would prevent the importation of wholesome meat from other States and was therefore unconstitutional as an unreasonable burden on interstate commerce.29 In view of the reluctance of many States to accept outside inspection the opinion of the Court as expressed by Justice Harlan is of peculiar interest. He said in part:

"It will not do to say-certainly no judicial tribunal can, with propriety, assume that the people of Minnesota may not, with due regard to their health, rely upon inspections in other States of animals there slaughtered for purposes of human food." 30

A more recent case, in December 1934, concerned an ordinance of the city of Reno, Nev. This ordinance provided for the licensing and inspection by Reno officials of all bakeries selling their products in the city. The law became effective February 1, 1935, and on that date. California bakeries were prevented from making deliveries in Reno despite the fact that no move had been made to inspect their plants. The California bakeries whose products were sold in Reno secured a temporary injunction restraining the city from imposing its regulations. In March 1936 this injunction was made permanent by order of the United States District Court.31

HEALTH AND SANITARY MEASURES IN RELATION TO INTERSTATE COMMERCE

In concluding this examination of health and sanitary regulations, we may well raise a question as to the social desirability of this legislation. Obviously, the protection of public health through proper sanitary regulations and license requirements is highly desirable. Even if such health measures interfere with interstate commerce and increase the cost of milk to the consumer, probably few people would raise serious objection if they felt that public health could be protected in no other way. But are the two objectives, wholesome dairy products and free movement of goods in interstate commerce,

Minnesota v. Barber, 136 U. S. 313 (1890).

20 Ibid., p. 322.

1 Langendorf United Bakeries, Inc. v. City of Reno, 16 Fed. Supp. 442 (1936).

mutually exclusive? If we desire one, must we sacrifice the other?

Our study of the problem indicates that these ideals are by no means necessarily in conflict. A much greater degree of uniformity in health and sanitary regulations is possible without the loss of full protection to public health. The details of how this might be worked out are not within the province of this study, but there is no reason to believe that they could not be formulated through discussion and study by experts and administrators vitally interested in solving the problem.

Two possible ways out might be suggested here. These are general rather than detailed plans, and they are offered as suggestions, not as recommendations.

One possible way would be for Congress to impose a uniform set of sanitary requirements upon all dairy products moving in interstate trade, and provide that inspection be made by State officials subject to general supervision and check-up by the Federal Government. A plan not unlike this is in operation in England. This Federal action would need to be supported by parallel State legislation regulating intrastate trade in dairy products.

If this procedure is believed to involve constitutional difficulties or to give powers to the Federal Government which should be retained by the States, or if enforcement would be impracticable for any reason, then a plan could be adopted that would leave much more authority with the States.32 Under this program it would be necessary for the States to adopt some standard milk ordinance which would safeguard the twofold purpose of adequately protecting public health and interfering as little as possible with the free flow of dairy products. If their aim is really public health (not market restriction) such agreement, at least for a great number of States, ought not to be impossible. Probably under this scheme, it would be necessary to pro

32 The authors believe that, as a general proposition, cooperation between the States is preferable to a centralization of powers in the Federal Government. The degree to which it is desirable to have the Federal Government take over functions heretofore exercised by State or local authorities would seem to be determined by the prac tical necessities of each case.

vide Federal inspectors, with powers limited to investigation and report, whose duty it would be regularly to designate those States in which the inspection service was up to the agreed standard. If this were done and States adopted legislation permitting the entrance of dairy products from all other States reported by the Federal Government as meeting the agreed minimum standards, 33 then we might realize the objective both of wholesome dairy products and free trade among the States.

If we really wish to attain these objectives, we could, despite difficulties of procedure and detail which are always bound to arise, work out some kind of satisfactory program along one of the lines suggested above.

The fact is that health regulations, so far as they are directed to purely health objectives, need place no restraints on interstate or local commerce. On the other hand, if board-ofhealth regulations are to be used for protecting local dairy interests then interstate trade may be restricted. A major step forward would be accomplished if States and municipalities would. recognize and clearly state the purpose of their regulations. If, after open consideration, the decision is made to protect local dairy interests, then the question may well be faced as to whether this should be done through health regulations or by more direct means. At any rate, if the purpose is to protect public health let that clearly appear. If the aim is solely or in part to achieve market restriction, such purpose should likewise be publicly recognized.

STATE MILK CONTROL BOARDS

Between 1933 and 1936, 21 or more States attempted to deal with the dairy problem by setting up milk control boards of some kind. A few State laws are no longer in effect; 19 States still had milk-control laws on May 6, 1938. The depression years, 1931-34, marked a period of increasing milk production and low consumer purchasing power. As a result, fluid-milk consumption fell off in industrial

83 Possibly State adoption would not be necessary, for the courts might find that dairy products from a federally approved source in one State could not be barred from another.

centers, milk prices declined, and dairy farmers generally found themselves in a very difficult position.

The situation was further complicated by the fact that transportion improvements during the last 20 years have continuously widened the area from which fluid milk and cream can be profitably shipped to market. The natural protection formerly enjoyed by producers in the vicinity of the large industrial cities of the East has been greatly decreased not only through the development of railroad tank cars for shipping milk and cream, but particularly by the growing use of the motortruck. Improvements in roads and in truck-refrigeration methods, including tank trucks, have greatly increased the distance over which fluid milk and cream may be shipped to market.

State milk-control laws have been designed to help the dairy farmers and have provided pricefixing machinery to deal with the extremely complex problems of pricing and bargaining relationships which exist in this industry. The vicissitudes of these boards, their successes and failures, cannot be discussed here. We are primarily interested to examine the milk-control laws from the standpoint of their effect upon the free movement of milk and cream in interstate

commerce.

A central feature of State milk-control laws has been the setting of prices that distributors must pay the producers for fluid milk and cream. A difficult problem arose for those eastern industrial States into which milk could be profitably shipped from Western States and northern New England States. Thus, if the law were effectively to help producers within a given State, it must require distributors to pay the fixed price to all producers, both those within and those beyond the State lines. Otherwise, the effect would be to stimulate importation of fluid milk from out-of-State low-cost areas and further to embarrass the milk producers of the State.

To prevent this development, many of the early laws provided that the fixed price must be paid to outside producers as well as to those within the State. Such a provision made the milk-control law effective because it was im

possible to buy milk at a lower price outside the State than within the State. In fact, much support for these laws appears to have resulted from the belief that producers within the State, with out-of-State competition reduced, would be able to sell a larger proportion of their milk in the fluid-milk markets of their own State.

The New York Milk Control Board Act was the first in which this provision was put to court test. The case had to do with a New York milk dealer, G. A. F. Seelig, who sold milk in New York City which had been purchased in Vermont at a price lower than that which the New York State Milk Control Board ruled should be paid to producers whether in or outside the State. The Supreme Court of the United States, deciding the case in favor of Seelig, found that this provision of the New York law was a violation. of the commerce clause of the Constitution and, therefore, was unconstitutional. In delivering the opinion of the Court, Justice Cardozo said: "If New York, in order to promote the economic welfare of her farmers, may guard them against competition with the cheaper prices of Vermont, the door has been opened to rivalries and reprisals that were meant to be averted by subjecting commerce between the States to the power of the nation." 34

The chief threat of the milk-control boards to interstate commerce was therefore nullified by this decision. Nevertheless, there is at least some indication that these boards may at times, indirectly and informally, still discourage interstate shipments of milk or cream. All milk dealers must be licensed under the milk-control laws of most of the States. To secure such a license and to keep it, distributors must conform to numerous rulings and requirements of the State milk control board. In many States a dealer's license may be refused or revoked for action "demoralizing to price structure." It is claimed by dealers in certain States that the milk board puts effective pressure upon them to decrease or at least not to increase their out-ofState purchases of fluid milk. Such charges would be difficult to prove, but the powers of the milk boards are often so broad and include Baldwin v. G. A. F. Seelig, 294 U. S. 522 (1935).

such wide areas of administrative discretion that there is a clear possibility that their authority might be so used. To the extent that State boards do use their powers in this way, appreciable hindrance to interstate trade may result. Of course, any measures that result in controlling prices or production are likely to have some effect, direct or indirect, on interstate trade in dairy products. A thorough examination of this question is beyond the scope of this publication. It may be noted, however, that milk and milk products, in this country, are seldom if ever produced and distributed under conditions of pure competition. The alternative to public control is not open competition but a combination of competition and private monopolistic or semimonopolistic control.35

The larger question of whether there should be public control of the dairy industry in the interest of stability and orderly marketing cannot be dealt with here. We may merely emphasize the fact that efforts to stabilize the industry, whether through health and sanitary regulations or through price-fixing legislation, may appreciably hinder the movement of dairy products in interstate commerce. In promoting stability, interstate trade may be reduced. Here is a difficult problem of alternative objectives-one that needs careful study and that eventually the public must decide.

A number of bills have been urged in Congress by which the Agricultural Adjustment Administration would be empowered to adopt policies that would place restrictions on the free flow of dairy products in interstate trade. None of these bills has been adopted. None had the support of the Agricultural Adjustment Administration. In opposing an act of this nature—a shipping permit proposed in 1934 (H. R. 8988)the Administration took the position that:

"... Use of governmental powers to discriminate as between different groups of farmers has seemed to this Administration undemocratic and unjustifiable.

35 For a discussion of this subject see: E. W. GAUMNITZ and O. M. REED, SOME PROBLEMS INVOLVED IN ESTABLISHING MILK PRICES, Marketing Information Series, Agricultural Adjustment Administration, 1937.

"The erection of 'tariff walls' around milksheds, creation of monopoly for farmers within, and exclusion by law of those outside, have the same unfortunate effects inside this country as erection of international trade barriers has upon world commerce. They lead to retaliatory

action, which is injurious to the farmers and the public because it interrupts the economic flow of commerce." 36

36 BLACK, JOHN D., THE DAIRY INDUSTRY AND THE A. A. A. (Washington, D. C., 1935), p. 132.

HISTORY OF MARGARINE LEGISLATION 1

ALMOST from the time of its introduction into this country in the early 1870's Federal and State taxes and regulatory laws have, with varying success, been applied to the manufacture and sale of margarine (oleomargarine).2 Irrespective of whether or not such was its purpose, the actual effect of much of this legislation has been to raise appreciable barriers to interstate trade. in butter substitutes.

Federal margarine legislation, although to a certain extent restrictive, affects the country as a whole and, in the usual sense in which the expression is used, does not constitute a barrier to shipments across State lines. The history of Federal legislation may be briefly reviewed, however, as a background against which to examine the very important recent developments in State legislation relative to margarine.

A Federal margarine law providing for both. license fees and an excise tax was adopted in 1886.3 Annual license fees were set at $600 for manufacturers of margarine, $480 for wholesalers, and $48 for retailers. For dealers confining their business to uncolored margarine these license fees were reduced in 1902.4 An

1 For a more detailed historical treatment see: SNODGRASS, KATHARINE, MARGARINE AS A BUTTER SUBSTITUTE (Stanford University, 1930). A good brief account appears in DEWEES, ANNE, STATE AND FEDERAL LEGISLATION AND DECISIONS RELATING TO OLEOMARGARINE, Bureau of Agricultural Economics, U. S. Department of Agriculture, 1939.

As most margarine is now made from vegetable oils instead of from oleo and other animal oils, the term "margarine" is to be preferred to "oleomargarine."

24 Stat. 209.

432 Stat. 193.

nual payments for wholesalers were then placed at $200, and for retailers at $6.

The act of 1886 also provided for an excise tax of 2 cents per pound on all margarine manufactured in the United States and a stamp tax of 15 cents per pound on imported margarine. The act of 1902 distinguished between the colored and uncolored product, the excise on the former being 10 cents per pound and that on the latter one-fourth cent per pound. Numerous attempts to change these rates have met with failure, and they remain today the same as in 1902. Margarine imported from abroad has been subject to an import duty since 1883, as well as to the stamp tax imposed in 1886. The rate of duty since 1930 has been 14 cents per pound, the same as that paid on butter.

From the standpoint of this study of barriers to interstate trade, the history of State margarine legislation falls into two periods: (1) The years before 1929 when legislation that stood up in court tests was only moderately restrictive to interstate commerce, and (2) the period from 1929 to the present when effective restrictive legislation has been adopted and has survived the test of constitutionality.5

Even before the first Federal margarine law was adopted in 1886, over one-half of the States had enacted margarine laws. Most of these were planned to prevent the sale of margarine as butter, and some provided for license fees to be paid by margarine manufacturers and

Early State legislation did result in drastically restricting the manufacture and sale of colored margarine.