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facts, call it a finding of facts, but I submit that the findings of facts in these cases are fuller and more illuminating than any opinion you ever see rendered by a court with few exceptions.

If they want to find out what case decisions are involved, if they will just go back a step and read the briefs filed on both sides by the lawyers who cite the decisions upon which they rely

Mr. REECE. When did the Commisison stop writing opinions?

Mr. Davis. Well, the Commission except from time to time has not written any opinions since I have been on the Commission, but they do write the findings of facts, which is as illuminating as can be, and most of these lawyers do not need it, so far as that is concerned, but if they do want to study the law farther, if they will look in the briefs, they can find all of the decisions that either side has relied upon in that particular case.

Mr. REECE. You are familiar with the recommendation of the Attorney General's Committee which recommended that written opinions be rendered.

On what did they base that conclusion, or do you have knowledge of that?

Mr. Davis. It has been so long since I read that I would not undertake to state. That was years and years ago.

Mr. REECE. As I see it, the difference between the statement of fact to which you refer and the written opinion is this, a written opinion gives the basis for the decision and analysis of the reasoning that led to the conclusion, whereas a statement of fact, an example of which you had here, may embrace a hundred or hundreds of pages becoming all-inclusive with reference to the facts before the Commission which makes it difficult for an attorney, by reading it, to ascertain with any very great definiteness the deciding facts which enabled the Commission to reach a decision.

In reaching a decision, I hardly assume that the Commission gave the same weight to all of the facts enumerated in a statement consisting of hundreds of pages.

It is because of that fact that the attorneys would prefer to have written opinions.

I assume that there was some logical, or at least presumably logical, basis for the Attorney General's Committee to recommend that written opinions be rendered.

Mr. Davis. Do you know anybody that has adopted that recommendation of the Attorney General?

Mr. REECE. I do not have knowledge of that.
Mr. Davis. Neither do we.

Mr. KELLEY. I would like to clear up this a little. I would like to get the facts clearer to you. It depends upon the type and the character of the case.

A month ago, 2 months ago, the Commission issued a finding in a very important case involving price discrimination in the Detroit area under the Robinson-Patman Act against the Standard Oil Co. of Indiana. We are negotiating with the company now and I think there is an argument next week on the question of a modified order.

The findings in that case set out very clearly what you would call an opinion and the theory of the case, very, very extensively.

I refer you to the case against the Staley and the Corn Products companies involving a basing point. The findings in those cases in detail and elaborately set out more than what you would call a court opinion.

I refer you to the every extensive findings in the Cement case, much, much more exact and longer than the court will take when it writes its opinion.

The theories as well as all of the detailed facts are not only analyzed, but the whole theory of the law.

About 3 months ago, the Commission had a peculiar case under the Robinson-Patman Act against a cosmetic house in New York involving hidden demonstrators. It was a very elaborate finding:

One of the business houses, a department store in the southwest, was injured by that discrimination in the Arden case, sued the Arden company for threefold damages under the Sherman law in a private suit. They won the case. I think it is now in the Supreme Court of the United States. And the District Judge, in that case, commented very extensively on the Commission's finding and quoted at length in his opinion from the Commission's decision, and in fact, the Judge, I think, was very much enlightened in that very technical matter on account of the Commission's opinion in its findings.

I could refer you to the Commission's cases against the Rigid Steel Conduit Co., against the people involved in selling cable, the General Electric Co. These cases have all gone to the courts. The milk- and ice-cream-can industry, the blueprint-paper industry, and a great multitude of them, where the findings are very elaborate, much more elaborate in the sense of a legal opinion than you will find in a judicial decision, including the two recent cases involving the momentous question of basing point in discriminations flowing from the basing point.

These cases represent whole industries and the most very important public questions before the courts in generations, very technical matters, matters that have never been passed upon by the judiciary, like the questions that were involved in the Corn Products case and the Staley case, the case against the U. S. Steel Corp. involving identical prices through a formula, a basing point, and the case that we had in Chicago that is coming up on a tremendous record involving identical things through the use of the basing-point formula.

Those are the cases in which you need opinions, and those are the kind of cases in which the Commission is giving opinions.

When John Jones represents a product as containing silk when it is made out of cotton, and when a patent-medicine concern advertises falsely, and you set forth the facts that you find by the evidence and put it into the finding what is false, you do not need an opinion.

Mr. REECE. What harm would be rendered by writing an opinion in any of those cases!

Mr. KELLEY. About the only opinion you would have would be to repeat the findings that John Jones represented so and so, state that truth is that that statement was false, and add that a statement that was false and circulated in interstate commerce that has the capacity of injuring the people is unlawful, period. You do not need those kinds of opinions. The findings speak for themselves.

Mr. Davis. I will answer you.

The Federal Trade Commission, like nearly all other agencies, is not able to handle all of the cases that it could handle if it had more funds and a larger staff.

I think we do a good job with what we have. We have jurisdiction over five different acts and we have less funds than we did just a few years ago. I do not remember just how it is now, but if you recall, a few years ago, it was stated at a committee here that this Commission, for all of its activities, had $400,000 less appropriations than the Food and Drug Administration had on food and drug and devices alone.

The harder you make it, the more you require, the more difficult it is going to be to protect the public interest and stop these things that a congressional act says we shall do. We are directed to stop these things. We are simply doing the best we can to do it, but if Congress is going to depart from its position, when it enacted the Federal Trade Commission Act and when it enacted the Wheeler-Lea Act, to consider the public interest, and not a small fringe of false advertisers and price fixers, and so on, why, it is going to be still harder.

Mr. Chairman, did I understand that I was permitted to introduce in the record the House and Senate reports on the Wheeler-Lea Act?

Mr. SADOWSKI. I think they ought to go in.

Mr. Davis. Because this bill is, with the exception of the first provision, an attack on the Wheeler-Lea Act, which it was stated by Chairman Lea and by Congressman Reece and various others, was passed for the purpose of strengthening the hand of the Federal Trade Commission in order that it could better protect the public interest and the public health. That was the position that was considered then, not to try to get it so easy that anybody could continue any sort of false advertising that they wanted without regard to how many people it killed or injured.

(The Senate and House reports referred to are as follows:)

[S. Rept. No. 1705, 74th Cong., 2d sess.)


The Committee on Interstate Commerce, to whom was referred the bill (S. 3744) to amend sections 4, 5, 6, and 9 of the Federal Trade Commission Act, having considered the same, report the bill back to the Senate, with an amendment, with the recommendation that the bill, as amended, do pass.

Considerable press comment and numerous letters from chambers of commerce and the like have been provoked by a misunderstanding of the nature of the proposed legislation. It has been charged that this is an attempt to make the Federal Trade Commission an inquisitorial body and invest it with unlimited police powers. This is very inaccurate and misleading. It was pointed out in the public hearings which your committee held on the bill that many of the objections which were being raised were to portions of the Federal Trade Act which have been a part of the law for over 20 years.

A brief explanation of the nature of the functions of the Federal Trade Commission will be helpful to the consideration of the amendments under this bill.

Under section 5, unfair methods of competition are declared unlawful, and upon complaint the Commission is empowered to investigate and to call the parties before it for a hearing on the complaint. The Commission then either dismisses the complaint, or issues an order against the respondent to cease and desist from the specific trade practice which the Commission finds to be an unfair method of competition under the order.

The procedure is unlike that under the Pure Food and Drug Act or the Postal Statutes, in that it is merely preventive and cooperative rather than penal. An appeal from the order of the Commission can be taken to any circuit court of appeals, and the court, to quote from the Act, “shall have

jurisdiction to affirm, set aside, or modify the order of the Commission.” If the respondent




violates the cease and desist order of the Commission, the latter must go to the court for enforcement of the order, and the same right of review, affirmation, modification, or setting aside is given to the court at this stage of the proceeding.

Under section 5 the Commission is a quasi-judicial body in determining what constitutes an unfair method of competition, or, under the proposed legislation, an unfair or deceptive act or practice. This power was given to the Commission under the original act, rather than to attempt to define in the statute all the different unfair practices. On June 13, 1914, the Senate Committee on Interstate Commerce in reporting the bill used the following language:

“The committee gave careful consideration to the question as to whether it would attempt to define the many and variable unfair practices which prevail in commerce and to forbid their continuance or whether it would by a general declaration condemning unfair practices, leave it to the Commission to determine what practices were unfair. It concluded that the latter course would be the better, for the reason, as stated by one of the representatives of the Illinois Manufacturers' Association, that there were too many unfair practices to define, and after writing 20 of them into the law it would be quite possible to invent others.”

It must be noticed in the above quotation that the committee was concerned with the elimination of unfair practices, and the phrase “unfair methods of competition” was adopted as the expression of policy behind the legislation. However, in the course of the past 2 decades during which the courts have considered and defined the jurisdiction of the Commission, the judicial construction placed on the words “methods of competition” has forced the Commission to prove competition and injury to competitors before it could order that the unfair methods be stopped.

The committee is of the opinion that the Commission should have jurisdiction to restrain unfair or deceptive acts and practices which deceive and defraud the public generally without being put to the necessity of proving that the competitors of the offender have suffered monetary damage.

It was never the intention of Congress that the Commission should be a forum where private disputes or controversies between competitors should be settled, and the Commission is required to find that a proceeding is in the public interest in order to retain jurisdiction of it. In the case of Federal Trade Commission v. Klesner, involving the passing off of one trader's goods for those of another, the Supreme Court held that:

“A complaint may be filed only “if it shall appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public.' This requirement is not satisfied by proof that there has been misapprehension and confusion on the part of purchasers, or even that they have been deceived the evidence commonly adduced by the plaintiff in 'passing off' cases in order to establish the alleged private wrong. It is true that in suits by private traders to enjoin unfair competition by 'passing off,' proof that the public is deceived is an essential element of the cause of action. This proof is necessary only because otherwise the plaintiff has not suffered an injury. There, protection of the public is an incident of the enforcement of a private right. But to justify the Commission in filing a complaint under 5, the purpose must be protection of the public. The protection thereby afforded to private persons is the incident.”

The inevitably sound conclusion is that where it is not a question of a purely private controversy, and where the acts and practices are unfair or deceptive to the public generally, they should be stopped regardless of their effect upon competitors. This is the sole purpose and effect of the chief amendment to section 5.

The remaining amendments to this section are procedural in character and are designed to expedite proceedings for review or enforcement of the Commission's orders in the courts, or to lessen the expense of such proceedings.


The committee amended section 3 of the bill by striking out subsection (i), which reads as follows:

“(i) The Congress hereby confers upon the Commission so much of the auxiliary power of Congress to obtain information in aid of legislation as may be necessary to enable the Commission to carry out the provisions of section 6.”

First, the bill amends section 4 of the present act which has to do with definitions. Section 4 is amended by including within the definition of “corporation” a trust or so-called Massachusetts trust and by including within the term "documentary evidence" in addition to all documents, papers and correspondence, "books of account and financial and corporate records.” The definition of "antitrust acts” in this section is further amended by specifically including the Clay. ton Act, which was approved October 15, 1914, subsequent to the passage of the Federal Trade Commission Act.

Section 5 of the present act declares unlawful unfair methods of competition in commerce, and the pending bill amends that section by also declaring unlawful, unfair, or deceptive acts and practices in commerce. Under the present act it has been intimated in court decisions that the Commission may lose jurisdiction of a case of deceptive and similar unfair practices if it should develop in the proceeding that all competitors in the industry practiced the same methods, and the Commission may be ousted of its jurisdiction, no matter how badly the public may be in need of protection from said deceptive and unfair acts. Under the proposed amendment the Commission would have jurisdiction to stop the exploitation or deception of the public, even though the competitors of the respondent are themselves entitled to no protection because of their engaging in similar practices. It further appears that much time and money must now be expended in order to establish competition and to show injury to competitors, as the courts have held that competition and injury to the same must be established in order for the Commission to retain jurisdiction. Under the proposed amendment, if the Commission should have reason to believe that unfair and deceptive acts and practices are being engaged in, and that it is in the public interest that they be stopped, it could issue its restraining order without being put to the necessity of establishing competition and injury to such competition. The necessity of this amendment is made apparent by the decision of the Supreme Court in a case involving deceptive advertising, in which the Commission had issued its order to cease and desist. In that case the court said:

“If the necessity of protecting the public against dangerously misleading advertisements of a remedy sold in interstate commerce were all that is necessary to give the Commission jurisdiction, the order could not successfully be assailed.”

In spite of the finding of the Supreme Court that the advertising in question was misleading and dangerous to the public, it held that the Commission had no jurisdiction to order the respondent to cease and desist because it had not been shown that the respondent had competitors who were injured.

Some objection was voiced in the committee to the use of the word "acts" and the suggestion as made that the word "methods" should be substtiuted for the word “acts”, or that the word "acts” be eliminated entirely. After consideration the committee is of the opinion that, since the powers of the Commission in this respect are injunctive rather than punitive, the Commission should have the power to restrain an unfair act before it had become a method or practice, if, in its discretion, such restraint be in the public interest. A single act may have multiple or continuing effects, may be far reaching.

The other amendments to section 5 of the present law are procedural in character, and are designed to expedite and to lessen the expense of proceedings to review or to enforce the Commission's orders in the courts.

One amendment to section 6 is designed to make clear that the Commission is to exercise its general investigatory powers under paragraph (a) either upon the direction of either house of Congress or the President or upon its own initiative. Persons and partnerships, engaged in interstate commerce, already subject to section 5, are made subject also to section 6 which now extends only to corporations. In no other respect do the amendments of this section extend the investigatory powers of the Commission.

The first amendment to section 9 makes clear that the power to inspect and copy documents in investigations and the power to subpena witnesses and documents may be exercised when the Commission is proceeding either under section 5 or 6. It is customary to confer this power upon investigatory and factfinding agencies. It has been conferred upon the Interstate Commerce Commission and upon the Securities and Exchange Commission.

Further, there can be no danger of abuse of the power by the Commission since the command of the subpena can be enforced only by an order of a district court of the United States.

Another amendment requires that for a natural person to secure immunity from prosecution concerning any matter about which he shall testify he must claim the privilege before giving the testimony or producing the evidence. The purpose of this amendment is that the Commission may be advised that he claims this immunity in time to determine whether the public interest will best be served by foregoing the testimony or the production of evidence or granting the immunity. A similar provision is contained in the Securities Exchange Act.

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