228 FOODS, DRUGS, AND COSMETICS "(d) If it purports to be or is represented as a food for which a definition of identity has been prescribed by regulations as hereinafter provided, and (1) fails to bear on its label the name of the food defined in such terms as the regulations specify, or (2) fails to conform to the definition. "(e) If it purports to be or is represented as a food for which standards of quality have been prescribed by regulations as hereinafter provided, and (1) fails to state on its label, if so required by the regulations, a standard of quality in such terms as the regulations specify, or (2) falls below the standard stated on the label. "(f) If it purports to be or is represented as a food for which no definition of identity has been prescribed by regulations as hereinafter provided, and its label fails to bear (1) the common or usual name of the food, if any there be, and (2) the common or usual name of each ingredient thereof in order of predominance by weight; except that spices, flavors, and artificial colors may be designated as such without naming each spice, flavor, or artificial color. The Secretary is hereby authorized to prescribe by regulations requirements for such further information on the label thereof as he may deem necessary to protect the public from deception." Sections 7 of S. 2000 and S. 2800 provided as follows: "A food shall be deemed to be misbranded: "(d) If it purports to be or is represented as a food for which a definition and standard of identity have been prescribed by regulations as provided by section 11 and (1) its label fails to bear, if so required by the regulations, a statement of a standard of quality in such terms as the regulations specify, or (2) it falls below such standard. (f) If it is not subject to paragraph (d) of this section and its label fails to bear (1) the common or usual name of the food, if any there be, and (2) the common or usual name of each ingredient such food bears or contains in order of predominance by weight; except that spices, flavors, and colorings, other than those sold as such, may be designated as spices, flavors, and colorings without naming each: Provided, That to the extent that compliance with the requirements of subdivision (2) of this paragraph is impracticable because of normal variations in ingredients or their quantities, usual to good manufacturing or packing practice, reasonable variations from the stated order of such ingredients shall be permitted, and exemptions as to packages of assorted food shall be established by regulations promulgated by the Secretary. You will note that the provisions of section 7 as contained in S. 1944, S. 2000, and S. 2800 expressly provide that the Secretary shall have power to establish (1) minimum standards of identity, (2) minimum standards of quality, (3) in the event minimum standards of identity or minimum standards of quality are not prescribed by the Secretary then all foods must bear a label indicating the common or usual name of the food if there be any, and the common or usual name of each ingredient such food bears or contains in order of predominance by weight. Under the above provisions the Secretary is granted power to dictate the manner in which all foods shall be sold, and to promulgate legal definitions and standards for the sale of all foods. You will also note that no provision is made for the sale of foods commonly called mixtures, compounds, and fillers, sold under a distinctive name. Practically all of our members manufacture, produce, prepare, pack and distribute compounds, mixtures and fillers to the baking and confectionery industry, Under the provisions of (f) above set forth it is questionable as to whether or not definitions of identity could be established for the products in question. Therefore, we are confronted with the requirement of a complete form of disclosure of all such products. It is my opinion that the bakers, confectioners, restaurants, institutions, and certain competitors would like nothing better. It would be possible for them, with their working knowledge of the industry to reproduce the products and they would no longer require our products. Our competitors could in some fashion duplicate the products that it has taken years to develop, list practically the same list of ingredients and claim the inferior products to be just as good as the originals Our members would be placed at a decided disadvantage and would sustain irreparable losses in moneys invested in the production of such products, loss of good will extending over long periods of time in the development of the products and without much benefit to the consuming public. FOODS, DRUGS, AND COSMETICS 229 I also wish to call attention to the fact that the majority of these compounds, mixtures, and fillers are not sold to he consuming public, that is, to the housewife, but are sold to bakeries, confectioners, restaurants, institutions, and so forth, intended for further manufacturing purposes. I question very seriously as to whether or not it is possible to perpetrate a fraud upon experienced bakers, confectioners, restaurants, and institutions. Therefore, it is my recommendation that (d), (e), and (f) be amended to provide that no provision contained therein shall be construed to apply to food products intended for use for further manufacturing purposes. Also at this time wish to register serious complaints regarding section 23 of S. 1944 general administrative provisions and section 22 of S. 2000 and S. 2800 general administrative provisions. Under the aforesaid section the Secretary of Agriculture allocates to himself discretionary authority and dictatorial power over the food, drug, and cosmetics industries. The basic principle of our Constitution and the protection of American industry are threatened. The three branches of our Constitution, namely, legislative, executive, and judiciary, are to be merged into one. If the above bill passes the Secretary of Agriculture shall become (1) the legislator, (2) the executive, and (3) the judiciary in the enforcement of the Food, Drug, and Cosmetics Act. It is our further contention that there is no immediate demand or necessity at this time for a complete revision of the Federal Food and Drug Act of 1906. We also wish to interpose general objections to the other provisions contained in these bills, namely: Section 3: Adulterated food. Section 6: Misbranded food, drugs, and cosmetics-general. Section 9: False advertisement. Section 10: Tolerances for poisonous ingredients in food and cosmetic and certification of coal-tar colors for food. Section 11: Definitions and standards for food. Section 12: Permit factories. Section 13: Factory inspection. Section 14: Records of interstate shipment. Section 15: Investigations and institutions of proceedings. Section 16: Seizure. Section 17: Penalties. Section 19: Injunction proceedings. Section 20: Imports and exports. Section 21: Publicity. Section 23: Court review of regulations. Section 25: Effective date and repeals. NATIONAL ASSOCIATION OF BAKERS' AND By JOHN S. HALL, Attorney. The CHAIRMAN. The committee will now take an adjournment until tomorrow morning at 10 o'clock. (Whereupon an adjournment was taken until Thursday, Mar. 1, 1934.) FOODS, DRUGS, AND COSMETICS THURSDAY, MARCH 1, 1934 UNITED STATES SENATE, The committee met, pursuant to adjournment at 10 a.m., in the caucus room, Senate Office Building, Senator Hubert D. Stephens presiding. Present: Senators Stephens, chairman, Murphy, Caraway, Clark, Copeland, Bachman, Gibson, Erickson, Hebert, Brown, Overton, and Vandenberg. The CHAIRMAN. Come to order, please. Judge Davis. STATEMENT OF HON. EWIN L. DAVIS, COMMISSIONER, FEDERAL TRADE COMMISSION The CHAIRMAN. You may proceed, Judge, to discuss the matters that you have in mind. Judge DAVIS. Mr. Chairman, and gentlemen of the committee, it was indicated that the committee would be glad to hear whatever the Federal Trade Commission might desire to state in relation to the bill under consideration, S. 2800, and the Commission delegated me to appear in that capacity. I wish to state that we appreciate this privilege, and I shall undertake to be brief in what I may say, unless questions of the committee may lengthen the time required. We assume that it is not expected of this Commission to give any opinions in relation to any feature of the bill as it relates to any other agency, and consequently I shall only discuss it from the standpoint of the jurisdiction of the Federal Trade Commission. As perhaps you are aware, the Federal Trade Commission has jurisdiction over false and fraudulent advertisements. In its organic law it has enjoined upon it the duties of preventing unfair methods of competition in commerce, and the courts have repeatedly and uniformly held that false and fraudulent advertising came within that category. Senator VANDENBERG. Judge, you are referring, now, not only to food and drug advertising, but all fraudulent advertising? Judge DAVIS. All advertising, Senator. The Commission has exercised this jurisdiction from its beginning about 19 years ago, and during that time has handled many thousands of advertising cases relating to every article of commerce, almost. An examination of the reported cases indicates that about 70 percent of the Federal Trade Commission's unfair-method-of-com 231 232 FOODS, DRUGS, AND COSMETICS petition cases have related to some form of advertising, and of this 70 percent of their cases, embracing many thousands, about 20 percent related to food, drugs, and cosmetics; the other 80 percent relating to various other forms and classes of commodities. The procedure before the Federal Trade Commission in relation to unfair-methods-of-competition cases is that when a complaint is made, or in any manner there comes to the knowledge of the Commission a probable violation of such law, a preliminary investigation is made, sometimes in the form of a questionnaire, and sometimes by personal contacts through one of the Commission's field investigators. If it reaches a point that it is indicated that there is a probable violation of law, a formal complaint is issued. The respondent is served with a formal, specific complaint, is given 30 days within which to answer, if he desires to litigate it, and then it pursues the same course, practically, as a case in court. An attorney of the Commission takes proof, before a trial examiner of the Commission, who is skilled in that work, and who is absolutely impartial. He has had nothing to do with the preparation or prosecution of the case, and then counsel for the respondent is entitled to present whatever proof they desire. Then the trial examiner prepares a written finding of facts, to which either counsel may note an exception, and be heard before the Commission. Then the case is submitted to the Commission upon brief, and also upon oral argument if desired, and the Commission itself, of course, having nothing to do previously with the prosecution or investigation, sits there in a judicial capacity and undertakes to decide the case in accordance with the law and the facts; and in that connection, under the Federal Trade Commission, has grown up a long line of precedents, not only in the Commission, but in court decisions, because our cases have been reviewed time after time by courts, including the Supreme Court. The Supreme Court recently rendered two very important decisions affirming this Commission. Senator COPELAND. Was one of them in the Marmola case! Judge Davis. That is not the one to which I referred. That was a case; yes, sir. That was one of the cases. Senator COPELAND. In that case, did not the court hold something to the effect that the Federal Trade Commission could hardly act, because it was competition between two knaves, and that the Federal Trade Commission had to do with competition between concerns, and nothing to do with health, itself! Judge Davis. It held the former; yes, but not the latter. It reversed the Commission, on the ground that it was competition between knaves, and ignored the public equation; but I would say that in that respect that was quite an extraordinary decision, and we haven't had a difficulty of that kind except in very few instances; and furthermore, we expect to ask for and to procure an amendment to our act, which will cure the difficulty which was presented in that decision. Senator COPELAND. Is there any conflict between the Federal Trade Commission and the Bureau of Food and Drugs? Judge DAVIS. No; I want to state that there has been a fine cooperation between the Commission and the Pure Food and Drug Division of the Department of Agriculture. They have heretofore re FOODS, DRUGS, AND COSMETICS 233 peatedly referred to the Commission false advertising upon which the Commission has proceeded to act. In turn, we have repeatedly called upon them for analyses of drugs and foods and cosmetics, and asked for their opinion as to the therapeutic value, and other facts, which would aid us in determining whether or not there was false or fraudulent advertising, and they have always responded, and have been very helpful to us. In like manner, we have occasion to call upon the Bureau of Standards for reports in relation to matters over which they have jurisdiction; and sometimes we call upon the Public Health Service for opinions on certain cases, and furthermore we have occasion to refer some cases to the Department of Justice, which occurs frequently, and then, to the Post Office Department, when it appears that it is a fraud case-a case which comes within the criminal laws, and in turn they frequently refer cases to us, where perhaps they cannot make a criminal case, but where it does appear that they would come under the jurisdiction of our Commission. Now, of course, Senator Copeland, that Raladam decision to which you refer is very much akin to some of the decisions_that have been rendered, shaving the authority of the Food and Drug Administration, which have made it apparently necessary to strengthen their jurisdiction and their law, and we, as I say, expect to seek some similar amendments, similar in nature, and certainly not radical, but largely procedural, which we think will obviate a difficulty in what we conceive to have been rather strained interpretations, made without reference to the public interest. In other words, the theory of that case, as I view it, was that we had a right to correct false advertising in an industry which was 95 percent rotten, or less, but if it was 100 percent rotten, the public would have to be left without protection. Senator COPELAND. Well, Judge, I am not quite so sure, if you will permit me to say it, why you are appearing. Are you in opposition to the bill? Judge DAVIS. No; I am not. Senator COPELAND. I want to say for myself that I have been so much interested in that feature, of your angle, that in the Appropriations Committee and on the floor, I have always made a plea for larger appropriations, because I see the importance of it; but I have taken the position that there is no conflict whatever between your work and the work of the Pure Food Division, because you are dealing with competition between concerns. You take in the bakingpowder cases, where there was a reflection on the part of one concern against another, where there was an unfair practice, but, of course, this bill before us has to do with the protection of the public health, and does not have to do with those competitive features which you deal with. Judge DAVIS. Yes; it has to do with the protection of the public health, and yet the proposed bill gives the Food and Drug Administration jurisdiction over all advertising of food, drugs, and cosmetics, and as a matter of fact most of the false advertising with reference to all of them does not involve the question of injury to the public health so much as it does false claims as to what it will do. Senator COPELAND. Well, isn't that the purpose of this act, strictly? The control of advertising is to control false claims as to |