FRIDAY, DECEMBER 3, 1937. FEDERAL TRADE COMMISSION STATEMENTS OF HON. W. A. AYRES, CHAIRMAN; COMMISSIONER GARLAND S. FERGUSON, JR.; COMMISSIONER EWIN L. DAVIS ; COMMISSIONER R. E. FREER; OTIS B. JOHNSON, SECRETARY; WILLIAM T. KELLEY, CHIEF COUNSEL; JAMES A. HORTON, CHIEF EXAMINER; GEORGE M'CORKLE, DIRECTOR, TRADE PRACTICE CONFERENCES; HENRY MILLER, ASSISTANT DIRECTOR, TRADE PRACTICE CONFERENCES; C. G. DUGANNE, ASSISTANT SECRETARY SALARIES AND EXPENSES Mr. WOODRUM. We will take up at this time the items of appropriation for the Federal Trade Commission. We have with us the Chairman of the Commission, Mr. Ayres, his colleagues, members of the Commission, as well as members of the staff. The first item for the Commission is for salaries and general expenses, $2,134,000. The item is as follows: For five Commissioners, and for all other authorized expenditures of the Federal Trade Commission in performing the duties imposed by law or in pursuance of law, including secretary to the Commission and other personal services, contract stenographic reporting services; supplies and equipment, law books, books of reference, periodicals, garage rentals, traveling expenses, including not to exceed $900 for expenses of attendance, when specifically authorized by the Commission, at meetings concerned with the work of the Federal Trade Commission, for newspapers and press clippings not to exceed $600, foreign postage, and witness fees and mileage in accordance with section 9 of the Federal Trade Commission Act, $2,134,000: Provided, That the Commission may procure supplies and services without regard to section 3709 of the Revised Statutes (41 U. S. Č. 5) when the aggregate amount involved does not exceed $50. JUSTIFICATION OF ESTIMATES OF APPROPRIATION, FISCAL YEAR 1939 Mr. Ayres, you have submitted a justification statement covering the estimates for the coming fiscal year. Mr. AYRES. That is correct. Mr. WOODRUM. That will go into the record at this point. (The justification statement referred to is as follows:) JUSTIFICATION OF ESTIMATES OF APPROPRIATIONS FEDERAL TRADE COMMISSION, 1939 This statement is respectfully submitted to the chairman and Members of the House Committee on Appropriations for Independent Offices in explanation and justification of the estimates of appropriations of the Federal Trade Commission for the fiscal year July 1, 1938 to June 30, 1939. Statutory Authority. The Federal Trade Commission, a quasi-judicial and administrative body, created by the act of September 26, 1914, is charged with the enforcement of the Federal Trade Commission Act, (38 Stat. 717, U. S. C., title 15, secs. 41-51); Section 2 as amended June 19, 1936, and sections 3, 7, and 8 of the Clayton Antitrust Act of October 15, 1914 (38 Stat. 730, U. S. C. title 15, secs. 13, 14, 18, and 19); and the Export Trade Act approved April 10, 1918 (40 Stat. 516, U. S. C. title 15, secs. 61-65). The work under section 2 of the Clayton Act includes the administration of the Robinson-Patman Act approved June 19, 1936 (49 Stat. 1526, U. S. C. title 15, secs. 13, 13-b, and 21-a). 33819-37-32 Duties. The principal duties of the Commission under the Federal Trade Commission Act are (a) the prevention of unfair methods of competition in commerce, (b) the conduct of general investigations at the direction of the President, Congress and the Attorney General or upon the initiation of the Commission and the reporting of facts in respect of alleged violations of the Antitrust Acts as a result of such investigations; and (c) the conduct of trade conferences of industries for the elimination of unlawful and unethical business practices. Clayton Act.-Under the Clayton Antitrust Act as amended, the Commission is charged with the prevention of certain specific practices; i. e., unlawful price discriminations, tying contracts, stock acquisitions, and interlocking directorates. Under the Robinson-Patman Act the jurisdiction and duties of the Commission in respect of unlawful price discriminations are greatly enlarged and increased. Export Trade Act. Under the Export Trade Act the Commission supervises the registration and operations of associations of American exporters engaged solely in export trade, who for this purpose are exempt from the provisions of the Antitrust Acts. APPROPRIATIONS AND ESTIMATES Appropriations-1938.-The total appropriations for all purposes except printing and binding for the fiscal year 1938 amounts to $1,950,000. For printing and binding, 1938, $31,000. Estimates for 1989.-For all purposes except printing and binding, the estimates for the fiscal year 1939 approved by he Bureau of the Budget, amount to $2,134,000 and provide for the projects listed below in the amounts specified; the estimated costs for 1938 on a basis of the total amount appropriated, $1,950,000, and the actual expenditures for 1937 being indicated. Increases by projects, 1939.-An increase of $184,000 for 1939 over 1938 is allowed by the Budget. This increase is shown by projects as follows: Project No. 1-Commissioners' and secretary's offices This project covers the salaries and expenses of the Commissioners and the secretary and of the staff of their offices. The increase of $13,140 in the 1939 estimate for this project does not contemplate any increase over the present staff. It represents the salaries of members of the present staff who have been reassigned to this project, and classification and administrative changes in personnel. Project No. 2-Administrative expenses This project covers the salaries of the administrative division, which includes the following sections: Accounts and Personnel, Docket, Mails and Files, Stenographic, Library, Purchases and Supplies, Publications, and Information Service; also the various miscellaneous expenses covering purchases of supplies and materials, communications service, transportation of things, repairs and alterations, equipment and so forth. The estimates for the fiscal year 1939 provide for this project an increase of $17,820 in salaries, for 11 stenographers and docket clerks to handle the increase in legal work; and an increase of $9,310 for miscellaneous expenses, a total increase of $27,130. Project No. 3-Unlawful practices work Nature of the work. This is the quasi judicial and law enforcement work of the Commission. It includes the prevention of unfair methods of competition, the prevention of unlawful price discrimination, and other violations of the Antitrust laws over which the Commission has jurisdiction, and also the administration of the Export Trade Act. It includes the staff of the Chief Counsel, Chief Examiner, Chief Trial Examiner, Special Board of Investigation, and a part of the staff of the Economic Division. Statement of increase.—The estimates for 1939 include a net total increase of $130,315 over the amount included for this project in the 1938 appropriation. This amount includes $120,960 for salaries and $9,355 for traveling expenses. Justification for increase.—Increase of appropriations is necessary because of: (a) An increase of work; (b) A constantly increasing back log of undisposed of cases pending at the end of each of the past 4 years; and (c) A more difficult type of cases for consideration, under recent legislation. Types of cases.-The unfair competition cases are of two general types, as determined by the Supreme Court in the Gratz case (253 U. S. 421) wherein the Court in effect that the words "unfair method of competition" are clearly applicable to practices regarded as opposed to good morals because characterized by deception, bad faith, fraud or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly. Practices opposed to good morals are involved in cases charging false and misleading advertising in its myriad phases, misbranding, disparagement of competitors, business or products, espionage, bribery of employees of competitors, passing off of goods or name, etc. Among those classified as against public policy may be mentioned cases involving price-fixing agreements, boycotts and combinations in restraint of trade. Procedure.-Informal complaints of breach of law are referred by the Commission either to the Chief Examiner or to the Special Board of Investigation, according to the nature of the complaint. The Chief Examiner's Division makes field investigations, through its attorneyexaminers and/or through accountants detailed from the Economic Division, upon the basis of which the Commission determines the action to be taken by it. Cases not involving violation of the Sherman law or the Clayton Act are, when the Commission deems it in the public interest, closed by accepting stipulations agreeing to cease and desist the unfair practices in question. If such stipulations are authorized the cases are referred to the Chief Trial Examiner to negotiate such stipulations in settlement thereof. Cases in which complaint is issued by the Commission are tried by attorneys of the Chief Counsel's Division before Trial Examiners supplied by the Chief Trial Examiner. The Commission's decision is reached upon the basis of the trial record, the Trial Examiner's reports summarizing the evidence, briefs of opposing counsel, and oral arguments before the Commission. Court cases are handled by the Chief Counsel's office. The Special Board of Investigation examines radio and periodical advertising and negotiates stipulations to cease false advertising. Heavy docket of cases. With nearly 1,400 cases pending for investigation or trial, the legal docket of the Commission is the heaviest in its history. The receipt of work from the public is increasing. The increase for 1938 over 1937 was 12 percent. There is an estimated increase of 15 percent in cases to be handled in 1939 over 1938. Of great significance is the fact that the backlog of undisposed-of cases has increased each year for the past four years, as follows: Cases pending June 30, 1935 Cases pending June 30, 1936. Cases pending June 30, 1938 (estimated). 1,037 1,215 1,474 2,191 On November 1 there were pending 1,389 applications for complaints and formal complaints, i. e., more than a year's work if no new cases were instituted. Table of law cases.-The following table will indicate for the purpose of comparison for the fiscal years 1935, 1936, 1937, and 1938 the number of unfair competition and other law cases for disposition at the beginning of each fiscal year, the number disposed of during each fiscal year, and the number pending at the end of each fiscal year; the figure for the fiscal year 1938 being estimated on the basis of the current year's experience: Analysis of table.-From these figures, there will be noted a steady and consistent increase in legal work received by the Commission. In 1936 there was 4 percent more cases for disposition than in the preceding year; in 1937 the increase was 11 percent; in 1938, 12 percent. Comparison of figures for 1935 and 1938 will show an increase of nearly 30 percent in work. The figures for cases pending at the close of each year are more significant. In 1936 there was an increase of 17 percent over 1935; in 1937 an increase of 21 percent; in 1938, 49 percent. The comparison of figures for 1935 and 1938 will show an increase of 111 percent in cases pending at close of fiscal year. Excess of work over resources. As a result of the increased burden of work, undecided cases have been accumulating, and delays have become prevalent. The number of cases pending at the end of the fiscal year has grown steadily since 1935. In part, this increase is due to the larger number of cases instituted and, in part, to the fact that because the cases the more difficult to handle, the number of applications for complaint which the Commission could handle in 1937 was less than in 1936; and the numbers, both of applications and of formal complaints, which are being handled in the current fiscal year, are running lower than in 1937. Investigating and trial attorneys and trial examiners have assigned to them too many cases per man and, in consequence, one case waits while another is being dealt with. On the average, each investigating attorney has assigned to him at present 13 cases, each trial attorney 18 cases, and each trial examiner 13 cases. Delay in handling cases.-The delays which have been inevitable under these conditions have become so great as to decrease the effectiveness of the Commission's work. Cases which are dragged out over 1 or 2 years do not give applicants for complaint a sufficiently quick remedy against unfair practices, do not give the respondents a quick decision as to whether they have been violating the law, and do not serve effectively to discourage violations by competitors of those respondents. The following table indicates that more than 39 percent of the pending complaints and more than 23 percent of the pending applications for complaint have been under consideration for a year or more: Since each case involves a legal process both after application and after complaint, it is readily possible, under these conditions, for 2 years or more to elapse between the application for complaint and the issuance of the Commission's order. More difficult cases under Robinson-Patman Act-Also accounting phases of the Act. In addition to the increase in the number of cases, there has been a considerable increase in the amount of work required on the average case coming under the Robinson-Patman Act. The issues involved in these cases are whether price discriminations work an injury to competition, whether payments or facilities are available to all on proportionally equal terms, or whether brokers controlled by the buyer receive commissions from the seller without rendering service to him. The extent of both investigation and analysis is necessarily greater in dealing with such questions than in deciding cases which involve misrepresentation, candy lotteries, or similar breach of law. The market effects of a whole price structure must often be examined and, since the law aims to prevent discrimination in prices, but permits such price discriminations to be justified by differences in cost of manufacture, distribution or selling, an economic and accounting analysis of the competitive situation and the seller's costs must be made. The act also requires the Commission to examine into quantity discounts, advertising and brokerage allowances and to prevent such practices where found to be discriminatory, the ascertainment of the essential facts in such a situation requires a thorough examination of the books of account and operating records regarding the details of production and selling methods. These economic and accounting features of the act require the services of experienced economists and accountants. Moreover, since many points of interpretation are still unsettled, a more extensive legal analysis is required in these Robinson-Patman Act cases than in others in which the law has been long established. Table of cases.-A table of cases on the Robinson-Patman Act as of October 30, 1937, follows: Price-fixing cases.-. -Another factor in increasing the work has been that an unusual number of cases now pending involve alleged conspiracies to fix prices. Since each such case is brought against a number of respondents and may involve nearly all of their pricing practices, it requires far more elaborate investigation and a more extensive and costly trial than a case involving a single unfair practice of a single respondent. In the year ending August 31, 1937, the Commission issued 24 complaints and 10 orders in cases involving the collusive fixing or maintenance of prices. Among them were such large and important cases as those involving the basing point systems of the cement and soil pipe industries. Court cases.-Statutory provision is made for a review by the United States Court of Appeals of cases handled by the Commission. The Commission is pleased to report that since January 1, 1933, to date, a period of nearly 5 years, it has won 57 cases in the Federal courts and lost but 2, one of these by a 5-4 decision of the Supreme Court of the United States reversing a prior favorable decision by a circuit court of appeals. The other reversal was by the Sixth Circuit in the Goodyear Tire and Rubber Company case, in which the Commission is asking a writ of certiorari in the Supreme Court of the United States. Petitions for certiorari by the Commission were granted in four cases and denied in none; similar petitions by respondents were granted in 1 case and denied in 11. At the present time the Commission has 12 cases pending in the courts, with 11 more en route to the courts. Project No. 4-Trade practice agreements This project covers the work involved in the formulation, approval, administration, and enforcement of rules or standards of fair trade practices for selfgovernment of industry. An increase of $12,800 included in the estimates is 1 Both were Clayton Act cases; one under sec. 7 and the other under sec. 2 prior to its amendment by the Robinson-Patman Act. |