New York World, April 19, 1924]

TRUTH IN FABRICS

About a dozen truth in fabrics bills are pending in Congress and are the subject of highly excited committee hearings. They are all of much the same cut of cloth, and that cloth itself is being more or less misbranded by its legislative manufacturers.

Something is to be said for a law against the misbranding of merchandise offered in interstate commerce. It would be simply an extension of laws common to the States against fraudulent practices in trade. But the leading FrenchCapper truth in fabrics bill is another matter. It not only compels manufacturers to brand or mark every yard of cloth they put out to indicate what it is made of and in what proportions-virgin wool, shoddy, silk, cotton or other material but it establishes a great Federal system of licenses or permits which must be taken out by every textile manufacturer at home before he can begin to do business, and abroad before he can enter the American market. along with this system would go the creation of a great army of Federal supervisors and inspectors to eat up more of the people's tax money.

And

It is ostensibly a measure to protect the consumer. But Horace B. Cheney, of the Connecticut silk-manufacturing concern, says that 75 per cent of the misrepresentation takes place between the retailer and consumer.

Actually, however, the bill appears rather to be a device to compel people to consume more virgin wool under the high prices forced by the Fordney-McCumber tariff. If that is its object, then again would it be a failure, for it is the high prices of wool which drive people into the use of shoddy and cottonshoddy and not misrepresentation of the quality of the cloth.

Legislating against fraudulent practices is one thing. Legislating truth and honesty and temperance into people by fiat of law is another of which we are having altogether too much.

STATEMENT SUBMITTED BY JOHN W. HAHN, EXECUTIVE SECRETARY NATIONAL GARMENT RETAILERS' ASSOCIATION, NEW YORK

Mr. Chairman and gentlemen of the committee, the National Garment Retailers' Association, composed of hundreds of retailers of women's, misses', and children's wearing apparel throughout the country, is opposed to the passage of bill H. R. 739, introduced by Congressman French and submitted to your committee for consideration.

This association has been opposing truth-in-fabric legislation for three years, having appeared before the Senate committee which considered Senator Capper's bill, which is the companion bill to Congressman French's bill.

We feel now, as we have always felt, that the French bill is discriminatory legislation and will benefit no one but the woolgrowers and at the same time work to disadvantage against all others, including the public. We believe that it has never been the intention of Congress, and it is not now, to pass any legislation which would promote the interests of a few in one section to the disadvantage of others in other sections of the country.

The bill itself, we believe, is misbranded; it would not "prevent deceit and unfair prices that result from the unrevealed presence of substitutes for virgin wool in woven fabrics," etc., as claimed for it. On the contrary, we believe the passage of this bill would encourage malpractice and dishonest dealing.

To your committee it has been pointed out that there is nothing in the bill which would in any way compel those trade factors handling woolen fabrics to specify on the labels or brands the quality of the wool going into the fabric. There are many qualities and standards of wool, and simply to say that a fabric is 100 per cent virgin wool is in itself no recommendation or standard and would mean nothing in the way of protection to the public. On the other hand, such a law would mislead the public to believe that all fabrics or garments branded 100 per cent virgin wool are the best quality and superior to wool mixtures, though the intrinsic value of the mixtures may be greater than that of some virginwool fabrics.

So the passage of this measure, in our opinion, would place all virgin-wool fabrics on the same level, and dishonest traders so desiring could easily take advantage of the law to enrich themselves at the expense of the consuming public. To illustrate how the public might be deceived under such a law: Two garments of the same style and character, one of excellent virgin wool and the other of inferior virgin-wool fabric, would be branded identically the same. Naturally,

the public would consider them of equal value, and traders so desiring might easily increase the price level of the inferior virgin-wool garment to that of the better virgin-wool garment and extort an unfair profit. The public, of course, would take it for granted that they are fully protected under this legislation. Then, again, if the garment of the inferior virgin-wool fabric were not advanced in price, would not this bill put the honest trader to a great disadvantage? We believe it would, as the honest trader would have great difficulty in convincing the public that the fabrics of his garments are of a better quality virgin wool than the fabrics of the dishonest trader, and the public would simply accept his statements that they are better as attempts on the part of the honest trader to excuse high prices.

Every factor in trade is striving to bring down prices so that there will be a general resumption of trade and a return to normal conditions. Pass this legislation and, in our opinion, instead of declining prices, the public will witness increased prices on all virgin-wool fabrics.

To us it seems obvious that this bill, in the interest of the woolgrowers, is urged for one purpose alone. That purpose is to increase the consumption of wool; and when you increase the consumption of a commodity you increase the price.

This bill intends to brand or label fabrics or garments as to the percentage of virgin wool. To say that a cloth is a virgin-wool fabric is no particular recommendation for it as against the fabric made partly of shoddy and virgin wool. To the trade shoddy means reworked wool; to the consumer it means an inferior substitute, and this misconception would only be confirmed in the opinion of the public by the passage of this law. Naturally, the public would assume that their conclusion that shoddy is inferior was justified, for otherwise, they would probably reason, the United States Congress would not find it necessary to pass legislation compelling the labeling of fabrics containing shoddy. So you would find the public more and more turning from those fabrics composed partly of shoddy and accepting only virgin-wool fabrics, regardless of the merit of the wool-mixture fabric and the quality of the virgin wool.

Shoddy" does not mean inferiority. We ourselves find it almost impossible to determine, even by careful analysis, whether certain fabrics are made partly of shoddy and partly of virgin wool or entirely of virgin wool.

In our opinion the passage of this bill would add to the garment retailers' overhead by necessitating the maintenance of a vigilance force within the store to make certain that the provisions of the law are being properly carried out. A bureau of scientific research might have to be established to test the fabric of each garment, especially to ascertain the amount of cotton, if any, contained in the fabric before offering it for sale to be assured that the labels attached by the manufacturer are correct and truthful, for the burden of proof under the bill rests upon the retailer. In case of error it is obligatory upon the retailer to prove that the label attached to the garment going out of the store was the label passed along to the store by the manufacturer.

The committee will realize that the retailer might be wholly innocent of the offense, yet it would, in some cases at least, be difficult for the retailer to prove his innocence. The committee will also appreciate that retailers during the course of the year have returned to them hundreds of garments purchased by the public which in many cases have been worn. If the label was detached, as it probably would be by the consumer, what guaranty would the store have that the label and garment returned were associated when they left the store? Some garments would likely come back without labels. Many garments, especially those returned for no other reason than that they do not please the customer, are sold over again. How could the store protect itself on these garments if the labels had been removed?

If governmental protection were needed by the public-and we believe it is not-there are, we think, sufficient State laws to give the public adequate protection along this line without Federal legislation. We believe that the intention and desire of the stores to deal honestly is a greater safeguard to the public than all the laws of this kind that Congress could enact. Stores that are dishonest can not continue long in business.

But we respectfully call to the attention of the committee that 36 States in the Union now have advertising laws sufficiently embracing to protect the public against false and misleading statements, not only when used in the sale of woolen fabrics and garments of woolen fabrics, but all kinds of wares and merchandise. If it is the intention of the supporters of this bill to sincerely protect the public, all that is needed upon their part is to check up the offenders and prosecute them under the law in these 36 States and to urge the adoption of simlar laws in the remainder. For the information of the committee I am submitting

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.
Subject: House Bills 732 and 739.

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,
Washington, January 22, 1924.

Chairman Committee on Interstate and Foreign Commerce,
House of Representatives.

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,
Washington, March 12, 1924.

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