package of yellow oleomargarine and a plate containing muffins and a square of yellow-colored oleomargarine. A part of the text states:

Milk makes the flavor. * * * It's a bet: Even your fussiest guests won't know you are serving margarine when you give them point-saving Allsweet! This margarine is so delicate and fresh and rich-tsating.

Our Congress did not use the Canadian Government's method of dealing with the oleomargarine problem by prohibiting the manufacture and sale of both colored and uncolored oleomargarine. It chose to regulate and to tax. It made a distinction in the degree of taxation, namely, one-fourth cent per pound on uncolored and 10 cents per pound on colored. Undoubtedly this was because the Congress recognized the ease with which the colored product could be used for deception and fraud and decided to discourage both its production and sale.

Perhaps there were in Congress at that time men who foresaw the growth and development of international competition among the oils and fats and the disastrous effect of price competition which one major fat could exert upon another even though the normal price lines of the two fats might, in the beginning, be far apart. To be specific, the greater the volume produced of a low-priced fat, the greater strength it will exert in pulling down the price of a more expensively produced competing fat.

To illustrate further, in the early days of vegetable shortening and until the First World War, the price of lard dominated the price of vegetable shortening. But as shortening increased in volume, it had an increasingly potent price influence upon lard. Finally, lard's varying export position became the most important factor in determining the extent to which its price might rise to, approximate, or fall under the price of vegetable shortening whose production, like that of oleomargarine, is at all times under factory control.

Now oleomargarine and vegetable shortening are kindred products. The essential difference between them does not lie in any important difference as to their respective fat ingredients, for these ingredients are largely the same oils and fats. The difference does lie in the fact that oleomargarine contains only 80 percent of oil or fat while vegetable shortening contains 99 percent of fat. The additional difference is to be found in the addition to the fat of oleomargarine of such ingredients as moisture, salt, diacetyl (butter flavoring), benzoate of soda, and artificial coloring matter. Most of these ingredients are cheaper than fats, and may account for the fact that oleomargarine generally sells on the market at prices somewhat under the prices of vegetable shortening.

The oleomargarine people have frequently proclaimed as their first objective an annual production of 1,000,000,000 pounds. This year, even though there is a shortage of vegetable fats as well as butterfat, the Government may permit them to produce about 600,000,000 pounds. Considerable quantities, of course, will be taken out of the country to fulfill lend-lease commitments. Next year's production will depend upon available commercial fat supplies which are subject to the indefinite factors of domestic production and importations in wartime. For several years, however, there has been an edible use for every pound of peanut oil, cottonseed oil, and soybean oil produced from domestic raw materials. This year, even linseed oil is being prepared for edible consumption and used in the making of oleomargarine.

But what about the effect upon price of this growing production of oleomargarine? A study of the tables appended to this statement will show that as the production of oleomargarine and lard has increased. the production of vegetable shortening has slowed down. This would indicate that oleomargarine production has increased at the expense of shortening and because the Government has curtailed the consumption of butter.

There is no evidence to show that the oleomargarine maker pays any more for the fats used by him than does the maker of shortening. In important instances the maker of oleomargarine and the maker of vegetable shortening and also the producer of lard may be the same company. Not only do they produce considerable of these products as well as salad oil dressings but in great measure the owners of the cottonseed oil mills of the South are the Middle-Western refiners and manufacturers of these products. It is therefore possible to use ownership of chain oil mills in the South to control the price of crude cottonseed oil. The locally owned cottonseed oil mill is thus placed at the mercy of the competing chain oil mills whose owners buy the product from the independent mill. No classified-use plan of pricing prevails in the oils and fats industry as it does in the pricing of milk. As long as this present pricing system exists, it will not matter for what purpose a tank of cottonseed oil is sold by an independent operator to an unknown buyer; and the seller of the oil rarely knows who is bidding for it until after the sale has been consummated through the broker and shipping orders are received. Thus we come to a situation where, as the consumption of salad oils and oleomargarine increases, supplies of fats will have to be drawn either from the vegetable shortening vats or from importations. Let us bear this truth in mind in considering further the program of the oleomargarine people.

Backed by huge advertising and propaganda funds and by millions of dollars' worth of free governmental aid over radio, through penalty mail distribution of governmental literature and through the block system of educational work by the so-called nutrition committees set up by the Federal Security Agency, it is not inconceivable that the oleomargarine manufacturers are looking forward to securing for themselves a more advanced civilian wartime footing and a post-war civilian consumption exceeding a billion pounds a year. But they know that under normal conditions the average housewife would rather have butter than any imitation product and that she still looks askance upon a product which, when placed in her icebox with the wrapper off, she may mistake for either lard or vegetable shortening.

This ambitious program was launched many years before Pearl Harbor. Coincident with it was the shift to cottonseed oil and an attempted development of a bloc of Southern opinion. Perhaps also the makers of oleomargarine deliberately avoided an effort to develop a market for the colored product in preparation for the time when they would launch their present all-out campaign to remove the color tax, the congressional definition of the product, and all congressional regulations. Perhaps that is why oleomargarine advertisements appear in yellow color even though the consumer has considerable difficulty in finding yellow oleomargarine in the stores.

Let us now assume that they may succeed in repealing the Federal tax law, what will be their next stop? Success in the Congress will intensify the force and add momentum to their drive to break down

State regulations. Even if certain pro-oleomargarine witnesses did raise the question that many States are regulating the manufacture and sale of oleomargarine, the facts are that oleomargarine lobbyists are trying to get rid of these State laws wherever they can. These lobbyists swarm around the State capitols when legislatures are in session. They haunt convention hotel headquarters of important citizenship organizations. Their field agents are busy throughout the year visiting influential persons and telling their stories, each adapted to the particular community in which the person visited may live.

Assuming that they could achieve a fair measure of success in repealing or modifying State laws, since many State legislatures are impressed by congressional policy, where then will the domestic producers of oil-bearing raw materials profit? This consummation devoutly wished by the oleo people will have taken place in the post-war period. By then the ships now carrying soldiers and war materials will be returning to the cargoes of peace. The vast oil-bearing raw material sources of Africa, the Pacific, and the Indian Ocean will be tapped. Western European countries will be rapidly restoring their oil-crushing facilities so as to give employment to labor and to produce their own oils and cattle feeds. But that utilization will not tap the customary surplus of these countries of low labor costs and virgin production. In terms of oil equivalent, easily 2,000,000,000 pounds of foreign origin will be seeking entry each year. In that period of post-war reconstruction an administration may be in power that believes in fixing the lowest possible import duties and a return to free trade wherever that can be done.

Once the opportunity comes unrestrictedly to inject color they will rely upon continued advertising and propaganda to fix the eating habits of their customers. Then we will see a repetition of the shortening versus lard price influence but in reverse. As the colored product increases in volume, it will force downward the retail price of butter. Unless total consumption of edible fats increases markedly, more and more producers of butterfat will abandon their cows and turn to other ways of making a living. That will have a tragic effect upon the people of displaced occupations; and it will be unhealthy for the Nation to lose that much of its milk supply and attendant soilbuilding elements.

Here, then, is another side of the picture: Fats which represent only by-product incomes to certain groups of farmers will force out of the market a fat which represents primary incomes for several million farmers. Curiously this process may react adversely upon the first group of farmers because:

1. They will lose a large part of their market outlets for meal and hulls.

2. They will face the competitive buying practices of processors who, once the color fight is won, will turn to cheaper sources of supply.

3. They will lose the friendship and aid of dairy farmers in future efforts to obtain protection from the expected and inevitable flood of cheaper imported oils and fats.

So cottonseed oil may again be forced back into other edible uses. Soybean production will considerably decline and follow cottonseed oil into shortening, salad oils, and the soap kettle. Dairy farmers by that time will have diminished in numbers; their income will have declined and the Nation will be the loser from an unnecessary and

futile struggle of section against section and farmer against farmer. We have indicated that increased volume of oleomargarine production will force a large percentage of dairy farmers into a fight for existence. We have also shown that removal of color restrictions will not improve the future status of domestic producers of commercial fat raw materials, but that competition of imported oils will make them poor indeed. Let us now look at the picture of interrelated farm interests in the larger sense. From the close of the First World War until recently all producers of domestic fats or their raw materials have recognized a mutual interest and worked together to equalize their competitive position with the producers of imported competitive oleomargarine products.

Thus, concord was possible and natural as long as the domestic struggle over colored oleomargarine remained in abeyance. With the resumption of that struggle, dairy farmers, having their very existence at stake, and knowing that the other domestic producers have only a secondary interest involved, will no longer feel an obligation to join in common efforts for protection against the overwhelming flood of oriental and African oils in peacetime. Rather will they seek other ways to protect their own industry and leave the unorganized producers of cottonseed and soybeans to fight their own battles. This will be a necessary policy position with full recognition of the fact that dairy farmers of the Nation as represented by the National Cooperative Milk Producers' Federation, since 1919, have led and largely financed, the national fights to protect the domestic producers of commercial fats from the disastrous and depressing effects of free importations of the foreign fats.

The tragedy of this turn of events is to be found in the need of the groups of these very sections understanding each other and their respective problems and working together to protect themselves against larger, death-shadowing opponents.

In time of war it is important that there be no sectional divisions nor dissensions over commodity questions. Issues like the pending controversy over oleomargarine should be subdued and put aside in the common interest. Differing opinions over the question of oleomargarine resemble very much the splits which often occur in rural communities within churches or around the struggle of local bankers for predominance. Reason often goes out of the window while habits of thought and emotionalism take its place. Certainly in this serious condition of the time the question of repealing time-proven legislation should be held in abeyance until our Nation returns to a period of normality and our people are once more able, with patience and sound judgment, to appraise the most controversial issues involved in this attempt to rescind a most important Federal statute.

Proponents of the bill have repeatedly alleged that if the Federal oleomargarine code were repealed, the Food, Drug, and Cosmetics Act affords ample authority to protect American consumers. This is a legal question and I have asked our senior counsel, Charles W. Wilson, to give me his opinion upon it and certain related questions. This memorandum follows and is attached as a part of my statement:

NOVEMBER 15, 1943.

You have requested (1) my opinion on the adequacy of the Federal Food Drug, and Cosmetic Act of 1938 to regulate the manufacture and sale of oleomargarine, if the Fisting Federal tax statute and the regulations promulgated there

under are repealed, and (2) an analysis of the issues and decision in Land O' Lakes Creameries, Inc. v. Paul V. McNutt, Federal Security Administrator, decided by the Eighth United States Circuit Court of Appeals.

Each of the foregoing will be dealt with separately as follows:

1. ADEQUACY OF THE FEDERAL FOOD, DRUG, AND COSMETIC ACT OF JUNE 25, 1938

Whether the provisions of the Federal Food, Drug, and Cosmetic Act of 1938 are adequate to cope with fraudulent and deceptive practices in the manufacture and sale of oleomargarine, if the existing Federal tax statute and the regulations issued thereunder by the Commissioner of Internal Revenue were removed, is open to serious question.

The provisions of the Internal Revenue Code dealing with oleomargarine (sections 2300-2314, inclusive, and sections 3200-3202, inclusive, Internal Revenue Code, 1939) are, of course, based upon the power of Congress to levy taxes under the Constitution. That power knows no limitation such as State boundaries. The exercise of that power in the form of the Federal tax statute on oleomargarine has been sustained by the United States Supreme Court.1 The Food, Drug, and Cosmetic Act, on the other hand, is based upon the power accorded Congress in the Constitution to regulate commerce with foreign nations and among the several States. There are limitations, in the way of State boundaries, on the exercise of this latter power, as represented by the Food-Drug enactment, for interstate commerce is the rationale of the law and the existence of interstate commerce is requisite to Federal enforcement authority under its provisions.3 Specifically, the pertinent prohibitions enumerated in the food and drug law, governing oleomargarine as well as other food products, are the following as set forth in section 301 of the act (title 21, U. S. C., sec. 331):

2

"The following acts and the causing thereof are hereby prohibited:

66

(a) The introduction or delivery for introduction into interstate commerce of any food * * * that is adulterated or misbranded;

"(b) The adulteration or misbranding of any food commerce;

*

*

*

that is adul

"(c) The receipt in interstate commerce of any food terated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise;

"(g) The manufacture within any Territory of any food adulterated or misbranded;

"(i) Forging, counterfeiting, simulating, or falsely representing, or without proper authority, using any mark, stamp, tag, label, or other identification device authorized or required by regulations promulgated under the provisions of sections 404, 406 (b), 504, or 604:

* * *

*

"(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 if such act is done while such article is held for sale after shipment in interstate commerce and results in such article being misbranded." In this general connection, it is of interest to note the following quotation from the brief of the Federal Security Administrator filed in the United States Circuit Coutr of Appeals for the Eighth Circuit in the case of Land O'Lakes Creameries, Inc., et al. v. Paul V. McNutt, Federal Security Administrator (132 F. (2d) 653)— a decision to be dealt with in more detail in the next succeeding subdivision of this statement. Quoting pages 31-37 of the Administrator's brief:

"There is not the slightest basis in the record for believing that oleomargarine has been sold in recent years, or will be sold, in such a manner as to pass as butter, which, as we have shown, would be the circumstance required to bring into play the imitation labeling requirements of section 403 (c). Even if a manufacturer of oleomargarine wished to pass his product off as butter, he would be thwarted by the labeling provisions of the standard, the misbranding provisions

1 McCray v. United States, 195 U. S. 27.

2 Weeks v. United States, 245 U. S. 618; Seven Cases v. United States, 239 U. S. 510; Hipolite Egg Co. v. United States, 220 U. S. 45-each decided under the 1906 act. 3 Tnited States v. J. L. Hopkins and Co., (D. C. N. Y.), 199 Fed. 649.

4 With the exception of sec. 404, the other sections enumerated deal with coal-tar colors. Sec. 404 deals with emergency permit controls.