Judge Buffington in the third circuit, in the Curtis Publishing Co. case, asked this question:

What supervisory power did Congress intend should be exercised by the courts of appeals? For if such supervisory power which is one of substance and judicial in its nature is not to be exercised by that court, then it is manifest that the supervising power which Congress invoked was one of mere shadow and not of substance.

That sounds like they are not very happy about it, from my point of view, and I think, gentlemen, it really comes down to one question upon which opinions may differ. What did Congress intend when it enacted the Federal Trade Commission Act? Did it intend that this fact-finding agency, which was to apply the law of unfair competition as known to the common law, was to have the right of final determination on questions of fact wherever there was any evidence to support them, or did it intend that the rule of substantial evidence meant that the courts had the right to look at the whole record? I don't know. I was not there. I was not even admitted to the bar at the time this matter was before the Congress.

Mr. O'HARA. Mr. Digges, has that rule been preserved in these court decisions on that point?

Mr. DIGGES. I can only say this, Mr. O'Hara, that in my circuit, the second circuit, the courts always assumed that they had that power until the Supreme Court of the United States in FTC versus Herzfeld told them they didn't have it, so that the men on that Court who, as Mr. Rabin knows, are men of substance and learning and men who would be well qualified to sit on the Supreme Court of the United States, were confused, and said so. They don't like the present situation, as is evident from their opinions.

Mr. O'HARA. Have you any suggestions for a remedy?

Mr. DIGGES. I haven't reached in my own mind appropriate language, with that degree of particularity advanced here by the first witnesses, but it seems to me that if you get to the root of this question and either decide in this committee here and now what Congress really intended, or what it intends today to do, which one of these concepts is right-was it the intention of the Congress that the whole record should be reviewed, or was it the intention of the Congress, as my friends on the Commission believe, that that function should be specifically taken away from the reviewing courts, and if it is the intention of the Congress that the powers of review should be the same in respect of the Federal Trade Commission as they are in respect of the district courts of the United States, for which I contend, then I think you ought to put in the words "fair preponderance of evidence," or "by a preponderance of the evidence," and you will have language there which every civil court in the United States will understand.

Mr. REECE. If, as you contend, that was the purpose of Congress when the Federal Trade Act was enacted, then these proposed amendments become only clarifying amendments?

Mr. DIGGES. That is correct, sir, and a reaffirmation of what at least the judges of the second Federal circuit, whose views I follow with considerable respect, have to say on that particular subject.

Mr. O'HARA. Mr. Digges, I have a high respect for the purpose for which the Federal Trade Commission was created. It does seem that the trier of the facts, the actual trier of fact-who is called a refereeas I understood

Mr. DIGGES. Trial examiner.

Mr. O'HARA. The trial examiner, who observes the witnesses, should certainly have some responsibility for making a recommendation as to the facts. He is the one who sees the witness, and the only one, as I understand, in these proceedings, who does. Should he not have some authority to make findings?

Mr. DIGGES. Well, sir, I think you have raised a question that, while I have not been privy to any discussion with the Federal Trade Commission on this particular point, I should say the question whether those Commissioners have the power to delegate their functions of deciding these questions to paid employees of the Commission. I don't know. I think there is a nice question of law there. I think it is a nice question of law, for example, with regard to the very incisive question which was put by one of the committeemen here as to whether or not those Commissioners are now delegating their authority to legal assistants, upon which I profess no knowledge-I am merely stating what I am informed to be the fact.

But I think, Mr. O'Hara, that your question is probably more properly related to what is known as the American Bar Association billat least that is what we call it outside the Congress, I understand it is called S. 7 around here there, if the prosecuting functions are differentiated from the judicial functions, then I think very well that a larger degree of authority should be given to these men. Their findings, or their report upon the evidence is not even part of the record under the present rules of the Federal Trade Commission. In that regard, may I just add this word: I don't think that the comparison which the Federal Trade Commission has made with the Interstate Commerce Commission is a very felicitous one. While

I never practiced before the Interstate Commerce Commission, I have been informed that when that agency sits in a determination of a case, it sits as an independent court without any predetermination as to who is right or who is wrong. I mean, there are private parties involved in connection with those cases.

The difference with regard to the Federal Trade Commissionand these gentlemen did not create the statute; it is a criticism which really should be directed to Congress-is that the very act itself requires a predetermination before a complaint may issue. It says, "Whenever the Commission shall have reason to believe that a proceeding by it shall be in the public interest," then it shall issue its complaint. So the act itself requires these gentlemen, at least on a prima facie basis, to have some conclusion with regard to the merits or demerits of the controversy. That is very different from the Interstate Commerce Commission.

Mr. O'HARA. Mr. Digges, you touch upon something which has given me a lot of concern-the present acts of Congress directed to this and other branches of the Government in that very situation, wherein we have a citizen of this country charged with a violation of some Federal law, and where the judge and the jury and the prosecutor and the hangman are practically all the same person, or in the same category, which has always been rather shocking to me. Because, if I am charged with a crime, I go into court and the prosecutor prosecutes me, but I have the confidence that the jury and the judge are neutral. I think this administrative phase of what we sometimes call bureaucracy is a

serious thing unless we have somewhere along the line the right of judicial review on the merits. I am very much concerned about that and its effect upon the country and its future. Certainly in some instances, even the liberty of our citizens is involved; certainly very serious property rights are involved in that.situation.

Mr. REECE. And it was because of the conditions and circumstances to which you refer I assume that caused the Second Circuit, again in the John Bene case, to say that the Federal Trade Commission, like many other modern administrative legal experiments, is called upon continuously to act as complainant, judge, and counsel.

Mr. DIGGES. May I be philosophical for just a moment in answer to Mr. O'Hara's question? I think there are among citizens of this country, and particularly among businessmen of this country, two trends which are of great danger to what has often been referred to as the American way of living, and by other, and erroneously so, as the system of free enterprise, because we have never had any system of free enterprise in this country, and never will have. What we have had is a system of private competitive enterprise under law, which is a very different thing. However, a great deal of power is achieved. by administrative agencies and I am not talking about the Federal Trade Commission now, but administrative agencies generally.

Mr. O'HARA. Let me change my question and make it general. Mr. DIGGES. Yes, because of the fact that men fritter away their liberties because it is inconvenient to fight for them; it is not worth the time involved to come down and fight for your liberties. That is one thing. And, of course, every time a man fails to fight for his liberties, the power of bureaucracy has grown in that respect. Secondly, and this has some specific application to this hearing going on here today, is the feeling among businessmen that Government touches them at so many points and in so many ways that they do not dare to come down here and tell you what they really feel. I have had clients of my own who raised serious question as to whether I should appear here, for fear of possible repercussions against them by the Federal Trade Commission. I know that is a lot of nonsense. I can't conceive of men of integrity that head the Federal Trade Commission doing any such thing, but there is that feeling. And those two things, in my field of observation, are things which are very dangerous.

Now, Mr. Chairman, I am acting as messenger in this regard. I have been asked to file with the committee a brief in behalf of the Motor & Equipment Manufacturers Association, which is an organization made up of a lot of small manufacturers, and some large ones, in which they have addressed themselves specifically to the statement made to this committee by the Federal Trade Commission. It is not my brief, and I do not want the record to indicate it is my brief. I am merely handing it in for the record.

Mr. RABIN. It will be received.

(The brief referred to will be found at the end of the days proceedings.)

Mr. REECE. There has been sent to me a brief which was prepared by Chadbourne, Wallace, Parke & Whiteside in support of this bill, and there will be others, which I would like to have appear in the record.

There is also a letter from Carl M. Anderson, chairman of the legislative committee of the drug, chemical, and allied trades section, Board of Trade, New York City; a resolution by the Chamber of Commerce of the State of New York; and a brief by G. V. Thompson, vice president and secretary of the Cream of Wheat Corp., Minneapolis, Minn. Also a brief by Mr. John Mueller, legislative committee cochairman, of the Associated Drug & Chemical Industries of Missouri and, as I have said, there will be others.

These briefs will appear at the end of the day's proceedings, and I would like the briefs thus submitted to appear in the same type as though presented in person.

(The papers referred to are as follows:)

STATEMENT OF THE MOTOR AND EQUIPMENT MANUFACTURERS ASSOCIATION

IN SUPPORT OF H. R. 2390

I

The Motor and Equipment Manufacturers Association respectfully submits for consideration of the Committee on Interstate and Foreign Commerce the following brief advocating passage of H. R. 2390, a bill to amend the act creating the Federal Trade Commission, to define its powers and duties, and for other purposes.

The Motor and Equipment Manufacturers Association is a trade association incorporated under the laws of the State of Illinois. Its object is "to foster the commercial interests of its members in the manufacture, sale, service, and use of fabricated and raw materials, component parts, machinery, tools, and devices of all kinds in the automotive, aircraft, marine, and related industries, and to encourage friendly intercourse among its members for their welfare and the advancement of their trade interests."

The association, known throughout the industry as MEMA, has been functioning since 1904 as the organized voice of leading manufacturers of parts, accessories, shop equipment, service tools, and maintenance materials in the automotive and allied fields. MEMA membership is comprised of manufacturers and is available to any company of good repute actually engaged in the production or manufacture of any of the above-listed automotive or allied products. Under the present wording of the Federal Trade Commission Act, "the findings of the Commission [upon appeal] as to the facts, if supported by evidence, shall be conclusive."

The Reece bill would amend this provision so that the Commission's findings would be conclusive "if supported by the preponderance of the evidence."

It is important that there be a clear and accurate understanding of the effects that such an amendment will have.

As the Commission correctly points out in its published statement with regard to this bill, the courts have held that the word "evidence," now required in order to render the Commission's findings conclusive, must be deemed to be qualified by the word "substantial." However, "substantial" is a word of art, and, as applied by the courts to the cases before them, does not have the breadth of scope implied in its ordinary usage, or as implied by the Commission in its statement.

What the courts mean when they say that there must be "substantial" evidence to support the Commission's findings is merely that the record must contain some evidence of a more substantial nature than mere rumor, guesswork, conjecture, or ambiguity. The latter obviously are not enough to render a finding conclusive.

However, if the appellate court, upon searching the record, is able to find any evidence at all contained in it which amounts to more than the insubstantial character above indicated, then it is bound by the Commission's findings of fact, based upon such evidence, regardless of what other evidence there may be in the record to controvert it (FTC v. Beechnut Co., 257 U. S. 441 (1922); Harriet Hubbard Ayer, Inc., v. FTC, 15 F. (2d) 274 (C. C. A. 2d, 1926), certiorari denied, 273 U. S. 759).

In other words, in determining whether or not there is evidence such as to render the Commission's finding conclusive, the court is restricted to determining whether any such evidence appears in the record, and, once having found it, the court cannot take into consideration its relationship to other evidence, regardless of how persuasive or how plentiful the controverting proof may be.

For example, let us assume a case in which a single eyewitness has testified, from bare memory, as to the occurrence of a certain event. Inasmuch as his testimony is not vague rumor or speculation, it constitutes substantial evidence within the meaning of the rule under discussion. Since it does so qualify, findings of fact based upon that kind of testimony are binding upon the circuit court of appeals in spite of the fact that the record might contain contradictory testimony of numerous unimpeachable witnesses supported by objective evidence in the nature of photographs or other credible evidence. The appellate court is precluded from taking into account the contradictory testimony and evidence, as that would constitute a weighing of the evidence, which it may not do, in view of the statutory provision that the Commission's finding is conclusive because there is "substantial" evidence to support it, that is, the competent, relevant, material, and otherwise admissible testimony of the single witness referred to above. If the testimony of the single witness has been based upon mere rumor, the circuit court of appeals could have disregarded it is not being "substantial," but as it was not, it must be accepted by that court as sufficient to support the Commission's findings, even though the court itself would disagree with the Commission's findings. That is the sole extent of the rule announced by the court that the evidence to support a Commission's finding must be "substantial." The Reece bill seeks to vest in the circuit courts of appeal the authority to consider the evidence in support of the Commission's finding of fact in its relationship to the other evidence introduced during the course of the proceeding; in other words, to allow it to weigh the evidence to the extent, at least, of determining whether or not the Commission's finding was supported by a preponderance of the evidence.

II

Fair play demands that the defendant in a judicial or quasi-judicial proceeding, have his rights determined upon the fair preponderance of the evidence. There is no tolerance within the American concept of justice for imposition of penalties or deprivation of rights when the weight of the evidence discloses that the respondent has conducted himself with propriety.

If the Federal Trade Commission should be required to determine proceedings before it upon the fair preponderance of the evidence, ability of the appellate courts to affirm the Commission's findings after an unrestricted examination into the matter would foster confidence in and enhance the prestige of the Commission. If, on the other hand, the outcome of the Federal Trade Commission proceedings is to continue to be controlled by factors other than the fair preponderance of evidence, it would represent a deplorable condition of moral bankruptcy and judicial impotency that would turn away the victim without a remedy. Thus far, we have considered the public interest only insofar as it concerns respondents in Federal Trade Commission proceedings, for it is upon those respondents that the impact of injustice most directly falls. No legislative inquiry into the desirability of the Reece bill would be complete. however, without a consideration of its salutary benefits to the consuming public.

If any single thing were to be designated as most distinctive of the American competitive economy, it would be the care with which merchandise is developed, manufactured, packaged, and distributed to suit every need, desire, and whim of the consumer. It is to the consumer's advantage that he may be informed as to the extent of the benefits to be derived from the various articles of merchandise available in the market. In the case of new and improved products and processes, this is more than desirable, as it becomes a matter of public

concern.

Yet, under the Federal Trade Commission Act as now written, the Commissioners are empowered to withhold such desirable advice and information from the American public notwithstanding that the fair preponderance of evidence may reveal the obvious welfare of the public in learning of such new and improved products and processes.