ponderance rule would inevitably and materially increase the length of the record in the Commission's proceedings, and unduly prolong the trial. What is the significance of using that language in the report if that rule is now followed?

Mr. KELLEY. I am going to come to that at length, but I will say at the outset that I do not think the Commission can decide on any rule or upon any basis except the weight of the evidence and the preponderance of the evidence. It has never decided, and I challenge the statements made here that they decide otherwise. What the Commission meant in that report was that to adopt this amendment and give to the appellate court the right and power to de novo try the case on the facts and weigh the evidence would increase litigation, and I do not think it would be in the public interest, but I will come to that more at length, and Mr. Wooden, the next witness, will elaborate on that in some detail.

Court review of this Commission's findings is based exactly on the same principle. The substantial evidence rule applicable to jury verdicts is the rule governing review of findings of the Federal Trade Commission. A finding of the Federal Trade Commission unsupported by such evidence is beyond the power of the Commission to make, as it is contrary to law and would be set aside by the courts. It is the duty of the court to examine the whole record, to determine whether there was no evidence, a scintilla of evidence, or whether the cvidence was substantial enough to base a reasonable judgment thereon. In Carlay Company v. Federal Trade Commission, decided February 15, 1946, that is this month, the Circuit Court of Appeals for the Seventh Circuit correctly stated the substantial evidence rule as follows; and, I think it is the best definition that I ever found from any court, and here is the rule that that seventh circuit applies in reviewing Federal Trade Commission cases. In most of our very important cases, involving complex records, they go to the seventh circuit and the second circuit. The seventh circuit has a case before it that it is going to hear on the 16th of next month, involving 50,000 pages of testimony and several thousand exhibits, involving a whole industry, one of the most important cases that the Government has ever instituted under the anti-trust laws. This is the rule that that court applies in looking at our records on review:

Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind would accept as adequate to support a conclusion. It must be of such character as to afford a substantial basis of fact from which the fact in issue can be reasonably inferred. It excludes vague, uncertain or irrelevant matter. It implies a quality and character of proof which induces conviction and makes a lasting impression on reason (Consolidated Edison Company v. National Labor Relations Board, 305 U. S. 197; National Labor Relations Board v. Columbian Enameling and Stamping Company, 306 U. S. 292, 299; National Labor Relations Board v. Thompson Products, Inc., 97 F. 2d. 13, 15 (C. C. A. 6)). The rule of substantial evidence is one of fundamental importance and marks the dividing line between law and arbitrary power; and the requirement that a finding must be supported by substantial evidence

and mind you, the court does not say some evidence or any evidence, but says:

substantial evidence does not go so far as to justify orders without a basis in evidence having rational, probative force (Consolidated Edison Company v. National Labor Relations Board, supra, National Labor Relations Board v. Thompson Products, supra).

That is the rule of the courts when they scrutinize our cases.

Mr. ROGERS. Will you differentiate between the substantial and the preponderance rule right there, and why you are opposed to the preponderance rule?

Mr. KELLEY. I will come to that. I can only say this: If there is any other rule that the Federal Trade Commission or any tribunal in this country can use in appraising the evidence and reaching a decision, except the weight of the evidence, the greater weight of the evidence and the preponderance of the evidence, I do not know it. If the Federal Trade Commission, in reviewing these cases and coming to a finding of the facts and a determination of law violation, should reach a conclusion based upon anything other than the weight of the evidence or the preponderance of the evidence, then the hearing under that amendment is out of place; there should be impeachment. Mr. ROGERS. Do you not believe that the preponderance-of-evidence rule would protect the respondents better?

Mr. KELLEY. The Commission uses the preponderance-of-the-evidence rule, the greater weight of the evidence. What other rule is there? No tribunal in this country from the justice of the peace to the Supreme Court of the United States can be intellectually honest if it arrives at a decision upon factual matters, upon anything except in its mind as to what constitutes the greater weight of the evidence and the preponderance of it. It is vital and it is fundamental, and the very minute that that line is crossed, the integrity of whatever tribunal that ever did it is impeached. This is a fundamental matter. I am going to endeavor here to prove to you that the Commission does not reach any decision upon any rule except the preponderance of the evidence, and I am going to endeavor to show to you that in every case, except maybe a few scattered ones, that you or any other tribunal would have to have reached the same conclusion. The Commission is protecting the public interest; it is not representing special interests. I am going to come to that in detail.

Mr. RABIN. Do you intend to say why you believe the appellate court should not use the same standard? I do not want you to do it now; you will, I presume.

Mr. KELLEY. The appellate court reviews these cases under this substantial evidence rule, as I have just read from the seventh circuit, in one of our own cases that it reviewed this month. Of course, the appellate court cannot weigh the evidence any more than it can weigh the evidence of a district judge, but as a matter at law it looks into the record and it finds that if it does not meet the test of the substantial evidence rule that it can set that finding or order aside, it is its duty to do it on the whole record, and I believe the courts have done a pretty good job. I think that they do it and do it honestly and meticulously.

I can find a few cases that I differ with the courts, I can find several that I would have come to a different conclusion of the Commission. In some cases, I do not think the order was harsh enough, and in a few cases I thought the order was too harsh. They dismissed a good. many cases that I did not think ought to be dismissed, but that is neither here nor there. We are here on the question of whether they approach these matters on a basis of weight of the evidence and the preponderance of the evidence.

Mr. RABIN. Mr. Kelley, I understand you to say, and I am ready to accept it, that the Federal Trade Commission only decides on a fair preponderance of the evidence. There is, however, a difference between deciding on substantial evidence and a fair preponderance of evidence, as you know. My question was, would you tell us, during the course of your discussion, why the same preponderance rule should not apply in the appellate court rather than the substantial evidence rule? Now, are you going to tell us that later?

Mr. KELLEY. Mr. Wooden will deal with that at length. There was a time back when the Interstate Commerce Commission was created, a good many years ago, and then later they wanted the decisions of the Interstate Commerce Commission passed on by a court that would review de novo, and try de novo the facts. That is the old Commerce Court. It is all history, but it was pretty generally accepted that the Interstate Commerce Commission was protecting the public interest and the Commerce Court was not.

At any rate, there was a lot said about it, and Congress abolished the Commerce Court. It did not want two courts trying de novo such matters of great importance and public interest. Congress has acted time and again with respect to these matters involved, because they were of so great public interest.

Mr. RABIN. The review by an appellate court does not necessarily have to be a trial de novo if the appellate court uses the fair preponderance rule does it?

Mr. KELLEY. The court reviews our cases very thoroughly and the rule that I have just read is the rule that is applied and courts won't hesitate to set the Commission's findings aside any time that they believe that they are contrary to what reasonable men could and should find. It may be that one of the judges, or maybe in a given case all of them, might say, "Well, we think if we were doing this job, we would have found it just this way, but the Commission found it this way, and we have reviewed the evidence in the record, and we cannot say that reasonable men would not have arrived at that conclusion." I want to make this plain, and I am going to state it now. The illustration referred to was theoretical, those kinds of matters do not usually arise. In most cases where the courts review our cases, they say that the Commission could not have come to any other conclusion. Mr. ROGERS. Let me ask this one question right here, and it will not interfere with your statement.

Do you not believe that if there is any condition or case where the preponderance rule ought to predominate, it is where the bureau or the department is prosecutor, jury, and judge? Do you not think it ought to apply there, if it should apply anywhere?

Mr. KELLEY. I think that all administrative agencies ought to be pretty carefully scrutinized by the Congress, and I do not except the Federal Trade Commission. If you have any feeling, and I think you should, go into this matter in view of the statements that the proponents of this bill have made; if you have any feeling that the Commission is not only deciding these cases on the preponderance of the evidence, generally speaking by and large, but of the hundreds of cases, if in 95 percent of them they are not reaching the same conclusion that you would reach or any other court in this land would reach. I think something should be done. But that is not the case. It is far from the case.

Mr. REECE. Then what would be the objection, Mr. Kelley, to writing the preponderance rule into the law?

Mr. KELLEY. The Commission is administering some pretty important statutes, involving monopoly, price discriminations, and the very health, also, of the public. You set up the Federal Trade Commission, and the President, with the confirmation of the Senate, has affirmed five men. I think that they are strong men of integrity, and they are protecting the public interest. They become specialized in this matter, and very specialized. It is hard work, and there are big records. I have had a lot of experience in the circuit courts. We have wonderful circuits courts, and I think that they have done a magnificent job of the review of our cases. Three judges always sit.

I do not think that you should have two trial courts. I might just as well say have three and four, and I would dare say that when you got through you would have the second trial court differing with the first court and agreeing with the Commission, and vice versa. They do not have the time. For one thing, they do not have the time to read all of these records and make complete findings de novo; they have not time to carefully review these records de novo but only where counsel points out that they have not been sustained by the evidence. Later I want to say something about the challenge that was made to the courts by the attorneys representing respondents and what the courts said.

Mr. SADOWSKI. Suppose that you proceed with your statement, Mr. Kelley.

Mr. KELLEY. The foregoing description of the substantial-evidence rule is substantially in accord with that given by Dean Stason, the first witness to appear before this committee in favor of the bill, when he testified in 1941 at the hearings before the subcommittee of the Committee on the Judiciary, United States Senate, Seventy-seventh Congress, first session, on the administrative procedure bills. He then said (pt. 3, pp. 1356, 1357):

* ** probably the most generally accepted meaning ascribed to the term "substantial evidence" is this: The term "substantial evidence" is construed to confer finality upon an administrative decision on the facts when, upon an examination of the entire record, the evidence, including the inferences therefrom, is found to be such that a reasonable man, acting reasonably, might have reached the decision. On the other hand, if a reasonable man, acting reasonably, could not have reached the decision upon the evidence and the inferences therefrom, then the decision is not supported by substantial evidence, and it should be set aside.

I ascribe fully to that statement by Dean Stason.

Dean Stason further stated that in effect that was the same as the prevailing rule relating to directed verdicts in jury trials and in setting aside jury verdicts because contrary to the evidence. He continued:

* * many courts have taken the position that substantial evidence should be equated to the rules concerning directed verdicts. That seems to be an eminently sensible conclusion. If it were generally accepted, if it could be made mandatory by statute, then the courts would be obliged to survey the entire records in cases arising under the rule and would be required to sustain administrative-fact decisions if the evidence, including the inferences therefrom, is found to be such that a reasonable man acting reasonably might have reached the decision. On the other hand, if a reasonable man, acting reasonably, could not have reached the decision, then the result would be otherwise and the decision I would be set aside.

Dean Stason thereupon endorsed the substantial-evidence rule in the following language:

Thus conceived and interpreted, the substantial-evidence rule would be eminently sound as applied to a vast majority of administrative-fact questions. It would permit wide latitude of administrative action, but it would at the same time check gross and palpable errors.

The flexibility of the substantial-evidence rule was shown by the following statement of the Attorney General's Committee on Administrative Procedure:

Both the judicial and the statutory standards as to the scope of judicial review leave with the courts considerable opportunity for choice and selfrestraint in applying the standards to specific cases. The standards are not objective. They relate in large measure to matters of opinion and require the exercise of judgment where differences of opinion are common and frequently reasonable. It is no matter of surprise, therefore, that judges of the same court or of separate courts differ as to whether in a given case the administrative action was supported by substantial evidence and was within the permissible scope of administrative judgment, or was arbitrary and capricious, without substantial support and, hence, without the scope of authority. What one judge regards as a question of fact another thinks is a question of law. (p. 90).

*

*

Under existing standards, then, the courts may narrow their review to satisfy the demands for administrative discretion, and they may broaden it close to the point of substituting their judgment for that of the administrative agency. In exercising their powers of review, the courts have been influenced, it is commonly thought, by a variety of inarticulate factors: The character of the administrative agency, the nature of the problems with which it deals, the nature of and consequences of the administrative action, the confidence which the agency has won, the degree to which the review would interfere with the agency's functions or burden the courts, the nature of the proceedings before the administrative agency, and similar factors (p. 91, Final Report of the Attorney General's Committee on Administrative Procedure).

The Attorney General's committee, in discussing the proposal for judicial review of the weight of evidence in administrative proceedings, also questioned the value of the proposal, stating:

In the first place, there is the question of how much change, if any, the amendment would produce. The respect that courts have for the judgments of specialized tribunals which have carefully considered the problems and the evidence cannot be legislated away. The line between "substantial evidence" and "weight of evidence" is not easily drawn-particularly when the court is confined to a written record, has a limited amount of time, and has no opportunity further to question witnesses on testimony which seems hazy or leaves some lingering doubts unanswered. "Substantial evidence" may well be equivalent to the "weight of evidence" when a tribunal in which one has confidence and which had greater opportunities for accurate determination has already so decided (p. 91, Final Report of the Attorney General's Committee on Administrative Procedure).

In I. C. C. v. Union Pacific Railroad the Supreme Court in 1911 applied the substantial-evidence rule to the findings and orders of that Commission, without any statutory requirement, by stating that it would not consider "whether on like testimony, it would have made a similar ruling." I assume the presumption is that it would; but they said that they would not go into it, that the decision could not be supported by a mere scintilla of proof, "but the courts will not examine the facts further than to determine whether there was substantial evidence to sustain the order" (222 U. S. 541, 547). And the Court told them plainly what they meant by substantial evidence. They did not mean any evidence or some evidence. Dean Stason

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