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

we do not have any more than 2 or 3 per cent of the output, and there is no possible restraint of trade or monopoly in that. Now, I could not tell those men, and no government official could tell those men, that it was an absolutely fair trade proposition, that it was a good thing and that it ought to be done, not only for their own benefit but in the interest of cheaper prices of the commodity to the public. I said to them, "Why do you not follow the advice of your counsel?" They said, "Counsel does not have to go to jail, and counsel does not have children who are possibly confronted with the disgrace of an indictment, and we are not going to take any chances." Now, many of these misbranding situations could be eliminated by agreements among the trade and yet they do not dare to agree among the trade, among themselves, even on a matter of that kind, for fear that it would be a restraint of trade.

The CHAIRMAN. Would the recent decision in the Supreme Court in the steel case encourage them to do it?

Mr. DAVIES. It might.

Mr. JONES. Why should not the law provide that the compliance with the rules and regulations of the Federal Trade Commission, if they were given power to investigate and make reports on this matter, why should not compliance with the rules and regulations of the Federal Trade Commission be an absolute defense against a subsequent criminal prosecution?

Mr. DAVIES. I think it would be a good provision.

Mr. JONES. Should it not be an absolute defense in subsequent prosecutions, criminal prosecutions, that the act was done in compliance with the orders of the Federal Trade Commission, if they had jurisdiction in the matter to investigate and make rules and regulations?

Mr. DAVIES. Yes; that would be fair.

Mr. DEWALT. Mr. Davies, you have stated that the Barkley bill and the Rogers bill were substantially framed on the British marks law. Now, how do they enforce the British marks law?

Mr. DAVIES. It is a plain criminal statute, as I recall it.

Mr. DEWALT. That is, the provisions for the violation thereof are contained in the statute itself?

Mr. DAVIES. Yes; with some provision, as I remember it, giving to the board of trade, under certain circumstances, a measure of discretion in determining whether a proceeding shall be brought.

Now, in conclusion, I venture to suggest that whatever your decision may be in the drafting of this legislation, either along the line of Mr. Barkley's bill or along the line of Mr. Rogers's bill, that some reservation ought to be contained in the act that does not preclude the Federal Trade Commission from continuing the good work that it has already done along this line, and that this legislation should not operate to prevent the functions which they are performing under section 5. My own opinion, as I have stated, is that it would be very helpful to the committee if it could call them into its conference, either with the whole committee or with the subcommittee, and take up this matter of misbranding with the experts of the commission who have had this matter in charge, and possibly one of the commissioners who has had it in charge, because undoubtedly they who are fresh on it have a large amount of valuable information and material which you would like to avail yourselves of, because I am 18 months

old on it and not so fresh as the present membership. If you do not see fit to charge the commission with the enforcement of the law, at least its present functions should not be impaired.

The CHAIRMAN. Mr. Davies, the suggestions which you have made to the committee are very valuable, and I was wondering whether or not you could not put them into concrete form in connection with your testimony when it is sent to you.

Mr. DAVIES. I would be very glad to do that, Mr. Chairman.

The CHAIRMAN. There is one thought that occurred to me, and that is this: The pure-food-and-drug act is administered through the Department of Agriculture. They make their investigations, etc. Do any cases come before the Federal Trade Commission in connection with food and drugs under section 5?

Mr. DAVIES. When I was on the commission we made it a rule not. to take up those cases.

The CHAIRMAN. To avoid any conflict of jurisdiction?

Mr. DAVIES. Yes, and where it had been first taken up by the Department of Agriculture we never interfered.

The CHAIRMAN. I understood that was your practice, but I wanted to have it clear.

Mr. BARKLEY. Mr. Davies, just a little further in elaboration. You would not interfere, by whatever jurisdiction the Federal Trade Commission is given, with the technical analyses of products by the Bureau of Standards or the Bureau of Chemistry, or both, because the commission itself is not equipped, as I understand it, to make those technical analyses, and your idea is that some technical branch of the Government would have to make these examinations, no matter what bureau or agency was given the authority to enforce the law?

Mr. DAVIES. That is exactly my idea, Congressman Barkley. As a matter of fact, that is the way it is working out now. In the first silk case that came before us we had the first silk samples analyzed by the Bureau of Standards under the direction of the Secretary of Commerce.

Mr. JONES. You did that as a matter of evidence?

Mr. DAVIES. Yes.

The CHAIRMAN. The Federal Trade Commission act gives you the right to call in other agencies of the Government?

Mr. DAVIES. Yes.

The CHAIRMAN. That is why you can call on the Bureau of Chemistry and the Bureau of Standards?

Mr. DAVIES. Yes, sir; that is correct.

Mr. DEWALT. Mr. Davies, as an ex-member of this Federal Trade Commission and a lawyer, do you think it would be practicable and feasible to so enlarge the provisions of section 5 as to cover these alleged evils of misbranding and thus possibly eliminate the necessity of new legislation as proposed by the Rogers bill and the Barkley bill? Mr. DAVIES. I think it would be simpler to have a law containing these definitions, conferring the power upon the Federal Trade Commission to enforce it and also providing for a criminal penalty in the event of a violation.

Mr. DEWALT. Your thought, then, is that it would be more practicable to pass either the Rogers bill or the Barkley bill, or a similar bill, than to enlarge the provisions of section 5?

Mr. DAVIES. I think it would be better, because it would overbalance the Federal Trade Commission act if you attempted to enlarge the provisions of section 5. I think it would be better to pass a bill with these definitions, conferring the power on the Federal Trade Commission or some other agency to make specific provisions for violations of the act, and then express in this bill the fair implication that the Federal Trade Commission is expected to compose these matters first by accommodation and to use the criminal side of it only in the event that there is a willful violation of law and a willful intent to be dishonest.

Mr. DEWALT. I understand, Mr. Chairman, that you have asked Mr. Davies to incorporate his ideas in concrete form?

The CHAIRMAN. Yes.

Mr. FRENCH. Mr. Chairman, may I ask just a question or so?
The CHAIRMAN. Yes.

Mr. FRENCH. Mr. Davies, do you know, with regard to prosecutions under the British marks act, whether there have been many prosecutions, and if so, how many?

Mr. DAVIES. I would not be able to state that offhand.

Mr. FRENCH. The reason I ask that question is because my understanding is that the prosecutions are practically negligible.

The CHAIRMAN. I think we will have Mr. McDonald on the stand, and he has made a study of the operation of the British act and also the acts of the various nations of Europe.

Mr. FRENCH. Then may I make this observation. Before I introduced the truth in fabrics bill I tried to check up on it and see whether or not the evils sought to be corrected by it would come under the Federal Trade Commission's authority already existing. I went over the matter with one of the members of the commission who has made something of a study of the question, and while it would be unfair for me to mention names, or perhaps to mention his conclusion, I will say that my own conclusion, from the conversation, was that it would not be possible to meet the situation under existing law by the Federal Trade Commission, in view of the ambiguity of the words "all wool." I mention that, because Mr. Davies, from the brief way in which it was outlined to him, seemed to think that it might be possible. I simply wanted the committee to know that I had tried to sound the matter out without; as a matter of fact, filing information and carrying the matter before the commission and to the courts and thereby determining it. I tried to sound the matter out before introducing this bill to see if there was a method, and at least one member of the commission gave me to understand that in his opinion it was impossible, and that was my judgment.

The CHAIRMAN. Mr. Davies can take a copy of your bill, Mr. French, and make such corrections as he sees fit.

Mr. FRENCH. I will be glad to furnish him with a copy of it.
The CHAIRMAN. Is that all, Mr. Davies?

Mr. DAVIES. Yes, Mr. Chairman; and permit me to thank you and the committee for your courtesy. I am obliged to be away in the trial of cases for the next seven or eight days. Might I have a bit of leeway, say 8 or 10 days in the matter of the return of the copy?

The CHAIRMAN. Yes; we will give you that time. Your testimony will be sent to you as speedily as possible, and you can submit your suggestions when you return your testimony. The committee is

obliged to you for this statement. We will now take a recess until 2 o'clock.

(Thereupon, at 12.15 o'clock p. m., the committee took a recess until 2 o'clock.

(The amendments suggested by Mr. Davies are as follows:)

MEMORANDUM OF SUGGESTED AMENDMENTS TO H. R. 13136 SUBMITTED BY HON. JOSEPH E. DAVIES AT THE REQUEST OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE.

Amend section 2, line 8, by inserting after the word "false" the words "or misleading."

Amend section 3, line 12, by inserting after the word "false" the words "or misleading."

Amend section 4, line 20, by inserting after the word "false" the words "or misleading.

The reason for these amendments is that a large number of trade descriptions which are intended to deceive are not technically false but are clearly misleading and were intended to deceive the purchasing public.

Amend section 5, line 10, by striking out the words "an imitation of and." The use of these words limits the scope of the section to actual imitations. Regardless of whether or not the product is a genuine article or an imitation if it is sold under the name of another article or with the name or brand so nearly like it as to deceive purchasers as to its origin or character the injury to the public and to the competitor is accomplished.

Amend section 5, lines 15 and 16, by striking out the words "with intent to deceive" and inserting in lieu thereof the words "unless a conspicuous notice of such change of contents is attached to such package."

It is often difficult to prove an actual intent to deceive. A person who removes the contents of a package in whole or in part and places other contents therein and offers the product for sale is obviously perpetrating a deception, and he should be prevented from so doing unless he attaches to the package some conspicuous label or other notice which will put the prospective purchaser on warning.

Amend section 6, line 13, by inserting after the word "mode" the words "or place." This will reach an ordinary form of deception which is prohibited in many countries. Amend section 6, line 19, by striking out the word "and" after the word "former," and inserting in lieu thereof the word "or."

The phraseology used might limit the scope of the section to cases where both the former and the present market value are misrepresented, whereas, the deception may be equally inexcusable if either the former or the present market value are misrepresented.

Amend section 8, line 21, by inserting after the word "contained" the words "or in which such commodity is designed to be exhibited or offered for sale."

The purpose of the suggested amendment is to cover the use of exhibit cases which are often furnished to the dealer without charge for exhibiting the commodity and on which may appear false or misleading trade descriptions.

Amend section 9 so that it shall read as follows:

"SEC. 9. That for the purposes of this act a person shall be deemed falsely to apply to goods a trade-mark or mark, who applies a mark so nearly resembling a trade-mark as to be calculated to deceive or who applies a trade-mark without the assent of the proprietor of such trade-mark, but in any prosecution for falsely applying a trade-mark to the goods the burden of proving the assent of the proprietor shall lie on the defendant."

The inversion of the language of this section is suggested in order that the section may not be construed as authorizing the proprietor of a trade-mark to assent to the use of a mark so nearly representing his trade-mark as to be calculated to deceive. To permit this would authorize the deception of the public which, as I understand it, is the primary purpose of the proposed act to prevent.

Amend section 10, lines 9 and 10, by striking out the words "Secretary of Commerce, the Secretary of the Treasury, and the Secretary of Agriculture", and inserting in lieu thereof the words "Federal Trade Commission."

This amendment is suggested for the reason that the placing of the power in the hands of one body would clearly fix the responsibility and lead to more efficient administration. The practices which it is desired to eliminate by this measure are unfair trade practices so closely allied to unfair methods of competition that they might more