APPENDIX

STATEMENT BY SENATOR PHILIP A. HART, DEMOCRAT, OF MICHIGAN, ON S. 985; THE FAIR PACKAGING AND LABELING BILL

INTRODUCTION

Our Founding Fathers gave to Congress in article I, section 8, of the U.S. Constitution the power and responsibility: To coin money, regulate the value thereof, and of foreign coin, and fix the standards of weights and measures. They knew history taught the necessity in any civilized society for standards of weights and measures.

The prepackaging revolution of the past two decades has made the package the modern-day weight and measure. This new proliferation of package weights, sizes, shapes, and their often noninformative labels has played havoc with our traditional system of weights and measures. In effect, these packaging practices now fix the standard of weights and measures.

The truth-in-packaging bill is a response to this condition. It is an opportunity for Congress to reassert its authority for the ultimate benefit of the consumer and the legitimate manufacturer.

This legislation, therefore, is not primarily directed at preventing fraud in the common law sense. It makes little difference to the economy and consumer whether price comparisons are made difficult or impossible because of fraud, deception or only confusing practices. The seller's intent is not the important point-the practice and its effects are. Rather this legislation is aimed at bringing order out of the chaos of the modern marketplace as it pertains to consumable items-those most affected by the packaging revolution.

PRACTICES

That the practices with which the bill is concerned exist-if not proliferatein the marketplace is agreed by most witnesses. Volumes of hearings replete with exhibits representing some of our largest and most responsible manufacturers document irrefutably the condition of our marketplace. And if anyone believes that the exhibits are exceptions-"the few bad apples"-he need only visit any supermarket at any time to verify the record. These practices at which the bill is aimed are:

1. Inconspicuous or nonexistent quantity designations.

2. Deceptive illustrations.

3. Imprinting on the package by the manufacturer of price information implying a retail bargain where the manufacturer has no control over retail price-such as "cents off" and "economy size" designations.

4. Use of adjectives to describe the net quantity that attempt to give the impression of a greater amount than the same quantity of a competitorsuch as "giant half quart" in place of "16 ounces" or "pint."

5. A proliferation of weights and measures expressed in odd amounts making price comparisons almost a mathematical impossibility; e.g., 71 quantities of potato chips under 31⁄2 pounds. Or, a consumer, to find the better bargain, must decide between 20 ounces for 35 cents or 241⁄2 ounces for 40 cents.

6. Use of containers of sizes, shapes, and dimensional proportions which give an exaggerated impression of the actual quantity within. This includes nonfunctional slack fill forcing the consumer to pay product prices for air.

7. The use of size designations that have no actual relation to the quantity in order to gain competitive advantage-one manufacturer's “king size" is another manufacturer's "large size" for an equivalent amount. In toothpaste the smallest size often is marked "large."

8. Meaningless "serving" designations. For the same quantity one package claims it "serves two"; another "serves four."

9. Lack of any useful method of price comparison where weight or count are meaningless. For example, perhaps "a unit of cleaning power" would be more meaningful than weights in detergents.

10. Lack of ingredient or composition information when this may be important, or presenting such information in an inconspicuous manner.

11. Reduction in content while masking the weight loss from the consumer by manipulation of package size and content markings.

NEED FOR LEGISLATION

The prepackaging revolution of the past two decades has seen the supermarket replace the neighborhood grocery store, the package replace the brown paper bag; the approximate 8,000 items on the store shelves replace the 1,500 available after World War II.

Passing down the modern supermarket aisle, the consumer-buyer is confronted not by a seller, but by rows of packages and cans, each an inanimate salesman, carrying a message from a remote manufacturer. The package has, in effect, replaced the live salesman. It is with the unfair practices arising from the package's salesman role that this bill is concerned.

The need arises from the fact that when marketing depends on prepackaging, the consumer cannot examine the product itself. He cannot look to the seller and get an assurance from him as to the product. Nor today can he readily compare products and their prices. Thus handicapped, the buyer has found it more difficult, if not impossible, to judge accurately the prices of competing products as a first step to making a rational choice between them.

And, a rational choice does require as a first step the opportunity to compare prices. If two products are of similar quality, or if they are different in quality, price per unit is the initial basic determination that must be made. Is the additional quality, if any, worth the additional cost? This bill is directed at this first consideration for rational choice.

There are three basic benefits flowing from this kind of informed and rational shopping decision.

1. To allow our free enterprise economy to function efficiently and without distortion

The pivotal point on which the American free enterprise system is poised is a marketplace in which price comparisons can be readily and easily made between competing products. Only in this way can the consumer steer production toward the socially desirable goal of the greatest good for the greatest number. It is, in fact, upon the sum of myriad, tiny directional nudges given by the buyer exercis ing his consumer sovereignty that we all depend for insurance that our resources will be utilized with the best possible efficiency.

However, when the buyer's ability to exercise a rational choice is inhibited, our economic directional sense is confused and the threat of waste and malpractice looms larger. Thus, when a buyer cannot or does not make such an informed choice as happens when the practices described occur-when he pays more than he need; when he chooses the worst, not the better part, the efficient producer is punished while the inefficient is rewarded.

Certainly, if consumers are unable to compare prices, competition can exert no discipline on rivals to meet the lower prices of competitors, and competition provides no inducement to rivals to seek consumer favor through price reductions. In short, the free enterprise system fails to function as intended.

This bill, by establishing a framework of competition in which it would be more difficult for deceptive and confusing practices to flourish, would:

A. Enhance the integrity of markets in order that they may more accurately direct the productive activities of the economy.

B. Make it more likely that profits will be channeled to the more efficient producer by promoting effective price competition.

2. Increase the effective spending power of the average family (which spends $80 billion yearly or approximately 25 percent of its income on “kitchen and bathroom" products covered by the bill)

Various estimates have been made as to how much the consumer would save if this bill were passed. The most popular figure is $250 yearly.

But

Admittedly such estimates can be little more than informed guesses. no one can disagree that the ability to focus on the best buy will and can save money-no matter what the amount. If pennies saved over a long period of time were not so important, manufacturers would not be continually engaged in the "cents off" duel and "couponing" with their promises of money saved. And to a substantial share of our population, pennies saved are vital. Ernest Giddings, testifying for the National Retired Teachers Association and American Association of Retired Persons, said:

"The population aged 65 and over reached 17.6 million at the end of 1963 and the proportion of persons aged 65 and over to the total population has more than doubled since 1900. Today 1 out of 11 persons has passed his 65th birthday. "The median income of families headed by persons aged 65 or over was $3,204 in 1962, just $200 over the "poverty line," and considerably lower than the median income for families headed by younger persons. Three million elderly families live on the wrong side of the poverty line with incomes of less than $3,000 a year. At least 1.9 million aged couples live on less than $2,500 a year. Over 5 million aged individuals live on less than $1,800 a year.

"Seventy-two percent of the population aged 65 or over were receiving OASDI benefits at the end of 1963. The average monthly benefits paid to OASDI beneficiaries in 1962 were as follows:

"Having just made a reference to the benefits received by a widowed mother and two children, this is an appropriate time to note that 1 out of 3 persons 65 or over is supporting an aged relative.

"In 1963 over 2 million aged persons were receiving old-age assistance under the Federal-State public assistance programs and the average monthly payment received under those programs in 1963 was $77.”

Esther Peterson, special assistant to the President for Consumer Affairs, testified:

"We are justly proud of the fact that 'food is a bargain' in the United States with less than 20 percent of the average workers paycheck spent for it. But for the poor-and there are about 35 million of them-the percentages are sig nificantly higher. Families with incomes under $3,000 spend around 30 percent for food, according to Bureau of Labor Statistics figures. For these families, particularly, every penny is important.'

The 35 million "poor," too, deserve our best efforts in their daily fight to keep their heads above the economic waters.

3. To assist the legitimate manufacturer

The practices with which this bill are concerned do not generally reflect a desire to deceive on the part of the manufacturer. Rather, they are a reaction to competitive practices which have made the package the new salesman in the supermarket. If one manufacturer receives a temporary advantage by making his package look bigger while at the same time lowering the content, then the competitor feels he must follow the leader or lose sales. This process has resulted in the follow-the-leader approach to marketing, with the leader sometimes being the least scrupulous in the marketplace. Many manufacturers have said privately that they are on a merry-go-round on which they are not comfortable. But they do not know how to get off without losing sales. By establishing before-the-fact ground rules, this bill would allow the legitimate manufacturer to follow his personal ethical standards without being penalized in the marketplace. It would assist the vast majority of honest businessmen by upgrading the economic value of fair packaging and labeling practices.

Another source of concern to businessmen is legal uncertainty. This uncertainty is written into present law with its vague concepts. Yet neither the FTC Act nor the FDA Act authorize the agency involved to draft substantive

regulations that would give meaning to these vague concepts by establishing guides that would be required of all competitors.

A manufacturer then has no ground rules to which he can refer. What the manufacturer can or cannot do is subject to the subjective determination of the agency and this determination is an agency's best guess of a subjective evaluation of a court. This is a bad situation, at best, for the competitor who is putting large sums of money into his packaging and labeling program and who sees his competitor taking unfair advantage of the ambiguity of present law.

The legitimate businessman is entitled in this area to the certainty he seeks and which this legislation would give.

OBJECTIONS TO THE BILL

In reading the industry testimony before the Commerce Committee, it occurred to me that someone must have substituted another bill for the original fair packaging and labeling bill while my back was turned. Certainly the horrible examples cited of what could happen to industry and the supermarket if the bill were passed had no relation to any provision of S. 985 as I recalled it. But the bill was the same and dire predictions without foundation as far as I could discover. Therefore, it seems appropriate to outline some of the objections raised contrasted with the facts as they exist.

Objection 1: Present law is adequate.-This is simply not true. These practices proliferate under present law. Why? Certainly the vast majority of corporations and executives involved are law abiding. Before expenditures are made. the package and labels generally must be approved by the legal staff. It stretches credulity to believe that any lawyer would give approval to a package or label he believed illegal under present law.

To say that all that is needed is more vigorous enforcement of present law presupposes that the corporations involved are deliberately violating existing law. This I cannot and do not accept.

The truth is that present law is imprecise to a degree that allows these praetices to flourish. The corporations, understandably, are marketing their products to the outside limits allowed by such imprecision. And court decisions under the existing law have established legal precedents which do not prohibit the practices observed. An actual showing of deception is required. But to the consumer faced with a shopping decision, ease in price comparison is the important factornot whether a manufacturer set out to deceive her or not.

What is needed is greater precision in the forms of specific guidelines having the force of law. Enforcement agencies cannot do this under existing law and no one claims that they can.

It is somewhat ironic that industry witnesses tell the committee that what is needed is more vigorous enforcement, not additional law. Yet the agencies charged with enforcement say it is impossible to do the job under existing law. It is not a problem of additional appropriations, it is a problem of additional legal tools.

Certainly, the agencies may and in some cases have issued advisory regulations. But these do not have the force of law. They may be ignored with impunity, and in many cases this is precisely what has happened. Yet the agency has no power to enforce them. It still must fall back to proving actual deception in each case. This bill would require that mandatory regulations having the force of law be promulgated according to specific congressional directions.

This lack of precision easily is seen from the provisions of existing law. The FTC Act provides "Unfair methods of competition in commerce or deceptive acts or practices in commerce, are declared unlawful."

These words give no assistance to the manufacturer who wants specifics as to what he may or may not do in terms of his packaging and labeling. Its failure as a legal tool to correct the practices with which this legislation is concerned was summed up by Paul Rand Dixon, chairman of the Federal Trade Commission. He testified:

"*** Because of this burden of showing deception as a basis for its actions, the Commission has not found it feasible to issue orders requiring affirmative disclosures on packages of the net contents, or establishing reasonable weights or quantities in which a commodity shall be distributed for retail sale, or defining what constitutes a 'serving,' or requiring labels to disclose information concerning product ingredients or composition.”

The pertinent sections of the Food, Drug, and Cosmetic Act are: "SEC. 343. Misbranded food.

"A food shall be deemed to be misbranded—

"(a) False or misleading label. If its labeling is false or misleading in any particular.

"(d) Misleading container. If its container is so made, formed, or filled as to be misleading. * * *

"(f) Prominence of information on label. If any word, statement, or other information required by or under authority of this chapter to appear on the label or labeling is not prominently placed thereon with such conspicuousness (as compared with other words, statements, designs, or devices, in the labeling) and in such terms as to render it likely to be read and understood by the ordinary individual under customary conditions of purchase and use."

But what does false and misleading mean; what does made, formed, or filled as to be misleading mean; what does "conspicuousness" mean? It means exactly what a specific court in a specific case says it means. These vague concepts give no specifics or assurances to the manufacturer.

The FDA cannot promulgate mandatory regulations giving content to these concepts.

The practical effect was described by George P. Larrick, Commissioner of the Food and Drug Administration. He testified:

"We have faced great difficulty in enforcing the requirements of the Federal Food, Drug, and Cosmetic Act with respect to conspicuousness of labeling and deceptive packaging. Where there is no well-established practice in the industry, most courts have looked with a skeptical eye upon our attempts to bring about correction of practices which we thought involved economic deception."

John Connor, Secretary of Commerce, who has a sympathetic understanding of the problems of industry, testified the bill is needed.

And the President himself through his consumer representative, Esther Peterson, announced that the bill has full administration support.

Faced with this array of testimony by the executive branch of Government, it is somewhat academic to argue about whether present law is or is not adequate. The hard fact is that the required job is not being done. When the agencies involved cite chapter and verse as to why the job cannot be done effectively under present law, it does not solve the problem to say "you can too." It is the responsibility of Congress to correct this situation. It must tell the enforcement agencies what it wants done and how it wants it done. Finally, Congress has the responsibility to give the appropriate agencies the authority necessary to effectuate these directions. This, of course, is what the Fair Packaging and Labeling bill does.

Under the bill Congress gives to the agencies specific direction, specific authority, and a specific policy. It does this within a framework of appropriate and specific safeguards. It leaves to the agency the working out of technical details within the expertise of the agencies involved. Certainly these are the kinds of technical problems which Congress ought not to legislate in detail. It would be neither feasible, practical, nor desirable.

To be more specific, testimony clearly establishes the limits of present agency authority.

Under present law, the Food and Drug Administration cannot require that the net weight be on the front panel; it cannot designate minimum type size and face for net quantity of content statements; it cannot forbid qualifying adjectives modifying net weight. These are the first three provisions of the mandatory section of the bill (a) (1), (2), (3). On commodities not subject to the Food, Drug, and Cosmetic Act, no net weight or number is required by law.

Neither the FDA nor the FTC can prohibit the "cents off" promotion or the economy size definitions as is done in the fifth of the mandatory provisions (a) (5).

In regard to the last of the mandatory provisions, which requires regulations prohibiting deceptive illustrations, both the FDA and the FTC under present law could proceed against an allegedly deceptive illustration. But again, they would be faced with the hit and miss process of proving the legal elements of deception on a case by case basis taking into considertaion the thousands of market basket items which would require review. Neither, however, can establish criteria before the fact defining a meaning for deception. Once definitions