of a supplemental antitrust law-the Clayton Act. The activities of the Federal Trade Commission are centered, in fact, in six sections of the two laws-two sections of the Federal Trade Commission law and four sections of the Clayton Act.

The CHAIRMAN. The Federal Trade Commission act only authorizes investigations by the Federal Trade Commission, and the hearing of complaints for unfair methods of competition.

Mr. MURDOCK. That is correct.

The CHAIRMAN. And it is also given jurisdiction under four sections of the Clayton Act.

Mr. MURDOCK. I would like, if I may this morning, to confine myself to suggested amendments of those two acts, briefly as possible, and then Mr. Commissioner Colver and Mr. Commissioner Thompson will follow with suggestions, which will be quite independent of mine, some of them, and some undoubtedly in emphasis of what I have said. The section of the Federal Trade Commission act which is followed with the most activity and helpfully constructive work by the Federal Trade Commission is section 5. You remember that the burden of section 5 reads substantially as follows: That unfair methods of competition in commerce are hereby declared unlawful, and whenever the commission shall have reason to believe that an unfair method of competition in commerce has been or is being used it shall (because the law is mandatory) issue a complaint. After the complaint has been issued, under the direction of the law, a hearing is given the parties complained against, and thereafter the commission, if its reason to believe is confirmed, may then issue an order upon the respondent to cease and desist. An appeal from that order lies to the circuit court of appeals.

I think that it would be well if I would detail to the committee just what the proceeding under that section is. Anyone in the United States may write in to the commission, and they do by the score, complaining that such and such an act is an unfair method of competition, and asking relief. The commission takes this letter, usually a business letter, places it in the hands of the chief examiner who has all this preliminary activity in charge, and the letter is docketed as an application for the issuance of a complaint. It has not reached the formal complaint stage yet, and to the fact that it has not reached the complaint stage is due a great deal of misunderstanding in the public mind and considerable unjust criticism of the commission. When we receive a complaint it does not at once become a formal complaint; it becomes an application for complaint. The chief examiner takes this application for complaint, places it in the hands of an examiner, usually an attorney, and this examiner, either through correspondence or by personal visit, develops the facts in that case, usually sees both parties, finds out what is back of the complaint, and whether it be justly founded or not.

Mr. DYER. May I interrupt just for a minute?

Mr. MURDOCK. Surely.

Mr. DYER. You say the attorney or employee visits both the complainant, the one who writes the letter, and the one who is complained against?

Mr. MURDOCK. Yes; he may.

Mr. DYER. My understanding has been that they did not, and that is why I wanted to ask the question. My understanding has been that the one who is complained against is kept in ignorance of

it throughout the entire procedure, and is not even made acquainted with the fact that some one has complained against him.

Mr. MURDOCK. Mr. Dyer, from all the cases that I have handled I think I can say, without exception, that the attorney does visit the man who later becomes the respondent.

Mr. DYER. I know I made a request of an attorney some time ago to find out who it was that was complaining against a constituent of mine, and he refused to tell me.

Mr. MURDOCK. That is true, and I can answer your question about that. Very frequently the commission will not reveal the name of the complainant to the respondent to be. It does not reveal the name of the man who brings the complaint, because the applicant for formal complaint is carried in the docket as the Federal Trade Commission; that is, as the applicant for the issuance of a complaint against the party complained of. The commission takes the place immediately in the title of the procedure of the man who has made the complaint, and very frequently we do not reveal the name of the complainant. Very often he requests that we do not, and there are other reasons for that.

Now, after the attorney has examined the case, his report comes back to the chief examiner. If the chief examiner is not convinced that it has been thoroughly investigated and inquired into there is a further inquiry, and all these steps, Mr. Dyer, are taken with the idea of avoiding working an injury, and not going off half-cocked in the case. After the inquiry by the examiner has been completed the application for complaint passes into the hands of a board of review, made up of the staff of the commission, of economists and lawyers. They read the findings of the examiner and make a recommendation to the commission, the recommendation being in the one instance that complaint issue, or in the other that the application be dismissed. The application then comes to a commissioner to whom it has been originally assigned for supervision, the commissioner reads the case, the report of the board of review, and then writes a recommendation to the commission. He may disagree with the board of review, and if the commissioner does disagree with the board of review, then the board of review is invited in before the full commission to argue their side of the case as against the commissioner. If a majority of the commission agrees with the board of review, and the board of review has recommended the issuance of a complaint or a dismissal, then the commission orders the issuance of a complaint or dismissal.

Now, up to this point there has been no formal complaint. This has been only the application for complaint. The commission has been arriving at a reason to believe or not to believe that an unfair method of competition has been or is being used. Having arrived at a reason to believe, then, and then only, does the commission issue its complaint. That makes for a very safe and sure survey. It is very difficult for injustice to be done anyone when that degree of care is exercised.

Now, then the complaint is ordered issued, the matter passes out of the hands of the chief examiner and the board of review and passes into the hands of a chief counsel, the head of the legal branch of the commission, and the chief counsel proceeds to draft the complaint and the commission serves notice upon the parties in interest.

Mr. STEELE. When the board of review presents its report, is that report passed upon by the entire commission?

Mr. MURDOCK. Yes.

Mr. STEELE. That is the report of the board of review before the issuance of a complaint is authorized?

Mr. MURDOCK. Well, Mr. Steele, the commissioner to whom the case has been assigned in the first place first reads the report of the board of review, and agrees or disagrees with the board of review, and then the case is taken before the full commission. If the commissioner disagrees with the board of review then, under the rules, the board of review must come before the commission to argue its side of the case, and as very frequently happens a commissioner is reversed by the commission, the rest of the commission agreeing with the board of review.

Mr. STEELE. Then in reaching a judgment your system is practically that of an appellate court?

Mr. MURDOCK. I am not acquainted with that court procedure, so I can not answer that question. Now, when a complaint is issued, notice is given and hearing is held. Of course, the complaint is issued in written form, and parties have the right to file a written answer, and I think invariably do. Finally, the case, after hearing, is argued out on briefs and orally before the commission, if parties desire, and if the commission's reason to believe is confirmed on trial of the law and facts, then the commission issues its order to cease and desist.

It is a noteworthy thing and it is a gratifying thing about this procedure that at many stages along the line of procedure the respondent wants to confess his fault and quit. Many, many of these cases reveal at once methods that are obviously unfair; the very complaint itself establishes that the method is unfair-the method complained against. A criticism has arisen against the commission, due to that fact and I do not want to take too much time with that, but I want to get to the Committee on Judiciary just what that criticism is. It is a criticism to the effect that the commission issues the cmplaint and does not dismiss the application for complaint when complaint is indicated. A man files an application for complaint with the commission; the commission investigates the application; it goes to the respondent to be, the prospective 1espondent; the prospective respondent takes a look at his act and says, “Of course, that was wrong, and I would like to quit."

Mr. STEELE. Is not the criticism largely this, Mr. Murdock, that the commission, instead of looking at things in a judicial way, becomes a prosecutor?

Mr. MURDOCK. I will let some one else handle that. I resent that. As a matter of fact, our procedure prevents our being the prosecutor. We must be the impartial judge, our survey of the facts being so long and thorough.

Mr. WHALEY. But do you not bring the proceeding and try your own case?

Mr. MURDOCK. Yes; we issue the complaint on reason to believe, and we finally pass judgment on all the facts in the case, after argument at the end, before we issue an order to cease or desist, or refuse to issue it.

Mr. WHALEY. Do you not find him guilty when you bring the complaint and try the case?

Mr. MURDOCK. Absolutely not.

Mr. IGOE. But after all, you find him guilty.

Mr. MURDOCK. Certainly, if we issue the order. It is that very idea in the minds of men, that we do find them guilty when we merely issue a complaint that makes many resent the complaint. Now I submit this thought to the Judiciary Committee. I am not in favor of a government by men. While I am not a lawyer, but a newspaper man, I am very much in favor of a government by law. Section 5 leaves me, as a commissioner, no discretion in the matter of a complaint. After I have investigated, as a commissioner, an application for complaint, and I have reason to believe that an unfair method of competition in commerce has been used or is being used, and the commission agrees with me, then the law says specifically that we shall issue that complaint. Now, that is not a sentence of guilt, it is not a finding of guilt against the respondent; it is merely the issuance of the complaint, setting in progress an inquiry to develop facts and law. If the law said that we might issue a complaint after reason to believe, or we could if we wished, issue a complaint, then I could see that before the day of the issuance of the complaint the commission might legally dismiss a case where the facts indicated a complaint, but where the law says manditorily that we shall issue this complaint where complaint is indicated, I do not see any escape from that, and I do not see that there should be any escape. For this reason, that when we have reason to believe that a method of competition is unfair and we issue the complaint and try it out, in the trial we serve notice to all the community that this practice has been challenged and is being tried. If, before the day of the issuance of the complaint, the application is dismissed, it is done in obscurity, and the community in general has no benefit from the trial.

Now, what are some of these complaints? Well, some methods complained of are obviously unfair, so obviously unfair that you would think at first that no investigation or inquiry was necessary. Some of them run through entire trades. I handled recently a portion of the sponge trade of the country. Sponges are fished out of the ocean somewhere off the coast of Florida. For the last 15 or 20 years, perhaps longer, sponges in volume have been sold in bales, by weight. Some of the bills of sale on a bale of sponges read very curiously, that the sponges can not be returned to the consignor if the bale is broken, or if the bale becomes wet. A dealer in sponges complained that some in the sponge trade were loading these sponges with salts, glucose, and other weighty materials. Obviously, if the bale was broken, the salt being dry would fall out and the weight of the sponge would diminish, or any other loading would drop out. Now, when that application was made I had reason to believe that this was an unfair method of competition. I think anyone would. We put out an examiner who went to the members of the trade, and I think that they are now unanimous in asking that the commission forbid this practice.

Mr. BOISE. Do you not think that was proper, rather than

Mr. MURDOCK. Certainly, but in many of these cases that come to the commission the element of fraud is present, not always as manifest as in the case I have just cited, but it is there. Now, we took these cases, these applications, and they reached into many sections of the United States, and we have issued our complaints. The men against whom the complaints are issued, without any question or

objection, will come to the commission and consent that an order be issued against them to cease and desist this practice. I do not believe they will want a trial of the case. As a matter of fact, I think a great majority of the men if not all in the sponge trade are giad to get rid of the practice.

As you know, we have gone into commercial bribery, the paying of commissions to employees of customers by the manufacturer, jobber, or dealer.

Mr. COLVER. Secret commissions?

Mr. MURDOCK. They are, of course, secret commissions. Some of those cases are very clear. When a complaint issues, the respondent comes in immediately and says, "I consent to an order to cease that; let us get the practice out of the way.

Mr. STEELE. At that point, Mr. Murdock, the mere issuance of a complaint sometimes acts as a stigma upon the business, and I wondered whether or not any opportunity was given the respondent to present his side of the case before complaint actually issues.

Mr. MURDOCK. Not before the commission.

Mr. STEELE. Or before any officer of the commission.

Mr. MURDOCK. Very frequently the examiner calls upon the prospective respondent. In the sponge case we went to all the respondents, all the dealers in sponges, and asked them what about it, and they said it was a vicious custom that had grown up in the trade, and they were glad to be ordered to quit it.

Now, similarly men come to the commission and consent to an order to cease and desist in commercial bribery cases, if the case is flat-footed and plain. But there are some cases that are very, very difficult. There is a twilight zone between what is a substantial bribe and what is a harmless gift. If we should issue a complaint against a man for giving a cigar secretly to the employee of a customer to get his trade, of course that would be absurd; two cigars, three cigars absurd, possibly a box; the gift of a bottle of whisky to secure trade in a wetter day than this might have been absurd. But there comes a time when you cross the twilight zone, and you get into a region where the secret commission is clearly bribery. The practice then is not trivial. In some instances it is very extensive. În some cases the money which it is alleged has secretly passed reaches very large sums. We have one case still on trial before the commission in which the allegation appears that one manufacturer in three years gave in commercial bribes secretly to the employees of his customers over a million dollars.

We have inquired into this practice in many trades; we have been into printer's ink, and, by the way, the manufacturer of ink came to us and asked us to go into it; we have been into commercial bribery in varnish, in soap, and we are now inquiring into the practice in dye

stuffs.

During the war, Mr. Herbert Hoover, as you know, had very broad power given to him by Congress. One day Mr. Hoover came to the commission and said he had one proposition that he could not handle very well. It was this, that the canners of vegetables, in delivering on their contracts with jobbers and wholesale grocers and others, were in some instances withholding the contract quota and selling spot on a rising market; that that was unfair and that he thought we could handle it. Now, at first blush it does look to be an unfair method of competition, but when you come to prove it legally as an unfair