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enter such order, in the nature of a permanent injunction, as it shall deem appropriate.

“(d) The decision or order of the court shall be subject to review at the instance of the Commission or any party to the proceeding as provided in sections 128 and 240 of the Judicial Code, as amended (U. S. C., 1940 edition, title 28, secs. 225 and 347).”

SEC. 2. Section 13 (a) of such Act, as amended (U. S. C., title 15, sec. 53), is hereby amended to read as follows: "SEC. 13. (a) Whenever the Commission has reason to believe

“(1) that any person, partnership, or corporation is engaged in, or is about to engage in, the dissemination or causing of the dissemination of any advertisement in violation of section 12; and

“(2) that the enjoining thereof, pending the entry of a final decree pursu

ant to section 5, would be to the interest of the public; the Commission may forthwith institute a proceeding as authorized by section 5 and move therein to enjoin the dissemination or the causing of the dissemination of such advertisement. Upon proper showing a temporary injunction or restraining order shall be granted without bond.”

Sec. 3. Section 16 of such Act, as amended (U. S. C., title 15, sec. 56), is hereby amended to read as follows:

“SEC. 16. Whenever the Federal Trade Commission has reason to believe that any person, partnership, or corporation is liable to a penalty under section 14, it shall certiíy the facts to the Attorney General, whose duty it shall be to cause appropriate proceedings to be brought for the enforcement of the provisions of such section."

SEC. 4. In any case where the Federal Trade Commission, prior to the date of the enactment of this Act, has issued a complaint under subsection (b) of section 5 of the Federal Trade Commission Act as in force pricr to the enactment of this Act, the provisions of the Federal Trade Commission Act as in force prior to the enactment of this Act shall apply as though this Act had not been enacted.

The CHAIRMAN. At this point in the record we will insert the communications which have been received from the Federal Trade Commission and also from the Department of Justice. (The communications above referred to are as follows:)


Washington, June 30, 1947. Re H. R. 3871. Hon. CHARLES A. WOLVERTON, Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN : Supplementing our letter to you dated June 20 and in compliance with your communication dated June 19, the Commission has examined the bill above referred to and as requested submits this, its report and comment thereon, in duplicate. A copy of this report was transmitted to the Bureau of the Budget on June 30, and with its approval this report and comment are now made.

The bill proposes to take from the Commission the power to decide whether the Federal Trade Commission Act has been violated and transfers that power to the United States district courts, leaving to the Commission only the function of initiating and prosecuting proceedings under that act. From the time such suit is filed in court it would be governed by the rules applying to other court cases under the rules of civil procedure and the judicial code. In rendering the decision one district judge would be substituted for five Commissioners and his power would be enlarged as indicated later. Contempt proceedings for violations of the court's injunctive order would seem to be the only remedy, since civil penalty suits are omitted (H. R. 3871, secs. 5, 16). In any event, this would appear to be the necessary result since no further orders could be issued by the Commission and no provision for civil penalty suits in the present act applies only where final orders have been violated. The fines provided for false advertising of food, drugs, devices or cosmetics under section 14 of the present act remain (H. R. 3871, sec. 16). The injunction provided against such advertising by section 13 of the present act may be sought only at the time of filing a complaint in the district court under section 5 (H. R. 3871, sec. 2). At that time the Court, under the proper circumstances, may grant a temporary injunction (idem). The present act is made applicable to suits instituted before enactment of the bill (H. R. 3871, sec. 4).

The idea that the factual issues in cases arising under the Federal Trade Commission Act should be tried by the courts may seem plausible at first because private litigants have to settle their differences before judges who are not experts in many of the matters they handle, such as medical questions. But Federal Trade Commission cases are not lawsuits, although they are tried in accordance with procedure similar to that followed in lawsuits. Congress did not intend to make the Commission a court as it might have done. Instead, it created a Commission responsible to Congress itself and did not make it a part of the judicial branch of the Government which is independent of Congress. In a more primitive society Congress might pass a separate bill defining and forbiding each violation of fair-trade practice. Under modern conditions this is impracticable, so Congress created a Commission responsible to it to apply the general standards set up by Congress to the facts of particular cases. Congress provided for a review of the Commission's decisions by the courts, not because it wanted the factual issues decided by the courts (having specifically made the findings of the Commission as to the facts conclusive when supported by substantial evidence), but to assure protection of constitutional and other legal rights of respondents and to provide judicial review on all questions of law. One of the principal advantages in setting up such an administrative agency is that a broad, sweeping investigation may be made, unhampered by technical procedures prevailing in courts of law (A. E. Staley Manufacturing Co. v. Federal Trade Commission, 135 Fed. 2d. 453, 454— C. C. A. 7, 1943).

The bill would put an end to quasi-judicial powers and functions of the Commission which it has exercised under the Federal Trade Commission Act for over 30 years and under which a large body of administrative law has been built up for the guidance of business under the safeguards of judicial review. The whole philosophy of dealing with the increasing complexities of modern commerce through an agency directly responsible to the legislature and which acts as an agent of the Congress in its constitutional function of regulating commerce among the States would be abandoned if this bill were to become law. The philosophy of dealing with the problem through an agency which specializes in such complexities so that it becomes expert in them is a philosophy that the courts have frequently recognized with approval. In a private suit recently decided by the Supreme Court (Bruce's Juices, Inc., v. American Can Company, decided April 7, 1947) both the majority and minority opinions paid tribute to the expert character of the Commission in dealing with the complicated matter of price discrimination under the Clayton and Robinson-Patman Acts. The majority opinion stated that “The economic effects on competition (of quantity discounts) are for the Trade Commission to judge,” and that “Until the Commission has determined the question, courts are not given guidance as to what the public interest does require concerning the harm or benefit of these quantity discounts on the ultimate public interests sought to be protected in the act.” And the minority opinion stated that “It may be granted that the Federal Trade Commission has more technical knowledge and experience in dealing with the complexities of this problem than most courts; and the Commission's judgment would be of inestimable value to any judge called upon to deal with quantity discounts."

Such observations would also be applicable to the Commissions' remedial powers under the Federal Trade Commission Act which this bill would cancel. For that reason the argument for removing such powers from the Commission under the Federal Trade Commission Act could be made with similar force in favor of removing the remedial powers conferred on the Commission by the Clayton Act, the Robinson-Patman Act, and the Wool Products Labeling Act.

The philosophical basis underlying the legislation which confers remedial powers on the Commission was stated by the Circuit Court of Appeals for the Seventh Circuit in the Sears, Roebuck & Co. case, as follows:

“With the increasing complexity of human activities many situations arise where governmental control can be secured only by the board' or 'commission' form of legislation. In such instances Congress declares the public policy, fixes the general principles that are to control, and charges an administrative body with the duty of ascertaining within particular fields from time to time the facts which bring into play the principles established by Congress. Though the action of the Commission in finding the facts and declaring them to be specific offenses of the character embraced within the general definition by Congress may be deemed to be quasi legislative, it is so only in the sense that it converts the actual legislation from a static into a dynamic condition. But the converter is not the electricity. And though the action of the Commission in ordering desistance may be counted quasi judicial on account of its form, with respect to power it is not judicial because a judicial determinatiton is only that which is embodied in a judgment or decree of a court and enforceable by execution or other writ of the court” (258 Fed. 307, 312).

To the same effect as last stated the Supreme Court declared in Federal Trade Commission v. Eastman Kodak Company that “The Commission exercises only the administrative functions delegated to it by the act, not judicial powers" (274 U. S. 619, 623 [1927]).

To a similiar effect Dr. E. Blythe Stason, dean of the University of Michigan Law School, has stated that the function of the administrative tribunal is a function of regulation as an arm of the legislative, and

"Its principal reason for being is that the Congress or the State legislature, as the case may be, has concluded that a certain area of business, industrial, economic, or social activity demands regulation, and, being unable to regulate by self-executing legislation, an administrative tribunal is created for the purpose. The principal task of the tribunal is to regulate. To aid it in its task it is implemented with a variety of powers. Some of these powers happen to look somewhat like, and may be classified as, judicial in nature. Others may be classified as legislative in nature. Still others may be administrative. However, all of their powers are simply incidental to the principal objective, regulation. Any reorganization which cuts away the tools provided to serve the regulatory process necessarily will reduce the effectiveness with which that process is carried on” (Michigan Law Review, February 1938, vol. 36, pp. 556, 557).

In the Sears, Roebuck & Co. case above referred to, the Circuit Court of Appeals described the functions of the Commission as follows:

“On the face of this statute the legislative intent is apparent. The Commissioners are not required to aver and prove that any competitor has been damaged or that any purchaser has been deceived. The Commissioners, representing the Government as parens patriae, are to exercise their common sense, as informed by their knowledge of the general idea of unfair trade at common law, and stop all those trade practices that have a capacity or a tendency to injure competitors directly or through deception of purchasers, quite irrespective of whether the specific practices in question have yet been denounced in common-law cases. But the restraining order of the Commissioners is merely provisional. The trader is entitled to his day in court, and there the same principles and tests that have been applied under the common law or under statutes of the kinds hereinbefore recited are expected by Congress to control. This prima facie reading of legislative intent is confirmed by reference to committee reports and debates Congress, wherein is disclosed a refusal to limit the Commission and the court to a prescribed list of specific acts (Congressional Record, 63d Cong., 2d sess. pp. 13, 18, 533, 12246)” (supra p. 311).

In addition to these matters of basic import there are a number of incidental points concerning the bill which may be mentioned. Deprived of its power to decide cases the relation between the Commission and its attorneys would be much like that existing between a United States district attorney and his assistants. The question would then arise as to why there need be any Commission at all, and why, if it be desirable to put the decision in the hands of a single judge without specialized experience, it would not be equally desirable to place matters of investigation and prosecuting in the hands of district attorneys without specialized experience. The point need not be labored that the Commission is better able than the courts to make the decisions involved, for the courts have often said so themselves. But no possible arrangement could each of the district courts duplicate the Commission's advisory staff. In addition, the five Commissioners are presumably chosen by the President with a view to their special fitness to deal with the particular matters committeed to the Commission's jurisdiction.

The bill would not only give the power of decision to nonexpert single judges, but it enlarges the scope of the remedy available to a point which may be danger

The court may enter “such order, in the nature of a permanent injunction, as it shall deem appropriate” (H. R. 3871, sec. 2 (c)). By contrast the Federal Trade Commission may only enter an order requiring the respondent “to cease and desist from using such method of competition or such act or practice” (Federal Trade Commission Act, sec. 5 (b)).

The Commissioners, because of their short terms and because Federal judges have a constitutional life tenure, are presumably more responsive to the will of Congress than such judges. The idea that the Commission acts as prosecutor,


judge, and jury involves the idea that the President may appoint and the Senate may confirm men who maladminister their trust. While such an appointment might at some time be made, there is no reason to believe that the President and the Senate would be any more fortunate in their selection of judges who are responsive to the will of Congress than in the selection of Commissioners.

The present act provides the public and respondents with a more complete trial of the facts than the courts can supply and affords all of the legal protection which the proposed bill offers. This would be true even if crowded court dockets would permit as expeditious trials. Those who make a business of deceiving or exploiting the public can be more quickly and more adequately dealt with by those who can devote their entire time to that business.

When an injunction is sought to enforce sections 5 and 12 of the Federal Trade Commission Act, the bill would not afford respondents the protection now given them under section 13 (b) (1) and (2). For the nature of the temporary injunction seems to be left to the discretion of the judge. It is not apparent why his discretion should be enlarged by omitting section 13 (b) (1) and (2) of the present act. The provision of the bill which requires the Commission to ask for an injunction at the time of instituting suit under section 5 unnecessarily limits the power of the Commission to protect the public in cases of a serious nature involving injury to health. Under the present act the Commission may apply for an injunction pending issuance of its complaint at any time it believes such action to be in the public interest.

However, and as already indicated, the bill involves much more than these incidental changes in law. It involves a fundamental change in policy, in the theory of government, and in the distribution of governmental powers. The theory of the bill is that there should be no commingling in one agency of functions that are quasi legislative, quasi judicial, and quasi executive. Such a theory goes far beyond the latest action of Congress in dealing with that question. After years of investigation, discussion, and debate, Congress passed the Administrative Procedure Act, approved June 11, 1946. That act dealt comprehensively with the subject of procedure before administrative agencies on which Congress had in numerous instances conferred remedial powers and commingled functions, but contented itself with safeguarding against possible abuses by requiring a more effective internal separation between the investigative, prosecuting, and deciding functions of all such agencies. By contrast the present bill would dismember the functions of what is, next to the Interstate Commerce Commission, the oldest of administrative agencies. It would divide the remedial powers of government in dealing with unfair and monopolistic trade practices, despite the notoriously increasing concentration of economic power. It would amount to a legislative declaration that the whole philosophy underlying regulation of commerce through agencies directly responsible to Congress has been a major mistake ab initio. The bill would presumably be a forerunner of other legislative proposals to transfer the deciding or quasi judicial function of other agencies to the courts, for the question involved is common to many administrative agencies.

Of course Congress has the power, the duty, and the responsibility of determining public policy regarding these matters. But the present bill seems 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, the Supreme Court, through the late Chief Justice Stone, referred to that controversy as follows:

“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 (307 U. S. 183, 191).

Writing in 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 beneficent sway of equity” (50 Harvard Law Review, 4, 17).

In Federal Communications Commission v. Pottsville Broadcasting Company (309 U. S. 134 (1939)), 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


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hardship if administrative agencies were permitted the freedom to act as the Communications Commission had acted, the Court said:

"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”. (309 U. S. 134, 146).

H. R. 3371 proceeds on the theory that the commingling of quasi-judicial with quasi-legislative power is not merely a defect to be surrounded with safeguards and corrected as experience may reveal, but is a basic defect for which the only proper remedy is complete eradication. It is to be hoped that what Congress and the courts have finally united in establishing and upholding over so many years will not lightly be overthrown by Congress on the basis of a doctrinaire separation of powers deriving from no constitutional necessity. By direction of the Commission. Sincerely yours,

R. E. FREER, Acting Chairman.

OCTOBER 28, 1947. N. B.-Pursuant to regulations, this report was submitted to the Bureau of the Budget on June 30, and in a letter of October 27, 1947, the Commission was informed that there would be no objection to the submission of the report to the committee.



Washington, October 27, 1947.
Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is in response to your request for the views of the Department of Justice relative to a bill (H. R. 3871) to amend the act creating the Federal Trade Commission, to define its powers and duties, and for other purposes.

Section 1 of the bill would materially amend section 5 of the Federal Trade Commission Act. The proposed new section would retain the present prohibitions of the section against unfair methods of competition and unfair or deceptive acts or practices in interstate commerce, but it would provide that when the Federal Trade Commission has reason to believe that section 5 is being violated, it shall bring a proceeding in a Federal district court stating its charges and praying for a court order enjoining continuance of the complained of method of competition or act or practice. Appeals from judgments entered in such proceedings would lie to the circuit courts of appeals and the decisions of such courts would be subject to review by the Supreme Court on writ of certiorari.

Sections 2 and 3 of the bill would, respectively, make minor changes in sections 13 (a) and 16 of the Federal Trade Commission Act so as to conform these sections to the new procedure provided for enforcing the prohibitions of section 5.

Section 4 of the bill specifies that the present provisions of section 5 shall apply to any complaint under that section issued by the Commission prior to the enactment of the bill.

Under section 5 in its present form, the Commission issues a complaint charging a violation of the section; testimony is taken before an examiner appointed by the Commission; the examiner issues a report to which exceptions may be filed and written and oral argument in support of such exceptions may be presented to the Commission; it may issue a cease and desist order which becomes final and enforceable by a civil penalty of $5,000 for violation unless a petition to review the order is filed in the appropriate circuit court of appeals within 60 days of the order; and the reviewing court is authorized to affirm, modify, or set aside the order in whole or in part.

Under the present section, therefore, enforcement is by the administrative agency. The statute makes the Commission's findings of fact conclusive if they are supported by evidence and it is also settled law that the determination of the administrative body as to what constitute prohibited methods of competition, acts,

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