Whereas it is desirable in the interest of the manufacturers and of the public to avoid duplication of jurisdiction and unnecessary litigation, and to have a single, well-equipped and experienced body in control of both the labeling and advertising of foods, drugs, and cosmetics: Therefore be it

Resolved by the executive board of the Toilet Goods Association, Inc., That sole jurisdiction of both the labeling and advertising of foods, drugs, and cosmetics should be vested in the Food and Drug Administration; and be it further Resolved, The necessary litigation to that effect is hereby recommended. THE TOILET GOODS ASSOCIATION, INC., By S. L. MAYHAM, Executive Vice President.

Hon. CLARENCE F. LEA,

THE ALBERTY FOOD PRODUCTS, Hollywood 38, Calif., January 8, 1946.

House of Representatives, Washington, D. C.

DEAR CONGRESSMAN LEA: May I call your attention to the Reece bill, H. R. 2390, which I understand is to be debated before the House committee some time this month. I earnestly request and beseech your whole-hearted and active support of this measure.

The present Federal Trade Act is unfair, unjust, and un-American. As you doubtless know, at the present time there is virtually no review of FTC actions, thus permitting the Commission to serve as complainant, prosecutor, judge, and jury. This deprives us of the right of all American citizens-a trial by jury. The existing law ties the courts' hands. They must uphold the Commission even when they are convinced that it is in error. The Reece bill would cure this evil by empowering the court of appeals to review both sides' records of the case. Its decision as to whether or not the Commission had rendered a just verdict then could be based upon the preponderance of the evidence. As matters now stand, the defendant's doom is sealed from the moment that the FTC first issues a complaint.

Defeat of the Reece bill would be a tragedy to virtually all branches of industry. Again, I urge your strong support of this proposed measure.

Respectfully,

THE ALBERTY FOOD PRODUCTS,
ADA ALBERTY.

Mr. RABIN. The committee will stand in recess until 2: 30 this after

noon.

(Whereupon at 12: 15 p. m. the committee recess until 2: 30 p. m. of the same day.)

AFTERNOON SESSION

The subcommittee reconvened at 2:30 p. m., the Honorable Benjamin J. Rabin, presiding.

Mr. RABIN. We will proceed, gentlemen.

Mr. Hoge, how long do you expect to take?

Mr. HOGE. Mr. Chairman, I do not know exactly, not less than 30 minutes, and I hope not more than an hour.

Mr. RABIN. Mr. Murphy, how long do you expect to take?

Mr. MURPHY. I believe I can make my presentation in 10 minutes, sir.

Mr. HOGE. I would be glad to yield to him.

Mr. RABIN. We will hear Mr. Murphy from New York.

Mr. REECE. You are not entirely limited to 10 minutes, of course.

STATEMENT OF CHARLES E. MURPHY, GENERAL COUNSEL, ADVERTISING FEDERATION OF AMERICA

Mr. MURPHY. Mr. Chairman and members of the committee, my name is Charles E. Murphy, and I am general counsel for the Adver

tising Federation of America. The Advertising Federation of America is an organization representative of all phases of advertising activity throughout our country. Among its active members are national advertisers, advertising agencies, radio broadcasting companies, newspapers, magazine, business paper and farm paper publishers, outdoor advertising companies, graphic art organizations, and other branches of the advertising business. It also includes in its membership local advertising clubs in all parts of the Nation, of which there are about 100.

In 1911, the Advertising Federation of America founded and promoted the Truth in Advertising movement and started a permanent. crusade for higher standards of advertising copy. We will exert constant influence for universal honesty in advertising and for increasingly higher levels of taste and of information value.

Many years ago this organization sponsored the formation of vigilance committees, which vigorously policed the advertising of those days. These committees eventually developed into the well-known better business bureaus, of which there are now about 60 in existence and with which the federation still cooperates in furthering their splendid work.

Mr. REECE. So the New York Better Business Bureau developed in this way?

Mr. MURPHY. Precisely, sir; and every other business bureau in this country.

Mr. REECE. Occasionally I have had opportunity to consult the Better Business Bureau up there for some constituent or friend and in all of my experience I have never found an organization that was more vigilant and who rendered a finer service in that respect than that organization and I want to compliment not only the organization but also those responsible for its organization in the first instance.

Mr. MURPHY. It will be a great pleasure for me to take back that message to them. I am sure it will be most heartening in their most wonderful work.

Mr. REECE. And the information which they have developed and presented in some cases has caused me to wonder what kind of an organization they had which enabled them to get such complete information on matters with which you would think they would not be immediately in touch.

Mr. MURPHY. They explore every field of merchandising in New York, all department stores, retail stores, and every other field of merchandising which their staff can physically reach. They have a complete staff who hand in complete reports and then a determination is reached as regards those reports and then it is taken up with the merchants and they try to settle any differences amicably first before proceeding or recommending anything to the authorities.

We have given you this brief background of the Advertising Federation of America so that you will know of our sincerity when we state that we appreciate the outstanding contribution which has been made. to advertising by the Federal Trade Commission as one of the regulatory agencies of the Government in our field. We therefore hasten to state that if we were of the belief that any proposed amendment to the Federal Trade Commission Act would dilute or diminish the effectiveness of the Commission in preventing or eliminating false advertising, we would be against such proposed amendment.

As to the provisions of the Reece bill, we have this to say: We are for the proposed amendment to section 5 (c) which would permit the appellate court to modify an order of the Federal Trade Commission and would provide further that the findings of the Commission shall be conclusive only if supported by the preponderance of the evidence. We believe it is a fundamental concept of our jurisprudence that a defendant or respondent should have the right of appeal to an appellate tribunal when he questions the justice of his conviction and has reasonable grounds for questioning it. We also believe that the appellate court should have the right, and the duty, of modifying the ruling where it finds that such ruling is contrary to the law or where it is not supported by the preponderant weight of evidence. Especially do we believe this to be so in matters involving the rulings of a great administrative agency such as the Federal Trade Commission, which by the very nature of its procedure acts simultaneously as the complainant, jury, judge, and counsel.

We have read with profound interest the memorandum, dated March 27, 1945, written to the chairman of your Committee on Interstate and Foreign Commerce by Hon. Edwin L. Davis, Chairman of the Federal Trade Commission, and in which Mr. Davis gives his observations regarding the provisions of the Reece bill. After stating that "the vast majority of such cases are disposed of by the execution of stipulations in which the proposed respondents agree to cease and desist from the continued use of the unfair methods or unfair acts or practices in question," Mr. Davis continues:

With respect to the cases in which formal proceedings are instituted and the cases tried before the Commission, a relatively small percentage appeal from the decisions of the Commission, notwithstanding the fact that every respondent has the undisputed right to appeal for a review of the Commission's cease-and-desist order to a United States circuit court of appeals of his own selection. In a large number of the cases that finally reach the courts, the facts are not disputed.

I query, parenthetically, in anticipation of the Commission's objection to this part of the amendment, how in the world of reason can they object to the inclusion of the clause permitting modification and requiring a preponderance of the evidence, in the light of their statement, knowing Judge Davis, it must be true.

We doubt if anyone is in a position to state how many aggrieved respondents were deterred from filing an appeal because of their belief that the courts, under the present status of the law, seemed reluctant or powerless to upset the rulings of the Commission even where they obviously disagreed with the Commission's ruling. With all due respect to the Commission, we feel that the right of appeal should be complete and unrestricted, and that where the Commission's ruling is not supported by the preponderance of evidence, that the court shall have the right to modify or set aside such ruling.

The term "preponderance" does not mean overwhelming. It means, and we believe it is so intended to mean in the proposed amendment, a superiority in the weight of evidence; a balance in the weight of evidence indicating guilt or innocence. The extent to which that superiority exists in a given case will be up to the Federal Trade Commission to determine in the first instance, and in the event of appeal, then the court shall have the right and duty to decide if, in fact, a preponderance in the evidence does exist.

There is nothing new in this concept; in fact it is typical of your and our idea of American jurisprudence. It exists in the WalshHealey Act and in the Commodity Exchange Act.

The adoption of the proposed amendments to section 5 (c) will eliminate one of the few justifiable objections any right-thinking person may have regarding the Federal Trade Commission Act and its administration.

Now I will just address myself, if I may, in two short paragraphs to the other sections of the bill.

With regard to the proposed amendments in the Reece bill which have for their purpose the removal of dual and conflicting jurisdiction by and between the Federal Trade Commission and the Food and Drug Administration, the Advertising Federation of America feels that the objectives of these amendments should be accomplished. We frankly are not certain that the provisions of the Reece bill are the best means of the ends desired in this respect. We would be hesitant to recommend any change in the description of a false advertisement unless and until we feel that such a change is necessary to the removal of the conflicting jurisdiction now existing between the two agencies, and then only in the event that such a change would not have the effect of weakening the safeguards to the consuming public.

No one can read the letter of July 13, 1945, to Representative Reece by Hon. P. B. Dunbar, Commissioner of Food and Drugs, without being impressed with the dangers existing in connection with this conflict between the Federal Trade Commission and the Food and Drug Administration, and we are glad that your committee has given all parties concerned the opportunity to discuss this vital matter so completely.

Those are dangers, I may say, parenthetically, not to the litigating parties, to the respondent or the defendant, but dangers to the consuming public itself, where the Government has found itself, to use the vernacular, behind the well-known eight ball, because of this unfortunate and undesirable conflict.

We are glad, finally, Mr. Chairman and members of your committee, that you have given and will give of your time and careful consideration to these matters. I thank you for hearing me. Mr. RABIN. Thank you very much, Mr. Murphy.

We will now hear Mr. James F. Hoge, of New York.

STATEMENT OF JAMES F. HOGE, COUNSEL TO THE PROPRIETARY ASSOCIATION OF AMERICA

Mr. HOGE. Mr. Chairman and gentlemen of the committee, my name is James F. Hoge, I am a lawyer and my firm is Rogers, Hoge, & Hills, of 41 East Forty-second Street, New York. I appear here today as the attorney of the Proprietary Association of America, which is an unincorporated association, whose membership is made up of manufacturers of so-called proprietary medicines. That association does not include all of such manufacturers, but that association does include by volume of manufacture most of the manufacturers. I have in my capacity as attorney for individual clients appeared in Federal Trade Commission cases. I mention that only as indi

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cating something of my background. I mention it with no intention whatever of injecting any of my personal cases into the matter or of doing anything which would border on special pleading. I address myself to this bill, with appreciation to the committee and to the Congress for the opportunity, in the earnest belief that the bill deals with two situations which sorely need correction.

The manufacturers for whom I speak today are very much affected by the situation or rather the situations to which this bill is addressed. These manufacturers are subject to the Federal Trade Commission Act as to the advertising of their products, they are subject to the Federal Food, Drug, and Cosmetic Act as to the composition and the labeling of their products. As I shall show you the same subject matter is being dealt with as far as these people are concerned under both laws, and pursuant to these laws they are in the courts where the rules of evidence and the procedures of the courts pertain, when the subject matter is labeling and they are in the Federal Trade Commission where the administrative process which is being discussed pertains when their advertising is involved, and every so often the same subject matter is reflected in both media.

Now, this bill presents two situations in which the clarification of the intent of Congress is much needed. The first proposition is, does, or did, Congress intend that actual controversies of fact and law be tried and adjudicated by the Commission without effective court review; and second, did, or does, Congress intend that two agencies of the Government shall deal under different procedures with the same subject matter?

Now, I think that I may say with confidence, Mr. Chairman, that those two situations exist. I do not presume to say what Congress will do with them, but I do presume to say that they are situations with which the Congress ought to deal and to which this bill is addressed. Let me first speak of the one which has already been under consideration here today and that is the one dealing with the administrative procedure.

I think that this is a good place to say that what may be the situation in other statutes and what may be indicated as a corrective action in procedures of other agencies should not influence what is done with this proposed amendment to the Federal Trade Commission. Many Federal agencies, and of course there are many, have various and different functions one from another. Many are engaged to a large extent in what is called rule making, in the formulation of standards which are applicable to a whole class, in the shaping of regulations which may apply equally and uniformly throughout a class.

Now, of course one form of review may be indicated when you are dealing with that sort of function, whereas an entirely different form of review is due when you are dealing with another function, to wit, an adjudicating function.

Now, where Congress delegates a legislative function to an agency, I shall be the first to say that the same form of court review should not be applied to that as I will say to you today should be applied where Congress has delegated an adjudicating function. We are discussing here today-as we talk about the Federal Trade Commission procedure, and as we talk only about that, and do not get into