Central to the successful achievement of substantially all the objectives envisioned by the creation of the Legal Adviser's position is the matter of recognizing that there are indeed criteria that should be utilized in weighing the pros and cons to the opening of an investigation, and adherence to such standards to the fullest extent possible. Accordingly, the former Director and the Legal Adviser for Screening and Planning began the use of the criteria set out above, and the criteria were adopted by the present Director and continue to serve to the present as guides for beginning new investigations. The value of careful selectivity of matters to investigate was graphically shown by certain statistics available at the end of Fiscal 1968. With considerably fewer personnel evaluating the complaints appearing in incoming correspondence, over 400 more such preliminary matters were disposed of than in the prior year, and 388 investigations were initiated compared with 666 in the prior year. This greater selectivity in turn permitted staff concentration on disposition of investigations, many started a number of years ago and which for a variety of reasons, had not been completed. On January 1, 1968 there were 1245 investigations pending in the Bureau. By the end of the following June the caseload had been reduced to 1076. It now appears that the caseload approaches manageable limits, the attainment of such goal being one that we realize has been of considerable concern to the Commission. Continued careful selection of matters to investigate will be required to maintain these caseload limits. PRELIMINARY INQUIRIES CONDUCTED AS AN ACCESSORY TO THE USE OF CRITERIA IN STARTING CASES Many complaint letters simply do not contain sufficient information to allow the formation of a judgment that a full investigation is warranted. Certain preliminary steps are now routinely taken by the Legal Adviser for Screening and Planning which provide some help. For example, if a complaint on its face seems to have some merit, and a scientific question is presented, the Chief of the Division of Scientific Opinions is requested to give his views as to the validity of the complaint and the seriousness of the practice. As another example, unless a possible proposed respondent has a recognizable name representing a sizeable operation, and a newly complained of practice appears questionable, a Dun and Bradstreet report is obtained in order to determine volume of business and location and size of the geographical area in which the possible proposed respondent does business. If it appears that an applicant may have a justifiable complaint but has not stated facts essential to a considered evaluation of the matter, we do not now hesitate at the Screening and Planning level, in acknowledging receipt of his complaint, to ask the applicant to furnish additional information. In a relatively few instances a decision as to whether a matter meets our criteria for investigation is not possible in the absence of a contact with the proposed respondent. The Bureau has, therefore, on occasion in carefully selected instances, written to possible proposed respondents for the purpose of clarifying what is ordinarily a simple, single point but critical to the question of whether an investigation should be opened. For example, a complaint was received from an official of the Columbus (Ohio) Milk Council stating that an advertisement published by The Cereal Institute in the Journal of the American Home Economics Association was deceptive in presenting a chart comparison of the nutrients in some other foods (including milk). Screening and Planning conferred with Division of Scientific Opinions. That Division was of the opinion that the advertising was misleading. However, the Division further advised, if the advertisement complained of appeared only in publications like the Journal of the American Home Economics Association, the likelihood of deception would be remote because subscribers are home economists, nutritionists, and others working in specialized fields who are knowledgeable in such matters. If, on the other hand, the comparison chart was appearing in publications having general readership, the Division said, its dissemination should be stopped. 829 Accordingly, we sent a letter to the Cereal Institute advising it that we were interested in determining whether its chart might be misrepresenting the comparison of nutrients, and asked to be furnished with a schedule of the publications in which the chart had been published in the past year. Whenever such a contact is made with a possible proposed respondent, it is particularly advised that the inquiry is not to be interpreted to mean that a formal investigation of its practices has been initiated. The above has been a confined reply to the Commission's directive of September 26, 1968. Because both the use of the criteria discussed and the limited making of preliminary contacts with possible proposed respondents, can so substantially contribute to the development of truly aggressive planning, the following additional thoughts with respect to the Bureau's planning, much of it constituting a broad outline of intent, are respectfully offered. Development of a planned program for the Bureau is based essentially on the following concepts: 1. A system for accumulating more comprehensive information concerning existing practices subject to regulation by the Commission. 2. Organization of such information in meaningful form. 3. Continuing evaluation of this incoming flow of information and of the Commission's pending workload, permitting 4. Selection of those areas of greater public interest to which the Commission should devote its limited resources. The logical first step is that of organizing the information presently available and now flowing in, by computerizing all such data. It is hoped that such computerizing can be started within the next 30 days. When a letter of complaint is received there will be extracted and fed into the bank a variety of data, such as the industry involved (Standard Industrial Classification), Census Bureau coding of categories of products within the industry, the practice involved, and the identity of the proposed respondent. From the date of receipt of the complaint, additional data will be fed into the bank, until final disposition of the matter. It will be possible to thus detect potential consumer problems, identify all information received during any desired period of time relating to any industry, product or practice, or combination thereof. This information can then be assigned to an attorney for preliminary evaluation. When it appears warranted he can build on this data, by developing important related factors, such as the economie magnitude of the problem, the type and number of consumers adversely affected, etc. He will then draft a report detailing the public interest factors, estimating the amount of manpower which would be required to effect correction and recommending the type of procedure which would seem to offer greatest promise of effective correction. Data will be available respecting the amount of manpower being expended on pending matters. The Commission can know, for example, how much time is being devoted to enforcement of its guidance program, or any one particular guide. Informed determinations will be possible, among the alternatives thus presented, as to what new projects should be initiated, and as to those pending, which might be abandoned or intensified, or a change in direction adopted. As rapidly as more information can be absorbed, to the extent of the limited capability of the computer equipment, our intelligence network will be materially expanded. The field offices will be encouraged to seek out and feed into the bank more intelligence about practices in their respective areas. We will initiate or increase our liaison with other government agencies and with consumer oriented groups in order to tap these sources fully. The Assistant General Counsel for Federal-State Cooperation will participate. The monitoring of advertising will be keyed in. As we have said, much of these conclusory remarks constitutes a broad outline of intent. Initial steps have been taken to implement our plans. At least several months must pass before the program can be in full operation but, given adequate support in personnel, our hopes are high that, with the fruition of these plans, the Commission's important mission to protect consumers and businessmen from the effects of deceptive practices will have taken a giant step forward. MEMORANDUM NOVEMBER 6, 1968. Subject: The need and basis for the bureaus to plan by specific objectives along industry and product lines. To: Charles A. Sweeny Program Review Officer From: John J. Hurley, Economist PROBLEM AND APPROACH What should each bureau and division in the Commission be doing and how much? Carefully worked out indusrty-oriented objectives by the bureaus could narrow the non-competitive and deceptive target areas and improve program planning. Accordingly, this memorandum deals with why each bureau and division should develop specific objectives-that include aims in primary product lines for use as guides to bureau decisions on what new investigations to start and on whether to move or displace old investigations. This report will also apply the described goal-getting process to planning a deceptive pracitces project that encompasses the nation's largest national advertisers. COMMISSION AND BUREAU OBJECTIVES It is not a fundamental objective of the Commission to propose having so many attorneys in restraint of trade work and so many inspectors policing wool and fur labeling. The real Commission objectives are maintaining open and fair competition in the economy's unregulated sectors, and providing maximum consumer protection in the market place. Within these basic policy objectives the Commismision has a number of "misssions", including the dismantlement of unlawful mergers and the prevention of unfair and deceptive practices. To think out more specific objectives at the bureau (and division) level is not an easy job. Nevertheless, the bureaus should be requested to do so and to prepare formalized statements of their missions as a means to give an overall sense of purpose to what they are doing. Generally, a bureau's objective should be an explicit guide to action that considers subprogram costs and relates to the broader Commission objectives. The statement of bureau objectives should. of course, go beyond paraphrasing the relevant laws. The next step requires that the bureau, in consultation with the divisions, define the range of activities on an industry basis which would be used to achieve the bureau objectives. 1 USES OF BUREAU OBJECTIVES 1 What tangible results could the enforcement bureaus come up with by giving some thought and time to clarifying and stating their objectives? There can be two gains from this effort: First, the most significant use of objectives would be in bureau planning. since a hierarchy of objectives-bureau and division aims that include goals for strengthening competition in key industries-can facilitate analyzing and choosing alternative courses of action (which is the essence of planning). The process of exploring alternative subprograms to reach bureau objectives cover three main issues-how important is the proposed project, what will it cost, and what good will it do. Second, efficiency in Commission output involves producing a desired result 1 There are objectives within objectives in the process of deriving specific aims from broader goals. See Granger, The Hierarchy of Objectives, 42 Harv. Bus. Rev. 63 (May/June, 1964). at the lowest cost. Thus, we cannot consider the question of Commission efficiency without taking into account a range of objectives. Specific objectives can tell us in what new directions Commission activities should be moving. For example, the Bureau of Restraint of Trade could aim to block mergers in the high-profit drug industry which give large firms advertising and promotional advantages over smaller competitors. OBJECTIVES AND PLANNING The Commission's basic policy objective is to discover and correct those trade practices that, if continued, can be expected to injure or destroy competition or otherwise harm the public. The most effective way to reach this objective is to ascertain such practices in their incipiency and stop them. This action requires a searching out by the bureaus of those industries, product lines, and areas in the economy in which competition is most seriously threatened, and then to allocate manpower and assign priorities for the attention of appropriate divisions. Assigning priorities depends generally on the bureau's use of such quantitative criteria as the relative significance of the affected industry to the economy and the size and number of firms involved. Then, in the second instance, qualitative and subjective criteria would be applied, such as the relative severity of the trade practice being used and the danger to public health or safety of the practice. In this planning approach the bureaus' own internal investigations and studies based on Commission public hearings, Congressional reports, the economic bureau's analyses, and (secondarily) data supplied by complaining parties-would identify priority industries and product markets which should receive attention. After these industries are pinpointed, the bureau would then move into the area of case selection. However, under existing bureau procedures for starting investigations, the cart (case selection) is usually put before the horse (industry selection). What sometimes passes as an "industry approach" at the bureau level actually amounts to an afterthought in which several firms doing the same unlawful practice are added to the case so as not to single out one respondent unfairly for prosecution. APPLYING THE PLANNING CONCEPT To illustrate planning by objectives in an industry framework, we can take the deceptive practices field and set as a main bureau objective the elimination of false advertising and marketing deceptions in the primary product lines produced by the nation's 100 largest advertisers. The premise of this approach is that large corporations with substantial advertising power can work greater injury to competition and to consumers than their smaller rivals. Another valid hypothesis of the plan is that heavy advertising encourages high economic concentration in mass-produced consumer goods, and by deterring new competition permits higher prices and profits." The foundation for planning a new project in the deceptive practices field is provided in Table 1, which shows the advertising expenditures of the 100 largest advertisers during the first six months of 1968. These advertisers will probably spend over $3 billion on advertising in 1968 or about one-fifth of the $17 billion total advertising outlays. On this basis, roughly 20 percent of the Commission's resources in deceptive practices might be assigned to the surveillance and investigation of deceptives employed by these large corporations. Doyle, Economic Aspects of Advertising: A Survey, The Economic Journal at 570 (September, 1968). In the cigarette industry the domination of a few large firms has been preserved largely because of the power of advertising. The Statistical Abstract of the United States (1968) tabulates estimated advertising expenditure by years. |