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23 F.(2d) 41

vent. Federal Trade Comm. v. Gratz, 253 U. S. 421, 40 S. Ct. 572, 64 L. Ed. 993. It comes well within the prohibition of an unfair method of competition in commerce which is declared unlawful. 38 Stat. 717 (15 USCA §§ 41-51). The basis of the condemnation of resale price fixing is the elimination of competition as represented by the prices among distributors of a product on which the resale prices were so fixed, and it has the danger of a distinct monopolistic effect. Toledo Pipe Threading Machine Co. v. Fed. Trade Comm. (C. C. A.) 11 F. (2d) 337; Fox Film Corp. v. Fed. Trade Comm. (C. C. A.) 296 F. 353.

But it is argued that the decision in Harriet Hubbard Ayer, Inc., v. Fed. Trade Comm. (C. C. A.) 15 F. (2d) 274, justifies the petitioner in its business conduct. There we pointed out that there was no evidence to show that there was anything by way of direction in their merchandising system to compel or even request retail dealers to adhere to their prices in resale. A price list was sent out in the packages, and to serve no purposes other than to apprise the ultimate consumer of the ordinary retail prices at which he could purchase petitioner's products, and also to name the price at which the retailer or jobber could purchase its product. We pointed out that there were but a few iso

lated instances of an effort to eliminate a price cutter, and said:

"We think the petitioner did no more than it might lawfully do in selecting its customer whom it considered desirable."

And further we said:

"There is nothing disclosed in this record to base a finding of fact that there was an effort of discrimination resulting in substantially lessening competition or tending to create a monopoly in this line of commerce. Price maintenance is unlawful when it tends to create a monopoly. But there was no cooperation with its jobbers and retailers, or other distributors, which was effectual either as an agreement, expressed or implied, intended to accomplish purposes of price fixing. Until such is established, an order to cease and desist is unwarranted."

[3] For the reasons there stated, we think the cases are distinguishable. What was proven here established offenses of agreements or understanding either in obtaining, directly or indirectly from its customers, promises or assurances that the prices fixed by the petitioner would be observed by such dealers and entering into contracts with the understanding that the petitioner's products would be

resold by the dealers at prices specified or
fixed by the petitioner. There was also a
method employed in reporting on price cut-
ters and a continuous request of dealers and
jobbers to report the competitors who did
not observe the resale prices suggested by the
petitioner and a threat to refuse sales to
dealers so reported on. These practices were
offensive to the act and warrant the order en-
tered below. Cream of Wheat Co. v. Fed.
Trade Comm. (C. C. A.) 14 F. (2d) 40; Q.
R. S. Music Co. v. Fed. Trade Comm. (C.
C. A.) 12 F. (2d) 730; Moir et al. v. Fed.
Trade Comm. (C. C. A.) 12 F. (2d) 22;
Hills Bros. v. Fed. Trade Comm. (C. C. A.)
9 F. (2d) 481.

[4] It is argued that the order cannot stand
because one commissioner took the testimony
in the case to support the complaint and aft-
erwards passed on the effect of it as a mem-
ber of the commission; that he was not pres-
ent at the oral argument when the case was
submitted. It is conceded that briefs were
filed. The claim that the statute makes the
commissioner both the judge and prosecutor
Sears,
has been held to be unsubstantial.
Roebuck & Co. v. Fed. Trade Comm. (C. C.
provides (section 3, Fed. Trade Commission
A.) 258 F. 307, 6 A. L. R. 358. The statute
Act [15 USCA § 43]) that the commission
may, by one or more of its members or by
such examiners as it may designate, prose-
cute any inquiry necessary to its duties in
any part of the United States. Section 9 of
the Federal Trade Commission Act (15
USCA § 49) authorizes a member of the
commission to sign subpoenas, administer
oaths, affirmations, summon witnesses and
receive evidence. The fact that the com-
missioner took the evidence and made a re-
port without recommendation does not, un-
der the terms of the act, disqualify him from
participating in the decision rendered by the
commission.

[5, 6] It is argued that the order of the com-
mission should be supplemented by directing
affirmatively what the petitioner may do. But
the commission exercises only the administra-
tive function delegated by the act. It has no
judicial powers. Nat. Harness Mfrs.' Ass'n
v. Fed. Trade Comm. (C. C. A.) 268 F. 705.
It has not had delegated to it the power of
review. The order of the commission is not
too indefinite for purposes of obedience to
its command. Oppenheim, Oberndorf & Co.
v. Fed. Trade Comm. (C. C. A.) 5 F.(2d)
574; Fed. Trade Comm. v. Beech-Nut Pack-
ing Co., 257 U. S. 441, 42 S. Ct. 150, 66 L.
Ed. 307, 19 A. L. R. 882.

The petition is denied.

ALEXANDER THEATRE TICKET OFFICE, Inc., et al. v. UNITED STATES.

Circuit Court of Appeals, Second Circuit. December 12, 1927.

No. 163.

1. Internal revenue "Excises" are taxes on manufacture, sale, or consumption of commodities within country, or on licenses to pursue certain occupations and corporate privileges.

"Excises" are defined as taxes laid .on manufacture, sale, or consumption of commodities within the country, or upon licenses to pursue certain occupations and corporate privileges.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Excise.] 2. Internal revenue-Power conferred on Congress to lay excise taxes is exhaustive, and embraces all attributes appertaining to sovereignty in fullest sense (Const. art. 1, § 8, cl. 1).

Powers to lay excise taxes conferred on Congress by Const. art. 1, § 8, cl. 1, is exhaustive, and embraces all attributes which appertain to sovereignty in fullest sense.

3. Internal revenue I-In laying excise taxes, some property may be taxed and other property omitted (Const. art. 1, § 8, cl. 1).

In laying excise taxes, under Const. art. 1, § 8, cl. 1, Congress may tax one class of property and forbear to tax another.

4. Internal revenue 2 (3)-Act of selling amusement ticket away from box office is transaction distinct enough on which to levy excise tax, as was done by law (Const. art. 1, § 8, cl. 1; Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Act of selling ticket to place of amusement at place other than the box office is transaction distinct enough on which Congress, under Const. art. 1, § 8, cl. 1, may levy an excise tax, as was done under Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871).

5. Internal revenue 6-Tax on act of selling tickets to amusement places away from box office is "excise tax," not "direct tax" (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Tax imposed on act of selling tickets to places of amusement at places other than the box office by Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), which provides for monthly return under section 602 (26 USCA § 885), is an "excise tax," and may not be classed as direct tax.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Direct Tax.]

6. Constitutional law 68 (4)-Act of Congress, in regulating amount of tax on act of selling tickets away from box office, and its graduation, is not subject to judicial review (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Act of Congress in regulating amount of tax under Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), on act of selling tickets to

places of amusement away from box office, and its graduation on considerations of public policy, was not subject to judicial review or inquiry, since these are matters in respect to which legislative determination is final.

7. Constitutional law

68 (4)-Economic consequences and public policy involved in tax on selling tickets away from box office were within political domain of Congress (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Economic consequences and matters of public policy involved in tax on act of selling tickets to places of amusement away from box office, under Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), were within political domain of legislative branch.

8. Internal revenue 2(3)-That tax on act of selling tickets away from box office may reduce profits in some instances is not fatal to tax (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

That Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), imposing tax on act of selling tickets to amusement places at places other than the box office, may reduce or control profits in some instances, is not fatal to tax.

9. Constitutional law 70(1), 253—Mere errors of government in statute are not subject to judicial review, but only its palpably arbltrary exercise, which can be declared void (Const. Amends. 5, 14).

A statute may be unjust and oppressive, and yet be free from judicial interference, since mere errors of government are not subject to judicial review; it being only its palpable arbitrary exercise which can be declared void, under Const. Amends. 5, 14.

10. Internal revenue 2(3)—Act taxing act of selling tickets away from box office held not confiscatory, since it does not affect ticket brokerage business as whole (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), imposing tax on act of selling tickets to amusement places away from box office, is not confiscatory, for it does not affect ticket brokerage business as a whole.

II. Internal revenue 2(3)-Act taxing act of selling tickets away from box office is not unauthorized exercise of police power (Const. Amend. 10; Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), imposing tax on act of selling tickets to amusement places away from box office, held not an unauthorized exercise by Congress of police power, in violation of Const. Amend. 10, providing that powers not delegated to United States are reserved to states or to people.

12. Internal revenue 2(3)—Provision of act imposing graduated tax on act of selling tickets away from box office does not invalidate it (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

Provision of Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), imposing graduated or progressive tax on act of selling tickets to amusement places away from box office, does not invalidate the statute.

23 F.(2d) 44

13. Internal revenue 2 (3)-That tax on act of selling tickets away from box offices may prevent excessive prices for tickets does not invalidate statute (Revenue Act 1926, § 500 [a], subd. 2 [26 USCA § 871]).

That tax imposed under Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), on act of selling tickets to amusement places away from box office, may operate in preventing excessive prices for tickets, does not of itself invalidate statute.

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A graduated excise tax is permissible, if it

affects profiteering methods.

15. Internal revenue 2(3)-Statute imposing tax on act of selling tickets away from box office provides sufficient standards for determining whether there has been violation of law; "established price" (Revenue Act 1926, § 500 [a], subd. 2, § 500 [d], and § 1114 [26 USCA §§ 871, 1265-1268, 1268a, 1269]).

Revenue Act 1926, § 500 (a), subd. 2 (26 USCA § 871), imposing excise tax on act of selling tickets to amusement places away from box office, held not unconstitutional because of basis for criminal prosecution contained in sec

tion 1114 (26 USCA §§ 1265-1268, 1268a, 1269), in failing to provide sufficient standards for determining whether or not there has been violation of law, since subdivision 2 refers to "established price" of tickets, which is box office price, and section 500 (d) requires price to be

printed on tickets, and statute was neither in

definite nor vague.

16. Internal revenue 47(6)-In prosecution for failing to pay tax on act of selling tickets away from box office, question of established price of tickets is question of law for court (Revenue Act 1926, § 500 [a], subd. 2, and § 1114 [26 USCA §§ 871, 1265-1268, 1268a, 1269]).

In prosecution under Revenue Act 1926, § 1114 (26 USCA §§ 1265-1268, 1268a, 1269), for failing to pay tax imposed on act of selling tickets to places of amusements away from box office, under section 500 (a), subd. 2 (26 USCA § 871), question of established price of tickets sold is question of law for court.

In Error to the District Court of the United States for the Southern District of New York.

The Alexander Theatre Ticket Office, Inc., and others, were convicted under Revenue Act 1926, § 1114, for failing to pay tax under section 500(a), subd. 2, and for willfully attempting to evade and defeat such tax, and they bring error. Affirmed.

Louis Marshall, Charles H. Griffiths, Nathan D. Perlman and Francis L. Kohlman, all of New York City, for plaintiffs in error.

Charles H. Tuttle, U. S. Atty., of New York City (Samuel C. Coleman, Asst. U. S. Atty., of New York City, of counsel), for the United States.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

MANTON, Circuit Judge. The defendants below were indicted in 14 counts for making a false and incorrect tax return for 14 consecutive months, commencing March, 1926, in violation of section 500 of the Revenue Act (26 USCA § 871). In each return it is charged that they willfully and untruthfully reported that for the specific month they had not made sales at a price exceeding 50 per cent. in excess of the sum of the established price at such ticket offices, plus the amount of any tax imposed under paragraph 1, subd. (a), of section 500 of the Revenue Act, and it is charged that they in fact sold tickets at a much greater advance and that they willfully failed to pay and attempted to evade and defeat the tax under paragraph 2, subd. (a), of section 500. Section 500 (a), subd. (2) provides:

"(2) Upon tickets or cards of admission to theatres, operas, and other places of amusement, sold at news stands, hotels, and places other than the ticket offices of such theatres, operas, or other places of amusement, at not to exceed 50 cents in excess of the sum of the established price therefor at such ticket offices plus the amount of any tax imposed under paragraph (1), a tax equivalent to 5 per centum of the amount of such excess; and if sold for more than 50 cents in excess of the sum of such established price plus the amount of any tax imposed under paragraph (1), a tax equivalent to 50 per centum of the whole amount of such excess, such taxes to be returned and paid, in the manner and subject to the interest provided in section 602, by the person selling such tickets."

And paragraph (d) of the same section provides:

"(d) The price (exclusive of the tax to be paid by the person paying for admission) at which every admission ticket or card is sold shall be conspicuously and indelibly printed, stamped, or written on the face or back of that part of the ticket which is to be taken up by the management of the theatre, opera, or other place of amusement, together with the

name of the vendor if sold other than at the

ticket office of the theatre, opera, or other place of amusement. Whoever sells an admission ticket or card on which the name of the vendor and price is not so printed, stamped, or written, or at a price in excess of the price so printed, stamped, or written thereon, is guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100."

Section 602 of title 6 of the Revenue Act (26 USCA § 885) required the defendants below to make a monthly return under oath in duplicate and pay the taxes imposed by this section to the collector of the district in which their principal place of business was located. They were obliged to pay the tax without assessment by the Commissioner or notice from the collector that it was due and payable and if the tax was not paid when due, a penalty of tax interest at the rate of 1 per centum a month from the time when the tax became due, was imposed. There was sufficient in the proof to require submission to the jury of the question of whether or not the defendants below had, by fraudulent means and subterfuge, evaded and defeated the tax and prevented the government from ascertaining the truth as to this obligation.

On this review, the principal question presented is whether or not the statute is unconstitutional in imposing this tax. The argument is (a) that it is a direct tax, which has not been apportioned between the states in the manner provided by article 1, § 8, cl. 1, article 1, § 2, cl. 3, and article 1, § 9, cl. 4 of the Constitution of the United States; (b) because by its enactment Congress has exercised a police power which has not been conferred upon it in violation of article 10 of the Amendments of the Constitution of the United States; (c) it was a violation of the Fifth Amendment of the Constitution, in depriving the defendants below of their property without due process of law; and (d) that section 500 violated the Fifth and Sixth Amendments of the Constitution, because it proceeds on the theory of making noncompliance therewith a basis of criminal prosecution under section 1114 of the act, (26 USCA §§ 1265-1268, 1268a, 1269), and fails to provide sufficient standards of determining whether or not there has been a violation of the law.

the manufacture, sale, or consumption of commodities within the country, or upon licenses to pursue certain occupations and corporate privileges. Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The power to lay excise taxes conferred upon Congress by the Constitution (article 1, § 8, cl. 1) is exhaustive, and embraces all the attributes which appertain to sovereignty in the fullest sense. Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 36 S. Ct. 236, 60 L. Ed. 493; United States v. Bennett, 232 U. S. 299, 34 S. Ct. 433, 58 L. Ed. 612. The nature of the tax is to be determined from the standpoint of the Constitution. It is an inland imposition, sometimes upon the consumption of the commodity, and sometimes upon the retail sale; sometimes upon the manufacturer and sometimes upon the vendor. Pacific Ins. Co. v. Soule, 7 Wall. 433, 19 L. Ed. 95. And all excises upon any use of property affect some inherent incidents of the right of property. Excise taxes are levied upon the owner in the exercise of some interest had in property, which might well be termed a right of property. Anderson v. McNeir (C. C. A.) 16

F.(2d) 970.

[3, 4] The most ample authority (recognized in levying excise taxes) has been recognized from the beginning to select some and omit another; to tax one class of property and forbear to tax another. Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. The right to sell a ticket of admission at places other than the ticket office of the theater does not exhaust the entire right of property, either in the ticket or in the privilege which the ticket represents. The tax seems to be upon the act of selling the ticket away from the box office, which is a transaction distinct enough upon which to levy an excise tax. Nicol v. Ames, 173 U. S. 509, 19 S. Ct. 522, 43 L. Ed. 786. The Nicol Case limited the tax to sales had in an Exchange or Board of Trade, or any other similar place, and its fair meaning was said to impose a duty upon those privileges or facilities which are there found and made use of in the sale at such place of any product of merchandise. There the court said:

Subdivision 2, § 500, imposes an excise tax, and not a direct tax. The tax is not upon the ticket, which is evidence of the right of admission to the theater. The privilege and selling at places other than the ticket office of the theater, the evidence which gives the privilege of admission or accommodation at the theater, is what is taxed. It is not a direct tax against persons or objects of intrinsic value, but upon the business of dealing in these tickets, which grant admission to places of amusement, when sold at places other than the place where they are originally issued. It does not cover the incident of ownership of the ticket as such. [1,2] Excises are defined as taxes laid upon facility, and the fact of a sale is alone re

"A tax upon the privilege of selling property at the exchange and of thus using the facilities there offered in accomplishing the sale differs radically from a tax upon every sale made in any place. The latter tax is really and practically upon property. takes no notice of any kind of privilege or

23 F.(2d) 44

garded. Although not created by govern-
ment, this privilege or facility in effecting a
sale at an exchange is so distinct and definite
in its character, and constitutes so clear and
plain a difference from a sale elsewhere, as to
create a reasonable and substantial ground
for classification and for taxation when simi-
lar sales at other places are untaxed."
[5] The courts have upheld excise taxes im-
posed on carriages for conveyance of per-
sons who are keeping them for their own use
or to be let out for hire or conveying pas-
sengers. Hylton v. United States, 3 Dall.
171, 1 L. Ed. 556. A tax upon manufac-
tured tobacco intended for sale was held to be
an excise tax in Patton v. Brady, 184 U. S.
608, 22 S. Ct. 493, 46 L. Ed. 713; a stamp
tax on memorandum or contract of sale, in
Thomas v. United States, 192 U. S. 363, 24
S. Ct. 305, 48 L. Ed. 481; a tax on oleomar-
garine, not artificially colored, and a higher
tax on artificially colored oleomargarine, in
McCray v. United States, 195 U. S. 27, 24
S. Ct. 769, 49 L. Ed. 78, 1 Ann. Cas. 561; a
tax upon the use of foreign built yachts not
used or intended for use for trade in Billings
v. United States, 232 U. S. 261, 34 S. Ct.
421, 58 L. Ed. 596. Because Congress had
no power to tax exports, but had the express
power to impose excise taxes, in Fairbank
v. United States, 181 U. S. 283, 21 S. Ct. 648,
45 L. Ed. 862, it was held that Congress
could not impose a tax upon exports; that
is, a stamp tax upon a foreign bill of ex-
change is equivalent in substance to a tax
upon a thing exported. Congress named this
to be an excise tax, for it made the matter of
making monthly return under subdivision 2
of section 500 (a) governed by section 602,
which is a provision of the Revenue Law un-
der the title of excise taxes. It may not be
classed as a direct tax. As an excise tax it
was within the power of Congress to impose
the tax.

[6-8] Within that power and within the dis-
cretion of the judgment of Congress, it could
and did regulate the amount of the tax and its
graduation upon considerations of public
policy. Such action is not subject to judi-
cial review or inquiry. These are matters in
respect to which the legislative determination
is final. Patton v. Brady, 184 U. S. 608, 22
S. Ct. 493, 46 L. Ed. 713. The economic
consequences and matters of public policy
always involved in a tax were within the
political domain of the legislative branch of
the government. Lambert v. Yellowley,
272 U. S. 581, 47 S. Ct. 210, 71 L. Ed. 422,
49 A. L. R. 575. By the terms of this taxing
statute, the tax is not prohibitive or confisca-

tory. It may reduce or control profits in
some instances, but that is not fatal to the
tax. It nowhere appears that the business of
reselling tickets at the place referred to in
the statute makes it unprofitable or prohibi-
tive. The act does not compel a ticket bro-
ker to buy tickets above the ticket office or
established price, and does not prevent re-
selling tickets at any price he may obtain.
[9-11] To be able to find fault with the law is
not to adjudge its invalidity. It may be un-
just and oppressive, and yet be free from ju-
dicial interference. Mere errors of govern-
ment are not subject to judicial review; it is
only its palpable arbitrary exercise which can
be declared void under the Fifth and Four
teenth Amendments. Metropolis Theatre Co.
v. Chicago, 228 U. S. 61, 33 S. Ct. 441, 57
L. Ed. 730; Quong Wing v. Kirkendall, 223
U. S. 59, 32 S. Ct. 192, 56 L. Ed. 350. The
act is not confiscatory, for it does not affect
the ticket brokerage business as a whole.
It is not an unauthorized exercise by Con-
gress of police power. It differs from the
tax involved in the Child Labor Tax Case,
259 U. S. 20, 42 S. Ct. 449, 66 L. Ed. 817,
where the Supreme Court held that Congress
had no constitutional power to enact a code
of supervision and regulatory authority for
the control of an industry involving a tax
which was imposed for violations of the pro-
visions of the code.

[12, 13] In the Future Trading Act (Comp.
St. 1923, p. 2822) which had for its purpose
and was in essence a regulation of the busi-
ness of the grain Board of Trades, the tax
was in fact a penalty on the sale of grain for
future delivery to coerce the boards and other
members into compliance with its regulations,
and it was held that Congress, in the exercise
of its taxing power, had exceeded its author-
ity. Hill v. Wallace, 259 U. S. 44, 42 S. Ct.
453, 66 L. Ed. 822. At bar, the tax is imposed
as an excise tax upon a ticket agency business
according to the amount of the excess in
price received at the enumerated places. Its
provision as to imposing a graduated or pro-
gressive tax does not invalidate it. McCray
v. United States, 195 U. S. 27, 24 S. Ct. 769,
49 L. Ed. 78, 1 Ann. Cas. 561; Knowlton
v. Moore, 178 U. S. 41, 20 S. Ct. 747, 44 L.
Ed. 969; Towne v. McElligott (D. C.) 274
F. 960. Although the tax may operate in
preventing excessive prices for tickets, that
of itself does not invalidate it. In re Kollock,
165 U. S. 526, 17 S. Ct. 444, 41 L. Ed. 813.

"The only limitation upon the power of Congress to levy excise taxes of the character now under consideration is geographical uniformity throughout the United States. This

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