position for you to take. What I would like to know is how many dollars you think are economically justifiable as expenditures in order to produce so many dollars increase in volume of sales.

Mr. JOYCE. As an industry, I do not think you can look at it that way. Mr. HESELTON. I did not hear that.

Mr. Joyce. From the industry standpoint, I do not think you can look at it that way.

you

Mr. HESELTON. I am not interested now in whether think you can look at it that way. Just assume I am looking at it that way for the moment. I am asking you the question. After all, you are saying do not pass this legislation because it will have an adverse economic effect upon the industry you represent. That is a conclusion.

Mr. JOYCE. Yes, sir.

Mr. HESELTON. I want you to tell us, if you will, in terms of actual experience in calendar year 1955, or if that is not available, calendar year 1954, how many dollars were spent in order to increase the volume of sales, and what the result was in terms of an increase in the volume of sales.

Mr. JOYCE. I think I have given you those figures for 1955. In connection with that I think you ought to also consider that practically the same amount of money was spent in advertising in 1954. In 1954, the sales of liquor decreased nearly 5 percent over the sales for the preceding year in 1953.

Mr. HESELTON. The difference was then 3 and 5 percent, is that right?

Mr. JOYCE. Yes, sir. 1954 showed a decrease over 1953. So the advertising is spent

Mr. HESELTON. Would you say that the expenditure in 1954 was justifiable economically and the expenditure in 1955 was not?

Mr. JOYCE. No, sir. I think both of them were. Because where I have the difficulty in answering your question is that you advertise to hold a market just the same as you advertise to increase it. If the market does not increase, you cannot just disregard all advertising and say "the market is not increasing so I won't advertise." You advertise in order to hold your percentage of that existing market from losing it to other competitors who are competing for a portion of that overall general market.

Mr. HESELTON. Is it your position that any reduction in the consumption of distilled liquors would be unfortunate?

Mr. JOYCE. Would be unfortunate?

Mr. HESELTON. Yes.

Mr. JOYCE. Yes, sir. I think it would.

Mr. HESELTON. To whom?

Mr. JOYCE. I think it would be unfortunate both to our industry and to the Federal Government.

Mr. HESELTON. You mean to the people who are employed in the industry and to the Government in terms of taxes, is that right? Mr. JOYCE. Yes, sir. And to the people who have the investment in those companies.

Mr. HESELTON. And what?

Mr. JOYCE. The stockholders and people who have their investment in the companies.

Mr. HESELTON. The people who have a financial interest in the industry. Would it be unfortunate to anybody else?

Mr. JOYCE. It might be unfortunate if, as we presume, and if as we are quite sure would happen

Mr. HESELTON. If what?

Mr. JOYCE. If, as we feel quite certain, would happen, there would be an increase in the illegal sale; then there would be a further increase in the lawlessness; there would be a further increase in the disregard for law. There would be further burdens placed on the enforcement forces of both State and Federal Governments.

Mr. HESELTON. Do you mean to suggest, Mr. Joyce, that the average intelligent American, knowing where he can purchase liquor of the quality that is produced by brand distillers would immediately turn to bootleg liquor?

Mr. JOYCE. We think that there would be a number of them that would. We are greatly concerned with this: Over the past 10 years there has been a steady increase in the moonshine and bootlegging operations.

Mr. HESELTON. Will you give us percentages? You say over the last 10 years? Go back over 1954 and tell us how much bootleg was produced.

Mr. JOYCE. If you take the figures of the Federal Government which report the seizures of stills they show a gradual increase since the end of World War II. That increase is something like 100 percent in the number of seizures of stills.

Mr. HESELTON. Do you have any idea how many people use that? Mr. JOYCE. We would love to have that figure. Unfortunately, all you can do is make an estimate as to what that quantity is. But we do not know how many people use it.

Mr. HESELTON. My point is that in terms of the thought of the increase in bootleg liquor, unless you can present something to show that the people who were consuming brand liquor in 1944 changed to bootleg liquor in 1954, there is no validity whatever to the figures or conclusions you present here.

Mr. JOYCE. There are these figures which make us believe that is so. We have, thanks to the accuracy of the Government figures, rather definite figures on the per capita consumption. We know that the per capita consumption in 1954 was about as low as it has been for the past 10 or 12 years. We know at the same time that national income the expendable income that is in the hands of the people to buy products of this kind-has resulted in a substantial increase in the products of many other industries, while the increase in volume that we have enjoyed has been an increase that has been measured exactly with the increase in population. With more money in the hands of the people to buy more of everything, it would be natural to suspect that there would be more of our product bought. That, unfortunately, has not existed.

Mr. HESELTON. That is all.

The CHAIRMAN. Are there any further questions?

Mr. HALE. I have just one other question, Mr. Chairman.

The CHAIRMAN. Mr. Hale.

Mr. HALE. Did I understand you correctly to say that the actual consumption of distilled spirits decreased in 1954 5 percent over 1953? Mr. JOYCE. Decreased in 1954 over 1953.

Mr. HALE. It went up again 3 percent in 1955 over 1954?
Mr. JOYCE. Yes, sir.

Mr. HALE. Do you think that the people of this country were worse off in 1954 over 1953 on account of that decrease in consumption?

Mr. JOYCE. I would not say that they were any worse off; no, sir. Mr. HALE. You would not say that they were better off because they had increased their consumption in 1955?

Mr. JOYCE. No, sir; I would not say that.

Mr. HALE. You would not equate the consumption of liquor to the national welfare?

Mr. JOYCE. No, sir. I think there are probably more things that have a direct relation to national welfare than the consumption of liquor.

The CHAIRMAN. Mr. Springer.

Mr. SPRINGER. Mr. Joyce, you are not a lawyer, are you?

Mr. JOYCE. Not for the past 10 or 15 years. I was a lawyer; yes. Mr. SPRINGER. I take it that your approach to this problem is that such a law, when enacted, would be in essence unconstitutional? Mr. JOYCE. We feel it would be unconstitutional; yes, sir.

Mr. SPRINGER. Have you briefed this matter?

Mr. JOYCE. No. We knew that constitutional question was going to be briefed and presented by others. Consequently, we did not go into it. We would be glad if you would like us to do that.

Mr. SPRINGER. In other words, the Distilled Spirits Institute itself, through its counsel, has not briefed this problem?

Mr. JOYCE. We have gone into the general effect of the passage of the 21st amendment—and had to in many instances on the authority of States to impose restrictions on its sale and manufacture.

Mr. SPRINGER. Have you gone into it with respect to the effect of this kind of a law on the Federal Constitution?

Mr. JOYCE. We have gone into it. We have not actually briefed the matter from the standpoint of the advertising regulations.

Mr. SPRINGER. Are you going to brief it?

Mr. JOYCE. We would be very glad to do that if you would like us to. Mr. SPRINGER. When that is briefed, would you supply me and each member of this committee with a copy of that brief?

Mr. JOYCE. Yes, sir.

Mr. SPRINGER. That is all, Mr. Chairman.

(The following brief was subsequently submitted for the record :)

BRIEF OF THE DISTILLED SPIRITS INSTITUTE RELATIVE TO THE POWER OF CONGRESS TO ENACT H. R. 4627

This brief is submitted upon request of a member of the committee, in support of the statement by Mr. R. E. Joyce, witness for the Distilled Spirits Institute, Inc., that H. R. 4627, if enacted, would be of doubtful constitutionality.

Inasmuch as committee members manifested a particular interest in the effect of the 21st amendment would have upon the power of Congress to enact H. R. 4627, this brief is largely confined to that point.

It is our purpose in this brief to demonstrate:

1. That when a government, State or Federal, has established a policy in a field in which it possesses paramount power, it thereby preempts the field and supersedes all other legislation which conflicts with the policy so established or contains any significant provisions inconsistent with the exercise of the paramount power;

2. That under the 21st amendment the several States have powers in the regulation of the liquor traffic which are paramount to the commerce clause and statutes enacted pursuant thereto;

3. That advertising is but an incident of the sale of alcoholic beverages, a field in which the States possess paramount power;

4. That the States have preempted the field in regard to the regulation of alcoholic beverage advertising; and

5. That the enactment by the Congress, exercising an inferior power, of H. R. 4627, would result in conflict and inconsistencies with the policies and objectives established by the States, in the exercise of their paramount power, in the field of alcoholic beverage advertising.

I. ESTABLISHMENT OF POLICY BY PARAMOUNT POWER SUPERSEDES CONFLICTING LEGISLATION BY INFERIOR POWER

It is a familiar rule that where the Federal Government has paramount power it may by legislation preempt the field so as to preclude the valid exercise of State legislative authority. It is equally settled that the ccmmerce clause of the Constitution confers upon the Federal Government paramount power to regulate commerce, and that this power "is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are presc.ibed in the Constitution" (Gibbons v. Ogden (1824), 9 Wheat. 1, 196). This power to regulate includes also the power to exclude, deny, or prohibit the facilities of interstate commerce to articles or commodities, or the use of its facilities for practices deemed inimical to the general welfare (Ky. Whip & Collar Co. v. Illinois Central Ry. Co. (1937), 299 U. S. 334). It has long been recognized, however, that this "plena.y power" is not completely without limitation, rather it "acknowledges no limitations, other than are prescribed in the Constitution" (Gibbons v. Ogden, supra).

The 21st amendment is such a limitation upon the powers of the Federal Government under the commerce clause. Is it such a limitation as will preclude the valid enactment of H. R. 4627?

We believe it is.

In seeking the extent to which the States possess paramount authority in the field of intoxicating liquors under the 21st amendment, it would be well to consider the extent to which the Federal Government may legislate in a field in which it possesses paramount power. The same well established rules which apply to the Federal power in this regard apply conversely to whatever power the States may exercise under the 21st amendment. Consequently, the decisions concerning the relation between Federal statutes and State statutes under the commerce clause may be applied in reverse, so to speak, as regards State legislation under the 21st amendment.

An early Supreme Court decision bearing upon the relationship of Federal and State statutes in the same field is Southern Railway Co. v. Railroad Commission of Indiana ((1914) 236 U. S. 439). In this case Southern Railway Co. had been prosecuted under an Indiana statute which required that railroad cars be equipped with hand holds. The company asserted that Congress, in enacting the Federal Safety Appliance Act, had so occupied the field relating to safety equipment on cars moving on interstate railways as to invalidate the provisions of State law in the same field. The statutes in question were not in conflict. Mr. Justice Lamar, speaking for the Court stated that the nature of the Federal Government's power under the commerce clause was such that, when exercised, it is exclusive and ipso facto superseded State legislation on the same subject, and that the State may not supplement the Federal statute. He quoted the following from Prigg v. Com. ((1842) 16 Pet. 539 (236 U. S. at p. 447)):

"Its [Congress] silence as to what it does not do is as expressive of what its intention is as the direct provisions made by it *** the will of Congress upon the whole subject is as clearly established by what it had not declared, as by what it has expressed."

And again at page 448:

"The test, however, is not whether the State legislation is in conflict with the details of the Federal law or supplements it, but whether the State had any jurisdiction of a subject over which Congress had exerted its exclusive control.”

Again in the same year in Charleston & W. C. Ry. Co. v. Varnville Furniture Co. ((1914) 237 U. S. 597), it was argued that the State of South Carolina was not precluded from enacting State statutes in aid of the policy of Congress. Mr. Justice Holmes expressed doubt that the State legislation in question was contrived in aid of the Federal policy, and added (p. 604):

"But that is immaterial. When Congress has taken the particular subject matter in hand, coincidence is as ineffective as opposition, and a State law is not to be declared a help because it attempts to go farther than Congress has seen fit to go."

A leading case on the supremacy of a Federal statute, once the Congress has chosen to enter a field in which it has paramount power is Bethelem Steel Co. v. New York Labor Rel. Bd. ((1946) 330 U. S. 767). The question in this case was whether certain foremen of the appellant had the right to organize labor union bargaining units under the State labor relations act, in the face of the National Labor Relations Act which did not recognize such right. In holding that the Federal statute left no room for operation of the State authority asserted. Mr. Justice Jackson stated (p. 774):

"But when Federal administration has made comprehensive regulations effectively governing the subject matter of the statute, the Court has said that a State regulation in the field of the statute is invalid even though that particular phase of the subject has not been taken up by the Federal agency."

In U. S. v. South-Eastern Underwriters Association ((1943) 322 U. S. 533, 548), it was said:

"In marking out these activities the primary test applied by the Court is not the mechanical one of whether the particular activity affected by the State regulation is part of interstate commerce, but rather whether, in each case, the competing demands of the State and national interests involved can be accomplished."

It will be noted, in the cited cases, that in striking down State statutes in a field in which the Federal Government exercises paramount power, the Court was not required to find a literal conflict between the State and Federal statutes, nor was it necessary to declare that the entire field had been covered by the Federal legislation. And in Rice v. Santa Fe Elevator Corp. ((1946) 331 U. S. 218), the point was made that it is sufficient if the conflict is one of policy. Mr. Justice Douglas stated (p. 230):

"The scheme of Federal regulation may be so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it. *** Or the act of Congress may touch a field in which the Federal interest is so dominant that the Federal system will be assumed to preclude enforcement of State laws on the same subject. * * * Or the State policy may produce a result inconsistent with the objective of the Federal statute."

And again at page 236:

"He could not be required by a State to do more or additional things or conform to added regulations, even though they in no way conflicted with what was demanded of him under the Federal act. We recently noted that a Congress can act so unequivocally as to make clear that it intends no regulation except its own."

"The test, therefore, is whether the matter on which the State asserts the right to act is in any way regulated by the Federal act. If it is, the Federal scheme prevails, though it is a more modest, less pervasive regulatory plan than that of the State."

In U. S. v. Frankfort Distilleries, Inc. ((1944) 324 U. S. 293), the point was again made that the conflict need not be literal, but may be merely one of policy. The Court stated (p. 299):

"We therefore do not have here a case in which the Sherman Act is applied to defeat the policy of the State. That would raise questions of moment which need not be decided until they are presented."

Countless illustrations of this rule could be given. It is sufficient to add, however, that a State may not legislate inconsistently with the purpose of Congress, nor can it curtail or complement the Federal law or enforce additional or auxiliary regulations if the Federal Government has enacted a complete scheme of regulations. It is also clear that the conflict sufficient to invalidate the inferior statute may be a conflict of policy or objective (Hines v. Davidowitz (1940), 312 U. S. 52, 67; Sola Electric Co. v. Jefferson Electric Co. (1942), 317 U. S. 173, and cases cited above). The State legislation fails, not only in case of dilutes or dimrishes the Federal program, but also where the matter is in any way regulated by the superior act. This is true even though the dominant act "is a more modest, less pervasive regulatory plan" (Rice v. Santa Fe Elevator Co., supra; Cloverleaf Butter Company v. Patterson (1941), 315 U. S. 148).

The rule stated above, that is to say, where the Federal Government has paramount power it may by legislation preempt the field so as to preclude the valid exercise of State legislative authority, is applicable in reverse to the exercise, by a State, of the power conferred on the States by the 21st amendment, and the exercise of such power may so preempt the field as to exclude the possibility of Federal legislation.