1157. Misbranding of Special Formula Tablets #2. U. S. v. 1 Drum of Special
Formula Tablets #2. Tried to the court. Judgment for the Govern-
ment. Decree of forfeiture and destruction. Judgment affirmed on
appeal to the Circuit Court of Appeals. Application for writ of certiorari
denied by the Supreme Court.     (F. D. C. No. 5800.    Sample No. 51270-B.)
On September 22, 1941, the United States attorney for the District of Massa-
chusetts filed a libel against 1 drum containing 99,940 tablets of the above-named
product at Boston, Mass., alleging that the article had been shipped on or about
July 3 and August 7, 1941, from Buffalo, N. Y., by the Arner Co., Inc.; and
charging that it was misbranded.
Analysis disclosed that the article contained an extract of a laxative plant
drug such as cascara sagrada, sodium bicarbonate, and sodium citrate.
The article was alleged to be misbranded (1) in that its label failed to bear
the common or usual names of the active ingredients in the preparations; (2)
in that its labeling bore no directions for use; and (3) in that its labeling failed
to bear adequate warnings, since the labeling did not warn the purchaser that
the use of the article in case of abdominal pain, nausea, vomiting, or other
symptoms of appendicitis might be dangerous and that frequent or continued
use of the article might result in dependence upon laxatives to move the bowels.
On March 31, 1943, Paul Case, Brockton, Mass., and the Arner Co., Inc., hav-
ing appeared as claimants, and the case having been submitted to the court on
an agreed statement of facts, the following opinion was handed down by the
court:
:  I
SWEENEY, District Judge: "This is a libel for the condemnation of certain drugs
described in the libel as Special Formula Tablets No. 2. Paul Case has filed an
answer asserting ownership of the goods seized. The Arner Co., Inc., in its
answer, asserts that as agent for Case it shipped the goods in two large drums,
and at the time of shipment it had in its possession a duly executed guarantee
from Case that the drugs shipped would be packaged and labeled to conform
to the law before sale to the consumer. The parties have agreed on the facts,
and the real question of law is whether this shipment was exempt under the
regulations.
"The tablets were manufactured in Buffalo, New York, by The Arner Co.,
Inc., for Paul Case of Brockton, Massachusetts, under a special formula owned
by Case. They were labeled Special Formula Tablets No. 2 upon shipment, and,
at all times thereafter and when seized, were in the container in which they
had been shipped, and were not packed for retail sale. They were received
by Case, and it was upon his premises that they were seized under 21 U. S. C. A.
? 334 by the United States Marshal, who found one drum containing about
40,000 tablets of Special Formula No. 2. The parties agree that a representa-
tive sample of the tablets shows them to be 'sugar coated tablets containing
sodium citrate, sodium bicarbonate and extract of a plant drug, such as cascara
sagrada.' The Arner Co., Inc., is not the operator of the establishment where
the tablets were to be labeled or repackaged.
"The case is one of first impression. The claimants contend that they are
not required by the law to label the drugs, because they are in bulk. The
statute requires all shipments to be properly labeled, and a special exemption
for goods in bulk would not have been made in Section 353 (a), (21 U. S. C. A.
? 353 (a) if bulk packages were not covered by the Act. Strong, Cobb & Co. v.
United States, 103 F 2d 671, was a prosecution under the old Pure Food and Drug
Act for drugs shipped in bulk.   The present law is no narrower.
"There are two exemptions in Regulations ?2.107 (a) under Section 353 (a),
21 U. S. C. A. ? 353 (a). The first is where the person who introduces the
goods into interstate commerce is the operator of the establishment where the
goods are to be repackaged. It is to be noted that the Regulation is addressed
to the shipper and not the operator of the establishment. The Arner Co., Inc.,
manufactured and shipped the goods, and admits it is not the operator of the
establishment where the drugs were to be repacked. Case claims that he in-
troduced the goods into commerce through his agent, The Arner Co., Inc. There
is no exemption in the regulations where the operator of the establishment that
repacks introduces the goods into interstate commerce through an agent
designated for that purpose. The exemption is to a qualified shipper, and the
only shipper who can qualify is one who is the operator of the repacking plant.
Further, the commercial agency of The Arner Co., Inc., to ship the goods was
not such an agency as a law whose purpose is to guard the public health can
notice. It does not avoid the scope of interstate commerce. Santa Cruz Fruit
Packing Company v. National Labor Relations Board, 303 U. S. 453.
"The second exemption requires an agreement between the parties 'containing
such specifications for the processing, labeling, or repacking, as the case may be,
of such drug or device in such establishment as will insure, if such specifications
are followed, that such drug or,device will not be adulterated or misbranded
within the meaning of the Act upon completion of such processing, labeling or
repacking.' The agreement submitted by the claimants contains no specifica-
tions as to the label on the retail package, and cannot be said to conform to
the Regulation.
"I conclude that the seized shipment was not within the exempted classes,
and, accordingly, was liable to seizure and forfeiture.
"A decree in accordance with the above may be submitted."
On April 6, 1943, judgment of forfeiture was entered and the product was
ordered destroyed. Notice of appeal was filed by the claimants on April 13,
1943, and on May 4, 1944, the United States Circuit Court of Appeals for the
First Circuit handed down the following opinion which affirmed the. judgment
of the District Court:
MA HONEY, J.: "This is a libel for the condemnation of certain drugs alleged
to have been misbranded in violation of the Act of Congress of June, 1938, c.
675, 52 Stai. 1040, 21 U. S. C. ?? 301-392, known as the Federal Food, Drug,
and Cosmetic Act. The drugs were manufactured in Buffalo, New York, by The
Arner Co., Inc., for Paul Case of Brockton, Massachusetts, under a special
formula owned by Case and were shipped f. o. b. from Buffalo by Arner to
Case in Brockton where they were seized on the premises of the latter while in
the bulk package in which they had been shipped. The package, a drum of
about 40,000 tablets, was labeled 'Special Formula Tablets No. 2-The product
contained herein must be packaged and labeled at point of destruction before
sale.' The drugs were to be repackaged by Case for the retail trade. The
libel alleged that the drugs were misbranded in that the label did not contain
the required names of the active ingredients of the preparation and contained
no statement of warning and directions. The appellants denied that the drugs
were misbranded and asserted that they were exempt from the labeling re-
quirements of the Act as they were in bulk package, not retail packages and
not intended for sale until repackaged and labeled. Paul Case, in his answer,
asserts ownership of the goods. Th# Arner Company asserts that it shipped
the goods as agent for Case and that at the time of shipment it had in its
possession a duly executed guarantee from Case that the drugs shipped would
be packaged and labeled to conform to the law before sale to the consumer.
It is agreed that the composition of said Special Formula Tablets No. 2 is as
follows: sugar coated tablets containing sodium citrate, sodium bicarbonate
and extract of a plant drug, such as cascara sagrada. The Arner Company is
not the operator of the establishment where the tablets were to be labeled or
repackaged. The Arner Company and Paul Case here appeal from the decree
of forfeiture. They contend (1) that 'labeling' as defined in the statute does
not apply to containers of bulk shipments; (2) that regulation (a) (2) of
? 503 (a) (21 U. S. C. ? 353) is invalid because it exceeds the limitations of the
statute; (3) that if said regulation is not invalid, it has been sufficiently complied
with; (4) that the bulk package herein involved is especially exempted under
regulation (a) (1) of ? 503 (a).
"Section 301 (a) (21 U. S. C. ? 331) prohibits 'the introduction or delivery
for introduction into interstate commerce of any food, drug, device, or cosmetic
that is adulterated or misbranded'. By ? 502 (21 U. S. C. ? 352) it is provided
that a drug shall be deemed misbranded:' (e) If it is a drug and is not designated
solely by a name recognized in an official compendium unless its label bears (1)
the common or usual name of the drug, if such there be; and (2), in case it is
fabricated from two or more ingredients, the common or usual name of each
active ingredient, including the quantity, kind, and proportion of any alcohol,
and also including, whether active or not, the name and quantity or proportion
of any bromides, ether, chloroform, acetanilid, acetphenetidin, amidopyrine,
antipyrine, atropine, hyoscine, hyoscyamine, arsenic, digitalis, digitalis glu-
cosides, mercury, ouabain, strophanthin, strychnine, thyroid, or any derivative
or preparation of any such substances, contained therein. . . .'*
"Section 201 (k) (21 U. S. C. ?321) in defining 'label' provides: 'The term
"label" means a display of written, printed, or graphic matter upon the im-
mediate container of any article; and a requirement made by or under authority
of this chapter that any word, statement, or other information appear on the
label shall not be considered to be complied with unless such word, statement,
or other information also appears on the outside container or wrapper, if any
there be, of the retail package of such article, or is easily legible through the
outside container or wrapper.'
"Contrary to appellants' contention, this section does not indicate that the
labeling requirement applies only to retail packages and not to bulk shipments.
*That could not be the proper interpretation in view of ? 503 (a) which directs
the Administrator to promulgate regulations exempting such shipments on
certain conditions: 'The Administrator is hereby directed to promulgate regu-
lations exempting from any labeling or packaging requirement of this chapter
drugs and devices which are, in accordance with the practice of the trade, to
be processed, labeled, or repacked in substantial quantities at establishments
other than those where originally processed or packed, on condition that such
1Also pertinent to the libel is: "(f) Unless its labeling bears (1) adequate directions
for use; and (2) such adequate -warnings against use in those pathological conditions
or by children where its use may be dangerous to health, or against unsafe dosage or
methods or duration of administration or application, in such manner and form, as are
necessary for the protection of users. . . ."
drugs and devices are not adulterated or misbranded under the provisions of
this chapter upon removal from such processing, labeling, or repacking estab-
lishment.'
"The first clause of ? 201 (k)-'The term "label" means a display of written, (
printed, or graphic matter upon the immediate container of any article'-thus
must refer to an immediate container of an article shipped in bulk as well as the
retail package and the second clause in referring specifically to retail packages
must be an extension of labeling requirements and not a limitation. If ? 201 (k)
were not intended to apply to bulk shipments, ? 503 (a) would be purposeless and
meaningless. There would be no need to provide for the promulgation of regu-
lations exempting bulk shipments from labeling requirements under designated
conditions if the labeling requirement applied only to retail packages in the
first place.
"Appellants rely in large part on a case under the Food and Drugs Act of
1906, 34 Stat. 768, United States v. Sixty-Five Casks Liquid Extracts, 170 Fed.
449 (N. D. W. Va. 1909) afiirmed on appteal by memorandum decision in United
States v. Knowlton Danderine Co., 175 Fed. 1022 (C. C. A. 4th, 1910). They
contend (1) that the case was cited with approval in Hipolite Egg Co. v. United
States, 220 U. S. 45 (1911), and (2) that it is squarely in point with the case at
bar. The Danderine case was unsuccessfully relied on by the plaintiff in error
in the HipoUte Egg case. The Supreme Court set forth that case as follows, pp.
52, 53: 'The articles involved in the first case were charged with having been
misbranded and consisted of drugs in casks, which were shipped from Detroit,
Michigan, to Wheeling, West Virginia, there to be received by the Knowlton
Danderine Company in bulk in carload lots and manufactured into danderine,
of which no sale was to be made until the casks should be emptied and the
contents placed in properly marked bottles.
" 'It was contended that the articles, not having been shipped in the casks
for the purpose of sale thus in bulk, but shipped to the owner from one State
to another for the purpose of being bottled into small packages suitable for sale,
and when so bottled to be labeled in compliance with the requirements of the
act, were not transported for sale, and were therefore not subject to libel under
?10 of the act.
" 'The contention submitted to the court the construction of the statute. The
court, however, based its decision upon the want of power in Congress to
prohibit one from manufacturing a product in a State and removing it to another
State "for the purpose of personal use and not sale, or for use in connection with
the manufacture of other articles, to be legally branded when so manufactured;"
and concluded independently, or as construing the statute, that the Danderine
company, being the owner of the property, shipped it to itself and did not come
within any of the prohibitions of the statute. The case was afiirmed by the
Circuit Court of Appeals, 175 Fed. 1022. The court, however, expressed no
opinion as to the power of Congress. It decided that the facts did not exhibit
a case within the purpose of the statute, saying: "No attempt to evade the law,
either directly or indirectly or by subterfuges, has been shown, it appearing that
the manufacturer had simply transferred from one point to another the product
he was manufacturing for the purpose of completing the preparation of the
same for the market. Under the circumstances disclosed in this case, having in
mind the object of the Congress in enacting the law involved, we do not think the
liquid extracts proceeded against should be forfeited. In reaching this conclu-
sion we do not find it necessary to consider other questions discussed by counsel
and referred to in the opinion of the court." '
"Additional facts not stated by the Supreme Court were that Parke, Davis &
Co., under a contract with the Danderine Company, compounded the product
in accordance with a formula, a trade secret owned by the Danderine Company,
and caused it to be shipped to that company. Whether it was a part of the
agreed statement of facts, or whether it was a conclusion from the terms of the
contract, Parke, Davis & Co. were considered by the circuit court to be agents
of the Danderine Company and not independent contractors in the manufactur-
ing of the product. We cannot conclude the same, nor was it so argued to us at
the hearing, as to the Arner Company here. In the facts before us, insofar as
the manufacturing of the drug is concerned, Arner Company cannot be said to
be mere agents. They compounded the drug as independent contractors and
title passed at some time to Paul Case.
"As was mentioned above, the Supreme Court refused to sustain the plaintiff
in error's position in the HipoUte Egg case, and the plaintiff in error there relied
on the Knowlton Danderine case. The facts in Hipolite Egg Co. v. United States,
supra, p. 50, were these: the action was a libel under ? 10 of the Act of 1906,
34 Stat. 768, '* * * against fifty cans of preserved whole eggs, which had been
prepared by the Hipolite Egg Company of St. Louis, Missouri.
" 'The eggs before the shipment alleged in the libel were stored in a warehouse
in St. Louis for about five months, during which time they were the property of
Thomas & Clark, an Illinois corporation engaged in the bakery business at
Peoria, 111.
" 'Thomas & Clark procured the shipment of the eggs to themselves at Peoria,
and upon the receipt of them placed the shipment in their storeroom in their
bakery factory along with other bakery supplies. The eggs were intended for
baking purposes, and were not intended for sale in the original, unbroken
packages or otherwise, and were not so sold. The Hipolite Egg Company
appeared as claimant of the eggs, intervened, filed an answer, and defended
the case, but did not enter into a stipulation to pay costs.
" 'Upon the close of libellant's evidence, and again at the close of the case,
counsel for the Egg Company moved the court to dismiss the libel on the ground
that it appeared from the evidence that the court, as a Federal court, had no
jurisdiction to proceed against or confiscate the eggs, because they were not
shipped in interstate commerce for sale within the meaning of ? 10 of the Food
and Drugs Act, and for the further reason that the evidence showed that the
shipment had passed out of interstate commerce before the seizure of the eggs,
because it appeared that they had been delivered to Thomas & Clark and were
not intended to be sold by them in the original packages or otherwise.'
"The decision of the Supreme Court affirming the decree of condemnation
must be taken as in effect a disapproval of the doctrine of the Danderine case.
As was said in Strong, Com & Co. v. United States, 103 F. (2d) 671, 673
(C. C. A. 6th, 1939) : 'However, appellant maintains that under the doctrine of
United. States v. KnovMon Danderine Co., 4 Cir., 175 F. 1022, there was in
contemplation of law no shipment in interstate commerce under the Food and
Drugs Act because the tablets were shipped in bulk, to be repackaged by the
Scotch-Tone Company before retail distribution. The conclusive answer to
appellant's contention is that the doctrine of the Knowlton Danderine Co. case
has been in effect disapproved in Hipolite Egg Co. v. United States, 220 U. S. 45,
31 S. Ct. 364, 55 L. Ed. 364. In that case the Knowlton Danderine decision was
relied on as supporting the proposition that Section 10 of the Food and Drugs
Act, 21 U. S. C. A. ? 14, does not apply to an article of food which has not been
shipped for sale, but which has been shipped solely for use as raw material in the
manufacture of some other product. The court, in discussing the proposition,
states that the situations covered by the statute cannot be qualified "bythe purpose
of the owner to be a sale" and holds that the contention of the Egg Company is
untenable.' See also Philadelphia Pickling Co. v. United States, 202 F. 150,
151-2, (C. C. A. 3rd, 1913).
"The appellant Arner Company argues that title to the drugs passed to Paul
Case within the state of origin for transportation and that Arner Company acted
merely as agent for Case in shipping the goods in interstate commerce, hence the
shipment is not within the Act. Such argument cannot avail the appellants. The
passing of title in the state of origin for transportation does not take the case
out of the Act. Hipolite Egg Co. v. United States, supra; United States v. Tucker,
U. S. D. C. S. D. Ohio, April 8,1911 (reported in Decisions of Courts In Cases Under
The Federal Food and Drugs Act by Mastin G. White and Otis H. Gates, at
page 248).
"As was said in Santa Cruz Fruit Packing Co. v. National Labor Relations
Board, 303 U. S. 453, 463 (1938): '. . . sales to purchasers in another State are
not withdrawn from federal control because the goods are delivered f. o. b. at
stated points within the State of origin for transportation. See Savage v. Jones,
225 U. S. 501, 520; Texas d N. O. R. Co. v. Saiine Tram Co., 227 U. S. Ill, 114,122;
Pennsylvania R. Co. v. Clark Bros. Coal Mining Co., 238 U. S. 456, 465-468. A
large part of the interstate commerce of the country is conducted upon that basis
and the arrangements that are made between seller and purchaser with respect
to the place of taking title to the commodity, or as to the payment of freight,
where the actual movement is interstate, do not affect either the power of Con-
gress or the jurisdiction of the agencies which Congress has established . . .'
"The Act is concerned not with the proprietory relation to a misbranded or an
adulterated drug but with its distribution.' United States v. Dotterweich, 320
U. S. 277, 283 (1943).
641299-45 2
"The appellants argue that although Hipolite Egg Co. v. United States, supra,
and Strong, Cobb & Co. v. United States, supra, were cases holding bulk shipments
within the earlier Act, those cases involved adulterated goods which, of course,
would be harmful to the ultimate consumer. Since such consumer never will
see the label on the bulk package, the argument runs, there is no protection to him
in requiring such label and hence nothing in such a requirement facilitates the
purposes of the Act.2 The argument is based on the maxim that where the
reason ceases (protection of consumer) the rule also ceases. The fallacy in this
line of reasoning lies in a misconception of the functions of the label. In addi-
tion to advising the ultimate consumer, there are other purposes of a label: 'The
label upon the unsold article is in the one case the evidence of the shipper that
he has complied with the act of Congress, while in the other, by its misleading
and false character, it furnishes the proof upon which the Federal authorities
depend to reach and punish the shipper and to condemn the goods. If truly
labeled within the meaning of the act his goods are immune from seizure by
Federal authority; if the label is false or misleading within the terms of the law
the goods may be seized and condemned. In other words the label is the means
of vindication or the basis of punishment in determining the character of the
interstate shipment dealt with by Congress.' McDermott v. Wisconsin, 228 U. S.
115, 132-133 (1913). If adulterated bulk shipments are within the purview of
the act as established by the Hipolite Egg and Strong, Cobb & Co. cases, the
requirement of labeling of bulk goods facilitates the detection and proof of such
adulteration. Of course, enforcement of a labeling requirement could not be
effective if the failure to meet the requirement were prosecuted only in the
comparatively rare instances where the goods actually were adulterated.
"Another facet of the same argument is appellants' contention that since Paul
Case supplied the formula for the drugs he knew what they were to contain and
therefore any label indicating the contents would be superfluous. This argu-
ment overlooks the aforementioned functions of a label. If the drugs sent out
by the Arner Company were of less strength than called for by the order, Paul
Case might not detect this and might repack them in retail containers, mis-
branding them because the Arner Company had not properly filled his order,
and the ultimate consumer would be getting a product which was adulterated
within the meaning of the Act. If the bulk shipment were labeled, the Food
and Drug administrators would be aided in detecting the adulteration since they
could sample the bulk shipment and compare it with the label. In this way
the administration of the Act would be facilitated. Adulteration could be detected
in the early bulk stage before it ever got into retail channels.
"We turn now to. a consideration of ? 503 (a) which provides for regulations
exempting bulk shipments from the labeling requirement:8 'Sec. 353(a). The
Administrator is hereby directed to promulgate regulations exempting from any
labeling or packaging requirement of this Act drugs and devices which are, in
accordance with the practice of the trade, to be processed, labeled, or repacked
in substantial quantities at establishments other than those where originally
processed or packed, on.condition that such drugs and devices are not adulterated
2 Since the regulations provided for by the Act exempt bulk goods from the labeling
requirement on condition that certain information otherwise required on the label is set
forth in an agreement, this argument would be more properly addressed to those
regulations hereinafter considered.
8 Sen. Rep. No. 493, 73rd Cong., 2d Sess., 1934, p. 9, accompanying S. 2800, one of the
bills leading to enactment of the present law declared: 'Par. (c) authorizes the exemption
from any labeling or packaging requirement of the bill articles which are, in accordance
with the practice of the trade, processed, labeled, or repacked in substantial quantities
at establishments other than those where they are originally processed or packed, on con-
dition that the articles conform to the provisions of the bill at the time they leave the
processing, labeling or repacking establishment. This exemption is necessary to avoid
unwarranted interference with certain legitimate commercial operations, such as the
canning of food at branch canneries and delivery to a central plant for labeling, or the
bulk shipment of crude drugs for processing and repacking before distribution to
consumers.'
In House Report No. 2139 (75th Cong., 3rd Sess., 1938) the following comment on
section 405(2) of the bill in relation to exemption of labeling with respect to food ap-
pears (p. 6) : "Section 405 authorizes exemptions from the labeling requirements of the
act which are not provided by the present law but which have been permitted by admin-
istrative regulation. There is no necessity for labeling of any kind on most of the types
of open containers of fresh fruits and fresh vegetables. In certain cases there is a very
real need for the exemption of canned food and other food from labeling. For examnle,
most of the salmon packed in Alaska is shipped unlabeled to Seattle, Portland, and San
Francisco, and from these points distributed under appropriate label. The exemptions
will apply only where the interests of consumers will not be jeopardized."
or misbranded under the provisions of this chapter upon the removal from such
processing, labeling, or repacking establishment.' The pertinent regulation
promulgated under this section provides: 'Regulation. [? 2.107] (a) Except
as provided by paragraphs (b) and (c) of this regulation, a shipment or other
delivery of a drug or device which is, in accordance with the practice of the
trade, to be processed, labeled, or repacked in substantial quantity at an estab-
lishment other than that where originally processed or packed, shall be exempt,
during the time of introduction into and movement in interstate commerce and
the time of holding in such establishment, from compliance with the labeling
and packaging requirements of sections 501(b) and 502(b), (d), (e), (f), and
(g) of the Act if-(1) The person who introduced such shipmtent or delivery
into interstate commerce is the operator of the establishment where such drug
or device is to be processed, labeled, or repacked; or (2) in case such person
is not such operator, such shipment or delivery is made to such establishment
under a written agreement, signed by and containing the post-office addresses of
such person and such operator, and containing such specifications for the proc-
essing, labeling, or repacking, as the case may be, of such drug or device in such
establishment as will insure, if such specifications are followed, that such drug
or device will not be adulterated or misbranded within the meaning of the Act
upon completion of such processing, labeling, or repacking. Such person and
such operator shall each keep a copy of 'such agreement until all such shipment
or delivery has been removed from such establishment, and shall make such
copies available for inspection at any reasonable hour to any officer or employee
of the Agency who requests them.' *
"The appellants contend that the Administrator went beyond the statute
in requiring a written agreement containing specifications. Their contention
is that ? 503(a) requires regulations flatly exempting such bulk shipments from
the labeling provision and providing no safeguarding conditions to such exemption.
To so construe the section would 'read(s) an exception to an important pro-
vision safeguarding the public welfare with a liberality which more appropriately
belongs to enforcement of the central purpose of the Act'. United, States v.
Dottervoeich, 320 U. S. 277 (1943). The Supreme Court thus clearly indicated in
the Dotterweich case what must be our guide in construing the Act. As Mr. Jus-
tice Frankfurter said: 'The Food and Drugs Act of 1906 was an exertion by
Congress of its power to keep impure and adulterated food and drugs out of the
channels of commerce. By the Act of 1938, Congress extended the range of its
control over illicit and noxious articles and stiffened the penalties for disobedience.
The purposes of this legislation thus touch phases of the lives and health of
people which, in the circumstances of modern industrialism, are largely beyond
self-protection. Regard for these purposes should infuse construction of the
legislation if it is to be treated as a working instrument of government and not
merely as a collection of English words. See Hipolite Egg Co. v. United States,
220 U. S. 45, 57, and McDermott v. Wisconsin, 228 U. S. 115, 128. * * *
Nothing is clearer than that the later legislation was designed to enlarge and
stiffen the penal net and not to narrow and loosen it. This purpose was
unequivocally avowed by the two committees which reported the bills to the
Congress. The House Committee reported that the Act "seeks to set up effective
provisions against abuses of consumer welfare growing out of inadequacies in the
Food and Drugs Act of June 30,1906". (H. Rep. No. 2139, 75th Cong., 3rd Sess.,
p. 1.) And the Senate Committee explicitly pointed out that the new legislation
"must not weaken the existing laws", but on the contrary "it must strengthen
and extend that law's protection of the consumer". (S. Rep. No. 152, 75th Cong.,
1st Sess., p. 1).'
* The remainder of this regulation provides:
"(b) An exemption of a shipment or other delivery of a drug or device under clause
(1) of paragraph (a) of this regulation shall, at the beginning of the act of removing
such shipment or delivery, or any part thereof, from such establishment, become void
oo initio if the drug or device comprising such shipment, delivery, or part is adulterated
or misbranded within the meaning of the Act when so removed. ..."
"(d)  An exemption of a shipment or other delivery of a drug or device under clause
(2) of paragraph (a) of this regulation shall expire-
"(1) at the beginning of the act of removing such shipment or delivery, or any part
thereof, from such establishment if the drug or device comprising such shipment, delivery,
or part is adulterated or misbranded within the meaning of the Act when so removed; or
"(2) upon the refusal by the operator of the establishment where such drug or device
is to be processed, labeled, or repacked, to make available, for inspection a copy of the
agreement, as required by such clause."
"Section 503 (a) does not state the exemption. 'It authorizes the formulation
of the exemption by regulations. Therefore, unless contrary to law, arbitrary,
or unreasonable, the terms of the exemption can be prescribed in the discretion
of the administration'. See Hoge: An Appraisal of the New Drug and Cosmetic
Legislation, 6 Law and Contemporary Problems 116. Had Congress intended an
outright exemption of bulk shipments from the labeling requirement without
restrictive terms of any sort, there would have been no need for it to provide
for regulations formulating the exemption; the law would have simply stated
the exemption. The agreement containing specification's for the labeling of the
drugs as provided in regulation (a) (2) serves the same purposes of facilitating
the enforcement of the Act as was indicated by the Supreme Court in McDermott
v. Wisconsin, supra, to be the purpose served by a label on a retail article before
the article is sold. Applied to a situation like the case at bar it would aid in the
detection and proof of adulteration in the shipment from the manufacturer to
the proprietor of the formula. Cf. Strong, Cobb & Co., Inc. v. United States,
supra. There is no hindrance to honest business in this requirement. The
instrument5 which is here purported to be such an agreement is neither signed
by the shipper, nor does it contain any specifications for the labeling as required
by the regulation (a) (2). Obviously such an instrument does not serve the use-
ful function indicated above and was intended for some purpose entirely foreign
to the regulation.
"Regulation (a) (1) is not applicable to this case. It pertains to a case
where the repacker and the person shipping the article to be repacked are one
and the same person with plants in different states. See Toulmin, Law of Food,
Drugs and Cosmetics (1942) p. 322, ? 173. There is no danger in such a case of
the repacker unwittingly passing on adulterated drugs to the ultimate consumer.
The regulation does not exempt a repacker who introduces the goods into com-
merce through an 'agent' designated for that purpose, which 'agent' was the
vendor of the goods. This 'agency' of the Arner Company to ship the goods can
no more bring the appellants within regulation (a) (1) than can it avoid the
scope of interstate commerce as indicated by the cases cited in the earlier part of
this opinion.
The decree of the District Court is affirmed.
The Arner Co., Inc., subsequently filed with the United States Supreme Court
an application for a writ of certiorari, and on October 9, 1944, the application
was denied.