added, would be frustrated when the pills one buys are not labeled as required, whether the labor has been torn from the original container or the pills have been transferred from it to a nonlabeled container.

The circuit court of appeals also thought that to give such a broad interpretation to this section would open the door to similar consequences in the case of retail sales of food and cosmetics since the coverage is the same. Such a result the lower court viewed with undisguised alarm, but its alarm was not shared by the Supreme Court majority which declared that "the scope of the offense which Congress defined is not to be judicially narrowed as applied to drugs by envisioning extreme possible applications of its provisions which relate to food, cosmetics, and the like. There will be opportunity enough to consider such contingencies should they ever arise."

Finally, it was contended that this broad construction of the act was beyond any constitutional authority of Congress and that it invaded the power of the States. The Supreme Court in denying this contention recognized that it was going farther than it had in McDermott v. Wisconsin (228 U. S. 115), which had upheld the constitutionality of the Pure Food and Drug Act of 1906. The act of 1906 did not contain the language of section 301 (k), although it did prohibit misbranding and authorized seizure of misbranded articles after they were shipped from one State to another, so long as they remained "unsold." Also, in the McDermott case the labels involved were on the original containers, and the possessor of the labeled cans held for sale had himself received them by way of an interstate sale and shipment. Nevertheless the Court found the McDermott holding not only applicable but controlling since in both cases "the question relates to the constitutional power of Congress under the commerce clause to regulate the branding of articles that have completed an interstate shipment and are being held for future sales in purely local or intrastate commerce."

The Sullivan case has been set forth in considerable detail because of its bearing upon the question of whether or not a public eating place is violating the Federal Food, Drug, and Cosmetics Act, if it serves to patrons colored oleomargarine after it has been shipped in interstate commerce without complying with the provisions of that act with respect to labeling.

Section 301 (k) of the act, the coverage and scope of which was construed in the foregoing case, is quoted in full as follows and prohibits:

"(k) The alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of any other act with respect to, a food, drug, device or cosmetic, if such act is done while such article is held for sale after shipment in interstate commerce and results in such article being misbranded."

Section 403 of the act states, among other things, that a food shall be deemed misbranded

"(k) If it bears or contains any artificial flavoring, artificial coloring, or chemical preservative, unless it bears labeling stating that fact: Provided, That to the extent that compliance with the requirements of this paragraph is impracticable, exemptions shall be established by regulations promulgated by the Administrator. The provisions of this paragraph and paragraphs (g) and (i) with respect to artificial coloring shall not apply in the case of butter, cheese, or ice cream.”

Section 403 (k) specifically states that a misbranding will occur if the food bears artificial coloring and is not labeled accordingly, provided it is not specifically excepted by the act or by regulations of the Federal Security Administrator. Oleomargarine is not specifically excepted nor do any regulations of the Administrator appear to have excepted it from the operation of this section. The principal case makes it clear that "the doing of any other act resulting in a misbranding" may consist in transferring an article from one container to another and that the local merchant is not immunized from the full force and effect of the act if the article he sells has passed through interstate commerce. Therefore, a retail dealer, who offers for sale oleomargarine which has at one time been in interstate commerce, even though he acquired it and sells it in an intrastate or local transaction, probably must comply with the Federal Food, Drug, and Cosmetic Act with respect to labeling. The penalty for violation is found in section 303 (a) and subjects the convicted party to imprisonment for not more than 1 year, or to a fine of not more than $1,000, or to both.

The coverage of the act with respect to the local grocer seems more certain than with respect to the restaurant proprietor. The latter presents some special problems. Section 201 (k) of the act defines label as a "display of written, printed, or graphic matter upon the immediate container of any article." Section 403 in defining "misbranded food" requires certain types of information

to appear on the label. A restaurant dispenses oleomargarine, if at all, in very small quantities and certainly not heretofore in containers. The majority opinion in the Sullivan case in refusing to pass upon whether its holding would require labeling of penny candy sticks and sardines after they are removed from their containers recognizes that such transactions might present special circumstances. The Court said: "There will be opportunity enough to consider such contingencies should they ever arise." Where labeling as defined in the act is entirely impracticable and not feasible such fact might well be considered as having some bearing upon the intent of Congress in the application of the act. It might follow that the act was never intended to cover the case of the restaurant transaction with which we are concerned; at least such might well be its judicial construction.

Also, another uncertainty arises as to the coverage of the act with respect to the restourant transaction. Section 301 (k) contains the words "if such act is done while such article is held for sale." It can be argued that there is no holding for sale, or sale, in the typical restaurant transaction where a patron is served with his meal a pat of oleomargarine and for which no separate or discernible charge is made. The point would seem to be arguable, and without some clarifying legislation, a court might well hold that such a transaction is not covered by the present act.

The Court in the Sullivan case gives ample indication that where the labeling requirements of the act are entirely impracticable, it confidently expects that the Federal Security Administrator will exempt the transaction as he is quite generally authorized to do. Mr. Justice Rutledge, in his concurring opinion, evinces considerable concern over the far-reaching implication of the Court's holding, and emphasizes heavily the discretion of the Administrator praticularly with respect to food. He writes:

"Under section 403 (k), however, in dealing with foods the Administrator can dispense with labels much more broadly. In terms the criterion for his action becomes 'the extent to which compliance * * * is impracticable' rather than, as under section 502 (f), 'where any requirement of clause 1 (adequate direction for use) * * * is not necessary for the protection of the public health.' Practical considerations affecting the burden of compliance by manufacturers and retailers, irrelevant under section 502 (f), become controlling under section 403 (k). Thus under the statute's intent a much more rigid and invariable compliance with the labeling requirements for drugs is contemplated than for those with foods, apart from the greatly narrower coverage of the latter. And the difficulty of compliance with those requirements for such articles as candies explains the difference in the two provisos."

In view therefore of the uncertain coverage of the act with respect to the restaurant transaction, and the uncertainty inherent in the possibility that such transactions may be specifically exempted through administrative action, additional legislation would seem to be required. It could be argued that legislation which would compel restaurants and other public eating places to notify their patrons by a conspicuous sign or item on the menu that colored oleomargarine is being served, if such be the fact and the oleomargarine was shipped in interstate commerce, will clarify a confused situation and make the labeling requirements of the act, which may otherwise be applicable, less burdensome.

II. Federal legislation which would require restaurants and other public eating places to notify by an appropriate sign that colored oleomargarine is being served, if such be the fact and the oleomargarine was shipped in interstate commerce, would appear to be constitutional.

In view of the Sullivan case there would seem to be no serious question on this point. It is true that the Sullivan case was not unanimously decided, but neither Mr. Justice Rutledge's concurring opinion nor the dissenting opinion of Messrs. Frankfurter, Reed, and Jackson raises any constitutional questions as to the scope of the Federal, Food, Drug, and Cosmetics Act is interpreted by the majority. The majority, it will be recalled, held that the constitutional power of Congress under the commerce clause extended to the regulation of the branding of articles which have completed an interstate shipment and are held for sales in purely local or intrastate commerce. This holding was reached despite the fact that the seller had not himself obtained the article through interstate commerce, but had purchased them within the State and had sold them locally. The only connection with interstate commerce was in the origin of the articles. It follows therefore, that the commerce power of Congress is sufficiently broad to authorize any reasonable regulation on the sale of articles, which have passed through the channels of interstate commerce, and which is designed to protect the ultimate

consumer. A law compelling restaurants to give an appropriate form of notice to their patrons when colored oleomargarine is served after it has passed through interstate commerce would seem to be a reasonable requirement designed to protect consumers from receiving misbranded food. Such a law would not appear to exceed the permissible limits of congressional power as now exercised in the Federal Food, Drug, and Cosmetics Act, and would clarify the application of that act as it relates to a certain factual situation.

The holding in the Sullivan case is in line with a whole series of Supreme Court decisions dealing with the permissible limits of the Federal power under the commerce clause. Following the Shreveport Rate Cases (234 U. S. 342), in which it was held that railroad rates of an admittedly intrastate character and fixed by authority of the State might still be revised by the Federal Government because of the economic effects which they had upon interstate commerce, the Supreme Court has frequently sustained Federal regulations under the commerce power when applied to intrastate transactions. Mulford v. Smith (307

U. S. 38); United States v. Darby (312 U. S. 100); United States v. Wrightwood Dairy Co. (315 U. S. 110); Wickard v. Filburn (317 U. S. 102). Warnings have been uttered as to the error inherent in relying upon cases which deal with and control the exercise of power by the States over commerce as a criteria on which to measure the scope of the Federal power. Santa Cruz Co. v. Labor Board (303 U. S. 453). And, in broad strokes the Court in United States v. Wrightwood Dairy Co. (315 U. S. 110), painted the commerce power and in doing so gave a clear indication of its potential sweep and possible ramifications. The issue in that case was whether a Chicago milk dealer who purchased milk within the State and sold it locally could be properly subjected to the provisions of the Agricultural Marketing Agreement Act of 1937 for the purpose of setting minimum prices. The Court in upholding this exertion of national power stated: "The commerce power is not confined in its exercise to the regulation of commerce among the States. It extends to those activities intrastate which so affect interstate commerce, or the exertion of the power of Congress over it, as to make regulation of them appropriate means to the attainment of a legitimate end, the effective execution of the granted power to regulate interstate commerce" (p. 119).

It is not necessary, the Court continues, that the person regulated be engaged to some extent at least in interstate commerce.

"It is no answer to suggest, as does respondent, that the Federal power to regulate intrastate transactions is limited to those who are engaged also in interstate commerce. The injury, and hence the power, does not depend upon the fortuitous circumstance that the particular person conducting the intrastate activities is, or is not, also engaged in interstate commerce (citations). It is the effect upon interstate commerce or upon the exercise of the power to regulate it, not the source of the injury which is the criterion of congressional power" (p. 121).

It is permissible therefore in approaching these questions involving the Federal power under the commerce clause to look at the transaction to be regulated and ask certain questions. Is it intrastate or interstate? If the latter, no question arises, and if the former, the inquiry may continue. Does the transaction sought to be regulated, affect in some substantial way interstate commerce, or the regulation of it by Congress? If the answer can reasonably be made in the affirmative, then the power would appear to be not lacking. There is Federal legislation which regulates to some extent at least, interstate commerce in food, drugs, and cosmetics. Its purpose is to safeguard the consumer. United States v. Dotterweich (320 U. S. 277). It not only seeks to protect the consumer from unhealthful articles but from misbranded articles as well. In order to protect the consumer from misbranded articles the act requires various types of labeling. If Congress can only regulate up to the point when the article is received by one from another in a different State, no effective protection in many instances is accorded to ultimate consumers, as the facts of the Sullivan case disclosed. Therefore, those transactions up to the point of sale to the ultimate consumer are intermediary in the larger transaction which encompasses the first and last sale of an article in interstate commerce. Those intermediary transactions affect the larger transaction which is in interstate commerce, and also the regulation of that larger transaction. Therefore, since they are parts of a greater transaction and they affect that greater transaction, or its regulation, they too may be regulated.

Specifically, and with respect to the question at hand, the Federal act regulates the interstate sale of colored oleomargarine from its first to its last sale. It

requires labeling so that an ultimate consumer will know that he is eating a food which is artificially colored. The transaction in which a restaurant dispenses colored oleomargarine to a patron, the ultimate consumer, is a constituent part and final link in a greater interstate transaction. Congress can and has regulated the whole; therefore it can regulate the part.

It may be concluded, on the authority of the Sullivan case and other recent decisions of the Supreme Court defining the scope of the commerce power, that there is in all probability no constitutional objection to a Federal law requiring restaurants and other public eating places to post a notice that they are serving colored oleomargarine, if that be the fact and such oleomargarine was at one time in interstate commerce.

MEMORANDUM ON FEDERAL REGULATION OF OLEOMARGARINE PREPARED BY THE NATIONAL COOPERATIVE MILK PRODUCERS FEDERATION FOR THE FINANCE COMMITTEE OF THE UNITED STATES SENATE, MAY 21, 1948

The chairman of the Senate Finance Committee has requested the National Cooperative Milk Producers Federation to submit this memorandum for the record in connection with the hearings on H. R. 2245. The limited time available has not permitted the preparation of a more complete memorandum.

The question presented is this: Can the Federal Government effectively regulate oleomargarine without levying special taxes against it?

The Federal Government can, of course, regulate oleomargarine in interstate commerce without the use of taxes. The effectiveness of such regulations would be a matter of degree. Purely intrastate transactions which do not operate to affect or burden interstate commerce could not be regulated under the interstate commerce clause. However, transactions in interstate commerce or affecting or burdening interstate commerce could be regulated as effectively without the use of special taxes as with them.

Decisions of the United States Supreme Court in recent years have broadened materially the interpretation of the interstate commerce clause. The effect of these decisions has been to extend the power of Federal control of interstate transactions much farther within the boundaries of the individual States than had previously been considered possible.

A Federal statute regulating oleomargarine, if so drawn as to come within these decisions, would afford substantial control. Such a statute might fail to reach some intrastate transactions now subject to regulations under the taxing power, but nevertheless it would provide a substantial measure of control.

If it should be desired to eliminate the special taxes on oleomargarine and shift its control or regulation from the taxing power to the power to regulate interstate commerce, it would seem that the logical place for such new regulations would be under the food and drug laws.

Whatever regulations the Congress considers necessary or proper in this respect should be made effective as widely and completely as possible. This could best be accomplished by setting up the regulations as a separate chapter under the food and drug laws rather than by adding amendments to the present acts. The use of a separate chapter would permit Congress to make the regulations applicable to transactions affecting or burdening interstate commerce and the free flow of goods in interstate commerce without at the same time broadening the existing statutes relating to other matters.

Oleomargarine as presently manufactured and sold, particularly when it is colored butter yellow, is indistinguishable by the average consumer from real butter. It lends itself readily to confusion, deception, and substitution. Its unregulated manufacture, shipment, and sale in interstate commerce would clearly burden and affect such commerce. White oleomargarine, while distinguishable as long as it remains white is easily colored to resemble real butter and the coloring necessary to accomplish this purpose is ordinarily included in the same package and the same shipment. The opportunities for fraud in connection with its unregulated movement in interstae commerce likewise justify its control.

The power of Congress to regulate interstate commerce items which present opportunities for confusion, deception, and substitution was considered by the United States Supreme Court in the Filled Milk cases.

In Carolene Products Co. v. United States (323 U. S. 18, 65 S. Ct. 1, (1944)), the Court said:

"A second reason (for enacting the Filled Milk Act) was that the compounds lend themselves readily to substitution for or confusion with milk products. Although, so far as the record shows, filled-milk compounds as enriched are

equally wholesome and nutritious as milk with the same content of calories and vitamins, they are artificial or manufactured foods which are cheaper to produce than similar whole-milk products. When compounded and canned, whether enriched or not, they are indistinguishable by the ordinary consumer from processed natural milk. The purchaser of these compounds does not get evaporated milk. This situation has not changed since the enactment of the act. The possibility and actuality of confusion, deception, and substitution was appraised by Congress. The prevention of such practices or dangers through control of shipments in interstate commerce is within the power of Congress (United States v. Carolene Products Co., 304 U. S. at p. 148, 58 S. Ct. at p. 781, 82 L. Ed. 1234; cf. McCray v. United States, 195 U. S. 27, 63, 24, S. Ct. 769, 779, 49 L. Ed. 78, 1 Am. Cas. 561). The manner by which Congress carries out this power, subject to constitutional objections which are considered hereinafter in part "Third" of this opinion, is within legislative discretion, even though the method chosen is prohibition of manufacture, sale, or shipment. Congress evidently determined that exclusion from commerce of filled milk compounds in the semblance of milk, was an appropriate method to strike at evils which it desired to suppress."

The Filled Milk Act (21 U. S. C., sec. 61-63), which prohibits the shipment in interstate commerce of filled milk was held not to transcend the power of Congress to regulate interstate commerce nor to infringe the fifth amendment of the Constitution (United States v. Carolene Products Co., 304 U. S. 144, 58 S. Ct. 778). In that case the Court said:

"The power to regulate commerce is the power 'to prescribe the rule by which merce is to be governed' (Gibbons v. Ogden, 9 Wheat. 1, 196, 6 L. Ed. 23), and extends to the prohibition of shipments in such commerce (cases cited). The power is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the Constitution' (Gibbons v. Ogden, supra, 9 Wheat, 1, 196, 6 L. Ed. 23)."

In discussing the power to regulate interstate commerce as applied in the Agricultural Marketing Agreement Act (7 U. S. C., sec. 601 et seq.) the Court, in United States v. Rock Royal Co-op (307 U. S. 533, 59 S. Ct. 993), said:

"This power over commerce when it exists is complete and perfect. The authority of the Federal Government over interstate commerce does not differ in extent or character from that retained by the States over intrastate commerce." The Agricultural Marketing Agreement Act authorizes the regulation of an agricultural commodity or product which "is in the current of interstate of foreign cultural commodity or product which "is in the current of interstate or foreign commerce in such commodity or product thereof" (7 U. S. C., sec. 608 c (1)). Under this provision it was held that the sale of milk within a State could be regulated as could also the purchase of milk from a producer within the State. In the Wrightwood Dairy case (United States v. Wrightwood Dairy Co., 315 U. S. 110, 62 S. Ct. 523) the Court applied the Agricultural Marketing Agreement Act to wholly intrastate transactions which, however, because of their competition with sales in interstate commerce operated to burden and affect interstate com

merce.

The Federal Food Drug and Cosmetic Act (21 U. S. C., sec. 301 et seq.) prohibits misbranding with respect to a drug held for sale after shipment in interstate

commerce.

In United States v. Sullivan (68 S. Ct. 331) the Court held the act applicable to a retail sale of drugs which had moved in interstate commerce some 9 months previously and which had passed through one intrastate sale prior to retail sale. The Court said that the wording of the statute was apparently designed to control the drug all the way from the moment of its introduction into interstate commerce to its delivery to the ultimate consumer. The Court held that Congress has the constitutional power to regulate the branding of articles that have completed an interstate shipment and are being held for future sales in purely local or intrastate commerce.

Other examples of statutory language which have been broadly construed to permit Federal regulation of intrastate transactions which affect interstate commerce or the free flow of goods in interstate commerce can be found in the labor laws and in other statutes relating to agriculture. However, the limited time available does not permit of the further development of the matter in this memorandum.

Respectfully submitted.

MARION R. GARSTANG. Counsel.

The CHAIRMAN. The next witness is Congressman Robert J. Corbett.