Mr. PICKLE. Mr. Chairman, I have two other questions which I will submit for the record and ask that the record be kept open for that. Mr. MACDONALD. The record will be kept open for a reasonable time. (The questions, and replies thereto, follow:)

QUESTIONS, AND REPLIES THERETO, SUBMITTED BY CONGRESSMAN PICKLE QUESTION. On the matter of give-away contests. Recently, a constituent of mine wrote in that she had received in the mail several cards advertising a giveaway contest for a national soap company. Apparently, she was supposed to have received only one such card, since they contained a "lucky number." It seems that both of the cards she received contained the same lucky number and that several neighbors also received identical notices. Now I don't know if this is evidence of misdealings in the administration of the contest, or if it is simply the way these matters are handled. At any rate, given the fact that a certain contest is not unfair competition, I am still concerned about the ethics used in conducting such contests. What control do you exercise with regard to such matters? ANSWER. We are presently investigating the legal and economic aspects of contest promotions in the retail grocery industry. Your constituent's question goes to a particular aspect of this investigation, namely, whether deception or "rigging" is involved in the promotional schemes. This is presently receiving very intensive study by the Commission's staff. While the study is primarily concerned with contest promotions at the retail grocery level, I have been advised it has not been practical to limit it very strictly to that level alone. Files are being maintained on game promotions at other leevls and in other industries. The public has been very helpful in furnishing material to us and, of course, many Congressmen have forwarded constituents' letters to us on this subject.

I share your concern about the growing use of this form of promotion by American industry. Of course, you realize that since I may be called upon to exercise a quasi-judicial function in determining the legality of contests in general, or of any specific contest such as that to which you referred, it would not be proper for me to comment about their legality at this time.

QUESTION. When a businessman is brought before your Commission for alleged violation, you will have him sign a “cease and desist" order. That implies guilt, of course, and it may well be an admission in many cases. There are times, however, when businessmen actually ask your field representatives, or write your Commission direct, trying to get the proper interpretation of a given rule or regulation. They act in good faith, trying to follow your rules. Later, someone in higher authority tells them they are in violation. After months of negotiating, the FTC will ask them to sign a cease and desist order . . . and in doing so, admit a violation, which might have been accidental or unintentional. My question is, whether a remedy exists that might solve the dilemma without forcing them to sign the cease and desist order? Or, is the present procedure still the best?

ANSWER. Our proposed procedures and rules of practice, as first effected in 1961, have two objectives, that of guidance and enforcement. With the ever increasing volume of work and no increase in staff in the past three years we have made unprecedented efforts to educate the business community with respect to the statutes entrusted to the Commission for administration and to encourage voluntary compliance. While we believe these new procedures have been effective, with the results encouraging, the Commission must also fulfill its statutory responsibility by strong enforcement where self policing and voluntary compliance may fail.

The Commission has not only been empowered to prevent violations of law, but has been directed to do so by congressional mandate. In carrying out the congressional mandate, investigations are essential to determine whether or not alleged practices constitute violations of law administered by the Commission. A "case", i.e., an adjudicative proceeding, is commenced by the issuance and service on the named party of a formal complaint charging a violation of law. By statute, we may issue such a complaint only when we have "reason to believe" there has been such a violation. The pre-complaint investigations are the means by which we acquire the basis for the "reason to believe".

The voluntary cooperation of persons under investigation is initially sought. However, if denied, compulsory process is used where appropriate. The result, of course, of our pre-complaint investigation is that the Commission is generally very well informed as to the facts before issuing its complaint.

Not all pre-complaint investigations result in adjudicative proceedings. The Commission's rules of practice, under its informal enforcement procedures, provide as follows:

"Section 1.21-Voluntary Compliance.

The Commission, when it has information indicating that a person or persons may be engaging in a practice which may involve violation of a law administered by it, and if it deems the public interest will be fully safeguarded thereby, may afford such person or persons the opportunity to have a matter disposed of on an informal nonadjudicatory basis. In determining whether the public interest will be fully safeguarded through such informal administrative action, the Commission will consider (1) the nature and gravity of the alleged violation; (2) the prior record and good faith of the parties involved; and (3) other factors, including, where appropriate, adequate assurance of voluntary compliance."

One of the most significant changes first effected in the Commission's rules of practice relates to its consent order procedure. From the standpoint of the party accused of violating the law, this procedure has very definite advantages, the most significant of which is the fact that such orders "may contain a statement that the signing thereof is for settlement purposes only and does not constitute an admission by any respondent that the law has been violated as alleged in the complaint."

The principal significance of this caveat is in the fact that a very large number of our cases involve practices that are actionable in the federal courts at the suit of any private party who might have been injured in his business or property by the illegal act. Our decision that a respondent has violated the law is not admissible to prove that fact in a subsequent private treble damage action; however, a respondent who forces the Commission to litigate the matter compels us to build a formal adjudicative record which is examinable and available to anyone. It should be emphasized that it is the Commission's duty under the law to aid, not hinder, injured parties seeking to vindicate their rights by private antitrust actions. From the Commission's standpoint, the consent order is much in the public interest. We simply do not have the legal manpower to try every case of law violation discovered or brought to our attention. More than 75% of the formal cases are disposed of by consent order. It is our policy, therefore, to encourage those we believe have violated the laws to consent to the entry of a cease and desist order. This policy was first implemented by the changes in our rules of practice initiated in 1961. Under our present rules, if the Commission agrees that the complaint should issue, it first serves upon the party to be charged a proposed complaint and a proposed cease and desist order. The party served with the proposed complaint and order then must decide whether it is interested in having the proceeding disposed of by the entry of a consent order. If the reply is in the negative or if no reply is received, the complaint is issued and served forthwith. Once the complaint is issued, adjudicative proceedings have begun, and the consent order procedure will not be available. In effect, we will no longer permit the issuance of an order containing the caveat that the respondent does not admit that he has violated the law. Our new rules eliminate the tactic of delaying or dragging out the first pre-trial proceeding and the trial itself and just before having a decision handed down finding the respondent a law violator consenting to the entry of an order containing the statement that no admission of guilt was being made.

There remains a large number of cases that can be disposed of only by trial. Our rules are designed to give full consideration to such cases. Therefore, where no consent settlement is reached, our rules provide that the complaint shall be issued and served forthwith. At this point, the adjudicative proceeding has been started. Following the hearings and the initial decision, the Commission, on review, exercises all the powers it could have exercised if it had made the original decision. It may either adopt, modify, or set aside the findings, conclusions and order contained in the initial decision. Section 5(b) of the Federal Trade Commssion Act provides that the Commission, if of the opinion that the Act has been violated, "shall make a report in writing in which it shall state its findings as to the facts and shall issue and cause to be served an order requiring it to cease and desist . . ." Our decision is in written form, setting forth in detail a statement of the reasons and the basis for action.

The Commission is not unmindful of the facts that the statutes it administers are not always easy to apply. In the fifty years of the Commission's existence, it has repeatedly condemned as unlawful the very same practices that are pres

ently involved in its investigation or formal dockets. With this experience, we have instituted several new programs that are designed to furnish guidance to those who are interested. Our guidework takes three forms: (1) trade practice conference rules and guides interpreting the laws as it applies to the practices of a particular industry or to practice common to many, (2) trade regulation rules and (3) advisory opinions which are binding upon the Commission. Related to our guidance program is our effort to obtain in our adversary proceeding industry-wide enforcement. In effect, this means that we shall not single out a single violator in a particular industry and place him at a competitive disadvantage with those who are similarly violating the law. We attempt to follow this policy in industry situations and violations where they lend themselves to such proceedings.

Our educational efforts have been successful; not all violators have been required to sign cease and desist orders. These efforts will continue to be implemented. However, such efforts will be effective so long as the Commission under its statutory authority may bring adversary proceedings in the event the voluntary procedures fail.

Mr. MACDONALD. Mr. Kuykendall?

Mr. KUYKENDALL. Mr. Dixon, I want to compliment you for one particular thing. You are the only agency that has handled your business with such dispatch that we freshmen have had occasion to ask questions. I think the most profound statement you made all day was when you called this private labeling thing a dilemma.

I ask this of my colleague from Tennessee. When you make a decision as to what action you will take and what kind of legislation you will seek in asking for the temporary injunction against the flyby-night operator that you discussed, sometimes the only determination as to whether he is fly-by-night or a shoestring operator is whether he actually flies.

And I would like to see whether this is possible. This person may be out of business before it is determined whether or not he is legitimate. I would like you to look into the question, in connection with the restraint, of some type of restitution for this person where he proves to be legitimate.

Mr. DIXON. The original bill which came forward here and which we supported was that a temporary restraining order is an extraordinary remedy and should not be granted except under the most careful

review.

We asked for an sent forward a bill suggesting that only upon a record fully supported could the Commission issue such a temporary order, where irreparable harm and injury could be shown, and then only when it was reviewed.

That meant that it wouldn't take effect until it was reviewed and we would ask, as to that review, that a district judge do it.

Mr. MACDONALD. This was all you had?

Mr. DIXON. The bill that was up here was adequate protection, but the question is whether we should be given the power to do it on our own or go to the individual district courts and seek it. We thus far have held to the proposition that we think we have the expertise of any district judge and there are five of us.

We think that we were so created to have more expertise than a given district judge. So we thought we should be allowed to do that. We are given the power of a cease and desist and we thought that, on the record subject to review, we ought to have the ability to do it in those extraordinary cases where it was justified.

That was the way the proposition came up. In the past, several Members of Congress-Congressman Steed and Congressman Pat

man, and I don't know how many more-have put in bills from the standpoint of trying to save small businesses before it is too late from the predator or from things that may not be predatory, but the evidence is there.

Mr. MACDONALD. Mr. Ottinger?

Mr. OTTINGER. Thank you, Mr. Chairman.

I enjoyed the opportunity to hear you. I am new on the committee and found your remarks very interesting, indeed. I just tell you, as a new member of the committee, that I view with interest your request for temporary injunctive relief authority and perhaps it is worth another try.

There has been a good deal of controversy recently about trading stamps both in the foodstores and in the gasoline stations and possibly misrepresentation as to whether you are getting something for nothing and what the value is of the products actually given.

There is legislation pending by my colleague from New York, Mr. Wolfe, to allow cash redemption of these stamps.

Mr. DIXON. I think the Commission has been up and down the hill several times on trading stamps generally. Mrs. America likes these trading stamps, Congressman. She sure loves them. Why, I don't know, but she loves them. Maybe it is the old cookie jar.

We have a case pending that involves not just the question of trading stamps, but we are actually looking into these so-called games of chance where I think goods are being sold by virtue of games of chance, and this is a big problem.

We are considering it both from the standpoint of economics, of what it means in cost, and deception and legality, and these matters are still before us.

Mr. OTTINGER. Do you have anything which you can give us to enlighten us on this question at this time?

Mr. DIXON. No. I think when we get a report on this game of chance case, and I can have it marked and sent to you if you wish. Mr. OTTINGER. We had under consideration and probably will have a recommendation from the administration this year on so-called truth-in-lending legislation

Mr. DIXON. Yes, sir.

Mr. OTTINGER (continuing). Requiring revelation of true costs of lending. What have your activities been in this field and is this something on which you favor legislation?

Mr. DIXON. I favor legislation. We have issued recently some guides for the District of Columbia where we have responsibility all the way down to the home in a limited area in the field, dealing principally with certain types of retail sales, especially those types of conditional sales where the goods can be replevined or taken back, but the Commission has consistently supported so-called truth in lending. Mr. OTTINGER. Thank you, Mr. Chairman.

Mr. MACDONALD. Mr. Blanton?

Mr. BLANTON. Being the last, Mr. Chairman, and proud of Rand Dixon as a Tennessean, and all of us are

Mr. DIXON. You are very kind.

Mr. BLANTON. I would like to comment on the fact that since he stopped quarterbacking that great football team at Vanderbilt my team has beaten them over the past few years.

Mr. DIXON. You took the Southeastern Conference away from us in basketball the other night, I understand.

Mr. BLANTON. We are proud of that, too.

I have just one question where I don't know if you have jurisdiction

or not.

We passed a little bill in the Tennessee Legislature last year requiring the labeling of foreign beef. Would it take legislation for you to have the power to enforce this move?

Mr. DIXON. I am not completely familiar with the Agriculture Department's powers in this respect. I don't know whether they are all mandatory or what.

All meats are not marked and graded, but as to whether there is any marking of foreign meat, I don't know whether there would be. We are excluded from doing anything about the packers and stockyards with the exception of the so-called Mahoney bill which was passed to kind of plug a loophole which was being seized upon to keep us from proceeding against a chainstore that might have a small packing operation.

I think that, in view of that statute with respect to meats as such, we would be excluded unless Congress took a different approach to it. Mr. BLANTON. One other question on the cement plants getting into the ready-mix business. That is what you were talking about, wasn't it?

Mr. DIXON. Yes, sir.

Mr. BLANTON. I was wondering why this concerns you because of the fact that I can buy a bag of cement from Kaiser in California and ship it to Tennessee at the same price that I can buy one from National and ship it 30 miles.

Mr. DIXON. Of course, section 7 of the act deals with mergers. In a horizontal or vertical merger if the facts support the finding of a tendency to monopolize, we have a law violation. We have had the beginning of a movement in this industry.

I have a feeling that once it starts it is kind of this way: Suppose that there were four, all independently owned, and maybe all of you were buying cement at the same price.

Then you had to have sand and gravel and you had to mix it and haul it, and you were competitive at that level and you had to make a living. If a cement company bought one of those outlets the economy scale could move in his favor and he could go out and take bids.

As soon as one happened, maybe the next one would move in and say, "I better buy one of these before it is too late," and pretty soon no one is there.

We had filed about 13 cases, and let it be said that we would hope that this might alert the industry to the problem and the challenge, but we felt that it might be better to stop and have a general hearing and give the guide or the statement that we did, hoping that this would be enough of an alert to where we would not have to continue one at a time because it gets rather difficult after the fact to do this. Mr. BLANTON. Thank you, Mr. Chairman.

Mr. MACDONALD. Thank you very much, Mr. Chairman and the other commissioners.

I don't guess it is a question, but I have a comment.