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I do not suppose anybody connected with the Commission saw any of their statements until they appeared here and presented them.
Mr. Chairman, Congressman Reece, as I understand it, made a reference to the fact that proceedings before the Food and Drug Administration were speedier than they were before the Federal Trade Commission.
In the first instance, that is true because it is a summary proceeding: They can go and seize the product and destroy it unless the owner of the goods goes into court and fights them, and then it takes the same course that our cases or any other cases do if they get into court, but it is a summary action to begin with, in seizing products that are adulterated or dangerous to health and impure.
When the Wheeler-Lea Act was up, Mr. Reece made this statement on the floor of the House :
Criticism has been made that the Commission's procedure is slow.
Necessarily, that must be so if a respondent in a Commission proceeding is to have his day in court. It takes time to gather evidence, conduct hearings, weigh testimony, and study briefs. Then when the Commission acts, its order is subject to review by the courts. Necessarily, this all makes for delay. For this reason, some have advocated transfer of jurisdiction over advertising to a Bureau of one of the Government's executive departments, because of the swifter procedure possible in such bureau. But this smacks too much of bureaucracy and dictatorship. It would lodge too much arbitrary power in a subordinate official of an executive agency.
Under such procedure, merchant or manufacturer might be called on the carpet, told that his advertising was misleading, and that he must stop it. This would amount to confiscation of property without due process of law. No matter if the courts, 6 months or a year later, found that the advertising was not false and that the product was not harmful, business in that commodity or in that article already would have been destroyed. The procedure which your committee has devised provides for due process of law, and at the same time, through the injunction process, makes it possible for the Commission to move with sufficient promptness to meet any emergency situation that may arise. Under this procedure, necessary and constitutional safeguards of property will be afforded. Before an injunction can issue, first the Commission, itself a quasijudicial body of five members, must be convinced that an emergency exists, and it in turn must convince the court of proper jurisdiction of the existence of such emergency, and that issuance of an injunction is justified and necessary in the public interest.
Since the passage of the Wheeler-Lea Act, the Commission has sought this injunctive power in 38 cases, and it was granted by the courts in 37.
Mr. REECE. And now the statement which I made, I think, is sound and I am not taking that statement back.
And in recognition of the necessity for slowness of action in proceedings of the Federal Trade Commission, we undertook to place jurisdiction in the Food and Drug Administration, in the case of dangerous or harmful drugs, to move more directly and more swiftly in order to conserve the health of the public and thereby gave them control over labeling and the statements which, in the opinion of the Food and Drug Administration, should go on the statements to adequately warn the purchasers. And in the provision of H. R. 2390, to which you refer, the only thing that is undertaken to be done is to continue single authority in the Food and Drug Administration to handle dangerous drugs in the interest of the public and control the labeling and the cautionary words on the label, and the basis for doing that is the statement from which you quote there.
Mr. Davis. I would like to place in the record all of Mr. Reece's speech on that Wheeler-Lea Act which involves all of the questions here with one exception.
Mr. REECE. I feel very much flattered, and I want to heartily concur in having my speech put in the record.
Mr. Davis. That is a good speech,
Mr. REECE. It subjects me to no embarrassment, because I still stand on all I said in the speech.
And now I want to make good on what I said, in the speech, that we had avoided any conflict in authority between the Federal Trade Commission and the Food and Drug Administration.
Mr. Davis. I am afraid you will not make as good a speech the second time as you did before and that is why I want it in.
(The statement referred to is as follows:)
[From the Congressional Record (House), January 12, 1938, pp. 397–399]
Mr. MAPES. Mr. Chairman, I yield 10 minutes to the gentleman from Tennessee [Mr. Reece).
Mr. REECE of Tennessee. Mr. Chairman, the Lea bill, or S. 1077, as reported out by the House Interstate and Foreign Commerce Committee, proposes to amend the Federal Trade Commission Act in a number of important particulars.
The Federal Trade Commission Act, passed in 1914, the same year in which the Clayton Act became law, was intended, along with the Clayton Act, to supplement and complement the Sherman antitrust law. It has been on the statute books for more than 22 years, and during all that time never has been amended. In the light of more than 22 years of experience in administering the act, the Federal Trade Commission has recommended certain amendments which have been approved by the Interstate and Foreign Commerce Committee, along with others which the House committee itself has written into the pending bill. Briefly, the pending bill would amend and extend the Federal Trade Commission law so as to
Protect the consuming public from unfair practices in commerce, as the present law protects honest businessmen from unlawful competitive practices by their rivals;
Provide for Commission cease-and-desist orders to become effective after 60 days from issuance, unless appealed to the courts, and provide penalties for their violation;
Write specifically into law the declaration that false or misleading advertising of food, drugs, devices, or cosmetics, commodities which directly affect life and health, shall be unlawful, and provide civil and in some cases criminal penalties for the dissemination of such advertising;
Add certain clarifying and procedural amendments to the present law, in the interest of clarity, expedition, and economy of administration.
Of the proposed changes in the present Federal Trade Commission Act at least one is fundamental. Section 5 of the present Federal Trade Commission Act declares "unfair methods of competition in commerce" to be unlawful. The pending bill would change section 5 so as to provide that “unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce" shall be unlawful. The new language is “and unfair or deceptive acts or practices in commerce.” This amendment is in the public interest. It seeks to make the consumer of equal concern under the law with the man who is engaged in commerce.
So far as I know, there is no serious objection to this change. It has been adopted by the Senate and recommended by the House con mittee. Personally, I have never entertained any doubt that when Congress declared unfair methods of competition to be unlawful, it intended to protect the public as well as the man who is engaged in commerce. But the courts have construed the language “unfair methods of competition” as limiting the Commission's jurisdiction to those cases in which it is able to establish the existence of competition and show that the practices complained about have been harmful to competitors. In other words, to make out a case that will meet the test of the courts, the Commission must show that the acts complained of are injurious to competitors engaged in the same field of business, no matter how seriously they may injure the purchasing or consuming public.
Thus it can happen that if a corporation has a monopoly in a given field, with no competition, it may not be subject to the jurisdiction of the Federal Trade Commission, no matter how deceptive or how misleading, or how grossly unfair to the public, and no matter how much the public may suffer from its practices. It can also happen that if all competitors in a given field engage in the same sort of evil practices, the Commission may be powerless to act, no matter how much injury may be done the public.
In fact, in a relatively recent case involving the alleged false and deceptive advertising of a drug, the Supreme Court held that although the methods complained of were unfạir, and the proceeding appeared to be in the interest of the public, the Commission was without jurisdiction because it has not established the essential that the unfair methods in question were “methods of competition in commerce."
This amendment not only is necessary the public interest, because it will enable the Commission to protect the public from unfair trade practices, but it will be in the interest of economy and efficiency, because it will enable the Commission to make out a case without going to the trouble of providing competition. In most of the cases an element of competition is involved, but under the present procedure it is necessary for the Federal Trade Commission to prove it.
Often where it is perfectly obvious that practices complained about are detrimental to the public the Commission must spend a great deal of time and money in proving competition. This ought not to be, and that condition will no longer prevail if this amendment is adopted. In brief, this amendment makes the consumer-that is, the public-of equal concern before the law with the merchant or manufacturer who may be injured by the unfair methods of a dishonest competitor, and it will save both time and money.
Subsections (g) and (k), inclusive, of section 5 of the pending bill, are for the purpose of making definite the time when a Commission order to cease and desist shall become final—that is, within 60 days after the issuance of the orderunless, in the meantime, it shall have been appealed to the circuit court of appeals of proper jurisdiction.
Subsection (1) of section 5 provides that any person, partnership, or corporation who fails to obey an order of the Commission to cease and desist after such order shall become final shall forfeit and pay into the Public Treasury a civil penalty of not more than $5,000 for each violation, such penalty to be recovered by a civil action brought by the United States. This provision is believed to be necessary in order to enforce obedience to Commission orders after they shall have become final and is similar to provisions written into the Packers and Stockyards' Act and the Securities and Exchange Act.
A further important amendment to the present Federal Trade Commission Act is found in section 12 of the pending bill and relates to the advertising of food, drugs, devices, and cosmetics—a subject about which there has been most interest and most discussion during the period of more than 2 years this matter has been before the Congress.
Section 12 of the bill now before the House writes into law in specific language the declaration that it shall be unlawful for any person, partnership, or corporation to disseminate, or cause to be disseminated, any false advertisement, either by United States mails or in commerce, by any means, for the purpose of inducing or which is likely to induce the purchase of food, drugs, devices, or cosmetics; or to disseminate or cause to be disseminated, by any means, any such advertisement for the purpose of inducing or which is likely to induce the purchase in commerce of such coinmodities.
This section provides that the dissemination of a false advertisement as defined in the pending bill shall be an unfair or deceptive act or practice in commerce within the meaning of section 5 of the Federal Trade Commission Act and shall be subject to the Commission's cease-and-desist procedure, in addition to the injunction and criminal procedures.
Under the broad authority of section 5 of the present Federal Trade Commission Act, that Commission has jurisdiction over false or misleading advertising. The courts have held that such advertising is an unfair method of competition, and over the period of its existence the Commission has handled thousands of advertising cases, issuing a great many cease-and-desist orders. Many of them have been carried to the courts, where a large preponderance of the Commission's orders have been sustained and the Commission's jurisdiction upheld and made clear. Amendments to present law as proposed in the pending bill confirm and make explicit in definite language jurisdiction which the Commission already has, and which it long has exercised. But they go further in that they will make for more effective administration by speeding up the Commission's procedure and provide definite penalties for the dissemination of unlawful advertising.
Section 14 provides that any person, partnership, or corporation violating any provision of section 12 shall, if the advertising induces the use of the commodity advertised in such manner as to render it injurious to health, or if such advertising is disseminated with clear intent to defraud or mislead, be guilty of misdemeanor, and, upon conviction, shall be punished by a fine of not more than $5,000 or by imprisonment for not more than 6 months, or by both such fine and imprisonment, and that upon a second or subsequent violation the court may impose a fine of not more than $10,000 or imprisonment for not more than 1 year, or by both such fine and imprisonment.
I insist this provision for criminal prosecution is a more effective restraint upon an advertiser than a mere civil liability, as was suggested by the gentleman from New Jersey (Mr. KENNEY) in his remarks a few minutes ago.
It will thus be seen that distinction is made between the false advertising of commodities the use of which may be injurious to health, and those whose use does not affect health. There was some sentiment in the committee for the imposition of penalties for the dissemination of any false advertisement, whether or not the use of the commodity advertised affected health. The committee took the position—and I think it sound—that where a food, drug, device, or cosmetic would not endanger life or health it should not be set apart or treated differently from other commodities, alike not injurious. In other words, the committee felt that more rigorous penalties should be imposed for the false advertisement of a product that might endanger life or health than in cases where such risk is not involved, and that in order to stop dangerous advertising practices criminal procedure should be invoked, of course, under due process of law. Therefore, the pending bill proposes to discontinue the present cease-and-desist order procedure of the Federal Trade Commission with respect to the false advertising of all commodities which do not endanger health, whether food, drugs, or whatever the commodity, while in cases involving the advertising of products which may injure health the Commission would be required to certify the facts to the Department of Justice, where criminal procedure would be instituted, and the criminal penalties of the pending bill invoked in the courts, under due process of law.
If this does not provide teeth to enable the effective enforcement of the advertising provisions of the proposed legislation, I should like to see someone propose teeth which would be more effective. This certainly is a more effective provision than the mere imposition of civil penalties. We have drawn a distinction between advertising where injury to health is not involved and advertising where injury to health may be invoked, and provided drastic criminal penalties, in addition to a fine for false advertising where injury to health is involved or where there is intent to defraud. I regret some of the gentlemen appear to fail to understand this plan and effective provision of the bill now before the House.
There is a further provision in section 13 of the pending bill which gives the Federal Trade Commission to right to move in the interest of the public to prevent the dissemination of advertisements of food, drugs, devices, or cosmetics in violation of section 12. This is the right given the Commission to go before a court and sue for an injunction to prevent the dissemination of such advertisement pending the outcome of the Commission's regular cease-anddesist-order procedure. Paragraphs 1 and 2 of section 13 of the pending bill provide that where any person, partnership, or corporation is engaged in or is about to engage in the dissemination of an advertisement in violation of section 12, and that the enjoining thereof would be to the interest of the public, the Commission may bring suit in a district court to enjoin the dissemination of such advertisement pending the issuance of a complaint by the Commission under section 5, and until such complaint is dismissed by the Commission or set aside by the court, or the order of the Commission to cease and desist has become final. It is required that such suit shall be brought in the district in which such person, partnership, or corporation resides or transacts business.
Simply stated, the right of the Federal Trade Commission to sue for an injunction, as set out in section 13, means that where information reaches the Commission that false advertisements are being disseminated, or are about to be disseminated, of a food, drug, device, or cosmetic in violation of section 12, the Commission may have the right to move swiftly to prevent the distribution of such advertisements. This amendment will meet the criticism that has been lodged against the Commission that under its present authority it cannot proceed swiftly to meet an emergency situation involving a menace to life or health. Criticism has been made that the Commission's procedure is slow.
Necessarily, that must be so if a respondent in a Commission proceeding is to have his day in court. It takes time to gather evidence, conduct hearings, weigh testimony, and study briefs. Then when the Commission acts, its order is subject to review by the courts. Necessarily this all makes for delay. For this reason some have advocated transfer of jurisdiction over advertising to a bureau of one of the Government's executive departments, because of the swifter procedure possible in such bureau. But this smacks too much of bureaucracy and dictatorship. It would lodge too much arbitrary power in a subordinate official of an executive agency. Under such procedure, a merchant or manufacturer might be called on the carpet, told that his advertising was misleading, and that he must stop it. This would amount to confiscation of property, without due process of law. No matter if the courts, 6 months or a year later, found that the advertising was not false and that the product was not harmful, business in that commodity or in that article already would have been destroyed. The procedure which your committee has devised provides for due process of law, and at the same time, through the injunction process, makes it possible for the Commission to move with sufficient promptness to meet any emergency situation that may arise. Under this procedure, necessary and constitutional safeguards of property will be afforded. Before an injunction can issue, first the Commission, itself a quasi judicial body of five members, must be convinced that an emergency exists, and it in turn must convince the court of proper jurisdiction of the existence of such emergency, and that issuance of an injunction is justified and necessary in the public interest.
I cannot understand how anyone could read carefully the provisions of the proposed legislation and reach any other conclusion than that it is a most drastic bill. As far as I am concerned, I yield to no one in my desire to provide an effective law dealing with food, drugs, devices, and cosmetics, and with advertising relating to such commodities. If I did not believe the provisions of the bill now before the House would enable the Federal Trade Commission to enforce effectively the advertising provision, I would be the first to cppose its enactment. The difference of opinion, as the gentleman from Michigan has stated, is as to the agency which is to enforce the provisions of the law. The Federal Trade Commission since its inception has been charged with the responsibility of enforcing the false-advertising provisions of the law. This bill simply strengthens the present law to enable the Commission to enforce the law effectively as it relates to food, drugs, devices, and cosmetics when injury to health is involved or where there is an intent to defraud the public.
From the beginning of the agitation to amend and modernize the Food and Drug Act, passed 30 years ago, a serious controversy has been over the question of where jurisdiction over advertising of food, drugs, devices, and cosmetics should be lodged. At present all jurisdiction over advertising is lodged in the Federal Trade Commission. By the late unlamented and so-called Tugwell bill and its successor, the Copeland bill, which the Senate passed in the last Congress, such jurisdiction would have been conferred upon the Food and Drug Administration of the Department of Agriculture. However, the Senate bill expressly said that none of the present powers of the Federal Trade Commission should be diminished. Thus enactment of the Copeland bill would have meant the setting up of jurisdiction over false and misleading advertising in the Food and Drug Administration under the Copeland bill and the continuation of such jurisdiction in the Federal Trade Commission under section 5 of its organic act.
The House Interstate and Foreign Commerce Committee gave this matter most thoughtful consideration and finally voted overwhelmingly against dual jurisdiction and in favor of continuation of exclusive advertising jurisdiction in the Federal Trade Commission, where jurisdiction over the advertising of all commodities, whether food, drugs, or what not, is and has been since the passage of that act in 1914. The House itself in the last Congress overwhelmingly approved its committee's action. However, that bill died in conference during the legislative log jam which attended the closing days of the session.