mission because it does not strike at their central source, which is the combination of the adjudicating with the prosecuting functions.

Let me develop this in two ways: (1) The different types of administrative law; and (2) the insufficiency of the provisions of that act itself with respect to Federal Trade Commission procedure.

Numerous agencies have administrative procedures of a legislative character. For illustration, the Food and Drug Administration in enforcing the Federal Food, Drug, and Cosmetic Act, is empowered to promulgate regulations fixing definitions and standards of identity and quality and fill of container for foods; regulations certifying coal-tar colors which are harmless and suitable for use in drugs and cosmetics for purposes of coloring only, and for the certification of batches of such colors; regulations determining derivatives of the barbiturate drugs which are habit forming and which are to labeled with a warning of the habit-forming quality; regulations certifying batches of drugs composed of insulin, penicillin and streptomycin. These regulations are legislative in character and are applicable uniformly and equally to all persons of the class affected. It is to this form of regulation making that the Administrative Procedure Act is particularly addressed, and if there is any benefit under the Administrative Procedure Act, it is with respect to this sort of regulation making. Such regulations are subject to review by the circuit courts, and the review afforded to them is just as complete as that afforded to adjudications of the Federal Trade Commission in its trial of individual and specific cases between parties. No distinction is made in the act between hearings, decisions, and judicial review of regulations of this kind, and adjudications of the kind in Federal Trade Commission practice. The Patent Office, with a vast amount of administrative litigation, is not comparable in the least respect with the Federal Trade Commission. For one thing, the Rules of Civil Procedure are applicable in all proceedings in the Patent Office. A great deal of the litigation is inter partes, private parties contesting the registration or cancellation of trade-marks. Some is ex parte between the applicant for a trade-mark and the Patent Office which perhaps has refused the application. In all of these cases, whether inter partes or ex parte, there is ultimate appeal to the Court of Customs and Patent Appeals and, under the new Trade-mark Act, access to the Federal district courts under the provisions of section 21 (15 U. S. C. A. 1071).

The Interstate Commerce Commission, frequently referred to, has numerous functions and sides to it. The average person thinks of it in connection with rate making. As with the making of standards and definitions, there is a great difference between the making of rates applicable equally and uniformly to all in a class and the trial of issues of fact between the Government and its citizens. The Interstate Commerce Commission administers the Interstate Commerce Act, the Motor Carriers Act and a number of minor statutes, and generally regulates common carriers. In addition to rate making, it is concerned with the prevention of discriminatory charges and with the provision of adequate services and facilities. The bulk of its adjudication work arises out of complaints by persons claiming to be damaged by the action of the carrier, and its decision may take the form of a cease and desist order or the awarding of damages to the injured party. These are so-called reparation cases. These are inter partes cases as in fact are also many of the rate cases, for they stem largely from the complaints of private parties. It has been estimated that of the hundreds of hearings involving proposed adjustments in rate schedules, less than 5 percent arise on the Commission's own motion. (Monograph on Interstate Commerce Commission prepared by the staff of Attorney General's Committee on Administrative Procedure, p. 49). The Commission's actions on service complaints are essentially monitory and in the nature of mediation between parties. Emergency service orders directing the transfer of equipment are usually on petition of the carriers themselves.

The Supreme Court stated some of the salient differences in Federal Trade Commission v. Klesner (280 U. S. 19, 26):

"The provisions in the Federal Trade Commission Act concerning unfair competition are often compared with those of the Interstate Commerce Act dealing with unjust discrimination. But in their bearing upon private rights, they are wholly dissimilar. The latter act imposes upon the carrier many duties; and it creates in the individual corresponding rights. For the violation of the private right it affords a private administrative remedy. It empowers any interested person deeming himself aggrieved to file, as of right, a complaint before the Interstate Commerce Commission; and it requires the carrier to make answer.

Moreover the complainant there, as in civil judicial proceedings, bears the expense of prosecuting his claim. The Federal Trade Commission Act contains no such features."

The Securities and Exchange Commission is concerned with the regulation of security issues, security exchanges and dealers, and public utility holding companies. True, it has wide powers to direct the simplification of public utility systems and may, by refusing to register a security, effectively prevent its public sale without resort to a court in the first instance.

These matters involve by their very nature, however, intricate questions of corporate finance and organization. It is interesting to note, too, that some years ago the Securities and Exchange Commission itself decided that procedure in the courts, rather than by administrative techniques, offered a more suitable and expeditious means to enforce certain provisions of the statutes (Final Report of Attorney General's Committee on Administrative Procedure, p. 61).

The duties of the Federal Communications Commission with respect to telephones and telegraphs are analogous to those of the Interstate Commerce Commission: The regulation of a public utility. Its functions in the radio field involve the licensing of the channels of radio transmission. The Federal Power Commission is similarly concerned with the licensing of water power projects. Other commissions and agencies are concerned with the granting of licenses, franchises, and the like. We need not discuss any features, good or bad, pertaining to them because they are different from the ones with which we are involved, and, by their different nature, might require different treatment.

The National Labor Relations Board, prior to recent amendment, was almost identical in its procedure with the Federal Trade Commission Act. In fact, it was modeled upon it. However, that was found unsatisfactory and in the first session of this Congress the Labor-Management Relations Act was passed in a recognition of the very point this O'Hara bill makes as to the Federal Trade Commission, i. e., that the prosecuting and adjudicating transactions should be separated. The amended act attempts to accomplish that within the framework of the Labor Board, wherein the General Counsel's Office is made a separate and, to some extent, an independent unit, and the Board is to some degree insulated as the adjudicating body. The Administrative Procedure Act did not meet the need there and, notwithstanding its passage, this change was made in the labor law by this Congress.

When the Administrative Procedure Act is set up as an argument against this bill, considerable reliance is placed upon section 7 of that act with respect to agency hearings. But that action in itself illustrates the insufficiency of the act to govern procedures of the Federal Trade Commission type. For instance, it requires that

"No sanction shall be imposed or rule or order be issued except upon consideration of the whole record or such portions thereof as may be cited by any party and as supported by and in accordance with the reliable, probative, and substantial evidence."

In other words, the decision is not required to be on the preponderance of the evidence as should pertain in the adjudication of cases, but is permitted to rest upon "susbtantial" evidence which is the rule applicable to legislative enactments and to regulations upon legislative delegations.

The all-important difference is that in an adjudication of a specific case, as in Federal Trade Commission proceedings, the decision is supposed to be on the facts as they are, as they are proven to be, while in regulation-making such as the defining of a standard or the fixing of a rate, the decision is with regard to the situation as it should be a standard is promulgated for the future guidance and conformations of those subject to it. A Federal Trade Commission order, like the judgment of a court, is decisive of persons' rights and conduct upon the basis of what they have done. So this section 7 that is urged as a bar to the passage of this bill is in reality a fine illustration of the need for the passage of the bill. Another section of the Administrative Procedure Act which is relied upon by the opponents of the O'Hara bill is section 10 which deals with judicial review. The restatement of judicial review in the Administrative Procedure Act used more words than previously appeared in statutes pertaining to the different agencies and it may be that the courts will find some words on which they can, by construction, enlarge the review to some extent.

The best appraisal of the provision, however, is the evplanation of the American Bar Association which prepared the administrative procedure bill. The explanation pertained to the copy of the bill before its introduction in

Congress at which time the section was identified as 9 (f). Section 10 (e) as finally enacted differs in no material respect (only in the arrangement of a few words) from the draft 9 (f). This is how the bar association explained it:

"A restatement of the scope of review, as set forth in subsection (f), is obviously necessary lest the proposed statute be taken as limiting judicial review. "The objections to judicial review have been generally not to its availability but to its scope' (Final Report, Attorney General's Committee, p. 80). The subsection does not attempt to expand the scope of judicial review, but at the same time care must be taken not to reduce it directly or by implication. Nor is it possible to specify all instances in which judicial review may operate. Subsection (f), therefore, seeks merely to restate the several categories of questions of law subject to judicial review. Each category has been recognized (see Final Report, Attorney General's Committee, pp. 87 et seq.). The several categories, constantly repeated by courts in the course of judicial decisions or opinions, were first established by the Supreme Court as the minimum requisite under the Constitution (Interstate Commerce Commission v. Illinois Cent. R. Co., 215 U. S. 452, 470 (1910); Interstate Commerce Commission v. Union Pac. R. Co., 222 U. S. 541, 547 (1912)) and have also been carried into State practice in part at least as the result of the identical due process clauses of the fourteenth amendment, applicable to the States, and the fifth amendment, applicable to the Federal Government (New York & Queens Gas Co. v. McCall, 245 U. S. 345, 348 (1917))." [Italics added.]

If section 10 added anything to the former scope of judicial review, it was simply by the injection of the phrase "whole record." But the bar association's explanation of this is as follows:

66

*

* the words 'upon the whole record' are designed simply to assure that the hearing-if one is required by statute--is truly a hearing. If agencies may look only to part of the record of a statutory hearing, and ignore other uncontroverted and uncontrovertible evidence, then obviously the hearing is a mere sham, the parties are put to a needless expense in participating, and judicial review is nothing more than a form. The language does not, and is not intended to, deprive administrative agencies of authority to judge of the credibility of evidence or to appraise conflicting evidence [Italics added.]

Section 10 was written merely in the hope that the agencies subject to it would do better in the future. On the basis of what the bar's report stated and what the report of the Senate Committee on the Judiciary said, it was recognized that the law had not been changed; the agencies had just been admonished. Here is what the Senate committee said (Rept. No. 752, 79th Cong., 1st sess.):

"The 'substantial evidence' rule set forth in section 10 (e) is exceedingly important. As a matter of language, substantial evidence would seem to be an adequate expression of law. The difficulty comes about in the practice of agencies to rely upon (and of courts to tacitly approve) something less-to rely upon suspicion, surmise, implications, or plainly incredible evidence. It will be the duty of the courts to determine in the final analysis and in the exercise of their independent judgment, whether on the whole record the evidence in a given instance is sufficiently substantial to support a finding, conclusion, or other agency action as a matter of law. In the first instance, however, it will be the function of the agency to determine the sufficiency of the evidence upon which it acts-and the proper performance of its public duties will require it to undertake this inquiry in a careful and dispassionate manner. Should these objectives of the bill as worded fail, supplemental legislation will be required." [Italics added.]

A memorandum of the Justice Department which appeared in the Congressional Record for May 25, 1946, at page A3154 is very positive, saying:

"Section 10 as to judicial review does not, in my view, make any real changes in existing law. This section in general declares the existing law concerning judicial review. It is an attempt to restate in exact statutory language the doctrine of judicial review as expounded in various statutes and as interpreted by the Supreme Court. I know that some agencies are quite concerned about the phraseology used in section 10 for fear that it will change the existing doctrine of judicial review which has been settled for the particular agency concerned. I feel sure that should this section be given the interpretation which is intended, namely, that it is merely a restatement of existing law, there should be no difficulty for any agency. We may in a sense look at section 10 as an attempt by Congress to place into statutory language existing methods of review."

This confirmed earlier statements of the Attorney General, Hon. Tom C. Clark, in his letter to Hon. Pat McCarran, chairman of the Senate Judiciary Committee, October 19, 1945.

This analysis can be carried further, but it has already gone far enough to show that the setting up of the Administrative Procedure Act against the passage of the O'Hara bill is only a snare and a delusion.

THE COMMISSION'S ADJUDICATING POWER HAS BEEN GREATLY ENLARGED

This bill does not attempt to alter some long-standing principle which has acquired dignity and sanctity through age. The situation to which this bill is directed has become acute since 1938.

The Federal Trade Commission Act was passed on September 26, 1914. Since those early days, the Federal Trade Commission Act has radically changed so that the scope of the Commission's adjudicating powers has been immeasurably extended and the effect of its orders made the more severe as they bear upon the rights of respondents.

Originally, a Commission order to cease and desist was not enforceable except by the circuit courts of appeal. In other words, a Commission order might be disregarded with impunity and there was no punishment or compulsion available to the Commission. It applied to the circuit courts of appeal and at that time the respondent might make any attack upon the order which was open to him.

The Commission was empowered originally to prevent "unfair methods of competition in commerce." In 1938, the Commission act was amended in numerous important particulars. One amendment gave the Commission enlarged powers with respect to the advertising of food, drugs, devices, and cosmetics. Other amendments which are significant at this point were:

(1) Section 5 was amended to include "unfair or deceptive acts or practices in commerce" as well as "unfair methods of competition in commerce." The change there was slight in number of words used but vast in effect. Thereafter competition did not need to be established. Formerly it had to be shown to establish that the act complained of was "a method of competition" (Federal Trade Commission v. Raladam Co., 283 U. S. 643).

(2) A provision was inserted in the act by which an order to cease and desist becomes "final." That is to say that if the person against whom the order has been entered does not petition for a review, then when the time within which he might petition has expired, or if he petitions, then within a specified number of days after the disposition of the petition, the order becomes final.

(3) Next, a provision was entered providing that one who violates an order which has become final "shall forfeit and pay to the United States a civil penalty of not more than $5,000 for each violation" which may be recovered in a civil action by the United States.

Now that worked a vast change in the effect of a cease-and-desist order. Formerly, as stated, the order was unenforceable and of no practical effect until and unless the Commission at some later time, alleging a violation of it, applied to the circuit court to enforce it. Under this amendment of the statute, the only question in the event of a violation of the order in such civil penalty action is whether, as a matter of fact, the order has been violated; not whether the order is valid; not whether the order was in accordance with the evidence.

In addition to the foregoing, Congress added to the Commission's powers by the enactment of the Wool Products Labeling Act of 1939. This act regulates the branding of wool and provides for enforcement under section 5 of the Federal Trade Commission Act as well as by proceedings in the courts. While this adds to the adjudicating powers of the Commission, it also affords in part a precedent for the Commission trying cases in court. As for that matter, there are certain provisions in the Wheeler-Lea Act which likewise afford a precedent; i. e., the provisions with respect to suits for injunctions and criminal prosecutions.

ARDUOUS ASPECTS OF PROCEDURE

The Commission procedure for the trial of cases before it, some of them insubstantial in nature, is a luxury that only the wealthy can afford. It is impossible for a small-business man or a small corporation to stand the gaff of one these proceedings. The respondent must be a large corporation with unlimited resources in order to see one of them through. The only disposition open to the small-business man is to settle with the Commission on its terms or to go out of business.

The viselike hold and endurance-testing nature of this procedure upon respondents, both large and small, are disclosed by the following circumstances: (1) There is no means for peremptory termination of an unauthorized or a trivial case. The respondent may make a motion to the Commission to dismiss the complaint for want of legal authority or because of cessation of the offense or for any other reason. The Commission may dispose of such motion as it usually does by denying it without prejudice to the renewal of it at the end of the trial. If it does, no interlocutory appeal to the courts is permitted. The rules of civil procedure do not apply. And the courts refuse to entertain suits for declaratory judgment or for injunction to arrest one of these procedures at the inception before it has made its costly run.

In Miles Laboratories v. Federal Trade Commission (C. A. D. C., 140 Fed. (2d) 683), a suit for a declaratory judgment, the court held that it was without power to grant relief. As a result, thousands of miles have been traveled with great expenditure of time and money on a case of which the court made this highly significant statement (685):

"In the present case and on the present record-if the question were open-it might very well be argued that appellant's advertising is neither false nor misleading, when considered in the light of the statutory provision requiring no more than a revelation of all material consequences which may result from the use of the product in the customary way or under the conditions prescribed in the advertisement. But since the matter is not open, we have no ocasion to examine or weight questions of fact or law, since they are in the first instance within the exclusive jurisdiction of the Commission and its decision when made is subject to challenge only as provided in the act; nor is there anything in the Declaratory Judgment Act which changes this result or creates new rights or increases or extends the jurisdiction of the courts (Doehler Metal Furniture Co. v. Warren, 76 U. S. app. D. C. 60, 129 F. (2d) 43, 45).”

(2) The Commission, to a large extent, has prejudged the case. The act provides that if it has "reason to believe" that anyone has been or is using any unfair method of competition or unfair or deceptive act or practice in commerce, and if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve a complaint stating its charges and the respondent shall have the right to show cause why an order should not be entered by the Commission requiring it to cease and desist from the violation of the law so charged (sec. 5 (b)).

When Commissioner (now Chairman) Robert E. Freer outlined Federal Trade Commission Procedure and Practice for the George Washington Law Review in 1940, he noted that a complaint is issued only at the direction of the Commission and that motions with respect thereto are permitted, but he added (p. 323):

"As a practical matter, very few such motions are briefed and argued to the Commission, and a great majority of them are denied, without prejudice to the right of the respondent to renew them at the end of the proceeding. The Commission itself has passed upon the question of its jurisdiction in advance of ordering the issuance of a complaint and in most cases has fully considered the questions raised by the respondent in the motion."

At the end of the proceeding, when proofs have been made, the trial examiner has reported, and briefs have been filed, the Commission may upon request and at its discretion permit oral argument, but, says Mr. Freer (p. 329), “the oral argument is the first contact of the Commission with the case since it directed the preparation and service of complaint, unless it has been brought up beforehand upon a motion."

(3) This method of trying cases with what may be called an absentee judgship-the Commission being the ultimate authority but not being directly in touch with all of the determinative steps-involves far more in the way of formalities than does a case in court where the witnesses are presented before the judge or the jury and heard in regular order; where counsel frequently argue orally at the conclusion of the trial and obtain a judgment from the bench or a verdict from the jury, without further procedure and paper work. In court, under the rules of civil procedure, there are available to the litigants means of discovery, provisions for summary judgment, opportunities to dispose of cases on motions, and opportunities for certain interlocutory appeals, to say nothing of the protectinon afforded by the rules of evidence and trial procedures enforced by an impartial judge.