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Incidentally, I was the investigator who started that case on its road through the Commission and through the courts.

The court said:

The petitioner here assails that order on the ground, first, that the Federal Trade Commission Act is unconstitutional; second, that the Commission had no jurisdiction in this particular case; and, third, that the order to cease and desist is not supported by the evidence.

The constitutionality of the act is assailed, first, as assuming to combine legislative, executive, and judicial powers and functions and to confer them upon one and the same administrative body, contrary to articles I, II, and III of the Constitution, and because it assumes to authorize the Commission, which is ostensibly an administrative body, to deprive persons of their property without due process of law, contrary to the fifth amendment of the Constitution.

This proposition is to our minds without merit. Congress plainly has power to declare unfair methods of competition unlawful and to require that their practice cease. This Congress has done by the act in question. It, with equal clearness, has the power to authorize an administrative commission to deter. mine (a) the question what methods of competition the given trader employs, and (b) provisionally, the mixed question of law and fact whether such methods are unfair. These questions being determined against the trader, the administrative requirement to cease and desist, prescribed by Congress, follows, as matter of course, but only provisionally. The Commission's determination of these questions is not final. Not only does the statute give a right of review thereon upon application by an aggrieved trader, to a circuit court of appeals of the United States, but the Commission's order is not enforceable by the Commission but only by order of court. It is for the courts, not the Commission, ultimately to determine as matter of law what the words “unfair methods of competition” include.

There are two other cases here-Federal Trade Commission v. A. McLean and Son et al. (84 F. 2d 910, seventh circuit court), and Federal Trade Commission v. Martoccio Company (87 F. 2d 566, Circuit Court of Appeals for the Eighth Circuit).

The court there said:

The other and accented challenge is that the act is invalid because it combines in the Commission the functions of complainant, prosecutor, and judge. This matter has been determined against the position of respondent in several

cases.

And it cites the Klesner case in the eighth circuit court, and the McLean case in the seventh circuit court, and the National Harness case in the sixth circuit, and Sears, Roebuck Co. in the seventh circuit court.

Mr. HALE. May I have the abstract from which you read?
Mr. WOODEN. Yes.

Mr. HESELTON. Even though that may be true in terms of decisions which you have just given us, would you not also say that very combination of the investigating and prosecuting and judicial functions is one of the principal reasons for the uneasiness and unrest that has been spoken of here and which I feel certain you are aware of; and I am not aiming at the Federal Trade Commission any more than any other group, and which led to the report and the final adoption by Congress of the Administrative Procedure Act?

Mr. WOODEN. I think there has been some uneasiness of that sort, and it is understandable on the face of the set-up itself. But, after all, the test of all those things is in the experience. You might say the proof of the pudding is in the eating, what has occurred.

Mr. HESELTON. You would not go so far as to agree with me there was not only some uneasiness but considerable uneasiness. It took the

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course of the passage of legislation which some people said would destroy the field of administrative law.

Mr. WOODEN. Are you thinking about the Administrative Procedure Act?

Mr. HESELTON. Yes. Mr. WOODEN. That was set up to remedy some of the evils and some of the imperfections in the administrative process.

I do not pretend to say there were none. I do not pretend to say the practice of the Commission was perfect. But I do say there has been an increasing approximation or movement toward meeting any responsible and substantial criticism.

Mr. HESELTON. Thank you. Mr. Hale. In the National Harness case (6 Fed.), the Court said: Congress plainly has power to declare unfair methods of competition unlawful and to require that their practice cease. With equal clearness, it has the power to authorize the administrative commission to determine (a) the question what methods of competition the given trader employs, and (b) provisionally, the mixed question of law and fact whether such methods are unfair.

Not only does the statute give a right of review thereon upon application by an aggrieved trader, to a circuit court of appeals of the United States, but the Commission's order is not enforceable by the Commission but only by order of court.

In other words, as I read that opinion, they say that the saving feature of the Federal Trade Commission Act is that you do ultimately get into the court.

Mr. WOODEN. That may be.

Mr. Hale. The committee is considering in this bill whether the litigant gets into the court on fair terms or whether when he finally gets into the court, he gets a fair break; in other words, whether the circuit court of appeals has sufficient latitude in these cases.

Mr. WOODEN. They have always had the right to set aside the Commission order if not sustained by substantial evidence, the same situation that they would have with regard to a lay jury verdict.

Of course, they have the right to set aside on questions of law without any limitation whatever.

Mr. ELLSWORTH. One point there, Mr. Chairman. Do you feel that an individual accused in your cases has a completely fair hearing?

The thing I am trying to get straight in my mind just as a matter of straight justice: Does the accused have as fair a break under your system wherein all personnel are servants of one body?

Mr. WOODEN. I think he has.
Mr. ELLSWORTH. Can you elaborate just a little to help me out?

Mr. WOODEN. It was implicit in some of the things I had in my prepared statement to the effect that there is a constant series of checks and balances all the way through, and there is no uniformity of opinion among the Commissioners or among the Commission staff as to what the merits of a given controversy are. That is borne out by the fact, as I pointed out in my statement that the Commission dismissed 400 out of 915 cases over the years of a certain type.

It started out on what Dean Pound says was a predetermined course of action, but it completely reversed itself upon nearly 44 percent of the cases it did handle.

Mr. ELLSWORTH. That does not help me much, because the members of the Commission staff are ambitious and zealous guardians of the publie welfare. I mean that sincerely. I think those men in your work down there are 100 percent sincere, and obviously with that deep sincerity and energy and zeal, they are going to suggest a great many possible cases which the Commission, in its fairness, is going to have to dismiss.

That was not effective to my question. It still bothers me as to how an individual who becomes a case, how can he be sure of having as good a hearing and in as good a form before your Commission as your internal staff can present ?

Mr. WOODEN. I think I would say just what Dean Wigmore said in the quotation I gave: That there is not any substitute for some trust in the integrity and intelligence and good faith of the administrator. You cannot handle it by rules.

Mr. ELLSWORTH. I agree with that. That is the basis of our whole administrative branch of the Government.

But the case of a trial, which this amounts to, with all concerned being under the same roof on the one side, and the accused being the outsider, the antagonist, what assurance can we have?

Mr. WOODEN. I do not think there is any more assurance that can be given in such a case than it can be given assurance, you might say, in the fairness of a jury.

You do not know what a jury is going to do. We frequently see cases where we did not see how the jury could have done what it did, but we do not go so far as to say that they were not acting honestly.

I do not see any other way. You could take five Members of Congress and make them members of the Federal Trade Commission, and I would frequently disagree with what they do, and I have frequently disagreed with what the Commission has done.

But they have the responsibility, and I recognize they have the right to do what they have done.

Mr. ELLSWORTH. Thank you very much.

Mr. O'HARA. Mr. Wooden, could I ask you a couple of questions? I was called out during the middle of your testimony, and I missed some of it, which I will read in the record.

I notice on page 6, however, that you comment on the Bruce's Juices, Inc., case, and about the middle of the page of your statement, you quoted some language of the court in that case. That case was a violation of the Robinson-Patman Act, was it not?

Mr. WOODEN. Yes, indeed. I pointed that out.
Mr. O'HARA. This bill of mine in no way affects that.
Mr. WOODEN. I corrected that in my statement.
Mr. O'HARA. Did you?

Mr. WOODEN. I did. I did not rely upon that statement as contained here.

Mr. O'HARA. I wanted to make sure of that.

At the beginning of the hearings we read what President Wilson said about the need of the Federal Trade Commission, and that purpose was, as I understood from the expression of President Wilson, to try to prevent the violations of the law.

What I would like to know is, what the Commission is doing in the prevention rather than the correction of unfair practices; or why has

it been loathe to issue declaratory orders telling businessmen in advance what is legal, if it has been loathe to do this!

Mr. WOODEN. The Commission does and has for many years, carried on a function of so-called trade practice conference rules, in which it seeks and obtains the voluntary assistance of business in defining the practices that are considered unfair and unlawful.

As to the declaratory judgments, I think you would recognize that there is a danger.

Mr. O'HARA. I did not speak of declaratory judgment, as to the declaratory orders of the Commission rather.

Mr. WOODEN. I refer to the matter of giving advance opinion, so to speak, on what business might do.

I think experience warrants the observation that that is a very dangerous sort of thing to do. The Department of Justice has tried it at times, and has abandoned it because of the uncertainties and complications that arose from the practice.

You get only a certain limited hypothetical set of facts, and you give a judgment on that, and you will find out afterward in practice it has been buried so you would not have recognized it.

Mr. O'HARA. How many trade conferences have they had where the Commission has attempted, by its action, to advisedly tell the businessmen of this country of a certain industry that any particular thing is a bad practice?

Mr. WOODEN. I cannot give you the number, but they have been very numerous.

Mr. O'HARA. How many?
Mr. WOODEN. It can be easily ascertained.
Mr. O HARA. How many in the last 5 years?
Mr. WOODEN. I am informed it is 150. I do not know what period
of time that covers. I am informed that is from the beginning.

Mr. O HARA. From the beginning!
Mr. WOODEN. Yes.

Mr. O'HARA. Is it not true that sometimes requests are filed with the Commission requesting such a conference which are denied !

Mr. WOODEN. I do not know.
Mr. O'HARA. You do not know of that?
Mr. WOODEN. I do not know.

I can tell you one instance that rings the bell on that, where the Commission issued a formal complaint charging a price-fixing combination, and immediately after the complaint was issued, they came in and wanted a trade-practice conference with the hope and expectations that would end the adversary proceedings, and it was denied in that case.

Mr. O'HARA. Is that in general or just one?

Mr. WOODEN. Just one case I am thinking about. I do not profess to know how many cases have been denied.

Mr. O'HARA. You mentioned these certain types of cases that were dismissed by the Commission after proceedings had been institutet What type of cases were those—advertising?

Mr. WOODEN. No; they were not. They did not include advertising: They included only restraint of trade under section 5 of the Federal Trade Commission Act and violations of the Clayton Act, both of which are ordinarily classed as restraint-of-trade cases:

I believe one member of the committee asked if I would not supply similar figures for the other kind of cases. I undertook to do so.

Mr. O'XARA. Was the Harriet Hubbard Ayer case a recent case?

Mr. WOODEN. I think it was sometime back in the twenties. I do not think it was very recent.

Mr. O'HARA. Is that rule of findings still substantially supported by the courts?

The rule which I quote is as follows, and I quote from that case on page 276:

The rule is now well recognized that the findings of facts by the Commission having any evidence to support is conclusive and binding upon the courts, and we may not review the weight of the evidence.

That does not refer to any substantial evidence rule, does it? Mr. WOODEN. No; that language there certainly does not mention substantial evidence.

But I would venture to say that you cannot find other decisions of the courts which do not recognize the substantial evidence rule which, as I said, is the same rule as applied to the review of jury verdicts. It applies in Commission cases.

But I doubt very much that even in that case, the court meant exactly what that literal language expresses.

Mr. O'Hara. Do you remember whether the Indiana Quartered Oak Co. case was subsequent to that?

Mr. WOODEN. It may have been the latter part of the twenties. Mr. O'HARA. Circuit Judge Swan, in a concurring opinion, said: I reluctantly concur in the result, because Commission has made findings of deception of the public, which there is some evidence to support, though in my opinion it is greatly outweighed by contrary evidence.

Mr. WOODEN. The judge was there obviously weighing that evidence. He said it was greatly outweighed. Of course, the functions of the fact-finding body and the reviewing court are involved in that statement.

Mr. O'HARA. That is my whole point in this line of decisions.

You say they have a right to go into court, that they have to go into court to enforce a fine. You get into court and you get up against the sort of a rule where the fellow in the court says: “There is some evidence to support it, and even though outweighed by contrary evidence, it is pretty hard for me to say that the court would have found that way in the first instance."

Mr. WOODEN. And there are some other cases where the court has given lip service to the substantial evidence rule and in fact weighed the evidence and set the Commission's order aside.

In the Morton Salt case, decided by the Supreme Court a week ago today, the Commission tried that case on the theory that it had to prove actual injury and not merely a probable injury.

And the circuit court of appeals set the order aside because the Commission had not proved that.

The Supreme Court said it was not necessary to prove that, that all the Commission had to do was establish a reasonable probability of injury.

The Commission went further than the Supreme court said it needed

to go.

Mr. O'HARA. Maybe that is why it is a good idea to start in the courts originally with these cases.

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