considered in the 88th Congress. I agree that the type of conduct to which this legislation is directed should be dealt with as a civil violation rather than as a criminal offense. Also, I strongly endorse section 4(b) of S. 985 which provides that regulations under the discretionary authority may be adopted only after public hearing and review under sections 7 and 8 of the Administrative Procedure Act.

There are two major aspects in which S. 985 should, in my opinion, be modified. These points have been brought to your attention by previous Administration witnesses or reports but I should like to emphasize them also.

First, section 3(a) (5) of the bill would require the issuance of regulations to prohibit outright, with no exception, the so-called cents-off method of merchandising. Previous hearings have shown that this particular method of selling has been abused in various cases. However, there is certainly nothing inherently wrong in offering an article for sale in good faith and for a limited time at a price which in fact represents a genuine saving or decrease from the price at which the item is customarily sold. We should keep in mind that any abuse in cents-off selling requires the acquiescence or participation of the retailer. Yet, the present language of S. 985 would not subject the retailer to regulation. More important, I feel that it is unnecessary and undesirable to go to the length of total prohibition of a practice which is improper only when abused.

A better solution to the cents-off problem than outright prohibition is to be found in providing flexible administrative authority which would be directed to the prevention of abuses and deception in the use of cents-off labeling. For this reason, I urge that this item be dealt with under the discretionary authority section of the bill (sec. 3(c)) rather than under the mandatory regulations section (sec. 3(a));

Second, I believe it would be desirable to provide in this legislation an advance clearance procedure. What I have in mind is that the producer or distributor of the commodity subject to regulation under the bill should be able to apply for and receive prompt and adequate assurance that his intended packaging or labeling of a product is in conformity with published regulations. I am sure that there is no intention to retard or discourage or make economically impossible legitimate innovation and progress in packaging and labeling. Such a result could occur, however, if a producer or distributor must risk substantial sums in developing and using a new package or label and actually put it on the market without having a reasonable assurance in advance that the package or label would not violate Federal law. It is my recommendation that S. 985 be amended to provide that the administering agencies shall review, upon request, proposed packaging and labels and issue clearances where appropriate.

In addition to the major points previously mentioned, I should like to call attention to other more or less technical aspects in which we believe the bill could be improved.

Section 3(c) (1) of the bill provides that discretionary regulations establishing reasonable weights and quantities in which a commodity may be distributed for retail sale may not be inconsistent with standards prescribed by the Secretary of Commerce before the effective date of this act with regard to the sizes of containers used for the

retail sale of that commodity. The reference to standards "prescribed by the Secretary of Commerce" relates to voluntary standards published under our commodity standards program which is a going program of long standing. I think it would be desirable, in addition, to clarify the language of the bill so that it would be understood that the administering agencies would give due consideration to any other standards published by the Secretary of Commerce, before or after the effective date of the act, which were relevant to proposed regulations issued under this bill.

The same section 3(c) (1) relating to discretionary regulation of weights and quantities in which commodities may be distributed for sale contains the following language: "no weights or measures shall be established in amounts of less than 2 ounces.' We assume that this is intended mainly to deny authority to establish standards of weight and measure for commodities offered in amounts less than two ounces rather than to forbid producers or distributors to package and sell commodities in quantities less than two ounces. As to many commodities which might be subject to the act, the latter restriction would seem unreasonable. It would be helpful, however, if the committee's report could reaffirm our understanding on this point.

The Department of Commerce would favor enactment of S. 985, with the modifications we have suggested.

Senator NEUBERGER. Thank you, Mr. Secretary.

Senator Hart?

Senator HART. Thank you very much for a statement which I think will be most helpful to the Committee.

I have not been able to attend the hearings as I should have liked. I understand that some comment has been made that the changes, some of which you comment on, made in this bill, are without significance. I take it that after your study of the bill you felt that they did constitute some significant improvement as you view it.

Secretary CONNOR. Yes, sir, that is right.

Senator HART. I think you have made some helpful suggestions with respect to amendments, too, Mr. Secretary. Thank you very much. Secretary CONNOR. Thank you, Senator Hart.

Senator NEUBERGER. Senator Cotton?

Senator COTTON. Mr. Secretary, in the opening sentences of your statement in which you quote the President and the fact that you are up here as Secretary of Commerce and a Cabinet officer, I assume we can consider this bill as having the approbation of the President of the United States.

Secretary CONNOR. The Administration supports the bill, yes, sir. Senator COTTON. It is an Administration bill?

Secretary CONNOR. Yes, sir.

Senator COTTON. I call your attention to page 2 of your statement, with regard to the "cents-off" method of merchandising. Is it a fact that any retailer who cheats on the "cents-off" method of merchandising, is already in violation of the law and subject to punishment and is in the control of not only the Federal Trade Commission but other enforcement branches of government?

Secretary CONNOR. Senator Cotton, I have with me Mr. Robert Giles, the General Counsel of the Department of Commerce. If I may,

I would like him to answer legal questions. Long ago I forgot about acting as a lawyer.

Mr. GILES. Šenator, I believe in response to your question that most retailers in that situation probably wouldn't be subject to the FTC law, at least there would be a legal question as to whether they would be acting in interstate commerce.

There may be some situations where a retailer would be in interstate commerce, depending on the location of his business, whether close to a State line and so on. Certainly I would think most retailers would not be under the FTC law or regulation which is directed. against deceptive practices in interstate commerce.

You would have the possibility of state laws, which may be applicable in such a situation.

Senator COTTON. I just want to make sure I understand this. If "X" manufacturer, which admittedly has no right to fix prices for the retailer, contemplates and recommends the sale of his product for 30 cents a package, and charges the retailer through the wholesaler, a corresponding price allowing a legitimate profit, and then reduces for a certain time and under certain circumstances the charge to the retailer and sends the package that says "This package is 5 cents off, to be sold for 25 cents instead of 30," the only way I know of that the public can be deceived or defrauded is if the retailer does not disclose that the original price was 30 cents but leads the consumer to understand it was 35 cents and he is giving him 5 cents off and charging the full 30. Isn't that the transaction that is sought to be avoided?

Mr. GILES. Yes, sir.

Senator COTTON. If that is the case, isn't that retailer clearly engaging in a deceptive practice?

Mr. GILES. My understanding is that there would be a question, depending on the exact facts and circumstances, as to whether that retailer, in that kind of transaction, was in interstate commerce, which is the reach that the FTC laws and HEW laws have. At least that is the view that those agencies seem to take.

Senator COTTON. My dear sir, you are counsel for the great Department of Commerce, and I am only a country lawyer and very rusty from years in Washington. But if there is a single retailer selling a national product that isn't in interstate commerce, I wish you would give me the circumstances under which that retailer would not be in

interstate commerce.

Interstate commerce has now been broadened to the extent that almost any commodity, any portion of which comes across state lines, or any portion of which may be purchased and carried across state lines, has been considered for regulation. Surely you know the long line of cases starting with the window-washing case.

I am just seeking information. But when you look me in the eye and say that this sort of practice that the retailer may not be in interstate commerce, there isn't one in ten thousand, is there, as a matter of fact, who wouldn't be?

Mr. GILES. We are assuming a transaction where there is no deceptive practice on the part of the manufacturer or the distributor who has sold this commodity. And the only deception involved would be solely by the retailer. I think that is the specific fact situation that we

are talking about, and the one on which there may be some question as to what FTC would do precisely in that case.

Senator COTTON. If the retailer is selling a nationally-known and manufactured soap powder when I go into his store and he hands me that package and I pay him, he is engaged in interstate commerce, isn't he?

Mr. GILES. If the customer is out of State.

Senator COTTON. I beg your pardon?

Mr. GILES. If the customer is not from the State in which the retail establishment is located, I think you would have a situation in interstate commerce. If the customers are local or in-State, then some of our laws don't seem to reach them if they are applicable only to interstate commerce.

Senator COTTON. How about the commodity itself that has to be purchased out of state?

Mr. GILES. It is a deceptive act which we are talking about and a deceptive act solely by the retailer, and not by the distributor or

manufacturer.

Senator COTTON. And the retailer is not subject to the laws relating to deceptive practices?

Mr. GILES. If the deceptive practice is not in interstate commerce, then apparently the regulatory agencies have that problem.

Senator COTTON. Then of course it wouldn't be reached by this bill. If he is not in interstate commerce this bill won't reach him. Mr. GILES. That's right.

Senator COTTON. Any more than the present law.

Mr. GILES. That's right.

Senator COTTON. What does all this come to, sir? I respect you, and I want to treat you with complete respect and courtesy, but you have just been running me around the post because if this "cents-off" is a deceptive practice, it is a deceptive practice by the retailer. If it is a deceptive practice by the retailer and he is in interstate commerce, he is already subject to prosecution under existing law.

If he is not in interstate commerce, which is almost inconceivable, but if he is not in interstate commerce, this bill won't reach him. Is that correct or not?

Mr. GILES. If we are talking only about the deceptive practices of the retailer, I think you have that question. But as I understand the proposal, some of the concern that has been expressed and brought out in the hearings relate to practices of distributors or producers of the commodities who without question are in interstate commerce, and presumably any regulation under this bill would be designed to get to those activities.

Senator COTTON. If they are engaged in deceptive practices they certainly are subject to enforcement and prosecution under the present law, are they not?

Mr. GILES. If it relates to deceptive practices, that is my understanding.

Senator COTTON. That is what you just said, that you are now talking about manufacturers or wholesalers who are engaged in deceptive practices. Deceptive practice is against the present law, and there is provision for enforcement by the Federal Trade Commission, by the

Department of Welfare, and the Food, Drug, and Cosmetic Act, and if necessary by the Department of Justice.

All the force of law is already marshaled and aimed at anyone who is engaged in a deceptive practice. Am I right or wrong?

Mr. GILES. That is my understanding, assuming we are dealing with interstate commerce. No question on that.

Senator COTTON. Then if this bill adds anything on this matterand I am now simply talking about this "cents-off" business—if it adds anything, it is adding it on the retailer. It is reaching the retailer, as a practical matter. Is that correct?

Mr. GILES. I think it depends on the regulations that might be proposed or issued under this. I realize, Senator, that there is a question as to exactly what the present law provides, and exactly where this proposed bill may in some particulars overlap.

I think in the final analysis on the legal issues I would have to defer to the regulatory agencies involved. They have expressed their own views on it. I know there are some differences of opinion.

I am not certain to what extent the proposed new authority on centsoff regulation would enable the regulatory agencies to do more than they are now doing. They say it would give them additional authority. That is the position they are taking. I recognize that lawyers can have differences of opinion as to exactly what authority we have under the present law.

Senator COTTON. Let's forget the lawyers and let's get down to simple facts. I inquired earlier, when I learned that this bill was coming to this committee, I inquired from supporters of the bill in the Senate and asked for an explanation of this "cents off" business. I was given a very clear down-to-earth explanation that a sophomore in high school could understand and, hence, it was comprehensible even to me, and this explanation was as follows: That it is the custom or a practice of manufacturers to recommend prices for the sale of their products, the retail sale for a certain amount, even though they are, of course, precluded from forcing the retailer fixing his price. Their custom, if their product is for sale for 30 cents a package is to have a "cents off" sale in which they print on the package that for purpose of introducing this product, you have a 5-cent discount.

If the retailer received the package and sold it at 25 cents instead of 30 cents, there is no deception, but that it gave the opportunity for the retailer to let the customer understand that the original price was 35 cents and sold it for the original price of 30, thus leading the consumer to think he was getting a discount when he wasn't.

That was explained to me as the purpose of this section and the situation aimed at. Was that explanation to me, by the proponents of this bill, incorrect?

Mr. GILES. Let's look at the exact language of that particular section. That is 3 (a) (5).

(5) prohibit the placement upon any package containing such commodity, or upon any label affixed to such commodity, of any printed matter stating or representing by implication that such commodity is offered for retail sale at a price lower than the ordinary and customary retail sale price, or that a retail sale price advantage is accorded to retail purchasers thereof by reason of the size of that package or the quantity of its contents, except that no regulation promulgated under this section shall prevent any person while engaged at any time in