consist of checking the labeling, invoicing, and advertising practices of the inspected firms, together with the sufficiency of required fiber content and other records required to be maintained by them. Reports of the inspections are submitted to Washington headquarters. Minor deficiencies are handled by verbal assurances to the investigator at the time of the inspection that corrections will be made or, in certain instances, the inspected firm is requested to put its assurance in writing and submit it to Washington with corrected sample labels or invoices. In those cases where there are serious deficiencies due possibly to intention or negligence, or in the case of deficiencies which have been called to the inspected firm's attention on several occasions without correction being made, it is the practice to request a formal investigation number looking forward to a Commission cease and desist order or an affidavit of voluntary compliance. The Bureau of Textiles and Furs also has several examiners who scan newspaper and periodical advertising received from throughout the country noting advertisements which are in violation of the Textile, Fur or Federal Trade Commission Acts in regard to textile and fur products. The efficacy of the Bureau's inspection work is demonstrated when we consider that during the first three quarters of fiscal 1969 of 189 formal investigations initiated 140 of these resulted from the inspection program. DEAR MR. BUFFINGTON: First let me say that I appreciate very much the cordiality with which we were received on Friday, and the very cooperative way in which you and your colleagues went about making information available to us. I will try to set out briefly in this letter the categories of information that it was agreed could be made available to us without inordinate inconvenience to the staff of the Commission. We request at this time that the following data be supplied: 1. A statistical breakdown of "formal" enforcement activities of the FTC by year for each of the last 10 years. Information furnished would include data with respect to complaints filed and pending, complaints dismissed prior to final action (by settlement or otherwise), cease and desist orders obtained, etc. It is understood that the information will be furnished in the finest categories possible; for example, it would be most helpful in the antimonopoly enforcement area to have separate data for section 7 enforcement, and for each relevant subsection of the Robinson-Patman Act (i.e. 2(a), 2(c), 2(d), 2(e), and 2(f)). 2. A statistical breakdown, similar to that described under Paragraph 1, of FTC "informal" compliance activities (e.g. advisory opinions, trade regulation rules, etc.) by year for each of the past 10 years. 3. Copies of the "Workload and Manpower Quarterly Report" for each quarter for each of the past 4 years. 4. To the extent available, an indication of dollars spent by year by each Bureau and Division of the FTC for the past 12 years. 5. A copy of the transcript of testimony of the FTC Consumer Protection hearings, held during November and December of 1968. It is understood that we will review this transcript and then discuss with you an arrangement whereby a member of our staff may have access to the accumulated written submissions and exhibits compiled during those hearings. 6. Copies of the 1948 agreement, and the subsequent exchange of letters in 1962 and 1963, summarizing coordination arrangements between the Antitrust Division of the Department of Justice and the FTC in areas of concurrent antitrust enforcement. 7. A compilation of data for the present year and the past two years showing the following information with respect to each applicant to the FTC who accepted an offer of employment on the legal staff, or received and declined an offer: (a) home state (b) law school affiliation (c) rough estimate of class standing, and (d) law school aptitude score (when available). 8. To the extent available, similar information will be furnished for the current year and each of the past two years with respect to applicants who did not receive offers. 9. A copy of the standard rating form used by interviewers in summarizing relevant data on law school students applying for legal positions with the FTC. 10. An organizational chart for the FTC showing the number of people in each Bureau and Division. 11. A brief description of techniques used to detect violations in each substantive area within the jurisdiction of the FTC, e.g., textile and fur labeling, deceptive practices, mergers, price discrimination, etc. 12. Statistical analysis of the duration of formal enforcement proceedings in each substantive area within the jurisdiction of the FTC for a series of recent years (if possible, for cases filed since 1961). 13. Instructions to the staff concerning governing criteria to open or close cases, and concerning selection of the appropriate enforcement procedures (e.g. formal proceeding, advisory opinion, etc.)-largely included in the Administration Manual. 14. Any reports or evaluative materials showing the extent to which states have established or expanded consumer protection programs in the last 10 years. Please send the data requested to Roberɩ Skitol at the N.Y.U. Law Review office, N.Y.U. Law School, 249 Sullivan Street, New York, New York 10002. We would appreciate it if you would send information along as it becomes available rather than await compilation of all requested data. In the future, when additional information is requested, we understand that Mr. Skitol is to communicate directly with John Delany. Again, many thanks for your cooperation. Very truly yours, ROBERT PITOFSKY. ITEM NO. 11 (RESTRAINT OF TRADE) JUNE 30, 1969. To: John A. Delaney, Director, Office of Administration. Attached herewith are brief descriptions of techniques used to detect violations in each of the Division's areas of responsibility, as requested by Robert Pitofsky, Esq. in Item 11 of his letter of June 9, 1969. Respectfully submitted, CECIL G. MILES, Director, Bureau of Restraint of Trade. SECTION 5 FEDERAL TRADE COMMISSION ACT (DIVISION OF GENERAL TRADE RESTRAINTS) The Division of General Trade Restraints utilizes several methods in determining the existence of possible violations of Section 5 of the Federal Trade Commission Act. First: This Division regularly receives letters of complaint from Congressmen, other government agencies, corporations and private businessmen and citizens concerning alleged illegalities. Division attorneys daily review these complaints to determine whether any violations of Section 5 of the FTC Act exist, and what if anything, can be done about such violations in view of prior commitment of money and manpower. Second: Attorneys in this Division regularly scrutinize various trade publications such as the Kipplinger Letter; Oil Daily, Wall Street Journal; Journal of Commerce; Barron's; etc., as well as the New York Times and various other newspaper publications and some of the better known magazines such as Fortune. The Division also receives copies of magazines or periodicals published by trade associations and distributed primarily to their members. Also, the attor neys in this Division attend various seminars where information with respect to different industries is disseminated. In addition, we are in regular receipt of economic reports from various sources, including the Federal Government, on different industries. As a result of the foregoing the Division develops a rather high degree in expertise in being able to become knowledgeable as to the possibility of violations of the statutes administered by the Federal Trade Commission. ROBINSON-PATMAN ACT (DIVISION OF DISCRIMINATORY PRACTICES) Most of the complants charging acts or parctices which may violate the Robinson-Patman Act are initially brought to the Commission's attention by those individuals and firms adversely affected by the pricing practice, i.e., injured business competitors and dealers or distributors of the party against whom the complaint was made. Other sources include members of Congress, other federal state or local government agencies, and trade associations. Such complaints are assigned to staff counsel for screening purposes and as an incident to this process, or during the course of a formal investigation, staff counsel may detect other violations of the Act. In addition, we have our own program to detect and identify possible violations of the Act. Members of the staff regularly monitor trade journals, financial newspapers and magazines, and newspapers of general circulation as well as other publications for information indicating possible violations. Also those members of the staff who are specialists in specific industries maintain a constant surveillance over those industries. The Commission also utilizes the formal procedures of investigational hearings and reports or answers furnished in compliance with Section 6(b) orders as investigational aids in determining the existence of possible law violations. MERGERS AND ACQUISITIONS (DIVISION OF MERGERS) There are two sources of information used by this Division for detecting violations of Section 7 of the Clayton Act-the public press, primarily The Wall Street Journal, and complaints from the public and competitors about particular mergers. More than 95 percent of our original information concerning mergers comes to our attention from reports in The Wall Street Journal, other newspapers and trade publications. Such publications are analyzed on a daily basis and certain planned or announced mergers are selected for investigation after checking through liaison arrangements with the Department of Justice that the matter will be handled by the Commission. Once it has been decided that a merger is to be handled by the staff of the FTC, the usual procedure is to initiate an investigation and to send letters requesting comprehensive information from the acquiring and acquired corporations. In some few instances, compulsory process is used, instead of using letter requests for voluntary submission of information. Compulsory process consists of investigational subpoenas duces tecum, orders to file Section 6(b) Special Reports and on occasion investigational subpoenas ad testificandum, wherein witnesses testify at closed investigational hearings. The information obtained from the merging corporations is analyzed and attorneys from this Division confer with competitors and any other persons in or outside the industry who may have pertinent knowledge concerning the industry and the impact of the merger therein. Universe market data is developed using any available Bureau of the Census information or other public or industry recognized survey data showing total industry sales from which market shares may be derived. All of the data obtained is carefully analyzed as the investigation develops in order to determine if Section 7 has, or has not, been violated. If the information indicates a violation, a draft of complaint with a supporting memorandum is submitted to the Commission for approval and issuance. If no violation is indicated, a memorandum is prepared recommending the Commission close the investigation. During the past three years, an average of nine major proposed mergers annually have been called off after the initiation of prompt investigations. The staff of the Division of Mergers is unique within the operation of the Commission in that it does its own investigating of merger cases, in addition to handling the preparation of the complaint, negotiations of settlements and any ensuing litigation resulting from such investigations. The staff of the Division of Mergers rarely utilizes the Field Offices of the Commission for the purpose of investigating merger matters. SECURING AND MAINTENANCE OF COMPLIANCE WITH ALL FINAL ORDERS (COMPLIANCE DIVISION, BUREAU OF RESTRAINT OF TRADE) The Compliance Division of the Bureau of Restraint of Trade assumes responsibility for the procurement and maintenance of compliance with all final orders issued by the Commission affecting antimonopolistic and trade restraining practices having genesis in Section 5 of the Commission Act, and all sections of the Clayton Act, as amended over which the Commission has jurisdiction. Keeping in mind that some techniques are more adaptable to particular types of order compliance than are others, the following are the most prevalent procedures which we utilize to detect order violations: (a) Requiring a covered respondent to file a supplemental report of compli ance responding in detail to specific areas of inquiry: e.g., all mergers entered into in a prior year, if applicable to a provision of an order prohibiting acquisitions without Commission approval (Section 7); all meetings attended with competitors during prior year (Section 5 price fixing order); names of customers granted maximum advertising allowances or discounts last year (Section 2(a) or (d) of Clayton Act, as amended). (b) A variation of (a) above is utilized through correspondence if, for considered reasons, a supplemental report is not deemed necessary, as, for example, if a question of order coverage exists. (c) Investigational hearings accompanied by compulsory process (several of our civil penalty cases were developed by personnel of this Division through utilization of this technique). (d) Use of Section 6 questionnaires. We have found this device to be particularly adaptable to Section 7 and 2(d) type inquiries. (e) Interviews in the field by Compliance Division personnel if the matter indicates the advisability of our getting quick information through this medium. (f) Referral to Bureau of Field Operations of spot checks or protracted investigations involving interviews with a multiplicity of industry factors at various functional levels. An illustration of this type of referral would be an order prohibiting dealer coercion. (g) An extensive use of correspondence to develop general inquiries or complaints which we receive on a periodic basis. A variation of this technique also involves our consistent use of the telephone to talk to informants or trade sources. (h) At times, check of certain data in possession of other governmental agencies. (i) At times, referrals from other governmental agencies, both State and Federal. (j) Examination of trade periodicals, particularly with respect to merger activity which may involve a covered respondent. (k) Referrals from other Divisions of the Commission which develop information which in their opinion bear upon compliance with an order. (1) Complaints from competitors, members of Congress, and the public. (m) The insertion of affirmative provisions in an order requiring respondent to maintain certain types of records or to assume a particular type of burden in the event that a particular course of action is pursued. LETTER TO PROFESSOR ROBERT PITOFSKY FROM JOHN A. DELANEY, DATED JULY 29, 1969, TRANSMITTING MATERIAL WITH RELATION TO ADVISORY OPINIONS AND TRADE REGULATION RULES JULY 29, 1969. PROF. ROBERT PITOFSKY, Vanderbilt Hall, New York University Law School, DEAR PROFESSOR PITOFSKY: The enclosed materials are being submitted to you in response to paragraph 2 of your letter of June 9, 1969. As Mr. Yarley has mentioned in his memorandum to Mr. Day dated July 17, 1969, we are unable to fulfill the 10-year requirement in the furnishing of statistics in those areas since the first trade regulation rule was not adopted until FY 1964. Information is being submitted on trade practice rules only since FY 1962 (see Mr. Hall's memorandum dated July 14, 1969); the first advisory opinions were issued in that same fiscal year when the Division of Advisory Opinions was established. Mr. Helm has also submitted a paper entitled "The Use of Advisory Opinions and Voluntary Compliance Procedures in Dealing with the Federal Trade Commission," which he submitted at the Proceedings of the Seventh Annual Corporate Counsel Institute, held at Northwestern University School of Law on October 10 and 11, 1968. Letter dated June 9, 1969, from Robert Pitofsky. The following information is submitted in response to item #2 of Mr. Pitofsky's letter of June 9, 1969, addressed to General Counsel Buffington. We are unable to fulfill the 10 year requirement since the first trade rgulation rule was not adopted until FY 1964. There are presently 13 trade regulation rules in effect, adopted as follows: Fiscal year 1964 Advertising and Labeling Of Sleeping Bags As To Size Deceptive Use Of "Leakproof," "Guaranteed Leakproof," Etc., As Descriptive Of Dry Cell Batteries Deception As To Nonprismatic And Partially Prismatic Instruments Being Prismatic Binoculars Misbranding And Deception As To Leather Content of Waist Belts Fiscal year 1965 Deceptive Advertising and Labeling as to Size of Tablecloths and Related Products Deceptive Advertising and Labeling of Previously Used Lubricating Oil Misuse of "Automatic" or Terms of Similar Import as Descriptive of Household Electric Sewing Machines Fiscal year 1966 Deceptive advertising as to sizes of viewable pictures shown by television receiving sets. |