a new civil penalty proceeding was initiated in the case of Thomas Management Corp., Chicago, and others (Docket 4422). The Attorney General, at the Commission's request, brought suit in the District Court at Chicago, seeking penalities in the amount of $290,000. The suit charged repeated violations of a Commission order requiring abandonment of claims for curing scalp ailments and growing hair. Besides the Thomas proceeding, other civil penalty cases pending in United States district courts included:

U. S. v. Lady Carole Coats, Inc., and others; U. S. v. Shelbrooke Coats, and others. Suits for penalties for failure to keep records under the Wool Products Labeling Act. District Court (New York City).

U. S. v. Korjena Medicine Co., and others; U. S. v. Oland D. Redd. Suits for civil penalties for violation of a Commission order to cease and desist. District Court (Buffalo).

U. S. v. Standard Education Society, and others. Suit for civil penalties for violation of a Commission order. District Court (Chicago).

U. S. v. Gerald A. Rice, and others. Suit for civil penalties for violation of a Commission order. District Court (Seattle).

*Aggregating 1,034,914 typewritten pages.

The legal case work described in the foregoing pages requires, of course, investigations to determine the facts. This function is the responsibility of the Division of Investigation. It investigates alleged violations and obtains the information necessary to support issuance of formal complaints, negotiation of stipulations, and other corrective action by the Commission.

The Federal Trade Commission Act requires that before issuance of a formal complaint the Commission must "have reason to believe"

that the Act has been violated and that a proceeding by it would be "to the interest of the public." The primary function of the Division of Investigation, therefore, is to obtain necessary information for the Commission to determine whether there is reason to believe that the Act has been violated and whether there is sufficient public interest to warrant issuance of a complaint. The investigations conducted by the Division are sufficiently broad in scope to accomplish this purpose, as well as to permit disposition of some matters by less formal

means.

The Division also conducts deceptive practice investigations for other Commission units, including some for the Division of Wool and Fur Labeling, some for the Assistant General Counsel in Charge of Trade Marks and Insurance, and others for the Assistant General Counsel in Charge of Compliance.

In addition to individual-case procedure, the Division conducts industry-wide investigations as circumstances require when it appears that questionable practices are widespread in an industry.

In order that violations may be promptly brought to the attention of the Commission, the Division maintains a continuing survey of published, broadcast, and telecast advertising for the purpose of detecting false and deceptive claims. It also screens letters of complaint which are received from such sources as businessmen, consumers, and other Government agencies.

Possible violations are first subjected to preliminary inquiry, usually by correspondence, to determine initially whether a proceeding is called for. This procedure serves to weed out those matters which, because of lack of jurisdiction, lack of public interest, or for other reasons, are not proper subjects for Commission action. It serves also to obtain in many instances, prompt, voluntary cessation of unlawful practices.

If a matter cannot be satisfactorily disposed of in the preliminary inquiry stage and it appears to involve a probable violation and substantial public interest, it is scheduled for more extended investigation, either in the field or by correspondence, or both. For field investigation the case is transmitted to one of the Commission's six field offices. There it is assigned to an attorney-examiner for development of all necessary information. The proposed respondent is usually advised of the nature of the charges against him, and is afforded full opportunity to submit information in explanation or justification of his practices. Upon completion of the investigation, a report to the Commission is prepared, summarizing the evidence and the applicable law, together with a recommendation for disposition, which may be for (1) issuance of a formal complaint; (2) negotiation of a stipulation-agreement in which the respondent agrees to

cease and desist from the practices challenged as unlawful; or (3) closing where in certain types of cases the illegal practices were discontinued without intent to resume, or where the charges were not sustained, the Commission was without jurisdiction, or there was insufficient public interest to warrant a proceeding.

In its advertising survey, the Division examines advertisements appearing in current issues of magazines, newspapers, farm and trade journals, mail-order catalogs, and radio and television commercial continuities. The survey brings to light advertisements which form the basis for scheduling deceptive practice investigations; provides an inexpensive method of checking on the activities of advertisers. covered by outstanding cease-and-desist orders and stipulations; furnishes evidence which facilitates investigations and trials in advertising cases; supplies information for determining the need for, and the extent of compliance with, trade practice rules; and provides a readily available cross-section of advertisements with respect to particular products and industries for use in conducting industry-wide investigations. Advertisements observed in the survey are also utilized by the Alcohol Tax Unit of the Treasury Department in its enforcement of the advertising provisions of the Federal Alcohol Administration Act. In addition to these direct and measurable effects, the survey is known to exert a salutary effect upon advertising generally.

In connection with the survey, some newspapers and magazines are examined on a continuing basis because of the high percentage of questionable advertisements published in them. Copies of most of the 20,000 publications circulated in this country, however, are procured three times yearly.

Mail order catalogs and circulars are received from 50 mail order houses, 5 of which have combined annual sales of nearly $4 billion. The frequency of calls for commercial continuities from the 2,900 radio and television stations covered by the survey is in proportion to the population of the cities in which the stations are located. Radio stations in small cities submit samples of commercial script once yearly; stations in cities of intermediate size, twice yearly; and stations in large cities, 3 times yearly. The national and regional radio networks respond on a continuous weekly basis, and producers of electrical transcriptions submit texts of commercial recordings once each month. Television networks, individual television stations, and producers of television advertising films and records also submit samples of their commercial script periodically. Material for the survey is furnished on a voluntary basis.

Advertisements examined in the survey during the fiscal year 1951 totaled 712,862, of which 28,518 were set aside as questionable.

During the year, 14,715 such advertisements were supplied to operating divisions of the Commission for use in connection with the investigation and trial of cases, the preparation of scientific opinions, the administration of trade practice rules, or the enforcement of outstanding orders and stipulations to cease and desist; and 269 advertisements were transmitted to the Alcohol Tax Unit at its request. Advertising of alcoholic beverages, cigarettes, and oleomargarine was given special attention.

Complaints from outside sources alleging false advertising or other deceptive practices numbered 2,524. Of 2,324 such matters disposed of, 376 were scheduled for investigation; 32, reported directly to the Commission; 211, referred to other divisions of the Commission; 554, added to other Commission files; 60, referred to other Government agencies; and 202, disposed of administratively. The remainder were filed without action. Those cases disposed of administratively were matters in which correction of objectionable practices was brought about by voluntary action on the part of the proposed respondent. The matters scheduled for investigation were those which could not be satisfactorily disposed of in the preliminary stage, and which appeared to involve illegal practices and substantial public interest.

Scheduled investigations completed during the year totaled 869. Of these, 546 involved false advertising and misrepresentation generally, including 12 insurance cases; 318, false advertising of food, drugs, cosmetics, and devices; 3, trade-mark matters under the Lanham Trade-Mark Act; and 2, misbranding under the Wool Products Labeling Act. Included in the total were 27 investigations for the purpose of determining compliance with Commission orders to cease and desist.

The Division completed an industry-wide investigation of advertising and promotional practices of manufacturers and large distributors of so-called "orthopedic" and "health" shoes, involving 103 companies with an aggregate sales volume of $710,000,000. This investigation dealt with claims to the effect that various stock shoe products, especially those for children, insure healthy feet and correct and prevent deformities of the feet and poor posture. Corrective action was recommended by the Division in 54 separate cases arising from this survey.

In addition to false and misleading advertising, the charges in cases investigated by the Division during the year included misbranding, fictitious price-marking, failure to deliver, failure to make refunds, false disparagement of competing products, offering second-hand goods as new, concealment of and failure to disclose foreign origin, simulation of trade-name or product, and lottery methods of sale. Among the important products covered by the investigations were

clothing, food, medicines (human and animal), therapeutic devices, building materials, automotive products and accessories, insecticides and related products, sewing machines, furniture, rugs, cosmetics, correspondence courses, encyclopedias, magazines, jewelry, electrical appliances, alcoholic beverages, and cigarettes. Three investigations involving alleged false advertising of oleomargarine were pending at the year end.

The Division of Investigation contributed materially to the Commission's defense survey work during the last 4 months of the fiscal year by detailing some 30 percent of its investigational staff to that work. In its regular work, the Division gave priority attention to products and practices especially important by reason of the defense emergency.

Medical and Chemical Opinions

Scientific facts and opinions play an important role in the investigation and trial of cases involving advertising claims made for food, drugs, therapeutic devices, cosmetics, and other commodities. These facts and opinions are furnished to the Commission by the Division of Medical and Chemical Opinions.

The Division arranges for analyses of samples of products under investigation and gathers information concerning their composition, nature, effectiveness, and safety. It provides medical opinions and scientific information needed in the preparation of formal complaints, the negotiation of stipulation-agreements, and the drafting of affidavits of scientific experts. It assists the legal staff in connection with hearings involving questions of science and secures the services of expert scientific witnesses.

During the fiscal year, the Division prepared 87 written opinions with respect to medical and scientific matters. In addition, it rendered oral opinions in 72 cases under investigation and in 51 cases where formal complaints had been issued. Personnel of the Division attended 8 informal conference-hearings and 28 formal hearings. The Division arranged for the appearance at hearings of 32 expert scientific witnesses.

The Chief of the Division is the Commission's liaison officer with the Food and Drug Administration and with the Insecticide Division, Livestock Branch, Production and Marketing Administration of the Department of Agriculture. Cooperation with these agencies has brought to the Commission necessary information and other assistance in handling cases involving food, drugs, devices, cosmetics, and "economic poisons" such as insecticides, fungicides, rodenticides, and weed exterminators. Through the Division, the Commission maintains cooperative contact with other Government agencies concerned