deceptive acts and practices, and false and misleading advertising. Third, a number of special Federal laws deal with the problems of competition in specific industries, with the purpose of increasing buyer competence and protecting honest competitors; the most familiar of these laws are the Wool Products Labeling Act (1939), the Fur Products Labeling Act (1953), and the Textile Fiber Products Identification Act (1958).

S. 387, the truth-in-packaging bill, is in the tradition of our antitrust laws. It is a measure designed to promote fair competition, to maintain the integrity of markets, to enhance the competence of consumers, and to promote efficiency in industry.

6. PROTECTION OF COMPETITION OR PROTECTION OF CONSUMERS?

Any appraisal of S. 387 requires that a preliminary question be answered with respect to the nature of the problem with which the bill is concerned. Is the problem basically a matter of consumer protection or of defining a more adequate framework for competition? Will the consumer interest in the markets for nondurable consumer goods be more adequately protected by a more rational functioning of competition or by direct legislative and administrative safeguards addressed specifically to protecting the consumer? Does the modern practice of packaging and preselling relate essentially to the necessity of assuring fair and effective competition, or to the need of safeguarding the quality of the product? Is it an antitrust problem or is it a food and drugs problem?

A judgment with respect to the nature of the problem will significantly influence conclusions as to the appropriate remedy. The committee appears to have concluded that it is first and foremost a question of unfair and deceptive competitive practices, for the bill is offered as an amendment to the Clayton Act. With this judgment, I concur. The problem stems almost wholly from changing patterns of competition, from the development of more sophisticated products. from the necessity of prepackaging to meet the requirements of mass distribution, from the critical importance of preselling to secure access for the branded product to the shelves of the supermarkets. Packaging and advertising are fundamentally coordinate aspects of competitive merchandising; they are associated in competition, and problems in one area increase problems in the other.

In our market-oriented economy, consumers must depend generally upon the integrity of markets, upon sound and fair competition, to provide them with honest products offered at competitive prices. Administrative regulations to protect consumers would soon become outmoded, obsolete, and ineffective. Just as the Congress in 1914 concluded that it was not possible to enumerate and outlaw the specific instances of unfair competition which the enforcement of the antitrust laws had revealed, but instead chose a general statutory prohibition against unfair competition, so today the Congress is on firmer ground in providing a more general statement of objectives and in depending upon regulatory procedures to fit the standards to the requirements of the particular industry or market. Such flexible application of general competitive standards to a specific industry or market carries with it a responsibility on the part of a regulatory

authority to keep currently informed as to the changing necessities of both business and the consumer.

In any regulation of the character under consideration, it must be recognized that legitimate business will always be deeply concerned to protect its good name with consumers, and that the majority of businesses will not only willingly adhere to such regulations, but will actively initiate proceedings looking to the improvement of such standards. But legitimate business can act in its own interest and in the interest of consumers only if competitive conditions permit, that is, only if law and regulation define a framework of competition which outlaws deceptive practices and protects the legitimate competitors from the unfair tactics of less scrupulous or more necessitous rivals. The problem here is really that of making the shortsighted minority conform to the wholly reasonable standards of the enlightened majority and of making competition work to produce socially useful, rather than unwanted, results.

7. IS GOVERNMENTAL ACTION NECESSARY?

Is governmental action necessary to correct confusing and deceptive practices in packaging or will these evils be eliminated by reforms instituted by industry?

The imperatives of competition are such that it would be unrealistic to expect that industry would be able to bring about an orderly correction of poor packaging practices.

In a more leisurely age, where consumers were dealing with products which they could competently judge with respect to quality and where they were not conditioned by intensive advertising, consumers could recognize improper packaging and could refuse to buy such products, and by selecting the more informative and more honest package, reward those manufacturers who followed higher standards. But in the contemporary setting, with consumers presold by intensive advertising and with increasing difficulties in judging the quality of competing products, competition is more likely to work toward the deterioration of packaging standards than toward their improvement. The significance of buyer competence and buyer sophistication may be realized by comparing the packaging used for industrial products with the packaging used for consumer products. The packaging of industrial products is wholly functional, for the buyers of industrial products are sophisticated; they buy according to specifications; they are interested in the contents and in their protection from damage; and they are not influenced in their choice among competing suppliers by the attractiveness, the art work, or the adjectives that appear on the package. In the case of consumer products, on the other hand, packaging goes beyond the essential functions of supplying a container and protecting the contents, the critical differences which distinguish packages used for like products relate to the attempts to influence consumer choice by the character of the package or container rather than by the contents; in other words, it is hoped that the consumer's judgment with respect to contents will be formed in part on the basis of the package, or on the association of the package with the seller's advertising.

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Competitors cannot, as we know from experience, discipline the rival who engages in unfair and deceptive acts and practices or even in false and misleading advertising. Oblique statements calling attention to the merits of one product may carry implications with respect to the characteristics or advertising of another product, but these oblique statements are seldom very effective in influencing buyer responses. And any direct attack upon a competitor or his product is likely to be challenged as disparaging the competitor or the product. Disparaging a competitor or his product is, and long has been, treated as an unfair method of competition. Since consumers in substantial numbers do not recognize promptly any departure from good packaging standards and react decisively against those manufacturers who use deceptive packaging, there is little likelihood that competition can eliminate deceptive packaging when this practice is advantageous to some competitors. Consequently, we are forced to the conclusion that competitive morals in packaging are likely to be set by the least moral and the less scrupulous, rather than by those competitors who are sensitive to the importance of straightforward dealings with consumers. This last statement must be modified to recognize that where a firm establishes a dominant position in the market, either by reason of its size or by reason of its capacity to engage in intensive advertising and promotion, that dominant firm may be able to maintain high and scrupulous standards in packaging simply because it has established such strong consumer loyalty.

Similarly, when an industry has only a few large competitors, there may be a mutual recognition that no firm can hope to benefit from confusing packaging and all may adhere to simple functional standards for packaging. Certainly, the large competitors can protect themselves better than small firms from unfair competition in the form of confusing or deceptive packaging, but even large firms can be prejudiced in their approach to the consumer if deceptive packaging standards become established in their industry. In general, regulatory standards for the maintenance of high standards in packaging are most essential in those industries where there are many competitors, and particularly where there are many small competitors who might suffer critical losses from a diversion of volume to rivals employing dubious packaging practices.

All the packaging practices with which the subcommittee's hearings have been concerned, where they are not the result of technical necessities relating to the nature of the product or to the use of highspeed packaging techniques, are instances where packaging is used as part of the firm's competitive strategy. The package as it appears on the shelves of today's supermarkets is not a chance design-it has been carefully studied by specialists whose concern is as largely with the sales appeal that can be built into the package as with the performance of its basic functions as a container. The attempt is always to use the package to create differential advantage for the product and its manufacturer, and if differential advantage does accrue in the use of a particular form of packaging, it will certainly be emulated by rival firms.

Much of this search for differential advantage in packaging is beneficial to the consumer: if the package gives more effective protec tion to the contents, that is fine; if the package is more convenient

in use, that is good for the consumer; if the package is more attractive in appearance, certainly no harm results to the consumer. However, as the committee's hearings have demonstrated, packaging may be used to conceal a cheapening in the contents, thereby creating a cost advantage or a profit advantage, permitting the firm to engage in more intensive competitive promotion of its product or in accruing larger profits. If the package is deceptive as to the quantity of its contents, the manufacturer may enjoy a cost advantage, he may achieve greater sales and a more rapid turnover of the product as the consumer uses it more rapidly, and he may even be regarded more favorably as a contender for shelf space in the supermarket. If the consumer is unable to compare the quality of the contents, competition can exert no discipline on rival producers to assure a maintenance or improvement in quality. If consumers are unable to compare prices, competition can exert no discipline on rivals to meet the lower prices of their competitors, and competition provides no inducement to rivals to seek consumer favor through price reductions. Indeed, it may even be a fact that, with effective advertising, with a product completely differentiated in the consumer's mind from other rival products, with the consumer convinced of the desirability of the particular product, the consumer makes no comparisons for price and quality; these factors do not even enter into his consideration of different products. If the product is supported by intensive and effective advertising, the package then serves the seller's purpose if it simply identifies the product and triggers a buying reflex among

consumers.

8. IS ADDITIONAL LEGISLATION REQUIRED?

All of the questionable packaging practices which this committee's investigation has uncovered are, I believe, within reach of the Federal Trade Commission under section 5 of the Federal Trade Commission Act. They are all subject to attack either as unfair methods of competition or as unfair or deceptive acts or practices in commerce. Just as the committee's investigations have stimulated a reexamination of packaging practices by industry, so likewise it may be anticipated that, even without legislation, both the Federal Trade Commission and the Food and Drug Administration will be increasingly active to eliminate deceptive and confusing packaging of consumer products. Theoretically then, additional legislation would not appear to be necessary.

As a practical matter, however, the passage of S. 387, or some similar legislation, is indispensable to any correction of the faulty packaging practices which this committee has shown to be prevalent. Every extension in the interpretation of section 5 of the Federal Trade Commission Act, every new application of the legal tests of unfair or deceptive acts or practices in commerce, is contested in the courts, and normally all the way to the Supreme Court.

It would, in all probability, require 10 to 15 years of assiduous application of the section 5 test to packaging practices to secure judicial affirmation of the standards which the Congress can establish simply and directly by passing this bill. The problem cannot be solved by simple resort to the trade practice conference procedure, for trade practice conferences are effective principally where prior litigation

has established the unlawful character of the practices which the conference then outlaws on an industry-wide basis. The adoption of legislation will encourage industry to act cooperatively with the appropriate governmental agencies in correcting bad packaging practices. The reaffirmation of congressional objectives with respect to the elimination of unfair and deceptive acts and practices with respect to packaging will have a very helpful impact on the courts that are called upon to enforce these principles. And certainly the adoption of this legislation will spur the regulatory agencies to give more attention to the problem of packaging and to take a stronger stand for the protection of fair competition and the consumer. The fact that all of the objectives of the present bill could, in theory, be achieved under section 5 of the Federal Trade Commission Act is no argument against the passage of the truth-in-packaging bill.

The adoption of legislation with respect to packaging is clearly in the tradition of the antitrust laws. It was the purpose of the original Clayton Act to provide more certain guides for business conduct by specifically prohibiting practices which had come to be recognized as capable of impairing effective competition As opportunities arise to make the law more specific and more certain in particular areas, amendments to the Clayton Act are certainly in order. As previously noted, it is the responsibility of the Federal Government, and specitically the responsibility of the Congress, to be concerned that the institutional framework of competition is such that competition and business rivalry are guided into socially useful channels.

The present bill recognizes the importance of enhanced buyer competence for preserving fair and active competition. It is a logical first step in meeting the problem of the buyer in today's market where sophisticated products are distributed on a mass basis, packaged and presold by the manufacturer. It is only a first step because consumers increasingly are concerned about their inability to make accurate judgments with respect to the quality of packaged products, and until the consumer can judge accurately with respect both to quality and price, rational buying is not possible. To the extent that the proposed bill will increase the integrity of markets, promote fair competitive practices, and eliminate deceptive and confusing forms of competition, the bill will be beneficial to competition, beneficial to business, beneficial to the economy, and beneficial to consumers. The correction of corrosive competitive practices will be accomplished more surely and more promptly if Congress gives a clear mandate to business and to the regulatory agencies and if reasonable and enforceable standards are spelled out in new legislation.

The adoption of S. 387 might also be recommended for the effect which the passage of this legislation will have on the Congress. This commitment of Congress to support measures to improve packaging practices is, in effect, a commitment by Congress to provide budgetary appropriations which will permit the regulatory agencies to perform this function effectively. The importance of this undertaking will be in the minds of the members of the appropriation committees as they scrutinize the budgets submitted by regulatory agencies. Regulatory agencies are notoriously hesitant to ask for substantial additional funds unless they anticipate that Congress will look with approval on their request. So the enactment of S. 387 will encourage the regula