The use of that method is promotive of competition. To strike it down militates against competition. The public naturally benefits from the competition.

There would be no warrant for saying that those who use the boards are bad people. They are used at church bazaars and picnics, by various veteran's associations, labor unions, and lodges. These organizations find them of important practical use in their efforts to raise money used by them for charitable and other laudable purposes. These people are better qualified to judge whether or not the use of the boards is immoral than are biased commercial concerns who want to handicap their smaller competitors. If the board method of selling merchandise did not pass muster from a moral standpoint, it would not be used to sell merchandise at church bazaars and church picnics. Since it is sufficiently moral to pass muster there, it is not reasonable to say that it is too immoral to be used in stores. The boards are used in respectable stores in respectable neighborhoods by respectable people. Since the use of the boards does not warrant questioning the user's respectability, so supplying the boards to the user cannot warrant questioning the supplier's respectability.

The primary purpose of boards being advertising and not gambling, they are in a somewhat different category from some of the other devices considered by the committee. In eight States the use of punchboards for the purposes mentioned is permitted. In only nine States is the use of the boards specifically prohibited.

Most of the States have general statutes agains lotteries, gaming, and gambling, but these statutes do not either permit or prohibit specifically the use of punchboards. In all of the States except the nine States which specifically prohibit the use of boards, they are looked upon as an innocent amusement and not a serious violation of the lottery or gambling statute. Even in the nine States which prohibit the use of the boards specifically there appears to be considerable disposition on the part of the local authorities not to regard their use as particularly serious. In any event, whether or not they are used depends upon the local sentiment in the particular neighborhood affected.

A list of the States which respectively permit and prohibit punchboards specifically appears in appendix I.

ARGUMENT

I. The Attorney General deems inclusion of punchboards undesirable; the Federal Trade Commission recommends their specific inclusion.

The Attorney General's representative testified that S. 3357 was not intended to include punchboards. The representative of the Federal Trade Commission, however, recommended that the proposed legislation be broadened to specifically include punchboards (see Transcript of Hearings, pp. 167, bottom, and 168, top, and 171).

The Attorney General's representative, when asked why there was a provision permitting shipments into States such as Nevada, said:

* the basic theory upon which the bill rests, namely, that the policy is a local policy, to avoid any interference, if possible, by the use of Federal power in local affairs. If there are communities in this country that want these things, let us not interfere with it (Transcript, p. 73, middle).

When asked if S. 3357 includes punchboards, he said,

No, sir, it does not. Actually, the bill that was before the conference on March 16 specifically included punchboards, and the conference struck it out, not because it was against hitting at those, but they were afraid the breed of the definition might include so much as to make this bill really unworkable (Transcript, p. 106, middle).

The word "breed" in this quotation is probably erroneous. The witness probably said "breadth."

The Attorney General's staff evidently found it exceeding hard to draw a bill that would not encounter serious administrative obstacles. The members of your committee promptly perceived that the bill, even as drawn, presented difficult administrative problems and applied itself to the task of endeavoring to solve these; but the proposed ways of doing so always collided with the inexorable fact that the subject covered by the bill is inherently of such a nature that it can be dealt with effectively only by the State and municipal governments and officials, to whom our system of government assigns that task. The founders of the Government discovered that that was the only practical course; and their successors have found, again and again, that whenever they deviate from that course, they bring on an unworkable result irritating and detrimental to the people and to the Government. The Volstead Act is a most striking instance.

The Federal Trade Commission's admissions defeat its request. Its representative, when asked whether the Commission would want to be charged with the administration of such a law, said, "I can speak, I am certain, for the Commission on that, and I am certain they would not" (Transcript, p. 170, bottom). He was in no doubt that the Commission would not want to tackle that tough job. The Commission preferred that it be placed on the shoulders of the Attorney General (Transcript, p. 171, top). He said that if that were done "the Commission could spend its time on much more important matters" (Transcript, p. 171, eighth line from bottom).

Thus the Federal Trade Commission admits that the Attorney General is right in not putting punchboards into the bill and in leaving them to be dealt with by State and municipal officials, as our system of government contemplates.

The Commission could hardly deny that the Department of Justice, this committee, and the Congress are loaded with "much more important matters" and each could "spend its time on much more important matters" by leaving to the State and municipal officials things which our system of government assigns to them and which they can do and will do if the people of the particular State or municipality really want them to be done.

The Commission has had much experience with punchboards during the 30 years since 1920 (Transcript, p. 164, first paragraph). The use of boards occurs in the open so that they are easy to detect. Hence, local officials would have no difficulty in acting. Indeed, if the people in a given neighborhood should disapprove of their use, the neighborhood storekeeper would have to discontinue it, to avoid losing trade. The Commission's representative also said:

We have handled all these cease-and-desist orders in this type of case, but we have not stopped it. We have skimmed the surface. These things are still going on (Transcript, p. 171, last paragraph).

* **

This is a demonstration that the people continue to use the boards because they want to use them. There is nothing to fool them. Everything is open and simple. The people are competent to make the simple decision whether or not they want to buy a bar of candy or some other article of merchandise by using the board or without using it. They have had over 40 years' experience with the boards and they are still using them. If their experience in the use of them were unsatisfactory to them, they would naturally stop using them.

The Commission's representative who made the statements also said:

It is my understanding from the investigations made by the Commission in connection with the Keppel case when that was being investigated, that practically every State, if not all of them, even Nevada, had some kind of antigambling provision either in some law or in their constitution; but I do not know that a majority of the States make it illegal to dispose of and distribute merchandise through the means of punchboards or pull tabs or other lottery devices in aid of local sale. I doubt whether most of the Sttaes have a law against it, or at least that it is being enforced as to that (Transcript, p. 174).

* * * It might be that they would have a law preventing money payments as the result of the use of punchboards or push cards and that would not be applicable to a punchboard that was used to draw trade and give the lucky person a set of dishes, or something like that.

Transcript, p. 174

If the use of punchboards in the various States were of serious concern to the people, this situation would not exist. If their use were really bad, or if the people's experience with them were unsatisfactory to them, they would demand specific legislation against them or that existing laws be enforced. Demand for boards would decrease and fewer would be shipped into the State. The boards go into the State only as fast as the people use them up.

II. Federal court decisions afford no basis for this legislation, and the Federal Trade Commission's assumption of jurisdiction over interstate shipment of boards as an unfair method of competition has not been passed upon by the Supreme Court

The Commissioner's representative cited Federal Trade Commission v. Keppel, (291 U. S. 304). That case did not deal with punchboards at all. The Keppel concern manufactured and shipped in interstate commerce receptacles containing pieces of candy, some of which had colored centers. The purchaser of a piece of candy with a colored center would have the right to a prize. That is known as the breakand-take method. The Keppel concern also supplied pieces of candy with wrappers around them. In those wrappers, concealed from view, were slips of paper stating the price of the piece of candy in the wrapper. The buyer did not know until he took off the wrapper what kind of a piece of candy he was getting or what price he would have to pay for it. The price might turn out to be 1 cent, or 2 cents, or 3 cents, or some other price. This was known as the pick-anddraw method. The candy consisted of penny goods, usually sold to children. Note that the element of chance was manufactured into some of the pieces and could be removed only by remaking them, and that the element of chance was wrapped into the other pieces and could be removed only by rewrapping them. That candy with the element of chance put into it in that way moved in interstate commerce. The retailer sold it in accordance with the chance method

manufactured into it as to some pieces and wrapped into it as to others. The Supreme Court decided that case against Keppel because the method exploited consumers. The Court said:

It is true that the statute does not authorize regulations which has no purpose other than that of relieving merchants from troublesome competition or of censoring the morals of businessmen, but here the competitive method is shown to exploit consumers

*

(FTC v. Keppel, 291 U. S. 304, 313.)

It should be noted that the exploiting factor was inherent in the goods, having been manufactured into them and having been wrapped into them and being inseparable from them except by remanufacturing or rewrapping. That is what moved in interstate commerce.

The Keppel decision follows Federal Trade Commission v. Winsted Hosiery Company, (258 U. S. 483), cited by the Court, wherein it appeared that the manufacturer had sold in interstate commerce misbranded and falsely labeled goods which served to deceive the buyers including the retailer's customers. In the Winsted case the exploiting factor was inherent in the goods when they moved in interstate commerce. In both cases there was an exploiting factor inherent in the goods whereby the consumers were exploited. It was on that that the decisions were based, and it was that which made the Winsted decision a precedent for the Keppel decision.

In the Keppel case the Supreme Court also said:

We do not intimate * * * that the Commission may prohibit every un ethical competitive practice regardless of its particular character or consequences. (FTC v. Keppel, 291, U. S. 304, 314).

The Supreme Court has not yet passed upon the question of the Commissioner's jurisdiction to prohibit the interstate shipment of a device alone which may be used locally to sell merchandise by means of lot or chance. That question was presented to the Circuit Court of Appeals for the Sixth Circuit in the case of Charles A. Brewer & Sons v. Federal Trade Commission (158 Fed. (2) 74) decided December 5, 1946, in which that court sustained an order of the Commission forbidding the interstate shipment of punchboards in which the sale of merchandise was not involved. It is understood that by the time the Commission issued its order, the Brewer company was practically out of business and no appeal was taken to the Supreme Court, so that the highest Court has not passed on the question of the Commission's jurisdiction to bar punchboards, as such, from interstate commerce. The Brewer decision discussed a number of other decisions of the several circuit courts of appeals and the conflict between the third circuit in the case of Scientific Manufacturing Co. v. Federal Trade Commission (124 Fed. (2) 640) and the seventh circuit court in Modernistic Candies, Inc. v. Federal Trade Commission (145 Fed. (2d) 454). In the Brewer case the circuit court of appeals referred to the decision of the Court of Appeals for the Second Circuit in Deer v. Federal Trade Commission (152 Fed. (2d) 65), in which that circuit affirmed an order of the Commission restraining the use of bingo paraphernalia.

It is fair to say that the decisions generally of both the Supreme Court and the other Federal courts are based primarily on the sale of merchandise through a method involving lot or chance, and it remains to be seen whether the Supreme Court will sustain the Com

mission in barring from interstate transportation a device susceptible of being used for the purpose of selling merchandise through lot or chance where the manufacturer of the device is not selling, nor interested in the sale of merchandise other than the board.

III. The Congress has consistently refused to enact any such law as that here proposed

The Congress has on numerous occasions determined that it should not enact any bill on the subject dealt with in S. 3357 and H. R. 6736, evidently feeling that it should leave the subject to the States and municipalities.

From May 1919 to January 1941, the Congress had before it many bills on the subject covered by S. 3357 and H. R. 6736. On one occasion one House passed such a bill, and on another occasion the other House passed one. Extended hearings were held on some of these bills. Most of them ended in the committees. They were as follows: Sixty-sixth Congress-S. 1541, Senator Sheppard. To bar gambling devices and lottery paraphernalia from the mails.

H. R. 1195, Representative Randall. To enable the Postmaster General to forbid payment of money orders in connection with exclusion from the mails of fraudulent gambling devices and lottery paraphernalia.

Sixty-eighth Congress-H. R. 6071, Representative Purnell. To prohibit importation and interstate transportation of gambling or chance slot machines or automatic vending machines or devices connected with chance devices.

Sixty-ninth Congress-H. R. 3935, Representative Purnell. Reintroduction of above.

H. R. 4004, Representative Dyer. To punish the unlawful transportation in interstate commerce or through the mails of gambling machines and fraudulent devices.

Seventieth Congress-H. R. 387, Representative Dyer. Reintroduction of above.

Seventy-first Congress-S. 2751, Senator Sheppard. Reintroduction of above.

H. R. 2408, Representative Dyer. Reintroduction of above.

Seventy-second Congress-S. 182, Senator Sheppard. Reintroduction of above.

H. R. 353, Representative LaGuardia. To provide penalties for use of the mails for gambling devices and lottery paraphernalia.

H. R. 7537, Representative LaGuardia. Reintroduction of above. S. 2570, Senator Sheppard. Reintroduction of above.

Seventy-third Congress-S. 3076, Senator Copeland. Denying transportation in interstate commerce and transmission through the mails of gambling devices.

S. 2559, Senator Reynolds. Providing against transportation in interstate commerce and use of the mails to gambling devices and lottery paraphernalia.

Seventy-fourth Congress-S. 6, Senator Copeland. Reintroduction of above.

Seventy-fifth Congress-H. R. 4796, Representative Sachs. To amend the criminal code to prohibit the importation and interstate transmission of gambling devices.