SURVEY OF RADIO AND PERIODICAL ADVERTISING

37

Export Trade Act.-In its administration of the Export Trade (Webb-Pomerene) Act, the Commission directed the Legal Investigations Division to investigate the organization and operation of certain export-trade associations organized and functioning under the act, and in particular to ascertain whether they (a) are artificially or intentionally enhancing or depressing domestic prices; (b) are used to eliminate competition in the purchase of raw materials in the United States; (c) are in any way restraining trade within the United States; or (d) are engaging in unfair methods of competition in foreign trade.

Preliminary investigations were completed of the activities and operations of one export-trade association whose members are im portant producers and distributors of rubber. Investigations of three other associations were pending at the close of the year. These involved producers and distributors of alkali and lumber.*

Industry investigations.-Continuing the policy established 2 years ago, the Commission directed that investigations be conducted on an industry-wide scale when practicable. Such investigations may be authorized by the Commission when it appears that there exist in an industry practices that may call for corrective action under any of the laws administered by the Commission. The purpose is to avoid, as far as possible, widely separated actions which might place some members of an industry in an unfair or disadvantageous position. Industry-wide investigations may terminate in a trade-practice conference, the simultaneous negotiation of stipulations, or in separate proceedings brought simultaneously against each member of an industry using the allegedly unlawful practice or method.

Six industry investigations were pending at the beginning of the fiscal year 1948; three were instituted during the year; and four were completed, leaving five pending as of June 30, 1948. The completed investigations covered the individual activities of 77 different concerns, as follows:

Industry:

Cast iron soil pipe

Automobile dealers, New York...

Automobile dealers, District of Columbia.

Cheese

Total

Number of companies investigated

35

19

21

2

77

SURVEY OF RADIO AND PERIODICAL ADVERTISING Through its Division of Radio and Periodical Advertising, the Commission conducts expeditious investigations of certain cases involving false and misleading advertising violative of the Federal Trade Commission Act, as well as other types of cases not requiring field investigations, including certain industry-wide investigations.

The survey of advertising was inaugurated by the Commission in 1929. At that time it was limited to magazines and newspapers. Expanded in 1934 to cover radio commercial continuities, it also has included, since 1939, mail-order catalogs and foreign-language news

For further details of the administration of the Export Trade Act, see p. 67.

papers, and early in 1948 it was extended to include commercial television broadcasts. Questioned advertisements noted in these surveys form the bases of prospective investigations, and also provide a means of determining whether advertisers are complying with orders and stipulations to discontinue false and misleading representations.

Where the advertising is determined by the Commission to be false or misleading, and circumstances warrant, the advertisers are extended the privilege of disposing of the matters through an informal procedure more fully explained on page 53, which permits their executing stipulations to cease and desist from the use of the acts and practices involved. A large majority of the cases are adjusted in this

manner.

In matters involving advertising, the investigations cover the practices of all advertising agencies which participated in the preparation of the advertisements to determine whether they should be joined as parties in any corrective action by the Commission.

The only objective of the Commission's continuous survey of advertising is to prevent the dissemination of false and misleading advertising representations. It does not undertake to dictate what an advertiser shall say, but merely indicates what he may not say under the law.

Newspaper and magazine advertising.-It has been found advisable in examining advertisements in current publications to call for some newspapers and magazines on a continuous basis due to the persistently questionable character of the advertisements published. However, as to publications generally, of which there are more than 20,000, it is physically impossible to survey continuously all advertisements of a doubtful nature. Also, it has been found unnecessary to examine all the issues of publications of recognized high ethical standard whose publishers require that advertising copy be censored before acceptance.

Copies of current magazines and newspapers generally are procured on a staggered monthly basis, at an average rate of three times yearly for each publication, the frequency of the calls for each publication depending upon its circulation and the character of its advertisements. Through such systematic calls during the fiscal year, the Commission procured 1,619 editions of representative newspapers of established general circulation and 1,173 editions of magazines and farm and trade journals of interstate distribution. These periodicals included 249 issues of farm journals, 159 issues of trade journals and specialty publications, and 10 issues of domestic foreign-language publications.

In these newspapers, magazines, and farm and trade journals, 308,544 advertisements were examined, of which 11,119 were noted as containing representations that appeared to warrant investigation as to the facts.

Mail-order advertising.-The Commission procured mail-order catalogs and circulars containing an aggregate of 12,903 pages, examination of which resulted in 325 advertisements being marked as containing possibly false and misleading representations. Of the 50 mail-order houses included in the survey, 5 had combined annual sales

SURVEY OF RADIO AND PERIODICAL ADVERTISING

39

Radio advertising.-The Commission has issued calls for commercial continuities from each individual radio station three times yearly since January 1, 1947. National and regional networks respond on a continuous weekly basis, submitting copies of the commercial advertising parts of all programs wherein linked hook-ups are used involving two or more stations. Producers of electrical transcription recordings each month submit typed copies of the commercial portions of all recordings produced by them for radio broadcast. This material is supplemented by periodic reports from individual stations listing the identities of recorded commercial transcriptions and related data.

The Commission received copies of 748,284 commercial radio broadcast continuities and examined 643,604. The continuities received amounted to 1,580,543 typewritten pages, and those examined totaled 1,423,515 pages, consisting of 538,950 pages of network script, 852,165 pages of individual station script, and some 32,400 pages of script representing the built-in advertising portions of transcription recording productions destined for radio broadcast through distribution of multiple pressings of such recordings to individual stations. An average of 5,582 pages of radio script was read each working day. From this material 8,819 advertising broadcast statements were marked for further study as containing representations that might be false or misleading.

Television advertising.-Mounting public interest as reflected in the accelerated sales of television receiving equipment, the actual operation of 28 television stations in highly populated metropolitan areas, and the issuance of 109 construction permits for additional stations, provided ample reason for the Commission's attention to this type of advertising. Therefore, during the first quarter of the calendar year 1948, the Commission initiated its coverage of television advertising. Arrangements have been made to receive from television networks, as rapidly as they go into operation, weekly submittals of advertising script used during the course of network telecasts. In addition, individual television stations are scheduled to furnish four times yearly their commercial script on a "sampling" staggered basis for specified 15-day broadcast periods.

To assure expanding coverage as new television stations go into operation, contacts have been made with persons and companies authorized to construct television stations, and to proposed network groups, acquainting them with the work of the Commission as it pertains to broadcast advertising.

Cooperation of radio and publishing industries.-In general, the Commission has received the cooperation of the 4 Nation-wide network chains, 16 regional network groups, and transcription producers engaged in preparing commercial radio recordings; and of 1,244 commercial radio stations, 497 newspaper publishers, and 436 publishers of magazines, farm journals, and trade publications. It has observed a desire on the part of these broadcasters and publishers to aid in the elimination of false and misleading advertising.

Number of cases handled.-At the close of the year 572 cases were pending, as compared with 630 at the close of the previous fiscal year. During the fiscal year, 390 investigations were completed, and 332 new

investigations were initiated, 140 of which originated through the division's continuing survey of advertising, 46 through letters of complaint, and 146 by reference from the Commission. Settlement by stipulation was recommended in 43 cases; issuance of complaint in 2

cases.

Correspondence handled by the division during the year totaled 3,180 incoming pieces of mail and 9,175 outgoing pieces.

Procedure in advertising cases. If it appears to the Commission that a published advertisement may be misleading, a contact letter is sent to the advertiser and request is made for a sample of the product advertised, if this is practicable, and the quantitative formula if the product is a compound. Representative specimens of all advertising copy containing all claims made for the product during a 6-month period also are requested.

Upon receipt of these data, scientific opinions are obtained based upon the sample and formula. Then a list of the claims that appear to be false or misleading is sent to the advertiser, together with a statement based upon the scientific opinion. The advertiser is invited to submit informally by letter, in person, or by counsel evidence in support of his claims.

If, after a consideration of all available evidence, including that furnished by the advertiser, the questioned claims appear not to be false or misleading, the division reports the matter to the Commission with the recommendation that the case be closed. If it appears from the weight of the evidence in the investigational files that the advertising is false and misleading, the matter is referred to the Commission, through the Director of the Bureau of Legal Investigation, with a recommendation either that complaint issue or that negotiation of an appropriate stipulation-agreement to cease and desist be authorized. Industry-wide investigations. During the year, the Commission, through its Division of Radio and Periodical Advertising, completed industry-wide investigations of the simulated and cultured pearl industry, dealing with the advertising and promotional practices of 122 separate companies; and of the floor wax products industry, involving 107 manufacturers and distributors of floor wax. The division also completed a survey of advertising and promotional practices of manufacturers and distributors of 127 shampoos and scalp preparations.

At the close of the year, the division was conducting industry-wide investigations with respect to the advertising of manufacturers and distributors of wallpaper cleaning preparations, involving 18 companies; manufacturers and distributors of crib and carriage mattresses, involving 42 companies; and manufacturers and distributors of so-called orthopedic or "health" shoes, involving 94 companies.

DISPOSITION OF CASES BY STIPULATION

Instead of disposing of cases by the formal complaint and trial method, the Commission under certain circumstances affords respondents the opportunity of signing a statement of facts and an agreement to cease and desist from most types of unfair methods of competition and unfair or deceptive acts or practices in commerce. The policy of the Commission with respect to stipulations of this type is set forth in

I. COMPLAINTS UNDER FEDERAL TRADE COMMISSION ACT 41

During the fiscal year the Commission approved 99 stipulations. (See p. 53 for report of Bureau of Stipulations.)

FORMAL COMPLAINTS

During the fiscal year the Commission issued 70 formal complaints alleging violations of the laws it administers and reopened 1 case. Of these 71 cases, 53 charged violation of the Federal Trade Commission Act; 14, violation of the Clayton Act; 1, violation of the Federal Trade Commission and Clayton Acts; and 3, violation of the Wool Products Labeling and Federal Trade Commission Acts.

I. COMPLAINTS UNDER FEDERAL TRADE COMMISSION ACT

A. PRICE-FIXING COMBINATIONS AND RESTRAINT-OF-TRADE PRACTICES [Complaints referred to are identified by accompanying docket numbers]

In each of six complaints issued by the Commission competing manufacturers and sales organizations were charged with combining, through their trade associations and otherwise, to fix prices and restrain trade in the sale of their products. The products involved were steel (5508); bobbins (5543); coupons and tickets (5532); plywood (5529); fir doors (5528); and rubber heels and accessories (5527). In complaint 5508, the American Iron & Steel Institute and 101 corporations controlling more than 95 percent of all the steel produced and sold in the United States were charged with combining and conspiring to promote and maintain monopolistic and noncompetitive prices and conditions in connection with the sale of their products. The complaint alleged that, among other unlawful practices, they collusively maintained a uniform basing-point, delivered-pricing system by which their price offers to purchasers at any given point were matched.

Another complaint (5531) charged a manufacturer of pressure cookers and canners with use of coercive practices to enforce exclusive dealing contracts. Violation of section 3 of the Clayton Act was also alleged in this complaint.

B. FALSE ADVERTISING AND MISREPRESENTATION

A total of 47 complaints charged false and misleading advertising. The majority may be classified broadly as follows, although some involved more than one classification:

Seven complaints alleged false and misleading representations with respect to the therapeutic properties of medicinal preparations and devices, and in some cases the advertisements also were alleged to be false and misleading because they failed to reveal the potential danger in the use of the advertised products; five charged misrepresentation with regard to the results to be obtained; seven, misrepresentations as to origin, composition, condition, quality, ingredients, or price; two, misrepresentations in connection with the sale of correspondence school courses; four, misrepresentations in connection with so-called special offers or "free" goods; two, misleading use of trade name; one, misrepresentations concerning a so-called university as to size, status, and