Consumer protection should be the only consideration in such cases, and if the representations are in fact false, the Federal Trade Commission and the Food and Drug Administration are fully justified in taking as many actions to forbid such practice as are authorized by law to stop the law violations. The Food and Drug Administration has in fact instituted many successive actions against the same product based upon the same falso labeling and involving the same manufacturer. Dr. Dunbar refers to four seizures of Ayds Candy in 1940 and 1941. That is referred to in the letter that he wrote this committee. The Carley Co. was the manufacturer. The same false labeling was involved in each case. Mr. O'HARA. Mr. Cassedy, no one disagrees with the necessity of consumer protection. Naturally, we are all as much concerned with that as you are. Now, the point that appears to me to be important in this matter is whether there in a dual jurisdiction of the Federal Trade Commission and the Food and Drug Administration. If a proceeding is brought by one, obviously the purpose there is the same as that of the other as to consumer protection, is that not so? That is the ultimate aim of both of them. Mr. CASSEDY. Yes, sir. Mr. O'HARA. Unless there is a vicious propensity on the part of the manufacturer to disregard, why should there be a continuation of a harassing action by the other when it covers the same purpose and for the same effect? Mr. CASSEDY. That would necessarily follow when the Food and Drug has jurisdiction over labeling and the Federal Trade Commission has jurisdiction over advertising. Mr. O'HARA. It all reaches the same end, does it not? Consumer protection or the public welfare? Mr. CASSEDY. Yes, sir; it does. But let me point this out to you: If you had the jurisdiction or the authority all in one agency, as I have written in my statement, you would still be met with the doctrine of res adjudicata. Mr. O'HARA. That is, you would, as I understand the law to be, in the event there is an acquittal. Mr. CASSEDY. Yes, sir, where a decision would be favorable to the advertiser, the manufacturer. Mr. O'HARA. Now, if there is not, then the door is wide open. Mr. DAVIS. Right in that connection, Congressman O'Hara, these decisions in question do not base the res adjudicata upon the Federal Trade Commission's action or the Food and Drug Administration, but the Government. They say that if the Government proceeds against citizens and it lost in the suit, and then a subsequent action is instituted by the Government, it applies to the Government, whether it is this agency or that agency, or the Department of Justice. Now, if the same agency is cast in an action and then it institutes a subsequent action against the same party for the same alleged offenses, the doctrine of res adjudicata would apply to them just the same as if the first action had been by another agency. Mr. O'HARA. I understand that, sir. Mr. DAVIS. That applies to the Federal Trade Commission, and it applies to the Food and Drug Administration, so that the doctrine of res adjudicata would apply just the same whether all of this authority was under the Food and Drug or under the Federal Trade Com mission. Now, here is another thing: Out of the thousands and thousands of cases that have been handled by the Food and Drug Administration and by the Federal Trade Commission during the years, they can only fish out four in which action by one has been successfully plead as res adjudicata. Mr. CASSEDY. Only three cases, Judge. Mr. DAVIS. Only three cases out of thousands and thousands. Mr. O'HARA. The question in my mind that I was trying to decide was what would be the policy of your Commission in an identical labeling case involving also advertising, if the circumstances were the same, and the Food and Drug prosecuted? Why should you follow it up with a prosecution on the false advertising? I would like to know the reason why. Mr. DAVIS. Well, the Food and Drug Administration, we will say, are involved in a proceeding for false labeling. We will say that they stop that false labeling. But they still advertise the same things that they had on the label and which were stopped. Mr. O'HARA. You mean that is a condition which continues after the Food and Drug would prosecute? Mr. DAVIS. Yes; absolutely. Mr. O'HARA. I can recognize the distinction there. Mr. DAVIS. Now, our statute says that we are authorized and directed to prevent unfair methods of competition-unfair and deceptive acts and practices. One of those unfair practices is false advertising. Mr. SADOWSKI. I think that is absolutely right. That is the correct procedure. Mr. DAVIS. In other words, for the protection of the public if the procedure before the Food and Drug does not stop them from all the violations, and simply stopped false labeling, but permitted engaging in false advertising subsequent to that, I think the suggestion of Mr. Cassedy is correct: That we should continue until we stop them from those practices if we can. Mr. O'HARA. Well, Judge, I do not differ with your statement on that at all. But from what I understood as to some of the complaints where the same principles was involved, there seems to be a sort of race for jurisdiction over the subject, as it seems to me. I think that is unfortunate because we are all interested in consumer protection in the whole situation. I was trying to get at your attitude as a matter of policy. Mr. DAVIS. I will tell you, Congressman, that we try very hard to avoid any conflict; we do not like to start after the same rabbit somebody else already has jumped. That is particularly true with the Department of Justice. In other words, if they have instituted an investigation of a violation over which we also have jurisdiction, we always inquire before we start on anything of that kind, and if they are doing it, we stay off. We do the same with the Food and Drug Administration and with the Post Office Department, which, as you know, has jurisdiction over fraudulent use of the mails. Frequently complaints are made to us at the same time. An applicant may complain about the unfair practices of his competitors. Sometimes he will write to the Post Office Department and the Food and Drug Department and Federal Trade Commission. None of us knows that he has written the other. Sometimes actions may be instituted by both. Well, we always try to let them try it out, especially if they are the first to institute the action. We do not quibble over a question of a little time either. We try to avoid those things. We have plenty to do without duplicating our efforts with any other agency of the Government. And I tell you in all good faith, we do everything we can to avoid that, because we think it is only fair. Now, in that connection, after the Federal Trade had instituted a very important action, that of the Cement Association, et al., which was tried with a large volume of testimony, the Commission issued a cease-and-desist order, and the other side, the respondents, appealed to the circuit court of appeals. Since that appeal was taken, 27 different motions were filed. When it was set for a final hearing, very much to our surprise, the Department of Justice filed a similar complaint in the district court, the Federal District Court of Colorado. Well, we were astonished when we heard what was taking place. Then the respondents in the case we were trying filed a petition setting forth that as a bar to the action out there. Well, the chief counsel and I and one or two other members went over and talked with the Attorney General, the present Attorney General, who had just recently become the Attorney General and who was wholly unfamiliar with the details. He called in those responsible for that other case and heard their version of it and said that he thought it should not have been brought. To make a long story short, that case was squelched right there just as soon as he got knowledge of the situation. Now, I simply mention that to tell you that sometimes those things happen without the higher-ups knowing about it. Mr. O'HARA. Of course, Judge, they do not all turn out as judicially as that case did, I understand. They do not all admit that, after all, one prosecution is enough. Somebody likes to hang on sometimes. Mr. DAVIS. That is true when they are still engaging in the practices involved in that suit, and they have undertaken, even according to the statement of the court, to delay it in various ways with all those petitions and motions, and so forth, which they have filed and which have been overruled. But I tell you that we all have our problems in the executive branch of the Government. We have plenty to do. The Federal Trade Commission is certainly doing all it can to avoid any conflict with any other department, and we do not think we have any. If so, it is a most isolated instance, such as those referred to here, which were really not conflicts. Mr. SADOWSKI. Thank you, Judge. You may proceed, Mr. Cassedy. We hope we may have your statement concluded this morning. Mr. CASSEDY. It will be concluded in a few minutes, sir. Section 5 of the Reece bill, if enacted by Congress, would have the effect of depriving the Federal Trade Commission of its jurisdiction over false labeling as an unfair method of competition, but neither this section nor any other section of the Reece bill would prevent the application of the doctrine of res adjudicata as a bar to Federal Trade Commission proceedings when the Food and Drug Administration proceeding results favorably to the respondent involved or as a bar to the Food and Drug Administration proceedings when the Federal Trade Commission action against false advertising results favorably to the respondent involved. Dr. Dunbar has suggested as a solution, in substance, that the jurisdiction over both advertising and labeling of food, drugs, devices and cosmetics should be vested in a single agency. If this were done, the doctrine of res adjudicata would still apply in those cases where the action of the single agency resulted favorably to the respondent involved as a bar to any successive action by the single agency against the same respondent and upon the same false statements. And to support that, in the case of George H. Lee Company v. Federal Trade Commission (113 F. (2d) 583 (C. C. A. 8, 1940)) in regard to this question, the court stated: The United States may not relitigate the same issue in successive libel proceedings involving different quantities of the same product (George H. Lee Co. v. United States (9 Cir., 41 F. (2d) 460)), nor may it relitigate the same issue in any proceeding in which the parties are the same and the product is the same. The rule is "that a right, question, or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and, even if the second suit is for a different cause of action, the right, question, or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified." Now, I want to point out that the circuit courts of appeals have decided the Willard Tablet and the George H. Lee cases, but the Supreme Court has not passed on this question. What the Supreme Court may decide, I do not know. Congressman O'Hara, that may somewhat answer your question. There is considerable difference of opinion as to whether the decisions in these cases are sound. I have the decisions of the circuit courts of appeals in these cases. The other case is not yet decided. I will file these with the committee, if you so desire. Mr. REECE. Mr. Chairman, yesterday, in referring to the so-called bromide and acetanilid cases, I made reference to labels or cautions which had been approved by the Food and Drug Administration. What I had in mind at the time were warnings that had been suggested by the Food and Drug Administration, having in mind, of course, that the Food and Drug Administration never, or at least I so understand, approves a label. But I want to ask you if this is a correct statement of those cases; taking, for instance, the Bromo Seltzer case, the Emerson case: That the Food and Drug Administration in December 1939 issued suggested warning for the bromide, acetanilid, and other products of that type. Then in January there were seizures by the Food and Drug Administration of various headache remedies which included the products of the Emerson Co. The Emerson Co. filed an answer, and indicated its intention to contest the action of the Food and Drug Administration, moving to have the case transferred to the Baltimore jurisdiction from the New York jurisdiction, where the proceeding was instituted. The removal was refused, and a short while prior to the prospective date of the trial the senior judge of the Eastern District of New York, called the representatives of the Emerson Drug Co. and the Food and Drug to his chambers to discuss the possible amount of time that would be required to try the case. When he was informed that it would possibly take several weeks, he suggested that it would be some time before his court would have opportunity or time to try the case. He suggested that the manufacturer and the Government representatives, the Food and Drug Administration representatives, should see if they could not arrive at a satisfactory agreement in the case without the necessity of a trial with the result that an agreement was reached, I believe on December 20, 1939. The Court then issued an order in the case, which was evidently done with the agreement of representatives of the Food and Drug Administration as well as the Emerson Co. A quantity of bromide was agreed upon to which the Food and Drug Administration took no exception. The label following that order was studied by the Food and Drug Administration, and no objection was interposed to it. They did not approve the label, as I understand, it being their policy not to formally approve any labels, but they interposed no objection, which is the most that is done in such cases. That put the Emerson Co. in a position of operating without objection by the Food and Drug Administration. The product continued on the market with that label under those circumstances, until sometime later, the date of which I am not sure, but I believe 1942, when the Federal Trade Commission proceeded against the advertising of various bromide and acetanilid companies including the Emerson Co., on the basis that the advertising was false. That, has resulted, of course, in a long, drawn-out preceeding which has not terminated now. The effect of that is that after an action had been instituted by the Food and Drug Administration and adjudicated in the court and the company was operating without any objection from the Food and Drug Administration ostensibly, the Federal Trade Commission, in 1942, instituted proceedings on ostensibly the same set of facts. That, as I see it, puts the Federal Trade Commission in conflict or, at least, gives it dual control with the Food and Drug Administration, in that the labels and warnings to which the Food and Drug Administration had not made any objection after this proceeding in the Federal court was settled, did not meet the requirements imposed by the Federal Trade Commission after its suit was instituted; and the company was required to change the labels and cautions, under penalty of a requirement that it would be forced, otherwise, to carry them in all advertising matter, both printed and spoken, and since it would be wholly impracticable to comply with such an order the company had no other alternative and the effect of action by the Commission was to exercise control of labeling in this cast. Is that a fair statement with reference to that proceeding? Mr. CASSEDY. No, sir; it is not. No, sir. |