Statement of the Court.-Pages 6-7:

"Inasmuch as we are convinced, after a careful study of the record, that there is no substantial evidence to support the finding of the Commission upon which its supplemental order is predicated, we find it unnecessary to consider numerous other questions raised by petitioner.

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“Admittedly, there is no direct proof in support of this finding, either in the evidence heard at the supplemental hearing or in the stipulation entered into prior to the original hearing. Respondent (the Commission), however, indulges in certain inferences, assumptions, and innuendoes, which it contends furnish the necessary support. The burden of its argument in this respect is that respondent, with petitioner's knowledge, was led to believe that petitioner was making no contention but that its advertisements failed to reveal any precautionary statement, and that under such circumstances it was the duty of petitioner to rebut he assumptions so indulged in by respondent by the introduction of petitioner's complete advertisement. Passing by the proposition that such assumption on the part of respondent, even though acquiesced in by petitioner, should be permitted as a substitute for proof, of which we are doubtful, we are of the view that the record furnishes no basis for saying that there was acquiescence by petitioner. In fact, the circumstances point to a contrary conclusion." [Italics added.]

The Carlay Company v. Federal Trade Commission, decided February 14, 1946, C. C. A. 7, not yet reported

"There is no evidence in this record to support a finding that it is necessary, in order to follow the suggested plan, that the user adhere to a restricted diet. The facts are plain, it being undisputed that eating candy before meals curbs the appetite, lessens intake of food and involves no restriction of diet but automatically restrains the desire for food. This, we think is all that petitioners have ever claimed; this, we think is all that their advertising represents. There is absolute absence of any deceptive representation. It follows that there is lack of substantial evidence to support the finding that a rigorous or restricted diet is necessary.

Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind would accept as adequate to support a conclusion. It must be of such character as to afford a substantial basis of fact from which the fact in issue can be reasonably inferred. It excludes vague, uncertain or irrelevant matter. It implies a quality and character of proof which induces conviction and makes a lasting impression on reason. Consolidated Edison Company v. National Labor Relations Board, 305 U. S. 197; National Labor Relations Board v. Columbia Enameling and Stamping Company, 306 U. S. 292, 299; National Labor Relations Board v. Thompson Products, Inc., 97 F. 2d 13, 15 (C. C. A. 6). The rule of substantial evidence is one of fundamental importance and marks the dividing line between law and arbitrary power; and the requirement that a finding must be supported by substantial evidence does not go so far as to justify orders without a basis in evidence having rational, probative force. Consolidated Edison Company v. National Labor Relations Board, supra., National Labor Relations Board v. Thompson Products, supra." [Italics added.]

S. Buchsbaum & Co. v. Federal Trade Commission (C. C. A. 7, 8405, decided January 14, 1946, CCH Court Dec., p. 58044, certiorari applied for)

Facts. As stated by the court, on petition for review of a Commission order: "W. C. Reeves was the trial examiner originally appointed to act in this case. He conducted hearings on April 3 and 4, 1941, at Chicago, and on April 11 and 12, 1941, at Toledo, Ohio, at which evidence was taken covering 619 pages of transcript, and 48 Commission exhibits and 17 of petitioner's exhibits were received in evidence. Sixteen witnesses for the Commission testified before him, including all six of the consumer witnesses.

"Mr. Reeves died October 26, 1941. Trial Examiner Vilas was appointed on November 17, 1941, to complete the taking of testimony, close the case, and make his report upon the evidence. Within 4 days from that date petitioner filed with the Commission its motion that there be a trial de novo and that the transcript of hearings before Trial Examiner Reeves be stricken from the record. 85257-46-38

The motion was denied by the Commission on December 5, 1941, and Examiner Vilas proceeded from where Mr. Reeves left off and based his report both upon the evidence taken before Mr. Reeves and that heard by him."

Holding of the Court.-The order was set aside, the court saying there should have been trial de novo after the first trial examiner's death:

"The Commission contends that what it calls the marked difference between the functions and authority of trial judges and masters, on the one hand, and trial examiners, on the other, precludes the application of the rule of confrontation in the authorities just referred to. Hence it argues that the finding of examiners being advisory only, there is not present in their findings the principal consideration-that is to say, finality of factual judgment-which requires a trial de novo in the event of the death or disability of a judge or master. We think this does not meet petitioner's contention."

CASES ON "PREPONDERANCE" AND "CLEARLY ERRONEOUS"

United States v. Mancini, 29 Fed. Supp. 44 (D. C. Pa.)

"It should be noted that preponderance of the evidence does not mean preponderance in amount, but in weight” (p. 45).

Guilford Const. Co. et al., v. Biggs, 102 Fed. (2d) 46 (C. C. A. 4)

"The provisions of the new procedural rules that the findings of fact of the trial judge are to be accepted on appeal unless clearly wrong (rule 52 (a), 28 U. S. C. A. following sec. 723c) is but the formulation of a rule long recognized and applied by courts of equity" (p. 47).

State Farm Mut. Automobile Ins. Co. v. Bonacci et al., 111 F. (2d) 412 (C. C. A. 8)

"The rule plainly contemplates a review by the appellate court of the sufficiency of the evidence to sustain the findings. If this were not true, the provision that requests for findings are not necessary for the purpose of review' would be meaningless. If the findings are clearly erroneous, the appellate court should set them aside, always giving due regard to the fact that the trial court had the opportunity of observing the witnesses.

"In Koenig v. Oswald, supra, we reversed the findings of the lower court in a fraud case because they were deemed to be contrary to the weight of the evidence, even though they were sustained by the spoken word from the witness stand. While the findings of fact are presumptively correct, they are not conclusive on appeal, if against the clear weight of the evidence.

"The facts largely relied upon in this case consist of testimony and written statements given or made by the defendants not in the presence of the lower court but in the course of the trial of the damage actions in the State court. The lower court, as to such evidence, had no better opportunity of judging the credibility of the witnesses than does the appellate court" (p. 415).

United States v. State Street Trust Co., 124 Fed. (2) 948 (C. C. A. 1)

"A finding cannot be set aside unless it is clearly erroneous; that is, against the clear weight of the evidence (rule 52 (a), Fed. Rules Civ. Proc., 28 U. S. C. A. following section 723c" p. 950).

Aetna Life Ins. Co. v. Kepler, 116 Fed. (2) (C. C. A. 8)

"The effect of rule 52 (a) was to establish a uniform standard for testing the validity of findings of fact in any case tried without a jury. The standard adopted was that which had always prevailed in equity.

"This court, with respect to jury-waived cases, is no longer merely a court of error which considers only questions of law. It now acts as a court of review in all nonjury cases in accordance with the practice which formerly prevailed in equity appeals.

"The findings of fact of the court below to the extent that they are unsupported by substantial evidence, or are clearly against the weight of the evidence or were induced by an erroneous view of the law, are not binding upon this court" (p. 5).

A DISCUSSION OF THE DUAL AND CONFLICTING JURISDICTION OF THE FEDERAL TRADE COMMISSION AND THE FOOD AND DRUG ADMINISTRATION CONTAINING EXCERPTS FROM THE COMMITTEE REPORTS AND STATEMENTS OF MEMBERS OF CONGRESS WITH RESPECT TO THE WHEELER-LEA ACT

The dual and conflicting jurisdiction of these two Federal agencies is in the field of regulating commerce in foods, drugs, devies, and cosmetics.

The authority of the Federal Trade Commission is the Federal Trade Commission Act, as amended by the Wheeler-Lea Act, which was approved March 21, 1938 (15 U. S. C. A. 41).

The authority of the Food and Drug Administration is the Federal Food, Drug, and Cosmetic Act, which was approved June 25, 1938 (21 U. S. C. A. 301). It replaced the Federal Food and Drugs Act of June 30, 1906 (21 U. S. C. A. 1).

The two statutes involved, therefore, were enacted by the same Congress. They were considered and reported by the same committee of the House of Representatives, i. e., the Committee on Interstate and Foreign Commerce, and by the same subcommittee of that committee. The reports of this committee and statements made by the committee members on the floor of the House of Representatives clearly show-as do the statutes themselves-that the committee intended to formulate a pattern of regulation which would operate smoothly as a whole without conflict among the parts.

Conflict, however, has developed. It came slowly at first, but later gathered speed and proportion. It is now acute and is constantly becoming more serious. The conflict has sprung in part from the Commission's effort to make section 15 (a) of the Wheeler-Lea Act support its asserted authority to deal with directions and warnings pertaining to the use of drug and cosmetic products.

That section was to define the term "false advertisement." Rather than be the basis for conflict, the section was intended by the Congress to guard against conflict by excluding labeling from the Commission's jurisdiction.

Whether Congress intended that the Commission should have any jurisdiction over the labeling of foods, drugs, devices, and cosmetics after passage of the Wheeler-Lea Act is a serious question. If Congress intended the Commission to retain any jurisdiction over the labeling of those commodities it was solely on the Commission's general authority over unfair methods of competition.

For the regulation of commerce in foods, drugs, devices, and cosmetics Congress passed two laws: One, the Federal Food, Drug, and Cosmetic Act, to govern the composition and labeling of the products; and the other, the Wheeler-Lea Act, to prohibit the false advertisement of them.

It was not intended to encumber advertising with the minutiae of directions and cautions which appropriately belong in the labeling which is at the hand of the user when the article is used.

This is crystal clear in the congressional debates and reports. Said the committee report in the House of Representatives on the Wheeler-Lea Act (Rept. No. 1613, August 19, 1937, 75th Cong., 1st sess., p. 5):

"It will be observed that it is not mandatory on the advertiser to state anything. The only requirement is in case he does advertise, he shall not make statements that are misleading in a material respect.

"It is incumbent on the advertiser to reveal facts material in the light of representations made in the advertisement."

When Commissioner Freer appeared before the Senate Committee on Interstate Commerce to testify concerning the Wheeler-Lea bill, he said:

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* * It should be borne in mind that the Federal Trade Commission deals with false and misleading advertising matter in contradistincition to the prohibitions in the Food and Drug Act, which are directed against the adulteration of foods and drugs and the misbranding and mislabeling of the bottles or packages in which they are contained" (hearing on S. 3744, Senate Committee on Interstate Commerce, 74th Cong., 2d sess., p. 79).

Congressman Reece, a member of the subcommittee which handled the bills, said on the floor of the House (vol. 83, Congressional Record, p. 399) :

"The bill amending the Federal Trade Commission Act and dealing specifically with advertising is before you for action. It is to be followed by a food and drug bill which I, as a member of the committee, believe will give the Food and

Drug Administration of the Department of Agriculture ample authority with which to effectively regulate and control the food, drug, device, and cosmetic industries. If the House passes these two bills, I believe that agreements on such legislation can be effected with the other branch of Congress and we will have equipped two appropriate agencies of the Federal Government with all of the authority and power necessary to properly regulate the food, drug, device, and cosmetic industries, to prevent the dissemination of unlawful advertising, and protect the public."

Congressman Wolverton, a member of the Committee on Interstate and Foreign Commerce, said in the House (vol. 83, Congressional Record, p. 396):

"It (the definition of a false advertisement) places no requirement on the advertiser to make any statement concerning the commodity, but does require that he shall make no statement that is misleading in a material respect."

And the Commission itself, in its 1942 annual report to Congress, referring to its advertising activity, said (p. 80):

66* ** The Commission's only object is to prevent false and misleading advertisements. It does not undertake to dictate what an advertiser shall say, but merely indicates what he may not say under the law."

HOW CONFLICT DEVELOPS

In spite of the limitation-clear in the statute and in the expressed intent of Congress-the Commission, in an increasing number of cases, projects its controls into matters of labeling. Perhaps the Commission does not agree that the limitation is clear. In a recent case (Dearborn Supply Company v. Federal Trade Commission, C. C. A. 7, 146 Fed. (2d) 5), the Commission's brief referring to section 15 (a) says:

"The contention that the Commission has no jurisdiction over labeling (petitioner's brief, pp. 27-39) is based on the provision of section 15 of the Federal Trade Commission Act, which, 'For the purposes of sections 12, 13, and 14,' excludes labeling' from the statute's definition of a 'false advertisement' of foods, drugs, and cosmetics (52 Stat. 116; 15 U. S. C. A., sec. 55). This exclusion, we think was intended to apply only in proceedings under sections 13 and 14 of the statute (15 U. S. C. A., secs. 53, 54), to enjoin or criminally prosecute the dissemination of false advertisements in violation of section 12 (15 U. S. C. A., sec. 52), and was not intended as a limitation upon the Commission's jurisdiction to suppress false labeling by an administrative order to cease and desist." [Italics added.]

The Commission has an ingenious device for controlling labeling. It determines whether an advertisement is "false" by what appears, or does not appear, in the labeling. If the labeling is not satisfactory to the Commission it orders the advertiser to cease and desist disseminating any advertisements which do not contain the warnings which it thinks should be in the labeling, unless the labeling is revised to include them and, in that event, the advertiser is to include in his advertisements the phrase: "Caution: Use Only as Directed." No other phrase will do. And it matters not whether the advertisement be large or small or composed of much, little, or no text.

THE COMMISSION INSISTS ON WARNINGS AGAINST "EXCESSIVE" USE

Many companies which have labeled their products in a manner which has met either the expressed or implied approval of the Food and Drug Administration are finding themselves in difficulty with the Commission because the Commission does not consider the labeling satisfactory. That is true in the cases discussed by the Commission's witness (Mr. Cassedy) (Emerson Drug Co., Docket No. 4854; Capudine Chemical Co., Docket No. 4852; Miles Laboratories, Inc., Docket No. 4993; The Larned Corp., Docket No. 5038).

It is no answer to say, as a Commission witness (Mr. Cassedy) said in referring to some of these complaints that "nowhere in any of the complaints in any of those four cases does the Commission seek to control labeling." Likewise, it would be no answer to say that in those complaints the Commission may have inserted allegations pertaining to other matter. Perhaps the complaints were drawn so as not to disclose the real purpose of the cases. The fact is that the cases were started primarily on the subject of warnings in the labeling. The case files-particularly the stipulations submitted to the respondents before the complaints were instituted (the complaints were not instituted until the respondents refused to sign such stipulations)-show that clearly, and the conduct of such of the cases which are now active shows it beyond doubt. The cases have

been instituted by the Commission in an effort to compel the manufacturers to revise their labeling to include announcements that the "Excessive" use of the products may have dire effects such as mental derangement, collapse, serious blood disturbances, etc. No definition of the word "Excessive" is provided.

THE LAW DOES NOT APPLY, AND WAS NOT INTENDED TO APPLY, TO CASES WHERE POSSIBLE INJURIOUS CONSEQUENCES MIGHT FOLLOW USE OTHER THAN THAT RECOMMENDED

The conference report on the Wheeler-Lea Act, as it refers to the definition of "false advertisement," said:

"The section does not contemplate penalization in those cases where the use is not as recommended and is not under usual or customary conditions. It is not intended to extend to cases where there might be injurious results merely because of reactions of consumers due to their peculiar idiosyncrasies or allergic conditions." (H. Rept. No. 1774, 75th Cong., 3d sess., p. 10.)

When the Wheeler-Lea bill was being discussed in the House of Representatives, January 12, 1938, the following colloquy occurred (vol. 83, Cong. Rec., p. 414):

"Mr. O'MALLEY. May I ask the gentleman from California [Mr. LEA] if it would be his understanding, as well as the understanding of the members of the committee, that the term 'false advertisement' in this section would mean that the advertiser failed to say, for instance, that Sloan's liniment is unhealthy to drink? Would this be a false advertisement if some one used it to drink? "Mr. LEA. No. * * * He is not required to say anything in his ad, but if he does state anything it must be true."

And at the same time the following occurred (vol. 83, Cong. Rec., p. 412): "Mr. WHITE of Ohio. Let us take, for example, the manufacturer of cosmetics. If cosmetics are used for normal purposes and injury occurs, the gentleman would want to punish the man who put out the cosmetics, but, on the other hand, if these cosmetics are eaten by somebody or used for a purpose other than prescribed, certainly the gentleman would not want to hold the manufacturer responsible? "Mr. LEA. No. We are shortly going to come along with a food-and-drug bill which is pretty well prepared for presentation to the House. The gentleman referred to cosmetics. The new food-and-drug bill will require a warning of what may be the deleterious effects if used under certain conditions. We are going to take care of that in the label and misbranding features."

One of the Commission's witnesses (Mr. Cassedy) referred several times to the case of Miles Laboratories v. Federal Trade Commission (C. A. D. C. 140 Fed. (2d) 683). That was a case instituted by Miles Laboratories when confronted by the Commission with the demand for a stipulation in the case above referred to as Docket No. 4993. The company had the choice of signing the stipulation, which required a change in the warnings on its labels, or of being subjected to a complaint and proceeding by the Commission. The company instituted suit for a declaratory judgment and, while the court did make the statement which the Commission witness considered favorable to his position and which he therefore quoted, the court also made this highly significant statement (685):

"In the present case and on the present record-if the question were open-it might very well be argued that appellant's advertising is neither false nor misleading, when considered in the light of the statutory provision requiring no more than a revelation of all material consequences which may result from the use of the product in the customary way or under the conditions prescribed in the advertisement. But since the matter is not open we have no occasion to examine or weigh questions of fact or law, since they are in the first instance within the exclusive jurisdiction of the Commission and its decision when made is subject to challenge only as provided in the act; nor is there anything in the Declaratory Judgment Act which changes this result or creates new rights or increases or extends the jurisdiction of the courts Doehler Metal Furniture Co. v. Warren, 76 U. S. App. D. C. 60, 129 F. 2d 43, 45).”

HOW DUAL CONTROL WORKS

Several years ago the Food and Drug Administration caused a large quantity of Bromo-Seltzer to be seized, alleging misbranding primarily with respect to the adequacy of the directions and warnings. After much consideration, the formula and labeling of Bromo-Seltzer were revised and the litigation was terminated. Then the Federal Trade Commission moved in. Now the company