of the Secretary, but there is nothing to require the Secretary to make his ruling and his practice has been in the past to hold the rulings until the situation has so changed that the many issues raised by the petition in the first place become moot or the relief requested would not longer be of any benefit.

Furthermore, the review procedure should be extended to producers as well as to handlers. As the act is now written a producer has no right of review afforded in the statute. The handler and producer should be treated alike as far as judicial review is concerned.

One final word ought to be said about the Ruzicka case already referred to. The Supreme Court in 1946 held in substance that a handler cannot raise any defenses as to his liabilities under the act in enforcement proceedings brought by the Government under section 8a (7). Mr. Ruzicka justified his failure to pay certain contributions under the order on the basis that there had been a faulty inspection of accounts and improper test of milk and milk products by the Government.

The district court held that Ruzicka had not followed the administrative procedure under section 15 (A) to test whether there had been a faulty inspection of their account and improper test of their milk and therefore he could not raise these questions in an enforcement proceedings brought by the Government. The circuit court of appeals reversed the district court. The Supreme Court reversed the circuit court and required Ruzicka to pay the Government the amount which was claimed to be owing and then appeal to the Secretary, who had made the adverse ruling in the first place, to see whether he would reverse himself. Unquestionably the act must be amended so as to negate the full impact of the Ruzicka case for under it any handler must submit to any demand by the Government without question, whether legal or illegal. He must postpone his day in court until the Secretary elects to give it to him.

II. Producer referendum: The issuance of an order of the Secretary must be favored by at least a two-thirds vote of the producers. The cooperatives have been permitted to cast one ballot on behalf of all producers represented by it. In most markets the casting of the bloc ballot by the cooperative insures the adoption of any proposed order. Frequently there are a great number of producers within a cooperative who are not in favor of an order but are deprived of a vote. This should be remedied by permitting each individual producer to cast a secret ballot for or against any issues submitted to the farmers for approval. The least that should be done would be to require the cooperative to conduct a referendum among its own members to determine what the attitude is toward any particular proposal before the voting is done by the cooperative officials. The statute should also require that the count of the ballots should be public and witnessed and the results of the balloting be disclosed to interested parties. In Cleveland the Secretary announced that the order passed by a two-thirds majority but he refused to disclose the exact vote or to allow anybody to inspect the ballots.

Another point in the matter of voting has been practiced in Cleveland recently which appears to be illegal. The referendum among producers is so worded that a nay vote would not only defeat the amendments but throw out the entire order. This has apparently been adopted as a technique by the Department to insure that the co

operative is compelled to cast a ballot in favor of any amendment proposed by the Department. Otherwise the entire order would be lost. Nothing in the statute would permit such a procedure and it is obviously unfair to pressure the cooperative or any producers to take all or nothing.

Only producers shipping to the market on a day fixed by the Secretary are permitted to vote at a referendum. The day selected is not fixed by statute. This leaves too much latitude with the Secretary and it is believed that the fixing of a day certain by statute, such as the day the petition for an order or amendments is filed, should be accomplished.

The act grants considerable power to cooperatives to control membership of the co-ops and there have been a number of abuses in this regard. It affords lack of equal opportunity to producers of milk that is furnished to Federal order markets. Some co-ops have assumed the practice of receiving the payments from the market administrator and then distributing proceeds to the members of the co-op in accordance with the policy of the co-op. In effect this means producers do not receive the order price for milk furnished to the market and it appears the purpose of the act is not carried out since the entire justification for the act is to assure the producers an adequate price for milk to assure a pure and wholesome supply of milk for the conThe elaborate precautions to assure the producer of parity price for his milk seems to be contravened when the co-op can deduct whatever amount it desires from the milk check.

III. Jurisdiction of the Secretary: The language of the act pertaining to the jurisdiction of the Secretary to issue orders regulating milk in interstate commerce should be more clearly spelled out. A review of the congressional proceedings during the discussions of the act back in 1937 reveals that it was the purpose to take care of interestate markets near State lines or the borders of several States which could not be practically regulated by the States and where perhaps 50 percent of the milk flowed across a State line. Consequently the first few orders that were issued under the act involved clear interstate markets such as Boston, Toledo, Chicago, et cetera. Now we have orders in purely intrastate markets such as Columbus, Ohio, and more recently in Canton, Ohio. Under the views taken by the Secretary there is no market in the country that could not be made subject to a Federal milk order. He simply concludes that there is a burdening, affecting or obstructing interstate commerce in milk or milk products. The mere request for an order should not give the Secretary jurisdiction to issue one.

IV. Trade barriers: The statute should be amended so as to eliminate all trade barriers found in Federal orders at the present time except those made necessary by local health regulations. One of the avowed purposes of the act was to insure an adequate supply of pure and wholesome milk, but it has become apparent from the many orders that have been issued that one of the purposes of the Secretary has been to restrict the supply of milk in a very limited geographical area and to favor a limited number of producers. Penalties are imposed on handlers in most instances when they attempt to sell their products within a regulated marketing area unless their sales meet a certain fixed minimum.

In large metropolitan areas such as Cleveland, where the milk dealers are dependent on country pool plants for a large amount of their milk supply, restrictions are imposed to require these outside. milk plants to furnish certain minimum quantities of milk before they are regarded as a part of the pool. These quantities are not based on current market needs but usually some arbitrary percentages of total receipts. If they should deliver lesser quantities, then the milk which they sell in the marketing area carries with it certain penalties on the buying handler, which make it difficult, if not impossible, for handlers to purchase such other source milk.

A trade barrier of this type was declared invalid in the case of Kass v. Brannan (196 F. 2d 791), commonly referred to as the Babylon case. It will serve no useful purpose to repeat all the facts in that case but it will suffice to say that a regulation under the New York order, which required a handler to pay a penalty into the pool for the purchases of outside milk, was held invalid as not being in accordance with the provisions of the act. In spite of the holding in this case, however, order provisions still exist and are enforced which require payments of penalties for outside milk purchases.

Section 8c (5) (G) of the act provides that no order shall prohibit or in any manner limit the marketing in any area of any milk or milk products produced anywhere in the United States. This provision of the act has been ignored or given such limited application that it is now meaningless. The Secretary has proceded to adopt provisions in almost every order that prohibit, or at least greatly limit, the marketing of milk which is not produced by the select group of producers being favored by the order. Penalties are even placed on milk which is transferred between Federal order markets.

V. Findings should be supported by a preponderance of the evidence: The Department claims to be operating under the Administrative Procedure Act and claims that its findings are supported by substantial evidence in the record. A judicial officer under the Secretary who makes the decision on 15A petitions holds in almost every instance that he finds substantial evidence in the record to support the conclusions and findings of the Secretary. What is substantial evidence? With the exhibits that the Government inserts in every hearing record, it is conceivable that there is substantial evidence in the record to support almost any conclusion with respect to milk or milk products. Many times, however, the substantial evidence relied on does not amount to a preponderance of the evidence. There have been innumerable instances where the handlers, producers, and all others agreed that a certain proposal or amendment should be adopted to maintain orderly marketing conditions. The final decision of the Secretary, however, would be to the contrary. This would seem to be inconceivable, but it has happened many times. If the act required that a preponderance of evidence be found in support of any particular change, this result would hardly be possible.

It has many times come to the attention of handlers that there are certain fixed policies and theories within the Department with respect to different problems arising under milk regulations. Regardless of what the evidence may show at any particular hearing, these policies are followed, and on occasions representatives of the Department have not been bashful in so stating.

In the promulgation of the Canton milk order a proposal was made by the cooperative for a base-surplus plan which was opposed by the handlers. The recommended decision and the final order contained a supply-demand proposal which was similar to other supply-demand formulas adopted in other parts of Ohio, but, of course, bore no resemblance to the base surplus proposed for Canton. A large part of the hearing record was devoted to the discussion of base surplus but nothing was said during the course of the hearing, nor did anybody advocate a supply-demand formula. It was a clear case of the Department superimposing its views on the market, irrespective of what was reflected in the hearing record.

In the Cleveland market handlers showed in many amendment hearings that ice-cream ingredients could be bought from outside sources for considerably less than the prices fixed by Order No. 75. Facts and figures were introduced showing losses in thousands of dollars because of the inequitable pricing of ice-cream ingredients. The requests met deaf ears within the Department. As a result, one of the largest handlers in the market overhauled its entire corporate structure so as to separate ice-cream operations from fluid-milk operations, thereby putting the ice-cream operations out from under the order. Shortly after this was accomplished and at a subsequent amendment hearing the Department finally granted a substantial part of the relief that had been requested for several years.

The act should be amended to require that any finding of the Secretary be supported by a preponderance of the evidence in the record and the reviewing court should be required to look at the record to see whether this requirement is being met, for the Secretary can state that there is a preponderance when in fact there is not.

VI. Nonpricing orders: Consideration should be given to changes in the act which would provide marketing orders for milk without fixing prices but providing a method for arbitration of prices monthly by producer and handler groups. Such arbitration should, of course, be exempted from antitrust laws. Under this sort of an arrangement the Government would operate the milk pool, audit accounts, gather and publish statistics, and do everything that is now being done by the local market adminisrators except the fixing of prices. One of the big objections to formula pricing has been its rigidity. Conditions change within a market so rapidly that amendments and pricing provisions cannot be made in time to afford the necessary relief. Arbitrating of prices each month would be constantly in tune with the times and would eliminate the necessity for frequent, extensive, and costly administrative hearings.

SUGGESTED ADMINISTRATIVE AND PROCEDURAL CHANGES

I. Favoritism should be eliminated: Any handler who has participated in an administrative hearing has suffered from feelings of futility because of the very apparent prejudice which representatives of the Government openly display in favor of the producer position on any given issue. Members of the Department of Agriculture openly state that the act was intended to benefit the producer and usually anything that would tend to benefit a handler or the consuming public or bring equity between handlers and producers will meet deaf ears unless there may be coincidentally some benefit to the producers. The act was

intended to benefit producers and rightly so, but not to the prejudice of every other element in the milk business. The act was also intended to benefit the public.

At one table at any hearing are representatives of the Government who for the record disavow any intent to favor or oppose any proposal or to influence any decision which may result from the hearing. Behind the scenes, however, the representatives of the Government coach the representatives of the farmers' groups, suggest ways and means of accomplishing their ends through evidence and testimony, through examination of witnesses, bring out information which they think will favor the producers' position, quite openly sometimes insure that the record will contain evidence which will support a finding which is in accordance with their own ideas, and in the final analysis literally write the decision which is usually rubber stamped by the Secretary or one of his assistants. A suggested change in this regard would be to have the representative of the Government either be parties to the proceedings or not participate at all. Underhanded participation destroys faith in the whole proceedings.

II. Elimination of delays: There ought to be a time limit within which the Department must act on the issues raised in administrative hearings. There have been many instances when months and years have passed so that the need for the relief requested at the hearing has long since passed. There have been instances when no action was ever taken as a result of a hearing. Marketing conditions change rapidly and therefore changes in milk orders should be made without delav.

III. A change in philosophy: One of the problems in the past has been that a few people within the Government have determined in their own minds what is best for the dairy industry and have set up certain policies and philosophies and have proceeded to execute them regardless of what the industry required. There has been too much room in the past for people in important positions to influence decisions through their own pet ideas, prejudices, and leanings. It is doubted whether a change in the statute or a change in the procedure will effect any change in their thinking. It is difficult to legislate a change in attitude. The only remedy is to staff the dairy branch with efficient and competent persons who are administrators, not dictators. This must be done or any new act or change in procedure will be sabotaged by those who are certain that their way is the best and have already demonstrated that they will not yield to change. (The document referred to is as follows:)

Mr. E. W. GAUMNITZ,

Chairman, Technical Committee on Federal Milk Orders,

National Cheese Institute, Inc., Chicago, Ill.

AUGUST 27, 1953.

DEAR SIR: This letter is written in an effort to cooperate with your committee and the United States Department of Agriculture in the study now being made of Federal milk market orders. The Columbus, Ohio, market has been regulated by an order since February 1946, and the observations and suggestions contained herein are based principally upon our experience under the order.

By way of preface, it should be noted the handlers regulated by the Columbus order and the writer are cognizant of the fact there are many complex problems confronting the Department of Agriculture in administering the Agricultural Marketing Agreement Act of 1937 and the various orders promulgated under it. In view of the complexities of those problems opinions will vary as to the best solutions as well as to the procedure which should be followed in administration,