped or delivered for shipment or otherwise introduced into or 
received in any State from any place outside thereof, or tiie adver- 
tising of malt beverages intended to be sold or shipped or delivered 
for shipment or otherwise introduced into or received in any State 
from any place outside thereof, only to the extent that the law of 
such State imposes similar requirements with respect to the labeling 
or advertising, as the case may be, of malt beverages not sold or 
shipped or delivered for shipment or otherwise introdued into or 
received in such State from any place outside thereof. 

The Administrator shall give reasonable public notice, and afford 
to interested parties opportunity for hearing, prior to prescribing 
regulations to carry out the provisions of this section. 

BULK SALES AND BOTTLING 

Sec. 6. (a) It shall be unlawful for any person — 

(1) To sell or offer to sell, contract to sell, or otherwise dispose 
of distilled spirits in bulk except, under regulations of the Ad- 
ministrator, for export or to the following, or to import distilled 
spirits in bulk except, under such regulations, for sale to or for 
use by the following: A distiller, rectifier of distilled spirits, per- 
son operating a bonded warehouse qualified under the internal- 
revenue laws or a class 8 bonded warehouse qualified under the 
customs laws, a winemaker for the fortification of wines, a pro- 
prietor of an industrial alcohol plant, or an agency of the United 
States or any State or political subdivision thereof. 

(2) To sell or offer to sell, contract to sell, or otherwise dispose 
of warehouse receipts for distilled spirits in bulk unless such v^are- 
house receipts require that the warehouseman shall package such 
distilled spirits, before delivery, in bottles labeled and marked in 
accordance with law, or deliver such distilled spirits in bulk only to 
persons to whom it is lawful to sell or otherwise dispose of distilled 
spirits in bulk. 

(3) To bottle distilled spirits unless the bottler is a person to 
whom it is lawful to sell or otherwise dispose of distilled spirits 
in bulk. 

(b) Any person who violates the requirements of this section shall,, 
upon conviction thereof, be fined not more than $5,000 or imprisoned 
for not more than one year or both, and shall forfeit to the United 
States all distilled spirits with respect to which the violation occurs 
and the containers thereof. 

(c) The term " in bulk " means in containers having a capacity 
in excess of one wine gallon. 



11 Act 

PENALTIES 

Sec. 7. The District Courts of the United States, the Supreme 
Court of the District of Columbia, and the United States court for 
any Territory, of the District where the otfense is committed or 
threatened or of which the offender is an inhabitant or has his prin- 
cipal place of business, are hereby vested with jurisdiction of any 
suit brought by the Attorney General in the name of the United 
States, ro prevent and restrain violations of any of the provisions 
of this Act. Any person violating any of the provisions of sections 
3 or 5 shall be guilty of a misdemeanor and upon conviction thereof 
be fined not more than $1,000 for each offense. Subject to the ap- 
proval of the Attorney General, the Administrator is authorized. 
with respect to any violation of this Act, to compromise the liability 
arising with respect to such violation (1) upon payment of a sum not 
in excess of $500 for each offense, to be collected by the Administrator 
and to be paid into the Treasury as miscellaneous receipts, and (2) 
in case of repetitious violations and in order to avoid multiplicity 
of criminal proceedings, upon agreement to a stipulation that the 
United States may, on its own motion upon five days' notice to the 
violator, cause a consent decree to be entered by any court of com- 
petent jurisdiction enjoining the repetition of such violation. 

interlocking directorates 

Sec. 8. (a) Except as provided in subsection (b), it shall be 
unlawful for any individual to take office, after the date of the enact- 
ment of this Act, as an officer or director of any company, if his doing 
so would make him an officer or director of more than one company 
engaged in business as a distiller, rectifier, or blender of distilled 
spirits, or of any such company and of a company which is an affiliate 
of any company engaged in business as a distiller, rectifier, or 
blender of distilled spirits, or of more than one company which is an 
affiliate of any company engaged in business as a distiller, rectifier, or 
blender of distilled spirits, unless, prior to taking such office, appli- 
cation made by such individual to the Administrator has been 
granted and after due showing has been made to him that service by 
such individual as officer or director of all the foregoing companies 
of which he is an officer or director together with service in the com- 
pany with respect to which application is made will not substan- 
tially restrain or prevent competition in interstate or foreign com- 
merce in distilled spirits. The Administrator shall, by order, grant 
or deny such application on the basis of the proof submitted to 
him and his finding thereon. The District Courts of the United 
States, the Supreme Court of the District of Columbia, and the 
United States court for any Territory shall have jurisdiction of 
suits to enjoin, annul, or suspend in whole or in part any final 
action by the Administrator upon any application under this 
subsection. 

(b) An individual may, without regard to the provisions of sub- 
section (a), take office as an officer or director of a company described 
in subsection (a) while holding the position of officer or director of 



Act 12 

any other such company if such companies are affiliates at the time 
of his taking office and if — 

(1) Such companies are affiliates on the date of the enactment 
of this Act; or 

(2) Each of such companies has been organized under the law 
of ii State to comply with a requirement thereof under which, as 
a condition of doing business in such State, such company must 
be organized under the law of such State; or 

(3) One or more such companies has been organized under the 
law of a State to comply with a requirement thereof under which, 
as a condition of doing business in such State, such company must 
be organized under the laws of such State, and the other one or 
more of such companies not so organized, is in existence on the 
date of the enactment of this Act ; or 

(4) One or more of such companies has been organized under 
the law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such State, such com- 
pany must be organized under the law of such State, and not more 
than one of such companies is a company which has not been so 
organized and which has been organized after the date of the 
enactment of this Act. 

(c) As used in this section, the term " company " means a cor- 
poration, joint stock company, business trust, or association, but does 
not include any agency of a State or political subdivision thereof or 
any officer or employee of any such agency. 

(d) Any individual taking office in violation of this section shall 
be punished by a fine of not exceeding $1,000. 

DISPOSAL OF FORFEITED ALCOHOLIC BEVERAGES 

Sec. 9. (a) All distilled spirits, wine, and malt beverages for- 
feited, summarily or by order of court, under any law of the United 
States, shall be delivered to the Secretary of the Treasury to be 
disposed of as hereinafter provided. 

(b) The Secretary of the Treasury shall dispose of all distilled 
spirits, wine, and malt beverages which have been delivered to him 
pursuant to subsection (a) — 

(1) By delivery to such Government agencies as, in his opinion, 
have a need for such distilled spirits, wine, or malt beverages for 
medicinal, scientific, or mechanical purposes; or 

(2) By gift to such eleemosynary institutions as, in his opinion, 
have a need for such distilled spirits, wine, or malt beverages for 
medicinal purposes; or 

(3) By destruction. 

(c) No distilled spirits, wine, or malt beverages which have been 
seized under any law of the United States, may be disposed of in 
any manner whatsoever except after forfeiture and as provided in 
this section. 

(d) The Secretary of the Treasury is authorized to make all rules 
and regulations necessary to carry out the provisions of this section. 



13 Act 

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

Sec 10. The Federal Alcohol Control Administration established 
by Executive order under the provisions of Title I of the National 
Industrial Recovery Act is hereby abolished. All papers, records, 
and property of such Federal Alcohol Control Administration are 
hereby transferred to the Administrator. This section shall take 
effect on the date that the Administrator first appointed under this 
Act takes office. 

Sec. • 11. Section 610 of the Revenue Act of 1918, as amended 
(U. S.'C, Supp. VII, title 26, sec. 1310), is amended by adding at 
the end thereof the following new paragraph : 

" The provisions of the internal-revenue laws applicable to natural 
wine shall apply in the same manner and to the same extent to citrus- 
fruit wines which are the product of normal alcoholic fermentation 
of the juice of sound ripe citrus fruit (except lemons and limes), 
with or without the addition of dry cane, beet, or dextrose sugar 
(containing, respectively, not less than 95 per centum of actual sugar, 
calculated on a dry basis) for the purpose of perfecting the product 
according to standards, but without the addition .or abstraction of 
other substances, except as may occur in the usual cellar treatment 
of clarifying or aging." 

Sec. 12. S^'ion 612 of the Revenue Act of 1918, as amended 
(U. S. C, Supp. VII, title 26, sec. 1301), is amended to read as fol- 
lows: 

" Sec. 612. That under such regulations and official supervision 
and upon the giving of such notices, entries, bonds, and other security 
as the Commissioner, with the approval of the Secretary, may pre- 
scribe, any producer of wines defined under the provisions of this 
title may withdraw from any fruit distillery or special bonded ware- 
house grape brandy, or wine, spirits, for the fortification of such 
wines on the premises where actually made, and any producer of 
citrus-fruit wines may similarly withdraw citrus-fruit brandy for 
the fortification of citrus-fruit wines on the premises where actually 
made : Provided, That there shall be levied and assessed against 
the producer of such wines or citrus-fruit wines a tax (in lieu of the 
internal-revenue tax now imposed thereon by law) of 20 cents per 
proof gallon of grape brandy, citrus-fruit brandy, or wine spirit 
whenever withdrawn and hereafter so used by him in the fortification 
of such wines or citrus-fruit wines during the preceding month, which 
assessment shall be paid by him within ten months from the date of 
notice thereof: Provided further. That nothing contained in this 
section shall be construed as exempting any wines, citrus-fruit wines, 
cordials, liqueurs, or similar compounds from the payment of any 
tax provided for in this title. 

"Any such wines or citrus-fruit wines may, under such regulations 
as the Secretary may prescribe, be sold or removed tax free for the 
manufacture of vinegar, or for the production of dealcoholized wines 
containing less than one-half of 1 per centum of alcohol by volume. 

" The taxes imposed by this section shall not apply to dealcoholized 
wines containing less than one-half of 1 per centum of alcohol by 
volume." 



Act 14 

Sec. 13. Section 613 of the Revenue Act of 1918, as amended 
(U. S. C, Supp. VII, title 26, sec. 1300 (a) (2)), is amended by 
inserting after "grape brandy" a comma and the following: "or 
containing citrus-fruit wine fortified with citrus-fruit brandy ". 

Sec. 14. Section 42 of the Act entitled "An Act to reduce the reve- 
nue and equalize duties on imports, and for other purposes ", ap- 
proved October 1, 1890, as amended (U. S. C, Supp. VII, title 26, 
sec. 1302 (a)), is amended by inserting at the end thereof the follow- 
ing new paragraph : 

"The provisions of this section and section 43 shall apply to 
the use of citrus-fruit brandy in the preparation of fortified citrus- 
fruit wines in the same manner and to the same extent as such pro- 
visions apply to the use of wine spirits in the fortification of sweet 
wines, except that no brandy (other than a citrus-fruit brandy) may 
be used in the fortification of citrus-fruit wine and a citrus-fruit 
brandy prepared from one kind of citrus fruit may not be used for 
the fortification of a citrus-fruit wine prepared from another kind 
of citrus fruit or for the fortification of a wine prepared from any 
fruit other than citrus fruit." 

Sec. 15. Section 3255 of the Kevised Statutes, as amended 
(U. S. C, Supp. VII, title 26, sec. 1176), is amended to read as 
follows : 

"Sec. 3255. The Commissioner of Internal Revenue, with the 
approval of the Secretary of the Treasury, may exempt distillers of 
brandy made exclusively from apples, peaches, grapes, oranges, pears, 
pineapples, apricots, berries, plums, pawpaws, persimmons, prunes, 
figs, cherries, dates, or citrus -fruits (except lemons and limes) from 
any provision of the internal-revenue laws relating to the manufac- 
ture of spirits, except as to the tax thereon, when in his judgment 
it may seem expedient to do so : Provided, That where, in the manu- 
facture of wine or citrus-fruit wine, artificial sweetening has been 
used, the wine, or the fruit pomace residuum thereof, or the citrus- 
fruit wine may be used in the distillation of brandy or citrus-fruit 
brandy, as the case may be, and such use shall not prevent the Com- 
missioner of Internal Revenue, with the approval of the Secretary 
of the Treasury, from exempting such distiller from any provision 
of the internal-revenue laws relating to the manufacture of spirits, 
except as to the tax thereon, when in his judgment it may seem expe- 
dient to do so: And provided further, That the distillers mentioned 
in this section may add to not less than five hundred gallons (ten 
barrels) of grape cheese not more than five hundred gallons of a 
sugar solution made from cane, beet, starch, or corn sugar, 95 per 
centum pure, such solution to have a saccharine strength of not to 
exceed 10 per centum, and may ferment the resultant mixture on a 
winery or distillery premises, and such fermented product shall be 
regarded as distilling material." 

Sec. 16. (a) Section 1 of the Act of March 3, 1877, as amended 
(U. S. C, Supp. VII, sec. 1250), is amended by striking out "not 
exceeding ten in numbers in any one collection-district," and by 
inserting at the end of such section the following new paragraph: 

"The Commissioner of Internal Revenue, under such regulations 
as he may promulgate from time to time with the approval of the 



15 Act 

Secretary of the Treasury, may, in his discretion, establish such 
warehouses adjacent to distilleries, and may, in his discretion, 
permit the removal of brandy directly from the distillery to such 
warehouses, and from such warehouses to the distillery warehouse 
of the producing distiller." 

(b) Section 51 of the Act of August 27, 1894, as amended (U. S. C, 
Supp. VII, sec. 1265), is amended by striking out "not exceed- 
ing ten in number in any one collection district," and by inserting 
at the end of such section the following new paragraph: 

" The Commissioner of Internal Revenue, under such regulations 
as he may promulgate from time to time with the approval of the 
Secretary of the Treasury, may, in his discretion, establish such 
warehouses adjacent to distilleries, and may, in his discretion, per- 
mit the removal of spirits directly from the distillery to such ware- 
houses, and from such warehouses to the distillery warehouse of the 
producing distiller." 

MISCELLANEOUS 

Sec. 17. (a) As used in this Act-*- 

(1) The term "Administrator" means the head of the Federal 
Alcohol Administration. 

(2) The term "United States" means the several States and 
Territories and the District of Columbia ; the term " State " includes 
a Territory and the District of Columbia; and the term " Territory " 
means Alaska, Hawaii, and Puerto Rico. 

(3) The term "interstate or foreign commerce" means commerce 
between any State and any place outside thereof, or commerce 
within any Territory or the District of Columbia, or between points 
within the same State but through any place outside thereof. 

(4) The term " person " means individual, partnership, joint stock 
company, business trust, association, corporation, or other form of 
business enterprise, including a receiver, trustee, or liquidating agent 
and including an officer or employee of any agency of a State or 
political subdivision thereof ; and the term " trade buyer " means any 
person who is a wholesaler or retailer. 

(5) The term " affiliate " means any one of two or more persons 
if one of such persons has actual or legal control, directly or indi- 
rectly, whether by stock ownership or otherwise, of the other or 
others of such persons; and any one of two or more persons subject 
to common control, actual or legal, directly or indirectly, whether by 
stock ownership or otherwise. 

(6) The term " distilled spirits " means ethyl alcohol, nydrated 
oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin, and other 
distilled spirits, including all dilutions and mixtures thereof, for 
non-industrial use. 

(7) The term "wine" means (1) wine as defined in section 610 
and section 6171 of the Revenue Act of 1918, (U. S. C, title 26, sees. 
441 and 444) as now in force or hereafter amended, and (2) other 
alcoholic beverages not so denned, but made in the manner of wine, 
including sparkling and carbonated wine, wine made from condensed 
grape must, wine made from other agricultural products than the 
juice of sound, ripe grapes, imitation wine, compounds sold as wine, 



Act 16 

vermouth, cider, perry and sake ; in each instance only if containing 
not less than 7 per centum and not more than 24 per centum of alco- 
hol by volume, and if for non-industrial use. 

(8) The term " malt beverage " means a beverage made by the 
alcoholic fermentation of an infusion or decoction, or combination 
of both, in potable brewing water, of malted barley with hops, or 
their parte, or their products, and with or without other malted 
cereals, and with or without the addition of unmalted or prepared 
cereals, other carbohydrates or products prepared therefrom, and 
with or without the addition of carbon dioxide, and with or without 
other wholesome products suitable for human food consumption. 

(9) The term " bottle " means any container, irrespective of the 
material from which made, for use for the sale of distilled spirits, 
wine, or malt beverages at retail. 

(b) The right to amend or repeal £he provisions of this Act is 
expressly reserved. 

(c) If any provision of this Act, or the application of such pro- 
vision to any person or circumstance,' is held invalid, the remainder 
of the Act and the application of such provision to persons or cir- 
cumstances other than those as to which it is held invalid, shall not 
be affected thereby. 

Approved, August 29, 1935. 



ACT BY SECTIONS 

AN ACT 

To further protect the revenue derived from distilled 

spirits, wine, and malt beverages, to regulate interstate 

and foreign commerce and enforce the postal laws with 

respect thereto, to enforce the twenty-first amendment, 

and for other purposes. 

Note. — Title of the Act was amended on the floor of the Senate 
to eliminate the mention of malt beverages; see note to section 3 
(Cong. Kec., vol. 79, no. 167, p. 13419). 

Be it enacted by the Senate and House of Representa- 
tives of the United States of America in Congress as- 
sembled, That this act may be cited as the " Federal 
Alcohol Administration Act. ' ' 

Note. — In the bill as originally introduced in the House (H. R. 
S539) the first section provided for the levying of an occupational 
tax of $10 per annum on importers, sellers of liquor in interstate 
or foreign commerce, distillers, wine producers, brewers, rectifiers, 
blenders, wholesalers, and other holders Of permits provided for in 
the bill. The provisions of law relating to the levy, collection, and 
payment of existing occupational taxes were made to apply to the 
taxes imposed by the section (H. R. 8539, print dated June 18, 1935, 
pp. 1-3). Mr. Choate, Director of the Federal Alcohol Control Ad- 
ministration, while testifying at the hearings before the House Ways 
and Means Committee on the proposed bill raised two objections to 
this section; first, that it was a flat tax imposing no greater burden 
upon the largest industry member than upon the smallest member of 
the smallest industry ; and second, that the revenue raised by the tax 
would be entirely insufficient to maintain the Federal agency 
created by the act (record of Ways and Means Committee hearing 
on H. R. 8539, p. 8). At a later session of the same hearings Con- 
gressman Celler of New York, appearing as a witness, raised the 
objection that occupational taxes had already been levied on dis- 
tillers, rectifiers, brewers, and wholesalers, and that therefore the 
section would cause a duplication of taxes (id. p. 88). The section 
appeared in the bill as introduced by Congressman Cullen (H. R. 
8870, print dated July 16, 1935). The bill as reported out by the 
Ways and Means Committee still contained the occupational tax pro- 
vision (H. R. 8870, print dated July 17, 1935, bearing Union Cal- 

(17) 



Sec. 2a 18 

endar So. ;>44-), and this section is referred to in the committee's 
report (H. Kept. Xo. 1542. Federal Alcoholic Control Bill. p. 4). In 
the discussion of the bill before the House sitting as the Committee 
of the Whole. Congressman Cullen informed Congressman Celler 
that the section would be eliminated by amendment (Cong. Rec, vol. 
79. no. 151, p. 12182. July 23. 1935).' Congressman McCormack, a 
member of the committee, ottered an amendment which he stated 
lie understood to be agreeable to the committee striking out this 
section. The amendment was agreed to after a short discussion as 
to the reason for the incorporation of the section of the bill. Mr. 
Cullen offered the present language in lieu of the matter stricken 
nut by Mr. McCormack's amendment (id. p. 1219',). and p. 12191). 

This section was read in the Senate in its present form (H. II. 
SS70. print dated July '1~>. 1935). In view of the fact that the Sen- 
ate Finance Committee recommended that the bill be administered 
bv a commission rather than by an administration, the Senate 
amended the short title of the bill to *' Federal Alcohol Control Act " 
(H R. 8870. print dated Aug. 9. bearing Calendar Xo. 1265; S. Rept. 
Xo. 1215. Federal Alcoholic Control Act; Cong. Rec. vol. 79. no. 
107. p. 13395). The former wording was replaced due to the Sen- 
ate's receding from its amendment at the suggestion of the con- 
ferees. (H. Rept. Xo. 1898. Revenue From Distilled Spirits, p. 1 and 
P- 8). 

FEDERAL ALCOHOL ADMINISTRATION 

Sec. 2. (a) There is hereby created the Federal Alcohol 
Administration as a division in the Treasury Department. 

Xote. — It was recommended by the F. A. C. A. that an independent 
agency be created to administer the act. Mr. Choate, in testifying 
before the "Ways and Means Committee of the House, gave the 
following arguments for his belief that an independent agency 
should be established: First, that the administrative officer was en- 
dowed by the bill with complete responsibility for the execution of 
the powers and duties imposed by the bill and should also be given 
complete and final authority to carry out his powers; second, that 
the Treasury's function has always been the collection of the revenue 
and that it is not suited to the regulation of the liquor industry for 
the correction of social evils, governmental problems, and the indus- 
try's own economic welfare; third, that the Secretary of the Treas- 
ury wotdd be subjected to great pressure to give the final decision 
on questions he could not be qualified to answer: fourth, that agencies 
of the Government with quasijudicial functions should be, and 
generally are. independent and are not subjected to executive con- 
trol; and fifth, that the authority and prestige of the agency over 
the industry, through suggestions and advice, would be curtailed. 

Mr. Vinson, a member of the committee, in support of the com- 
mittee's position stated that the bill was, at least in part, concerned 
with the protection of the revenue, that all regulation of the liquor 
industry should issue from one department and that conflicting 
regulations and rulings would be avoided and the other benefits re- 
sulting from a united control would be secured by putting the new 



19 Sec. 2a 

act in the Treasury Department (record of hearing on H. R. 8539, 
pp. 13-20. 22-24). The Secretary of the Treasury was of the opinion 
that the duties imposed on the new agency were such that it should 
not be made a part of the Treasury Department (id. Mr. Graves, 
Assistant to the Secretary of the/ Treasury, pp. 29-31. Mr. Hester of 
the Treasury Department, pp/ 42-^13). At these same hearings 
Congressman O'Malley, appearing as a witness, said that he favored 
placing the new agency in the Treasury to get rid of " a lot of 
red tape and cockeyed regulations ", to get liquor down to a reason- 
able price, and to enable small units to get into the liquor industry 
(id. p. 98). The committee referred to the creation of the new 
agency in its report as follows: 

Section 2 establishes a Federal Alcohol Administration which 
is to be a division in the Treasury Department. The name of 
the organization is fixed so as to avoid confusion with the Fed- 
eral Alcohol Control Administration created under the author- 
ity of the National Industrial Recovery Act. The latter organi- 
zation is abolished under section 8 of the bill, and its papers, 
records, and property are transferred to the new agency. The 
abolition and transfer are postponed, however, until the Ad- 
ministrator who is to head the new organization takes office 
(H. Kept. No. 1542, Federal Alcohol Control Bill, p. 5). 

At the hearings before the Senate Finance Committee, Mr. Choate 
again objected to the incorporation of the new agency into the Treas- 
ury Department (record of Senate Finance Committee hearings on 
H. R. 8870, pp. 1-5). He stated that no economies would be ef- 
fectuated by this plan and also seemed to favor an agency headed 
by a commission or board rather than by a single man. Mr. Choate's 
position was supported by Mr. Lourie, executive secretary of the 
National Association of Alcoholic Beverage Importers. Because of 
the enormous powers given to the Administrator and because the 
functions of the new agency are so far separated from those of the 
Secretary of the Treasury 'he stated that the responsibility should 
be placed in a separate organization responsible only to the Presi- 
dent and to the Congress (id. p. 102). The Senate' Finance Com- 
mittee in its report recommended the establishment of an independ- 
ent agency headed by a commission and gave the following reasons 
for its position: 

The House bill (sec. 2) established the Federal Alcohol Ad- 
ministration as a division of the Treasury Department. The 
Administrator was to be appointed by the President, by and 
with the advice and consent of the Senate, but his rules and 
regulations were subject to the approval of the Secretary of 
the Treasury. The compensation of his employees was sub- 
ject to like approval. Both the Treasury Department and the 
Federal Alcohol Control Administration vigorously opposed 
these provisions on the ground that while the provisions of the 
bill would be of great assistance in preventing evasion of taxes 
and facilitating collection of the revenue, the provisions did 
not involve the levying and collection of taxes which is the 
Treasury Department's sole function with regard to liquor. 
The provisions of the House bill were also opposed on the 



ec. 2a 20 

ground that authority and responsibility were divorced under 
the set-up proposed and that thereby sound and efficient ad- 
ministration would be seriously hampered (S. Kept. No. 1215,. 
Federal Alcohol Control Act, pp. 3-^1). 

The Finance Committee recommended that subsections 2 (a) 
b) (c) and (d) of the House bill (H. K. 8870) be amended to read 
.s follows : 

FEDERAL ALCOHOL COMMISSION 

Sec 2. (a) There is hereby established a commission to be 
known as the Federal Alcohol Commission, to be composed of 
three commissioners, who shall be appointed by the President by 
and with the advice and consent of the Senate. The terms of 
office of the commissioners first taking office shall expire, as 
designated by the President at the time of nomination, one at 
the end of the first year, one at the end of the second year, and one 
at the end of the third year after the date of the enactment of 
this Act. A successor shall have a term of office expiring 3 years 
from the date of expiration of the term for which his predecessor 
was appointed, except that a person appointed to fill a vacancy 
occurring prior to the expiration of such term shall be appointed 
for the remainder of such term. No person shall be eligible for 
appointment as a commissioner or continue in office as a commis- 
sioner if he is engaged or financially interested in, or is an officer 
or director of or employed by a company engaged in, the produc- 
tion or sale of alcoholic beverages or the financing thereof. 
Each commissioner shall, for his services; receive compensation 
at the rate of $10,000 per annum, together with actual and neces- 
sary traveling and subsistence expenses while engaged in the- 
performance of his duties as commissioner outside the District 
of Columbia. 

(b) As designated by the President at the time of nomination : 
One of the commissioners shall be chairman of the commission 
and shall be the chief executive officer of the commission; an- 
other of the commissioners shall be vice chairman of the com- 
mission and shall perform the functions and duties of the chair- 
man in his absence or in the event of his incapacity caused by ill- 
ness; and the third commissioner, who shall be a lawyer, shall 
be general counsel of the commission. The commission may 
function notwithstanding vacancies, and a majority of the com- 
missioners in office shall constitute a quorum. The commission 
shall meet at the call of the chairman or a majority of its mem- 
bers. The commission is authorized to adopt an official seal, 
which shall be judicially noticed. The commission shall be 
entitled to free use of the United States mails in the same man- 
ner as the Executive departments. 

(c) The commission shall, without regard to the civil-service 
laws, but subject to the Classification Act of 1923, as amended,, 
appoint and fix the compensation and prescribe the duties of 
such officers and employees as may be necessary to carry out its- 
powers and duties; except that any such officer or employee 



21 Sec. 2a 

receiving a salary at the rate of $5,000 or more per annum shall 
be appointed by the President, by and with the advice and 
consent of the Senate. 

(d) The commission is authorized and directed to prescribe 
such rides and regulations as may be necessary to carry out its 
powers and duties. 

The committee's suggested amendment was adopted by the Senate 
with two minor changes. Senator McXary offered an amendment, 
which was adopted without discussion, to insert after the first 
sentence of the amended subsection 2 (a) the sentence ;; Xot more 
than two members of the Commission shall be members of the same 
political party" (Gong. Rec, vol. 79, no. 167, pp. 13413-13414). 
Senator George, of the Finance Committee, suggested that after 
the words " or sale " in the fourth sentence of the amended sub- 
section 2 (a) be inserted the words " or other distribution." This 
amendment was also adopted without discussion (id., pp. 13395- 
13396). The Senate's changing the agency from an administrator 
subject to the Treasury to an independent commission necessitated 
numerous other changes of a purely clerical nature. These changes will 
not be discussed here, as they involve the form of the bill alone 
and are not matters of substance (H. R. 8870, print dated Aug. 13, 
1935, with Senate amendments numbered). The conferees agreed 
that the Senate should recede from its amendments relating to an 
independent agency. The following excerpt from the statement of 
the Managers on the Part of the House shows the result of the 
conference with respect to this matter : 

Amendment no. 2 : The House bill created the Federal Al- 
cohol Administration as a division in the Treasury Depart- 
ment. The Administration was to be headed by an Adminis- 
trator appointed by the President, by and with "the advice and 
consent of the Senate. Appointments of officers and employees 
by the Administrator were to be made without regard to the 
civil-service laws and the Classification Act of 1923, as amended, 
but their compensation was subject to the approval of the Sec- 
retary of the Treasury. All rules and regulations prescribed 
by the Administrator were subject to the approval of the Secre- 
tary of the Treasury. The Senate amendment establishes in 
lieu of the Federal Alcohol Administration provided in the 
House bill an -independent agency to be known as the " Federal 
Alcohol Commission ", to be composed of three commissioners 
appointed by the President, by and with the advice and con- 
sent of the Senate. It provides that not more than two mem- 
bers of the Commission shall be members of the same political 
party. The amendment further provides that one of the Com- 
missioners shall be chairman of the Commission, and shall be its 
chief executive officer: another Commissioner shall be vice chair- 
man of the Commission: and a third Commissioner, who shall 
be a lawyer, shall be general counsel of the Commission. Under 
the Senate amendment, appointments by the Commission are 
made without regard to the civil-service laws but subject to the 
Classification Act of 1923, as amended, and any officer or em- 
ployee receiving a salary at the rate of $5,000 or more per annum 



Sec. 2b 22 

is required to be appointed by the President, by and with the 
advice and consent of the Senate. All officers and employees 
of the Commission receiving less salary are to be appointed by 
the Commission and the Commission is to prescribe the duties 
of all its officers and employees irrespective of their method of 
appointment. The Senate recedes. 

Amendments nos. 3. 5, 6, 7, 8, 9, 10, 11, 12, 17, 21, 23, 27, 29, 
30, 31, 32, 33. 34, 35, 36, 14, 45, 46, 47, 48, 50, 51, 52, 53, 54, 
56, 58, 59, 60, 61, 62. 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 74, 
76, 77, 87, 95, 96, 107, 110, 113, 115, 116. 117, 118, 120, 122, 124, 
125, 131, 134, 136, 138, 139, 140, 141, 142, 145, 148, 149, and 154 : 
These amendments are clerical amendments made necessary by 
reason of Senate amendment no. 2. The Senate recedes in con- 
formity with the action on amendment no. 2 (H. Rept. No. 1898, 
Revenue From Distilled Spirit, pp. 8 and 9, numbers refer to 
numbered amendments' in H. R. 8870, print dated Aug. 13 with 
Senate amendments numbered). 

In the discussion of the conference report before the House, 
Congressman Doughton, Chairman of the Ways and Means Com- 
mittee and one of the House Managers, stated : 

The setting up of an independent agency was one of the im- 
portant changes made in the bill by the Senate. The House put 
the administration of the law in the Treasury Department, and 
the Senate put it under an independent agency. That was one 
provision in the House bill that the House conferees insisted 
on. Every member of the Committee on Ways and Means was 
insistent on that provision. The Senate very reluctantly yielded 
on that vital amendment (Cong. Rec, vol. 79, no. 177, p. 14808, 
Aug. 24, 1935). 

(b) The Administration shall be headed by an Adminis- 
trator, who shall be appointed by the President, by and 
with the advice and consent of the Senate. The Adminis- 
trator shall for his services receive compensation at the 
rate of $10,000 per annum, together with actual and neces- 
sary traveling and subsistence expenses while engaged in 
the exercise of his powers and duties outside the District 
of Columbia. No person shall be eligible to appointment, 
or continue in office, as Administrator if he is engaged or 
Linancially interested in, or is an officer or director of or 
thiployed by a corporation engaged in, the production or 
sale or other distribution of alcoholic beverages, or the 
financing thereof. 

Note. — In the original bill introduced before the House on June 
18, 1935, by Congressman Dougluon (H. R. 8539, print dated June 
18, 1935), the words "payable monthly" appeared after the phrase 
"compensation at the rate of $1C J00 per annum." These words are 



23 Sec. 2c 

not found in the bill introduced by Congressman Cullen on July 16, 
1935 (H. R. 8870, print dated July 16, 1935), nor do they appear in 
any of the other prints of this bill. 

(c) The Administrator shall, without regard to the 
civil-service laws and the ' Classification Act of 1923, as 
amended, appoint and fix the compensation and duties of 
such officers and employees as he deems necessary to carry 
out his powers and duties, but the compensation so fixed 
shall be subject to the approval of the Secretary of the 
Treasury. The Administrator is authorized to adopt an 
official seal, which shall be judicially noticed. 

Note. — This subsection appeared in the bill as originally intro- 
duced in the following form : 

(c) The Administrator shall, with the approval of the Sec- 
retary of the Treasury, but without regard to the civil service 
laws and the Classification Act of 1923, as amended, appoint and 
fix the compensation and duties of such officers and employees as 
he deems necessary to carry out his powers and duties (H. R. 
8539, print dated June 18, 1935). 

The subsection appeared in its present form in the bill as intro- 
duced by Congressman Cullen on July 16, 1935 (H. R. 8870, print 
dated July 16, 1935). 

At the hearing before the House Ways and Means Committee on 
June 20, 1935, Congressman O'Malley, of Wisconsin, appearing as a 
witness, stated that he would like to see the Administration's em- 
ployees amenable to the Civil Service Act and have Congress and 
not the Administrator fix their salaries (record of Ways and Means 
Committee hearing on H. R. 8539, p. 96). 

When the report of the committee was considered on the floor of 
the House, Congressman Mapes, of Michigan, proposed an amendment 
placing the employees under the Classification Act and the civil 
service. He argued that favoritism would thus be avoided and the 
Administrator would be protected from criticism in the choice of 
his employees. In the liquor field employees should not be chosen 
through patronage *or for other political reasons. Congressman Vin- 
son of the committee pointed out that a civil-service requirement 
would bar all of the persons employed by the F. A. C. A. In this 
connection Mr. Doughton said : ' 

Mr. Chairman, I trust the amendment of the gentleman from 
Michigan will not prevail. No doubt his motive is good, but 
the effect of his amendment would be bad; there is not any 
question about that. 

The Alcohol Control Administration, under Mr. Joseph 
Choate, a distinguished gentleman from New York, a Republi- 
can, has built up an organization composed of both Democrats 
and Republicans, I have been reliably informed. 

That personnel has been very carefully selected, and those 
employees who have not been found capable and efficient have 



Sec. 2d 24 

been discharged and removed and only those retained who have 
proven their qualifications, efficiency, and capability. 

In this particular work, to set up a system whereby all of 
this trained personnel and all of these trained people, which has 
cost the Government much money to train, would be lost to the 
Government, I am quite sure would be something my friend 
would hardly be willing to take the responsibility for. The 
Bureau would have to be manned with new people picked up 
from various departments. Of course, they would have edu- 
cation and knowledge, but they would have no experience in 
this particular work (Cong. Rec, vol. 79, no. 151, p. 12192, 
July 23, 1935). 
Congressman McCormack, of Massachusetts, also a member of the 
committee, added : 

Mr. Chairman, in addition to the argument of the gentleman 
from North Carolina as to the efficiency of the present personnel, 
which I think the gentleman from Michigan (Mr. Mapes) recog 
nizes, and this being a permanent set-up which he also recognizes, 
the President has the power by Executive order to bracket the 
personnel that should be included and taken over by the Federal 
alcohol set-up. They may take the persons with the experience 
which the Government ought to have in this new set-up in the 
Treasury Department. The power is there already under- gen- 
eral law to bracket them under the civil service by a general 
order (id. p. 12193). 

After some further discussion the amendment of Mr. Mapes was 
voted down 103 to 42. 

In discussing the advisability of creating an independent agency 
before the Senate Finance Committee, Mr. Choate stated that he 
believed that the staff of the F. A. C. A., " the only people in 
the country who do know the business ", should be carried over 
into the new agency, and that the creation of a new staff and the 
confusion in the industry during its training should thus be avoided. 
The creation of a new staff in the Treasury Department would not 
result in economy but in the reverse. He also said : 

No one would more strongly advocate than I would the even- 
tual bringing of this organization into the civil-service fold, but 
while it is performing specialized services for which it has a 
trained staff, which cannot be replaced outside, I would say 
it would be unwise to apply those regulations. (Record of 
Finance Committee hearings on H. R. 8870, p. 4.) 

The Senate's amendment of this section appears above, but the 
conferees suggested that the Senate yield on this point (see quotation 
from statement of managers contained in footnote to sec. 2 (a) 
supra). Congressman Mapes noted the retention of the House pro- 
vision when the conference report was considered by the House 
(Cong. Rec, vol. 76, no. 177, p. 14806, Aug. 24, 1935). 

(d) The Administrator is authorized and directed to 
prescribe such rules and regulations as may. be necessary 



25 Sec. 2e, f 

to carry out his powers and duties. All rules and regula- 
tions prescribed by the Administrator shall be subject to 
the approval of the Secretary of the Treasury. 

Note. — This subsection appeared in the same form in the bill as 
introduced by Congressman Doughton on June 18, 1935, and was 
never amended by the House. Though the Senate struck out the 
last sentence in view of its contention that a separate agency be 
established, it receded as a result of the conference report, and the 
subsection was passed in its original form, (see quotation from State- 
ment of the Managers in note to section 2 (a) supra). 

(e) Appropriations to carry out powers and duties of 
the Administrator shall be available for expenditure, 
among other purposes, for personal services and rent in 
the District of Columbia and elsewhere, expenses for travel 
and subsistence, for law books, books of reference, maga- 
zines, periodicals, and newspapers, for contract steno- 
graphic reporting services, for subscriptions for library 
services, for purchase of samples for analysis or use as 
evidence, and for holding conferences of State and Federal 
liquor control officials. 

Note. — Except for the correction of a clerical error (changing the 
word " conference " to " conferences ") and the clerical changes in- 
volved by the Senate's desire for control through a commission, this 
subsection remained as it appeared in the bill introduced by Mr. 
Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935). 
An appropriation of $300,000 for the purpose of carrying out the 
provisions of the Act for the fiscal year 1936 was attached by amend- 
ment proposed by Senator Adams of Colorado, to the Third Defi- 
ciency Bill (74th Cong., 1st sess., H. R. 9215) (Cong. Rec, vol. 79, 
no. 177, p. 11922) . This deficiency bill failed to pass the Senate prior 
to the adjournment of the Congress. The Ways and Means Com- 
mittee report refers, to this subsection as follows : 

The usual objects of expenditure of appropriations are author- 
ized by subsection (e) of section 2, but provision is specifically 
made by which the Administrator may acquire magazines, period- 
icals, and newspapers so that he may effectively carry out his 
powers relating to advertising contained in section 5, and specific 
provision is made under which expenditure may be made for the 
purchase of samples for analysis and use as evidence (H. Kept. 
1542, Federal Alcohol Control Bill. p. 5). 

(f) The Administrator may, with the consent of the 
department or agency affected, utilize the services of any 
department or other agency of the Government to the ex- 



Sec. 2g, h, i 26 

tent necessary to carry out his powers, and duties and 

authorize officers and employees thereof to act as his 

agents. 

Note. — This subsection remained as it appeared in the bill intro- 
duced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated 
June 18, 1935), except for clerical amendments, afterward deleted, 
involved in the Senate's proposal to establish a Commission in lieu of 
an Administrator. The subsection is merely mentioned in the report 
of the Ways and Means Committee (H. Eept. 1512, Federal Alcohol 
Control Bill, p. 5). 

(g) The provisions, including penalties, of sections 9 
and 10 of the Federal Trade Commission Act, as now or 
hereafter amended, shall be applicable to the jurisdiction, 
powers, and duties of the Administrator, and to any per- 
son (whether or not a corporation) subject to the provi- 
sions of laws administered by the Administrator. 

N 0TE . — This subsection appeared in the same form in the bill intro- 
duced by Mr. Doughton on June 18, 1935 (H. R. 8539, print dated 
June 18, 1935), and, except for clerical changes due to the Senate's 
amendment relating to the establishment of a Commission, is found 
in the other prints of the bill. The Ways and Means Committee in 
its report referred to it briefly : 

Subsection (g) applies the procedural provisions of law relat- 
ing to Federal Trade Commission investigations to the exercise 
of the Administrator's powers (H. Rept. 1542, Federal Alcohol 
Control Bill, p. 5). 

(h) The Administrator is authorized to require, in such 
manner and form as he shall prescribe, such reports as are 
necessary to carry out his powers and duties. 

Note. — The language is the same as in the bill introduced by Mr. 
Doughton on June 18, 1935 (H. R. 8539, print dated June 18, 1935), 
and except for clerical changes in the Senate, remained the same 
until the bill was passed. The subsection is merely mentioned in the 
report of the Ways and Means Committee (H. Rept. 1542, Federal 
Alcohol Control Bill, p. 5). 

(i) The Administrator shall make a report to Congress, 
at the beginning of each regular session, of the adminis- 
tration of the functions with which he is charged, and shall 
include in such report the names and compensation of all 
persons employed by the Administration. 

Note. — The Senate Finance Committee proposed that a new sub- 
section be inserted in this section authorizing the Commission to 



27 Sec. 2i 

make investigations and studies and to report thereon to the Presi- 
dent and to the Congress (H. R. 8870, print dated Aug. 9, 1935). 
This subsection was passed by the Senate (Cong. Rec, vol. 79, no. 
167, p. 13396) and read: 

(i) The commission is authorized to make investigations and 
studies and to report thereon from time to time to the Presi- 
dent and to the Congress, together with recommendations, with 
respect to matters necessary for the proper performance of 
the powers and duties conferred upon the commission, and with 
respect to the production, distribution, and consumption of 
alcoholic beverages, including monopolistic practices, unfair 
methods of competition, and concentration of ownership in the 
alcoholic beverages industries, and control of retail outlets and 
prices; advertising, labeling, and merchandising methods with 
respect to alcoholic beverages, including standards of identity, 
quality, and size and fill of container therefor; and enforce- 
ment of the twenty-first amendment, State and Federal coopera- 
tion in the administration of alcoholic beverage control laws, 
and methods of promoting temperance. The commission, when- 
ever in its judgment such action will be in the public interest, 
may publish the results of such investigations and studies (H. 
R. 8870, print dated Aug. 13, 1935). 
At the hearing before the Ways and Means Committee on June 19, 
Mr. Choate suggested that a similar section be incorporated into the 
bill on the ground that it was necessary that some one in the Govern- 
ment be definitely charged with observing the problems of the in- 
dustry and with furnishing information and making recommenda- 
tions with respect thereto. Congressman McCormack criticized the 
section proposed by Mr. Choate as it referred to methods of pro- 
moting temperance and this might be considered paternalistic (Rec- 
ord of Ways and Means Committee hearing on H. R. 8539. pp. 24 
and 25). With respect to this proposed amendment the Finance 
Committee stated in its report: 

The amendment recommended by the committee also author- 
izes the commission to make certain investigations and studies 
and report thereon to the President and to the Congress. It 
is believed that such investigations and studies and voluntary 
activities of the commission in connection therewith will prove 
as valuable in 6btaining law observance by the alcohol beverage 
industries as the regulatory provisions of the bill (S. Rept. No. 
1215, Federal Alcohol Control Act, p. 4). 
The Senate, however, receded from this amendment as a result of 
the conference (H. Rept. 1898. Revenue From Distilled Spirits, p. 9). 
This subsection did not appear in the print of the bill while it was 
before the House. It was added as subsection (j) as a committee 
amendment by the Senate (H. R. 8870. print dated Aug 9. 193o; 
S. Rept. No. '1215, Federal Alcohol Control Act, p. 4: Cong. Rec. 
vol. 79, no. 167, p. 13396). As a result of the managers' statement 
the House acceded to the incorporation of this subsection as. passed 
by the Senate with only minor clerical changes (H. Rept. Ib98, 
Revenue From Distilled Spirits, p. 9). 



Sec. 3 28 

UNLAWFUL BUSINESSES WITHOUT PERMIT 

Sec. 3. In order effectively to regulate interstate and 
foreign commerce in distilled spirits, wine, and malt 
beverages, to enforce the ! twenty-first amendment, and to 
protect the revenue and enforce the postal laws with 
respect to distilled spirits, wine, and malt beverages : 

Note. — In connection with the control of the liquor industries by 
means of a permit system the Ways and Means Committee stated 
in its report on the bill : 

A permit or license system has been a customary method of 
administering and enforcing liquor laws. At the present time 
by act of Congress distillers of alcohol for industrial purposes 
and brewers of beer of an alcoholic content of 3.2 by weight or 
less operate under Federal permits. The permit system was used 
under the codes. 

Enforcement of liquor laws is an exceptionally difficult en- 
forcement problem. Many factors not common to other indus- 
tries exist in the liquor industry and present enforcement diffi- 
culties not commonly met with in the enforcement of other laws. 
The racketeering element present in the industry during prohi- 
bition is not wholly eliminated. Internal revenue taxes and cus- 
toms duties afford an economic inducement to operate outside of 
both liquor tax and liquor control laws. The industry has been 
newly reestablished and is unstable in its personnel and prac- 
tices. This, together with the tradition of past practices, par- 
ticularly corruption and interference in politics and efforts to 
stimulate consumption through the u tied house " and control of 
retail channels, afford a poor groundwork for reliance on law 
observance through voluntary action or through the customary 
methods of enforcement. The history of the enforcement of 
liquor laws in this country has been characterized by widespread 
violations and evasions. The ease with which the products of 
the industry are adulterated, sophisticated, and misbranded; 
their relatively high value; the perishable character of many 
wines and malt beverages; the large distribution costs — all are 
extraordinary incentives to ignore requirements of law. The 
mobility of products of the industry makes all channels of inter- 
state and foreign commerce readily available for illegal trans- 
actions. Relatively drastic enforcement methods, such as the 
permit system, therefore become necessary (H. Rept. 1542, Fed- 
eral Alcohol Control Bill, pp. 5 and 6). 

And with respect to the scope of the permit system : 

Scope of permit system. — The bill (sec. 3) requires permits 
for all distillers; wine producers; rectifiers or blenders of dis- 
tilled spirits or wine; bottlers or warehousemen and bottlers 
of distilled spirits; importers of distilled spirits, wine, or malt 
beverages; and wholesalers of distilled spirits, wine, or malt 
beverages. The permit does not authorize the industry member 



29 Sec. 3 

to engage in operations which are prohibited by State laws. No 
permits are provided for brewers or retailers. No permit is 
required for any State liquor control monopoly, board, or 
similar agency, or the members thereof. 

A distiller, blender, or rectifier, or other producer of distilled 
spirits or wine, or an importer of distilled spirits, wine, or 
malt beverages, or a wholesaler of such products, would, under 
his permit as such, be in addition authorized, either directly 
or indirectly or through an affiliate, to sell or otherwise dispose 
of in interstate or foreign commerce, at wholesale or retail, goods 
produced by him, imported by him, or purchased by him, re- 
spectively. No permit authority is required for sale or other 
disposition in intrastate commerce or for warehousing, except 
in connection with bottling of distilled spirits. 

The permit would also include authority to the producer, 
importer, or wholesaler to bottle, with or without reduction in 
proof, either directly or indirectly, or through an affiliate, bulk 
goods produced, imported, or purchased, respectively, by the 
permittee; subject to the limitations of section 4 (e) (2) which 
restricts the privilege of bottling in case of distilled spirits. 
Puerto Rico is not included in the restriction inasmuch as the 
internal-revenue laws do not apply within Puerto Rico. In 
accordance with these restrictions, a distiller could, under his 
permit, bottle in a distiller} 7 bonded warehouse all distilled 
spirits of his own production, and if his warehouse is designated 
as a concentration warehouse or if he operates an alcohol bonded 
warehouse, he may also bottle distilled spirits produced by others 
either on his own account or for hire. Such bottling operations 
may be undertaken on the tax-paid premises in connection with 
any such warehouse, and the permittee may sell or otherwise 
dispose of at wholesale or retail in interstate or foreign com- 
merce the distilled spirits so bottled. A blender or rectifier of 
distilled spirits could under his permit bottle on his rectifier's 
premises distilled spirits blended or rectified by him or acquired 
by him from any other person, whether for his own account or 
for hire, and sell or otherwise dispose of at wholesale or retail 
in interstate or foreign commerce the distilled spirits so 
bottled. 

A warehouseman, who is not a distiller or rectifier, could under 
his permit bottle distilled spirits acquired by him from any 
other person, whether for his own account or for hire, if the 
warehouseman is operating a general or special or alcohol bonded 
warehouse qualified under the internal revenue laws or a class 8 
bonded warehouse qualified under the customs laws, and if the 
bottling operations occur on the bonded premises of such ware- 
house or the tax-paid premises in connection therewith; and 
could under his permit sell or otherwise dispose of at wholesale 
or retail in interstate or foreign commerce the distilled spirits 
so bottled. An importer or wholesaler would have no privilege 
of bottling distilled spirits for sale or resale unless he qualified 
as a rectifier under the internal-revenue laws. 

The permit provisions apply to all members of the specified 
industries, irrespective of whether the permittee's operations 



Sec. 3 30 

are intrastate or interstate in character. Apart from the more 
effective enforcement of revenue and postal laws, which apply 
as well to intrastate as to interstate operations, laws relating to 
the enforcement of the twenty-first amendment and to interstate 
commerce require that the permit system extend to all intrastate 
operations in order that the permit system may be an effective 
means of preventing evasion of these laws. The intricacies of 
corporate set-ups, the establishment of branch houses and sales 
corporations, the use of rectifiers, blenders, and wholesalers as 
interstate distribution conduits, and the disposal of stocks 
through sale of warehouse receipts, make it necessary that all 
industry members of the specified industries operate under per- 
mits, irrespective of the character of their operations at any 
time, if the permit system is to prove adequate in more effectively 
enforcing the revenue and postal laws and laws relating to inter- 
state commerce and the twenty-first amendment (id. pp. 6 and 7). 

One of the most debated questions in the drafting of the Act 
concerned the position of the brewers under it. In the draft of 
the bill discussed at the "Ways and Means Committee hearings on 
June 19 and 20, 1935 (H. R. 8539, print dated June 18, 1935), the 
brewing industry was subjected to the permit system. Clause num- 
bered (1) of subsection 3 (b) provided that it shall be unlawful, 
except pursuant to a basic permit issued under the act by the 
Administrator — 

to engage in the business of distilling distilled spirits, produc- 
ing wine, producing malt beverages, rectifying or blending dis- 
tilled spirits or wine, or bottling, or warehousing and bottling, 
distilled spirits, or (id. p. 6, italics ours). 

This provision excited considerable opposition at the hearings. Mr. 
Nicholson, a representative of the Ruppert brewery, who, it was 
stated, spoke for a committee representing 496 brewers, appeared in 
order to contest the subjection of brewers to a permit system. He 
objected as a matter of principle and because he believed the pro- 
vision unnecessary. He believed that all the benefits of the N. R A. 
could be best preserved through voluntary agreements among brew- 
ers, since their business was largely intrastate in character, through 
State cooperation (Record of Ways and Means Committee hearing 
on H. R. 8539, pp. 61-63). Mr. Paul Esselborn, a Cincinnati 
brewer, read to the committee a statement submitted by Mr. John 
C. Bruckmann, former chairman of the Brewers' Code Authority 
under the F. A. C. A. Brewers' Code of Fair Competition. This 
statement also opposed a permit system for brewers and pointed 
out the fact that brewers alone of the alcoholic beverage industries 
had operated under a voluntary and not an imposed code, and that 
their code contained no permit provisions. He further stated that 
during the drafting of this code Government officials had attempted 
to write in permit requirements, and that after the refusal of the 
brewers to accept the provision and after considerable study the 
Government came to the decision that the brewers were right (id. 
pp. 64 and 65). Congressman O'Malley, of Wisconsin, appearmg 
as a witness, also objected to the inclusion of malt beverages in 



31 Sec. 3 

the bill, since brewers had operated very satisfactorily in the 
past without any permit system (id. pp. 95 and 96). A brief filed 
with the committee by Charles R. Lipsett, publisher of the trade 
journal, " Brewers News ", in addition to the above arguments, 
stated that, since beer is not considered intoxicating, it should be 
strictly differentiated from hard liquor and should not be subjected 
to the same rigorous supervision and that State control alone should 
be sufficient (id. p. 131). This argument was also proffered by Mr. 
Nicholson (supra). 

In testifying at the hearing, Mr. Choate stated in this connection 
that it was logical, if one industry was under permits, that the rest 
of them should be also, but that the F.A.C.A. got along " fairly 
well " with the brewers not under permits (id., p. 28). 

The former supervisor of the Beer Division of the Wholesale Code 
Authority, Mr. A. D. O'Connor, strongly urged that all of the alco- 
holic beverage industries be placed under permits and that, if the 
brewers were excepted from the provision, the permit system should 
be entirely eliminated. He stated that the beer wholesalers were 
the largest of the alcoholic beverage industries in number, about 
9,000 distributors. He also submitted a letter from his division of 
the Code Authority to the F.A.C.A. requesting that the brewers' 
code be amended to provide for permits (id., p. 116). 

In the bill introduced by Mr. Cullen on July 16, 1935 (H. R. 8870, 
print dated July 16, 1935), the phrase " producing malt beverages ", 
which appeared in clause (1) of subsection 3 (b) of H. R. 8539, was 
deleted and the brewers were thereby removed from the permit 
system. 

Considerable additional testimony relating to the position of brew- 
ers under the act was offered at the hearings on July 26, 27, and 29, 
1935, before the Senate Finance Committee. Mr. M. J. Donnelly, of 
Chicago, representing the brewers shipping in interstate commerce, 
made a very strong plea for the complete omission of brewers from 
the Act. His argument raised the following points: (1) The Act 
does not protect the revenue derived from the manufacture of malt 
beverages; (2) a separate agency need not be created to enforce the 
postal laws and the twenty-first amendment since the Department of 
Justice already has supervision of these matters; (3) the Act is an 
attempt to legislate code provisions that have already been declared 
unconstitutional by the Supreme Court; (4) the brewing industry, 
already subject to* numerous regulatory bodies, will be unnecessarily 
burdened by having to comply with the regulations and rulings of 
another one. He differentiated beer from distilled spirits by stating 
that, while 90 percent of distilled spirits ir shipped in interstate 
commerce, only 20 percent of beer is so shipped. The shipping 
brewer is in continual competition with local brewers and would be 
discriminated against if forced to comply with Federal restrictions 
to which local brewers doing an intrastate business were not subject. 
The present act would not reach intrastate brewers (citing Ward 
Baking Co. v. Fed. Trade Comm., 264 Fed. 330; Schechter Poultry 
Corp. v. V. £., 55 S. Ct. Rep. 837 ; and Fed. Trade Comm. v. Sinclair 
Refining Co., 261 U. S. 463). He adduced the falsity of the theory 
that the evils which caused prohibition were due to the control of 



Sec. 3 32 

retail outlets by brewers (hearings of Senate Finance Committee on 
H. R. 8870, pp" 113-122). 

Mr. Walter D. Corrigan, representing the Wisconsin State Brew- 
ers Association, stated his association, as well as 450 brewers in con- 
vention at Chicago, had requested that they work out their problems 
by voluntary agreements and cooperation. He argued that beer was 
non intoxicating and that it was illogical to group it in legislation 
with distilled spirits. (See discussion with Senator Barkley, Hear- 
ing Record, pp. 123 and 121.) He pointed out that there is at present 
little or no bootlegging in beer and therefore no great need of strin- 
gent control. He argued that in order to effectuate the " very fine pur- 
poses " recited in the bill the Administrator must apply its provisions 
to local breweries and if he did so, the act would be clearly uncon- 
stitutional. Senator Connally pointed out that in that event the 
application, and not the act, would be bad (id., p. 126) . The discrim- 
ination against the interstate brewer would cause him to stop ship- 
ping interstate and, by selling his product locally, force the smaller 
brewers to the wall (id. 128). 

Mr. O'Connor testified again that the exemption of the brewers 
from the permit system would leave the Government powerless to 
enforce most of the provisions of the bill. The brewers are more 
vitally concerned with the fair trade practice provisions than the 
other industries but without a permit system applicable to brewers 
it will be difficult to enforce these provisions (id. 138-141). 

The Finance Committee proposed that malt beverages be elimi- 
nated from the act and suggested the necessary clerical and substan- 
tial amendments to accomplish this result (H. R. 8870, print dated 
Aug. 9, 1935). The reasons given for these amendments are stated 
in the committee's report to be : 

Under the House bill the various branches of the malt-bever- 
age industry were subjected to varying degrees of regulation. 
Importers and wholesalers, for instance, of malt beverages were 
required to obtain basic permits before doing business; and the 
provisions against unfair competition and unlawful practices 
applied to brewers and importers and wholesalers of malt bever- 
ages. It was emphasized before your committee that a com- 
paratively small percentage of brewers distributed their pro- 
ducts in interstate or foreign commerce, and the power to regu- 
late such commerce afforded the constitutional basis for the 
provisions relating to unfair competition and unlawful- prac- 
tices. It may be observed in this connection that the brewing 
industry operated under a voluntary code under the code sys- 
tem, whereas the President imposed codes upon the other al- 
coholic beverage industries, namely, the distillers, rectifiers, im- 
porters, wholesalers, and wine producers. Aside from these 
facts, however, your committee took the position that the appli- 
cation of the bill should be limited to distilled spirits and wines 
(S. Jlept. 1215, Federal Alcohol Control Bill, p. 6). 

The Senate agreed to this amendment without discussion and the 
bill as passed bv the Senate on August 13 (Cong. Rec. Vol. 79, No. 
167, p. 13396; H. R. 8870 print dated Aug. 13) does not refer to malt 
beverages. 



33 Sec.3 

Tiiis major change in the bill made necessary many clerical amend- 
ments in other sections. Since these changes raise no questions other 
than those discussed above they will be overlooked or merely men- 
tioned in the consideration of later sections of the Act. 

The conferees suggested that the Senate recede from its amend- 
ments eliminating malt beverages from the bill and that a compro- 
mise provision be added dealing with the fair-trade provisions. This 
compromise will be considered later. The statement of the mana- 
gers summarizes the matter below: 

Amendments nos. 15, 16, 18, 19, 24, 25, 37, 39, 78, 79, 80, 81, 
82, 83, 89, 90, 91, 92, 94, 97, 101, 102, 106, 108, 109, 112, 114, 119, 
123, 126, 155, and 157: The House bill covered beer and other 
malt beverages, and its provisions applied to brewers and im- 
porters and wholesale distributors of such malt beverages, except 
that brewers were exempt from the provisions of the House bill 
requiring basic permits. The effect of these Senate amendments 
is to exempt brewers, importers, and wholesale distributors 
of malt beverages from all provision of the bill. 

The conference agreement retains the provision of the House 
bill under which importers and wholesalers of malt beverages are 
required to have permits. The conference agreement applies the 
trade practices provisions of the bill to malt beverages with a 
modification under which such provisions are to apply to trans- 
actions between a brewer or other distributor outside a State and 
a retailer or trade buyer in a State only to the extent that the 
State imposes similar requirements on the same classes of per- 
sons and with respect to the same transactions within the State, 
and under which the requirements of the bill with respect to 
labeling and advertising are to apply to persons outside the 
State in respect to their products shipped into or advertised in 
a State only to the extent that the State imposes similar require- 
ments in similar cases within the State, The conference action 
to accomplish this result consists of the House receding with an 
amendment on amendment no. 79 and the Senate receding on all 
the other amendments. (BL Kept. No. 1898, Revenue From Dis- 
tilled Spirits, p. 9, the numbers refer to the print of H. R- 8870 
dated August 13, 1935, with Senate amendments numbered.) 
In the discussion of the conference report before the House. Con- 
gressman Fuller of Arkansas, a member of the Ways and Means 
Committee, stated : 

Mr. Speaker, I know it is useless to seek to kill a conference 
report in the closing hours of a session, but I think in this case 
the House conferees have made an absolute surrender. It is an 
instance in which the voices of the majority of the members on 
the committee were not taken into consideration as well as the 
sentiment of the House. This bill, as it passed the House, was 
not the same instrument now pending before us. It is a sur- 
render to the liquor and to the glass-bottle lobby of the United 
States as well as to the brewers. 

We seek to have an alcohol control board created to regulate 
the liquors of this country, including whisky and beer, but the 



Sec 3 34 

brewers with their influence and power are exempted from this 
bill. The brewers, as everyone knows, are the ones who have 
caused the greatest trouble in the past. It is common knowl- 
edge that in the old days on almost every street corner in the big 
cities the brewers equipped saloons,, and dominated them. Un- 
der this law they cannot be regulated at all. .According to the 
Senate amendment, which the House agreed to in conference, 
they cannot be regulated (Cong. Rec. Aug. 24, Vol. 79, No. 177, 
p. 14806). 
In this same connection the following discussion occurred: 

Mr. Celler. Do I understand from this conference report 
that the brewers are not going to be regulated, that they may 
continue their system of tied houses? 

Mr. Fuller. Absolutely. 

Mr. Celler. That is wrong. 

Mr. Fuller. They concurred in the Senate amendment. They 
say that " tied houses " may be regulated in the various States. 
If the States are to regulate breweries, why not the States also 
regulate the distillers in their unfair practices and save the 
Federal Government the expense? Why separate them when 
one needs regulation as much as the other? In other words, if 
New York wants to buy Milwaukee beer, the Federal control 
can regulate that interstate transaction. Eighty percent of the 
beer is sold in the States where brewed. 

Mr. Celler. There are only a few interstate sales. 

Mr. Fuller. Yes; just a few. This bill ought to be- branded 
and known as the " brewery bill from Milwaukee." That is 
how it ought to be known. If there is any use for the mainte- 
nance of alcoholic control in the United States, the Board ought 
to have something to do, but under the terms and provisions of 
this bill the employers will have absolutely nothing to do. It 
simply means the continuation of jobs for two or three hundred 
people with nothing to do under the terms and provisions of 
this biD. 

Mr. McFarlane. Will the gentleman yield? 

Mr. Fuller. I yield to the gentleman from Texas. 

Mr. McFarlane. The platform provides — 

We urge the enactment of such measures by the several 
States as will actually promote temperance and effectively 
prevent the return of the saloon. 

Does this bill do that? 

Mr. Fuller. No. 

Mr. McFarlane. Will not this bill tend to put an open saloon 
on every street corner? 

Mr. Fuller. It will have a tendency toward the days before 
prohibition. 

Mr. Hoepfel. Will the gentleman yield? 

Mr. Fuller. I yield to the gentleman from California. 

Mr. Hoeppel. May I state that I am going to support the 
gentleman's argument, because only last Monday there were 225 
drunks arraigned in the courts of the District of Columbia. 
I concur with the gentleman's views on temperance, but fear 



35 Sec. 3a 

the liquor business, controlled as it appears to be by the Whisky 
Trust and the brewers, will ultimately lead to the preprohibi- 
tion excesses. The Government should exercise positive and 
complete control of the liquor business in the interests of morals 
and the elimination of political dominance by the whisky 
interests. 

Mr. Fuller. Some of the Members of this House may not be 
well enough informed to know the powerful influences of the 
liquor organization in this country. This powerful organiza- 
tion is absolutely controlling and dictating the terms and pro- 
visions of this bill, as well as all legislation and all rules and 
regulations which come out of the Alcohol Control Division of 
the Treasury Department affecting liquor. The Board and 
this division is controlled absolutely, lock, stock, and barrel, 
by the biggest monopoly that has ever been known in this coun- 
try. If we do not stop this we will go back to the time before 
prohibition. 

Mr. Celler. I will be happy to cooperate, as will many Mem- 
bers of the House, in any kind of legislation to come out of the 
Ways and Means Committee controlling the breweries. Will 
the gentleman cooperate? 

Mr. Fuller. Certainly I will. The House Ways and Means 
Committee put the breweries under control just like the dis- 
tilleries, one of them violates the law no more than the other. 
The " tied houses " will be tied to the breweries the same as be- 
fore prohibition, with no Federal regulation. Such a com- 
promise is a shame and brought about by the powerful influ- 
ence of the brewers and distillers. 

Mr. Speaker, I have no distilleries in my State, nor have I 
any breweries. This lobby is influencing newspapers by ad- 
vertising and propaganda^ Why, they are even making the 
good women of the W. C. T. U. believe they are pulling strong 
for prohibition in this country. If we follow them we will go 
back to the old bootleg policies and they will be running the 
temperance cause of this country (Cong. Rec. Aug. 24, 1935, 
Vol. 79, No. 177, pp. 14806 and 14807). 
The act therefore represents a compromise between the position 
taken by the Ways and Means Committee and the House that the 
brewing industry should be subjected to the same restrictions as the 
other alcoholic beverage industries, except for permit requirements, 
and the stand taken by the Finance Committee and the benate that 
malt beverages and the brewing industry be excluded from the act. 

(a) It shall be unlawful, except 'pursuant to a basic 
permit issued under this Act by the Administrator— 

(1) to engage in the business of importing into the 
United States distilled spirits, wine, or malt bever- 
ages; or 

(2) for any person so engaged to sell, offer, or 
deliver for sale, contract to sell, or ship, in interstate 



Sec. 3b 36 

or foreign commerce, directly or indirectly, or through 

an affiliate, distilled spirits, wine, or malt beverages 

so imported. 

This subsection shall take effect sixty days after the date 

upon which the Administrator first appointed under this 

Act takes office. 

Note. — In view of the Senate's position that the act should be ad- 
ministered by a commission ami that malt beverages should not be 
subject to it. clerical amendments were made in the bill by the Senate 
(H. R. SS70, prints dated Aug. 9. 1935, and Aug. 13, 1935). Except 
for the last sentence the subsection was restored to its original form 
by the conferees (H. R. 8539, print dated June 18, 1935). 

In the bill as introduced by Mr. Doughton on June 18, 1935 (H. R. 
8539) , the last sentence of this subsection read : " This subsection shall 
take effect sixty days after the enactment of this act." The Senate 
Finance Committee proposed that the sentence be amended to read : 
" This subsection shall take effect sixty days after a majority of 
the commissioners first appointed take office " (H. R. 8870, print 
dated Aug. 9, 1935). This passed the Senate without discussion 
(H. R. 8870, print dated Aug. 13, 1935, Cong. Rec, Aug. 13, 1935, 
vol. 79, no. 167, p. 13396). The conferees suggested the language in 
the act (H. Rept. No. 1898, Revenue From Distilled Spirits, pp. 
2 and 9). 

Amendments nos. 20 and 22 : Under the House bill the require- 
ment that importers and persons engaged in the business of 
distilling spirits, producing wine, rectifying or blending distilled 
spirits or wine, or bottling or warehousing and bottling distilled 
spirits, must have a basic permit to engage in operations, became 
effective 60 days after the enactment of the act. The Senate 
amendment provides that these requirements shall be effective 
60 days after such date as the majority of the commission first 
appointed takes office. The House recedes on both amendments 
with amendments changing " Commission " to " Administrator " 
(H. Rept. No. 1898, p. 9). 

(b) It shall be unlawful, except pursuant to a basic 
permit issued under this Act by the Administrator — 

(1) to engage in the business of distilling distilled 
spirits, producing wine, rectifying or blending dis- 
tilled spirits or wine, or bottling, or warehousing and 
bottling, distilled spirits; or 

(2) for any person so engaged to sell, offer or 
deliver for sale, contract to sell, or ship, in interstate 
or foreign commerce, directly or indirectly or through 
an affiliate, distilled spirits or wine so distilled, pro- 



37 Sec. 3c 

duced, rectified, blended, or bottled, or warehoused 

and bottled. 
This subsection shall take effect sixty days after the date 
upon which the Administrator first appointed under this 
Act takes office. 

Note. — See note to subsection 3 (a) above and note to section 3 
above as to the inclusion of producers of malt beverages under this 
section in the bill as introduced by Mr. Doughton (H. R. 8539, print 
dated June 18, 1935). 

(c) It shall be unlawful, except pursuant to a basic 
permit issued under this Act by the Administrator — 

(1) to engage in the business of purchasing for 
resale, at wholesale, distilled spirits, wine, or malt 
beverages; or 

(2) for any person so engaged to receive or to sell, 
offer or deliver for sale, contract to sell, or ship, in 
interstate or foreign commerce, directly or indirectly 
or through an affiliate, distilled spirits, wine, or malt 
beverages so purchased. 

This subsection shall take effect March 1, 1936. 

Note. — See note to subsection 3 (a) above. In the bill introduced 
by Mr. Doughton (H. R. 8539) and the bill introduced by Mr. 
Cullen (H. R. 8870) the date appearing in the last sentence of this 
subsection was "January 1, 1936/' March 1, 1936, was suggested 
by the Finance Committee as the effective date of this subsection 
(H. R. 8870, print dated Aug. 9, 1935) and received the approval of 
the Senate (H. R. 8870, print dated Aug. 13, 1935). The conferees 
recommended that the House recede: 

The House bill provided that the requirement that wholesale 
distributors must have a basic permit to engage in operations 
should take effect January 1, 1936. The Senate amendment 
provides that "this requirement shall take effect March 1, 1936. 
The House recedes (Statement of Managers, H. Rept. No. 1898, 
Revenue From Distilled Spirits, Aug. 23, 1935, pp. 9 and 10) . 

This section shall not apply to any agency of a State or 
political subdivision thereof or any officer or employee of 
any such agency, and no such agency or officer or employee 
shall be required to obtain a basic permit under this Act. 

Note. — This sentence did not appear in the bill introduced bv 
Mr. Doughton on June 18, 1935 (H. R. 8539). At the Ways and 
Means Committee hearing on June 19, Mr. George E. Eppley, a 



Sec. 3c 38 

member of the Ohio State Liquor Board, requested that Ohio and 
other States engaged in the liquor business under a State monopoly 
system be specifically exempted from this section of the act. He 
argued that States should not be required to apply to the Federal 
Government for permission to engage in the liquor industries. He 
assented to regulation under the other sections of the act. After 
some discussion with members of the committee as to whether a 
State liquor monopoly is subject to Federal regulation, Congress- 
man Hill stated that a sovereign State ought not to have come to 
the Federal Government to get a permit to do that which is lawful 
within the State. Congressman Dingell, through questioning, ascer- 
tained that the Ohio board was permitted to sell only within the 
State of Ohio and not outside the State (record of Ways and Cleans 
Committee hearings on H. R. 8539, pp. 5-4—58). 

Mr. Choate was consulted as to the advisability of exempting 
State monopolies from the permit section : 

Mr. Vinson. Mr. Chairman, would it be asking too much just 
at this point for Mr. Choate to make a statement of his views 
in regard to the State control board i 

Mr. Choate. You referred to the statement in regard to what, 
Mr. Vinson \ 

Mr. Vinson. The testimony of the witness, as to exempting 
a State liquor board from the operation of this statute. 

Mr. Choate. I see really no serious objection to exempting 
them, if they want to be exempted. I think they ought to be 
under the regulations, both of the statute and of the regula- 
tions imposed under the statute, but I think the permit, in the 
case of the State, would offer no substantial additional means 
of enforcement. If a State wants to violate the rules, I think 
they will violate them. I do not expect the State to want to 
violate them. 

Mr. Vinson. So far as you are concerned, then, and so far 
as it applies to the permit, the statute might exempt State 
agencies such as the State Liquor Board of Ohio. 

Mr. Choate. I should think so, without great difficulty, al- 
though I agree with you that when the State engages in 
the business it is a private business and is subject to regulation, 
if anybody wants to regulate it (Record of Ways and Means 
Committee hearings on H. R. 8539, pp. 5S and 59). 

Later in the hearings, in discussing the practice of some State 
monopolies of forcing distillers to sell on consignment or accept 
exchanges of ' ; dead stock " for merchandise, Mr. Choate made it 
clear that he did not advocate that the States be entirely exempted 
from the act and that he did not believe an exemption from the 
permit section above would have this result: 

Mr. Vinson. With those practices admitted, do you not think 
that this agency of the State, which certainly is not an essential 
governmental function, should be treated as any other person 
or agency ? 

Mr. Choate. There is no question in my mind that the same 
rules ought to apply to the States as to the individuals, except 
that I have some doubt as to whether in case of the State the 



39 Sec. 3c 

permit system adds any such power of enforcement as it does 
in the case of the individual. 

Mr. Vinson. It cannot hurt anything, can it? 

Mr. Choate. I doubt if it can hurt anything much. 

Mr. Vinson. As I understand it, we Tvant control; if I read 
the papers correctly, we want control of the liquor business to 
some degree, within bounds. 

Mr. Choate. Within the bounds suggested in this bill. 

Mr. Vinson. You would not have any objection to causing the 
State monopoly or State stores to put in the permit system ? 

Mr. Choate. No; but at the same time I think it is a de- 
batable question as to whether it is worth while to injure the 
State feelings, if they have such feelings, when as a matter of 
fact, if we revoke the permit, we could not do anything to a 
State who chose to defy us. 

Mr. McCormack. Could you not control that situation by a 
permit to the distiller, so that they can take that back ? 

Mr. Choate. Yes ; but the difficulty is that it enables the State 
to coerce the distiller. All these transactions were in violation 
of the distillers' code, but the distillers, with an enormous cus- 
tomer like the State of Pennsylvania facing them, could not as 
a practical matter refuse to violate the code, when the State of 
Pennsvlvania told them to. 

Mr. McCormack. It was not fair to put them in the position 
of fighting a sovereign State. 

Mr. Choate. We thought so (id. pp. 85 and 86). 

The sentence appeared in its present form in the bill introduced 
by Mr. Cullen on July 16, 1935 (H. K. 8870) and it was not amended 
by the House or Senate, The Ways and Means Committee report 

No permit is required for any State liquor monopolv, board, 

or similar agency, or the members thereof (H. Kept. No. 1542, 

Federal Alcohol Control Bill, July 17, 1935, p. 6). 

At the Finance Committee hearings Judge Marion De Vries made 

a well-documented plea for subjecting State monopolies to permit 

requirements based on the status under Federal laws of State 

agencies engaged in functions that are not essentially governmental 

(record of Senate Finance Committee hearings on H. K. 8870, pp. 

131-136). _ , _ . ., 

Congressman Tarver, of Georgia, offered an amendment when tne 
bill was discussed on the floor of the House after being reported out 
by the committee, to insert a new subsection in section 3, providing 
that it be unlawful to transport or import into any State, Territory, 
or possession of the United States for delivery or use therein, intoxi- 
cating liquors in violation of the laws thereof. Mr. Cullen pointed 
out that a bill to enforce the twenty-first amendment was at that 
time before the Judiciary Committee of the House and that the 
provision suggested by Mr. Tarver had no place in the- bill. After 
some discussion Mr. tarver's amendment was voted down 69 to 66 
(Cong. Rec, July 23, 1935, vol. 79, no. -151, pp. 12183, 12194, and 
12195). 



Sec. 4a 40 

Congressman Gilchrist, of Iowa, offered an amendment providing 
that it would be unlawful for any person to use imported molasses 
in the manufacture of alcohol or distilled spirits. After considerable 
discussion as to the use of blackstrap molasses in rectifying whiskey 
and in manufacturing gin, Mr. Doughton pointed out that the Act 
was not a farm relief bill nor a bill dealing with imports and that, 
therefore, although the farmers might be helped by the suggested 
amendment, it had no place in the Act. Some discussion followed 
as to whether or not the amendment was germane to the bill. On 
a vote the amendment was voted down 65 to 74 (Cong. Rec, vol. 79, 
no. 151, pp. 12195-12197). 

PERMITS 

Sec. 4. (a) The following persons shall, on application 
therefor, be entitled to a basic permit: 

(1) Any person who, on May 25, 1935, held a basic 
permit as distiller, rectifier, wine producer, or im- 
porter issued by an agency of the Federal Govern- 
ment. 

Xote. — In the original bill introduced by Mr. Doughton on June 
18, 1935, the word "brewer" appeared in clause (1) of subsection 
4 (a) ; see note to section 3. Aside from this minor change the 
phrasing remains as it appeared in the original bill. The following 
excerpt from the Ways and Means Committee's report is explanatory 
of clause (1) : 

All persons who held a basic permit issued under the code 
system and in full force and effect at the time of the termina- 
tion of that system as a result of the decision in the S cheekier 
case, are, under the bill, entitled as a matter of right to permits 
issued under the new law when enacted, except in the case of 
wholesalers (sec. 4 (a) (1)). Wholesalers held only temporary 
basic permits at the time of the termination of the code system. 
The temporary basic permits were issued without the usual 
investigation. The other permittees under the code system were 
issued permits after they demonstrated that they did not have 
records as law violators and that by reason of their previous 
experience, financial standing, and trade connections they were 
potential legal members of the industry (H. Rept. 1542, Federal 
Alcohol Control Bill, July 17, 1935, p.' 8). 

(2) Any other person unless the Administrator 
finds (A) that such person (or in case of a corpora- 
tion, any of its officers, directors, or principal stock- 
holders) has, within five years prior to date of appli- 
cation, been convicted of a felony under Federal or 



41 Sec. 4a 

State law or has, within three years prior to date of 
application, been convicted of a misdemeanor under 
any Federal law relating to liquor, including the taxa- 
tion thereof; or (B) that such person is, by reason 
of his business experience, financial standing, or 
trade connections, not likely to commence operations 
within a reasonable period or to maintain such opera- 
tions in conformity with Federal law; or (C) that the 
operations proposed to be conducted by such person 
are in violation of the law of the State in which they 
are to be conducted. 

X 0TE . — At the Ways and Means Committee hearing, Congressman 
Celler of Xew York, appearing as a witness, objected to the language 
of this section as being too vague, as permitting arbitrary rulings, 
and stated that the Volstead Act contained no such rigid restrictions. 
Congressman McCormack, of the committee, stated in reference to 
this objection : 

May I say this in regard to page 7. that I think you have placed 
a construction upon the language that the committee— I know 
some of the members of the committee, at least— never intended. 
They did not want to have too drastic requirements, and they 
limited it to three directions (Report of Ways and Means 
Committee hearing on H. R. 8539, p. 90). 
While Mr. Choate was testifying at the Ways and Means Com- 
mittee hearings on the bill, Congressman Dinged of Michigan asked 
him about this section: 

Mr. Dixgeix. Right at this point, may I ask a question or two 
regarding what appears to me as an excess of power — right now, 
in this bill, page 7 ? 

In line 13. section (b). it grants the Administrator the power 
to withold a permit, if he presupposes that the applicant is a 
person who, bv reason of his business experience, financial stand- 
ing, or trade 'connections, is not likely to commence operations 
within a reasonable period or to maintain such operations .in con- 
formity with Federal law. Is not that giving an Administrator 
an unusual amount of power, to presuppose and presume that a 
man may or may not make good in the business, and on that 
supposition to deny a permit ? 

Mr. Choate. I would not say it was a question ot presupposi- 
tion. It is a question of the interpretation of the man's record. 
You cannot keep out of the business the men who ought to be 
kept out of the business, unless you use. in your permit section, 
thoroughlv general language of that sort. 

Mr. Dingell. But it is giving you a great deal of latitude 
to determine that matter. 



.:. ib 42 

M:. Oiojlte. It does give a good deal of latitude. There is 
• ; ij -e questioning that. It is the very power we have been 
exercising for a vear and a half (record of hearing on H. R. 
8539, pp. 20 and 21). 

Congressman O'Malley, of "Wisconsin, appearing as a witness, criti- 
H ed this section as not telling applicants just what conditions must 
; met to obtain a permit. He stated that the provision makes it 
m ibsolute one man dictatorship (id. pp. 96 and 97). 

1 he committee's report contains the following statement in regard 
to this clause: 

Under the bill, wholesalers and new applicants are entitled to 
permits, unless the Administrator after notice and hearing makes 
certain specific findings (sec. 4 (a) (2) ). Thus, in order to deny 
an application, the Administrator must find that the applicant, 
within 5 years prior to his application, has been convicted of 
a felony under Federal or State law, or that the applicant is, 
by reason of his business experience, financial standing, or trade 
connections, not likely to commence operations within a rea-v 
sonable period or to maintain such operations in conformity 
with Federal law, or that the operations proposed to be con- 
ducted under the permit are in violation of the laws of the 
State in which they are to take place. 

These requirements are designed to exclude from the indus- 
tries persons who would be likely to violate the provisions of 
the bill and other Federal or State laws. Such requirements 
are, in the judgment of the committee, fair and reasonable, and 
bear a real and substantial relation to the adequate enforcement 
of provisions of Federal law heretofore enacted or enacted in the 
accompanying bill (H. Kept. no. 1542, Federal Alcohol Control 
Bill, p. 8). 

The remainder of clause (A) after the phrase " been convicted 
of a felony under Federal or State law, or" is not found in the 
original bill or in the bill as reported to, and passed by the House 
(H. R. 8539, H. R. 8870 prints dated July 16, July 17, and July 25, 
1935). 

The Finance Committee suggested and the Senate passed the fol- 
lowing amendment, " or of a violation of any Federal law relating 
to liquor, including the taxation thereof." (H. R. 8870 prints dated 
Aug. 9 and Aug. 13, 1935.) The present language was suggested 
by the conferees. (H. Rept. no. 1898, Revenue From Distilled 
Spirits, Aug. 23, 1935, pp. 2 and 10.) 

(b) If upon examination of any application for a basic 
permit the Administrator has reason to believe that the 
applicant is not entitled to such permit, he shall notify the 
applicant thereof and, upon request by the applicant, 
afford him due notice and opportunity for hearing on the 
application. If the Administrator, after affording such 
notice and opportunity for hearing, finds that the appli- 



43 Sec. 4c, d 

cant is not entitled to a basic permit hereunder, he shall by 
order deny the application stating the findings which are 
the basis for his order. 

Note. — This subsection appeared in the original bill introduced 
by Mr. Doughton (H. R. 8539) and except for clerical changes in 
the Senate retained its original form until enactment. 

(c) The Administrator shall prescribe the manner and 
form of all applications for basic permits (including the 
facts to be set forth therein)' and the form of all basic 
permits, and shall specify in any basic permit the authority 
conferred by the permit and the conditions thereof in ac- 
cordance with the provisions of this Act. To the extent 
deemed necessary by the Administrator for the efficient 
administration of this Act, separate applications and per- 
mits shall be required by the Administrator with respect to 
distilled spirits, wine, and malt beverages, and the various 
classes thereof, and -with respect to the various classes of 
persons entitled to permits hereunder. The issuance of a 
basic permit under this Act shall not operate to deprive the 
United States of its remedy for any violation of law. . 

Note. — This subsection appeared in the bill introduced by Mr. 
Doughton (H. R. 8539) and except for clerical changes by the Senate 
retained its original language until enactment. 

(d) A basic permit shall be conditioned upon compliance 
with the requirements of section 5 (relating to unfair 
competition and unlawful practices) and of section 6 (re- 
lating to bulk sales and bottling), with the twenty-first 
amendment and laws relating to the enforcement thereof, 
and with all other Federal laws relating to distilled spirits, 
wine, and malt beverages, including taxes with respect 
thereto. 

.Note.— This subsection of the bill as originally introduced by Mr. 
Doughton read as follows: 

(d) A basic permit shall be conditioned upon compliance with 
the requirements of section 5 (relating to unlawful practices), 
with the Twenty-first Amendment and laws relating to the en- 
forcement thereof, and with all other Federal laws relating 
to distilled spirits, wine, and malt beverages, including taxes 
with respect thereto (H. R. 8539, print dated June 18, 1935, 
p. 8) 



Sec. 4e 44 

In the bill as introduced by Mr. Cullen on July 16, 1935, the words 
"unfair competition and to " were inserted in the parenthetical phrase 
as it now appears. 

The Senate Finance Committee recommended, and the Senate 
approved of, the insertion of the reference to section 6, which was 
a new section proposed at the same time. Since the. House receded 
from its position with respect to section 6 it also permitted this 
reference to it (H. Kept. no. 1898, Revenue From Distilled Spirits, 
pp. 1 and 10). 

The following statement with respect to this subsection is found 
in the Ways and Means Committee's report : 

Caad'/twris of permit. — The only conditions which attach to a 
validly issued permit (other than revocation because of nonuse 
for more than 1 year or termination in the event of transfer) 
are: (1) Compliance with the provisions of the bill relating to 
unlawful practices involving interestate or foreign commerce and 
in some instances involving enforcement of the postal laws; (2) 
compliance with the twenty- first amendment and laws relating 
to the enforcement thereof (which would include the provisions 
of H. R. 8368, if enacted *), and (3) compliance with all other 
Federal laws now in force or hereafter enacted relating to dis- 
tilled spirits, wine and malt beverages, including taxing laws, 
postal laws, and such interstate commerce laws as the Reed 
amendment (sec. 4 (d)). The permittee is thus left free under 
the bill to conduct his business as he sees fit, subject only to 
compliance with Federal laws of unquestionable validity. It 
follows, therefore, that the permit provisions constitute an exer- 
cise by Congress of its power to use such means as are " necessary 
and proper " in order more effectively to carry out its powers to 
collect taxes, regulate interstate and foreign commerce, enforce 
the twenty-first amendment, and administer the postal laws, as 
exercised in the provisions of the present bill relating to unlaw- 
ful practices and enforcement of the twenty-first amendment, in 
laws hereafter enacted to enforce the twenty-first amendment, 
and in the provisions of existing law. (H. Rept. 1542, Federal 
Alcohol Control Bill, pp. 7 and 8.) 

* Ed. note.— H. R. 8368 failed to pass the 74th Congress at its first 
session. 

(e) A basic permit shall by order of the Administrator, 
after due notice and opportunity for hearing to the per- 
mittee, (1) be revoked, or suspended for such period as the 
Administrator deems appropriate, if the Administrator 
finds that the permittee has willfully violated any of the 
conditions thereof, provided that for a first violation of 
the conditions thereof the permit shall be subject to sus- 
pension only; or (2) be revoked if the Administrator finds 
that the permittee has not engaged in the operations au- 



45 Sec. 4f 

thorized by the permit for a period of more than two years ; 
or (3) be annulled if the Administrator finds that the 
permit was procured through fraud, or misrepresentation, 
or concealment of material fact. The order shall state the 
findings which are the basis for the order. 

Note. — This provision appears in the bill introduced by Mr. 
Doughton (H. R. 8539) as section 4 (g). In the bill introduced by 
Mr. Cullen (H. R. 8870) it is numbered section 4 (f ) . 

By an amendment offered by Congressman O'Neal of Kentucky, 
the period appearing in clause (2) of this subsection was changed 
from 1 to 2 years. The amendment was passed without discussion. 
Aside from this slight amendment and clerical changes made by the 
Senate, from which it later receded, the original language in Mr. 
Doughton's bill was retained (Cong. Rec, vol. 79, no. 152, p. 12265, 
H. R. 8539, sec. 4 (g), p. 9). 

The Ways and Means Committee report contains the following 
statement relative to this subsection: 

A permit is subject to revocation or suspension for willful 
violation of its conditions or to revocation for nonuse, or to 
annulment if obtained through fraud, misrepresentation, or con- 
cealment of material fact (sec. 4 (f)). For a first offense, in- 
volving a violation of the conditions of a permit, the Admin- 
istrator may not revoke, but only suspend, the permit. The 
requirements as to issuance and as to revocation, suspension, or 
annulment of a permit provide definite standards to be applied 
by the Administrator. The Administrator's determination must 
be embodied in findings made after due notice and opportunity 
for hearing. The bill fulfills all legal requirements as to both 
standards and findings (H. Rept. No. 1542, Federal Alcohol Con- 
trol BUI, p. 8). 

(f) Orders of the Administrator with respect to any 
denial of application, suspension, revocation, annulment, 
or other proceedings, shall be served (1) in person by any 
officer or employee of the Administration designated by 
the Administrator or any internal revenue or customs 
officer authorized by the Administrator for the purpose, or 
(2) by mailing the order by registered mail, addressed to 
the. applicant or respondent at his last known address in 
the records of the Administrator. 

Note.— Except for clerical changes, this subsection remained as it 
appeared in Mr. Doughtbn's bill (H. R. 8539). It was numbered 
in that bill as section 4 (h) and in Mr. Cullen's bill (H. R. 8870), 
until reported to the Senate by the Finance Committee, as section 

4 (g). 



Sec. 4g 46 

In considering this subsection, the following excerpt from, the re- 
port of the Ways and Means Committee should be noted : 

Provision is made in connection with the administrator's 
power to deny a permit or to revoke, suspend, or annul a permit 
that his action be by formal order stating therein the finding 
upon which the order is based (sec. 4 (b) and sec. 4 (f) ). This 
requirement is inserted in order that the applicant or permittee 
may be informed of the substance of the reasons for the ad- 
ministrator's action (though this provision does not have the 
effect of invalidating the order if the reasons stated are inade- 
quate but the record discloses adequate reasons). The speci- 
fication that the action of the administrator, even in case of 
denial of an application for a permit, be by order permits the 
reviewing court to have something before it to review so that 
jurisdiction will not be denied on the ground that the action 
of the administrator is negative (H. Kept. No. 1542, Federal 
Alcohol Control Bill, pp. 8 and 9) . 

(g) A basic permit shall continue in effect until sus- 
pended, revoked, or annulled as provided herein, or 
voluntarily surrendered; except that (1) if leased, sold 
or otherwise voluntarily transferred, the permit shall be 
automatically terminated thereupon, and (2) if trans- 
ferred by operation of law or if actual or legal control of 
the permittee is acquired, directly or indirectly, whether 
by stock-ownership or in any other manner, by any per- 
son, then such permit shall be automatically terminated at 
the expiration of thirty days thereafter: Provided, That 
if within such thirty-day period application for a new 
basic permit is made by the transferee or permittee, re- 
spectively, then the outstanding basic permit shall con- 
tinue in effect until such application is finally acted on by 
the Administrator. 

Note. — Except for a clerical change, this subsection remained as 
it appeared in Mr. Doughton's bill (H. R. 8539). It was there 
numbered as section 4 (i) and in Mr. Cullen's bill (H. R. 8870) , until 
reported to the Senate by the Finance Committee, it was numbered 
as section 4 (h). With respect to this subsection, the report of the 
Ways and Means Committee states: 

The bill prohibits the lease, sale, or other voluntary transfer 
ot any permit (sec. 4 (h) ). This prohibition does not, however, 
prohibit the sale or other transfer of the assets of a permittee. 
A distiller, for instance, may sell his distillery but not his per- 
mit. The purchaser in such case is required to obtain a new 
Eermit. In order to provide continuity of operation of the 
usiness, in case of a sale, it lies within, the power of the parties 



47 Sec. 4h. 

to condition the transfer of title upon the prospective purchaser's 
obtaining a new permit. For the purpose of caring for situa- 
tions that arise through transfers by operation of law or through 
acquisition, for instance, of control of an existing permittee by 
acquisition of its stock, provision is made for .he continuance 
of the old permit, but only for a limited time, pending applica- 
tion for a new permit and action by the Administrator thereon. 
This, the committee believes, is necessary in order to prevent 
the permits from falling into the hands of bootleggers and other 
law violators who would not have been entitled to a permit in 
the first instance (H. Kept. No. 1542, Federal Alcohol Control 
Bill, pp. 9 and 10). 

(h) An appeal may be taken by the permittee or appli- 
cant for a permit from any order of the Administrator 
denying an application for, or suspending, revoking, or 
annulling, a basic permit. Such appeal shall be taken by 
filing, in the circuit court of appeals of the United States 
within any circuit wherein such person resides or has his 
principal place of business, or in the United States Court 
of Appeals for the District of Columbia, within sixty days 
after the entry of such order, a written petition praying 
that the order of the Administrator be modified or set 
aside in whole or in part. A copy of such petition shall 
be forthwith served upon the Administrator, or upon any 
officer designated by him for that purpose, and thereupon 
the Administrator shall certify and file in the court a 
transcript of the record upon which the order complained 
of was entered. Upon the filing of such transcript such 
court shall have exclusive jurisdiction to affirin, modify, 
or set aside such order, in whole or in part. No objection 
to the order of the Administrator shall be considered by 
the court unless such objection shall have been urged be- 
fore the Administrator or unless there were reasonable 
grounds for failure so to do. The finding of the Adminis- 
trator as to the facts, if supported by substantial evidence, 
shall be conclusive. If any party shall apply to the court 
for leave to adduce additional evidence, and shall show to 
the satisfaction of the court that such additional evidence 
is material and that there were reasonable grounds for 
failure to adduce such evidence in the proceeding before 
the Administrator, the court may order such additional 



Sec. 4h 48 

evidence to be taken before the Administrator and to be 
adduced upon the hearing in such manner and upon such 
terms and conditions as to the court may seem proper. 
The Administrator may modify his findings as to the facts 
by reason of the additional evidence so taken, and he shall 
file with the court such modified or new findings, which, if 
supported by substantial evidence, shall be conclusive, and 
his recommendation, if any, for the modification or setting 
aside of the original order. The judgment and decree of 
the court affirming, modifying, or setting aside, in whole 
or in part, any such order of the Administrator shall be 
final, subject to review by the Supreme Court of the United 
States upon certiorari or certification as provided in sec- 
tions 239 and 240 of the Judicial Code, as amended 
(U. S. C, title 28, sees. 346 and 347). The commencement 
of proceedings under this subsection shall, unless speci- 
fically ordered by the Court to the contrary, operate as a 
stay of the Administrator's order. 

Note. — This subsection, except for one minor amendment, is in the 
same form in which it appeared in Mr. Doughton's bill (H. R. 8539). 
Except for clerical changes made by the Senate and later removed, 
the subsection retained its original form until enactment. In H. R. 
8539 it appeared as section 4 (j) and in H. R. 8870 until reported out 
by the Finance Committee it was designated section 4 (i). The 
Ways and Means Committe commented on this section in its report : 

This provision is inserted in order to comply with the consti- 
tutional requirement that a man's right to do business may not 
be denied administratively, even in pursuance of a Federal 
power, without his having his day in court. The provision of 
the bill is similar to that contained in the Packers and Stock- 
yards Act, the Communications Act, the Securities Act, and the 
Securities Exchange Act as well as the provision in the internal 
revenue laws under which appeals are taken from the Board of 
Tax Appeals. Review is granted in the United States Court 
of Appeals for the District of Columbia or the Circuit Court of 
Appeals of the United States where the person resides or has 
his principal place of business, at his election. Review in the 
circuit court is thought to be more desirable than review in the 
district court in order that there may not be the delay and ex- 
pense consequent upon a lawsuit in the district court and appeal 
from that court's action to the circuit court of appeals. Further, 
review of the order is in substance an appellate function which 
is not within the usual scope of district court jurisdiction but 
rather within that of the circuit court of appeals. Review is 
limited to questions of law as required by the Constitution in 



49 Sec. 4h 

the case of a constitutional court in accordance with the prin- 
ciples laid down in Old Colony Trvist Co. v. Commissioner of 
Internal Revenue (1929) (279 TJ. S. 716) ; Federal Radio Co-mmis- 
sion v. General Electric Co. (1930) (281 U. S. 464) ; and Federal 
Radio Commission v. Nelson Brothers Bond & Mortgage Co. 
(1933) (289 U. S. 266). Provision is made, however, by which 
additional evidence may be adduced before the Administrator 
even after the case is in court. Appeal from the decision of the 
court of appeals may be had by certification or certiorari to the 
Supreme Court of the United States. The court proceedings are 
to operate as a stay of the order of the Administrator unless 
the court otherwise directs (H. Kept. 1542, Federal Alcohol Con- 
troll Bill, p. 9). 
At the Ways and Means Committee hearings, Mr. Dingell of 
the committee criticized this subsection on the grounds that the dis- 
trict courts were not open to appellants. Mr. Choate stated that 
going straightway to the circuit court of appeals shortened the pro- 
ceedings ; that it was a compromise between making appellants come 
to Washington to sue and letting them delay proceedings indefinitely 
(record of hearings, pp. 21 and 22). Congressman Celler, appear- 
ing as a witness, raised the same point and urged the procedure used 
in the Volstead Act of reviews by writs in equity to the district 
courts. Appellants should not have to pay the higher costs and 
the increased traveling expenses involved in going to the circuit 
courts of appeal (record of hearings, pp. 91-93). He raised the 
same plea at the Finance Committee hearings supported by a letter 
from the Department of Justice and the additional argument of not 
crowding the secondary courts (record of Finance Committee hear- 
ings, pp. 143-145) . An amendment offered by Mr. Celler on the floor 
of the House in this connection was, after considerable debate be- 
tween Mr. Celler and Mr. Vinson, rejected (Cong. Rec, vol. 79, 
no. 152, pp. 12262-12264). 

Senator Copeland, of New York, inquired, when the bill was de- 
bated in the Senate, whether the committee had considered the 
advisability of having appeals taken to the district court instead of 
to the court of appeals: 

Mr. George. Mr. President, I may say that none of the com- 
mittee amendments deals with the precise question now raised 
by the distinguished Senator from New York, but the question 
he raises was presented to the committee by Representative 
Celler, of New York, and the committee gave due consideration 
to it. There is some force in the suggestion ; but it was the view 
of the committee, at least at the time, that the jurisdiction to 
consider and to review any action taken by the Federal Alcohol 
Commission denying to a permittee or an applicant a permit, or 
modifying or changing or revoking it, should be vested in the 
circuit court of appeals, notwithstanding some slight increase 
in cost to the litigant, because it was deemed advisable to leave 
the jurisdiction in that particular court in order that we might 
remove as far as possible from local influences the decision of 
matters of this character involved in the regulation of the manu- 
facture and sale of distilled spirits. 



Sec. 41i 50 

Mr. Harrison. Mr. President, will the Senator yield? 

Mr. Copeland. I yield. 

Mr. Harrison. In further answer to the Senator from New 
York in connection with this question, I may say that with 
reference to appeals in the cases involved here the committee 
followed the same policy which was adopted in the case of the 
Packers and Stockyards Act, the Communications Act, the Se- 
curities Act, and the Securities Exchange Act. The committee 
did not believe it would involve very great additional expense 
and thought probably the district courts were so clogged with 
litigation that a man who might wish to appeal could secure 
quicker action in this way. 

Mr. Copeland. I take it, then, that the feeling of the com- 
mittee is that the procedure recommended here is parallel with 
the procedure in reference to appeals from other governmental 
agencies. 

Mr. George. As recently decided and determined by the 
Congress. 

Mr. Copeland. The point which was raised involved not alone 
the question of the expense of going to the circuit courts of 
appeals, but the suggestion was made to me that the district 
courts are more readily accessible at all times of the year than 
are the circuit courts of appeals. 

Mr. George. I think it will be found that appeals of this 
character could be decided more quickly and finally determined 
if jurisdiction should be vested in the circuit courts of appeals ; 
and for most purposes, and in most districts, they are as readily 
available as are the district courts themselves (Cong. Rec, vol. 
79, no. 167, p. 13398). 

Mr. Dingell also criticized the sixth sentence in this subsection 
providing that the Administrator's findings of fact shall be con- 
clusive, as too extreme and as giving the Administrator " an un- 
godly lot of power which should be curbed." Mr. Choate stated that 
such a provision was usual on appeal from a fact-finding agency. 
Mr. Vinson, of the committee, pointed out if the appellant wasn't 
satisfied that the record was complete he could go back and introduce 
additional evidence before the Administrator and then appeal 
(record of hearing, pp. 21 and 22). Mr. Celler took up this point 
in his testimony before the committee as follows : 

Furthermore, I will ask you to look through all your records 
and all the statutes, and ask you whether you will find anything 
like this, that the finding of the administrator as to the facts, 
if supported by substantial evidence, shall be conclusive. I have 
searched and searched since I have seen this bill, to find any such 
provision, and I say that if you keep it in — and I say it as one 
who has studied these propositions as a member of the Judiciary 
Committee — you will be doing something highly unfair. I doubt 
very- much whether it would stand the test of any court. You 
would destroy the efficacy of the appeal, because what the Ad- 
ministrator would say with reference to all matters which con- 
stitute a code, with reference to the granting or withholding of 
permits, on good grounds or " coffee grounds ", would be abso- 



51 Sees. 4, i and 5 

lutely abortive, and you would give the permittee an empty 
right. I ask you, gentlemen, to think twice before you leave that 
provision in the statute (record of Ways and Means Committee 
hearing, p. 93). 

In reply it was pointed out that the same provision was found in 
several recent acts (see quotation from Congressional Record in pre- 
ceding note) . 

The words " to the contrary " in the last sentence of the subsection 
were inserted at the recommendation of the Senate Finance Com- 
mittee (H. R. 8870, print dated Aug. 9, 1935), passed bv the Senate 
(H. R. 8870, print dated Aug. 13, 1935 ; Cong. Rec, vol. 79, no. 167, 
p. 13398), and retained by the conferees (H. Rept. 1898, Revenue 
From Distilled Spirits, pp. 1 and 11). 

(i) No proceeding for the suspension or revocation of 
a basic permit for violation of any condition thereof relat- 
ing to compliance with Federal law shall be instituted by 
the Administrator more than eighteen months after con- 
viction of the violation of Federal law, or, if no conviction 
has been had, more than three years after the violation 
occurred; and no basic permit shall be suspended or re- 
voked for a violation of any such condition thereof if the 
alleged violation of Federal law has been compromised by 
any officer of the Government authorized to compromise 
such violation. 

Note. — This subsection did not appear in Mr. Doughton's bill, but 
originated in Mr. Cullen's bill (H. R. 8870, print dated July 16, 
1935, p. 14 y as section 4 (j). The subsection is merely restated in 
the Ways and Means Committee's report (H. Rept. No. 1542, p. 9). 

The Senate Finance Committee recommended that the words 
" or agency " be inserted immediately after the phrase " compro- 
mised by any officer " in the last portion of this subsection (H. R. 
8870, print dated Aug. 9, p. 17) . This change was approved by the 
Senate (H. R. 8870, print dated Aug. 13, p. 17), but was not 
accepted by the managers for the House. (H. Rept. No. 189S, 
Revenue From Distilled Spirits, p. 1). 

UNFAIR COMPETITION AND UNLAWFUL PRACTICES 

Sec. 5. It shall be unlawful for any person engaged in 
business as a distiller, brewer, rectifier, blender, or other 
producer, or as an importer or wholesaler, of distilled 
spirits, wine, or malt beverages, or as a bottler, or ware- 
houseman and bottler, of distilled spirits, directly or in- 
directly or through an affiliate : 



Sec. 5 52 

Note.— At the hearings before the Ways and Means Committee 
on H. R. 8539, Mr. James R. Nicholson representing the Ruppert 
Brewery and presenting the views of a committee elected by a con- 
vention of 496 brewers, opposed the incorporation of fair trade 
practice provisions into the Act on the ground that conditions in 
the brewing industry were still so unsettled that it. was impossible 
to tell just "what provisions would be found equitable and maintain- 
able. He pointed out that similar provisions in the Brewers Code 
of Fair Competition were repeatedly amended. Penalties for vio- 
lation of these provisions hit the brewers doubly hard since pro- 
ducing malt beverages is a continuous process and the shutting down 
of a plant for even a short time would result in great loss (Record 
of Hearings pp. 61-63). A brief submitted by Mr. John C. Bruck- 
mann, former chairman of the Brewers' Code Authority, stated a 
similar position and presented the additional objection that the 
brewers had had no contact with the drafting of the bill. He sug- 
gested that the brewers be given a year to offer concrete suggestions 
relative to fair trade practice provisions to be written into a statute 
(id. pp. 64-65). The provisions of section 5 are, in the main, derived 
from similar prohibited practices in the various codes of fair compe- 
tition for the alcoholic beverage industries. 

The following quotation from Mr. Cullen's remarks when he sub- 
mitted the bill, has reference to these provisions in the act. 

This bill provides for Federal regulation of the liquor in- 
dustry. It has as its major objectives the protection of the 
Federal revenue and the prevention of the recurrence of those 
evils in the 'liquor traffic which existed prior to and after pro- 
hibition. No provision of the bill is violative of the Constitu- 
tion either because it denies a fundamental right secured by the 
Constitution or because it invades a field of regulation reserved 
by the Constitution to the States. Further, wherever power is 
granted by the bill to put into effect a policy contemplated by 
the bill, discriminating language has been used, so that the bill,, 
if enacted, will not suffer from the infirmity of invalid delega- 
tion of legislative power. 

The Ways and Means Committee held hearings on the subject 
matter of the bill. These hearings and previous hearings on the 
Liquor Taxing Act and the studies and reports in connection 
therewith, and hearings on H. R. 8001 and on the N. R. A. ex- 
tension bill, furnished a basis upon which deliberate and 
thoughtful consideration could be devoted to the problems which 
this bill is designed to meet. 

The committee sessions disclosed that it is necessary by some 
method of Federal control to provide means by which unscrupu- 
lous racketeers may be prohibited from entering or remaining in 
the liquor business. Until we can do that the Government's efforts 
to collect the revenue to which it is entitled will be frustrated 
at least in part. Further, we must do something to prevent the 
unfair trade activities of those in the industry who chisel and 
take advantage of the ignorance of the consumer by dishonest 
labeling and advertising and by preying on the weakness of 
others in the industry. Finally, we must do something to supple- 



53 Sec. 5 

ment legislation by the States to carry out their own policies. 
The liquor industry is too big and the constitutional and prac- 
tical limitations on the States are so considerable that they alone 
cannot do the whole job (Cong. Rec. Vol. 79, No. 151, p. 12178.) 
******* 

The committee felt that the experience under the voluntary 
N. R. A. codes with the brewers was sufficient to warrant the 
hope and expectation that they would conduct their business in 
such a fashion that, for at least an experimental period, the 
drastic requirement that they have a license or permit prior to 
engaging in business need not be imposed upon them at this 

time (ib.). 

******* 

Unfair and unlawful trade practices are prohibited by the 
bill. This control extends to prohibition on the ;; tied house ", 
exclusive outlets, dishonest payments to buyers which amount 
to bribes, deceptive names, and consignment sales, and to label- 
ing and advertising requirements designed to prevent deception 
of the consumer. 

Adequate court review of action of the Administrator in con- 
nection with permits and prohibitions on unfair and unlawful 
practices is provided for. 

It is believed that this bill will furnish a systematic and care- 
fully conceived basis for proper Federal control of those matters 
connected with the liquor industry which imperatively require 
supervision by the United States. It is also believed that proper 
machinery has been provided in it by which administration will 
be easy and workable. Finally, no hardship will be imposed on 
legitimate industry by the bill. Nothing in it is unfair or dis- 
criminates against the honest business man who is trying to 
conduct his business in a fair and reasonable manner (id., p. 
12179). 
The scope of section 5 is mentioned in the Ways and Means Com- 
mittee's report: 

Section 5 of the bill enumerates six specifically defined un- 
lawful practices. The prohibition of these practices is based 
primarily on the commerce clause and in some instances on the 
twenty-first amendment and the postal power. The section ap- 
plies to distillers, rectifiers, blenders, and other producers of dis- 
tilled spirits, wine, or malt beverages, importers and wholesalers 
of distilled spirits, wine, or malt beverages, and bottlers and 
warehousemen and bottlers of distilled spirits. The provisions 
are applicable to the persons engaged in such businesses whether 
the unlawful practices are engaged in directly by them or en- 
gaged in indirectlv or through an affiliate as defined in the bill. 
(H. Rept. no. 1512, Federal Alcohol Control Bill, p. 10.) 

The Finance Committee in its report referred briefly to the back- 
ground that made the inclusion of fair trade practice provisions seem 
advisable : 

The House bill (sec. 5) prohibited two classes of trade prac- 
tices. The first class of these prohibited practices were those 



Sec. 5a 54 

which tended to produce monopolistic control' of retail outlets, 
such as arrangements for exclusive outlets, creation of tied 
houses, commercial bribery, and sales on consignment or with 
the privilege of return. The reports of the National Commis- 
sion on Law Observance and Enforcement (Wickersham Com- 
mission) and of other agencies that conducted surveys of liquor 
enforcement problems, all indicated that control by producers 
and wholesalers of retail outlets through the various devices 
such as those prohibited by the bill has been productive not only 
of monopoly but also of serious social and political evils which 
were in large measure responsible for bringing on prohibition. 
The bill seeks to prevent the recurrence of these evils in the 
fields that cannot be reached by the States, provided the evils 
occur in interstate commerce or reach such an extent in the par- 
ticular case that they constitute a substantial restraint on inter- 
state commerce or deterrent to the free flow of interstate com- 
merce in distilled spirits and wines (S. Rept. No. 1215, Federal 
Alcohol Control Act, pp. 6 and 7). 

In its original form in. H. R. 8539 the introductory clause in sec- 
tion 5 read as follows: 

Sec. 5. It shall be unlawful for any distiller, brewer, rectifier, 
blender, or other producer, or any importer or wholesaler, of 
distilled spirits, wine, or malt beverages, or any bottler, or ware- 
houseman and bottle, of distilled spirits, directly or indirectly 
or through an affiliate (H. R. 8539, print dated June 18, 1935). 

The present language appeared in H. R. 8870 when introduced by 
Mr. Cullen (H. R. 8870, print dated July 16, 1935), and, except 
for clerical changes made by the Senate and later withdrawn, it was 
not changed while it was before Congress. 

(a) Exclusive outlet: To require, by agreement or 
otherwise, that any retailer engaged in the sale of dis- 
tilled spirits, wine, or malt beverages, purchase any such 
products from such person to the exclusion in whole or in 
part of distilled spirits, wine, or malt beverages sold or 
offered for sale by other persons in interstate or foreign 
commerce, if such requirement is made in the course of 
interstate or foreign commerce, or if such person engages 
in such practice to such an extent as substantially to re- 
strain or prevent transactions in interstate or foreign 
commerce in any such products, or if the direct effect of 
such requirement is to prevent, deter, hinder, or restrict 
other persons from selling or offering for sale any such 
products to such retailer in interstate or foreign commerce ; 
or 



55 Sea 5a 

Note.— This subsection appeared in the same form in Mr. Dough- 
ton's bill (H. R. 8539), the onlv difference being that the word 
" actual " was used in place of the word " direct " as limiting the 
phrase "effect of such requirement" in the last clause. It ap- 
peared in its present form in Mr. Cullens bill (I- R. 8870) and. 
except for clerical changes in the Senate due to the elimination of 
malt beverages from the bill, retained its original form.' 

With reference to the type of commerce affected by the unfair 
practices prohibited by section 5 of the act, the Ways and Means 
Committee's report contains the following statement : / . . 

It should be noted in each instance that the unfair practices 
above referred to are prohibited only under those circumstances 
where they occur in the course of interstate or foreign com- 
merce, or are engaged in to such an extent as substantially to 
restrain or prevent transactions in interstate or foreign com- 
merce, or where the direct effect of the practices is to prevent, 
deter, hinder, or restrict other persons from selling or offering 
for sale their products in interstate or foreign commerce. The 
practices here involved are analogous to those prohibited by the 
antitrust laws (H. Rept. No. 1542, Federal Alcohol Control Bill, 
p. 12). 
The intent of Congress to closely limit the application of the 
act to the field of interstate commerce is demonstrated in both com- 
mittee reports. The following excerpt from the report of the Fin- 
ance Committee is also to be found in the report of the Ways and 
Means Committee (H. Rept. No. 1542, Federal Alcohol Control 
Bill, pp. 1-3). 

The bill is foimded on the principle that, for the protection 
of the public and adequate conservation of the revenue, Federal 
regulation is necessary. These industries are Nation-wide in 
their extent, profoundly affect many phases of national life, and 
present problems national in their scope. State regulation is 
inadequate, by reason of practical and constitutional limitations, 
to meet the problems presented. Federal regulation, in the field 
in which the Constitution permits the exercise of Federal 
authority, is necessary to deal with these problems. 

Experience prior to prohibition demonstrated that the indi- 
vidual States, by reason of the diversity of their laws and the 
fact that praotically all alcoholic beverage producers and large- 
scale distributors did an interstate business, could not alone pro- 
vide those safeguards necessary for the protection of the revenue 
of the United States, prevent the use of the facilities of inter- 
state and foreign commerce and the mails to carry on unlawful 
and deceptive practices, and protect their own citizens from the 
evils which are always present in an inadequately regulated 
liquor traffic. That situation holds true today. Further, dur- 
ing prohibition, unscrupulous persons entered into the liquor 
business with the consequences known to all. The bootlegger 
and the racketeer have not yet disappeared from our national 
life. Under existing Federal law there is no means of keeping 
the criminal from entering the legalized liquor field. The execu- 
tive branch of the Government (except to a limited extent in 



Sec. 5a oti 

the case of distilleries) is powerless to prevent the most notorious 
criminal from entering into the business of. production or dis- 
tribution of alcoholic beverages. The revenue cannot be ade- 
quately protected, the " tied-house " control cannot be curbed, 
the public cannot be protected front unscrupulous advertising, 
the consumer cannot be protected from deceptive labeling prac- 
tices: in short, the legalized liquor traffic cannot be effectively 
regulated, if the door is left open for highly financed gangs of 
criminals and racketeers to enter into the business of liquor 
production and distribution. 

Even if the present Federal law were adequate to prevent the 
criminal from entering the liquor field, there would still remain 
the problem of control of the unethical minority in the business, 
the activities of which are beyond State power and require regu- 
lation in the public interest. The internal revenue. Federal 
trade, and food and drug laws are insufficient for this purpose. 
Protection of the consumer and the elimination of improper 
practices in this industry are imperative, and additional legis- 
lation to accomplish these purposes is necessary (8. Rept. No. 
1215, Federal Alcohol Control Act, pp. 1 and 2). 

During Mr. Choate's testimony before the Ways and Means Com- 
mittee, Congressman Duncan of the committee questioned Mr. Choa'e 
on the applicability of this section in intrastate transactions: 

Mr. Duncan. Mr. Chairman, L would like to ask Mr. Choate a 
question on page 14 of the bill, with respect to unfair trade 
practices. Apparently, of course, it is the intention that that 
will only apply to interstate commerce? 

Mr. Choate. Yes. 

Mr. Duncan. And is it the intention of the administration, 
however it may be set up, to control intrastate commerce or 
business through the licensing provisions of the bill? 

Mr. Choate. No. except to this extent, that the permit sections 
are in a measure independent of the interstate commerce feature. 
As a means of keeping industry clean, that is, making the indus- 
try the kind of industry which will obey the revenue laws and 
the twenty-first amendment, the permit provisions can properly 
operate irrespective of interstate commerce, but if you will notice, 
it is only the sales in interstate commerce which are covered by 
the permit provision, engaging in the business of manufacturing 
and selling in interstate commerce. 

Mr. Duncan. In paragraph (b), line 15, on page 14 — 

Mr. Choate. Of course, that is not in the permit provisions 
at all. You are now dealing with the unfair competition pro- 
vision. 

Mr. Duncan. Unfair competition, yes, but of course your juris- 
diction would also go to interstate transactions? 

Mr. Choate. Yes. 

Mr. Duncan. Unless you did control through the permit pro- 
vision. 

Mr. Choate. Yes, sir. 

Mr. Duncan. Now, with respect to breweries or distilleries or 
liquor dealers, furnishing fixtures or signs, or financing retailers, 



57 Sec. 5b 

supposing the breweries or distillers are located in States having 1 
a number of large cities, where there would be no interstate 
features, what would be the effect on those breweries or distil- 
leries, Jjecoming interested in the retail or outlet store? 

Mr. Choate. That would have to be taken care of entirely by 
the State legislation. 

Mr. Duncan. So. if a brewery in a large State saw tit to lease 
or furnish fixtures or equipment to the retailers, they would have 
a permit, right under this act, to do that \ 

Mr. Choate. Yes. I do not think any Federal legislation can 
prevent that, but in order to make the State's own legislation of 
that kind effective, you must have Federal legislation to prevent 
the brewer or the seller in the State next door tying up the house 
within the State in question (Record of Ways and Means Com- 
mittee hearings on H. R. 8539, pp. 26 and 27). 

A brief discussion of the application of the unfair competition 
provisions to intrastate transactions took place between Mr. Corrigan. 
representing the Wisconsin State Brewers Association, and Senator 
Connally. of the Senate Finance Committee, at the hearings on the 
bill (Record of hearing on H. R. 8870. pp. 124-127). 

(b) "Tied house": To induce through any of the fol- 
lowing means, any retailer, engaged in the sale of distilled 
spirits, wine, or malt beverages, to purchase any such 
products from such person to the exclusion in whole or in 
part of distilled spirits, wine, or malt beverages sold or 
offered for sale by other persons in interstate or foreign 
commerce, if such inducement is made in the course of in- 
terstate or foreign commerce, or if such person engages 
in the practice of using such means, or any of them, to 
such an extent as substantially to restrain or prevent 
transactions in interstate or foreign commerce in any such 
products, or if the direct effect of such inducement is to 
prevent, deter, hinder, or restrict other persons from sell- 
ing or offering. for sale any such products to such retailer 
in interstate or foreign commerce : 

Xote. — The introductory portion of the subsection is just as it 
appeared in Mr. Doughtoirs bill (H. R. 8539) except the word " ac- 
tual " was here used instead of the word " direct " as limiting " effect 
of such restriction." Only clerical changes were suggested by the 
Finance Committee and Senate. 

With respect to this subsection the report of the Ways and Means 
Committee contains the following paragraph : 

The foregoing practices [note, those prohibited by this subsec- 
tion] have in this industry constituted the principal abuses 
wherebv interstate and foreign commerce have been restrained 



Sec. 5b 58 

and monopolistic control has been accomplished or attempted. 
The most effective means of preventing monopolies and restraints 
of trade in this industry is by prohibiting such practices, thereby 
striking at the causes for restraints of trade and monopolistic 
conditions and dealing with such conditions in their incipiency. 
Furthermore, such abuses were so prevalent before prohibition 
that they were regarded in a large measure as responsible for 
the evils' which led to prohibition. (See report of the National 
Commission on Law Observance and Enforcement (1931), H. 
Doc. No. 722, 71st Cong.. 1st sess., p. 6: and Fosdick and Scott, 
Toward Liquor Control (1933), pp. 42-43.) The prohibition of 
these practices will, accordingly, not only prevent monopoly and 
restraint of interstate trade but will also tend to eliminate or 
mitigate certain incidental social evils, such as those which have 
necessarily followed the forced increase in alcoholic-beverage 
sales resulting from the " tied house." The majority of the in- 
dustry members have come to accept the view that it is unfair 
for any of their number to resort to practices which result in 
such social evils, since other members of the industry are there- 
upon compelled likewise to engage in such practices if they are 
to retain their business, and as a result the entire industry is 
brouirht into disrepute. (H. Kept. No. 1542, Federal Alcohol 
Control Bill, pp. 11 and 12). 

Congressman Treadway, of Massachusetts, representing the mi- 
nority members of the Ways and Means Committee in the discussion 
of the reported bill on the floor of the House, said inter alia : 

Now, there are two provisions in the measure to which I want 
very briefly to refer. One is found on page 15, subsection (b). 
Probably some of the Members wondered what the meaning 
may be of " tied house ", the first two words under (b) . To my 
mind that is one of the best features in this bill if it accom- 
plishes what it is intended to accomplish. Subsection (b) is 
intended to prevent distillers, brewers, and wholesalers controll- 
ing the dispensation of whisky or beer, as the case may be, by 
exercising dominion and control over the place at which the 
liquor is sold. , 

I think that is extremely desirable, and I commend the com- 
mittee for having written in that provision which I hope the 
administrator later on can enforce. I feel that the method 
whereby the distiller and brewer controlled the dispensing of 
liquor and beer was one of the great reasons that brought on 
prohibition. We certainly do not want to see that repeated. So 
I thoroughly approve of that section. (Cong. Rec, vol. 79, no. 
151, pp. 12181 and 12182). 

Some consideration of the application of this subsection to brewers 
doing an intrastate business will be found in the testimony of Mr. 
Donnelly, representing the shipping brewers, before the Finance 
Committee (Record of Senate Finance Committee Hearings on H. R. 
8870, pp. 115 and 116). Additional consideration is given in the 
memorandum filed with the committee by George R. Beneman, 
representing the United States Brewers Association (id. pp. 97 
and 98). 



59 Sec. 5b (1), (2) 

The following statement relating to the class of retailers affected 
by this subsection appears in the Finance Committee report : 

The tied-house provisions, it should be noted, relate to the 
acquisition by industry members of control o r theretofore 
independent retail establishments and do not prohibit industry 
members from continuing- to operate retail outlets heretofore 
established by them and wholly owned and operated by them, 
nor the establishment by industry members of new retail outlets 
of such character (S. Kept. No." 1215, Federal Alcohol Control 
Act, p. 7). 

(1) By acquiring or holding (after the expiration of 
any existing license) any interest in any license with 
respect to the premises of the retailer ; or 

Xote. — This clause appeared in Mr. Doughton's bill (H. R. 8530) 
and was not amended by either House of the Congress. At the hear- 
ings before the Finance Committee Judge Marion De Yries, repre- 
senting the Wine Institute, suggested that this clause and the rest of 
the subsection be amended so that it restricted only the "tying " of 
retailers selling for consumption on the premises and allowed in- 
dustry members to engage in the sale of their products for con- 
sumption off the premises" (Record of Hearings of Senate Finance 
Committee on H. R, 88T0, pp. 130 and 131). A similar suggestion 
has been made bv Frank A. Coleman, president of the National 
Wholesale Wine and Liquor Dealers Association (Record of Way? 
and Means Committee Hearings on H. R. 8539, p. 67). Mr. Vinson 

stated: 

Mr. Vinson. You would not advocate an abolition ot 
that section dealing with tied houses, going back to all the abuses 
in the preprohibition davs? 

Mr. Coleman. I would object to it in the way it is written 
here. If I remember rightly, it merely mentions the retailer. 

Mr. Vinson. The retailer 'is the fellow whose house is tied 
in with the brewerv or distillery? 

Mr. Coleman. There is a distinction between the retailer tor 
consumption on the premises and a retailer for bottling-house 

izoods. . , 

" Mr. Vinson. You know what the purpose of the tied hoii-H? ;>c 

Mr. Coleman. Yes. sir. 

Mr. Vinson. It is to control the abuses that had a lot to do 
with bringing on prohibition. Is not that true? 

Mr. Coleman. That is correct (id. p. 71). 

(2) by acquiring any interest in real or personal prop- 
erty owned, occupied, or used by the retailer in the conduct 
of his business; or 

Xote.— In H. R. 8539. as introduced by Mr. Doughton. this clause 
read "(2) bv acquiring any interest in any premises of the retailer: 
or.'' The above wording was offered as a committee amendment by 



Sec. 5b (3) GO 

Congressman Buck of California, a member of the Ways and Means 
Committee, and agreed to bv the House. (Cong. Rec. vol. 79. X<>. 
152, p. 12267). 

(3) by furnishing, giving, renting, lending, or selling 
to the retailer, any equipment, fixtures, signs, supplies, 
money, services, or other thing of value, subject to such 
exceptions as the Administrator shall by regulation pre- 
scribe, having due regard for public health, the quantity 
and value of articles involved, established trade customs 
not contrary to the public interest and the purposes of 
this subsection; or 

Xote. — In H. R. 8539 this clause read : 

(3) by furnishing, giving, renting, lending, or selling to the 
retailer any equipment, fixtures, signs, supplies, money or other 
thing of value, except advertising specialties; or (H. R. 8539. 
print dated June 18, 1935). 

The present language first appeared in the bill introduced bv Mr. 
Cullen (H. R. 8870, print dated July 16, 1935). Congressman 
Buck suggested, as a committee amendment, the insertion of the 
word " services " after the word " money ", and the House agreed 
to the amendment (Cong. Rec, vol. 79, no. 152, p. 12267). 

At the hearings on the bill before the Congressional committees 
there was considerable discussion concerning the interpretation of 
the prohibition placed on the furnishing of signs. Dr. Doran. in 
the brief filed at the hearing of the Ways and Means Committee 
(record of hearings, p. Ill), suggested the section be clarified to 
show clearly that ordinary advertising material might be furnished 
with impunity. Congressman O'Malley, of Wisconsin, offered on 
the floor of the House an amendment allowing the furnishing of 
signs costing collectively not more than $100 per year per retail 
outlet. (Cong. Rec, vol. 79, no. 152, p. 12267.) The amendment, 
he said, would protect the little brewer against the big brewer who 
could spend almost unlimited sums in advertising. It would also 
prevent the Administrator from barring the furnishing of signs- 
altogether and thereby injuring the sign industry. He said, in part : 

I have sought enlightenment upon what this section does from 
many members of the committee, and everyone I have talked 
to has agreed that, as this section is written, no limitation is 
placed on the amount of advertising material which may be 
furnished retailers by brewers and distillers so long as no agree- 
ment is entered into for exclusive outlet. If the chairman were 
to tell what transpired in the committee he would agree with 
me that there was a very sharp division on this particular point. 
and I am reliably informed that this very proposition contained 
in my amendment lost in committee by only one vote. I think 
we should take out of here by the adoption of my amendment 
the possibility of discrimination and hardship in the use of 



61 Sec. 5b (4), (5), (6) 

advertising that this section works upon the small producer who 
certainly needs some help and not hindrance in endeavoring to 
compete for the sale of his produce (id., p. 12268). 

The amendment was bitterly opposed by Congressman Vinson 
of the committee, who said it would encourage the evils of the tied 
house. The amendment was rejected by the House (id. p. 12269). 
Mr. Beneman filed a brief at the Finance Committee hearings sug- 
gesting that the clause be revised to permit the furnishing of any- 
thing permitted to be furnished by State law. (Record of Finance 
Committee hearing on H. R. 8870, p. 99.) Mr. Hodges, repre- 
senting the Advertising Metal Sign and Display Manufacturers 
Association, testified at the latter hearings that his industry would 
feel more secure if the provision allowed industry members to fur- 
nish retailers up to $100 worth of signs in any one year (id. pp. 
63-65). Mr. O'Connor, of the Beer Division of the Wholesale Code 
Authority, expressed himself as being in favor of an absolute pro- 
hibition against the furnishing of anything (id. p. 140). The 
Finance Committee proposed, and the Senate agreed to, amendments 
to this section specifically excepting " signs not exceeding $100 in 
aggregate value to any retailer in any calendar year " and " adver- 
tising specialties and graphic arts advertising items of paper or 
paper-like substance" (H. R. 8870, prints dated Aug. 9 and Aug. 
13, 1935). The Senate receded from these amendments as a result 
of the conference (H. Rept. No. 1898, Revenue From Distilled Spirits, 
p. 11). 

(4) by paying or crediting the retailer for any adver- 
tising, display, or distribution service ; or 

Note. — This clause appeared in the same form in H. R. 8539 as 
introduced by Mr. Doughton and was not changed or amended. 

(5) by guaranteeing any loan or the repayment of any 

financial obligation of the retailer; or 

Note. — This clause appeared in the same form in H. R. 8539 as 
introduced by Mr. Doughton and was not changed or amended. 

(6) by extending to the retailer credit for a period in 
excess of the credit period usual and customary to the 
industry for the particular class of transactions, as ascer- 
tained by the Administrator and prescribed by regulations 
by him ; or 

Note. — This clause appeared in the same form in H. R. 8539 as 
introduced by Mr. Doughton. When H. R. 8870 (Mr. Culleirs bill) 
was debated oh the floor of the Senate, Senator Tydings of Mary- 
land offered an amendment striking out the words " to the industry ", 
changing the comma after " transactions " to a period, and striking 
out the remainder of the clause. He stated the purpose of the amend- 
ment to be " to change the wording so that the act may be adminis- 
tered in line with the practices of the business '\ and further stated 
that he understood that Mr. Choate was not opposed to the amend- 



Sec. 5b (7) and c 62 

ment. (Cong. Rec. vol. 79, no. 167, p. 13402.) The amendment 
was agreed to by the Senate but the Senate receded as a result of 
the conference (H. Kept. No. 1898, Revenue From Distilled Spirits, 
pp. 1 and 11). The amendment was originally suggested in the brief 
filed with the Finance Committee by George R. Beneman repre- 
senting the United States Brewers Association (Record of Finance 
Committee hearings on H. R. 8870, p. 99). A similar amendment 
was suggested by Fred A. Caskey, representing the League of Dis- 
tilled Spirits Rectifiers Inc., in a letter to Senator Harrison dated 
July 27, 1935, and included in the Record of the Hearing (id. 148). 

(7) by requiring the retailer to take and dispose of a 
certain quota of any of such products ; or 

Note. — This clause was offered as an amendment by Congressman 
Lewis, of Colorado, when the bill, as reported by the Ways and 
Means Committee, was debated before the House in session as the 
Committee of the Whole. Mr. Lewis made the following statement 
in connection with the amendment : 

Mr. Lewis, of Colorado. Mr. Chairman, this is a further 
restriction on the so-called " tied house " which is regulated 
under section 5 (b) of this bill. Before prohibition, in our part 
of the country at least, one of the evils of the liquor traffic 
was that a retailer was required by the brewer or distiller to 
take a certain quota of beer or spirits of some private brand 
as a condition to being allowed to retail that brand. The 
temptation was often irresistible for the retailer to induce cus- 
tomers to buy drinks when they had already had quite enough. 
This was a very great evil, as I believe the members of the 
committee will concede. I think this is an important amend- 
ment to this bill. I hope the committee will accept the 
amendment. 

The Chairman. The question is on the amendment offered 
by the gentleman from Colorado (Mr. Lewis). The amend- 
ment was agreed to (Cong. Rec, vol. 79, no. 152, p. 12270). 

(c) Commercial bribery : To induce through any of the 
following means, any trade buyer engaged in the sale of 
distilled spirits, wine, or malt beverages, to purchase any 
such products from such person to the exclusion in whole 
or in part of distilled spirits, wine, or malt beverages sold 
or offered for sale by other persons in interstate or foreign 
commerce, if such inducement is made in the course of 
interstate or foreign commerce, or if such person engages 
in the practice of using such means, or any of them, to such 
an extent as substantially to restrain or prevent trans- 
actions in interstate or foreign commerce in any such 
products, or if the direct effect of such inducement is to 



63 Sec. 5d 

prevent, deter, hinder, or restrict other persons from sell- 
ing or offering for sale any such products to such trade 
buyer in interstate or foreign commerce: (1) By com- 
mercial bribery; or (2) by offering or giving any bonus, 
premium, or compensation to any officer, or employee, or 
representative of the trade buyer; or 

Note. — This subsection appears in the same form in the bill as 
introduced by Mr. Doughton (H. R. 8539, print dated June 18, 
1935) except that' in the phrase "direct effect of such inducement" 
the word " direct " has been substituted for the word i4 actual." Al- 
though clerical amendments were made by the Senate, these were 
withdrawn as a result of the conference report. 

As to type of commerce affected by this subsection, see note to 
subsection (a) of section 5 above. 

(d) Consignment sales: To sell, offer for sale, or con- 
tract to sell to any trade buyer engaged in the sale of 
distilled spirits, wine, or malt beverages, or for any such 
trade buyer to purchase, offer to purchase, or contract to 
purchase, any such products on consignment or under con- 
ditional sale or with the privilege of return or on any basis 
otherwise than a bona fide sale, or where any part of such 
transaction involves, directly or indirectly, the acquisition 
by such person from the trade buyer or his agreement to 
acquire from the trade buyer other distilled spirits, wine, 
or malt beverages — if such sale, purchase, offer, or con- 
tract is made in the course of hiterstate or foreign com- 
merce, or if such person or trade buyer engages in such 
practice to such an extent as substantially to restrain or 
prevent transactions in interstate or foreign commerce in 
any such products, or if the direct effect of such sale, 
purchase, offer, or contract is to prevent, deter, hinder, or 
restrict other persons from selling or offering for sale any 
such products to such trade buyer in interstate or foreign 
commerce : Provided, That this subsection shall not apply 
to transactions involving solely the bona fide return of 
merchandise for ordinary and usual commercial reasons 
arising after the merchandise has been sold ; or 

Note. — This subsection appeared in H. R. 8539 as introduced by 
Mr. Doughton in the following form : 



Sec. 5d G4 

(d) Consignment sal<$. — To sell, offer for sale, or contract to 
sell to any trade buyer engaged in the sale of distilled spirits, 
wine, or malt beverages, any such products on consignment or 
conditionally or with the privilege of return or on any basis 
otherwise than a bona fide sale, if such person makes such sale, 
offer, or contract in the course of interstate or foreign commerce, 
or if such person engages in such practice to such an extent as 
substantially to restrain or prevent transactions in interstate 
or foreign commerce in any such products, or if the actual effect 
of such sale, offer, or contract is to prevent, deter, hinder, or 
restrict other persons from selling or offering for sale any such 
products to such trade buyer in interstate or foreign commerce: 
or (H. R. 8539, pp. 15 and 16). 

At the Ways and Means Committee hearing Frank A. Coleman, 
president of the National Wholesale Liquor Dealers Association, ob- 
jected to this provision on the ground that, if not rigorously enforced, 
the law-abiding industry member would suffer at the hands of less 
scrupulous competitors (Record of Wavs and Means Committee hear- 
ing on H. R. 8539, pp. 71 and 72). 

Morris O. Alprin. testifying before the committee as counsel for 
the Wholesale Wine and Spirits Merchants Association of New York, 
stated that some of the State agencies were " practically coercing " 
members to take unsalable merchandise produced by others in part 
payment of their bills, or as condition to the offering of further 
orders. He further stated that one State agency would only purchase 
on a basis that was "practically" a consignment sale. At the re- 
quest of Mr. Doughton, Mr. Choate substantiated Mr. Alprin's state- 
ment and said that the same rules ought to apply to States as to 
individuals (id. 80-88). 

The following excerpt from the report of the Ways and Means 
Committee relates to this subsection : 

In connection with the prohibition on consignment sales (sec. 
5 (d)) it is to be noted that the provision relates to the buyer as 
well as the seller. The other provisions discussed above relate 
only to conduct by the seller. It has been brought to the attention 
of the committee that certain large buyers are in such a strategic 
position with respect to sellers that they often have sufficient eco- 
nomic power to compel the sellers to deal with them on a con- 
signment or return basis. Buyers less powerful are unable to 
exact such terms from the seller. Such situations are in practical 
effect not essentially different from the exaction of price dis- 
criminations In favor of the large trade buyer. Accordingly the 
committee felt that the trade buyer ought to be included within 
the consignment-sale prohibition. The provision is broad enough 
to include not only the case where the seller agrees in a single 
transaction to take back undesirable goods in consideration for 
the sale of other goods but also cases in which, in form, separate 
transactions have occurred but which are in substance one trans- 
action. The consignment sale provision is made to apply to sales 
and purchases by State agencies. The constitutionality of apply- 
ing such regulation to State agencies is sustained by the cases of 



65 Sec. 5e 

South Carolina v. U. S. (1905) (199 U. S. 437) : Ohio v. Helverinrj 
(1934) (292 U. S. 360): and H el wring v. /W-ers (1934) (293 
U. S. 214) (H. Kept, No. 1542, Federal Alcohol Control Bill, 
p. 11) 

In the bill introduced by Mr. Culleii (H. R. 8870, print dated July 16. 
1935), the subsection appeared in its present form except that the 
proviso at the end was omitted. 

At the hearing; before the Finance Committee, Howard T. Jones, 
counsel for the Distilled Spirits Institute, Inc., filed a memorandum 
in letter form which contained the suggestion that a similar proviso 
be added at the end of the subsection since normal commercial inter- 
course sometimes necessitates the return of merchandise (record < f 
hearings before the Finance Committee on H. R. S870. p. 88). The 
proviso at the end of the subsection was added without discussion 
by an amendment offered by Senator Tydings, of Maryland, during the 
debate in the Senate on the bill after it was reported out by the 
Finance Committee (Cong. Rec. vol. 79, no. 167. p. 13402). The con- 
ferees agreed to its incorporation in the act (H. Rept. Xo. 1898. Rev- 
enue From Distilled Spirits, pp. 1 and 11). 

'(e) Labeling. — To sell or ship or deliver for sale or 
shipment, or otherwise introduce in interstate or foreign 
commerce, or to receive therein, or to remove from 
customs custody for consumption, any distilled spirits, 
wine, or malt beverages in bottles, unless such products 
are bottled, packaged, and labeled in conformity with such 
regulations, to be prescribed by the Administrator, with 
respect to packaging, marking, branding, and labeling and 
size and fill of container (1) as will prohibit deception of 
the consumer with respect to such products or the quautity 
thereof and as will prohibit, irrespective of falsity, such 
statements relating to age, manufacturing processes, 
analyses, guarantees, and scientific or irrelevant matters 
as the Administrator rinds to be likely to mislead the 
consumer ; 

Xote. — The language of the introductory portion of thi- subsection 
and of clause (1) remained as they appeared in H. R. 8539 as intro- 
duced by Mr. Doughton on June 18. 1935, except for clerical changes, 
afterwards withdrawn, made in the Senate. Mr. Choate made the 
following statement as to the general purpose of this, and the sub- 
section immediately following, at the hearings before the Way- and 
Means Committee on H. R. 853*9 : 

Xow. the provisions of this bill show that the purpose was to 
carry that regulation into certain particular fields in which con- 
trol of interstate commerce in liquors was paramount and neces- 
sary. The purpose was to provide such regulations, not laid down 



Sec. 5e (2) 66 

in statute, so as to be inflexible, but laid down under the guidance 
of Congress, under general principles, by a "body which could 
change them as changes were found necessary. 

Those regulations were intended to insure that the purchaser 
should get what he thought he was getting, that representations 
both in labels and in advertising should be honest and straight- 
forward and truthful. They should not be confined, as the pure- 
food regulations have been confined, to prohibitions of falsity, 
but they should also provide for the information of the consumer, 
that he should be told what was in the bottle, and all the im- 
portant factors which were of interest to him about what was in 
the bottle (Record of hearing, p. 10). 

A general summary of these subsections and of the scope of the 
regulations issued pursuant thereto is found in the report of the Ways 
and Means Committee on H. R. 8870: 

The labeling and advertising provisions (sec. 5 (e) and (f ) ) 
prohibit the use of interstate channels when labeling or adver- 
tising of distilled spirits, wine, or malt beverages does not 
conform to regulations, with the force and effect of law, pre- 
scribed by the Administrator. Definite standards are laid down 
for these regulations. The regulations are not only required 
to prohibit labeling and advertising that is false, misleading, 
obscene, or indecent, or that disparages competitors' products, 
but must also provide for the prevention of deception of the 
consumer with respect to the product or its quality. They must 
also prohibit, regardless of their truth, statements relating to 
age, manufacturing process, analyses, guaranties, and scientific 
or irrelevant matters that the Administrator finds likely to mis- 
lead the consumer, and must make provision for informing the 
consumer adequately as to the identity and quality of the 
product, its alcoholic content, the net contents of the package. 
and the person responsible for the package or the advertise- 
ment (H. Kept. No. 1542, Federal Alcohol Control Bill, p. 
12). 

It was suggested at the Ways and Means Committee hearings 
that clause (1) be revised to cut out the phrase "as the Admin- 
istrator finds will be likely to " and insert in lieu thereof " as will 
be likely to " (letter of Rectifiers' and Blenders' Association of New 
Jersey, Inc., brief filed by Mr. Caskey, record of hearing, p. 115). 
The same suggestion was made in the brief of George R. Beneman, 
representing United States Brewers Association, filed at the hear- 
ings of the Finance Committee (record of hearings on H. R. 8870, 
p. 99). The purpose of the change was stated to be to prevent arbi- 
trary rulings by the Administrator and to open the courts to ap- 
pellants on the question as to whether the labels were in fact 
misleading. The suggested change was not adopted by either of 
the committees. 

(2) as will provide the consumer with adequate infor- 
mation as to the identity and quality of the products, the 
alcoholic content thereof (except that statements of, or 



67 > Sec. 5e (2) 

statements likely to be considered as statements of, 
alcoholic content of malt beverages are hereby prohibited 
unless required by State law and except that, in case of 
wines, statements of alcoholic content shall be required 
only for wines containing more than 14 per centum of 
alcohol by volume), the net contents of the package, and 
the manufacturer or bottler or importer of the product; 

Note.— In H. R. 8539 introduced by Mr. Doughton on June 18, 
1935, clause (2) of subsection 5 (e) reads as follows: 

(2) as will provide the consumer with, adequate information 
as to the identity and quality of the products, the alcoholic 
content thereof (except in case of wines, and except that state- 
ments of, or statements likely to be considered as statements 
of, alcoholic content of malt beverages are hereby prohibited 
unless required by State law), the net contents of the package, 
and the manufacturer or bottler or importer of the product 
(H. R. 8539, print elated June 18, 1935, pp. 16 and 17). 

At the hearings before the Ways and Means Committee. Mr. Lourie, 
representing the Association of Alcoholic Beverage Importers, sug- 
gested in his brief that the exception with respect to the statement 
of alcoholic content on wine labels be modified to require a state- 
ment on wines containing more than 14 percent of alcohol so^ that 
the consumer may differentiate readily between " light wines " and 
"fortified wines" (record of hearings on H. R. 8539. pp. 112 and 
113). This suggestion was followed in the drafting of Mr. Cullen's 
bill (H. R. 8870) and the exception appeared in that bill in the form 
finally enacted. The report of the Ways and Means Committee 
contains the following statement with respect to clause (2) : 

Alcoholic content is required to be stated in connection with 
wines only if alcoholic content is above 14 percent by volume, 
and is optional in case of other wines. Alcoholic content is pro- 
hibited from being stated in the case of malt beverages. Malt 
beverages should not be sold on the basis of alcoholic content. 
The variation of alcoholic content has little consumer importance 
and the industry recognizes that attempts to sell beer and other 
malt beverages on the basis of alcoholic content are attempts to 
take advantage of the ignorance of the consumer and of the 
psychology created by prohibition experiences. 

Legitimate members of the industry have suffered seriously 
from unfair competition resulting from labeling and advertis- 
ing that uses such terms as " strong ". " extra strength. "', "high- 
test ", " high proof ". " prewar strength ". " 14 percent original 
extract ", and from brand names or other statements or refer- 
ences which include conspicuous numerals or symbols intending 
to suggest that the numerals or symbols represent the alcoholic 
content. Usually such respresentations of excess alcoholic con- 
tent are false, but irrespective of their falsity, their abuse has 
grown to such an extent since repeal that the prohibition of all 



Sec. 5e (3) 68 

such statements is in the interest of the consumer and the pro- 
motion of fair competition (H. Rept. No. 1512, Federal Alco- 
hol Control Bill, pp. 1-2 and 13). 

In briefs tiled with the Senate Finance Committee at the hearings 
on H. R. 8S70, it was suggested by Mr. Beneman, representing the 
United States Brewers' Association, and by Mr. Jon.es, counsel for the 
Distilled Spirits Institute, that the words " or distributor " be added 
after the word "manufacturer'' in the latter part of clause (2) to 
protect trade marks and private brands of distributors. The Finance 
Committee suggested, and the Senate agreed to, the elimination of 
the words " importer of the product and the incorporation of 
"distributor of domestically bottled products and the manufacturer 
and importer of imported products."' The Senate also eliminated 
all reference to malt beverages in the clause. The Senate receded on 
both amendments as a result of the conference (H. Rept. Xo. 1898, 
Revenue From Distilled Spirits, pp. 1 and 11). 

(3) as will require an accurate statement, in the case 
of distilled spirits (other than cordials, liqueurs, and 
specialties) produced by blending or rectification, ' if 
neutral spirits have been used in the production thereof, 
informing the consumer of the percentage of neutral 
spirits so used and of the name of the commodity from 
which such neutral spirits have been distilled, or in case 
of neutral spirits or of gin produced by a process of con- 
tinuous distillation, the name of the commodity from 
which distilled; 

Xote. — As it appeared in the bill introduced by Mr. Doughton. 
clause < :> >) omitted the parenthetical expression '"(other than cordials, 
liqueurs, and specialties)" and ended with the phrase "the commod- 
ity from which such neutral spirits have been distilled." 

In the brief filed with the Ways and Means Committee at the 
hearings on H. R. 8539. Mr. Lourie, representing the Associa- 
tion of Alcoholic Beverage Importers, stated that the percentage 
of neutral spirits used and the commodity from which such neutral 
spirits were produced should not have to appear on labels of gin. 
cordials, and Liqueurs since such products are commonly recognized 
as always being made from neutral spirits, plus additional flavors 
(record <>f hearings before the Ways and Means Committee on H. 
R. 8539. p. 112). Fied A. Caskey. representing the League of Dis- 
tilled Spirits Rectifiers, Inc., made a similar recommendation (id. 
pp. Ill and 115). 

The parenthetical expression was inserted in clause (3) in H. R. 
R870 a» introduced by Mr. Cullen on July 16, 1935. The Ways and 
Means Committee's report with respect to this clause reads: 

The labeling and advertising requirements also compel state- 
ments as t<> the percentage of neutral spirits used in distilled 
spirits (including gin), except in case of liqueurs, cordials, cock- 



69 Sec. 5e (3) 

tails, gin fizzes, highballs, bitters, and other specialties. This is 
for the purpose of informing the consumer of the fact that he 
is purchasing a product which contains neutral spirits whereas 
he might think he was obtaining one in which no such spirits 
were used. Since there is in some cases a consumer preference 
for neutral spirits made out of grain rather than other products, 
the labeling and advertising provisions require, where neutral 
spirits have been used, a statement of which commodity (whether 
•Train, sugarcane and it> products, fruit, or whatever the com- 
modity may be) has been distilled to produce the neutral spirits 
used (H. Rept. no. 154-2. Federal Alcohol Control Bill. p. 13). 

When the bill was debated before the House in session a> the 
Committee of the Whole, the following discussion on this clause 
occurred : 

Mr. Gilchrist. On page 19, that is not the language that 
was in the former bill. It provided that the label shall contain 
an accurate statement informing the customer of the presence 
of neutral spirits, and naming the commodity from which the 
spirits have been distilled. Does that refer to whisky? Of 
course, it would not refer to whisky that is not blended. 

Mr. Cullen. Whisky that is not blended is labeled in the 
bonded warehouse and sent into the market as bonded liquor. 

Mr. Gilchrist. But it does not contain the name of the com- 
modity from which it was distilled. 

Mr. Cullen. No. The propose of labeling the bottle with its 
ingredients is to show to the consumer that he is at least getting 
pure material insofar as it relates to liquor. 

Mr. Gilchrist. That is all right. I am not finding any fault. 
That is, except to say that I think that clause 3 ought to go 
further than it does here, and apply to all distilled liquors in- 
stead of those that are merely blended or rectified. 

Mr. Cullen. That is a matter of opinion. 

Mr. Gilchrist. What does the gentleman say about that ( 

Mr. Cullen. The committee went into that and decided that 
that is as far as they can go. 

Mr. Gilchrist. Does that apply to gin ? 

Mr. Cullen. Gin is stricken out. 

Mr. Gilchrist. Suppose I was putting gin in a bottle and 
selling it. would I have to state on the bottle the commodity 
from which it was distilled ? 

Mr. Cullen. On the label, yes: and gin is very potent, let 
me tell the gentleman. 

Mr. Gilchrist. It is a distilled, blended liquor. 

Mr. Cullen. Sometimes it is made from aniseed and some- 
times it is made from everything (Cong. Rec. vol. TO. no. 151, 
pp. 1:2180 and 12181). 

Congressman Buck, as a committee amendment, suggested the in- 
sertion of the phrase "or in case of gin. whether or not produced by 
blending or rectification " after the word '* rectification '* in the first 
part of the clause (Cong. Rec. vol. 79. no. 152. p. 12267). 

At the hearings before the Finance Committee. Mr. Jones, counsel 
for the Distilled Spirits Institute, recommended the elimination of 



Sec. 5e (3) 70 

this latter amendment since it would not require all types of gin .to 
be labeled with the commodity from which it was produced (record 
of hearings, p. 88). The Finance Committee recommended the elimi- 
nation of that amendment and the addition of the phrase which now 
appears at the end of clause (3), i. e., "or in case of neutral spirits 
or of gin produced by a process of continuous distillation, the name 
of the commodity from which distilled." The report of the Finance 
Committee contains the following statement with respect to this pro- 
posed amendment. 

The committee has recommended the insertion of a new pro- 
vision in the false-labeling and false-advertising provisions so 
as to make it clear that in the case of gin, whether produced by a 
process of original distillation in a distillery or by blending or 
rectification in a rectifying plant, the gin shall show the pr- 
centage of the neutral spirits contained therein that are derived 
from each of the respective raw material sources, such as grain, 
fruit, and sugarcane and its products such as molasses. The 
amendment also provides similar requirements as to. the source 
of neutral spirits sold straight without blending. The require- 
ment of the House bill that other blended and rectified distilled 
spirits, except cordials, liqueurs, and specialties, shall be labeled 
so as to inform the consumer of the percentage of neutral spirits 
contained therein and the percentage of such neutral spirits de- 
rived from each of the respective commodity sources, is retained 
without change. (S. Rept. No. 1215, Federal Alcohol Control 
Act, p. 7). 
Senator Murphy, of Iowa, introduced an amendment on the floor 
of the Senate, striking out the above clause entirely and inserting 
at the end of the paragraph the following : 

The regulations of the commission shall prohibit the designa- 
tion of any product as neutral spirits, or as any type of whisky 
or gin, for nonindustrial use, if the neutral spirits contained 
therein are distilled from materials other than grain. Such 
regulations shall also require that the labels of all distilled 
spirits (other than cordials, liqueurs, and specialties) to which 
neutral spirits have been added by blending or rectification, and 
that the labels of all neutral spirits and of gin, for nonindustrial 
use, whether produced by blending or rectification or by .a process 
of continuous distillation, shall state thereon the percentage of 
neutral spirits contained therein, the name of the commodity or 
commodities from which such neutral spirits have been dis- 
tilled, and the percentage thereof derived from each such com- 
modity. As used herein, the term " neutral spirits " includes 
ethyl alcohol (Cong. Rec. vol. 79, no. 167, p. 13418). 

This amendment was agreed to by the Senate, but later eliminated 
as a result of the conference. The statement of the managers on 
the part of the House contains the following summary of the posi- 
tions taken by the House and the Senate with respect to this clause : 

The House bill provided that the regulations of the enforce- 
ment agency with regard to the informative labeling and ad- 
vertising of distilled spirits provide that in the cases of dis^ 



71 Sec. 5e (3) 

tilled spirits (other than cordials, liqueurs, and specialties) 
there be stated on the label or in the advertisement, as the case 
might be, the percentage of the neutral spirits used in the pro- 
duction thereof and the name of the commodity from which the 
neutral spirits were distilled. The provision applied to dis- 
tilled spirits produced by blending or rectification and to gin, 
whether produced by blending or rectification or by process of 
continuous distillation. The provisions did not apply to straight 
neutral spirits or alcohol produced by process of continuous dis- 
tillation. The Senate amendments incorporate clarifying pro- 
visions making it certain that the informative requirements ap- 
ply to gin produced by process of continuous distillation as well 
as by blending or rectification and also extend the requirements 
to straight neutral spirits or alcohol produced by process of 
continuous distillation. In addition, the Senate amendment 
makes it clear that it is mandatory upon the enforcement agency 
to issue regulations of this informative character and that in 
case neutral spirits made from two different commodities are 
included in the product then the percentage made from each 
such commodity shall be stated. 

Senate amendment no. 105 further provides that the regula- 
tions of the Commission with respect to labeling and standards 
of identity shall prohibit the designation of any product as 
neutral spirits or as any type of whisky or gin, or * nonindustrial 
use, if the neutral spirits used in making the product are dis- 
tilled from materials other than grain. This requirement ap- 
plies to neutral spirits, whisky and gin produced by a process 
of continuous distillation, as well as to gin or any type of 
blended or other whisky produced by blending or rectification. 
The Senate amendment further provides by definition that the 
term " neutral spirits ", where used throughout the act, is synon- 
omous with ethyl alcohol. 

The Senate recedes on amendments nos. 105 and 129 which 
make the regulations mandatory and which prohibit designation 
of whisky, neutral spirits, or gin, as such, unless produced from 
grain. The Senate recedes on amendments nos. 100 and 128 
which make changes in numbers in connection with amendments 
nos. 105 and 129. The effect of the conference agreement is to 
insert the substance of the House provisions with the addition 
thereto of provisions similar to those in Senate amendments 
nos. 105 and 129 under which the requirement is imposed that 
there be a statement of the commodity from which neutral 
spirits or gin produced by continuous distillation is produced 
(H. Kept. No. 1898, Revenue From Distilled Spirits, pp. 11 and 
. 12). 

At the debate before the House. Congressman Gilchrist of Iowa 
argued at some length in favor of a provision aiding the growers 
of grains by prohibiting: the use of blackstrap molasses in the pro- 
duction of beverage spirits. (Cong. Rec, vol. 79, no. 151, pp. 12188. 
12195, and 12196.) Amendments to accomplish this purpose were, 



* Ed. note. — This apparent error appears in the printed report. 



Sec. 5e (4), (5) 72 

however, voted down (id. p. 12197 and no. 152, pp. 12265, 12269, 
and 12270). Congressman Dirksen of Illinois spoke in favor of this 
amendment at the hearings before the Finance Committee (record 
of hearing, pp. 61-63), Such an amendment was, however, never 
incorporated in the bill. 

(4) as will prohibit statements on the label that are 
disparaging of a competitor's product or are false, mis- 
leading, obscene, or indecent; and 

Xote. — This clause appeared in H. R. 8539 as introduced by Mr. 
Doughton on June 18, 1935, and was enacted without change. 

(5) as will prevent deception of the consumer by use 
of a trade or brand name that is the name of any living 
individual of public prominence, or existing private or 
public organization, or is a name that is in simulation or 
is an abbreviation thereof, and as will prevent the use of 
a graphic, pictorial, or emblematic representation of any 
such individual or organization, if the use of such name 
or representation is likely falsely to lead the consumer to 
believe that the product has been indorsed, made, or used 
by, or produced for, or under the supervision of, or in 
accordance with the specifications of, such individual or 
organization: Provided, That this clause shall not apply 
to the use of the name of any person engaged in business 
as a distiller, brewer, rectifier, blender, or other producer, 
or. as an importer, wholesaler, retailer, bottler, or ware- 
houseman, of distilled spirits, wine, or malt beverages, nor 
to the use by any person of a trade or brand name used by 
him or his predecessor in interest prior to the date of the 
enactment of this Act ; 

Xote. — This clause first appeared in H. R. 8870 as introduced 
by Mr. Cullen on July 16, 1935, and replaced subsection 5 (f) 
" Unfair Name " in H. R. 8539 : 

(f ) Unfair name. — To sell or ship or deliver for sale or ship- 
ment, or otherwise introduce in interstate or foreign commerce. 
or to receive therein, or to remove from customs custody for con- 
sumption, any distilled spirits, wine, or malt beverages, under 
a trade or brand name which the Administrator has found is 
the name of any individual or organization, if the Adminis- 
trator has also found that the use of such name is unfair be- 
cause it is intended or is likely falsely to lead the consumer to 



TA Sec. 5e 

believe that the produce has the indorsement of or is made or 
used bv such individual or organization: or (H. R. 8539. print 
dated June 18, 1935, p. 19). 

The clause was .enacted without amendment. The following- 
excerpt from the Ways and Means Committee's report is relevant : 

Further protection is given the consumer by prohibiting the 
use of trade or brand names of prominent living persons or of 
organizations. The use of such names frequently leads him 
to believe that the product behind the label was produced, en- 
dorsed, made, or used by. or in certain other ways specified in 
the bill identified with the individual or organization whose 
name appears on the label. Abbreviations and other methods 
of indicating the name of such individuals or organizations are 
similarly barred. Nothing in the provision restrains the truth- 
ful use of a name to the extent to which its use has been author- 
ized or the use of a name used prior to the enactment of the 
act by the user or a person from whom he secured it through 
chain of title. The provision does not extend to cases of con- 
flict within the industry as to proprietary rights in trade or 
brand names (H. Rept. 1542, p. 13). 

including regulations requiring, at time of release from 
customs custody, certificates issued by foreign govern- 
ments covering origin, age, and identity of imported 
products : 

Note. — This clause appeared in H. R. 8539 as introduced by Mr. 
Doughton on June 18, 1935, and was enacted without change. 

Provided further, That nothing herein nor any deci- 
sion, ruling, or regulation of any department of the Gov- 
ernment shall deny the right of any person to use any 
trade name or brand of foreign origin not presently effec- 
tively registered in the United States Patent Office which 
has been used by such person or predecessors in the United 
States for a period of at least five years last past, if the use 
of such name or brand is qualified by the name of the lo- 
cality in the United States in which the product is pro- 
duced, and, in the case of the use of such name or brand 
on any label or in any advertisement, if such qualifica- 
tion is as conspicuous as such name or brand. 

Note. — The first part of this proviso was added by an amend- 
ment offered bv Senator Johnson, of California, while the bill was 
being debated on the floor of the Senate. There follows an excerpt 
from the Congressional Record relating to this amendment: 

Mr. Johnson. Mr. President. I desire to offer an amendment. 
Mr. George.. Mr. President, we are proceeding somewhat ir- 



Sec. 5e 74 

regularly, because there are some committee amendments as 
yet undisposed of, unless there is objection raised by some other 
Senator, it is quite agreeable to me to have the bill thus, 
considered. 

The President Pro Tempore. Without objection, the amend- 
ment of the Senator from California will be received and will 
be stated . 

The Chief Clerk.. On page 23, line 17, after the word " prod- 
ucts", it is proposed to insert a proviso, as follows: 

Provided, further, That nothing herein nor any decision, 
ruling, or regulation of any Department of the Govern- 
ment shall deny the rights of any person to use any trade 
name or brand of foreign origin not presently effectively 
registered in the United States Patent Office which has 
been used by such person or predecessors in the United 
States for a period of at least 5 years last past. 

Mr. George. Mr. President, I understand that this amendment 
is perhaps inspired by a recent -ruling of the Federal Trade 
Commission. It would seem to have a proper and legitimate 
purpose, and for the committee the amendment is accepted, 
insofar as I can accept it. 

The President Pro Tempore. The question is on agreeing to 
the amendment. 

The amendment was agreed to (Cong. Rec, vol. 79, no. 167, p. 
13403). 
The final language of the proviso was decided upon in conference. 
The statement of the Managers on the part of the House reads in. 
this connection: 

This amendment provides that nothing in the act or any de- 
cision, ruling, or regulation of any Department of the Govern- 
ment shall deny the right of any person to use any trade name 
or brand of foreign origin not presently effectively registered in 
the United States Patent Office which has been used by such per- 
son or predecessors in the United States for a period of at least 
5 years last past. The House bill had no corresponding provi- 
sion. The House recedes with an amendment inserting the sub- 
stance of the Senate provision but adding a limitation that if 
such a name or brand is used its use must be qualified by the 
name of the locality in the United States in which the product 
is produced and on labels and in advertising this qualification 
must be as conspicuous as the name or brand itself (H. R. No. 
1898. Revenue From Distilled Spirits, p. 12). 

It shall be unlawful for any person to alter, mutilate, 
destroy, obliterate, or remove any mark, brand, or label 
upon distilled spirits, wine, or malt beverages held for 
sale in interstate or foreign commerce or after shipment 
therein, except as authorized by Federal law or except: 



75 Sec. 5e 

pursuant to regulations of the Administrator authorizing 
relabeling for purposes of compliance with the require- 
ments of this subsection or of State law. 

Note. — The wording of this paragraph appeared, except for the 
last four words thereof, in H. R. 8539 as introduced by Mr. Doughton 
on June 18, 1935. The last four words, " or of State law.", were 
added in the paragraph in H. R. 8870 as introduced by Mr. Cullen 
on July 16, 1935. At the Hearings before the Finance Committee 
Mr. Beneman, representing the United States Brewers Association, 
suggested the addition of a proviso exempting damage to labels in- 
curred due to the icing of bottles by retailers (record of hearings, 
pp. 99-100). This suggestion was not followed by the committee. 
The report of the Ways and Means Committee contains the following 
statement : 

The labeling requirements also make it unlawful for any per- 
son to alter, mutilate, destroy, obliterate, or remove any mark, 
brand, or label upon distilled spirits, wine, or malt beverages 
held for sale in interstate or foreign commerce or held for sale 
after shipment therein, except as authorized by Federal law or 
except pursuant to regulations of the Administrator authorizing 
relabeling for the purpose of compliance with the labeling re- 
quirements or State law. The provision conforms to that 
previously enacted in the Federal Caustic Poison Act, and is 
believed valid under the doctrine applied in McDermott v. Wis- 
consin (1913) (228 U. S. 115). The provision is designed to 
cover two classes of cases : First, if alcoholic beverages are shipped 
in interstate commerce under illegal labels, the provision 
is intended to preserve the labels in order to prevent destruc- 
tion of the evidence upon which prosecution of the violation 
would be based; and, second, if goods are shipped in inter- 
state commerce under legal labels, the provision is intended to 
prevent the protection given the consumer by Federal law from 
being nullified by destruction or removal, obliteration, or muti- 
lation of the label used in interstate commerce, or by the addi- 
tion of other labels, substitution of labels, or other alteration 
of the labeling, prior to the article's reaching the consumer. 
Regulations .will provide for appropriate exceptions so as to 
take from out of the prohibition appropriate additional labeling 
requirements imposed by a State pursuant to its law, and not 
in conflict with the Federal requirements (H. Rept. No. 1542, 
Federal Alcohol Control Bill, pp. 13-14). 

In order to prevent the sale or shipment or other intro- 
duction of distilled spirits, wine, or malt beverages in 
interstate or foreign commerce, if bottled, packaged, or 
labeled in violation of the requirements of this subsec- 
tion, no bottler, or importer of distilled spirits, wine, or 
malt beverages, shall, after such date as the Administrator 



Sec. 5e 76 

fixes as the earliest practicable date for the application of 
the provisions of this subsection to any class of such per- 
sons (but not later than March 1, 1936, and only after 
thirty days' public notice), bottle or remove from customs 
custody for consumption distilled spirits, wine, or malt 
beverages, respectively, unless the bottler or importer r 
upon application to the Administrator, has obtained and 
has in his possession a certificate of label approval cover- 
ing the distilled spirits, wine, or malt beverages, issued by 
the Administrator in such manner and form as he shall by 
regulations prescribe: Provided, That any such bottler 
shall be exempt from the requirements of this subsection 
if the bottler, upon application to the Administrator, shows 
to the satisfaction of the Administrator that the distilled 
spirits, wine, or malt beverages to be bottled by the appli- 
cant are not to be sold, or offered for sale, or shipped or 
delivered for shipment, or otherwise introduced, in inter- 
state or foreign commerce. Officers of internal revenue 
and customs are authorized and directed to withhold the 
release of such products from the bottling plant or cus- 
toms custody unless such certificates have been obtained, 
or unless the application of the bottler for exemption has 
been granted by the Administrator. The district courts 
of the United States, the Supreme Court of the District 
of Columbia, and the United States court for any Terri- 
tory, shall have jurisdiction of suits to enjoin, annul, or 
suspend in whole or in part any final action by the Ad- 
ministrator upon any application under this subsection ; or 

Xote. — The first two sentences in the above paragraph appeared 
in the same form in Mr. Doughton's bill (H. R. 8539) introduced on 
June 18, 1935. The date before which the Administrator must re- 
quire that certificates of label approval be secured was, however, post- 
poned by the Senate on the recommendation of the Finance Commit- 
tee from January 1, 1936, to March 1, 1936 (H. R. 8870, prints dated 
Aug. 9 and Aug. 13). 

Many clerical amendments were made in the Senate from which 
the Senate receded as a result of the conference. There follows a 
paragraph from the report of the Ways and Means Committee 
which relates to this portion of the Act: 

Provision is made to enforce the labeling requirements at the 
source by means of certificates of label approval to be issued 



77 Sec. 5t (1) 

by the Administrator and to be enforced by internal-revenue 
and customs officers. This system was partially in effect under 
the codes and proved successful in preventing; improperly labeled 
woods from reaching interstate channels. Adequate enforcement 
of the labeling provision would be impracticable without such a 
system. Opportunity for exemption from the requirement of 
obtaining these certificates is afforded industry members who 
demonstrate that their products are not to be shipped in inter- 
state commerce (H. Kept. No. 1542, Federal Alcohol Control 
Bill, p. 13). 

The last sentence of this subsection first appeared in H. R. 8870 
as introduced by Mr. Cullen on July 1G, 1935. Though it was not 
amended, Mr. Jones, counsel for the*Distilled Spirits Institute, sug- 
gested the addition of a phrase authorizing the service of process on 
the Administrator by service on the United States attorneys (record 
of hearings before Senate Finance Committee on H. R. 8870, p. 88). 
This recommendation was not followed by the committee. 

(f) Advertising: To publish or disseminate or cause 
to be published or disseminated by radio broadcast, or in 
any newspaper, periodical, or other publication or by any 
sign or outdoor advertisement or any other printed or 
graphic matter, any advertisement of distilled spirits, 
wine, or malt beverages, if such advertisement is in, or is 
calculated to induce sales in, interstate or foreign com- 
merce, or is disseminated by mail, unless such adver- 
tisement is in conformity with such regulations, to be 
prescribed by the Administrator, (1) as will prevent de- 
ception of the consumer with respect to the products 
advertised and as will prohibit, irrespective of falsity, 
such statements relating to age, manufacturing processes, 
analyses, guaranties, and scientific or irrelevant matters 
as the Administrator finds to be likely to mislead the 
consumer ; 

Note.— The language of the introductory portion of this subsec- 
tion and of clause (1) remained as it appeared in H. R. 8539, as 
introduced by Mr. Doughton on June 18, 1935. except for clerical 
changes, afterwards withdrawn, made in the Senate. In view of 
the similarity of the standards for the regulations authorized m 
this subsection to those set forth in subsection 5 (e) above for 
labeling regulations, the two subsections were usually considered to- 
gether, and much of the material in the notes to subsection 5 .(e). 
therefore, also refers and is applicable to subsection 5 (f). For 
information as to the purposes and scope of this subsection see, 
therefore, the first note to subsection 5 (e) above. In addition, the 
testimony of William I. Denning, representing the National Pub- 



Sec. 5£ (1) 78 

lishers' Association, before the Senate Finance Committee at its hear- 
ings on H. R. 8870, related specifically to the advertising provisions 
(record of hearings, pp. 136-138).' The following excerpts from 
his testimony are worthy of note : 

The Chairman. Let me ask you, has not the Federal Trade 
Commission got authority now to prevent any advertisement 
through fraud or misrepresentation, and so on? 

Mr. Denning. They have. 

The Chairman. How does this broaden it? 

Mr. Denning. So does the Post Office Department. 

The Chairman. How does this broaden the power that is 
given to the Federal Trade Commission with reference to adver- 
tisements? 

Mr. Denning. It goes still further and prescribes certain 
standards to be covered by regulations of the Administrator 
which go to what may be put in the advertisements. 

The Chairman. In other words, it must be first submitted to 
the Administrator? 

Mr. Denning. I did not get your question. 

The Chairman. It must be first submitted to the Administra- 
tor, this advertising? 

Mr. Denning. I imagine it will be, although I am not familiar 
with it ; I am not familiar with the procedure, but I am under 
the impression that the advertising must be submitted to the 
Administrator. 

Senator Capper. I do not find any provision in this section 
here that says specifically that they must first. submit the adver- 
tising to the Administrator. 

Mr. Denning. No, sir ; but I .should think that an advertiser 
would probably feel compelled, in order to be certain that his 
advertising did not violate the regulations that might- be fixed 
by the Administrator, to submit them to the Administrator. 

The Chairman. Was a similar provision to this written into 
the code under the. National Recovery Administration ? 

Mr. Denning. I do not think so, although I think there were 
certain restrictions regarding advertising, but I do not think 
they went this far. I am not positive. 

Senator Barkley. I imagine it follows the practice of the 
Bureau of Chemists which administers the Pure Food Act, where 
general regulations may be prescribed with respect to that adver- 
tising, but I doubt seriously whether the Administrator would 
feel it his duty to pass individually on every advertisement that 
everyone wants to put in the magazine, just as the Bureau of 
Chemists, which does not pass on individual cases of labeling 
under the Pure Food Act. 

Mr. Denning. That is correct, Senator. 

The Chairman. We would have to build up a pretty big bu- 
reau if we did have to go over and approve every advertisement. 

Mr. Denning. The undoubted purposes of this act is to throw 
the primary responsibility on the brewer, the distiller, the recti- 
fier, and the blender of complying with the regulations of the 



79 Sec. 5f (2), (3) 

Administration as to the tvpe of advertising that should be pub- 
lished (id. p. 137). 

(2) as will provide the consumer with adequate in- 
f oruiation as to the identity and quality of the products 
advertised, the alcoholic content thereof (except that 
statements of, or statements likely to be considered as 
statements of, alcoholic content of malt beverages are pro- 
hibited and except that, in case of wines, statements of 
alcoholic content shall be required only for wines contain- 
ing more than 14 per centum of alcohol by volume), and 
the person responsible for the advertisement; 

Note. — The changes made in clause (2) were the same as those 
made in clause (2) of subsection 5 (e) and have already been con- 
sidered in the note appended to that clause. Except for these 
changes the wording of clause (2) remained as it appeared in the 
bill introduced by Mr. Doughton. 

(3) as will require an accurate statement, in the case of 
distilled spirits (other than cordials, liqueurs, and special- 
ties) produced by blending or rectification, if neutral 
spirits have been used in the production thereof, inform- 
ing the consumer of the percentage of neutral spirits so 
used and of the name of the commodity from which such 
neutral spirits have been distilled, or in case of neutral 
spirits or of gin produced by a process of continuous dis- 
tillation, the name of the commodity from which distilled ; 

Note. — The changes made in clause (3) were the same as those 
made in clause (3) of subsection 5 (e) and have already been con- 
sidered in the note appended to the latter clause, with the exception 
that an amendment offered on the floor of the Senate by Senator 
Tydings of Maryland, and agreed to by the Senate, inserted the 
words " if a representation of age is made " immediately after the 
word " rectification." This amendment was suggested by Mr. Jones, 
counsel for the Distilled Spirits Institute, in the brief filed with the 
Finance Committee (record of hearings, p. 88). With respect to this 
amendment, Senator George said: 

Mr. President, the amendment has been given some consid- 
eration by other members of the committee, and it will be agree- 
able to take it to conference (Cong. Rec, vol. 79, no. 167, p. 
13402). 
The amendment was, however, almost immediately eliminated by 
Senator Murphy's amendment striking out the entire clause, and was 
not reinserted by the conferees. 



Sec. 5f (4), (5) 80 

(4) as will prohibit statements that are disparaging of 
a competitor's products or are false, misleading, obscene, 
or indecent; 

Note.— This clause is identical to clause 4 of subsection 5 (e) , and 
reference is made to the note to that clause. 

(5) as will prevent statements inconsistent with any state- 
ment on the labeling of the products advertised. 

Note.— In Mr. Doughton's bill (H. R. 8539) the following ap- 
pears as clause 5 : 

f») As will prevent the use of any trade or brand name with 
respect to which a finding has been made by the Administrator 
under subsection (f) that the use of such name is unfair; and 
(H. R. 8539, print dated June 18, 1935, pp. 20 and 21). 

It does not appear in Mr. Cullen's bill (H. R. 8870) because the sub- 
section 5 (f ) " Unfair Name ", to which it refers, was also eliminated 
from the latter bill. Clause (5) of the Act appeared in the same 
form in Mr. Doughton's bill as clause (6) (H. K. 8539, print dated 
June 18, 1935, p. 21). 

This subsection shall not apply to outdoor advertising in 
place on June 18, 1935, but shall apply upon replacement, 
restoration, or renovation of any such advertising. 

Note. — In H. R. 8539 as introduced on June 18, 1935, this sentence 
read: "This subsection shall not apply to outdoor advertising in 
place on the date of the enactment of this act." In H. R. 8870 as 
introduced on July 16, 1935, the period was changed to a comma 
and the following phrase was added, " but shall apply upon replace- 
ment, restoration, or renovation of any such advertising." 

In the debate on H. R. 8870 on the floor of the House in session as 
the Committee of the Whole, Congressman Buck offered as a com- 
mittee amendment the elimination of the phrase "the date of the 
enactment of this act" and the insertion of "June 18, 1935." In 
offering this amendment, he said : 

Mr. Chairman, I shall explain this amendment so that the 
members of the committee may know the reason for it. 

This amendment is designed to make outdoor advertising 
which has been erected since June 18, 1935, conform to the pro- 
visions of the bill relating to what must be placed on such adver- 
tising and what must not be placed on such advertising. 

Congress has the power to make outdoor advertising no matter 
when erected conform to such provisions and, therefore, the re- 
quirement that advertising erected or repainted since June 18, 
1935, conform to the provisions of the bul is not unreasonable, 
since that date is not an arbitrary date. That date is the date 
of the introduction of the original bill, H. R. 8539, and the 
industry had notice on that date of the contemplated regulation. 
It seemed fair to the committee to permit advertising in place 



81 Sec. 5f 

on and prior to such date to continue until replaced, restored, 
or renovated but that the provisions of the bill ought not to be 
permitted to be avoided by the erection of permanent signs be- 
tween June 18 and the passage of the act. 

Mr. Kvale. Mr. Chairman, will the gentleman yield? 
Mr. Buck. Yes. 

Mr. Kvale. Aside from the merits of the amendment, would 
the gentleman join in a movement to forbid all outdoor nature- 
defacing advertising? 

Mr. Buck. The laws of the State that I have the honor in 
part to represent limits severely that type of advertising. 
Mr. Truax. Mr. Chairman, "will the gentleman yield? 
Mr. Buck. Yes. 

Mr. Truax. The gentleman states that Congress has the power 
to regulate outdoor advertising. I think the gentleman is right, 
but why would not the Congress have the same right to regu- 
late outdoor advertising, for instance, of the gasoline and oil 
companies, the Standard Oil, the Sinclair, the Texas Co.? They 
all furnish their dealers, who are confined exclusively to the sale 
of their own products, with electric signs. As I understand 
this bill, it will impose very drastic regulations upon the use 
of such signs and outdoor advertising material. Is that true? 
Mr. Vinson of Kentucky. It does not restrict the use, but it 
prohibits a distillery or a brewery from furnishing signs and 
other things to induce the retailer to purchase exclusively the 
product of the distillery or brewery. 

Mr. Buck. If the gentleman will permit, it goes further than 
that, It prohibits the placing of misleading advertising on any 
signs that may be erected. 

Mr. Truax. The point I wish to make is: If we enter this 
field as we are entering it in this bill, why not also enter the 
fields of similar advertising? For instance, the Coca Cola Co. 
That company furnishes all its dealers with prepared signs, 
outdoor advertising signs. Why discriminate and single out 
the brewers and beer dealers? _ 

Mr. Buck. I am afraid our committee has no jurisdiction 
over these other subject matters. They will have to be taken 
care of in some other committee, no matter how meritorious 
the contention of the gentleman may be. 

Mr. Truax. I wanted to make the point that this section ot 
the bill, in my judgment, is unfair and discriminatory in that 
it singles out* this 'particular traffic and this particular com- 
modity and will dictate to the dealers and to the wholesale 
brewers. . . 

Mr. Buck. Mav I suggest that the liquor industry, including 
the wine and brewing industry, has always been subject to 
Federal jurisdiction. 

Mr. Truax. In the matter of advertising? 
Mr. Buck. In the matter of almost any sort of control that 
the Government wants to place upon these industries. 
Mr. Truax. But not advertising. 



Sec. 5f 82 

Mr. Buck. We have never placed it upon tliem before in this 
form, but the Food and Drug Act forbids false or misleading 
labeling or advertising. 

(Here the gavel fell.) 

The Chairman. The question is pn agreeing to the commit- 
tee amendment. 

The committee amendment was agreed to (Cong. Jtec, vol. 79, 
no. 152, p. 12267). 

The prohibitions of this subsection and regulations 
thereunder shall not apply to the publisher of any news- 
paper, periodical, or other publication, or radio broad- 
caster, unless such publisher or radio broadcaster is en- 
gaged in business as a distiller, brewer, rectifier, or other 
producer, or as an importer or wholesaler, of distilled 
spirits, wine, or malt beverages, or as a bottler, or ware- 
houseman and bottler, of distilled spirits, directly or in- 
directly or through an affiliate. 

Xote. — William I. Denning, representing the National Publishers 
Association, in his testimony before the Senate Finance Committee 
at the hearings on H. R. 8870 stated that since the publisher does 
not prepare the advertisements that appear in his publication he 
should be expressly exempted from the requirements and penalties 
of this subsection (record of hearing, pp. 136-138). The sentence 
in the Act was suggested by Mr. Dennmg, adopted by the Finance 
Committee and agreed to by the Senate and the conferees. The 
following statement appears in the Finance Committee report on 
H. R. 8870: 

The committee amendments include a clarifying provision 
which makes it definite that the industry member, and not the 
newspaper or periodical publisher or radio broadcaster, is re- 
sponsible for any advertising of liquor and wines that fails to 
conform to the commissions regulations requiring informative 
and prohibiting false advertising (S. Rept. 1215, Federal Al- 
cohol Control Act, p. 8). 

The managers on the part of the House mentioned this sentence : 

This is a clarifying amendment and makes certain that the 
prohibitions with regard to false advertising and the require- 
ments as to informative advertising shall not apply to the pub- 
lisher of any newspaper, periodical, or other publication, or 
radio broadcaster unless such publisher or radio broadcaster 
is engaged in publishing the newspaper, periodical, or other 
publication, or in transmitting radio broadcasts, is engaged in 
the distilled spirits or wine industry, directly or indirectly. The 
House recedes with an amendment applying similar provisions 
in the case of malt beverages (H. Rept. 1898, Revenue From Dis- 
tilled Spirits, p. 13). 



83 Sec. 5 

The provisions of subsections (a), (b), and (c) shall 
not apply to any act done by an agency of a State or politi- 
cal subdivision thereof, or by any officer or employee of 
such agency. 

Note. — This paragraph appeared in identical form in H. R. 8870 
as introduced by Mr. Cullen on July 16, 1935 (H. R. 8870, print dated 
July 16, 1935, p. 23). It was not amended by either House. In 
connection with this paragraph the Ways and Means Committee's 
report states: 

The labeling and advertising requirements are made applicable 
to State agencies. While in the usual case they will not conduct 
transactions in the field of operation to which these provisions 
are confined, to the extent that they do so they are operat- 
ing in a Federal field, and the labeling and advertising provi- 
sions of the bill are so necessary to safeguard the interests of 
consumers that it is desirable that State agencies should be sub- 
ject to them. (H. Kept. no. 1542, Federal Alcohol Control Bill, 
p. 14). See also notes appended to the last paragraph of 
section 3 and to subsection 5 (d). 

In the case of malt beverages, the provisions of subsec- 
tions (a), (b), (c), and (d) shall apply to transactions 
between a retailer or trade buyer in any State and a 
brewer, importer, or wholesaler of malt beverages outside 
such State only to the extent that the law of such State 
imposes similar requirements with respect to similar 
transactions between a retailer or trade buyer in such 
State and a brewer, importer, or wholesaler of malt bever- 
ages in such State, as the case may be. In the case of malt 
beverages, the provisions of subsections (e) and (f ) shall 
apply to the labeling of malt beverages sold or shipped or 
delivered for shipment or otherwise introduced into or 
received in any State from any place outside thereof, or 
the advertising of malt beverages intended to be sold or 
shipped or delivered for shipment or otherwise introduced 
into or received in any State from any place outside 
thereof, only to the extent that the law of such State im- 
poses similar requirements with respect to the labeling or 
advertising, as the case may be, of malt beverages not sold 
or shipped or delivered for shipment or otherwise intro- 



Sec. 5 84 

duced into or received in such State from any place out- 
side thereof. 

Xote. — This paragraph was introduced into the bill by the con- 
ferees and represents a compromise between the provisions of the 
bill as passed by the House, which treated brewers in the same man- 
ner as the other liquor industries except as to permits, and the Sen- 
ate amendments which eliminated the brewers and malt beverages 
from the bill entirely. This compromise has already been discussed 
in the note to section 3. The statement of the managers with respect 
to this compromise and comments made on the floor of the House 
in connection therewith will be found in that note. When questioned 
on the floor of the House with respect to this compromise, Mr. 
Doughton, one of the managers on the part of the House and chair- 
man of the Ways and Means Committee, explained it as follows : 

.. Mr. Celler. Is it the purpose of the chairman of the Commit- 
tee on Ways and Means to adopt some measure at the next ses- 
sion of the Congress which would put brewers under the same 
sort of regulation? 

Mr. Doughton. That was the understanding, so far as you 
could have an understanding. We cannot bind the Congress. 
The Committee on Ways and Means cannot determine what this 
Congress will do at the next session, but we all felt that brewers 
should be under more rigid control. But we do feel this, that 
on the question of brewers, we got a reasonably fair compromise. 
The Alcohol Control Administration and those in control — my 
good friend Fuller to the contrary notwithstanding, who says 
we got nothing — say that the regulation of the breweries under 
the Senate amendment will be helpful, that it is not a complete 
surrender. Moreover, so far as beer is concerned, we put it un- 
der the same control in every State that the State law imposes 
at the present time. Further, 80 percent of the business is intra- 
state and cannot be controlled by the Federal Government at all. 

Mr. Fuller. Mr. Speaker, will the gentleman yield? 

Mr. Doughton. Yes. 

Mr. Fuller. The gentleman does not mean to tell the House 
that the Alcohol Board of Control can regulate 80 percent of 
the beer that is sold inside the State? 

Mr. Doughton. Oh, no; I do not; but if the State does not 
want control, why should the Federal Government want con- 
trol? I thought the gentleman believed in State rights. 

Mr. Fuller. Why control distilleries when you cannot reach 
the Jt>reweries? 

Mr. Doughton. That is an entirely different matter. So far 
as the breweries are concerned, it was testified by the head of the 
Alcohol Control Administration that the breweries, since the 
Alcohol Administration had been set up under the N". R. A., have 
conducted themselves in a commendable manner. I was in favor 
of the breweries being licensed, but we could not get that in the 
bill (Cong. Rec, vol. 79, no. 177, p. 14808). 



85 Sec 6 

The Administrator shall give reasonable public notice, 
and afford to interested parties opportunity for hearing, 
prior to prescribing regulations to carry out the provisions 
of this section. 

Note. — This paragraph did not appear in H. R. 8539. At the 
hearings before the Ways and Means Committee it was urged that 
regulations be prescribed by the Administrator only after reason- 
able notice and an opportunity for Jiearing. (See brief filed by 
Dr. Doran, Administrator of the Distilled Spirits Institute, record 
of hearings before Ways and Means Committee on H. R. 8539, 
p. Ill; brief filed by Mr. Lourie, executive secretary of the Asso- 
ciation of Alcoholic Beverage Importers, id. p. 112; brief filed by 
Mr. Caskey, general counsel of the League of Distilled Spirits Rec- 
tifiers, Inc., id. p. 114; testimony of Mr. Alprin, appearing as coun- 
sel for the Wholesale Wine and Spirits Merchants Association of 
New York, id. p. 80; Congressman Celler, of New York, id. pp. 88 
and 89.) 

The paragraph in its present form appeared in H. R. 8870 as in- 
troduced by Mr. Cullen (H. R. 8870, print dated July 16, p. 24, 
and was not amended by either House. The sentence is paraphrased 
in the Ways and Means Committee report (H. Rept. No. 1542, 
p. 14)). 

BULK SALES AND BOTTLING 

Sec. 6. (a) It shall be unlawful for any person^- 

(1) To sell or offer to sell, contract to sell, or other- 
wise dispose of distilled spirits in bulk except, under 
regulations of the Administrator, for export or to the 
following, or to import distilled spirits in bulk except, 
under such regulations, for sale to or for use by the 
following: A distiller, rectifier of distilled spirits, per- 
son operating a bonded warehouse qualified under the 
internal-reYenue laws or a class 8 bonded warehouse 
qualified under the customs laws, a wine maker for 
the fortification of wines, a proprietor of an indus- 
trial alcohol plant, or an agency of the United States 
or any State or political subdivision thereof. 

(2) To sell or offer to sell, contract to sell, or other- 
wise dispose of warehouse receipts for distilled spirits 
in bulk, unless such warehouse receipts require that 
the warehouseman shall package such distilled spirits, 
before delivery, in bottles labeled and marked in ac- 



Seo. 6 86 

cor da nee with law, or deliver such distilled spirits in 
bulk only to persons to whom it is lawful to sell or 
otherwise dispose of distilled spirits in bulk. 

(3) To bottle distilled spirits, unless the bottler- is 
a person to whom it is lawful to sell, or otherwise dis- 
pose of distilled spirits in bulk. 

(b) Any person who violates the requirements of this 
section shall, upon conviction thereof, be fined not more 
than $5,000 or imprisoned for not more than one year or 
both, and shall forfeit to the United States all distilled 
spirits with respect to which the violation occurs and the 
containers thereof. 

(c) The term " in bulk " means in containers having a 
capacity in excess of one wine gallon. 

Note. — The handling of distilled spirits in bulk brought forth the 
most heated and hard-fought battle in the enactment of this law. 
The House and the Senate took directly opposing and irreconcilable 
positions on this point. The House contended against the placing 
of restrictions on the distribution of whisky in barrels, while the 
Senate held that distilled spirits should only be handled in bulk by 
persons under the direct supervision of the' Alcohol Tax Unit of the 
Treasury Department. Section 6 of the act was recommended by 
the Finance Committee in the above form to replace subsection 4 (e) 
of the bill (H. R. 8870), as passed by the House. This subsection 
provided roughly that no provision of a basic permit and no rule, 
regulation, or order issued under any act of Congress should pro- 
hibit the use or sale of any wooden barrel, cask, or keg as a container 
for distilled spirits, wine, or malt beverages unless applicable in a 
State in which State law prohibited the use or sale of such barrel, 
cask, or keg. It also provided (2) that only rectifiers or persons 
qualified as rectifiers, distillers, or the operators of internal revenue 
or customs bonded warehouses holding basic permits or industrial- 
alcohol plants or State agencies could package or repackage distilled 
spirits for sale in bottles. It further provided (3) that no person 
subject to occupational tax as a retailer should bottle distilled spirits 
for sale or qualify as a rectifier, and that no such person, except a 
bona fide hotel or club, should remove distilled spirits from a barrel, 
cask, or keg for purposes of sale. A $100 fine or imprisonment for 
not more than 1 year was provided as a penalty for violating 
clauses (2) and (3). 

Clause (1) appeared in H. R. 8539 as introduced by Mr. Doughton. 
At the hearings before the Ways and Means Committee on this bill 
the provision was commented on by Mr. Choate (record of hearings 
before the Ways and Means Committee on H. R. 8539, p. 11), and 
severely criticized bv Harold X. Graves. Assistant to the Secretary 
of the Treasury (id. pp. 30-11 and 41) ; Arthur Mellott, Deputy 



87 Sec. 6 

Commissioner, Bureau of Internal Revenue (id. pp. 44-46, 48-54) ; 
George E. Kppley, a member of the Ohio State Liquor Board (id. 
pp. 57-58) ; Michael J. Flynn, representing the Labor National Com- 
mittee for Modification and Repeal (id. pp. 107-109) ; Dr. J. M. 
Doran, Administrator, Distilled Spirits Institute (id. pp. 109-110) ; 
Harry L. Lourie, executive secretary, Association of Alcoholic Bev- 
erage Importers (id. p. 112) ; Fred A. Caskey, general counsel League 
of Distilled Spirits Rectifiers, Inc. (id. pp. 113-115). The subsec- 
tion was commended by Frank A. Coleman, president National 
Wholesale Wine and Liquor Dealers' Association (id. p. 72) and by 
Hugh J. McMackin, secretary of the same association who filed 
several letters supporting the subsection (id. pp. 120-131). A. Sid- 
ney Johnston, president Associated Cooperage Industries of Amer- 
ica (id. pp. 73-79) ; H. P. Somerville, chairman National Legislative 
Committee, American Hotel Association (id. pp. 98 and 99) ; and 
F. P. Hankerson, secretary National Legislative Committee of the 
Cooperage Industry (id. pp. 99-102). 

Clauses (2) and (3) of the House provision on bulk sales first 
appeared in H. R. 8870 as introduced by Mr. Cullen on July 16, 1935 
(H. R. 8870, print dated July 16, 1935, pp. 9 and 10). 

The principal arguments adduced in favor of the House provision 
relaxing the strict limitations on bulk sales were: (1) That the 
cooperage industry would be greatly aided thereby; (2) that this 
would tend to destroy an alleged liquor monopoly operated by the 
large distillers and bottle manufacturers; (3) that the price of 
whisky would be lowered with the accompanying benefits to the 
consumer; (4) because of lower prices the bootlegger's inducement 
to violate the laws would be decreased; (5) that bootlegging con- 
tinued to flourish under the bulk sales restrictions and that a differ- 
ent and less discriminatory method of control should be tried. In 
its report, the Ways and Means Committee placed the following 
statement with respect to its position : 

Subsection (e) of section 4 contains a provision of general 
application, which is designed to prevent the operation of rules 
and regulations promulgated under Federal law, which rules 
and regulations prohibit the use of barrels of wood of one 
or more wine gallons capacity as containers in which to trans- 
port, store, or sell, or from which to sell distilled spirits, wine, 
or malt beverages. This provision invalidates certain existing 
regulations which limit the retail sale of alcoholic beverages 
to sale in glass containers. The last sentence of the first para- 
graph of the subsection is inserted out of abundant caution so 
that the limitations on the power of the executive branch of the 
Government contained in this subsection will not be construed 
• as giving authority to a permittee to violate State law which 
prohibits the sale or use of such barrels. Nor does such sen- 
tence indicate an enlargement of the scope of the powers to 
prescribe conditions of permits under the bill. 

The second and third paragraphs of the subsection are de- 
signed to meet objections to permitting indiscriminate bottling : 
First, that there will be added likelihood of loss of revenue if 
a wholesaler acquiring distilled spirits in bulk in wood may not 



Sec. 6 88 

only dispense them from such containers but also package or 
repackage them for resale in glass or other containers since he 
has authority to receive the liquor in wooden containers; and 
second, that' the labeling and other requirements of law will 
readily be evaded if bottling can occur in premises at which 
Government officers are not stationed and which, in case of re- 
tailers, are not under a basic permit. These ' paragraphs pro- 
hibit such packaging or repackaging by a retailer in any case 
and by a wholesaler unless he qualifies as a rectifier. In such 
case, the wholesaler is specifically authorized to become a rectifier 
and then is subject to the provisions of law applicable to recti- 
fiers. Further, while authority is given to the use of wooden 
barrels, etc., as containers in which to sell distilled spirits to 
a wholesaler, retailer, or the individual consumer, an express 
prohibition is contained in paragraph (3) under which no re- 
tailer except a retailer operating a bona fide hotel or club, or his 
agents in the course of their duties, may break such packages 
for sale on or off the premises. In such cases the hotel or club 
may remove the contents to decanters or otherwise for sale by 
it but all other retailers must sell the spirits barrel and all in 
the unbroken packages (H. Kept. no. 1542, Federal Alcohol 
Control Bill, p. 10). 

At the hearings of the Senate Finance Committee on H. R. 8870, 
Mr. Choate again criticized the House provision but stated that it 
had been improved by the addition of clauses (2) and (3) (record of 
hearings before the Senate Finance Committee on H. R. 8870, pp. 
5-9). Mr. Lockwood Thompson, former vice chairman of the Ohio 
State Liquor Board and vice chairman of the National Conference of 
State Liquor Administrators, appearing solely in his own behalf, 
also objected to the House provision (id. p. 66). E. P. Mulrooney, 
chairman of the New York State Liquor Authority and chairman of 
the National Conference of State Liquor Administrators, argued 
strongly against the House provision (id. pp. 76-81). The State 
Treasurer of Wisconsin and the legal adviser of the Maine State 
Liquor Commission, in letters filed in the record, also requested the 
elimination of this subsection (id. pp. 81 and 150, respectively). Mr. 
Jones, counsel for the Distilled Spirits Institute, Mr. Lourie, Mr. 
Caskey and Mr. Alprin again voiced the opposition of their associa- 
tions to the provision (id. pp. 87-89, 102, 147-148, and 148-149, re- 
spectively). Mr. Michael Curtes, representing the National Retail 
Liquor Package Stores Association, argued against permitting hotels, 
clubs, or restaurants to secure distilled spirits in bulk (id. pp. 104— 
107) j filing letters from several State package store associations sup- 
porting his contention. Mr. Tapee, representing the Institute of 
Wine and Spirit Distributors, Inc., opposed the provision and filed a 
brief for that organization (id. pp. 108-111). 

In support of the provision Mr. Hankerson and Mr. Johnston again 
voiced the views of the cooperage industry and filed several support- 
ing letters and articles (pp. 15-38). Mr. McMackin reiterated the 
desires of his association and supported that position with a brief, 
letters, articles, and a compilation of statistical data (id. pp. 38-57). 
Miss Louise Gross, the national chairman of the Women's Moderation 



89 Sec. 6 

Union, spoke in favor of the House provision from the feminine 
consumer's point of view (id. pp. 67-71). Mr. Somerviile again 
urged that hotels be permitted to obtain bulk distilled spirits (id. 
pp. 95 and 96). 

The Finance Committee's report contains a brief summary of the 
arguments in support of its suggested amendment restricting bulk 
distribution: 

The House bill (see. 4 (e)) permitted the distribution of 
distilled spirits in bulk, i. e., in containers having a capacity 
of more than one wine gallon, to wholesalers, retailers (in- 
cluding hotels, restaurants, clubs and saloons), and to consumers, 
as well as to distillers and rectifiers, provided the barrel, cask r 
keg, or other container was made of wood. The only excep- 
tion related to bulk distribution into States whose laws pro- 
hibited bulk sales. On the other hand, while bulk sales were 
freely permitted, only a limited class of persons receiving bulk 
goods were permitted to bottle them, principally distillers, rec- 
tifiers, and certain warehousemen. Further, while bulk goods 
could be sold to the consumer by retailers the only retailers 
who could dispense bulk goods by the drink were bona fide 
hotels and clubs. 

The committee recommends an amendment eliminating the 
House provisions and prohibiting bulk distribution. The com- 
mittee is of the opinion that restriction of bulk distribution is 
necessary for the following reasons : 

First. Bulk liquor in the hands of wholesalers, retailers, and 
other persons whose plants are not subject to constant Treasury 
supervision and at whose plants Treasury inspectors are not 
stationed makes it likely that rectifying, blending, or bottling 
operations will be carried on in violation of law, and also that 
the bottling of liquors under improper labels and the bottling 
of liquors that have been tampered with in various ways not 
disclosed to the purchaser, will be engaged in. Control of bulk 
distribution and the privilege of bottling is essential if labeling 
requirements are to be adequately enforced, evasion of recti- 
fiers' tax prevented, and adulteration of liquor controlled. 

Second. The right of wholesalers and retailers to have bulk 
goods on the premises facilitates the use of wholesale and retail 
outlets for the disposition of bootleg liquor. The refilling of 
bulk containers for legitimate liquor with liquor from bootleg 
sources is an easy matter. With the possession of bulk liquors 
limited principally to distillers, rectifiers, and certain ware- 
housemen, the presence of such liquors on other premises in- 
dicates that the liquors were obtained from illegitimate sources. 
The Treasury Department estimates approximately $5,000,000 
additional appropriation would be necessary annually for ade- 
quate policing of wholesale and retail outlets if wholesale and 
retail outlets were permitted to handle bulk goods. 

Third. Some 18 States now have legislation affirmatively pro- 
hibiting bulk sales within the State to wholesalers, retailers, or 
consumers. The laws of 9 States still prohibit all sale of dis- 
stilled spirits, and the laws of 11 States by reason of establish- 



Sec. 6 90 

ment of liquor monopolies or State-stores systems control bulk 
sales within the State. If the Federal Government is to ade- 
quately enforce the protection afforded by the twenty-first 
amendment with respect to these States, bulk distribution must 
be prohibited. Such distribution, despite local laws relating to 
bulk sales, makes possible the bringing of bulk goods into the 
State or into adjoining States and greatly facilitates the viola- 
tion of the local laws. 

Fourth. Bulk distribution breaks down the control over bott- 
ling established by the Treasury Department through its licens- 
ing of bottle manufacturers and the control over the use of 
bottles established by that Department pursuant to the Bottling 
Act passed at the last session of Congress. 

The committee amendment prohibits all bulk distribution ex- 
cept to distillers, rectifiers, operators of internal-revenue bonded 
warehouses or customs-manipulation bonded warehouses, pro- 
prietors of industrial alcohol plants, and State agencies. It 
thereby prohibits the dispensing of liquor from bulk packages 
and, of course, eliminates necessity for consideration of the 
preferential treatment given to hotels and clubs by the House 
bill. The committee amendment retains a valuable feature of 
the House bill under which bottling was controlled and limits 
bottling to those persons named above who are entitled to 
receive bulk goods. The committee amendment does not 
discriminate between distribution in glass, wood, steel, or other 
containers. So far as the committee amendment is concerned 
containers of any material can be used for distribution both in 
bulk and in packages of a gallon or less. Any limitations as to 
the kind of materials that can be used for containers will flow 
not from the committee amendment, but from the provisions of 
the Bottling Act previously passed by Congress. 

The restriction of bulk distribution was urged by the Federal 
Alcohol Control Administration, the Treasury Department, the 
National Conference of State Liquor Control Officials, various 
State liquor control authorities, and, with the exception of one 
group of wholesalers, by all the liquor trade associations appear- 
ing before the committee. Under the codes of fair competition 
for distillers, rectifiers, importers, and wholesalers, bulk distri- 
bution of distilled spirits was prohibited substantially in accord- 
ance with the principles set forth in the committee amendment, 
and these provisions, it is understood, were fully acquiesced in by 
the several industries as represented by their respective code au- 
thorities. Since the termination of the codes the Treasury has 
attempted to control certain phases of the bulk distribution and 
bottling problem through regulations recently promulgated. 
The validity of these regulations has been seriously questioned 
(S. Rept. No. 1215, Federal Alcohol Control Act, pp. 4, 5, 
and (>). 

The House provision was fully discussed during the debate on 
H. R. 8870 on the floor of the House in session as the Committee of 
the Whole. (Cong. Rec, Apr. 23, 1935, vol. 79, no. 151, pp. 12179- 
12181, 12182-12183, 12184-12185, 12188, 12189-12190, 12198-12203, 



91 Sec. 6 

reuse of charred barrels, Cong. Rec. July 24, 1935, vol. 79. no. 152, p. 
12259-12262 bona fide hotels and clubs, 12264-12265 bulk liquor in 
retail stores, 12265 protecting State bulk restrictions.) 

At the debate on the House bill (H. R. 8870, print dated Jill}- 25, 
1935) on the floor of the Senate, Senator George postponed consid- 
eration of the bulk sales provision until the other provisions of the 
bill had been considered (Cong. Rec, Aug. 13, vol. 79, no. 167, p. 
13397). 

Senator Clark of Missouri, a member of the Finance Committee, 
bitterly opposed the committee's amendments with respect to bulk 
sales (id. 13403-13407). In answering Senator Clark and in expla- 
nation of the committee's amendments, Senator George of the com- 
mittee said in part: 

The matter ought not to be settled, because it is a much larger 
problem, on the basis of the dispute between the bottle makers 
and the cooperage interests, but of course if the same public 
purpose can be subserved by dealing fairly in our legislation 
with any or all industries, we would be disposed to take that 
course and should take that course. The large question here 
is whether it can be done. I wish to call attention to the fact 
that, without being considered an expert, it seems to me every- 
one is obliged to reach the conclusion that if bulk sales shall be 
permitted, it will be found very easy to adulterate whisky ia 
large quantities and to dispense such whisky after adulteration. 

1 also wish to call attention to the fact that the Treasury 
officials have taken a very positive, very definite, and possibly 
a very justifiable position upon that question not only in this ' 
particular proposed legislation but in an act which we passed 
last year, known as the " Bottling Act." The Treasury officials 
take the position — and certainly we must accept their statement 
as being true — that if bulk handling of whisky by the whole- 
salers and by the retailers shall be permitted, the Treasury will 
have greatly to increase their revenue force; and it is estimated 
that an additional cost of $5,000,000 will be involved if the bulk 
sales provisions carried in the House bill shall be enacted into 
law. 

***** 

The committee amendment does not prohibit all bulk distribu- 
tion. It makes possible and authorizes bulk distribution to dis- 
tillers, to rectifiers, to operators of internal-revenue bonded 
warehouses, to customs-manipulation bonded warehouses, to 
proprietors of industrial-alcohol plants, and to all State agencies 
and State stores. A large bulk distribution of whiskies is made 
possible under the committee amendment. What the committee 
amendment seeks to do is to make it more difficult to carry on 
successfully the bootlegging which would necessarily follow, as 
the Treasury Department and the Federal Alcohol Control 

Administration think. 

***** 

There is, however, another very important question involved 
in this particular bill. It is a matter of very serious importance, 
and I wish to call the attention of the Senate to it. 



Sec. 6 92 

"When we repealed the eighteenth amendment, we did not 
stop with the mere repeal of the amendment; but we declared 
in the twenty-first amendment to the Constitution that — 

The transportation or importation into any State, Ter- 
ritory, or possession of the United States for delivery or use 
therein of intoxicating liquors, in violation of the laws 
thereof, is hereby prohibited. 

If that is the responsibility and duty of the Congress — and 
it is — then it is the responsibility of the Congress equally to 
take every step which will legitimately protect the dry States. 
If we permit bulk sales of liquor in all the States adjoining 
a dry State, it will be entirely impossible for such State to pro- 
tect itself against the steady and almost uninterrupted flow of 
liquor inside its borders. That has been the experience of dry 
States in the past, because we did not prohibit the sale of 
liquor in bulk until the repeal of the eighteenth amendment. 

* * * * * 

I now call attention to the fact that the legislatures of 18 
States have affirmatively prohibited the sale of liquor in bulk. 

Mr. Clark. Mr. President, will the Senator yield? 

Mr. George. I yield to the Senator from Missouri. 

Mr. Clark. The Senator does not contend, does he, that the 
enactment of the provision in the House bill would in any way 
affect the requirements of any State which prohibited bulk sales? 

Mr. George. I undoubtedly do, because that was the effect of 
the testimony before the committee. I am coming to that; but 
I wish again to call attention to the fact that 18 States have 
affirmatively prohibited bulk sales within their borders to whole- 
salers, to retailers, or to consumers. Why? Because, however 
we may argue about it here, those 18 States know very well that 
it is easier to bootleg liquor if bulk sales are permitted. 

Not only have 18 States prohibited bulk sales but in 11 other 
States State monopolies or State stores have been authorized 
and established, which control the bulk sales within those States; 
and there are, of course, 9 States which still prohibit the sale. 
of whisky legally in any form within their borders. So that 
out of the whole number of our States 29 are controlling the 
sale of liquor in bulk, and in 9 others no sale is legalized, what- 
ever the form in which the liquor is distributed. 

* ^ * * * * * * 

Minds may differ as to whether there will be a better oppor- 
tunity to prevent bootlegging if bulk sales shall be outlawed, 
• and reasonable men may take different positions upon that ques- 
tion. It seems to me the weight and force of the reasoning is in 
favor of the committee amendment. It is certainly the judg- 
ment of the Treasury Department, whose officials have had con- 
siderable struggle in their effort to collect the revenue, and it is 
certainly the judgment of the Federal Alcohol Control Adminis- 
tration that bulk sales directly tend to increase the distribution 
of bootleg liquor, and that by prohibiting and restricting bulk 
sales, as the Senate committee amendment does restrict and pro- 
hibit them, the problem will be much more easily handled. 






93 Sec. 6 

It seemed to the committee that the judgment of those charged 
directly with the responsibility of protecting the revenue and 
of administering the law of the land, who have given to this 
subject study, and have been compelled to examine and reexamine 
the whole question from time to time over many, many months, 
could well be relied upon in considering this important feature 
" of the bill. 

It was also pointed out by some of the witnesses who appeared 
- and who spoke from experience that there would be no very great 
increase in the use of barrels in any event, even if bulk sales were 
permitted. 

They pointed out that barrels were already used and that 
under Treasury regulations the cooperage industry as an indus- 
try was faring about as well as it would fare if bulk sales were 
permitted. But that seemed to me to be more or less beside the 
question in the settlement of the problem upon a basis of sound 
public policy whether bulk sales should be permitted or re- 
stricted or prohibited. 

Mr. President, I do not care to argue the question longer. It 
is important, and I think that there should be a full representa- 
tion of the Senate when the vote is taken on the amendment. I 
merely wish to call attention to the fact that the committee 
amendment does not prohibit bulk distribution to distillers, to 
the rectifiers, and to the operators of internal revenue bonded 
warehouses or customs bonded warehouses, or proprietors of 
industrial-alcohol plants, or to any State agency or State monop- 
oly, and I call attention also to the fact that the majority of 
the States where this question has been considered themselves 
decided that either the total prohibition of bulk sales or the 
restriction of bulk sales very much in line with the Finance 
Committee amendment was desirable (Cong. Rec, vol. 79, no. 
167, pp. 13407 and 13408). 
The debate continued in the* Senate with arguments against the 
amendment by Senators Robinson, Lewis, and McKellar (id. 13408- 
13410). Senator Barkley of Kentucky spoke briefly in favor of the 
amendment (id. 13410-13411). The amendment finally passed by a 
vote of 59 to 24 (id. 13413) without specific discussion of the 
wording of the amendment. 

The Statement of the Managers on the Part of the House sum- 
marizes the bulk sale and bottling provisions of the House bill and 
continues : 

Senate amendments numbered 40. 41, and 42 strike out the 
House provisions. Senate amendment numbered 132 makes it 
unlawful for any person to sell or offer to sell, contract to sell or 
' otherwise dispose of distilled spirits in containers having a 
capacity in excess of 1 gallon, except under regulations of the 
Commission for export, or to a distiller or rectifier (including 
a wholesaler who qualifies as a rectifier) of distilled spirits, 
person operating a bonded warehouse under the internal-revenue 
laws or a class 8 bonded warehouse qualified under the cus- 
toms laws, a wine maker for the fortification of wines, a pro- 
prietor of an industrial alcohol plant, or an agency ol the 



Sec. 7 94 

United States or any State or political subdivision thereof. 
The Senate amendment also makes it unlawful for any person 
to import distilled spirits in bulk unless he is one of the list 
above specified or unless for sale to or use by one of such per- 
sons. The Senate amendment further makes unlawful transac- 
tions in warehouse receipts covering spirits in bulk unless the 
particular receipt includes among its terms a requirement that 
the warehouseman shall, before delivery of the distilled spirits, 
pursuant to the delivery of the receipt, package them in bottles 
labeled and marked in accordance with law, or deliver them in 
bulk only to persons to whom it is lawful to sell or otherwise 
dispose of distilled spirits in bulk; i. e., the persons in the list 
above specified. The Senate amendment further provides that 
it is unlawful for any person to bottle distilled spirits, or pack- 
age or repackage distilled spirits in bottles, unless the bottler 
is a person to whom it is lawful to sell or otherwise dispose of 
distilled spirits in bulk ; i. e., a person in the list above specified. 
A criminal penalty of $5,000 or imprisonment for not more 
than 1 year, or both, is provided for the violation, and all dis- 
tilled spirits and the containers thereof with respect to which 
a violation occurs are forfeited to the United States. (H. Rept. 
1898, Revenue From Distilled Spirits, pp. 10, 11. Numbers refer 
to H. R. 8870, print dated Aug. 13, with the amendments of 
the Senate numbered.) 

PENALTIES 

Sec. 7. The District Courts of the United States, the 
Supreme Court of the District of Columbia, and the 
United States court for any Territory, of the District 
where the offense is committed or threatened or of which 
the offender is an inhabitant or has his principal place of 
business, are hereby vested with jurisdiction of any suit 
brought by the Attorney General in the name of the United 
States, to prevent and restrain violations of any of the 
provisions of this Act. Any person violating any of the 
provisions of sections 3 or 5 shall be guilty of a misde- 
meanor and upon conviction thereof be fined not more 
than $1,000 for each offense. Subject to the approval of 
the Attorney General, the Administrator is authorized, 
with respect to any violation of this Act, to compromise 
the liability arising with respect to such violation (1) 
upon .payment of a sum not in excess of $500 for each 
offense, to be collected by the Administrator and to be 
paid into the Treasury as miscellaneous receipts, and (2) 
in case of repetitious violations and in order to avoid 



95 Sec. 7 

multiplicity of criminal proceedings, upon agreement to 
a stipulation that the United States may, on its own 
motion upon five days' notice to the violator, cause a 
consent decree to be entered by any court of competent 
jurisdiction enjoining the repetition of such violation. 

Xote. — This section appears in the same form as that in which it 
was included in H. R. 8539, as introduced by Mr. Doughton on 
June 18, 1935, except that the phrase " prior to the commencement 
of court proceedings " appeared in the third sentence immediately 
after the phrase " the Administrator is authorized." Only clerical 
changes, afterwards withdrawn, were recommended by the Finance 
Committee. This phrase was stricken out as the result of an amend- 
ment offered by Senator Tydings, of Maryland, while the Finance 
Committee's- amendments and the report of the committee were 
being considered on the floor of the Senate (Cong. Rec, vol. 79, 
no. 167, p. 13403). This amendment was agreed to at the conference 
and was explained : " The Senate amendment provides this power 
of compromise can be exercised either before, pending, or after com- 
pletion of court proceedings " (H. Rept. 1898, Revenue From Dis- 
tilled Spirits, p. 13). The following statement with respect to this 
section appears in the report of the Ways and Means Committee : 

Section 6 provides a penalty not in excess of $1,000 for 
engaging in operations without a permit or for violating the 
unlawful practice provisions. Prior to the commencement of 
court proceedings, the Administrator is authorized, subject to 
the approval of the Attorney General, to compromise any such 
penalty upon payment of an amount not in excess of $500 for 
each offense. Sums so collected will be paid into the Treasury 
as miscellaneous receipts. In the event that repetitious viola- 
tions are involved, the Administrator is given the power in 
order to prevent multiplicity of criminal proceedings, to require 
as part of the compromise a stipulation to the effect that the 
United States may, on its own motion upon 5 days' notice to 
the violator, cause a consent decree to be entered in any court 
of competent jurisdiction, enjoining the repetition of the viola- 
tion. The administrative compromise of penalties embodies a 
policy similar to that incorporated in many acts of Congress 
relating to customs, internal revenue, air navigation, immigra- 
tion, and the like. The compromise would relieve the violator 
from all further criminal liability for the offense and for all 
.liability to suspension or revocation of permit or to equity pro- 
ceedings. The compromise provisions would not disturb any 
authority the Attorney General may have to compromise cases 
once court proceedings have been instituted. 

Where the offense does not appear to be flagrant and where 
the violator is willing to admit his offense, it would appear to 
be proper to afford him an opportunity by compromise to avoid 
the expense of a criminal or equity proceeding and to be relieved 
from the penalty of suspension or revocation. 



Sec. 8 96 

The section also provides that violations may be enjoined by 
district courts of the United States through appropriate pro- 
ceedings in equity brought by the Attorney General in the name 
of the United States (H. Kept. 1542, Federal Alcohol Control 
Bill, pp. 14 and 15). 

In his testimony before the Ways and Means Committee, Mr. 
Alprin, representing the Wholesale Wine and Spirits Merchants 
Association of New York, suggested an amendment providing for 
a fine or compromise for a first violation of section 5, and for a fine 
or compromise, and in addition the suspension of the violator's basic 
permit for a second violation, and for any subsequent violation the 
fine or compromise and the revocation of the basic permit. 

Mr. Vinson asked: 

Have vou not got that compromise power in section 6 of 
this act?" 

Mr. Alprin. We have. 

Mr. Vinson. Why do you want to repeat it? I refer specifi- 
cally to violations of section 5. 

Mr. Alprin. That is correct. Under the act as it is written, 
a violation of section 5, or any section of the act, subjects the 
violator to a fine of $1,000; and, in addition thereto, a suspen- 
sion of his permit, or a possible suspension of his permit. 

Mr. Vinson. I am not speaking about the first violation, but 
about the compromise part. 

Mr. Alprin. Yes, sir. 

Mr. Vinson. The compromise part is in section 6 ? 

Mr. Alprin. That is correct. 

Mr. Vinson. There would not be any need to repeat it here? 

Mr. Alprin. No; you could leave it out. The purpose of this 
proposed amendment is that in the event a permittee misjudges 
innocently or does not understand the regulation entirely, it 
causes him, possibly, to commit a violation of the advertising or 
labeling regulations; for example, so that he be not subject to a 
fine and a suspension; that for a first violation for that cause it 
should be limited to a fine only. 

Mr. Vinson. Being a young fellow and inexperienced? 

Mr. Alprin. Something along those lines. (Record of hearing 
before the Ways and Means Committee on H. R. 8539, p. 82.) 

The compromises provided for above do not apply to violations of 
section 8 "Interlocking directorates." (See quotation from report 
of Ways and Means Committee in note to that section.) 

INTERLOCKING DIRECTORATES 

Sec. 8. (a) Except as provided in subsection (b), it 
shall be unlawful for any individual to take office, after 
the date of the enactment of this Act, as an officer or direc- 
tor of any company, if his doing so would make him an 
officer or director of more than one company engaged in 
business as a distiller, rectifier, or blender of distilled 



97 Sec. 8 

spirits, or of any such company and of a company which 
is an affiliate of any company engaged in business as a 
distiller, rectifier, or blender of distilled spirits, or of more 
than one company which is an affiliate of any company en- 
gaged in business as a distiller, rectifier, or blender of dis- 
tilled spirits, unless, prior to taking such office, applica- 
tion made by such individual to the Administrator has 
been granted and after due showing has been made to him 
that service by such individual as officer or director of all 
the foregoing companies of which he is an officer or direc- 
tor together with service in the company with respect to 
which application is made will not substantially restrain 
or prevent competition in interstate or foreign commerce 
in distilled spirits. The Administrator shall, by order, 
grant or deny such application on the basis of the proof 
submitted to him and his finding thereon. The District 
Courts of the United States, the Supreme Court of the 
District of Columbia, and the United States court for any 
Territory shall have jurisdiction of suits to enjoin, annul, 
or suspend in whole or in part any final action by the Ad- 
ministrator upon any application under this subsection, 
(b) An individual may, without regard to the provisions 
of subsection (a), take office as an officer or director of 
a company described in subsection (a) while holding the 
position of officer or director of any other such company if 
such companies are affiliates at the time of his taking 
office and if— 

(1) Such companies are affiliates on the date of the 
enactment of this Act ; or 

(2) Each of such companies has been organized 
under the law of a State to comply with a require- 
ment thereof under which, as a condition of doing 
business in such State, such company must be organ- 
ized under the law of such State ; or 

(3) One or more such companies has been organ- 
ized under the law of a State to comply with a re- 
quirement thereof under which, as a condition of doing 



Sec. S 9S 

business in such State, such company must be organ- 
ized under the laws of such State, and the other one 
or more of such companies not so organized, is in 
existence on the date of the enactment of this Act ; or 
(4) One or more of such companies, has been or- 
' ganized under the law of a State to comply with a 
requirement thereof under which, as a condition of 
doing business in such State, such company must be 
organized under the law of such State, and not more 
than one of such companies is a company which has 
not been so organized and which has been organized 
after the date of the enactment of this Act. 

(c) As used in this section, the term " company " 
means a corporation, joint stock company, business trust, 
or association, but does not include any agency of a State 
or political subdivision thereof or any officer or employee 
of any such agency. 

(d) Any individual taking office in violation of this sec- 
tion shall be punished by a fine of not exceeding $1,000. 

Note. — This section first appeared in H. R. 8870 as introduced 
by Mr. Cullen on July 16, 1935. It was then numbered section 
seven. Except as hereafter noted and except for clerical amend- 
ments added in the Senate, most of which were later withdrawn, 
it remained in its original form. In H. R. 8539, as introduced by 
Mr. Doughton on June 18, the following subsection appeared as 
subsection 4 (e) : 

(e) Each basic permit shall contain a condition that no 
officer or director of the permittee shall at any time act as an 
cfficer or director of any other corporation, joint stock company, 
business trust, or association which is engaged in the business 
of producing, importing, rectifying or blending, bottling, ware- 
housing, or selling at wholesale or retail, distilled spirits, wine, 
or malt beverages. This subsection shall not apply to per- 
mittees of the class described in paragraph (1) of subsection 
(a) of this section until after six months after the date of the 
enactment of this act. 

In his brief filed with the Ways and Means Committee during its 
hearings on H. R. 8539, Dr. Doran, Administrator of the Distilled 
Spirits Institute, suggested the following amendment to the above 
subsection : 

Section 4 (e) should be amended by adding to the fourth 
line thereof, after the words " or association " the words " ex- 
cept affiliates." Section 8, paragraph (a) (5), defines the term 



99 , Sec. 8 

k * affiliate." Section 5 prohibits certain acts to be done by " any 
distiller * * * directly or through an affiliate." The 
amendment is necessary for the reason that many of our distill- 
ing corporations, large and small, who do business in more than 
one State, and they are all in interstate business, have found it. 
necessary, in order to meet the requirements of State laws, to 
organize a separate corporation to do business in the State and 
are required to maintain a corporate office in the State. These 
subsidiary corporations, which are defined under the term " affil- 
iate " in the bill, are wholly owned and are brought into being 
by reason of State laws, and in most instances are merely sales 
subsidiaries. They are not so-called " interlocking director- 
ates ", which the bill, as I read it, is intended to prohibit, and 
while the same officers may serve in each corporation neverthe- 
less the ownership is one and the same (record of hearings, 
p. 109). 

The report of the Ways and Means Committee says in connection 
with this section : 

Section 7 prohibits interlocking directorates in corporations 
and similar forms of business organization engaged in distilling 
and rectifying distilled spirits and companies connected with 
such companies. No person who is an officer or director of one 
such company may serve as an officer or director of another such 
company without the approval of the Administrator. The sec- 
tion is prospective in its operation to the extent that it relates 
only to those officers and directors who take their offices in the 
second company after the date of the enactment of the act. In 
general it may be said that under the section existing companies 
having interlocking directorates may keep their present systems 
but may not spread their common directorates except to com- 
panies which are formed to comply with State law. Company 
systems formed in the future may not have interlocking directo- 
rates except in cases where the companies are formed to comply 
with State law and not more than one other company in the 
system in which the directorates are common is a company not 
formed to comply with State law. The exemption of companies 
formed to comply with State law is inserted to take care of 
cases in which subsidiaries of distillers, rectifiers, or affiliates 
thereof have been formed or may be formed to comply with the 
requirements of corporation laws of some States which require 
that as a condition of doing business therein the corporation 
must be organized under their law. The individual desiring to 
serve in the second company must first apply to the Administra- 
tor and present evidence to him that the service in both com- 
panies will not restrain competition in interstate or foreign 
commerce in distilled spirits. The Administrator is required to 
act on the application, and court review by injunction of the 
Administrator's action is authorized. If the individual takes 
office or serves without the approval of the Administrator, in 
those cases to which the section applies, or if his suit to restrain 
is not sustained, he is subject to a fine of not more than $1,000. 

The provisions of section 6 authorizing compromise of penal- 



Sec. 8 100 

ties do not apply to such fines. Compliance with section 7 is not 
made a condition of a basic permit (H. Kept. no. 1542, Federal 
Alcohol Control Bill p. 15). 

At the Ways and Means Committee hearings, Mr. Choate was 
closely questioned by Congressman Duncan as to the existence of 
a monopoly or of interlocking directorates in the distilled spirits 
industry. (Record of above hearings, pp. 27-29.) 

Congressman Cullen, the chairman of the subcommittee of the 
Ways and Means Committee that handled the bill, and the pro- 
ponent of H. R. 8870, said in explaining the bill to the House in 
-ession as the Committee of the Whole for the debate of the bill : 

Section 7 prohibits, in certain cases, interlocking directorates 
in the distilled-spirits business and businesses affiliated with dis- 
tilling or rectifying businesses. The section constitutes a regu- 
lation of interstate and foreign commerce to prevent restraints 
on such commerce. In this respect the provision is comparable 
to the prohibition on interlocking directorates in railroad com- 
panies contained in paragraph (12) of section 20a of the Inter- 
state Commerce Act. 

The section is not retroactive in its operation. It applies only 
where an officer or director takes office after the date of the en- 
actment of the act — either in pursuance of an election or ap- 
pointment to the job. In the case of existing companies com- 
mon directorates may be continued. But if a system of existing 
companies sets up a new company, no director of one of the 
existing companies may be a director of the new company 
unless the new company has been formed to comply with the 
law of a State under which such company must be formed 
under its law in order to do business in the State. But there 
may be common directors in any number of companies so 
formed to comply with State law. In the case of company 
.-ystems formed in the future there can be no common directors 
except in one company not formed to comply with State law 
and one or more companies formed to comply with State law. 

The individual seeking to serve the two companies must 
apply to the Administrator and prove to him that service in 
both companies will not substantially restrain or prevent com- 
petition in interstate or foreign commerce in distilled spirits. 
If the Administrator approves, service may be rendered not- 
withstanding the prohibitions of the section. Court review is 
provided for and violations of the section are made punishable 
criminally. 

Mr. Duffy of Xew York. Will the gentleman yield? 

Mr. Co.LEN". I yield to the gentleman from Xew York. 

Mr. Duffy of Xew York. Does that mean that interlocking 
directorates which exist at the present time may continue to 
exist so long as they wish i 

Mr. Cullen. Interlocking directorates as in existence today. 
may continue, but they will not expand in the future. 

Mr. Duffy of New York. Is there any period of time during 
which they must unlock? 

Mr. Cullen. Xo. They are frozen just as they are today. 



101 Sec. 8 

Mr. Duffy of New York. So the bill protects them? 

Mr. Cullex. Exactly. "We were very careful about that 
matter. 

May I say there was great opposition in regard to men hold- 
ing positions on the directorates of one distilling company and 
another, which brought out the argument that the whisky dis- 
tillers held a monopoly in the country. There is one way by 
which we are breaking it up, insofar as it relates to new boards 
of directors or new individuals locking themselves in from one 
company to another, thereby controlling the industry. 

Mr. Keller. But if it is already done they are allowed to 
go ahead under this bill? 

Mr. Cullex. Yes (Cong. Rec, vol. 79, no. 151, p. 12179). 

In the debate that followed, Congressman Fuller spoke at some 
length concerning the existence of a whisky ring or trust formed 
by interlocking directorates. He was questioned as follows: 

Mr. Keller. I would like to know why we should allow these 
interlocking directors in the whisky trust? 

Mr. Fuller. Well, I cannot go into that now. 

Mr. O'Malley. Cannot the Administrator continue to do 
under this bill what he has done? 

Mr. Fuller. No. 

Mr. O'Malley. Why cannot we write into the law the 
terms 

Mr. Fuller. Oh, we cannot do that ; the Administrator has to 
have some discretion (Cong. Rec, vol. 79, no. 151, p. 12185). 

In the debate in the Senate, Senator Clark in arguing against the 
Finance Committee's bulk sales amendments spoke of a whisky 
ring, monopoly or trust and of the interlocking directorates between 
distillers and bottle makers. He was questioned as follows : 

Mr. McKellar. Nine principal members, and that there is a 
bottling trust; that they have interlocking directorates and they 
have very unusual power and control over the distribution of 
liquors. Did the committee, of which the Senator from Mis- 
souri is a very prominent member, consider the question of in- 
terlocking directorates and prohibiting interlocking directorates 
in this bill? 

Mr. Clark-. We did not. I think that would be a most ex- 
cellent thing to do. 

Mr. McKellar. Does not the Senator think an amendment 
ought to be offered by which interlocking directorates between 
the whisky trust and the bottle trust should be eliminated and 
prohibited ? 

Mr. Clark. I entirely agree with the Senator from Tennes- 
see upon that point. I do not believe, however, with the regu- 
lations made in pursuance of this bill or with the Treasury 
regulations in existence which are to be legalized by the com- 
mittee amendment, if it shall be adopted, that we could reach 
the situation by prohibiting membership on both boards of di- 
rectors by the same men (Cong. Rec, vol. 79, no. 167, p. 13406). 

The phrase " in whole or in part " which appears in the last sen- 
tence of subsection (a) of this section was inserted by a Senate 



Sec. 9 102 

amendment suggested by the Finance Committee (H. R. 8870, prints 
dated Aug. 9, 1935, and Aug. 13, 1935). The suggestion made by 
Mr. Jones, counsel for the Distilled Spirits Institute, relating to 
service of process on the Administrator in appeals from final or- 
ders of the Administrator with respect to labeling also applied to 
final action by the Administrator under this section (see note to the 
final paragraph of subsec. 5 (e)). 

DISPOSAL OF FORFEITED ALCOHOLIC BEVERAGES 

Sec. 9. (a) All distilled spirits, wine, and malt bever- 
ages forfeited, summarily or by order of court, under any 
law of the United States, shall be delivered to the Secre- 
tary of the Treasury to be disposed of as hereinafter 
provided. 

(b) The Secretary of the Treasury shall dispose of all 
distilled spirits, wine, and malt beverages which have been 
delivered to him pursuant to subsection (a) — 

(1) By delivery to such Government agencies as, 
in his opinion, have a need for such distilled spirits r 
wine, or malt beverages for medicinal, scientific, or 
mechanical purposes; or 

(2) By gift to such eleemosynary institutions as, in 
his opinion, have a need -for such distilled spirits T 
wine, or malt beverages for medicinal purposes; or 

(3) By destruction. 

(c) No distilled spirits, wine, or malt beverages which 
have been seized under any law of the United States, may 
be disposed of in any manner whatsoever except after 
forfeiture and as provided in this section. 

(d) The Secretary of the Treasury is authorized to 
make all rules and regulations necessary to carry out the 
provisions of this section. 

Xote. — H. R. 8539 as introduced bv Mr. Doughton on June 18. 
1935, and H. R. 8870 as introduced by Mr. Cullen on July 16, 1935. 
and referred to the Senate on July 25, 1935, after passing the House, 
contained no provision similar to this section. At the hearings be- 
fore the "Ways and Means Committee on H. R. 8539, Mr. A'prin. 
appearing as counsel for the Wholesale Wine and Spirits Merchants 
Association of New York, ritrongly urged that the Government be 
prohibited from selling seized liquor (record, pp. 82-84, 87--8S1. 
He stated that in some instances liquor had been openly illegally 



103 Sec. 9 

imported with the intention that it be seized. The smuggler would 
thereafter repurchase it at the Government sale for an amount con- 
siderably less than the taxes and duties and the liquor would thus 
acquire a legal status and enter into competition very advantageously 
with goods imported through regular channels. The committee re- 
ceived his suggestion very favorably. Congressman McCormack, of 
Massachusetts, a member of the committee, stated : 

I am sorry I was not here when you said something about 
confiscated liquor. Do I understand you to say that it should 
not be sold in competition? 

Mr. Altrin. That is correct. We feel that it deprives the 
United States of revenue. 

Mr. McCcrmack. You do not have to argue that with me. 
I agree with you. 
Mr. Alprin. Fine. 

Mr. McCormack. I just wanted to get your opinion because 

we are hopeful that something along that line will come out 

very quickly ; if not in this bill, then in some other bill (record, 

p. 84). 

In this connection, Mr. Choate stated his views in the following 

discussion : 

Mr. Woodruff. Mr. Choate, what can you tell the committee 
regarding this alleged sale of seized liquor ? 

Mr. Choate. I can only tell you that it has undoubtedly 
brought about a great many of the evils that Mr. Alprin has 
suggested. There have been large sales of somewhat doubtful 
merchandise, at very low prices, which have not netted the 
Government as much as the taxes would have, but the' Govern- 
ment has always tried to arrive at the best solution to the 
problems arising from facts in its possession, . and that is a 
problem which has undoubtedly bothered the Customs and 
Treasury and other seizing authorities very seriously. 

Mr. Woodruff. May I ask this further question? Is it the 
cust-om of the authorities to sell at a low price liquors known to 
be good? 

Mr. Choate. No; as I 'understand it, they analyze and sell 
something which does not pass the analysis as reasonably 
wholesome. That does not speak for its qualit} r , or does not 
speak for its being what appears on the label. 

We, in the Federal Alcohol Control Administration, got out 
a separate set of labels for property sold at Government sales, 
applying as much of our regular labeling regulations as could 
conceivably be applied, stuff more or less of unknown origin, 
and that, to a certain extent, protected the customer to as great 
an extent as we could. 

Mr. Woodruff. Is there any justification for the statement of 
Mr. Alprin to the effect that liquors were brought in here and, 
as I gathered his statement, encouragement was given to seizing 
those liquors? 

Mr. Choate. I have no knowledge as to any particular case, 
but it is perfectly obvious that if the price is up and the sales 



Sec. 9 104 

that take place and are low enough, that con it I be done. I do 
not happen to know what the recent prices have been, whether 
any of them have gone low enough for that purpose or whether 
any enterprising bootlegger has taken advantage of that curi- 
ous system (record, p. 86). 

Mr. Lipsett, publisher of the American Wine and Liquor Journal, 
suggested in his brief fded with the committee that all seized liquor 
be destroyed. Mr. Lourie, in his brief filed for the Association of 
Alcoholic Beverage Importers, suggested the incorporation into the 
bill of a provision forbidding Government sales of seized liquor so 
that the law-abiding industry members who pay liquor taxes and 
duties should not have to sell their goods in competition with goods 
sold by the Government at much lower prices (record, p. 113). Ap- 
pearing as a witness before the Senate Finance Committee, Mr. 
Lourie reiterated his recommendation with the additional argument 
that much of the liquor seized and sold by the Government recently 
has not been genuine and that established brands of liquor have been 
injured by the return of such counterfeit articles to the market (rec- 
ord of hearings by Senate Finance Committee on H. R. 8870, pp. 
103 and 104). In a letter filed with the Finance Committee, Mr. 
Alprin repeated his suggestion (id. pp. 148 and 149). 

The Senate Finance Committee recommended the elimination of 
the following sentence from section 5 (e) of H. R. 8870 as passed by 
the House (this phrase aLso appeared in H. R. 8539) : 

No person shall remove from Government custody after pur- 
chase at any Government sale any distilled spirits, wine, or malt 
beverages in bottles to be held for sale, until such bottles are 
packaged, marked, branded, and labeled in conformity with the 
requirements of this subsection. 

and the insertion, in lieu thereof, of the following new section: 

DISPOSAL OF FORFEITED DISTILLED SPIRITS AND WINE, 

Sec. 9. Notwithstanding any provisions of existing law, dis- 
tilled spirits and wine forfeited or condemned summarily or pur- 
suant to court decree or otherwise, by or under any law of the 
United States, shall not be sold or otherwise disposed of publicly 
or privately but shall be destroyed at such time as such for- 
feiture or condemnation has become final; except that any such 
distilled spirits and wine certified by Government chemists to 
be of a quality equivalent to United States Pharmacopoeia 
quality or to be suitable for medicinal purposes shall be placed 
in the custody of the United States Public Health Service and 
disposed of by the Surgeon General of such Service, in accordance 
with regulations to be prescribed by him, to hospitals operated 
or maintained in whole or in part by the United States, for use 
by them for medicinal purposes only. 

With respect to this amendment the report of the Finance Committee 
contains the following: 

The committee amendments eliminate the requirement as to 
the labeling of distilled spirits and wine purchased at Govern- 



105 Sec. 9 

ment sales after seizure by the Government for violation of law. 
In lieu thereof it is provided (see new sec. 9) that distilled 
spirits and wine forfeited and condemned summarily or pur- 
suant to court decree or otherwise, by or under any law of the 
United States shall not be disposed of publicly or privately, 
but shall be destroyed. 

This provision will protect the public from the placing upon 
the market of seized bootleg liquor and other liquor from un- 
known sources. Such liquor may be of inferior quality or adul- 
terated. Moreover, the wholesaler or retailer purchasing such 
liquor from the Government is, by reason of lack of informa- 
tion as to its origin and character (neither of which can be ade- 
quately supplied by data obtained through chemical analysis) 
unable properly to label or relabel the goods in conformity with 
law. In consequence, the consumer purchasing these goods from 
a wholesaler or retailer is usually in the position of buying a 
pig in the poke. The amendment will also prevent the present 
situation whereby legitimate distributors and importers who pay 
internal-revenue taxes and import duties have to meet competi- 
tion from goods sold by the Government, frequently at prices 
less than the amount of tax owed to the Government. Such 
goods also often bear labels identical with those handled by the 
legitimate distributor or importer in circumstances under which 
the authenticity of the label and the genuineness of the goods 
is open to most serious doubts. 

An exception is made to the destruction of the forfeited and 
condemned liquors whereby, if they are found to be of United 
States Pharmacopoeia quality or suitable for medicinal pur- 
poses, they may be distributed under the direction of the 
Surgeon General of the Public Health Service to Government 
hospitals for medicinal use only (S. Kept. No. 1215, Federal 
Alcohol Control Act, pp. 7 and 8). 

The proposed amendments were agreed to by the Senate without 
discussion (Cong. Kec. vol. 79, no. 167, p. 13402). The section as^it 
appears in the act was recommended by the conferees (H. Rept. No. 
1898, Revenue From Distilled Spirits, p. 4). After summarizing the 
provision in the bill as it passed the House, and the Senate amend- 
ments thereto, the Statement of the Managers on the Part of the 
House contains the following paragraph relating to the recom- 
mended section : 

The conference agreement on amendment no. 146 inserts a 
provision under which distilled spirits, wine, and malt bever- 
ages forfeited summarily or by order of court are to be delivered 
to the Secretary of the Treasury. He is to dispose of them by 
delivering them to Government agencies for medicinal, scientific, 
or mechanical purposes, but if they have no need for them, by 
giving them to charitable institutions for medicinal purposes. 
Any articles which are not so disposed of are to be destroyed by 
the Secretary of the Treasury. Previous contrary authoriza- 
tions are repealed and the Secretary is given power to prescribe 
rules and regulations to carry out the section. 



Sec. 10 106 

The House recedes on amendment no. 104 relating to labeling 
after Government sale in view of the insertion of the provision 
prohibiting Government sales (id. p. 13; numbers, refer to the 
numbered Senate amendments in H. R. 8870, print dated Aug. 
13, 1935). 

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

Sec. 10. The Federal Alcohol Control Administration 
established by Executive order under the provisions of 
Title I of the National Industrial Recovery Act is hereby 
abolished. All papers, records, and property of such Fed- 
eral Alcohol Control Administration are hereby trans- 
ferred to the Administrator. This section shall take effect 
on the date that the Administrator first appointed under 
this act takes office. 

Note. — This section as it appeared in H. R. 8539 was num- 
bered section 7 and did not include the last sentence (H. R. 8539, 
print dated June 18, 1935). The last sentence wa's included in the 
section in H. R. 8870 as introduced by Mr. Cullen on July 16, 1935. 
A clerical change was made in the Senate and the effective date of 
the section was changed to " when a majority of the commissioners 
first appointed under this Act have, taken office " (H. R. 8870, print 
dated Aug. 13, 1935). The Senate receded from its amendments 
as a result of the conference. (H. Rept. 1898, Revenue From Dis- 
tilled Spirits, p. 1). Mr. Choate, while testifying before the Ways 
and Means Committee, suggested the addition of the last sentence 
to the section as it first appeared. 

One small detail, but of considerable importance, is this. On 
page 22, lines 9 and 11, you will notice that the effect of the 
section is to abolish the present Federal Alcohol Control Admin- 
istration on the date of the enactment of this bill, if it becomes 
a law. The bill, however, requires the appointment of the 
entire staff by an administrator, and the confirmation of the 
administrator by the Senate. 

Accordingly, there might be a lapse of a month or 6 weeks 
or 2 months, between the death of the present Federal Alcohol 
Control Administration and the birth of the new body. 

I would therefore recommend that, at the end of line 12, the 
following words be inserted : 

This section shall take effect on the date that the Admin- 
istrator first appointed under this act takes office. 

That would enable him to take over immediately the existing 
staff of the Federal Alcohol Control Administration, which is 
being held together under the N. R. A. Continuation Act, in the 
hope of being able to keep it intact until the new man takes 
it over. 



107 Sees. 10, 11 

Mr. Fuller. I think, Mr. Choate, the committee drawing that 
bill and putting that clause in there, conferred with authorities 
in regard to it, and it was understood that the alcoholic control 
is now out of existence, in a way, but that orders are being made 
whereby they would be taken care of, and that that agency 
would continue' in force and effect until such time as this law 
went into effect. 

Mr. Choate. I think that ought to very carefully taken care 
of, because the present staff is expert, it is valuable, it is worth 
preserving. 

Mr. Fuller. That was the intention in drafting this, to take 
care of them. 

Mr. Knutson. What is the language that you suggest? 

Mr. Choate. The language was to strike out the word 
" hereby " in line 11, and at the end of line 12, on page 22, insert 
" this section shall take effect on the date that the administrator 
first appointed under this act takes office " (record of Ways and 
Means Committee hearings on H. R. 8539, pp. 25 and 26). 

Later at the same hearing Mr. Choate stated that he regarded it as 
extremely important that the new body should have continuity with 
the old so that there would not be again a formative period during 
which the industries would suffer while the new body was finding out 
what it was all about: 

Mr. Hill. May I ask, Mr. Choate, how would you effectuate 
that continuity you talk about? 

Mr. Choate. I would do it very much as it is done in this 
bill, with the one suggestion that I make that if the present 
body be not abolished until the first administrator under the new 
law was actually in office, that he would then be able, under this 
bill as it is now drafted, to take over the staff as is, he would 
also, under this bill, take over all the chattels of the existing 
body, so that there would be complete continuity there (record of 
Wavs and Means Committee hearings on H. R. 8539. p. 59). 
See"note to section 2 (a) for relevant quotation from the Ways 
and Means Committee's report on H. R. 8870. 

Sec. 11. Section 610 of the Revenue Act of 1918, as 
amended (U. S. C, Supp. VII, title 26, sec. 1310), is 
amended by adding at the end thereof the following new 
paragraph : 

The provisions of the internal-revenue laws appli- 
cable to natural wine shall apply in the same man- 
ner and to the same extent to citrus-fruit wines which 
are the product of normal alcoholic fermentation of 
the juice of sound ripe citrus fruit (except lemons 
and limes), with or without the addition of dry cane, 
beet, or dextrose sugar (containing, respectively, not 



Sec. 11 108 

less than 95 per centum of actual sugar, calculated 
on a dry basis) for the purpose of perfecting the 
product according to standards, but without the addi- 
tion or abstraction of other substances, except as may 
occur in the usual cellar treatment of clarifying or 
aging. 

Xote. — Sections 11, 12, 13, 14, and 15 were offered as amendments 
on the floor of the Senate, during debate, to H. R. 8870, as reported 
out by the Finance Committee (H. R. 8870, print dated Aug. 9, 
1935) by Senator Fletcher, of Florida. In connection with his 
amendment Senator Fletcher said : 

Mr. Fletcher. Mr. President, I have submitted this amend- 
ment to the committee, and the members of the committee are 
familiar with it. I think the committee will make no objection 
to the amendment, because it is embodied in a bill which I intro- 
duced and which was referred to the Finance Committee, known 
as " Senate bill 2302." The bill was referred to the Treasury 
Department, and I have here the report of the Bureau of Inter- 
nal Revenue, which says : 

With these suggested changes, insofar as the internal- 
revenue laws are concerned, it is recommended that S. 2302 
be enacted into law. 

This amendment is the same as the bill, with the changes sug- 
gested by the Internal Revenue Bureau. 

Mr. Harrison. Mr. President, I desired to ask the Senator 
whether he had incorporated the changes suggested by the Treas- 
ury Department. 

Mr. Fletcher. I have. I have followed their suggestion. 

Mr. George. Mr. President, this amendment was submitted to 
the Finance Committee and, as the Senator from Florida has 
said, it has the approval of the Treasury Department. 

The Vice President. The question is on agreeing to the 
amendment offered by the Senator from Florida. 

The amendment was agreed to (Cong. Rec. vol. 79, no. 167, 
p. 13413). 

Some minor changes were made in these sections and an additional 
section relating to special taxes on wine makers, was deleted in con- 
ference. (H. R. 8870, print dated Aug. 13, with Senate amendments 
numbered, pp. 35-40). These changes are summarized in the state- 
ment of the managers on the part of the House as follows : 

The Senate amendment applies to citrus-fruit wines the pro- 
visions of internal-revenue laws applicable to " natural " grape 
wine. It also permits the withdrawal of citrus-fruit brandy 
and use of it for the fortification of citrus-fruit wine — applying 
in such case the same tax (20 cents a proof gallon) as in the case 
of grape brandy for fortification of grape wine. The amend- 
ment makes the necessary amendment to the provisions of law 
under which liqueurs, cordials, or similar compounds are taxed 



109 Sec. 12 

if grape brandy is used therein so that these provisions will 
apply with respect to citrus-fruit wines fortified with citrus- 
fruit brandy. The amendment makes applicable to the fortifi- 
cation of citrus-fruit wines with citrus-fruit brandy the provi- 
sions of law relating to fortification of grape wines with grape 
brandy but limits the provision so that a citrus-fruit brandy 
ma}' be used only for the fortification of a citrus-fruit wine 
produced from the same fruit, e. g.. orange brandy may be 
used only for fortification of orange wine. Citrus-fruit brandy 
distillers and date brandy distillers may be exempted by the 
Secretary' of the Treasury from certain provisions of law relat- 
ing to the manufacture of such brandies as in the case, under 
present law. of distillers of apple brandy and other fruit brandy 
distillers. 

The amendment also exempts citrus-fruit wine makers and 
other wine makers (in the same manner as in the case of grape 
wine makers) from the special tax upon wine makers if they 
sell wines of their own production where they are made or at 
the wine maker's general business office. 

The amendment also makes clear that where manufacturing 
chemists or flavoring extract manufacturers use recovered al- 
cohol or spirits, they may be again used only in the making of 
medicines or flavoring extracts of the same kind in which they 
are first used. 

The House recedes with an amendment which makes clari- 
fving changes and which excepts lemons and limes from the 
application of the Senate provision. The conference agreement 
also omits the provisions relating to business offices of a wine 
maker and to the use of recovered alcohol in flavoring extracts 
and medicines. (H. Kept. No. 1898, Revenue From Distilled 
Spirits, p. 14; see also id. pp. 4, 5, and 6 of conference report 
for language agreed to in conference.) 

Sec. 12. Section 612 of the Revenue Act of 1918, as 
amended (IT. S. C, Supp. VII, title 26, sec. 1301), is 
amended to read as follows : 

Sec. 612. That under such regulations and official 
supervision and upon the giving of such notices, 
entries, bonds, and other security as the Commis- 
sioner, with the approval of the Secretary, may pre- 
scribe, any producer of wines denned under the pro- 
visions of this title may withdraw from any fruit 
distillery or special bonded warehouse grape brandy, 
or wine spirits, for the fortification of such wines on 
the premises where actually made, and any producer 
of citrus-fruit may similarly withdraw citrus-fruit 
brandy for the fortification of citrus-fruit wines on 



Sees. 13, 14 110 

tlie premises where actually made: Provided, That 
there shall be levied and assessed against the pro- 
ducer of such wines or citrus-fruit wines a tax (in 
lieu of the internal-revenue tax now imposed thereon 
by law) of 20 cents per proof gallon of- grape brandy, 
citrus-fruit brandy, or wine spirit whenever with- 
drawn and hereafter so used by him hi the fortifica- 
tion of such wines or citrus-fruit wines during the 
preceding month, which assessment shall be paid by 
him within ten months from the date of notice 
thereof : Provided further, That nothing contained in 
this section shall be construed as exempting any 
wines, citrus-fruit wines, cordials, liqueurs, or simi- 
lar compounds from the payment of any tax provided 
for in this title. 

Any such wines or citrus-fruit wines may, under 
such regulations as the Secretary may prescribe, be 
sold or removed tax free for the manufacture of 
vinegar, or for the production of dealcoholized wines 
containing less than one-half of 1 per centum of 
alcohol by volume. 

The taxes imposed by this section shall not apply 
to dealcoholized wines containing less than one-half 
of 1 per centum of alcohol by volume. 
Note. — See note to section 11. 

Sec. 13. Section 613 of the Revenue Act of 1918, as 
amended (U. S. C, Supp. VII, title 26, sec. 1300 (a) (2)), 
is amended by inserting after "grape brandy" a comma 
and the following: "or containing citrus-fruit wine forti- 
fied with citrus-fruit brandy." 

Xote. — See note to section 11. 

Sec. 14. Section 42 of the Act entitled "An Act to re- 
duce the revenue and equalize duties on imports, and for 
other -purposes", approved October 1, 1890, as amended 
(U. S. C, Supp. VII, title 26, sec. 1302 (a)), is amended 
by inserting at the end thereof the following new para- 
graph: 



HI Sec. 15 

The provisions of this section and section 43 shall 
apply to the use of citrus-fruit brandy in the prepa- 
ration of fortified citrus-fruit wines in the same 
manner and to the same extent as such provisions 
apply to the use of wine spirits in the fortification of 
sweet wines, except that no brandy (other than a 
citrus-fruit brandy) may be used in the fortification 
of citrus-fruit wine and a citrus-fruit brandy pre- 
pared from one kind of citrus fruit may not be used 
for the fortification of a citrus-fruit wine prepared 
from another kind of citrus fruit or for the fortifica- 
tion of a wine prepared from any fruit other than 
citrus fruit. 
Note. — See note to section 11. 
Sec. 15. Section 3255 of the Revised Statutes, as 

amended (XL S. C, Supp. VII, title 26, sec. 1176), is 

amended to read as follows : 

Sec. 3255. The Commissioner of Internal Revenue, 
with the approval of the Secretary of the Treasury, 
may exempt distillers of brandy made exclusively 
from apples, peaches, grapes, oranges, pears, pine- 
apples, apricots, berries, plums, pawpaws, persim- 
mons, primes, figs, cherries, dates, or citrus fruits (ex- 
cept lemons and limes) from any provision of the 
internal-revenue laws relating to the manufacture of 
spirits, except as to the tax thereon, when in his judg- 
ment it may seem expedient to do so: Provided, That 
where, in the manufacture of wine or citrus-fruit 
wine, artificial sweetening has been used, the wine, or 
the fruit pomace residuum thereof, or the citrus-fruit 
wine may be used in the distillation of brandy or 
citrus-fruit brandy, as the case may be, and such use 
shall not prevent the Commissioner of Internal Reve- 
nue, with the approval of the Secretary of the 
Treasury, from exempting such distiller from any 
provision of the internal-revenue laws relating to the 
manufacture of spirits, except as to the tax thereon, 



Sec 16 112 

when in his judgment it may seem expedient to do so : 
And provided further, That the distillers mentioned 
in this section may add to not less than five hundred 
gallons (ten barrels) of grape cheese not more than 
five hundred gallons of a sugar solution made from 
cane, beet, starch, or corn sugar, 95 per centum pure, 
such solution to have a saccharine strength of not to 
exceed 10 per centum,- and may ferment the resultant 
mixture on a winery or distillery premises, and such 
fermented product shall be regarded as distilling 
material. 

]Sotk. — See note to section 11. 

Sec. 16. (a) Section 1 of the Act of March 3, 1877, as 
amended (U. S. C, Supp. VUL, Sec. 1250), is amended by 
striking out "not exceeding ten in numbers in any one 
coUc^on-d^strict/' and by inserting at the end of such 
section the following new paragraph: 

The Commissioner of Internal Revenue, under such 
regulations as he may promulgate from time to time 
with the approval of the Secretary of the Treasury, 
may, in his discretion, establish such warehouses ad- 
jacent to distilleries, and may, in his discretion, per- 
mit the removal of brandy directly from the distillery 
to such warehouses, and from such warehouses to the 
distillery warehouse of the producing distiller. 

(b) Section 53 of the Act of August 27, 1834, as amended 
(U. S. C, Supp. VUL, Sec. 1265), is amended by striking 
out "not exceeding ten in number in any one collection 
district," and by inserting at the end of such section the 
following new paragraph: 

The Commissioner of Internal Revenue, under such 
regulations as he may promulgate from time to time 
with the approval of the Secretary of the Treasury, 
may, in his discretion, establish such warehouses ad- 
jacent to distilleries, and may, in his discretion, per- 
mit the removal of spirits directly from the distillery 



113 Sec. 17a 

to such warehouses, and from such warehouses to the 
distillery warehouse of the producing distiller. 

Note. — At the hearings before the 'Senate Finance Committee on 
H. R. 8870, Z. L. Cobb, attorney for the Lawrence Warehouse Co., 
filed a brief, in letter form and attached communications from offi- 
cials of the company and banks. Mr. Cobb suggested that the bill 
be amended to specifically permit the establishment of general and 
special bonded warehouses adjacent to distilleries without limita- 
tion as to number and to specifically permit the return of liquor from 
such warehouses to the distillery warehouse. The amendment was 
urged to facilitate the use of warehouse receipts from independent 
warehouses for use as collateral, and to thereby encourage greater 
credit expansion. Distillers would be able to bail their products in 
independent warehouses and secure negotiable warehouse receipts 
therefor to use as collateral. They would still be ab]e, when the re- 
obtained possession of the receipts, to return the liquor to their own 
warehouses for bottling and labeling. (Record of Senate Finance 
Committee hearings on H. R. 8870, pp. 59 and 60.) 

This section was offered as an amendment by Senator Connally 
of Texas, a member of the Finance Committee, on the floor of the 
Senate during the debate on the bill as reported out by the committee 
and was agreed to by the Senate without discussion (Cong. Rec, vol. 
79, no. 167. p. 13419 ; H. R. 8870, print dated Aug. 13 with amend- 
ments of Senate numbered, sec. 17, p. 40). As passed by the Senate 
the section included the following preamble : 

To prevent monopoly, and to facilitate financing through 
warehouse receipts issued by independently owned bonded ware- 
houses qualified under the Internal Revenue Laws : 

The preamble was omitted and several clerical changes were made 
in conference (H. Rept. No. 1898, Revenue From Distilled Spirits, 
p. 6). The Statement of the Managers on the Part of the House 
contains the following summary of the section : 

This amendment strikes out the limitation on the number of 
warehouses which the Commissioner of Internal Revenue may 
establish in any one collection district for the storage of fruit 
brandies and spirits distilled from materials other than fruit. 
It also provides" that in the discretion of the Commissioner of 
Internal Revenue such warehouses may be established adjacent 
to distilleries, and further that he may in his discretion permit 
the removal of brandies and spirits, as the case may be, directly 
from the distillery to such warehouses, and from such ware- 
houses to the distillery warehouse of the producing distiller. 
The House recedes with an amendment which omits the preamble 
and makes clerical changes (id. p. 14). 



MISCELLANEOUS 
Sec. 17. (a) As used in this Act— 

Note. — An additional section " section 18 " was offered by Senator 
Copeland of New York on the floor of the Senate during the debate 
on the bill as reported out by the Finance Committee. The amend- 
ment was passed by the Senate after the following discussion : 

Mr. George. Mr. President, I ask unanimous consent that the 
reading of the amendment, which is entirely technical, be dis- 
pensed with. As a matter of fact, as I understand it and as the 
committee understood it, the amendment simply provides for 
the collection of the taxes at the time of the final sale rather 
than the first sale or intermediate sale. 
Mr. Copeland. That is correct. 

Mr. George. I think that is all that is sought to be accom- 
plished by this particular amendment. There has been a hearing 
by a subcommittee of the Finance Committee, and the Treasury 
has not approved the amendment as yet because of administrative 
difficulties. I am quite willing to take the amendment to con- 
ference because it unquestionably would add to the revenue, in 
my judgment, and it would also tend to prevent bootlegging. 
I should be very glad to take it to conference. 

The Vice President. The question is on agreeing to the amend- 
ment. 

The amendment was agreed to (Cong. Kec., vol. 79, no. 167, p. 
13414). 
(For text of the amendment see H. R. 8870, print dated Aug. 13, 
1935, pp. 41-45 and Cong. Rec, vol. 79, no. 167, p. 13414. For dis- 
cussion of the amendment by Senator Copeland and of its scope. 
purposes and effects see Cong. Rec. Aug. 13, 1935, vol. 79, no. 167, 
pp. 13414-13418 and Cong. Rec. Aug. 24, 1935, vol. 79, no. 177, pp. 
14950-14952.) The amendment was suggested by Eugene Greenhut, 
representing the National Civic Federation of New York, at the 
hearings before the Ways and Means Committee on H. R. 8539 
(record of hearings, pp. 104-107). 

The conference report recommended that the Senate recede from 
this amendment and summarized it as follows : 

This amendment changes the method of levying and collecting 
the tax on distilled spirits. Under the present law. the tax is 
paid by the distiller or importer. The amendment imposes the 
tax on the retailer and provides that it shall be collected at the 
time of its first retail sale. The retailer is required to affix to 
the bottle or other container of distilled spirits stamps denoting 
the quantity contained therein and evidencing payment of all 
internal-revenue taxes, and of all customs duties. The amend- 
ment further provides that no person shall manufacture, distill, 

(114) 



115 Sec. 17a (1), (2), (3), (4) 

import, or sell at wholesale or retail any distilled spirits unless 
such person furnishes a bond guaranteeing the payment of all 
taxes and customs duties imposed thereon. The Senate recedes 
(H. Kept. No. 1898, Revenue From Distilled Spirits, pp. 14 and 
15). 

(1) The term " Administrator" means the head of the 
Federal Alcohol Administration. 

Note. — This definition is in the form in which it appeared in 
H. R. 8539. *. Changes were made in the Senate which were withdrawn 
as a result of the conference. 

(2) The term "United States" means the several 
States and Territories and the District of Columbia ; the 
term " State" includes a Territory and the District of 
Columbia; and the term "Territory" means Alaska, 
Hawaii, and Puerto Rico. 

Note. — This definition remained in its original form until finally 
enacted. 

(3) The term "interstate or foreign commerce" means 
commerce between any State and any place outside 
thereof, or commerce within any Territory or the District 
of Columbia, or between points within the same State but 
through any place outside thereof. 

Note. — This definition remained in its original form until finally 
enacted. 

(4) The term " person " means individual, partnership, 
joint stock company, business trust, association, corpora- 
tion, or other form of business enterprise, including a re- 
ceiver, trustee, or liquidating agent and including an officer 
or employee of any agency of a State or political subdi- 
vision thereof; and the term " trade buyer " means any 
person who is a wholesaler or retailer. 

Note.— This definition remained in its original form until enacted. 

It is referred to in the Ways and Means Committee's report as 

follows : 

Section 9 (a) (4) defines " person " to include, in addition to 
business organizations which that term usually includes, the 
officers and employees of agencies of States or political subdivi- 
sions thereof. Many States and political subdivisions have gone 
into various phases of the liquor business. The only provisions 
of the bill which relate to. such agencies are those dealing with 
consignment sales, labeling, and advertising. As noted above 



Sec. 17a (5), (6), (7) 116 

no permit is required of such agencies. The effect of the lan- 
guage of the definition is to treat the officers and employees of 
the governmental board, or whatever form the agency ma}^ take, 
as the ones who are subject to Federal regulation, and not the 
State or political subdivision itself. Wherever such agencies 
and officers and employees thereof are exempt from provisions 
of the bill, persons who hold licenses under State or local law 
and similar persons are not to be regarded as within the exemp- 
tion and of course the State and local officials are exempt only in 
their official capacitv (H. Rep. No. 1542, Federal Alcohol Con- 
trol Bill, pp. 15 and 16). 

(5) The term " affiliate " means any one of two or more 
persons if one of such persons has actual or legal control, 
directly or indirectly, whether by stock ownership or other- 
wise, of the other or others of such persons ; and any one 
of two or more persons subject to common control, actual 
or legal, directly or indirectly, whether by stock ownership 
or otherwise. 

Note. — This definition remained in its original form until enacted. 
The following comment appears in the report of the Ways and 
Means Committee: 

The term " affiliate " is defined to include the two or more 
persons who are involved where one of such persons controls 
the other or others and all the persons involved in the case 
where the control of one or more companies is in a common 
parent. The definition includes control which is indirect as 
well as that which is direct (H. Kept. No. 1542, Federal Alcohol 
Control Bill, p. 16). 

(6) The term " distilled spirits " means ethyl alcohol, 
hydrated oxide of ethyl, spirits of wine, whiskey, rum, 
brandy, gin, and other distilled spirits, including all dilu- 
tions and mixtures thereof, for non-industrial use. 

Note. — This definition remained as it appeared in H. R. 8539 until 
enacted. The following comment appears in the report of the W T ays 
and Means Committee : 

The definition of distilled spirits includes the products 
usually considered within that definition and includes them when 
they are for beverage, medicinal, culinary, sacramental, or other 
use, but excludes such products if for industrial use. This 
definition has the effect of eliminating from the scope of the bill 
industrial alcohol production and distribution (H. Rept. No. 
1542, Federal Alcohol Control Bill, p. 16). 

(7) The term " wine " means (1) wine as defined in 
section 610 and section 617 of the Revenue Act of 1918, 
(U. S. C, title 26, sees. 441 and 444) as now in force or 



117 Sec. 17a (7), (8) 

hereafter amended, and (2) other alcoholic beverages not 
so denned, but made in the manner of wine, including 
sparkling and carbonated wine, wine made from con- 
densed grape must, wine made from other agricultural 
products than the juice of sound, ripe grapes, imitation 
wine, compounds sold as wine, vermouth, cider, perry and 
sake ; in each instance only if containing not less than 7 
per centum and not more than 24 per centum of alcohol 
by volume, and if for non-industrial use. 

Note. — This definition remained as it appeared in H. R. 8539. 

The following comment appears in the report of the Ways and 

Means Committee: 

The definition of wine (sec. 9 (a) (7)) incorporates by refer- 
ence the definition contained in the revenue laws and includes in 
addition alcoholic beverages made in the manner of wine, 
wine made from agricultural products other than sound ripe 
grapes, and imitation wine. The definition applies only to the 
article if it contains 7 percent or more but not more than 24 
percent of alcohol by volume. Wines above 24 percent of alcohol 
by volume are classed as distilled spirits. In all cases, as in 
the case of distilled spirits, the definition eliminates industrial 
use but includes beverage, medicinal, culinary, sacramental, and 
other uses (H. Rept. No. 1542, Federal Alcoholic Control Bill, p. 
16). 

(8) The term " malt beverage " means a beverage made 
by the alcoholic fermentation of an infusion or decoction, 
or combination of both, in potable brewing water, of 
malted barley with hops, or their parts, or their products, 
and with or without other malted cereals, and with or 
without the addition of unmalted or prepared cereals, 
other carbohydrates or products prepared therefrom, and 
with or without- the addition of carbon dioxide, and with 
or without other wholesome products suitable for human 
food consumption. 

Note. — This definition appeared in the same form in H. R. 8539. 
Although stricken out by the Senate, it was restored as a result of 
the conference (H. R. 8870, print dated Aug. 13. 1935, H. Rept. no. 
1898, Revenue from Distilled Spirits, p. 1). The following comment 
on the definition appears in the Ways and Means Committee report: 

The definition of malt beverages (sec. 9 (a) (8)) is a technical 
one designed to cover the beverage products of the brewing in- 
dustry and includes such products regardless of their alcoholic 
content (H. Rept. No. 1542, Federal Alcohol Control Bill, p. 16). 



Sec. 17a (9), (b), (c) 118 

(9) The term "bottle" means any container, irrespec- 
tive of the material from which made, for use for the sale 
of distilled spirits, wine, or malt beverages at retail. 

Note. — This definition appeared in the same form in H. R. 8539. 
Although amended by the Senate to eliminate malt beverages, it 
was restored to its original form as a result of the conference (H. R. 
8870, print dated Aug. 13, 1935 (H. Rept. No. 1898, Revenue From 
Distilled Spirits, p. 1). The following comment appears in the 
Ways and Means Committee report: 

The definition of " bottle " is broader than a glass container. 
It includes the closed container used for the sale of distilled 
spirits, wine, or malt beverages at retail and ignores its size 
and the material from which it is made, thus including jugs, 
cans, barrels, and all other closed containers if for use for sale of 
alcoholic beverages at retail (H. Rept. No. 1542, Federal Al- 
cohol Control Bill, p. 16). 

The following interpretative statement as to the meaning of the 
term " wholesaler " where used in the bill is found in the report of 
the Ways and Means Committee: 

" Wholesaler " as used in the bill, outside the taxing provisions 
of section 1, means a wholesaler in accordance with the usual 
trade understanding and not as defined in the internal-revenue 
laws for tax purposes (H. Rept. No. 1512, Federal Alcohol Con- 
trol Bill, p. 16). 

(b) The right to amend or repeal the provisions of this 
Act is expressly reserved. 

(c) If any provision of this Act, or the application of 
such provision to any person or circumstance is held 
invalid, the remainder of the Act and the application of 
such provision to persons or circumstances other than 
those as to which it is held invalid, shall not be affected 
thereby. 

Note. — Subsections (b) and (c) appeared in the same form in 
H. R. 8539 and were not changed in either House of the Congress. 



APPENDICES 

Appendix I.— H. R. 8870 AS REPORTED TO THE HOUSE 
BY THE COMMITTEE ON WAYS AND MEANS 

A BILL To further protect the revenue derived from distilled spirits, 
wine, and malt beverages, to regulate interstate and foreign com- 
merce and enforce the postal laws with respect thereto, to enforce 
the twenty-first amendment, and for other purposes. 

Be it enacted by the Senate and House of Representatives of thfe 
United States of America in Congress assembled, That (a) there shall 
be levied, assessed, collected, and paid annual occupational taxes at 
the rates provided in subsection (b) by the following persons for 
the privilege of carrying on any of the following businesses: 

(1) Importers importing into the United States distilled 
spirits, wine, or malt beverages ; 

(2) Persons engaged in selling, or shipping for sale, in inter- 
state or foreign commerce distilled spirits, wine, or malt bever- 
ages imported into the United States; 

(3) Distillers of distilled spirits, producers of wine, and 
producers of malt beverages; 

(4) Rectifiers and blenders of distilled spirits or wine ; 

(5) Persons engaged in the business of purchasing for resale 
at wholesale distilled spirits, wine, or malt beverages; and 

(6) Any other person not included in the foregoing, who is 
the holder of a basic permit issued under this Act and is engaged 
in any business covered by such permit. 

(b) Such tax shall be at the rate of $10 per annum and shall be 
in addition to any other occupational tax imposed on such person. 
In the case of any person subject to an occupational tax under any 
law of the United States, the tax imposed by this section shall be 
levied, assessed, collected, and paid in the same manner, at the same 
time, and subject to the same provisions of law (includingpenalties) 
as such other tax. In the case of a person who is not subject to any 
occupational tax under any law of the United States tax imposed 
by this section shall be levied, assessed, collected, and" paid in the 
same manner, at the same time, and subject to the same provisions 
of law (including penalties) as the tax imposed by paragraph 
" First " of section 3244 of the Revised Statutes, as amended 
(relating to the tax on brewers). 

FEDERAL ALCOHOL ADMINISTRATION 

Sec. 2. (a) There is hereby created the Federal Alcohol Adminis- 
tration as a division in the Treasury Department. 

(HO) 



App. I 120 

(b) The Administration shall' be headed by an Administrator, 
who shall be appointed by the President, by and with the advice and 
consent of the Senate. The Administrator shall for his services 
receive compensation at the rate of $10,000 per annum, together with 
actual and necessary traveling and subsistence expenses while en- 
gaged in the exercise of his powers and duties outside the District of 
Columbia. No person shall be eligible to appointment, or continue 
in office, as Administrator if he is engaged or financially interested 
in, or is an officer or director of or employed by a corporation engaged 
in, the production or sale or other distribution of alcoholic beverages, 
or the financing thereof. 

(c) The Administrator shall, without regard to the civil-service 
laws and the Classification Act of 1923, as amended, appoint #:id 
fix the compensation and duties of such officers and employees as he 
deems necessary to carry out his powers and duties, but the compen- 
sation so fixed shall be subject to the approval of the Secretary of 
the Treasury. The Administrator is authorized to adopt an official 
seal, which shall be judicially noticed. 

(d) The Administrator is authorized and directed to. prescribe 
such rules and regulations as may be necessary to carry out his 
powers and duties. All rules and regulations prescribed by the 
Administrator shall be subject to the approval of the Secretary of 
the Treasury. 

(e) Appropriations to carry out powers and duties of the Admin- 
istrator shall be available for expenditure, among other purposes, 
for personal services and rent in the District of Columbia and else- 
where, expenses for tra\el and subsistence, for law books, books of 
reference, magazines, periodicals, and newspapers, for contract steno- 
graphic reporting services, for subscriptions for library services, for 
purchase of samples for analysis or use as evidence, and for holding 
conference of State and Federal liquor control officials. 

(f) The Administrator may, with the consent of the department 
or agency affected, utilize the services of any department or other 
agency of the Government to the extent necessary to carry out his 
powers and duties and authorize officers and employees thereof to 
act as his agents. 

(g) The provisions, including penalties, of sections 9 and 10 of the 
Federal Trade Commission Act, as now or hereafter amended, shali 
be applicable to the jurisdiction, powers, and duties of the Adminis- 
trator, and to any person (whether or not a corporation) subject 
to the provisions of laws administered by the Administrator. 

(h) The Administrator is authorized to require, in such manner 
and form as he shall prescribe, such reports as are necessary to carry 
out his powers and duties. 

UNLAWFUL businesses without permit 

Sec. 3. In order effectively to regulate interstate and foreign com- 
merce in distilled spirits, wine, and malt beverages, to enforce the 
twenty-first amendment, and to protect the revenue and enforce 
the postal laws with respect to distilled spirits, wine, and malt 
beverages : 



121 App. I 

(a) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator — 

' (1) to engage in the business of importing into the United 
States distilled spirits, wine, or malt beverages; or 

(2) for any person so engaged to sell, offer or deliver for 
sale, contract to sell, or ship, in interstate or foreign commerce, 
directly or indirectly or through an affiliate, distilled spirits, 
wine, or malt beverages so imported. 

This subsection shall take effect sixty days after the date of the 
enactment of this Act. 

(b) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator — 

(1) to engage in the business of distilling distilled spirits, 
producing wine, rectifying or blending distilled spirits or wine, 
or bottling, or warehousing and bottling, distilled spirits; or 

(2) for any person so engaged to sell, offer or deliver for 
sale, contract to sell, or ship, in interstate or foreign commerce, 
directly or indirectly or through an affiliate, distilled spirits or 
wine so distilled, produced, rectified, blended, or bottled, or 
warehoused and bottled. 

This subsection shall take effect sixty days after the date of the 
enactment of this Act. 

(c) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator — 

(1) to engage in the business of purchasing for resale at 
wholesale distilled spirits, wine, or malt beverages ; or 

(2) for any person so engaged to receive or to sell, offer or 
deliver for sale, contract to sell, or ship, in interstate or foreign 
commerce, directly or indirectly or through an affiliate, distilled 
spirits, wine, or malt beverages so purchased. 

This subsection shall take effect January 1, 1936. ^ 

This section shall not apply to any agency of a State or political 
subdivision thereof or any officer or employee of any such agency, 
and no such agency or officer or employee shall be required to obtain 
a basic permit under this Act. 

PERMITS 

Sec. 4. (a) The following persons shall, on application therefor, 
be entitled to a basic permit : 

(1) Any person who, on May 25, 1935, held a basic permit as 
distiller, rectifier, wine producer, or importer issued by an agency 
of the Federal Government. 

(2) Any other person unless the Administrator finds (A) that 
such person (or in case of a corporation, any of its officers, direc- 
tors, or principal stockholders) has, within five years prior to 
date of application, been convicted of a felony under Federal or 
State law; or (B) that such person is, by reason of his business 
experience, financial standing, or trade connections, not likely to 
commence operations within a reasonable period or to maintain 



App. I 122 

such operations in conformity with Federal law; or (C) that 
the operations proposed to be conducted by such person are in 
violation of the law of the State in which they are to be con- 
ducted. 

(b) If upon examination of any application for a basic permit 
the Administrator has reason to believe that the applicant is not 
entitled to such permit, he shall notify the applicant thereof and, 
upon request by the applicant, afford him due notice and opportunity 
for hearing on the application. If the Administrator, after affording 
such notice and opportunity for hearing, finds that the applicant is 
not entitled to a basic permit hereunder, he shall by order deny the 
application stating the findings which are the basis for his order. 

(c) The Administrator shall prescribe the manner and form of all 
applications for basic permits (including the facts to be set forth 
therein) and the form of all basic permits, and shall specify in any 
basic permit the authority conferred by the permit and the conditions 
thereof in accordance with the provisions of this Act. To the extent 
deemed necessary by the Administrator for the efficient administra- 
tion of this Act, separate applications and permits shall be required 
by the Administrator with respect to distilled spirits, wine, and malt 
beverages, and the various classes thereof, and with respect to the 
various classes of persons entitled to permits hereunder. The is- 
suance of a basic permit under this Act shall not operate to deprive 
the United States of its remedy for any violation of law. 

(d) A basic permit shall be conditioned upon compliance with 
the requirements of section 5 (relating to unfair competition and 
unlawful practices), with the twenty -first amendment and laws 
relating to the enforcement thereof, and with all other Federal 
laws relating to distilled spirits, wine, and malt beverages, including 
taxes with respect thereto. 

(e)(1) No basic permit issued under this Act shall contain any 
condition prohibiting, nor shall any rule, regulation, or order, issued 
under this or any other Act of Congress, prohibit, the use or sale 
of any barrel, cask, or keg, if made of wood and if of one or more 
wine-gallons capacity, as a container in which to store, transport, 
or sell, or from which to sell, any distilled spirits, wine, or malt 
beverages. This subsection shall not apply to any condition in 
any basic permit issued under this Act or any rule, regulation, or 
order issued in connection therewith to the extent that such condi- 
tion applies in a State in which the use or sale of any such barrel, 
cask, or keg is prohibited by the law of such State. 

(2) It shall oe unlawful for any person to package or repackage 
distilled spirits for sale or resale in bottles unless such person is a 
distiller, a rectifier of distilled spirits, or a person operating a 
bonded warehouse qualified under the internal revenue laws or a 
class 8 bonded warehouse qualified under the customs laws, holding 
a basic permit under this Act, or is a proprietor of an industrial 
alcohol plant or is an agency of a State or political subdivision 
thereof : Provided, That any other person may so package distilled 
spirits in bottles if he qualifies under the internal revenue laws as 
a rectifier and holds a basic permit issued under this Act for the 
rectification of distilled spirits. 



123 App. I 

(3) Notwithstanding the foregoing provisions of this subsection, 
no person who is subject to the occupational tax imposed by section 
3244 " Fourth " of the Revised Statutes, as amended (U. S. C., Supp. 
VII, title 26, sec. 1394 (c) ), on retail dealers in liquors shall package 
or repackage distilled spirits for sale or resale in bottles or be eligible 
to qualify as a rectifier of distilled spirits, and no such person, except 
a bona fide hotel or club, shall, for purposes of sale, remove from any 
such barrel, cask, or keg any distilled spirits contained therein. 
Any person who violates the provisions of this paragraph or para- 
graph (2) shall, upon conviction thereof, be fined not more than 
$1,000 or imprisoned for not more than one year, or both, and shall 
forfeit to the United States all distilled spirits with respect to 
which the violation occurs, and the bottles in which packaged. 

(f) A basic permit shall by order of the Administrator, after 
due notice and opportunity for hearing to the permittee, (1) be- 
revoked, or suspended for such period as the Administrator deems 
appropriate, if the Administrator finds that the permittee has will- 
fully violated any of the conditions thereof, provided that for a 
first violation of the conditions thereof the permit shall be subject 
to suspension only; or (2) be revoked if the Administrator finds 
that the permittee has not engaged in the operations authorized 
by the permit for a period of more than one year; or (3) be annulled 
if the Administrator finds that the permit was procured through 
fraud, or misrepresentation, or concealment of material fact. The 
order shall state the findings which are the basis for the order. 

(g) Orders of the Administrator with respect to any denial of 
application, suspension, revocation, annulment, or other proceed- 
ings, shall be served (1) in person by any officer or employee of the 
Administration designated by the Administrator or any internal 
revenue or customs officer authorized by the Administrator for the 
purpose, or (2) by mailing the order by registered mail, addressed 
to the applicant or respondent at his last known address in the 
records of the Administrator. 

(h) A basic permit shall continue in effect" until suspended, 
revoked, or annulled as provided herein, or voluntarily surrendered ; 
except that (1) if leased, sold or otherwise voluntarily transferred, 
thexpermit shall be automatically terminated thereupon, and (2) if 
transferred by operation of law or if actual or legal control of the 
permittee is acquired, directly or indirectly, whether by stock-owner- 
ship or in any other, manner, by any person, then such permit shall 
be automatically terminated at the expiration of thirty days there- 
after: Provided, That if within such thirty-day period application 
for a new basic permit is made by the transferee or permittee, 
respectively, then the outstanding basic permit shall continue in 
effect until such application is finally acted on by the Administrator. 

(i)- An appeal mav be taken by the permittee or applicant for a 
permit from any order of the Administrator denying an applica- 
tion for, or suspending, revoking, or annulling, a basic permit. Such 
appeal shall be taken by filing, in the circuit court of appeals of the 
United States within any circuit wherein such prson resides or has 
his principal place of business, or in the United States Court of 
Appeals for the District of Columbia, within sixty days after the 
entry of such, order, a written petition praying that the order of the 



App. I 124 

Administrator be modified or set aside in whole or in part. A copy 
of such petition shall be forthwith served upon the Administrator, 
or upon any officer designated by him for that purpose, and there- 
upon the Administrator shall certify and file in the court a transcript 
of the record upon which the order complained of was entered. 
Upon the filing of such transcript such court shall have exclusive 
jurisdiction to affirm, modify, or set aside such order, in whole or in 
part. No objection to the order of the Administrator shall be con- 
sidered by the court unless such objection shall have been urged 
before the Administrator or unless there were reasonable grounds 
for failure so to do. The finding of the Administrator as to the 
facts, if supported by substantial evidence, shall be conclusive. If 
ajiy party shall apply to the court for leave to adduce additional 
evidence, and shall show to the satisfaction of the court that such 
additional evidence is material and that there were reasonable 
grounds for failure to adduce such evidence in the proceeding before 
the Administrator, the court may order such additional evidence to 
be. taken before the Administrator and to be adduced upon the hear- 
ing in such manner and upon such terms and conditions as to the 
court may seem proper. The Administrator may modify his findings 
as to the facts by reason of the additional evidence so taken, and 
he shall file with the court such modified or new findings, which, 
if supported by substantial evidence, shall be conclusive, and his 
recommendation, if any, for the modification or setting aside of the 
original order. The judijment and decree of the court affirming, 
modifying, or setting aside, in whole or in part, any such order of 
the Administrator shall be final, subject to review by the Supreme 
Court of the United States upon certiorari or certification as pro- 
vided in sections 239 and 240 of the Judicial Code, as amended 
(U. S. C, title 28, sees. 346 and 347). The commencement of pro- 
ceedings under this subsection shall, unless specifically ordered by 
the court, operate as a stay of the Administrator's order. 

(j) No proceeding for the suspension or revocation of a basic 
permit for violation of any condition thereof relating to compli- 
ance with Federal law shall be instituted by the Administrator 
more than eighteen months after conviction of the violation of 
Federal law, or, if no conviction has been hajl, more than three years 
after the violation occurred; and no basic permit shall be suspended 
or revoked for a violation of any such condition thereof if the al- 
leged violation of Federal law has been compromised by any officer 
of the Government authorized to compromise such violation. 

UNFAIR COMPETITION AND UNLAWFUL PRACTICES 

Sec 5. It shall be unlawful for any person engaged in business 
as a distiller, brewer, rectifier, blender, or other producer, or as an 
importer or wholesaler, of distilled spirits, wine, or malt beverages, 
or as a bottler, or warehouseman and bottler, of distilled spirits, 
directly or indirectly or through an affiliate : 

(a) Exclusive outlet: To require, bv agreement or otherwise, that 
any retailer engaged in the sale of distilled spirits, wine, or malt 
beverages, purchase any such products from such person to the 
exclusion in whole or in part of distilled spirits, wine, or malt bev- 



125 App. I 

erages sold or offered for sale by other persons in interstate or 
foreign commerce, if such, requirement is made in the course of inter- 
state or foreign commerce, or if such person engages in such prac- 
tice to such an extent as substantially to restrain or prevent transac- 
tions in interstate or foreign commerce in any such products, or if 
the direct effect of such requirement is to prevent, deter, hinder, or 
restrict other persons from selling or offering for sale any such 
products to such retailer in interstate or foreign commerce; or 

(b) " Tied house " : To induce through any of the following means, 
any retailer, engaged in the sale of distilled spirits, wine, or malt 
beverages, to purchase any such products from such person to the 
exclusion in whole or in part of distilled spirits, wine, or malt 
beverages sold or offered for sale by other persons in interstate or 
foreign commerce, if such inducement is made in the course of inter- 
state or foreign commerce, or if such person engages in the practice 
of using such means, or any of them, to such an extent as substanti- 
ally to restrain or prevent transactions in interstate or foreign com- 
merce in any such products, or if the direct effect of such induce- 
ment is to prevent, deter, hinder, or restrict other persons from 
selling or offering for sale any such products to such retailer in inter- 
state or foreign commerce: (1) By acquiring or holding (after the 
expiration of any existing license) any interest in any license with 
respect to the premises of the retailer; or (2) by acquiring any inter- 
est in any premises of the retailer; or (3) by furnishing, giving, 
renting, lending, or selling to the retailer, any equipment, fixtures, 
signs, supplies, money, or other thing of value, subject to such excep- 
tions as the Administrator shall by regulation prescribe, having due 
regard for public health, the quantity and value of articles involved, 
established trade customs not contrary to the public interest and the 
purposes of this subsection; or (4) by paying or crediting the retailer 
for any advertising, display, or distribution service; or (5) by guar- 
anteeing any loan or the repayment of any financial obligation of the 
retailer; or (6) by extending to the retailer credit for a period in 
excess of the credit period usual and customary to the industry for 
the particular class of transactions, as ascertained by the Adminis- 
trator and prescribed by regulations by him ; or 

(c) Commercial bribery: To induce through any of the following 
means, any trade buyer engaged in the sale of distilled spirits, wine, 
or malt beverages, to purchase any such products from such person 
to the exclusion in whole or in part of distilled spirits, wine, or malt 
beverages sold or offered for sale by other persons in interstate or 
foreign commerce, if such inducement is made in the course of inter- 
state or foreign commerce, or if such person engages in the practice 
of using such means, or any of them, to such an extent as substan- 
tially to restrain or prevent transactions in interstate or foreign 
commerce in any such products, or if the direct effect of such induce- 
ment is to prevent, deter, hinder, or restrict other persons from sell- 
ing or offering for sale any such products to such trade buyer in 
interstate or foreign commerce: (1) By commercial bribery;. or (2) 
by offering or giving any bonus, premium, or compensation to any 
officer, or employee, or representative of the trade buyer; or 

(d) Consignment sales: To sell, offer for sale, or contract to sell 
to any trade buyer engaged in the sale of distilled\spirits, wine, or 



App. I 126 

mult beverages, or for any such trade buyer to purchase, offer to 

purchase, or contract to purchase, any such products on consign- 

i or under conditional sale or with the privilege of return or 

.. .iiiy basis otherwise than a bona fide sale, or where any part of 
-Koii transaction involves, directly or indirectly, the acquisition by 
such person from the trade buyer or his agreement to acquire from 
the trade buyer other distilled spirits, wine, or malt beverages — if 
such sale, purchase, offer, or contract is made in the course of inter- 
state or foreign commerce, or if such person or trade buyer engages 
in such practice to such an extent as substantially to restrain or 
prevent transactions in interstate or foreign commerce in any such 
products, or if the direct effect of such sale, purchase, offer, or con- 
tract is to prevent, deter, hinder, or restrict other persons from 
selling or offering for sale any such products to such trade buyer in 
imersiate or foreign commerce; or 

iiO Labeling. — To sell or ship or deliver for sale or shipment, or 
otherwise introduce in interstate or foreign commerce, or to re- 
ceive therein, or to remove from customs custody for consumption, 
a in distilled spirits, wine, or malt beverages in bottles, unless such 
products are bottled, packaged, and labeled in conformity with such 
regulations, to be prescribed by the Administrator, with respect to 
packaging, marking, branding, and labeling and size and fill of 

ontaiuer (1) as will prohibit deception of the consumer with re- 
spect to such products or the quantity thereof and as will prohibit, 
irrespective of falsity, such statements relating to age, manufac- 
turing processes, analyses, guaranties, and scientific or irrelevant 
matters as the Administrator finds to be likely to mislead the con- 
sumer: (2) as will provide the consumer with adequate information 
as to the identity and quality of the products, the alcoholic content 
thereof (except that statements of, or statements likely to be con- 
sidered as statements of, alcoholic content of malt beverages are 
hereby prohibited unless required by State law and except that, in 
case of wines, statements of alcoholic content shall be required only 
for wines containing more than 14 per centum of alcohol by vol- 
ume), the net contents of the package, and the manufacturer or 
bottler or importer of the product; (3) 'as will require an accurate 
statement, in the case of distilled spirits (other than cordials, 
liqueurs, and specialties) produced by blending or rectification if' 
neutral spirits have been used in the production thereof, informing 
the consumer of the percentage of neutral spirits so used and of 
die name of the commodity from which such neutral spirits have 
been distilled ; (4) as will prohibit statements on the label that are 
disparaging of a competitor's products or are false, misleading, ob- 
scene, or indecent; and (5) as will -prevent deception of the con- 
sumer by use of a trade or brand name that is the name of any 
living individual of public prominence, or existing private or public 
organization, or is a name that is in simulation or is an abbrevia- 
tion thereof, and as will prevent the use of a graphic, pictorial, or 
emblematic representation of any such individual or organization, 
if the use of such name or representation is likelv falsely to lead 
the consumer to believe that the product has been indorsed, made, 
or used by, or produced for. or under the supervision of, or in 
accordance with the specifications of, such individual or organiza- 



127 App. I 

tion : Provided. That this clause shall not apply to the use of the 
name of any person engaged in business as a distiller, brewer, rec- 
tifier, blender, or other producer, or as an importer, wholesaler, 
retailer, bottler, or warehouseman, of distilled spirits, wine, or malt 
beverages, nor to the use by any person of a trade or brand name 
used by him or his predecessor "in interest prior to the date of the 
enactment of this Act; including regulations requiring, at time of 
release from customs custody, certificates issued by foreign crovern- 
ments covering origin, age. and identity of imported products. No 
person shall remove from Government custody after purchase at any 
Government sale any distilled spirits, wine, or malt beverages in 
bottles to be held for sale, until such bottles are packaged, marked, 
branded, and labeled in conformity with the requirements of this 
subsection. 

It shall be unlawful for any person to alter, mutilate, destroy, oblit- 
erate, or remove any mark, brand, or label upon distilled spirits. 
wine, or malt beverages held for sale in interstate or foreign com- 
merce or after shipment, therein, except as authorized by Federal 
law or except pursuant to regulations of the Administrator author- 
izing relabeling for purposes of compliance with the requirements of 
this subsection or of State law. 

In order to prevent the sale or shipment or other introduction of 
distilled spirits, wine, or malt beverages in interstate or foreign com- 
merce, if bottled, packaged, or labeled in violation of the require- 
ments of this subsection, no bottler, or importer of distilled spirits. 
wine, or malt beverages, shall, after such date as the Administrator 
fixes as the earliest practicable date for the application of the provi- 
sions of this subsection to any class of such persons (but not later 
than January 1. 1936, and only after thirty days' public notice), 
bottle or remove from customs custody for consumption di-tilled 
spirits, wine, or malt beverages, respectively, unless the bottler or im- 
porter, upon application to the Administrator, has obtained an 1 has 
in his possession a certificate of label approval coverino- the distilled 
spirits, wine, or malt beverages, issued by the Administrator in sii< h 
manner and form as he shall by regulations prescribe: P oi'hhd. 
That anv such bottler shall be exempt from the requirements of this 
subsection if the bottler, upon application to the Administrator. 
shows to the satisfaction of the Administrator that the distilled 
spirits, wine, or malt beverages to be bottled by the applicant are 
not to be sold, or offered for sale, or shipped or delivered for /mo- 
ment, or otherwise introduced, in interstate or foreign CKnmeree. 
Officers of internal revenue and customs are authorized and directed 
to withhold the release of such products from the bottling plant or 
customs custody unless such certificates have been obtained, or unless 
the application of the bottler for exemption has been granted by die 
Administrator. The district courts of the United States, the >u- 
preme Court of the District of Columbia, and the I tilted States court 
for any Territory, shall have jurisdiction of -nits to enjoin, annul. 
or suspend in whole or in part, any final action by the Administrator 
upon any application under this subsection: or 

(f) Advertising : To publish or disseminate or cause to be pub- 
lished or disseminated bv radio broadcast, or in anv newspaper, 
periodical or other publication or by any sign or outdoor advertise- 



App. I 128 

ment or any other printed or graphic matter, any advertisement of 
distilled spirits, wine, or malt beverages, if such advertisement is in, 
or is calculated to induce sales in, interstate or foreign commerce, 
or is disseminated by mail, unless such advertisement is in conform- 
ity with such regulations, to be prescribed by the Administrator, 
(1) as will prevent deception of the consumer with respect to the 
products advertised and as will prohibit, irrespective of falsity, such 
statements relating to age, manufacturing processes, analyses, guar- 
anties, and scientific or irrelevant matters as the Administrator finds 
to be likely to mislead the consumer; (2) as will provide the con- 
sumer with adequate information as to the identity and quality of 
the products advertised, the alcoholic content thereof (except that 
statements of, or statements likely to be considered as statements of, 
alcoholic content of malt beverages are prohibited and except that, 
in case of wines, statements of alcoholic content shall be required 
only for wines containing more than 14 per centum of alcohol by 
volume), and the person responsible for the advertisement; (3) as 
will require an accurate statement, in the case of distilled spirits 
(other than cordials, liqueurs, and specialties) produced by blending 
or rectification if neutral spirits have been used in the production 
thereof, informing the consumer of the percentage of neutral spirits 
so used and of the name of the commodity from which such neutral 
spirits have been distilled; (4) as will prohibit statements that are 
disparaging of a competitor's products or are false, misleading, ob- 
scene, or indecent; (5) as will prevent statements inconsistent with 
any statement on the labeling of the products advertised. This sub- 
section shall not apply to outdoor advertising in place on the date 
of the enactment of this Act, but shall apply upon replacement, 
restoration, or renovation of any such advertising. 

The provisions of subsections (a), (b), and (c) shall not apply 
to any act done by an agency of a State or political subdivision 
thereof, or by any officer or employee of such agency. 

The Administrator shall give reasonable public notice, and afford 
to interested parties opportunity for hearing, prior to prescribing 
regulations to carry out the provisions of this section. 

PENALTIES 

Sec. G. The District Courts of the United States, the Supreme 
Court of the District of Columbia, and the United States Court for 
any Territory, of the District where the offense is committed or 
threatened or of which the offender is an inhabitant or has his 
principal place of business, are hereby vested with jurisdiction of 
any suit brought by the Attorney General in the name of the United 
State.-, to prevent and restrain violations of any of the provisions 
of this Act. Any person violating any of the provisions of sections 
3 or 5 shall be guilty of a misdemeanor and upon conviction thereof 
be fin^J pot more than $1,000 for each offense. Subject to the ap- 
proval af the Attorney General, the Administrator is authorized, 
prior to commencement of court proceedings with respect to any 
violation of this Act, to compromise the liability arising with respect 
to such violation (1) upon payment of a sum not in excess of $500 
for each offense, to be collected by the Administrator and to be paid 



129 App. I 

into the Treasury as miscellaneous receipts, and (2) in case of 
repetitious violations and in order to avoid multiplicity of criminal 
proceedings, upon agreement to a stipulation that the United State- 
may, on its own motion upon five days' notice to the violator, cause 
a consent decree to be entered by any court of competent jurisdiction 
enjoining the repetition of such violation. 

INTERLOCKING DIRECTORATES 

Sec. 7. (a) Except as provided in subsection (b). it shall be un- 
lawful for any individual to take office, after the date of the enact- 
ment of this Act, as an officer or director of any company, if his 
doing so would make him an officer or director of more than one 
company engaged in business as a distiller, rectifier, or blender of 
distilled spirits, or of anj 7 such company and of a company which 
is an affiliate of any company engaged in bu-iness as a distiller. 
rectifier, or blender of distilled spirits, or of more than one com- 
pany which is an affiliate of any company engaged in busine.-s as a 
distiller, rectifier, or blender of distilled spirits, unless, prior to 
taking such office, application made by such individual to the Admin- 
istrator has been granted and after due showing has been made to 
him that service by such individual as officer or director of all the 
foregoing companies of which he is an officer or director together 
with service in the company with respect to which application ',s 
made will not substantially restrain or prevent competition in inter- 
state or foreign commerce in distilled spirits. The Administrator 
shall, by order, grant or deny such application on the basis of the 
proof submitted 1.0 him and his finding thereon. The District Court 
of the United States, the Supreme Court of the District of Colum- 
bia, and the United States courts for any Territory shall have 
jurisdiction of suits to enjoin, annul, or suspend any final action by 
the Administrator upon any application under this subsection. 

(b) An individual may. without regard to the provisions of sub- 
section (a), take office as an officer or director of a company de- 
scribed in subsection (a) while holding the position of officer or 
director of any other such company if such companies are affiliates 
at the time of his taking office and if — 

(1) Such companies are affiliates on the date of the enact- 
ment of this Act : or 

(2) Each of such companies has been organized under the 
law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such Stat* 1 , such com- 
pany must be organized under the law of such State: or 

(3) One or more such companies has been organized under 
.the law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such State, such com- 
pany must be organized under the laws of such State, and the 
other one or more of such companies not so organized, is in 
existence on the date of the enactment of this Act: or 

(4) One or more of such companies has been organized under 
the law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such State, such com- 



App. I 130 

pany must be organized under the law of such State, and not 
more than one of such companies is a company which has not 
been so organized and which has been organized after the date 
of the enactment of this Act. 

^c) As used in this section, the term "company" means a cor- 
poration, joint stock company, business trust, or association, but does 
not include any agency of a State or political subdivision thereof or 
any officer or employee of any such agency. 

(d) Any individual taking office in violation of this section shall 
be punished by a fine of not exceeding $1,000. 

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

Sec. 8. The Federal Alcohol Control Administration established by 
Executive order under the provisions of Title I of the National In- 
dustrial Recovery Act is hereby abolished. All papers, records, and 
property of such Federal Alcohol Control Administration are hereby 
transferred to the Administrator. This section shall take effect on 
the date that the Administrator first appointed under this Act 
takes office. 

MISCELLANEOUS 

Sec. 9. (a) As used in this Act — 

(1) The term "Administrator" means the head of the Fed- 
eral Alcohol Administration. 

(2) The term "United States" means the several States and 
Territories and the District of Columbia ; the term " State " 
includes a Territory and the District of Columbia ; and the term 
"Territory" means Alaska, Hawaii, and Puerto Rico. 

(3) The term " interstate or foreign commerce " means com- 
merce between any State and any place outside thereof, or com- 
merce within any Territory or the District of Columbia, or 
between points within the same State but through any place 
outside thereof. 

(4) The term " person " means individual, partnership, joint 
stock company, business trust, association, corporation, or other 
form of business enterprise, including a receiver, trustee, or 
liquidating agent and including an officer or employee of any 
agency of a State or political subdivision thereof; and the term 
" trade buyer " means any person who is a wholesaler or retailer. 

(5) The term " affiliate " means any one of two or more per- 
sons if one of such persons has actual or legal control, directly 
or indirectly, whether by stock ownership or otherwise, of the 
other or others of such persons; and any one of two or more 
persons subject to common control, actual or legal, directly or 
indirectly, whether by stock ownership or otherwise. 

(6) The term "distilled spirits " means ethyl alcohol, hydraied 
oxide of ethyl, spirits of wine, whiskey, rum. brandy, gin. and 
other distilled spirits, including all dilutions and mixtures 
thereof, for nonindustrial use. 

(7) The term " wine " means (1) wine as defined in section 
610 and section 617 of the Revenue Act of i° 1 ° "J. S. C, title 



131 App. I 

26, sees. 441 and 444) as now in force or hereafter amended, and 
(2) other alcoholic beverages not so defined, but made in the 
manner of wine, including sparkling and carbonated wine, wine 
made from condensed grape must, wine made from other agri- 
cultural products than the juice of sound, ripe grapes, imita- 
tion wine, compounds sold as wine, vermouth, cider, perry and 
sake; in each instance only if containing not less than 7 per 
centum and not more than 24 per centum of alcohol by volume, 
and if for nonindustrial use. 

(8) The term " malt beverage " means a beverage made by the 
alcoholic fermentation of an infusion or decoction, or combina- 
tion of both, in potable brewing water, of malted barley with 
hops, or their parts, or their products, and with or without other 
malted cereals, and with or without the addition of unmalted 
or prepared cereals, other carbohydrates or products prepared 
therefrom, and with or without the addition of carbon dioxide, 
and with or without other wholesome products suitable for 
human food consumption. 

(9) The term " bottle " means any container, irrespective of 
the material from which made, for use for the sale of distilled 
spirits, wine, or malt beverages at retail. 

(b) The right to amend or repeal the provisions of this Act is 
expressly reserved. 

(c) If any provision of this Act, or the application of such provi- 
sion to any person or circumstance, is held invalid, the remainder 
of the Act and the application of such provision to persons or circum- 
stances other than those as to which it is held invalid, shall not be 
effected thereby. 

(d) This Act may be cited as the " Federal Alcohol Administration 
Act." 



Appendix II.— REPORT OF THE COMMITTEE ON WAYS 
AND MEANS ON H. R. 8870 

(Rept. No. 1542. Federal Alcohol Control Bill) 

The Committee on Ways and Means, to whom was referred the 
bill (H. R. 8870) to further protect the revenue derived from distilled 
spirits, wine, and malt beverages, to regulate interstate and foreign 
commerce and enforce the postal laws with respect thereto, to enforce 
the twenty-first amendment, and for other purposes, having had the 
same under consideration, report favorably thereon without amend- 
ment and recommend that the bill do pass. 

General Statement 

This bill covers the industries engaged in the distilling, brewing, 
blending, rectifying or other production of distilled spirits, wine, and 
malt beverages, or in the importing or wholesaling of such products, 
or in the bottling, or warehousing and bottling, of distilled spirits. 
The bill is designed to supplement the present Federal laws relating 
to such industries so as to provide for the further protection of the 
revenue derived therefrom, regulate interstate and foreign commerce 
in nonindustrial distilled spirits and wine and in malt beverages, en- 
force the postal laws with respect thereto, and, incidentall}-, enforce 
the twenty-first amendment. 

The bill is founded on the principle that, for the protection of the 
public and adequate conservation of the revenue, Federal regulation 
is necessary. These industries are Nation-wide in their extent, pro- 
foundly affect many phases of national life, and present problems 
national in their scope. State regulation is inadequate, by reason of 
practical and constitutional limitations, to meet the problems pre- 
sented. Federal regulation, in the field in which the Constitution 
permits the exercise of Federal authority, is necessary to deal with 
these problems. 

National scope of the industry. — There are in the United States 
today 192 distilleries, qualified under the internal-revenue laws tor 
the production of distilled spirits, other than brandy, for beverage 
use. In addition, there are 1G9 distilleries authorized to engage in 
the production of brandy only, and 55 persons authorized as lessees 
to operate distilleries owned by others. During the calendar year 
1934 the operating distilleries produced, for beverage use, about 17 
million gallons of alcohol, 5 million gallons of gin, iy 2 million gal- 
lons of rum, and 108 million gallons of whisky, using in such produc- 
tion, among other materials, approximately 20 million bushels of 
grain. All the lawfully established distilleries of the United States, 
including those actively in operation and those completed and ready 

(132) 



133 App. n 

for operation, possess a potential productive capacity well in excess 
of the above figures. 

There are 415 active rectifiers of distilled spirits in the United 
States engaged in the rectification and bottling of such spirits for 
public consumption. During the year 1934 the total output of these 
rectifying plants was approximately 24 million gallons. 

Six hundred and twenty concerns are actively engaged in the im- 
portation of alcoholic beverages. During the calendar year 1934 
these concerns brought into the United States a total of approxi- 
mately 11 million gallons of alcoholic beverages, valued at some 48 
million dollars. 

At the present time 680 breweries are in operation in the United 
States. During 1934 these breweries produced approximately 43 
million barrels of fermented malt beverages, 40 million barrels of 
which were actually marketed for sale to the public. Beer produced 
during 1934 required the use by brewers of approximately V/ 2 billion 
pounds of malt, hops, corn, and similar brewing materials. 

Approximately 500,000 people are employed directly by the pro- 
ducers and wholesalers of alcoholic beverages and by the 200,000 
retail outlets scattered throughout the country. This figure does not 
include those indirectly employed in the production of barrels, glass, 
labels, and other materials and accessories used in the production and 
distribution of alcoholic beverages. During 1934 the American pub- 
lic expended the sum of approximately 2 billion dollars in the pur- 
chase of tax-paid liquors, including over 40 million gallons of hard 
liquors, 35 million barrels of beer, and 21 million gallons of wine. It 
is estimated that the advertising expenditures alone for the alcoholic 
beverage industries during the current year will exceed the sum of 
20 million dollars, more than half of which will go toward the pur- 
chase of newspaper and periodical advertising. 

It is estimated that during the calendar year 1934 Federal internal- 
revenue receipts, exclusive of income taxes, derived from the alcoholic 
beverage industries, totaled approximately $375,000,000: State license 
fees and excise taxes totaled approximately $116,000,000: and net 
profits derived from alcoholic beverages bv the monopoly States 
totaled $34,000,000. 

The figures set forth above indicate both the size of the liquor 
business and the national scope of its operation. 

Inadequacy of existing law. — Experience prior to prohibition dem- 
onstrated that the individual States, by reason of the diversity of 
their laws and the fact that practically all alcoholic beverage pro- 
ducers and large-scale distributors did an interstate business, could 
not alone provide those safeguards necessary for the protection of 
the revenue of the United States, prevent the use of the facilities of 
interstate and foreign commerce and the mails to carry on unlawful 
and deceptive practices, and protect their own citizens from the evils 
which are alwavs present in an inadequately regulated liquor traffic. 
That situation holds true today. Further, during prohibition, un- 
scrupulous persons entered into the liquor business with the conse- 
quences known to all. The bootlegger and the racketeer have not 
vet disappeared from our national life. Under existing Federal law 
there is no means of keeping the criminal from entering the legalized 
liquor field. The executive" branch of the Government, Cevnpnt to a 



App. n 134 

limited extent in the case of distilleries) is powerless to prevent the 
most notorious criminal from entering into the business of production 
or distribution of alcoholic beverages. The revenue cannot be ade- 
quately protected, the " tied-house " control cannot be curbed, the 
public cannot be protected from unscrupulous advertising, the con- 
sumer cannot be protected from deceptive labeling practices; in 
short, the legalized liquor traffic cannot be effectively regulated, if 
the door is left open for highly financed gangs of criminals and rack- 
eteers to enter into the business of liquor production and distribution. 

Even if the present Federal law were adequate to prevent the 
criminal from entering the liquor field, there would still remain the 
problem of control of the unethical minority in the business, the activ- 
ities of which are beyond State power and require regulation in the 
public interest. The internal revenue, Federal trade, and food and 
drug laws are insufficient for this purpose. Protection of the con- 
sumer and the elimination of improper practices in this industry are 
imperative, and additional legislation to accomplish these purposes 
is necessary. 

The former code system. — The codes of fair competition for the 
liquor industry under the National Industrial Recovery Act repre- 
sented efforts to meet many of the evils outlined above and to accom- 
plish many of the purposes of this bill. The adoption of the twenty- 
first amendment took place with unexpected speed. When repeal 
became effective on December 5. 1933, Congress was not in session, 
nor was there legislation on the books adequate to control the alco- 
holic beverage industries. Codes of fair competition under the Na- 
tional Industrial Recovery Act were availed of to meet the situation 
until Congress had had an opportunity to legislate. This view as to 
the temporary character of the codes appears in their preamble. It 
was expected that Congress would, at the next session, enact appro- 
priate legislation. Nevertheless the code system continued in effect, 
without the enactment of legislation by Congress, from December 
1933, until May 27 last, when the Supreme Court handed down its 
decision in the case of Schechter Poultry Corporation v. United States. 
As a result of that decision, the codes are no longer being enforced, 
and since that date the several alcoholic beverage industries have 
been without Federal supervision, except such as is incident to the 
collection of the revenues. 

Under the code system a voluntary code for the brewing industry 
(already in existence at the time of repeal as a result of 3.2 beer 
legislation of Mar. 22, 1933) was approved by the President. At the 
same time, the President imposed codes upon the other alcoholic 
beverage industries, namely, the distillers, rectifiers, importers, 
wholesalers, and wine producers. By Executive order under the 
National Industrial Recovery Act the President established the 
Federal Alcohol Control Administration to administer these codes 
and certain related functions. The bill embodies in statutory form 
so much of the former code system as the committee now deems 
appropriate and within the constitutional power of Congress to 
enact. In general, it may be said that the bill incorporates the 

greater part of the system of Federal control which was enforced 
y the Government under the codes. 



135 App. n 

The outstanding exceptions are that all provisions relating to 
open-price competition, including posting of prices and prohibition 
of guarantees against decline in price and of refunds, rebates, and 
concessions, have been omitted, together with the system of code 
authorities, divisional committees, and regional boards to aid in ad- 
ministering the codes. Also control under the codes of bulk dis- 
tribution of. distilled spirits to wholesalers, retailers, and consumers 
is omitted. 

The proposed legislation, by providing a Federal agency to super- 
vise the aspects of the liquor industry within the range of Federal 
power, a permit system under which that supervision can b? effec- 
tive, and methods to restrict unlawful and unfair practices in the 
liquor business, will, it is believed, do much to protect the revenue 
and to prevent the recurrence of those evils known to be present in, 
the liquor traffic in the past and which no fair-minded citizen wishes 
to be restored and maintained. 

Hearings. — Hearings were held by the committee on June 19 and 
20, 1935, on H. R. 8539, which formed a basis for the bill now being 
reported. (See hearings entitled " Federal Alcohol Control Act ", 
74th Cong., 1st sess.) Hearings upon other phases of the necessity 
for Federal control of the alcoholic beverage industries, including 
the extension of the code system under which such industries for- 
merly operated, were held by the committee on May 22, 1935 (see 
hearings entitled " Extension of National Industrial Recovery Act *', 
74th Cong., 1st sess.) and by the Senate Committee on Finance on 
April 17, 1935. (See hearings entitled " Investigation of the Na- 
tional Recovery Administration ", 74th Cong., 1st sess., pt. 6.) 
Hearings on various other phases of the liquor problem were held 
by the Committee on Ways and Means in conjunction with its con- 
sideration of H. R. 8001. (See hearings entitled "Administration 
of Liquor Taxing Laws ", 74th Cong., 1st sess.) 

Analysis and Explanation of the Bill 

taxes 

Section 1 levies an occupational tax on the carrying on of various 
phases of the liquor business. The taxes provided are at the rate of 
$10 per annum and are imposed on importers, sellers in interstate 
or foreign commerce of liquor, distillers, wine producers, brewers, 
rectifiers, wholesalers, and other holders of permits provided for in 
the bill. The provisions of law relating to the levy, collection, and 
payment of existing occupational taxes by persons engaged in the 
occupations to which the additional tax applies are made to apply 
to the taxes imposed by the section. 

federal alcohol administration 

Section 2 establishes a Federal Alcohol Administration which is 
to be a division in the Treasury Department. The name of the 
organization is fixed so as to avoid confusion with the Federal 
Alcohol Control Administration created under the authority of the 



App. II 136 

National Industrial Recovery Act. The latter organization is abol- 
Mir.1 under section 8 of the bill, and its papers, records, and prop- 
erty are transferred to the new agency. The abolition and transfer 
are' postponed, however, until the Administrator who is to head the 
new organization takes office. . , 

Section 2 (b) provides for the appointment of an Administrator 
bv and with the advice and consent of the Senate, whose compen- 
sation is to be $10,000 per annum. No person connected with the 
liquor industry or its financing is to be eligible to appointment or 
to* service as Administrator. 

ruder section 2 (c), the Administrator is given the power to ap- 
point and fix the compensation and duties of his officers and em- 
ployees. Such appointments and compensation are to be made and 
fixed without regard to the civil-service laws or the Classification 

i. The compensation of each of the officers and employees so 

: minted, however, is required to be approved by the Secretary of 
t :o Treasury. This subsection also authorizes the Administrator 
! ' ftdopt an official seal which is to be. judicially noticed. 

S .■•„• .1 .n 2 (d) gives the Administrator power to prescribe rules 
;> :•■ regulations. "All such rules and regulations (including those 
prescribed in the exercise of powers under section 5 which relates 
' unfair competition and unlawful practices) must have the ap- 
proval of the Secretary of the Treasury. 

Tiie usual objects of expenditure of appropriations are authorized 
!>v subsection (e) of section 2, but provision is specifically made by 
which the Administrator may acquire magazines, periodicals, and 
newspapers so that he may effectively carry out his powers relating 
to advertising contained in section 5, and specific provision is made 
under which expenditure may be made for the purchase of sam- 
ples for analysis and use as evidence. Subsection (f ) authorizes the 
Administrator to use the services of other agencies of the Govern- 
ment with their consent. Subsection (g) applies the procedural pro- 
visions of law relating to Federal Trade Commission investigations 
to the exercise of the Administrator's powers. Subsection (h) au- 
thorizes the Administrator to require reports necessary to carry out 
his powers and duties. 

PERMITS 

A permit or license system has been a customary method of ad- 
ministering and enforcing liquor laws. At the present time by act 
of Congress distillers of alcohol for industrial purposes and brewers 
of beer of an alcoholic content of 3.2 by weight or less operate under 
Federal permits. The permit system was used under the codes. 

Enforcement of liquor laws is an exceptionally difficult enforce- 
ment problem. Many factors not common to other industries exist 
in the liquor industry and present enforcement difficulties not com- 
monly met with in the enforcement of other laws. The racketeering 
element present in the industry during prohibition is not wholly 
eliminated. Internal revenue taxes and customs duties afford an 
economic inducement to operate outside of both liquor tax and 
liquor control laws. The industry has been newly reestablished and 
is unstable in its personnel and practices. This, together with the 



137 App. n 

tradition <5f past practices, particularly corruption and interference 
in politics and efforts to stimulate consumption through, the " tied 
house " and control of retail channels, afford a poor groundwork 
for reliance on law observance through voluntary action or through 
the customary methods of enforcement. The history of the enforce- 
ment of liquor laws in this country has been characterized by wide- 
spread violations and evasions. The ease with which the products 
of the industry are adulterated, sophisticated, and misbranded : their 
relatively high value; the perishable character of many wines and 
malt beverages; the large distribution costs — all are extraordinary 
incentives to ignore requirements of law. The mobility of products 
of the industry makes all channels of interstate and foreign com- 
merce readily available for illegal transactions. Relatively drastic 
enforcement methods, such as the permit system, therefore become 
necessary. 

Scope of permit system. — The bill (sec. 3) requires permits for all 
distillers ; wine producers ; rectifiers or blenders of distilled spirits or 
wine; bottlers or warehousemen and bottlers of distilled spirits; 
importers of distilled spirits, wine, or malt beverages; and whole- 
salers of distilled spirits, wine, or malt beverages. The permit does 
not authorize the industry member to engage in operations which 
are prohibited by State laws. No permits are provided for brewers 
or retailers. No permit is required for any State liquor control 
monopoly, board, or similar agency, or the members thereof. 

A distiller, blender, or rectifier, or other producer of distilled 
spirits or wine, or an importer of distilled spirits, wine, or malt 
beverages, or a wholesaler of such products, would, under his permit 
as such, be in addition authorized, either directly or indirectly or 
through an affiliate, to sell or otherwise dispose of in interstate or 
foreign commerce, at wholesale or retail, goods produced by him, 
imported by him, or purchased by him, respectively. No permit 
authority is required for sale or other disposition in intrastate com- 
merce or for warehousing, except in connection with bottling: of dis- 
tilled spirits. 

The permit would also include authority to the producer, importer, 
or wholesaler to bottle, with or without reduction in proof, either 
directly or indirectly, or through an affiliate, bulk goods produced, 
imported, or purchased, respectively, by the permittee; subject to 
the limitations of section 4 (e) (2) which restricts the privilege of 
bottling in case of distilled spirits. Puerto Rico is not included in the 
restriction inasmuch as the internal-revenue laws do not apply 
within Puerto Rico. In accordance with these restrictions, a distiller 
could, under his permit, bottle in a distillery bonded warehouse all 
distilled spirits of his own production, and if his warehouse is desig- 
nated as a concentration warehouse or if he operates an alcohol bonded 
warehouse, he may also bottle distilled spirits produced by others 
either on his own account or for hire. Such bottling operations may 
be undertaken on the tax-paid premises in connection with any such 
warehouse, and the permittee may sell or otherwise dispose of at 
wholesale or retail in interstate or foreign commerce the distilled 
spirits so bottled. A blender .or rectifier of distilled spirits could 
under his permit bottle on his rectifier's premises distilled spirits 



App. H 138 

blended or rectified by him or acquired by him from- any other per- 
son, whether for his own account or for hire, and sell or otherwise 
dispose of at wholesale or retail in interstate or foreign commerce- 
the distilled spirits so bottled. 

A warehouseman, who is not a distiller or rectifier, could under his 
permit bottle distilled spirits acquired by him from any other person r 
whether for his own account or for hire, if the warehouseman is 
operating a general or special or alcohol bonded warehouse quali- 
fied under the internal revenue laws or a class 8 bonded warehouse 
qualified under the customs laws, and if the bottling operations 
occur on the bonded premises of such warehouse or the tax-paid 
premises in connection therewith ; and could under his permit sell or 
otherwise dispose of at wholesale or retail in interstate or foreign 
commerce the distilled spirits so bottled. An importer or whole- 
saler would have no privilege of bottling distilled spirits for sale or 
resale unless he qualified as a rectifier under the internal revenue 
laws. 

The permit provisions apply to all members of the specified in- 
dustries, irrespective of whether the permittee's operations are intra- 
state or interstate in character. Apart from the more effective 
enforcement of revenue and postal laws, which apply as well to intra- 
state as to interstate operations, laws relating to the enforcement of 
the twenty-first amendment and to interstate commerce require that 
the permit system extend to all intrastate operations in order that 
the permit system may be an effective means of preventing evasion 
of these laws. The intricacies of corporate set-ups, the establishment 
of branch houses and sales corporations, the use of rectifiers, blend- 
ers, and wholesalers as interstate distribution conduits, and the dis- 
posal of stocks through sale of warehouse receipts, make it necessary 
that all industry members of the specified industries operate under 
permits, irrespective of the character of their operations at any time, 
if the permit system is to prove adequate in more effectively enforc- 
ing the revenue and postal laws and laws relating to interstate com- 
merce and the twenty-first amendment. 

Conditions of permit. — The only conditions which attach to a val- 
idly issued permit (other than revocation because of nonuse for 
more than 1 year or termination in the event of transfer) are: (1) 
Compliance with the provisions of the bill relating to unlawful prac- 
tices involving interstate or foreign commerce and in some instances 
involving enforcement of the postal laws, (2) compliance with the 
twenty-first amendment and laws relating to the enforcement thereof 
(which would include the provisions of H. R. 8368, if enacted), and 
(3) compliance with all other Federal laws now in force or here- 
after enacted relating to distilled spirits, wine and malt beverages T 
including taxing laws, postal laws, and such interstate commerce 
laws as the Reed amendment (sec. 4 (d)). The permittee is thus 
left free under the bill to conduct his business as he sees fit. subject 
only to compliance with Federal laws of unquestionable validity. It 
follows, therefore, that the permit provisions constitute an exercise 
by Congress of its power to use such means as are " necessary and 
proper " in order more effectively to carry out its powers to collect 
taxes, regulate interstate and foreign commerce, enforce the twenty- 
first amendment, and administer the postal laws, as exercised in the 



139 App. II 

provisions of the present bill relating to unlawful practices and en- 
forcement of the twenty-first amendment, in laws hereafter enacted 
to enforce the twenty-first amendment, and in the provisions of 
existing law. 

Qualifications for permit. — All persons who held a basic permit 
issued under the code system and in full force and effect at the time 
of the termination of that system as a result of the decision in the 
Schechter case, are, under the bill, entitled as a matter of right to 
permits issued under the new law when enacted, except in the case 
of wholesalers (sec. 4 (a) (1)). Wholesalers held only temporary 
basic permits at the time of the termination of the code system. The 
temporary basic permits were issued without the usual investigation. 
The other permittees under the code system were issued permits after 
they demonstrated that they did not have records as law violators 
and that by reason of their previous experience, financial standing, 
and trade connections they were potential legal members of the 
industry. 

Under the bill, wholesalers and new applicants are entitled to 
permits, unless the Administrator after notice and hearing makes 
certain specific findings (sec. 4 (a) (2)). Thus, in order to deny an 
application, the Administrator must find that the applicant, within 
5 years prior to his application, has been convicted of a felony under 
Federal or State law, or that the applicant is, by reason of his busi- 
ness experience, financial standing, or trade connections, not likely 
to commence operations within a reasonable period or to maintain 
such operations in conformity with Federal law, or that the oper- 
ations proposed to be conducted under the permit are in violation of 
the laws of the State in which they are to take place. 

These requirements are designed to exclude from the industries 
persons who would be likely to violate the provisions of the bill and 
other Federal or State laws. Such requirements are, in the judg- 
ment of the committee, fair and reasonable, and bear a real and 
substantial relation to the adequate enforcement of provisions of 
Federal law heretofore enacted or enacted in the accompanving 
bill. 

Suspension and revocation. — A permit is subject to revocation or 
suspension for willful violation of its conditions or to revocation for 
nonuse, or to annulment if obtained through fraud, misrepresenta- 
tion, or concealment of material fact (sec. 4 (f ) ) . For a first offense, 
involving a violation of the conditions of a permit, the Administrator 
may not revoke, but only suspend, the permit. The requirements 
as to issuance and as to revocation, suspension, or annulment of a 
permit provide definite standards to be applied by the Administrator. 
The Administrator's determination must be embodied in findings 
made after due notice and opportunity for hearing. The bill fulfills 
all legal requirements as to both standards and findings. 

Personal service of orders of the administrator as well as service 
by registered mail of such orders is provided for in subsection (g). 

Provision is made in connection with the Administrator's power to 
deny a permit or to revoke, suspend, or annul a permit that his action 
be by formal order stating therein the finding upon which the order 
is based (sec. 4 (b) and sec. 4 (f)). This requirement is inserted 
in order that the applicant or permittee may be informed of the 



App. H 140 

substance of the reasons for the Administrator's action (though this 
provision does not have the effect of invalidating the order if the 
reasons stated are inadequate but the record discloses adequate 
reasons). The specification that the action of the Administrator, 
even in case of denial of an application for a permit, be by order per- 
mits the reviewing court to have something before it to review so that 
jurisdiction will not be denied on the ground that the action of the 
Administrator is negative. 

A permit may not be revoked or suspended on the ground of viola- 
tion by the permittee of Federal law more than 18 months after the 
conviction for the offense nor more than 3 years after violation if no 
conviction has theretofore been had. Nor may a permit be revoked 
or suspended at any time for a violation of Federal law if the viola- 
tion has been compromised by a Federal officer authorized to com- 
promise such violation (sec. 4 ( j ) ) . 

Court review. — Court review of the Administrator's order is pro- 
vided in section 4 (i). This provision is inserted in order to comply 
with the constitutional requirement that a man's right to do business 
may not be denied administratively, even in pursuance of a Federal 
power, without his having his day in court. The provision of the 
bill is similar to that contained in the Packers and Stockyards Act, 
the Communications Act, the Securities Act, and the Securities Ex- 
change Act as well as the provision in the internal revenue laws 
under which appeals are taken from the. Board of Tax Appeals. Re- 
view is granted in the United States Court of Appeals for the Dis- 
trict of Columbia or the Circuit Court of Appeals of the United 
States where the person resides or has his principal place of business, 
at his election. Review in the circuit court is thought to "be more 
desirable than review in the district court in order that there may 
not be the delay and expense consequent upon a lawsuit in the district 
court and appeal from that court's action to the circuit court of ap- 
peals. Further, review of the order is in substance an appellate 
function which is not within the usual scope of district court juris- 
diction but rather within that of the circuit court of appeals. Review 
is limited to questions of law as required by the Constitution in the 
case of a constitutional court in accordance with the principles laid 
down in Old Colon]/ Trust Co. v. Commissioner of Internal Revenue 
(19-29) (279 U. S. 716) ; Federal Radio Commission v. General Elec- 
tric Co. (1930) (281 U! S. 464) ; and Federal Radio Commission v. 
Nelson Brothers Bond & Mortgage Co. (1933) (289 U. S. 266). Pro- 
vision is made, however, by which additional evidence may be 
adduced before the Administrator even after the case is in court. 
Appeal from the decision of the court of appeals may be had by certi- 
fication or certiorari to the Supreme Court of the United States. 
The court proceedings are to operate as a stay of the order of the 
Administrator unless the court otherwise directs. 

Transfers of permits. — The bill prohibits the lease, sale, or other 
voluntary transfer of any permit (sec. 4 (h) ). This prohibition does 
not, however, prohibit the sale Oi* other transfer of the assets of a 
permittee. A distiller, for instance, may sell his distillery .but not 
his permit. The purchaser in such case is required to obtain a new 
permit. In order to provide continuity of operation of the business, 
in case of a sale, it lies within the power of the parties to condition 



141 App. II 

the transfer of title upon the prospective purchaser's obtaining a new 
permit. For the purpose of caring for situations that arise through 
transfers by operation of law or through acquisition, for instance, of 
control of an existing permittee by acquisition of its stock, provision 
is made for the continuance of the old permit, but only for a limited 
time, pending application for a new permit and action by the Ad- 
ministrator thereon. This, the committee believes, is necessary in 
order to prevent the permits- from falling into the hands of boot- 
leggers and other law violators who would not have been entitled to 
a permit in the first instance. 

Bulk sales. — Subsection (e) of section 4 contains a provision of 
general application, which is designed to prevent the operation of 
rules and regulations promulgated under Federal law, which rules 
and regulations prohibit the use of barrels of wood of one or more- 
wine gallons capacity as containers in which to transport, store, or 
sell, or from which to sell distilled spirits, wine, or malt beverages. 
This provision invalidates certain existing regulations which limit 
the retail sale of alcoholic beverages to sale in glass containers. The 
last sentence of the first paragraph of the subsection is inserted out of 
abundant caution so that the limitations on the power of the executive 
branch of the Government contained in this subsection will not be 
construed as giving authority to a permittee to violate State law 
which prohibits the sale or use of such barrels. Nor does such sen- 
tence indicate an enlargement of the scope of the powers to prescribe 
conditions of permits under the bill. 

The second and third paragraphs of the subsection are designed to- 
meet objections to permitting indiscriminate bottling: First, that 
there will be added likelihood of loss of revenue if a wholesaler 
acquiring distilled spirits in bulk in wood may not only dispense 
them from such containers but also package or repackage them for 
resale in glass or other containers since he has authority to receive 
the liquor in wooden containers; and second, that the labeling and 
other requirements of law will readily be evaded if bottling can 
occur in premises at which Government officers are not stationed and 
which, in case of retailers, are not under a basio- permit. These 
paragraphs prohibit such packaging or repackaging by a, retailer 
in any case and by a wholesaler unless he qualifies as a rectifier. In 
such case, the wholesaler is specifically authorized to become a rec- 
tifier and then is subject to the provisions of law applicable to recti- 
fiers. Further, while authority is given to the use of wooden bar- 
rels, etc., as containers in which to sell distilled spirits as a whole- 
saler, retailer, or the individual consumer, an express prohibition is 
contained in paragraph (3) under which no retailer except a retailer 
operating a bona fide hotel or club, or his agents in the course of 
their duties, may break such packages for sale on or off the premises^ 
Tn such cases the hotel or club may remove the contents to decanters 
or otherwise for sale by it, but all other retailers must sell the 
spirits barrel and all in the unbroken packages. 

UNFAIR COMPETITION AND UNLAWFUL PRACTICES 

Section 5 of the bill enumerates six specifically defined unlawfuL 
practices. The prohibition of these practices is based primarily oil 



App. II 142 

the commerce clause and in some instances on the twenty-first amend- 
ment and the postal power. The section applies' to distillers, recti- 
fiers, blenders, and other producers of distilled spirits, wine, or malt 
beverages, importers and wholesalers of distilled spirits, wine, or 
malt beverages, and bottlers and warehousemen and bottlers of dis- 
tilled spirits. The provisions are applicable to the persons engaged 
in such businesses whether the unlawful practices are engaged in 
directly by them or engaged in indirectly or through an affiliate as 
defined in the bill. These prohibited practices fall in two general 
categories, those relating to monopolistic control of retail outlets 
and those relating to labeling and advertising. 

" Tied-house" provisions. — Section 5 (b) prohibits a number of 
specific practices under the heading " tied-house ", such as holding 
any interest in any retail license or the acquiring of any interest in 
the premises of a retailer; the furnishing, giving, renting, lending, 
or selling to a retailer of equipment, fixtures, signs, supplies, money, 
or other thing of value, except as permitted under regulations; pay- 
ing or crediting a retailer for advertising, display or distribution 
services; guaranteeing of any loan or repayment of any financial 
obligation of a retailer; and extending to a retailer of credit in 
excess of that usual and customary in the industry for the particular 
class of transactions. 

Three other types of practices which are closely related to. and 
have constituted additional means of effecting, the " tied-house " are 
also prohibited. These practices are exclusive purchase arrangements 
with retailers (sec. 5 (a)) ; commercial bribery of a trade buyer, or 
the offering or giving of any bonus, premium, or compensation to the 
officers or employees of a trade buyer (sec. 5 (c) ) ; and deliveries to a 
trade buyer on consignment, or conditional sales, or sales with the 
privilege of return, or sales on any basis other than a bona-fide sale 
(sec. 5(d)). 

In connection with the prohibition on consignment sales (sec. 5 
(d)) it is to be noted that the provision relates to the buyer as well 
as the seller. The other provisions discussed above relate only to con- 
duct by the seller. It has been brought to the attention of the com- 
mittee that certain large buyers are in such a strategic position Tvith 
respect to sellers that they often have sufficient economic power to 
compel the sellers to deal with them on a consignment or return basis. 
Buyers less powerful are unable to exact such terms from the seller. 
Such situations are in practical effect not essentially different from 
the exaction of price discriminations in favor of the large trade 
buyer. Accordingly the committee felt that the trade buyer ought to 
be included within the consignment-sale prohibition. The provision 
is broad enough to include not only the case where the seller agrees 
in a single transaction to take back undesirable goods in consideration 
for the sale of other goods, but also cases in which, in form, separate 
transactions have occurred but which are in substance one transac- 
tion. The consignment sale provision is made to apply to sales and 
purchases by State agencies. The constitutionality of applying srch 
regulation to State agencies is sustained bv the cases of Sou-th Caro- 
lina v. U. S. (1905) (199 U. S. 437) ; Ohio v. Helverinq (1934) (292 
U. S. 360) ; and Helveringv. Powers (1934) (293 U. S. 214). 



143 App. II 

The foregoing practices have in this industry constituted the prin- 
cipal abuses whereby interstate and foreign commerce have been re- 
strained and monopolistic control has been accomplished or attempted. 
The most effective means of preventing monopolies and restraints of 
trade in this industry is by prohibiting such practices, thereby strik- 
ing iat the causes for restraints of trade and monopolistic conditions 
and dealing with such conditions in their incipiency. 

Furthermore, such abuses were so prevalent before prohibition 
that they were regarded in a large measure as responsible for the evils 
which led to prohibition. (See Report of the National Commission 
on Law Observance and Enforcement (1931), H. Doc. No. 722, Tlst 
Cong., 1st sess., p. 6; and Fosdick and Scott, Toward Liquor Control 
(1933), pp. 42^3.) The prohibition of these practices will, accord- 
ingly, not only prevent monopoly and restraint of interstate trade but 
will also tend to eliminate or mitigate certain incidental social evils, 
such as those which have necessarily followed the forced increase in 
alcoholic-beverage sales resulting from the " tied-house." The major- 
ity of the industry members have come to accept the view that it is 
unfair for any of their number to resort to practices which result in 
such social evils, since other members of the industry are thereupon 
compelled likewise to engage in such practices if they are to retain 
their business, and as a result the entire industry is brought into dis- 
repute. 

It should be noted in each instance that the unfair practices above 
referred to are prohibited only under those circumstances where they 
occur in the course of interstate or foreign commerce, or are engaged 
in to such an extent as substantially to restrain or prevent transac- 
tions in interstate or foreign commerce, or where the direct effect of 
the practices is to prevent, deter, hinder, or restrict other persons 
from selling or offering for sale their products in interstate or foreign 
commerce. The practices here involved are analogous to those pro- 
hibited by the antitrust laws. 

Labeling and advertising provisions—The labeling and advertising 
provisions (sec. 5 (e) and (f)) prohibit the use of interstate channels 
when labeling or advertising of distilled spirits, wine, or malt bever- 
ages does not conform to regulations, with the force and effect of law, 
prescribed by the Administrator. Definite standards are laid clown 
for these regulations. The regulations are not only required to pro- 
hibit labeling and advertising that is false, misleading, obscene, or 
indecent, or that 'disparages competitors' products, but must also 
provide for the prevention of deception of the consumer with respect 
to the product or its quality. They must also prohibit, regardless of 
their truth, statements relating to age, manufacturing process, analy- 
ses, guaranties, and scientific or irrelevant matters that the Admin- 
istrator finds likely to mislead the consumer, and must make provi- 
sion for informing the consumer adequately as to the identity and 
quality of the product, its alcoholic content, the net contents of the 
package, and the person responsible for the package or the advertise- 
ment. Alcoholic content \is required to be stated in connection with 
wines only if alcoholic content is above 14 percent by volume, and is 
optional in case of other wines. Alcoholic content is prohibited from 
being stated in the case of malt beverages. Malt beverages should 
not be sold on the basis of alcoholic content. The variation of alco- 



App. H 144 

holic content has little consumer importance and the industry recog- 
nizes that attempts to sell beer and other malt beverages on the basis 
of alcoholic content are attempts to take advantage of the ignorance 
of the consumer and of the pyschology created by prohibition ex- 
periences. 

Legitimate members of the industry have suffered seriously from 
unfair competition resulting from labeling and advertising that uses 
such terms as " strong ". " extra, strength ", k ' high test ", " high 
proof ", " pre-war strength ", " 14 percent original extract ", and 
from brand names or other statements or references which include 
conspicuous numerals or symbols intending to suggest that the 
numerals or symbols represent the alcoholic content. Usually such 
representations of excess alcoholic content are false, but irrespective 
of their falsity, their abuse has grown to such an extent since repeal 
that the prohibition of all such statements is in the interest of the 
consumer and the promotion of fair competition. 

The labeling and advertising requirements also compel statements 
as to the percentage of neutral spirits used in distilled spirits (in- 
cluding gin), except in case of liqueurs, cordials, cocktails, gin fizzes, 
high balls, bitters, and other specialties. This is for the purpose of 
informing the consumer of the fact that he is purchasing a product 
which contains neutral spirits whereas he might think he was ob- 
taining one in which no such spirits were used. Since there is in 
some cases a consumer preference for neutral spirits made out of 
grain rather than other products, the labeling and advertising pro- 
visions require, where neutral spirits have been used, a statement of 
which commodity (whether grain, sugarcane and its products, fruit, 
or whatever the commodity may be) has been distilled to produce 
the neutral spirits used. 

Further protection is given the consumer by prohibiting the use of 
trade or brand names of prominent living persons or of organizations. 
The use of such names frequently leads him to believe that the prod- 
uct behind the label was produced, endorsed, made, or used by, or in 
certain other ways specified in the bill identified with the individual 
or organization whose name appears on the label. Abbreviations and 
other methods of indicating the name of such individuals or organ- 
izations are similarly barred. Nothing in the provision restrains the 
truthful use of a name to the extent to which its use has been author- 
ized or the use of a name used prior to the enactment of the act by 
the user or a person from whom he secured it through chain of title. 
The provision does not extend to cases of conflict within the industry 
as to proprietary rights in trade or brand names. 

In the case of advertising, specific exemption is given to outdoor 
advertising in place on the date of the approval of the act, but when 
such advertising is rehabilitated it must conform to the advertising 
provisions. 

Provision is made to enforce the labeling requirements at the 
source by means of certificates of label approval to be issued by the 
Administrator and to be enforced by internal-revenue and customs 
officers. This system was partially in effect under the codes and 
proved successful in preventing improperly labeled goods from 
reaching interstate channels. Adequate enforcement of the labeling 



145 App. n 

provision would be impracticable without such a system. Oppor- 
tunity for exemption from the requirement of obtaining these cer- 
tificates is afforded industry members who demonstrate that their 
products are not to be shipped in interstate commerce. 

The labeling requirements also make it unlawful for any person 
to alter, mutilate, destroy, obliterate, or remove any mark, brand, 
or label upon distilled spirits, wine, or malt beverages held for sale 
in interstate or foreign commerce or held for sale after shipment 
therein, except as authorized by Federal law or except pursuant to 
regulations of the Administrator authorizing relabeling for the pur- 
pose of compliance with the labeling requirements or State law. 
The provision conforms to that previously enacted in the Federal 
Caustic .Poison Act, and is believed valid under the doctrine applied 
in McDermott v. Wisconsin (1913) (228 U. S. 115). The provision 
is designed to cover two classes of cases: First, if alcoholic bever- 
ages are shipped in interstate commerce under illegal labels, the 
provision is intended to preserve the labels in order to prevent 
destruction of the evidence upon which prosecution of the violation 
would be based ; and, second, if goods are shipped in interstate com- 
merce under legal labels, the provision is intended to prevent the 
• protection given the consumer by Federal law from being nullified 
by destruction or removal, obliteration, or mutilation of the label 
used in interstate commerce, or by the addition of other labels, sub- 
stitution of labels, or other alteration of the labeling, prior to the 
article's reaching the consumer. Regulations will provide for appro- 
priate exceptions so as to take from out of the prohibition appropri- 
ate additional labeling requirements imposed by a State pursuant 
to its law and not in conflict with the Federal requirements. 

The labeling and advertising requirements are made applicable to 
State agencies. While in the usual case they will not conduct trans- 
actions in the field of operation to which these provisions are con- 
fined, to the extent that they do so they are operating in a Federal 
field, and the labeling and advertising provisions of the bill are so 
necessary to safeguard the interests of consumers that it is desirable 
that State agencies should be subject to them. 

Hearings on regulations. — As noted above, the Administrator is 
specifically given power to prescribe regulations to carry into effect 
tifie provisions of this section. The last paragraph of this section 
provides that such regulations are to be issued only after public 
notice has been "given and opportunity for the industry to be heard 
lias been allowed. 

PENALTIES 

Section 6 provides a penalty not in excess of $1,000 for engaging in 
operations without a permit or for violating the unlawful practice 
provisions. Prior to the commencement of court proceedings, the 
Administrator is authorized, subject to the approval of the Attorney 
General, to compromise any such penalty upon payment of an amount 
not in excess of $500 for each offense. Sums so collected will be paid 
into the Treasury as miscellaneous receipts. In the event that repe- 
titious violations are involved, the Administrator is given the power 
in order to prevent multiplicity of criminal proceedings, to require as 
part of the compromise a stipulation to the effect that the United 



App. H 146 

States may, on its own motion upon 5 days' notice. to the violator, 
cause a consent decree to be entered in any* court of competent juris- 
diction, enjoining the repetition of the violation. The administrative 
compromise of penalties embodies a policy similar to that incorporated 
in many acts of Congress relating to customs, internal revenue, air 
navigation, immigration, and the like. The compromise would relieve 
the violator from all further criminal liability for the offense and for 
all liability to suspension or revocation of permit or to equity pro- 
ceedings. The compromise provisions would not disturb any author- 
ity the Attorney General may have to compromise cases once court 
proceedings have been instituted. 

Where the offense does not appear to be flagrant and where the 
violator is willing to admit his offense, it would appear to be proper 
to afford him an opportunity by compromise to avoid the expense of 
a criminal or equity proceeding and to be relieved from the penalty 
of suspension or revocation. 

The section also provides that violations may be enjoined by dis- 
trict courts of the United States through appropriate proceedings in 
rquity brought by the Attorney General in the name of the United 
States. 

INTERLOCKING DIRECTORATES 

_ Section 7 prohibits interlocking directorates in corporations and 
•similar forms of business organization engaged in distilling and rec-. 
tifying distilled spirits and companies connected with such com- 
panies. Xo person who is an officer or director of one such company 
may serve as an officer or director of another such company without 
the approval of the Administrator. The section is prospective in its 
operation to the extent that it relates only to those officers and 
directors who take their offices in the second company after the date 
of the enactment of the act. In general it may be said that under 
the section existing companies having interlocking directorates may 
keep their present systems but may not spread their common direc- 
torates except to companies which are formed to comply with State 
law. Company systems formed in the future may not have inter- 
locking directorates except in cases where the companies are formed 
to comply with State law and not more than one other company in 
the system in which the directorates are common is a company not 
formed to comply with State law. The exemption of companies 
formed to comply with State law is inserted to take care of cases in 
which subsidiaries of distillers, rectifiers, or affiliates thereof have 
been formed or may be formed to comply with the requirements of 
corporation laws of some States which require that as a condition of 
doing business therein the corporation must be organized under their 
law. The individual desiring to serve in the second company must 
first apply to the Administrator and present evidence to him that 
the service in both companies will not restrain competition in inter- 
state, or foreign commerce in distilled spirits. The Administrator 
is require'd to act on the application, and court review by injunction 
of the Administrator's action is authorized. If the individual takes 
office or serves without the approval of the Administrator, in those 



147 App. II 

cases to which the section applies, or if his suit to restrain is not 
sustained, he is subject to a fine of not more than $1,000. 

The provisions of section 6 authorizing compromise of penalties 
do not apply to such fines. Compliance with section 7 is not made 
a condition of a basic permit. 

MISCELLANEOUS 

Section 9 contains the definitions of term- used in the bill. Aside 
from the usual definitions which are inserted for the sake of drafting 
economy in legislation, there are other definitions which are particu- 
larly important for the purposes of this bill. 

Section 9 (a) (4) defines " person " to include, in addition to busi- 
ness organizations which chat term usually includes, the officers and 
employees of agencies of States or political subdivisions thereof. 
Many States and political subdivisions have gone into various phases 
of the liquor business. The onty provisions of the bill which relate 
to such agencies are those dealing with consignment sales, labeling, 
and advertising. As noted above no permit is required of such 
agencies. The effect of the language of the definition is to treat the 
officers and employees of the governmental board, or whatever form 
the agency may take, as the ones who are subject to Federal regula- 
tion, and not the State or political subdivision itself. Wherever such 
agencies and officers and employees thereof are exempt from provi- 
sions of the bill, persons who hold licenses under State or local law 
and similar persons are not to be regarded as within the exemption 
and of course the State and local officials are exempt only in their 
official capacity. The term ' ; affiliate " is defined to include the two 
or more persons who are involved where one of such persons controls 
the other or others and all the persons involved in the case where the 
control of one or more companies is in a common parent. The defi- 
nition includes control which is indirect as well as that which is 
direct. 

The definition of distilled spirits includes the products usually con- 
sidered within that definition and includes them when they are for 
beverage, medicinal, culinary, sacramental, or other use, but excludes 
such products if for industrial use. This definition has the effect of 
eliminating from the scope of the bill industrial alcohol production 
and distribution. The definition of wine (sec. 9 (a) (7)) incorporates 
by reference ther definition contained in the revenue laws and in- 
cludes in addition alcoholic beverages made in the manner of wine 
and wine made from agricultural products other than sound ripe 
grapes, and imitation wine. The definition applies only to the article 
if it contains 7 percent or more but not more than 21 percent of 
alcohol by volume. Wines above 21 percent of alcohol by volume 
are classed as distilled spirits. In all cases, as in the case of dis- 
tilled spirits, the definition eliminates industrial use but includes bev- 
erage, medicinal, culinary, sacramental, and other uses. The defini- 
tion of malt beverages Usee. 9 (a) (8)) is a technical one designed 
to cover the beverage products of the brewing industry and includes 
such products regardless of their alcoholic content. 



App. H 148 

The definition of " bottle " is broader than a glass container. It 
includes the closed container used for the sale of distilled spirits, 
■wine, or malt beverages at retail and ignores its size and the material 
from which it is made, thus including jugs, cans, barrels, and all other 
closed containers if for use for sale of alcoholic beverages at retail. 

" Wholesaler " as used in the bill, outside the taxing provisions 
of section 1, means a wholesaler in accordance with the usual trade 
understanding and not as defined in the internal-revenue laws for 
tax purposes. 






Appendix III.— H. R. 8870 AS REPORTED TO THE SENATE 
BY THE COMMITTEE OX FIXAXCE 

AN ACT To further protect the revenue derived from distilled 
spirits, wine, and malt beverages, to regulate interstate and foreign 
commerce and enforce the postal laws with respect thereto, to 
enforce the twenty-first amendment, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled, That this Act may be cited 
as the "Federal Alcohol Administration Control Act." 



FEDERAL ALCOHOL ADHINIOTTtATION 

S^erSr {ft} There is feefefey erea4ed fefee Federal Alcohol Adminio 
tration as a division m tfee Treasury Department. 

{fe}- Tfee Administration shall -be headed fey aft Administrator, whe- 
shall fee appointed fey tfee President, fey aftd -with the advice a»d eea- 
seftfc el Ifee Senate. "The Administrator shall ler his services receive 
compensation a% -the pa4e el $10,000 pee annum, t ogether w-itfe actual 
ftftd- ncceooary traveling and: subsistence expenses while engaged m 

*re person sfe«4i fee eligible te appointment, e? continue m office, as 
Administrator if fee is engaged e? financially interested my e? is a» 
officer e? director el e? employed fey a corporation engaged in-r -tfee 
production ef sale ef other distribution el alcoholic beverages, e? t-fee 
financin g thereof. 

■(e> ¥fee Administrator shall, without regard *e Ifee eHril service 
laws aad the Classification Ael el ±0^ as amended, appoint aad is 
■fefee compensation a«d duties el suefe officers aftd employees as fee 
deemo necessary le carry eu-l feis powers aed duties, trtrt Ifee compen 
satiea se feed shall fee safejeel le trhe approval el the Secretary el Ifee 
Trcaoury. The Administrator is authorized #e adopt a-a official seal? 
wfeiefe shall fee judicially noticed. 

{d> The Administrator is authorized aed directed te prescribe saeb 
f«ks arftd regulations as may fee necessary *e earn* e*rt feis peweps aftdr 
duties. Ail i?«ies a«d regulations prescribed fey tfee Administrator 
sfeftU fee subject -fee the approval el tfee Scoretary el the Treasury. 

FEDERAL ALCOHOL COMMISSION 

Sec. 2. (a) There is hereby established a commission to be known as 
the Federal Alcohol Commission, to be composed of three commissioners, 
who shall be appointed by the President by and with the advice and 
consent of the Senate. The terms of office of the commissioners first 
taking office shall expire, ds designated by the President at the time of 
nomination, one at the end of the first year, one at the end of the second 
year, and one at the end of the third year after the date of the enactment of 
this Act. A successor shall have a term of office expiring three years from 

(149) 



App. m 150 

the date of expiration of the term for which his predecessor was appointed, 
except that a person appointed to fill a vacancy occurring prior to the 
expiration of such term shall be appointed for the remainder of such term. 
No person shall be eligible for appointment as a commissioner or continue 
in office as a commissioner if he is engaged or financially interested in, or 
is an officer or director of or employed by a company engaged in, the pro- 
duction or sale of alcoholic beverages or the financing thereof. Each com- 
missioner shall, for his services, receive compensation at the rate of 
$10,000 per annum, together with actual and necessary traveling and sub- 
sistence expenses while engaged in the performance of his duties as com- 
missioner outside the District of Columbia. 

(b) As designated by the President at the time of nomination: One 
of the commissioners shall be chairman of the commission and shall be 
the chief executive officer of the commission; another of the commissioners 
shall be vice-chairman of the commission and shall perform the functions 
and duties of the chairman in his absence or in the event of his incapacity 
caused by illness; and the third commissioner, who shall be a lawyer, shall 
be general counsel of the commission. The commission may function 
notwithstanding vacancies, and a majority of the commissioners in office 
shall constitute a quorum. The commission shall meet at the call of the 
chairman or a majority of its members. The commission is authorized 
to adopt an official seal, which shall be judicially noticed. The commis- 
sion shall be entitled to free use of the United States mails in the same 
manner as the Executive departments. . 

(c) The commission shall, without regard to the civil-service laws, but 
subject to the Classification Act of 1923, as amended, appoint and fix 
the compensation and prescribe the duties of such officers and employees 
as may be necessary to carry out its powers and duties; except that any 
such officer or employee receiving a salary at the rate of $5,000 or more 
per annum shall be appointed by the President, by and with the advice 
and consent of the Senate. 

(d) The commission is authorized and directed to prescribe such rules 
and regulations as may be necessary to carry out its powers and duties. 

(e) Appropriations to carry out powers and duties of the Adminis - 
trator commission shall be available for expenditure, among other 
purposes, for personal services and rent in the District of Columbia 
and elsewhere, expenses for travel and subsistence, for law books, 
books of reference, magazines, periodicals, and newspapers, for con- 
tract stenographic reporting services, for subscriptions for library- 
services, for purchase of samples for analysis or use as evidence, and 
for holding conference conferences of State and Federal liquor control 
officials. 

(f) The Administrator commission may, with the consent of the 
department or agency affected, utilize the services of any department 
or other agency of the Government to the extent necessary to carry 
out kis its powers and duties and authorize officers and employees 
thereof to act as bh its agents. 

(g) The provisions, including penalties, of sections 9 and 10 of the 
Federal Trade Commission Act, as now or hereafter amended, shall 
be applicable to the jurisdiction, powers, and duties of the Adminis - 
trator commission, and to any person {whether or not a corporation) 
subject to the provisions of laws administered by the 
commission. 



151 App. HI 

(h) The Administrator commission is authorized to require, in such 
manner and form as fee it shall prescribe, such reports as are necessary 
to carry out feis its powers and duties. 

(i) The commission is authorized to make investigations and studies 
and to report thereon from time to time to the President and to the Congress, 
together with recommendations, with respect to matters necessary j or the 
proper performance of the powers and duties conferred upon the commis- 
sion, and with respect to the production, distribution, and consumption 
of alcoholic beverages, including monopolistic practices, unfair methods 
of competition, and concentration of ownership in the alcoholic beverages 
industries, and control of retail outlets and prices; advertising , labeling, 
and merchandising methods with respect to alcoholic beverages, including 
standards of identity, quality, and size and fill of container therefor; and 
enforcement of the twenty-first amendment, State and Federal cooperation 
in the administration of alcoholic beverage control laws, and methods of 
promoting temperance. The commission, whenever in its judgment such 
action will be in the public interest, may publish the results of such 
investigations and studies. 

(J) The commission shall make a report to Congress, at the beginning 
of each regular session, of the administration of the functions with which 
it is charged, and shall include in such report the names and compensation 
of all persons employed by the commission. 

UNLAWFUL BUSINESSES WITHOUT PERMIT 

Sec. 3. In order effectively to regulate interstate and foreign com- 
merce in distilled spirits, winoy ft&d malt beverages distilled spirits 
and wine, to enforce the twenty-first amendment, and to protect the 
revenue and enforce the postal laws with respect to distilled spirits, 
wine, aftd malt beverages distilled spirits and wine: 

(a) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator commission — 

(1) to engage in the business of importing into the United 
States distilled spirits, wine ? e? malt beverages distilled spirits or 
wine; or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to sell, or ship, in interstate or foreign commerce, 
directly or indirectly or through an affiliate, distilled s pirits, - 
wine, e? malt beverages distilled spirits or wine so imported. 

This subsection shall take effect sixty days after -fefee darte ei the enact - 
ment el this Ae* a majority of the commissioners first appointed take 
office. 

(b) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator commission — 

(1) to engage in the business of distilling distilled spirits, pro- 
ducing wine, rectifying or blending distilled spirits or wine, or 
bottling, or warehousing and bottling, distilled spirits; or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to sell, or ship, in interstate or foreign commerce, directly 
or indirectly or through an affiliate, distilled spirits or wine so 
distilled, produced, rectified, blended, or bottled, or warehoused 
and bottled. 



App. hi 152 

This subsection shall take effect sixty days after *he date of *he 
enactment of -fefeis Aet a majority of the commissioners first appointed 
take office. 

(c) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the Administrator commission — 

(1) to engage in the business of purchasing for resale at whole- 
sale fe tilled op ir i ts y wine, e* mak bcvcrag03 distilled spirits or 
urine: or 

(2) for any person so engaged to receive or to seU, offer or 
deliver for sale, contract to sell, or ship, in interstate or foreign 
commerce, directly or indirectly or through an affiliate, dis4il4e4 
spirits-; wise;- or ma-k beverages distilled spirits or wine so pur- 
chased. 

This subsection shall take effect Ja-nu-ary- March 1, 1936. 

This section shall not apply to any agency of a State or political 
subdivision thereof or any officer or employ ee of any such agency, 
and no such agency or officer or employee shall be required to obtain 
a basic permit under this Act. 

PERMITS 

Sec. 4. (a) The following persons shall, on application therefor, 
be entitled to a basic permit: 

m (1) Any person who, on May 25, 1935, held a basic permit as 
distiller, rectifier, wine producer, or importer issued by an 
agency of the Federal Government. 

(2) Any other person unless the Administrator commission 
finds (A) that such person (or in case of a corporation, any of its 
officers, directors, or principal stockholders) has, within five 
years prior to date of application, been convicted of a felony 
under Federal or State law or of a violation of any Federal latv 
relating to liquor, including the taxation thereof; or (B) that such 
person is, by reason of his business experience, financial standing, 
or trade connections, not likely to commence operations within 
a reasonable period or to maintain such operations in conformity 
with Federal law; or (C) that the operations proposed to be con- 
ducted by such person are in violation of the law of the State 
in which they are to be conducted. 

(b) If upon examination of any application for a basic permit the 
Administrator commission has reason to believe thai the applicant is 
not entitled to such permit, he the commission shall notify the appli- 
cant thereof and, upon request by the applicant, afford him due notice 
and opportunity for hearing on the application. If the Administrator 
commission, after affording such notice and opportunity for hearing, 
finds that the applicant is not entitled to a basic permit hereunder, 
he it shall by order deny the application stating the findings which are 
the basis for his its order. 

(c) The Administrato r commission shall prescribe the manner and 
form of all applications for basic permits (including the facts to be 
set forth therein) and the form of all basic permits, and shall specify 
in any basic permit the authority conferred by the permit and the 
conditions thereof in accordance with the provisions of this Act. 



153 App. HI 

To the extent deemed necessary by the Administrator commission 
for the efficient administration of this Act, separate applications and 
permits shall be required by the Adminiotrator commission with 
respect to diatillcd apirita, wincy and malt beverages distilled spirits 
and wine, and the various classes thereof, and with respect to che 
various classes of persons entitled to permits hereunder. The issuance 
of a basic permit under this Act shall not operate to deprive the 
United States of its remedy for any violation of law, 

(d) A basic permit shall be conditioned upon compliance with the 
requirements of section 5 (relating to unfair competition and unlawful 
practices) and of section 6 (relating to bulk sales and bottling) , with the 
twenty-first amendment and laws relating to the enforcement thereof r 
and with all other Federal laws relating to diatillcd spirits, wine, and- 
malt bevcragco distilled spirits and wine, including taxes with respect 
thereto. 

■(e)- 44} £J^ basic permit issued under this Aet shall contain any 
condition prohibiting, ' nop shall any rule, regulation, ep order, issued 
under this op any other Aet el Congress, prohibit, the nse op sale of 
any barrel, cask, ep kegy if made of wood and if ef one ep more wine 
gallons capacity, as a container in which to 3 tore ; transport, of sett? 
ep fees* which te setiy any distilled spirit ^ wine, ep malt beverages. 
34ns subsection shall net apply te any condition in any basic permit 

•I^^ii i-k *-l iir^^ a«i f Uia A p f rkr* nn y T*l 1 1 f* nftflU 1 I n t ITlD A4* fWitOV i * a .a ii^f X 4-+4- »*t U) t w ij*-— 

tien therewith -fee- the extent that sn-efe condition applies in a State m 
which the nse op sa4e ef &&? snek barrel, cask, ep keg is prohibited 

17 V 1 "OTTT? TTCTT^ or oTTt^TT 1JUU1VL . 

■(3} Jt shall fee unlawful fop any person -to package of repackage 
distilled spirits fo? sale op resale in bottles unless s«eh person is a 
distiller, a rectifier ef distilled spirits, op a person operating a bonded 
warehouse qualified under the internal revenue laws- op a class & 
bonded warehouse qualified under the customs laws, holding a basic 
pepmit nndep this Aety ep is a proprietor ef an industrial alcohol plant 
op is an agency ef a State ep political subdivision thereof : Provided, 
That any etfeep person may so package distilled spirits in bottles if he 
qualifies under -the internal revenue laws as a rectifier &&4: holds a 
basic permit issued under -this Aet fep the rectification ef distilled 
spirits. 

-(£} Notwithstanding the foregoing provisions ef this subsection, 
ne person who is subject te -the occupational -tax i mposed fey section 
3344 "Fourth" ef the Revised Statutes, as amended &rr St Gt? Supp. - 
¥44y title 3§y seer 4304 fo)4y en petail dealeps in heneps shall p^ekage ep 
repackage distilled spirits fep sale ep pesafe in bottles op fee ehgifele to 
qualify as a rectifier ef distilled spirits, and ne snek person, except a 
feena fide hotel ep etefer shall, fep purposes ef saley remove fpem nf^r 
s^efe feftffe^ easky ep keg any distilled spirits contained therein. Any 
person who violates the provisions ef this paragraph ep paragraph 
{3} shall, upon conviction thereof, fee fined net more than 8 1,000 ep 
imprisoned fep net mope than ene yeapy ep feetfey and snail forfeit to the 
United States ail diatillcd spirits with respect te which the violation 
occurs, and the botbloo in Wfeieh packaged. 

{f> (e) A basic permit shall by order of the Administr ate* commis- 
sion, after due notice and opportunity for hearing to the permittee, 
(1) be revoked, or suspended for such period as the Administr ate* 



App. m 154 

commission deems appropriate, if the Administrator commission finds 
that the permittee has willfully violated any of the conditions thereof, 
provided that for a first violation of the conditions thereof the permit 
shall be subject to suspension only; or (2) be revoked if the Adminis - 
trator commission finds that the permittee has not engaged in the 
operations authorized by the permit for a period of more than two 
years: or (3 N > be annulled if the Administrator commission finds that 
the permit was procured through fraud, or misrepresentation, or con- 
cealment of material fact. The order shall state the findings which 
are the basis for the order. 

■(g)- (f) Orders of the Administrator commission with respect to 
any denial of application, suspension, revocation, annulment, or other 
proceedings, shall be served (1) in person by any officer or employee 
of the Administration commission designated by the Administrator 
commission or any internal revenue or customs officer authorized by 
the Administrator commission for the purpose, or (2) by mailing the 
order by registered mail, addressed to the applicant or respondent at 
his last known address in the records of the Administrator commission. 

■(b)- (g) A basic permit shall continue in effect until suspended, 
revoked, or annulled as provided herein, or voluntarily surrendered; 
except that (1) if leased, sold or otherwise voluntarily transferred, 
the permit shall be automatically terminated thereupon, and (2) if 
transferred by operation of law or if actual or legal control of the 
permittee is acquired, directly or indirectly, whether by stock-owner- 
ship or in any other manner, by any person, then such permit shall 
be automatically terminated at the expiration of thirty days there- 
after: Provided, That if within such thirty-day period application for 
a new basic permit is made by the transferee or permittee, respec- 
tively, then the outstanding basic permit shall continue in effect until 
such application is finally acted on by the Administrator commission. 

■(i)-(A) An appeal may be taken by the permittee or applicant for a 
permit from any order of the Administrator commission denying an 
application for, or suspending, revoking, or annulhng, a basic permit. 
Such appeal shall be taken by filing, in the circuit court of appeals 
of the United States within any circuit wherein such person resides 
or has his principal place of business, or in the United States Court of 
Appeals for the District of Columbia, within sixty days after the entry 
of such order, a written petition praying that the order of the Adminis - 
trator commission be modified or set aside in whole or in part. A copy 
of such petition shall be forthwith served upon the Administrator 
commission, or upon any officer designated by hie* it for that purpose, 
and thereupon the Administrator commission shall certify and file in 
the court a transcript of the record upon which the order complained 
of was entered. Upon the filing of such transcript such court shall 
have exclusive jurisdiction to affirm, modify, or set aside such order, 
in whole or in part. No objection to the order of the Administrator 
commission shall be considered by the court unless such objection shall 
have been urged before the Administrat e? commission or unless there 
were . reasonable grounds for failure so to do. The finding of the 
Admrnbtrat - op commission as to the facts, if supported by substantial 
evidence, shall be conclusive. If any party shall apply to the court 
for leave to adduce additional evidence, and shall show to the satisfac- 
tion of the court that such additional evidence is material and that 
there were reasonable grounds for failure to adduce such evidence in 



155 App. HI 

the proceeding before the Administrator commission, the court may 
order such additional evidence to be taken before the Adruiubt rerrep 
commission and to be adduced upon the hearing in such manner and- 
upon such terms and conditions as to the court may seem proper. 
The A dministrat or commission may modify hk its findings as to the 
facts by reason of the additional evidence so taken, and he it shall 
file with the court such modified or new findings, which, if supported 
by substantial evidence, shall be conclusive, and his its recommenda- 
tion, if any, for the modification or setting aside of the original order. 
The judgment and decree of the court affirming, modifying, or setting 
aside, in whole or in part, any such order of the Administrato r com- 
mission shall be final, subject to review by the Supreme Court of the 
United States upon certiorari or certification as provided in sections 
239 and 240 of toe Judicial Code, as amended (U. S. C, title 28, sees. 
346 and 347). The commencement of proceedings under this subsec- 
tion shall, unless specifically ordered by the court to the contrary, 
operate as a stay of the Administrat e? '9 commission's order. 

(j) (i) No proceeding for the suspension or revocation of a basic permit, 
for violation of any condition thereof relating to compliance with 
Federal law shall be instituted by the Administrator commission more 
than eighteen months after conviction of the violation of Fedenil law, 
or, if no conviction has been had, more than three years after the 
violation occurred ; and no basic permit shall be suspended or revoked 
for a violation of any such condition thereof if the alleged violation 
of Federal law has been compromised by any officer or agency of the 
Government authorized to compromise such violation. 

UNFAIR COMPETITION" AND UNLAWFUL PRACTICES 

Sec. 5. It shall be unlawful for any person engaged in business as a 
distiller, brewer, rectifier, blender, or other producer, or as an im- 
porter or wholesaler, of distilled apirito, wiee? er a^rk beverages 
distilled spirits or wine, or as a bottler, or warehouseman and bottler, 
of distilled spirits, directly or indirectly or through an affiliate: 

(a) Exclusive outlet: To require, by agreement or otherwise, 
that any retailer engaged in the sale of diatillcd apiritj, wine, of m*h 
bevcragco distilled spirits or wine, purchase any such products irom 
such person to the exclusion in whole or in part of dis till e d spirits, - 
wine, er f&ait bevcragco distilled spirits or wine sold or ottered for 
sale by other persons in interstate or foreign commerce, if such re- 
quirement is made in the course of interstate or foreign commerce, or 
if such person engages in such practice to such an extent as substan- 
tially to restrain or prevent transactions in interstate or foreign com- 
merce in any such products, or if the direct effect of such requirement 
is to prevent, deter, hinder, or restrict other persons from selling or 
offering for sale any such products to such retailer in interstate or 
foreign commerce; or 

(b) "Tied house": To induce through any of the following means, 
any retailer, engaged in the sale of dbtillc d sptfrts^ ww*^ e? «*a4t 
bevcragco distilled spirits or wine, to purchase any such products from 
such person to the exclusion in whole or in part of distilled >pirito, 
wine, e* «H*tfc bevcragco distilled spirits or wine sold or offered for sale 
by other persons in interstate or foreign commerce, if such inducement 
is made in the course of interstate or foreign commerce, or if such 



App. HI 156 

person engages in the practice of using such means; or any of them, to 
such an extent as substantially to restrain or prevent transactions in 
interstate or foreign commerce in amy such products, or if the direct 
effect of such inducement is to prevent, deter, hinder, or restrict other 
persons from selling or offering for sale any such products to such 
retailer in interstate or foreign commerce: (1) By acquiring or holding 
(after the expiration of any existing license) any interest in any license 
with respect to the premises of the retailer; or (2) by acquiring any 
interest in real or personal property owned, occupied, or used by the 
retailer in the conduct of his business: or (3) by furnishing, giving, 
renting, lending, or selling to the retailer, any equipment, fixtures, 
signs (excepting signs not exceeding $100 in aggregate value to any retailer 
in any calendar year), supplies, money, services, or other thing of 
value, except advertising specialties and graphic arts advertising items 
of paper or paper-like substance and subject to such further exceptions 
as the Administrator commission shall by regulation prescribe, having 
due regard for public health, the quantity and value of articles in- 
volved, established trade customs not contrary to the public interest 
and the purposes of this subsection; or (4) by paying or crediting the 
retailer for any advertising, display, or distribution service; or (5) by 
guaranteeing any loan or the repayment of any financial obligation of 
the retailer; or (6) by extending to the retailer credit for a period in 
excess of the credit period usual and customary to the industry for the 
particular class of transactions, as ascertained by the Administrator 
commission and prescribed by regulations by him- U; or (7) by requiring 
the retailer to take and dispose of a certain quota of any of such 
products; or 

(c) Commercial bribery: To induce through any of the following 
means, any trade buyer engaged in the sale of distilled spirits, winc^ 
of malt bevcragca distilled spirits or wine, to purchase any such prod- 
ucts from such person to the exclusion in whole or in part of distilled 
spirits, wine, - e* malt beverages distiEed spirits or wine sold or offered 
for sale by other persons in interstate or foreign commerce, if such 
inducement is made in the course of interstate or foreign commerce, 
or if such person engages in the practice of using such means, or any 
of them, to such an extent as substantially to restrain or prevent 
transactions in interstate or foreign commerce in any such products, 
or if the direct effect of such inducement is to prevent, deter, hinder, 
or restrict other persons from selling or offering for sale any such 
products to such trade buyer in interstate or foreign commerce: 
(1) By commercial bribery; or (2) by offering or giving any bonus, 
premium, or compensation to any officer, or employee, or representa- 
tive of the trade buyer; or 

(d) Consignment sales: To sell, offer for sale, or contract to sell to 
any trade buyer engaged in the sale of di s tilled spirits, wine, - ee malt 
beverages distilled spirits or wine, or for any such trade buyer to 
purchase, offer to purchase, or contract to purchase, any such prod ucts 
on consignment or under conditional sale or with the privilege of 
return or on any basis otherwise than a bona fide sale, or where any 
part of such transaction involves, directly or indirectly, the acquisi- 
tion by such person from the trade buyer or his agreement to acquire 
from the trade buyer other distidMod spirits, wine, o* malt bovci^g ea 
distilled spirits or wine — if such sale, purchase, offer, or contract is 



157 App. HI 

made in the course of interstate or foreign commerce, or if such person 
or trade buyer engages in such practice to such an extent as sub- 
stantially to restrain or prevent transactions in interstate or foreign 
commerce in any such products, or if the direct effect of such sale, 
purchase, offer, or contract is to prevent, deter, hinder, or restrict 
other persons from selling or offering for sale any such products to 
such trade buyer in interstate or foreign commerce ; or 

(e) Labeling. — To sell or ship or deliver for sale or shipment, or 
otherwise introduce in interstate or foreign commerce, or to receive 
therein, or to remove from customs custody for consumption, any 
distilled spirits, wine, ef malt beverages distilled spirits or wine in 
bottles, unless such products are bottled, packaged, and labeled in 
conformity with such regulations, to be prescribed by the Ad mini s - 
trator commission, with respect to packaging, marking, branding, and 
labeling and size and fill of container (1) as will prohibit deception 
of the consumer with respect to such products or the quantity thereof 
and as will prohibit, irrespective of falsity, such statements relating 
to age, manufacturing processes, analyses, guarantees, and scientific 
or irrelevant matters as the Administrator commission finds to be 
likely to mislead the consumer; (2) as will provide the consumer with 
adequate information as to the identity and quality of the products, 
the alcoholic content thereof ( except that statements e*V ef state - 
ments likely to be considered as statements e£V alcoholic content el 
malt beverages afe hereby prohibited unless required by- State law 
ftftd except that, in case of wines, statements of alcoholic content 
shall be required only for wines containing more than 14 per centum 
of alcohol by volume), the net contents of the package, and the 
manufacturer or bottler or importer ef -the product distributor of 
domestically bottled products and the manufacturer and importer of 
imported products; (3) as will require an accurate statement, in the 
case of distilled spirits (other than cordials, liqueurs, and specialties) 
produced by blending or rectification ef m ease ef «ia whether ef 
fie4 produced by blending ef rectification, if neutral spirits have been 
used in the production thereof, informing the consumer of the per- 
centage of neutral spirits so used and of the name of the commodity 
from which such neutral spirits have been distilled, or in case of 
neutral spirits or of gin produced by a process of continuous distillation, 
the name of the commodity from which distilled; (4) as will prohibit 
statements on the label that are disparaging of a competitor's prod- 
ucts or are false, misleading, obscene, or indecent; and (5) as will 
prevent deception of the consumer by use of a trade or brand name 
that is the name of any living individual of public prominence, or 
existing private or public organization, or is a name that is in simu- 
lation or is an abbreviation thereof, and as will prevent the use of 
a graphic, pictorial, or emblematic representation of any such indi- 
vidual or organization, if the use of such name or representation is 
likely falsely to lead the consumer to believe that the product has 
been indorsed, made, or used by, or produced for, or under the 
supervision of, or in accordance with the specifications of, such indi- 
vidual or organization: Prodded, That this clause shall not apply to 
the use of the name of any person engaged in business as a distiller, 
brewer, rectifier, blender, or other producer, or as an importer, whole- 
saler, retailer, bottler, or warehouseman, of distilled opirito, wine, ef 



App. Ill 158 

malt V - ~orrtgo 3 distilled spirits or wine, nor to the use by any person 
of a r • .< or brand name used by him or his predecessor in interest 
prior to the date of the enactment of this Act; including regulations 
requiring, at time of release from customs custody, certificates issued 
by foreign governments covering origin, age, and identity of imported 
products. -rVe person shall remove from Government custod} 1 - after 
purchase a4 a&y Government sttie asy distilled spirits, wine, op malt 
beverages m bottles to be held pop sale, until such bottles ap© pack - 
aged, marked, branded, aed labeled m conformity with -the require - 
ments el -this subsection. 

It shall be unlawful for any person to alter, mutilate, destroy, 
obliterate, or remove any mark, brand, or label upon distilled spirits, 
wine, op malt beverages distilled spirits or wine held for sale in inter- 
state or foreign commerce or after shipment therein, except as author- 
ized by Federal law or except pursuant to regulations of the Adminis - 
trator commission authorizing relabeling for purposes of compliance 
with the requirements of this subsection or of State law. 

In order to prevent the sale or shipment or other introduction of 
distilled spirits, wincy op malt beverages distilled spirits or wine 
in interstate or foreign commerce, if bottled, packaged, or labeled in 
violation of the requirements of this subsection, no bottler, or im- 
porter of distilled spirits, wine, ©p malt beverages distilled spirits or 
wine, shall, after such date as the Administrator commission fixes as 
the earliest practicable date for the application of the provisions of 
this subsection to any class of such persons (but not later than 
January March 1, 1936, and only after thirty days' public notice), 
bottle or remove from customs custody for consumption distilled 
spirits, wine, ©p mal -fe beverages distilled spirits or wine, respectively, 
unless the bottler or importer, upon application to the Administrator 
commission, has obtained and has in his possession a certificate of 
label approval covering the distilled spirits; wine, ©p malt beverages 
distilled spirits or wine, issued by the Adrmnistrator commission in 
such manner and form as he it shall by regulations prescribe: Pro- 
vided, That any such bottler shall be exempt from the requirements 
of this subsection if the bottler, upon application to the Administrator 
commission, shows to the satisfaction of the Administrator commis- 
sion that the distilled spirits, wine, op malt beverages distilled spirits 
or wine to be bottled by the applicant are not to be sold, or offered 
for sale, or shipped or delivered for shipment, or otherwise 
introduced, in interstate or foreign commerce. Officers of internal 
revenue and customs are authorized and directed to withhold the 
release of such products from the bottling plant or customs custody 
unless such certificates have been obtained, or unless the application 
of the bottler for exemption has been granted by the Administrator 
commission. The district courts of the United States, the Supreme 
Court of the District of Columbia, and the United States court for 
any Territory, shall have jurisdiction of suits to enjoin, annul, or 
suspend in whole or in part y part any final action by the Administrator 
commission upon any application under this subsection: or 

(f Advertising: To publish or disseminate or cause to be published 
or disseminated by radio broadcast, or in any n^wfp°per, periodical 
or other publication or by any sign or outdoor advertisement or any 
other printed or graphic matter, any advertisement of 



159 App. HI 

wine, op »a4t bcvcragcq distilled spirits or wine, if such advertisement 
is in, or is calculated to induce sales in, interstate or foreign commerce, 
or is disseminated by mail, unless such advertisement is in conformity 
with such regulations, to be prescribed by the Administrator com- 
mission, (!) as will prevent deception of the consumer with respect to 
the products advertised and as will prohibit, irrespective of falsity, 
such statements relating to age, manufacturing processes, analyses, 
guaranties, and scientific or irrelevant matters as the Administrator 
commission finds to be likely to mislead the consumer; (2) as will 
provide the consumer with adequate information as to the identity 
and quality of the products advertised, the alcoholic content thereof 
( except that statements of? e? statements likely -fee be considered as 
statements e£j alcoholic content el malt beverages a*=e prohibited aed: 
except that, in case of wines, statements of alcoholic content shall be 
required only for wines containing more than 14 per centum of alcohol 
by volume), and the person responsible for the advertisement: (3) 
as will require an accurate statement, in the case of distilled spirits 
(other than cordials, liqueurs, and specialties) produced by blending 
or rectification e? m ease e# gist whether e? ee-t produced feV blending 
er rectification, if neutral spirits have been used in the production 
thereof, informing the consumer of the percentage of neutral spirits 
so used and of the name of the commodity from which such neutral 
spirits have been distilled, or in case of neutral spirits or of gin produced 
by a process of continuous distillation, the name of the commodity from 
which distilled; (4) as will prohibit statements that are disparaging of 
a competitor's products or are false, misleading, obscene, or indecent; 
(5) as will prevent statements inconsistent with any statement on the 
labeling of the products advertised. This subsection shall not apply 
to outdoor advertising in place on June 18, 1935, but shall ^pply 
upon replacement, restoration, or renovation of any such advertising. 
The prohibitions of this subsection and regulations thereunder shall not 
apply to the publisher of any newspaper, periodical, or other publication, 
or radio broadcaster, unless such publisher or radio broadcaster is engaged 
in business as a distiller, rectifier, or other producer, or as an importer 
or wholesaler, of distilled spirits or wine, or as a bottler, or warehouseman 
and bottler, of distilled spirits, directly or indirectly or through an affiliate. 

The provisions of subsections (a), (b), and (c) shall not apply to 
any act done by an agency of a State or political subdivision thereof, 
or by any officer or employee of such agency. 

The Administrator commission shall give reasonable public notice, 
and afford to interested parties opportunity for hearing, prior to 
prescribing regulations to carry out the provisions of this section. 

BULK SALES AND BOTTLING 

Sec. 6. (a) It shall be unlawful for any person — 

(1) To sell or offer to sell, contract to sell, or otherwise dispose of 
distilled spirits in bulk except, under regulations of the commission, 
for export or to the following , or to import distilled spirits in bulk 
except, under such regulations , for sale to or for use by the following: 
A distiller, rectifier of distilled spirits, person operating a bonded 
warehouse qualified under the internal-revenue laics or a class 8 
bonded warehouse qualified under the customs laws, a wine maker 



App. Ill 160 

for the fortification of wines, a proprietor of an. industrial alcohol 
plant, or an agency of the United States or any State or political 
subdivision thereof. 

(2) To sell or offer to sell, contract to sell, or otherwise dispose of 
warehouse receipts for distilled spirits in hulk unless such ware- 
house receipts require that the warehouseman shall package such 
distilled spirits, before delivery, in bottles labeled and marked in 
accordance with law, or deliver such distilled spirits in bulk only 
to persons to whom it is lawful to sell or otherwise dispose of distilled 
spirits in bulk. 

(3) To bottle distilled spirits unless the bottler is a person to 
whom it is lawful to sell or otherwise dispose of distilled spirits in 
bulk. 

(b) Any person who violates the requirements of this section shall, 
upon conviction thereof, be fined not more than $5,000 or imprisoned 
for not more than one year or both, and shall forfeit to the United States 
all distilled spirits with respect to which the violation occurs and the 
containers thereof. 

(c) The term li in bulk" means in containers having a capacity in 
excess of one wine gallon. 

PENALTIES 

Sec. # 7. The District Courts of the United States, the Supreme 
Court of the District of Columbia, and the United States Court for 
any Territory, of the District where the offense is committed or 
threatened or of which the offender is an inhabitant or has his prin- 
cipal place of business, are hereby vested with jurisdiction of any suit 
brought by the Attorney General in the name of the United States, 
to prevent and restrain violations of any of the provisions of this Act. 
Any person violating any of the provisions of sections 3 or 5 shall be 
guilty of a misdemeanor and upon conviction thereof be fined not more 
than $1,000 for each offense. Subject to the approval of the Attorney 
General, the Administrator commission is authorized, prior to com- 
mencement of court proceedings with respect to any violation of this 
Act, to compromise the liability arising with respect to such viola- 
tion (1) upon payment of a sum not in excess of $500 for each offense, 
to be collected by the Administrator commission and to be paid into 
the Treasury as miscellaneous receipts, and (2) in case of repetitious 
violations and in order to avoid multiplicity of criminal proceedings, 
upon agreement to a stipulation that the United States may, on its 
own motion upon five days' notice to the violator, cause a consent 
decree to be entered by any court of competent jurisdiction enjoining 
the repetition of such violation. 

INTERLOCKING DIRECTORATES 

Sec. 7 8. (a) Except as provided in subsection (b), it shall be 
unlawful for any individual to take office, after the date of the enact- 
ment of tins Act, as an officer or director of any company, if his doing 
so would make him an officer or director of more than one company 
engaged in business as a distiller, rectifier, or blcr.der of distilled 
spirits, or of any such company and of a company which is an affiliate 
of any company engaged in business as a distiller, rectifier, or blender 
of distilled spirits, or of more than one company which is an affiliate 



161 App. in 

ot any company engaged in business as a distiller, rectifier, or blender 
of distilled spirits, unless, prior to taking such office, application made 
by such individual to the Adminiotrator commission has been granted 
and after due showing has been made to hira it that service by such 
individual as officer or director of all the foregoing companies of 
which he is an officer or director together with service in the company 
with respect to which application is made will not substantially 
restrain or prevent competition in interstate or foreign commerce in 
distilled spirits. The Administrator commission shall, by order r 
grant or deny such application on the basis of the proof submitted 
to hkft it and his its finding thereon. The District Courts of the 
United States, the Supreme Court of the District of Columbia, and 
the United States courts court for any Territory shall have jurisdiction 
of suits to enjoin, annul, or suspend in whole or in part any final 
action by the Administrator commission upon any application under 
this subsection. 

(b) An individual may, without regard to the provisions of sub- 
section (a), take office as an officer or director of a company described 
in subsection (a) while holding the position of officer or director of 
any other such company if such companies are affiliates at the time 
of his taking office and if — 

(1) Such companies are affiliates on the date of the enactment 
of this Act; or 

(2) Each of such companies has been organized under the law 
of a State to comply with a requirement thereof under which, as 
a condition of doing business in such State, such company must 
be organized under the law of such State; or 

(3) One or more such companies has been organized under the 
law of a State to comply with a requirement thereof under which, 
as a condition of doing business in such State, such company 
must be organized under the laws of such State, and the other 
one or more of such companies not so organized, is in existence 
on the date of the enactment of this Act; or 

(4) One or more of such companies has been organized under 
the law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such State, such com- 
pany must be organized under the law of such State, and not 
more than one of such companies is a company which has not 
been so organized and which has been organized after the date 
of the enactment of this Act. 

(c) As used in this section, the term "company" means a corpora- 
tion, joint stock company, business trust, or association but does 
not include any agency of a State or political subdivision thereof or 
any officer or employee of any such agency. 

(d) Any individual taking office in violation of this section shall 
be punished by a fine of not exceeding $1,000. 

DISPOSAL OF FORFEITED DISTILLED SPIRITS AND WINE 

Sec. 9. Notwithstanding any provisions of existing law, distilled 
spirits and wine forfeited or condemned summarily or pursuant to court 
decree or otherwise, by or under any law of the United States, shall not 
be sold or otherwise disposed of publicly or privately but shall be destroyed 



App. HE 162 

at suck time as such forfeiture or condemnation has become final; except 
that any such distilled spirits and wine certified by Government chemists 
to be of a quality equivalent to United States Pharmacopoeia quality or 
to be suitable for medicinal purposes shall be placed in the custody of 
the United States Public Health Service and disposed of by the Surgeon 
General of such Service, in accordance with regulations to be prescribed 
by him, to hospitals operated or maintained in whole or in part by the 
United States, for use by them for medicinal purposes only. 

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

Sec. S 10. The Federal Alcohol Control Administration established 
by Executive order under the provisions of Title I of the National 
Industrial Recovery Act is hereby abolished. All papers, records, 
and property of such Federal Alcohol Control Administration are 
hereby transferred to the Administrator commission. This section 
shall take effect os -fehe dat e that -the Administrator fif&fc appointed 
under tfeis Aefe takes offie e when a majority of the commissioners first 
appointed under this Act have taken office. 

MISCELLANEOUS 

Sec. 9 11. (a) As used in this Act — 

Alcohol Administration . 

CO The term "commission" means the Federal Alcohol Com- 
mission. 

(2) The term "United States" means the several States and 
Territories and the District of Columbia; the term " State" 
includes a Territory and the District of Columbia; and the term 
"Territory" means Alaska, Hawaii, and Puerto Rico. 

(3) The term "interstate or foreign commerce" means com- 
merce between any State and any place outside thereof, or 
commerce within any Territory or the District of Columbia, 
or between points within the same State but through any place 
outside thereof. 

(4) The term "person" means individual, partnership, joint 
stock company, business trust, association, corporation, or other 
form of business enterprise, including a receiver, trustee, or 
liquidating agent and including an officer or employee of any 
agency of a State or political subdivision thereof; and the term 
"trade buyer" means any person who is a wholesaler or retailer. 

(5) The term "affiliate" means anyone of two or more per- 
sons if one of such persons has actual or legal control, directly 
or indirectly, whether by stock ownership or otherwise, of the 
other or others of such persons; and any one of two or more 
persons subject to common control, actual or legal, directly or 
indirectly, whether by stock ownership or otherwise. 

m (6) The term "distilled spirits" means ethyl alcohol, hydrated 
oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin, and 
other distilled spirits, including all dilutions and mixtures thereof, 
for non-industrial use. 

(7) The term "wine" means (1) wine as defined in section 610 
and section 617 of the Revenue Act of 1918, (U. S. C, title 26, 



163 



App. in 






sees. 441 and 444) as now in force or hereafter amended, and 
(2) other alcoholic beverages not so denned, but made in the 
manner of wine, including sparkling and carbonated wine, wine 
made from condensed grape must, wine made from other agri- 
cultural products than the juice of sound, ripe grapes, imitation 
wine, compounds sold as wine, vermouth, cider, perry and sake; 
in each instance only if containing not less than 7 per centum and 
not more than 24 per centum of alcohol by volume, and if for 
non-industrial use. 
-(&)■ The term "ma4fe beverage " mcano a beverage made by the 

ei both, i& potable brewing water, of malted barley with hop - 3, - 
e? their partoy of their products; a**d with e? without other 
malted cereals, aftd with e* without -the additi on: e£ unmaltcd 
e* prepared ccrcab, other carbolrydratca e? products prepared 
therefrom, a&d with of without the addition of carbon dioxide, 
and. with of witnout otner wnolcsome products suit a Die ior Duniim 
food consumption. 

f9> (8) The term "bottle" means any container, irrespective 
of the material from which made, for use for the sale of distilled 
spirits, wine, ef malt beverage s distilled spirits or wine at retail. 

(b) The right to amend or repeal the provisions of this Act is 
expressly reserved. 

(c) If any provision of this Act, or the application of such provision 
to any person or circumstance, is held invalid, the remainder of the 
Act and the application of such provision to persons or circumstances 
other than those as to which it is held invalid, shall not be affected 
therebv. 

Amend the title so as to read: "An Act to further protect the 
revenue derived from distilled spirits and wine, to regulate interstate 
and foreign commerce and enforce the postal laws with respect 
thereto, to enforce the twenty-first amendment, and for other pur- 
poses." 

Passed the House of Representatives July 24, 1935. 

Attest: 

South Trimble, 

Clerk. 



Appendix IV.— REPORT OF THE COMMITTEE ON FINANCE 

ON H. R. 8870 

(Report No. 1215. Federal Alcohol Control Act) 

The Committee on Finance, to whom was referred the bill (H. R. 
8S T 0) to further protect the revenue derived from distilled spirits, 
wine, and malt beverages, to regulate interstate and foreign com- 
merce and enforce the postal laws with respect thereto, to enforce 
the twenty-first amendment, and for other purposes, having consid- 
ered the same, report favorably thereon with amendments and 
recommend that the bill do pass. 

General Statement 

This bill covers the industries engaged in the distilling, blending, 
rectifying, or other production of distilled spirits and wine, or in the 
importing or wholesaling of such products, or in the bottling, or ware- 
housing and bottling, of distilled spirits. The bill is designed to 
supplement the present Federal laws relating to such industries so as 
to provide for the further protection of the revenue derived therefrom, 
regulate interstate and foreign commerce in nonindustrial distilled 
spirits and wine, enforce the postal laws with respect thereto, and 
enforce the twenty-first amendment. 

The bill is founded on the principle that, for the protection of the 
public and adequate conservation of the revenue, Federal regulation 
is necessary. These industries are Nation-wide in their extent, pro- 
foundly affect many phases of national life, and present problems 
national in their scope. State regulation is inadequate, by reason of 
practical and constitutional limitations, to meet the problems pre- 
sented. Federal regulation, in the field in which the Constitution 
permits the exercise of Federal authority, is necessary to deal with 
these problems. 

Experience prior to prohibition demonstrated that the individual 
States by reason of the diversity of their laws and the fact that 
practically all alcoholic beverage producers and large-scale distribu- 
tors did an interstate business, could not alone provide those safe- 
guards necessary for the protection of the revenue of the United 
States, prevent the use of the facilities of interstate and foreign com- 
merce and the mails to carry on unlawful and deceptive practices, 
and protect their own citizens from the evils which are always present 
in an inadequately regulated liquor traffic. That situation holds true 
today. Further, during prohibition, unscrupulous persons entered 
into the liquor business with the consequences known to all. The 
bootlegger and the racketeer have not yet disappeared from our 
national life. Under existing Federal law there is no means of keeping 
the criminal from entering the legalized liquor field. The executive 
branch of the Government (except to a limited extent in the case of 

(164) 






165 App. IV 

distilleries) is powerless to prevent the most notorious criminal from 
entering into the business of production or distribution of alcoholic 
beverages. The revenue cannot be adequately protected, the "tied- 
house" control cannot be curbed, the public cannot be protected from 
unscrupulous advertising, the consumer cannot be protected from 
deceptive labeling practices; in short, the legalized liquor traffic can- 
not be effectively regulated, if the door is left open for highly financed 
gangs of criminals and racketeers to enter into the business of liquor 
production and distribution. 

Even if the present Federal law were adequate to prevent the 
criminal from entering the liquor field, there would still remain the 
problem of control of the unethical minority in the business, the 
activities of which are beyond State power and require regulation in 
the public interest. The internal revenue, Federal trade, and food and 
drug laws are insufficient for this purpose. Protection of the con- 
sumer and the elimination of improper practices in this industry are 
imperative, and additional legislation to accomplish these purposes is 
necessary. 

The codes of fair competition for the liquor industry under the 
National Industrial Recovery Act represented efforts to meet many 
of the evils outlined above and to accomplish many of the purposes 
of this bill. The adoption of the twenty-first amendment took place 
with unexpected speed. When repeal became effective on December 
5, 1933, Congress was not in session, nor was there legislation on the 
books adequate to control the alcoholic beverage industries. Codes 
of fair competition under the National Industrial Recovery Act were 
availed of to meet the situation until Congress had had an oppor- 
tunity to legislate. This view as to the temporary character of the 
codes appears in their preamble. It was expected that Congress 
would, at the next session, enact appropriate legislation. Neverthe- 
less the code system continued in effect, without the enactment of 
legislation by Congress, from December 1933, until May 27 last, 
when the Supreme Court handed down its decision in the case of 
Schechter Poultry Corporation v. United States. As a result of that 
decision, the codes are no longer being enforced, and since that date 
the several alcoholic beverage industries have been without Federal 
supervision, except such as is incident to the collection of the revenues. 

Under the code system a voluntary code for the brewing industry 
(already in existence at the time of repeal as a result of 3 .2 beer legis- 
lation of Mar. 22,. 1933) was approved by the President. At the same 
time, the President imposed codes upon the other alcoholic beverage 
industries, namely, the distillers, rectifiers, importers, wholesalers, and 
wine producers. By Executive order under the National Industrial 
Recovery Act the President established the Federal Alcohol Control 
Administration to administer these codes and certain related func- 
tions. The bill embodies in statutory form so much of the former 
code system as the committee now deems appropriate and within the 
constitutional power of Congress to enact. In general, it may be 
said that except with respect to malt beverages the bill as amended 
by the committee incorporates the greater part of the system of Fed- 
eral control which was enforced by the Government under the codes. 

The outstanding exceptions are that all provisions relating to open- 
price competition, including posting of prices and prohibition of guar- 



App. IV 166 

antees against decline in price and of refunds, rebates, and concessions, 
have been omitted, together with the system of code authorities, 
divisional committees, and regional boards to aid in administering 
the codes. 

The proposed legislation, by providing a Federal agency to super- 
vise the aspects of the liquor industry within the range of Federal 
power, a permit system under which that supervision can be effective, 
and methods to restrict unlawful and unfair practices in the liquor 
business, will, it is believed, do much to protect the revenue and to 
prevent the recurrence of those evils known to be present in the liquor 
traffic in the past and which no fair-minded citizen wishes to be 
restored and maintained. 

A more detailed discussion of the objectives of the bill, together 
with a section by section analysis of its provisions (subject to modifi- 
cations made on the floor of the House), will be found in the report 
of the YVavs and Means Committee of the House of Representatives 
(H. Rept."No. 1542, 74th Cong.). The bill reported by your com- 
mittee adopts, in general, the plan of control embodied in the House 
bill. However, the committee has made a number of amendments, 
manv of which are substantial in character. At the same time it 
should be said that a large number of amendments shown are clerical 
in character, made necessary by changing the administrative agency 
to a commission and eliminating malt beverages (hereinafter dis- 
cussed). A discussion of the more important of the amendments 
follows: 

FEDERAL ALCOHOL COMMISSION 

The House bill (sec. 2) established the Federal Alcohol Administra- 
tion as a division of the Treasury Department. The Administrator 
was to be appointed by the President, by and with the advice and 
consent of the Senate, but his rules and regulations were subject to 
the approval of the Secretary of the Treasury. The compensation of 
his employees was subject to like approval. Both the Treasury 
Department and the Federal Alcohol Control Administration vigor- 
ously opposed these provisions on the ground that while the provisions 
of the bill woidd be of great assistance in preventing evasion of taxes 
and facilitating collection of the revenue, the provisions did not 
involve the levying and collection of taxes which is the Treasury 
Department's sole function with regard to liquor. The provisions of 
the House bill wore also opposed on the ground that authority and 
responsibility were divorced under the set-up proposed and that 
thereby sound and efficient administration would be seriously 
hampered. 

The committee has amended these provisions so as to create an 
independent agency similar to the Federal Alcohol Control Admin- 
istration which was charged with the administration of the several 
codes. The committee has provided for a Federal Alcohol Com- 
mission, ((imposed of three members. Such a commission, instead 
of a single, director provided by the House bill, will, it is believed, 
aid in preventing: arbitrary and improper action in one of the most 
difficult fields of Government administration. In the interest of 
economy the principal officials of the new agency, namely, the chair- 
man, vice chairman, and general counsel, are to constitute the com- 
mission. The salaries are fixed at $10,000, the same salary as that of 



167 App. IV 

the members of the Federal Alcohol Control Administration, and that 
fixed by the House bill for the Administrator. The Commissioners 
will be appointed by the President, subject to Senate confirmation. 

The Commissioners will hold terms of office of 3 years except that 
the Commissioners first appointed will be on a staggered basis of 1, 
2, and 3 years. 

The bill retains the House provision abolishing the Federal Alcohol 
Control Administration which agency has remained in existence 
pursuant to the recent legislation extending the National Recovery 
Administration. 

Under the House bill the employees of the Administration were 
exempt from both the civil-service laws and the Classification Act of 
1923. The amendment recommended by the committee requires the 
salaries of employees of the Commisson to be fixed in accordance 
with the Classification Act and makes the further provision that no 
employee shall receive a salary of $5,000 or more unless appointed by 
the President, by and with the advice and consent of the Senate. 
Employees of a less salary will be appointed by the Commission. 

The amendment recommended by the committee also authorizes 
the Commission to make certain investigations and studies and report 
thereon to the President and to the Congress. It is believed that 
such investigations and studies and voluntary activities of the Com- 
mission in connection therewith will prove as valuable in obtaining 
law observance by the alcohol beverage industries as the regulatory 
provisions of the bill. The Commission is also required to make an 
annual report to the Congress which shall, among other matters, 
include the names and compensation of employees of the Commission. 

BULK SALES AND BOTTLING 

The House bill (sec. 4 (e)) permitted the distribution of distilled 
spirits in bulk, i. e., in containers having a capacity of more than 1 
wine gallon, to wholesalers, retailers (including hotels, restaurants, 
clubs and saloons), and to consumers, as well as to distillers and 
rectifiers, provided the barrel, cask, keg, or other container was made 
of wood. The only exception related to bulk distribution into States 
whose laws prohibited bulk sales. On the other hand, while bulk 
sales were freely permitted, only a limited class of persons receiving 
bulk goods were permitted to bottle them, principally distillers, recti- 
fiers, and certain warehousemen. Further, while bulk goods could 
be sold to the consumer by retailers the only retailers who could dis- 
pense bulk goods by the drink were bona fide hotels and clubs. 

The committee recommends an amendment ehminating the House 
provisions and prohibiting bulk distribution. The committee is of 
the opinion that restriction of bulk distribution is necessary for the 
following reasons: 

First. Bulk liquor in the hands of wholesalers, retailers, and other 
persons whose plants are not subject to constant Treasury super- 
vision and at whose plants Treasury inspectors are not stationed makes 
it likely that rectifying, blending, or bottling operations will be carried 
on in violation of law, and also that the bottling of liquors under 
improper labels and the bottling of liquors that have been tarn- 



App. IV 168 

pered with in various ways not disclosed to the purchaser, will be 
engaged in. Control of bulk distribution and the privilege of 
bottling is essential if labeling requirements are to be adequately- 
enforced, evasion of rectifiers' tax prevented, and adulteration of 
liquor controlled. 

Second. The right of wholesalers and retailers to have bulk goods 
on the premises facilitates the use of wholesale and retail outlets for 
the disposition of bootleg liquor. The refilling of bulk containers for 
legitimate liquor with liquor from bootleg sources is an easy matter. 
With the possession of bulk liquors limited principally to distillers, 
rectifiers, and certain warehousemen, the presence of such liquors on 
other premises indicates that the liquors were obtained from illegiti- 
mate sources. The Treasury Department estimates approximately 
$5, 000, 000 additional appropriation would be necessary annually for 
adequate policing of wholesale and retail outlets if wholesale and retail 
outlets were permitted to handle bulk goods. 

Third. Some 18 States now have legislation affirmatively prohibit- 
ing bulk sales within the State to wholesalers, retailers, or consumers. 
The laws of 9 States still prohibit all sale of distilled spirits, and the 
laws of 1 1 States by reason of establishment of liquor monopolies or 
State stores systems control bulk sales within the State. If the 
Federal Government is to adequately enforce the protection afforded 
by the twenty-first amendment with respect to these States, bulk dis- 
tribution must be prohibited. Such distribution, despite local laws 
relating to bulk sales, makes possible the bringing of bulk goods into 
the State or into adjoining States and greatly facilitates the violation 
of the local laws. 

Fourth. Bulk distribution breaks down the control over bottling 
established by the Treasury Department through its licensing of 
bottle manufacturers and the control over the use of bottles established 
by that Department pursuant to the Bottling Act passed at the last 
session of Congress. 

The committee amendment prohibits all bulk distribution except 
to distillers, rectifiers, operators of internal-revenue bonded ware- 
houses or customs manipulation bonded warehouses, proprietors of 
industrial alcohol plants, and State agencies. It thereby prohibits 
the dispensing of liquor from bulk packages and, of course, eliminates 
necessity for consideration of the preferential treatment given to 
hotels and clubs by the House bill. The committee amendment 
retains a valuable feature of the House bill under which bottling was 
controlled and limits bottling to those persons named above who are 
entitled to receive bulk goods. The committee amendment does not 
discriminate between distribution in glass, wood, steel, or other con- 
tainers. So far as the committee amendment is concerned containers 
of any material can be used for distribution both in bulk and in 
packages of a gallon or less. Any limitations as to the kind of ma- 
terials that can be used for containers will flow not from the committee 
amendment, but from the provisions of the Bottling Act previously 
parsed by Congress. 

The restriction of bulk distribution was urged by the Federal 
Alcohol Control Administration, the Treasury Department, the 
National Conference of State Liquor Control Officials, various State 
liquor control authorities, and, with the exception of one group of 



169 App. IV 

wholesalers, by all the liquor trade associations appearing before the 
committee. Under the cod3s of fair competition for distillers, recti- 
fiers, importers, and wholesalers, bulk distribution of distilled spirits 
was prohibited substantially in accordance with the principles set 
forth in the committee amendment, and these provisions, it is under- 
stood, were fully acquiesced in by the several industries as represented 
by their respective code authorities. Since the termination of the 
codes the Treasury has attempted to control certain phases of the 
bulk distribution and bottling problem through regulations recently 
promulgated. The validity of these regulations has been seriously 
questioned. 

MALT BEVERAGES 

Under the House bill the various branches of the malt-beverage 
industry were subjected to varying degrees of regulation. Importers 
and wholesalers, for instance, of malt beverages were required to 
obtain basic permits before doing business; and the provisions against 
unfair competition and unlawful practices applied to brewers and 
importers and wholesalers of malt beverages. It was emphasized 
before your committee that a comparatively small percentage of 
brewers distributed their products in interstate or foreign commerce, 
and the power to regulate such commerce afforded the constitutional 
basis for the provisions relating to unfair competition and unlawful 
practices. It may be observed in this connection that the brewing 
industry operated under a voluntary code under the code system, 
whereas the .President imposed codes upon the other alcoholic beverage 
industries, namely, the distillers, rectifiers, importers, wholesalers, 
and wine producers. Aside from these facts, however, your com- 
mittee took the position that the application of the bill should be 
limited to distilled spirits and wines. 

TRADE PRACTICES 

The House bill (sec. 5) prohibited two classes of trade practices. 
The first class of these prohibited practices were those which tended 
to produce monopolistic control of retail outlets, such as arrange- 
ments for exclusive outlets, creation of tied houses, commercial 
bribery, and sales on consignment or with the privilege of return. 
The reports of the National Commission on Law Observance and 
Enforcement (Wickersham Commission) and of other agencies that 
conducted surveys of liquor enforcement problems, all indicated that 
control by producers and wholesalers of retail outlets through the 
various devices such as those prohibited by the bill has been produc- 
tive not only of monopoly but also of serious social and political evils 
widen were in large measure responsible for bringing on prohibition. 
The bill seeks to prevent the recurrence of these evils in the fields 
that cannot be reached by the States, provided the evils occur in 
interstate' commerce or reach such an extent in the particular case 
that, they constitute a substantial restraint on interstate commerce 
or deterrent to the free flow of interstate commerce in distilled spirits 
and wines. 

The second class of unfair practices prohibited by the bill are those 
relating to false labeling and. false advertising or labeling or advertise- 



App. IV 170 

ing that is not adequately informative, to the end of affording the 
consumer adequate protection and of preventing unfair competition. 

The bill as reported by the committee retains the House unfair 
practice provisions with certain amendments. The prohibitions 
against creation of tied houses through furnishing of signs, supplies, 
and the like have been modified by two exceptions. The first is that 
an industry member may furnish a retailer signs to an amount not 
exceeding $100 in aggregate value in any calendar year. The second 
exception is that the prohibition shall not apply to the furnishing of 
advertising specialties of paper or paper-like substance or graphic 
arts items of similar materials. The tied-house provisions, it should 
be noted, relate to the acquisition by industry members of control 
over theretofore independent retail establishments and do not pro- 
hibit industry members from continuing to operate retail outlets 
heretofore established by them and wholly owned and operated by 
them, nor the establishment by industry members of new retail 
outlets of such character. 

The committee has recommended the insertion of a new provision 
in the false-labeling and false-advertising provisions so as to make 
it clear that in the case of gin whether produced by a process of 
original distillation in a distillery or by blending or rectification in 
a rectifying plant, the gin shall show the percentage of the neutral 
spirits contained therein that are derived from each of the respective 
raw material sources, such as grain, fruit, and sugarcane and its 
products such as molasses. The amendment also provides similar 
requirements as to the source of neutral spirits sold straight without 
blending. The requirement of the House bill that other blended 
and rectified distilled spirits, except cordials, liqueurs, and specialties, 
shall be labeled so as to inform the consumer of the percentage of 
neutral spirits contained therein and the percentage of such neutral 
spirits derived from each of the respective commodity sources, is 
retained without change. 

• The committee amendments eliminate the requirement as to the 
labeling of distilled spirits and wine purchased at Government sales 
after seizure by the Government for violation of law. In lieu thereof 
it is provided (see new sec. 9) that distilled spirits and wine forfeited 
and condemned summarily or pursuant to court decree or otherwise, 
by or under any law of the United States, shall not be disposed of 
publicly or privately, but shall be destroyed. 

This provision will protect the public from the placing upon the 
market of seized bootleg liquor and other liquor from unknown sources. 
Such liquor may be of inferior quality or adulterated. Moreover, 
the wholesaler or retailer purchasing such liquor from the Govern- 
ment, is by reason of lack of information as to its origin and character 
(neither of which can be adequately supplied by data obtained 
through chemical analysis), unable properly to label or relabel the 
goods in conformity with law. In consequence, the consumer pur- 
chasing these goods from a wholesaler or retailer is usually in the 
position of buying a pig in the poke. The amendment will also pre- 
vent the present situation whereby legitimate distributors and im- 
porters who pay internal-revenue taxes and import duties have to 
meet competition from goods sold by the Government, frequently at 
prices less than the amount of tax owed to the Government. Such 
goods also often bear labels identical with those handled by the legiti- 



171 Apr.. IV 

mate distributor or importer in circumstances under which the 
authenticity of the labei and the genuineness of the goods is open to 
most serious doubts. 

An exception is made to the destruction of the forfeited and con- 
demned liquors whereby, if they are found to be of United States 
Pharmacopoeia quality or suitable for medicinal purposes, they may 
be distributed under the direction of the Surgeon General of the Public 
Health Service to Government hospitals for medicinal use only. 

The committee amendments include a clarifying provision which 
makes it definite that the industry member, and not the newspaper 
or periodical publisher or radio broadcaster, is responsible for any 
advertising of liquor or wines that fails to conform to the commission's 
regulations requiring informative and prohibiting :dse .advertising. 



Appendix V.— H. R. 8870 AS PASSED BY THE SENATE, WITH 
THE AMENDMENTS OF THE SENATE NUMBERED 

AN ACT To further protect the revenue derived from distilled 
spirits, wine, and malt beverages, to regulate interstate and foreign 
commerce and enforce the postal laws with respect thereto, to 
enforce the twenty-first amendment, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled, That this Act may be cited as 
the " Federal Alcohol (1) Administration Control Act." 

(2) PEDEItAL ALOOnOL ADMINISTRATION 

tien as a- division m the Trcaoury Department. 

fb> qPhe Administration shall be headed by an Administrator, whe 
shall be appointed by the Prcoidcnt, by ftftd w4th the aeteiee and eea- 
eetti e| ^ Senate. ¥be Adm iniatrator shall leg Ms services peeeive- 
compensation at the pate of MO7OOO per ftftawft; together with aetuaf 
and necessary traveling and s ubsistence expenses while engaged » 

5ve person shall be cUgiblo te appointment, ep continue is office, as- 
Administr ator if he is engaged op financially interested »r op is as 
officer op director of op employed by a corporation engaged m? the 
production op sale op other distribution of alcoholic beverages, op the 
financing thereof: 

-fe} ¥he Administrator shall, without regard to the civil scrvico 
fe^a ft^ ^ke Classification Aet of 4-9S&7 as amended, appoint &&& fig 
the compensation and duties ef sueh officers aed employees as he 
deems necessary to carry out his powers a»d duties, but the com 
pensation so feed shall be subject te the approval of the Secretary 
e| ^be Treasury. ¥he Administrator » authorized te adopt an- 
official seely which shall be judicially noticed. 

-(d)- ¥he Adminiatrator is authorized imS directed te prescribe sueh 
pules and regulations as m&y be necessary te carry out his powers aedr 
duties. AH pules and regulations prescribed by the Administrator 
shall be subject te the approval ef the Secretary el the Treasury. 



FEDERAL ALCOHOL COMMISSION 

Sec. 2. (a) There is hereby established a commission to be known as 
the Federal Alcohol Commission, to be composed of three commissioners, 
who shall be appointed by the President by and with the advice and con- 
sent of the Senate. Not more than two members of the commission shall 
be members of the same political party. The terms of office of the com- 
missioners Jirsi taking office shall expire, as designated by the President 

(172) 



173 App. V 

at the time of nomination, one at the end of the first year, one at the end 
of the second year, and one at the end of the third year after the date of the 
enactment of this Act. A successor shall have a term of office expiring 
three years from the date of expiration of the term for which his prede- 
cessor was appointed, except that a person appointed to fill a vacancy 
occurring prior to the expiration of such term shall be appointed for the 
remainder of such term. No person shall be eligible for appointment as 
a commissioner or continue in office as a commissioner if he is engaged or 
financially interested in, or is an officer or director of or employed by a 
company engaged in, the production or sale or other distribution of alco- 
holic beverages or the financing thereof. Each commissioner shall, for 
his services, receive compensation at the rate of $10,000 per annum, to- 
gether with actual and necessary traveling and subsistence expenses while 
engaged in the performance of his duties as commissioner outside the 
District of Columbia. 

(b) As designated by the President at the time of nomination: One 
of the commissioners shall be chairman of the commission and shall be 
the chief executive officer of the commission; another of the commissioners 
shall be vice-chairman of the commission and shall perform the functions 
and duties of the chairman in his absence or in the event of his incapacity 
caused by illness; and the third commissioner, who shall be a lawyer, 
shall be general counsel of the commission. The commission mayfunc-. 
tion notwithstanding vacancies, and a majority of the commissioners in 
office shall constitute a quorum. The commission shall meet at the call 
of the chairman or a majority of its members. The commission is 
authorized to adopt an official seal, which shall be judicially noticed. 
The commission shall be entitled to free use of the United States mails in 
the same manner as the Executive departments. 

(c) The commission shall, without regard to the civil-service laws, but 
subject to the Classification Act of 1923, as amended, appoint and fix 
the compensation and prescribe the duties of such officers and employees 
as may be necessary to carry out its powers and duties; except that any 
such officer or employee receiving a salary at the rate of $5,000 or more 
per annum shall be appointed by the President, by and with the advice and 
consent of the Senate. 

(d) The commission is authorized and directed to prescribe such rules 
and regulations as may be necessary to carry out its powers and duties. 

(e) Appropriations to carry out powers and duties of the (3)Ad- 
Tninin trn.tf H' commission shall be available for expenditure, among 
other purposes, for personal services and rent in the District of Co- 
lumbia and elsewhere, expenses for travel and subsistence, for law 
books, books of reference, magazines, periodicals, and newspapers, 
for contract stenographic reporting services, for subscriptions for 
library services, for purchase of samples for analysis or use as evidence, 
and for holding (4) conference conferences of State and Federal liquor 
control officials. 

(f) The (5) Adminiotrator commission may, with the consent of 
the department or agency affected, utilize the services of any depart- 
ment or other agency of the Government to the extent necessary to 
carry out C6)h*s its powers and duties and authorize officers and 
employees thereof to act as (7)his- its agents. 

(g) The provisions, including penalties, of sections 9 and 10 of 
the Federal Trade Commission Act, as now or hereafter amended, 



App. V 174 

shall be applicable to the jurisdiction, powers, and duties of the (8) 
Ad mini j tin tor commission, and to any person (whether or not a cor- 
poration) subject to the provisions of laws administered by the (9) 
Administrator commission. 

(h) The (lO) Adminijtrator commission is authorized to require, 
in such manner and form as (ll)he it shall prescribe, such reports as 
are necessary to carry out (12)hie its powers and duties. 
(13) (0 The commission is authorized to make investigations and 
studies and to report thereon from time to time to the President and to 
the Congress, together with recommendations, with respect to matters 
necessary for the proper performance of the poivers and_ duties conferred 
upon the commission, and with respect to the production, distribution, 
and consumption of alcoholic beverages, including monopolistic prac- 
tices, unfair methods of competition, and concentration, of ownership in 
the alcoholic beverages industries, and control of retail outlets and prices; 
advertising, labeling, and merchandising methods with respect to alcoholic 
beverages, including standards of identity, quality, and size and fill of 
container therefor; and enforcement of the twenty-first amendment, 
State and Federal cooperation in the administration of alcoholic beverage 
control laws, and methods of promoting temperance. The commission, 
whenever in its judgment such action will be in the public interest, may 
publish the results of such investigations and studies. 
(14) (j) The commission shall make a report to Congress, at the begin- 
ning of each regular session, of the administration of the functions with 
which it is charged, and shall include in such report the names and com- 
pensation of all persons employed by the commission. 

UNLAWFUL BUSINESSES WITHOUT PERMIT 

Sec. 3. In order effectively to regulate interstate and foreign com- 
merce in (lo) diatilled 3pirit3, winca, fted eittk bevcragea distilled 
spirits and wine, to enforce the twenty-first amendment, and to pro- 
tect the revenue and enforce the postal laws with respect to (16) 
4ig^m^4 5 pi r it o , wine, ftftd «*a4fe bcvcragcG distilled spirits and wine: 

(a) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the (17)A4fft inbtrator commission— 

(1) to engage in the business of importing into the United 
States (18)eU~fciWe4 opiriti, wine, e? m#k bevcrage o distilled 
spirits or wine; or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to sell, or ship, in interstate or foreign commerce, directly 
or indirectly or through an affiliate, (19) diotiil e4 spirit wme-, 
e¥ . fe-rtk beverage * distilled spirits or wine so imported. 

This subsection shall take effect sixty days after (20)44*e d*±e ef the 
^j^^^^+,4. ^ j-ta-, A-e-fc a majority of tht commissioners first appointed 

take ojfice. . . 

(b) It shall be unlawful., except pursuant to a basic permit issued 
under this Act by the (21) Admini ■ iratnr commission — 

(1) to engage in the business of distilling distilled spirits, pro- 
ducing wine, rectifying or blending distilled spirits or wine, or 
bottling, or warehousing and bottling, distilled spirits; or 

(2) for any person so engaged to sell, offer or deliver for sale, 
contract to 'sell, or ship, in interstate or foreign commerce, 



175 App. V 

directly or indirectly or through an affiliate, distilled spirits or 
wine so distilled, produced, rectified, blended, or bottled, or 
warehoused and bottled. 

This subsection shall take effect sixty days after (22)*he da-fce e-f 4fee 
enactmen t e£ this Aefc a majority of the commissioners first appointed 
take office. 

(c) It shall be unlawful, except pursuant to a basic permit issued 
under this Act by the (23) Admini s4fa4eg commission — 

(1) to engage in the business of purchasing for resale at whole- 
sale (24) distille d apirita, wifte^ op malt beverage s distilled spirits 
or wine ; or 

(2) for any person so engaged to receive or to sell, offer _ or 
deliver for sale, contract to sell, or ship, in interstate or foreign 
commerce directly or indirectly or through an affiliate, (25) 
distilled apirita, wino j ©* malt - bcvcragea distilled spirits or vnne so 
purchased. 

This subsection shall take effect C 2 6) January March 1, 1936. 

This section shall not apply to any agency of a State or political 
subdivision thereof or any officer or employee of any such agency, 
and no such agency or officer or employee shall be required to obtain a 
basic permit under this Act. 

PERMITS 

Sec. 4. (a) The following persons shall, on application therefor, 
be entitled to a basic permit: 

(1) Any person who, on May 25, 1935, held a basic permit as 
distiller, rectifier, wine producer, or importer issued by an agency 
of the Federal Government. 

(2) Any other person unless the (27) Adminbtrator commis- 
sion finds (A) that such person (or in case of a corporation, any 
of its officers, directors, or principal stockholders) has, within 
five years prior to date of application, been convicted of a felony 
under Federal or State law (2S) or of a violation of any Federal lam 
relating to liquor, including the taxation thereof; or (B) that such 
person is, by reason of his business experience, financial standing, 
or trade connections, not likely to commence operations within a 
reasonable period or to maintain such operations in conformity 
with Federal* law; or (C) that the operations proposed to be con- 
ducted by such person are in violation of the law of the State in 
which they are to be conducted. 

(b) If upon examination of any application for a basic permit the 
(29> Adminiatrator commission has reason to believe that the appli- 
cant is not entitled to such permit, (30)ke the commission shall notify 
the applicant thereof and, upon request by the applicant, afford him 
due notice and opportunity for hearing on the application. If the 
C31) Administrator commission, after affording such notice and oppor- 
tunity for hearing, finds that the applicant is not entitled to a basic 
permit hereunder, C32)he it shall by order deny the application 
stating the findings which are the basis for (33)h» its order. 

(c) The C34) AdminiQtrator commission shall prescribe the manner 
and form of all applications for basic permits (including the facts to 



App. V 176 

be set forth therein) and the form of all basic permits, and shall 
specify in any basic permit the authority conferred by the permit and 
the conditions thereof in accordance with the provisions of this Act. 
To the extent deemed necessary by the (35) Administrator commission 
for the efficient administration of this Act, separate applications and 
permits shall be required by the (36) Admin i strator commission with 
respect to (37) distill ed spiri ts? wine , ■ aftd malt beverage s distilled 
spirits and wine, and the various classes thereof, and with respect to 
the various classes of persons entitled to permits hereunder. The 
issuance of a basic permit under this Act shall not operate to deprive 
the United States of its remedy for any violation of law. 

(d) A basic permit shall be conditioned upon compliance with the 
requirements of section 5 (relating to unfair competition and unlawful 
practices) (38)arwf of section 6 {relating to bulk sales and bottling), with 
the twenty-first amendment and laws relating to the enforcement 
thereof, and with all other Federal laws relating to (39) distillcd 
spirits, wine, and malt beverages distilled spirits and wine, including 
taxes with respect thereto. 

(40){e) -(4} :rve basic perna - i t issued under this Aet shall contai n asy 
condition prohibiting, ftep shall a«y rule, regulation, ep order, issued 
under this ep afty other Aet el Congress, prohibit, -the use op sale of 
aw barrel, cask, ep kegj if pnade of wood and if of ene ep more winc - 
gallons eapaeit}'; a* a container in which -fee store, transport, of sett? 
ep fpem which -fee seHy a»y distilled spirits, wine, ep malt beverages 
This subjection shall net apply -to &&$■ condition m any basic permit 
issued under this Aet ep any rule, regulation, ep order i ssued m connec - 
tiee therewith -to the extent that ouch condition applies m a State ift 
which the use ep safe of frny such barrel, cask, op keg is prohibited 
by the law ©I such State. 

(4 1 )43} i-t shall be unlawful pop afty perso n te package ep repackage 
distilled spirits fep safe op resale in bottles unless such person is a 
distiller, a rectifier ef distilled spirits ? ep a person operating a bonded 
warehouse qualified under -the internal revenue laws ep a class 8 
bonded warehouse qualified under -the customs laws, holding a easie 
permit under -this Aet? ep is a proprietor el an industrial alcohol 
plant ep is aft agency of a State ep political subdivision t hereof: Prv- 
vidod, That any other person pnay so p ackage distilled spirits m bottles 
if he qualifies under -the internal revenue laws as a rectifier and holds 
a basie permit issued under -this Aet fop -the rectification ef distilled 
spirits. 

(42)4&} Notwithstanding the foregoing provisions el this subsection, 
fte person wke is subject -to -the occupationa l tax imposed Ipv section 
£244 " Fourth " el t4te Revised Statute s , as amended +Ur St €^ 
Supp. V44-r title 2-e? seer 1304 -fe^r en petail dealers in- liquors shall 
package ep repackage distilled sp irits lep -^afe op pesale i« bottles op 
be eligible -to qualify ao a rectifier el distilled sp iri .s, and- ne such 
perso n? except a bona fide hotel ep club, sfeftH; fop purposes of sale, - 
remove fpepa tmy such barrel, cask, op keg *fty- di s tilled spirits eon- 
taincd therein. Any person wke violates the provisions of -this papa- 
graph e^ p aragraph -(-2-} shall, upon conviction t hereof, be fined net 
more than 81,000 ep i mprisoned pop net more than ene yea-p? ep bothy 
and sha ll forfeit te the United States aU distilled spirits with respect 
te which the violation occurs, aftd the bottles ift which packaged. 



177 App. V 

{43)^)- (e) A basic permit shall by order of the (44)A-d ministrato g 
commission, after due notice and opportunity for hearing to the per- 
mittee, (1) be revoked, or suspended for such period as the (45) 
A Hnfiinin t.rftf.nr commission deems appropriate, if the (46) Adminia - 
trator commission finds that the permittee has willfully violated any 
of the conditions thereof, provided that for a first violation of the 
conditions thereof the permit shall be subject to suspension only; or 
(2) be revoked if the (47)Adf niniatrato ? commission finds that the 
permittee has not engaged in the operations authorized by the permit 
for a period of more than two years; or (3) be annulled if the (48) 
Administrator commission finds that the permit was procured through 
fraud, or misrepresentation, or concealment of material fact. The 
order shall state the findings which are the basis for the order. 
(49){g} (J) Orders of the (oO) Adminiatrator commission with respect 
to any denial of application, suspension, revocation, annulment, or 
other proceedings, shall be served (1) in person by any officer or 
employee of the (51) Adminiatratio e commission designated by the 
(52) Adminiotrato f commission or any internal revenue or customs 
officer authorized bv the (53) Adminiotrator commission for the pur- 
pose, or (2) by mailing the order by registered mail, addressed to the 
-applicant or respondent at his last known address in the records of 
the (54) Administrat e? commission. 

(55)-<%)- (g) A basic permit shall continue in effect until suspended, 
revoked, or annulled as provided herein, or voluntarily surrendered; 
except that (1) if leased, sold or otherwise voluntarily transferred, the 
permit shall be automatically terminated thereupon, and (2) if trans- 
ferred by operation of law or if actual or legal control of the permittee 
is acquired, directly or indirectly, whether by stock-ownership or in 
any other manner, by any person, then such permit shall be auto- 
matically terminated at the expiration of thirty days thereafter: 
Provided, That if within such thirty-day period application for a new 
basic permit is made by the transferee or permittee, respectively, 
then the outstanding basic permit shall continue in effect until such 
application is finally acted on by the (56) Admmiotrator commission. 
(57)-(i> (h) An appeal may be taken by the permittee or applicant 
for a permit from any order of the (58) Administrator commission 
denying an application for, or suspending, revoking, or annulling, a 
basic permit. Such appeal shall be taken by filing, in the circuit court 
of appeals of the United States within any circuit wherein^ such 
person resides or.has his princioal place of business, or in the United 
States Court of Appeal for the District of Columbia, within sixty 
days after the entry of such order, a written petition praying that the 
order of the (59) Adminiotrator commission be modified or set aside 
in whole or in part. A copy of such petition shall be forthwith served 
upon the (60) Administrator commission, or upon any officer desig- 
nated by (61)feH» it for that purpose, and thereupon the (62) Admin 
iotrator commission shall certify and file in the court a transcript of 
the record upon which the order complained of was entered. Upon 
the filing of such transcript such court shall have exclusive jurisdiction 
to affirm, modify, or set aside such order, in whole or in part. No 
objection to the order of the (63) Adminiotrato f commission shall 
be considered by the court unless such objection shall, have been 
urged before the (64)A-dm iniotrator commission or unless there were 
reasonable grounds for failure so to do. The finding of the (65) 



App. V 178 

Administrator commission as to the facts, if supported by substantial 
evidence, shall be conclusive. If any party shall apply to the court 
for leave to adduce additional evidence, and shall show to the satis- 
faction of the court that such additional evidence is material and that 
there were reasonable grounds for failure to adduce such evidence in 
the proceeding before the (66) Admini3 -tfa-top commission, the court 
may order such additional evidence to be taken before the (67) 
Administrator commission and to be adduced upon the hearing in such 
manner and upon such terms and conditions as to the court may seem 
proper. The (68) Administrat es commission may modify (69)his its 
findings as to the facts by reason of the additional evidence so taken, 
and (70)he it shall file with the court such modified or new findings, 
which, if supported by substantial evidence, shall be conclusive, and 
(71)his its recommendation, if any, for the modification or setting 
aside of the original order. The judgment and decree of the court 
affirming, modifying, or setting aside, in whole or in part, any such 
order of the (72) Administrator commission shall be final, subject to 
review by the Supreme Court of the United States upon certiorari 
or certification as provided in sections 239 and 240 of the Judicial 
Code, as amended (U. S. C, title 28, sees. 346 and 347). The com- 
mencement of proceedings under this subsection shall, unless specifi- 
cally ordered by the court (73)£o the contrary, operate as a stay of the 
(74) Administrator a commission's order. 

(75)-0- (i) No proceeding for the suspension or revocation of a bas : c 
permit for violation of any condition thereof relating to compliance 
with Federal law sha.l be instituted by the (76) Administrat or com- 
mission more than eighteen months after conviction of the violation 
of Federal law, or, if no conviction has been had, more than three 
years after the violation occurred; and no basic permit shall be sus- 
pended or revoked for a violation of any such condition thereof if the 
alleged violation of Federal law has been compromised by any officer 
(77) or agency of the Government authorized to compromise such 
violation. 

UNFAIR COMPETITION AND UNLAWFUL PRACTICES 

Sec. 5. It shal be unlawful for any person engaged in business as a 
distiller, (78) brewer 7 rectifier, blender, or other producer, or as an 
importer or wholesaler, of (79) distillcd spirit wine, or malt fee^efages 
distilled spirits or wine, or as a bottler, or warehouseman and bottler, of 
distilled spirits, directly or indirectly or through an affiliate: 

(a) Exclusive outlet: To require, by agreement or otherwise, that 
any retailer engaged in the sale of (SO) distillcd spirits, wine, en? malt 
beverages distilled spirits or wine, purchase any such products from 
such person to the exclusion in whole or in part of (Sl) distilled spirits, 
wine, e*» malt beverages distilled spirits or wine sold or offered for sale 
by other persons in interstate or foreign commerce, if such requirement 
is made in the course of interstate or foreign commerce, or if such 
person engages in such practice to such an extent as substantially to 
restrain or prevent transactions in interstate or foreign commerce in 
any such products, or if the direct effect of such requirement is to 
prevent, deter, hinder, or restrict other persons from selling or offering 
for sale any such products to such retailer in interstate or foreign 
commerce; or 



179 App. V 

(b) "Tied house": To induce through any of the following means, 
any retailer, engaged in the sale of (82)4Js4illed apirito, winc^ e? malt 
bevcragco distilled spirits or wine, to purchase any such products from 
such person to the exclusion in whole or in part of (83) diotillcd spirit s? 
wine ? ef malt beverages distilled spirits or wine sold or offered for sale 
by other persons in interstate or foreign commerce, if such inducement 
is made in the course of interstate or foreign commerce, or if such 
person engages in the practice of using such means, or any of them, 
to such an extent as substantially to restrain or prevent transactions 
in interstate or foreign commerce in any such products, or if the direct 
effect of such inducement is to prevent, deter, hinder, or restrict other 
persons from selling or offering for sale any such products to such 
retailer in interstate or foreign commerce: (1) By acquiring or hold- 
ing (after the expiration of any existing license) any interest in any 
license with respect to the premises of the retailer; or (2) by acquiring 
any interest in real or personal property owned, occupied, or used by 
the retailer in the conduct of his business; or (3) by furnishing, giving, 
renting, lending, or selling to the retailer, any equipment, fixtures, 
signs (84) (excepting signs not exceeding $100 in aggregate value to any 
retailer in any calendar year), supplies, money, services, or other thing 
of value, {85)except advertising specialties and graphic arts advertising 
items of paper or paper-like substance and subject to such (86)/wrfAer 
exceptions as the (87) Adminiotrator commission shall by regulation 
prescribe, having due regard for public health, the quantity and value 
of articles involved, established trade customs not contrary to the 
public interest and the purposes of this subsection; or (4) by paying 
or crediting the retailer for any advertising, display, or distribution 
service; or (5) by guaranteeing any loan or the repayment of any 
financial obligation of the retailer; or (6) by extending to the retailer 
credit for a period in excess of the credit period usual and customary 
to the industry for the particular class of transactions (£8)7 fts a g c ob - 
tained fey %fee Adminiotrator *ad prescribed fey regulations fey mm; 
or (7) by requiring tne retailer to take and dispose of a certain quota 
of any of such products; or 

(c) Commercial bribery: To induce through any of tne following 
means, any trade buyer engaged in the sale of (89) dbtillcd spirits, 
w jnc, e* f&ftit bevcrageo distilled spirits or wine, to purchase any such 
products from such person to the exclusion in whole or m part of 
(90) distillod apirito, wine, of ma& bevcragoo distilled spirits or ■wine 
sold or offered for sale by other persons in interstate or foreign com- 
merce, if such inducement is made in the course of interstate or 
foreign commerce, or it such person engages in the practice of using 
such means, or any of them, to suck an extent as substantially to 
restrain or prevent transactions in interstate or foreign commerce m 
any such products, or if the direct effect of such inducement is to 
prevent, deter, hinder, or restrict other persons from selling or offering 
for sale any such products to such trade buyer in interstate or foreign 
commerce: (1) By commercial bribery; or (2) by offering or giving 
any bonus, premium, or compensation to any officer, or employee, or 
representative of the trade buyer; or 

(d) Consignment sales: To sell, offer for sale, or contract to sell to 
any trade buyer engaged in the sale of (91)&s4ffle4 epifrtsr wmey e* 
53^ boveragco distilled spirits or wine, or for any such trade buyer 
to purchase, offer to purchase, or contract to purchase, any sucn 



App. V 180 

products on consignment or under conditional sale or with the privi- 
lege of return or on any basis otherwise than a bona fide sale, or where 
any part of such transaction involves, directly or indirectly, the 
acquisition by such person from the trade buyer or his agreement to 
acquire from the trade buyer other (92) distillcd spirits, wine, e? 
matt bevcragco distilled spirits or wine — if such sale, purchase, offer, 
or contract is made in the course of interstate or foreign commerce, 
or if such person or trade buyer engages in such practice to such an 
extent as substantially to restrain or prevent transactions in inter- 
state or foreign commerce in any such products, or if the direct 
effect of such sale, purchase, offer, or contract is to prevent, deter, 
hinder, or restrict other persons from selling or offering for sale any 
such prod acts to such trade buyer in interstate or foreign com- 
merce (93): Provided,- That this subsection shall not apply to trans- 
actions involving solely the bona fide return of merchandise for ordinary 
and usual commercial reasons arising after the merchandise has been 
sold; or 

(e) Labeling. — To sell or ship or deliver for sale or shipment, or 
otherwise introduce in interstate or foreign commerce, or to receive 
therein, or to remove from customs custody for consumption, any 
(94) distilfcd spirits, wine, of met& bevcragco distilled spirits or wine 
in bottles, unless such products are bottled, packaged, and labeled in 
conformity with such regulations, to be prescribed by_ the (95) 
Administrator commission, with respect to packaging, marking, brand- 
ing, and labeling and size and fill of container (1) as will prohibit 
deception of the consumer with respect to such products or the 
quantity thereof and as will prohibit, irrespective of falsity, such 
statements relating to age, manufacturing processes, analyses, guar- 
antees, and scientific or irrelevant matters as the (96) Administrator 
commission finds to be likely to mislead the consumer; (2)_ as will 
provide the consumer with adequate information as to the identity 
and quality of the products, the alcoholic content thereof ((97) 
except t&at statements efy e* statements likely -to be considered as 
statements of? alcoholic ee ntont e£ mak- beverages are hercb}' pi=e- 
liibitcd unless required fe^ State tew «aa4 except that, in case of wines, 
statements of alcoholic content shall be required only for wines con- 
taining more than 14 per centum of alcohol by volume), the net 
contents of the package, and the manufacturer or bottler or (98) 
i mporter el the product distributor of domestically bottled products and 
the manufacturer and. importer of imported products; (3) (99) as wik 
require «i accurate statement, m 44*e ease e£ distille d: spirits (other 
■than e ordiab, liqueurs, attti specialties produced &¥ bl c mlmg e? 
rcctilifutiim tn? m ease e£ g-m whether e* tte* produced bf blending e+ 
rectification, if neutral spirits have beet* used m the produ cti on [hereof, 
informing tfee consumer el -the percentage el neutral spirits se used 
rw4 el 4w namo el the eo mmodity lw« whi+sh s«<4t neutral spirits 
ka->ee beea <li ■ tilled; {4} as will prohibit statements on the label that 
are disparaging of a competitor's products or are false, misleading, 
obscene, or indecent; and (100)t^ (4) as will prevent deception of 
the consumer by use of a trade or brand name that is the name of 
any living individual of public prominence, or existing private or 
public organization, or is a name that is in simulation or is an abbre- 
viation thereof, and as will prevent the use of a graphic, pictorial, or 
emblematic representation of any such individual or organization, if 



181 App. V 

the use of such name or representation is likely falsely to lead the 
consumer to believe that the product has been indorsed, made, or 
used by, or produced for, or under the supervision of, or in accordance 
with the specifications of, such individual or organization: Provided, 
That this clause shall not apply to the use of the name of any person 
engaged in business as a distiller, (lOl) brcwcr, rectifier, blender, or 
other producer, or as- an importer, wholesaler, retailer, bottler, or 
warehouseman, of (102) diotillcd opirito, wine, of malt bevcragco 
distilled spirits or wine, nor to the use by any person of a trade or 
brand name used by him or his predecessor in interest prior to the 
date of the enactment of this Act; including regulations reqiiiring,_ at 
time of release from customs custody, certificates issued by foreign 
governments covering origin, age, and identity of imported products 
(103): Provided further , That nothing herein nor any decision riding or 
regulation oj any Department of the Government shall deny the right of 
any person to use any trade name or brand of foreign origin not presently 
effectively registered in the United States Patent Office which has been 
used by such person or predecessors in the United States for a period 
of at least five years past. (104)£Je pcroon sha4J remov e free* 
Government eus^edy af t er pwekase a-fe afty Go-^erameft* sale aey 
diotillcd opirito, wine, of 'ma4tr bevcragco ie bottlco to be heldr 
&hp safey ttfifeii seek feezes a#e packaged, marked, branded, aadr 
labeled m conformity w*th -the r e qu i rcm e nto of this oubocction. 
(105)27ie regulations of the commission shall prohibit the designation 
of any product as neutral spirits, or as any type of whisky or gin, for 
non-industrial use, if the neutral spirits contained therein are distilled 
from materials other than gram. Such regulations shall also require 
that the labels of all distilled spirits (other than cordials, liqueurs, and 
specialties) to which neutral spirits have been added by blending or 
rectification, and that the labels of all neutral spirits and of gin, for non- 
industrial use, whether produced by blending or rectification or by a 
process of continuous distillation, shall state thereon the percentage of 
neutral spirits contained therein, the name of the commodity or commodi- 
ties from which such neutral spirits have been distilled, and the percentage 
thereof derived from each such commodity. As used herein, the term 
" neutral spirits" includes ethyl alcohol. 

It shall be unlawful for any person to alter, mutilate, destroy, 
obliterate, or remove any mark, brand, or label upon (106) diatillcd 
o pirito - wine, e* malt bevcragco distilled spirits or wine held for sale in 
interstate or foreign commerce or after shipment therein, except as 
authorized by Federal law or except pursuant to regulations of the 
(107) Adminiotrator commission authorizing relabeling for purposes 
of compliance with the requirement of this subsection or of State law. 

In order to prevent the sale or shipment or other introduction of 
Cl08) diotulod opirito, wine , er malt bevcragco distilled spirits or wine 
in interstate or foreign commerce, if bottled, packaged, or labeled in 
violation of the requirements of this subsection, no bottler, or importer 
of (109) di3till ed: opirito, wine, e* ma4* beverage s distilled spirits or 
wine, shall, after such date as the (llO) Adminiotrator commission 
fixes as the earliest practicable date for the application of the pro- 
visions of this subsection to any class of such persons (but not later 
than OH) January March 1, 1936, and only after thirty days' 
public notice), bottle or remove from customs custody for consump- 



App. V 182 

tion (112) distillcd a pirita , wine ? of »a4t> beverages .distilled spirits or 
wine, respectively, unless the bottler or importer, upon application 
to the (11 3) Administrator commission, has obtained and has in his 
possession a certificate of label approval covering the (114) di3tillcd 
sp iritay wine, of malt beverages distilled spirits or wine, issued by the 
(115) Adniiniatrator commission in such manner and form as (HG)he 
it shall be regulations prescribe: Provided, That any such bottler 
shall be exempt from the requirements of this subsection if the 
bottler, upon application to the (1 17) Admini strator commission, 
shows to the satisfaction of the (11 8) A dmin i strator commission 
that the (119) di3tillcd s pirits ? wi n e? er malt beverages distilled spirits 
or wine to be bottled by the applicant are not to be sold, or offered 
for sale, or shipped or delivered for shipment, or otherwise introduced, 
in interstate or foreign commerce. Officers of internal revenue and 
customs are authorized and directed to withhold the release of such 
products from the bottling plant or customs custody unless such certi- 
ficates have been obtained, or unless the application of the bottler for 
exemption has been granted by the (120) Administrator commission. 
The district courts of the United States, the Supreme Court of the 
District of Columbia, and the United States court for any Territory, 
shall have jurisdiction of suits to enjoin; annul, or suspend in whole 
or in (121)p ar t, part any final action by the (122)A dminiatrator 
commission upon any application under this subsection; or 

(f) Advertising: To publish or disseminate or cause to be published 
or disseminated by radio broadcast, or in any newspaper, periodical 
or other publication or by any sign or outdoor advertisement or any 
other printed or graphic matter, any advertisement of (123) diatillcd 
spirits, - wine, - e? f»a44 beverages distilled spirits or wine, if such adver- 
tisement is in, or is calculated to induce sales in, interstate or foreign 
commerce, or is disseminated by mail, unless such advertisement is 
in conformity with such regulations, to be prescribed by the (124) 
Administrator commission, (1) as will prevent deception of the con- 
sumer with respect to the products advertised and as will prohibit, 
irrespective of falsity, such statements relating to age, manufacturing 
processes, analyses, guaranties, and scientific or irrelevant matters as 
the (125)A dminiotrator * commissio n finds to be likely to mislead the 
consumer; (2) as will provide the consumer with adequate informa- 
tion as to the identity and quality of the products advertised, the 
alcoholic content thereof ((126)e*eept that statem ents efy e* atato 
menta l ikely te be co n s id e r e d a^ state ments e£? alcoholic content of 
malt bevcrage a a*e prohibited and- except that, in case of wines, 
statements of alcoholic content shall be required only for wines con- 
taining more than 14 per centum of alcohol by volume), and the 
person responsible for the advertisement; (3) (127)as win requir e 
aa a'- our ' Ho stateinent-,- in- -the ease of dis tilled apirita ( o t her -than 
oo n l! ;i - l :-7 ii ' t'ioura, - awl s pooialtion j pro duc e d fey blending ev rcctifica - 
tien ef m e**e ef gift whether tne n«t prod u c e d by blendin g e? rccti n- 
cati iMi -; if neutral a pirite ha-ve been used in -the production thereof ,- 
inform ing thr f onaumer el -the p erc entage *4 neut-pa4 aphita se used 
ftjs4 e4* i-ne na-n-n? ef the ee mmudi ty fran* whieh sueh neutral apirita 
hove been dbtiUed-j 4-4} as will prohibit statements that are disparag- 
ing >f a competitor's products or are false, misleading, obscene, or 
. in : (!?8)te-> (4) as will prevent statements inconsistent with 
un; cement on the labeling of the products advertised. (129) 



183 App. V 

Such regulations sha I require that the advertisement of any distilled 
spirits (other than cordials, liqueurs, and specialties) to which neutral 
spirits have been added by blending or rectification, and that the adver- 
■ tisement of any neutral spirits or oj gin, for non-industrial purposes, 
whether produced by blending or rectification or by a process of con- 
tinuous distillation, shall state the name of the commodity or commodities 
from which the neutral spirits contained therein have been distilled and 
the percentage thereof derived from each such commodity. This subsec- 
tion shall not apply to outdoor advertising in place on June 18, 1935, 
but shall apply upon replacement, restoration, or renovation of any 
such advertising. (130) The prohibitions of this subsection and regu- 
lations thereunder shall not apply to the publisher of any newspaper, 
periodical, or other publication, or radio broadcaster, unless such pub- 
lisher or radio broadcaster is engaged in business as a distiller, rectifier, 
or other producer, or as an importer or wholesaler, of distilled spirits 
or wine, or as a bottler, or warehouseman and bottler, of distilled spirits, 
directly or indirectly or through an affiliate. 

The provisions of subsections (a), (b), and (c) shall not apply to 
any act done by an agency of a State or political subdivision thereof, 
or by any officer or employee of such agency. 

The (131) Administrator commission shah give reasonable public 
notice, and afford to interested parties opportunity for hearing, prior 
to prescribing regulations to carry out the provisions of this section. 

* Ed. Note: This apparent error is found in the original print of the bill. 
CIZ2)BULK SALES AND BOTTLING 

Sec. 6. (a) It shall be unlawful for any person — 

(1) To sell or offer to sell, contract to sell, or otherwise dispose of 
distilled spirits in bulk except, under regulations of the commission, 
for export or to the following, or to import distilled spirits in bulk 
except, under such regulations, for sale to or for use by the following: 
A distiller, rectifier of distilled spirits, person operating a bonded 
warehouse qualified under the internal-revenue laws or a class 8 
bonded warehouse qualified under the customs laws, a wine maker 
for the fortification of wines, a proprietor of an industrial alcohol 
plant, or an agency of the United States or any State or political 
subdivision thereof. 

(2) To sell or offer to sell, contract to sell, or otherwise dispose of 
warehouse receipts for distilled spirits in bulk unless such ware- 
house receipts require that the warehouseman shall package such 
distilled spirits, before delivery, in bottles labeled and marked in 
accordance with law, or deliver such distilled spirits in bulk only to 
persons to whom it is lawful to sell or otherwise dispose of distilled 

. spirits in bulk. 

(8) To bottle distilled spirits unless the bottler is a person to 
whom it is lawful to sell or otherwise dispose of distilled spirits in. 
bulk. 

(b) Any person who violates the requirements of this section shall, upon, 
conviction thereof, be fined not more than $5,000 or imprisoned for not 
more than one year or both, and shall forfeit to the United States all dis- 
tilled spirits with respect to which the violation occurs and the containers 
thereof. 



App. V 184 

(c) The term "in bulk" means in containers having a capacity in 
excess of one wine gallon. 

PENALTIES 

Sec. (133)6 7. The District Courts of the United States, the 
Supreme Court of the District of Columbia, and the United States 
Court for any Territory, of the District where the offense is committed 
or threatened or of which the offender is an inhabitant or has his 
principal place of business, are hereby vested with jurisdiction of 
any suit brought by the Attorney General in the name of the United 
States, to prevent and restrain violations of any of the provisions of 
this Act. Any person violating any of the provisions of section 3 or 5 
shall be guilty of a misdemeanor and upon conviction thereof be fined 
not more than $1,000 for each offense. Subject to the approval of 
the Attorney General, the (1 34) Administra te* commission is author- 
ized, (135)p«ep te commencement of court proceedings with respect 
to any violation of this Act, to compromise the liability arising with 
respect to such violation (1) upon payment of a sum not in excess of 
$500 for each offense, to be collected by the O 36) Administrat e? 
commission and to be paid into the Treasury as miscellaneous receipts, 
and (2) in case of repetitious violations and in order to avoid multi- 
plicity of criminal proceedings, upon agreement to a stipulation that 
the United States may, on its own motion upon five days' notice to 
the violator, cause a consent decree to be entered by any court of 
competent jurisdiction enjoining the repetition of such violation. 

INTERLOCKING DIRECTORATES 

Sec. (137)? 8. (a) Except as provided in subsection (b), it shall 
be unlawful for any individual to take office, after the date of the 
enactment of this Act, as an officer or director of any company, if 
his doing so would make him an officer or director of more than one 
company engaged in business as a distiller, rectifier, or blender of 
distilled spirits, or of any such company and of a company which is an 
affiliate of any company engaged in business as a distiller, rectifier, 
or blender of distilled spirits, or of more than one company which is 
an affiliate of any company engaged in business as a distiller, rectifier, 
or blender of distilled spirits, unless, prior to taking such office, appli- 
cation made by such individual to the (138) Administrator commission 
has been granted and after due showing has been made to (139)feH» 
it that service by such individual as officer or director of all the fore- 
going companies of which he is an officer or director together with 
service in the company with respect to which application is made 
will not substantially restrain or prevent competition in interstate 
or foreign commerce in distilled spirits. The (140) Administrator 
commission shall, by order, grant or deny such application on the 
basis of the proof submitted to (141)hkft it and (142)feis its finding 
thereon. The District Courts of the United States, the Supreme 
Court of the District of Columbia, and the United States (143) courts 
court for any Territory shall have jurisdiction of suits to enjoin, annul, 
or suspend (144 )in whole or in part any final action by the (145) 
Administrator commission upon any application under this subsection, 
(b) An individual may, without regard to the provisions of sub- 
section (a), take office as an officer or director of a company described 



185 App. V 

in subsection (a) while holding the position of officer or director of 
any other such company if such companies are affiliates at the time 
of his taking office and. if — ■ 

(1) Such companies are affiliates on the date of the enactment 
of this Act; or 

(2) Each of such companies has been organized under the law 
of a State to comply with a requirement thereof under which, as 
a condition of doing business in such State, such company must 
be organized under the law of such State; or 

(3) One or more such companies has been organized under the 
law of a State to comply with a requirement thereof under which, 
as a condition of doing business in such State, such company 
must be organized under the laws of such State, and the other 
one or more of such companies not so organized, is in existence 
on the date of the enactment of this Act; or 

(4) One or more of such companies has been organized under 
the law of a State to comply with a requirement thereof under 
which, as a condition of doing business in such State, such com- 
pany must be organized under the law of such State, and not 
more than one of such companies is a company which has not 
been so organized and which has been organized after the date 
of the enactment of this Act. 

(c) As used in this section, the term "company" means a corpora- 
tion, joint stock company, business trust, or association, but does 
not include any agency of a State or political subdivision thereof or 
any officer or employee of any such agency. 

(d) Any individual taking office in violation of this section shall be 
punished by a fine of not exceeding $1,000. 

CU6)DISPOSAL OF FORFEITED DISTILLED SPIRITS AND WINE 

Sec. 9. Notwithstanding any provisions of existing law, distilled 
spirits and wine forfeited or condemned summarily or pursuant to court 
decree or otherwise, by or under any law of the United States, shall not 
be sold or otherwise disposed of publicly or privately but shall be destroyed 
at such time as such forfeiture or condemnation has become final; except 
that any such distilled spirits and wine certified by Government chemists 
to be of a quality equivalent to United States Pharmacopoeia quality or 
to be suitable for medicinal purposes shall be placed in the custody of 
the United States' Public Health Service and disposed of by the Surgeon 
General of such Service, in accordance with regulations to be prescribed 
by him, to hospitals operated or maintained in whole or in part by the 
United States, for use by them for medicinal purposes only. 

FEDERAL ALCOHOL CONTROL ADMINISTRATION 

Sec. C147)8 10. The Federal Alcohol Control Administration 
established by Executive order under the provisions of Title I of the 
National Industrial Recovery Act is hereby abolished. All papers, 
records, and property of such Federal Alcohol Control Administration 
are hereby transferred to the (148) Adminiotra 4ef commission. This 
section shall take effect (l49)e» -fefee darfce tka4 ihe Adminiatrator fipsfc 
appointed under %feis Aefc takco office when a majority of the commis- 
sioners first appointed under this Act have taken office. 



App. V 186 

\ : '^Sec. 11. Hint section 610 of the Revenue Act of 1918, as amended 
U. S. C. Supp. VII, title 26, sec. 1310), is amended by adding at the 
end thereof the following new paragraph: 

" The provisions of the internal-revenue laws applicable to natural 
unne shall apply in the same manner and to the same extent to citrus- 
fruit wines which are the product of normal alcoholic fermentation of the 
juice of sound ripe citrus fruit, with or without the addition of dry cane, 
h*ei, or dextrose sugar (containing, respectively, not less than 95 per 
centum of actual sugar, calculated on a dry basis) for the purpose of 
perfecting the product according to standards, but without the addition 
or ibstraction of other substances, except as may occur in the usual cellar 
Treatment of clarifying or aging." 

Sec. 12. Section 612 of the Revenue Act of 1918, as amended ( U. S. C, 
Sunp. VII, title 26, sec. 1301), is amended to read as follows: 

"Sec. 612. That under such regulations and official supervision and 
upon the giving of such notices, entries, bonds, and other security as the 
( on'itiissioner, with the approval of the Secretary, may prescribe, any 
; roducer of wines defined under the provisions of this title, may withdraw 
f>om any fruit distillery or special bonded warehouse grape brandy, or 
■cine spirits, for the fortification of such wines on the premises where 
actually made, and any producer of citrus-fruit wines may similarly 
withdraw citrus-fruit brandy for the fortification of citrus-fruit wines on 
th' premises where actually made: Provided, That there shall be levied 
and- assessed against the producer of such wines or citrus-fruit wines a 
tux {in lieu of the internal-revenue tax now imposed thereon by law) of 20 
cents per proof gallon of grape brandy, citrus-fruit brandy, or wine spirit 
>rhenever withdrawn and hereafter so used by him in the fortification of 
s'ich wines or citrus-fruit wines during the preceding month, which 
assessment shall be paid by him within ten months from the date of notice 
thereof: Provided further, That nothing contained in this section shall be 
construed as exempting any wines, citrus-fruit wines, cordials, liqueurs, 
or similar compounds from the payment of any tax provided for in this 
title. 

''Any such wines or citrus-fruit wines may, under such regulations as 
the Secretary may prescribe, be sold or removed tax free for the manufacture 
of vinegar, or for the production of dealcoholized wines containing less 
than one-half of 1 per centum of alcohol by volume. 

" The taxes imposed by this section shall not apply to dealcoholized 
wines containing less than one-half of 1 per centum of alcohol by volume.' 1 '' 

Sec. 13. Section 613 of the Revenue Act of 1918, as amended (U. S. C, 
Supp. VII, title 26, sec. 1300 (a) (2)), is amended by inserting after 
"grape brandy' 1 a comma and the following: "or containing citrus- 
fruit wine fortified with citrus-fruit brandy". 

Sec. 14- Section 42 of the Act entitled "An Act to reduce the revenue 
and equalize duties on imports, and for other purposes", approved 
October 1, 1890, as amended (U. S. C, Supp. VII, title 26, sec. 1302 
(a)), is amended by inserting at the end thereof the following new para- 
graph: 

" Tlve provisions of this section and section 4.3 shall apply to the use of 
citrus-fruit brandy in the preparation of fortified citrus-fruit wines in the 
same manner and to the same extent as such provisions apply to the use of 
wine spirits in the fortification of sweet wines, except that citrus-fruit 
wines and citrus-fruit brandy made vnth sugar as herein indicated may 
be used in fortification: Provided, That citrus-fruit brandy prepared 



187 App. V 

from one citrus fruit shall be used only for the fortification of a citi-us- 
fruit urine prepared from the same kind of citrus fruit." 

Sec. 15. Section 3255 of the Revised Statutes, as amended (U. S. C, 
Supp. VII, title 23, sec. 1176), is amended to read as follows: 

"Sec. 3255. The Commissioner of Internal Revenue, with the approval 
of the Secretary of the Treasury, may exempt distillers of brandy made 
exclusively from apples, peaches, grapes, oranges, pears, pineapples, 
apricots, berries, plums, pawpaws, persimmons, prunes, figs, cherries, 
or dates and distillers of citrus-fruit brandy made exclusively from citrus 
fruit, from any provision of this title relating to the manufacture of spirits, 
except as to the tax thereon, when in his judgment i$ may seem expedient 
to do so: Provided, That where, in the manufacture of wine or citrus-fruit 
wine, artificial sweetening has been used the wine, citrus-fruit wine, or the 
fruit pomace residuum may be used in the distillation of brandy or citrus- 
fruit brandy, as the case may be, and such use shall not prevent the Com- 
missioner of Internal Revenue, with the approval of the Secretary of the 
Treasury, from exempting such distiller from any provision of this title 
relating to the manufacture of spirits, except as to the tax thereon, when 
in his judgment it may seem expedient to do so: And provided further, 
That the distillers mentioned in this section may add to not less than five 
hundred gallons (ten barrels) of grape cheese not more than five hundred 
gallons of a sugar solution made from cane, beet, starch, or corn sugar, 
95 per centum pure, such solution to have a saccharine strength of not to 
exceed 10 per centum, and may ferment the resultant mixture on a winery 
or distillery premises, and such fermented product shall be regarded as 
distilling material." 

Sec. 16. Section 3246 of the Revised Statutes, as amended (U. S. C, 
Supp. VII, title 26, sec. 1394 (h), (J), and 0))» ^ amended to read as 
follows: 

"Sec. 3246. Nothing in this chapter shall be construed to impose a 
special tax upon winemakers who sell wines of their own production 
where the same are made, or at the general business office of such wine- 
maker: Provided, That no winemaker shall have more than one place of 
business for the sale of such wine that shall be exempt from the special tax. 
No special tax shall be imposed upon apothecaries as to wines or spirituous 
liquors which they use exclusively in the preparation or making up of 
medicines unfit for use for -beverage purposes. 

"No special tax shall be imposed upon manufacturing chemists or 
flavoring extract manufacturers for recovering tax-paid alcohol or spiritu- 
ous liquors from dregs or marc of percolation or extraction, if such re- 
covered alcohol or spirituous liquors be again used in the manufacture of 
like medicines or flavoring extracts." 

(\o\)Sec. 17. To prevent monopoly, and to facilitate financing through 
warehouse receipts issued by independently owned bonded warehouses 
qualified under the Internal Revenue Laws: 

(a) Section 1 of the Act of March 3, 1877 (19 Stat., 393; 26 U. S. C, 
382), is amended by striking out the words, "not exceeding ten in number 
in any collection district", and by adding to said section, at the end 
thereof, the words: " The Commissioner of Internal Revenue, under such 
regulations as he may promulgate from time to time with the approval of 
the Secretary of the Treasury, may, in his discretion, establish such ware- 
houses adjacent to distilleries, and may, in his discretion, permit the 
removal of brandy directly from the distillery to such warehouses, and 



App. V 188 

from such warehouses to the distillery warehouse of the producing 
distiller." 

(6) Section 51 of the Act of August 27, 1894 {28 Stat., 564; U. S. C, 
393), is amended by striking out the words: "not exceeding ten in number 
in any collection district", and by adding to said section, at the end 
thereof, the words: " The Commissioner of Internal Revenue, under such 
regulations as he may promulgate from time to time with the approval of 
the Secretary of the Treasury, may, in his discretion, establish such ware- 
houses adjacent to distilleries, and may, in his discretion, permit the 
removal of spirits directly from the distillery to such warehouses, and 
from such warehouses to the distillery warehouse of the producing 
distiller." 

(152)S , £C. 18. Title II of the Liquor Taxing Act of 1934 is amended to 
read as follows: 

"Sec. 201. (a) There shall be levied, collected, and paid upon all 
distilled spirits sold at retail a tax of $2 on each proof-gallon or wine- 
gallon when below proof and a proportionate tax at a like rate on all 
fractional parts of such proof- or wine-gallon. 

"(b) No tax shall be imposed upon any distiller or importer under 
paragraph (4) of subdivision (a) of section 600, as amended, of the 
Revenue Act of 1918, in respect to any distilled spirits taxable under this 
section. 

"Sec. 202. The internal-revenue tax imposed by the precedinq section 
upon distilled spirits shall be collected from retailers, who shall affix to 
every bottle or other container of distilled spirits at the time of its first 
retail sale or retail transfer unopened in a container for on or off -premise 
consumption, and to every bottle or other container of distilled spirits out 
of which any part of the contents is removed for the purpose of reiail sale, 
transfer, or use on or off the premises, before such container is opened, a 
stamp or stamps indelibly canceled, denoting the quantity of distilled 
spirits contained therein and evidencing payment of all internal-revenue 
taxes imposed on such spirits, and in the case of imported spirits, of all 
customs duties imposed thereon. 

"Sec. 203. Any licensed retailer possessing or coming into possession 
of distilled spirits upon which all internal-revenue taxes and customs 
duties imposed by law shall have been paid, shall be entitled to purchase 
such stamps as are necessary for stamping the containers of distilled 
spirits in the manner required by the preceding section. Stamps for this 
purpose may be purchased by such retailer only from vhe collector of 
internal revenue for the revenue district in which such retailer's place or 
places of business for retail sales shall be located. Such retailer shall 
present satisfactory proof to such collector of internal revenue thai such 
tax and customs duties on such distilled spirits have been paid. Such 
stamps shall be sold by the collector to such retailer at a price of 1 cent for 
each stamp, except that in case of stamps for containers of less than one- 
half pint, the price shall be one-fourth of 1 cent for each stamp. 

"Sec 204- No person shall manufacture, distill, rectify, import, 
transfer, or sell at wholesale or at retail any distilled spirits unless such 
person shall have furnished a surety- company bond given by a company, 
companies, or syndicate of companies approved by the Commissioner of 
Internal Revenue and guaranteeing the payment of all taxes and customs 
duties imposed by law on such distilled spirits, with such terms and 
conditions and in such penal sum as may be approved by said Commis- 
sioner. The provisions of this section shall not apply to any regularly 



189 App. V 

established common carrier receiving, transporting, delivering, or holding 
for transportation or delivery distilled spirits in the ordinary course of its 
business as a common carrier. 

"Sec. 205. The Commissioner, with the approval of the Secretary of 
the Treasury, shall prescribe (a) regulations with respect to the time and 
manner of applying for, issuing, affixing, and canceling stamps required 
by this title, the form and denominations of such stamps, proof that 
applicants are entitled to such stamps, and the method of accounting for 
receipts from the sale of such stamps; and (b) such other regulations as he 
shall deem necessary for the enforcement of this title. 

"Sec. 206. All distilled spirits found in any container required to 
bear a stamp by this title, which container is not stamped in compliance 
with this title and regulations issued thereunder, shall be forfeited to the 
United States. 

"Sec. 207. Any person who violates any provision of this title, or 
who, with intent to defraud, falsely makes, forges, alters, or counterfeits 
any stamp made or used under this title, or who uses, sells, or has in his 
possession any such forged, altered, or counterfeited stamp, or any plate 
or die used or which may be used in the manufacture thereof, or any 
stamp required to be canceled by this title, or who makes, uses, sells, or 
has in his possession any paper in imitation of the paper used in the 
manufacture of any such stamp, or who reuses any stamp required by 
this title to be canceled, or who affixes any stamp issued under this title 
to any container of distilled spirits on which any tax is unpaid, or who 
makes any false statement in any application for stamps under this 
title, or who has in his possession any such stamps obtained by him 
otherwise than as provided in this title, or who sells or transfers any such 
stamp otherwise than as provided in this title, shall on conviction be 
punished by a fine not exceeding $1 ,000 or by imprisonment at hard labor 
not exceeding five years, or by both. Any officer authorized to enforce 
any provisions of law relating to internal-revenue stamps is authorized 
to enforce the provisions of this section and the provisions of section 7 of 
the Act of March 3, 1897, relating to the bottling of distilled spirits in 
bond." 

(a) This section shall take effect sixty days after the date of enactment 
of this Act. 

MISCELLANEOUS 

Sec. (153)0 19. (a) As used in this Act — 
(154)-(4} Tfee torm "Aaminiotrator" moona *fee- hoad ef tfee- 
Federal Alcohol Administration. 

(1) The term "commission 11 means the Federal Alcohol Com- 
mission. 

(2) The term "United States" means the several States and 
Territories and the District of Columbia; the term "State"" 
includes a Territory and the District of Columbia; and the term 
"Territory" means Alaska, Hawaii, and Puerto Rico. 

(3) The term "interstate or foreign commerce" means com- 
merce between any State and any place outside thereof, or com- 
merce within any Territory or the District of Columbia, or 



App. V 190 

between points within the same State but through any place 
outside thereof. 

(4) The term "person" means individual, partnership, joint 
stock company, business trust, association, corporation, or other 
form of business 'enterprise, including a receiver, trustee, or 
liquidating agent and including an officer or employee of any 
agency of a State or political subdivision thereof; and the term 
"trade buyer" means any person who is a wholesaler or retailer. 

(5) The term "affiliate" means any one of two or more persons 
if one of such persons has actual or legal control, directly or 
indirectly, whether by stock ownership or otherwise, of the other 
or others of such persons; and any one of two or more persons 
subject to common control, actual or legal, directly or indirectly, 
whether by stock ownership or otherwise. 

(6) The term "distilled spirits" means ethyl alcohol, hydrated 
oxide of ethyl, spirits of wine, whiskey, rum, brandy, gin, and 
other distilled spirits, including ah dilutions and mixtures thereof, 
for non-industrial use. 

(7) The term "wine" means (1) wiDe as defined in section 610 
and section 617 of the Revenue Act of 1918, (U. S. C, title 26, 
sees. 441 and 444) as now in force or hereafter amended, and (2) 
other alcoholic beverages not so defined, but made in the manner 
of wine, including sparkling and carbonated wine, wine made 
from condensed grape must, wine made from other agricultural 
products than the juice of sound, ripe grapes, imitation wine, 
compounds sold as wine, vermouth, cider, perry and sake; in 
each instance only if containing not less than 7 per centum and 
not more than 24 per centum of alcohol by volume, and if for 
non-industrial use. 

(15o)-(-8} The te?» — malt beverage' - mcan3 a h overage made 
by £he alcoholic fermentation ©I a« in fusion &e decoction, e? 
combination of both, m potable brewing water, e-f malted barley 
with hops, e*» t - hc i r parts, of i - h c ir products, attd with of without 
other malted cereals, an-d with a? without -the addition ef *m- 
maltcd ef prepared cereals , other carbohydrates e? products pee- 
parcd therefrom, and with ©i : wi thout -the addition el carbon 
dioxide, and with e? without other wholesome products suitable 
£ef human f ood consumption. 

(156){9XS) The term "bottle" means any container, irrespec- 
tive of the material from which made, for use for the sale of 
(157) distillcd spirits, wine; e? mal t beverages distilled spirits or 
mine at retail. 

(b) The right to amend or repeal the provisions of this Act is 
expressly reserved. 

(c) It any provision of this Act, or the application of such provision 
to any person or circumstance, is held invalid, the remainder of the 
Act and the application of such provision to persons or circumstances 
other than those as to which it is held invalid, shall not be affected 
thereby-. 



191 App. V 

Amend the title so as to read: "An Act to further protect the 
revenue derived from distilled spirits and wine, to regulate interstate 
and foreign commerce and enforce the postal laws with respect 
thereto, to enforce the twenty-first amendment, and for other pur- 
poses." 

Passed the House of Representatives July 24, 1935. 
Attest: South Trimble, 

Clerk. 
Passed the Senate with amendments July 29 (calendar day, August 
13), 1935. 
Attest: Edwin A. Halsey, 

Secretary. 



Appendix VI.— CONFERENCE REPORT AND STATEMENT 
OF THE MANAGERS ON THE PART OF THE HOUSE ON 
H.R. 8870 

(Report No. 1898. Revenue from Distilled Spirits) 

The committee of conference on the disagreeing votes of the two 
Houses on the amendments of the Senate to the bill (H. R. 8870) to 
further protect the revenue derived from distilled spirits, wine, and 
malt beverages; to regulate interstate and foreign commerce and 
enforce the postal laws with respect thereto; to enforce the twenty- 
first amendment, and for other purposes, having met, after full and 
free conference, have agreed to recommend and do recommend to 
their respective Houses as follows: 

That the Senate recede from its amendments numbered 1, 2, 3, 5, G, 
7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 21, 23, 24, 25, 27, 29, 30, 31, 
32, 33, 34, 35, 36, 37, 39, 44, 45, 46, 47, 48, 50, 51, 52, 53, 54, 56, 58, 
59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 74, 76, 77, 78, 
80, SI, 82, 83, 84, 85, 86, 87, 87K, 88, 89, 90, 91, 92, 94, 95, 96, 97, 
98, 100, 101, 102, 105, 106, 107, 108, 109, 110, 112, 113, 114, 115, 116, 
117, 118, 119, 120, 122, 123, 124, 125, 126, 128, 129, 131, 134, 136, 
13S, 139, 140, 141, 142, 145, 148, 149, 152, 154, 155, 156, and 157. 

That the House recede from its disagreement to the amendments 
of the Senate numbered 4, 26, 38, 40, 41, 42, 43, 49, 55, 57, 73, 75, 
93, 104, 111, 121, 133, 135, 137, 143, 144, and 147; and agree to the 
same. 

Amendment numbered 14: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 14, and agree to the same with an amendment, 
as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert the following: 

(?) The Administrator shall make a report to Congress, at the beginning 
of each regular session, of the administration of the functions with which 
lt£ is charged, and sfiall include in such report the names and compensa- 
tion of all persons employed by the Administration. 

And the Senate agree to the same. 

Amendment numbered 20: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 20, and agree to the same with an amendment, 
as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert the date upon which tlce Administrator first appointed under 
this Act takes office; and the Senate agree to the same. 

(192) 



193 App. VI 

Amendment numbered 22: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 22, and agree to the same with an amendment 
as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert the date upon which the Administrator first appointed 
under this Act takes office; and the Senate agree to the same. 

Amendment numbered 28: 

That the House recede from its disagreement to the amendment 
of the Senate numbered 28, and agree to the same with an amend- 
ment as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert or has, within three years prior to date of application, been 
convicted of a misdemeanor under any Federal law relating to liquor, 
including the taxation thereof; and the Senate agree to the same. 

Amendment numbered 79: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 79, and agree to the same with an amendment 
as follows: 

Omit the matter proposed to be inserted and restore the matter 
proposed to be stricken out by said amendment; and on page 22 of 
the House bill, after line 23, insert the following: 

In the case of malt beverages, the provisions of subsections (a), (b), (c), 
and (d) shall apply to transactions between a retailer or trade buyer in any 
State and a brewer, importer, or wholesaler of malt beverages outside such 
State only to the extent that the law of such State imposes similar require- 
ments with respect to similar transactions between a retailer or trade 
buyer in such State and a brewer, importer, or wholesaler of malt bever- 
ages in such State, as the case may be. In the case of malt beverages, the 
provisions of subsections («) and (J) shall apply to the labeling o/ malt 
beverages sold or shipped or delivered for shipment or otherwise intro- 
duced into or received in any State from any place outside thereof, or the 
advertising of malt beverages intended to be soil or shipped or delivered for 
shipment or otherwise introduced into or received in any State from any 
place outside thereof, only to the extent that the law of such State imposes 
similar requirements with respect to the labeling or advertising, as the case 
may be, of malt beverages not sold or shipped or delivered for shipment or 
otherwise introduced into or received in such State from any place 
outside thereof. 

And the Senate agree to the same. 

Amendment numbered 99: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 99, and agree to the same with an amendment 
as follows: , 

In lieu of the matter proposed to be stricken out by said amendment 
insert the following: as will require an accurate statement, in the case 
of distilled spirits (other than cordials, liqueurs, and specialties) produced 
by blending or rectification, if neutral spirits have been used in the pro- 
duction thereof, infor ming the consumer of the percentage of neutral spirits 
so used and of the name of the commodity from which such neutral spirits 



App. VI 194 

have been distilled, or in case of neutral spirits or of gin produced by a 
process of continuous distillation, the name of the commodity from which 
distilled; (4); and the Senate agree to the same. 

Amendment numbered 103: 

That the House recede from its disagreement to the amendment 
of the Senate numbered 103, end agree to the same with an amend- 
ment, as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert a colon and the following: Provided further, Thai nothing 
herein nor any decision, ruling, or regulation of any Department of the 
Government shall deny the right of any person to use any trade name or 
brand of foreign origin not presently effectively registered in the United 
States Patent Office which has been used by such person or predecessors 
in the United States for a period of at least five years last past, if the use 
of such name or brand is qualified by the name of the locality in the 
United States in which the product is produced, and, in the case of the 
use of such name or brand on any label or in any advertisement, if such 
qualification is as conspicuous as such name or brand; and the Senate 
agree to the same. 

Amendment numbered 127: 

That the House recede from its disagreement to the amendment 
of the Senate numbered 127, and agree to the same with an amend- 
ment, as follows: 

In lieu of the matter proposed to be stricken out by said amendment 
insert the following: as will require an accurate statement, in the case 
of distilled spirits (other than cordials, liqueurs and specialties) produced 
by blending or rectification, if neutral spirits have been used, in the 
production thereof, informing the consumer of the percentage of neutral 
spirits so used and of the name of the commodity from which such neutral 
spirits have been distilled, or in case of neutral spirits or of gin produced 
by a process of continuous distillation, the name of the commodity from 
v)hich distilled; (4) ', and the Senate agree to the same. 

Amendment numbered 130: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 130, and agree to the same with an amendment, 
as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment, insert The prohibitions of this subsection and regulations there- 
under shall not apply to the publisher of any newspaper, periodical, 
or other publication, or radio broadcaster, unless such publisher or radio 
broadcaster is engaged in business as a distiller, brewer, rectifier, or 
other producer, or as an importer oi mhoh valer, of distilled, spirits, wim , 
or malt bereragt <. or as a bottler, or warehouseman and bottler, of dis- 
tilled spirits, directly or indirectly or through an affiliaU ; and the Senate 
agree i<> the same. 

Amendment numbered L32: 

That the House recede from its disagreement to the amendment of 
the Senate numbered L32, and agree t" the same with an amendment, 
as follows: In the fifth line of said amendment strike out "Commis- 
sion" and insert Administrator: and the Senate agree to (!"• ame 



195 App. VI 

Amendment numbered 146: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 14f>, and agree to the same with an amend men . 
as follows: In lieu of the matter proposed to he inserted hy the Sen .' e 
amendment insert the following: 

DISPOSAL OF FORFEITED ALCOHOLIC BEVERAGES 

Sf.c. 0. (a) All distilled spirits, trine, and malt bevem ■ ' ■ '■ 
summarily or by order of court, under any Ian-- of ike I itt **'<■ ■ ■. -■' 
}), delivered to :u Secretary ofti-.i Treasury to be'dispo* f .ofa*. ■ •"• ■ 

provided. 

(b) The Secretary of the Treasury shall dispose of all distilled 
wine, and malt beverages which hare been delivered to 
subsection (a)— 

(1) By delivery to such Government agencies as, in lis ■ '■ 
have- '■' need for s-uch distilled spirits, wine, or malt * jo: 
medicinal, scit ntijic, or mechanical purposes; or 

(2) By gift to such eleemosynary institutions as, in his ■ ■ 
have a need for such distilled spirits, wine, or malt beve: ojes for 
medicinal purposes; or 

(3) By destruction. 

(c) :Vo distilled spirits, wine, or malt beverages which have been <e : 
under any lav: of the United States, may be disposed of in any mm ner 
whatsoever except after forfeiture and as provided in this section. 

(d) The Secretary of the Treasury is authorized to make all rules and 
regulations necessary to carry out the provisions of this section. 

And the Senate agree to the same. 

Amendment numbered 150: 

That the Hor.se recede from its disagreement to the amendment of 
the Senate numbered 150, and agree to the same with an amendment, 
as fellows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert the following: 

Sec. II. Section ell of the Re re hup Act of 1918, as amendea : 
C.,Sup. I'll, title 20, iec. 1310), is amended by adding at the end the: ; 
the follovyi.ng new paragraph : 

•'■The provisions of the internal-revenue laws applicable to 
wine shall apply in the same mat ner and to the same eu -' 

wines which an. the? product <f normal alcoholic fer mental i ■' ' ■ 
of sound ripe citrus fruit [except lemons and limes:, with >:>r without 
addition of dry cane, beet, or dextrose sugar (containing, 
not less I \ per cent';*, of actual sugar, calculated on a a 

for the purpose of perfecting the product according to sta la -. but 
without the addition or abstraction of other substances, except as may 
occur in the usual cellar treatment of clarifying or aging:' 

Sec 12. Section 612 of the Revenue Act of 10 IS, as amended {I .S.C. 
Sap. VII, title 26, sec 1301 ;, Is anu tided to read, as follows: 

•■Sec. 013. 'That under such regulations and official supervmo 
upon the giving of such notice-*, entries, bonds, and other security as tin 
Commissioner', with the approval of the Secretary, may preset 
producer of wines defined' under the provisions of this title may with- 
draw from ant/ fruit distillery or special bonded warehouse grapi brandy, 
or wine spirits] for the fortification of such wines on the premises wher 



App. VI 196 

actually made, and any producer of citrus-fruit wines may similarly 
withdraw citrus-fruit brandy for the fortification of citrus-fruit wines on 
the premises where actually made: Provided, That there shall be levied 
and assessed against the producer of such wines or citrus-fruit wines a 
tax (in lieu of the internal-revenue tax now imposed thereon by law) of 
20 cents per proof gallon of grape brandy, citrus-fruit brandy, or wine 
spirit whenever withdrawn and hereafter so used by him in the fortification 
of such wines or citrus-fruit wines during the preceding month, which 
assessment shall be paid by him within ten months from the date of notice 
thereof: Provided further, That nothing contained in this section shall 
be construed as exempting any wines, citrus fruit wines, cordials, liqueurs, 
or similar compounds from the payment of any tax provided for in this 
title. 

"Any such wines or citrus-fruit wines may, under such regulations as 
the Secretary may prescribe, be sold or removed tax free for the manufac- 
ture of vinegar, or for the production of dealcoholized wines containing 
less than one-half of 1 per centum of alcohol by volume. 

" The taxes imposed by this section shall not apply to dealcoholized 
wines containing less than one-half of 1 per centum of alcohol by volume." 

Sec. 13. Section 613 of the Revenue Act of 1918, as amended (U. S. C, 
Sup. VII, title 26, sec. 1300 (a) (2)) , is amended by inserting after " grape 
brandy" a comma and the following: "or containing citrus-fruit wine 
ortified with citrus-fruit brandy." 

Sec. 14- Section 42 of the Act entitled "An Act to reduce the revenue 
and equalize duties on imports, and for other purposes", approved 
October 1, 1890, as amended (U. S. C, Sup. VII, title 26, sec. 1302 (a)), 
is amended by inserting at the end thereof the following new paragraph: 

" The provisions of this section and section 43 shall apply to the use of 
citrus-fruit brandy in the preparation of fortified citrus-fruit wines in the 
same manner and to the same extent as such provisions apply to the use 
of wine spirits in the fortification of sweet wines, except that no brandy 
(other than a citrus-fruit brandy) may be used in the fortification of 
citrus-fruit wine and a citrus-fruit brandy prepared from, one kind of 
citrus fruit may not be used for the fortification of a citrus-fruit wine 
prepared from another kind of citrus fruit or for the fortification of a 
wine prepared from any fruit other than citrus fruit." 

Sec. 15. Section 3255 of the Revised Statutes, as amended (U. S. C, 
Sup. VII, title 26, sec. 1176), is amended to read as follows: 

"Sec. 3255. The Commissioner of Internal Revenue, with the approval 
of the Secretary of the Treasury, may exempt distillers of brandy made 
exclusively from apples, peaches, grapes, oranges, pears, pineapples, 
apricots, berries, plums, pav)paws, persimmons, prunes, figs, cherries, 
dates, or citrus fruits (except lemons and limes) from any provision of the 
internal-revenue laws relating to the manufacture of spirits, except as to 
the tax thereon, when in his judgment -it may seem expedient to do so: 
Provided, That where, in the manufacture of wine or citrus-fruit wine, 
artificial sweetening has been used, the wine, or the fruit pomace residuum 
thereof, or the citrus-fruit wine may be used in the distillation of brandy 
or citrus-fruit brandy, as the case may be, and such use shall not prevent 
the Commissioner of Internal Revenue, with the approval of the Secretary 
of the Treasury, from exempting such distiller from any provision of the 
niternal-revenue laws relating to the manufacture of spirits, except as 
to the tax thereon, when in hi-s judgment it may seem expedient to do so: 
And provided further, That the distillers mentioned in this section may 



197 App. VI 

add to not less than Jive hundred gallons (ten barrels) of grape cheese not 
more than Jive hundred gallons of a sugar solution made from cane, beet, 
starch, or corn sugar, 95 percentum pure, such solution to have a sac- 
charine strength of not to exceed 10 per centum, and may ferment the 
resultant mixture on a winery or distillery premises, and such fermented 
product shall be regarded as distilling material." 
And the Senate agree to the same. 

Amendment numbered 151: 

That the House recede from its disagreement to the amendment of 
the Senate numbered 151, and agree to the same with an amendment, 
as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert the following: 

Sec. 16. (a) Section 1 of the Act of March 3, 1877, as amended (U. S. 
C, Supp. VII, sec. 1250), is amended by striking out "not exceeding ten 
in numbers in any one collection district," and by inserting at tlce end of 
such section the following new paragraph: 

"The Commissioner of Internal Revenue, under such regulations as 
he may promulgate from time to time with the approval of the Secretary 
of the Treasury, may, in his discretion, establish such warehouses adjacent 
to distilleries, and may, in his discretion, permit the removal of brandy 
directly from the distillery to such warehouses, and from such warehouses 
to the distillery warehouse of the producing distiller." 

(b) Section 51 of the Act of August 27, 1894, as amended (U.S. C, 
Supp. VII, sec. 1265), is amended by striking out "not exceeding ten 
in number in any one collection district," and by inserting at the end of 
such section the following new paragraph: 

"The Commissioner of Internal Revenue, under such regulations as 
he may promulgate from time to time with the approval of the Secretary 
of the Treasury, may, in his discretion, establish such warehouses ad- 
jacent to distilleries, and may, in his discretion, permit the removal of 
spirits directly from the distillery to such warehouses, and from such 
warehouses to the distillery warehouse of the producing distiller." 

And the Senate agree to the same. 

Amendment numbered 153: 

That the House recede from its disagreement to the amendment 
of the Senate numbered 153, and agree to the same with an amend- 
ment, as follows: 

In lieu of the matter proposed to be inserted by the Senate amend- 
ment insert 17; and the Senate agree to the same. 

That the Senate recede from its amendment to the title. 

R. L. Doughton, 
Samuel B. Hill, 
Thos. H. Cullen, 
Allen - T. Treadway, 
Isaac Bacharach, 

Managers on the part of the House. 

Pat Harrison, 
William H. King, 
Walter F. George, 
Robert M. La Follette, Jr., 
Jesse H. Metcalf, 

Managers on the part of the Senate. 



App. VI 198 

STATEMENT OF THE MANAGERS ON THE PART OF THE HOUSE 

The managers on the part of the House at the conference on the 
disagreeing votes of the two Houses on the amendment of the Senate 
to the bill (H. R. 8870) to further protect the revenue derived from 
distilled spirits, wine, and malt beverages; to regulate interstate and 
foreign commerce and enforce the postal laws with respect thereto; 
to enforce the twenty-first amendment, and for other purposes, sub- 
mit the following statement in explanation of the effect of the action 
agreed upon and recommended in the accompanying conference 
report: 

Amendment no. 1: This amendment changes the short title of the 
act. The Senate recedes. 

Amendment no. 2: The House bill created the Federal Alcohol 
Administration as a division in the Treasury Department. The 
Administration was to be headed by an Administrator appointed by 
the President, by and with the advice and consent of the Senate. 
Appointments of officers and employees by the Administrator were 
to be made without regard to the civil-service laws and the Classifica- 
tion Act of 1923, as amended, but their compensation was subject to 
the approval of the Secretary of the Treasury. All rules and regula- 
tions prescribed by the Administrator were subject to the approval 
of the Secretary of the Treasury. The Senate amendment establishes 
in lieu of the Federal Alcohol Administration provided in the House 
bill an independent agency to be known as the ''Federal Alcohol 
Commission", to be composed of three Commissioners appointed by 
the President, by and with the advice and consent of the Senate. 
It provides that not more than two members of the Commission shall 
be members of the same political party. The amendment further pro- 
vides that one of the Commissioners shall be chairman of the Com- 
mission and shall be its chief executive officer; another Commissioner 
shall be vice chairman of the Commission; and a third Commissioner, 
who shall be a lawyer, shall be general counsel of the Commission. 
Under the Senate amendment, appointments by the Commission are 
made without regard to the civil-service laws but subject to the Class- 
ification Act of 1923, as amended, and any officer or employee receiv- 
ing a salary at the rate of So, 000 or more per annum is required to be 
appointed by the President, by and with the advice and consent of 
the Senate. All officers and employees of the Commission receiving 
less salary are to be appointed by the Commission and the Commission 
is to prescribe the duties of all its officers and employees irrespective 
of their method of appointment. The Senate recedes. 

Amendments nos. 3, 5, 6, 7, 8, 9, 10, 11. 12, 17, 21, 23, 27, 29, 30, 
31, 32, 33, 34, 35, 30, 44, 15, 40, 47, 48, 50, 51, 52, 53; 54, 50, 5S, 59, 
60, 61, 62, 63, 64, 65, 66, 07, 68, 69, 70, 71, 72, 74, 76, .- - , 87, 95, 96, 
107. 110, 113, 115, lie. 117, IIS, 120, 122, 124, 125, 131, 134, 136, 
13S, 139, 140, Ml. 142, 145, 148, 149, and 154: These amendments 
are clerical amendments made necessary by reason of Senate amend- 
ment no. 2. The Senate recedes in conformity with the action on 
amendment no. 2. 

Amendment no. 4: This is a clerical amendment, and the House 
recedes. 

Amendment no. 13: The Senate amendment authorizes the Com- 
mission to make investigations and studies with respect to various 



199 App. VI 

phases of the alcoholic beverage industries, or with respect to matters 
necessary for the performance of its powers and duties, and to report 
thereon to the President and Congress from time to time, together 
with its recommendations. The House bill had no similar provision. 
The Senate recedes. 

Amendment no. 14: The Senate amendment provides that the 
Commission shall make an annual report to Congress and include 
therein the names and compensation of all persons employed by the 
Commission. The House bill had no similar provision. The House 
recedes with an amendment placing such duties on the administrator. 

Amendments nos. 15, 16, 18, 19, 24, 25, 37, 39, 78, 79, 80, 81, 82, 
83, 89, 90, 91, 92, 94, 97, 101, 102, 106, 108, 109, 112, 114, 119, 123, 
126, 155, and 157: The House bill covered beer and other malt bever- 
ages, and its provisions applied to brewers and importers and whole- 
sale distributors of such malt beverages, except that brewers were 
exempt from the provisions of the House bill requiring basic permits. 
The effect of these Senate amendments is to exempt brewers, import- 
ers, and wholesale distributors of malt beverages from all provision 
of the bill. 

The conference agreement retains the provision of the House bill 
under which importers and wholesalers of malt beverages are required 
to have permits. The conference agreement applies the trade prac- 
tices provisions of the bill to malt beverages with a modification 
under which such provisions are to aj>ply to transactions between a 
brewer or other distributor outside a State and a retailer or trade 
buyer in a State only to the extent that the State imposes similar 
requirements on the same classes of persons and with respect to the 
same transactions within the State, and under which the requirements 
of the bill with respect to labeling and advertising are to apply to 
persons outside the State in respect of their products shipped into or 
advertised in a State only to the extent that the State imposes similar 
requirements in similar cases within the State. The conference action 
to accomplish this result consists of the House receding with an 
amendment on amendment no. 79 and the Senate receding on all the 
other amendments. 

Amendments nos. 20 and 22: Under the House bill the requirement 
that importers, and persons engaged in the business of distilling 
spirits, producing wine, rectifying or blending distilled spirits or wine, 
or bottling or warehousing and bottling distilled spirits, must have 
a basic permit to.engage in operations, became effective 60 days after 
the enactment of the act. The Senate amendment provides that these 
requirements shall be effective 60 days after such date as the majority 
of the commission first appointed takes office. The House recedes 
on both amendments with amendments changing " Commission" 
to "Administrator". 

Amendment no. 26: The House bill provided that the requirement 
that wholesale distributors must have a basic permit to engage in 
operations should take effect January 1, 1936. The Senate amend- 
ment provides that this requirement shall take effect March 1, 1936. 

Amendment no. 28: The House bill provided that applicants for a 
basic permit (other than those entitled thereto as a matter of right) 
should not be entitled to the permit if it were found that the applicant 



App. VI 200 

had within 5 years prior to the date of application been convicted 
of a felony. The Senate amendment adds an additional requirement 
that the applicant must not have been convicted, in such period, of a 
violation of a Federal law relating to liquor, including the taxation 
thereof, irrespective of whether the violation constituted a felony. 
The House recedes with an amendment providing that the applicant 
must not have been convicted, within a period of 3 years prior to 
date of application, of a misdemeanor under any Federal law relating 
to liquor, including the taxation thereof. 

Amendments nos. 38, 40, 41, 42, and 132: The House bill provided 
that distilled spirits could be distributed without restriction in bar- 
rels, casks, or kegs made of wood, if the container had a capacity of 
1 wine gallon or "more. This authority was, however, subject to an 
exception in the case of distribution into those States in which the 
use or sale of any such barrel, cask, or keg is prohibited by the law 
of the State. The House bill further provided that a recipient of 
bulk goods should not be entitled to package or repackage the bulk 
distilled spirits for sale or resale in bottles or other containers in- 
tended to reach the consumer, unless the bottler was a distiller, 
rectifier of distilled spirits, a person operating a bonded wareh, use 
qualified under the internal-revenue laws, or a class 8 bonded ware- 
house qualified under the customs laws, holding a basic permit, or 
was a proprietor of an industrial alcohol plant, or was an agency of 
a State or any political subdivision thereof. The House bill further 
provided that a recipient of bulk distilled spirits should not dispense 
the distilled spirits for sale unless such person was a bona fide hotel 
or club. Specific provision was also made in the House bill recog- 
nizing that a wholesaler of distilled spirits could qualify as a rectifier 
but prohibiting a retailer from so qualifying. 

Senate amendments numbered 40, 41, and 42 strike out the House 
provisions. Senate amendment numbered 132 makes it unlawful for 
any person to sell or offer to sell, contract to sell, or otherwise dispose 
of distilled spirits in containers having a capacity in excess of 1 gallon, 
except under regulations of the Commission for export, or to a distiller 
or rectifier (including a wholesaler who qualifies as a rectifier) of dis- 
tilled spirits, person operating a bonded warehouse under the internal- 
revenue laws or a class 8 bonded warehouse qualified under the cus- 
toms laws, a wine maker for the fortification of wines, a proprietor of 
an industrial alcohol plant, or an agency of the United States or any 
State or political subdivision thereof. The Senate amendment also 
makes it unlawful for any person to import distilled spirits in bulk 
unless he is one of the list above specified or unless for sale to or use 
by one of such persons. The Senate amendment further makes un- 
lawful transactions in warehouse receipt.-, covering spirits in bulk unless 
the particular receipt includes among its terms a requirement that the 
warehouseman shall, before delivery of the distilled spirits, pursuant 
to the delivery of the receipt, package them in bottles, labeled and 
marked in accordance with law, or deliver them in bulk only to per- 
sons to whom it is lawful to sell or otherwise dispose of distilled spirits 
in bulk; i. e., the persons in the list above specified. The Senate 
amendment further provides that it is unlawful for any person to 
bottle distilled spirits, or package or repackage distilled spirits in 
bottles, unless the bottler is a person to whom it is lawful to sell or 



201 App.VX 

otherwise dispose of distilled spirits in bulk; i. e., a person in the list 
above specified. A criminal penalty of $5,000 or imprisonment for 
not more than 1 year, or both, is provided for the violation, and ail 
distilled spirits and the containers thereof with respect to which a 
violation occurs are forfeited to the United States. 

Senate amendment numbered 38 makes observance of the bulk 
sales requirements as set forth in Senate amendment numbered 132 
a condition of a basic permit issued under the bill. The House recedes 
on amendments numbered 38, 40, 41, and 42, and recedes with an 
amendment on 132, changing "Commission" to "Administrator" 

Amendments nos. 43, 49, 55, 57, and 75: These are clerical amend- 
ments changing paragraph letters. The House recedes. 

Amendment no. 73: This is a clarifying amendment, and the 
House recedes. 

Amendment no. 84: This amendment excepts from the tied-house 
prohibitions signs not exceeding $100 in aggregate value to any 
retailer in any calendar year. There is no corresponding exception in 
the House bill. The Senate recedes. 

Amendments nos. 85 and 86: Amendment no. 85 excepts from 
the tied-house prohibitions "ad vex rising specialties and graphic arts 
advertising items of paper or paperlike substance." Amendment 
no. 86 makes a clerical amendment in connection with amendment no. 
85. The Senate recedes. 

Amendment no. 87#: The House bill provided in the tied-house 
prohibition that credit in excess of the period usual and customary to 
the industry for the particular class of transactions could not be 
extended to the retailer. The Senate amendment strikes out "to 
the industry". The Senate recedes. 

Amendment no. 88: The House bill provided that the tied-house 
prohibition against excessive credits to retailers should be subject to 
regulations of the enforcement agency. The Senate amendment 
strikes out the requirement as to regulations. The Senate recedes. 

Amendment no. 93: This amendment provides that the restrictions 
in the "consignment sales" subsection shall not apply to transactions 
involving solely the bona fide return of merchandise for ordinary and 
usual commercial reasons arising after the merchandise has been sold. 
The House bill contained no corresponding provision. The House 
recedes. 

Amendment no. 98: The House bill provided that the regulations 
of the enforcement agency as to informative labeling should provide 
the consumer with adequate information as to the manufacturer or 
bottler or importer of the particular product. The Senate amend- 
ment provides that in case of domestically bottled goods the regulation 
shall require the label to show the name of the manufacturer or bottler 
or distributor, and, in the case of imported products, show the name 
of the foreign manufacturer and the domestic importer. The Senate 
recedes 

Amendments nos. 99, 100, 105, 127, 128, and 129: The House bill 
provided that the regulations of the enforcement agency with regard 
to the informative labeling and advertising of distilled spirits provide 
that in the cases of distilled spirits (other than cordials, liqueurs, and 
specialties) there be stated on the label or in the advertisement, as 
the case might, be, the percentage of the neutral spirits used in the 
production thereof and the name of the commodity from which the 



App. VI 202 

neutral spirits were distilled. The provision applied to distilled spirits 
produced by blending or rectification and to gin, whether produced 
by blending or rectification or by process of continuous distillation. 
The provisions did not apply to straight neutral spirits or alcohol 
produced by process of continuous distillation. The Senate amend- 
ments incorporate clarifying provisions making it certain that the 
informative requirements apply to gin produced by process of con- 
tinuous distillation, as well as by blending or rectification and also 
extend the requirements to straight neutral spirits or alcohol produced 
by process of continuous distillation. In addition, the Senate amend- 
ment makes it clear that it is mandatory upon the enforcement agency 
to issue regulations of this informative character and that in case 
neutral spirits made from two different commodities are included in 
the product then the percentage made from each such commodity 
shall be stated. 

Senate amendment no. 105 further provides that the regulations of 
the Commission with respect to labeling and standards of identity 
shall prohibit the designation of any product as neutral spirits or as 
any type of whisky or gin, *or nonindustrial use, if the neutral spirits 
used in making the product are distilled from materials other than 
grain. This requirement applies to neutral spirits, whisky and gin 
produced by a process of continuous distillation, as well as to gin or 
any type of blended or other whisky produced by blending or rec- 
tification. The Senate amendment further provides by definition 
that the term "neutral spirits", where used throughout the act, is 
synonymous with ethyl alcohol. 

The Senate recedes on amendments nos. 105 and 129 which make 
the regulations mandatory and which prohibit designation of whisky, 
neutral spirits, or gin, as such, unless produced from grain. The 
Senate recedes on amendments nos. 10.0 and 128 which make changes 
in numbers in connection with amendments nos. 105 and 129. The 
effect of the conference agreement is to insert the substance of the 
House provisions with the addition thereto of provisions similar to 
those in Senate amendments nos. 105 and 129 under which the re- 
quirement is imposed that there be a statement of the commodity from 
which neutral spirits or gin produced by continuous distillation is 
produced. 

Amendment no. 103: This amendment provides that nothing in 
the act or any decision, ruling, or regulation of any Department of 
the Government shall deny the right of any person to use any trade 
name or brand of foreign origin not presently effectively registered 
in the United States Patent Office which has been used by such person 
or predecessors in the United States for a period of at least 5 years 
last past. The House bill had no corresponding provision. The 
House recedes with an amendment inserting the substance of the 
Senate provision but adding a limitation that if such a name or brand 
is used its use must be qualified by the name of the locality in the 
United States in which the product is produced and on labels and in 
advertising this qualification must be as conspicuous as the name or 
brand itself. 

* Ed. Note: This apparent error is found in the original print of the report. 



203 A PP- TO 

Amendments nos. 104 and 146: The House bill provided that no 
person should remove from Government custody after purchase at a 
Government sale any distilled spirits, wine, or malt beverages in 
bottles to be held for sale, until such bottles are packaged, marked, 
branded, and labeled in conformity with the labeling requirements of 
the bill. Senate amendment no. 104 strikes out these provisions. 
Senate amendment no. 146 provides that distilled spirits and wine 
forfeited or condemned shall not be sold, or otherwise disposed of, 
but shall be destroyed ; except that any such distilled spirits and wine 
certified by Government chemists to be of a quality equivalent to 
United States Pharmacopoeia quality or suitable for medicinal pur- 
poses shall be disposed of by the Surgeon General of the United 
States Public Health Service to hospitals operated or maintained in 
whole or in part by the United States, for use by them for medicinal 
purposes only. 

The conference agreement on amendment no. 146 inserts a provi- 
sion under which distilled spirits, wine, and malt beverages forfeited 
summarily or by order of court are to be delivered to the Secretary 
of the Treasury. He is to dispose of them by delivering them to 
Government agencies for medicinal, scientific, or mechanical purposes, 
but if they have no need for them, by giving them to charitable insti- 
tutions for medicinal purposes. Any articles which are not so dis- 
posed of are to be destroyed by the Secretary of the Treasury. Pre- 
vious contrary authorizations are repealed and the Secretary is given 
power to prescribe rules and regulations to carry out the section. 

The House recedes on amendment no. 104 relating to labeling after 
Government sale in view of the insertion of the provision prohibiting 
Government sales. 

Amendment no. 1 1 1 : The House bill provided that the requirements 
for certificates of label approval should become effective not later than 
January 1 , 1936. The Senate amendment provides that these require- 
ments shall become effective not later than March 1, 1936. The House 
recedes. 

Amendment no. 121: This is a clerical amendment. The House 

recedes. 

Amendment no. 130: This is a clarifying amendment and makes 
certain that the prohibi tions with regard to false advertising and the 
requirements as to informative advertising shall not apply to the 
publisher of any newspaper, periodical, or other publication, or radio 
broadcaster unless such publisher or radio broadcaster is engaged m 
publishing the newspaper, periodical, or other publication, or m trans- 
mitting radio broadcasts, is engaged in the distilled spirits or wine 
industry, directly or indirectly. The House recedes with an amend- 
ment applying similar provisions in the case of malt beverages. 

Amendments nos. 133, 137, 147, and 153: These are clerical amend- 
ments changing section numbers. The House recedes on 133, 137, 
and 147, and with an amendment making a further change m the 
number on 153. . . . , , 

Amendment no. 135: The House bill provided that violations of the 
act could be compromised by the enforcement agency at any tune 
prior to the commencement of court proceedings with respect to the 
violation. The Senate amendment provides this power of compromise 
can be exercised either before, pending, or after completion of court 
proceedings. The House recedes. 



App. VI 204 

Amendments nos. 143 and 144: These are clerical amendments, 
and the House recedes. 

Amendment no. 150: The Senate amendment applies to citrus- 
fruit wines the provisions of internal-revenue laws applicable to 
"natural" grape wine. It also permits the withdrawal of citrus- 
fruit brandy and use of it for the fortification of citrus-fruit wine — 
applying in such case the same tax (20 cents a proof gallon) as in the 
case of grape brandy for fortification of grape wine. The amendment 
makes the necessary amendment to the provisions of law under which 
liqueurs, cordials, or similar compounds are taxed if grape brandy is 
used therein so that these provisions will apply with respect to citrus- 
fruit wines fortified with citrus-fruit brandy. The amendment makes 
applicable to the fortification of citrus-fruit wines with citrus-fruit 
brandy the provisions of law relating to fortification of grape wines 
with grape brandy but limits the provision so that a citrus-fruit brandy 
may be used only for the fortification of a citrus-fruit wine produced 
from the same fruit, e. g., orange brandy may be used only for fortifi- 
cation of orange wine. Citrus-fruit brandy distillers and date brandy 
distillers may be exempted by the Secretary of the Treasury from 
certain provisions of law relating to the manufacture of such brandies 
as in the case, under present law, of distillers of apple brandy and 
other fruit brandy distillers. 

The amendment also exempts citrus-fruit wine makers and other 
wine makers (in the same manner as in the case of grape wine makers) 
from the special tax upon wine makers if they sell wines of their own 
production where they are made or at the wine maker's general business 
office. 

The amendment also makes clear that where manufacturing 
chemists or flavoring extract manufacturers use recovered alcohol or 
spirits, they may be again used only in the making of medicines or 
flavoring extracts of the same kind in which they are first used. 

The House recedes with an amendment which makes clarifying 
changes and which excepts lemons and limes from the application of 
the Senate provision. The conference agreement also omits the pro- 
visions relating to business offices of a wine maker and to the use of 
recovered alcohol in flavoring extracts and medicines. 

Amendment no. 151: This amendment strikes out the limitation on 
the number of warehouses which the Commissioner of Internal Reve- 
nue may establish in any one collection district for the storage of fruit 
brandies and spirits distilled from materials other than fruit. It also 
provides that in the discretion of the Commissioner of Internal Reve- 
nue such warehouses may be established adjacent to distilleries, and 
further that he may in his discretion permit the removal of brandies 
and spirits, as the case may be, directly from the distillery to such 
warehouses, and from such warehouses to the distillery warehouse of 
the producing distiller. The House recedes with an amendment which 
omits the preamble and makes clerical changes. 

Amendment no. 152: This amendment changes the method of levy- 
ing and collecting the tax on distilled spirits. Under the present law, 
the tax is paid by the distiller or importer. The amendment imposes 
the tax on the retailer and provides that it shall be collected at the 
time of its first retail sale. The retailer is required to affix to the bottle 
or other container of distilled spirits stamps denoting the quantity 



205 App. VI 

contained therein and evidencing payment of all internal-revenue 
taxes, and of all customs duties. The amendment further provides 
that no person shall manufacture, distill, import, or sell at wholesale 
or retail any distilled spirits unless such person furnishes a bond 
guaranteeing the payment of all taxes and customs duties imposed 
thereon. The Senate recedes. 

Amendment no. 156: This is a clerical amendment changing the 
paragraph number. The Senate recedes. 

The Senate amended the title of the bill to conform to the Senate 
amendment eliminating malt beverages from the bill. The Senate 
recedes. 

R. L. Doughton, 
Samuel B. Hill, 
Thos. H. Cullen, 
Allen T. Treadway, 
Isaac Bacharach, 
Managers on the part of the House.