AMEND FEDERAL TRADE COMMISSION ACT MONDAY, MARCH 11, 1946 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee reconvened at 10 a. m., Hon. George C. Sadowski, chairman of the subcommittee, presiding. Mr. SADOWSKI. The committee will come to order. Our first witness this morning is Mrs. Mary Keyserling. Will you kindly state your name and the organization you represent? Mrs. KEYSERLING. My name is Mary Dublin Keyserling. I represent the American Association of University Women. Mr. O'HARA. What is the address of your organization? STATEMENT OF MRS. MARY DUBLIN KEYSERLING, REPRESENTING AMERICAN ASSOCIATION OF UNIVERSITY WOMEN Mrs. KEYSERLING. The American Association of University Women is strongly opposed to the provisions of H. R. 2390, to amend the act creating the Federal Trade Commission. It contends that the amendments offered by the bill are not only wholly unnecessary but would, if enacted, deprive the consumer of present protection against misleading and highly dangerous advertising, by making it impossible for the Federal Trade Commission effectively to control the advertising of potentially dangerous cosmetics and patent medicines. Further, the bill is detrimental to public interest, in our view, in that by lowering present penalties for violations of an order of the Commission, now too low to afford adequate consumer safeguards, it would make of penalties mere license fees. The proposed bill would, we believe, deprive the public of much of the invaluable protection that has been given by the Federal Trade Commission, in that the amendments proposed would break down the Commission's essential administrative function and by vastly increasing the number of cases which would be taken unnecessarily into court, tie up its limited resources in long-drawn-out expensive and fruitless proceedings. Consumer protection from fraud, potentially dangerous drugs and cosmetics, misleading advertising and unfair competitive practice is far from fully effective today. We regard with serious misgivings any attempt which would break down any protection for which those with the public interest at heart, the American Association of University Women among them, have fought for over 30 years. This is no time to tinker with established procedures which years of experience have proved fair and reasonable and beyond question of benefit to the community. This is not time to concede to the demands of small special interest groups who shortsightedly put their concern for private gain above the public benefit. These are the facts as we see them: This bill would make a very important change in the Federal Trade Commission Act, (sec. 15) which now defines false advertising as that which is misleading in a material respect. In determining whether advertising is misleading, the present law requires that there be taken into account "Not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or," and this I underline, "material with respect to consequences which may result from the use of a commodity to which the advertisement relates under the conditions prescribed in said advertisement or under conditions as are customary or usual." The last part of this requirement has proved especially essential to public protection. The use of drugs is a complicated business. The consumer, drawn to a preparation by an advertisement, may not know that its use may be habit-forming, that it may cause permanent functional injury, that it may produce insomnia or far more injurious consequences, unless he is so warned. Because of the protection afforded by the present law, the Federal Trade Commission has been able to require the advertisers of certain products to reveal the possible consequences of which the consumer should be fully apprised. We consumers are more than entitled to know that the use of a given preparation may result in grave injury. Far from being too strong, we hold that the present law is weak, in that the consumer is now informed of potential danger but can still buy a product which could result in permanent injury to the heart, to tissues, or to organic functions, or cause other irreparable damage. Why, then, we ask, should the phrase which requires an indication in advertising of these potential dangers, where they clearly exist, be stricken from the law as this bill proposes? The warning in advertising now required is little enough protection of the consumer. If the law is changed in this respect as proposed, we cannot but foresee an increased sale of products which have proven seriously harmful to some users in the past and of menacing new ones. It is not enough to prevent deception resulting from ambiguity and indirection or from false statement, all that H. R. 2390 would require. To do away with the indication now required of potential consequences of the use of a drug or other product when used under customary or usual conditions, or under conditions prescribed in the advertisement is not only unjustified; in our view it is dangerous in the extreme. A second serious danger contained in the proposed bill is the provision which would put a ceiling of $10,000 on penalties imposed on violators of an order of the Commission and reduce from $5,000 to $1,000 the penalty for each violation. We hold that present penalties are not adequate deterrents of violation on the part of firms with the immense resources of presentday corporations. Further, to reduce this deterrent would be to make of it merely a license fee rather than a fine. We would point out that $5,000 would far from pay for one good advertisement in a national magazine or over the air. Perhaps the most serious dangers of the bill, in our minds, are those which strike at the heart of the powers of the Commission. At the present time, any order of the Commission to cease and desist certain practices is subject to review by an appropriate United States Circuit Court of Appeals at the choice of the affected party. The full record of the Commission's proceedings is in all such cases certified to the court and, as is well-known, the Commisison's findings as to the facts, if supported by evidence, are held conclusive. This has been the standard administrative procedure under the law, not only of the Federal Trade Commission but also of other quasijudicial governmental agencies, such as the Interstate Commerce Commission, the Federal Communications Commission, the Securities and Exchange Commission, and others. Those against whom cease and desist orders have been issued have the fullest protection of the courts against arbitrary or unreasonable action, and, as is evidenced by the record, the courts have not hesitated in a few cases where the courts have found the Commission's orders were not supported by substantial evidence, to set the Commission's orders aside. We can see no reason for any change in the present procedures of the Federal Trade Commission. H. R. 2390 would, if enacted, require that the Commisison's findings as to the facts be held conclusive by the court only "if supported by the preponderance of the evidence." The implications of this change would make one wonder whether some supporters of this proposal do not seek to cripple the powers of the Commission rather than to assure that justice is done. For what this would do would be to require that the courts in all cases brought before them become experts in the issues themselves, review and weigh all the evidence on both sides, and reach an independent conclusion as to the facts. Obviously, this would impose a tremendous burden on already overburdened courts. Proceedings would be greatly extended, the course of litigation would be greatly increased. The unscrupulous, who are always eager to make money, even out of dangerous products, might bring case after case into court, tieing up the Commission and the courts in endless litigation. What a device this would be in the hands of those whom we know would be ready to exploit it to the full. The highly specialized functions of the Commission, which has served the public well and long, would be transferred, under H. R. 2390, to the courts, and the Commission would become merely a rollector of evidence. If the procedure proposed by the bill is warranted in the case of the Federal Trade Commission, which we contend it is not, then it is equally appropriate to all other quasijudicial bodies. Can anyone imagine how our justices, able as they are, could become experts as to the facts in fields as diverse as trade practices, national labor relations, communications, and interstate commerce, to mention but a few? Can one conceive of the difficulties and delays that would result? Could one expect that the essential public protection the Federal Trade Commission now affords would be strengthened? We feel that justice would not be served; it is well served now. The proposed change is not only unnecessary; in our view, it is a threat to practice long tried and long proven in the public interest. The American Association of University Women must conclude that the provisions of H. R. 2390 would deprive the consumer of necessary safeguards the law now affords. We urge that the bill be voted down with the least possible delay. Mr. SADOWSKI. Thank you. Mr. REECE. May I ask if you are a member of the bar? Mrs. KEYSERLING. No, I am not. Mr. REECE. A good portion of your statement dealt with the court review provisions of the bill, and I was wondering if you had advised with some member of the bar in connection with that. Mrs. KEYSERLING. No, sir; I have not. I am an economist but not a lawyer. Mr. O'HARA. Just one or two other questions: In your comments upon the drug and cosmetic angle, particularly with regard to the matter of drugs, would you suggest that the law should be that every person who wants to buy headache tablets or something of that type should only do so by prescription of a physician? Mrs. KEYSERLING. I feel that in the case of drugs not potentially harmful, or injurious, the consumer should be free, as he is at present, to purchase as he chooses. Mr. O'HARA. Do you think the average purchaser of the average drug which he can buy without prescription reads the directions and labels upon the drug? Mrs. KEYSERLING. I am afraid not-I am afraid very few do. Mrs. KEYSERLING. So that the advertising which leads him to learn of the product is, in our minds, a very important place for him to get the information he should have. Mr. O'HARA. How much do you think he would read the advertising? Mrs. KEYSERLING. I think people read a good deal more than one sometimes thinks. Mr. O'HARA. Well, in your comments upon the legal end of it, do you know how long it takes an appeal to go from the Federal Trade Commission to the Circuit Court of Appeals to be argued, generally, as to what the limitation is? Mrs. KEYSERLING. I do not know what that limitation is. Mr. O'HARA. Do you have any idea how long it takes some of the cases to be tried in the Federal Trade Commission? Mrs. KEYSERLING. No, I have not analyzed that record. Mr. O'HARA. That is all. Mr. REECE. Just in that regard, of course primarily responsibility for protecting the public from injurious drugs rests with the Food and Drug Administration, which I think you will agree has done a very good job in administering that provision of the law. That responsibility was given the Food and Drug Administration because it had the technical and laboratory facilities and the staff to enable it to determine the therapeutic value of drugs. Then in order to enable the Food and Drug Administration to move rapidly in protecting the public, where an injurious drug appeared on the market, it was given power to seize the injurious drug and immediately remove it from sale and likewise move directly in the Federal court by direct action, both in connection with the seizure and also in a criminal prosecution where the law had been violated, and likewise go immediately into the Federal court and get an injunction to enjoin any violation of the law. Now, Dr. Dunbar in his letter with reference to this bill called attention to the fact that the Federal Trade Commission's chief course of action to protect the public lay in obtaining a cease and desist order, which usually follows a long investigation and development, as has been referred to by the witnesses with respect to the Federal Trade Commission. Then that is subject to legal procedure of different types. Dr. Dunbar points out instances where the limitation over a cease-anddesist order has continued for as high as 2 years, during which time the injurious drug could be sold and would continue to be sold. Now, what would your idea about any additional power which the Food and Drug Administration might need, giving all that power to the Food and Drug Administration so as to enable it to move directly on every phase of the distribution of a product so as to enable it to rapidly protect the interests of the public without waiting for long legal proceedings such as obtains in the case of a cease-and-desist order? Mrs. KEYSERLING. We feel that the powers of the Food and Drug Administration are exceedingly important and have been very effective in protecting the consumer from the sort of products that you mention. However, we feel that there is a different function, different in emphasis, having to do with the advertising of a commodity, which the Federal Trade Commission has exercised under the present law. We feel that the consumer is informed of many of these potentially harmful products through advertising, and therefore would regret it if the present law which makes it necessary for an advertisement to indicate potential dangers were limited. We feel that it is important that that power not be limited. It is quite a different power from that which the Food and Drug Administration exercises. Then, to comment on another aspect of what you have just said. Now, as to delays in proceeding: As we have reviewed the record we have been very much impressed by the fact that although the Federal Trade Commission receives thousands of complaints, a very large proportion of the practices which violate the law have been altered on a voluntary basis without the institution of legal proceedings. As we have looked at the record we have found that a very small proportion of the cases actually have had to go into the courts, and we feel that that is something which should very definitely be borne in mind. It is to us an impressive record. Mr. REECE. Have the Commission or members of the staff advised with you with regard to your statement? Mrs. KEYSERLING. No, in no way. |