The CHAIRMAN. The Federal Trade Commission is now sending the Members of Congress a weekly statement of actions taken by it, cases pending and the cases disposed of. There is a New York agency which sends to us a loose-leaf copy of the various proceedings before the commission, giving a synopsis of the findings of the commission. Of course, that is not as broad and as extensive as we would like to have in every instance, nor does it give us an opportunity to fully determine the merits of a proposition, but still it gives us some data as to what has been done by the commission.

Mr. DAVIES. I appreciate that, Mr. Chairman; but I also appreciate that you are all busy men, and that it is a very difficult thing to digest all of these matters that are formally presented to you. That is why I have attempted to digest it for you, because I thought it might be helpful to the committee.

There have been filed with the Federal Trade Commission 127 complaints involving misbranding. The total number of complaints disposed of by the commission was 87. The total number now pending before the commission is 40. The methods by which these 87 have been disposed of were, 42 by ex parte proceedings; that is, by conference rulings after the manner which I have described in the silkaline proceeding, 45 by applications ordered to formal complaint. The 45 applications ordered to formal complaint resulted in the issuance of 87 formal complaints, the excess being due to the fact that in some applications there were a number of respondents which were proceeded against individually. The present situation of the 87 is as follows: Formal complaints involving misbranding, 87; disposed of by order to cease and desist, 34; dismissed for lack of evidence, 1; pending formal complaints involving misbranding, 52. Now, here are some of the commodities involved in these applications filed with the commission involving misbranding: Jewelry, garden seeds, paints, oil, gasoline, turpentine, cotton goods, bicycles, bedding, cordage, soap, celluloid, clothing, coal, underwear and hosiery, brick and tile, corn starch, coffee, men's collars, dental rubber, cordials and sirups, cotton goods, miscellaneous foodstuff's, animal and poultry food, fountain pens, glass, hair restorer, leather goods, linoleum, safety matches, evaporated and condensed milk, motion pictures, ochre, horse collar pads, writing paper, perfumery, explosives, typewriters, sponges, automobile tires, disinfectants. Here, then, is a list of 40 or 50 different commodities in which there have been complaints of alleged misbranding filed with the trade commission and with reference to which it is taking corrective

measures.

Mr. SIMS. Mr. Chairman, in the beginning Mr. Davies started to say something in reference to the Barkley bill and we have asked something about the French bill and he has gotten away from the Barkley bill. I would be very glad if he would say something about the Barkley bill.

Mr. SANDERS of Indiana. I am very much interested in this Federal Trade Commission matter, and I think he should go on with it. The CHAIRMAN. I think Mr. Davies will develop that as he goes on. Mr. DAVIES. I think I have pretty well developed my thought in response to the questions. Briefly, the thought as it was assembled in my mind, was this, that the principle of the Barkley bill and the

Rogers bill is right. Second, there is room for just such additional definition as is contained in these bills. These bills, moreover confer express power and relieve the situation of any doubt as to the jurisdiction of the Federal Government over misbranding. The only law under which you can proceed through a Federal agency at the present time for misbranding, outside of the Department of Agriculture, as to general commodities, is section 5 of the Federal Trade Commission act, and as I outlined in the beginning, in my opinion there may be room for division of judgment as to whether or not that does permit of the stopping of these misbranding practices through its procedure.

In a report which I made as commissioner of corporation in 1915, entitled "Trust Laws and Unfair Competition" which covered the different laws of the countries of the world, including our own, with reference to competition and unfair methods of competition, there is some discussion on pages 521 to 529 and 530, and also in subsequent parts of the volume, with reference to misbranding or falsely marked goods, not only in this country but also in all the other countries of the world. It might be of value to have me send to the clerk of the committee these excerpts and have them incorporated in the record so that you might have them for such use as you may desire.

The CHAIRMAN. We will be glad to receive it.

Mr. DAVIES. The gist of the matter is simply this; that practically the same condition exists with reference to legislation as to misbranding, as in many others. There is much confusion with reference to such legislation, State and Federal. Many States have attempted to prevent misbranding and mislabeling of goods. They approached it from different standpoints, they cover many different subjects, many different commodities. Some are general and some are specific. It illustrates the necessity, in our complicated industrial organization of to-day, characterized as it is by interstate commerce, of having some Federal agency define the misbranding and mislabeling of goods and declare such practices in interstate commerce as contrary to the law. So that this important situation be not left to conflicting enforcement through the individual States with their varying provisions of law. I judge that both Congressman Barkley's bill and Congressman Rogers's bill were drafted from the British bill of 1887 and the Canadian bill, both of which are treated in this volume on unfair competition. The Rogers bill being somewhat more specific, it appeals to me very strongly. I have always been for Congressman Barkley's bill.

Now, that leads me to this suggestion, if I may venture to offer it. In both of these bills the jurisdiction for the enforcement of this power is conferred upon the Secretary of Commerce, the Secretary of the Treasury, and the Secretary of Agriculture, and the duty is imposed upon the departments of making uniform rules and regulations. Now, without holding any brief for the Federal Trade Commission, I think I have given you facts enough here to indicate that here is an agency of Government which has given a great deal of thought and attention to this matter and which knows a great deal about it, which has been doing in part some of the things which evidently this legislation is designed to effect, and perhaps, therefore it might be wise to consider the insertion in the bill of some provision

that would charge the Federal Trade Commission with the responsibility for the enforcement of the law, with, perhaps, the aid of the Department of Agriculture and the Department of Commerce. For myself, I do not believe in division of responsibility or authority. Nor do I believe in joint powers. It seems to me that it would be very advisable to clothe both responsibility and power in one agency but at the same time make provision that other departments of the Government shall be available for aid and assistance to that agency. Mr. BARKLEY. Mr. Davies, right there let me suggest that my bill was introduced before the Federal Trade Commission was created. It was the result of hearings held by a subcommittee of this committee for some time. Since the creation of the Federal Trade Commission it has occurred to me that it ought to be yoked up in some way with this proposition, but whether it should be substituted for the three secretaries, in making the uniform rules, I have not been satisfied with my own opinion about it, or whether it should be combined and have a voice in the making of the rules and subsequently to have jurisdiction to make investigations. I would like to get your views as to just what part you think the commission ought to play in the preliminaries and in the enforcement of the law after it is enacted.

Mr. DAVIES. Well, my idea with reference to all of these regulations differs in part from the ideas of some men who have been on the commission in the past and perhaps from the ideas of the present commissioners, so I am only expressing, of course, my view. There is a provision in both of these bills that looks to securing the accommodation of business regulation by informal proceedings rather than by formal proceedings. The suggestion is contained in both of these bills that the Secretary of Commerce.shall cause the complaint to be issued informally, first by the Bureau of Standards, and that the party charged shall be given an opportunity to be heard, and that then the inference is that the party shall be given an opportunity to desist and that if the party does not desist that then the matter shall be submitted to the United States District Attorney. I think that is a splendid thing to do. It has been my experience when I was on the Federal Trade Commission that there are comparatively few men who are willfully and deliberately violating the law. There are such men, to be sure, and they should be punished. But in the large majority of instances unfair practices of this kind are the result of competitive conditions over which the single individual competitor has no control, and he is forced into it as a matter of keeping his business going. It has been my observation that men, as in these silk cases, when they are called together by a Government agency and the proposition is put up to them, do not oppose remedying the situation. As a matter of fact, they welcome it. Men generally in business throughout the country prefer to be honest rather than to be dishonest. They prefer to make a truthful allegation rather than a deceptive allegation, provided their competitors are also compelled to resort to the truth rather than to deception. I think there is a great work to be performed by these agencies upon that theory. If in the sale of any of these goods, wool or turpentine or paints or automobile tires, one manufacturer knows that a Federal agency is making an investigation into that business, that that agency is clothed with power to issue a complaint for unfair branding, he will

come down and he will agree with all of his other competitors and agree with the Government agency to stop it. You will get a speedy elimination of the evil without the law's delay, without the ignominy and the calumny of holding a man up to public disgrace by indictment. In many instances that is proper and it should be done, but in many instances it should not be done. Where it is an economic and not a moral crime, where it is malum prohibitum and not malum in se, as the lawyers speak of it, it is my opinion that you should get the matter adjusted in the public interest in the most speedy and efficacious manner possible without resorting to criminal prosecution. If, on the other hand, there is a willful intent, a willful determination to be unfair and to disregard the law and the policy of the law, and where there is a long continued course of conduct that indicates a conspiracy to violate the law which both great parties of this country have established as the law of the land, then indict, but do not do it unless that situation is clear. Now, in most of these misbranding situations it is my judgment that there is not a willful intention to deceive, but it is a situation that has grown up under competitive conditions where men have to meet the fertility of suggestion of commercial minds in making their marks, etc., in competition, and it grows like a snowball. Now, in direct answer to Congressman Barkley's inquiry, my idea would be that personally I would place the responsibility upon the Federal Trade Commission and I would clothe it and indeed charge it with express power to do what I have described. That is the function for which the Federal Trade Commission was originally conceived and for which the act was passed.

Mr. BARKLEY. Do you mean by that you would clothe it with the power to make regulations for the enforcement of the law in so far as they did not involve criminal prosecution? Of course, in cases involving criminal prosecution it would have to be submitted to the law officers of the Government just as it is now?

Mr. DAVIES. Yes, sir; but I would have the corrective processes resorted to first.

Mr. BARKLEY. Now, would you have that done by the Federal Trade Commission or by the Bureau of Standards, as provided in these bills, or by the various departments before whom it came? What agency would you have to turn the matter for criminal prosecution to the Attorney General or the district attorneys throughout the country?

Mr. DAVIES. I would make the machinery of the act such that the duty of the investigation would be upon the Federal Trade Commission. I would make the provision of the law such that upon an agreement by these parties to cease and desist it would be then within the discretion of the Federal Trade Commission whether to make it a criminal offense or not by turning it over-well, that is a rather broad statement, but I would make it discretionary with the Federal Trade Commission as to whether they should turn the facts over to the district attorney or not.

Mr. SIMS. In other words, you would make them the grand jury? Mr. DAVIES. Yes. I would clearly indicate that it was within the contemplation of the law that practical results were to be achieved rather than criminal prosecutions, with a clause in the law that in the event that the situation were willful and malicious, that the commission might then be turned over to the district attorney for prosecution

under a law with teeth in it; but I would charge the commission with the primary duty of securing speedy results through accommodation if that were possible. It is my judgment that the reasons why there have been no convictions under the Sherman law, for since 1892 there has only been one man sent to jail and he was a longshoreman and he was only in jail two or three hours down in New Orleans-the reasons why there are no convictions that stick for violations of the Sherman law, in my opinion, is the fact that juries are loath and courts are loath to convict a man for purely economic crimes.

Mr. SIMS. Mr. Davies, Mr. Esch was on the committee at the time this Trade Commission law was prepared. Prior to that time business men had often referred a state of facts to the Department of Justice or to the legal authorities. They would say, "Now, will so and so be a violation of the law?" To which the response was, "We only deal with the question after an act has been done as to whether the act was a violation or not. We do not propose to say what is a violation and what is not." Now, the Federal Trade Commission, composed in part of business men, to whom they could refer these matters and avoid violating the law, and avoid, as you say, the horrible contemplation of an indictment and a trial before the country, and being advertised all over the country, when they were just as anxious to avoid violating the law as Congress was that that law should not be violated.

Mr. DAVIES. Judge Sims, that was the purpose back of the Federal Trade Commission act, and one of the great reasons for its promotion, beyond any question. Unfortunately that was not translated into the law and the result has been that, from the debates of Congress and from the committee reports, there is rather a clear indication that that power should not be exercised, and consequently it has not been exercised by the Federal Trade Commission except through these conference rulings, and those conference rulings followed the conference rulings of the Interstate Commerce Commission and the precedents of the Department of Agriculture. Now, when I was Commissioner of Corporations-this is not directly germane, however, and I do not wish to take up your time unduly on thisThe CHAIRMAN. You have a few minutes yet, Mr. Davies.

Mr. DEWALT. Before you go I would like to ask a few questions. Mr. DAVIES. I know of many cases where men came before me as Commissioner of Corporations in good faith and honestly, I believe, and stated that they wanted to form a combination of 8 or 10 small concerns so that they could save overhead expenses and advertising expenses and selling expenses, so that they could go out and hire expert service and keep a barometric measure of the market so as to know whether they should continue in the business or whether, perhaps, to embark in side lines to stabilize their production. I asked why they did not go ahead, and they frequently said they were afraid of the Sherman law. Now, I believe in the Sherman law as the fundamental law; I believe it is as sound to-day as it was when it was enacted. I asked these men, "Have you been over to the Department of Justice?" They said, "Yes." I said, "What did they say to you?" They said, "They say, no. What do you say?" I said, "I can not give you any advice. What do your lawyers say?" They said, "The lawyers say that there is no violation of the law,

if