FEDERAL AGENCY RESPONSIVENESS TO PUBLIC NEEDS FRIDAY, SEPTEMBER 12, 1969 U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE PRACTICE AND Washington, D.C. The subcommittee met, pursuant to call, at 9 a.m., in room 5110, New Senate Office Building, Senator Edward M. Kennedy (chairman of the subcommittee) presiding. Present: Senators Kennedy, Burdick, and Mathias. Also present: James Flug, chief counsel; Thomas M. Susman, assistant counsel; Joseph Onek, assistant counsel; Bernard Waters, minority counsel; and F. Glenn Smith, assistant to Senator Thurmond. OPENING STATEMENT Senator KENNEDY. The subcommittee will come to order. In February, as the new chairman of the Subcommittee on Administrative Practice and Procedure, I sent a questionnaire to the members of a large number of Federal offices, departments, bureaus, and agencies. The thrust of the questionnaire concerned agency responsiveness to public needs and citizen involvement in the administrative processes. Earlier this week, we published the replies of six major administrative agencies, including those of the five members of the Federal Trade Commission, who are with us here today. Throughout its history, many people have complained that the FTC was not doing enough. Since 1924, scholars, executive agencies, and the Congress have critically assessed the work of the Commission. It is important to note that many of the earliest criticisms are very similar to those of recent times. Thus the current attention focused on the Commission is not aimed at particular personalities, but on the fundamental underlying questions which have always faced not only the FTC, but many Federal administrative agencies: How should the agency go about setting its priorities, and what should those priorities be? How can delay in its proceedings be reduced, and what methods are there for monitoring delay? How can the agency insure that the public is well represented in its processes, and that citizens' needs are felt and responded to? And finally, how should the agency undertake to carry out its policy decisions in ways which bring timely and complete compliance? The subcommittee itself does not now have the answers to these questions, and we are not meeting today to propose to the FTC a pro (1) gram of our own. Our belief is that answers, or possible answers, exist. They are contained in the many professional analyses undertaken by outsiders, practically from the FTC's birth right up to the present day. And they exist especially in the minds of the Commissioners themselves. They have all lived with the FTC, its problems and prospects, for some or most of this decade, and the Chairman's and Commission MacIntyre's experience goes much further back than that. These five citizens know the Commission best. They have ideas, and hopes. In our questionnaire, and here today, we want to give them a chance both to assess their agency's present processes and to tell us how they would like to see the operations of the agency change. We want to know not only how they think these changes can be implemented, but also how the desire for change, the spirit of self-assessment and self-improvement can be built into the agency's practices so as to continue even when these Commissioners are gone. The broadest spectrum of replies to our questionnaire and some of the most penetrating self-criticism came from the members of the Federal Trade Commission. That agency has increasingly been in the public limelight. In January a study of the Commission was issued by students who investigated its procedures last summer. In April President Nixon asked the American Bar Association to appoint a special study commission to appraise the work of the FTC in the fields of consumer protection and antitrust enforcement, and soon thereafter a 16-member panel was named by the ABA president. The ABA study will be released next week, and it should give Congress, the administration, and the public a new comprehensive, independent analysis of the practices and procedures of the agency. The recent upsurge of interest in the FTC is not surprising. It parallels our rising concern with the just grievances of the American consumer. For too long the American consumer has suffered from deceptive advertising, shoddy manufacturing practices, and a lack of vigorous price competition in many industries. The FTC was designed to confront these consumer problems, and in many areas it has done so. A generation ago studies by the Commission led to passage of the Robinson-Patman Act. Recent studies of credit practices contributed to the passage of the Truth in Lending Act. And, as everyone knows, the FTC took the lead in requiring cigarette manufacturers to disclose the health hazards of cigarette smoking. Its present studies of conglomerate mergers and consumer problems hold promise of a great future return. It is important that the public know of the Commission's achievements and to acknowledge the extent to which it is fulfilling a constructive role as a regulatory agency. But it is likewise important that the public know of its shortcomings and of its failures. This subcommittee hopes to act as a catalyst during these hearings, to bring out for the record the views of the Commissioners on many of the issues in which the public and Congress are vitally interested. If one message is clear from all the members' responses it is that the agency must change to fulfill its mandate and to keep up with the times. There are and will be aired today, disagreements about the nature and pace of change, but there is a basic agreement as to the need and desire for change. The task for all of us--Commission, Congress, and the Executiveis to transform this basic agreement into positive action, to make the FTC truly responsive to the needs of the American consumer and businessman. Our witnesses today are the five members of the Federal Trade Commission. Each has responded to our questionnaire, and these responses from the basis of their testimony here. In addition, two of the Commissioners have provided us with further statements prepared for today's hearing. In each case we will include in full for the record as if given whatever statements the witnesses wish. It will not be necessary for you to read your responses or statements in full, and it is our hope that you can make your initial presentation as concise as possible because we have a long day ahead of us. But we will ask you to proceed in your own manner, and we hope you will feel free to proceed in any way that you wish. Our first witness this morning is the FTC Chairman, Paul Rand Dixon. Chairman Dixon spent many years on the staff of the Commission. He then left to become general counsel to the Kefauver Antitrust Subcommittee, whose work did so much to stimulate the American consumer movement. In 1961 President Kennedy appointed him Chairman of the FTC. In 1967 President Johnson reappointed him to that position. He has now served some 31 years in the fields of antitrust and consumer protection and is widely regarded as a leading expert in both these fields. Mr. Dixon, we welcome you here. TESTIMONY OF HON. PAUL RAND DIXON, CHAIRMAN, FEDERAL TRADE COMMISSION Mr. DIXON. Senator, I thank you for the invitation. I must apologize for not having given you a written statement since receiving your invitation, but I must state that it was just over a week ago that I obtained copy of Mr. Elman's statement to you which from reading the press, seems to be of great interest. And with the other duties I have, I have not found time to do any more than to try to digest what's in those various statements and to prepare myself here this morning. But I do thank you for the opportunity to talk about the Federal Trade Commission. I hope you will bear with me for a minute because I want to tell you where I think the Federal Trade Commission came from and some of the reasons for its creation. HISTORY OF THE FTC We have read much about the history of the Commission, but I think when the country finally passed through the Civil War period and faced the great decision of whether or not we were going to lose the great dream of a free society, and was faced with the real fundamental question whether the people through its elected officials could see to it that its trade and commerce were so regulated so that we would not be beset by monopoly and those undesirable things that flow from monopoly, the Sherman Antitrust Act was passed in 1890. But I point out to you that 3 years prior to that time the Congress had created the Interstate Commerce Commission to deal with the great problems that had arisen in this country out of the outright discriminatory practices that had led to the great monopolies in trade, in transportation. And so the Congress, exercising its command in the Constitution to regulate commerce, created this great Commission. The Sherman Act soon followed, and then a bit of history passed and with that history in the early 1900's, if you recall, the great so-called merger and concentration movement took place. Much was said about it. One of our Presidents, President Theodore Roosevelt, had much to say about it and has been depicted in history as the great trustbuster, the man that wielded the big stick and shook it. In the debates of 1912 all three candidates made mention of the need of a new type of agency. The Founding Fathers of this country in the Constitution I think clearly made it known as to how they feared monopoly wherever it might be found. Students of our Government know full well the threads of checks and balances that spread throughout the Government, the three branches of our Government. But in 1912, the time had come where during the debate it was made plain that all three candidates espoused a new type of an agency not to deal with monopoly once it has already occurred but to deal with the symptoms of monopoly, the practices, the things that lead to monopoly and the difficult decision of what does the Government do about it and what can and will the courts allow to be done about it under the Sherman Act, and what, if you will, will be the will of the various administrations that come to power when they are faced with monopoly. Now, the very handmaiden of monopoly is discrimination in various forms, discrimination that if allowed to continue too long leads to monopoly. And so when Mr. Wilson became President he espoused and recommended the creation of the Federal Trade Commission. After some debate the Federal Trade Commission was created. Mr. Chairman, I want to call your attention, however, to the fact that the Congress at that time followed somewhat the pattern of the Congress itself. They decreed that the Commission should consist of five members. Now, if they had wanted something easy and not a debate and not controversial they would have created only one commission. But they created five Commissioners. And they decreed that no more than three could belong to one political party, decreeing that it would be bipartisan. To be sure that no one that would come to that agency might be ill-chosen, or who might not carry out the will and the mandate of the party in power, or what would be referred to as actions in the public interest, the terms of the Commissioners were limited to 7 years. Of course, they were staggered in the beginning so that these 7-year terms don't come exactly in succession. There are five in succession nevertheless. Usually, as you look back-that is as to membership eventually when the party in power is superseded by the other party, a swingman's term comes up and he is replaced and the so-called majority changes. But realistically, if a President stays in office more than one term he has the privilege of appointing all five Commissioners. And so the present five Commissioners have been appointed by the two past Democratic Presidents, your brother, President Kennedy, and his successor, President Lyndon Johnson. I think this is well. This decrees that people of different backgrounds and abilities are nominated by the President subject to advice and consent of the Senate. Now, when this Federal Trade Commission was created there had been in the Government, under the Commerce Department, the Bureau of Corporations, having powers vested in it by the Congress to investigate and study the activities of interstate corporations. They could only study them and make recommendations and reports. Now, when the Federal Trade Commission was created the pattern began to take shape during the debates and it became clear that the sponsors wanted something more than just an agency that would make investigations and reports. They wanted an agency to do something about those practices that led to monopoly and trouble if we were to have a free enterprise system. And so the Congress assigned in the basic act a responsibility to this agency, and it is found in section 5 of the basic act. Originally Congress declared in very simple language that the Commission would enforce the section that read unfair methods of competition in interstate commerce is hereby declared unlawful. Now, this is the first time to my knowledge that Congress had used the word "competition," although this obviously was what Congress had in mind when it passed the Sherman Act. Congress, gave to the Federal Trade Commission its own power to investigate and tied to it a responsibility because with the granting of the subpena power, the right to investigate was the responsibility that one could immunize from criminal prosecution. Nevertheless this was the beginning of the Commission. At about the same time, Mr. Chairman, the Congress had a great deal of information called to its attention that even though they had a Sherman Act, certain practices were so questionable that they should be made a body of the antitrust laws and outlawed by statute. And so they passed the Clayton Act. Now, the Clayton Act has four basic sections in it. Section 2 of that act decreed that certain discriminations were illegal. It challenged tying or exclusive dealing contracts. It challenged through the antimerger section certain mergers. And in section 8 it challenged interlocking directorates. History shows that when that act was first considered these practices were considered so dangerous and so questionable that they were first considered to be made criminal law violations. As they were debated among the committees, and in the final stages of the passage of the act, they were reduced to civil law. The empowering sections of that law are found in sections 11 and 15. Section 15 commands that the Attorney General through the respective systems shall enforce sections 2, 3, 7, and 8. In section 11 when it was passed was the exception for transportation-that is, the ICC functions and banks. It commanded all other things should be proceeded against by the Federal Trade Commission. And so we had a duality of responsibility, and so the debate started from that time. But very wisely in my opinion Congress took this course because in all of our life there is a great benefit that comes from duality of many things. I think that it's like the benefits that flow from having more than one training academy in the Defense Department-many questioned that but I think much good comes from it. Then, there is the difference of procedure. One, the administrative route, and the other, the court route. Now, the Commission started here, sir. Of course, over the years. the Commission has had many more responsibilities added to it. From the very beginning of the Federal Trade Commission, the Congress used the Commission quite often to do its own work, calling upon it |