By the terms of the twenty-first amendment the power to prohibit the manufacture and sale of intoxicating liquors is vested in the respective States and interstate traffic in such liquors is restricted to their transportation into States which do not by law limit or prohibit their importation.

The courts in some very recent cases have had occasion to construe the twentyfirst amendment in connection with State laws restricting or prohibiting the importation of liquor, which were challenged as discriminatory or as violative of the commerce clause of the Constitution.

In Indianapolis Brewing Co., Inc. v. the Liquor Control Commission of the State of Michigan and Joseph S. Finch & Co., et al, decided January 3, 1939, the Supreme Court held that since the twenty-first amendment the right of a State to prohibit or regulate the importation of intoxicating liquors is not limited by the commerce clause of the Federal Constitution, and that discrimination between domestic, and imported intoxicating liquors or between imported intoxicating liquors is not prohibited by the equal protection clause. These cases also reaffim the well-settled doctrine that a State has substantive power to prevent the sale of intoxicating liquors within its borders.

In State Board v. Young's Market Co. (299-U. S. 59), the Court said that "the words used (in the twenty-first amendment) are apt to confer upon the State the power to forbid all importations which do not comply with the conditions it prescribes." It was said further that the twenty-first amendment permits the various States to place direct burdens on interstate commerce in intoxicating liquors.

There can be no question that the twenty-first amendment has narrowed the general power of Congress, existing before the amendment, of regulating interstate commerce in intoxicating liquors. But this limitation merely deprives Congress of the right to insist that the channels of interstate commerce in these products be kept open into all States and to require states to permit the importation of such liquors if their public policy forbids it. It is not believed this restriction of the Federal power to regulate such interstate commerce can be considered to be an extinguishment of that power.

In State Board v. Young, supra, it was urged that if the Court should sustain the validity of the state law it "would involve a declaration that the amendment has, in respect to liquor, freed the States from all restrictions upon the police power to be found in other provisions of the Constitution." The Court said, significantly, that the question for decision required no such generalization. There is nothing in the twenty-first amendment which indicates that under its terms the Federal Government was deprived of its preexisting constitutional right to regulate interstate commerce in intoxicating liquors, in spite of the evident purpose to turn over to the States the right to impose conditions upon or to prohibit the importation of such liquors into their respective jurisdictions. The question involved here is not whether Congress can prohibit the transportation of the liquor itself in interstate commerce, but whether it can prohibit the transmission of advertisements for such liquor into all States.

In United States v. Frankfort Distilleries, Inc., Supreme Court of the United States 523-530, (October term 1944) producers, wholesalers and retailers of alcoholic beverages were indicted in a Federal district court for restraining commerce in violation of the Sherman Act by combining and conspiring to raise, fix, and stabilize retail mark-ups and margins of profit. Respondents pleaded nolo contendre to one count of the indictment. On these pleas they were adjudged guilty by the district court and fined. The circuit court of appeals reversed on the ground that the indictment failed to show that the conspiracy charged was in restraint of interstate commerce. The Supreme Court reversing the judgment of the circuit court of appeals and affirming that of the district court, speaking through Mr. Justice Black, said:

"Respondents were properly convicted, unless as they argue, their conduct is not covered by the Sherman Act, either because the price fixing applied only to retail sales which were wholly intrastate, or because the State's power to control the liquor traffic within its boundaries makes the Sherman Act inapplicable. These two questions thus posed relate to the extent of the Sherman Act's application to trade restraints, resulting from actions which take place within a State. In resolving them, there is an obvious distinction to be drawn between a course of conduct wholly within a State and conduct which is an inseparable element of a larger program dependent ́for its success upon activity which affects commerec between the States. It is true that this Court has on occasion determined that local conduct could be insulated from the operation of the antitrust laws on the basis of the purely local aims of a combination, insofar as those aims were not

motivated by the purpose of restraining commerce, and where the means used to achieve the purpose did not directly touch upon interstate commerce. The cases relied upon by respondents fall witin this category. All of them involved the application of the antitrust laws to combinations of businessmen or workers in labor disputes, and not to interstate commercial transactions. On the other hand, the sole ultimate object of respondents' combination in the instant case was price fixing or price maintenance. And with reference to commercial trade restraints such as these, Congress, in passing the Sherman Act, left no area of its constitutional power unoccupied; it "exercised all the power it possessed." Apex Hosiery Co. v. Leader (310 U. S. 465, 495).

The fact that the ultimate object of the conspiracy charged was the fixing or maintenance of local retail prices, does not of itself remove it from the scope of the Sherman Act; retail outlets have ordinarily been the object of illegal price maintenance. Whatever was the ultimate object of this conspiracy, the means adopted for its accomplishment reached beyond the boundaries of Colorado. The combination concerned itself with the type of contract used in making interstate sales; its coercive power was used to compel the producers of alcoholic beverages outside of Colorado to enter into price maintenance contracts. Nor did the boycott used merely affect local retail business. Local purchasing power was the weapon used to force producers making interstate sales to fix prices against their will. It may be true, as has been argued, that under Colorado law, retailers are prohibited from buying from out-of-State producers, but this fact has no relevancy. The power of retailers to coerce out-of-State producers can be just as effectively exercised through pressure brought to bear upon wholesalers as though retailers brought such pressure to bear directly upon the producers. And combinations to restrain, by a boycott of those engaged in interstate commerce, through such indirect coercion is prohibited by the Sherman Act.

It is argued that the twenty-first amendment to the Constitution bars this prosecution. That amendment bestowed upon the States broad regulatory power over the liquor traffic within their territories. It has not given the States plenary and exclusive power to regulate the conduct of persons doing an interstate liquor business outside their boundaries. Granting the State's full authority to determine the conditions upon which liquor can come into its territory and what will be done with it after it gets there, it does not follow from that fact that the United States is wholly without power to regulate the conduct of those who engage in interstate trade outside the jurisdiction of the State of Colorado."

A law prohibiting the transmission of advertisements for liquor in interstate commerce or through the mails does not prohibit the transportation of the liquor itself, and only indirectly does it affect the transportation of such liquor. It is believed that Congress may constitutionally prohibit the transmission of false and misleading advertisements in the channels of interstate commerce, as it has done under the Wheeler-Lea Act, as a measure reasonably protecting the health, morals, and social welfare of the public. Since Federal regulations of interstate commerce may have the quality of a police regulation, it is my opinion that, if Congress is of the opinion that the transmission of advertisements for intoxicating liquors in the channels of interstate commerce is injurious to the health, safety, or morals of the public or detrimental to the general welfare, it can prohibit the transmission of such advertisements across state lines.

An article of commerce may be legitimate and still be subject to regulation in the public interest under the commerce clause. Laws prohibiting the transmission of advertisements for intoxicating liquors are regulatory, not prohibitive, if it be kept in mind that the article of commerce is the intoxicating liquor and not the advertisements themselves.

It may be doubted whether the question of an abridgement of the freedom of the press is involved in the question here considered. Article I of the Bill of Rights says that Congress shall make no law abridging the freedom of speech, or of the press. This article safeguards the right of the individual to voice his opinions by oral or written word without hindrance. It does not go to the extent of affording immunity to newspaper or magazine publishers from public regulatory measures otherwise valid. Due process does not guarantee to such publishers the right to sell advertising space for advertisements inimical to the public interest. If it did, the Wheeler-Lea Act, insofar as it deals with advertisements. abridges the freedom the press. I have seen no case so holding.

In my opinion, it is within the province of Congress to declare it to be against public policy to transmit advertisements for intoxicating liquors through the channels of interstate commerce, as a valid and reasonable measure for the protection of the health, morals and social welfare of the public. I believe that an

act designed to accomplish this purpose might well contain a preamble in something like the following form:

"Congress hereby declares that the advertisement of intoxicating liquors in the channels of interstate commerce for the purpose of promoting and increasing the sale thereof is contrary to the public policy which it desires to promulgate, for the reason that it finds from the evidence before it that such advertisement has the tendency and effect of encouraging the vice of intemperance among users of such liquors, of instilling in the minds of minors and other persons the erroneous belief that the use of such liquors, regardless of quantity consumed, is conducive to health and well being, and of inducing and bringing about the consumption of such liquors to an extent and degree inconsistent with the social welfare of the people of the United States."

Respectfully submitted.

MARCH 2, 1945.

W. T. KELLEY, Chief Counsel.

Mr. JOHNSON. Then I will file a statement of Rev. Albert D. Betts, together with this sheaf of papers. I would also like to file a brown book from the National Association of Broadcasters, on the subject of Here's How to sell beer.

There is a picture here of a mother sitting by a table with a beer bottle on the table, Whistler's Mother, I think it is.

Senator REED. We do not want to encumber the record too much, of course.

Mr. JOHNSON. I appreciate that, but I would like to show how the beer industry of this country has attempted to throw their weight on the side of beer drinking.

I would also like to call attention to the record filed in the Congress of the United States at the hearing recently, concerning an annual postal deficit of the United States from the carrying of second class mail matter, reported to be $1,450,000,000 covering 16 years from 1930 through 1945, or nearly $800,000,000 a year.

Senator REED. You did not mean that the average deficit was $800,000,000 a year, did you?

Mr. JOHNSON. I beg pardon?

Senator REED. You did not mean to say that the average deficit of the Post Office Department was $800,000,000 a year?

Mr. JOHNSON. No; $85,000,000. Divided by 16, it would be about $85,000,000.

The Chicago Tribune, in one of its recent articles, Senator, made the statement that some of the publications in the United States using second class mail matter, were being subsidized to the extent of $12,000,000 a year. These particular publications that were pointed out in that article are the ones that last year received about $8,000,000 for advertising beer and liquor.

Now, gentlemen of the committee, we very much appreciate the privilege which has been accorded this great group of Christian and welfare people of this country to appear before you. You have been very patient. You have not put any restrictions upon us. We appreciate that.

If we have erred in any way, we have probably erred in bringing too many witnesses. And yet, if it were necessary, we could have brought thousands of witnesses here representing large groups, altruis tic people, who are trying to work for the benefit of the boys and girls of this Nation.

We are motivated by the idea of one-third of the population of the United States being boys and girls between 5 and 21 years of age.

These boys and girls in the next generation are to be the fathers and the mothers, the heads of the families of this land. And it is important that these boys and these girls should be properly trained and properly educated and properly environed, and in no way be lured into habits that will reflect upon them in any way, or which might result in harm, injury, or damage to them.

We expect to present in the brief a discussion of the legal and constitutional questions. We think that this correspondence you have received from these department heads clearly shows that this bill is clear of any reasonable question regarding its constitutionality.

Of course, we never know what the Supreme Court of the United States may do upon a particular matter, when it is raised by distinguished and skilled lawyers. But with it all, we say that these boys and these girls have a right to have this Congress protect them.

Some statement has been made that there is no analogy regarding putting restrictions on interstate commerce in the protection of anything else. Well, that is a mistake. We protect our animal life, our husbandry, our horticulture. We protect our securities. We will not let the United States mails in interstate commerce be used for the purpose of selling bogus securities, securities that are not sound, to our investors. We protect the President of the United States, and anybody that puts in an advertisement that has any statement regarding the President of the United States must indicate the source of it, and his name must be published along with it.

We prevent lotteries. We prevent obscene matter. We prevent even premium coupons from being used in connection with packages that are sent or transported through the mails.

Now, we think we have made a case here for the boys and girls of this land. We do not have any ax to grind. We are not here for the purpose of making money.

Most of the people who have appeared here have appeared at their own expense and at their own sacrifice of time and with consequent inconvenience.

We are here believing that, after all, and finally, this body of men who are said to be a very deliberative body, who consider matters upon their merits, will report this bill.

We are here to ask you gentlemen to report this bill.

In conclusion, I want to call your attention to one thing:

As to one group of witnesses who testified here, as you probably must have observed, the burden of their song and their plea was, as most of them finished; that this committee should not report this bill out of committee.

I wonder what sort of an idea anyone might have that this committee, that has organized itself for the purpose of considering and hearing both sides in a democratic way, should in any way be motivated by a desire of smothering this bill and not reporting it out of committee.

All we want is that there shall be a report. Of course, we want the report our way, and we do not blame them in any way for wanting the report their way. But where we do complain is that they should come here and make a plea—and that was the burden of their song— that this committee should not report it out of committee.

Now, I think enough has been said. We have done our very best here. You have given us your best attention. We are sorry that more

members of the committee were not here, but we know that when the matter is submitted this record will be read, and our summary of it, which will be printed and handed to you, will be read.

We therefore submit our case, in the absolute faith and confidence that in the end there will not be any decision in favor of smothering this bill, and on the contrary there will be a decision in favor of the boys and girls of America having a chance against all the lures and enticements that are put over the radio and in the press toward the end that they may become drinkers of alcoholic beverages.

Senator HAWKES. Mr. Johnson, may I just say this, because you have touched upon the question that you are sorry more members of the committee were not present: I know I can speak for myself, and I think I can speak for other members of the committee, when I say that this subject is interesting enough to have each and every one of us here to hear all that was said by both sides.

But you, I think, probably understand that the way things are going here in the Senate and in the Congress today, we cannot find a way to divide ourselves into two parts.

If somebody would invent a system so that a Senator could be in two places at one time, I think you would find more Senators present.

Mr. JOHNSON. We appreciate that, and we know that those of you who could not be here will certainly read the record and familiarize yourself with what has been said.

Senator HAWKES. I regret that I could not have been here to hear all that was said, but I would like very much to hear both sides of the subject.

Mr. JOHNSON. Thank you.
Senator REED. Mr. Brady?

FURTHER STATEMENT OF JOSEPH E. BRADY, COORDINATOR, STATE COUNCILS, INTERNATIONAL UNION OF BREWERY WORKERS, CINCINNATI, OHIO

Mr. BRADY. Mr. Chairman and gentlemen of the committee; I am speaking in behalf of our organization, the brewery workers, and the majority of the people of these United States that voted out prohibition, that don't want prohibition to come back to this country.

The workers who would be involved if prohibition were to return. to this country would be in the thousands. The economic structure of our country would be changed to one of poverty, as in the black days that we had upon us some time ago.

Now, I am no attorney. I came up the hard way. And I was a citizen, a resident, of the city of Detroit during prohibition. And I believe there was as much smuggling and "blind pig" operation in the city of Detroit as any place in the United States.

I have been through that era and I, for one, with the two boys that I am raising, don't want that to happen to the children of America, not only my two boys, but all of the children of America.

The brewery workers' councils throughout the United States have a policy of education through the use and not abuse of alcoholic beverages.