To these ends, the Commission will emphasize:

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Maintaining and expanding prosecution of private
restraints on competition.

Re-examining the costs and benefits of existing

or proposed government regulation and taking
appropriate action against wasteful and anti-
competitive practices at all levels of government.
Making full use of the new powers conferred by

the Magnuson-Moss Warranty Federal Trade Commission

Improvement Act of 1974 to eliminate unfair and

deceptive trade practices.

Combined with the Commission's planning, resource allocation, and programmatic control processes, these initiatives provide the basic thrust for the Commission's fiscal 1977 activities. Now, we would like to give you an overview of each of our missions and to highlight several specific programs.

MAINTAINING COMPETITION MISSION

The major emphasis of the Maintaining Competition Mission will continue to be in the areas of food, energy, and health care. It is anticipated that these programs will consume nearly 46 percent of the resource request for the fiscal 1977 budget for the Commission's antitrust activities. In fiscal 1977, pretrial activity in the Exxon, et litigation will include discovery and analysis of millions of document pages subpoenaed from respondents and third parties by Commission trial counsel. Most of the increase in funds to be allocated to the Exxon proceeding is directly related to the personnel, travel, and support expenses associated with this required field discovery.

al.

In addition, work in the Engery Program includes activity on reports, mandated by the Congress, on the structure, practices and performance of significant energy industries.

In the past year, three staff reports have been published; the Western States Petroleum Industry, Federal Energy Land Policy, and Mineral Leasing on Indian Lands.

Currently

scheduled for publication in the near future are additional reports on the coal, nuclear, and solar energy industries, and on the competitive effects of the use of fuel adjustment clauses by utilities. The need to seek enforcement of the Commission's compulsory process against a number of corporations in the energy and financial industries is likely to delay completion of the other energy industries reports until fiscal 1977.

In addition, the Commission is examining possible enforcement activities involving the energy industries, as well as performing its responsibilities under a number of special statutes pertaining to the energy industries, including the Energy Policy and Conservation Act of 1975.

In fiscal 1977, the Commission plans to increase the resources devoted to its inquiry into competition at the various stages of food production and distribution. At the grower-producer level, the Commission staff issued a report regarding the Capper-Volstead Act antitrust exemption for certain activities of agricultural cooperatives. This subject will continue to be an area of concern for further Commission study and possible law enforcement initiatives. In the manufacturer-processor area of the food industries many cases are in litigation, including the cereal case (Kellogg, et al.), which is now beginning trial. In addition, other major litigation in this area includes pretrial activity involving the Commission's complaint alleging monopolization and discriminatory and predatory

1

practices by ITT-Continental Baking Company and the Commission's complaint challenging the acquisition by Nestle Alimentana S.A. of Stouffer Corporation.

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In the distribution and marketing segments of the program, the Commission will continue surveillance of the marketing practices of food wholesalers and distributors, including alleged violations of Section 5 of the Federal Trade Commission Act and of the Robinson-Patman Act. The Commission will also continue to pursue its investigation of retail food pricing. Finally, the food program also includes an analysis of the soybean and grain industries to determine whether there are any possible anti-competitive practices that may be corrected by possible antitrust prosecution.

Planned resources to be committed to a revised Health

Care Program are more than doubled from the fiscal 1976
level to the fiscal 1977 request. This program has been
revised to concentrate on the three major components of
the health care field: drugs, hospital care, and physician
services. In this connection, the Commission has recently
issued a complaint alleging that the code of ethics of the
American Medical Association illegally restrains advertising
and competitive practices by doctors. The Commission has
also announced an industrywide investigation involving the
practices of Blue Shield, which, together with Blue Cross,
is the leader in health care insurance.

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In fiscal 1977, the Commission will continue to devote substantial resources to its law enforcement activities involving mergers, horizontal and distributional restraints. Law enforcement activity in the merger area is expected to increase as the economy improves and stock prices increase. In addition, increased efforts will be placed on the identification and investigation of horizontal or price fixing restraints and other forms of collusion, including problems involving government procurement. Resources for the Commission's continued vigilance against illegal distributional restraints, including discriminatory practices, are included

in both its distributional restraints program, and in specific law enforcement activity in the Food and other programs.

For fiscal 1977, the Commission's ability to continue prosecution of its existing antitrust workload, while undertaking new initiatives will depend on the availability of sufficient resources. For the Maintaining Competition Mission, we request increases of 30 positions and $5,515,000 for a total request of $23,147,000 and 639 permanent positions. Of the $5.5 million increase, $3.7 will be devoted to the Exxon litigation.

CONSUMER PROTECTION MISSION

Fiscal year 1977 will see continued Commission action to enable consumers to protect themselves through fair and honest disclosure of information necessary to make an informed choice among competing products, to prevent unfair or deceptive trade practices, and to provide redress to consumers who have been injured as a result of illegal practices.

As a result of the passage of the Magnuson-Moss Warranty Federal Trade Commission Improvement Act of 1974, the Commission has a significantly strengthened ability to protect consumers by eliminating unfair or deceptive practices. During fiscal 1976, the Commission redesigned a major part of its Consumer Protection Mission to take advantage of the Act's potential for more cost-effective law enforcement. In 1977, the Commission will strengthen consumer protection law enforcement without increases in expenditures by placing reliance on the promulgation of trade regulation rules, codification of prior law and implementation of the MagnusonMoss Act's consumer redress provisions to bring cases designed to restore to consumers the monetary loss suffered as a result of an unfair or deceptive practice.

The promulgation of trade regulation rules provides

the Commission with a systematic approach to a broad spectrum of unfair or deceptive practices in a number of significant industries. As mandated by the Congress, the Commission has already proposed four warranty rules, three of which are final, designed to promote competition among warrantors and establish standards for the fair and non-deceptive use of warranties. During this fiscal year, the Commission has also issued trade regulation rules to protect mail order buyers and to preserve consumers' defenses in credit transactions that previously were blocked by the holder in due course doctrine. Additional rulemaking proceedings are currently underway in the areas of food nutrition advertising, credit practices, the funeral industry, vocational schools, hearing aids, and the used car sales. In total, the Commission has 17 rules currently under consideration, and is encouraging wide public participation in these proceedings to build the best possible record for promulgation of final rules. 1, attached, indicates the status and development of trade regulation rules and guides for the period 1970-1976.

Exhibit

In fiscal 1976, Commission efforts have focused on unfair or deceptive practices that inhibit the free exercise of informed choice. Utilizing the federal preemption doctrine,

the Commission has proposed trade regulation rules to remove impediments to competition, such as restrictions on price advertising of prescription drugs and prescription eyeglasses, and initiated investigations into licensing requirements which may have an anti-competitive impact on consumer access to goods and services. would not impose a new layer of federal law upon existing law. Instead, restrictive private and state restraints would be neutralized, thus strengthening the operation of the free

market.

It is noteworthy that such "preemption"