(An address entitled "The Reece Bill-H. R. 2390"-submitted by Dr. Robert L. Swain, is as follows:)

THE REECE BILL-(H. R. 2390)-AN APPROACH TO THE REINSTATEMENT OF BASIO FR NCIPLES OF AMERICAN LAW INTO THE PROCEDURE OF THE FEDERAL TRADE COMMISSION

(By Dr. Robert L. Swain)

On January 1, 1937, the late President Roosevelt, in transmitting to Congress the report of his Committee on Administrative Management, made the following comment:

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"I have examined this report carefully and thoughtfully, and am convinced that it is a great document of permanent importance. * * The practice of creating independent regulatory commissions, who perform administrative work in addition to judicial work, threatens to develop a 'fourth' branch of the Government for which there is no sanction in the Constitution."

This is tantamount to say that administrative agencies were not visualized by the founding fathers, and hence may not of themselves conform to the system of checks and balances which found expression in the division of the Government into the legislative, executive, and judicial departments.

Also, the mere fact the administrative agencies are not provided for in the Constitution would seem a sufficient admonition upon the Congress, the Executive, and the courts to see to it that they were hedged about with every necessary safeguard. These safeguards have been largely ignored, and this is the chief reason why the proper conduct of administrative agencies presents a grave issue to the American people.

Now, it must be agreed that the relatively simple governmental problems which confronted the Constitutional Convention have become tremendously expanded, inordinately complicated, and intricate beyond words. It is highly probable that many of the most important governmental functions could not be performed today were it not for administrative agencies. This thought is well crystallized in an address by Elihu Root, delivered in 1916.

Said Mr. Root:

"There is one special field of law development which has manifestly become inevitable. We are entering upon the creation of a body of administrative law quite different in its machinery, its remedies, and its necessary safeguards from the old methods of regulation by specific statutes enforced by the courts. As any community passes from simple to complex conditions the only way in which government can deal with the increased burdens thrown upon it is by the delegation of power to be exercised in detail by subordinate agents, subject to the control of general directions prescribed by superior authority. The necessities of our situation have already led to an extensive employment of that method. The Interstate Commerce Commission, the State public service commissions, the Federal Trade Commission, the powers of the Federal Reserve Board, the health departments of the States, and many other supervisory offices and agencies are familiar illustrations.

ADMINISTRATIVE AGENCIES NECESSARY

"Before these agencies the old doctrine prohibiting the delegation of legislative power has virtually retired from the field and given up the fight. There can be no withdrawal from these experiments. We shall go on; we shall expand them, whether we approve theoretically or not, because such agencies furnish protection to rights and obstacles to wrongdoing which under our new social and industrial conditions cannot be practically accomplished by the old and simple procedure of legislatures and courts as in the last generation."

But Mr. Root, who was thoroughly grounded in the basic purposes and principles of constitutional law, was fearful that in the development of administrative agencies, rights and privileges granted by the Constitution might be overlooked or impaired. He saw the danger inherent in the growth and expansion of administrative bodies. He was apprehensive lest they would become governments within the government, and hence beyond the control of the legislative, executive, and judicial branches of the government.

While admitting that administrative agencies had become utterly essential to the governmental process, Mr. Root foresaw that this particular type of regulatory activity must be held in bounds if constitutional government was to con

tinue. Mr. Root's words on this basic point take on a truly phophetic siguificance:

"Yet the powers that are committed to these regulating agencies, and which they must have to do their work carry with them great and dangerous opportunities for oppression and wrong. If we are to continue a government of limited powers these agencies of regulation must themselves be regulated. The limits of their power over the citizen must be fixed and determined. The rights of the citizen against them must be made plain."

The same apprehension exists among thoughtful students of contemporary government. In its explanatory statement accompanying the text of its proposed Federal Procedure Act the Special Committee on Administrative Law of the American Bar Association expressed itself as follows:

"So long as the Federal administrative system is not defined and placed within a system of law, administrative justice is a loophole through which civil rights and constitutional guarantees may be frittered away. The American people and their Congress are therefore confronted with the problem of maintaining the American system by appropriate legislation which will preserve constitutional rights and guarantees."

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Just recently, Dr. Rufus D. Smith, acting dean of the New York University School of Retailing, in discussing the impact of certain governmental activities upon business practices, declared that "* America must learn to set adequate safeguards of control over our present administrative agencies. "We are going to find, I believe, that the major problem of American democracy over the next few decades will center in this vast administrative organization and its complex impact on the life of America."

WALTER-LOGAN BILL PASSED

The attitude of Congress to the problems inherent in the growth and expansion of administrative agencies and particularly their tendency to consider themselves beyond legislative control, is summed up in the report approving the Walter-Logan bill, later passed by Congress:

"The modern-day problems of government are entirely too technical to be performed in many cases by the untrained, and hence it is not possible today to emulate the practice in the comparatively simple days of President Jackson, discharge all employees in responsible administrative positions and turn the machinery of law administration over to a newly appointed group of officials freshly drawn from the people. In order to secure and retain the services of competent people to man the administrative agencies of government, we have been compelled to establish a career service under civil-service laws, but there is no gainsaying the fact that with competency and long tenure of office we also secure employees who tend in some cases to become contemptuous of both the Congress and the courts; disregardful of the rights of the governed; and for lack of sufficient legal control over them a few develop Messiah complexes. They honestly and fervently believe that their mission in life is to at least reform the United States regardless of the terms of the statutes, the Constitution, or anything else."

Now, the Walter-Logal bill was an earnest, thoughtful attempt upon the part of Congress to meet a situation which it looked upon as inherently detrimental to our system of constitutional government. The provisions of the bill were thoroughly debated, public hearings were held, and every effort made to meet the issue in a straightforward, conscientious manner.

VETOED BY THE PRESIDENT

As is well known, President Roosevelt vetoed the bill. Said the President: "Notwithstanding recognition of the necessary character of administrative agencies by many lawyers, jurists, educators, administrators, and the more progressive bar associations, a large part of the legal profession has never reconciled itself to the existence of the administrative tribunal. * * For years, such lawyers have led a persistent fight against the administrative tribunal. * * *

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"Great interests, therefore, which desire to escape regulation rightly see that if they can strike at the heart of modern reform by sterilizing the administrative tribunal which administers them, they will have effectively destroyed the reform itself.

"The bill that is now before me is one of the repeated efforts by a combination of lawyers who desire to have all processes of government conducted through lawsuits, and of interests which desire to escape regulation."

It is no unfair criticism to state that the views here expressed by the late President were more or less typical of his attitude toward business and its problems in those days.

While the administrative agencies have in many important respects proved their value, they have, nevertheless, confronted the American people with some highly significant questions.

For instance, how can civil rights be safeguarded and protected under the growing weight of administrative procedure? Can basic civil rights be safely left to administrative agencies necessarily controlled and directed by the prosecution complex?

Is it prudent to permit the Government to become a series of governments within the Government, with the courts closed to those made subject to their administrative rules, regulations, and disciplinary actions?

Aren't we, the people, faced with deciding as a matter of vital American law, whether we can justify clothing administrative agencies with judicial immunity? Put another way, should not free, complete, and unobstructed access to the courts be the inalienable right of every citizen?

In spite of the searching character of these questions, we must admit that under the law, as now interpreted by the Supreme Court, administrative agencies have for the most part been made self-contained, self-sufficient, and insulated against judicial review in any practical or fair-minded meaning of the term.

In fact, under the law, as now interpreted by the highest Court, appeal from many of the administrative agencies is an empty gesture. At the present time and this applies with special force to the actions of the Federal Trade Commission-the courts are virtually rubber stamps, restricted in their review of the sufficiency of the evidence or the appropriateness of the remedy. In fact, the administrative agencies have been made so completely supreme that important governmental officials are themselves crying out against the situation.

No one has phrased the issue more dramatically than did Lindsay C. Warren, Comptroller General of the United States, in a recent statement before the Senate Banking and Currency Committee:

"This thing called 'government' has reached such gargantuan proportions that it is sprawled all over the lot. It has become greater than Congress, its creator, and at times it arrogantly snaps its fingers in the face of Congress.

"The most necessary thing that I know of today along governmental lines is a thoroughgoing reorganization of the executive branch of the Government. It should be done scientifically, but once the decision is made, then a bush ax or a meat cleaver should be used. The only way to reorganize is to reorganize. It calls for great courage. Duplications and overlapping are widely prevalent, and untold millions could be saved and efficiency increased to a high degree. Of course, there would be loud yelps and snarls, but that is always true when powers are curbed, consolidations made, or appropriations reduced or discontinued."

COURTS POWERLESS TO INTERFERE

The seriousness of this situation is to be found in status given by the Supreme Court to the War Labor Board, the Federal Power Commission, and to other agencies of recent origin. In the highly critical field of management-labor relations the highest court has held that the decisions of the War Labor Board are not subject to judicial review. Even though vast economic and social rights are involved, the courts are forbidden to intrude just to see that justice is done. In a recent case in which the authority of the Federal Power Commission was the subject under consideration, the Supreme Court held that the courts may not interfere. Here vast property rights are involved, the power to make rates is the power to destroy, but in spite of all this, the courts of justice must keep hands off.

The opinion of the Supreme Court was irksome to Mr. Justice Jackson that, in his dissenting opinion, he expressed himself in these direct, challenging words: "If we are to hold a rate is reasonable, just because the Commission has said it was reasonable, review becomes a costly, time-consuming pageant of no prac tical value to anyone." (Federal Power Commission v. Hope Natural Gas Company, January 3, 1944.)

To claim that making the War Labor Board and the Federal Power Commission immune from judicial review is safe government and true democracy seems to me to make a mockery of the terms.

VAST FTC AUTHORITY

Now, all the criticism which can be and has been hurled at administrative agencies can with equal, if indeed not greater force, be leveled against the Federal Trade Commission. In fact, we of the drug industry are much more concerned with the authority and methods of operation of the FTC than of most administrative agencies. The FTC Act was passed in 1914, and the mere fact that it was virtually the first agency of its kind is the only justification for the broad, sweeping authority given it.

It is well to bear in mind constantly that under the FTC Act, the Commission's findings of fact are conclusive, if supported by evidence. It is noteworthy that the word "evidence" is not modified or qualified in any form. The courts construe the requirement to be "substantial evidence" but that is more technical than real and the courts uphold the Commission if there is an evidence to support its findings.

The Wheeler-Lea Act, which amended the FTC law to expand the Commission's jurisdiction over advertising, brought forward with its greater powers the old immunity to effective court review contained in the basic act of 1914. In other words, even though there may be deep-rooted, honest, irreconcilable differences of medical opinion with respect to the basic facts set forth in an advertisement, the Commission is empowered to make conclusive findings of fact. Medical men may differ, but such differences do not deter the Commission from actually deciding what is the correct medical opinion on the points involved.

So sharply limited are the powers of the courts when reviewing the FTC cases that they must uphold the Commission, even though the courts, who are by far the most expert in evaluating evidence, are convinced that the Commission has erred.

This was emphasized in the recent case of Indiana Quartered Oak Company v. Federal Trade Commission (26 Fed. (2nd) 340), in which the court said:

"I reluctantly concur in the result because the Commission has made findings of deception of the public, which there is some evidence to support, though in my opinion it is greatly outweighed by contrary evidence * * Interference with such commercial usage does not seem to me justifiable, but in view of the Commission's findings, the court is powerless."

At this point, let us ask, has not the administration of justice become a sorry spectacle when the courts, in cases such as these, admit they are powerless to meet the situation?

The attitude of the Supreme Court, when considering appeals from FTC decisions, is well set forth in the Algoma Lumber Company case (291 U. S. 67) in which the court said:

"The findings of the Commission as to facts, if supported by testimony, shall be conclusive. The Court of Appeals though professing adherence to this mandate, honored it, we think, with lip service only. In form, the court determined that the finding of unfair competition had no support whatever. In fact, what the court did was to make its own appraisal of the testimony, picking and choosing for itself among uncertain and conflicting inferences."

So that there can be no doubt as to its position, the Supreme Court, in the Standard Education Society case (302 U. S. 112) made the following forthright statement:

"The courts do not have a right to ignore the plain mandate of the statute which makes the findings of the Commission conclusive as to the facts if supported by testimony. The courts cannot pick and choose bits of evidence to make findings of fact contrary to the findings of the Commission."

COMPLAINANT, PROSECUTOR, JUDGE, AND JURY

Now, as a practical matter, what does all of this mean? In the first place, as the courts have pointed out, and as many an American business firm has found out, to its peril, the Commission simultaneously carries on as complainant, judge, jury, and counsel. It decides that a citizen should be proceeded against, it investigates, files its complaint, prosecutes the case, decides it and renders judgment.

To emphasize the significance of this situation, let me ask if substantial justice would always be assured if the prosecuting attorney were permitted to decide the case. As things now stand, the Commission can, and as a practical matter does accept the evidence best suited to its needs. A manufacturer, forced to defend his actions before the FTC, may match, and indeed, overmatch the Com85257-46- -8

mission's witnesses in every basic respect, and yet the Commission can decide the case on the basis of the testimony offered by its side.

It seems to me a matter of plain common sense that neither the FTC nor any other governmental agency should function as complainant, prosecutor, judge, and jury. No agency is wise enough, tolerant enough, or sufficiently well balanced to properly administer justice on any such water-tight basis. But not only does the Commission function as complainant, prosecutor, judge, and jury, but for all purposes and effects it is practically a law unto itself. Appeal from its decisions is of little or no value.

If we contrast the basic procedure of the Federal Trade Commission with that of the Food and Drug Administration, the uncontrolled authority of the Commission stands out in bold relief. The FDA, in the enforcement of the Food, Drug, and Cosmetic Act, has no power to issue orders, stipulations, or to make final decrees of any kind. Once it becomes necessary to try a case, FDA and the defendant appear in a court of law where the evidence on both sides is fully presented, and the case is tried in conformity with established rules of judicial procedure.

FDA-FTC BASIC DIFFERENCES

Under the FTC law the Commission, as the courts have taken pains to point out, serves as "complainant, judge, jury, and counsel" (John Bene v. F. T. C., 229 Fed. 468). Under the Food, Drug, and Cosmetic Act, all issues of fact are determined in open court.

And will anyone contend that the Food and Drug Administration has not been fully as effective as the Federal Trade Commission in the performance of its duly delegated tasks? As a matter of fact, can the enforcement record of FDA be matched by any other agency of the Federal Government? Does not the record of constructive accomplishment of FDA show conclusively that the water-tight powers of FTC to decide what the evidence is, is not necessary to the effectuation of congressional policy or the realization of governmental objectives?

Now, this brings us to a consideration of the Reece bill, which was introduced in the House by the Honorable B. Caroll Reece, of Tennessee, and is identified as H. R. 2390.

The principal purpose of the Reece bill, in the plainest English, is to require the Commission to base its rulings on a preponderance of the evidence. It would permit a defendant to come into court for a full, complete, and impartial evaluation of the evidence. The complete record of the case would be reviewed and the court would determine whether or not the Commission had predicated its conclusions upon the preponderance of the evidence. The Reece bill is limited to minimizing the hazards and removing the booby traps inherent in prevailing Federal Trade Commission procedure.

That the passage of the Reece bill is highly desirable seems to me pretty well set forth in the statement which Mr. Reece made to the House of Representatives recently (Congressional Record, p. A1117, March 6, 1945). In his statement Mr. Reece made it clear that, "As the law is now, the scope of judicial review of the Commission's orders to cease and desist is so narrow as to afford hardly any relief at all. In an increasing number of cases the courts are declaring their impotence to review the findings of fact or the application of the remedy—or to prevent an unauthorized proceeding.'

To drive home the point, Mr. Reece declares that the "appellate courts are obliged to sustain its decisions in spite of the fact that the weight of the evidence may be strongly to the contrary. The courts need read only one side of the case, and, if they find any evidence there, the administrative action is to be sustained and the record to the contrary ignored.

"The bill would cure this. It would enable the courts to examine the evidence on behalf of the respondent and to assure the decision of these cases according to the weight of the evidence."

Emphasizing the peculiar qualities of the Commission's authority, Mr. Reece further declares that "the nature of the Commission's proceedings is such as to make it highly appropriate for the courts to review the whole record of the evidence upon which the Commission has acted. Commission cases involve decision on pure questions of fact-questions peculiarly within the province of the courts. By empowering the courts to review the facts, the amendment draws upon the fundamental offices and the historical experience of the judiciary and operates to separate, in a substantial degree, the prosecution and judicial functions which, as the law now stands, are combined in the Commission."