ably intelligent comparisons between competing products. Our competitive economy to be effective proceeds on the assumption that consumers have this knowledge, so that they can maximize their satisfactions by purchasing those goods and services which most nearly meet their needs or desires. Now I am not suggesting here that we can or should take action to supply all of the voluminous information which consumers conceivably could use to shop intelligently. But there are certain facts about each product which are essential to be known before a decision can be made as to whether the product or another should be purchased. Surely it would not be asking too much to suggest that the label disclose accurately the nature of the product which is being offered for sale, how much is in the package, and the price in terms which are understandable to the consumer. Consumers also should be protected against packages which contain inordinate amounts of air or nonfunctional material. They should not be lured by fake bargains, cents off, free deals, or combination offers. They should not be confused by goods packaged in such miscellaneous sizes as to defy rational price comparisons, or in "new improved packages" which conceal price increases.

The forces of competition cannot meet the consumer's need in this regard. What the consumer wants is a reasonable degree of comparability between competing goods, in order to make informed choices. The producer's interest, on the other hand, is toward product differentiation. The producer wishes to create, through advertising, labeling, package design, and by all other available means, the notion that his product is different from competitive products. He wants to catch the eye of the consumer walking down the aisle at the supermarket. If a broader and thinner box will do that, he will use it, regardless of whether it offers any advantage in the preservation, shipping, or storage of the product. Moreover, if one producer uses a certain size or shape of package, his competitors feel obliged to follow suit even if the package is oversized and otherwise deceptive. Recent news reports indicate that retailers often become annoyed with the multitude of different sizes and shapes of packages, because of the difficulty of handling and displaying them.

And if the producers themselves, without Government supervision, attempt to achieve standardization or uniformity of product, they may run afoul of the antitrust laws.

Thus we find an area providing unique advantage for government intervention to aid both the consumer and the producer. With the governmental regulation being kept to a minimum consistent with achieving the purposes of the bill, and with the regulations being fairly and simultaneously applied on an industrywide basis, no particular industry and no particular industry member will be placed at a competitive disadvantage. All would be on equal footing from the standpoint of the labeling and packaging practices comprehended by the bill, and the consumer would at least be given reasonable opportunity to "compete" in the market place.

The Federal Trade Commission Act declares "unfair" and "deceptive" acts and practices to be unlawful. Surely it is beyond argument today that business transactions in the United States should not be characterized by unfairness or deception. And this statute does ex

tend to certain types of labeling and packaging practices, some of which might be comprehended within the subject bill.

For example, the Commission has proceeded in a number of individual cases to require that sellers of various products cease offering them in containers or packages which are substantially larger in size or capacity than that required for packaging the quantity of product contained therein (docket 3064, 25 FTC 937 (1937); docket 3732, 32 FTC 1014 (1941); docket 4374, 33 FTC 89 (1941); docket 3729, 35 FTC 643 (1942); docket 5128, 39 FTC 188 (1944); docket 6580, 53 FTC 1174 (1957); and docket 8489, decided Dec. 24, 1963).

The Commission also has prohibited packaging depictions which misrepresented the number of pieces contained in the package (docket C-690, decided Jan. 21, 1964).

The Commission also prohibited the use of a method of packaging insulating tape which gave a visually deceptive image of the amount of tape on the spool. The tape was rolled around a spool, part of which was of the same color and appearance as the tape, while the balance of the center of the spool was of a contrasting color (docket C-206, decided Aug. 15, 1962).

However, with the exception of a number of instances involving the improper labeling of goods as to country of origin and those relating to deceptive pricing by means of preticketing and other methods, the Commission, under its present limited authority, has issued relatively few cease and desist orders prohibiting deceptive packaging and labeling of consumer commodities.

The present law extends to a positive misrepresentation, whether made pictorially or by other means. It also includes the failure to disclose information on packages or labels, but only when the result is likelihood of purchaser deception. 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.

If consumers are to be provided with this information, and we believe they should be provided with it, then new legislation is needed. New legislation is also needed from the producer's standpoint, if consumers are to be provided with this information, in order that the requirements may be made fairly, uniformly, and simultaneously applicable to all members of a given industry. The Commission has endeavored through its trade-practice rules, guides and trade-regulation rules to achieve a measure of industrywide corrective action of unlawful industry practices through voluntary or guidance procedures. But to achieve more prompt, equitable and simultaneous corrective action, the maximum requirements for acceptable consumer packaging and labeling practice should be enacted into law by the Congress, with authority in the administering agency to issue regulations having the force of law, as under the other consumer labeling statutes administered by the Commission. They are the Wool Products Labeling Act, the Fur Products Labeling Act, and the Textile Fiber Products Identification Act.

These acts, like the proposed bill, have as their objective the protection of the consuming public by requiring that it be informed as to what is being offered for purchase. Not only do these labeling laws serve the interests of consumers, but they also have met with widespread support from industry. The rules and regulations issued by the Commission under those labeling laws have been clear and definitive so as to aid those coming within the coverage of the laws to understand and comply with them without difficulty.

Under the present draft of the bill, the role of the Commission in administering this statute would be relatively minor. The Commission would have jurisdiction only with respect to products such as detergents, soap, and paper. The substantial bulk of the packaging problem relates to food and cosmetics which under the present bill are assigned to the Department of Health, Education, and Welfare.

Because of the Federal Trade Commission's long experience in the prevention of unfair and deceptive practices, and in the administration of the consumer labeling laws requiring helpful disclosures informative to the purchasing public, the Commission feels impelled to recommend that the subject bill be changed to declare that the Commission shall be the administering agency. The practices sought to be corrected are in the area of economics, competition, and promotional practices, rather than in the area of protecting the health and safety of the public. The Commission, a bipartisan agency, is well equipped to make sure that any regulations adopted under the bill would not unduly restrict businessmen in their freedom to compete or in their exercise of ingenuity in new product development. Assignment of these duties to the Commission would be consistent with its present mandate to maintain and strengthen the competitive free enterprise system, which is the foundation of our democratic form of government.

The administrative procedures available to the Commission are more suitable than the court procedures available to the Department of Health, Education, and Welfare for dealing with economic problems of the type sought to be regulated by this bill. We are dealing here not with matters of fraud or danger to health or safety, but simply with selling practices that are deceptive or confusing or uninformative. The courts, already overburdened as they are, should not be expected to acquire an expertise which has been developed in an administrative agency, the Federal Trade Commission.

The Fair Packaging and Labeling law should, in our opinion, provide that when regulations are adopted in accordance with the provisions of the law, the regulations would have the same effect as specific laws enacted by Congress, and that a violation of those regulations would constitute an unfair method of competition and an unfair and deceptive act or practice under section 5 of the Federal Trade Commission Act. Then both the agency and the industry have a more definite guideline as to the congressional purpose.

For this same reason, of providing firmer guidelines as to congressional intent, it is desirable to retain in section 3 (a) the provision for mandatory promulgation of regulations respecting net contents disclosures, when in the public interest.

However, I agree with the position taken by the Bureau of the Budget in its letter of April 16, 1965, to Mr. Magnuson, chairman,

with reference to the so-called "cents-off" labels. As now drawn, section 3(a) (5) of the bill would make mandatory the issuance of regulations prohibiting the use of such labels. It would appear preferable, as suggested in the letter from the Bureau of the Budget, that such labels be subject to discretionary regulation, under section 3(b).

We at the Federal Trade Commission know that "cents-off" and other claims of price reduction or price advantage can be and often are a potent form of competition, a form of competition that should be encouraged when the claimed advantage is true. Consumers like nothing better than a bona fide bargain. We at the Federal Trade Commission, different from the Food and Drug Administration, have ample investigative authority to make sure that the claimed. bargains are bona fide.

We also concur in the suggestion of the Bureau of the Budget that a procedure be provided for giving advance clearance of specific packages and labels. The Federal Trade Commission has such a procedure now. But if such a procedure is incorporated into law, then sufficient time should be allowed for the administering agency to review such applications for clearance, and during this time the applicant should be required to refrain from using the proposed new package or label. I could anticipate if this law were passed, the agency getting it would be flooded without that suggestion. In addition, the agency's determination should be binding unless and until the applicant obtained a reversal after a formal hearing procedure. The bill as drawn could be violated only by persons engaged in packaging or labeling of consumer commodities for distribution in commerce and those engaged in distribution in commerce of packaged or labeled goods. It is suggested that the bill's coverage in this regard be made more consistent with that provided in the consumer labeling laws now administered by the Commission. For example, the Textile Fiber Products Identification Act extends to

The introduction, delivery for introduction, manufacture for introduction, sales, advertising, or offering for sale, in commerce, or the transportation or causing to be transported in commerce, or the importation into the United States of any textile fiber product which is misbranded or falsely advertised within the meaning of that act, and also

The sale, offering for sale, advertising, delivery, transportation, or causing to be transported, of any textile fiber products which has been advertised or offered for sale in commerce, and which is misbranded or falsely or deceptively advertised * * *(15 U.S.C. 70).

And the "persons" subject to the Textile Act are defined as "an individual, partnership, corporation, association, or any other form of business enterprise" (15 U.S.C. 70(a)).

The Commission opposes inclusion in the bill of the limitation, in subsection 3 (c) (1), that no regulation establishing reasonable weights or quantities may be inconsistent with standards prescribed by the Secretary of Commerce before the effective date of the bill. Presumably this proviso would include voluntary commercial standards which are promulgated by the Secretary of Commerce at the instance of industry groups. If the agency charged with responsibility for administering this proposed legislation should determine, after due

notice, public hearings, and so forth, as set forth in the bill, that a certain type of labeling or packaging is deceptive or otherwise fails to comply with the intent and purpose of the bill, then it seems illogical to provide that the agency's finding would be superseded by some voluntary standard that might theretofore have been approved by the Secretary of Commerce at the instance of an interested industry group. It seems apparent that the interests of the public must prevail in such a situation.

We do not have basis for concluding that it would be justifiable to include in subsection 3 (c) (1) the limitation that no weight or measure could be established in amounts of less than 2 ounces. The initial statement in the subsection that only "reasonable" weights or quantities should be established, seems to provide adequate protection against any arbitrary action.

In subsection 3 (c) (2) the limitation against regulations proscribing

the

use of package shapes which have been designed to exploit the unique advantages of any material for use in the production of packages of distinctive appearance

might be so broad as to permit use of packages which are deceptive. It is suggested that the limitation should not go beyond permitting "nondeceptive use" of the distinctive packaging material.

It seems superfluous to declare in section 4(b) that no regulation should be promulgated except after public hearing and opportunity for review under sections 7 and 8 of the Administrative Procedure Act. Would it not suffice to stop after the declaration in the first sentence of the subsection that all regulations will be promulgated in conformity with the provisions of the Administrative Procedure Act.

The requirement in section 6 that annual report be rendered as of the first of January each year differs from the other reporting requirements now followed by the Trade Commission. The Commission now reports to the Congress on a fiscal-year basis.

On behalf of the Commission, may I compliment this committee for the service it is rendering to the consuming public and to our competitive free enterprise system in its consideration of a Fair Packaging and Labeling law.

The Commission, as always, is at the service of the committee for any assistance it can render with respect to the proposed legislation. Senator NEUBERGER. Thank you, Mr. Chairman. Senator Hart regrets that he is torn between two important meetings, but he will return as soon as he can.

I thought you cited an interesting historical fact which I had almost forgotten-that was the Fur Products Labeling Act. I remember when the need for that was so great that it brought about this bill, so the public is now assured of the reliability of fur products and they accept this part of Government interference-as some people might call it. The same with the Wool Act and the Textile Fibers Act.

Would you say then that preventing deception in grocery items and cosmetics will be somewhat a continuation of that same philosophy? Mr. DIXON. Yes; I think so. But I believe, more important, in