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It follows that to impose upon appellate courts the burden of trying our cases de novo would impose upon them something more than ascertaining whether there is a “rational basis” for the conclusions of the Commission, would make the courts the administrators, and would exhaust the judicial function in more senses than one.

The result would be at odds with the principles stated by the Supreme Court in Federal Communications Commission v. Pottsville Broadcasting Company, when it said:

The technical rules derived from the interrelationship of judicial tribunals forming a hierarchical system are taken out of their environment when mechanically applied to determine the extent to which congressional power, exercised through a delegated agency, can be controlled within the limited scope of "judicial power” conferred by Congress under the Constitution.

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To be sure, the laws under which these agencies operate prescribe the fundamentals of fair play. They require that interested parties be afforded an opportunity for hearing and that judgment must express a reasoned conclusion. But to assimilate the relation of these administrative bodies and the courts to the relationship between lower and upper courts is to disregard the origin and purposes of the movement for administrative regulation and at the same time to disregard the traditional scope, however far-reaching, of the judicial process. Unless these vital differentiations between the functions of judicial and administrative tribunals are observed, the courts will stray outside their province and read the laws of Congress through the distorting lenses of inapplicable legal doctrine (309 U. S. 134, 141, 143-144).

The issue that we are dealing with here is not merely procedural. It is fundamental. There is real danger that in the form of a procedural change the very considerations that brought this Commission into being may be sacrificed or lost in the resulting confusion. We assume that Congress desires and intends to adhere to the policy embodied in the Federal Trade Commission Act, as amended by the Wheeler-Lea Act, the Clayton Act, as amended by the RobinsonPatman Act, and the antitrust laws generally.

We submit finally that to inject the preponderance of evidence rule into the appellate consideration of cases arising under those laws would give such cases a specially favored appellate status that could only weaken the enforcement of such laws.

Mr. O'HARA. Mr. Wooden, you do not advance the philosophy that there should be no appeal from the ruling or decision of the administrative body, do you?

Mr. WOODEN. No, sir. We have that now. I think what we have now is adequate so far as the Federal Trade Commission is concerned.

Mr. O'HARA. Of course, the statute, when it was enacted originally in 1914, provided for appeals to the courts, as did the Wheeler-Lea bill.

Mr. WOODEN. Yes, sir.

Mr. O'HARA. And, of course, the reason I ask you that question, there are some people who feel that our laws should be administered by groups of administrative bodies rather than courts; there should be no review. I do not subscribe to that.

Mr. WOODEN. Nor do I.

Mr. O'HARA. As a matter of fact, no one knows what is going to happen to the McCarran bill, S. 7. Í think my colleague, Mr. Rabin, asked that question of Dean Stason when he appeared before the committee. Mr. Rabin asked him if that bill did not pass, what his objections were, if any, to this bill. And he thought that this bill was a good bill, so far as the direction of appeal, if S. 7 did not pass. And I think Mr. Rabin will remember that. I am just quoting the substance of his testimony.

The mere changing of a rule from substantial evidence rule to the preponderance of evidence rule would not, in any way, abolish the functions of the Commission in any way, would it?

Mr. WOODEN. In my own opinion, and in the opinion of some very substantial men whom I have quoted, including Dean Stason, it would cripple the Commission.

Mr. O'HARA. How would it cripple it?

Mr. WOODEN. By making the Commission, as Dean Stason says, "a mere media for transmitting the evidence to the courts for the courts' decision."

Mr. O'HARA. I do not agree necessarily with the dean on that statement. I think that he went a little bit far afield on that question because, as I view it, Mr. Wooden, you still have the right of appeal from the decision, limited as it may be to the substantial evidence rule, as the courts have written it in, but I find, and I think you will agree with me on this statement, that in the confusion which does exist in the decisions of the courts themselves, that it might be a helpful thing to have a yardstick as the preponderance of evidence rule.

Mr. WOODEN. Whatever confusion has existed in the past would not be a marker to what would exist under the preponderance of evidence rule.

Mr. O'HARA. In what way do you think it would be increased?

Mr. WOODEN. In the way that these various people have said, including Dean Stason, the Attorney General, the majority of the Attorney General's committee, and others, John Dickinson, others of that type. I do not know whether I can improve on what they have said. I doubt it very much.

Mr. O'HARA. You read one decision this morning by the Supreme Court which gave the preponderance of evidence rule, and you read another one which gives the substantial evidence rule.

That is what I was hinting at.

Mr. WOODEN. As a matter of fact, some of the concepts of these various rules shade off into each other, and it is difficult to know sometimes whether you are talking about one or the other.

As Dean Stason says, there are certain concepts of the substantial evidence rule that amount to the preponderance rule. That is what the courts formerly applied in Federal Trade cases, but they have gotten away from it.

Mr. O'HARA. Earlier in your statement you made some reference to the fact that you felt that Congress had refused to adopt the preponderance rule. Do you have anything in mind with reference to an absolute refusal on the part of Congress, or whether this question has ever been up?

Mr. WOODEN. Well, I have in mind the discussion in conference on the Wheeler-Lea amendment, where Congressman Lea said that the substantial evidence rule provided for an honest-to-God judicial review, that this was taken officially as being the conference committee's position, and that they reenacted the substantial evidence rule by their discussion.

Mr. O'HARA. That might have been the views of the conference committee but not necessarily the views of the Congress.

Mr. WOODEN. Oh, yes.
Mr. O'HARA. That is all I have.
(The following was submitted for the record :)

BRIEF IN SUPPORT OF THE BILL
(By Newell W. Ellison and Ernest W. Jennes)

INTRODUCTION

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Section 5 (c) of the Federal Trade Commission Act (15 U. S. C. 45 (c)) provides that any order issued by the Federal Trade Commission to cease and desist from any method of competition it has found unfair or any act or practice it has found unfair or deceptive may be reviewed by the appropriate circuit court of appeals of the United States upon petition of the party to whom the order is addressed. Upon such petition the Commission is required to file in the court "a transcript of the entire record in the proceeding, including all the evidence taken and the report and order of the Commission.” The court is empowered "to make and enter upon the pleadings, evidence, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the Commission

The scope of the court's review is circumscribed by the provision that “the findings of the Commission as to the facts, if supported by evidence, shall be conclusive."

Section 1 of H. R. 2390, introduced by Mr. Reece, of Tennessee, proposes to amend the foregoing provision by expressly authorizing the court in its decree to modify the order of the Commission “as in its judgment the circumstances of the case require.1

It would also amend section 5 (c) so as to require the findings of the Commission to be "supported by the preponderance of the evidence” in order to merit the status of conclusiveness."

This brief is submitted in support of these provisions which are intended to increase the scope of judicial review of findings of fact and orders of the Commission. Our support of these provisions can in no way be construed as a criticism of the integrity or fidelity with which the Commission performs the duties placed upon it by the act creating the Commission. The Commission is composed of men of the highest integrity but they, like all men, make errors in judgment and our support of an adequate review of their findings and orders is to do no more than endeavor to correct errors that inevitably befall the acts

As will be seen, the need for more adequate review is perhaps due not so much to the historical inadequacy of the substantial evidence rule as it is to the dilution of that rule in its application by the appellate courts. Whatever the reason, the fact remains that litigants feel that review of the Commission's findings by the courts is inadequate and that an enlargement of the scope of the review is necessary to correct the situation.

of men.

EXISTING SCOPE OF REVIEW

Review of the findings of fact of the Federal Trade Commission is now governed by what is known as the substantial evidence rule (Cf. Consolidated Edison Co. v. National Labor Relations Board, 305 U. S. 197, 229 (1938)). This rule has been construed so as to confine judicial review of the actions of administrative agencies within very narrow limits. In Neff v. Federal Trade Commission (117 F. (20) 495 (C. C. A. 4th 1941)) the court said at page 497 :

"It is settled beyond controversy that under such a statute, this court may not pass upon the weight to be given to conflicting testimony. If the findings of the Commission are supported by substantial evidence, they are binding upon us.”

An indication of how this rule of review has limited judicial discretion is to be found in Federal Trade Commission v. Standard Education Society (86 F. (20) 692 (C. C. A. 2nd 1936), reversed 302 U. S. 112 (1937)). Here, the Circuit Court of Appeals for the Second Circuit was totally unimpressed by certain findings of the Commission :

"Coming now to the practices forbidden, the first and third clauses of the order wer in substance the same; they forbade representing that the 10 books were given away and that only the 'extension service was sold. It is true that the Commission is not to sanction unfair trade practices merely because they are of long standing; its duty is to bring trade into harmony with fair dealing (Federal Trade Comm. v. Winsted Hosiery Co., 258 U. S. 483, 493, 494 ; 42 S. Ct. 384, 385, 386 ; 66 L. Ed. 729). To the discharge of that duty it should not, however, bring a pedantic scrupulosity ; too solicitous a censorship is worse than any evils it may correct, and a community which sells for profit must not be ridden on so short a rein that it can only move at a walk. We cannot take seriously the suggestion that a man who is buying a set of books and a 10 years' 'extension serviee' will be fatuous enough to be misled by the mere statement that the first are given away and that he is paying only for the second. Nor can we conceive how he could be damaged were he to suppose that that was true. Such trivial niceties are too impalpable for practical affairs, they are will-o-'the-wisps, which divert attention from substantial evils” (pp. 695–696).

1 Italic supplied.

Other findings were, the court felt, wholly without proof:

“For the eighth [clause) which forbade the use of such testimonials which had not been given by the person whose name was used, we have been able to find no support in the evidence; and we are referred to none except the conclusions of one, Nixon, which are outweighed by her identification of the handwriting of the person whose name was used” (p. 697).

The Supreme Court, however, unanimously reversed the court of appeals, holding that it had no "right to ignore the plain mandate of the statute which makes the findings of the Commission conclusive as to the facts if supported by testimony (Federal Trade Commission v. Standard Education Society, 302 U. S. 112, 117 (1937)).

În Jacob Siegel Co. v. Federal Trade Commission (150 F. (20) 751, 755 (C. C. A. 3u 1944, aff’d on rehearing 1945)) the court quoted as applicable to a Federal Trade Commission case the following language from Medo Photo Supply Corporation v. National Labor Relations Board (321 U. S. 678, 681-682 (1944)):

“It has now long been settled that findings of the Board, as with those of other administrative agencies, are conclusive upon review in courts when supported by evidence, that the weighing of conflicting evidence is for the Board and not for the courts, that the inferences from the evidence are to be drawn by the Board and not by the courts, save only as questions of law are raised, and that upon such questions of law the experienced judgment of the Board is entitled to great weight."

Under the substantial-evidence rule as enunciated in Federal Trade Commission v. Standard Education Society, supra, and as stated even more strongly in other cases, the appellate court is prevented from setting aside or modifying the findings of the Commission not only if it feels that a different conclusion would be reasonable but even if it feels that the conclusion of the Commission is clearly erroneous, and, upon a consideration of all the evidence, it would reach a different conclusion (Swayne & Hoyt, Ltd., v. United States, 300 U. S. 297, 304 (1937); Manufacturers Railway Company v. United States and Interstate Commerce Commission, 246 U. S. 457, 482 (1918); Moretrench Corporation v. Federal Trade Commission, 127 F. (20) 792, 794–795 (C. C. A. (20) 1942)). See Segal v. Federal Trade Commission (142 F. (20) 255 (1944)), where the Circuit Court of Appeals for the Second Circuit said that even if the Commission wished to rely on testimony that was biased, it could not interfere whatever might be its own indisposition to rely on such testimony. An extreme statement is to be found in Consolidated Edison Co. v. National Labor Relations Board (305 U. S. 197 (1938)), where the court of appeals sustained the Board's finding of discrimination because the record was not "wholly barren of evidence" to support it and the Supreme Court held that the substantial-evidence rule had been satisfied.

SCOPE OF REVIEW OF COURTS

It is pertinent to inquire into the scope of review to which the findings of a trial court are subject. In this connection, rule 52 (a) of the Federal Rules of Civil Procedure (28 U. S. C. 723 (c)) provides :

"In all actions tried upon the facts without a jury, the court shall find the facts specially and state separately its conclusions of law thereon and direct the entry of the appropriate judgment; and in granting or refusing interlocutory injunctions the court shall similarly set forth the findings of fact and conclusions of law which constitute the grounds of its action. Requests for findings are not necessary for purposes of review. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.” 1

1 Cf. the strong language of the Supreme Court in National Labor Relations Board v. Waterman Steamshin Corp. (309 U. S. 206, 226 (19401), that “whether the court would reach the same conclusion as the Board from the conflicting evidence is immaterial and the court's disagreement with the Broad could not warrant the disregard of the statutory division of authority set up by Congress.”

This—the clearly erroneous rule—was derived from the prior equity practice with respect to appellate review of the findings of fact of a trial court. Such findings were presumptively correct but would be set aside if clearly against the weight of the evidence (Aetna Life Ins. Co. v. Kepler, 116 F. (20) 1, 4-5 (C. C. A. 8th 1941): 3 Moore's Federal Practice 3115 et seq. Note to Rule 52 (a) 28 U. S. O. A. 723 (c)). According to the Honorable William P. Mitchell, chief of the advisory committee on the drafting of the rules, the findings of a trial court where a jury is waived or there is no right to a jury—whether in law or in equity"can be set aside if against the clear weight of evidence, even though there is some evidence that might support a verdict or findings in a law case under the old system.” Rules of Civil Procedure, Annotated, Appendix, p. 199.

The Supreme Court has recently had opportunity to analyze the scope of review permitted under the clearly erroneous rule in District of Columbia v. Pace (320 U. S. 698, 701-703 (1944)).

"This statute was enacted in May 1938. The law at that time as to the review of findings of fact in equity was, as stated by Mr. Justice Brandeis for the Court, 'in equity, matters of fact as well as of law are reviewable

Virginian Ry. Co. v. United States (272 U. S. 658, 675). Findings of fact by the trial judge of course were presumptively correct and were accepted by reviewing courts unless clearly wrong. Butte & Superior Copper Co. v. Clark-Montana Realty Co. (249 U. S. 12, 30). This rule, however, did not deny power to the circuit court of appeals to review facts, but rather went to the weight to be accorded to the findings of a lower court and had special pertinence where credibility of witnesses was involved. This Court had a well-settled rule that 'when two courts have reached the same conclusion on a question of fact, their finding will not be disturbed unless it is clear that their conclusion was erroneous.' Baker v. Schofield (243 U. S. 114, 118). Such a rule would have no support in reason if the second court could not make its findings as a result of its own. judgment.”

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“We conclude, therefore, that the court of appeals has power to review decisions of the Board of Tax Appeals as under the equity practice in which the whole case, both facts and law, is open for consideration in the appellate court, subject to the long-standing rule that findings of fact are treated as presumptively correct and are accepted unless clearly wrong. The court of appeals therefore had power to set aside the determination of the Board of Tax Appeals if convinced, as it was, that the Board was clearly wrong. We are not called upon to separate factual from legal grounds of decision and to determine if reversal of the Board of Tax Appeals by the court of appeals could stand on questions of law alone."

Thus, it is clear that both the new Federal rules and prior Federal equity practice afford an appellate court much more discretion in reviewing the findings of fact of a trial court than in reviewing those of the Federal Trade Commission. When it feels that a trial court's view of the facts is incorrect, it is free to consider all the facts and grant the petitioner proper relief. In doing so, it may determine the weight to be given conflicting evidence, draw its own inferences from the facts, and, havhg thoroughly evaluated the evidence, decide whether the whole record is inconsistent with the findings of the trial court. When reviewing the findings of fact of the Federal Trade Commission, the appellate court is practically forced to determine that no sane person could come to the conclusion at which the Commission arrived before it can grant relief to the petitioner. So long as the record is not "wholly barren of evidence” to support the findings of the Commission, those findings must stand.

The imposition of greater restrictions upon the appellate court when reviewing the findings of the Commission than when reviewing findings of a trial court has no justification. Neither the area nor the effect of the Commission's activity

1 Italic supplied.

2 The First Circuit's comment regarding rule 52 (a) in Fleming y. Palmer (123 F. 2d. 749, 751 (1941)) sharply contrasts is to the substantial evidence ruie :

"A finding of fact is clearly erroneous if it is against the clear weight of the evidence. It does not suffice that it be supported by evidence.”

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