Now, with respect to false advertising, fraudulent methods and devices, and innumerable other things affecting not only the public health but affecting the pocketbook of all of our citizens, and yet ordinarily not affecting any one of them as distinguished from thousands of others, you could not expect these various individual citizens to go into the courts and prosecute for those offenses, and until Congress passed these acts, there were very few offenses upon which such a proceeding could be based.

Suppose they went to a district attorney. He would say, "Well, you will have to develop and bring to me all the facts and the analyses and the various other things, scientific and otherwise, involved; which, of course, would be an impossibility.

Consequently, the Federal Trade Commission and the other quasijudicial commissions are created for the purpose of protecting the public, and are supplemental to the courts, and perform a service which in the very nature of things the courts could not perform.

Now, the question of expertness-I do not like to speak about myself, four of the present members of the Federal Trade Commission have been on the Commission from 11 to 17 years, and one who died a few months ago, Colonel March, was on the Commission 17 years, and was succeeded by Commissioner Mason.

During that time they have heard and studied and disposed of thousands of cases. Right in that connection, as the personnel of the Commission seems to have been brought into question, I want to take the liberty of handing you, if I may, some biographical sketches of the different members of the Commission.

Mr. REECE. Mr. Chairman, who brought the personnel of the Commission into question?

Mr. DAVIS. Well, I think the bill itself does. And there have undoubtedly been insinuations.

Mr. REECE. Well, I certainly disagree.

Mr. DAVIS. Yes; I say that there have been insinuations about the Commission in performing its duty and all that sort of thing.

Now, right along this line, I want you to examine the background and experience of the men on the Commission in order to determine whether you think they were disregardful of the interests of the people with whom they have been dealing, and so forth.

I submit that for what it is worth.

Mr. REECE. But, Mr. Chairman, I want to add, so far as I am concerned, I have not in any way intended to disparage the Commission's qualifications or manner of performance of their duties; and I think the impression which you seek to convey, Judge, is unfortunate to say the least.

Mr. DAVIS. Well, I want to say this: That in view of the fact that there are numerous commissions of a quasi-judicial nature, who are performing in substantially the same way in their fields as the Federal Trade Commission, and when there is a bill pending in Congress which has been under careful study for 4 or 5 years, undertaking to define the operation of all judicial commissions, which has been reported out to the Senate, the mere fact that the Federal Trade Commission alone has been singled out to reform and weaken, I say that fact alone is a reflection on the Commission and I so take it.

I know the other members do, too. But then, that is neither here nor there.

Mr. REECE. Then, Judge, any bill which may be introduced affecting the functions of the Federal Trade Commission is a reflection upon the members of the Commission?

Mr. DAVIS. No; I did not say that. I did not say that. I do not think that the McCarran-Sumners bill is. That undertakes to deal with all the quasi-judicial commissions, although with respect to some of the first bills they excepted the Federal Trade Commission. But the present bill does not..

Mr. REECE. Now, Judge, as to the statement you made a moment ago analyzing your theory of government that as government becomes more complex it is necessary to set up administrative agencies to protect the public, I recognize that it has become increasingly necessary to do so.

This bill does not seek to change that tendency, but it does, recognizing that increased powers of necessity must be given the bureaus and agencies, recognize the necessity of giving to the courts the power of making an adequate review of the decisions of such agencies; with the view, as one of your witnesses expressed so well the other day, of making sure that we are under the law and not under arbitrary action.

The whole tendency, as you said, of all great governments is to go toward government by administrative action.

That was particularly true in Germany and in Italy and in Russia, where the whole government was administered by administrative action and not by law.

That is what we want to avoid in this country: To live under law and not by arbitrary action.

Mr. DAVIS. Now, Mr. Chairman, it is 11 o'clock. I would like to present my views without interruption. When I get through I will stay just as long as Mr. Reece wants to debate the question, before the full committee or anywhere else.

But I cannot get my statement in if I do not have an opportunity to talk. I am not going to be able to say nearly as much as I would like to say anyhow, because, as I understand, it has been decided to close the hearings today.

We are only replying to things which are said about the Commission. We think we should have the full opportunity and right to do that, and I cannot possibly answer all of the innumerable things that have been injected into this record in an hour's time, or in a day's time for that matter.

But I would like to have an opportunity to say some of them uninterrupted. When I get through, I will be glad to appear any time anywhere, before this subcommittee or the full committee, and debate the question with Mr. Reece, or answer all the questions that he may desire to put.

But I would like to get in some answers to the innumerable things, many of which are absolutely untrue, that have been injected into this

record.

Mr. SADOWSKI. I think the witness is entitled to make his statement, and this committee has always been most fair in that respect.

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We are proud of our record as a committee in permitting witnesses to present their statements without being harassed and bothered too much.

Mr. REECE. Well now, if asking a question for the purpose of developing information constitutes harassment of the witness, I misunderstand procedure.

The purpose of the hearing is to develop information which might be helpful to the committee in reaching a conclusion.

I am sure the Judge would not mind questions occasionally in order to bring out information which might be helpful.

Mr. DAVIS. I am not at all afraid of your questions, if I have the time. Not that I expect to convince you, Congressman Reece; I would be perfectly willing, but here we are right down to the last day, and I have held back to go on the stand to pick up the odds and ends of things that had not been covered, and I would like to have some privilege in that respect.

Mr. REECE. One thing, Mr. Chairman, that I had in mind asking the Judge early in his statement is to give us the procedure that is followed in the Commssion leading up to the issuance of a complaint and the trial of the case.

Mr. DAVIS. Now, I already had that in mind. That is a part of my statement.

Mr. REECE. For instance, how many different departments of the Commission

Mr. DAVIS. And I will answer anything you want to ask about if you just give me a chance.

Mr. REECE. For instance, how many different departments of the Commission function on a case before a complaint is issued? And does the Commission itself have anything to do with the issuance of the complaint?

Those go to the procedure of the Commission, and those are some of the questions that I want to ask as we go along.

Mr. SADOWSKI. The Judge has said that he will answer that question, Mr. Reece, and under the rules of the committee when the witness makes a request to make his statement without interruption, it is the policy of the committee to grant that request.

We shall follow that in this instance.

Mr. O'HARA. Mr. Chairman, I would like to have the record show that I have no objection to the program as far as the witness is concerned, but I do object to your using the term "harass."

Mr. SADOWSKI. I will strike that. But I do think that when a witness makes a request to make his statement without interruption, his request should be granted; Judge, you may proceed with your

statement.

Mr. DAVIS. Now, Mr. Chairman and gentlemen, on the question of appeal, these records are in many instances very voluminous, running into the thousands of pages.

They deal with things that courts are not accustomed to dealing with unless they get an appeal from the Federal Trade Commission or perhaps the Food and Drug Administration.

Some of those courts will not get a case from either of those oftener than every 2 or 3 or 4 years, and some oftener, and then when they get them it is primarily handled by one member of the court.

The New York circuit, the second circuit, and the seventh circuit, get cases much more frequently.

The Supreme Court has many times said that the Commission by reason of its long experience and study of these questions is better able to determine them than where a court gets one for the first time. But the question of appeal is no different than it is in many other instances. For instance, an appeal from a jury by or from a master in chancery, or where the jury is waived, as it is in many States, in Mr. Reece's State and mine, it has the same force and effect as if there were a jury; that is, substantially the same as the substantial evidence rule.

Now, I want to, in the first place, explain that the Federal Trade Commission can impose no fine or penalty. Just remember that. The Federal Trade Commission can only in proper cases say, "Cease and desist."

In other words, stopping them from doing that. If they are not doing it, as sometimes they insist, it would not hurt them much to tell them to stop, if they are not doing anything.

If they are doing it and it is wrong, they ought to be stopped. Now, it is the mildest form of procedure in law, "Cease and desist", and Í want to show you our procedure and show you how these cases are winnowed down.

You get down to a very few cases that all of this is about. All of this talk has resolved around a few cases out of tens of thousands. In other words, it is proposed to burn down the barn to kill a rat; or, I might say, a mouse.

Now, that is what is involved here. In the first place, if the Commission receives a complaint, it may be from a competitor; it may be from a consumer who claims to have been gypped; it may be from different departments of the Government, as it frequently is, our municipal governments, better business bureaus, chamber of commerce, all those; but the vast majority of complaints come from competitors who are complaining of the unfair practices of their competitors.

Now, when a complaint comes to the Commission, in the first place, section 5 of the act provides:

Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful.

The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, common carriers

and so forth—

from using unfair methods of competition in commerce and unfair and deceptive acts or practices in commerce.

Now, that is not only an authority but a direction from Congress, a specific direction, and that was in the original act, and then the Wheeler-Lea amendment to the act strengthened the law, because it greatly strengthened the authority of the Commission to deal with the advertising and sale of dangerous drugs, and so forth.

This bill is all directed at the Wheeler-Lea Act, which was passed after serious 4 or 5 years' study, about the same time Congress passed the amendment to the new Food and Drug Act, with the one exception about the question of preponderance of the evidence.

That was not considered then. No one raised the question then. Nobody else is raising the question. It is not raised or proposed in the McCarran-Sumners bill that is pending.

The preponderance of evidence on appeal was not recommended by the Attorney General's committee. As was already stated here, originally about 10 years ago, some bar association committee suggested it, but the American Bar Association has receded from it, and nobody, so far as I know, in high authority, is advocating it except in this bill. Their first witness introduced here, Dean Stason, refused to go along on the bill. He said he was not for preponderance of the evidence on appeal and was not for a de novo trial on appeal, and other things along that line.

He was introduced by the proponents. Now, going on with this procedure:

Whenever the Commission shall have reason to believe that any such person, partnership, or corporation has been or is using any unfair method of competition or unfair or deceptive act or practice in commerce, and if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public, it shall issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect and containing a notice of a hearing upon a day and at a place therein fixed at least 30 days after the service of said complaint.

Then the act provides that they have 30 days within which to answer, and then it is assigned to a trial examiner, after the issues are joined. When the Commission receives a complaint from a citizen which appears to be an alleged violation of the law, involving interstate commerce, and so forth, it is referred to the Chief Examiner, who is Chief of the Field Investigational Division of the Commission.

He assigns the matter to an attorney examiner to make an investigation, and among other things he is directed to always visit the respondent himself, or if it is a corporation, one of their officials; explain to him what the charge is and ask him if he has anything to say. He is not compelled to say anything but is always given the privilege of doing it.

Reports of all interviews are written up daily, first on the daily report, and finally the field examiner writes up his report on the whole investigation, also stating his conclusions and recommendation; the record is gone over by the Chief Examiner, and he writes his report. He may recommend that it be dismissed or closed. He may recommend corrective action.

Now, with certain exceptions, monopolistic fixing of prices, and so forth; in other words, a violation of the Sherman law or the Clayton Act, or unless a person is an old offender who has been up from time to time before, the Commission, if it decides from this record, the written record of the investigation, that it may probably be a violation of the law, and the Commission decides to grant the privilege of stipulation, they refer it to the chief trial examiner, who will proceed to negotiate a stipulation, in which the respondent admits whatever facts he is willing to admit, admits the advertising, admits that it is false, and agrees to cease and desist from engaging in certain specified acts, and not to resume same.

Now, if it is settled that way, all well and good. The respondent may decline to stipulate, and he is never forced, and we never permit him to sign a stipulation if he says, "I will sign it but it is not correct."