which will require reopening for compliance checks. Such personnel increase, along with an expected addition of two trial attorneys, should result in more orders for FY 1970 than were issued in the previous year. The Compliance Section has earmarked 35 cases in which it considers compliance checks should be run. In FY 1970, the following compliance activity is projected: Carry-over of cases pending July 1, 1969__. Total work load for fiscal year 1970--- 6 attorneys for fiscal year 1970, 24 cases per attorney_. Carryover anticipated July 1, 1970-- 5 148 130 50 328 144 184 5 Based on .77 cases developed per inspector, 43 inspectors plus cases produced by the 49 allocated for fiscal year 1970. Assuming during fiscal year 1971 a 20 percent increase in the number of investigators and interpreting this increase, it is expected that there will be a total of 100 inspectors in a productive capacity in 1971 and the following compliance activity is anticipated: Increase required in Compliance Attorneys for fiscal year 1971 to maintain status quo-- 4 Disposition for 10 attorneys for fiscal year 1971, 24 cases per attorney--. 240 Carry-over projected July 1, 1969-. 186 Based on .77 compliance cases developed per inspector, 92 inspectors plus cases produced by 18 additional expected for fiscal year 1971. Respectfully submitted, EUGENE H. STRAYHORN, Chief, Division of Enforcement. MEMORANDUM JUNE 4, 1969. Subject: Fiscal year 1971 budget. To: Frank C Hale, Director, Bureau of Deceptive Practices. Attached hereto is this Division's fiscal year 1971 budget report to be submitted to the Commission. Respectfully submitted, MICHAEL J. VITALE, Chief, Division of General Practices. FISCAL 1971 BUDGET I would like to take a practical and realistic approach to our budget request Too often we engage in conjecture and in crystal-ball gazing. Before we can decide on where we are going, we should first look at where we have been and what we have done. In this connection let me first orient you to our present operation, both from the standpoint of personnel and casework. I. PERSONNEL This Division presently consists of twenty attorneys including the Division Chief. The semi-outonomous D.C. Consumer Protection Group, which is now a part of this Division, consists of eight attorneys (two of whom have advised me orally that their resignations are forthcoming). There are five secretarial and clerical persons assigned to the Division at the present time. The breakdown in grades for all attorneys is as follows: GS-16 GS-15 GS-14 GS-13 GS-12 Total As is noted by the grade breakdown, the personnel in this Division are of varying degrees of experience and competency, and only approximately 50 percent actually qualified in both experience and competency to carry on any assignment-including trial and appeals to the Commission. One of the acute problems of this Division has been the unusual turnover of attorneys, particularly the younger ones (many of whom seemed to become disenchanted with the Commission). For example, as of September 1965 when this Division was merged with the Division of General Advertising, the professional staff was: Average number of attorneys as of 9/30/65. 35 32 20 1 Of those attorneys included, two are on leave without pay; two are detailed out of the Division; one is on extended sick leave; and one has submitted his resignation to be effective June 21, 1969. These statistics exclude the D.C. Consumer Protection Group. which was assigned to the Division, November 1, 1968, and consists of eight attorneys (two to resign shortly). During this period of time, this Division-excluding the D. C. Consumer Protection Group-gained approximately 27 attorneys and lost approximately 35, so that we have had the movement of approximately 62 attorneys during a fouryear period. These changes entail reassignment of cases, training programs, and often result in the delay in disposition of cases and loss of benefit of personnel during the training period. A certain amount of these changes would normally take place and would not ordinarily be a part of this report. However, because of the unusual number of attorneys leaving, we feel the efficiency and the operation of this Division has been severely affected and should be reported on any budget statements. In my opinion, it has become a factor to be considered in any budget request. Within a period of several weeks, I will have lost eight attorneys (one of whom is on extended sick leave) and gained two young, inexperienced attorneys. II. CASELOAD At the present time, this Division has approximately 629 investigations pending, including those in the field; 69 complaint matters pending; 15 assurances of voluntary compliance awaiting disposition; and 39 closings. In addition, there are 14 cases in the Consent Order Division and 13 cases at various stages of trial. Many of the investigations in this Division usually involve matters unrelated to an industry or a project; however, because of the similarity of either the practices or the product, there are investigations characterized as "industry-wide projects" (these matters have been generally handled on a case-by-case basis). The following list includes such projects which are set forth in the order of their importance: 1. Automobile industry In the last several years, the Commission's attention has been called to various facets of the pricing practices of automobile manufacturers and their dealers in connection with the sale of new cars. At least ten investigations were opened and one order of the Commission reopened. The Commission has determined to hold comprehensive public hearings on this subject of new car price advertising with a view towards drafting trade regulation rules in this area of the economy. The hearings will encompass standardoptional equipment changes and their effect on the purchaser; comparison of new model car prices with "comparably equipped" former models; price advertising of new cars involving displayed optional equipment; dealer advertising of huge savings on trade-ins and otherwise; the determination of the manufacturer's suggested retail price or the "Monroney sitcker" price. These hearings will affect not only domestic manufacturers but also foreign car manufacturers who compete in the American market. As indicated above, these hearings will be an in-depth approach to the whole spectrum of automobile pricing. Depending upon the success of the hearings, we would estimate two to three attorneys would be needed. 2. Automobile tires As a result of Commission action, this Bureau was given responsibility for enforcement of Guide 15 (pricing) of the Tire Advertising and Labeling Guides. Some 22 investigations have been initiated and eight have been closed on the basis of assurances of voluntary compliance. The problem of questionable price advertising by tire marketers will be one of some duration and will extend through the next two years at least. Depending on the cooperation of the industry, we would need two to three attorneys. 3. Games of chance An enormous amount of time was spent by at least two attorneys in this Division preparing reports, answering Congressional letters, conducting investigations. One attorney participated full time in the public hearing. As an off-shoot of the Commission action in this area, we opened some 10 or 12 files, most of which were eventually returned from the field with a recommendation for closing. Only one file thus far was returned with a recommendation for complaint and we are presently in the process of readying it for transmission to the Commission. The main issue in this particular case is "rigging" as well as other charges unrelated. Depending on the outcome of the Commission's final action and the cooperation of the industry, it is estimated that we may need a minimum of two or three attorneys to continue with this work. 4. Home improvements In the past fiscal year, we have obtained five consent agreements; we have issued investigational subpoenas in three cases; and a recent decision was rendered by the Commission in one case. We have approximately 60 cases under investigation and are continuing to handle these on a case-by-case basis. There is an intense public interest in this area and even if Congress did not grant us the additional money requested, we plan to use two to three attorneys. 5. Earnings a. Chinchillas.-Approximately ten matters have been disposed of by cease and desist orders. We have 35 current investigations in the field. We are continuing to enter cases for investigation. The practices employed by chinchilla promoters border on the fraudulent, victims often times investing their entire savings. We have made, and are making, a determined effort to scrutinize the practices of persons or firms engaged in the sale of chinchillas to the general public since a great number of them misrepresent earnings, production, quality, value, etc. of chinchilla breeding stock. To continue in this area, a minimum of two attorneys would be required. b. Franchises.-Most of our activity involves the sale of water repellant paints by means of franchise dealerships. We have obtained orders against two companies and two additional companies are in litigation. We are also negotiating for a consent agreement in another case. These matters are handled on a case-by-case basis, the public interest being significant because the dealers invest anywhere from $500 to $2,500. Companies involved have gross sales from $125,000 to $2,000,000 a year. Depending on the number of complaints we receive, at this point it is estimated that one attorney will be required to handle these cases. 6. Sewing machines During the past 20 years, false and misleading advertising and deceptive acts and practices by manufacturers, distributors and retailers of sewing machines have been the subject of an ever-increasing volume of formal and informal Commission actions. Prior to 1953, such matters involved for the most part pricing, guarantee and foreign origin issues. In recent years, sewing machine sales have been extensively promoted by sham contest promotions and the classified ad gimmick. Such bonus give-aways and "bargain" offers are advertised to obtain leads to guillible persons, whose interest can be switched to purchasing readily-available, high-profit sewing machines. Since 1950, the Commission has issued 64 complaints. The sham contest promotions of sewing machines was the subject of Advisory Opinion Digest No. 70. In addition, the Commission promulgated a Trade Regulation Rule relating to the misuse of the term "automatic" as descriptive of household sewing machines which became effective July 15, 1966. We have referred the merchandising practices of 48 sewing machine dealers to State enforcement officials. The total number of home sewers, who spend an estimated 1.25 billion dollars a year on patterns, sewing machines, fabrics, threads and notions, is approximately 40,000,000 accordin to some industry spokesmen. The most recent Bureau of Census figures of sales of industrial and household sewing machines manufactured in the United States amounted to $117,000,000. In 1965, annual sales reached an estimated 1,860,000 units, with Japan supplying 62 percent of the total. It is planned that an increasing number of complaints will be directed at the practices of both distributors and retailers of a particular line or make of industry products. By this "class action" method of seeking orders requiring distributors and their retailers to abstain from questionable practices, actions against a large number of retailers will be unnecessary. An example of this procedure is the recent proposed complaint against Riccar America Company, File No. 662 3758, currently the subject of consent negotiations. It is estimated that between two and three attorneys would be required. 7. Fictitious pricing a. Greeting Cards. This project involves pre-ticketing with fictitious retail selling prices by manufacturers and distributors of Christmas cards. Twentyone investigations have been established and proposed consent agreements have been sent to all these companies. This matter will extend into the next fiscal year and a minimum of two attorneys will be required. b. Fishing Tackle. This project involves the use of fictitious retail prices in catalogs and on pre-ticketed merchandise furnished dealers. We have conducted an industry-wide investigation covering 11 major manufacturers of fishing tackle and we have at hand from each either an assurance of voluntary compliance or an executed consent agreement. These will be transmitted to the Commission. Estimated annual sales of firms investigated was $100, 000,000 or 43 percent of total fishing tackle sales in the United States, including imports. The time of one attorney will be required to complete this project. 8. Door-to-door salesmen-encyclopedias, housewares, etc. This is a constant battle on the distributor level of door-to-door sales of encyclopedias and related educational books. Most of the major publishers are already under Commission orders. The distributors are using the same deceptive sales approaches that were banned in the case of the publishers. This operation must proceed on a case-by-case basis. In the last year, an order was issued in a contested case and we obtained one consent order. Currently there are two encyclopedia cases in the consent negotiation stage and one more that is before the Commission on complaint. There are several more cases in the field under investigation. While this is the major area for the practices of salesmen, there are cases that occasionally arise involving other products. It is estimated that this area would require at least one attorney. 9. Correspondence and vocational schools. The practices usually misrepresent benefits to be obtained. Alleged deceptive practices by proprietary schools have continued to be the subject of Commission action. The ease of entry into this business has meant, and will continue to mean, that new schools are constantly being established, some of which will operate in a less than ethical manner. Approximately 22 investigations were pending at one time or another during the current fiscal year. Proposed respondents submitted consent agreements in five of these matters. Assurances of voluntary compliance were obtained in two others. Closing has been recommended in two others because proposed respondents had gone out of business. It is likely that we will continue to have activity in this field until such future time as all of the states have adequate laws regulating these schools. It is also likely that the level of activity will remain about the same. A minimum of one attorney will be required. 10. Gold Medallion homes This is another industry-wide activity which affects all prospective home buyers. Originated by General Electric for the purpose of advertising General Electric products, it has been adopted through the National Association of Electrical Manufacturers by some 700-plus power and light companies throughout the United States to promote the use of electric power. It was ascertained that there were different minimum standards used by these companies in allowing contractors to use the "Gold Medalion" seal. Our effort has been directed to raising and, more particularly, unifying the minimum standards. So far, over 600 companies have agreed to the improved standards. Any company that does not agree to these uniform standards will not be allowed to use the "Gold Medalion" seal in their advertising. One attorney will be required. PROJECTION 1971 It is anticipated that the following number of man years will be required to carry on future work of this Division: 24 1. To continue the aforementioned projects- 2. To handle compliance of avc's_-- 1 3. Congressional letters are averaging almost 100 per month and in many instances require a great deal of preparation___. 4. To handle the current caseload, exclusive of the aforementioned projects__ 10 5. D. C. Consumer Protection Program__. 8 Total man-years- Current actual staff_ 44 28 This projection is based on our current workload and does not take into consideration any future matters that our Division of Screening and Planning may contemplate opening. Since the initiation of new investigations now takes place in that Division, we are now limited in determining future programs. In addi 36-138-70-vol. 3-61 |