to ultimately attain approximately equivalent sizes. In response to this pro-
posal, tlie Commission has advised the Department of Commerce that it would
defer further action concerning the marking of actual size pending an appraisal
of the effectiveness of the publicity campaign. However, the right was reserved
to take whatever steps were necessary to require disclosure of size through
marking should the public interest so require.
By direction of the Commission.
Paul Rand Dixox, Chairmati.
Mr. PoTvix. This, Mr. Kirkpatrick, was the letter I mentioned to
you earlier in the afternoon in Avhich Mr. Dixon reports on some very-
excellent ^York done by Mr. Donald Tenny of that staff on consumer
matters as a function of softwood dimension lumber. The central
point here is that the Department of Commerce is considering: and
may be about to promulgate a new lumber standard, which poses
certain problems. Now, Mr. Dixon says this :
The Commission opposes the pyramiding of averages in the manner herein
described and believes that rule writing which utilizes this method would run
substantial risks of violating section 5 of the Federal Trade Commission Act.
As previously indicated, this risk can be averted by basing group modules of
elasticity value on the average value of the weakest species in the group.
Now, without getting into the rather more esoteric reaches of the
lumber technology, the point is this: The Commission, in carrying out
its consumer protection role, finds something that would be a viola-
tion, in their judgment, of section 5. They go to the Department of
Commerce and they say, "We do not think you should promulgate the
standard, because it inherently would be deceptive and injurious to
the consumer." Now, could you discuss for the subcommittee what
weight you feel sister agencies should give this ? Should there be new
machinery ? How should the interplay be accomplished ? Who should
have the final word? That sort of thing. Is congressional action re-
Mr. Kirkpatrick. I will start by saying that as you are well aware,
our report does not deal with this problem at all. I do not myself
feel that I am at all competent to give any new suggestions to this
distinguished subcommittee in that regard. I am frank to say I do
not even know what vehicle, what mechanisms, what procedures there
may now be in existence which are directed, perhaps, toward, al-
though unsatisfactorily so, bringing about a resolution of such con-
flicts. I do not feel, in short, that I am competent to discuss that.
Mr. PoTViN. In a more general way, Mr. Kirkpatrick — -well, first,
you have expressed strongly and effectively, I believe, the thought that
tlie Commission should do more on Consumer issues. As part of this,
it is just inevitable, of course, that some of the things that they find
will be primarily a function of powers possessed by sister agencies.
So then here, as with your proposed study, the question is, ha\dng
found it. what do you do with it? Any suggestions that any of your
members have had' along these lines, I am sure, will be most helpful.
Mr. KiRKPATRiCK. I do not recall that the matter ever came up in
our discussions. I would hope that Avhat would happen is that as
reasonable people, there would be discussions between the two ag:encies
and there would be a satisfactory resolution of the problem. But as
far as our report is concerned and as far as our deliberations are
concerned, we did not discuss that.
Mr. PoTyiN". Would you agree as to this point, though, that it would
be wasteful of the taxpayer's dollar and the etl'ort of the Commission
if, having gone to the time and the trouble of uncovering these things,
it were not given substantial weight by the other agencies that had
the primary responsibility, it would appear to have been an exercise
Mr. KiRKPATRiCK. I would certainly think that any reasonable peo-
jDle in the other agency would want to give consideration to the views
of the Federal Trade Commission on such a matter, certainly.
Mr. DiXGELL. I would share his troubles about several matters. Did
your panel give consideration to physical restructuring inside the
FTC, such as changing the number of commissioners ?
Mr. KiKKPATRiCK. "We did not, as I recall, give any consideration to
the possibility of changing either the number of commissioners or
their term of office.
]Mr. DiNGELL. I just went through handling legislation on the floor
and in committee that dealt with the setting up of a new agency to be
composed of a number of members. AYe got into the question of whether
it should be broadly representative or be small and tightly knit. We
are informed thnt wlien you go above the number of three, you tend
to get into social phenomena wherein there is a tendency to form col-
lections, groupings, power blocks, and differences of opinions and
personalities, et cetera. I am curious to know whether this phenomenon
ever came under the scrutiny of the Commission.
Mr. KiRKPATRiCK. I cannot say that it did, sir. As a matter of fact,
I am satisfied within my own mind that we did not discuss that.
Mr. DiXGELL. You did find in the commissioners, though, I gather,
that there was some splitting along personality lines and philosophic
lines. Would a reduction in the number of commissioners help?
Mr. KiRKPATRiCK. As a personal opinion, ^Ir. Chairman, I do not
know that I would have — I would have to say I have no real opinion
on that at all.
Mr. DiNGELL. Did you give consideration to the problem that one
finds in connection with agencies of this sort, in areas where you
might have a breaking down of the commission into panels to study
questions? Was there any thought in renfird to the commissioners
having different responsibilities, with, appeals to the fii"'l committee?
Mr. KiRKPATRiCK. I do not recall that we discussed that vehicle of
their accomplishincr their purpose.
Mr. DiNGELTv. Did you give anv thoue-ht to the fiindnmental p^-o-
cedure under which the agcncv happens to function — for example,
thp Administrative Procedure Act?
Mr. KiRKPATRiCK. We did. there ; yes.
Mr. DiNGETX. Did you come forward with any recommendations
]\fr. Ktrkpatrtck. The recommenrlations thnt nre set out in our
report are, in effect, that the administrative set-up is a proper one
for the agency's purpose. We did explore that philosophy at some
length and discuss that in our meetings.
Mr. DiNGELL. I have also had the feeling that the APA is a lawyer's
full employment law. I happen to be a lawyer. It provides abundance
of opportunity for young lawyers in this town, and older lawyers,
too. I am wondering did you give any thought to this wierd fairy-
land of procedure that is inflicted upon all of our regulatory agencies
as being a problem ?
Mr. KiRKPATRicK. We gave consideration to the procedural prob-
lems, yes, Mr. Chairman.
Mr. DiNGELL. Is it your personal experience that APA tends to
deny justice by prolonging procedures?
Mr. KiRKPATRiCK. I cannot say that that is my experience, sir.
Mr. DiNGELL. I have the distinct feeling that this is one of the rea-
sons why cases go on and why generations of lawyers will be suc-
ceeded by second, third, and fourth generations of lawyers before mat-
ters are finally resolved. T wonder if this question had occurred to you?
]Mr. PiTOFSKY. The FTC is somewhat unique in that in recent years,
it has been bringing so few formal cases that really the problems of
delay have been cut back substantially there. There are still problems
of delay, and I suspect they are attributable to procedures, including
tlie APA and tlie Commission's own procedures. But the truth is that
postcomplaint delay in the Commission has been cut back substan-
tially. Once they decide to file a complaint, they move tlirough in a
reasonably expeditious way. But the real problems of delay in the
Co7->imission seem to bo in the investigative stage.
iMr. DiNGELL. I see.
Mr. Odex. ^Ir. Kirkpatrick, in your report on pages G7 and 68 and
referring to the Robinson-Patman Act, I notice that you made no
reference to section 2(a). I assume that the majority of your panel
felt that section 2(a) was at this time adequate and should be en-
forced. Is that correct ?
Mr. Kirkpatrick. Well, I think we made no specific mention as to
any dealing with it in a particular fashion in the interim period of
our study. Section 2(a), of course, would be one of the sections that
would come under the scrutiny of the Commission in making the
Mr. Oden. I would like to point out on page 68 of your report, vou
state "The FTC should direct its enforcement proceedings against
section 2 (c), (d), and (e) of the act to cases in which injun' to com-
Mr. Kirkpatrick. Yes.
Mr. Oden. Are you aware of the fact that tliat is a higher standard
than section 2(a) itself requires? Section 2(a) requires onlj^ where
the effect of such competition may be substantially to lessen compe-
Mr. Kirkpatrick. I am aware that that is the case. Asrain, the docu-
ment win have to speak for itself. "Wliether the terminology that tliere
exists was intended to create such a higher standard or not, I could
not comment upon. T would say this, that I myself do not think T had
intended that a higher standard be created here than the 2(a) itself
has built into it. But I cannot speak for my Commission in that
Mr. Oden. One other question. Mr. Posner's separate statement
seems to recommend abolishment of the Federal Trade Commission,
because it does not perform the function historically assigned to it
by the Congress.
On the bottom of page 3 of your report, you state that this
Commission, referring to the ABA Commission, I assume, believes that
it should be the last of a long series of committees and groups which
have earnestly insisted that drastic changes were essential to recreate
the FTC in its intended image. At the bottom of that, you say :
"If change does not occur, there will be no substantial purpose to
be served by its continuing existence.''
I assume that means the FTC ?
Mr. KiRKPATRicK. Yes.
Mr. Oden. Did you give any consideration to the lapse of time that
will be required to decide whether the change would occur that would
warrant the continued existence of the Federal Trade Commission?
Mr. KiRKPATRicK. I do not recall any discussion that particular-
ized that in terms of years. I think that at least in my mind, it was an
impossible thing to quantify in years until we saw what happens as the
months or years unfolded.
Mr. Oden. The reason why I ask is that, in your report, you quoted
from several studies going back into the forties dealing with the Fed-
eral Trade Commission. I just wondered whether your Commission
itself had considered any
Mr. IviRKPATRiCK. I recall no discussions that would yeild any an-
swer to that question, sir,
Mr. Oden. Personally, would you have any idea as to what would
constitute a reasonable length of time for necessary change to take
Mr. KiRKPATRiCK. I would rather do it by hindsight than by fore-
Mr. Oden. Thank you.
Mr. PiTOFSKY. I can only add one point on that. There was a dis-
cussion of the question of whether or not the FTC really could be con-
verted into the kind of model agency that some of us would hope for.
But we all agreed, I think, that our proposals really were directed to-
ward tlie conception of turning the Commission aroimd to the point
where it begins to do some of these things. No one expects that they
will l>e done veiy quickly, that all the staff and planning and delega-
tion and allocation problems can be solved very quickly. They will
take quite a bit of time.
But once there is a sense in the Commission that they are doing the
things of merit and worth, we think, first of all, that will be reflected
in more successful recruitment, and also in the ajbility to hold the
best people, the best young lawyers there.
So in looking at the time dimension, our first concern was only to
give the agency w^hat, in our view, would be a sense of direction and
jVI r. Dtngell, Mr, Wertheimer,
Mr. Wertheimer. Thank you, Mr. Chairman.
I have a few questions based on some of the findings in yonr report.
One of the findings was that all of the Commissioners, ^^^th the ex-
exception of the chairman, asserted that control by the FTC of its own
mission, goals, and priorities continues to be a most perplexing and
largely unsolved problem.
Did these Commissioners indicate the reason why they felt this to
be the case and how they felt that this kind of problem should be
Mr. PiTOFSKT. Well, as to how it should be approached, there is a
very lengthy memorandum prepared by Commissioner Nicholson,
which goes into the question of plamiing, and at least in my own
opinion, is an extraordinarily a])le ])iece of work. He has 90 pages
worth of proposals as to how planning can be improved.
As to the other Commissioners who commented on it, they had
various proposals of one kind or another — not as ambitious as the
Nicholson set of proposals. But principally, the issue of planning, I
think, is simply a matter of picking some people, giving them an
adequate staff, telling them it is their job to plan, and then reaping
the benefits of a calculated planned program. I think Commissioner
Jones said that sort of thing in much those words.
Mr. Wertheimer. Am I correct that there is a position at the Com-
mission known as program review officer for the Commission and that
that position has not been filled in more than the last year?
Mr. PiTOFSKT. In about a year.
Mr. DiNGELL. Did you ever find out why that position had not been
Mr. PiTOFSKT. I think part of the answer is that there is a dispute
in the Commission, as you probably know, as to who has the power
to make certain appointments. This is one of the positions subject to
Mr. DiNGELL. I was wondering if this was really related to a budget-
Mr. PiTOFSKY. I do not believe so.
Mr. KiRKPATRicK. If so, we were not so advised.
Mr. Wertheimer. Could I ask you about that? Can you explain the
facts surrounding the action taken by the majority of Commissioners
to increase from 11 to 63 the number of senior staff positions to which
the chairman could not make appointments without the approval of
the majority of the Commission, and what the status of that is now?
Mr. KiRKPATRiCK. As I understand the status, to answer the last
part of your question, it has been submitted for opinion to the Attorney
General of the United States. I think Chairman Dixon wrote such a
letter relating the facts to the Attorney General, and the last time I
looked at it, no opinion had been forthcoming. It grows out of Re-
organization Plan No. 8 of 1951, of course, which provides that the
chairman shall have the power to fill all but — well, briefly, policy
positions in the Commission, approval must be had for positions that
are of a policy stature. The quarrel is as to which positions, indeed,
have the stature of policy positions.
Chairman Dixon would have it that there are 11 such positions and
the other Commissioners would, I think, have it that there are 63.
Mr. Wertheimer. Is this a problem, to your knowledge, that has
come up before in other agencies for this kind of interpretation ?
Mr. KiRKPATRicK. I have not heard of it coming up before in other
Mr. Wertiieimer. Your report points to what you would call crip-
pling procedures as a serious problem there. You find also that in recent
years, the Commission has sought t-o improve its rules of practice and
procedure. Have these later activities made any headway against what
you describe as the crippling procedures and can you comment on what
should and can be done, in your opinion about crippling procedures?
Mr. PiTOFSKY. We did not get very deeply into that question, for
the reason I indicated pre\aously. We were asked to evaluate the
enforcement programs. We found that because they had cut back so
sharply on cases, there really was not nearly as serious a problem of
delay post complaint.
We got into the question, very definitely into the question, of delay
in the investigative stage and the field office investigation stage. But
we did not take a position on whether or not the procedural rules con-
tributed to delay after a complaint has been filed.
Mr. Wertheimer. "Wliat was the basis for this position on crippling
procedures ? Did you make some study of tlie procedure ?
INIr. PiTorsKY. Oh, yes. It is at pages 28 through 32 of the report.
At the conclusion of that section, we point out that delay is at least as
serious today in the investigation stage as it was in the period 1961-63.
As a matter of fact, it is probably slightly worse. But one consequence
of the sharp decline in formal enforcement activity has been to alle-
viate problems of delay in the formal proceeding stage.
Mr. Wertheimer. Could you spell out the problems that you felt
result from the Commission's program of relying on comj^laints from
the public as its major source of initiating action, which I believe is
the position you set forth in your report.
Mr. KiRKPATRicK. Well, I think that is one of the major premises
of our report, that reliance on what is sometimes called the mailbag
teclmique, the passive mailbag technique of selection of cases to bring,
does not get very sensible priorities. It does not really promote the pur-
poses of the Commission in any sensible way. The lax direction, it is
helter-skelter and it inevitably involves the Commission, in fact, may
bog it down in trivia, in cases of very minor dimension, wliile cases of
maybe major dimension languish.
Mr, Wertiieimer. Did you recommend any kind of procedural
Mr. KiRKPATRicK. We have recommended that the first order of
attention be given to the matter of planning and procedure.
Mr. PiTOFSKY. May I just say a few words on that?
I would say that the problem of mailbag detection is very simply
that some of the people who are the victims of the worst sort of frauds
have never written a letter to a Government agency in their lives and
never think about it. Our suggestion to alleviate that situation is to
open up, at least on a pilot project basis, offices of consumer complaints
in localities where people can come and explain exactly in what way
they were defrauded.
Mr. Wertheimer. In your report, you state the position that the
FTC has exercised little leadership in the prevention of retail market-
Could you give your view as to FTC jurisdiction over retailing
Mr. PiTOFSKY. Yes. That is covered at pages 52 through 54 of the
report. Quite simply, it is a unanimous view of 15 members of our
Commission that the FTC's reluctance to proceed against essentially
localized fraud and deception in retail marketing is based on an ex-
aggerated fear that they do not ha^e jurisdiction in tliis area. We
l^elieve that if a test case were brought, for tlie reasons we spell out at
length in the report, they would find that they have that jurisdiction.
If they do not have the jurisdiction, we believe they ought to go to
Congress and ask tliat they l)e given jurisdiction in the area.
Mr. Wertheimer. Am I right that your report finds that nearly 40
percent of total investigations opened and 50 percent of complaints
filed at the Commission involve the Bureau of Textiles and Furs?
Mr. KiRKPATRicK. Yes.
Mr. PiTOFSKY. That is right.
Mr. Wertheimer. Is there any good reason for this in your opinion,
other than it is just the FTC's present policy or program?
Mr. PiTOFSKY. I think there is no good i-eason for it. I think it is
a misallocation of lesources.
Mr. Oden. On pages 40 and 41 of your report, in discussing false
and deceptive advertising, you state that among the recurrent flaws of
FTC enforcement — and you state several of them — one of them hap-
pens to be timidity in instituting formal })roceedings. I wonder if you
discussed this point with tlie Connnissioners, particularly with regard
to withholding or refusing to issue complaints in the false and decep-
tive area under section 5.
Mr. KiRKPATRiCK. I do not recall any discussion of that with the
Mr. PiTOFSKY. I would have to check on that. I seem to recall that
was one of the questions we raised with the commissioners, but I can-
not recall what they said about it.
Mr. Oden. Thank you.
Mr. Wertheimer. You also reach the conclusion and deal with the
question of FTC's enforcement program, which you say depends heav-
ily on voluntary compliance by businessmen, with no effective check
on that compliance. You state that this is unlikely to adequately
protect the public interest. Would you comment on this and what you
feel, what kind of approach the Commission should be taking?
Mr. PiTOFSKY. Let me try that.
First of all, let me say that the report does not intend to criticize
what I think is the very favorable develoi)ment in the FTC in the
direction of voluntary compliance activities. We simply think that tliey
have gone too far in that direction and more importantly, that a volun-
taiy compliance program, where you do not check to see whether those
people who say they are complying in fact are complying, really in
fact are complying, is deficient. Many of the firms that sign these as-
surances of voluntary compliance or informal corrective actions, of
course will do exactly what they say. They will stop violating the law
l)ecause it has been called to their attention. But many others will not.
I think this is particularly unfortunate, where the firm that is signing
one of these things is engaged in some form of consumer fraud or
Unless you check back to see in fact whether they are complying,
then I just do not think that that kind of program deserves the name of
Mr. Wertheimer. Is it connnon knowledge throughout the indus-
tries that there is no check, no surveillance ? Would this not in effect
so act as a basis for people to be less concerned about compliance ?
Mr. PiTOFSKY. I can't say it is common knowledge. I was surprised
Mr. KiRKPATRiCK. I cannot say it is common knowledge, but if it is
common knowledge, it will produce the effect you stated.
Mr. Wertheimer. Would you comment on your finding that there
appeai-s to be no effective procedure within the FTC to keep track of
progress on matters formally initiated, to establish realistic deadlines
and to terminate investigations which no longer are justified? I take
it by that finding that you are basically saying that there is no central
office keeping track of the status of various investigations.
Mr. Kirkpatrick. That certainly has been the case for many years.
I believe recently there has been instituted a program of reporting as
to matters that have been in the field offices for a given period of time
and other matters that are under investigation in the Washington
oifice for a given period of time. So that procedures have been recently
created, I think, to alleviate the situation.
Mr. Wertheimer. Are these the kind of things that could deal with
these problems ?
Mr. Kirkpatrick. It would accumulate some data, I think upon
which then more effective and elaborate procedures might be
Mr. Wertheimer. Thank you.
Thank you, Mr. Chairman.
Mr. Oden. Mr. Kirkpatrick, in your discussion of ex parte dealings
of individual Commissioners with outside attorneys, did you uncover
any examples of impropriety by any of the Commissioners regarding
ex parte discussions?
Mr. Kirkpatrick. I do not recall any what you might call impro-
prieties, no, I think that our concern was that there were not any
guidelines to the bar generally and that there should be in tlie circum-
stances, that lawyers, some lawyers seem to have free access, and I do
not mean improper access at all, and others — there just was no guid-
ance, no criteria which were available to the bar generally that was
helpful in this regard.
Mr. Oden. In other words, you were more concerned with the ap-
pearance of any impropriety tlian any actual wrongdoing.
Mr. Kirkpatrick. That was certainly part of our concern, yes.
Mr. DiNGELL. Did you find the appearance of impropriety ?
Mr. Kirkpatrick. Again, I do not like the word ''impropriety," sir.
It was the appearance of uncertainty, I think, that many of us felt as
to when one miglit have access properly to a Commissioner and when
one might not. A great deal, I suppose, would depend upon your