Mr. DAVIS. It is a companion piece to that. Our part of it relates to advertising, false and misleading advertisement, of foods, drugs, cosmetics, and other devices.

Mr. HOUSTON. The reason I ask that is because there might have been a misunderstanding there, because there was a Wheeler-Lea bill which was the transportation bill that was passed during this session of Congress.

Mr. DAVIS. That is different from this bill. This was a bill amending the Federal Trade Commission Act, and then it supplemented it by some entirely new provisions in which Congress undertook to tighten up the law, in an effort to prevent false or misleading advertising, particularly of foods, drugs, cosmetics, and devices which relate to the public health.

WORK DONE BY THE COMMISSION OF A NATIONAL-DEFENSE NATURE

Mr. WOODRUM. Is the Commission doing any defense work of any kind?

Mr. DAVIS. Only in this way. We have several members of our staff who are serving, by request, upon various committees in the national-defense commission organization.

Mr. WOODRUM. Full time?

Mr. DAVIS. Only one of them full time. They have agreed to pay his salary. The others are called in to meetings that they have. The reason that they asked for these men, of course, is that each of them had expert knowledge along certain lines.

Mr. WOODRUM. Have you any personnel permanently detailed to any committee?

Mr. DAVIS. Only one detailed over there permanently.

Mr. WOODRUM. I mean to any congressional committee.

Mr. DAVIS. Not at this time.

Mr. FITZPATRICK. Does profiteering under the National Defense Act come under your jurisdiction?

Mr. DAVIS. Not necessarily. It depends entirely upon what the circumstances were; if it were the result of a conspiracy, of a pricefixing arrangement among competitors or something of that kind, or a violation of the Robinson-Patman Act, it might be, and it might not. There is one further thing on that that I want to explain to you, Mr. Chairman, bearing upon your question. During the World War, the Federal Trade Commission did practically all of the auditing for the Government of cost-plus contracts.

Here is a description of our activities (indicating booklet). We got so many requests for it that we brought some of these along. This has to do with the cost plus 10 percent contracts. The question arose as to what was cost, and whether the various companies who made these contracts were billing the Government with what was actual cost or whether they were padding the returns, or whether they were including items which legitimately should not have been included as cost items. There was quite a controversy in the accounting world on many of those subjects, as you know.

So the President issued an Executive order directing the Federal Trade Commission to act as the auditing agent for the Government. We performed that work for the Army and the Navy, for the War Industries Board, and for several other organizations. The work

became so voluminous that at one time the Commission had over 600 accountants and assistants engaged on this work. And if you will examine this booklet, you will see that their services were very enthusiastically commended by those for whom the work was done. There is no question but that they saved the Federal Government very large sums of money.

We have not been called upon up to now, Mr. Chairman, to perform that identical service, but the representatives from this defense commission have been coming over constantly, asking to examine our old files, and underlying data with respect to all of those audits, or at least a very large proportion of them. And while we have been. making that material available to them, it has naturally taken a good deal of time of our staff in order to ferret out those things and make them available because they are asking for material on certain industries, or on certain contracts, or something like that, and somebody has to go into the records and dig that up. We have been complying with their requests thinking it was proper that we should do so. But it has imposed a considerable burden upon us in that way, by way of using our employees.

AMOUNT REQUESTED OF AND ALLOWED BY THE BUDGET BUREAU

Mr. WOODRUM. The Budget allowed you an increase of $60,000; how much did you ask them for in addition to your last year's appropriation?

Mr. JOHNSON. We asked $2,778,385 lump sum for 1942. That is $538,385 over what we have in 1941.

Mr. WOODRUM. They cut you $478,385 from what you requested? Mr. JOHNSON. Yes.

PREPARATION OF BUDGET ESTIMATES

Mr. WOODRUM. Mr. Johnson, do you wish to say anything about the new Budget break-down?

Mr. JOHNSON. We have set the green sheets up in the way suggested by the Bureau of the Budget. I understand that it is in the nature of an experiment. We have worked with them, and we are glad to

cooperate.

Mr. WOODRUM. It is about as easy to handle from your standpoint? Mr. JOHNSON. Yes, sir.

UNEXPENDED BALANCE OF APPROPRIATIONS, 1940 AND 1941

Mr. WOODRUM. How much of a balance did you have at the beginning of this fiscal year to bring over?

Mr. JOHNSON. Nothing to carry over. We did not have any balance that was available to be used in 1941. We had about $61,000 unused in 1940, but not carried over. The $61,000 from our 1940 appropriation which went back to the Treasury included a reserve of (1) $20,000 earmarked for 1940 for the Bureau of Standards; (2) an administrative reserve of $25,000, making a total reserve of $45,000; and (3) $16,000 representing the unused balance.

Mr. WOODRUM. That went back into the Treasury?
Mr. JOHNSON. Yes.

Mr. WOODRUM. What do you estimate your balance will be at the end of this fiscal year?

Mr. JOHNSON. We estimated that we will not have any usable balance, although there is an amount impounded by the Budget, about 21⁄2 percent of the 1941 appropriations.

Mr. WIGGLESWORTH. Of the 1941 or the current year's appropriation?

Mr. JOHNSON. 1941.

Mr. WOODRUM. Your rate of expenditure now shows that you will come out about even?

Mr. JOHNSON. Yes. However, the Commission must be very careful in handling its funds to avoid separations from the staff. Mr. FITZPATRICK. Will you spend that 21⁄2 percent that was set aside?

Mr. JOHNSON. No, sir. It is not available to the Commission.
Mr. FITZPATRICK. That goes back into the Treasury?
Mr. JOHNSON. Yes.

Mr. DAVIS. Mr. Chairman, with respect to the $37,000 not used for the last fiscal year, I think it proper to explain that the Commission needed all of that, and more, too, but it is impossible to figure to a dollar or even a thousand dollars or two thousand dollars just how you are coming out, because of travel expenses and of various other expenses that we have to meet in our work.

The year before last, when we thought we were in the clear absolutely, after all of the bills came in, we were about $7,200 in the red, and it took a few months to get that straightened out. The only way we got it straightened out was that the Budget had impounded some of our funds, and finally they and the President agreed to release a sufficient amount of that to take up this $7,200 deficit which we had run.

Mr. JOHNSON. There was no expenditure in excess of the appropriation.

Mr. DAVIS. One of my colleagues thought, Mr. Chairman, I did not make it clear why last year we had $37,000 left over, when we needed it. That was because we were playing safe. Having had the experience we did the year before and wanting to be certain to be in the clear and not have a deficit, it happened, I think, that we had $37,000 or something like that of the appropriation left over. And of that amount the Budget had approved an item of $20,000 for us to pay the Bureau of Standards for making tests of various kinds for us. They had been doing it through the years without making any charges to us for it, as we were another Government Department; but they finally told us they would not be able to do it any more unless they were reimbursed. So we took it up with the Budget and with them, with the result that the Bureau of the Budget approved an item of $20,000 for the past fiscal year for that purpose.

That was not as much as the Bureau of Standards wanted and, besides, it was not the way the Bureau of Standards wanted it. They wanted it on a lump-sum basis. The Bureau of the Budget wanted it done on a billing basis. At any rate, the Budget approved $20,000 and, somewhat to our surprise, the Bureau of Standards did not accept the $20,000 and so that went back into the Treasury. During the present fiscal year $10,000 has been transferred to account. of Bureau of Standards and we are trying to work it out for the future.

so that it will be satisfactory all the way around. But if the $20,000 were deducted from the $37,000, it would leave a very small balance.

PROMOTIONS OR SALARY INCREASES

Mr. WOODRUM. What about promotions or salary increases, or grade changes during this current fiscal year?

Mr. JOHNSON. There may be a few promotions under the statutory limitations. The Budget has set $10,780 as the maximum amount which may be expended in 1941. However, in accordance with the provisions which now apply, the Commission is limited to an expenditure of $8,800 for promotions in 1941. It cannot utilize the maximum set by the Budget.

Mr. WOODRUM. Will you be able to make some increases under that?

Mr. JOHNSON. Yes; a limited number.

Mr. WOODRUM. What about the next fiscal year?

Mr. JOHNSON. For 1942?

Mr. WOODRUM. Yes.

Mr. JOHNSON. No provision is made at all.

Mr. WIGGLESWORTH. $10,780 in the present fiscal year?

Mr. JOHNSON. Yes; as a maximum to be saved from other items if used for promotions.

PERCENTAGE OF COMPLAINTS INVESTIGATED

Mr. DAVIS. Mr. Chairman, my colleague, Commissioner Ferguson, has suggested that I explain further in response to Congressman Fitzpatrick's question that where we receive letters of complaint and upon preliminary investigation or examination of the facts, on the face, it appears that we do not have jurisdiction, or that it is so trivial that we will not proceed, or something of that kind, those are not docketed, and consequently no record is made of them. They are not included in the number of cases which we speak of in any way at all.

Mr. FITZPATRICK. Then there is no way by which you can tell what percentage of the complaints received are dropped on investigation? Mr. DAVIS. No. We just close those. That is a closed chapter, and there is no statistical record made of them.

Mr. FITZPATRICK. Nevertheless, you have to have correspondence on those cases.

Mr. DAVIS. Yes. We have a very voluminous correspondence. Many of them are of a type that it is necessary for the answers to be drafted, if not by the Commission, then by the chief counsel or the chief examiner, or the director of the radio and periodical division, or other chiefs of staff, because they involve an interpretation of law; they involve matters which cannot be lightly treated. That applies with particular force to frequent communications that we receive from Members of Congress.

I do not think there is a day passes that we do not receive one or more, and sometimes several communications from both Senators and Representatives, generally submitting a letter which they have received from a constituent asking for an opinion or a decision, or something of that kind.

WORK IN CONNECTION WITH THE WOOL PRODUCTS LABELING ACT

Mr. HOUSTON. Have any new laws been enacted this year that have increased your work?

Mr. DAVIS. The Wool Products Labeling Act, to which I made brief reference, is a very important act. It has been said by some that it has created more general comment in the press, and in the business world, and in farm journals, than any legislation that has been passed in recent times. Perhaps some of you are aware that for approximately 30 years an effort was made to pass what was known as a truth-in-fabrics bill.

Mr. FITZPATRICK. That only referred to the quality of the wool, did it not?

Mr. DAVIS. And the quantity, the content.

Mr. FITZPATRICK. It did not refer to the percentage of wool, but to the quality of wool; is not that correct?

Mr. DAVIS. Both. In other words, both are important, the content even more so, because you might buy a suit of clothes with 20 percent wool and 80 percent cotton or 80 percent rayon

Mr. FITZPATRICK. But it did specifically provide as to the quality of the wool, whether it was virgin wool or whatever it might be. Mr. DAVIS. Yes.

Mr. FITZPATRICK. Some thought the object of that was to benefit certain wool growers. That seemed to be the argument at the time. Mr. DAVIS. Well, the wool producers were in favor of the bill.

Mr. HOUSTON. It was supposed to protect the purchaser of the ordinary class, was it not?

Mr. DAVIS. It was primarily to protect the purchaser-the consumer. In other words, Congressman Fitzpatrick, the bill does not prohibit the sale of any kind of wool in fabric at all.

Mr. FITZPATRICK. Oh, I appreciate that.

Mr. DAVIS. It simply requires a truthful label; that is all.

Mr. FITZPATRICK. And to specify what is in it.

Mr. DAVIS. To advise the purchasing public what it is; in other words if, as I say, it is 20 percent wool, 60 percent rayon, and the other cotton.

Mr. FITZPATRICK. But in the 20 percent wool, must it not state what kind of wool that is?

Mr. MARCH. Yes; that is correct. It cannot be shoddy and claim it is wool.

Mr. FITZPATRICK. And it cannot be reclaimed wool?

Mr. MARCH. That is right.

Mr. FITZPATRICK. It must be specified if it is reclaimed wool or virgin wool?

Mr. DAVIS. They must state it is reclaimed or reprocessed wool, if it is.

In connection with the discussion of the Wool Products Labeling Act, I wish to state there has been furnished to each of you a copy of the act, which you will find in your data.

Mr. WOODRUM. Yes; we have that.

Mr. DAVIS. But, gentlemen, there is nothing in the estimates for it. We expect to undertake to get along without any additional funds; we did not even ask for anything. After the experience we will have in the administration of the act, it depends upon circumstances and