cause you find a reviewing court in a State, or the circuit court of appeals in a circuit, finding some small bit of evidence and saying, “Well, you might have found differently, but there is some evidence to sustain the triers of facts." I think the damage is done in regard to the finding of some small bit of evidence which is greatly outweighed by other evidence, and the remedy is gone when you go to the circuit court of appeals or appellate court as the case may be. They may make their decision on some small bit of evidence. I think in some of these cases that arise until we get a trial de novo, it is going to be difficult for Congress to afford relief on some of these complaints of administrative injustices. Do you agree with me or not?

Dr. STASON. No; I don't agree that a trial de novo is the solution. I would add a qualification to that, and, if I may, I would rather explain it a little later.

Mr. O'HARA. Very well.

Dr. STASON. The third defect in section 5 (c) to which I would refer has to do with the possibility of court review of the remedy that is ordered by the Commission. The Commission, of course, enters its cease-and-desist order. The court is given the power to reverse, affirm or modify, subject to the provision that the decision on questions of fact, if supported by evidence, shall be conclusive. The courts have been construing that power to modify in a rather restrictive way. In fact, the courts have said in recent years that the question of the remedy to be applied is discretionary or should be discretionary with the administrative agency, and being discretionary, should not be subject to judicial review. As a consequence, the power of the court is circumscribed, and if it decides that the fact decision is supported by substantial evidence, that there are no errors of law, it must sustain the cease-and-desist order, even though the remedy which is prescribed goes beyond what seems to be the reasonable needs of the case. I quote from the A. P. W. Paper Co. case, a 1945 case:

The present order goes beyond permissible limits in forbidding any use of the words "Red Cross." Accordingly, the order must be reversed and the case remanded to the Commission for the entry of an order which will not infringe the rights of the petitioner under the Red Cross Act above considered. We do not ourselves attempt to formulate a new order, because our recent decisions have held that the measure of the necessary relief is peculiarly within the competence of the Commission.

Now, ever since the decision, 5 or 6 years ago, by Judge Hand, in the so-called Herzfeld case, it has become increasingly clear that the question, of the remedy is one which the courts deem to have been left within the discretionary control and power of the Commission, that the court should not intervene at that point, even though it deems the remedy unduly harsh and severe.

Those are three of the features of section 5 (c) to which I refer as seeming to need statutory decision.

Now, there is the fourth, and the last proposition that I would like to make, and that is this: The Federal Trade Commission process, beginning with the issuance of the complaint and ending with the entry of a cease and desist order, is a very thorough process indeed, handled with great skill, and yet to an outsider like myself, it doesn't look like a properly developed quasi-judicial procedure. It is a very high-class investigatory procedure. It lacks many of the essential elements of fairness that should inhere in a quasi-judicial process.

Now, to be somewhat more specific. In the first place, the issuance of the complaint is passed upon by the Commission. The Commission itself becomes the grand jury in the proceeding. Then in the second place, the trial examiner is no real authority. He presides over the taking of testimony; he has no power to rule on motions; just as he has no power to enter a recommendation involving a conclusion of fact or law. In the third place, there is nothing like an intermediate report submitted either by the examiner or by the Commission, giving a statement of the conclusions of law to be drawn tentatively from the facts, and, as a consequence, there is very little before the Commission at the final hearing, for counsel for the respondent to bite into, and there is very little by way of framework on which the Commission itself can work in hearing the argument and formulating its decision.

Mr. O'HARA. May I ask a question there?

Dr. STASON. Yes.

Mr. O'HARA. Does the examiner rule upon questions of admissability of testimony?

Dr. STASON. Yes. The process does not, therefore, result in a thoroughgoing trial at any stage, but in addition, because of the organization of the process it has a strong tendency to reduce the confidence that should be engendered by all tribunals that have quasi-judicial or judicial functions and powers.

Now, those are the four phases of section 5 (c), and the last, of course, deals with the general process leading up to the cease and desist order to which I would refer.

Now, may I take up the other side of the picture and offer a few observations concerning what might be done to deal with the situation? May I turn now to H. R. 2390, and particularly to section 5 (c) thereof. I will address myself to the phases of the proposed amended bill in the same order as I discussed the defects, as I see them.

First, regarding the proposal concerning the standardization of review of questions of fact. Lines 22, 23, and 24, page 2, constitute the revision and provide that—

The findings of the Commission as to the facts, if supported by the preponderance of the evidence, shall be conclusive.

A question was asked a short time ago as to whether or not I would be inclined to favor a trial de novo. I answered no, with a qualification. This sentence that I have just read, the preponderance of evidence sentence, would, in effect, make the court proceeding a trial de novo on the same record as that prepared by the Commission, instead of being a trial de novo in the sense that new testimony is taken. It would be a trial de novo, excepting that the record would be prepared by the Commission.

I would agree that the preponderance of the evidence rule is satisfactory, and indeed justifiable, if the Commission continues to retain its present administrative process.

I have just referred to the defects as I see them in the process, beginning with the complaint and ending with the cease and desist order. I say it is a splendid investigatory process, but it is not a quasi-judicial proceeding. If the Commission continues to follow such an investigatory process, leading up to its cease and desist order, then it seems to me there is very strong justification for a review by the courts on a

preponderance of the evidence. However, as an academic person, I would hope that the time would come when the Federal Trade Commission for one reason or another would adopt a more satisfactory quasi-judicial process, and if it should do so, I would favor a more limited judicial review of the facts.

Now, to be specific, there is before the Congress at the present time a bill known as the McCarran-Sumners bill. I know it by its Senate number only, S. 7, but I understand a corresponding bill has been introduced in the House of Representatives also.

The McCarran-Sumners bill is a bill which very carefully attempts to prescribe the course of procedure to be followed by an administrative agency-not only the Federal Trade Commission, but most other administrative agencies-between the time of the initiation of a proceeding and the entry of the final order. There is a great deal in that bill that is worthy of enactment.

If that bill should become law, and it is my understanding that it is being given very careful consideration in committee at the present time, then certain very marked improvements would be made in the administrative process of the Commission itself.

One section of the bill provides rather carefully for a separation of the functions of the investigatory staff and the trial staff. Another section of the bill empowers the examiner to control the trial far more than an examiner of the Federal Trade Commission does today. He becomes, really, a judge in the proceeding; he has the power to issue subpenas, to, of course, rule on testimony, to rule on motions and to enter a final decision on the facts and the law. Or, in the alternative, to prepare and submit a recommended decision. The examiner becomes under that McCarran-Sumners bill a real judge. He is the judicial authority.

In order to achieve judicial impartiality and independence, the bill makes some very specific provisions regarding the tenure and salary arrangements for trial examiners. They can be removed only for cause; their salaries are adjusted under regulations of the Civil Service Commission.

Should that bill become law, there would still be ample power in the responsible commission to control the situation. The Commission would have the authority on appeal from a decision of the examiner to review the whole record. Or, if the other course of procedure should be adopted and a recommended decision should be filed by the trial examiner, the Commission, of course, would enter the final decision. Whichever course is followed, when the proceedings get to the commission stage, they would be focused on either the decision of the examiner or a complete intermediate report, and the commission stage would be much like that of an appellate court in judicial proceedings. No, I say if the McCarran-Sumners bill becomes law-and it is a bill that has been given the most careful consideration for many years-it will effectually improve the administrative process, and assuming that it applies to the Federal Trade Commission, I would say that the preponderance of evidence rule would no longer be

necessary.

Instead, I would suggest something different. I would suggest a clear definition of the substantial evidence rule. And may I make that specific?

Mr. RABIN. You make that suggestion based upon the assumption that that bill will be passed?

Dr. STASON. That is right. On that assumption I would have a little different language in the review section, and if I may do so, I shall point out just the language I would use.

The CHAIRMAN. Very well.

Dr. STASON. The sentence that reads, "The findings of the Commission as to the facts, if supported by a preponderance of the evidence, shall be conclusive," lines 22, 23, and 24 of page 2, of H. R. 2390, I would revise to read as follows:

The findings, inferences, and conclusions of the Commission as to the facts shall be conclusive if, and only if, they are found to be supported by substantial evidence upon consideration of the whole record, or such portions thereof as may be cited by the parties.

May I read that again? Because there are two features of it to which I would refer more specifically, and I know how difficult it is to follow a long, complicated sentence.

The findings, inferences and conclusions of the Commission as to the facts shall be conclusive if, and only if, they are found to be supported by substantial evidence upon consideration of the whole record, or such portions thereof as may be cited by the parties.

That is the language I would use if the improved process of the McCarran-Sumners bill should be effectuated either by the adoption of that bill or in some other way.

Mr. REECE. It would be your hope, in that event, that the language that you have suggested would accomplish the same purpose that the preponderance of evidence language as now embodied in the bill is intended to accomplish?

Dr. STASON. That is right. The change in the language, plus the change in the process, would accomplish the same objective.

You will notice that the proposed language achieves two purposes, and meets two of the four points that I made reference to as defects in the present law. First, the word "evidence"

* * * conclusive of the facts, if supported by evidence

is considerably modified and strengthened and clarified. It will be "substantial evidence" written into the measure and not just by judicial interpretation drawn in. Moreover, it will be substantial evidence upon the whole record, a phrase which has come to mean, in judicial parlance, more than the scintilla rule, more than an examination of the evidence on just one side, but an examination of the whole record on both sides. So that language would be my suggestion to cover the first two alleged defects.

Third, I want now to direct attention

Mr. REECE. If I may interrupt again.

Dr. STASON. Yes.

Mr. REECE. As I recall, earlier you referred to the opinion rendered by Chief Justice Stone.

Dr. STASON. Yes.

Mr. REECE. My attention is called to that, and it reads this way:

It has not long been settled that the findings of the Board, as with those of other administrative agencies, are conclusive upon the reviewing courts, when supported by evidence, that the weighing of conflicting evidence is for the Board, not the courts, that the inferences from the evidence are to be drawn by

the Board and not by the courts, save only as questions of law are raised, and that upon such questions of law the experienced judgment of the Board is entitled to great weight.

Dr. STASON. Yes, sir. one I read awhile back. The CHAIRMAN. Yes.

I think that is the same statement as the
Shall I turn now to the third point?

Dr. STASON. I will now direct attention to the question of remedy and the authority of the court, if any, to modify the remedy prescribed in the cease and desist order. As I said previously, the recent decisions have precluded the courts from dealing with the question of remedy. Lines 14, 15, 16, and 17, on page 2, of H. R. 2390, purport to deal with that problem.

The court

shall have the power to make and enter upon the pleadings, evidence, and proceedings set forth in such transcript a decree affirming, setting aside, or modifying, as in its judgment the circumstances of the case require, the order of the Commission * * *

Now, I think that the propriety of the remedy should be subject to some judicial control. I don't think it is sound to take the position that the remedy is exclusively for the Commission to determine and courts may not intervene even though the remedy is unduly severe. Of course, the courts may always intervene if there is an abuse of discretion, but that is a state seldom achieved. Therefore, I think the objective lying behind the addition of the words "modifying the order, as in its judgment the circumstances of the case require" has merit.

I am going to take the liberty, however, of pointing out one or two phases of that proposed amendment that I think are worthy of consideration. It is at least possible that the proposed language would be construed by the court to accomplish nothing more than was accomplished under the original language. At the present time the word "modifying" as set forth in section 5 (c) gives the court the power to affirm, modify, or set aside. The courts have really written that word "modify" out of the present section 5 (c), and there is at least a possibility that the courts will, with equal ease, read out the new clause "modifying, as in its judgment the circumstances of the case require." I will agree, of course, it would be somewhat more difficult to read out the new phrase for various reasons, but still it is a possibility.

On the other hand, suppose the court doesn't read it out. Suppose the court says that means that the discretion to deal with the remedy is now transferred from the Commission to the court. Is that what is really desired? Or is that going further than is wise in the premises? If the court proceeding is to be made virtually a trial de novo, then of course a broader concept of the broader concept of a full discretionary power in the court is the correct one to pursue. On the other hand, if the court review is to be a review for the purpose of correcting palpable errors in a satisfactory quasi-judicial process, I believe the transfer of the full discretionary power from the Commission to the court is going too far.

Again that comes back to the question of what is going to be done with the McCarran-Sumners bill. Should the McCarran-Sumners bill be adopted, or should the procedure of the McCarran-Sumners