AMENDING FEDERAL TRADE COMMISSION ACT

THURSDAY, APRIL 29, 1948

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The committee met at 10 a. m., pursuant to adjournment, in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding.

The CHAIRMAN. The committee will come to order.

The first witness will be Mr. Wendell Berge, Washington, D. C.

I would like to call to the attention of the witnesses that the House convenes at 11 o'clock today. That may or may not require the members of the committee to go to the floor. I call this to your attention so that you can save time wherever possible, in the hope that we will be able to dispose of all of the witnesses today.

You may proceed, Mr. Berge.

STATEMENT OF WENDELL BERGE, WASHINGTON, D. C.

Mr. BERGE. Mr. Chairman, my name is Wendell Berge. I am a member of the bar of the District of Columbia, practicing law here in the District. I was formerly Assistant Attorney General of the United States in charge of the Antitrust Division, and prior to that in charge of the Criminal Division. I am appearing on my own behalf, both as a lawyer and as a citizen who is deeply interested in the broad question of regulation of unfair competitive practices and the problems of antitrust and trade practices generally. I am opposed to the pending bill, H. R. 3871, to amend the Federal Trade Act.

In general, and without attempting a detailed summary of the whole bill, H. R. 3871 would amend the Federal Trade Commission Act by terminating the powers of the Federal Trade Commission to enter cease-and-desist orders against parties found to have been engaged in unfair methods of competition or unfair or deceptive acts or practices in commerce. The bill provides that when the Commission has reason to believe that parties are using unfair methods of competition or unfair or deceptive acts or practices and that it is in the public interest to proceed against such methods or practices, the Commission shall file in the appropriate district court a complaint stating the charges and seeking a court order against the continuance of the methods or practices. The court, after hearing, is empowered to enter an injunction, which is subject to appellate review.

In my opinion this bill would undermine the Commission as an effective regulatory agency in the field of competitive practices. It would emasculate the power of the Commission to stop unfair methods

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of competition or unfair or deceptive acts or practices in commerce. The bill runs contrary to the whole course of development of public administrative law. It is a reactionary bill that would wipe out more than 30 years' development of regulatory techniques to combat unfair methods of competition.

I had supposed that it had been clear ever since the Federal Trade Commission was created that the public policy of this country was to implement the antitrust statutes with a Commission having powers tto deal administratively with the large volume of unfair trade practices which do not always, in and of themselves, violate the antitrust statutes. The Commission has numerous ancillary powers which promote the general public policy of all of our antitrust statutes. But its most important function through the years has been to deal with unfair methods of competition and unfair or deceptive acts or practices. While these methods, acts, or practices, if allowed to continue, would often lead to antitrust violations, the usual practices to which ceaseand-desist orders are directed do not in and of themselves amount to monopolization or attempt to monopolize, nor do these practices necessarily involve contract, combination, or conspiracy in restraint of trade or commerce. These practices, therefore, as a usual thing would not violate the Sherman Antitrust Act, although they often are the beginning of a situation which if unchecked would lead to a Sherman Act violation.

President Wilson and the other statesmen of that day who brought about the enactment of the Federal Trade Commission Act wisely thought that the then-existing antitrust law was not enough to cope with the problems of monopoly. Once monopoly controls have become well established in an industry, the task of unscrambling them and reestablishing competition is colossal. Monopoly control and contracts, combinations, and agreements in restraint of trade must be halted by effective court action, but these problems are only a part of the total picture. At the time that the Federal Trade Commission Act was passed, it was the belief of Congress that something more was needed; that a tribunal to pass upon complaints of unfair business practices and to order the cessation of such practices was required.

I do not believe that anything has happened in the course of more than 30 years to alter the belief in the basic soundness of the idea that motivated the creation of the Federal Trade Commission. Indeed, I had supposed that the necessity for the Government to carry out vigorously the functions which the Federal Trade Commission performs had now become an accepted truism. From time to time through the years, Congress has conferred additional duties and responsibilities upon the Commission, thus indicating a fundamental confidence in the administrative techniques and procedures which the Commission has evolved, as well as in the able, fair, and high-minded quality of its personnel. Congress has also substantially increased the Commission's appropriation-an action only compatible with confidence in the Commission.

And the Federal courts time and again have vindicated the Commission's performance of its duties, not only by upholding its orders in a large percentage of cases but also by frequent judicial declarations of approval of the Commission's method of operation. The judicial attitude has been epitomized by the Supreme Court's char

* * *

acterization of the Commission as a tribunal peculiarly qualified as a "body of experts informed by experience" (Humphrey's Executor v. United States, 295 U. S. 602, 624).

This very week the Supreme Court reaffirmed these basic principles, and declared again its confidence in the performance of the Commission. In Federal Trade Commission v. The Cement Institute, decided on Monday, April 26, the Court said:

There is a special reason, however, why courts should not lightly modify the Commission's orders made in efforts to safeguard a competitive economy. Congress when it passed the Trade Commission Act felt that courts needed the assistance of men trained to combat monopolistic practices in the framing of judicial decrees in anti-trust litigation. Congress envisioned a commission trained in this type of work by experience in carrying out the functions imposed upon it.

Continuing, the Court said:

In the present proceeding the Commission has exhibited the familiarity with the competitive problems before it which Congress originally anticipated the Commission would achieve from its experience. The order it has prepared is we think clear and comprehensive. At the same time the prohibitions in the order forbid no activities except those which if continued would directly aid in perpetuating the same old unlawful practices. Nor do we find merit to the charges of surplusage in the order's terms.

The bill before the Committee would terminate the effective powers of the Commission. It will no doubt be urged that the bill does not deal the deadly blow which I contend that it does; that after all the Commission could still perform a useful law-enforcement function by preparing charges and presenting them to Federal courts. It may be asserted that if the Commission has a good case it can prevail just as effectively and expeditiously by taking it direct to court as by the present procedure of entering cease and desist orders. I challenge the basic position that unfair methods of competition could be dealt with effectively through suits de novo in Federal courts.

To begin with the courts would be glutted with cases; that is, they would be glutted if prosecutions were to be instituted in anything like the volume that complaints are now docketed for in hearing in the Federal Trade Commission. At the beginning of fiscal year 1947 there were 423 complaints pending before the Commission. During the year 53 more complaints were docketed and 46 cease and desist orders were entered. In addition to this, 128 controversies were settled by stipulation, hence did not have to go to complaint and hearing. I assume that if the Commission were deprived of its power to enter orders it would also lose its power to enter into binding stipulations in lieu of orders. Therefore, if every controversy which the Federal Trade Commisison settled administratively last year had been prosecuted as a new case in Federal court, it would mean that 184 new cases would have had to be instituted. This compares with 33 cases, both civil and criminal, instituted by the Department of Justice during the last calendar year under the Sherman Act, although there are presently pending in the Federal courts altogether, 122 cases instituted by the Attorney General under the Sherman Act.

The Department of Justice is undertaking an expanded program of Sherman Act enforcement pursuant to the desire of Congress. These cases must be brought initially in Federal courts, and properly so. The Sherman Act is a criminal statute. But even where civil remedies are sought under the Sherman Act, the nature of the charges under that

act is such that it has not seriously been suggested that Sherman Act enforcement be transferred to an administrative tribunal. So I think we may assume that the courts will be increasingly involved in lengthy antitrust proceedings under the Sherman Act. To add to this volume of litigation, the number of cases annually that would be required to enforce the prohibitions of the Federal Trade Commission Act against unfair methods of competition and unfair or deceptive acts or practices would impose a crushing burden upon the Federal courts; a burden which, frankly, I do not think they could handle unless the number of Federal judges all over the country was substantially increased. ·

But what I really fear and suspect is that the practical result of the enactment of this bill would be the virtual cessation of any attempt effectively to prevent unfair methods of competition. I was in Government for 17 years and I think I know what would be the human reaction of an enforcement staff to this kind of legislation. I think that staff attorneys might well feel that it was futile to proceed by injunction in courts already sagging with the weight of too many cases. In other words, I suspect that there would be a letdown and that fewer enforcement actions would be brought. I also suspect, let me candidly say, that this is really the motive of the interests who are backing this bill; but I do not think that it represents the motive or desire of the American people.

It may be asked: Why should the Commission be disinclined to go to the court if it has a good case? But such a question is a neat way of trying to duck the real issue; which is whether the courts are equipped to handle a large volume of cases of this kind. The Commission, of course, is not unwilling to submit its findings and orders to a court for review. The present law confers that review and the Commission is sustained in over 90 percent of its court litigation. And so I do not understand that the Commission is disinclined to submit its actions to court review. But it all comes back to the question of whether the courts or a specialized commission are better able to deal initially with the factual questions involved in the field of unfair competitive practices, and to make the findings and fashion the order to stop such practices. The whole philosophy of dealing with the increasing complexities of modern commerce through an agency directly responsible to the Congress and which acts as an agent of Congress in its constitutional function of regulating commerce among the States would be abandoned if this bill were to become law.

Of course Congress has the power, the duty, and the responsibility to determine public policy regarding these matters. But the present bill seem to reflect a philosophy of government which would reopen a basic controversy supposedly long since settled in the public interest. In United States v. Morgan (307 U. S. 183), the Supreme Court, through the late Chief Justice Stone, referred to that controversy as follows (at p. 191):

Court and agency are the means adopted to obtain the prescribed end. * * through coordinated action. Neither body should repeat in this day the mistake made by the courts of law when equity was struggling for recognition * *

Writing in a similar vein for the Harvard Law Review, Mr. Justice Stone had said in 1936:

We still get the reverberations of these early fulminations in renewed alarms at our growing administrative bureaucracy and the new despotism of boards and commissions. So far as these nostalgic yearnings for an era that has

passed would encourage us to stay the tide of needed reform, they are destined to share the fate of the obstacles which Coke and his colleagues sought to place in the way of the extension of the beneficient sway of equity (50 Harvard Law Review, 4, 17).

In Federal Communications Commission v. Pottsville Broadcasting Company (309 U. S. 134), the Supreme Court characterized "the enforcement of legislative policy through administrative control" as involving a quite different process than the judicial one. Answering the contention of possible delay and hardship if administrative agencies were permitted the freedom to act as the Communications Commission had acted, the Court said (at p. 146):

But courts are not charged with general guardianship against all potential mischief in the complicated tasks of government. The present case makes timely the reminder that "legislatures are ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts" (Missouri, K & T Ry. Co. v. May (194 U. S. 267, 270)). Congress, which creates and sustains these agencies, must be trusted to correct whatever defects experience may reveal.

I raise the question why, if the Federal Trade Commission is to be converted from a regulatory agency to a prosecutor, the same thing should not be done to the Interstate Commerce Commission, the Federal Communications Commission, the Securties and Exchange Commission, the Civil Aeronautics Board, and other similar agencies? If the Interstate Commerce Commission thinks a railroad rate is unjustly discriminatory, why not require that it file a complaint in court to enjoin the continuance of such rate? Or if the same Commission thinks that the operations of a motor carrier are unsafe, why not require that it go to court and ask an injunction against the continuance of such operations? These questions which I have just asked could be multiplied endlessly, and I think no logical or practical answer could be given that would not apply equally to the change sought by the present bill. The answer to all such questions is that the subject matter of the various agencies requires specialized and expert attention and that the courts are not equipped to do a regulatory job.

I am well aware of the criticism often leveled at administrative tribunals that they function as prosecutor, judge, and jury wrapped up in one, and that the limited scope of judicial review sometimes does not afford adequate protection against abuse of discretion. This is a criticism that has sometimes been justified as applied to the procedures of particular governmental agencies. It raises a basic problem which has come to be recognized and which has received a great deal of thought and study in recent years. Our present institutions are not perfect and probably always can be improved. But Congress made a great step toward meeting these criticisms when it enacted the Administrative Procedure Act. That act has already become a landmark, and it has had a healthy effect on the procedures of almost all Government agencies. The separation within agencies of the functions of investigation, preparation, and presentation of evidence, on the one hand, and decision, on the other hand, has already had a beneficent effect. The greater independence which has now been attached to the trial examiners represents an important step forward. Certainly the acclaim with which the Administrative Procedure Act has been received is testimony to the greater confidence which the public will now accord to administrative agencies subject to the act.

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