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another.” The effect of this decision was to make the Commission's protection of the consumer merely an incident to the protection of honest competitors, likewise injured by the practices of unethical traders.

This was considered by the Commission to present a serious defect in its act and recommendations were made to Congress for curative amendments. As early as 1935, bills were introduced in Congress in response to these recommendations and

for the purpose of amending the act. In March 1938 the Wheeler-Lea Act was passed and approved, making the first direct amendments to the Federal Trade Commission Act since its original passage in 1914. The principal change effected by the Wheeler-Lea Act broadens section 5 to make unlawful “unfair or deceptive acts or practices” as well as “unfair methods of competition." Under the new language, it will not be necessary for the Commission to allege or prove injury to competition where an act or practice in commerce can be shown to be unfair or deceptive and that there is substantial public interest in its prevention.

Seven entirely new sections were also added by Congress to the act and five of these implement the Commission with definite and specific power over the dissemination of false advertisements regarding food, drugs, curative devices, and cosmetics. A highly interesting section relating to advertising of the products directs the Commission "in determining whether any advertisement is misleading” to take into account, among other thingsnot only representations made 'or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual.

The Commission is given additional and specific jurisdiction over advertising of food, drugs, curative devices, and cosmetics when disseminated in interstate commerce by any means; or when disseminated either locally or in commerce where it is intended or is likely to induce a purchase in interstate commerce; or when disseminated by United States mails irrespective of commerce.

Another new section empowers the Commission, when it has reason to believe that a party is engaged in or is about to engage in the dissemination of any false advertisement of food, drugs, curative devices, or cosmetics, in violation of the act, to seek an injunction in any district court of the United States. These courts are directed, upon proper showing, to issue a temporary injunction or restraining order. About 1 month ago, the first injunction under this new section was granted in the Federal district court in Chicago, restraining the advertisement of a reducing compound which the Commission had reason to believe was dangerous to health.3

Another new section makes it a misdemeanor to violate the provision forbidding false advertisement of food, drugs, curative devices, or cosmetics, if violation is with intent to defraud or mislead or if the suggested or customary use of the commodity advertised may prove injurious to health. When the Commission has reason to believe the

3 F. T. C. v. Harry Goron, Trading as Isabella Laboratories and the Hartman Chain of Drugstores (D. C. Ili., September 1938).

party has violated this section, it is to certify the facts to the Attorney General. A party may be punished upon conviction by a fine of up to $5,000 or by imprisonment of not more than 6 months. Second offenders run the risk of fines up to $10,000 and imprisonment for 1 year.

Other amendments are made by the Wheeler-Lea Act to procedural functions of the Commission, and I shall discuss these as I go along in describing to you the method by which cases are handled.

COMMISSION PRACTICE

With relation to practice, I suppose you will be interested in knowing just who may appear before the Commission. Any party to a proceeding may appear for himself, or may be represented by an attorney at law who has been admitted to practice before the Supreme Court of the United States, or the highest court of any State or Territory or of the District of Columbia.

No register of attorneys is maintained, nor is formal application for admission to practice required. A written notice of appearance on behalf of a specific party in the particular proceeding should be submitted by attorneys desiring to appear before the Commission, and such notice should contain a statement that the attorney is eligible under the rule. Any attorney practicing before the Commission, or desiring to practice, may be disbarred or suspended for good cause shown, but only after he has been afforded an opportunity to be heard in the matter.

Perhaps the clearest exposition of practice before the Federal Trade Commission can be obtained from a description of the actual manner and method by which cases are handled.

Bear in mind that the Commission is not required to wait until a method of competition has been called to its attention by some injured competitor or member of the public. While a large proportion of its cases do originate through such informal complaints, investigations are initiated by the Commission on its own motion. Where the Commission's attention is called to an alleged violation of one of the laws committed to its jurisdiction, the matter may be handled in one of several ways. If the evidence of violation submitted in application for complaint is fairly clear, the matter is assigned for such field investigation as is necessary to ascertain the facts in a preliminary way. This usually involves interviewing both the applicant for complaint and the party complained about. In this connection investigations conducted by the Commission prior to formal action are confidential, and no publicity is given to the fact that such an investigation has even been initiated before a stipulation is accepted from or a formal complaint is served upon a respondent. The Commission's examining attorney upon completion of his investigation summarizes the evidence in a report, reviews the law, and recommends the action he considers appropriate for the Commission. The record is then reviewed by the Chief Examiner and, if in his opinion no further investigation is necessary, is submitted to the Commission with his conclusions and recommendations.

The Special Board of Investigation was created in 1929 as a separate division for handling false and misleading advertising matter as published in newspapers and in magazines and as broadcast over the radio. In 1938 this branch of the Commission was reorganized and its name changed to Radio and Periodical Division. Attorneys for this Division review advertising in nearly every magazine of interstate circulation, current issues of hundreds of newspapers, and approximately a million pages per year of advertising continuity broadcast on the radio. Advertising matter from these sources which is considered by the Division to be false or misleading is made the subject of preliminary inquiry, usually by correspondence. It is possible in this way to contact hundreds of advertisers each year. The procedure of the Division is rather informal, and advertisers may appear for conferences before it and submit evidence to explain or justify representations which on their face appear misleading.

Stipulation procedure.-To proceed formally by issuing complaints and trying all cases involving unfair practices would require a greatly augmented staff and much larger expenditures. Since most businessmen are willing on notice to modify or abandon unfair practices, the Commission usually affords them the opportunity of executing what is known as a stipulation. These stipulations set out the facts and the agreement of parties executing them to cease and desist from unfair practices in the future. The Commission's policy is against allowing any respondent to stipulate when the practice involved is tinged with fraud or where there is a restraint of trade prejudicial to the public. Stipulations are also denied parties respondent who cannot give satisfactory assurance to the Commission that the stipulation will be adhered to.

Stipulations are negotiated directly with advertisers by the Radio and Periodical Division in matters handled by it, and by the chief trial examiner in other cases.

Complaints and answers. In the event a proposed respondent rejects the privilege of stipulation and wishes to contest the matter, where the stipulation procedure is not appropriate, or where a prior stipulation has been violated, the Commission issues its formal complaint setting out the facts as indicated by its investigation and charging the respondent with a violation of the law.

The Commission's Rules of Practice provide that an answer shall be filed by the respondent within 20 days of service of the complaint. In the event a respondent desires to admit all material allegations he may do so without forfeiting his right to urge that the facts do not constitute a violation of law.

Hearings.- Where no answer is filed or where the answer raises any issue of fact, the matter is set down for the taking of testimony before a trial examiner, to conduct hearings at convenient places throughout the country. Hearings before trial examiners bear much resemblance to ordinary equity procedure. All testimony is stenographically reported and witnesses and exhibits may be introduced both by the trial attorney for the Commission and by respondent's attorney.

I suppose that you will be particularly interested in this stage of the proceeding. Much has been said recently on the subject of applicability of the rules of evidence to such hearings before administrative tribunals. Several formal rules have been adopted by the Commission relating to evidence in a hearing before a trial examiner. They are contained in the Commission's Rules of Practice.

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I suppose that the best way of stating the Commission's policy with reference to the rules of evidence would be to say that it requires as close adherence to them as possible. Of course, many of the common law rules of evidence which were designed to protect lay juries from irrelevant material are not applicable to a Commission which is designed to be expert in its particular field. Both the trial examiners and the Commissioners have a special and expert knowledge of the questions involved in these cases and are much more able to sift the wheat from the chaff. Thus, while it is our policy to preserve all the essentials of a fair hearing no slavish adherence to the rules of evidence as such is required. Then too, some respondents are not represented by counsel, and requirements of technical rules would place them under considerable hardship.

It is the Commission's practice upon seasonable motion and proper showing to permit appeals to the Commission from rulings of the trial examiners on admissibility of evidence or other procedural matters. Where essential, the Commission may hold a hearing on such appeals during the course of trial of the case; in other instances, the Commission hears the appeal at the time of final argument on the merits.

Trial examiner's reports, exceptions, briefs, and arguments.-After evidence has been presented by both sides to the proceeding, the trial examiner who has heard the matter prepares a report setting forth the evidentiary facts elicited in the hearing together with his conclusions of fact and of law and his recommendation as to action to be taken by the Commission. This report is sent with the entire record to the Commission and a copy is served on counsel for respondent and upon the Commission's trial attorney. Exceptions may be taken to the trial examiner's report by either attorney. Briefs are then in order to be filed, and if the respondent desires, final oral argument may be had before the Commission sitting en banc.

Commission's decisions. Following this the Commission makes its final decision on the basis of the entire record and the briefs and oral arguments. This decision may be either to dismiss the complaintsometimes without prejudice—or it may be to issue an order directing the respondent to cease and desist from such of its practices as are found to violate the law. In the event the Commission decides to issue an order to cease and desist it prepares and publishes, along with its order, its findings as to the facts, setting out the facts as found by the Commission from the public record.

Right at this point I should like to call your attention to the fact that these findings are made on the basis of the public record. Before a complaint is issued a record is built up consisting of interview reports and exhibits secured in a preliminary investigation. This preliminary record is confidential and never published. Facts relied upon by the Commission in issuing its complaint, and which are contained in the preliminary record, may not be relied upon in preparing findings of fact unless they have also been established in the public record. And to protect parties investigated by the Commission from indiscriminate use of information gained in preliminary investigation criminal penalties are provided for unauthorized disclosure of such information by Commission employees.

JUDICIAL REVIEW AND ENFORCEMENT OF ORDERS

Under the Federal Trade Commission Act before its recent amendment, a Commission order could reach the courts in one of two ways: The respondent had a right to petition any of the circuit courts of appeal of the United States for review of the Commission's order, and the court was empowered to affirm, set aside, or modify the order of the Commission, the Commission's findings as to the facts, if supported by testimony, to be conclusive on the court.

In the event a respondent did not file an appeal and continued to engage in the practice in violation of the order, the Commission's only method of enforcement was to apply to one of the United States circuit courts of appeals for a decree affirming the order and directing compliance therewith. The court in such a proceeding, of course, had the power to modify or set aside the Commission's order, but if it affirmed it and directed compliance, any subsequent violation was punishable as for contempt of court.

The Wheeler-Lea amendments to the Federal Trade Commission Act provided a time limit upon appeals and an important additional enforcement procedure. In the event no appeal is made to the United States Circuit Court of Appeals within 60 days a cease-and-desist order becomes final automatically. Each subsequent violation of an order which has become final either through affirmance or failure to appeal within 60 days subjects a respondent to a civil penalty of not more than $5,000, recoverable in any of the district courts of the. United States upon application of the Attorney General. In the event of an appeal within the 60-day period, the court may review, modify, set aside or affirm the Commission's orders, and the Commission, no doubt, may still seek enforcement through the contempt process of a United States Circuit Court of Appeals whose decree directing compliance with a Commission order is violated.

TRADE PRACTICE CONFERENCES

One of the most important functions of the Commission is accomplished through its trade practice conferences.

An ideal visualized by President Wilson in the creation of the Federal Trade Commission was that it wasa means of inquiry and of accommodation in the field of commerce which ought to both coordinate the enterprises of our traders and manufacturers and to remove the barriers of misunderstanding and of a too technical interpretation of the lawand he stated that the Commission had been created with powers of gúidance and accommodation which have relieved businessmen of unfounded fears and set them upon the road of helpful and confident enterprise.

It is through its trade practice conference procedure that the Commission is able to furnish to business and industrial groups the "guidance and accommodation" which President Wilson had in mind.

Any industry or important group within an industry may have a trade practice conference if it appears to the Commission that it is desired by a substantial majority of members of the industry, and that

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