Various vegetable oil, vegetable shortening and margarine products are being promoted to the consumer as good sources of polyunsaturated fats. Many are being advertised as being high, higher and highest in polyunsaturated fats and low, lower and lowest in saturated fat. Food fats and oils contain three kinds of fatty acids, saturated, monounsaturated and polyunsaturated. A single food may, and usually does, contain varying amounts of all three kinds of fatty acids. Liquid vegetable oils which have been hydrogenated or "hardened" for use in margarine and shortening manufacture have lost part of their original polyunsaturated fat content. Hydrogenation chemically converts some of the polyunsaturated fat into saturated fat, the degree of conversion depending upon the extent of the hydrogenation and the particular process employed. Since margarine and other vegetable oil products vary in their content of each of the three kinds of flatty acids, and in other respects which may be of health significance, depending not only upon the basic ingredients used but also upon the method of manufacture of the finished product, neither the consumer nor most physicians are presently in a position to make perceptive selections.

Neither current labeling nor current advertising of this product category provides sufficient information to enable consumers or physicians to make a knowledgeable choice on the basis of relative content of polyunsaturated fats and saturated fats from among the products on the market. There have been a number of complaints from consumers and physicians about the failure of labeling and advertising to provide this needed information.

By memorandum of September 28, 1966, the Division of Scientific Opinions suggested, and by memorandum of October 10, 1966, the Commission authorized this Division to implement its recommendation that companies, which voluntarily promote their oils, fats and fatty foods as being high in polyunsaturated fatty acids, state in advertising how much polyunsaturated, monounsaturated and saturated fat are present in the product. The Division of Scientific Opinions had stated in this memorandum that if the health value of substitution of polyunsaturated for saturated fatty acids in the diet is as great as many physicians believe it to be, the deception inherent in inadequate declaration of the ingredients in such products may be material. By Commission memorandum of January 13, 1967, the Bureau of Deceptive Practices was relieved of the duty of submitting further interim reports and the then Bureau Director suspended further work on this project. It is recommended that this project be renewed. Manpower Requirements.-It is our intention to recommend a trade regulation rule proceeding as a proposed solution to the problem presently raised by vegetable and margarine advertising. Prior to such staff recommendation, liaison with the Food and Drug Administration, and with the Food and Nutrition Board of the National Research Council is deemed desirable to develop a common enforceable scientific policy in this area. Consultation with the Council on Foods and Nutrition of the American Medical Association may also be advisable. It is estimated that one man-year of a medical officer and one man-year of nonmedical scientist would be required to undertake and see this project to fruition. 2. Special Dietary Foods

Pending the completion of the Food and Drug Administration's hearing on proposed regulations for foods for special dietary use, which have been actively under way for almost one year, we have been relatively inactive in this field. A final decision by FDA is anticipated during fiscal 1970 so that a project undertaking in this category by FTC can be programmed for fiscal 1971.

Manpower Requirements.-It is estimated that this project would require one man year of a medical officer's time.

3. Artificial Sweeteners

A major new project which should be started because it involves a health question is a re-evaluation of advertising for all low-calorie drinks containing artificial sweeteners. In the light of new scientific evidence of the potential hazard of artificial sweeteners, the Food and Drug Administration has recently initiated major labeling changes.

In 1967 industry was reported to have spent over $4,500,000 to advertise and promote artificial sweeteners, while the public spent more than $47,000,000 in their purchase.

Manpower Requirements.-It is estimated that this project would require one half man year of a medical officer's time.

C. Miscellaneous Product and Device Advertising Other Than Foods, Drugs, Devices and Cosmetics

There are a large number of products and devices that can be grouped together in a miscellaneous category. This category includes cooking utensils, detergents, soaps, household and other cleaning agents, bleach dispensers, silver cleaners, paint removers, plastic cements, soil conditioners, fertilizers, silage treatments, window cleaners, solvents employed in coin-operated machines and water sterilizers.

An evaluation of the advertising of these products and devices from the standpoint of their efficacy and safety is another project for 1971.

Manpower Requirements. It is estimated that this project would require one half man year of a medical officer's time and one and one half man years of a non-medical scientist's time.

C. Miscellaneous product and device advertising (other than foods, drugs, devices and cosmetics).......

Subtotal of estimated manpower needs for fiscal 1971.

Combined totals of I and II...

MEMORANDUM

JUNE 10, 1969.

Subject: Budget Plans of the Bureau of Restraint of Trade for Fiscal 1971. To: Commission.

From: James M. Nicholson.

The comments made below on the budget plans of the Bureau of Restraint of Trade and the Division of Mergers should not be interpreted as singling out either of these units for special criticism. On the contrary, the care and thoroughness of the planning of these units exceed that of most others.

My comments are meant to apply to all budget plans which have been submitted, and I request that this memorandum be distributed to all operating units as illustrative of the kind of analysis I would like to see.

I. BUREAU OF RESTRAINT OF TRADE

In the Chairman's directive to Bureau Directors of March 20, 1969 he instructed the Directors to: ". . . consolidate and evaluate [emphasis in original] the division proposals."

In the report of the Bureau of Restraint of Trade I find no more than restatements of the responses of each of the divisions (perhaps a consolidation), but no evaluations. Just as the responsibility of the Commission is to evaluate the relative merits of the budget requests of the various bureaus and make an overall allocation of funds, the responsibility of each Bureau Director is to make similar judgments and choices within the operating divisions of his Bureau. If the Bureau hierarchy has any justification, it must be to relate the efforts of each of its divisions to over-all Bureau objectives.

At the very least, the Bureau Director has the responsibility to evaluate the proposals of each division, not as autonomous units (and even that has not been done here), but as an integral part of the over-all Bureau effort. To my knowledge this has never been done. Certainly it has not been done for fiscal 1971. I, for one, am unwilling to consider a proposal like the one made last year when each of the major operating divisions within the Bureau were given almost identical "goodies" in terms of new men (8, 8, 8 and 7). This year the formula seems to be a 20% increase for everybody. Much more should be done by the Bureau Director to formulate a rational allocation of resources.

II. DIVISION OF MERGERS

I recognize that the future workload of this Division is uniquely difficult to predict. Mergers may occur or become imminent during the fiscal year which require an immediate challenge and a suddent shift in priorities. This problem, notwithstanding, this Division should provide a substantially improved Program Plan for consideration by its Bureau and by the Commission.

PENDING MATTERS

I am well aware that the Division must project and make educated guesses in preparing estimates and evaluations for fiscal 1971-a twelve-month period beginning more than 12 months from now. Nevertheless, some of the Division's present commitments are likely to extend into fiscal 1971 and these may require an allocation of part of the funds for fiscal 1971. The Division plan, in my judgment, has not adequately taken into account current matters. Existing commitments should be treated separately from future commitments because the Division knows (or should know) with far more authority the budgetary requirements for the former.

There is still another reason for the Division to discuss in detail those projects likely to be concluded during fiscal 1970. The Commission's Budget for that year has not yet been approved by the Congress, and the Commission retains under Reorganization Plan 8 the authority to reallocate whatever appropriations are eventually made. In my opinion, this is one of the Commission's most significant tools. The preparation of the 1971 fiscal year budget happens to be coincident with the actual fiscal appropriation for the current year; it can, therefore, provide the Commission with the information necessary to make such a reallocation. In reporting on pending matters, the Division should start with current litigation. Recognizing the Commission's separation from the staff in pending adjudicative matters, the staff should designate the cases by some unrelated

number (without disclosing name or actual docket number), and give the following information:

(a) Industry involved;

(b) Volume of sales of companies involved;

(c) Man-year investment to date (using 1800 hours as one man-year, but not attaching any dollar value to such man-years);

(d) Estimated man-years to complete the Division's responsibility in the matter, and the fiscal year in which such completion is estimated. If it is estimated that the parties may accept the decision of the hearing examiner or that a settlement might be reached without appeal to the Commission, it is possible that alternative estimates might be necessary here (recognizing always that these figures are estimates and may be altered substantially); (e) An estimate of the likelihood of an appeal to the courts, assuming there is some substantial basis for making such an estimate. Next, with respect to pending complaints not yet in litigation the Division should report the same information suggested on adjudicative matters, but now including the names of the parties. In addition, the Division should report its evaluation of the estimated final dispositions, including what it expects to be accomplished, and give its comments on the following two points:

(a) Whether the case involves any novel approach or theory and, if so, what;

(b) How this case may be related to any industrywide approach.

PROSPECTIVE COMMITMENTS

On the subject of prospective commitments the Bureau Director in his report states:

"A substantially complete critical survey of the universe of mergers (at least of the larger mergers) over a given time period, is accomplished in the conduct of Section 7 enforcement, providing a readily useable basis for comparative evaluation of competitive impact in different industries and marketing environments related to particular acquisitions, mergers or merger trends."

I am not sure I know what this means. Does it mean there resides somewhere in the building an actual survey of all merger activities prepared in summary form? If so, the Commission should have it. Does it mean that studies conducted by the Division and the Bureau of Economics in individual matters constitute, separately or cumulatively, the “. . . readily useable basis for comparative evaluation . . ."? Or does "... the conduct of Section 7 enforcement . . ." simply refer to the aggregate of testimony and documents introduced into evidence in all Section 7 hearings . . .” of a given time period. . ."? Such a survey-depending on what is meant by the word-could be useful to the Commission in exercising its reallocation discretion. The Division itself could use such a survey in determining its future commitments.

Considerably more detail should be supplied about prospective preliminary investigations. In 1968 there were 1,895 mergers and 162 joint ventures examined on a preliminary basis. In the 1970 Budget presented to Congress the estimates were 2,100 and 195 for 1969, and the estimates for fiscal year 1970 were 2,200 and 190. We now know what actually happened in fiscal year 1969 (except for the final 30 days); therefore, an accurate final estimate can be made for that year, and in light of the last quarter's experience in 1969, a more accurate estimate can be made for 1970. On the basis of this actual experience and perhaps the "survey" referred to above, a tighter estimate for 1971 should be made. In other words, based upon the man-year experience of the Division for FY 1968 and FY 1969, a man-year estimate for FY 1970 and FY 1971 should be made. It would be helpful to the Commission if the Division could also furnish criteria used in determining whether to make a preliminary investigation, and any changes in those criteria necessitated by the recent increase in the pace of the merger movement.

The responsibility for pre-merger notification, which the Commission has given this Division during FY 1969, was not taken into consideration in establishing the budget for FY 1970. It should, however, be a factor in projecting the budget of the Division for FY 1971 because the man-year commitment for this project may affect the figures for preliminary investigations and formal investigations. Therefore, some estimates should be made for the man-years required for this effort in FY 1970 and FY 1971, based, if possible, on any experience in

the short period of FY 1969 when these requirements were in effect. Furthermore, to assist the Commission in making any reallocation of the 1970 appropriations which may be required, the Division should indicate any downward or upward adjustments made in the estimate of preliminary and formal investigations as a result of the pre-notification procedure.

In the area of formal investigations I must defer to the inquiries made by Commissioner Jones in her memorandum of May 27, 1969. In reviewing the report of the Division, I draw the following conclusions, which should be corrected if in error:

(a) Priority 1.-(Grocery products) There are nine pending investigations of which four will result in a complaint recommendation. These will take an undetermined amount of time in FY 1970 and will require five man-years in FY 1971 (with moderate increases in FY 1972 and 1973). If this projection contemplates more matters than these, then how many and how was the five man-year figure reached?

(b) Priority 2.-(Auto Parts) There are 13 pending investigations which will probably result in at least three recommendations of complaint. Again, five attorneys for FY 1971 are required. The same questions put with respect to Priority 1 apply here.

(c) Priority 3.—(Cement) There are 12 pending investigations which will result in at least one recommendation of complaint. Again the magic five which again raises the questions raised above.

(d) Priority 4.-(Special Projects) Pre-merger notification, the conglomerate merger study, and others likely to arise will require at least three man-years in FY 1971. If the Commission decides to take any action with respect to the concentrated industry problem, it would seem to me that this is too modest, not to mention whatever other special projects might arise. Since the Commission has in recent times imposed a number of special and unanticipated burdens on this Division, it might be helpful if the Division could enlighten us on the impact of these special chores on scheduled efforts.

(e) Priority 5.—(Commercial and Industrial Equipment, Machinery and Supplies) There are 13 pending investigations and four likely complaint recommendations. It is estimated that these (plus two pending adjudicative) will take four man-years in the period FY 1970–1973. Although I approve the longer estimate. I can see no relation to the figures cited above and therefore request the further analysis suggested with respect to Priority 1.

(f) Priority 6.-(Metals, Minerals and Mining) We have seven investigations with considerable activity and more is in offering, requiring an estimated four man-years during FY 1971. It is interesting to note that the Kennecott litigation alone is taking three man-years. Without discussing that matter, I think it would be helpful if the staff would treat in their budget submission the relative times for litigation of different types of matters. In light of the Bureau of Economics' memorandum and analysis in Sterling on the general operating record of the Commission, as contrasted with Justice, I wonder if the resource problems of this Division has not been a larger problem than the Commission has been aware.