Commission level is important. Too often criticism of the Commission's employees has been unnecessarily corrosive, with an inevitable adverse impact on morale and performance. In my view, the staff will respond affirmatively to fair criticism if couched in terms of good will, courtesy and respect."

Moreover, the Commission has further complicated the staff's and its own problems by policy reversals and lack of adherence to precedent in a number of significant areas. The resultant confusion has made it difficult to chart a coherent course for the future or to evaluate what has gone before. In this connection, one of the striking examples is the Commission's revision of its pricing guides in January of 1964 which overturned precedent painfully built-up over a period of many years and affirmed by the courts. The modification resulted in no benefit whatsoever to the consumer. The new standards, as a matter of fact, complicated enforcement by substituting a subjective for an objective standard for determining truthfulness of such representations. As a result, the Commission's task of ensuring that the consumer would be able to intelligently evaluate the pricing representations held out to him was made much more difficult. After the promulgation of the new guides, for some time Commission activity in this area dropped off sharply. As far as I can determine, the contested cases where the issue of deceptive pricing has figured significantly have been few.18

Similarly, the Commission recently reversed policy of two years standing when it redefined its definition of a consumer commodity within the scope of the Fair Packaging and Labeling Act. The reversal in response to a challenge in the courts was accomplished by a settlement on the basis of the new and narrower definition before the courts even had a chance to pass on the merits of the suits." The result has been that the public has less protection and the staff's task in enforcing the law has been made immeasurably more difficult by forcing it to engage in almost metaphysical inquiry to determine whether coverage is indicated in particular cases. Even if the Commission's position had been overturned by the courts, we would nevertheless have been in a position to go to Congress asking for remedial action. Such a step, as a result of the Commission's policy reversal, has become almost impossible as a practical matter. The impact on the staff responsible for administration of this statute who for over two years with the Commission's full knowledge worked with numerous people in state and local government as well as consumer organizations on the basis of one set of assumptions and then found these premises in effect changed over night can be readily imagined.

Equally detrimental to the staff's operations have been a number of instances where the Commission for little or no discernible reason simply dismissed by pro forma orders, expensively litigated cases into which the staff had poured considerable time and effort without any findings on the legality of the practices under consideration." How the staff, in the future, was to respond to Commission policy in these areas where for practical purposes such policy was unknown and unknowable is difficult to comprehend.

My recommendations for improvement rest on the premise that the Congress desires the Commission to continue to fulfill the responsiblities spelled out in the legislation now in effect. There are no easy or quick solutions. Reform will have to begin with an attempt by the members of the Commission to achieve some unanimity of purpose as to the goals of this agency. Unless this is achieved all other proposals for reform and improvement are essentially without meaning. Undoubtedly this will be a task of prime importance for the new Chairman to be nominated possibly this month.

My second major recommendation is that steps should be taken to improve the relationship of the Commission's members with the staff. If the Commission is to sensibly reassess its law enforcement duties it cannot do so without the assistance of the staff in pinpointing trouble spots where the Commission's enforcement activities will have maximum impact. Similarly, you have heard by this time, I am sure, considerable criticism about this agency's and its staff's pre

17 See Livingston, Pygmalion in Management, Harv. Bus. Rev., 81 (July-August 1969). "It is as though there were a law that caused a subordinate's performance to rise or fall to meet his manager's expectations."

18 See my dissenting statement to the Revised Pricing Guides and my dissent in Revco D. S., Inc., attached hereto as Appendices C and C(1).

19 See my dissent attached hereto, F.T.C. Press Release, August 7, 1969 (Appendix D). 20 See my dissent to the dismissal of the order in Pure Oil Company, Docket 6640; The Texas Company, Docket 6898; Standard Oil Company (Indiana), Docket 7567; Shell Oil Company, Docket 8537, issued December 28, 1964, attached hereto as Appendix E, and cases cited therein.

38-132-70-pt. 1-5

occupation with trivia. The basic problem lies in the fact that the Commission simply has not set up the staff machinery to enable the agency's officials to objectively review the Commission's performance and objectives on an overall basis. Theoretically, the Office of Program Review was designed to perform that job, but it has never been given adequate resources to accomplish this task. Staffing this office or a similar unit with sufficient personnel competent to make such an appraisal on a continuing basis will be of considerable help to the Commission in its function of setting general policy. In addition, once the Commission has set up an adequate staff to facilitate its responsibilities in the policy making area, its directives to the staff should be characterized by greater clarity and the Commission's goals in various areas more readily apparent. Performance would be improved all along the line.

While I endorse such reforms, the real search for improvement must commence with the five members of the Commission. The words of Senator Norris some forty-three years ago are relevant to this agency's problems today.

"... [I]f the Commission is to function, if it is to continue to perform the work that the law designed it to perform, its personnel must be of men who believe in that kind of law. For the purpose of the discussion, we must assume that that kind of a law is right. I am not quarreling with any man who disagrees with me in that assumption, but he must agree, even though he does not agree in the law. that if we have a law at all, and if we are honest about it, it is based on the assumption that the law is good and that that kind of a Commission can do some good for our people." ."" It is reassuring that the Commission was able to surmount its early crises. It should be able to overcome its present problems with good will and dedication.

(The appendixes to Commissioner MacIntyre's prepared statement appear in the appendix to these hearings.)

TESTIMONY OF COMMISSIONER A. EVERETTE MacINTYRE,
MEMBER, FEDERAL TRADE COMMISSION

Commissioner MACINTYRE. Thank you, Mr. Chairman, gentlemen. I shall attempt to summarize if I may what I have in the statement that I furnished the committee late yesterday and copies of which I furnished to my colleagues.

Perhaps in that summary I will be interpolating at a time or two. You have heard of course from the Chairman of the Commission and from Commissioner Elman, and I have noted in their statements and I know you have references as to how it is and as to how it was. I hope that in what little I have to say to you today you may infer from some of it how it really ought to be.

The regulatory agencies, including the Federal Trade Commission. at this time are again the subject of intensive scrutiny and criticism from without and within. That criticism has increased to the point where serious suggestions are being made for the abolition of the independent administrative agencies and a redistribution of their functions among the legislative, judicial, and executive branches. Clearly, the time for self-evaluation by the agencies is at hand. I trust, however, that this statement will not be my valedictory to an agency which by and large in the words of Learned Hand has helped "to discover and make explicit those unexpressed standards of fair dealing which the conscience of the community may progressively develop."

In your letter, Mr. Chairman, to me under date of August 22, you suggested that you would appreciate it if we could provide you with information regarding a process of self-analysis and reassessment of goals, tasks, and priorities.

167 Cong. Rec. 5962 (March 20, 1926).

I say that the assessment of the FTC's performance must of necessity begin with the analysis of the law enforcement goals entrusted to the Commission.

We cannot have any other goals, Mr. Chairman, except those provided in the public policy declared by the Congress in the laws. Those are the goals.

Priorities will have to come within those goals. We cannot change the goals. Congress may do so.

In my further discussion, of course, I would like to say that I will base some of the judgments I express on my experience with the Commission, about 8 years as a member and on the experience of almost four decades in the field of antitrust and trade regulation.

The public policy objectives-oh, before I get into that, I want to go back to a question that you brought up a number of times this morning as to whether once given these goals such as I have just suggested how are priorities within them determined.

This came up time and time again, and it did not seem to me that there is much of an understanding that there is any effort to make a determination of priorities on particular matters within each of those goals.

I disagree with that, that there is not. I would like to cite you to your printed record up to this time which you released yesterday commencing at about the middle of page 201 and particularly the 10 items specified on page 202. That was some information that I supplied you in response to your request for any reference to the establishment of priorities and how those standards were applied in establishing priorities within goals.

The best information I have is to the effect that this procedure is being followed and these standards are being applied in the determination of which items within one of these goals will be taken up and which ones shall not.

I just thought your attention ought to be called back to that because it seemed to me that it was being lost sight of here this morning.

Now, the public policy objectives set forth in congressional enactments, as I have noted, and in the judicial interpretation of these laws cannot be achieved unless there is a reasonable degree of agreement as to the goals provided by Congress and the public policy declared in those laws.

There is at this time no meaningful agreement among the FTC members and I stress "members," if you please, Mr. Chairman-as to the legislative goals; namely, the public policies which this agency is to pursue.

I am not referring to the absence of agreement on a decision in a particular case. Of course there is room for that where judgment of individuals are to apply. I am talking about disagreement on the question as to whether Congress should or should not have set a particular policy in a law for us to follow and whether we should follow if it has been set.

I just do not think that that is a prerogative of a member of the Federal Trade Commission.

Yet there is disagreement on that, as to whether we ought to be following such policies. As a result, under present circumstances the

task of a realistic reassignment of goals, tasks, and priorities as you have suggested in your letter of August 22 is virtually precluded.

One of the most serious obstacles to coherent Commission antitrust activity is a basic disagreement of some members of the Commission with the public policy declared by Congress in section 2 of the Clayton Act as amended.

This law and its administration by the Commission is again under severe attack on the ground that the prevention of price discrimination which the law is directed to is action against price competition. Congress decided the opposite. But some Commissioners believe they decided wrongly. I say they ought to come back to Congress and tell Congress that they decided it wrongly rather than to attempt to rescind the law by administrative action within the halls of the Federal Trade Commission.

Moreover, the Commission's administration of the antitrust laws and the Robinson-Patman Act in particular have been derided by members of the Commission as "business protectionism," and as a misconception of law enforcement priorities.

There is no glossing over the fact that that point of view has become increasingly prominent within the Commission as it is presently constituted.

The fact remains that one of the legislative goals entrusted to the Commission under these laws is the effectuation of the public policy expressed therein. And I repeat that time and time again so that we, I hope, will not lose sight of that fact.

In my view at least, the Commission should not lose sight of this goal or disregard it under the guise of reordering priorities.

The Commission in this area should be guided by the declaration of the public policy by the Congress in the Small Business Act as passed in 1958 and approved by President Eisenhower in that year. There it is said:

It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interest of the small business concerns in order to preserve free competitive enterprise.

Similarly, serious disagreement exists among the Commissioners in the consumer protection area. For example, enforcement efforts under the Fur, Wool, and Textile Acts have been cited as illustrating the Commission's preoccupation with trivia. However, public policy as expressed by Congress does require for example that used wool not be sold as new and that weasel not be mislabeled as mink, irrespective of how we want to weasel about it.

The Commission as an independent regulatory agency and an arm of Congress is bound to enforce these laws when violations come to its attention. The Commission may not, or at least in my view it should not, substitute its own notions for those of Congress by starving these laws for appropriations in order to allocate our resources alsewhere simply on a basis of the Commissioners' own predilections and value judgments.

Certainly truth in fabrics and truth in furs should not be considered out of date, Mr. Chairman, in light of the recent enactment of the Truth-in-Packaging and Lending Acts.

PRIORITIES

Senator KENNEDY. Let me ask you if you agree with what Professor Auerbach said in 1962:

If Congress does not provide such personnel to enable the Commission to attain all the planned objectives, the lowest priority objectives will have to be sacrificed.

What is your reaction to that statement?

Commissioner MACINTYRE. I do not think though that we can ignore any one of them. I agree that there are some value judgments that will have to be expressed in what proportion of the total you are going to give, but I certainly do not agree with those colleagues of mine who say you ought to forget them as trivia. Congress did not forget them, and Congress did not empower the Federal Trade Commission to decide whether or not a particular type of wool labeling was or was not deceptive. Congress made that determination itself, and spelled it out in so many words in that act that whether it was so and so and not so and so, it was deceptive and mislabeled. We cannot decide that. Congress has decided it.

Senator KENNEDY. I suppose it depends on the man-hours and resources which are available to the Commission. The Commission must decide where those man-hours and resources are going to be expended and how they are going to be spent.

Commissioner MACINTYRE. I agree.

Senator KENNEDY. And I suppose that that is really what we are talking about. One of the areas that I have been trying to explore during the course of the morning is how those priorities are really established, and how the machinery for establishing them works.

Commissioner MACINTYRE. Perhaps that is so, Mr. Chairman, but the impression is getting around that the Commission is preoccupying itself with these particular laws where it should not be, that it ought to be on some other law, that it ought to be doing something else. And with that sort of an idea I thoroughly disagree.

I think we ought to come to Congress and tell it that it should repeal or cut back these laws if we feel that way, although that is not my feeling.

Now, on the question that you just raised about how we have reordered some of the allocations under these particular laws, because there has been I think a wrongful impression left by some things that have been said by some of my colleagues about it, I would like to tell you that for the fiscal year 1970 in which we are now, that on flammable fabrics-the Textile Fiber Identification Act, the Wool Labeling Act, the Fur Products Labeling Act, and all of their administration, those four laws have not been allocated for 1970, but $1,800,000 of the Commission's total appropriations.

This is to be contrasted with $2,307,000 for deception in other areas. And, after all, these laws, except for the flammable fabrics, all of them that I mentioned, are antideceptive laws, laws against the deception of the consumer.

If the question is one of deciding to protect a consumer from buying a shoddy garment because it is mislabeled or protecting him from a deceptive magazine sales scheme, I would give priority to the deception involving the basic necessity of clothing.