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sion or critical of its personnel in its administration. This is not so.

I am in favor of the principle of the Federal Trade Commission, but with trial of issue in the district court. I have a sincere admiration for the personnel of the Commission, among whom I have a number of old friends.

I admire the job that they have done and that they continue to do within the framework of what I consider an improper structure.

I admire, for instance, that of their own motion as lawyers with an enlightened notion of fair play, the Commissioners place upon themselves restraints and burdens not required under the act; but I do not consider this a solution.

The fair treatment that the Commission accords respondents should be a matter of right, not a matter of sufferance or despotic grant. For the sake of the personnel of the Commission as well as for all others concerned, I believe this bill desirable and necessary.

I think possibly not enough emphasis has yet been laid upon the need for selectivity in considering the proceedings in the administrative process.

We are not dealing, in this instance, with a licensing agency such as the Federal Communications Commission or the Civil Aeronautics Board, or with a rate-fixing agency such as the Interstate Commerce Commission or Federal Power Commission, or a claims commission such as the Social Security Board or the Veterans' Administration or the Railroad Retirement Board.

We are dealing rather with private rights and properties of private individuals, the adversary proceedings that have been for time immemorial the subject of protection and limitation of use of the courts.

This morning, Mr. Hoge mentioned an article published by Kenneth Culp Davis in the Harvard Law Review, in February or Narch.

I should like to quote Mr. Davis on that particular point. He says:

The first step in any sound analysis is to recognize that broadside condemnation or approval of combination of functions is likely to be the product of ignor

The next step is to appreciate the need for highly technicalized solutions. Generalizations which are sound for one type of activity may be nonsense for another.

Each kind of combination must be examined not in the abstract or in general but the context of a particular administrative activity. Some generalizations may be permissible such as that one who is truly an advocate should never be allowed to participate in judging. But more often a greater particularity is requisite. Combination of investigation with judging may be bad in such prosecuting agencies as the National Labor Relations Board, and the Federal Trade Commission, but it may be harmless and even affirmatively desirable in claims agencies which are as much interested in making payments to the deserving as in withholding payments from the undeserving—the Veterans' Administration, the Social Security Board, the Railroad Retirement Board.

You must bear in mind in the Federal Trade Commission you have the investigating and the advocating or prosecuting functions and the judging function all in one. The Commissioners of the Federal Trade Commission make the decision in the last instance either in accordance with, or in spite of, the recommendations of the examiners.

I do not think much should be made therefor, of this separation, or the insulation, or isolation, of the examiners from the Commissioners because in the last instance the Commissioners may make the findings and the decision either in accordance with the recommendation of the examiner or strictly in spite of it.


The findings of the Federal Trade Commission are final and bindings, if supported by substantial evidence, as Mr. Hoge and others pointed out this morning.

The Commission does not balance the evidence. It can pick the evidence it prefers and can choose to rely upon that particular evidence.

I think no change has been made in that in the Administrative Procedure Act.

An argument has been made by John Dickinson that the Administrative Procedure Act provides that the appeal to the circuit court shall be on the entire record. But in preparing the language as finally enacted, Congress decided not to put in that the finding must be made on the evidence of the whole record.

A dissenting opinion by Commissioner Ayers recently shows that he, at least, feels that the old rules of evidence still prevail, that no change is made by the Administrative Procedure Act.

The Commission is not forced to find preponderance of evidence as is the district court. From long experience and practice before ascending the bench, the district court judge has been schooled to establish his case by the preponderance of evidence. As a judge, he is well aware of the need to sift, screen, and weigh the evidence and find for the preponderance; for he suffers the embarrassment of a reversal on appeal if he fails to do so.

The Trade Commission is not compelled to any such refinements.

Possibly it is the result of the demand upon the judge to sift, screen, and weigh the evidence and base his decision on the preponderance that has resulted in the fact that traditionally the judge renders an opinion, advising the litigants and the rest of the world how he arrived at his decision.

This is an important element in doing justice, as it explains to the loser how he lost, and it forms some guidance for the future conduct of all.

This opinion must meet the test of satisfying the litigants, the court above, and the public, that the judge has thought through his decision.

Unfortunately, we have no such standard of traditional procedure in the Commission. It has only been with the advent of Commissioner Mason that we are now beginning to receive regularly a few opinions, but then only as a rule in instances where the Commissioners have not been able to agree among themselves.

This bill has ample precedent. I have mentioned the special treatment accorded the division of functions under the National Labor Relations Act as amended by the Labor Management Relations Act. I have mentioned the present disposition of the Ways and Means Committee and the Treasury Department and the joint staff of the House and Senate on the Dobson rule.

Finally, I believe that the agency most nearly paralleling the Federal Trade Commission in functional character is one where there is a complete separation of functions. I refer to the Food and Drug Administration.

It has been suggested that the distinction between the Federal Trade Commission and the Food and Drug Administration is that the latter is concerned with enforcement of criminal law. It is no more concerned with enforcement of criminal law than is the Federal Trade Commission. Both have jurisdiction over conduct that is criminal in character. Both, however, concern themselves primarily with civil restraint of this conduct.

While I have made no actual check of the food and drug cases, from an experience of following their leases over a period of 15 years, I venture the estimate that not more than 1 case out of 25, and

possibly not more than 1 out of 50, brought by this agency is a criminal proceeding

Its customary procedure is, for example, by libel in a United States district court in an action in rem against a product. Not only are these proceedings not criminal, but they are not even adversary in the sense of being against an individual or a company.

The seized product is simply condemned and destroyed unless someane comes forward to claim and defend it.

If someone comes forward to claim, the Food and Drug Administration prosecutes the charge of adulteration or misbranding, but the district court where the product was seized finds the facts and decides the issue. The burden of proof is on the Food and Drug Administration, and the party claiming the product is entitled to his day in court as in any other district court proceeding.

Mr. O'HARA. Where is the burden of proof upon the Federal Trade Commission?

Mr. Perry. It is upon the Government to prove that the product is misbranded or adulterated.

If it is a case on the labeling, you have the same character of issue that you have in false, deceptive, misleading advertising before the FTC.

The product on its label fails to mention something that should be mentioned, as in the case that Mr. Hoge treated this morning on advertising, or it makes an affirmative claim which is not justified, and it is considered a misbranding.

On the other hand, and this is very much more difficult, in the subject of medicine the question is whether the product is adulterated as a departure from the standards fixed by the official compendia of the United States Pharmacopoeia, National Formulary, or rulings and regulations of the Food and Drug Administration. And the court hears that issue.

I submit that if any special degree of competence is required to, determine whether the public is being deceived in the normal case before the Commission, it has been very much more difficult to acquire the character of uncommon experience in medicine and in the foodand-drug field, yet they have done an outstanding job.

And I suggest further that the reason for the firm public acceptance of the Food and Drug Administration is because of, rather than in spite of, its need to go to court. No doubt that serves as a firm restraining influence upon that agency.

It will not go after a product until it is satisfied that it has the weight of the evidence for the condemnation of the product.

But when it moves, you may be sure that the party affected considers it of the greatest seriousness and is very careful to come within the provisions of the Food and Drug Administration rulings and regulations and wishes.

Moreover, they have worked out an effective method for picking up country-wide almost immediately products that are adulterated.

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We had a case recently of a company putting out a product to be injected into the blood stream, and the Food and Drug Administration found, on picking up samples, that there was contamination.

Immediately the product was recalled, working with the manufacturer, over the entire country, from 6,000 dealers, and the press estimated there would be a million packages immediately recovered in that fashion.

So, it is very prompt, very swift, very effective protection, and yet it is all done through the courts except so far as informal proceedings, which may continue in the future with Federal Trade Commission as in the past have been carried on with the Food and Drug Administration.

Mr. O'HARA. Your point is, Mr. Perry, the very fact the Federal Trade Commission will bring its case into the court instead of trying it before the Commission would act as a deterrent upon those who would violate the law or might be violating the law. Is that true?

Mr. PERRY. Yes, Mr. O'Hara.

I have heard the suggestion that the inspiration for support of this bill is that some people would like to avoid the penalty of their wrongdoing. They would like to carry on false and deceptive practices. They do not like being checked up by the Commission.

I am not familiar with any person or any company to whom that could properly apply. I think all of those in industry, the overwhelming majority, like the idea of having a force which serves really as an official Better Business Bureau, stopping improper and cheap and deceptive practices.

But I do not think it is so effective as handled at present before the Commissioners as it would be if handled directly by a court with the Commission on one side urging the court to take the action, and the party on the other side, the individual on the other side, having his full day in court.

Mr. O'HARA. Do you take the position, Mr. Perry, that we need the Federal Trade Commission and the Federal trade law in this great country of ours?

Mr. PERRY. Yes, sir, I do. I do not want to be thought to be speaking against the administrative process, as such.

We have seen it grow a great deal in recent years, but I have no doubt that that growth is justified and necessary, and it should remain.

I am addressing myself only to an adversary proceeding between an agency which is on one side as adversary and

company or an individual on the other side as adversary. It would not apply to that great gamut of agencies of which there are several hundred, in which there is no need for the provisions of this bill. That fact was recognized in part at least in the Administrative Procedure Act.

The division and segregation of functions even internally was provided only for those cases where there is to be a hearing and a decision on the record. In many cases that goes far enough, but I submit it does not go

far enough in the case of the Federal Trade Commission. I think we have to deal with it selectively.

I think the paramount public interest must and will be served, but I think it can be reconciled to the full rights of individuals.


After all, the public interest is nothing more than an aggregation of the private interest. It is not a State in and of itself and for itself. It is nothing more than a representation of the people, and we like the fact that these agencies are cleaning up undesirable practices. But I think the adversary proceedings in the Federal Trade Commission should be treated on a selective basis, and that we should have a district court rather than the Commissioners in the role of judge.

Mr. O'HARA. Might I say to you that is exactly the viewpoint of the author of this bill, which I had when I introduced the bill, that it was not any attempt to abolish the Federal Trade Commission or its purposes for which it was created but solely getting at the so-called administrative law or administrative judicial proceedings wherein I disagree with the theory that the Federal Trade Commission should act as the prosecutor, judge, jury, and adviser at least to counsel to the plaintiff, and it is that condition that brought about the thought you should

go into the Federal court and have the question tried there. I appreciate your statement very much.

Mr. PERRY. I see no reason why this bill should interfere with the continuance of the informal stipulation proceedings the Commission has carried on in the past.

As Mr. Hoge pointed out, there are many ways by which settlement is arrived at in advance of trial. There are only a few cases in the normal private litigation that actually get to a court trial.

Thinking back over the cases I have had in 10 or 15 issues with the Commission, I can think of only 2, and possibly 1, where I would want a district court trial. But in one case affecting private property rights, I would most fervently hope I might have a district court trial and not a Commission finding and decision.

It might be erroneously thought I am antagonistic to the Federal Trade Commission. As I have attempted to point out, I am not. I agree with the attitude of the sponsors of the bill.

The Commissioners have done a good job with inadequate weapons. I think both for the purpose of the Commission and enforcement of the law, it would be infinitely better if there is district court trial of the issue.

The CHAIRMAN. Any questions, gentlemen!
If not, we thank you, Mr. Perry, for your testimony today.

Mr. O'HARA. Could I insert some matters into the record, Mr. Chairman?


Mr. O'HARA. Mr. Chairman, I ask permission of the committee to insert in the record at this point an article by Lowell B. Mason, one of the members of the Federal Trade Commission, in the American magazine, May 1948, entitled “Let's Stop Kicking Business Around.”

And an article by Curtis L. Waller, circuit judge, United States Circuit Court of Appeals for the Fifth Circuit, entitled “These Inferior Federal Courts.

And an article on the subject The Federal Trade Commission's Intrusion Upon the Tripartite Separation of Powers.

It is just a compilation of authorities on the subject, and an article which is the foreword to the George Washington Law Review Symposium on the Federal Trade Commission by S. Chesterfield Oppenheim.


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