The CHAIRMAN. When questions were being asked with reference to the prosecutor, judge, and jury, how would you like this legislation to be decided that way by Mr. O'Hara, who introduced the bill?

Mr. WOODEN. It seems to me this committee is doing very much what the Commission has always done.

The CHAIRMAN. I am speaking of a proceeding where Mr. O'Hara would introduce the bill and decide whether it was a good bill or not, and pass it.

Mr. WOODEN. I assume he has to get a certain number of the committee with him before he can do anything.

The CHAIRMAN. I mean we are letting Mr. O'Hara be the sponsor and judge.

Mr. WOODEN. You do not have that in the Trade Commission. You have five Commissioners, each of whom has equal power with the others, and they frequently dissent.

Mr. O'HARA. Mr. James W. Cassedy, assistant general counsel, of the Federal Trade Commission.

STATEMENT OF JAMES W. CASSEDY, ASSISTANT GENERAL COUNSEL OF THE FEDERAL TRADE COMMISSION

Mr. CASSEDY. On behalf of the Federal Trade Commission, I appear before this committee to oppose H. R. 3871. At the outset, I desire to state certain facts regarding the creation organization, functions, rules of practice, procedure, and policy of the Federal Trade Commission as a background in considering the merits and demerits of this bill.

The Federal Trade Commission is composed of five Commissioners appointed by the President and confirmed by the Senate. It was organized March 16, 1915, under the Federal Trade Commission Act approved September 26, 1914, and amended by the Wheeler-Lea Act approved March 21, 1938.

In addition to the administration of these acts, the Commission administers section 2 of the Clayton Act, as amended by the Robinson-Patman Act, prohibits price and other discriminations, and sections 3, 7, and 8 of the Clayton Act dealing with tying and exclusive dealing contracts, acquisition of capital stock, and interlocking directorates, respectively; the Export Trade Act, also known as the WebbPomerene law, which, for the purpose of promoting foreign trade, permits the organization of associations to engage exclusively in export under stated restrictions; the Wool Products Labeling Act of 1939, designed to protect industry, trade, and the consumer against the evils resulting from the unrevealed presence of substitutes and mixtures in wool products; and certain sections of the Lanham TradeMark Act which became effective July 5, 1947, and delegated to the Commission certain duties with respect to the cancellation of trademarks registered with the Patent Office.

The Federal Trade Commission was established as an agency to foster fair and free competition and to supplement the antitrust laws. It has remedial functions in the administration and enforcement of various statutes included within the acts previously mentioned, and prohibiting the use of unfair, deceptive, discriminatory, and monopolistic trade practices. These functions are exercised by way of

adversary proceedings and orders to cease and desist, by the stipulated acquiescence of the parties or by trade-practice conference proceedings. It has advisory functions which are exercised by way of general investigations and reports to Congress or to the President and by recommendations for legislation. These functions are exercised through various divisions of the Commission.

Since the enactment of the Administrative Procedure Act, the Federal Trade Commission has revised its organization, rules of practice and procedure, its policies and functions in exact accord with the provisions of that act.

For the information of this committee, I wish to describe briefly the organization of the Commission, the applicable rules of practice and procedure and in general the functions performed by the Commission with particular emphasis upon the effect thereon of the O'Hara bill.

All preliminary legal investigations of the Commission are conducted by the staff of its Bureau of Legal Investigation which is made up of a Director, an Associated Director, a chief examiner, and a Chief of the Division of Radio and Periodical Advertising.

Any person, partnership, corporation, or association may apply to the Commission to institute a proceeding in respect to any violation of law over which the Commission has jurisdiction.

Such application for complaint should be in writing, signed by or in behalf of the applicant, and should contain a short and simple statement of the facts constituting the alleged violation of law, and the name and address of the applicant and of the party complained of, together with all relevant available information. No forms or formal procedure are required in making an application for complaint. The applicant is not a party to a Commission proceeding except where allowed to intervene as provided by the statute. It has always been and now is the rule not to publish or divulge the name of an applicant.

Upon receipt of an application for complaint, the Commission through its Bureau of Legal Investigation, considers the essential jurisdictional elements before deciding whether or not it shall be docketed. Also, the Commission, acting on its own motion, dockets applications for complaint and initiates investigations.

It is the policy not to docket an application for complaint or institute proceedings where the alleged violation of law is merely a private controversy and does not tend adversely to affect the public.

The general procedure is that after a matter has been docketed, it is assigned to an attorney-examiner for the purpose of developing all the material facts. He is directed to interview the applicant. He is also directed to interview the party complained against, advise him fully of the charges, and obtain relevant information, oral and documentary, including such as may be furnished in defense. Such additional investigation is made as may be necessary.

After developing all the relevant facts, the attorney-examiner summarizes the material in a report, reviews the law applicable, and makes recommendations as to what action he believes the Commission should take. The file is reviewed by the chief examiner, and, if found to be complete, is submitted by him to the Commission-through the Director of the Bureau of Legal Investigation-with a summary of the

issues involved, his conclusions thereon, and his recommendation. He may recommend, one, closing of the file without prejudice to the right of the Commission to reinstate the matter if and when conditions may warrant, or two, disposition of the application for complaint by the respondent signing a stipulation as to the facts, and an agreement to cease and desist from the practices set forth in the stipulation, or three, issuance of formal complaint or, four, other appropriate action. The Division of Radio and Periodical Advertising of the Bureau of Legal Investigation conducts a current and continuing survey of radio, newspaper, magazine, and mail-order catalog or circular advertising. If it appears that a published advertisement may be misleading, a contact letter is sent to the advertiser containing a request for pertinent information and material regarding the product and the advertisement thereof. He is also invited to submit any statement he may care to make regarding the product and his advertising of it. When all available data have been examined and analyzed, the Chief of the Division makes his recommendation to the Commissionthrough the Director of the Bureau of Legal Investigation-in the same manner as described with relation to docketed matters.

The Commission maintains a Bureau of Stipulations consisting of a Director, Assistant Director, and staff of attorney-conferees.

When a case is referred to the Bureau of Stipulations, that Bureau gives the proposed respondent notice of such reference, together with a statement of the alleged illegal acts, practices, or methods and request a reply within a specified period of time.

The proposed respondent may reply by correspondence or upon his request, may confer with the Director of the Bureau of Stipulations, or with a designated attorney-conferee either in person or through his authorized representative.

If the proposed respondent enters into a satisfactory stipulation to cease and desist from such practices as the Director of the Bureau of Stipulations deems in accord with the Commission's direction, and to have been sufficiently substantiated by the investigational records and reports, or by the admissions of the proposed respondent, said stipulation usually is submitted to the Commission for its approval. In the event of failure of the proposed respondent to sign a satisfactory stipulation covering the charges which the Director considers to have been so substantiated, the Director then reports the matter to the Commission with recommendation as to what action is required in the public interest. He may recommend formal complaint or closing of the matter in whole or in part without prejudice to the right of the Commission to reopen the same at a later date, or other appropriate action. Stipulations after acceptance by the Commission are matters of public record.

When the issuance of a formal complaint is directed by the Commission, the matter is referred to the Bureau of Litigation for preparation of the complaint and proceedings thereunder. The complaint names the respondent or respondents, alleges a violation or violations of law, and contains a statement of the charges. The proceedings are carried forward thereafter in conformity with the Rules of Practice. Should an order to cease and desist be issued by the Commission under the Federal Trade Commission Act or the Wool Products Labeling Act the order becomes final 60 days after date of service upon the respondent, unless within that period the respondent peti

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tions an appropriate United States Circuit Court of Appeals to review the order.

In case of view, the circuit court enters a decree affirming, modifying, or setting aside the order of the Commission and enforcing the same to the extent that such order is affirmed. Final orders in such cases are enforceable by civil penalty suits, instituted by the Attorney General.

The function of preparing, trying, briefing, and arguing complaints in litigated cases is a prosecuting function which is performed by a staff of attorneys who work under the supervision of the chief trial counsel and three assistant chief trial counsel-designated Chiefs of the Divisions of Antimonopoly Trials, Deceptive Practice Trials, and Export Trade. Neither they nor any of the attorneys performing such function in a particular case or in a factually related one participate or advise in the decision of such case except under the same conditions that are applicable to the attorneys representing the respondent therein and which conditions are set forth in the Commission's published Rules of Practice.

The function of handling the Commission's cases which are reviewed by the courts after decision by the Commission is performed by the general counsel, an associate general counsel, and an assistant general counsel, with the necessary assisting attorneys.

Under the general counsel an assistant general counsel administers trade-mark, compliance, and enforcement matters, as hereinafter set out. The general counsel also acts as the principal legal adviser to the Commission on the applicable law, precedent, or policy in a wide variety of matters.

When, after the issuance of formal complaint, issues are joined, the matter comes under the Commission's trial procedure, which is implemented through the Bureau of Trial Examiners, consisting of the chief trial examiner and a staff of trial examiners.

The chief trial examiner acts as the administrative head and chief law officer of the Bureau. He exercises supervision over the forms of reports and coordinates methods of compliance by the trial examiners with the Rules of Practice.

Insofar as practicable, trial examiners are assigned in rotation to cases by the Commission on recommendation of the chief trial examiner. The trial examiner thus designated proceeds to convene hearings for the reception of relevant evidence on the issues. A Commissioner may be assigned to this duty.

Hearings are held in such parts of the country as may be necessary with due regard for the convenience of the parties and witnesses. All proper parties may be represented by counsel and all fundamental rights such as cross-examination of witnesses, adduction of evidence, objections, exceptions, motions, appeals, and the submission of briefs and oral argument are preserved to the respondents.

After the evidence is concluded in a case and parties have been duly heard and their contentions considered, the trial examiner makes and files a recommendation decision which includes a statement of, one, findings and conclusions, as well as the reasons or basis therefor, upon all the material issues of fact, law, or discretion presented on the record, and two, an appropriate order.

The trial examiner's recommended decision becomes a part of the record and a copy thereof is served on each party who may then file

exceptions thereto and present substitute conclusions and form of order.

The Commission, after considering the entire record, including the recommended decision of the trial examiner and the exceptions thereto, resolves all questions of fact by what it deems to be the greater weight of the evidence thereon, and makes its decision stating the reasons or basis therefor and enters an appropriate order. Wherever it decides that an order to cease and desist should be entered, the Commission also makes a report in writing stating its findings as to the facts.

Reports of compliance with orders to cease and desist are required in accordance with the provisions of rule XXVI of the Rules of Practice. The Commission may by order require such supplemental reports of compliance as it considers warranted.

Reports of compliance must consist of a full statement showing the manner and form in which the order has been complied with. Mere statements that the respondent is not violating the order are not acceptable. A factual showing is required sufficient to enable the Commission to appraise the manner and form of compliance.

After an order to cease and desist issued by the Commission pursuant to the Federal Trade Commission Act has become final as provided for under section 5 of that act, and the Commission has reason to believe that a respondent has violated such order, it shall certify the facts concerning the violation to the Attorney General, who may institute a suit in one of the district courts of the United States for the recovery of civil penalties as provided in the act. In proceedings under the Federal Trade Commission Act, where a circuit court of appeals of the United States has by decree commanded obedience to the Commission's order, enforcement may be accomplished by way of contempt proceedings in the circuit court.

Matters relating to reports of compliance with, and violation of, or enforcement of Commission orders are handled in the Division of Compliance, which is a part of the General Counsel, under the supervision of an assistant general counsel, except that the Division of Appellate Proceedings of the General Counsel handles appearances in the circuit courts in enforcement proceedings by way of contempt.

Matters relating to reports of compliance with voluntary agreements to cease and desist-stipulations—are handled in the Bureau of Stipulations.

Rules for the elimination and prevention of unfair trade practices on an industry-wide basis are established by the Commission under the trade practice conference procedure, the requirements for which are contained in the Commission's published Rules of Practice.

This procedure permits of the organization and utilization of cooperative effort among members of an industry for elevating the standards of business ethics and preventing unfair methods of competition, monopolistic restraint, and other trade abuses that are contrary to the laws administered by the Commission.

The work is carried out by the Commission through the staff of the Bureau of Trade Practice Conferences and Wool Act Administration, which is under the supervision of a director who is principal adviser to the Commission in such matters, an associate director, and three assistant directors.