far as they were concerned, and they agreed to help sell it to the respective stations and chains, that we would call upon all of the chains and transcription companies and also the broadcasting stations to furnish us with copies of the advertising portions of their programs; in other words, what they call "advertising continuities." As I say, they agreed to it, and we have had practically 100-percent coopera

tion.

Since July 1, 1934, we have received 500,000 radio advertisements. We have made a preliminary view of all of these except possibly 50,000 and the current ones coming in, and we have taken action with regard to a great many.

Now, answering your question, Mr. Chairman, we have, first, a corps of lawyers, which is small-entirely too small-to read these radio advertisements; and if they are clearly unobjectionable they are laid aside and filed; if they clearly embrace what appears to be false representations or exaggerated claims beyond the realm of legitimate advertising, they will be put over here in another group; then in another group there will be the doubtful ones.

This first class is filed without reference to the Commission because there are so many of them. Out of this number there were not over 15 percent-I think it was about 15 percent-that were not passed as unobjectionable. As to those we rely upon the judgment of our staff. The others go to a special board of investigation for further investigation and consideration, culminating in reports to the Commission.

Mr. WOODRUM. How do they send in these advertisements? Is it periodically?

Mr. DAVIS. At first, Mr. Chairman, we called for all of them and they furnished all of them. But they came in in such numbers that it was wholly impossible for us to handle them without a very much larger force than we had; so we adopted this method: We still receive all of the advertising continuities of all the chains, and so far as individual stations are concerned we issue calls, something like the calls on the Federal banks for reports. And they never know when they are going to come. We will make a call, let us say, for all the stations in the first zone to make a report to us during the month of December, and then, perhaps, we will skip to the fifth zone and ask that they make a report to us of all their continuities during the month of January or during the month of December, as the case may be. We jump around and we are always getting in many reports from one zone. But even then in the course of a very few months we get to every station again. And many of these advertisements run consecutively for an indefinite period, and we get them. And, as I say, we get them all from chains all the time.

Mr. WOODRUM. Do you find many of them objectionable?

Mr. DAVIS. Well, I think the record shows that about 85 percent are passed as unobjectionable on their face. Then they are laid aside; and there are laid aside about 15 percent for further investigation and consideration. And some of those are able to justify their claims. They are given that privilege. We never issue a complaint against anybody without their having been advised of the complaint and of the criticism-not who made it, you understand, but what is charged. And they are given the opportunity to make an explanation. We ask, "What do you say about it?"

We give them a chance to prove that it is true. That applies to all advertising, not only radio but all other advertising, and, in fact, all charges of unfair methods of competition, whether it is advertising or whatnot-misbranding or commercial bribery or anything of that kind-before the Commission issues a formal complaint. Before the Commission issues a formal complaint they are always given an opportunity to say what they want to say in defense before. the complaint is issued.

Sometimes they will produce evidence that justifies it. And while it may appear on the face to be false, or perhaps that they are doing this, that, or the other unfair thing; but they convince our staff, who report to us that they have not violated the law and the facts in substantiation hereof.

And you understand we do not give any publicity to these preliminary proceedings and conferences. If it is terminated without a complaint or stipulation, they are not exposed to publicity. We pursue that course because we do not want to do anybody an injustice.

ALLOTMENT FROM N. R. A.

Now, Mr. Chairman, and gentlemen of the committee, I want to call your attention further to this fact. During the last year we received an allotment from the N. R. A. I think we got from them all told $140,000 covering something over a year.

Mr. FERGUSON. About $10,000 a month?

Mr. DAVIS. Yes; it ran about $10,000 a month. They made that allotment to us for making investigations of N. R. A. cases and matters and alleged violations of the codes.

Mr. WIGGLESWORTH. That is, for the fiscal year of 1935?

Mr. DAVIS. Well, it extended up until the Schechter decision. It stopped there. It had extended, I think, for about 14 months prior to the Schechter decision.

Mr. FERGUSON. That is right.

Mr. DAVIS. It was part of the last fiscal year and the preceding fiscal year.

Mr. WOODRUM. Do you get anything from them now?

Mr. DAVIS. That is what I wanted to explain to you. We are not getting any money.

There was a section in the N. R. A. Act which authorized the Federal Trade Commission to make investigations of violations of the codes.

There was no question about the authority. They requested us to do it, and they paid for it.

Mr. WIGGLESWORTH. Did that cover the total work you did for them or did you have to draw on the funds which were made available to you in the ordinary course?

Mr. DAVIS. No, sir; that covered only the cases in which they themselves asked us to make investigations. It did not cover cases that came to us by appeal from either party or complaints from any outside parties. We had quite a good many of those relating to the codes and, incidentally to the law, because the N. R. A. provides that a violation of an approved code was an unfair method of competition within the meaning of section 5 of the Federal Trade Commission Act. That is where our jurisdiction came in.

N. R. A. PERSONNEL DETAILED TO COMMISSION

Now, responsive to your question, Mr. Chairman, after the Schechter decision they announced a policy of demobilization of the personnel of the National Recovery Administration. We were then advised by the then director, Mr. O'Neil, that in the interest of orderly procedure and humanitarian considerations, in order to give more time within which dismissed personnel might make connections in other departments and elsewhere, they were going to adopt a policy of releasing a percentage of them at stated periods, that is, every two weeks. They said in the meantime they would like to lend to us any of their personnel we could use, because they were paid by the Government and they would like for them to be doing useful work, if it could be arranged. We told them "all right", that we could use quite a number of lawyers, stenographers, and clerks, and so on. They sent down to us an aggregate, I think, of 78 people. But shortly after this Mr. O'Neill resigned and went out; so most of the clerical personnel was withdrawn-not all at once, but withdrawn rather rapidly. But the lawyers, about 8 or 10 in number, were permitted to remain until a few weeks ago, when they received notice of the termination of the detail.

These lawyers had all been assigned cases and other work of the Commission and they were right in the midst of them. I think they had 34 litigated cases. They were all trial lawyers. We have picked out the lawyers from there a litigation staff, men who were real lawyers, and they were engaged in the trial of cases after we had issued complaints. So it left us with rather a bad situation when we needed the men. So we went to the President and explained the situation to him and called attention to section 8 of our act. I want to say by way of explanation that a question had been made about the legality of the detail by the N. R. A. of their personnel to any other department, not only our department but any other department.

Mr. WOODRUM. Was it raised by the Comptroller?

Mr. DAVIS. The Director of the Budget raised it. They told me that he did. And I think there was some question in connection with the Comptroller General.

At any rate, one of the N. R. A. officials said that the Director of the Budget said that he would not approve pay for any of their men who were detailed to other departments, that he would only approve personnel that was needed by the N. R. A. itself. So all of these details were terminated.

Section 8 of the Federal Trade Commission provides that

The several departments and bureaus of the Government, when directed by the President, shall furnish the Commission, upon its request, all records, papers, and information in their possession relating to any corporation subject to any of the provisions of this act, and shall detail from time to time such officials and employees to the Commission as he may direct.

We laid that fact before the President, and he directed a letter to the Acting Director of the N. R. A. to detail 31 named lawyers to us and such stenographic and clerical assistances as might be available and might be needed.

With respect to those 31 lawyers who were named in the order I wish to explain that that embraced those who were then with us

from the N. R. A. and others whom our chief counsel, and we, and the N. R. A. officials, had already agreed upon. We agreed that we would like to have them detailed, and the N. R. A. officials were willing for them to be detailed to us, and we were advised that these respective men were willing to be placed on the detail and wanted to come. So that was done.

Mr. WIGGLESWORTH. Those men, of course, are still paid by the N. R. A.?

Mr. DAVIS Yes; they are.
Mr. WOODRUM. The lawyers?
Mr. DAVIS. Yes, sir.

Mr. WOODRUM. How much?

Mr. DAVIS. Their aggregate salaries are $132,100.

Mr. FERGUSON. For 12 months?

Mr. DAVIS. Yes; for 12 months.

Mr. WOODRUM. How many have you besides lawyers? You have 31 lawyers, but how many others?

Mr. DAVIS. Under the last detail there are detailed to us 10 clerks, amounting to $16,840.

Mr. WOODRUM. Is that a breakdown on that sheet which you have before you, Judge?

Mr. DAVIS. Yes, sir.

Mr. WOODRUM. Those two figures you have given us must be added together to get the total? One was not included in the other? Mr. FERGUSON. No, sir.

Mr. DAVIS. I mentioned $132,100 for the lawyers, and the other was for the 10 clerical persons.

Mr. FERGUSON. That is on a yearly basis?

Mr. WOODRUM. What are the salaries of these lawyers?

Mr. DAVIS. Well, they are from $3,200 up, and I think perhaps there is one at $5,200.

Mr. FERGUSON. They average about $3,800.

Mr. DAVIS. In that connection I want to say that there has been a reclassification. Those were salaries that were fixed by the N. R. A., and they were paying them. But I will state that they requested us to advise them the character of work to which we assigned them and the salary that they would carry in the class of work in which they were engaged, in order to determine whether or not their present classification was correct.

Mr. WIGGLESWORTH. They are carried on the rolls of N. R. A. or on your rolls?

Mr. DAVIS. They are carried on the rolls of the N. R. A. It is not costing us anything out of our funds.

The reason I explained this was in response to an inquiry of the chairman.

And I also wish to say this, gentlemen, that we are now getting the benefit of this personnel, and I presume we will until April 1. We hope so, at any rate. Unless there is some additional legislation, that will terminate April 1, 1936. By that help that has been given and by speeding up the work and obtaining the very maximum of work out of all of our staff, and by having, unfortunately, to require a great deal of overtime work, we have increased the amount of work we are turning out.

PERCENTAGE OF CASES REPRESENTING LAW VIOLATIONS

Mr. FITZPATRICK. Of all the cases you investigate, what percentage of them do you find violating the law?

Mr. DAVIS. Do you have reference to the complaints that come to us from outside sources?

Mr. FITZPATRICK. Yes; that is what I mean.

Mr. DAVIS. I would say approximately a third of the complaints that we get are such that we find upon investigation that there is a prima facie case of violation. That is a guess.

Mr. FITZPATRICK. Does your Commission investigate and find out whether the party making the complaint is reliable or not?

Mr. DAVIS. Oh, yes.

Mr. FITZPATRICK. And do you request them to give you evidence that you believe is a violation?

Mr. DAVIS. Yes, sir. He is called upon to furnish any evidence he has.

Mr. FITZPATRICK. Before your investigation is started?

Mr. DAVIS. That is a part of the investigation.

Mr. FITZPATRICK. I mean, when a complaint comes in, do you ask the party to submit evidence sufficient for you to start a hearing on the complaint?

Mr. DAVIS. If he does not furnish it in his communication, if it is a matter handled by the chief examiner, the first thing one of our investigators will do will be to call upon him, if it looks like a case from the form of the written complaint. We receive many of them that are not referred. In other words, the Commission will answer many letters without ever referring them to our staff for investigation, because it does not appear of sufficient importance or that there is sufficient showing to justify it. But if it looks like a case, or if it amounts to a charge with a showing that it is one which calls for some further investigation, then the man who makes the charge is always contacted to find out, "What have you got? Why do you make this charge? What proof do you have?

And then the man against whom the charge is made, or the company against whom the charge is made, is always visited and given an opportunity to answer it. We ask, "What do you say about this? It has been charged that you are doing so and so and so and so. What have you to say about it?" We give him an opportunity to justify it.

In other words, our purpose is always to get at the facts. We would rather find there is no violation than to find there is one. We are interested in developing the facts and employing corrective methods if the facts are developed that warrant it, but not otherwise. Right in line with that I will make this statement, that after we do make our investigation and after we decide to issue a complaint, that I expect 90 percent of the complaints are maintained or sustained on trial. And any aggrieved respondent, any party against whom the Commission issues a cease and desist order, has an absolute right to appeal from the decision of the Commission to the court of appeals of the district in which he is located. And we have many appeals.