been instituted by the Commission in an effort to compel the manufacturers to revise their labeling to include announcements that the "Excessive" use of the products may have dire effects such as mental derangement, collapse, serious blood disturbances, etc. No definition of the word "Excessive" is provided.

THE LAW DOES NOT APPLY, AND WAS NOT INTENDED TO APPLY, TO CASES WHERE POSSIBLE INJURIOUS CONSEQUENCES MIGHT FOLLOW USE OTHER THAN THAT RECOMMENDED

The conference report on the Wheeler-Lea Act, as it refers to the definition of "false advertisement," said:

"The section does not contemplate penalization in those cases where the use is not as recommended and is not under usual or customary conditions. It is not intended to extend to cases where there might be injurious results merely because of reactions of consumers due to their peculiar idiosyncrasies or allergic conditions." (H. Rept. No. 1774, 75th Cong., 3d sess., p. 10.)

When the Wheeler-Lea bill was being discussed in the House of Representatives, January 12, 1938, the following colloquy occurred (vol. 83, Cong. Rec., p. 414):

"Mr. O'MALLEY. May I ask the gentleman from California [Mr. LEA] if it would be his understanding, as well as the understanding of the members of the committee, that the term 'false advertisement' in this section would mean that the advertiser failed to say, for instance, that Sloan's liniment is unhealthy to drink? Would this be a false advertisement if some one used it to drink?

"Mr. LEA. No. * * * He is not required to say anything in his ad, but if he does state anything it must be true."

And at the same time the following occurred (vol. 83, Cong. Rec., p. 412): "Mr. WHITE of Ohio. Let us take, for example, the manufacturer of cosmetics. If cosmetics are used for normal purposes and injury occurs, the gentleman would want to punish the man who put out the cosmetics, but, on the other hand, if these cosmetics are eaten by somebody or used for a purpose other than prescribed, certainly the gentleman would not want to hold the manufacturer responsible? "Mr. LEA. No. We are shortly going to come along with a food-and-drug bill which is pretty well prepared for presentation to the House. The gentleman referred to cosmetics. The new food-and-drug bill will require a warning of what may be the deleterious effects if used under certain conditions. We are going to take care of that in the label and misbranding features."

One of the Commission's witnesses (Mr. Cassedy) referred several times to the case of Miles Laboratories v. Federal Trade Commission (C. A. D. C, 140 Fed. (2d) 683). That was a case instituted by Miles Laboratories when confronted by the Commission with the demand for a stipulation in the case above referred to as Docket No. 4993. The company had the choice of signing the stipulation, which required a change in the warnings on its labels, or of being subjected to a complaint and proceeding by the Commission. The company instituted suit for a declaratory judgment and, while the court did make the statement which the Commission witness considered favorable to his position and which he therefore quoted, the court also made this highly significant statement (685):

"In the present case and on the present record-if the question were open-it might very well be argued that appellant's advertising is neither false nor misleading, when considered in the light of the statutory provision requiring no more than a revelation of all material consequences which may result from the use of the product in the customary way or under the conditions prescribed in the advertisement. But since the matter is not open we have no occasion to examine or weigh questions of fact or law, since they are in the first instance within the exclusive jurisdiction of the Commission and its decision when made is subject to challenge only as provided in the act; nor is there anything in the Declaratory Judgment Act which changes this result or creates new rights or increases or extends the jurisdiction of the courts Doehler Metal Furniture Co. v. Warren, 76 U. S. App. D. C. 60, 129 F. 2d 43, 45).”

HOW DUAL CONTROL WORKS

Several years ago the Food and Drug Administration caused a large quantity of Bromo-Seltzer to be seized, alleging misbranding primarily with respect to the adequacy of the directions and warnings. After much consideration, the formula and labeling of Bromo-Seltzer were revised and the litigation was terminated. Then the Federal Trade Commission moved in. Now the company

is engaged in the trial of a Commission complaint, Docket No. 4854, in which the Commission demands warnings in excess of those which appear in the revised labeling. The case has been going on for a protracted period of time with hearings at many places in the United States from coast to coast and from the Gulf to the Great Lakes. See the attached chart as to it and two other cases discussed by the Commission witness. And compare the complaints in these cases with the stipulations which were submitted by the Commission to the companies prior to the filing of the complaints.

These cases are perfect examples of dual and conflicting jurisdiction. As the Circuit Court of Appeals for the Seventh Circuit said in the Willard Tablet case (U. S. v. Willard Tablet Co., 141 Fed. (2d) 141), holding a Commission order to be res judicata against the Food and Drug Administration:

"We, therefore, have the incongruous situation of one branch of the Government approving the method now pursued by the claimant and another branch seeking to condemn."

Thus, an agency which is "complainant, jury, judge, and counsel" and an agency which the courts feel powerless to restrain either as to the findings of fact or the application of the remedy, would determine the rights of the manufacturers as to the claims for their products whether in advertising or labeling.

IN THE MATTER OF EMERSON DRUG COMPANY-DOCKET NO. 4854

Product.-Bromo-Seltzer:

Places where FTC has taken testimony:

Tuscaloosa, Ala.

Columbia, S. C..

Chicago, Ill.

Lansing, Mich.

New York, N. Y__
San Francisco, Calif.
Los Angeles, Calif.
Washington, D. C.
Philadelphia, Pa__
Washington, D. C.
Baltimore, Md__
Washington, D. C..

Number witnesses each place

IN THE MATTER OF MILES LABORATORIES, INC.-DOCKET NO. 4993

Products. Dr. Miles' Nervine, Dr. Miles' Nervine Tablets, Dr. Miles' Anti-Pain Pills:

IN THE MATTER OF CAPUDINE CHEMICAL COMPANY-DOCKET NO. 4852

2 1

(Position taken by James F. Hoge on behalf of the Proprietary Association, August 10, 1935, on the Federal food, drug, and cosmetic bill, S. 5, sometimes referred to as the Copeland-Chapman bill, which consolidated regulation of both labeling and advertising in the Food and Drug Administration :)

STATEMENT (IN PART)

OF

JAMES F. HOGE

ON BEHALF OF THE PROPRIETARY ASSOCIATION

BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, HOUSE OF REPRESENTATIVES, ON H. R. 6906, H. R. 8805, H. R. 8941, AND S. 5, TO REGULATE FOODS, DRUGS, AND COSMETICS, AUGUST 10, 1935-PAGES 694-696

PAGES 694-669

Mr. CHAPMAN. Mr. Hoge, state the usual facts for the record, as to your name, place of residence, business address, profession, and the person or persons for whom you speak.

Mr. HOGE. My name is James F. Hoge, of the law firm of Rogers, Ramsay & Hoge, 41 East Forty-second Street, New York City, and I appear on behalf of the Proprietary Association.

Mr. CHAPMAN. Will you, Mr. Hoge, file with the clerk a list of your companies? Mr. HOGE. I will be glad to, and I will mention some of the names here. The membership of this association, Mr. Chairman, consists of several hundred members. I am not sure of the exact number. It will appear on the list. But I think there are slightly more than 200, perhaps, manufacturers of proprietary medicinal and toilet preparations. The annual production of these members represents about 80 percent in volume of the proprietary drugs and medicines that are sold in this country annually.

Nearly all of these people are advertisers, and some of them are among the largest advertisers in the country. The nature of the business and an index to the membership are disclosed by some of the outstanding products, such as Absorbine, Alka Seltzer, Bayer Aspirin, Bromo-Seltzer, Fletcher's Castoria, Ingram's Shaving Cream, Ipana Tooth Paste, Lavoris, Listerine, Mentholatum, Musterole, Pepsodent, Phillips Milk of Magnesia, Sal Hepatica, Scott's Emulsion, Vitalis Hair Tonic, Zonite, and so on.

These manufacturers are as vitally affected, Mr. Chairman, by this legislation as any others, and perhaps more so than many others. Because of that this association and its members have been interested and active in the whole course of this legislation since the introduction of the original bill, S. 1944, on June 12, 1933. That was the Tugwell bill. We opposed that bill, believing that it was a fantastic piece of legislation adapted to such vast interests as foods, drugs, cosmetics, publishers, and other businesses.

Mr. CHAPMAN. Just at that point, for my own part, I am frank to say that I also was very much opposed to it, and this committee, in fact, never did conduct any hearings on it.

Mr. HOGE. I know that is true. Our opposition, of course, was in the Senate, and we also opposed S. 2000, which was a revision of it, introduced in January 1934, and S. 2800, introduced in February 1934, another revision.

S. 5 was introduced this year, in January, and represented at that time a rearrangement of many sections of the previous bill with some new matter added. We opposed certain sections of S. 5, which were brought over from the previous bill.

When it was amended to the form in which it passed the Senate on May 28, this association withdrew its opposition. We did that not because S. 5 had become a thoroughly satisfactory bill to this association or to its members. We did it because the bill had been so altered as to remove the substance of our principal objections, and we did not feel that, as an organization, as an association, we could longer stand between this bill and its passage.

We do not oppose the bill here today and we do not propose any amendments. I am particularly glad to say that, Mr. Chairman, because up until this time we have considered it necessary to be an opponent, although all the while we have realized that improved food and drug legislation was, and is, needed, not only in the interest of the public but in the interest of legitimate industry.

I know from private

And there is need for this legislation, Mr. Chairman. practice that drug and chemical connections and compounds are made up in attics and cellars, and in the back yards, and peddled among the financially unfortunate and the illiterate. We do need legislation that will clean up this situation. And, because of peculiar circumstances, I think the chief threat to the security and the prosperity of industry such as I am speaking for is unscrupulous competition. When that is added to prejudicial attitudes at times and emotional appeals, it is pecularly important to the security of an industry such as I am talking for that it be regulated. Legitimate business needs an umpire, and crooked business needs a policeman.

Heretofore our views on specific legislation took the form of endorsement of the Mead bill. We now approve also the Copeland bill, which, because of the greater care and study given it in its course through the Senate, is at this time a more comprehensive bill.

FEDERAL TRADE COMMISSION,
Washington, March 15, 1946.

Re Hearings on H. R. 2390 (Reece bill), testimony of James W. Cassedy.
Hon. GEORGE G. SADOWSKI,

Chairman, Subcommittee of the Committee on Interstate and
Foreign Commerce of the House of Representatives,

House Office Building, Washington, D. C.

DEAR SIR: On Thursday, March 7, 1946, during the hearings before the subcommittee of the Committee on Interstate and Foreign Commerce of the House of Representatives on H. R. 2390, and particularly on pages 502 to 506 of the stenographic transcript and during the course of my testimony, Congressman Reece made certain statements and asked certain questions regarding the Dearborn case (Federal Trade Commission v. Dearborn Supply Company) which are incorrect and which, I am sure, both you and Mr. Reece would desire to correct when the matter is called to your attention.

Beginning on page 502 Mr. Reece states:

"Mr. Chairman, if I may, before he renews his statement, I would like to call the witness' attention to a statement which I understood him to make with reference to the date on which the Dearborn case was begun."

Following this statement Mr. Reece continued to discuss the Dearborn case with me, and on page 504 of the transcript stated:

"I assumed that there was investigation in advance of the serving of the complaint but the investigation was concluded and the complaint drawn up after the act was passed and in light of the increased powers which it gave the Commission. In that same connection, you were careful in your statement that there was no reference to labeling in the complaint."

Thereafter, on pages 504 and 505, the transcript discloses the following:

"Mr. CASSEDY. There is none.

"Mr. REECE. That is correct.

"Mr. CASSEDY. It is a pure advertising case. "Mr. REECE. That is correct.

But when the stipulations were issued, which

the company was asked to sign, of which I have what purports to be a copy, it goes on at great length and sets out the labeling and warnings which are required to be used; that is in this stipulation, to be signed by the petitioners. It quotes the labeling and the caution which the Food and Drug Administration had suggested be placed upon the bottle of the product referred to.

"Then, the stipulation states that the cautions suggested by Food and Drug are not sufficient and sets out a new labeling and new cautions which must be met if the company signs the stipulation and thereby closes the case.

"That is just the point that I was undertaking to make the other day, which evidently you misunderstood, Mr. Cassedy, when that provision was being used to indirectly control the labelings.

"In the copy of the stipulation, after quoting the labeling and the warning which the Food and Drug Administration suggested be placed upon this product, this sentence appears in the stipulation: "The caution appearing on the containers in which such products are packaged fails to include a warning to the effect that repeated and excessive use of said drugs may result in mental derangement.'

"As I stated awhile ago, the stipulation goes ahead and sets out the type of labeling and the type of caution which must appear.

"Then the stipulation contains a provision that if the labeling which meets the views of the FTC, and the caution, are included, then the advertisement can read: 'Caution; use only as directed.'

"And what impressed me after reading this stipulation was that your statement that the complaint did not have reference to labeling, did not reveal the full story which one expects from a representative of a governmental agency when he appears before the committee. Because I do not see how anyone can read that stipulation without coming to the conclusion that the FTC is exercising jurisdiction over labeling and the type of caution that shall be used in connection with the labels. That appears to be the whole purpose of it and it certainly has that effect."

Anyone reading the foregoing statements of Congressman Reece would certainly get the impression that a stipulation was offered to the respondent in the Dearborn case that dealt with labeling, warnings, and cautions, when as a matter of fact the proposed stipulation in the Dearborn case contains no reference whatsoever to labeling, warnings, and cautions. The proposed stipulation in the Dearborn case was prepared and offered to the respondent during 1937 and prior to the enactment on March 21, 1938, of the Wheeler-Lea amendments to the Federal Trade Commission Act. I enclose a copy of that stipulation and request that it be filed, together with this letter, as a part of my tesimony.

If you will compare this stipulation with the statements made by Congressman Reece, such comparison will conclusively demonstrate that Congressman Reece could not have been referring to the proposed stipulation in the Dearborn case. For instance, on page 505 of the transcript Congressman Reece quotes a sentence which he says appears in the stipulation, as follows:

"The caution appearing on the containers in which such products are packaged fails to include a warning to the effect that repeated and excessive use of said drugs may result in mental derangement.”

This sentence does not appear in the proposed stipulation in the Dearborn case, and it should be especially noted that the Dearborn case dealt with cosmetics and not with drugs. It is obvious to me that Congressman Reece was referring to some case other than the Dearborn case.

The statements made by Congressman Reece indicate to me that he may have been referring to the proposed stipulation in the Miles Laboratories, Inc., case. The proposed stipulation in that case does include the statement quoted by Congressman Reece, and this fact will be demonstrated by an examination of that proposed stipulation which has already been filed with the committee as a part of my testimony.

If Congressman Reece was in fact referring to the proposed stipulation in the Miles Laboratories, Inc., case, then I respectfully refer the committee to that part of my testimony wherein I discuss this subject in connection with the policy of the Commission under section 15 (a) of the Federal Trade Commission Act, as amended by the Wheeler-Lea amendments of 1938. As you will remember, I reached the conclusion that the Commission, in following this policy, was not attempting to regulate labels, and supported this conclusion by the decision of the Circuit Court of Appeals of the District of Columbia in the case of Miles Laboratories, Inc. v. Federal Trade Commission, (140 F. (2d) 638 (1944)), in which the court stated:

"The Commission denies, and we think correctly, that it is attempting to regulate appellant's labels. All that is said on that subject was to offer that means of correction as a choice which appellant could take or leave as it pleased."

This decision was prior to the issuance of the complaint in the Miles Laboratories, Inc., case and dealt with the proposed stipulation which I believe Congressman Reece had in mind when making the statements now appearing on pages 504 and 505 of the transcript of the hearings before your subcommittee.

In view of the misleading and incorrect statements of Congressman Reece which I have pointed out in this letter, and in view of the fact that I undertook to answer fully every question that was asked me, and in addition thereto discussed in great detail the subject of the so-called conflict of jurisdiction between the Federal Trade Commission and the Food and Drug Administration, I feel that Congressman Reece was unjust to me and unfair to the Federal Trade Commission when he said that my statement:

66 ** did not reveal the full story which one expects from a representative of a governmental agency when he appears before the committee. Because I do not see how any one can read that stipulation without coming to the conclusion that the FTC is exercising jurisdiction over labeling and the type of caution that shall be used in connection with the labels.

cc: Hon. B. Carroll Reece.

* * *"

JAMES W. CASSEDY,
Special Attorney.