the complete text of the honest-advertising law, known as the Printer's Ink model statute, which we believe, takes care of the condition which the supporters of this bill claim exists. The law is as follows: 'Any person, firm, corporation, or association who, with intent to sell or in any wise dispose of merchandise, securities, service, or anything offered by such person, firm, corporation, or association, directly or indirectly, to the public for sale or distribution, or with intent to increase the consumption thereof, or to induce the public in any manner to enter into any obligation relating thereto, or to acquire title thereto, or an interest therein, makes, publishes, disseminates, circulates, or places before the public, or causes directly or indirectly to be made, published, disseminated, circulated, or placed before the public in this State, in a newspaper or other publication or in the form of a book, notice, handbill, poster, bill, circular, pamphlet, or letter, or in any other way, an advertisement of any sort regarding merchandise, securities, service, or anything so offered to the public, which advertisement contains any assertion, representation, or statement of fact which is untrue, deceptive, or misleading, shall be guilty of a misdemeanor." The following States have the Printers' Ink model statute: Colorado, Idaho, Kansas, Minnesota, Missouri, Rhode Island, Louisiana, Nebraska, Kentucky, New Jersey, North Dakota, Ohio, Washington, West Virginia, Indiana, Oregon, Iowa, Michigan, Oklahoma, Nevada, Wyoming, Virginia, and New York. The following State has the Printers' Ink model statute, but with an amendment requiring knowledge of the falsity of statements, but prescribing that due care and diligence shall be used in ascertaining the falsity or truth: Texas. The following States have the Printers' Ink model statute, but amended to require that the offense must be done knowingly: Pennsylvania, Illinois, California, Massachusetts, North Carolina, South Dakota, Alabama, Tennessee, Maryland, Utah, Connecticut, South Carolina, Arizona, Montana, Wisconsin. The following have laws differing in text and requirements to the Printers' Ink model statute: Hawaii and the District of Columbia. In conclusion we sincerely hope that your committee will not recommend that bill, H. R. 739, or any similar legislation, be enacted for these reasons: First. We believe it discriminatory legislation, in the interest of only the woolgrowers and to the disadvantage of other industries of the country. Second. We believe it will increase prices of virgin-wool fabrics and garments made from these fabrics. Third. That it would not encourage "truth in fabrics," but would encourage deception and malpractice. Fourth. That it will lead the public to believe that virgin wool and shoddy mixtures are inferior fabrics to all fabrics of virign wool. Fifth. It in no way establishes a standard of value which the public might use as a guide, and which it should provide if it is "to prevent deceit and unfair prices that result from the unrevealed presence of substitutes for virgin wool in woven fabrics" as its sponsors claim for it. BUREAU OF STANDARDS, Washington, December 29, 1923. Memorandum for the Assistant to the Secretary of Commerce. 1. With reference to your two letters of December 24, inclosing letters from Hon. S. E. Winslow, chairman of the House Committee on Interstate and Foreign Commerce, dated December 18, requesting reports on House bills 732 and 739, these two bills are considered jointly in this reply as they are very similar, especially in so far as they affect our consideration. 2. The bureau is in a position to carry out all the necessary rules and regulations which may be made by the Secretary of the Treasury, the Secretary of Agriculture, and the Secretary of Commerce for executing the provisions of these acts with the exception that we are not able to differentiate between virgin wool and shoddy in a fabric, nor do we know of any method or any person who has successfully developed tests which would effect such a differentiation. 3. Methods are available and constantly used by us to determine the percentages of cotton, "wool" (but not differentiating virgin wool from shoddy), jute, silk, and other mixtures in a fabric. 4. We are returning herewith the letters from the Hon. S. E. Winslow and the bills. 5. We appreciate greatly the opportunity to consider these bills as they may affect us. Respectfully, GEORGE K. BURGESS, Director. Hon. SAMUEL E. WINSLOW, DEPARTMENT OF AGRICULTURE, Chairman Committee on Interstate and Foreign Commerce, DEAR MR. WINSLOW: Replying further to your communication of December 31, 1923, regarding H. R. 4141, the latter has been considered by the specialists of the department who are making studies of the commodities covered by its provisions. This bill as now drafted appears to apply only to commodities that are manufactured within any territory of the United States or the District of Columbia for sale or transportation to any State or the District of Columbia and does not cover products that enter interstate or foreign commerce unless manufactured in a Territory or in the District of Columbia. It would seem also that an article manufactured in a Territory or the District of Columbia and shipped to a Territory would not be covered by the provisions of this bill. The department is not informed as to whether it was the intention to limit the scope of the bill in this manner or whether interstate commerce provisions were omitted through an oversight. Commenting on the bill in the form in which it is submitted to the department, it is the opinion here that since such a comparatively small proportion of the articles covered by this bill are manufactured in any Territory or the District of Columbia, and since a number of other bills are pending which apply to fabrics and general merchandise entering interstate and foreign commerce as well as to those manufactured in any Territory or the District of Columbia, it would seem that no good purpose would be served by the passage of this bill. Very truly yours, HENRY C. WALLACE, Secretary. FEDERAL TRADE COMMISSION, MY DEAR MR. CHAIRMAN: The Federal Trade Commission received and has very carefully considered your letter of December 18, forwarding H. R. 16 and H. R. 3225 for an expression of the views of the commission concerning these bills. The obvious purpose of the proposed legislation is to check the false branding and false advertising of commodities in interstate commerce by bringing these practices within the criminal law. As these bills are very similar and the views of the commission with reference to each are the same they will be treated together. At the outset it seems necessary to state briefly the jurisdiction which has already been given to this commission in such matters and the extent of the work and the results which have already been accomplished in this field and are still possible of accomplishment under existing legislation. Early in its history the commission commenced the institution of proceedings to correct misbranding as a method of unfair competition. The first cases were brought against companies branding as “silk" material containing little, if any, of the product of the silk worm. The result of these proceedings was that the members of the principal associations of silk manufacturers took prompt steps themselves to create an internal organization for the correction of misbranding in that industry. By the cooperation of the commission with this organization in the industry, the questioned practice has been very markedly checked and is well on its way to disappearance. The commission's jurisdiction in the premises was determined by the United States Supreme Court in the case of Federal Trade Commission v. Winsted Hosiry Company (258 U. S. 483). A similar result has followed the commission's action against misbranding in other lines. This was noticeably true in the paint and varnish industry, in which that industry followed the example of the silk associations and in the knit goods and underwear associations which adopted a standard system of nomenclature in which it consulted with the commission in order that there might be no conflict between the decisions and the code adopted by the association. The commission's jurisdiction to prevent false and misleading advertising has been sustained in Sears, Roebuck & Co. v. Federal Trade Commission (258 Fed. 307), followed by a number of other cases in the second, fifth, and sixth circuits, until now it is well settled that the prohibition against the use of unfair methods of competition includes both misbranding and false advertising. In this field the commission has cooperated extensively with the advertising clubs of the world, comprised of the better business bureaus established in the various cities of the United States. A great part of the effective work of the commission is very quietly accomplished through its cooperation with these organizations in the industry itself. In this connection it should be noted that the jurisdiction of the Federal Trade commission is preventive and anticipatory of any injury reasonably to be apprehended. The legislation under consideration reverses this attitude and awaits the happening of an injury because each of these bills makes the offense a criminal act. While the jurisdiction now existing in the Federal Trade Commission is intended to and does protect the purchaser from harm the criminal law awaits the actual happening of the injury before it becomes applicable. If either of these two bills becomes a law the effect probably will be to deprive the Federal Trade Commission of the jurisdiction in cases of misbranding and false advertising and to change the process from one of prevention to one of dealing with the completed act. If, on the other hand, the result of the passage of either bill should be that the commission's jurisdiction were left unimpaired, one offender misbranding or falsely advertising might be dealt with under the Federal Trade Commission act which results in a simple order to cease and desist. A similar offender in another State engaged in the same mispractice might be convicted and punished for a misdemeanor. This divergence of proceedings is inherent in H. R. 16 and would result, in any event, from the adoption of this bill. You will note that under section 11 of this act the Secretary of Commerce, upon being satisfied of the violation of the act, may certify the facts to a United States district attorney for prosecution or may refrain from so doing and dismiss the criminal charge upon the execution of a stipulation to cease and desist. But, if under Paragraph 12, the offense is reported to a district attorney by a State officer the district attorney then has no power to compound the offense by accepting a stipulation nor may he report the case to the Secretary of Commerce but he must prosecute for the enforcement of the penalties provided. The provision authorizing the Secretary of Commerce to compound the offense is not found in H. R. 3225 but the same divergence between the principle of this act and the existing jurisdiction of the Federal Trade Commission still remains. It should be noted that under the Federal Trade Commission act, a respondent may deny the facts or the application of the law and make a test of his rights in a civil proceeding. But under either of these bills he must submit to the ruling or stand indictment and trial on a criminal charge as the only method of testing his civil rights. Whereas misbranding or misrepresenting under H. R. 16 is an offense in any territory of the United States or in the District of Columbia, the effect of the operation of the act upon interstate commerce between States is limited to the actual movement of commodities. This is also true of H. R. 3225. While such a provision would probably reach cases of misbranding, the commission has found that a very large part of the harmful false advertising is not directly connected with the shipment of goods but lies in the preliminary field of advertisement. And the preliminary advertising is quite as harmful as that which is connected with a sale or shipment. The experience of the commission has shown that in most phases of its work the field is covered as to intrastate commerce, by State statutes, criminal in character, which have become wholly ineffective through lack of prosecution. To apply the same process of criminal remedy to the field of interstate commerce is, in the opinion of this commission, to ivite exactly the same result, namely, an intermittent, sporadic, and unequal application of the law. The result would be that one of two competitors may, in his own State, be subjected by the district attorney and a succession of grand and petit juries to a strict interpretation and application of the law. His opposing competitor, in another State, might find either a district attorney of a different mind or grand or petit juries not impressed by the statutes or the facts. Fair competition must be uniform in the application of the principles involved and this result can not be expected particularly in this class of cases, from local and separate enforcement. It should be remembered in this connection that the courts of the United States are surcharged at the present time with the burden of business already devolved upon them by existing statutes. This law will be one of many others which these courts are required to enforce. Probably but few cases will be prosecuted by a particular district attorney in a substantial period of time, and the cases will go to many district courts frequently without familiarity with the law and without the background of the principles of economies and business upon which the law rests. These difficulties will be increased by the stricter construction which obtains in the criminal courts and the presumption of innocence and the strict rules of evidence which govern in criminal cases. Moreover, since the cases will be criminal, few, if any, of them can reach the Supreme Court for the purpose of reconciling inconsistencies between the decisions of the circuit courts and correcting errors of construction. The transformation of the attitude of the law toward this class of cases from the preventive and civil jurisdiction of the Federal Trade Commission to the remedial and criminal jurisdiction of the courts will bring about a result which, if there were no other argument present, should give reason for pause. The Federal Trade Commission has, through the practice known as "trade practice submittal," evolved a process of conference between an industry and the Federal Trade Commission in which the industry proceeds to crystallize in the form of a statement its own concepts of unfair competition which thereafter the industry endeavors to regulate by pressure from within, aided by the processes of the Federal Trade Commission where necessary. This can only be done through an administrative agency working on the civil side. Its value is being more and more clearly recognized and the possibility of service through this one agency alone in the future would warrant the continuance of a civil rather than a criminal treatment of this phase of business practices. The effect of the adoption of the criminal statute governing interstate commerce is to put an end to the possibility of an internal development by a business group in which the Government agencies serve the development merely by the policing of such cases as the business group is not able to reach. The criminal law separates government and business inevitably, On the other hand, the civil remedy and the administrative agency with a power merely to enter an injunctive order subject to court review, provides a medium for a direct contact through which the business group may express its concept of the methods and practices of the industry and permits a uniform construction and development of the law by a continuous interpretation originating through one source. Each successive case is thus dealt with in the light of all those cases and those industrial conferences which have proceeded it whereby the law is adapted to various industries and to the innumerable circumstances and conditions which present themselves in the administration of a statute which requires constant application of fundamental principles to divergent states and conditions of fact. If the law be administered in this manner the great mass of cases will be settled by an administrative order, only an occasional case reaching the courts. Such an administration will, in the long run, be more effective than an enforcement through criminal prosecution. In short, it is the opinion of the Federal Trade Commission that the enactment of either of these two bills would not work out any permanent benefit but would seriously endanger those results which have already been accomplished and prevent the accomplishment of still greater results under the existing Federal Trade Commission Act. By direction of the Commission. Cordially yours, Hon. SAMUEL E. WINSLOW, HUSTON THOMPSON. Chairman Cemmittee on Interstate and Foreign Commerce, FEDERAL TRADE COMMISSION, MY DEAR Mr. CHAIRMAN. The commission duly received your letters of December 18, inclosing copies of H. R. 732, H. R. 739, and H. R. 4141, for report and suggestions. The purposes of the measures are practically identical, viz: To require branding of fabrics which purport to contain wool in such manner as to indicate the percentage of virgin wool, shoddy, cotton and silk contained in the fabric. The suggestions made in the commission's letter of even date with respect to the advantages of civil procedure over criminal prosecution and of centralizing the administration of the law in the misbranding measures (H. R. 16 and H. R. 3225) apply to these bills also. The policy embodied in these bills is apparently an entirely new departure from that heretofore pursued not only by the Federal Government but by the States and apparently by other English speaking countries. Should any of these bills become law, the task of enforcing them will be very much more difficult than that of enforcing the proposed misbranding measure. There are at this time, undoubtedly, vast quantities of goods containing some wool which are not branded at all. Indeed, brands on ready-made clothing showing the materials of which they are composed, are, perhaps, quite rare. The ultimate purchaser ordinarily depends upon the experience and honesty of the retail dealer to ascertain the composition of the material in such garments. The effect of the measures, should they become laws, will, of course, compel marking of all goods of the classes covered, and the task of ascertaining whether such goods are falsely marked will be very great. There would appear to be some question whether it is the part of wisdom at this time to go farther than to prohibit misrepresentation or misleading statements with respect to the materials of which goods are composed, such as is. proposed by H. R. 16 and H. R. 3225, including misrepresentations not only through brands and advertising, but through the use of trade marks, trade names. and corporate or firm names. If legislation at this time were limited to these forms of misrepresentation, experience in the administration of that law would disclose whether further legislation is required and the exact form which that legislation should take. If the administration of such misbranding law as is. passed were centralized, as suggested in the commission's letter and report on H. R. 16 and H. R. 3225, the experience in inforcing these laws would be readily available. By direction of the commission. Cordially yours, Hon. SAMUEL E. WINSLOW, HUSTON THOMPSON, Chairman. Chairman Committee on Interstate and Foreign Commerce, Hon. SAMUEL E. WINSLOW, Chairman DEPARTMENT OF AGRICULTURE, Committee on Interstate and Foreign Commerce, DEAR MR. WINSLOW: Replying further to your communications of December 18 regarding H. R. 732 and H. R. 739, these bills have received consideration by the specialists in this department who are most familiar with the subject matter of the bills. The prime purpose of both these bills is to require truthful labeling of woolen fabrics. We are strongly of the opinion that some sort of sound textile legislation which will serve to protect the interests of the consumer is most desirable and necessary. We recognize this to be the principal object of the bills under discussion but do not feel that these bills will wholly accomplish this, end. To the public the name "shoddy" signifies a practically worthless fiber or fabric, whereas there are some good grades of shoddy which would make a cloth superiorto one made of poor quality coarse virgin wool. In fact, we have as yet found no analytical method capable of distinguishing such shoddy from virgin wool beyond the shadow of doubt. Moreover, the method for estimating, quantitatively, the amount of virgin wool and shoddy in a given fabric is wholly inadequate. Therefore, it is as yet impossible to determine by an objective examination of a given fabric whether or not in all cases it contains shoddy,. and since it is as yet impossible, in the majority of cases, to determine by an objective examination of a given fabric how much shoddy it contains, it is suggested that the only effective way of accomplishing the end aimed at by the bills under consideration is to amplify and extend the section that gives to the Secretary of the Treasury, the Secretary of Agriculture, and the Secretary of Commerce, power to inspect the plant, raw materials, methods and books of all manufacturers of such goods who have secured a registration number. If this section were expanded so as to resemble corresponding sections of the Federal meat inspection act administered by the Bureau of Animal Industry, and if penalties for its violation were provided, and if the power were given to the three secretaries to close the channels of interstate commerce to any manu-facturer refusing to permit inspection of his establishment, or to furnish theinformation, or to keep the books required, then it would be possible effectively to achieve the end aimed at by the bills. I recognize fully that such legislation |