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AMEND FEDERAL TRADE COMMISSION ACT

WEDNESDAY, JANUARY 30, 1946

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The committee met at 10 a. m., Hon. Benjamin J. Rabin presiding. Mr. Rabin. We continue this morning with the consideration of H. R. 2390. Mr. Hugo Mock. Are you ready to proceed, Mr. Mock?

Mr. Mock. Yes, sir; my remarks will be very brief.
Mr. RABIN. Very well.

STATEMENT OF HUGO MOCK, REPRESENTING THE TOILET GOODS

ASSOCIATION

Mr. Mock. My name is Hugo Mock; I represent the Toilet Goods Association, which represents the bulk of the toilet goods industry. I am here as their representative, and also in my individual capacity as an attorney.

May I say at the beginning that I was very much gratified yesterday at the unusual approach made by Mr. Murphy, of the Advertising Federation, in which he said that the Federal Trade Commission was not on trial and was not a defendant. That point of view was particularly emphasized by Mr. Reece himself, and I think it is very important to keep to that point of view and not to consider in this case the Federal Trade Commission a defendant.

I am not here to eulogize the Commission; it has been working since 1914 on the initiative supplied by Woodrow Wilson, and Justice Brandeis. It has during that time, I might say, been the conscience of American business, and to use a phrase of Voltaire—I do not wish to be irreverent, but I think when Voltaire said, “If we didn't have God, we would have to invent one,” if we didn't have the Federal Trade Commission, we would have to invent it, because we needed that kind of an agency for American business.

That being the case, however, I think we are entitled, all of us, to be considered as partners in this enterprise, and I think I may go so far as to say we are entitled to the cooperation of the Commission itself in correcting such errors as we may find, especially of a procedural nature.

It must be remembered that from the very foundation of the Commission, and its intended jurisdiction, it was meant to cover practically the whole field of industrial activity, and that has been the source of its merits, and also of some of the defects of its operation. Much of its technique had to be improvised, and despite the splendid job it has done in many fields, it has been impossible to find specialists in all fields in which it operates.

The Interstate Commerce Commission has been frequently mentioned here, but that Commission has worked exclusively with the railroads, and when the Commission, after hearings, has ordered specific freight rates for specific commodities in specific territories, such decisions have been made by specialists who have confined themselves to that particular field, and necessarily a court of review of the decisions of the Interstate Commerce Commision in the field of freight rates would have difficulty in bringing to that consideration the same amount of experience and time which motivated the original decision.

I submit that such a background is not possible in the hundreds of cases in all fields brought before the Commission, and, not only that, in practice it has been found necessary within the Commission itself to divide specific cases into segments so that no one within the Commission has a specialized acquaintance with a particular case or with a particular industry.

There is the modus operandi._ If a certain set of facts is brought to the attention of the Federal Trade Commission, it is investigated by one attorney who, as soon as he reports to the Complaint Bureau, that particular attorney is through with the case. He is not consulted any more. The complaint is drafted by the Complaint Bureau, and then a trial attorney is appointed and hearings are had. The trial attorney makes his findings and recommendation and finally the case is heard before the members of the Federal Trade Commission, sitting as a court. They hitherto have had no acquaintance with the facts and circumstances of any particular case, but they are forced to rely upon the printed or typewritten record without the benefit of examining witnesses, and without any knowledge of the background of each particular case.

It is therefore the most natural things in the world in these circumstances for the members of the Federal Trade Commission to rely upon the word of the attorneys for the Commission and to adopt their point of view.

I will not remark upon the frequent assertion that the Federal Trade Commission is complainant, prosecutor, trial attorney, and judge—all embodied in the same agency. This concentration of function, diversified as it is, has in many cases worked remarkably well, but in other cases it has, I believe, worked to the injury of specific respondents.

I don't know whether it was ever intended that the findings of the Interstate Commerce Commission-rather the Federal Trade Commission, I should say-should be affirmed in all cases if supported by evidence. This word "evidence” just by itself constitutes almost a reductio ad absurdum, and it may be partially the reluctance of the courts themselves to disturb the findings of the Commission which has brought about this impasse.

Since, however, the circuit courts of appeal, especially in the Alpacuna case, and in other cases, have decided the findings of the Federal Trade Commission cannot be disturbed if supported by any evidence, it seems to me that it has become a necessity, for the Federal Trade Commission to voluntarily surrender, some of the authority apparently conferred by the present Federal Trade Commission Act.

I propose herein merely to call the attention of the members of the committee to some of the other procedural matters which I think can be improved. It will be conceded that a delay in justice is a denial of justice, and I want to say right there that my criticisms of the Commission is not that it has been too harsh, but in many cases it has not been harsh enough, and certainly it has not been direct or quick enough.

I will cite only three cases where in view of the circumstances, I believe there has been unnecessary and enormous delay in the trial of the issues and in the determination of the cases. May I say in reference to these three cases that I choose them at random. They are not special. I did not make a search for such cases, but they just happen to be three cases that I personally knew about. And in all three cases the issues are so simple that in every one of those cases I would guarantee to write the issues on a postal card.

The first of these cases is the Phillipine Mahogany case, Indiana Quartered Oak Company v. Federal Trade Commission (26 Fed. Rep. 2). This case involved the use of the simple term "Phillipine Mahogany” and was back in 1925. The issues are still being litigated and they have been started all over again afresh, under Dockets Nos. 1739 and 1916. That is 21 years and they have been in the courts all that time and they have just begun again.

Perhaps I am doing a great disservice to the legal profession in mentioning these cases, because this looks like it might support another generation of lawyers. It is 21 years already and we are beginning all over again.

The second case I refer to is the Armand Company v. Federal Trade Commission (78 Fed. Rep. 2; 707). In this case the complaint was filed June 27, 1925, and the first order of the Commission was entered 8 years later, January 27, 1933.

I think if this case had been tried before a Federal court, or a similar body, it might have taken 3 days or a week. The issue was as simple as you could ever get in a case, but it took 8 years to decide that.

The third case is one in which an appeal is to be heard within the next month or two. I refer to Federal Trade Commission v. Elizabeth Arden, and that affects the cosmetic industry especially.

This complaint was issued May 15, 1937, and decided October 3, 1944. The particular order is on appeal and, for many reasons, I do not wish to discuss the merits or demerits pending the possible action of the circuit court of appeals and of the Supreme Court of the United States. However, I do say that the case was not of such complexity as should have required even a half year for its trial and judgment, and if the conclusion of the Commission in that case were correct, such conclusion is much belated. If the conclusion of the Commission in this case were not correct, then a vast injustice has been done to the respondent in this case by the delay.

May I say that there are seven other parallel cases which have not yet been decided which were started at the same time, and in connection with this case I want to refer to another factor in the Arden case.

In that case the cease-and-desist order was given by order of the Commission. There was no opinion. Last week in New York City there was a first meeting of the section of the New York State Bar Association called the food, drug, and cosmetic section. There were presented at that meeting a number of papers on this very Arden case, by two very eminent lawyers, and what I want

sion.

to say it that these two papers were diametrically opposed in their interpretation of the cease-and-desist order in the Arden case, which means that after the appeal is heard, and if it is affirmed, the industry won't know what it is all about, because right now we don't know what it means. There has been no opinion, and there has been no direction for the industry to tell what we should do, whether the order is affirmed or reversed.

I shall briefly deal with the proposed sections 3 and 4 of the bill under consideration regarding advertising. Here I may express a certain amount of consistency on my own part as when the WheelerLea amendment was first passed, I objected to transferring the advertising of foods, drugs, and cosmetics to the Federal Trade Commis

I remember the circumstances very well. Furthermore, it is an anomalv that you should have one definition of false advertising in the Wheeler-Lea amendment and another definition of false advertising in the food, drug, and cosmetic law.

I am opposed to lying in advertising, or in labeling, and I don't think the time of this committee should be wasted in dialertics, upon a definition of the scope of false advertising in the Wheeler-Lea amendment and a similar definition in the food, drug, and cosmetic Jaw. I don't care what definition of false advertising we have—and I would adopt the one that is the best protection to the public.

However, I want to call your attention to one practical point. Where you have a nationally advertised article, it is the advertising that brings the customer to the store, and the customer never reads the label. Those two things, the advertising and the labeling, they always spring from the same source, so that it is entirely illogical that we should have two administrative bodies, one dealing with labeling and one dealing with advertising.

There isn't the slightest justification for penalizing certain statements in a label and then permitting the same statements to be circulated in advertisements, and certainly one Federal body should have jurisdiction over advertising and over labeling of the same product.

We have in the Federal Food and Drug Administration a staff of experts who are spending their lives dealing with their particular specialities, and it is an anomaly that with the passage of the WheelerLea amendment the Food and Drug Administration was divested of authority over the advertising of articles whose labeling they supervise and control.

Modern research in dermatology, and in the field especially of allergies, has yearly become more delicate and complicated. "The cosmetic industry, through its research program, is yearly trying to introduce safer and better cosmetics. A certain amount of public supervision, both of the formula and of the labeling and advertising of cosmetics is feasible and necessary. The cosmetic industry prefers the expert vigilance of the Food and Drug Administration, and even the corrective hand at times of the Food and Drug Administration, with its corps of experts, to the divided authority of the Federal Trade Commission and the Food and Drug Administration.

In the interest of efficiency and in the public interest, the inrisdiction of all advertising, labeling, and circularization should be returned, according to the provisions of the Reece bill, to the Food and Drug Administration, and it seems to me, with its enormous and expanding field, the Federal Trade Commission should be very glad to be rid of this small segment of its territory.

In closing, I might say that I have never heard at any time a single word against the integrity of the members of the Federal Trade Commission. But I do say that with the enormous jurisdiction they have, we are entitled to sit down with them and to ask their cooperation in these very necessary amendments.

Mr. ROGERS. What is the difference between the definition of the Federal Trade Commission and that of the Food and Drug Administration ?

Mr. Mock. I think you will find you are speaking of the WheelerLea amendment?

Mr. ROGERS. Yes.
Mr. MOCK. I think you will find textual differences there.
Mr. ROGERS. What are they!

Mr. Mock. I have copies here. I will be glad to point them out to you, Mr. Rogers.

Mr. ROGERS. I thought perhaps you knew offhand.
Mr. Mock. No; I don't know offhand.

Mr. RABIN. Mr. Mock, does the trial examiner have the right to
reject offers of evidence ?
Mr. Mock. Yes.
Mr. Rabin. Does that appear in the record?
Mr. Mock. I think it appears in the record.
Mr. RABIN. It does?
Mr. Mock. Yes.
Mr. RABIN. The offer of proof does appear?
Mr. Mock. That is right.
Mr. RABIN. But they have the right to reject it and not receive it?
Mr. Mock. That is right.

Mr. REECE. May I make this observation by way of interpretation of your remarks with reference to the statements that have been made here that the Commission is in the position of complainant, prosecutor, judge, and jury. The statement so describing the Commission's position is not a criticism of the Commission, because the act itself gives that authority and responsibility to the Commission, and vests it with that power, and the Commission could not exercise its functions if it did not act in those capacities.

Mr. Mock. But, Congressman, the difficulty is this: In the enthusiasm of combat, the Federal Trade Commission acts like any other combatant. It wants to win. I have seen this: Here is a Commission which represents the public, the consumer-and many of my brothers in the law will bear me out—where a complaint is issued on confusion on the use of a popular phrase like “Alpacuna,” or anything else. What does the Commission do? They go to one of these buildings here where there are a hundred girls employed, and they marshal them together and the trial attorney may call these girls one by one, and out of 100 girls he may find that 5 of the girls reinforce the complaint of the Commission, and 95 are dead against it. Now, what happens? Here is the Commission, representing the public. Do we get the benefit of those 95 witnesses, which would help the respondents? We do not. I have actually seen cases where the replies of the first witness is not favorable to the attitude of the Commission, and the

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