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Excerpt from statement of Representative Hatton W. Sumners, March 9, 1946 :

"Washington bureaucrats can now go to the average citizen with powers and authorities that no king ever possessed. For they make the rules which have the force of law. They construe the rules. They enforce the rules. And no citizen, practically speaking, has the power to resist.”

"By concentration of governmental power and drafts upon the Federal Treasury, we have now a financially 'busted,' great, piled-up mass of governmental confusion beyond human comprehension, impossible of democratic control, extravagant, wasteful, inefficient, and by its nature the instrumentality of favoritism, tyranny, oppression, and corruption and the destroyer of the self-reliance and self-respect and governmental capacity of the people, qualities without which no people can remain free.”

THE TOILET GOODS ASSOCIATION, INC.,

New York 20, N. Y., April 22, 1948. Hon. JOSEPH O'HARA, House of Representatives,

House Office Building, Washington 25, D. C. DEAR SIR: The Toilet Goods Association, Inc., representing manufacturers of SO percent of the perfumes, cosmetics, and other toilet preparations sold in the United States, is vitally interested in H. R. 3871 on which we understand hearing will begin April 28, 1948, before a special subcommittee of which you are chairman.

The association does not desire to take up the time of the subcommittee with a verbal presentation, and we respectfully request that this letter representing the views of the association on this measure be inserted in the record of the hearings in lieu of a personal appearance. The association and its members favor the principles of H. R. 3871 and strongly believe that the present procedure of the Federal Trade Commission which practically denies access to the courts to a defendant in matters initiated by the Commission, should be amended in order that the Commission is forced to try its cases before an impartial tribunal.

We would, however, strongly urge an amendment to H. R. 3871 designed to transfer the control of the advertising on drugs and cosmetics now under the jurisdiction of the Federal Trade Commission to the Food and Drug Administration. Such an amendment would resolve the conflict in jurisdiction now existing between the Federal Trade Commission and the Food and Drug Administration which has led to difficulties in enforcing laws against unfair advertising and improper labeling.

Since 1906 when the original Food and Drugs Act was passed, the Food and Drug Administration has fairly and consistently administered that law with respect to the labeling of food, drugs, and cosmetics. Its procedures are regular and call for the trial of cases in the courts. The advertising of such products might be considered as an extension of labeling and the experience and knowledge gained by the Food and Drug Administration on labeling laws particularly fits that agency for the task of making the advertising claims of such products conform to the interests of the purchasing public.

The record of the Federal Trade Commission in matters of this kind is hardly clear and the policy of the Federal Trade Commission with respect to advertising and claims made therein have from time to time changed so radically as to virtually deny justice to the affected manufacturer. In addition the delay entailed in the Federal Trade Commission's procedure has been so great as not only to deny justice to the respondent but to seriously jeopardize the interests of the ultimate consumer.

On the other hand, the record of the Food and Drug Administration is completely clear in both respects.

Accordingly the Toilet Goods Association strongly urges that H. R. 3871 be passed with an amendment which would transfer control of advertising of toilet goods to the Food and Drug Administration. Respectfully yours,

S. L. MAYHAM, Executive Vice President. The CHAIRMAN. The next witness is Mr. Walter B. Wooden, Associate General Counsel of the Federal Trade Commission.

Before he proceeds, may I inquire whether there is anyone else present who wishes to testify in behalf of the bill? If not, you may proceed, Mr. Wooden.

76551--48

14

STATEMENT OF WALTER B. WOODEN, ASSOCIATE GENERAL

COUNSEL, FEDERAL TRADE COMMISSION

Mr. WOODEN. Mr. Chairman and members of the committee, I have been Associate General Counsel of the Federal Trade Commission for about 2 years and as such have been in charge of the Commission's appellate work. This has involved the briefing and argument of the Commission's cases on review and in the various United States circuit courts of appeals and in the Supreme Court of the United States.

Among the cases I have handled in such courts are the Cement Institute case, decided by the Supreme Court on April 26 last, and the so-called Glucose cases, decided by it in April 1945.

Prior to becoming Associate General Counsel in charge of appellate work, I had handled a number of cases for the Commission in the courts, but between 1939 and 1945 I was Assistant Chief Counsel in charge of trials before the Commission in cases involving restraints of trade under the Federal Trade Commission Act and violations of the Clayton Act, as amended by the Robinson-Patman Act.

From 1924 to 1939 I was a trial attorney engaged in trying adversary proceedings before the Commission and specialized in trade restraints and Clayton Act cases. Many of these involved combinations in restraint of trade among groups of competitors organized into trade associations.

From 1915 to 1924 I was a field investigator for the Commission and the last 6 years of that period I was in charge of the Commission's Chicago office which_handled legal investigating work in the area bounded roughly by Pittsburgh on the east and Denver on the west, and between Minneapolis and New Orleans on the north and south.

I make this broad statement of my experience with the Commission in order to qualify myself as a witness having direct personal knowledge of certain facts which have been brought into issue by the proponents of this bill. In this connection I have primarily in mind the letter of Dean Roscoe Pound to Congressman O'Hara in which he said of the Federal Trade Commission:

As the matter stands at present, that Commission sends out investigators to gather up a vast amount of gossip and hearsay, reaches a conclusion, and then goes through a form of hearing to justify its predetermined conclusion when it becomes necessary to invoke the aid of the courts or when the order of the Commission may come before a court of review.

As one who was himself an investigator and a supervisor of investigators for 9 years during the adolescent period of the Commission, and as one who has examined the records of other investigators throughout the history of the Commission, I know that it is simply not true that investigators are sent out to gather up a vast amount of gossip and hearsay as a basis for the Commission's action. It is and always has been the practice for the Commission's investigators not to rely on gossip and hearsay but to trace back to its original sources all important information.

Documentary corroboration is always obtained where possible. Responsible representatives of proposed respondents are interviewed as a check upon information obtained elsewhere and their files and records are examined for relevant evidence.

Of course there is a vital difference between picking up gossip and hearsay during the course of a preliminary investigation and relying on it without sifting and checking. Any investigator with legal training knows better than to rely on gossip and hearsay. Yet I understand Dean Pound to say that the Commission has made it a policy to rely on it and to encourage its investigators to do so.

Moreover, lawyers will appreciate that there is often room for reasonable differences of opinion whether a given piece of evidence is hearsay and whether, even though it is, it comes within one or more of the recognized exceptions to the hearsay rule. Disputes over such questions not infrequently go to the highest court.

Congressman O'Hara referred to the Phelps-Dodge case where the Circuit Court of Appeals for the Second Circuit characterized a certain document as hearsay but also as “persuasive hearsay.” In my judgment that was equivalent to holding it to be admissible hearsay and therefore competent evidence. Unless that were so the court would not have held the particular respondent on the strength of this evidence. Its competency was a pure question of law on which the court was certainly not bound to accept the Commission's judgment and yet the court did accept it. If the Commission was at fault in relying on that hearsay evidence the court was also.

Mr. O'HARA. I believe that is the first time I ever heard any court use the term “persuasive hearsay."

Mr. WOODEN. It is the first time I know of. But it was the equivalent in my judgment to admissible hearsay.

Mr. O'HARA. You may proceed.

Mr. WOODEN. I deny that there is anything remotely warranted in Dean Pound's implied charge that the Commission has made it a policy to rely on gossip and hearsay in reaching its conclusions, either the preliminary one of deciding that a complaint should be issued for its final one in deciding that an order to cease and desist should be entered. Yet the dean says that his study of the Commission's cases in the Federal Reporter has satisfied him that in “a very large proportion of cases the process is exactly” what he described in the language I have already quoted.

I venture to say that if the dean were called on to support that assertion by detailed reference to the cases it would be found that in only a very small proportion of the reported cases would there be even plausible support for his sweeping condemnation. Moreover, I question also the logic of Dean Pound in resting such broad assertions on the slender foundation of the cases reviewed by the courts and without consideration of the far more numerous cases disposed of by the Commission without respondents seeking court review.

Dean Pound makes the assertion that the Commission “goes through a form of hearing to justify its predetermined conclusion.” Now if that assertion has any substantial basis it should be demonstrable by comparing the number of formal complaints issued by the Commission with the number of such complaints that were dismissed.

I happen to have available some figures on this that were prepared for other purposes some time ago and have been brought down to date for the purposes of this hearing.

Between 1915 and May 4, 1948, the Commission issued 915 formal complaints charging respondents with restraint of trade under the Federal Trade Commission Act or violations of the Clayton Act. The Commission's conclusions in these cases were so predetermined that it dismissed 100 of them or nearly 44 percent. There is no reason to believe that the percentage of dismissals would be substantially different in other types of cases. But if the committee is interested that information can be provided.

Mr. Gilbert Montague told the committee at the last hearing of his long experience before the Commission as counsel for respondents in the trial of adversary proceedings.

In substance his experience was that attorneys on both sides of such proceedings try, brief, and argue them to the Commission in the belief that the issues of fact will be resolyed according to the greater weight of competent evidence and not on the basis of gossip and hearsay or even on the basis of some substantial evidence.

My own experience in the trial of cases before the Commission between 1924 and 1942, when the Cement Institute case was submitted on briefs and argument, is in accord with that of Mr. Montague.

I have had as adversaries prominent attorneys throughout the country and in all our dealings, whether in the introduction of evidence, the preparation of briefs, or the making of oral argument, we acted always on the assumption that it was necessary to convince the trial examiner and also the Commission by the greater weight of the evidence.

The idea that the Commission is content to rest its proof on gossip or hearsay or anything less than the greater weight of the evidence is an idea that I did not once encounter in my contacts with respondents' attorneys during those 18 years. Their actions and their trial strategy were certainly based on the very reverse of any such idea.

Now what has been my experience with the circuit courts of appeal and the Supreme Court in defending the Commission's findings and orders which Dean Pound says are based on gossip and hearsay? In the cases I have handled personally the courts have never set aside a Commission order because the Commissions findings of fact were not supported by substantial evidence although the statute authorizes them to do so when substantial evidence is lacking.

The substantial-evidence rule simply means that if the evidence is such that reasonable minds could reasonably have found that the weight of the evidence was as the fact-finding body found it, the reviewing courts will not substitute their judgment on its weight for that of the trial body.

The courts have independently worked out that rule for themselves in reviewing the verdicts of lay juries. Congress merely put the rule into the statute in order that courts might not apply a different rule by weighing the evidence on review of the findings of a jury of experts in a specially difficult field.

In so doing Congress was acting on the same principle as that embodied in the constitutional provision to which Mr. Montague has called your attention, namely, that in civil suitsno fact tried by a jury shall be otherwise reexamined in any court of the United States than according to the rules of the common law (seventh amendment).

Nevertheless, every now and then a reviewing court has undertaken to substitute its judgment on the weight of the evidence for that of the Commission while paying lip service to the substantial-evidence

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rule. The most recent instance of this was the Cement case where the circuit court of appeals disagreed with the Commission on the weight of the evidence although the dissenting senior judge said the evidence was such as to leave him “free from doubt.”

The Supreme Court has now vindicated his dissent by a 6-to-1 majority. However, that same circuit court of appeals upheld the Commission in another price-fixing case and stated upon a review of the evidence that the Commission's conclusion on the weight of the evidence was such that any other “would do violence to common sense and the realties of the situation.". (United States Maltsters Assn. v. Federal Trade Commission. 152, F. 2d 161, 164).

In another case that same court reviewed the evidence and said of the Commission's findings thata study of the record is convincing that not only the finding is substantially supported but that it would be difficult to reach any other conclusion (Milk and Ice Cream Can Institute v. Federal Trade Commission, 152 F. 2d 478, 481).

In still another case that same court upheld the Commission after a careful review of the evidence and stated that the Commission's finding of ultimate fact was notbased simply on inference. It was a finding of fact based on actualities (Fort Howard Paper Co. v. Federal Trade Commission, 156 F. 2d 899, 906).

In the so-called Staley case, the Supreme Court reviewed the stipulated facts and stated that the Commission's finding that respondent's price discriminations were not made in good faith to meet an equally low price of a competitor "seems inescapable," and that it was "amply supported by the record” (324 U. S. 746, 756, 757).

I submit that these statements by reviewing courts do not savor of a judiciary which is bound and gagged into reluctant concurrence with a Commission which Dean Pound said relies on gossip and hearsay in lieu of evidence and then snaps its fingers at the courts because they are helpless to correct the situation unless some such bill as this be enacted.

Through the irony of events it so happens that these hearings to consider whether the Federal Trade Commission shall be stripped of its most vital and distinctive functions were held but 2 days after the Supreme Court gave those functions the clearest and most emphatic approval and commendation they have ever received.

I refer to the case of the Federal Trade Commission v. The Cement Institute and its members which represented practically the entire cement manufacturing industry of the country. By a-majority of 6 to 1, with two Justices not participating, the Supreme Court upheld the Commission's conclusion that the multiple basing point system of identical delivered prices used throughout the industry is a collusive price-fixing device that violates both the Federal Trade Commission Act and the Clayton Act, as amended by the Robinson-Patman Act. The Court decided that the industry's use of this system involved both an unfair method of competition and unlawful price discrimination.

The fact is in this cement case there were two counts, one of which was under the Clayton Act and the other under the Federal Trade Commission Act.

Those counts were complementary in that they both reached the same set of facts. This bill would deprive the Commission of jurisdiction

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