Lapas attēli
PDF
ePub

A

AMEND FEDERAL TRADE COMMISSION ACT

TUESDAY, JANUARY 29, 1946

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The committee met at 10 a. m., the Honorable Clarence F. Lea (chairman) presiding.

The CHAIRMAN. The committee will begin hearings this morning on H. R. 2390, a bill to amend the act creating the Federal Trade Commission, to define its powers and duties, and for other purposes. The bill and reports from Government agencies will be inserted at this place of the record.

(The matter referred to is as follows:)

[H. R. 2390, 79th Cong., 1st sess.]

A BILL To amend the Act creating the Federal Trade Commission, to define its powers and duties, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 5 (c) of the Act entitled “An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914, as amended (U. S. C., title 15, sec. 45 (c)) is hereby amended to read as follows:

"(c) Any person, partnership, or corporation required by an order of the Commission to cease and desist from using any method of competition or act or practice may obtain a review of such order in the circuit court of appeals of the United States, within any circuit where the method of competition or the act or practice in question was used or where such person, partnership, or corporation resides or carries on business, by filing in the court, within sixty days from the date of the service of such order, a written petition praying that the order of the Commission be modified or set aside. A copy of such petition shall be forthwith served upon the Commission, and thereupon the Commission forthwith shall certify and file in the court a transcript of the entire record in the proceeding, including all the evidence taken and the report and order of the Commission. Upon such filing of the petition and transcript the court shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, evidence, and proceedings set forth in such transcript a decree affirming, setting aside, or modifying as in its judgment the circumstances of the case require, the order of the Commission, and enforcing the same to the extent that such order is affirmed, and to issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public or to competitors pendente lite. The findings of the Commission as to the facts, if supported by the preponderance of the evidence, shall be conclusive. To the extent that the order of the Commission is affirmed, the court shall thereupon issue its own order commanding obedience to the terms of such order of the Commission. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before the Commission, the court may order such additional evidence to be taken before

1

[ocr errors]

the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by the preponderance of the evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of its original order, with the return of such additional evidence. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Supreme Court upon certiorari, as provided in section 240 of the Judicial Code." SEC. 2: Section 5 (1) of such Act, as amended (U. S. C., title 15, sec. 45 (1)), is hereby amended to read as follows:

"(1) Any person, partnership, or corporation who violates an order of the Commission to cease and desist after it has become final, and while such order is in effect, shall forfeit and pay to the United States a civil penalty of not more than $1,000 for each violation, not to exceed the sum of $10,000 in the aggregate, which shall accrue to the United States and may be recovered in a civil action brought by the United States."

SEC. 3. Section 15 (a) of such Act, as amended (U. S. C., title 15, sec. 55 (a)), is hereby amended to read as follows:

"SEC. 15. For the purposes of sections 12, 13, and 14

"(a) The term 'false advertisement' means an advertisement, other than labeling, which is misleading in a material respect; and in determining whether any advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations so as to prevent deception resulting from indirection and ambiguity, as well as from statements which are false. No advertisement of a drug shall be deemed to be false if it is disseminated only to members of the medical profession, contains no false representation of a material fact, and includes, or is accompanied in each instance by truthful disclosure of, the formula showing quantitatively each ingredient of such drug."

SEC. 4. Section 15 of such Act, as amended (U. S. C., title 15, sec. 55), is hereby further amended by adding a new subparagraph as follows:

"(f) The term 'labeling' means all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article."

SEC. 5. Such Act is further amended by adding at the end thereof a new section to read as follows:

"SEC. 19. Food, drugs, devices, and cosmetics shall be exempt from the provisions of this Act to the extent of the application or the extension thereto of the Federal Food, Drug, and Cosmetic Act, approved June 25, 1938, as amended (U. S. C., title 21, chapter 9)."

Hon. CLARENCE F. LEA,

FEDERAL SECURITY AGENCY,
Washington 25, May 3, 1945.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington 25, D. C.

DEAR MR. CHAIRMAN: This letter is in response to your request of March 2, 1945, for a statement of the views of this Agency upon H. R. 2390, a bill to amend the act creating the Federal Trade Commission, to define its powers and duties, and for other purposes.

While the bill would not amend the Federal Food, Drug, and Cosmetic Act, or directly affect administrative responsibilities of this Agency, certain of its provisions are of concern to us because of the dovetailing of our functions and those of the Federal Trade Commission in the control of representations concerning food, drugs, and cosmetics.

The first section of the bill would amend section 5 of the Federal Trade Commission Act so as to make the findings of fact of the Commission, upon which its orders are based, conclusive only if supported by the preponderance of the evidence rather than simply by the evidence.

We are concerned that this proposed change may establish a precedent for changing the Federal, Food, Drug, and Cosmetic Act so that the quasi-legislative

and quasi-judicial powers of the Federal Security Administrator in the enforcement of that act would both be significantly impaired.

I have noted Mr. Reece's statement in the Appendix to the Congressional Record (March 6, 1945, p. A1117) in connection with the introduction of this bill, in which he disclaims any intention of disturbing the conclusiveness of administrative findings in quasi-legislative orders. It seems to me, however, that this may nevertheless be used as a precedent for legislation applicable to rule making. The Congress used the provisions for court review of quasi-judicial orders of the Federal Trade Commission as both precedent and pattern for the then novel provisions of the Food, Drug, and Cosmetic Act for review of quasi-legislative orders. Certainly the change would be a clear precedent for legislation affecting the present method of review of applications for interstate commerce in new drugs.

It has been our consistent policy to limit the findings of facts in orders we have promulgated to those facts which we think are supported by a preponderance of the evidence. We would be disturbed at any proposal looking toward a transfer to the judiciary of the duty of weighing the evidence and determining its preponderance in records as technical as those ordinarily made in hearings under the Food, Drug, and Cosmetic Act.

We have no comment to offer on section 2 of the bill which would amend section 5 of the Federal Trade Commission Act by changing the penalties prescribed for its violation.

Section 3 of the bill would amend the definition of false advertisement in section 15 (a) of the Federal Trade Commission Act. The amendment would change a provision of the act which is identical. in its import with a provision of section 201 (n) of the Food, Drug, and Cosmetic Act. It would repeal the mandate of the present law to the administrative agency and to the courts to take into account, in determining whether representations for an article are misleading, failure to reveal facts material with respect to the consequences which may result from the use of the article under the conditions prescribed in those representations, or under such conditions as are customary or usual. In deleting this mandate, we think the conclusion is inescapable that the standard of truthfulness set up by the statute is lowered. While the amended language could perhaps be construed as broadly as the original provision, it is by no means apparent how the courts could do so in the light of the legislative history created by Mr. Reece's declared purpose in making the change.

We are gravely concerned that the adoption of this amendment will furnish a persuasive basis for a similar amendment to section 201 (n) of the Food, Drug, and Cosmetic Act. This would unquestionably impair the effectiveness of the act in controlling misrepresentations that result'in harm to health.

Section 4 of the bill would include the Food, Drug, and Cosmetic Act definition of labeling in section 15 of the Federal Trade Commission Act which lists definitions "for the purposes of sections 12, 13, and 14." Because of its limitation to these sections, we do not see that it would have any practical effect on the relationship between activities in the enforcement of the two laws since, so far as we are aware, the Federal Trade Commission's proceedings against labeling have not been under sections 12, 13, and 14 but under section 5. (See Fresh Grown Preserve Corp. v. Federal Trade Commission, 125 Fed. (2d) 917, 919.)

The final section of the bill is apparently designed to deny control under the Federal Trade Commission Act of anything that could be controlled under the Food, Drug, and Cosmetic Act. The text of the language is derived from section 902 (b) of the latter law, which exempts from it articles subject to the Meat Inspection Act. This wording, in the context in which it appears in the Food, Drug, and Cosmetic Act, is not entirely clear in all of its aspects. It seems even less clear when transposed to the context of the Federal Trade Commission Act. We have no adverse comment to offer on the purpose of the provision but we doubt that it will accomplish what Congressman Reece seems to have had in mind in referring in his statement for the Congressional Record to the Willard Tablet case. There the question was not one of dual jurisdiction over labeling. It concerned identical representations made in both labeling and advertising, and both the district court and the appellate court held that an administrative adjudication by the Federal Trade Commission, determining that a representation in advertising was not misleading, constituted res adjudicata which precluded courts of law from trying the truth or falsity of that same representation in labeling. If the Willard Tablet decision correctly states the law, this problem

or the greater number of witnesses (4 Wigmore, Evidence (3d ed., 1940) sec. 2498, p. 334). H. R. 2390 would therefore substitute for the definite and certain "substantial evidence" rule, a rule indefinite in meaning and uncertain in effect. Because of its close relation to the fallacious "quantitative and numerical" theory of evidence, adoption of the "preponderance rule" would inevitably and materially increase the length of the record in Commission proceedings, unduly prolong the trial of cases, and increase the expense of litigation. It would also probably result in a greater number of Commission cases being taken to court, and it would certainly greatly increase the work of the already overburdened courts in requiring them-contrary to established appellate practice--to weigh the evidence, determine the credibility of witnesses, and absorb to a material degree the fact-finding function which the Commission has performed successfully and with little criticism for more than 30 years.

The proposal, in section 1 of H. R. 2390, to authorize the courts to modify the Commission's orders "as in [the courts'] judgment the circumstances of the case require" is likewise unnecessary to secure "effective judicial review" of the Commission's orders.

It is well settled "that it is for the courts to determine what practices or methods of competition are to be deemed unfair," i. c., whether a person has violated the law, Federal Trade Commission v. Keppel & Brother (291 U. S. 304, 314 (1934)); Federal Trade Commission v. Gratz (253 U. S. 421, 427 (1920)), and the Commission's judgment in that respect, while entitled to weight, is not at all conclusive upon the courts. Where the Commission has properly concluded that a person is violating the law, however, it has been held that the Commission may exercise its discretion in so drafting its orders to cease and desist as to afford the public effective relief, and the courts will not disturb its judgment as to the remedy prescribed unless the Commission has abused its discretion.

This rule is by no means unusual or exceptional. It is precisely the same as that applied in reviewing decrees of United States district courts under the Sherman Act, decisions of the Tax Court, and the administrative orders of various commissions. Nor is the rule a recent development in the law. More than 40 years ago, in Bates & Guild Co. v. Payne (194 U. S. 106, 108-109 (1904)), the Supreme Court said that it had long been established "that where Congress has committed to the head of a department certain duties requiring the exercise of judgment and discretion, his action thereon, whether it involves questions of law or fact, will not be reviewed by the courts, unless he has exceeded his authority or this court should be of opinion that his action was clearly wrong."

The reason for the rule is both obvious and sound. It was designed to secure uniform and efficient enforcement of such statutes as the Federal Trade Commission Act by delegating their administration to a single body "specially competent to deal with them by reason of information, experience, and careful study" (Federal Trade Commission v. Keppel & Brother, 291 U. S. 304, 314 (1934) ; Humphrey's Executor v. United States, 295 U. S. 602, 624 (1935)). That end, obviously, cannot be attained if administrative functions are to be delegated to 11 different circuit courts of appeals.

In the course of a year not one circuit court of appeals normally reviews as many as a half dozen Commission cases; and a number of them review, on the average, only one case every 5 or 6 years. The Commission, on the other hand, disposes of some 200 litigated cases annually. Moreover, the Commission annually investigates thousands of applications for complaints. After investigation, a majority of such matters are closed without corrective action by the Commission because the charges in the applications are not sustained, the matter is a private controversy or is trivial in character, no interstate commerce is involved, or because of the absence of public interest. With respect to the cases in which the Commission decides to take corrective action, it grants the proposed respondents the privilege of adjusting the matters by stipulations to cease and desist, except in cases involving intent to defraud or mislead; false advertisement of food, drugs, devices, or cosmetics which are inherently dangerous to health; suppression or restraint of competition through conspiracy or monopolistic practices: violations of the Clayton Act; violations of the Wool Products Labeling Act of 1939 or the rules promulgated thereunder; or where the Commission is of the opinion that such procedure will not be effective in preventing continued use of the unlawful method, act, or practice. The vast majority of such cases are disposed of by the execution of stipulations in which the proposed respondents agree to cease and desist from the continued use of the unfair methods or unfair acts or practices in question.

« iepriekšējāTurpināt »