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

(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

(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

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)

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.)

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).

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)

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.

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

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

3 Act

(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.

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.

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).

(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).

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.

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:

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.

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

This subsection shall take effect January 1, 1936. ^

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.

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

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.

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

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

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.

(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.

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

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.

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.

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

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.

(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.

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

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

(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

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: ,

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.