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The other is a letter from the Toilet Goods Association, Inc., of endorsement of the principles of H. R. 3871. I ask that those might be permitted in the record at this time. The CHAIRMAN. They will be made a part of the record. (The documents are as follows:)



(By Lowell B. Mason)

American business is being harassed, bled, and even blackjacked under a preposterous, crazy-quilt system of laws, many of which are unintelligible, unenforceable, and unfair.

You might even say that they are un-American, for, in this democracy of ours, laws pertaining to commerce are supposed to protect society and to encourage and place a premium on giving the public something better for less. But in the case of the hodgepodge of legal gibberish rtaining to supposedly "fair-trade practices,” the laws too often actually place a premium on going along with the crowd and to heck with the consumer.

I say that this system is an outrage. To be brutally frank, it smells. And it's time the Government did something sensible about bringing its operations up to the same standard of ethics that it expects of business.

I know what I am talking about. Since 1945 I have been a member of the Federal Trade Commission, which for years has been floundering about in a misguided effort to enforce the unenforceable. I can't imagine a better grandstand seat than a Commissioner's chair on the FTC bench for getting a quick and liberal education in what's wrong with American business laws.

Since this article is lambasting Government in general and the Federal Trade Commission in particular, let's understand at the start that I am talking about a system, not the men in it. Nowhere is there a more conscientious and able group of workers than in our little shop at Sixth and Pennsylvania Avenue. Some folks may not like it when I say the methods the Government uses to bring about a reign of law in commerce are smelly. But at least everybody ought to be glad we live in a country where a hired hand, a bureaucrat like myself, can criticize his own Government and not have to spend the rest of his life, if any, working in the salt mines.

Most folks don't even know what the Federal Trade Commission is, so before I tell what's wrong with the Commission, let me present a thumbnail picture of just what we are and what we are supposed to do.

The Commission is composed of five men. It is the businessman's traffic court. Its job is to administer all the antitrust laws, all the regulations bearing on conspiracies to fix prices, untruthful advertising, “unfair” practices (that's something just about as tangible as a ghost to try to get your hands on!), commercial bribery, bad practices that might injure a competitor, etc.

If some of the FTC's rulings make you think of Phineas T. Barnum's museum, don't blame the present Commissioners—at least, don't blame us completely. Some of the laws under which we operate are 58 years old, and, for my money, ought to be stuffed away inside the Smithsonian. Of course, in my dissenting opinions, I have attempted to interpret some of these laws of the hand-loom days in the light of today's assembly-line conditions. But it is tough going.

The prosecuting function in the Government, I feel, is often beset with the cry that “competition is being injured” whenever someone reduces prices.

We must not confuse “injury to competition” with the normal effect resulting from the clash between two manufacturers, both trying to get more business by making a better product for less. As I wrote in one of my dissenting opinions, "We mouth the phrase 'injury to competition' so often that we confuse it with ‘injury to a competitor.' When you meet your competitor's lower prices so as to keep a customer he sought to take away from you, he feels he has been injured. Of course he has, but that does not mean that competition has been injured. On the contrary, it may have been improved.”

If I stopped to count up all the things the FTC has said business cannot do, I would not have time to finish this article. But once I counted as high as 2,200 inhibitions which the FTC has exercised against businessmen, and, in addition to these, there are hundreds of indictments, injunctions, and suits in courts which the Commission can pluck forth as precedent for declaring other practices illegal. There's such a welter of laws governing interstate commerce that the Government literally can find some charge to bring against any concern it chooses to prosecute. It's like playing pin the tail on the donkey with everybody blindfolded, including the spectators.

If businessmen know all these laws, they know more than we Government lawyers know. We hate to admit it, but the truth is that the only way the Government determines what a man can do is to sue him and let the courts tell us.

The Federal Trade Commission, which sometimes can be more mysterious than Fu Manchu, engages in what I look upon as a particularly onerous practice. Suppose Karl Klutz, of Klutz's Klassy Korsets, comes to us in good faith, puzzled by some point of law regarding the rules whereby he may contract to sell his Korsets to the Kansas City Emporium. “Hey, look !" asks Klutz. “What's the law on this?"

Do we guide him so he can avoid legal trouble? Oh, no! "Nuts, Klutz !" we tell him. “You guess what the law is. And if we think you're wrong, we'll sue you.”

Poor Klutz! Is it any wonder that he decides just to stumble along in the dark and run the risk of being punished when he is caught--if he is caught?

There are many things wrong with the way the FTC administers the laws pertaining to commerce. But, to wrap up in a paragraph the basic unfairness of the Government's approach to policing business, the trouble is this:

We bring prosecutions today against isolated businessmen of whose alleged misdeeds we happen to hear, usually because some competitior "squeals” on him. Yes, that's right—the FTC, obviously unable to prosecute everyone in the business world who allegedly violates one of the hundreds of obscure prohibitions, picks its cases to prosecute by the “fan mail” system. Someone doesn't like you, or doesn't like the way you're getting ahead of him in business, so he writes to Uncle Sam complaining about you, and Uncle Sam sues you. The identity of the informer, of course, is kept secret by the Government, so he doesn't have to worry.

Now, the unfortunate businessman who gets squealed on-Joe Doakes, the buttertub maker, or whoever he is—may be doing merely what 97 percent of his competitors are doing, only we don't hear about the other 97 percent. So Joe takes the rap.

This hit-and-miss prosecution creates bitterness in the hearts of those who are caught and disdain for the law in those who escape. This is bad enough, but, looking at it from the consumer's point of view, when we enter a cease-and-desist order against a' lone member of an industry it rarely results in protection to the public. The unfair practice keeps right on in the shops of the 97 percent who never get sued.

What I want to do is not to hound Joe Doakes and let the other 97 percent go free, but to reorganize the system on a new basis of industry-wide cooperation. If 97 percent of the businessmen within an industry will play square, we can crack down on the remaining 3 percent who are the real chiselers.

So I have two purposes in mind : The immediate one is to try to bring a little more common sense into the refereeing of the continual cops-and-robbers game between the Government and business. We're getting somewhere on this point.

The second purpose is to sell Congress the idea of a new law which will set up machinery for calling an industry-wide trade-practice conference, whenever it has been reasonably established by responsible officials that unfair business practices are prevalent within that industry. At these conferences, Government and business should sit down together and work out a set of common-sense rules, written in plain English. These should be rules which satisfy the Government, which inform industry, and which both agree are fair statements of the law. Industry will then sign up to follow these rules and will undertake the job of educating its own members to see that the rules make sense and must be observed. Then, when we get a violator, we and industry will know that he's a chiseler or a cheap crook whom we can prosecute in good conscience.

I have drafted a tentative law to this effect, which is being studied by committees of the American Bar Association, many local bar associations and other groups, and by Members of Congress.

The confusion about the laws of commerce has become so universal that it imperils our American system of free competition. I am inclined to think the error has grown far too big for a few superbrains in Washington to remedy. It is time for industry to stop its timid leaning on the Government and to develop


some moral self-reliance and leadership of its own. And it is up to the Government to help by shifting this public responsibility to the shoulders of private industry just as fast as businessmen can take it.

As for any community sentiment in favor of the Commission's prosecuting activities, when am introduced to businessmen as a member of the Federal Trade Commission, the atmosphere gets so frigid you could put on ice skates and glide around. Each man is afraid he will be the next guinea pig. He doesn't even want me to know his name.

He thinks we lean out of our ivory tower on Sixth and Pennsylvania Avenue and look upon the world of commerce, believing it's all wicked, and he is confident that we can sue and win against any we choose to favor with our attention. He knows we are against sin. But we won't tell him what sin is until we first drag him around in court for a few years. And to get dragged around in court can cost an awful lot, even up to several million dollars.

The Federal Trade Commission has no directive under law to hold conferences with businessmen for the purpose of developing understanding or common acceptance of trade practices. Sometimes it holds conferences with members of an industry in an attempt to establish understandable rules. But the few specific rules which come out of these scattered meetings are based on the law as established in cases which the FTC has won against industry in court prosecutions. We refuse and, in my opinion, quite wrongly—to base any definite rules on cases we lost in court. If we win, we keep your marbles. But if we lose, it doesn't count.

In my opinion, no administrative agency should prosecute a businessman for a method, act, or practice in interstate commerce if it is unwilling first to answer an inquiry as to its legality in terms of specific facts. A suit based on doubt or lack of precedent, or upon the uncertainty or obscurity of a statute, should never be the basis for Government prosecution. We are guilty of stalling and shillyshallying when we are unwilling to interpret what we are willing to sue on.

What steps should be taken to correct this situation? First, the public will have to be disabused of the pap fed it—that the Government is St. George and business the Dragon. Government is going to have to get off that big, white horse, pluck the plume from its hat, hang up its tilting lance, and show itself for what it really is—a bunch of human beings, certainly not better and probably no worse than those in business.

And business is going to have to call in its snipers and stop fighting that rearguard action against those in the Government whom Charles Beard once described as the antitrust racketeers.

One good mousetrap maker, furnishing a million-dollar pay roll to a community, a reasonable return to the stockholders, and about 40 percent of its profits to Uncle Sam, is worth 100 bureaucrats in anybody's money.

Merchants must get over having that funny feeling when they talk to the Government. You know what I mean-that sensation everybody gets when the traffic cop walks over to your car and reaches in his hip pocket for his ticket pad.

What would I have business do in place of ping at the antitrust racketeers? I would have business accentuate the positive instead of the negative. Instead of sniping, complaining, wailing, and squirming-all of which I admit it often has all too good reason to do—business should get behind the move to organize a system of industry-wide trade practices. Let American industry raise its voice in support of a proposal so fundamentally decent and fair as the proposal to have industry-and the Government sit down together at the conference table, instead of perpetually squaring away at each other in the prize ring. I guarantee that the American people and Congress will welcome it.

After 3 years on the Federal Trade Commission, I am convinced that as long as bureaucracy doesn't overextend itself by getting after too many people who violate regulations, officialdom can go on quietly kicking the spots out of one or two dozen businessmen every year without Congress being any the wiser.

Why do businessmen take so much abuse for granted? Well, the Government is a fearsome thing and, like the barber who wouldn't file an income-tax return because he “diln't want to get in trouble with Uncle Sam,” most industrialists are content to let well enough alone and are glad to have Uncle Sam do likewise.

Speaking for myself, I am fed up with the let-well-enough-alone policy which has kept the Federal Trade Commission for the past 34 years in a state of static animation in its program of hit-and-miss prosecution. Things are standing still, but it looks like we are going places.

But are we? I dissent.




No doubt you have often heard the remark that a Federal judge has more power than an oriental sultan. That statement may have been true once, but since Erie Railroad v. Tompkins 3 and Dobson v. Commissioner of Internal Revenue, a Federal judge inferior to nearly everything and everybody. The Federal judge would like to think that when the Constitution spoke of inferior Federal courts the term was used only in a relative sense or in the relation of those courts to the Supreme Court, but the realization is finally dawning that both Congress and the Supreme Court for some time have been according a literal interpretation to the term.

My discussion is not intended to be considered as authoritative, but only as suggestive, or provocative of thought, and I hope that what I say here will not be used against me. I realize that some phases of the subject which I shall advance for your consideration are contrary to pronouncements of judges of great name and learning, but notwithstanding the great names which might be cited as closing the door to judicial inquiry as to some of the thoughts to which I shall draw your attention, and notwithstanding the frequency with which some of their contrary views have been reiterated, Article III is still in the Constitution and as long as it is, lawyers have the privilege of coming to their own conclusions as to whether or not it stands as a perpetual protest against a trend by Congress and the Supreme Court to take the judicial power away from the courts and give it to administrative boards and tribunals.

Sections 1 and 2 of Article III of the Constitution provide :

“Section 1. The judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the Supreme and inferior Courts, shall hold their Office during good Behavior, and shall, at stated Times, receive for their Services, a Compensation, which shall not be disminished during their Continuance in Office.

“Section 2. The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority ;-to all Cases affecting Ambassadors, other public Ministers and Consuls; to all Cases of admiralty and maritime Jurisdiction;

to Controversies between two or more States; This, according to Justice Story, in Martin v. Hunter, “is the language creating and defining the judicial power of the United States. It is the voice of the people of the United States in establishing one of the three branches of their Government.” 6 Its language, the decision held, was mandatory and Congress could not ignore or deviate from it. Emphasis was placed on the fact that the judicial power “shall be vested” and not "may be vested.”


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These words vest the whole judicial power of the United States "in one Supreme Court and in such inferior courts as the Congress may from time to time ordain and establish," whose judges shall hold office during good behavior, and whose compensation could not be subject to a withholding tax during their continuance in office.

Since the same section of article III that vests the judicial power in these Federal courts provides for the tenure of their judges and the security of their compensation, does it or not seem to follow that all Federal tribunals that exercise judicial power, must have judges whose tenure and compensation are thus secured, and that any tribunal not having a judge appointed during good behavior is not a court that can be vested with this judicial power, regardless of its nomenclature? If so, would it also follow that a judge who has a tenure of office fixed in years can only discharge administrative duties? Although one may be called a "judge" of The Tax Court or the Court of Customs Appeals, can he constitutionally be vested with judicial power unless he is a judge as described in article III?

1 This article is an address delivered at the 40th annual meeting of the Mississippi State Bar on October 24, 1945, at Biloxi.

2 Circuit judge, Fifth Circuit Court of Appeals.
3 304 U. S. 64, 58, Sup. Ct. 817, 83 L. ed. 1188 (1938).
4 320 U. S. 489, 64 Sup. Ct. 239, 88 L. ed. 248 (1942).
51 Wheat. 304, 4 L. ed. 97 (1816).
81 Wheat. at 328, 4 L. ed. at 103.

I like the definition of judicial power by the Supreme Court of Missouri in State v. Fry,' that:

"Judicial power can mean nothing more nor less than the power which administers justice to the people according to the prescribed forms of law-according to their rights as fixed by the law.”

Another definition of judicial power is that "it is the power of a court to decide and pronounce judgment and to carry it into effect between parties who bring the case before it for decision."

In Todd v. United States, it was said:

“A court is defined to be a place in which justice is judicially administered. It is the exercise of judicial power, by the proper officer or officers, at a time and place appointed by law."

There seems to be much confusion as to what is judicial power and what is administrative power. Congress does not seem to have kept the distinction very clearly in mind. The Constitution did not accord to the courts any of the powers of the legislative or executive departments of Government, and definitely it was not the purpose of the people in the adoption of the Constitution to undertake to have the courts run or supervise the administrative branches of the Government in the discharge of their appropriate functions. But out of the multitudinous problems of an expanding governmental control it is sometimes difficult to discern the dividing line between judicial and administrative functions. We must all admit that it is necessary in carrying on the vast business of the Federal Government that decisions be made and facts determined without having to resort to, and wait on a decision from, the courts.

The courts, like the mills of the gods, grind slowly, and many facts ought to be determined by governmental agencies such as the Interstate Commerce Com. mission, Federal Power Commission, Securities and Exchange Commission, the Tax Court, the National Labor Relations Board, and scores of others; and their determinations involve the rights of citizens. In many of these adminis. trative inquiries hearings in the form and substance of judicial proceedings are accorded, and I readily admit that many of them do a creditable job which the courts are ill equipped oftentimes to do. In this day of radio, atomic power, and jet propulsion, the people do not wait on surrebutters; and whenever these boards and commissions in appropriately exercising quasi-judicial powers learn to do as the courts and make justice their guiding star instead of conceiving that their functions are the vigorous administration of certain acts, I, for one, will welcome them with open arms.

It seems not without significance that while the trend to collect governmental functions into the Federal Government has increased in its momentum, for better or for worse, the power of the Federal courts to review the acts of boards and commissions has been steadily reduced. I mention this, not for the purpose of decrying or protesting, for after all, Congress represents the people and is, doubtless, undertaking to meet a popular demand; but I mention it merely as illustrative of the diminution of the power of the courts.

Of course, the Congress may rightfully withhold from Federal courts jurisdiction of subjects not embraced in the category of those which by section 2 of article III of the Constitution were vested in the Federal courts, for they are courts of limited jurisdiction, having only such power as the Constitution and statutes of the United States have conferred upon them.,

But to what extent may it withhold jurisdiction of the cases which section 2 of article III extended to all cases arising under the Constitution and laws of the United States and treaties, and to all cases affecting ambassadors, public ministers, and consuls, and to all cases of admiralty and maritime jurisdiction?

The judicial power by section 2 of article III expressly extends only to cases and controversies. In Osborn v. United States Bank, Chief Justice Marshall speaking of article III, said :

“This clause enables the judicial department to receive jurisdiction to the full extent of the Constitution, laws and treaties of the United States, when any question respecting them shall assume such a form that the judicial power is capable of acting on it. That power is capable of acting only when the subject is submitted to it, by a party who asserts his rights in the form prescribed by law. It then becomes a case, and the Constitution declares, that the judicial power shall

7 4 Mo. 120, 187 (1835).
8 158 U. S. 278, 15 Sup. Ct. 889, 39, L. ed. 982 (1895).
9 9 Wheat. 738, 6 L. ed. 204 (1824).

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