III

The Commission's argument against those provisions of the Reece bill which would enlarge judicial review are divided into two headings: (1) the increased judicial authority is unnecessary; and (2) it is inadvisable.

The mere fact that the Commission opposes a requirement that its orders be based upon a preponderance of the evidence, necessarily implies a desire upon its part to retain its present power to decide the rights of respondents in a manner that runs counter to the weight of the evidence. So self-condemnatory is this position that further refutation would be superfluous. Any governmental commission which, vested with the responsibility of determining important and valuable public and private rights, desires freedom to do so regardless of a preponderance of the evidence, needs by very virtue of such a philosophy to be the subject of effective judicial review.

Aside from the foregoing, however, the sole argument advanced by the Commission to demonstrate that judicial authority to test its decisions by the standard of the preponderance of evidence is unnecessary, becomes patently unsound upon analysis.

In this connection, the Commission urges that under the present law, the appellate courts possess power to vacate any findings which are not supported by substantial evidence. So far so good, and in this statement the Commission is correct. However, it goes further to say that this is equivalent to the appellate authority of the courts as to regular jury cases or trial-court determinations in the Federal district courts, and that to confer upon the circuits courts power to overrule findings by the Commission which are not supported by a preponder. ance of the evidence would be to give such courts power beyond those ordinarily possessed by them in the regular judicial process.

This

Anyone who has been present at a jury trial knows that a regular and major portion of the judge's charge to the jury is devoted to instructions that it must decide the case before it upon the fair preponderance of the evidence. is a legal requirement. Any jury verdict which does not conform to it may be set aside either by the trial court itself or by a circuit court upon appeal.

The Commission has found and quoted some language to the effect that appellate review as to the acceptance of substantial evidence to support a finding is equivalent to the scope of review of motions for directed verdicts. But the Commission overlooks the important fact that there is in the regular civil trial a further motion to set aside a jury's verdict as being contrary to the weight of the evidence which is different from and additional to the motion to direct a verdict (Adams v. United States, 116 F. (2d) 199 (C. C. A. 7, 1940)).

As to district court trials by a judge without a jury, rule 52b of the Federal Rules of Civil Procedure provides: “* * * when findings of fact are made in actions tried by the court without a jury, the question of the sufficiency of the evidence to support the findings may thereafter be raised. * *

Certainly, the present powers of the circuit courts to review findings by the Commission on the sole basis of whether or not there is any substantial evidence in the record to support them falls far short of their power to pass upon motions to set aside the verdict of a jury as being contrary to the weight of the evidence, or to determine the "sufficiency of the evidence to support the findings" of district court trial judges.

Even if the Commission's arguments in this regard were sound, it would nevertheless not justify the conclusion sought to be drawn by the Commission. There are many other factors which distinguish a proceeding before the Commission from a regular civil trial, and the differences are such as to require more extensive powers of review upon appeal in Commission cases than are necessary to the administration of justice in civil trials.

In the first place, proceedings before the Commission are not governed by ordinary rules of evidence (Phelps Dodge Refining Corporation v. FTC., F. (2d) (C. C. A. 1943); John Bene & Sons, Inc. v. FTC, 299 Fed. 468 (C. C. A. 2d, 1924)). The rules which are administered in civil trials have been evolved out of centuries of experience and intensive thought in order to assure that the evidence permitted to be heard by a jury is best adapted to the nonprejudicial determination of the essential facts. Under such circumstances, a finding that substantial evidence has been presented during the course of the case in support of the jury's finding is assurance that evidentiary matter of real weight, competency, and importance has been adduced during the course of the trial.

In a Commission proceeding, however, the respondent has no such safeguard. The protective rules of evidence may be disregarded. Statements or documents may be introduced into evidence to support the finding, which would be inadmissible and hence insufficient to support a decree in a civil case.

Another distinction of vital importance is that a jury is impartial. The Commission, on the other hand, for all of its conscious desire to be honest, objective, and fair, inescapably approaches a determination of proceedings before it midst an aura of prejudgment. This arises out of the fact that the Commission is not only the court but the prosecutor as well, and may even furnish witnesses for the Government from among its own employees and agents. The mere fact that the Commission issues a complaint requires a preliminary determination by it that the respondent has violated its precepts. (Section 5 of the Federal Trade Commission Act authorized issuance of a complaint only "whenever the Commission shall have reason to believe [the respondent] has been or is using any unfair method of competition or deceptive act or practice in commerce.")

Many, if not most, of the Commission's findings of wrongdoing by respondents are based upon the interpretation which it attaches to certain forms of commercial activity and practice, interpretations to which fair-minded strangers might not agree. The very issuance of a complaint in such a case bears testimony to the existence of such a point of view at the Commission, and the same thought processes that led the Commission to issue the complaint motivate the ultimate decision upon the issues raised by the complaint. If this is not predetermination, we do not know what the word means. Commission proceedings are more truly activities of enforcement than of adjudication. In the light of the the evils which may arise out of so fertile a source of activity, it becomes apparent that greater protection by way of judicial review is needed than in civil trials, where the predisposing factors to injustice do not exist.

That this is a real and not an imaginary evil artificially conjured up for purposes of scholastic debate is strikingly illustrated by the case of Marquette Cement Manufacturing Company v. Federal Trade Commission, (C. C. A. Seventh, 1945). In that case, the respondent before the Commission sought to have the Commission disqualify itself from conducting the proceeding on the grounds of bias and prejudgment. It attempted to introduce before the Commission 23 documentary exhibits covering a period from 1927 to 1941, and showing that, prior to the respondent's hearing, the Commission had already arrived at a determination as to what the outcome should be.

The Commission would not even permit the exhibits to be introduced into evidence. However, the exhibits did come before the circuit court of appeals in the course of a proceeding by the respondent to have the Commission's determination review. The Circuit Court of Appeals for the Seventh Circuit was forced to decide that it was powerless to compel the Commission to disqualify itself even though prejudgment might have existed. It based this decision upon the fact that Congress, which created the Commission, did not provide for its disqualification, even though bias might exist. Some of the statements in the opinion of the court are highly illuminating.

"Congress is the creator of all inferior Federal courts, as well as administrative agencies. The jurisdiction and authority of each is confined solely to that which Congress bestows. There are no limitations upon this congressional power other than the Constitution. Congress has conferred upon a litigant the right to challenge the qualification of a judge, provided such litigant complies with the statutory mandate. On the other hand, no such right has been conferred upon a litigant before the Federal Trade Commission. In our view, the right to disqualify a trier of facts created by Congress, whether it be a judge or an administrative agency, is a matter for Congress. Such right may be conferred or withheld as Congress deems advisable."

"In conclusion, we are not unsympathetic to the criticism directed at the Commission by Marquette, a criticism much aimed at all administrative agencies, to the effect that their multiple functions as prosecutor, judge, and jury constitute an abridgment of the cherished right to a fair and impartial hearing. On the other hand, as already pointed out, they are the creatures of Congress and it is not within the province of courts either to emasculate or enlarge the powers which it has conferred. Any appeal for relief should be made to Congress rather than to the courts."

A third distinction is that in civil trials the trier of the fact, whether it be judge or jury, has the all-important opportunity of personally viewing the wit

nesses. This is the most vital factor in their process of deciding the weight to be given to conflicting testimony, and in passing upon the credibility of the various persons who take the stand. By virtue of this opportunity, the trial judge, or jury, possesses an advantage in passing upon the evidence which is lacking in appellate courts. In Commission proceedings, however, the five commissioners who initially pass upon the facts, stand in no better position with regard the evidence than does the appellate court which reviews their findings. Both base their determination solely upon the same printed record, and neither of them views the witnesses or the trial itself. Thus, while there may in civil trials be justification for according the appellate courts less power than the trial courts to pass upon the facts, there is no such reason with regard to Commission proceedings.

IV

The Commission's contention that it is inadvisable for appellate courts to be enabled to decide whether or not findings are based upon the preponderance of the evidence may be subdivided into three headings: (1) That the Commission is better prepared, as an expert upon the matters tried before it, to make such a determination; (2) that the courts would fall into the error of substituting quantity of evidence for weight of evidence; (3) that there would be conflicting determinations upon the same set of facts by different circuit courts of appeal. All of these contentions are without merit.

If the courts are inexpert in matters which come up to them through the Commission, then they must necessarily be labeled inexpert in the matters which they handle in the ordinary day-to-day course of their regular judicial function. We doubt that there is any subject matter the Commission can name which comes before it that doesn't also come to the circuit courts of appeal through its review of district court decisions. Intricate matters of bankruptcy, corporate affairs, real estate matters, unfair competition, economic conditions, and the like, all form the regular grist of the judicial mill. Minds which over the years of a life tenure in office have become sharpened to such matters do not become dulled to those situations when they are presented in appeals from Commission orders. Possibly the most specialized factual circumstances with which the Commission deals are those relating to technical questions, relating to foods, drugs, and cosmetics. Yet, the circuit courts of appeal, apparently oblivious of any mental impediment, review with apparent competency those very same matters in connection with Food and Drug Administration proceedings originating in district court actions. Additionally, under section 13 of the Federal Trade Commission Act, a temporary injunction may be sought by the Commission in a district court, based upon precisely the same matters which are to be litigated before the Commission itself. Is it to be claimed that the same type of judicial mind which is called upon to determine the propriety of issuing such an injunction is not sufficiently expert to judge the facts involved in the course of an appeal?

A similar underestimation. of judicial intelligence is implied by the Commis'sion's claim that the appellate courts will confuse quality of evidence with quantity. If the relative expertness of the appellate courts and the Federal Trade Commission to deal with such concepts is to be estimated, the former must be considered to have the advantage by far, for this is exactly the field with which it daily deals in considering, upon appeal, the propriety of factual decisions by trial courts and juries. It is the court of law, rather than the Commission, which has defined the difference between weight of evidence and 'amount of evidence, and to claim that the author of the distinction is less competent to apply it than persons who merely parrot it, is not very persuasive. Insofar as the Commission's fear of conflicting decisions amongst circuit courts is concerned, all that need be said is that the function of the United States Supreme Court is designed to meet just such a contingency. If the questions of fact are so close that different circuit courts will reach differing conclusions in similar situations, then it is far better to have such a conflict arise and be ultimately determined by the care and consideration involved in a Supreme Court decision, than to leave resolution of such a close question to the Federal Trade Commission alone, without any possibility of further independent review. By frequent statements in its memorandum, the Commission points out that there are remarkably few appeals taken from its orders. From this it would infer that its findings are so satisfactory that there are few appeals. We draw a very different conclusion. We believe the paucity of appeals is due to knowledge that the jurisdiction of circuit courts of appeal is so circumscribed and

limited under the present provisions of the Federal Trade Commission Act that the expense of appealing is unwarranted, since the appellant cannot succeed, even though the preponderance of evidence is on his side. In all justice this is a situation crying for correction. Of what avail to have the right to go through the form of an apeal, if the court appealed to is powerless to accord justice? The answer is obvious.

It is, therefore, respectfully submitted that H. R. 2390 should be enacted into law. MOTOR AND EQUIPMENT MANUFACTURERS ASSOCIATION, By ALBERT H. ELCHHOLZ, General Manager.

Dated January 23, 1946.

BRIEF OF CHADBOURNE, WALLACE, PARKE & WHITESIDE IN SUPPORT OF THE BILL This memorandum is submitted by Chadbourne, Wallace, Parke & Whiteside, a law firm of 25 Broadway, New York City, as the result of an invitation to do so extended by the Honorable B. Carroll Reece to one of its clients.

In submitting this memorandum in support of the proposed amendment we do so in the belief, gained as a result of our own experience as well as our study of the reported decisions, that this legislation is in the public interest. We have represented, or presently represent, various clients in a number of Federal Trade Commission matters. We do not, however, refer herein to any proceedings now pending which involve any of our clients.

THE PROPOSED AMENDMENT OF SECTION 5 (C), PERMITTING THE REVIEWING COURT TO APPRAISE THE EVIDENCE UPON WHICH THE COMMISSION BASES ITS ORDER, AND TO REVIEW THE REMEDY PRESCRIBED

As Congressman Reece has pointed out, the Federal Trade Commission acts simultaneously as complainant, jury, judge, and prosecutor. Acting upon its own initiative, or upon a complaint received from "any person, partnership, corporation, or association" (including, of course, any competitor of the respondent), the Commission prepares and serves its complaint. After the respondent has answered, his case is tried before a trial examiner, who is a representative of the Commission, and the role of prosecuting attorney is taken by one of the Commission's attorneys. At the conclusion of the trial, the trial examiner makes his report upon the facts, conclusions of fact, conclusions of law, and recommendation for appropriate action by the Commission. After giving the respondent an opportunity to file exceptions to the trial examiner's report and submit a brief, the Commission makes its findings of fact and issues its order.

In addition to this combination of the prosecuting and judicial capacity in one closely knit organization, the Federal Trade Commission Act presently provides that, upon a court review of the Commission's order, the Commission's findings as to the facts shall be conclusive if supported by evidence. No matter how clear and convincing the evidence to the contrary may be, the Commission can support its position and make findings of fact in accordance with its complaint which are entirely unassailable, provided it can point to any substantial evidence in the record in support of the facts as it claims them to be. And having determined the facts, the Commission can proceed to issue an order which, under recent decisions of the courts, cannot be modified by any court on review, no matter how far it goes beyond the actual needs of the situation. This recent development is in itself so serious as to require the proposed amendment of the act, as will appear from consideration of several court decisions before and after the promulgation of the present doctrine.

It has been recognized for many years that, under the act as it now reads, a court cannot disturb the Commission's findings if supported by evidence. For instance, the testimony of generally qualified experts who have had no personal experience with the product in question constitutes "substantial evidence" which will support the Commission's finding, so as to preclude the reviewing court from considering the weight of conflicting testimony of other experts who have had actual experience with the product (Neff v. Federal Trade Commission, 117 F. (2d) 495). For a time, however, the reviewing courts, particularly the second and third circuits, endeavored to apply a measure of reasonableness to the ultimate result, by modifying the remedy or by finding that the evidence was not "substantial."

For instance, in Allen B. Wrisley v. Federal Trade Commission (113 F. (2d) 437), the court stated (p. 440):

"One of the brands named in the complaint and the findings is, 'Palm and Olive Oil Soap.' Was the use of such brand and label a representation that it was a 100-percent olive-oil soap, and does the evidence substantially support a finding to that effect? There was testimony by a number of witnesses, including some of the witnesses for the Commission, who testified it would mean to them a soap, the contents of which included, at least, both palm oil and olive oil. The only evidence to the contrary, upon which the Commission is forced to rely, is found in a stipulation between counsel for the respective parties entered into during the course of the hearing. It was stipulated and agreed that if 30 members of the consuming public were called to testify, they would give certain testimony regarding various matters in controversy. Included in such matters was that '16 of said 30 persons would testify that they understand olive-oil soap to be one, the oil content of which is 100 percent olive oil,' while 14 would testify to the contrary, and 24 of said 30 persons would testify that use of the expression 'palm and olive oil soap' would lead them to believe that said soap is an oliveoil soap, i. e., one containing 100-percent olive oil. In our judgment, such a stipulation can be given little, if any, weight, and cannot be said to be substantial in view of the unanimous testimony to the contrary given by witnesses who appeared personally. How a person with any intelligence could look at the label or brand upon a cake of soap or the wrapper thereof, containing the two descriptive words 'palm and olive' oil and be mislead into believing that such words meant 100-percent olive oil, is so incredible as to be unbelievable. We suppose that by the same process of mental reaction, such witness would believe that the words 'goose grease and lard' means 100-percent lard and no goose grease, or that if shown a picture of a cow and a horse, would be led to believe he had seen a picture of two horses."

As to other brands involved in the Wrisley case, the court found that the order went far beyond the scope of the proceeding, requiring the naming of each ingredient in the brand name (p. 442):

"Various oils and fats are used in the manufacture of soap, such as olive, palm, tallow, white grease, olive oil foots, etc. Where the soap contains a number of oils, the order, as we understand it, would require that the name of each be included in the brand or label name. This would seem highly impractical, which perhaps is immaterial, but the essential objection is that such a requirement is beyond the involved issue. The sole issue, as stated heretofore, was that the representation of a 100-percent olive-oil soap was an unfair method of competition. If it failed to meet that requirement, it was immaterial and beside the issue as to what other ingredient it might include. It was that representation which deceived the public. The purpose of the order is to prevent such deception. In order to accomplish such purpose, the public, who has been deceived, needs be informed only that petitioners' soap is less than 100-percent olive oil. With that information, the public who demands a 100-percent olive-oil soap will no longer be interested in petitioners' product, or its contents."

In Gimbel Brothers v. Federal Trade Commission (116 F. (2d) 578), having found that mixtures of wool and other fibers had been represented as "woolens" (without any finding that the petitioner knew, or was negligent in not knowing, that the goods were not all wool), the Commission ordered that when fabrics composed partly of wool were offered for sale, the petitioner could thereafter use the words "wool" and "woolen" (in referring to them as "Mixtures of Wool and Rayon," for example) only if the percentage of each constituent material was stated. The court modified the Commission's order, stating (p. 579):

"We are satisfied that the Commission's order was correct, except for its burdensome proviso. This required, in the case of fabrics composed only partly of wool, words describing each constituent fiber in the order of its predominance by weight; and if any particular fiber was not present in a substantial amount by weight the percentage in which such fiber is present was required to be stated. This goes too far (Whirsley Co. v. Federal Trade Commission, 113 F. (2d) 437, 442 (C. C. A. 7). * * To require each constituent element to be described in the order of its predominance or in percentages would seem to require the retailer to make a laboratory test of each piece of goods put on sale. The petitioner's competitors are not required to describe mixed woolens in any such detail. The Commission expressly found that one competitor 'truthfully represented' similar merchandise as 'Mixtures of wool and rayon.' We think the order should be modified * *