All of these characteristics have been considered by the Commission and the courts in the more recent cases and it is becoming increasingly clear that the bureau and its field offices, if they are to adequately perform the heavy support role assigned to them, must be prepared to meet these new investigative demands by developing appropriate programs to instruct its field office personnel in the techniques for gathering and analyzing data of this character and also in investigating and assessing the public interest in such cases.

By way of illustrating the magnitude of the task that will be facing the Bureau of Field Operations and the field offices in the next few years, the Bureau of Restraint of Trade's budget proposal for Fiscal 1971 contemplates a number of investigations in some of the country's largest and most highly concentrated industries, including steel, chemicals, breakfast cereals, office copying machines, gasoline, auto parts, retail food, soft drinks, television networks, and the like. Investigations of this character will obviously require the highest order of skill and technical ability the field offices can provide.

We support, of course, the suggestion that the field offices should have greater autonomy and exercise their initiative without intensive long distance supervi sion, in answering businessmen's questions, in handling consumers' complaints or requests for aid, in working together with State enforcement agencies and local agencies and media to identify the problems and solutions to them, and ultimately in investigating and disposing of the violations going on in the backyards of the field offices. We propose to gear up the field offices to take on the full responsibilities the greater autonomy in such matters would place upon the field office staffs.

It is expected that the Bureau of Field Operations will have a workload of some 2300 cases during Fiscal 1971. The Bureau of Deceptive Practices is requesting 89 new attorneys for Fiscal 1971 in the areas that generate work for the field and this is more than 153% of the 58 average attorneys in this area during fiscal 1969. With this increase in manpower it anticipates that it will expand the cases initiated for investigation to 1500 cases. The Bureau of Restraint of Trade is outlining proposed programs and projects, which if effectuated would entail a tremendous expansion in its workload, particularly in those areas that likewise generate the most work for the field offices. From these areas it is anticipated that there will be some 300 cases initiated for investigation. This makes a possible 1800 new cases which may be referred to the field together with a backlog in the field which we estimate will have been cut down to some 500 matters, giving the field offices a possible total workload of some 2300 cases.

In the light of all of the foregoing, it is estimated that the Bureau of Field Operations will require an increase of 100% in the number of field attorneys for Fiscal 1971 over those estimated for 1970, or an increase of 190 attorney positions for a total of 380. A steno-clerical force of 152 would be required to service the 380 attorneys, or an increase of 55 over the number proposed for 1970, making a total of 532 positions for the field offices. Headquarters staff of the Bureau of Field Operations would remain at 6 positions.

MEMORANDUM

JUNE 20, 1969.

Subject: Review of allocations of funds for fiscal 1970 and basic plans for fiscal 1971.

To: Commission.

From: General Counsel.

The Commission's directive of June 4, 1969, concerning preliminary planning proposals, requires units "to not only prepare justifications for requests and allocations of funds for Fiscal 1971 but also to cover allocations of funds . . . for fiscal 1970." This requirement is particularly appropriate for the Office of General Counsel. It permits up-to-date comment on the proposal for Office funding now pending before the Congress; and its multi-year planning approach enables the Office to project proposals consonant with the recently ordered reorganization of the Office.

The pending proposal for Office funding in fiscal 1970, aside from the fact that it is based upon an Office structure no longer relevant, is inadequate in the following ways: It focuses exclusively upon Office response to demands for services. It is affirmative only in the fact that it anticipates continuance or an increase in demand for the same services the Office has performed in the past. It does not recognize the fact that while this Office is first and foremost a service organization, it, nevertheless, should and must, propose initiation of projects to further the overall goals of the Commission.

The two-year planning proposal outlined below is an Office proposal as opposed to a collection of proposals by the various administrative units within the Office. It is in keeping with the Commission's purpose for ordering Office reorganization. The Office is to be a cohesive unit of generalists, each of whom is ready to immediately specialize, or specialize after a minimum of training, in any area of the Office's mission. While, for purposes of administration, there are three continuing offices functioning under the direct supervision of the General Counsel (Litigation, Legal Services and Legislation/Federal-State Cooperation), the professional complement of these units will vary throughout the year as Commission demands require.

Thus, the planning proposal calls for a fixed commitment only in regard to the assignment of attorneys to the Office and avoids fixed commitments to units in the interest of maintaining a continuing reevaluation of projects in the light of initial results and confrontation with unanticipated demands.

I. PROJECTS

In addition to meeting Commission demands for legal advice and representation before the courts, as described infra, the Office intends to commence in fiscal 1970 several projects meant to affirmatively advance the overall goals of the Commission. None of the projects is outlined in the funding proposal presently under review by the Congress.

1. The drafting of a legal procedure which will prevent commission infringements of constitutional rights in consumer credit protection act investigations

It is understood that the Commission's Truth in Lending section antcipates directing the bulk of its investigative effort at small finance companies, the ghetto “easy credit" retailers, and the readily movable credit offerors. In view of the per se nature of the statute's provisions, it is reasonable to expect that a great majority of the matters will be handled through assurances of voluntary compliance and consent orders. In neither of these procedures does a proposed respondent admit his guilt. However, under the Consumer Credit Protection Act, the signing of an assurance of voluntary compliance or consent order places an individual in a very vulnerable position regarding the criminal provisions of the Act.

Section 112 of the Act calls for imprisonment and/or fine in the case of willful and knowing violation of the statute's provisions or any regulation issued thereunder. It would appear, therefore, that in many instances violation of the provisions of a voluntary assurance or consent order would establish a prima facie case for criminal prosecution.

It is not unreasonable to anticipate in such cases defenses based upon alleged infringements of basic Fifth Amendment rights. Approximately two-thirds of the personnel allocated to enforcement of the new statute will be non-lawyers stationed in the field to examine credit practices of individual businesses. Accordingly, he Office intends to develop a basic procedure for Commission employees charged with enforcement of the new statute which will guarantee against unwitting infringements of basic rights.

The project would commence immediately after Commission approval and would be completed by September 1, 1969, if not sooner.

2. Expansion of office efforts on the Federal-State Cooperation project

Personnel assigned to the Federal-State Cooperation project since its inception in October 1965 have numbered but one attorney and one clerk-stenographer. The return on this investment, in benefits to the Commission and to the public, has been prodigious. Through contact with state administrators of deceptive and unfair practice laws, and conferences with legislators and prospective administrators in states not having such laws, the attorney supervising this project has, with generous help from experts in other bureaus and offices of the Commission, created a very favorable climate regarding state reception of Commission offers of cooperation.

This program shows strong promise of developing effective policing of local and regional complaints of deceptive and unfair practices. If accelerated, this program should do much to alleviate the Commission's being inundated by the contents of the "mail bag" and should permit the Commission to concentrate on orderly planning and execution of programs to deal with unfair and deceptive practices of national scope.

The consumer protection movement grows stronger with each day. More than ever before, state legislators and officials are interested in enacting or enforcing statutes protecting consumers from market deceptions. Given the favorable relationship presently obtaining between the Commission and the states, it would be folly to not expand Office efforts on the Federal-State Cooperation project. Expansion of Office effort in this area has been, in recent years, unsuccessfully proposed to the Bureau of the Budget. The initial projection for fiscal 1970 serves as the most current example. However, in my opinion, Budget Bureau rejection does not mean proscription. Once funds have been allocated by the Congress, the Commission, under Reorganization Plans 8 and 4 may reallocate resources as required by the public interest.

A. Increasing the outward flow of referrals.-Within the past ten years, twenty-six states have enacted consumer protection laws. Some of these statutes are equivalents of the FTC Act; others are not as strong. However, there has been, in recent years, a growing willingness and capability on the part of these states to effectively handle Commission referrals.

There are, understandably, (at this time) conditions attached to state actions on Commission referrals. We are encouraged to provide technical information and advice which will enhance the successful prosecutions of the referred matters. Thus, referrals do not fall within the "form letter" category of effort.

Matters referred to state officials in calendar year 1968 numbered 121, an increase of 21% over the previous year. Through more effort, principally directed at analyzing matters in their preliminary stages, referrals would be increased to to 200 in fiscal 1970, and to 400 in fiscal 1971.

B. Drafting and Promoting Consumer Legislation.-During 1970, the Office would aim at obtaining enactment of, or improvement of, general consumer protection laws in eleven states where proposals for such legislation are, with Commission assistance, already being actively pushed by the Attorney General or another state official. The states are as follows: Arkansas, Florida, Kentucky. Maine, Minnesota, Nebraska, New Hampshire, New York, North Carolina. Ohio, and West Virginia. In fiscal 1971, the Office would encourage such legislation in ten additional states where legislative proposals are in embryonic stage, or where legislation is particularly needed because of low income concentrations. (Alabama, Georgia, Mississippi, Montana, Okalahoma, South Carolina, Indiana, Virginia, Tennessee and Montana).

The greater goal of such efforts would be the enactment of effective legislation by each state. This will not be achieved by the end of fiscal 1971: nor for that matter, can the Office guarantee enactment of any consumer legislation.

However, increased effort in this area would advance legislation, or at least the interest of state officials in consumer legislation, in each of the above-named states. Contacts, offers of assistance, and assistance would be repeatedly extended to these states.

In addition to keeping drafts of models, general consumer laws current with developments in the states, the Office should, and must, prepare model laws to complement or displace Commission jurisdiction in the consumer credit and fair packaging areas. Such effort would commence in fiscal 1970 and continue in 1971. At least, preliminary attention to the drafting and promotion of model state laws complementing Commission jurisdiction in regard to textiles, furs and flammable fabrics would be made in fiscal 1971.

C. Expansion of Liaison with State Officials and Agencies.-Until now, the Office's liaison effort has focused primarily upon the National Association of Attorneys General. While the Office must continue to "lobby" or assist the members of this Association, it is believed that Commission liaison with the various Attorneys General is now such that primary attention should be paid to other groups of state officials, such as the U.S. Conference of Mayors, the National Association of Counties, and the National District Attorneys Association. For effectuation of the Commission's overall goals regarding Federal-State Cooperation, municipal and county ordinances might well be more important than state statutes.

The Office would begin its effort on the local area in 1970 and accelerate it in fiscal 1971. Its goal would be generally similar to that explained above for state legislation. Initial individual contacts and assistance, aside from approaches and services to the national associations, would be made and rendered to those officials concerned with the administration of large cities and urban counties. 3. A continuing program to more effectively utilize, and to expand, commission authority to mitigate injury to consumers and competition resulting from deceptive practices and restraints of trade

While the Commission is empowered to arrest anticompetitive practices in their incipiency, experience demonstrates that accomplishment of this mission is virtually impossible in many areas of the Commission's work.

The basic approach to defense against charges of monopolization, attempt to monopolize, predatory pricing practices and false advertising and marketing is greatly influenced by the profitability of the practice involved. This factor is weighed against the possible extent of treble damage actions. The result is, frequently, either the defense of delay or the defense of abandonment (close the record as soon as possible). Empirical knowledge has confirmed, ad nauseum, a marked preference for the former approach to defense against Commission charges. Presently, a classic example of this proposition is being enacted before the Commission (Koppers Co.).

However, the adverse impact of "full blown" restraints and unfair and deceptive practices can be reduced, and to the end of recommending ways in which mitigation of consumer and competitive injury can be accomplished, a concentrated effort by this Office is proposed for fiscal 1970 which will continue beyond fiscal 1971.

The project would be approached from four areas of the Office's mission: legal research, inter-bureau liaison, litigation and legislation. The Assistant to the General Counsel would coordinate the program.

The program would concurrently follow two avenues; each with short-term and long-term objectives.

One avenue of approach would concern injunctions. Its lesser goal would be more effective employment of the Commission's present injunctive powers. Its greater or ultimate goal would be the expansion of Commission authority to enjoin unlawful practices.

The second avenue would concern expedition of Commission proceedings before hearing examiners and the courts. Its short-range objective would be a definitive analysis of the reasons for present delay in such matters and recommendations for the alleviation, if not the elimination, of such delay. The long-term goal would be the implementation, and revision as experienced dictated, of the proposed procedures.

A. Injunction Employment.-Under Sections 12 and 13 of the Federal Trade Commission Act, the Commission upon a "proper showing" can enjoin, prior to administrative hearings, the continued use of advertising and representations

concerning a food, drug or cosmetic product when the Commission has reason to believe that such representations are misleading. Under the provisions of Section 5(c) of the agency's organic statute, the Commission can, after its decision on a matter, obtain from a circuit court an injunction pendente lite if necessary to prevent injury to the public or to competitors. And, at least in regard to proceedings under Section 7 of the Clayton Act, the Commission can utilize the All Writs statute to obtain preliminary injunctions.

During the past fifteen years, the Commission has issued a considerable number of complaints involving charges of false advertising of food, drug and cosmetic products. Undoubtedly, during the same period, a substantial number of deceptive practices and unfair methods of competition were continued for years after Commission cease and desist orders, finally ceasing after exhaustion of all appeals to the courts. Yet, only four injunctions have been sought since 1955. The program would proceed from the following basic presumptions:

(a) if reasonable doubts concerning Commission injunctive authority are encountered, they should be resolved through litigation;

(b) if imaginative theory offers a reasonable prospect of overturning an old case or fitting a case within a narrow holding, litigation should be recommended; and

(c) if changes in Commission policy or procedure offer the prospect of miti gating public injury through an increased use of injunctive proceedings, they should be tried.

Thus, all past procedures and present assumptions concerning_Commission injunction efforts and powers would be systematically questioned. Was past inactivity the result of inattention by this Office and/or the operating bureaus? Was it due to a reluctance to confront narrow court decisions with imaginative and aggressive effort? Are there valid questions of law in these areas, which should be explored? Could the Commission through changes in procedure, such as the delegation of authority to the General Counsel on some matters, expand the use of its injunctive powers?

For example, in Section 12 matters the question of what is a "proper showing" has not been conclusively resolved. It has been successfully argued that an injunction is required merely on the basis of the reasonable belief of the agency. Other courts, however, have applied strict equity standards, taking into careful account the impact of an injunction without bond on the business of the respondent. The matter should be resolved. Initially, it would appear that the best test cases would involve false advertisements that might lead to physical harm.

With further regard to Section 12 matters, the Office would study the legal feasibility and possible effectiveness of Commission delegation of authority to the General Counsel to file injunction proceedings upon completion of a prima facie case by counsel supporting the complaint.

Possible new approaches to employment of the All Writs statute would be explored. Does a security agreement always preserve court jurisdiction, or do years of ownership of the acquired firm (albeit restricted ownership) irreparably injure competition and render divestiture token relief? Could the statute be employed to enjoin predatory price practices? Would Commission delegation of its authority to bring proceedings under the All Writs Act promote the Commission's mission?

The Office would maintain a close working relationship with the operating bureaus concerning possible injunction proceedings. Through continuing liaison with the trial bureaus, it would seek to maintain current knowledge concerning the continuance of the practices being challenged. In the event that the practices are continued after Commission entry of an order to cease and desist, the Office would seek injunctions under Section 5(c) of the Federal Trade Commission Act "to prevent injury to the public or to competitors pendente lite."

The Office would continue to review pending bills calling for extension of Commission injunctive powers, and would, when required, offer recommendations to the Commission for strengthening such proposed legislation. Its effort in this ares would go beyond response to congressional proposals. It would draft Commission proposals for legislation. In connection with the Commission's operating bureaus. it would develop statistics and projections that would support the "dollar value" to the public of a Commission injunction.

The Office would also seek appropriate forums for the Commission to present argument for the necessity of authority to mitigate injury to consumers and competition. It would keep the Legislature aware of the Commission's efforts