DECEMBER 12, 1941.

FEDERAL TRADE COMMISSION

STATEMENTS BY CHARLES H. MARCH, CHAIRMAN; COMMISSIONERS GARLAND S. FERGUSON, EWIN L. DAVIS, WILLIAM A. AYRES, AND ROBERT E. FREER; OTIS B. JOHNSON, SECRETARY; WILLIAM T. KELLEY, CHIEF COUNSEL; WILLIAM H. ENGLAND, CHIEF ECONOMIST; JAMES A. HORTON, CHIEF EXAMINER; HENRY MILLER, DIRECTOR, TRADE PRACTICE CONFERENCES; PGAD B. MOREHOUSE, DIRECTOR, RADIO AND PERIODICAL DIVISION; AND ANDREW N. ROSS, BUDGET OFFICER

SALARIES AND EXPENSES

Mr. WOODRUM. We will take up the items for the Federal Trade Commission, the first item for salaries and general expenses being in the amount of $2,252,224, and a second item for printing and binding, in the sum of $50,250, making a total of $2,302,474, 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, lawbooks, books of reference, periodicals, garage rentals, traveling expenses, including not to exceed $900 for expenses of attendance, when specifically authorized by the Comn ission, at meetings concerned with the work of the Federal Trade Commission, for newspapers not to exceed $500, foreign postage, and witness fees and mileage in accordance with section 9 of the Federal Trade Commission Act; $2,252,224: Provided, That no part of the funds appropriated herein for the Federal Trade Commission shall be expended upon any investigation hereafter provided by concurrent resolution of the Congress until funds are appropriated subsequently to the enactment of such resolution to finance the cost of such investigation. For all printing and binding for the Federal Trade Commission, $50,250. Total, Federal Trade Commission, $2,302,474.

JUSTIFICATION OF ESTIMATE

Mr. MARCH. May I submit the following statement in justification of these estimates?

JUSTIFICATION OF ESTIMATES OF APPROPRIATIONS, FEDERAL TRADE COMMISSION, 1943

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, 1942, to June 30, 1943.

Statutory authority. The Federal Trade Commission, an administrative agency, created by the act of September 26, 1914, is charged with the enforcement of the Federal Trade Commission Act, as amended by the Wheeler-Lea Act, approved March 21, 1938 (52 Stat. 111-117); section 2 of the Clayton Act, as amended by the Robinson-Patman Act, approved June 19, 1936 (49 Stat. 1526), and sections 3,7, and 8 of the Clayton Act of October 15, 1914 (38 Stat. 730); the Export Trade Act, approved April 10, 1918 (40 Stat. 516); and the Wool Products Labeling Act of 1939, approved October 14, 1940 (54 Stat. 1128).

Duties. The principal duties of the Commission under the above-mentioned statutes are

(1) The Federal Trade Commission Act.-Under this act, the Commission is charged with (a) the prevention of unfair methods of competition in commerce,

and unfair or deceptive acts or practices in commerce; (b) the conduct of investigations relating to (1) alleged violations of the antitrust acts, (2) the manner in which decrees in antitrust suits brought by the United States have been carried out, and (3) the organization, business, conduct, practices, and management of corporations engaged in commerce (with certain statutory exemptions), and their relation to other enterprises; (c) the making of reports and recommendations to the Congress with respect to legislation; and (d) the conduct of trade conferences of industries for the elimination of unlawful and unethical business practices.

(2) Clayton Act.-Under the Clayton Act, as amended by the Robinson-Patman Act, which greatly enlarged and increased the jurisdiction and duties of the Commission in respect to unlawful price discriminations, the Commission is charged with the prevention of certain specific practices; i. e., unlawful price and related discriminations, tying contracts, stock acquisitions, and interlocking directorates.

(3) Export Trade Act.-Under the Export Trade Act the Commission supervises the registration and operations of associations engaged solely in export trade, which for this purpose are exempt from the provisions of the antitrust acts, provided neither trade within the United States nor export trade of domestic exporters is restrained thereby.

(4) Wool Products Labeling Act of 1939.-Under this statute the manufacture for introduction into commerce, or the introduction, sale, transportation or distribution, in commerce, of misbranded wool products, is unlawful, and constitutes an unfair method of competition and an unfair and deceptive act and practice under the Federal Trade Commission Act. The Commission is authorized to make inspections analyses, tests, and examinations of all wool products subject to the act and to make such rules and regulations as may be necessary and proper for the administration and enforcement of the act. In addition, the Commission is also empowered under the statute to prevent the movement of misbranded wool products in commerce by injunction and to proceed by libel action in certain cases for condemnation of such products.

APPROPRIATIONS AND ESTIMATES

Appropriations, 1942.-The total appropriations for all purposes, except printing and binding, for the fiscal year 1942 amount to $2,300,000. For printing and binding, 1942, $60,000. A grand total of $2,360,000.

Estimates for 1943.-For all purposes, except printing and binding, the estimates for the fiscal year 1943 amount to $2,252,224 and provide for the projects listed below in the amounts specified. For printing and binding, 1943, $50,250. A grand total of $2,302,474.

Net decrease for 1943.-The estimates represent a decrease of $47,776 in salaries and expenses under 1942 appropriations. For printing and binding the estimate for 1943 represents a decrease under the appropriation for 1942 of $9,750, or a total decrease of $57,526.

These estimates, together with estimated expenditures for 1942 and actual expenditures for 1941, are set forth in the following table:

Decrease in and reallocations of funds by projects, 1943.-The amount carried in the estimates represents a base decrease of $75,000 for the fiscal year 1943 under the fiscal year 1942. This decrease of $75,000 in the defense project, however, is offset in part by the sum of $27,224 which is allocated in the estimates for a portion of the annual cost of the automatic salary advancements under the provisions of the Ramspeck Act approved August 1, 1941, leaving a net decrease

of $47,776 for all projects of the Commission under the fiscal year 1942, as shown by the following table:

JUSTIFICATION OF ESTIMATES BY PROJECTS

Project No. 1. Commissioners and Secretary.—This project covers the salaries and expenses of the Commissioners and the Secretary and the present staff of their offices. No base increase-$653 allocated to this project for in-grade salary increases by transfer from another project.

A net

Project No. 2. National defense and general investigations-Base decrease of $75,000.-$1,606 allocated to this project for in-grade salary increases. decrease of $73,394.

Statutory authority. By section 6 of the Federal Trade Commission Act, Congress has granted to this Commission authority to require financial and other data from corporations engaged in interstate commerce. Section 6, in part, provides that the Commission shall have power

"(a) To gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any corporation engaged in commerce, excepting banks and common carriers subject to the act to regulate commerce, and its relation to other corporations and to individuals, associations and partnerships.

"(b) To require, by general or special orders, corporations engaged in commerce, excepting banks, and common carriers subject to the act to regulate commerce, or any class of them, or any of them, respectively to file with the Commission in such form as the Commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. Such reports and answers shall be made under oath, or otherwise, as the Commission may prescribe, and shall be filed with the Commission within such reasonable period as the Commission may prescribe, unless additional time be granted in any case by the Commission."

Nature of the work.-The investigations under the authority of section 6 are made upon the direction of the President, the Congress, application of the Attorney General, or upon the initiation of the Commission. They relate to the organization, business, conduct, practices, and management of corporations engaged in commerce and their relation to other corporations and to individuals, associations, and partnerships. These investigations also relate to alleged violations of the Antitrust Act by any corporation.

Under this authority and since its organization in 1915, the Commission has completed approximately 115 investigations of specific industries, most of them in response to congressional resolutions. As a result of these investigations, the Congress has enacted the following legislation: Export Trade Act, approved April 10, 1918; Packers and Stock Yards Act, 1921, approved August 15, 1921; Grain Futures Act, 1921, approved August 24, 1921; Radio Act of 1927, approved February 23, 1927; Perishable Agricultural Commodities Act of 1930, approved June 10, 1930; Securities Act of 1933, approved May 27, 1933; Securities and Exchange Act of 1934, approved June 6, 1934; Federal Communications Act of 1934, approved June 19, 1934; Public Utility Holding Company Act of 1935, approved August 26, 1935; Federal Power Act of 1935, approved August 26, 1935; Robinson-Patman Antiprice Discrimination Act, approved June 13, 1936; amendment of the Perishable Agricultural Commodities Act, 1937, approved August 20, 1937; Wheeler-Lea Act, amending the Federal Trade Commission Act, approved March

21, 1938; and the Natural Gas Act of 1938, approved June 21, 1938. In addition, the Commission made approximately 400 costs, prices, and profits studies during the World War No. 1, at the request of other agencies of the Government.

Statement of estimate. For the purpose of conducting the investigations under section 6 of its organic act, the Commission has gathered together and maintains a small, highly trained staff of economists, accountants, and statisticians. For the past 4 or 5 years and including the fiscal year 1942, the Bureau of the Budget has approved and the Congress has appropriated a uniform amount of $150,000 per year to keep this force intact with the understanding that its first duty would be the making of such investigations and the preparation of such reports as may be ordered by the President, or the Congress.

The estimates for 1943 provide a total of $75,000 for this project to be devoted to the gathering and publication of industrial corporation reports (see p. 7). The reduction of $75,000 is understood to contemplate that the Federal Trade Commission will devote its staff, whose salaries represent the $75,000 cut, to the performance of defense work for other defense agencies, and that the Commission will thereupon be reimbursed to the extent of actual expenditures by the defense agencies requesting the work.

National-defense work.-During the latter part of the fiscal year 1941 and thus far in the fiscal year 1942, the Commission has been functioning as a Federal costfinding agency in the present emergency as it functioned during the first World War, and for this purpose has made use of the fund of $150,000 provided in 1942 for general investigations.

This cost work has been performed largely for the Office of Price Administration and to some extent for the Office of Production Management. In addition to its cost-finding work, the Commission has also made a legal investigation at the request of the Office of Production Management with respect to alleged violation of priority orders in one of the largest and most important industries furnishing defense materials. Details of the work will be furnished the committee at the hearing.

Industrial corporation reports project. The sum of $75,000 approved is to be used by the Commission for the gathering, analyzing and compiling of industrial corporation financial data for approximately 3,500 corporations. Information of this character previously collected by the Commission with respect to numerous industries is presently being utilized by the Office of Price Administration and other national-defense and governmental agencies, as well as by the Commission itself. Industrial corporation reports have been published for 76 industries embracing 780 corporations, including among others: (a) Aircraft industry, (b) railroad-equipment industry, (c) fertilizer industry, (d) steel works and rolling-mill products, (e) agriculture machinery and tractors, (f) cotton textiles, (g) petroleum products and refining, (h) cement, (i) flour milling, (j) firearms and ammunition, (k) milk and milk products, (1) electrical machinery and apparatuses, (m) motor vehicles, and (n) shipbuilding industry. The information called for in these reports has been developed pursuant to provisions of a coordinated plan worked out by the representatives of the Division of Statistical Standards, Office of Price Administration, and the Federal Trade Commission, with a view to reducing the number of reports which corporations shall be requested to furnish the Government. The collection of such financial corporation data, including the compilation of rates of profit, cost, income, expense ratios, etc., is of great value to agencies of the Government concerned with national defense.

Assistance in law enforcement.—The assistance of the general investigation staff of the Commission is required, a part continuously and another part recurrently, in the economic, accounting, and statistical phases of complaints under the Federal Trade Commission Act, and under the Robinson-Patman Act, both in the investigation preliminary to the issuance of such complaints and in their trial. Whenever reliance is placed by the respondent upon differences in costs of manufacture, sale, or delivery as justification for differences in price it becomes incumbent on the Commission's staff of economists and accountants to examine such evidence and assist the legal divisions in determining whether the information submitted meets the statutory defenses under the act, and to appear where necessary as witnesses in such proceedings.

Project No. 3. Trade practice agreements and Wool Products Labeling Act.No base increase-$1,116 allocated to this project for in-grade salary increases by transfer from another project.

Statement of estimate.-This is the first estimate submitted for the administration of a new law-the Wool Products Labeling Act. Inasmuch as this act became effective July 14, 1941, and funds had not been provided for its administration,

and inasmuch as the work under such Wool Act is interrelated with the tradepractice-conference work, particularly as to the promulgation and administration of rules, the Commission has used a portion of its trade-practice-conference funds and staff in a limited administration of the act to meet the urgent demands thereunder. Because of such interrelation the two subjects-(1) trade-practice conference and (2) the Wool Act-are submitted as one project.

The estimates for 1943 provide $100,000 for this joint project which is the same amount appropriated in 1942 for the "Trade practice agreements" project without the additional work involved in the administration of the Wool Act.

Description of work.-The above-entitled project No. 3 covers the work relating to the formulation and promulgation of trade-practice rules for the elimination and prevention of unfair competitive practices and the elevation of standards of fair competition in industry; the administration of promulgated rules and their application to competitive problems arising in the respective industries; and the general administration of the Wool Products Labeling Act and the rules and regulations thereunder, including amendment and extension of such regulations as needed from time to time.

Establishment and administration of trade-practice rules.—In the formulation and promulgation of trade-practice rules, provision is made for the holding of industrywide conferences under the auspices of the Commission at which industry members may consider unfair and unethical practices and trade abuses and provide methods for their correction and abandonment. The procedure involves the utilization of self-discipline and voluntary cooperation on the part of industry members under Commission supervision to eliminate and prevent unfair methods of competition and other practices contrary to the laws administered by the Commission. By such voluntary and cooperative action the same results are achieved as by the institution of separate proceedings against individual industry members but with a substantial saving in time and expense to both government and industry. The work necessitates basic research and study of competitive conditions and problems in the particular industries concerned. In addition to general trade practice conferences of entire industries, informal conferences are held from time to time with industry representatives and other interested parties for the discussion of industry problems and practices. Before rules are promulgated for an industry, the tests of law and the public interest are applied thereto and public hearings are held for the purpose of affording all interested or affected parties opportunity to present their views, including suggestions or objections, and to be heard. After due proceeding and hearing the rules in proper form are approved and promulgated by the Commission as guiding rules of fair competitive practices in the particular industry concerned.

Administration of established rules and their application to competitive practices in the industry relate not only to the trade-practice rules currently promulgated from time to time but also to rules which were promulgated in previous years and remain in effect. This activity includes the handling of a substantial volume of correspondence in supplying information and interpretations as to the rules and, in general, assisting industry members in the application and observance of the provisions thereof. This phase of the trade practice conference work also embraces extensive activity in obtaining compliance with the provisions of promulgated rules and the detection of violations of such provisions. Through this compliance activity voluntary correction of unfair trade practices is obtained in hundreds of cases with little expense and without the necessity of resorting to compulsory litigation by the issuance of formal complaints.

During the last fiscal year trade practice conference rules have been promulgated for the following industries, having a total annual sales volume of nearly a billion dollars: Resistance welder manufacturing industry; tuna industry; subscription and mail-order book-publishing industry; linen industry; hosiery industry; beauty and barber equipment and supplies industry. (With respect to the rules for the last-named industry, final action by the Commission was taken during the fiscal year but the rules were not formally issued until after the close of the year.) Thus far in the present fiscal year proceedings for several times that number of industries are receiving the attention of the Division.

The rules in operation and being administered by the Commission constitute a large volume of trade-practice provisions. These are codified in the Code of Federal Regulations of the United States of America. To illustrate, the last 50 industries out of the entire group have a total of 881 separate rules promulgated by the Commission and dealing specifically with trade evils or abuses in such industries. Administration of established rules is continuing work and is most productive in effecting law observance and protection of the public interest.