STATEMENT OF EDWARD BROWN WILLIAMS, COUNSEL, NATIONAL ASSOCIATION OF FROZEN FOOD PACKERS, WASHINGTON, D.C.

Mr. WILLIAMS. Mr. Chairman, since we are late in the afternoon, and this is a fairly long statement, if you wish I can deal briefly with the last 7 or 8 pages of it.

Senator HART. Mr. Williams, so far as the committee and staff are concerned, we are not under that kind of pressure. You go ahead and present it as you would like. You in turn have waited all day, so by all means.

Mr. WILLIAMS. I don't particularly want to bore you.

Senator HART. Have no sensitivity about that. We will be very glad to listen.

Mr. WILLIAMS. My name is Edward Brown Williams. I am counsel for the National Association of Frozen Food Packers, on whose behalf I appear. The membership of the association represents some 80 percent of the frozen food production of the United States. In a relatively few years the production of the frozen food industry has attained a value of more than $3 billion on an annual basis.

The association is in full agreement with the desire of the sponsors of S. 387 to eliminate misbranding and deception from the packaging and labeling of food commodities. We oppose such practices in any industry, including our own. We are satisfied, however, that the present provisions of the Food, Drug, and Cosmetic Act are adequate to control the kind of practices which I have named and that additional legislation for that purpose is not needed.

It is our considered opinion, moreover, that the bill would delegate to the Food and Drug Administration discretionary authority of a scope which goes beyond the regulation of misbranding and deception. We believe that this opinion is supported by the language of the bill and the legislative record upon which its provisions are based.

In his remarks at the time of the introduction of the bill as reported in the Congressional Record of January 21, 1963, Senator Hart said: Our aim is threefold: First, that the spirit and substance of the antitrust laws be extended to the relatively new form of nonprice competition represented by packaging. Second, that the American manufacturer be freed from the unfair trade practices that have grown up in this area beyond the reach of present law. Third, that the American consumer can know what she is buying and paying for.

The second and third aims stated by Senator Hart are, in our view, fully within the scope of present law, as we think previous witnesses have demonstrated; but the first of these aims, the extension of the antitrust laws to so-called "nonprice competition" could hardly be achieved under the existing provisions of the Federal Food, Drug, and Cosmetic Act. If only the prevention of those practices in "nonprice competition" which are deceptive were the objective of the bill, it would not seem logical to us to strive for that objective by way of an amendment to the Clayton Act, which is not aimed at deceptive practices. It could, as we have said, be attained under existing law. So-called "nonprice competition" cannot, in any manner which we can logically conceive, be equated with misbranding or deception. Competition through packaging or advertising practices can be fair or unfair depending upon its nature, just as can competition directly

related to price. It is obvious, however, that all packaging or advertising competition is not unfair or deceptive.

It would appear therefore that, in seeking to extend the antitrust laws to "nonprice competition," the bill pushes well beyond the well established concepts of misbranding and deception and includes practices which are fair and honest and in the interest of both business and the buying public.

That the authority which would be granted is not limited to misbranding and deception seems apparent from the language of the bill itself. The following references to provisions of the bill (except sec. 2) are to subdivision of section 3A of the Clayton Act which would be added to that act by the bill.

For example, section 3(c) (1) and (2) provide for regulations applicable to commodities generally, which would fix the location and prominance of the quantity of contents, including type size and face. It could not, of course, be predicted with what rigidity standards establishing location, prominence, type size, and face would be imposed and into what categories commodities would be segmented for the purposes of the regulations. It is evident that location, prominence, type size, and face are all elements determinative of readibility of statements of net contents and hence bear intimately upon whether the statement is deceptive. It is equally evident, however, that the power delegated by the provision in question is not limited to the prescription of regulations which go no further than to prevent misleading or deceptive net content statements.

No standards for the exercise of this authority are established. No procedural safeguards are provided. It is clear enough that deception can be avoided by clear and unambiguous net content statements without standardization of location and size of type. Yet the bill would permit the agency to go beyond the prevention of deception and to force conformance to its own ideas of the desirability of requiring all packages, at least in categories selected by it, to bear net content statements in the same location in uniform size and face of type, and, in conjunction, with section 3A (c) (6), to prescribe in effect the design of the package itself. It seems plain, therefore, that prevention of deception is not the limit of the application of section 3A (c) (1) and (2).

Section 3A (c) (3) and (4) are subject to like comment. It is apparent that words qualifying statements of net content may or may not be deceptive or misleading, depending upon the context of the label and the commodity contained in the package. It is equally evident that a statement that a price advantage is being offered to the purchaser may be informative and accurate and thus advantageous, rather than misleading or deceptive. Yet there being no standard for the exercise of the authority, the agency could apply it own ideas of what is good for the purchaser, above and beyond prevention of deceptive practices. Again-if prevention on deceptive practices were the limit of the authority granted, present law is adequate.

Under section 3A (e) the agency may establish regulations for particular commodities, if it "determines" that they are necessary to estab lish or preserve fair competition or to prevent deception of consumers. The language employed is reminiscent of some of that found in the Food, Drug, and Cosmetic Act and the Federal Trade Com

mission Act and, indeed, when taken alone, substantially reflects basic purposes of those acts. Here again, if this were the extent of authority which could be exercised under section 3A (e), existing laws need not be duplicated by this bill, since those things can be done under them. But this bill is not limited to those things. It authorizes the establishment of weights or quantity, and the sizes, shapes, or dimensional proportions in which a commodity may be sold-in other words, standardization of containers and weights of contents.

We are forced to recall that this committee has heard expounded the economic theory that many industry packaging practices are wasteful and unduly costly to industry and consumer alike, that Government should curb such practices, and that it is bad for one firm to be permitted to market a package which is allegedly uneconomic and because consumers are attracted by it-to force other members of the industry to engage in a similar endeavor.

There were references to containers which give a "billboard effect, an advertising effect." We must ask, what is wrong with this? Billboards and advertising and more expensive containers are not deceptive because they sell a product. If they, or a container, are in fact deceptive, present law can deal effectively with them.

If, regardless of deceptiveness, a container could be prohibited because it has a "billboard" or "advertising" effect, what about nondeceptive advertising outside the store? We wonder whether there will perhaps be another bill which would curb this also on the ground that it effectively plugs a product at a cost higher than that for which it would be possible to market the product and is therefore uneconomic and contrary to the best interest of consumers. We are apprehensive that the concept of deception and unfair competition is being so broadened by this bill, read in the light of its legislative record, that legitimate and heretofore clearly lawful business operations and policies will be subjected to Government control.

Let me just remark here that the impetus to buy may arise, not because a cute, tall, thin, bottle is deceptive but because the purchaser likes it and would rather have an attractive bottle than a drab one.

If, for example, a packer of frozen concentrated citrus juices should find it feasible and attractive as a business proposition to market his product in a curvaceous container instead of in a container with the simple lines of the traditional tin can, we think that he is entitled to it so long as he is not deceiving the consumer.

Some individuals deplore as uneconomic the additional costs which they say are involved in the building of a package beautiful. It seems at least doubtful whether their economic theory is so sound that they can demonstrate that, instead of hiking costs, such innovations do not sell more goods and, in the long run reduce costs. If, as we believe, this doubt exists, surely restricting legislation is not appropriate again, when there is deception, there is already applicable legislation.

Section 3A (g) of S. 387 would require each packer or distributor to submit to FDA upon its request

a true and correct sample of each package and label used or to be used by that producer or distributor for or in connection with the distribution in commerce of any particularly described consumer commodity * * *.

This apparently means that the filled package containing the food product must be submitted. In the case of some manufacturers this

could mean the transmission of hundreds of packages and, it may be added, nothing is said about payment for the commodity.

However this may be, the provision amounts to a premarketing clearance requirement, since its language reads "each package and label used or to be used." If a standardizing or other packaging regulation is already in effect, amendment of the regulation would frequently be required before a new package or label "to be used" could be marketed and the agency could exercise an effective veto upon the new package or label simply by refusing to amend its regulations. If no applicable regulation is in effect prohibiting the sale of the new package a warning to the manufacturer that such a regulation would be established would itself be an effective veto upon the use of the new package.

This provision, then, coupled with the rulemaking authority delegated under other provisions, would effectively hand over to a Federal agency the power to control marketing policies and practices of industry in the packaging field. Not only is FDA unequipped to make such basic business judgments but the enormity of the job of dealing with the thousands of products which would come under its jurisdiction would mean necessarily that some established packages would be marketed without control while others, in a different category but competing with the unregulated ones, would be made subject to restrictive regulations. This inevitably selective process would itself result in an unfair competitive situation-and this could be done by discretionary agency rules, without hearing or other procedural safeguards.

No product could be marketed if FDA didn't approve of it. The expense of formulating the new product and its packaging would be wasted if approval were withheld and, in any event the delays always incident to administrative action may fairly be expected to develop upon a grand scale. To what extent these artificial brakes and prohibitions would discourage innovation by industry can only be a matter for speculation. It can safely be assumed that discouragement would be widespread and substantial.

We know from experience that FDA, under present law, has effectively curbed new products which resemble or may be used in lieu of traditional foods. It matters not that the labeling of the new product is honest and that the consumer knows what he is getting. This is not a history which is conducive to confidence that the right to innovate will not suffer far greater encroachments than it has in the past. The power would be there and the pact-as we believe-that the bill goes beyond traditional concepts of misbranding and deception adds to our misgivings.

Mr. Chairman, I might say here that I say this with all respect for the Food and Drug Administration. I have complained on this particular point for many years. They are used to me. It hasn't done any good, I might add.

I have here a container for frozen concentrated lemonade which is now on the market. I don't know whether you can see it. It is a widely known brand. know what that was you may have to lool it to you if you like

in the shape of a tetrahedron. I didn't ced it up. It has four sides, although come to that conclusion. I will hand nt ounces and, as stated on the con

tainer, will make 1 quart or 32 ounches when its contents are combined with four cans of water.

If a regulation standardizing shapes or dimensional proportions of containers for frozen concentrated lemonade had been in effect when this tetrahedron-shaped container first came to the attention of the producer of the product, he could not have marketed it without first submitting the product in its proposed new container to FDA and obtaining an amendment of the regulation. If no such regulation had been in effect the packer could have been required to submit the container to FDA for clearance under the provisions of the bill. In either case the fate of the new departure in packaging would be speculative and, as I have noted, the delay incident to negative or affirmative decision by the agency is not a matter upon which a business organization can look with equanimity.

Now, perhaps you will ask, as I did when I found this unusually shaped container at the Frozen Food Exhibition in Dallas last week, Why did the packer want to use this container?

I am informed that there are three economic advantages to its use: savings in raw material costs, savings in space for packaging material, and freight savings because of lighter weight. Thus, in quantities of 1 million units, the savings in purchase price per dozen over the aluminum and foil cans would be $0.055 cents, or more than $4,500 for the 1 million units. The freight savings would be $0.004 cents per dozen over the foil can, or a total for 1 million units of $333. The corresponding savings on purchase price and freight over the tinplate can would be more than $6,100 and $740, respectively. In quantities of 5 million units the savings on the purchase price would be, over the foil can, $25,830 and over the tin can, $33,749. In the larger quantities in which containers are frequently purchased, savings are greater. The figures quoted are for the 6-ounce can.

Obviously, this is but one of numerous instances in which the right to innovate and the benefits frequently derived from innovation, could be seriously curtailed under the pending legislation, to the disadvantage of industry and consumers alike.

I have referred to the fact that the kind of competition at which the bill is aimed has been called "nonprice competition." That is a catchy term, but what does it mean? The purpose of competition is to sell a product and make a profit in the process. Competition by the use of deceptive practices is unfair competition. It is immaterial whether the deceptive practice is directly related to price or is primarily a function of format and design of packages. I have noted that competition, based on packaging or advertising practices, can be either fair or unfair depending upon its nature. When, however, it is authoritatively said by the chief sponsor of the bill that an aim of the bill is "that the spirit and substance of the antitrust laws be extended to the relatively new form of nonprice competition represented by packaging" we fear that all competition in packaging not directly a function of price may be prohibited, whether or not it is deceptive. The antitrust laws condemn practices which are not necessarily deceptive. We find it difficult to believe that this exceedingly broad authority is intended, yet the legislative background of the bill is such and the scope of the discretion which would be granted to FDA is so broad, that we have been forced to the conclusion that the bill could be construed to grant such authority.