AMEND FEDERAL TRADE COMMISSION ACT

MONDAY, MARCH 4, 1946

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee reconvened at 10 a. m., Hon. George G. Sadowski,, chairman of the subcommittee, presiding.

Mr. SADOWSKI. The subcommittee will come to order.

STATEMENT OF GILBERT H. MONTAGUE, ATTORNEY AT LAW, NEW YORK CITY

Mr. SADOWSKI. Our first witness today is Mr. Montague. Will you state your name and your position?

Mr. MONTAGUE. Mr. Chairman and gentlemen of the committee,. first of all, I want to express my thanks for being invited to come before this committee. I will begin by qualifying myself.

I taught on the general subject of antitrust law and economics at Harvard in 1901 to 1904, while I was a student in the law school. I became admitted to the New York bar in 1904, and during the period... from 1904 to 1911, 1912, I did considerable work on the antitrust-law field and wrote a number of articles for the Atlantic Monthly and the North American Review and other periodicals on that subject.

I opened my own office in 1910. Since then a large part of my practice has been in this field.

In 1913 and 1914, particularly 1914, I was down here as a counsel and representative of the Merchants Association, which is the largest commercial organization, as I understand it, each of Chicago. It is now the Commerce and Industry Association of New York. I was. here with the particular view to furthering the passage of the Federal Trade Commission Act.

In that connection, I saw a great deal of Justice Brandeis, who had a great deal to do with that, so from that time on I have been familiar with it.

Practice before the Federal Trade Commission has occupied me from the very first week that the Commission organized in 1915.

In looking through, I noticed that from the very first volume of the Commission's reports there has never been a month since then that I have not had to advise on a great many matters before the Commission.

Mr. REECE. If the gentleman will permit an interruption, he spoke about having had his economic training at Harvard. Being from. New York University, I will admit that Harvard is a pretty good. school, too.

Mr. MONTAGUE. I do not know what Congressman Reece means, but you and I have a good deal to expiate for the fact that we taught economics so far back as that. A good deal has happened since then.

One of my closest friends is Arthur Vanderbilt, Dean of New York University Law School, a man who has done a great deal of work on administration law. He and I have worked together at a great many problems and have spoken before a good many audiences.

I perhaps should also add that I have contributed articles on the general subject of the Federal Trade Commission to the annals of the American Academy of Social and Political Science, the Political Science Quarterly, the Quarterly Journal of Economics, the Political Economy, the Atlantic Monthly, North American Review, the Yale Law Journal, Columbia Law Review, Harvard Law Review, and George Washington Law Review.

I have spoken on that subject repeatedly by request of the association of the bar of the city of New York. I checked up and found my first address was given in 1915. Since then I have spoken at least half a dozen times before this association to show the progress of the law on this subject.

I have spoken before the New York State Bar Association repeatedly on the subject of the Federal Trade Commission Act. I have spoken before the Philadelphia Bar Association, before the bar associations in New York State, Massachusetts, Pennsylvania, Michigan, New Hampshire, Wisconsin, and two or three other States, so that altogether I have been doing a great deal of practicing and a great deal of talking and a great deal of writing on the subject which has required me to keep in very close contact with the Commission, I might say monthly, in many cases weekly, from 1915 to the present date. Mr. SADOWSKI. You certainly have a fine background to qualify you as a witness.

Mr. MONTAGUE. I have repeatedly served on committees of the Chamber of Commerce of the United States and the National Association of Manufacturers and the National Industrial Conference Board, and a great many other associations of businessmen dealing with problems on this subject during the past 30 years.

Just last month, or rather, in January, I was asked, because of my previous experience, to speak on phases of Federal Trade Commission practice at a conference in New York at which a number of lawyers were present. I was complimented by the New York Law Journal requesting the privilege of printing my address, which it did, serially, for three successive issues of the New York Law Journal, at the end of January and early February, I have been living with this subject intensively for 30 years.

Mr. REECE. You spoke about having addressed the New York bar. May I ask if the food and drug division of the New York bar is in harmony with the views which you contemplate expressing to this committee?

Mr. MONTAGUE. I am afraid you will find that some members of that section are not in harmony, but I did speak, as I say, at the end of January, at that symposium which they had on the Robinson-Patman Act, and I gave the initial introductory outline of that subject which was published serially.

Mr. REECE. You may be more convincing before the committee than you were before the New York bar.

Mr. MONTAGUE. I will try not to take up too much time. I will demonstrate how I differ with several of the lawyers whom you have listened to, and I think it will be rather interesting to compare my views with theirs, because I know you will weigh them judicially.

I might also add this that unlike all of the other lawyers who have appeared before you, I am paying my own expenses. I have no retainer. I have not discussed what I am saying with any client. I shall bill no client for what I say. I am down here speaking simply from my own experience. I have no doubt that a number of my clients might disapprove, perhaps, of what I say. I have yet to find a client who, when he is hooked by the Federal Trade Commission, does not hope that they will get abolished, but pretty soon something happens in which he is pretty glad to have it function as against one of his competitors.

So, I am absolutely a free man here at my own expense, whereas every lawyer you have heard is speaking for a client.

I will begin my discussion of the Reece bill by first giving the background of what appears on pages 4 and 5 of the Reece bill, and I will begin with the background of section 15 of this bill, dealing with false advertisement as it applies to food, drugs, and cosmetics.

Prior to 1938, the Food and Drug Administration had jurisdiction over misbranding of food and drugs, and misbranding, as interpreted in the Food and Drug Act, and as stated there, that included labels, brands, and statements on packages that deceived or misled purchasers of food and drugs.

The process of the Food and Drug Administration was to go ahead by prosecution through the district attorney, and it was in the United States district courts. And there were many fines, and there were condemnation proceedings by which there was a forfeiture of goods which were misbranded. And there was also destruction of misbranded goods.

I speak of the severity of the penalties which were enforced by the Food and Drugs Act up to that time. It covered only the subjects which I have spoken of; namely, misbranding, and, dating from about 1935, there was a strong agitation among consumer organizations which was reflected also by the officials of the Food and Drug Administration that there were a number of subjects which were not covered; that there should be in the Food and Drug Administration power to consider representations which, by word or statement, suggested things which were not true, and also by failure in their advertising to reveal facts which were material in the light of representations, and particularly, and this is part of the agitation, material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement or under such conditions as are customary or usual.

There was a reason for that agitation. There were a number of new drugs or new proprietary preparations which had had rather disastrous consequences, and there were also a number of cosmetics,

a number of hair dyes, which had had very injurious consequences, and so this became very soon practically an irresistible impulse to change the Food and Drug Act.

There were a number of people in the industry, in the food industry, and also some of them in some branches of the pharmaceutical industry, who were prepared to fight it out on the line of an amendment of the Food and Drug Act to accomplish this purpose, but the Proprietary Association, advised by Mr. Hoge, took a different view. And I would like at this time to speak of Mr. Hoge.

He is one of the most brilliant lawyers that I know of. He has been a friend of mine ever since he left law school. In the first job that he had, he and I worked together, so I had occasion to see him for the past 25 years. He is one of the ablest men that I know of. He has had a phenomenal record at the bar, and I think that if anybody can testify, and I know that Congressman Reece can, he is a perfectly superb man to work with and a charming personality.

I speak of that because

Mr. REECE. He is the kind of man that, in the South, we refer to as a scholar and gentleman.

Along that same line, in view of the inference that one of the witnesses made that certain lawyers who represent some proprietary medicine companies seem to be the sole proponents of the measure with which I, of course, disagree; you are familiar with such men as Mr. Hoge, Mr. Charles Murphy, and Mr. Isaac Digges, and Mr. Kelley and Mr. Perry, and most of the attorneys, I presume, who appeared here. Are they men and attorneys of ability and standing in their profession?

Mr. MONTAGUE. Mr. Hoge, particularly so. The others I simply know nothing against, but I think I will demonstrate before I get through that they are testifying here for their clients, giving you only half of the truth in respect to the situation, doing as lawyers have to do when they have retainers in their pockets, and I think you will see that when in that status they come in and state some of the things that they have said here to which I think I can refer and which I can clear up, you will understand that, after all, they are lawyers, working for their clients, and relying on the other side to show up the other side against them. It is only half a statement they have made. Perfectly reputable. I do not in any way question their legal right to do so, because that is what lawyers do when they get into court, but I am down here speaking against them. If you will give me the chance, I will show why I differ with them, and I am doing it for no other motive than that the full truth come out.

Mr. REECE. If a further interruption would not disturb your line of argument at this time

Mr. MONTAGUE. I would much prefer to take that up after you have heard what I have to say. I would like to go ahead and tell you why I have indicated that I will differ with them.

Mr. REECE. All I want to do at this time is to quote a paragraph from a speech which you made and which was inserted in the Congres sional Record

Mr. MONTAGUE. May I take that up, too, because I will tell youMr. REECE. On April 9, by Senator Hawkes of New Jersey, which reads as follows:

As litigant, the Government has advantages of unique prestige, unrivaled powers of publicity, specially traind legal talent, and inexhaustible resources. Such Government agencies as the Federal Trade Commission and the National Labor Relations Board have also the advantage that in all of their prosecutions, they are both prosecutor and judge and are empowered by statute to make decisions in their own favor, even though such decisions be contrary to the weight of the evidence.

Mr. MONTAGUE. That opens up another subject. As I say, if you will keep that in mind, and wait until I get through, I will completely explain just why that statement is true, and why what has been said by these lawyers is not the complete truth, sir.

Mr. REECE. That is why I was reading it at this time so you would have it in mind.

Mr. MONTAGUE. I ask you to be patient. It will take some time to demonstrate, and at the close, I would like you to read that again and I will show you exactly why that statement that I made is absolutely true, and yet the things which have been said against this Commission by the lawyers who preceded me are half truths, and in some cases, absolutely are untruths. And I have to say that in respect to Jimmie Hoge as well as these other lawyers. That indicates something of a clash, and you will have to give me some time to demonstrate it.

I have shown what the issue is. So, please do not interrupt me until I can get my statement in, sir.

Mr. REECE. Since you have stated that Mr. Hoge is a man of

Mr. MONTAGUE. A man of honor, but, also a lawyer speaking for his client and being paid by his client, to come down here and speak.

Mr. REECE. You have stated that he made statements which are half truths. I think you should not make such statements unless you are able to back them up.

Mr. MONTAGUE. And in regard to what the Federal Trade Commission does are not true. I will demonstrate that before I finish. Mr. REECE. Some of them as being

Mr. MONTAGUE. And please do not interrupt me until I can get my statement in. You will exactly understand why. With all of my admiration and affection for Mr. Hoge

Mr. SADOWSKI. I think it is only fair

Mr. MONTAGUE. I, nevertheless, differ with him.

Mr. SADOWSKI. I think it is only fair that when a witness comes before this committee, to make a statement, we should give him a chance to present his argument and then ask the questions afterward. I know the deep interest that you, Mr. Reece, have in this bill. It is your bill, but I think, in all fairness, we ought to let the witness. proceed and then you ask your questions when he gets through. You may proceed, Mr. Montague.

Mr. MONTAGUE. At that point, I said that the Proprietary Association of which Mr. Hoge is counsel took a different view. Their view was that the best way out of that situation for the benefit of all of their members, and they represent people who are making these