(Hearing on Buffalo General Electric Co., of Niagara Hudson group, vol. 62, p. 298, 299.)

Lastly, the rulings on the inclusion of evidence, because of the method used in the investigation, were arbitrary.

"Commissioner MCCULLOCH. Well, I am not going to let you introduce the exhibits now. You understand that? (Re radical organizations.)

"Mr. WEADOCK. Yes; I get that idea, but I do not desire to address myself to the question which is urged here, or raised now; that is the competency of the proof. I have considered in this investigation we have been operating more as a court of chancery, so to speak, than anything else, and the exact and strict rules of evidence have not been followed. I think we will all agree to that.

"Commissioner MCCULLOCH. That is true, and that is why I am letting this

go in

* * * ""

(Vol. 18-19, p. 193.)

(Vol. 18-19, p. 191):

"Commissioner MCCULLOCH. Now, I think I understand your position very clearly, and I have endeavored to make mine clear. I do not think I can add anything to the facts. I do not agree with you. You and I are in disagreement about it. I must make the ruling that is prompted by my judgment, and I have done so. Now, let me see the paper you are offering, and I will state whether I can let it in or not (re radical organizations).

"Mr. WEADOCK. Well, I certainly take an exception. Of course, we have no method of appeal from Your Honor's decision, but it seems to me that it is a most positively unique situation here, for we have given you everything we have had for 2 years.

"Commissioner MCCULLOCH. Now, Mr. Weadock, I have heard you very respectfully. I have heard you develop your position, and I understand it. Now, I have made my ruling on it.

"Mr. WEADOCK. I know; but, Your Honor, I have a situation here to consider. "Commissioner MCCULLOCH. I am controlling this hearing, and you must respect my rulings on it.

us

"Mr. WEADOCK. I will respect Your Honor's rulings. "Commissioner MCCULLOCH. And you must do so.

"Mr. WEADOCK. But only to the extent that those rulings do not deprive

"Commissioner MCCULLOCH (interposing) I do not care what effect they have. "Mr. WEADOCK (continuing). Of availing ourselves of our opportunity to present our full case.

"Commissioner MCCULLOCH. So far as this hearing room is concerned, you will respect my rulings, or I will find a way to compel you to do it.

"Mr. WEADOCK. Now, Judge McCulloch, I say this, that under the authority imposed upon you by that resolution we are entitled to show our cause.

"Commissioner MCCULLOCH. Mr. Reporter, suspend this report for a minute.” Whereupon Commissioner McCulloch ordered the reporter to cease taking further objections to his ruling and excluded the testimony.

These are a few illustrations of the many where, under the procedure adopted, companies were rigidly restricted in the character of their proof and the manner of offering the same.

BUDGET AND COMMITTEES OF THE NATIONAL ELECTRIC LIGHT ASSOCIATION

In his testimony before the Senate Committee, Colonel Chantland said: "I want to call attention to the budget of the National Electric Light Association. In this part 71-A (p. 27) that you have before you it shows that that budget exceeded a million dollars a year. It is true that a part of this was for technical work. But it is also true that so far as the time and energy at the headquarters of the various geographical and State divisions were concerned, the principal activities of the staff were devoted to the public relations end. The revived joint committee, in the 7 months from June 1 to December 31, 1927, collected $400,000 for its use. And it was purely for propaganda, of course, or publicity or public relations, whatever you may desire to call it."

It was testified by Mr. Preston S. Arkwright, president of the Georgia Power Co. and formerly president of the National Electric Light Association (Federal Trade Commission vol. 18-19, p. 87), that for the year 1927 the total expenditures of the National Electric Light Association were $993,527.08 and out of that sum $53,213 was directly expended for public relations work. In the same year, the association spent $107,647.85 on account of advertising in farm papers and

magazines to promote farm and rural electrification, which was not spent, according to Mr. Arkwright's testimony, for public relations purposes. So that the expenditure that year on public relations was only 6 percent of the budget. (See also exhibit no. 753, Federal Trade Commission ex. pt. 3, p. 103.)

Exhibit no. 5578, Federal Trade Commission volume 61, page 158, includes a statement of income and expenditures of the National Electric Light Association. It shows the following expenditures for public relations, by years:

For 1928:

Total income....

Expenditures for public relations__
Advertising..

Percent of public relations and advertising cost to total

income__

For 1929:

Total income_

Expenditures for public relations..

Publication cost__.

Percent of public relations and public relations publication

cost to total income__

For 1930:

$1, 273, 857. 16

61, 188. 31 103, 458. 43

12. 13

1, 456, 138. 11 785.47 168, 577. 61

11. 63

It is conceded by Colonel Chantland that a part of the record was of a technical nature. The work was done by committees. Exhibit no. 3, exs. pt. 1 and 2, p. 9 of the Federal Trade Commission record lists the organization committees showing that of the total of 59 committees, all but 7 related to technical, scientific, commercial, and engineering problems of the business, or, in other words, 88 percent of the total committees were of that nature.

STIGMA UPON THE EDISON ELECTRIC INSTITUTE

Colonel Chantland referred to the Edison Electric Institute as follows: "Until they put it (the former National Electric Light Association) out of its misery and formed a new so-called 'Edison Electric Institute' and he (Mr. Bernard F. Weadock) is vice president of that, with the same offices and files, but considerable changes, if you please, in their method of procedure."

The Edison Electric Institute was formed on January 12, 1933, and it was the first trade association organized providing for a code of ethics for its members. The code adopted is as follows, as provided in article IV of the Constitution:

"ARTICLE IV-BUSINESS PRINCIPLES

"SECTION 1. The company members shall from time to time and not less than annually publish financial statements, including balance sheets and earnings statements showing gross and net income, operating expenses, and surplus accounts, which statements shall be certified to by independent firms of certified public accountants who shall have audited the books of the company.

"SEC. 2. All statements and data furnished to consumers, stock exchanges and stockholders; all information designed for public dissemination and all reports to governmental authorities shall be accurate and clearly indicate their source.

"SEC. 3. All contracts between any member companies which involve the furnishing of management, supervisory, purchasing, construction, engineering or financing services to operating electric utility companies shall be so drawn and so

operate in practice that the charges to the operating company shall be reasonable and commensurate with the value of the services rendered and the fair cost thereof to the company furnishing the services.

"SEC. 4. Company members from time to time shall answer such questionnaires relative to their organization, financing, methods of operation, and business practices as may be requested by resolution of the board of trustees."

The objects of the Edison Electric Institute are fully stated in its constitution as follows:

"" ARTICLE II-OBJECTS

"The objects of the Institute shall be:

"1. The advancement in the public service of the art of producing, transmitting, and distributing electricity and the promotion of scientific research in such field.

"2. The ascertainment and making available to the members and the public of factual information, data, and statistics relating to the electric industry. "3. To aid its operating company members to generate and sell electric energy at the lowest possible price commensurate with safe and adequate service, giving due regard to the interests of consumer, investor, and employee."

Colonel Chantland might have testified with greater consideration for the facts if he had pointed out that two examiners of the Federal Trade Commission, under the jurisdiction and at the direction of Colonel Chantland, spent 2 days examining the files, records, correspondence, reports, and all material in the offices of the Institute. The material gathered was taken to Washington for examination by the superiors of the examiners, and although such examination occurred almost a year ago, it has never been introduced into the record. Inquiry as to why it had not been introduced, brought the answer: "There was not anything of interest to put in the record."

Had Colonel Chantland desired to be eminently fair, he would have brought the complete story of the Edison Electric Institute to the attention of the members of this committee.

This would seem to be in keeping with the practice of the Commission to avoid giving credit or commendation for things which are of a constructive type. It seems strange that in over 76 volumes printed, but few complimentary things are said by the Commission of a business which has been as successful in serving the public as the electric light and power industry.

It would have added greatly to the Federal Trade Commission's reputation as a fair and impartial body to have included some of the things which its technical and engineering staff stated but which were buried among the volumes of antagonistic reports of the Commission. That the statistical work was completely, thoroughly, and accurately done is best attested by the Commission's report on the interstate movement of electric energy (71st Cong., 3d sess., Doc. 238) an engineering study appearing in 1931:

"For the high degree of completeness and comprehensiveness achieved in the returns and compilations presented, moreover, the Commission owes much to the cooperation of the National Electric Light Association. This organization not only circularized its members but emphasized the importance of 100 percent returns."

and again:

"The comparison between the figures of this inquiry and those of the National Electric Light Association is gratifying evidence of the accuracy of both sets of detailed data (p. 9). * * * the competence of its statistical staff may be taken to mean that its own figures for 1928 and 1929 are on the same basis" (p. 47).

ADVERTISING-A LEGITIMATE AND ACCEPTED ATTRIBUTE OF BUSINESS

Expenditures for advertising are referred to by Colonel Chantland in the following terms:

66* * * the utilities industries were reported by their own men to have spent in the neighborhood of 28 million dollars for advertising. I need not tell you why. But I think that has to be considered in the matter of the influence it has on the program of the utilities and of getting things favorable to the utilities" (p. 88).

This description of the subject constitutes not only a stigma upon all advertising as such, but is also a misinterpretation of how and why the money was spent. Throughout the years of the Federal Trade Commission's investigation, it has

consistently sought to convey the impression that any advertising by any utility company was reprehensible in itself and that all such expenditures constituted "propaganda."

The 28 million dollars included not only the gas and electric utilities but all public utilities, including the telephone and traction companies as well (testimony of Bernard J. Mullaney, F. T. C. Exs. pt. 2, p. 127). The gas and electric utilities expended only one-third of this total, or less than one-half of 1 percent of their gross revenue.

Much of this advertising was to promote the sale of household appliances. The following table gives an analysis of the purposes of the advertising expenditures of the electric light and power companies under four general heads:

The money spent was for salaries, overhead, art and mechanical work, billboard and poster displays, as well as payments for space in publications.

Advertising expenditures of the industry must, of course, be increased if the objective of further increase in the use of electric service is to be attained more rapidly than heretfore. The sound business practice of advertising to promote the greater acceptance and use of electric service is surely not a matter for condemnation.

EMPLOYMENT OF COLLEGE PROFESSORS

In the 8 years of its investigations, the Federal Trade Commisson has given much publicity to the employment of college professors for special research by utility companies.

This was referred to by Colonel Chantland in the following manner: "Chairman WHEELER. Was any retainer given to professors?

Colonel CHANTLAND. Yes, sir. One man, Dean Ruggles, was retained for the specific purpose of making a survey of a good many books, and he went around the country and held meetings."

66

The statement about Dean Ruggles is untrue. He had nothing to do with a survey of books. He was retained and commissioned to make a survey of the extent of instruction in public utilities in colleges and universities, of the industry's interest in college graduates, and of the willingness and ability of utilities to cooperate with higher educational institutions." This was published under that title by the National Electric Light Association in 1929.

Inasmuch as this subject has been introduced by Colonel Chantland in the above reference and by his allusion to professor Stewart, discussed later, it is only fair to point out some of the fundamental principles of the relationship between the electric light and power industry and the colleges and universities of the country.

Detailed study of the Federal Trade Commission record, from the inception of its investigation, shows that instructors of various rank, in many colleges, were engaged at various times in work by the utility companies. The record shows that of that number, the vast majority received no compensation of any character, but were reimbursed in small amounts for their traveling expenses for attending meetings; that the engineering and scientific schools were engaged largely in research upon the following subjects, the cost of which was borne either by individual companies or the trade association interested in such work: Steam engines, turbines, and their accessories.

Hydraulic turbines and water wheels.

Interference between electric power and telephone communication.

Accident prevention.

Accounting methods.

Poles and wiring.

Farm electrification.

THE EMPLOYMENT OF COLLEGE PROFESSORS IN PROFESSIONAL WORK BY CORPORATIONS IS AN ACCEPTED TRADITION OF THE TEACHING PROFESSION

Some of the largest universities not only permit, but even encourage, their professors to hold positions in consulting capacities, accept retainers, and perform research for commercial and business firms. Almost every annual report by the

deans of the various engineering departments points with pride to the activities in outside commercial work engaged in by their instructors during the year.

The character of the references by the Federal Trade Commission to college professors and to their employment by the electrical industry is but another instance of the innuendoes deliberately manufactured to cast aspersions upon the industry and men of reputation and integrity in the educational field.

In 1928, as was stated in the following report, "the charges and innuendoes directed against members of the teaching profession finally grew to such a volume as to court action by the American Association of University Professors." In 1930, a report was rendered by a special committee, appointed to investigate and report upon the ethical principles involved in the employment of college professors by utility companies. This was prepared by Prof. E. R. A. Seligman, of Columbia, and approved by the association's committee on ethics, consisting besides Professor Seligman, of Profs. C. P. Costigan, California; G. W. Cunningham, Cornell; John Dewey, Columbia; E. A. Ross, Wisconsin; C. F. Taeusch, Harvard; C. J. Tilden, Yale; J. H. Tufts, Chicago; and U. G. Weatherly, Indiana. In regards to Dean Ruggles, the report states that:

"A committee of some 15 professors was constituted to aid the director, Professor Ruggles, in ascertaining the facts and formulating the report. When the public clamor resounded in the newspapers Mr. Jackson and the other utility members withdrew from the committee and the report was prepared entirely by the educational members. The report which appeared late in 1929 deals with a statement of the actual facts of present cooperation and declares it untimely to consider any definite plans for a formal future cooperation between the institutions and the industry.

"So far as results from a careful inspection of the minutes of the Ruggles committee there does not seem to be much of a serious character to criticize in the way in which Professor Ruggles conducted this investigation or in the activities of the cooperating academic instructors. While the tone of some of Mr. Ruggles' speeches was perhaps a little too exuberant and while a still franker statement of the situation might seem to have been desirable, the Ruggles committee was essentially a fact-finding committee. It successfully accomplished its object in ascertaining and publishing the facts. The payment of the insignificant traveling expenses of the attending professors is a quite common and unobjectionable procedure in committee and convention meetings."

On the broad subject of the college professor leaving the sheltered cloisters of academic thought and using his professional talents for the benefit of the world at large, the report states.

"The attitude which is taken by some that a professor should do nothing but teach and should refrain from any outside employment or activities is not only foolish but short-sighted. In the first place, no matter what his field, he will be a much better teacher if he has some contact with actual life. Moreover, while insistence on nonparticipation in extra-curricular activities would be unfair to his institution and his students, it would be equally unjust to the outside world that needs his help. More and more has the business man like the statesman come to rely upon the expert for advice if not for guidance. To say that a professor should refuse to carry on a piece of research or to give his opinion on some complex problem to the individual or the corporation would be about as intelligent as to say that a famous physician should restrict his activities to his university lectures and refuse to treat any outside patient."

The report emphasizes the very natural resentment of the academic world against the prevalent misuse of the word "professor" and the characterization of everybody upon a college pay roll by that title. It goes on to say:

"The second point on which confusion has existed lies in the failure of the public mind and of the Trade Commission itself to distinguish between the various categories of academic instructors. It is an interesting fact that in almost every case of alleged improper activity the individual in question was either a subordinate instructor or connected with the extension department or with some technical day or night school; and that, on the contrary, very few cases are noted of alleged impropriety on the part of regular instructors in the academic departments or of teachers of economics in the schools of business or elsewhere."

Had Colonel Chantland desired to present your committee with all the facts, it would only seem logical that he should have referred to the original testimony of the various hearings, which gave full details of who the professors were, what they did and their compensation, if any.