there are prevalent in the industry practices which are prejudicial to the best interests of the industry as a whole and inimical to the public. Due and proper notice is given so that every member of an industry may have opportunity to be present and participate in such a conference.

It is obvious that all industry cannot be poured into one mold. Hence, the members of an industry, with the aid and counsel of the Commission's staff, consider their peculiar problems, and such trade practice rules as fit the need of the industry are formulated. If within the law and otherwise acceptable, they are approved and promulgated by the Commission.

There are many advantages in the trade practice conference procedure and trade practice rules. For one thing, the Commission's jurisdiction under section 5 is contained in a broad grant which has been interpreted by the Commission and the courts to apply to a variety of situations. The ordinary businessman, and for that matter the practitioner at the bar, has no way of determining the extent to which the Commission's jurisdiction affects a particular industry, without research into Commission and court decisions. Group I rules codify and clarify the requirements of the broad language of section 5, and in such a way as to make them specifically applicable to a particular industry. Thus, for instance, in the trade practice rules for the rayon industry, provisions are contained requiring, to avoid deception of the public, positive identification of the different fibers in textiles and making it clear that an advertiser of mixed goods must, in describing such textiles, name the constituent fibers in the order of their predominance by weight, i. e., rayon, silk, and cotton, for a product containing 50 percent rayon, 30 percent silk, and 20 percent cotton.

The fact that the trade practice conference procedure permits of wholesale and simultaneous abandonment of unfair practices is one of its greatest advantages. Often the Commission will find on investigating an unfair practice engaged in by a single concern that a number of its competitors are likewise engaged. Usually in such situations offenders are only too glad to abandon the practice if some assurance can be given that competitors will also be bound to cease; thus, if the Commission institutes formal proceedings against one concern engaged in an unfair practice, others so engaged may derive a competitive advantage unless proceedings can be instituted against them at the same time. When a trade practice conference is held in such an industry, all those engaged in unfair practices may voluntarily abandon them at the same time and without the necessity of numerous formal cases.

In so-called group II rules, the Commission receives and publishes expressions of industry policy encouraging even more ethical practices than the law requires. While violation of group II rules is not ordinarily an infraction of the law, the fact that a substantial majority of members of an industry or business sit down together and agree among themselves to adopt such a policy has a moral weight almost as forceful as that of the law itself. A typical group II rule is that adopted in the trade practice rules for the rayon industry, which sets out that it is considered a desirable practice for sellers to give consumers information in advertising and labels on the best method of cleansing, caring for, and using the particular fabric.

GENERAL AND SPECIAL INVESTIGATIONS

Certain other important powers are granted to the Commission in section 6 and 7 of the act. Under section 6 (a) the Commission is granted power to gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any corporation engaged in commerce, excepting banks and common carriers subject to the act to regulate commerce and its relation to other corporations and to individuals, conduct of business in accordance with the law. It is also empower the Commission to require annual or special reports from any corporations engaged in commerce; and, upon the direction of the President or of either House of Congress, to investigate and report the facts relating to any alleged violation of the antitrust acts by any corporation. It is also empowered, upon application of the Attorney General, or upon its own initiative, to investigate the manner in which any final decree against any defendant corporation in a suit brought by the United States to prevent and restrain a violation of the antitrust acts, is carried out. The Commission may also, upon the application of the Attorney General, investigate and make recommendations for the readjustment or reorganization of any corporation alleged to be violating the antitrust acts, in order that the corporation may thereafter maintain its organization, management, and conduct of business in accordance with the law. It is also empowered to investigate from time to time foreign trade and to make such reports to Congress as it deems advisable.

Section 7 of the act provides that when a suit in equity is brought by or under the direction of the Attorney General as provided in the antitrust acts, the court may, if it is of the opinion that the complainant is entitled to relief at the conclusion of the testimony, refer the suit to the Commission as a master in chancery, to report an appropriate form of decree.

Under the general power to investigate, the Commission has completed a number of broad and general economic surveys of great importance. Probably its largest job in this respect was the investigation into the public utility field, which contributed in no small measure to the passage of the Public Utility Act of 1935, and resulted in the reduction of many utility rates in the various States.

NATURE OF COMMISSION'S POWERS AND FUNCTIONS

A very clear and concise statement from a legal viewpoint, of the nature of the Commission's functions, is contained in Rathbun v. United States, where the court said:

The Federal Trade Commission is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the executive. Its duties are performed without executive leave and, in the contemplation of the statute, must be free from executive control. In administering the provisions of the statute in respect of 'unfair methods of competition'-that is to say in filling in and administering the details embodied by that general standard-the commission acts in part quasi-legislatively and in part quasi judicially. In making 295 U. S. 602, 55 Sup. Ct. 869, 79 L. ed. 1611 (1935).

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investigations and reports thereon for the information of Congress under § 6, in aid of the legislative power, it acts as a legislative agency. Under 87, which authorizes the commission to act as a master in chancery under rules prescribed by the court, it acts as an agency of the judiciary. To the extent that it exercises any executive function-as distinguished from executive power in the constitutional sense-it does so in the discharge and effectuation of its quasilegislative or quasi-judicial powers, or as an agency of the legislative or judicial departments of the government.

It is perhaps this mixture of the types of functions described by the Court in the Rathbun case that has most perplexed members of the bar confronted with problems of practice before administrative agencies. The mixture of functions in the Federal Trade Commission was not created inadvisedly. On the contrary, it was considered necessary by the Congress in order to allow the Commission to reach effectively the objectives of the basic legislation and the problems toward the solution of which the antitrust laws are directed. As you who are familiar with the legislative history of the antitrust laws will recognize, various different approaches to the solution of the problem were suggested. The Bureau of Corporations, for instance, which was the Commission's immediate predecessor, was established in 1903 with the power to gather, compile, and publish reports concerning business practices, on the theory that adequate publicity would so activate public opinion as to make it expedient for those engaged in undesirable practices to abondon them. Another approach is expressed in the Sherman Act, which places largely in the courts the power of preventing combinations and monopolies in restraint of trade. Still another approach is expressed in the Clayton Act which proscribes certain specified and enumerated practices. Federal Trade Commission as finally constituted embodied something of all these approaches but with the addition of the power to implement a broad standard by rule, regulation, or order, either generally or in specific cases, and to act as an arm of the Congress in defining and proscribing unfair methods of competition which might not be specifically covered by the other legislation.

CONCLUSION

The

Bearing in mind these broad objectives, I am sure you will see that what might appear to be a departure from the traditional constitutional division of powers between strictly legislative, judicial, and executive agencies was both necessary and desirable.

Criticism has at times been advanced to the combination in administrative agencies of the functions of "judge, jury, and prosecutor." Specifically this charge was made against the Federal Trade Commission in some of the earlier literature.

However, the analogy of "judge, jury, and prosecutor" applied to procedure before the Commission is not apt. The Commission has no power to punish or inflict penalties. If penalties or punishment are exacted from a party to a Commission proceeding, it must be by a a court of law in the usual manner. Nor has the Commission any power to enforce its orders-this must be effected through a court of law. Nor can the Commission issue any cease-and-desist order which is not subject to review in a court of law as provided in the statute.

The power of the Commission to initiate proceedings on its own motion is highly important to the objectives of the act. In fact, this power represents one of the principal departures from the common law method of dealing with the situations which are within the Commission's jurisdiction. This was recognized by the Congress at the time and has been referred to since passage of the act by the courts as one of the impelling reasons for the legislation. Under the common-law doctrines of unfair competition, fraud and deceit, restraint of trade and monopoly, the courts could only act when a justiciable controversy was presented to them by a party having sufficient interest to maintain a suit. Thus a voluntary agreement among manufacturers to fix prices might never reach the courts unless one of the parties to the agreement brought suit, either to enforce the agreement against one who had breached it or because of special injury from its operation. And the public, which might be most seriously injured by such an agreement, would have no protection unless one or more of the chief beneficiaries of the agreement brought it to court.

5

A more specific illustration of the advantage in having an agency with the power to institute a case involving unfair competition on the basis of the public interest is contained in American Washboard Company v. Saginaw Manufacturing Company. The American Washboard Co., a manufacturer of genuine aluminum-faced boards, brought suit to restrain use by a competitor of the word "aluminum" on a washboard which did not contain any of that metal. Judges Taft, Lurton, and Day, each of whom later served upon the Supreme Court of the United States, held that the facts as shown did not entitle the complainant to relief. In the course of his opinion, Judge Day said:

Can it be that a dealer who should make such articles only of pure wool could invoke the equitable jurisdiction of the courts to suppress the trade and business of all persons whose goods may deceive the public? We find no such authority in the books, and are clear in the opinion that, if the doctrine is to be thus extended, and all persons compelled to deal solely in goods which are exactly what they are represented to be, the remedy must come from the legislature, and not from the courts.

6

In commenting upon the decision in the Washboard case, the court in Royal Baking Powder Co. v. Federal Trade Commission stated: The above case illustrates one of the reasons which led Congress to enact the statute creating the Federal Trade Commission and making unfair methods of competition unlawful and empowering the Commission to put an end to them. By that statute the identical situation which the court in the above case said it was beyond its power to suppress has been brought within the jurisdiction of the Federal Trade Commission-created to redress unfair methods of competition. Before the enactment of the Federal Trade Commission Act the courts appear to have had jurisdiction of an action for unfair competition only when a property right of the complainant had been invaded. But the Federal Trade Commission Act gave authority to the Commission itself when it had reason to believe that any person, partnership, or corporation was using any unfair method of competition in commerce, if it appeared to it that a proceeding by it in respect thereof "would be to the interest of the public," to bring such offending party before it to answer to its complaint and after a hearing could, upon good cause shown, require it to cease and desist from its unlawful methods.

5 103 Fed. 281 (C. C. A. 6th, 1900). 6281 Fed. 744 (C. C. A. 2d., 1922).

And in Armstrong Cork Company v. Ringwalt Linoleum Works, the Circuit Court of Appeals for the Third Circuit, in an action by a manufacturer of linoleum to restrain misrepresentation by a competitor, specifically suggested, in view of the Washboard case, that this type of action would probably be one for the jurisdiction of a body such as the Federal Trade Commission. It practically invited the complainant to call the Commisison's attention to the practice. This suggestion of the court was followed, and through a cease and desist order of the Commisison the misrepresentation was ended.

As indicated in these decisions, the Commisison's right to initiate proceedings on its own motion is very important. It has never been questioned by the courts, and on the contrary it has been referred to in judicial opinion as an improvement over the common law.

While the Commisison exercises certain functions which are quasijudicial, and some which are similar to a prosecution at law, they are but parts of a general machinery designated as a whole to protect commerce and the public, and to prevent rather than to punish unfair practices. As President Roosevelt said in 1937 on the occasion of his laying the cornerstone of the Commission's building—

The vision of Woodrow Wilson has been vindicated again. When that farseeing statesman asked Congress in January 1914 to create the Federal Trade Commission he saw in the realm of trade and commerce a field in which prevention was indeed better than punishment.

Prevention of unfair business practices is generally better than punishment administered after the fact of infringements costly to the consuming public and to honest competitors.

Mr. DAVIS. When I get my statement back and catch up with what we have said and what we have not, I understand that I have the privilege of making an extension.

I might want to do that in some particulars, although not very much.

Mr. SADOWSKI. That has been granted you.

Mr. DAVIS. While the Commisison naturally has a good many "brickbats" thrown at it, such as those at these hearings, yet it receives a great many more bouquets. Under the permisison granted, I am herewith presenting for insertion in the record a very few of the hundreds of bouquets:

Extension of remarks of Hon. Harry S. Truman on the Federal Trade Commission, a recapitulation of the Wheeler-Lea amendment to the Federal Trade Commission Act, in the Senate of the United States, June 2, 1938.

Letter from Mr. Frederick D. Ferris.

Letter from Mr. Edward Taylor.

Editorial in Advertising and Selling, March 1940.

Article by the Institute of Consumer Facts of the Pacific Advertising Association, in cooperation with the American Association of Advertising Agencies.

Article in New York Post quoting and commenting upon an address by Paul G. Hoffman, president of the Studebaker Corp.

Editorial from The Bedding Manufacturer.

(The matter referred to is as follows:)

7240 Fed. 1022 (C. C. A. 3d., 1917):