approval of the Bureau of the Budget and the furnishing by that Bureau of the necessary funds. On September 16, 1953, the Commission requested of the Bureau of the Budget an allocation of $34,000 from the appropriation entitled, “Expenses of management improvement." On October 9, 1953, this sum was allocated from the appropriation cited above by the Bureau of the Budget which also approved the survey in the same communication. The selection of the contractor was also approved by the Bureau of the Budget. The cost of the survey was $34,000 and it was paid from the following: Appropriation symbol 29-11X0061, "Expenses of management improvement, executive." QUESTION No. 3 List the names of the representatives of the Heller Associates who made the survey of the Federal Trade Commission internal operations and state briefly the nature and scope of each such representative's experience in the enforcement of Federal laws dealing with monopolistic acts or practices. The following representatives of Heller Associates participated in the management survey of the Federal Trade Commission: F. L. Elmendorf C. George Krogness, Jr. William F. Dunn George N. Mayer Miscellaneous service employees of the firm in their Cleveland office, such as typists, draftsmen, etc. We do not know "the nature and scope" of the experience of these persons "in the enforcement of Federal laws dealing with monopolistic acts or practices" inasmuch as the survey was not concerned with these laws or the policies and legal procedures of the Commission. The survey related only to internal administrative routines, office organization, procedures for the channeling of paperwork, and the like. It was decided by the Commissioners at the outset that legal procedures, as distinguished from internal work procedures, would not be the subject of the survey. Over the years, both prior and subsequent to the time the present chairman of the Commission took office, this management engineering firm made similar surveys for such Government departments as the Post Office Department and the Departments of Defense and State. It was not a prerequisite of such contracts that these engineers be proficient in the fields of postal rates and routes, national defense or foreign affairs, but rather that they be experts in management. In our own case, it was the combined judgments of the staff and Director of the Bureau of the Budget, and the members of the Commission, that this firm was well qualified to advise on management problems. QUESTION No. 4 Does the Federaì Trade Commission know whether or not any of the Heller Associates were retained or employed in any capacity since January 1952 by any individual or company under investigation by the Federal Trade Commission or involved in any of its proceedings or by any party having a direct interest in one of its proceedings? If so, list the names of the individuals or companies. So far as we know, Heller Associates were not retained or employed in any Federal Trade Commission matter during the period they were engaged in making its survey of the Commission. It is known that since February 1, 1954, Heller Associates have been employed, as is set out below, in one matter pending before a hearing examiner. Crown-Zellerbach Corp. through its attorneys has engaged Heller Associates to perform an economic and statistical analysis in connection with a current case. The Commission also has been informed that Pillsbury Flour Mills, Inc., attempted to engage the Heller Associates to perform a statistical analysis in a pending Commission proceeding, and that this proposal was rejected by Heller because it would have been made during the period that their contract with the Federal Trade Commission was operative. No other information concerning relations between Heller and other Federal Trade Commission proceedings has come to the Commission's attention. QUESTION No. 5 When and with whom did the proposal originate that Dr. Herbert F. Taggart make a survey or study of the Federal Trade Commission? In his first public address as Chairman at Ann Arbor, Mich., on June 18, 1953, Edward F. Howrey proposed the establishment of an advisory committee on cost justification. Again, on October 14, 1953, after recommending establishment of a Small Business Division, Mr. Howrey stated the following: "The Commission should strengthen the administration of the RobinsonPatman Act and seek wider compliance with its provisions. In this connection we propose to establish an advisory committee on cost justification. "Although savings in cost constitute the primary justification for lawful price differentials under the act, there has been little advancement in the field of distribution cost accounting during the 17 years it has been on the books. Business concerns have found it very difficult, if not impossible, to determine precisely what cost savings are allowable and how they may be proved. The few distribution cost studies that have been developed have been very expensive and have involved detailed functional analyses of the seller's entire business. "These difficulties have engendered widespread disregard of the prohibitions against price discrimination. This is so because sellers cannot, in our competitive economy, rely on a one-price policy. In order to compete they must be able, where the occasion requires it, to pass on to the buyer the actual savings created by the buyer's method of doing business. "It is our hope that this advisory committee will be able to ascertain whether it is feasible for the Commission to formulate standards of proof and procedures for costing which can be adopted by the Commission as guides to business enterprises desirous of complying with this important statute. The results of this activity, which should greatly stimulate compliance with the act, will prove especially helpful to smaller concerns." On November 30, 1953, when the members of the committee were appointed, Chairman Howrey said in a public statement "that the members of the advisory committee announced today are not to be regarded as employees of the Federal Trade Commission. They are not Government employees. The work of the committee is advisory only, and its functions will be confined to making recommendations to the Federal Trade Commission. Members will not receive compensation for their work on the committee." Members of the committee were also informed that they could not be given access to any confidential data in the Commission's files. The following organizations were invited to work with the Committee in the formulation of recommendations to the Commission: American Accounting Association, University of Michigan, Ann Arbor, Mich. Mobile Homes Manufacturers Association, 20 North Wacker Drive, Chicago 6, National Association of Cost Accountants, 505 Park Avenue, New York 22, N. Y. National Association of Food Chains, 726 Jackson Place NW., Washington 6, D. C. National Association of Independent Tire Dealers, 624 Wyatt Building, Washington 5, D. C. National Association of Purchasing Agents, 11 Park Place, New York 7, N. Y. National Association of Retail Druggists, 1163 National Press Building, Washington, D. C. National Association of Retail Grocers, 1112 du Pont Circle Building, Washington, D. C. National Association of Wholesalers, 708 Ring Building, Washington 6, D. C. National Candy Wholesalers Association, 1424 K Street NW., Washington 5, D. C. National Canners Association, 1133 20th Street NW., Washington 6, D. C. National Confectioners' Association of the United States, Inc., 221 North La Salle Street, Chicago 1, Ill. National Congress of Petroleum Retailers, Inc., 1249 Griswald Street, Detroit 26, National Council of Farmers Cooperatives, 744 Jackson Place NW., Washington, National Food Brokers Association, 527 Munsey Building, Washington 4, D. C. National Lumber Manufacturers Association, 1319 18th Street NW., Washington 6, D. C. National Oil Jobbers Council, Post Office Box 372, Charleston, S. C. The Commission on July 22, 1953, approved a motion authorizing the Chairman to appoint the committee. Pursuant to this authority, the Chairman on August 26, 1953, asked Professor Taggart to serve as Chairman of the Committee. QUESTION No. 6 What has been the cost to date of the study made by Dr. Taggert and his associates, and by whom has this cost been met? The total cost to date has been $953.79, which has been paid by the Federal Trade Commission. The Committee members are serving without compensation. The Federal Trade Commission is paing only the travel costs of attending meetings. No member of the Committee is an employee of the Federal Trade Commission, QUESTION No 7 Does the Commission know whether or not Dr. Taggart has been retained or employed in any capacity since January 1952 by any individual or company under investigation by the Federal Trade Commission or involved in any of its proceedings, or by any party having a direct interest in any of its proceedings? If so, list the names of the individuals or companies. It was known at the time Professor Taggart was appointed that he had been connected with a number of Robinson-Patman Act cost studies and had worked extensively in the field of distribution-cost accounting. He was, in fact, the recognized expert in this field in the academic sense. This was the reason why he was asked to serve as Chairman of the Advisory Committee. Among those who had employed him in formal Commission cases were the following: Crown Zellerbach Corp., Sylvania Electric Products, Inc., Thompson Products, Inc. QUESTION No. 8 Was the Federal Trade Commission reorganized effective June 30, 1954? The Federal Trade Commission was reorganized on July 1, 1954. On that date, and pursuant to the direction of the Commission, the recommendations resulting from the survey conducted by Heller Associates and approved by the Federal Trade Commission were made effective. This survey recognized, as did the survey undertaken by the Select Committee on Small Business (H. Rept. 3236, 81st Cong., 2d sess., Jan. 1, 1951), that (quoting from committee report on p. 10) “*** there seems to be opportunity for further improvement." This committee report had also pointed out "*** that the work of the Commission consists of a series of separate activities"; and *** the operating units have tended to become the vested interests of the officials in charge who have viewed their units as little domains operating independently of the agency as a whole. *** Planning council was established in part to establish a vehicle for integrating the work of the various bureaus, but soon met a barrier in the very bureau autonomy it was designed to overHere also is a field where a new and vigorous administrative policy is come. needed." On page 18 of the committee's report it is stated the Commission suffered from "*** heavy inbreeding resulting from a traditional practice of making promotions from within," and that "*** little improvement in the adminis tration of the Federal Trade Commission and Clayton Acts can be expected until this situation is remedied. The Select Committee on Small Business progress report, House Report No. 1228, 82d Congress, 1st session, January 7, 1952, stated on page 68, "certain improvements have been made in the organization of our antitrust agencies," but the committee was also "fully aware that much more remains to be done." In the final report of the committee, House Report 2513, 82d Congress, 2d session, December 31, 1951, the committee stated on page 287 that "vigorous action to simplify procedures is still clearly necessary.” The committee will note that many of the areas covered by the management survey recommendations are areas in which the Select Committee on Small Business reported weaknesses (H. Rept. 3236, 81st Cong., 2d sess., and 2513, 82d Cong., 2d sess.), such as a deficient organization, lack of delegations of authority, absence of a strong executive director, need for decentralization of authority and responsibility, delay in investigation and litigation of cases, absence of enforcement of Commission orders, shortcomings in the survey of advertising, and need for exercise of administrative control over staff. The reorganization of July 1, 1954, has already resulted in several significant improvements. These are: 1. The Commission in delegating authority in certain areas to Bureau directors and other officials has expedited the handling at the Commission level of the matters of greatest importance. One of the examples of the progress achieved relates to the speed with which litigated matters are being decided by the Commission. On April 1, 1953, when Mr. Howery assumed the chairmanship, there were 42 formal cases pending before the Commission for decision which had been assigned to individual Commissioners for 30 days or more. Of these, only 10 had been assigned in 1953, 27 in 1952, and 5 had remained unacted upon since 1951, 3 since January 5 of that year. In contrast, on April 1, 1955, only 7 cases had been unacted upon for more than 30 days and none had been assigned earlier than January 18 of this year. In this area as in others the management report recommendations coincided with the Select Committee on Small Business views quoted below from page 11 of House Report 3236, 81st Congress, 2d session: "Further delegation of authority over the processing of cases is in accordance with sound administrative procedure. There seems to be no compelling reason for refusing to permit the proper administrative officer to drop cases at any stage of the proceedings prior to the time when formal action by the Commission becomes legally necessary. In the last analysis the Commission can exercise only the most general supervision over the initial screening of cases anyway. It certainly seems incongruous to grant authority to drop cases at the close of a preliminary investigation, but to refuse to grant authority to close the same case once the investigation has passed the preliminary stage." 2. The coordination and supervision of Bureau directors by the Executive Director has made it possible to utilize the thinking and manpower of the personnel of the bureaus in attaining objectives to a degree not heretofore possible, has reduced interbureau friction, and with the new procedures has helped in solving the problem of "fragmentation" and the tendency of "*** operating units to become the vested interests of the officials in charge," quoting from the committee report 3236, page 10. 3. The project attorney concept has improved the control over investigations and has made a substantial contribution to the solution of the problem voiced by the committee on page 20 of House Report 3236, when it said: "An inordinate amount of time has been devoted to just plain 'sleeping' on a case." The project attorney has an application for complaint assigned to him under this procedure and the planning and expedition of the matter is his responsibility throughout the investigative phase; if the matter proceeds to trial, the project attorney is available to serve in an advisory capacity if needed. He also institutes and expedites the gathering of such supplemental evidence as is necessary to the successful trial of the proceeding. 4. In many areas, nonessential reviews, assignments, referrals, and other procedural steps, as illustrated by the flow charts, exhibits B and C, on investigative phase of the Commission work, have been eliminated. Formerly there were 25 reviews and assignments in a deceptive practice matter and 30 in an antimonopoly matter. The number of assignments and reviews in this activity is now 8. This in part solves the problem voiced in the House Report 3236, 81st Congress, 2d session, January 11, 1951, page 22, quoted below: "The many referrals, assignments, and reviews which have been characteristic of the Commission's operations have also made quick action a near impossibility. Each clearance takes time at best and at worst can create a serious jam. The Commission's new organization should help this situation somewhat but will not correct all the trouble. Some of the worst instances of this kind of redtape are intrabureau rather than interbureau." In the final report of the committee, House Report 2513, 82d Congress, 2d session, December 31, 1952, on page 287, the committee reiterated its concern with the delays caused by the "many referrals, reviews, and clearances." 5. There has been a reduction in delay and an increase in efficiency of the Commission's staff, particularly in the antimonopoly investigative phase as the following statistics show. Number of antimonopoly investigations pending in the branch offices as of June 30, 1953, May 31, 1954, and January 14, 1955, divided into groups showing the length of time the investigation has been pending in the branch office: The committee is also referred to the answer to question 47, where the reply shows a reduction in time between the completion of the investigation and issuance of complaint in antimonopoly cases. 6. The number of clerks engaged in recordkeeping of investigations has been reduced from 32 full time and 6 part time, costing $126,709, to 17 full time and 1 part time, costing $68,505. 7. The advertising survey has been revitalized and redirected and though the number of personnel has been reduced from 9 to 4 and the cost from $43,545 to $32,100, the worth of the new staffing of this activity is apparent from the statistics below, covering the period February 21 through March 20, 1955: 8 apparent violations of orders to cease and desist were reported to the Division of Compliance, General Counsel's Office; 67 apparent violations of stipulations or trade practice rules were reported to the Bureau of Consultation; 8 apparent violations of law were reported to the Bureau of Investigation. QUESTION No. 9 List the names of the Commissioners, the General Counsel, and the Bureau heads and state the salaries of each as of July 1, 1954. Edward F. Howrey, Chairman__ Lowell B. Mason, Commissioner_. James M. Mead, Commissioner_. John W. Gwynne, Commissioner___ Earl W. Kintner, General Counsel__. Joseph E. Sheehy, Director, Bureau of Litigation__~ Total-- $15,000 15,000 |