Does Price Fixing Destroy Liberty?/The Constitutionality of the Act

by George Howard Earle, Jr.

CHAPTER III.

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The Constitutionality of the Act.

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Some of the difficulties, indeed most of them, under this heading, disappear, if the Lever Act be interpreted as it should be; but as there has been some contention (and even judicial opinion in our United States Courts though, contradicted by many reaching the opposite conclusion) that the Act intended all the revolutionary and unconstitutional things hereinbefore discussed, it may be proper to discuss its constitutionality, as so incorrectly interpreted; and that will be taken up shortly. But, in the first place, even if the purpose of the Act looked, on the contrary, to the high end, as it is believed it did, of further safeguarding the liberty of those engaged in trade, it contains one blemish which properly should, and must nullify it, unless the Supreme Court is to depart from essentially right decisions, so often reaffirmed by it without dissent.

The Act makes it unlawful in substance^[1] for any person wilfully to destroy any necessaries for the purpose of enhancing the price or restricting the supply thereof; knowingly to commit waste, of, or to hoard necessaries, to monopolize, or to engage in discriminatory, deceptive or wasteful practices or devices affecting necessaries, to conspire or combine in transporting, producing, harvesting, supplying or dealing in necessaries, to restrict the supply, or distribution thereof, to prevent, limit or lessen the manufacture or production in order to enhance the price, or to exact unjust, unreasonable or excessive prices for necessaries. Intentionally to do any of these acts in a period of extreme public peril, would certainly be unpatriotic and wrongful. There can be no earthly reason, no reasonable foundation, for legislating that any citizen of the United States should be permitted to wage war against the vital interests of his country. And as food entirely arises and is produced from the soil, and can never serve its purpose if there destroyed, to no class should these prohibitions more urgently apply than those engaged in such primary production; and yet the Act actually provides: "That this section shall not apply to any farmer, gardener, horticulturist, vineyardist, planter, ranchman, dairyman, stockman, or other agriculturalist, with respect to the farm products produced or raised upon land owned, leased, or cultivated by him"; and then further provides that they alone can co-operate, so far as their production is concerned, in what the drafters of the Act are pleased to call "collective bargaining," and what the law in any other case would call "criminal conspiracy."

These provisions, it is conceived, are far from complimentary to the patriotism of a very large class, of which the writer is one, who, there is no reason to believe, wish to commit crimes against the welfare of their country in a time of its greatest peril.

But the Supreme Court, having already condemned and declared unconstitutional a far less vicious exemption found in a statute of the sovereign state of Illinois in an opinion covering nearly ten pages of most effective reasoning, it would be impertinent to attempt improvement, and the Connolly case,^[2] is referred to as the most complete discussion of this question; a similar conclusion being reached in the late case of McFarland vs. American Sugar Refining Company,^[3] in the last paragraph of Mr. Justice Holmes' opinion.

If the reasoning of Mr. Justice Harlan delivering the opinion of the Court in the Connolly case is followed, the classification made between the citizens of the United States by this exemption clause of the Act most certainly infringes the constitutional rights of citizens to be protected against discriminatory and class legislation. The vigorous denunciation by Justice Harlan of such exemptions in legislation may be gathered from the following language of his opinion:^[4] "We conclude this part of the discussion by saying that to declare that some of the class engaged in domestic trade or commerce shall be deemed criminals if they violate the regulations prescribed by the State for the purpose of protecting the public against illegal combinations formed to destroy competition and to control prices, and that others of the same class shall not be bound to regard those regulations, but may combine their capital, skill or acts to destroy competition and control prices for their special benefit, is so manifestly a denial of the equal protection of the laws that further or extended argument to establish that position would seem to be unnecessary." However, it may be noted in this connection, as exemplifying the diversity of views upon these vital questions that Judge Manton, delivering the opinion of the Circuit Court of Appeals for the Second Circuit, in Weed & Co. vs. Lockwood,^[5] rules "that Congress could make this classification and it be held not in contravention of the Constitution, International Harvester Co. vs. Missouri, 234 U. S. 199," and Judge Hough, a member of the same Court, and concurring in the opinion, says: "It would also be constitutionally obnoxious, because it is a gross piece of class legislation—incapable of distinction from that condemned in Connolly vs. Union, etc., Co., 184 U. S. 540."

The objections are so many, if the assumed interpretation of the act is to stand, that the only difficulty is to know where to begin, or how many of them to discuss.

Let us start by paraphrasing the Act as thus incorrectly interpreted. Its provisions would then mean (1) that no owner of merchandise had longer any right to place his own value on his own property; (2) that in guessing at what he should charge, the century-old method of seeking an open market, controlled only by free and untrammeled competition, was denied him; (3) that the Government, substituting no standard of guidance for the one taken away, first makes him guess, and second makes him guess with a mind so trammeled by fear that the guess of a jury will not accord with his guess, and will likely subject him to years of imprisonment and enormous fines. All of such dangers and uncertainties must so paralyze his mind, if he really believed the Courts would permit such things, as to incapacitate him from any proper use of his faculties—freedom of mind being as essential a part of liberty, as that of body; (4) that it would constitute an usurpation of the judicial power of the Government by the legislative power, making it dangerous in the extreme for citizens to appeal to the Courts for protection and for interpretation of their property rights; (5) that as the Act expressly gives these constitutional rights to citizens dealing with the Government and denies them to those dealing with each other, there would be a violation of the privileges and immunities guaranteed by the fifth amendment; (6) and that as it destroyed all standard of prices, it would constitute that criminal, and reached by guesses alone, upon which an enormous preponderance of men have always and are still guessing wrong; (7) that, as a large part of business payments are really for service, it would enslave men by compelling them to work for compensation not fixed by themselves; (8) that it creates an undefined power of confiscation; (9) that it, by legislation would terminate the freedom of trade safeguarded by the Constitution; and (10) that it really will establish Communism in the United States. Many more reasons could be given, and be discussed in detail, but in a matter so plain, a general statement is deemed sufficient.

The subject is simplified, however, by understanding certain fundamental conceptions of our law. In the first place, it has been settled for centuries, and in accordance with sound reasoning, that property really consists in the free enjoyment of its fruits. Lord Chief Justice Coke gives many illustrations of this primary principle. For example, this idea is so paramount that, as he points out:^[6] "If a man seised of lands in fee by his deed granteth to another the profit of those lands, to have and to hold to him and his heires, and maketh livery secundum forman chartae, the whole land itselfe doth passe; for what is the land but the profits thereof."

This, of course, being founded upon reason, remains our law today. Mr. Justice Clarke, delivering the opinion in Branson vs. Bush,^[7] says: "But the value of property results from the use to which it is put, and varies with the profitableness of that use, present and prospective, actual and anticipated. There is no pecuniary value outside of that which results from such use. The amount and profitable character of such use determines the value."

It is, of course, therefore, just as unconstitutional to take any part of the profits as it is to take any part of the commodity without just compensation. Upon this subject the Supreme Court, in treating of legislation providing that one man's property should be vested in another private person, says:^[8] It "would, if effectual, deprive the former of his property without due process of law. * * * Such an enactment would not receive judicial sanction in any country having a written Constitution distributing the powers of Government among three co-ordinate departments, and committing to the judiciary, expressly or by implication, authority to enforce the provisions of such Constitution. It would be treated not as an act of legislative power, but as a sentence, an act of spoliation. Due protection of the rights of property has been regarded as a vital principle of Republican institutions. 'Next in degree to the right of personal liberty * * * is the right of enjoying private property without undue interference or molestation.' The requirement that the property shall not be taken for public use without just compensation is but 'an affirmance of a great doctrine established by the Common Law for the protection of private property. It is founded in natural equity, and is laid down by jurists as a principle of universal law. Indeed, in a free Government, all other rights would become worthless if the Government possessed an uncontrolled power over the private fortune of every citizen.' "

Another very valuable opinion in this connection is that of Mr. Justice Miller, in the case of Loan Assn. vs. Topeka,^[9] and, quite recently in Smith vs. Texas,^[10] it is said: "Life, liberty, property, and the equal protection of the law, grouped together in the Constitution, are so related that the deprivation of any one of these separate and independent rights may lessen or extinguish the value of the other three. In so far as a man is deprived of the right to labor, his liberty is restricted, his capacity to earn wages and acquire property is lessened, and he is denied the protection which the law affords those who are permitted to work. Liberty means more than freedom from servitude, and the Constitutional guarantee is an assurance that the citizen shall be protected in the right to use his powers of mind and body in any lawful calling."

The very late case of Adams vs. Tanner,^[11] incorporates in the law of the United States Shakespeare's statement that: "You take my house when you do take the prop that doth sustain my house; you take my life when you do take the means whereby I live."

As the Supreme Court has so often insisted that, no matter how covered, it will seek out and be guided by realities, and that it is a primary duty to safeguard our present system of Republican Government and freedom as against despotism, Communism and all other systems, it seems only necessary to refer again to the decisions already cited to show that, if the Act is to be wrongly interpreted, it must be unconstitutional as establishing the very spirit and principle of Communism in substituting Governmental price fixing for the liberty-preserving method of freedom and competition.

It has been established that those things which tend to monopoly are illegal, because an invasion of freedom; it has been established that the fruits of property are property itself, that, in taking them in whole or part, you take property; and the Fifth Amendment establishes that, even for public uses, property cannot be taken except by giving a just equivalent found by the Judicial Department of our government. All these are necessary to safeguard Liberty.

If the Act be wrongly interpreted, plainly it would violate the Constitution by taking property for private use through some governmental agency, and no standard is attempted to be given, by an ex post facto determination, put into effect after the vendor had made his guesses as best he could. Moreover, as has always been the case in such attempts against Liberty, it would terrorize those producers or sellers of necessaries (who are not exempted by the Act), by threats of punishment, cruel and despotic beyond reason. Treating of this subject, Professor Laughlin in his work on "Money and Prices" well says:^[12] "It is a means of supplementing individual incapacity and want of success by assessment upon efficient and successful members of society. This is Socialism pure and simple. It is following the tendency to look to the State for aid when individual effort begins to be distasteful; it removes the incentive to industry from those weaklings who need to know that success is not the fruit of idleness and shiftlessness. To let such as these feel that their inefficiency may be condoned by the collective efforts of society is to penalize thrift and put a premium on failure. To legislate in favor of the inefficient at the expense of the efficient is to put demagoguery on the throne and discourage the very qualities on which the stability and moral growth of society always have, and always must, depend. Think of a civil polity which in the interest of one set of persons should undertake to regulate the prices of goods in the country's markets—whenever intemperate overtrading has been followed by a commercial crisis, or an abundant crop, and a small foreign demand has lowered the price of wheat or cotton! If we are to enter upon that path, it is well to know whither it leads. One such step in Socialism leads to another, and the outcome is the subversion of existing society. * * * Shall we accept dishonor, or shall we disappear down the unknown path of Socialism? One or the other must we choose, if the public is pleased to occupy itself in the future with the price question. * * * And so soon as the forces operating on price are understood to be complex and of a nature not to be interfered with by legislation, we shall be freed from a dangerous agitation. * * * sooner or later, the United States must face the inevitable political issue between the socialistic and non-socialistic conceptions of Government. * * * It was not merely the free coinage of silver, or the attacks upon the Supreme Court, which created an epoch-making year in American politics, but it was the first open appearance of a Socialistic theory of Government, which happened to emerge in the guise of the price question. * * * Whatever the special issue, we shall have to cope with Socialistic forces in one form or another."

On the same subject, Henry George, whom no one will accuse of ultra-conservatism, says, in his "Progress and Poverty:"^[13] "These are the substitution of governmental direction for the play of individual action, and the attempt to secure by restriction what can better be secured by freedom. As to the truths that are involved in socialistic ideas, I shall have something to say hereafter; but it is evident that whatever savors of regulation and restriction is in itself bad."

It is believed that there is no difference of opinion on this subject between Adam Smith, John Stuart Mill, or any of the other great masters of political thought.

It must never be forgotten, also, that the reach of this question is universal. If the State can wrench the control of the prices of commodities from the hands of all the people exercising their inalienable right of pursuit through the means of free competition pursued at their free discretions, it is, of course, inevitably fixing the compensation for their services and labors. As Adam Smith has so clearly shown, in the case of sales of many commodities, recompense for labor is not only an important factor, but the predominating factor.

It must not be forgotten, also, that the Supreme Court of the United States has, again and again, determined that the freedom of pursuit is constitutionally protected, and is only subject to such limitation or regulation by legislation as can be shown to be warranted by public welfare; and that there is no disagreement among those really well informed that such attempts at regulation are, on the contrary, pernicious to the last degree; that this has been not the result of mere theorizing, but of the actual tests and experiences of centuries. That such attempts have resulted in unvarying failures, and have been abandoned, sometimes after the greatest suffering, and always after imperilling Liberty herself.

It is strange that, in view of these vital questions, practically all of the attention of the lower Courts, in respect to this Act, has been directed to but a single question relating to the "uncertainty" of its provisions. This probably is the reason why there has been such conflict of views between them; but, however that may be, the discussion of this phase of the Act throws so much light upon the question that it seems to merit the most careful examination.

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1. See Note 26, page 37, supra, for exact phraseology of Section 4 of the Act, as amended.
2. The facts in Connolly vs. Union Sewer Pipe Co., 184 U. S. 540, 1902, were as follows: The Union Company brought suit against Connolly upon two promissory notes given for sewer pipe sold and delivered to him. Connolly refused to pay the notes at maturity on the sole ground that the Union Company was: (1) a trust or combination contrary to the common law, (2) a combination contrary to the Sherman Anti-Trust Act, (3) and a combination contrary to the Illinois Anti-Trust Act. Under the Illinois Act it was provided that any contract made by a company violating the act was "absolutely void and not enforcible." This Act also contained the following vital section: "The provisions of this act shall not apply to agricultural products or livestock while in the hands of the producer or raiser." The Court decided as to the first two propositions that a buyer could not refuse to comply with his contract of purchase on the ground that the seller was an illegal combination; and that the combination could be illegal, and yet the sales of property owned by it be valid. The Court declared the Illinois Statute was unconstitutional as it was discriminatory and repugnant to the Fourteenth Amendment, which provides "that no State shall * * * deny to any person within its jurisdiction the equal protection of the laws." The Court pointed out that under the Statute all persons engaged in trade or commerce, except agriculturalists and raisers of livestock, who combined their capital, skill or acts might be punished as criminals, while the latter might combine to destroy competition and control prices for their own benefit without a violation of law. The exemption of the Statute was arbitrary classification. Judgment for the company upon the notes was affirmed.
3. McFarland vs. American Sugar Refining Co., 241 U. S. 79 (see page 86). 1916.
4. Connolly vs. Pipe Co., 184 U. S. 540 (see page 564). 1902.
5. Weed & Co. vs. Lockwood, Circuit Court of Appeals, Second Circuit (not yet reported). Opinion of District Court in 264 Fed. Rep. 453. 1920.
6. Littleton, 4 b.
7. Branson vs. Bush, 251 U. S. 182 (see page 187). 1919.
8. Chicago, Burlington, etc., R. R. Co. vs. Chicago, 166 U. S. 226 (see page 235). 1897.
9. Loan Assn. vs. Topeka, 20 Wall. 655 (see pages 663-665). 1875.
10. Smith vs. Texas, 233 U. S. 630 (see page 636). 1914.
11. Adams vs. Tanner, 244 U. S. 590 (see page 593). 1917.
12. Laughlin's "Money and Prices," Chap. VII (see pages 187 to 192).
13. Henry George's "Progress and Poverty" (page 317).