istration with authority to adequately control pure food, drugs, and cosmetics is concerned.

Mr. DAVIS. But why does Dr. Dunbar try to make a point out of it then? He does. He is simply answering the letter.

Mr. REECE. Dr. Dunbar was bringing it up to date, and not dealing with history so ancient as that with which Mr. Cassedy dealt.

When the witness goes back and discusses the lack of authority which the Pure Food and Drug Administration had to deal with these things prior to the enactment of the 1938 law, it, to say the least, is not in point.

Mr. DAVIS. Dr. Dunbar specifies four cases of conflict between the Federal Trade Commission and the Food and Drug Administration, and Mr. Cassedy is showing you that there was not any conflict on any one of them; that these two cases just mentioned were instituted by the Commission at the request of the Food and Drug Administration after they had lost them.

Mr. REECE. And does Dr. Dunbar's letter, Judge, in reference to this case or these cases to which Mr. Cassedy is now devoting himself, deal only with the phases of those cases that obtained prior to the enactment of the 1938 act; or to certain phases that existed after the 1938 act was passed?

Mr. DAVIS. My opinion is that the impression could be obtained from his letter, since 1938. But, as Mr. Cassedy will show, none of them were instituted after that act except the Fresh Grown Preserve Corp. case, and it was already explained that after they had lost that case they asked the Federal Trade Commission to proceed and furnished us what material they had, and cooperated with the attorneys of the Commission in prosecuting the case.

The Commission won the case, and the court of appeals said they had the authority to do it. That is the only case since the passage of the Wheeler-Lea amendment to the act in which the Commission has instituted proceedings on the question of label.

Just as I was going to explain, as a matter of policy, to avoid any confusion or anything of the kind between the two agencies we decided upon a policy of not dealing with cases that involved nothing except labels.

Mr. REECE. Dr. Cullen's letter, written from the Pure Food and Drug Administration, calling the attention of the Federal Trade Commission to this matter, was dated March 8, 1932, and it would appear from Dr. Dunbar's letter, that it was in January 1938 that the cease and desist order was issued.

Do you mean to say that it took the Commission 6 years to reach a point in the proceedings where a cease-and-desist order was issued in this case, after the Food and Drug called the attention of the Commission to it? If so, that would indicate rather desultary action by the Commission.

Mr. DAVIS. I do not know the history of that, but I know there were all the delays on earth; and at any rate, it has absolutely nothing to do with the Wheeler-Lea Act.

Mr. O'HARA. Might I ask one question there, Mr. Cassedy? In how many instances have the Food and Drug requested prosecution by the Federal Trade Commission?

Mr. CASSEDY. I am informed of two, one the Fresh Grown Preserve Corp., and the other this Capon Water Co. that I have just mentioned. I am certain that there are others. However, I have made no independent investigation. I looked these up because I knew these cases would be discussed. But as to how many others, I am sure it is done

all the time.

We refer cases to them and they refer cases to us.

Mr. O'HARA. I would like for you to testify as accurately as you can on the point.

Mr. CASSEDY. Well, I can say that it is their policy to refer to the Commission any cases that involve false advertising, as well as our policy to refer to them cases that involve false labeling. We both follow that policy and have been doing it for years.

Mr. O'Hara, there are very, very cases of this Commission that involved false labeling, even with advertising, as Judge Davis has pointed out, since the Wheeler-Lea amendments, because it has been the policy of this Commission not to deal with these cases but to refer them to the Food and Drug Administration.

This Commission merely finished up a few cases that were in progress at the time of the enactment of the Wheeler-Lea amendments. Mr. O'HARA. Now, I presume it is perfectly natural that a case that is called to the attention of the Food and Drug Administration which involves the question of false advertising would automatically be referred by them to your office. Is that not true, Mr. Cassedy?

Mr. CASSEDY. Yes, sir, and I am sure they would do so.

Mr. O'HARA. And the alternative is true: Where you run into a case of this kind, you would refer that false labeling to the Food and Drug?

Mr. CASSEDY. Yes, sir; we do that all the time.

Mr. DAVIS. Mr. O'Hara, I have here to refer to the Commission over 60 letters, carbon copies of letters of labeling cases which the Commission has referred to the Food and Drug Administration since sometime in 1944, when we commenced keeping separate files.

In addition to that, I think there are 17 letters where they simply told the applicant to take that up with the Food and Drug Administration.

I have those here and was going to show them. That is the uniform policy.

Mr. O'HARA. Judge, what my last question to Mr. Cassedy related to, and what I would assume from what the testimony here is that that would be the natural flow of practice between the two groups. I just assumed that, and I hope I stated it fairly.

Mr. DAVIS. This policy that I am speaking of as to the Commission has obtained from the beginning, and they frequently refer complaints to us about advertisers.

I have no way of knowing, of course, whether they refer all those complaints, but I have reason to believe that they do, because we have received a great many of them, and receive them right along.

I do know that it has been our policy to send them all labeling cases, not withstanding the fact that both before and since the passage of the Wheeler-Lea Act the court has held specifically that we had always had and now have jurisdiction over labeling. But in order to proceed harmoniously and without any conflict, the Commission adopted that

policy and has agreed to it, and I want to say that I just cannot understand anybody, Dr. Dunbar or anybody else, suggesting any lack of harmony between the two agencies.

We have them to make laboratory tests for us all the time, and pay them for it. In other words, a good many advertisers will not furnish the contents of their products.

Mr. REECE. But Judge, Dr. Dunbar, as I read his letter, does not suggest any lack of harmony. It goes purely to the question of the law, which gives certain dual authority over these subjects to different agencies.

So I would not put Dr. Dunbar in the position where he is saying that there is any lack of cooperation.

Mr. DAVIS. I know. I did not say that. But he did say, if I understood, that there were instances of alleged conflict.

Mr. REECE. Oh, yes; conflict in authority, but not in personalties. Mr. DAVIS. Oh, I know. Of course not. I did not understand that. Our personal relations have been perfectly harmonious, and we are dealing with them all the time.

Now, on the question of dual jurisdiction, the Federal Trade Commission and the Department of Justice have dual jurisdiction, you might say, given by Congress over various sections of the Clayton Act.

We also have the same over violations of the Sherman Act. But I want to tell you, gentlemen, there is plenty of work for both of us, and then it cannot always be done. The same is true with regard to the Federal Trade Commission and the Food and Drug Administration.

We both have more than we can do, unless we are given a great deal more funds and a great deal more personnel to enforce the law. Mr. REECE. Now, as I understand, Dr. Dunbar in referring to this case, in effect is dealing with the question of conflict in jurisdiction, which involves the question of res adjudicata, the net result of which is the impairment of consumer protection.

Mr. CASSEDY. Will you permit me to answer that?

Mr. REECE. It is true that the complaint was filed prior to the enactment of the Wheeler-Lea Act. But it then went on to court, and Judge Dunbar quotes from what the court said.

Mr. SADOWSKI. What case is that?

Mr. REECE. The Capon case. He quotes at some length. But the court made this statement, referring to the ineffectiveness of the decision of the Commission to protect the public:

Because if these so-called mineral waters are not of any independent therapeutic value, the public should be protected against assertions otherwise.

Then it says:

The Commission's order is surely the most gentle exercise of its power extant. Then it says further:

Although this may be our feeling about the order we are affirming, there does not seem to be anything we can do about it.

Then, as Dr. Dunbar says, the respondents thereafter submitted a report to the Commission which contained a sample of the advertising. Then, in June of 1943, in an effort to protect the public from this product, the Pure Food and Drug Administration started action and made a seizure.

That action was challenged on the basis that the matter had already been adjudicated. I believe the Pure Food and Drug Administration appealed from that decision, but I do not think his reference to this case is out of point since he is dealing with the question of res adjudicata which is involved here and the fact that the case was referred to the Commission prior to the enactment of the Wheeler-Lea Act has nothing to do with it.

He has recited his facts going back to a date prior to the enactment of the Wheeler-Lea Act, it is true, but he brings it up to date and shows how this dual jurisdiction has the result of preventing or making it more difficult for the Pure Food and Drug Administration to protect the consuming public.

So far as I am concerned, I cannot see how his citing this case is out of point.

Mr. CASSEDY. I can show you, if you let me talk.

Mr. SADOWSKI. You may proceed, Mr. Cassedy.

Mr. CASSEDY. The only conflict of jurisdiction, if in fact it is a conflict, between the Federal Trade Commission and the Food and Drug Administration arises from an application of the doctrine of res adjudicata. This has occurred in the cases of George H. Lee Company v. Federal Trade Commission (113 F. (2d) 583 (C. C. A. 8, 1940), 27 F. T. C. 314), United States v. Willard Tablet Company (141 F. (2d) 141 (C. C. A. 7, 1944)), and United States v. Capon Springs Water, decided by the District Court for the Southern District of New York in February 1945, and which is pending on appeal in the second circuit court of appeals.

In the Lee case, supra, the failure of the Food and Drug Administration to establish the falsity of the statements in the labeling acts as a bar to an action by the Federal Trade Commission to forbid the use of substantially similar statements in advertising.

In the Willard Tablet and Capon Springs Water cases, the proceedings of the Federal Trade Commission, according to Dr. Dunbar, in approving certain advertising representations, acted as a bar to the Food and Drug Administration proceeding against false labeling that contained substantially similar representations.

It appears that both the Willard Tablet and Capon Springs Water cases were determined upon an erroneous assumption that the filing of reports of compliance in the Federal Trade Commission proceedings constituted an approval by the Commission of the statements made therein.

To explain that a little bit, after an order is issued by the Commission, as was issued in the Capon Water case and in the Willard Tablet case, the Commission procedure, and the rules, require the filing within a certain length of time-I believe 60 days-of a report of compliance. That is 30 days in some instances, I recall. The filing of that report of compliance by the respondent in such cases may include the advertisements or the representations that they use or intend to use in their future advertisements.

Now, the Commission received the reports of compliance in those two cases. There was no approval by the Commission in either of those two cases of the representations that the respondents said they intended to use in the future.

When the Food and Drug Administration proceeded in its cases. against these same respondents, the United States Attorney handling

those cases erroneously assumed, according to Dr. Dunbar in the Capon Water case, and according to the decision itself in the Willard Tablet case, that the Federal Trade Commission had approved those representations contained in the reports of compliance.

That was an erroneous assumption, but on that assumption the United States attorney stipulated that to be the fact in both cases. Based on that stipulation, the courts held that the approval of the representations by the Federal Trade Commission would act as a bar under the doctrine of res adjudicata to the proceedings by the Food and Drug Administration against the same representations in labeling. So I say to this committee that those two cases are not sound; that the doctrine of res adjudicata should not have applied in those cases. Mr. REECE. But, whatever the circumstances is, the courts have held that a Commission order was res adjudicata in a libel proceeding, so as to preclude the Food and Drug Administration from proceeding against a product, of which the Willard case is a sample; and then also the courts, whatever the circumstances, have held that a judgment in a libel proceeding brought by the Food and Drug Administration is res adjudicata in a Commission case involving the same product and the same claims, which is illustrated by the George H. Lee Co. case. Mr. CASSEDY. Yes, sir; it works both ways.

Mr. REECE. And the courts have so held.

Mr. CASSEDY. Yes, sir; the courts have so held, in the Willard Tablet and Capon Water cases, and the George H. Lee cases; the three cases in which that doctrine has applied.

The George H. Lee case applied to a decision of the Food and Drug and the other two applied to decisions of the Federal Trade Commission.

Mr. O'HARA. Mr. Cassedy, is that not a principle to which you agree on the res adjudicata case principle? Here is a conflict of jurisdiction between two departments of the Government. It is not any more than simple justice that after one department gets through prosecuting it ought to cover the offense.

Mr. CASSEDY. Let me read my explanation of that, sir, in the statement that I have.

However, regardless of the soundness of the application of the doctrine of res adjudicata in these cases, these situations do not arise except where the decision of the Commission in its proceedings or the court in Food and Drug proceedings, is favorable to the respondent or claimant.

If the false representation in the advertising or labeling is conclusively established in the Commission proceedings, such proceedings would not bar subsequent action by the Food and Drug Administration in its proceedings against the same product and upon the same false statements.

Likewise, if the false statements in the labeling are conclusively established by the Food and Drug Administration proceeding, such proceeding would not bar subsequent action by the Commission against the same false representations in advertising and in labeling as an unfair method of competition.

The fact that more than one proceeding may be had against the same respondent and same product should not be considered as an objection.

85257-46-24