David Peyser Sportswear, Inc., et al.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF DAVID PEYSER SPORTSWEAR INC. ET AL.

CONSENT ORDER, ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION, THE WOOL PRODUCTS LABELING AND THE TEXTILE FIBER PRODUCTS IDENTIFICATION ACTS Docket C-l079. Complaint, June 30, 1966-Decision, June 30, 1966 Consent order requiring a New York City seller of sport jackets and coats and its manufacturing subsidiary, to cease misbranding its wool and textile fiber products, and deceptively advertising and furnishing false guaranties on such products.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, the Wool Products Labeling Act of 1939 and the Textie Fiber Products Identification Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that David Peyser Sportswear, Inc., and Jacana Sportswear Co., Inc., corporations, and Paul Peyser, individually and as an offcer of said corporations, hereinafter referred to as respondents, have violated the provisions of said Acts and the Rules and Regulations promulgated under the Wool Products Labeling Act of 1939 and the Textile Fiber Products Identification Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent David Peyser Sportswear, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York. Its offce and principal place of business is located at 142 Fifth Avenue, New York New York. Said corporate respondent sells men s and boys' sport coats and jackets manufactured by its subsidiary corporation Jacana Sportswear Co. Inc.

Complaint 69 F.

Respondent J acana Sportswear Co., Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York. Its offce and principal place of business is located at 142 Fifth Avenue, New York, New York. Individual respondent Paul Peyser is an offcer of the said corporations and formulates, directs and controls the acts, practices and policies of the said corporations. He manages the production of the products referred to herein. His offce and principal place of business is the same as that of said corporations. PAR. 2. Subsequent to tb.e effective date of the Wool Products Labeling Act of 1939, respondents have manufactured for introduction into commerce, introduced into commerce, sold, transported, distributed, delivered for shipment, shipped, and offered for sale in commerce, as "commerce" is defined in said Act, wool products as "wool product" is defined therein. PAR. 3. Certain of said wool products were misbranded by the respondents within the intent and meaning of Section 4 (a) (1) of the Wool Products Labeling Act of 1939 and Rules and Regulations promulgated thereunder, in that they were falsely and deceptively stamped, tagged, labeled or otherwise identified with respect to the character and amount of the constituent fibers contained therein.

Among such misbranded wool products, but not limited thereto were jackets stamped, tagged, labeled, or otherwise identified by respondents as 80 % Wool, 20 % other fibers, whereas in truth and in fact, said products contained substantially different fibers and amounts of fibers than represented.

PAR. 4. Certain of said wool products were further misbranded by respondents in that they were not stamped, tagged, labeled, or otherwise identified as required under the provisions of Section 4(a) (2) of the Wool Products Labeling Act of 1939 and in the manner and form as prescribed by the Rules and Regulations promulgated under said Act.

Among such misbranded wool products, but not limited thereto was a wool product with a label on or affxed thereto which failed to disclose the percentage of the total fiber weight of the said wool product, exclusive of ornamentation not exceeding 5 % of the total fiber weight, of (1) wool; (2) reprocessed wool; (3) reused wool; (4) each fiber other than wool present in the wool product when said percentage by weight of such fiber was 5 % or more; and (5) the aggregate of all other fibers. PAR. 5. Certain of said wool products were misbranded in viola- DAVID PEYSER SPORTSWEAR, INC., ET AL. 1069 1067 Complaint tion of the Wool Products Labeling Act of 1939 in that they were not labeled in accordance with the Rules and Regulations promulgated thereunder in the following respects: (a) Wool products were offered or displayed for sale or sold to purchasers or the consuming public and the required stamp, tag, label and other mark of identification attached to the said wool product and the required information contained therein, was minimized, rendered obscure and inconspicuous, and placed so as likely to be unnoticed or unseen by purchasers and purchaserconsumers by reason of, among others, failure to use letters and numerals of equal size and conspicuousness, in violation of Rule 11 of the aforesaid Rules and Regulations.

(b) The respective percentages of fibers contained in the face and in the back of pile fabrics were not set out in such a manner as to give the ratio between the face and the back of such fabrics where an election was made to separately set out the fiber content of the face and back of wool products containing pile fabrics, in violation of. Rule 26 of the aforesaid Rules and Regulations. PAR. 6. The acts and practices of the respondents as set fmth above were, and are in violation of the Wool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commission.

PAR. 7. Subsequent to the effective date of the Textie Fiber Products Identification Act on March 3, 1960, respondents have been and are now engaged in the introduction, delivery for introduction, manufacture for introduction, sale, advertising, and offering for sale, in commerce, and in the transpmtation or causing to be transported in commerce, and the importation into the United States, of textie fiber products; and have sold, offered for sale advertised, delivered, transported and caused to be transported, textile fiber products, which had been advertised or offered for , de- sale in commerce; and have sold, offered for sale, advertised livered, transported and caused to be transported, after shipment in commerce, textie fiber products, whether in their original state or contained in other textile fiber products; as the terms "commerce" and "textile fiber product" are defined in the Textile Fiber Products Identification Act.

PAR. 8. Certain of said textile fiber products were misbranded by respondents in that they were not stamped, tagged, labeled or Complaint 69 F.

otherwise identified as required under the provisions of Section 4 (b) of the Textile Fiber Products Identification Act and in the manner and form as prescribed by the Rules and Regulations promulgated under said Acts.

Among such misbranded textile fiber products, but not limited thereto, were textie fiber products without labels and textile fiber products with labels which failed to show in words and figures plainly legible the correct generic name of the fibers present. PAR. 9. Certain of said textie fiber products were misbranded in violation of the Textie Fiber Products Identification Act in that they were not labeled in accordance with the Rules and Regulations promulgated thereunder in the following respects: (a) Samples, swatches, and specimens of textile fiber products subject to the aforesaid Act, which were used to promote or effect sales of such textile fiber products, were not labeled to show their respective fiber content and other information required by Section 4 (b) of the Textie Fiber Products Identification Act and the Rules and Regulations promulgated thereunder, in violation of Rule 21 (a) of the aforesaid Rules and Regulations. (b) The fiber content of textile pile fabrics or products composed thereof was set forth in such segregated form as to show the fiber content of the face and of the back, without setting forth the percentages of respective fibers as they exist in the face and back in such a manner as to give the ratio between the face and back of the aforesaid fabrics or products, in violation of Rule 24 of the aforesaid Rules and Regulations.

PAR. 10. Certain of said textile fiber products were falsely and deceptively advertised in that respondents, in making disclosures or implications as to the fiber content of such textile fiber products in written advertisements used to aid, promote and assist, directly or indirectly, in the sale or offering for sale of said products, failed to set forth the required information as to fiber content as specified by Section 4(c) of the Textie Fiber Products Identification Act and in the manner and form prescribed by the Rules and Regulations promulgated under said Act. Among such textile fiber products, but not limited thereto, were jackets which were falsely and deceptively advertised by means of brochures distributed by respondents throughout the United States in that fiber implying terms were used to describe such jackets and the true generic names of the fibers in such jackets were not set forth in immediate conjunction therewith. PAR. 11. By mens of the aforesaid advertisements and others DAVID PEYSER SPORTSWEAR, INC., ET AL. 1071 1067 Decision and Order of similar import and meaning not specifically referred to herein respondents falsely and deceptively advertised textile fiber products in violation of the Textie Fiber Products Identification Act in that said textie fiber products were not advertised in accordance with the Rules and Regulations promulgated thereunder in the foJ1owing respects:

(a) Fiber trademarks were used in advertising textile fiber products containing more than one fiber, other than permissive ornamentation, and such fiber trademarks did not appear in the required fiber- content information in immediate proximity and conjunction with the generic name of the fiber in plainly legible type or lettering of equal size and conspicuousness, in violation of Rule 41 (b) of the aforesaid Rules and Regulations. PAR. 12. Respondents have failed to maintain proper records showing the fiber content of the textie fiber products manufactured by them, in violation of Section 6 (a) of the Textie Fiber Products Identification Act and Rule 39 of the Regulations promulgated thereunder.

PAR. 13. The respondents have furnished false guaranties that their textile fiber products were not misbranded or falsely and deceptively invoiced or advertised, in violation of Section 10 (b) of the Textie Fiber Products Indentification Act. PAR. 14. The acts and practices of respondents, as set forth in , in viola- Paragraph Eight through Thirteen above were, and are tion of the Textie Fiber Products Identification Act and the Rules and Regulations promulgated thereunder, and constituted and now constitute unfair methods of competition and unfair and deceptive acts or practices, in commerce, under the Federal Trade Commission Act.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau of Textiles and Furs proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act, the Wool Products Labeling Act of 1939 and the Textile Fiber Products Identification Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an ad- Order 69 F.

mission by the respondents of ajj the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by the respondents that the law has been violated as alleged in such complaint, and waivers and provisions as required by the Commission s rules; and The Commission, having reason to believe that the respondents have violated said Acts, and having determined that complaint should issue stating its charges in that respect, hereby issues its complaint, accepts said agreement, makes the following jurisdictional findings, and enters the following order: 1. Respondent David Peyser Sportswear, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its offce and principal place of business located at 142 Fifth Avenue, New York, :'ew York. Respondent Jacana Sportswear Co., Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its offce and principal place of business located at 142 Fifth Avenue, New York, New York. Respondent Paul Peyser is an offcer of the said corporations and his address is the same as that of the said corporations. 2. The Federal Trade Commission has jurisdiction of the subj ect matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER , Inc. It is ordered, That respondents David Peyser Sportswear and Jacana Sportswear Co. Inc., corporations, and their offcers, and Paul Peyser, individually and as an offcer of said corporations, and respondents' respresentatives, agents and employees in connection directly or through any corporate or other device, with the introduction or manufacture for introduction into com- , distribution merce, or the offering for sale, sale, transportation or delivery for shipment or shipment in commerce, of wool jackets or other wool products, as "commerce" and "wool product" are defined in the Wool Products Labeling Act of 1939, do forthwith cease and desist from:

A. Misbranding such products by:

1. Falsely and deceptively stamping, tagging, labeling or otherwise identifying such products as to the character or amount of the constituent fibers contained therein. DAVID PEYSER SPORTSWEAR, INC., ET AL. 1073 1067 Order 2. Failing to securely affx to, or place on, each such product a stamp, tag, label, or other means of identification showing in a clear and conspicuous manner each element of information required to be disclosed by Section 4(a) (2) of the Wool Products Labeling Act of 1939. 3. Affxing or placing the stamp, tag, label or mark of identification required under the said Act or the information required by said Act and the Rules and Regulations promulgated thereunder on wool products in such a manner as to be minimized, rendered obscure or inconspicuous or so as to be unnoticed or unseen by purchasers and purchaser consumers, when said wool products are offered or displayed for sale or sold to purchasers or the consuming public.

4. Failing to set forth respective percentages of fibers contained in the face and back of pile fabrics in such a manner as to give the ratio between the face and back of each such fabric when an election is made to separately set out the fiber content of the face and back of pile fabrics containing wool or of pile fabrics incorporated in wool products.

It is further ordered That respondents David Peyser Sportswear, Inc., and Jacana Sportswear Co. Inc. , corporations, and their offcers, and Paul Peyser, individually and as an offcer of said corporations and respondents' representatives, agents and employees, directly or through any corporate or other device, in connection with the introduction, delivery for introduction, sale advertising, or offering for sale, in commerce, or the transportation or causing to be transported in commerce, or the importation into the United States of any textie fiber product; or in connection with the sale, offering for sale, advertising, delivery, transportation or causing to be transported, of any textile fiber product, which has been advertised or offered for sale in commerce; or in connection with the sale, offering for sale, advertising, delivery, transportation, or causing to be transported, after shipment in commerce, of any textie fiber product, whether in its original state or contained in other textile fiber products, as the terms commerce" and "textie fiber product" are defined in the Textie Fiber Products Identification Act, do forthwith cease and desist from:

A. Misbranding textile fiber products by: Order 69 F.

1. Failng to affx labels to such textie fiber products showing in a clear, legible and conspicuous manner each element of information required to be disclosed by Section 4 (b) of the Textile Fiber Products Identification Act.

2. Failing to affx labels showing the respective fiber content and other required information to samples swatches and specimens of textile fiber products subject to the aforesaid Act which are used to promote or effect sales of such textie fiber products.

3. Failing to set forth percentages of the respective fibers as they exist in the face and back of pile fabrics in such a manner as to give the ratio between the face and back of each such fabric when an election is made to separately set out the fiber content of the face and back of such textile pile fabric or product composed thereof. B. Falsely and deceptively advertising textile fiber products by:

1. Making any representations by disclosure or by implication of the fiber contents of any textile fiber product in any written advertisment which is used to aid, promote, or assist directly or indirectly in the sale or offering for sale of such textile fiber product unless the same information required to be shown on the stamp, tag, label or other means of identification under Section 4 (b) (1) and (2) of the Textile Fiber Products Identification Act is contained in the said advertisement, except that the percentages of the fibers present in the textile fiber product need not be stated.

2. Using a fiber trademark in advertising textie fiber products containing more than one fiber without such fiber trademark appearing in the required fiber content information in immediate proximity and conjunction with the generic name of the fiber in plainly legible type or lettering of equal size and conspicuousness. C. Furnishing false guaranties that textile fiber products are not misbranded or falsely invoiced under the provisions of the Textile Fiber Products Identification Act. D. Failing to maintain records of fiber content of textile fiber products manufactured by them, as required by Section DAVID PEYSER SPORTSWEAR, INC., ET AL. 1075 1067 Order 6 (a) of the Textile Fiber Products Identification Act and Rule 39 of the Regulations thereunder.

It is further ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with this order.

INTERLOCUTORY, V ACA TING, AND MISCELLANEOUS ORDERS MODERN MARKETING SERVICE, INC., ET AL.

C. H. ROBINSON COMPANY AND NASH-FINCH COMPANY Dockets 3783 , 4589. Order and Opinion, Jan. , 1966 Order denying respondents' request for a subpoena duces tecum directed to the Secretary of the Commission requiring him to produce intraagency memoranda and other Commission and staff documents relating to attempted industrywide enforcement of Sec. 2(c) of the Clayton Act in the Fresh Fruit and Vegetable Industry.

OPINION OF THE COMMISSION This matter is before the Commission on the certification by the hearing examiner appointed to preside over the investigational hearings in the above-entitled proceedings of a request by respondent, Kash-Finch Company, submitted on Kovember , 1965, for a subpoena duces tecum. The subpoena would require Joseph W. Shea, Secretary of the Commission, to appear and produce certain generally described intra-agency memoranda and other documents prepared by the Commission s staff, individual Commissioners and the Commission, including several Commission minutes, pertaining to Docket No. 3783 and Docket No. 4589, and certain other such writings pertaining to the Commission s activities in the area of its attempts to effectuate industrywide enforcement of Section 2 (c) of the Clayton Act as amended, in the Fresh Fruit and Vegetable Industry. The Commission s order directing an investigation to determine whether respondents C. H. Robinson Company and N ash- Finch Company have violated the provisions of a cease-and-desist order entered under Section 2 (c) of the amended Clayton Act on January 6, 1947 (43 F. C. 297J,' was issued on February 1 1 That order provides:

I. It is ordfired.That the re pondent C. 1-1. Robinson Company and it!! offcers, agents, H'pregentatives, and employees, directly or through any corporate or other device. in connection with the purchase of fruits, vegetables, and other commodities in commerce as "commerce" is defined in the aforesaid Clayton Act, do forthwith cease and desist from- 1963 (62 F. C. 1486). Fo1Jowing the termination of court proceedings in this matter ' Commission counsel moved the Commission to amend its order to include an investigation of respond- Ent Nash-Finch' s compliance with the provisions of a cease-anddesist order issued under Section 2 (c) on September 8, 1943. Respondent, Nash-Finch filed an answer in opposition to this motion and moved that this proceeding be terminated. On June , 1965 , the motion of Commission counsel was granted, respondent' s motion was denied, and the amended order issued. Respondent contends that the documents specified in the subpoena are necessary for the presentation of its defense in two respects. First, respondent contends that the documents contain information relevant to its contention that the cease-anddesist orders in Dockets 4589(43 F. C. 297) and 3783 (37 F. 386) do not cover the practices cha1Jenged by Commission counsel. In this regard, respondent takes the position that the order in Docket No. 4589 deals solely with receipt of brokerage by Nash- Finch on its own purchases through C. H. Robinson Company, a North Dakota corporation owned by Nash-Finch. As to Docket 1. Receiving' or accepting from any seller, directly Of indirectly, anything of value BS a commission or brokerage, or any compensation, allowance, or discount in lieu thereof. on or in connection with purchases made by nspondent )rash-Finch Company while acting under the control of and in fact for and on behalf of said respondent Nash-Finch Company. 2. Receiving or accepting from any seller, directly or indirectly, BTlything of value as a commission or brokerage, or any compensat;ol', alo\vance. or discount in lieu thereof, on or in connection with purchases made for respondent's own account or while acting for or in behalf of a purchaser as nil intermediary or agent or subject to the direct or indirect control of such purchaser.

3. Payin", transmitting. or delivering to or for the benefit of any purchaser, either directly in the form of money or credits or indirectly in the form of dividends, or otherwise, any commission or brokerage, or any compensation, allowance, or discount in lieu thereof, received from any seller while acting as an intermediary or agent for such purchaser or while subject to the direct or indirect control of such That the l'spondent p\.rchaser.Nash-Finch Company and its offcers, a"ents, II. It iB further ordered, representatives, and employees, directly or through any corporate or other device in connection with the purchase of fruits. vegetables, and other commodities in commerce as "commerce" is defined in the aforesaid Clayton Act, do forthwith cease and desist from- 1. Receiving or accepting from any seller, directly or indirectly, anything of value as a commission or brol,erage, or any compensation, aiiowance, or discount in lieu t1?ereof, on or in connection with purchases made for respondent's own account, either directly or by or through respondent C. H. Robinson Company. 2. Receiving or accepting from responuent C. H. Robinson Company, either directly in the form of money or credits or indirectly in the form of dividends, or otherwise; any commission or brokerage, or any compensation, allowance, or discount in lieu thereof, received by said C. H. Robinson Company from any seller while actin" for or in behalf of said respondent Nash.Finch Company as an intermediary or agent for said respondent or while subject to the direct or indirect control of said respondent. Nash-Finch Co. v, Federal Trade Commission, 233 F. Supp. 910 (D. Minn. 1964). 3 By the terms of that oruer, respondent ::ash.Finch Company and its offcers, agents, representatives and employees, in connection with the purchase by fmch responuent of commodities in commerce, as commerce is defined in the Clayton Act, were ordered to cease and desist fromreceiving or accepting from the sellers of such commodities, directly or indirectly, any brokerage fee, commission, or other compensation, or any allowance or discount in lieu thereof. &.

INTERLOCUTORY ORDERS, ETC. 1079 No. 3783, it is respondent's position that the order deals only with a group purchasing program, that Nash-Finch was named only as representative of a number of wholesalers who owned stock in the buying organization, and that, hence, the order has nothing to do with the individual acts of Nash-Finch. Respondent contends that none of the transactions as to which Commission counsel has introduced evidence in this investigational hearing relate to the practices prohibited by the two orders, as thus interpreted.

Second, respondent contends that the documents are necessary to support its asserted defense that the prosecution of this proceeding is not in the public interest inasmuch as "it involves the harassment of a single company when its competitors have been allowed to effect compliance with Section 2 (c) through acceptance of industrywide rules promulgated by the Federal Trade Commission during the past year.

In his certification, the hearing examiner indicated a belief that the requested documents are not only confidential and privileged but have "no relevancy to the issues involved in whether the respondent violated the orders of the Commission proscribing respondent' s acceptance of brokerage. " He concluded that respondent had failed to show good cause in the application for the requested subpoena and recommended that it be denied. The documents requested by the respondent include staff memoranda and recommendations, and Commission minutes memoranda and directives as well as the writings of individual Commissioners, leading to the issuance of the complaints and orders in the two matters under investigation and to reports of compliance with the orders. All of these documents are classified as confidential under S 1.133 of the Commission s Rules of Practice. Under S 1.134 of the Rules, such documents can be made public only by the Commission and only upon a showing of good cause, due consideration being given to the public interest in allowing such disclosure. As we have stated in the Macy case a request for confidential information made to a hearing examiner in the course of a litigated proceeding will be treated as an application under S 1.134.

We first consider respondent' s contention that certain of the documents are relevant to its defense that the transactions under investigation do not come within the scope of the two orders. Thus, it would appear that, in substance, respondent proposes R. H. Macy Co. , Inc. Doe.ket Ko. 8650, September 30 , 1965, petition for decla.ratory judgment dismissed, Civil o. 2707-65 (D. C. Dec. 17, 1965). to establish this defense by probing the deliberative processes of the Commission in formulating a proper order Of vital importance to an issue as to the scope of an order is the wen-established principle that the Commission has wide discretion to formulate a remedy adequate to prevent repetitions of a violation. ' Of particular significance here is the decision in the Western Fruit Growers case wherein the court, in sustaining a broad order issued under Section 2 (c), relied upon the holding by the Supreme Court to the effect that the Commission is not limited to prohibiting an megal practice in the precise form existing in the past but may fashion its relief to restrain other like or related unlawful acts.

Turning to respondent's request for a subpoena, we find that other than its own assertions as to the scope of the orders, the only bases it has advanced in support of its request are an affdavit attached to its motion to terminate, filed on April 26, 1965, and certain compliance reports which it has introduced in evidence in this proceeding. The affdavit is that of an attorney who served as counsel for respondent in the proceeding in Docket No. 4589. Giving fun credit to this affdavit, we find that it asserts only that in affant's dealing with the staff, the staff was solely concerned with respondent's ownership of stock in C. H. Robinson and the possibiliy that respondent might be paid dividends from brokerage received by C. H. Robinson respondent' s purchases.

These assertions do not provide suffcient cause for releasing the requested documents. Obviously, the staff' s primary concern would be "the megal practice in the precise form" , in which it then existed, and not related practices not then before it. Moreover, it is wen established that "The responsibility of decision is upon the Commission alone '" and that the staff' s action would in no way bind the Commission as to the scope of the order. As to staff memoranda and correspondence relating to compliance reports and the receipt and filing thereof, it is obvious that these documents cannot serve to limit the scope of the orders as to practices not therein considered. Respondent does not contend that any of the transactions involved in this investigation were the subject of a compliance report accepted by the Commission.

6 Jacob Siegel Co. v. Federal Trade. Commission, 327 "U.S. 608 (1946). Western Fruit Growers Sales Co. v. Federal Trade Commu.sion 322 F. 2u 67 (8th Gir. 1963). Federal Trade Commission v. Ruberoid Co. 343 U. S. 470 (1952). SJn the mtLtter of Carpel Frolited Food, Inc" Docket No. 5482, 48 F. C. 581 (1951). iP. UJTilard Co. v. Federal Trade Commil!sion 186 F. 2d 52 (4th Gir, 1950). INTERLOCUTORY ORDERS, ETC. 1081 With respect to minutes, memoranda, directives, recommendations or other writings of the Commission or any individual Commissioner, these documents relate solely to the Commission function in reaching a decision. In effect, by requesting these documents, respondent would inquire into the mental processes of the Commission in determining the scope of the orders under investigation. In denying the right to such inquiry, the Supreme Court in the MOTgan case" has stated that " Such an examination of a judge would be destructive of judicial responsibilty. * * * Just as a judge cannot be subjected to such a scrutiny, * * * so the integrity of the administrative process must equally respected. " In a case involving the National Labor Relations Board, the court had aptly pointed out that if information as to the deliberations of an administrative agency were made public "The function of deciding controversies might soon be overwhelmed by the duty of answering questions about them. " H Considering respondent's arguments and weighing them against the public interest in preserving the confidentiality of information dealing with internal agency operations, we conclude that respondent has failed to show good cause for the release of the documents requested in support of its defense as to the limited scope of the orders.

We turn next to respondent's contention that certain documents are needed to support its defense of "harassment." Specifically, respondent charges the Commission with "unequal enforcement" of the law and with having " arbitrarily singled out thisto effectrespondentvoluntaryfor prosecutioncompliance, whilebecauseallowingof theitsindustrywidecompetitors nature of problems arising under Section 2 (c). " In substance respondent states that after promulgation of Trade Practice Rules for the Fresh Fruit and Vegetable Industry (April 15 1965), the Commission forwarded cards to members of the industry requesting them to pledge that they would adhere to the rules. Respondent "requests confidential documents from the Commission s files to support its belief that the Commission has closed investigations involving its competitors upon receipt of signed pledges from them, while refusing to terminate this proceeding after receiving a card executed by Nash-Finch. We recently considered a request for confidential documents of a similar nature from a respondent to support its contention that the Commission had discriminated against it and in favor 10 United States v. Morgan, '313 U. S. 409 (1941). 11 Nationa Labor Relations Board v. Botany Worsted Mills, 106 F. 2d 263 (3d Cir. 1939). of its competitors in the enforcement of the Wool Products Labeling Act." The alleged discrimination there involved related to the issuance of a complaint against the respondent. In that case, we concluded that respondent had failed to show good cause and our position with respect to such matters was set forth, in part, as follows :

All that the respondent is challenging in effect is the Commission authority to exercise its discretion in the issuance of a complaint in this matter while administratively closing investigations in other matters with related charges. The Commission, however, is vested with discretion in bringing a complaint. Moir v. Federal Trade Commission 12 F. 2d 22, 28 (1st Cir. 1926), It has the administrative discretion to decide whether or not to proceed against individual respondents or on an industry-wide basis, and it alone is "empowered to develop that enforcement policy best calculated to achieve the ends contemplated by Congress. Moog lndustries v. Federal Trade Commission 355 U. S. 411 , 413 (1958). Also respondent has no "right" to the administrative treatment it here apparently seeks. Coro, Inc. v. Federal Trade Commission 338 F. 2d 149 (1st Cir. 1964). Clearly, an assertion of a difference in treatment alone does not create an issue of the denial of due process. RespondeDt's claim of alleged difference of treatment does not create or even suggest any inference or even a suspicion that the Commission action was in any way the result of discrimination or bias, conscious or unconscious, intentional or unintentional. The mere assertion of such a plea without more, cannot enable a respon.dent to interrogate Commission employees or to rummage through investigative reports and staff memoranda in the hope that something will turn up to support the claim. The matter before us goes beyond the question of whether to issue a complaint. Respondent, Nash-Finch, is bound under two outstanding orders to cease and desist. The Commission has reason to believe that it may have violated the provisions of these orders and, pursuant to its authority and public duty, has ordered investigational hearings.

In substance, respondent's defense would have the Commission terminate a proceeding inquiring into its compliance with the actual prohibitions of two orders on the grounds that it, together with its competitors, has signed a card pledging to abide by a trade practice rule. However, respondent denies that the practices which are the subject of this inquiry are i1ega!. Moreover, it is to be noted that nowhere in its present request does respondent claim that the products covered by the trade practice rule are the only products involved in the transactions under investigation. In support of its request, respondent quotes that part of a recent address by Commissioner Jones dealing with industry- 12 R. H. Macy Co., Inc., Docket No. 8650, September 30, 1965 , petition for decla.ratory judgment dismissed, Civil No. 2707-65 (D. C, Dec. 17, 1965). INTERLOCUTORY ORDERS , ETC. 1083 wide enforcement. Under the facts before us, we think that the fo1Jowing is a more appropriate quote from that speech: The Commission s case-by-case technique of law enforcement is of major importance in stopping law violations and defining through its decisions the conduct which it regards as violative of the statutes. It is also an imperative in maintaining respect for those laws and in achieving voluntary compliance with them. Failure to enforce the law s prohibitions promptly and impartially cad only breed disrespect and encourage disregard of the law s strictures. Moreover, for the great majority of business which keeps its conduct within the law, it is essential that law violations be promptly proceeded against as a simple matter of fairness if nothing more. We are of the opinion that respondent has failed to provide suffcient cause for the release of documents to support a defense of unequal treatment.

An appropriate order wi1 be entered.

Commissioner Elman did not concur.

Commissioner MacIntyre did not participate. ORDER RULING ON QUESTION CERTIFIED This matter having come before the Commission on the certification by the hearing examiner appointed to preside over the investigational hearings in the above-entitled proceedings of the question as to the issuance of a subpoena duces tecum, and the Commission having determined that the subpoena should not be issued:

It is ordered That the hearing examiner be, and he hereby , instructed not to issue the subpoena duces .tecum requested by respondent on November 19, 1965, requiring Joseph W. Shea to appear and to produce certain Commission documents. Commissioner Elman not concurring and Commissioner MacIntyre not participating.

ASSOCIA TED MERCHANDISING CORPORATION ET AL Docket 8651. Order and Opinion, Jan. 19, 1966 Order directing General Counsel to prepare papers for transmittal to Attorney General requesting him to initiate civil enforcement proceedings against respondents requiring them to comply with hearing examiner s order of August 12, 1965.

DISSENTING OPINION BY ELMAN Commissioner:

Assuming that the hearing examiner s order for production of 13 Address by Commissioner Mary Gardiner Jones before the Bar Aseodation of the District of Columbia, Washingkm, D,C. (February 25. 1965). documents was within his discretion and should have been obeyed by respondents, it does not necessarily foHow that the Commission should initiate a civil enforcement action pursuant to Section 9 of the Federal Trade Commission Act. Section 3. 12 of the Commission s Rules of Practice provides that, in the case of refusals to comply with hearing examiners' directions, the matter shah promptly be certified by the examiner to the Commission which wi1 thereafter make such orders as the circumstances require. It is only after the Commission, upon due deliberation enters an order of its own that Section 9 of the Federal Trade Commission Act comes into play. Before invoking Section 9 such manner the Commission should weigh (1) the requirement of Section 6 (a) of the Administrative Procedure Act that every agency "shah proceed with reasonable dispatch to conclude any matter presented to it", and (2) the representations made to it by staff counsel, in connection with the Commission s prior consideration of offers of settlement, concerning the scope and length of the litigation which would ensue if the offers were rejected.

The Commission s action today wi1 bring this administrative proceeding to a halt for at least several years. The inevitable consequence wi1 be that, if and when this case is finaHy decided on the merits, the record wi1 be stale and the practices chaHenged in the complaint wil have changed or disappeared. In the circumstances presented, this trip to court is neither necessary nor desirable. I would direct the hearing examiner to proceed with all dispatch in going forward with the proceeding. ORDER DIRECTING THE GENERAL COUNSEL To PREPARE AND SUBMIT PAPERS TO THE COMMISSIOK REQTcESTlSG THE A'rTOR:-EY GENERAL TO INITIATE CIVIL EKFORCEMENT PROCEEDINGS Upon consideration of the hearing examiner s certification filed December 10 , 1965 , of the motion of complaint counsel the Commission has determined that the Attorney General of the United States should be requested to initiate a civil enforcement action pursuant to Section 9 of the Federal Trade Commission Act, 15 U. C. S 49, against respondents Associated Merchandising Corporation, Aimcee Wholesale Corporation, and Federated Department Stores, Inc., in conformity with the stipulation of the parties and the order of November 18, 1965, of the United States District Court for the District of Columbia, in Civil Action No. 2701- , to require compliance with the hearing examiner s order for production of documents issued August 12 INTERLOCUTORY ORDERS, ETC. 1085 1965, and that the General Counsel should prepare and submit to the Commission for its consideration and approval the necessary papers for transmittal to the Attorney General of the United States in connection therewith, accordingly: It is ordered That the General Counsel be, and he hereby is directed to prepare and submit to the Commission for its consideration and approval the necessary papers for transmittal by the Commission to the Attorney General of the United States requesting the latter to initiate civil enforcement proceedings under Section 9 of the Federal Trade Commission Act against the aforesaid respondents to require compliance with the hearing examiner s order of August 12, 1965, in conformity with the stipulation of the parties dated November 18, 1965, and the order of the United States District Court for the District of Columbia of the same date.

Commissioner Elman dissented and has filed a dissenting statement.

BEATRICE FOODS CO. AND THE KROGER CO. , INC. Docket 8663. Order and Opinion, Jan, 1966 Order modifying hearing examiner s order of Oct. 29 , 1965 , by striking therefrom the last sentence of numbered paragraphs 1 and 2 which constituted offcial notice of competitive injury; respondents' petition for rehearing of an interlocutory appeal denied. OPINION OF THE COMMISSION This matter is before the Commission on the interlocutory appeal of respondent The Kroger Co., Inc. (hereinafter referred to as Kroger), from the hearing examiner s order granting in part complaint counsel's request for offcial notice, and on the petition of both respondents to rehear their request to file an interlocutory appeal from the examiner s orders of October 25 and 26, 1965 , which request was denied by the Commission December 1, 1965. Complaint counsel has filed briefs in opposition to the appeal and to the request for rehearing. Kroger s Appeal Kroger argues (a) that the examiner s order violates the requirements of due process, the Administrative Procedure Act and the Commission s Rules of Practice, (b) that it is improper because it notices "facts" which are not the proper subject of offcial notice, and (c) that the "facts" noticed are not relevant to the proceeding.

The statements noticed by the examiner are as fo1Jows 1. The retail grocery business is a highly competitive one. Net profits are low; consequently cash discounts and other allowances are important. Price is a very important factor in enabling a food retailer to compete. A low price to some, hut not to all, competing retail stores in a city would normally be expected to hinder competition between them. 2. Milk is a staple, highly standardized, food item sold by virtually all food retailers. Substantial and continuous discrimination in price of a major grocery product, such as milk, creates a probabilty of competitive injury. that is, the a1Jeged On the first argument made by Kroger, violation of due process, the claim is that the examiner s order wil deprive Kroger of a fair hearing because (a) the order has the effect of improperly shifting the burden of proof to Kroger and (b) it denies Kroger the opportunity to test the validity of complaint counsel's case through cross-examination. N either point is persuasive. The Commission as an administrative body may take offcial notice of facts which are appropriate for such notice. Thus, it is entitled to rely on established general facts within the area of its expertise subject to a respondent' right to rebut. Brite Mrrnufrrcturing Co. v. Fedeml Trrrde Commission 347 F. 2d 477 (D. C. Cir. 1965). See also Mrrnco Watch Stmp Co. 60 F. C. 495 (1962) : The Drryton Rubber Comprrny, Docket No. 7604 (final order issued Aligust 5, 1964 (66 F. 423); on appeal before Sixth Circuit Court of Appeals. ) The taking of offcial notice is in no way inconsistent with the requirement of a fair hearing. A fair hearing is had where respondent is given adequate opportunity to rebut the facts noticed. A provision to this effect is contained in both the Administrative Procedure Act and the Commission s Rules of Practice.' Kroger of course, wil have such opportunity. Ohio Bell Tel. Co. v. Public , is Utilities Commission 301 U.S. 292 (1937), cited by Kroger not apposite since there, among other things, the company was denied an opportunity to explain or rebut. By using offcial notice which does not require the presentation of witnesses, there necessarily is no opportunity for cross examination on the partic- 1 See Administrative Procedure Act 7(d), 5 V. C. l006(d): " "Were any ag"ency decision rests on offcial notice of a mat€ria! fact not appearing in the evidence in the record, any party shall on timely request be afforded an opportunity to show the contrary. " Federal Trade Commission Rules of Practice 14 (d): "\Vhen any decision of a hearing examiner or of the Commission rests, in whole or in part, upon the taking of offcial notice of a material fact not appearing in evidence of record, opportunity to disprove such noticed fact shall be granted any party making timely motion therefor. INTERLOCUTORY ORDERS , ETC. 1087 ular item of evidence noticed. However, as indicated, Kroger right to rebut or explain is fully protected and, thus, the requirement of due process is satisfied. Also, there is no shift in the burden of proof in the taking of offcial notice as claimed by Kroger; there is merely a change in the initiative in going forward with the evidence. See Dayton Rubber Company, supra (Slip Opinion, page 10) (66 F. C. 459J. The other two arguments raised on the appeal, that is, that the "facts" noticed are not the proper subject of offcial notice and that they are not relevant to the proceeding are related and wi1 be disposed of together in the paragraphs below. In contesting the offcial notice taken by the examiner, Kroger appears to be essentially concerned with (a) the last sentence in each of the two paragraphs noticed, which sentences are in the nature of conclusions as to probable competitive injury and (b) with the factual propositions set forth in the first paragraph which Kroger states suggest a judgment that price is a paramount factor in enabling a food retailer to compete. Kroger, so far as we can see, has not seriously contested the merits of the factual propositions noticed otherwise except to generally assert that markets are different and broad generalizations do not apply. The latter claim is the basis for Kroger s argument that the facts noticed are not relevant.

Taking first the argument referred to under (b) above, the claim that the statements suggest that price is a "paramount factor" in enabling a food retailer to compete, we observe that no such fact is expressly noticed and we do not read into the statements any such meaning. It is noticed only that price is a very important factor" in such connection. Factual propositions of which notice has been taken, not including the conclusionary sentences, are that the retail grocery business is highly competitive; that net profits are low, consequently cash discounts and other allowances are important; that price is a very important factor in enabhng a food retailer to compete; and that milk is a staple, hig-hly standardized food item sold by virtually a1l food retailers. Findings to this effect have been made in a number of prior Commission cases dealing both with grocery products generally and the dairy line in particular. These, we believe, are estabhshed general facts within the area of the Commission s expertise.

In Tri- Valley Packin,q Association 60 F. C. 1134, 1181 (1962), the Commission found that the grocery business is highly competitive, that the markups at various levels of distribution are affected by competition and that the percentage of return on large volumes of sales is small. The Court of Appeals for the Ninth Circuit, in Tri- Valley Packing Association v. Federal Trade Commission 329 F. 2d 694, 703 (9th Cir. 1964), in remanding the case to the Commission on other grounds, in part observed:

. . . There was testimony that those engaged in the resale of such products operate on a very narrow margin so narrOlV , in fact, that it is essential to take advantage of two per cent discounts for cash. The price discriminations, on the other hand, ranged from two per cent to ten per cent.

This would indicate that nonfavored retailers, and retailers who purchased from nonfavored wholesalers, were required to maintain retail prices at least two per cent higher than those of favored retailers in order to realize any appreciable profit on retail sales. In view of the highly competitive nature of the business, price disparities of this kind could well endanger the ability of these merchants to compete with favored retailers, or so the Commission-could find.

In United Biscuit Co. of America Docket No. 7817 (February 1964) (64 F. C. 586J, the Commission found that independent store owners testified generally as to the highly competitive nature of the retail food business and that net profits are low and cash discounts and other aJ10wances are important. The Court of Appeals for the Seventh Circuit, in affrming the Commission decision in United Biscuit Co. of America v. Feden)) Trade Commission 350 F. 2d 615 (7th Cir. 1965), specifically approved these findings. The Commission, in F1'uitvale Canning Company, 52 F. C. 1504, 1514 (1956), agreed with the hearing examiner s finding that the grocery business is vigorously and highly competitive, that markups on fast-moving items such as canned fruits are low, and that price is the chief factor in making sales. In F01' emost Dai1'ies, Inc. Docket No. 7475 (May , 1963) (62 F. C. 1344), the Commission adopted findings in the initial decision as to competitive effects, including those stating that milk is a staple, highly standardized food item sold by virtually aJ1 food retailers, that competition is keen among retailers and margins of profits and markups are small and that a lower price to some but not aJ1 competing retail stores in the market in question would normally be expected to hinder competition between them. In affrming, the Fifth Circuit Court Appeals, in Foremost Dairies, Inc. v. Federal TTade Commission 348 F. 2d 674, 679 (5th Cir. 1965), stated in part as follows: INTERLOCUTORY ORDERS , ETC. 1089 There is also testimony from which the Commission could infer what are well-known facts-that profit margins in the sale of fluid milk are relatively low and that competition in the sale of milk at retail is quite lively. (Emphasis supplied.

See also Page Dairy Company, 50 F. C. 395, 398 (1953) in which the Commission found that "In the sale of milk to the consuming public the gross margin of profit is very narrow. Therefore, any appreciable difference in price has the tendency to divert business from one se1Jer to another. The Commission in making its determination here additional1Jy draws upon the experience and knowledge gained not only from the many other actions it has taken in the grocery and dairy industries but also from the general inquiries and studies it has made in both fields.

Kroger suggests, though mainly, it seems, as to the conclusionary statements on injury, that markets are different and that the general statements may not apply in the geographic market involved in the complaint, Le. , Charleston, West Virginia. The conclusionary statements wil be considered below and as to the remaining statements the argument is rejected. The doctrine of notice, of course, recognizes the possibility of exceptions and that is why a respondent must be provided with the opportunity to rebut the noticed facts. Kroger wil be provided that opportunity.

In the circumstances, we believe that we may take offcial notice of and rely upon the factual propositions mentioned (i. a1J except the last sentence in each paragraph noticed) as established general facts within the area of the Commission expertise subject, of course, to respondents ' right to rebut. Brite Manufacturing Co. v. Federal Trade Commission, supra. The last sentence in each of the paragraphs noticed are in a somewhat different category from the other statements because they appear to be as much conclusionary as factual. The first which reads: "A low price to some, but not to a1l, competing retail stores in a city would norma1Jy be expected to hinder competition between them " appears to be drawn from a holding .in a prior case. See Commission opinion in Foremost Dairies Inc. Docket No. 7475 (May 23, 1963) (62 F. C. 1344). The statement, divorced from the factual circumstances in which a similar statement was made, is not suffciently meaningful to warrant the taking of offcial notice.

, p.

Coming then to the last sentence, we observe that it states as fo1Jows: "Substantial and continuous discrimination in price of a major grocery product, such as milk, creates a probability of competitive injury. " This statement appears to be a paraphrase of a conclusionary finding by the Commission in Foremost Dairies, Inc., supra as follows: " The probability of competitive injury resulting from such a substantial and continuous discrimination in the price of a major grocery product is manifest. (Opinion 1361.) It also follows closely, though not exactly, the test for competitive injury in a secondary line matter pronounced by the United States Supreme Court in Federal Trade Commission v. Morton Salt Co. 334 U. S. 37, 50 (1948). There the Court said it believed it to be self-evident that there is a "reasonable possibility" that competition may be adversely affected by a practice under which manufacturers and producers sell their goods to some customers substantia1Jy cheaper than they sell like goods to the competitors of these customers. This is precedent for the Commission in making its final determination, and specific offcial notice of such precedent is unnecessary. Moreover, this last sentence in the second paragraph is a statement which, if the conditions mentioned therein are found to exist, decides a major issue in the case the probability of competitive injury. In the circumstances here, we believe this determination should be made on the basis of the whole record upon the completion of the proceedings and not as a matter of offcial notice. Accordingly, on the last sentence in each of the two paragraphs of the offcial notice taken by the examiner Kroger s appeal is granted, and it is otherwise denied. Respondents' Request for Rehearing Respondents have filed a petition in this matter requesting a rehearing on the Commission s order of December 1 , 1965 (68 C. 1231), denying their request for permission to file an interlocutory appeal from the examiner s orders of October 25 and 26 1965. The examiner s orders granted complaint counsel's request for the production of documents and denied requests of respondents for an early trial and, alternatively, to dismiss the complaint. Respondents have presented no new arguments nor have they shown a change in circumstances to justify granting their request for a rehearing, and accordingly it wi1 be denied. An appropriate order wil be entered.

Commissioner Elman dissented and has fied a dissenting statement.

INTERLOCUTORY ORDERS , ETC. 1091 DISSENTING OPINION BY ELMAN Commissioner:

If indeed it were the Commission s objective to stretch out this case as long as possible, no action would be better calculated to achieve that result than issuance of the present order. Instead of proceeding with reasonable dispatch to a conclusion of the case (see Section 6 (a) of the Administrative Procedure Act), the Commission wiJ now become embroiled in another protracted litigation over unimportant collateral issues. Cf. Associated Merchandising Corporation Docket No. 8651 (Order issued January 19, 1966) (p. 1083 herein). I agree with respondents that the Commission is improperly invoking the doctrine of offcial notice as a substitute for "adequate probative analysis" and "realistic appraisals of relevant competitive facts (F. C. v. Sun Oil Co. 371 U. S. 505, 527). But even if respondents are wrong and it should ultimately be held after years of litigation that these facts" may be offcially noticed, the game would not be worth the candle. If, as the Commission thinks, these are ali "established general facts within the area of the Commission s expertise and "self-evident " the burden of proving such facts would appear to be minimal. Does it serve the public interest for the Commission, in order to relieve complaint counsel of that burden, to make a big "federal case" out of the matter? ORDER RULING ON INTERLOCUTORY Appeal AND DENYING PETITION FOR REHEARING This matter having come before the Commission upon the interlocutory appeal of respondent Kroger from the hearing examiner s order granting in part complaint counsel's request for offcial notice and upon a petition of both respondents to rehear their request to file an interlocutory appeal from the examiner s orders of October 25 and 26, 1965, and the Commission, in accordance with the accompanying opinion, having granted in part and denied in part the interlocutory appeal of respondent Kroger and having determined that the request for rehearing should be denied:

It is ordered That the hearing examiner s order on offcial notice dated October 29 , 1965, be, and it hereby is, modified by striking therefrom the last sentence in paragraph numbered 1 and the last sentence in paragraph numbered 2 of the statements of which he took offcial notice.

It is further ordered That the petition of respondents fied December 22, 1965, for rehearing of their request to file an interlocutory appeal be, and it hereby is, denied. Commissioner Elman dissented and has filed a dissenting statement.

DEVCON CORPORATION ET AL.

Docket C 607. Order and Opinion, Jan. , 1966 Order denying suspension of show cause proceedings and granting respondents 10 days from date of service to answer the show cause order of October 25 , 1965.

OPINION OF THE COMMISSION By REILLY Commissioner:

On October 11 , 1963 (63 F. C. 1034), the Commission issued a consent order to cease and desist against respondents Devcon Corporation, Albert M. Creighton, Jr. , and E. Leslie HalJ , individually and as offcers of said corporation, prohibiting in relevant part, in the sale of certain adhesive compound products the use of words denoting metallic substances to describe products consisting of non-metallic ingredients and prohibiting the use of words denoting rubber substances to describe products consisting principally of non-rubber ingredients. As to each class of product however the order permits a. statement of the percentage of metal or rubber actual1ly present in the product. As a result of further Commission consideration of the question herein involved and in light of the provisions of the Commission Guides Against Deceptive Labeling and Advertising of Adhesive Compositions promulgated June 30 , 1965 , the Commission considered that the public interest would be best served by focussing the proscriptions in its order upon the applied properties of the products in question rather than upon their metal or rubber content.

Accordingly, on October 25 , 1965 , the Commission issued an order to respondents to show cause why the Commission s order of October 11 , 1963, should not be amended to reflect this change in that portion of its order relating to metallic substances because it had been shown that those products lack the applied properties of metal and to set aside that portion of its order directed to rubber substances because there had been no showing that those products lack the properties of rubber. INTERLOCUTORY ORDERS, ETC. 1093 s order Prior to the date on which answer to the Commission to show cause might have been filed, respondents filed a Motion to Suspend Show Cause Proceedings. Weare of the opinion that the motion must be denied.

In support of their motion respondents state in essence that promulgation by the Commission on June 30, 1965 , of its Guides Against Deceptive Labeling and Advertising of Adhesive Compositions indicates a Commission lntention to deal with the matters involved herein on an industrywide voluntary compliance basis and that it would be inequitable to insist upon placing respondents alone under an order before determining whether the industry guides are successful in procuring compliance by respondents.

Restated, this argument is to the effect that once having decided to cope with industrywide problems by issuance of guides, aji members of the industry should be placed on a par by being subject only to the guides and not to the more rigorous strictures of an order to cease and desist.

A short answer to this is that guides and other methods of procuring compliance are not mutually exclusive and are not in any sense a substitute for, but rather a supplement to, the Commission s principal enforcement instrument, the order to cease and desist.

Furthermore, respondent is not alone. Other orders outstanding against members of this industry, while they may not relate to products of the exact description as respondents, nevertheless address themselves to similar practices covering similar products Docket 8575 Miracle Adhesives C01'poration (65 F. C. 524J; Docket C-610 K,'istee Products Company (63 F. C. 1065J. The fact is that Devcon and others in the industry are under orders while the Commission seeks to further its efforts in this industry through the promulgation of guides.

In discharging its duties in the public interest the Commission would be justified in substituting a less stringent remedy only if lt thereby more effectively brings about compliance with the laws it administers. Such is not the case here. The Commission has no reason to believe that respondents would be more responsive to guides than to an order.

Guides are designed to inform. They are persuasive or compulsive only according to the subjective response of industry members. They are not injunctive and are not of themselves an adequate instrument for procuring compliance with the statutes administered by the Commission.

To establish trade practice rules, guides or other methods of voluntary compliance as a total substitute for inj unctive remedies would, human nature being what it is, be the end of effective enforcement. To adopt respondents' argument would mean that once guides are issued an orders in that industry should be vacated so that an might have a sporting chance. We do not agree. Finally, the argument raised in respondents' reply memorandum relating to the applicabilty of our order to brand names does not can for comment here. This argument more properly belongs in respondents' answer to the order to show cause. Suffce it to say respondents have not offered adequate justification for suspension of show cause proceeding.

An appropriate order wi1 issue.

Commissioner Elman dissented.

Commissioner MacIntyre did not participate. ORDER DENYING MOTION TO SUSPEND The Commission on October 11, 1963 (63 F. C. 1034J, having issued its order to cease and desist against respondents prohibiting words denoting metallc or rubber substances to describe products consisting of non-metallc or non-rubber ingredients but permitting as to each class of product a statement of the percentage of metal or rubber actuany present, and On October 25, 1965, the Commission, being of the opinion that the public interest would be best served by focussing the proscriptions of its order upon the applied properties of the products in question rather than upon their metal or rubber content, having directed to respondents its order to show cause why its order of October 11 , 1963, should not be amended to reflect this change, and the respondents having by counsel filed with the Commission on November 24 1965, a Motion to Suspend Show Cause Proceedings, and The Commission having considered respondents' motion, the answer thereto filed by Commission counsel dated December 2 1965, and the reply of respondents filed December 17, 1965, and for the reasons set forth in the attached opinion, having decided that its order to show cause should not be set aside It is ordered That the motion of respondents to suspend show cause proceedings be, and it hereby is, denied. It is further ordered That respondents shall have ten (10) days from the date of service upon them of this order to answer our order to show cause dated October 25, 1965. INTERLOCUTORY ORDERS , ETC. 1095 Commissioner Elman dissenting, and Commissioner MacIntyre not participating.

LAKE LAND NURSERIES SALES CORP. ET AL.

Docket 8670. Order and Opinion, Feb. 3, 1966 Order denying respondents' motion to dismiss complaint on the grounds that many of the issues here in dispute have been litigated in a previous order, Docket 6666, 53 F. C. 1189 , against the same respondents.

OPINlOl\ OF THE COMMISSION This matter is before the Commission upon the respondents motion requesting permission to file an interlocutory appeal from the hearing examiner s order filed January 13, 1966, denying their motion to dismiss the complaint. Complaint counsel has filed an answer opposing the request, and respondents have filed a reply to the answer.

Section 3. 20 of the Commission s Rules of Practice provides with exceptions not here pertinent, that an interlocutory appeal from a ruling of the hearing examiner may be filed only after permission is first obtained from the Commission and that such permission wil not be granted except in extraordinary circumstances where an immediate decision by the Commission is clearly necessary to prevent detriment to the public interest. Respondents' position here is that under 9 3. 28 (b) (1) of the Commission s Rules of Practice, the Commission should proceed by way of reopening the prior proceeding in which a consent order was issued against these respondents and others (Lakeland-Deering Nurseries Sales, Docket No. 6666 , order issued June 25, 1957 (53 F. C. 1189J) rather than by the issuance of a new complaint. They claim that extraordinary circumstances justify an appeal because if they are right in asserting that the new complaint seeks to modify the prior cease and desist order , effortand their position is vindicated after trial, a1l of the time and expenses wil be in vain. They further assert that they will be greatly prejudiced and suffer irreparable harm if permission to appeal is not granted, although they have not set forth the precise ways in which such alleged effects wil occur. The instant proceeding is essentially, if not entirely, a different case from the old one. The examiner held in his order denying respondents' motion to dismiss that although some minor overlapping between the two matters was suggested, the issues raised by the new complaint are essentially different from those in the old. There is, in fact, no similarity between the matters except, of course, that some of the named respondents are, or appear to be the same The complaint in Docket No. 6666, the prior matter, was very narrowly drawn and brought into issue matters relating to only two plants, namely, the Shasta Daisy (Chrysanthemum Maximum) and the Lythrum Morden Gleam, and only on the latter were repl:esentations as to physical characteristics challenged. The order there is equally narrow in scope; its prohibitions are confined to representations concerning only the two plants named in the complaint and it prohibits representations as to physical characteristics (in issue as to other plants in the instant case) only as to Lythrum Morden Gleam. The prescnt complaint, on the other hand, while it alleges misrepresentation as to the physical characteristics of plants, is limited in such connection to the Nearly Wild rose plant, the Scarlet Showers rose plant the Wilson s Climbing Doctor rose plant, the Azaleamum chrysanthemum plant, and the Fragramum chrysanthemum plant. The two complaints are otherwise completely different as to the practices charged.

Respondents significantly do not claim in their motion that any issue in the complaint proper was previously litigated. The only specific connection asserted other than the common identity of certain respondents is that the proposed order, apparently broader in scope than the old as to misrepresentations of physical characteristics, overlaps to some extent the prior order. However it is clearly speculative to argue that this creates a conflict or inconsistency. The proposed order here was included with the complaint as a form of order which the Commission had reason to believe should issue if the facts are found to be as alleged (I) 3.3 (3) of the Commissions ' Rules of Practice). It is not necessarily the final order, even if the allegations are proved. Respondents wil have ample opportunity to argue as to any asserted inappropriateness of the order. Furthermore, if a prohibi- The prior complaint named the fo lowillg- parties: Lakeland-Deering Kurseries Sales, a cO!lJorat:on, and HCI11'Y 1, Hoffman, Chester Carity, Lilian Zo);heb and Allen Lekus, individ- Jy and as offcers of said corporation. The present comnlaint does not include the individual respondents Lillian Zop,'heb and AlJcn LekJs. As to the differences in the corporate names, respondents, in a footnote in their motion, state: Lakeland-Deering Nursery Sales Corp. is the same corporation named in the instant :proceec:ing as Lakeland Nurseries Sales Corp. , the name ' Lakeland.Deering Nursery Sales Corp. having been changed to Lakeland Kurseries Sales Corp. in 1957. INTERLOCUTORY ORDERS, ETC. 1097 tory order issues here and there is a conflict as claimed, the remedy might be (1) a change in the proposed order (i. exclude the Lythrum Morden Gleam plant) or (2) a reopening and modification of the prior order as to Lythrum Morden Gleam. K evertheJess, this proceeding has not reached the point where a determination should be made on the form of the order. This wil come later. Clearly, the possibility of a relatively minor overlap between the proposed tentative order and the prior order is not an extraordinary circun1stance requiring an immediate decision by the Commission.

Elmo Division of DTive-X Company, Inc. v. Dixon 348 F. 2d 342 (D. C. Cir. 1965), the principal case relied on by the respondents, is not controlling in this matter since that holding was based upon a showing of the incorporation of a Commission Rule into the consent order which "vested" that respondent with the right to a reopening hearing. No such situation exists here. In addition, in DTive- the court concluded that if it should appear the practices complained of varied significantly from those governed by the consent settlement, Drive-X could not"object to a new complaint directed at new conduct. Likewise, the respondents here cannot object to a new complaint covering new conduct. See also Federal Trade ComTnission v. lllotion Picture Ad. Service Co. , Inc. 344 U. S. 392, 397-398 (1953); Exposition Pnss, Inc. v. Fedeml Tmde Commission 295 F. 2d 869, 872 (2d Cir. 1961).

In view of the above discussion, we conclude that respondents have not shown that they wil be prejudiced in any way by the trial of this proceeding and that they have not shown the extraordinary circumstances which would require an immediate decision by the Commission to prevent detriment to the public interest.

An appropriate order wiJ be entered.

ORDER DENYING REQUEST FOR PERMISSION TO FILE I:-TERLOCUTORY Appeal This matter having come on to be heard upon the respondents motion requesting permission to file an interlocutory appeal from the hearing examiner s order filed January 13, 1966 , denying their motion to dismiss the complaint, and the Commission having determined, for the reasons stated in the accompanying opinion that the request should be denied:

It is ordered That respondents' request for permission to file an interlocutory appeal from the aforcsaid order of the hearing examiner be, and it hereby is, denied.

DEVCON CORPORATION ET AL.

Docket C-607. Order, Feb. , 1966 Order denying for the second time respondents' motion to suspend show cause proceedings and ordering respondent to ans\ver the show cause order.

ORDER DENYING MOTION The respondents by counsel having filed with the Commission under date of November 24, 1965, a Motion to Suspend Show Cause Proceedings, and The Commission on January 19, 1966, having issued its order denying said motion and ordering that respondents shall have ten (10) days from the date of service upon them of the order to answer its order to show cause dated October 25 , 1965, and Respondents by counsel having thereafter filed with the Commission on January 24, 1966, a letter, herein treated as a motion renewing its request to the Commission to be heard either formally or informally on its motion of November 24, 1965, and The Commission now having considered the latter motion January 24, 1966, It is ordered That said motion be, and it hereby is, denied. It is further ordered That respondents shall have ten (10) days from the date of service upon them of this order to answer our show cause order dated October ?5, 1965. Commissioner Elman dissents and would grant respondents request to be heard.

DIAMOND ALKALI CG:IPAKY Docket 8572. Order and Opinion, March 4, 1966 Order denying respondent' s petition for reconsideration and its motion to reopen the record and supplement additional evidence. OPINIOK OF THE COMMISSIOK Respondent on December 9, 1965, filed a Petition for Reconsideration under 9 3.25 of the Commission s Rules and a Motion to Supplement or Reopen the Record for Purposes of Receiving Evidence. We are of the opinion that both petitions must be denied.

Since the objective of both motions is the same, that is, to INTERLOCUTORY ORDERS , ETC. 1099 secure further consideration of this matter by the Commission the two wil be treated herein together. The petition for reconsideration cites two grounds, namely, (1) under the Coms ruling in Tampamission s interpretation of the Supreme Court' Electric Company v. Nashville Coal Company, 365 U. S. 320 (1961), the evidence supports respondent's position with regard to relevant section of the country and (2) the Commission was wrong in using only shipment figures as a basis for determining market shares; it should have used both shipment figures and the unused capacity of the mi1Js shipping to destinations within the 23 county area.

The motion to reopen and supplement is grounded upon asserted new evidence which demonstrates a post-acquisition change in market structure materia1Jy affecting the questions of relevant market, competitive effect and remedy.

In its first asserted ground for reconsideration respondent takes the position that the Commission interpreted Tampa as imposing a burden upon respondent to show that the suppliers to the 23 county area were "eager" to ship elsewhere and that those firms shipping substantial quantities of cement into the 23 county area were shipping elsewhere to a significant degree; and notwithstanding the inequity of the Commission s imposing this burden it has been sustained by the respondent. Apart from the merit of this contention, we must first determine whether respondent has met the threshhold requirements of S 3.25 of the Commission s Rules which states that the petition decision or must be confined to new questions raised by the final order and upon which the petitioner had no opportunity to argue ;,efore the Commission.

We are of the opinion that even had the Com11.ission so interpreted Tampa this would not present a new question within the meaning of Rule 3.25. The question of relevant market was thoroughly briefed and argued and the interpretation ascribed to the Commission by respondent is in no sense a new question as to which respondent has had no opportunity to argue. Nevertheless, since respondent has chosen to interpret the Commission s interpretation of Tampa we think it necessary in the interests of clarity to dispose of the substance of respondent' contention.

The language which prompts respondent' s motion appears at page 6 (68 F. C. 1204, 1208) of the Commission opinion: In Tampa record evidence was found that the coal companies supplying Tampa were "eager " to ship outside the Georgia and Florida area. And , according to the Supreme Court By far the bulk of the ov€nvhelming tonnage marketed from the same producing area as serves Tampa is sold outside of Georgia and Florida," We infer from this language that respondent here at least has the burden of coming forward .with some evidence meeting the criteria implicit in the court' s statement. But from our examination of the record, there is no evidence that the suppliers to the 23 county area were "eager " to ship elsewhere or that those firms shipping substantial quantities of cement into the area were shipping elsewhere to any significant degree. . . .

It was not our intention that the comparison between this case and Tampa should begin and end with the interpretation of the word "eager " nor that the decision in this case turn on that word alone or even on Tampa alone. In Tampa the Supreme Court held that the area of effective competition is determined by (l) the area in which the seJ1er operates and (2) the area to which the purchaser can practicably turn for supplies. 365 U. S. 320 , 327 (1961). Respondent emphasizes the first of these considerations at the expense of the second. The Commission found it necessary to weigh the two. Beca\lse of the peculiarities of cement distribution, the second of these two considerations becomes of substantial importance. In short, as was stated in S. v. Philadelphia National Bank 374 U. S. 321, 357 (1963), the proper area is that where . . . the effect of the merger on competition wi1 be direct and immediate. " In this case as in Tampa that area is, as outlned above, that in which the sener' operates and to which the purchaser can practicably turn for supplies. In Tarnpa the Court was satisfied that the relevant market embraced the 700 coal producers to whom the purchaser could practicably turn for supplies, that is, those firms who could serve the same market peninsula Florida. Their eagerness to sen elsewhere throughout the broad seven state area established that it was this broad area in which they were interested and that foreclosure from Tampa made no significant difference to them. In the present case the Commission is convinced from the evidence that purchasers in the 23 county area can practicably turn for supplies only to those firms shipping substantial quantities of cement into the area. To them what happens in the 2:1 county area makes a significant difference as demonstrated by the fact of their shipping substantial quantities there and their concomitant disinterest in shipping substantial quantities elsewhere. Thus, the area in which 100 % of the acquiring company standard" brand cement is sold and 66% of the acquired company s sales were made secured 90 % of its needs from companies with plants and terminals located therein. These companies make INTERLOCUTORY ORDERS, ETC. 1101 75% of their total shipments to that area. Thus, it was this 23 county area to which the firms supplying substantial amounts were eager to selJ and to which they did sell in substantial quantities as is amply demonstrated by the record. Complaint counsel sustained his burden that this is the relevant section of the country. The burden of proof was never placed upon respondent as alleged in its petition for reconsideration. However, if it wanted to undermine the prima facie showing of complaint counsel, it had the obligation of going forward with evidence that the substantial suppliers were in fact not substantial suppliers or that this 23 county area did not make a significant difference to them and that they looked elsewhere, eagerly if you wiJ1, for sales or that the purchasers could practicably turn for supplies to a much broader area. Respondent had no burden in this regard initially of course and the Commission did not interpret Tampa as imposing such a burden. As was stated in the Commission s opinion, respondent had a duty to show, if it wanted to rebut complaint counsel's case, that the substantial shippers to the 23 county area were eager to ship elsewhere or that they were shipping elsewhere to a significant degree.

Respondent did not do this and does not propose to do it now. It proposes to show that those firms accounting for a minor fraction of total shipments into the 23 county area were eager to ship elsewhere. This is a logical inference from the fact that they ship most of their cement elsewhere. But it does not overcome the problem that the eagerness to ship elsewhere and the exigencies of cement distribution disqualify these firms in the first instance because they establish clearly that the purchasers in the 23 county area could not practicably turn to these firms for supplies.

This question was briefed and argued at a1l stages of this proceeding and was thoroughly considered by the Commission and adequately disposed of in the Commission s opinion. Respondent has not raised a :Jew question under 25 and its petition mustbe denied. Moreover, respondent' s contention that the substantial shippers into the 23 county area were shipping elsewhere to a significant degree does not warrant extensive consideration here. This is simply the assertion of a conclusion contrary to that reached by the Commission after its examination of the whole record. It is in no sense a new question.

The second asserted ground for reconsideration is that in calculating market share the Commission should have considered shipments plus unused standby capacity rather than shipments alone.

Here again respondent fails to satisfy the requirements of 25. This question was also briefed and argued and specifically adverted to in the Commission s opinion, and thus no new question is raised. We are satisfied that Crown Zellerbach Corporation v. 296 F. 2d 800 (1961), and Permanente Cement Co. D. 7939, April 24, 1964 (65 F. C. 410), were not misapplied and that on the record of this case in this industry sales or shipment figures rather than production or capacity figures, used or unuse - are more significant in calculating market sales. By its Motion to Reopen and Supplement also filed December , 1965, respondent seeks to have admitted into evidence a number of exhibits, two of which, it alleges, were cited in the Commission s opinion in this case and should therefore be admitted in evidence, while the others are affdavits attesting to post-acquisition structural changes in the market warranting admission into the record and consideration by the Commission. The basis for respondent's motion as to the first two exhibits RX 94 and 95 , is apparently a reference in the Commission opinion to the sale of Plant B after the filing of the initial decision in this ll1atter 1 and a reference to the " , . . competitive huffng and puffng of firms such as L'S. Steel, Pittsburgh Plate Glass. . . ." 2 These references derive from statements in an affdavit of respondent's witness L. T. Welshans, RX 94, submitted to the hearing examiner, with a motion filed by respondent to supplement the record filed September 22, 1964 , after the filing of the initial decision. This motion was never ruled upon. It is apparent from the context of the Commission s opinion that these references do not affect the result and were in no way crucial to the Commission s consideration of this matter. Therefore, since respondent itself advised us of these facts it cannot now be heard to say that it was prejudiced by these references. We see no reason for reopening the record on the. basis of this claim of respondent.

Exhibit RX 95 was an affdavit of one Henry G. Hohorst. It does not appear that any material from this affdavit was used ill the Commission s opinion.

In regard to the other affdavits which respondent seeks to have admitted in evidence, it can be said that they contain data 1 Commission Opinion, p. 2 , footnote 2 l68 F, C. 1205l, and p. 12 (68 F. C. 12133. Commission Opinion, p. 10 (68 F, C. 1211). INTERLOCUTORY ORDERS, ETC. 1103 relating to changes in the post-acquisition market structure in the 23 county area.

Judging from their number, one might infer substantial postlittle moreacquisition changes. Examination shows, however, than the ebb and flow of competitive activity with minor changes in market composition and share. The material does not suggest the sort of radical change in market structure which warrants reconsideration of post-acquisition evidence. An appropriate order wi1 issue.

Commissioner MacIntyre did not concur.

ORDER DENYING PETlTlO:- FOR RECONSIDERATION AND MOTION TO REOPEN AND SUPPLEMENT THE RECORD The Commission on October 22, 1965 (68 F. C. 1204), having rendered its decision in this proceeding affrming the findings of fact contained in the initial decision of the hearing examiner, and issuing its order upon complaint counsel to file a proposed form of order and supporting memorandum within 30 days of service of the Commission s order and requiring respondent within 30 days of service of complaint counsel's proposed order to file its own alternative form of order and supporting memorandum, and Respondent on December 9, 196,5, having filed its Petition for Reconsideration and Motion to Reopen and Supplement the Record and the Commission having considered said motions and the answers in opposition thereto filed by complaint counsel It is ordered That respondent' s Petition for Reconsideration and Motion to Reopen and Supplement the Record be, and they hereby are, denied.

It is further ordered, That within ten (10) days of service of this order complaint counsel shall file a proposed form of final order in this matter accompanied by a supporting memorandum. Within ten (10) days of service of complaint counsel' s proposed order respondent shall file its alternative form of order and supporting memorandum. Upon consideration of all material submitted, the Commission will enter its final order. Commissioner MacIntyre not concurring.

VIVIAKO MACARONI COllP AKY Docket 8666. Ordel' and Opinion, March, 1966 Order denying request of respondent for access to confidential Commission documents pertaining to certain investigations. OPINION OF THE COMMISSIOI\ This matter is before the Commission on the certification of the hearing examiner of a portion of the application of respondent' s counsel, filed .March 1, 1966, requesting the inspection and copying of documents in the Commission s confidential fies pertaining to investigations made by the Commission. Complaint counsel, on March 4, 1966, filed a memorandum stating their position as to the examiner s certification. The respondent' s request for documents to the hearing examiner was as follows:

2. . . .

(a) All letters written to the Federal Trade Commission by all of the persons listed in Appendix A hereto which have been identified to the respondent as prospective Commission witnesses or any additional Commission witnesses not yet identified and also copies of all letters sent by the Commission to said persons;

(b) All \written statements given by the persons listed in paragraph 2(a) above;

(c) All memoranda of meetings, interviews and/or telephone conversations made by Commission personnel with all of the persons listed in paragraph 2(a) above.

At the commencement of the hearings on March 2, 1966, agreement was reached satisfactory to the parties which in substance provides that the documents called for by subparagraphs 2 (a) and 2 (b) wil be made available to respondent if they contain a statement or statements pertinent to the witnesses' testimony or the issues involved in the proceeding. Such documents wil be first turned over to the hearing examiner for his inspection. Accordingly, the certification concerns solely the request under 2 (c), above, which is for all memoranda of meetings, interviews, and/or telephone conversations made by Commission personnel with prospective witnesses.

Documents of this kind, if any such exist, would be contained in the confidential files of the Commission and these generally can be obtained only under the provisions of S 1.134 of the Commission s Rules of Practice. The cases dealing with this question have made clear that a request during the course of a hearing for confidential information in the Commission s files INTERLOCUTORY ORDERS , ETC. 1105 wi1 be treated as an application under 134 of the Commission Rules. The hearing examiner, in such a case, is required to certify the matter to the Commission with his recommendation. See L. G. Balfo",,' C01nprmy, Docket No. 8435, orders issued October 5, 1962 (61 F. C. 1491) and May 10, 1963 (62 F. 1541) ; R. H. Mercy Co. , Inc. Docket No. 8650, order issued September 30, 1965 (68 F. C. 1179). Under 134 the Commission may direct that confidential documents be disclosed to an applicant upon a showing of good cause therefor. Respondent' s position is that it is not required to meet the standard of "good cause " under 134 because the documents requested are relevant and necessary for its defense and, accordingly, the material should be released under the exception in 1.133 of the Commission s Rules. Section 1.133 broadly declares that records and files of the Commission and specified documents and information arc confidential, and it provides the fo1Jowing exception:

. . , Except to the extent that the disclosure of such material or information is specifically aTItnol'ized by the Commission or to the extent that its use may become necc,"sary in connection with adjudicative proceedings, they may be disclosed, divulged, or produced for inspection or copying only under the procedure set forth in 1.134. The exception in 1.133 referred to clearly does not, during the course of a proceeding, so change the requirements for the release of confidential information that a discovery type request prior to the trial on an assertion showing only a possible general helpfulness to a .respondent in the preparation of its defense is suffcient to override the requirements of Rule 1.134. The exception in pertinent part relates to material and information which lnay be necessary for use in connection with an adjudicative proceeding and this, in general, includes that which complaint counsel must use in the presentation of his case and other vital documents such as Jencks type statements. See ETnest Mark High 56 F. C. 625 (1959) ; Sun O'i Company, Docket No. 6934 order issued September 15, 1958. It is not a general authorization for pretrial discovery bypassing the Commission s requirements in 1.134 governing the release of confidential data. Commission cases prior and subsequent to the adoption of the present Rule 133 have stressed that confidential material requested in the course of a hearing ordinarily cannot be obtained except by application to the Commission. PostfLl Vife flnd CfLsualty Insumnce C01n))flny, Docket No. 6276, 52 F. C. 651 (1956); Thomasville Chm:,. Company, Docket No. 7273, 56 F. C. 1651 (1959); Giant 1106 FEDERAL TRADE COMMISSlO:- DECISIONS Foods, Inc. Docket Ko. 7773, 58 F. C. 1193 (1961); Shell Oil Company, Docket No. 8537, order issued February 1 , 1963 (62 C. 1488) ; L. G. Balfour Company, supm; R. H Mary Co. Inc., S1'pta; Modern Ma,'keting Service, Inc. Docket No. 3783, order issued January 7 1966 (p. 1077 herein). We turn then to the question of whether respondent has shown good cause as required by S 1.134. To qualify under this rule there must be a showing of real or actual need. Postal Life and Casualty Insurance Company, supm; Thomasville Chair Company, supra; Shell Oil Company, supm; Giant Food, Inc., supm; R. H. Macy Co., Inc., supm; GmbeT Manufactm'ing Company, Inc. Docket No. 8038, order issued December 13, 1965 (68 F. 1235) ; cf. Texas Industries, Inc. Docket No. 8656, order issued May 18, 1965 (67 F. C. 1378).

Here respondent has made no showing as required under Rule 1.134. In its application filed on March 1 , 1966, respondent makes only the unsupported claim that the documents are necessary for its defense. In his argument before the examiner on March 2 1966; according to the examiner, respondent's counsel urged that a "number of the prospective witnesses are hostile to the respondent and that, if he can obtain the documents called for and if they demonstrate this hostiity, he will be able, if not to attack the credibility of the witnesses, at least diminish the weight that should be given to their testimony. It should be stressed that respondent is not, in this connection seeking prior verbatim statements of the prospective witnesses which documents wjl be available pursuant to .the agreement to supply the items listed under subparagraphs 2 (a) and 2 (b) the request; rather, what it seeks are the summary reports by agents as contained in interview reports. These reports would be the impressions of a third party as to what was said in a particular conversation. This, of course, would be inappropriate for impeachment purposes since such a report is not necessarily the statement of the prospective witness. For this reason the Commission has previously ruled that interview reports which are merely agents ' summarizations are not to be produced. Ernest MUTk High, supm. As indicated in Ernest Mark High the Commission, in connection with the statements of a Government witness to an agent of the Government, will follow the substance of the Jencks Act. (18 V. C. S 3500. ) If there is any question whether or not the report is a statement within the scope of Section (e) of that statute, the examiner may inspect the document and make a determination. But that would not occur until INTERLOCUTORY ORDERS, ETC. 1107 after the witness takes the stand. The Jencks Act is strictly limited in its application to uses for impeachment. Palermo United States v. Berry,United States 360 U.S. 343, 349 (1959) ; 277 F. 2d 826 (7th Cir. 1960). It is not to be used for general discovery.

:Moreover, the documents involved would come within the rule protecting an attorney s work product. See Hickman v. Taylor 329 U.S. 495 (1947). As the Court there stated: . . . Here is simply an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party s counsel in the course of his legal duties. As such, it falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defense of legal claims. N at even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney, (ld. at 510. The Court continued:

, in . . . This work (preparation of a client' s case) is reflected, of course interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beEefs, and countless other tangible and intangible waysaptly though roughly termed by the Circuit Court of Appeals in this case as the "work product of the lawyer." Were such materials open to opposing counsel on mere demand, much of 'what is now put down in writing \,,'ould remain unwritten. An attorney s thoughts, heretofore inviolate, would not be his own. Ineffciency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice ,vould be poorly served. (ld. at 511.) The claim here that there might be hostile witnesses in the group of prospective witnesses to be called by complaint counsel is clearly insuffcient to justify production of documents within the category of an attorney s work product as defined in Hickman v. Taylor. See also Gmber Manufacturing Company, Inc. Docket No. 8038, order issued December 13, 1965 (pages 6 and 7 of slip opinion) (68 F. C. 1235, 1239-1240).

The examiner has recommended in his certification that because respondent has failed to show good cause for the release of the material requested under subparagraph 2 (c) of its application that such request should be denied. We are in agreement with his recommendation. An appropriate order will be issued. Commissioner Elman did not concur.

ORDER RULING ON Q1JESTION CERTIFJED This matter having come before the Commission upon the certification of the hearing examiner of respondent' s application 1108 FEDERAL TRADE COMMISSION DECISIOI\S filed :VI arch 1 , 1966, requesting access to documents in the confidential fies of the Commission, and the Commission having determined, for the reasons set forth in the accompanying opinion, that the respondent' s request should be denied: It is o;odered That respondent's request for access to confidential documents in the Commission s fies be, and it hereby is denied.

Commissioner Elman did not concur.

R. H. MACY & CO. mc.

Docket 8650. Order, March 10 , 196C Order remanding case to hearing examiner with instructions to grant respondent counsel access to certain parts of five interview reports relative to sweaters which are exhibits in this case. ORDER REMANDI;\G TO HEARING EXAMINER FOR FURTHER PROCEEDINGS The examiner in this matter has certified his ruling made January 18, 1966, denying respondent requested access to certain interview 01' investigational reports, the examiner stating in effect that the evidence is crucial in the proceeding and that his ruling should be passed on by the Commission at this time to allow appropriate steps for correction, if necessary. A Commission investigator testified for the complaint on direct that he purchased certain sweaters from stores of the respondent. Four of such sweaters were received in evidence. The examiner states that it is upon these four exhibits that complaint counsel rely to support the charge of misbranding in violation of the Wool Products Labeling Act. The examiner further states that he is satisfied that the investigator based his identification of the specific sweaters upon his recollection as refreshed, not by reports to the Commission and other notes, hut by a pin ticket with handwritten notes which he attached to each sweater after its purchase. On cross-examination it was revealed that the investigator s recollection was aided by an examination he made the night before he testified, of a file which included copies of his typewritten reports to the Commission and some of his handwritten notes relating to the investigation. Respondent' s counsel asked to examine the records referred to for the purpose of cross-examination. The examiner made a INTERLOCUTORY ORDERS , ETC. 1109 distinction in the material requested. He asked for the indicated file from complaint counsel and upon receiving it he extracted therefrom the handwritten notes. These notes were then turned over, without objection, to the respondent. As to the interview reports, however, the examiner indicated his view that such reports to the Commission were confidential, and he ruled specifically that for the purpose requested it was unnecessary for them to be made available.

The investigator testified that he had made five interview reports as to the sweaters identified and that he had signed these five reports (tr. 197, 202).

WhiJe Commission proceedings are not expressly governed by the terms of the Jencks Act (18 U. C. S 35001, which statute is limited to criminal prosecutions brought by the United States the Commission has indicated it wil follow the substance of this statute in appropriate circumstances. Ernest klark High 56 F. C. (;25, 632 (1959). Reports of Government agents called as witnesses by the United States have been held to be subject to the requirements of the Jencks Act. Clnncy v. United States 365 U. S. 312 (1961); Burke v. United States 279 F. 2d 824 (8th Cir. 19(0), and cases cited therein at pages 825 and 826. Therefore, where the investigator witness testifies, as here, on direct examination at the instance of complaint counsel and it develops during his testimony that he has made reports on the subject about which he testified and such reports are requested for cross- examination, it would be proper for the examiner to order the production of these documents. Complaint counsel authorized to make them available." Upon receiving the order to produce, how( e1' 1 complaint counsel may, under the procedure of the Jencks Act, elect not to comply with the order. If there is such a failure to produce the documents by complaint counsel the examiner should strike the testimony involved. This procedure, it should be stressed, applies only the Jencks Act type statements.

The access request in this instance, it appears, is confined to the five interview reports to which reference has been made. The hearing examiner may order these produced and, if requested, he should, before turning them over, inspect the reports in ""mem and excise the portions not covered in the testimony. 'Jencks Act type statements are cleaJ'ly within the exception in 1.133 of the Commissioll Rules, as do,-ument whose " use ilflY become necessary in connection with adjudicative proceedings. " Thus, comjJlaint counsel has the general authority to release such documents during the course of a. trial, and it is not necessary that he make a special request for the release of confidential information under 1.134. Here the witness testified as to the purchase of the sweaters in evidence, their identification and other closely related matters. Only such portions of the reports may be turned over to respondent. (See procedure for excision as set forth in paragraph (c) of the Jencks Act. ) Accordingly, It is ordered That this matter be, and it hereby is, remanded to the hearing examiner for further proceedings consistent with this order.

Commissioner Elman did not concur.

SHIP' n SHORE INC. ET AL.

Docket 8161. Order, March 11, 1966 Order reopening case for the purpose of receiving evidence on the questions of (1) whether the order should be modified and (2) whether the order should be set aside as to the individual respondent. ORDER DIRECTING HEARINGS Respondents, by petition filed January 7, 1966, have requested that this proceeding be reopened and the order to cease and desist set aside. In the alternative, respondents request that they be granted a hearing on this request pursuant to (\ 3. 28 (b) (3) of the Rules of Practice. Additionally, the individual respondent requests that the order be set aside as to him in his individual capacity. The Director, Bureau of "Deceptive Practices, has filed an answer in opposition to the petition. The Commission s decision, which issued on May 16, 1961 (58 F. C. 757J, is based on an agreement containing a consent order. By the terms thereof, respondents agreed to cease and desist from:

Using the \vord "madras " or any simulation thereof, either alone or in connection with other words to designate, describe, or refer to any fabric or other textile product .which is not in fact made of fine cotton, handloomed and imported from India, and if the cloth is other than natural in color, has not been dyed with bleeding vegetable dyes. In the petition before us, respondents contend that factual conditions have changed so that tbe public no longer understands the term "madras" to have the meaning ascribed in the order. Specifically, respondents allege that among the purchasing public it is now commonly accepted that the word "madras" is applied to the plaid design scheme of fabric, regardless of whether the fabric is domestic or imported, colorfast or bleeding. INTERLOCUTORY ORDERS, ETC. 1111 The individual respondent contends that the facts are such that he should not have been included in the order in his individual rapacity, under the Commission s decision in The Lovable Company, Docket No. 8620 (June 29, 1965) (67 F. C. 1326). The Commission has considered the grounds advanced by respondents in support of their requests and has concluded that the pleadings raise substantial factual issues. Therefore, the Commission has determined that respondents' alternate request for a hearing on the issues presented in their petition should be granted. Accordingly, It is ordered That this matter be assigned to a hearing examiner for the purpose of receiving evidence in support of and in opposition to respondents' allegations that a change of Jawor fact, or the public interest, requires (1) that the order to cease and desist be altered, modified or set aside and (2) that the order be set aside as to the individual respondent. It i8 fUTtheT orde,' That the hearings be conducted in accQl' dance with Part 3, Subparts C, D, E and F of the Rules of Practice.

It is further ordered That the hearing examiner, upon the conclusion of the hearings, certify the record, together with his recommendations, to the Commission, and that, in the circumstances of this matter, his recommended disposition be treated in the same manner as if it were an initial decision under of the Rules of Practice.

LAKE LAND NL'RSERIES SALES CORP. ET AL.

Docket 8670. Order, Ap ill, 1966 Order suspending proceedings in this case pending the outcome of respondents ' motion for a preUminary injunction in the District Court for the District of Columbia.

ORDER SUSPEC\DII\G PROCEEDINGS Upon consideration of the hearing examiner s certification filed March 24 , 1966, of the request of complaint counsel for a stay in the proceedings herein in consideration of a stipulation to suspend proceedings filed with the United States District Court for the District of Columbia in La),eland Nurseries Sales Corp. et al. v. Paul Rand Dixon, et al. Civil Action No. 419-66: It 'is ordered That proceedings, incl uding discovery proceedings, in this matter be, and they hereby are, suspended pending a determination by the District Court for the District of Columbia in Civil Action Ko. 419-66 of a motion for preliminary injunction filed in that court by the respondents. THE SPERRY AND HUTCHI:'SOK COMPANY Doclcet 8671. Order (LncZ Opinion, April, 1966 Order denying respondent' s request for access to confidential and other Commission files relating to the trading stamp industry. OPINIOI\ OF THE COMMISSION This matter is before the Commission upon the certification of the hearing examiner of respondent's motion dated January , 1966, requesting access to documents in the confidential files of the Commission.

The request for production made by the respondent includes among other things, all written statements, communkations, or other documents received by the Commission from September 1962 to the present from third parties, including retailers, trading stamp exchanges and trading stamp companies, responsive to inquiries made by the Commission, relevant to allegations in the complaint; the inquiries by the Commission to which the communications were responsive; depositions taken by the Commission in the same period relating to any of the matters covered by the first request; and, finally, all preliminary, interim, and final studies and reports made by the Bureau of Economics of the Commission for the period September 1962 to the present, relating to such things as the effects or lack of effects on prices and price structures of the use or discontinuance of the use by retailers of bonus, double or multiple stamps. The examiner recommends partial production under the request that is, all documents requested in the first item not produced pursuant to his Prehearing Order No. 2 that constitute complaints or explanations by customers of the third party producing the record " in the nature of verbal acts evidencing the existence or effect of the alleged conspiracy, records kept in the ordinary course of business, and documents showing on their face that they constitute prior recollection recorded which evidence the existence or effect of the alleged conspiracy" and such portions .-f .-\)cuments described in the second item of respondent's request INTERLOCUTORY ORDERS, ETC. 1113 necessary to limit or identify and thus make admissible the documents to be produced in compliance with paragraph 1 hereof, s request The examiner has correctly certified the respondent' for confidential data to the Commission with his recommendations. L. G. Balfour Company, Docket No. 8435, orders issued October C. 1541);5. 1962 (61 F. C. 1491), and May 10, 1963 (62 F. R. H. MrLOY Co., Inc. Docket No. 8650, order issued September , 1965 (68 F. C. 1179): Viviano MacCLTOni CompCLny, Docket No. 8666, order issued March 9, 1966 (69 F. C. 1104). Under the procedure set forth in these cases a request made during the course of a hearing for confidential information in the Commission s files wm be treated as an application under S 1.134 of the Commission Rules of Practice. Section 1.134 provides that the Commission may direct that confidential documents be disclosed to an applicant upon a showing of good cause therefor, and that the Commission, in considering the action to take upon a request for such documents, wm give due regard to statutory restrictions, its rules and the public interest.

The documents requested by respondent, to the extent that such are in the possession of complaint counselor the Commission, are highly confidential. The persons and businesses who supply the kind of information concerned are frequently reluctant to have their affairs made public and they expect, in providing this information to the Commission, that its confidentiality wil be maintained wherever possible. In this proceeding the sensitive nature of information received by the Commission is ilustrated by the fact that certain nonparties have moved to have material eubmitted by them be given in camera treatment.' This consideration, although alone not suffcient to foreclose production if required in the interest of justice and fairness, is significant in weighing respondent' s showing of need. Moreover, much of the kind of documentation requested seems to come within the work product category and the Commission has stated that such documents wm not be released without a strong showing of special circumstances, good cause 01' necessity. Graber Manufacturing Company, Inc. Docket No. 8038, order issued December 13, 1965 (68 F. C. 1235).

We wiJ consider at this point whether or not respondent has shown good cause. Good cause under S 1.134 of the Commission Rules has been construed as requiring a showing of real or actual 1 Motion for Jeave to intervene. and to request in camera treatment filed by )1merchants Green Stamp Trading- Co. , january 20, E166: motion for leave to intervene nll(1 to rcquest in camera treatment of information filed by P:"emiurn Service Corporation, January 28 , 1966. need. See Viviano Macaroni Company, supra and cases therein cited.

Respondent makes two general claims that it has established good cause. The first concerns its specific request for production of certain economic stud'es. Respondent apparently is of the view that complaint counsel intends to introduce the testimony of an expert witness concerning the effects on prices or price levels of its policy regarding the issuance of one S & H trad;ng stamp for each 10 cents of goods and services. Respondent states, therefore that if, as it believes, the Bureau of Economics has an economic analysis- of the impact of the use of trading stamps on retail prices, such a study is relevant to the charges in the complaint and should be made available to respondent "both for its possible evidentiary value and for use in cross examination of the expert witness upon whom complaint counsel expect to rely." The present prehearing procedure, however, calls for the production of proposed statistical proof with underlying documents in advance of the trial. Thus, respondent will have a,,ess to any such study used in ample time to prepare its defense. Intemal documents of this kind, if not used, wiJ ordinarily be privileged against disclosurc. See R. H. Macy Co., Inc., 8ul"' Respondent secondly daims that there is good cause for allowing respondent to examine all documents falling within the scope of its motion. It asserts that the three counts in the complaint each alleges practices which respondent denies but that respondent is beset with the practical diffculty of investigating Ectivities, covering many years, of 70 000 retail licensees and some 400 trading stamp companies. Respondent therefore avers that if it is able to examine the relevant documents sought by its motion there will be enormous practical advantages accruing to both the respondent and the Commission. It claims that the time required for investigation and preparation of the defense wiJ be materially shortened, the hearing may commence at an earlier date and proof at trial will be facilitated. These unsupported assertions are all too general to meet the test of need as required under S 1.134. Respondent has failed to show in any specific way that the documents requested are necessary for its defense. By the hearing examiner s Prehearing Order Ko. 2, it wil receive from complaint counsel substantially all the documents such counsel intend to offer.' By the same order 2 The e;-am:ner states the substance of th:s J)!irt of his order as follo\vs; By Prehearing 01'00"1" No. 2, COl1used supporting- the comnJaint wil suomit on or bcfo)' March 1. 1966, al! (1documents they intend to offer except underlying: documents fOj' statistical proof, statistic"l studies not y"t comIJktocd and document to be usell fo.' impeachment the ref)'eshment of witnesses ' recollection. INTERLOCUTORY ORDERS , ETC. 1115 provision is made for the submiss on of the names of witnesses in advance. In addition, statistical proof wjj be made available in advance of its offer, together with underlying data. The examiner states that in effect complete discovery of the case his adversary expects to present wil be made to both parties before the tria! of this proceeding.

Since respondent wil have pretrial production of the substance of its opponent's case, the production of documents mainly in issue must be those which will fall outside of the records affected by Pre hearing Order K o. 2. It appears, therefore, that respondent' chief purpose is not to seek specific documents or documents respecting a specific defense which upon analysis might demonstrate good cause. Rather, as the phrasing of its request indicates it is asking for general access to the Commission s confidential investigational files merely to see whether something useful to its defense may turn up. This is dearly an insuffcient ground for the production of such records. Respondent has made no showing of any kind which would constitute good cause for the requested access.

Respondent will be under no disadvantage by a denial of its motion. The examiner has pointed out that both sides wjj have complete discovery of the case of his adversary and for the respondent this will include access to some, and perhaps most, of the documents involved in its request. Respondent also has availobie to it appropriate means to conduct its own inquiry. Considering all the factors, we conclude that respondent's re- Quest should be denied in its entirety. An appropriate order will be issued herewith.

Commissioner Elman dissented and has filed a dissenting statement.

DISSENTING OPINION BY ELMAN Commissioner:

The refusal to give respondent access to the Bureau of Economics' report on trading stamps is inconsistent with a fundamental and paramount function of the Commission. One of the main purposes for which this agency was established was to conduct economic inquiries of the kind which that report reflects and to make the results of such inquiries available to the public. In the words of President Wilson, it was expected that the Commission would serve as a reservoir of economic data, "an indispensable instrument of information and publicity, a dearing house for the facts" by which both the public and businessmen would be guided. To conclude, as does the Commission, that such studies should be sheltered from public scrutiny, and be considered internal memoranda or mere tools to be used in the Commission investigative and prosecutorial functions, distorts, if it does not destroy, this important role which the Commission was expected to play.

K or can the Commission s refusal to order production of the report be justified on the grounds that such confidentiality is necessary to maintain a free flow of information between the Commission and its staff or that such reports are "workproducts" prepared for litigation. Such justifications misconceive the nature and function of economic inquiries into industry practices conducted by the Division of Industry Analysis of the Commission s Bureau of Economics. The Division s staff consists of professional economists whose obligation is to report data objectively and impartially, letting the chips fall where they may, whether the result is to support or to weaken a position taken by Commission complaint counsel in some adjudicative proceeding. To justify confidentiality on the ground that our economists would not otherwise feel free to submit such factual and impartial reports is to demean their professional status. To keep a report confidential because it conflicts with a position being taken by the Bureau of Restraint of Trade in an adjudicative proceeding would be clearly arbitrary. Such a justification would violate the fundamental principle of justice and fairness which prohibits a Government agency from suppressing documents which may be defense. See Bmdy critical to a respondent in making his v. United States 353 U. Maryland 373 U. S. 83, 86-88; Jeneks 657 667-71; Roviaro v. United States 353 U. S. 53, 60-61. The public interest in disseminating the facts contained in the Bureau of Economics' report on trading stamps, as well as respondent' s special need for the report in preparing its defense require that production be ordered.

ORDER RULING ON QCESTION CERTIFIED This matter having come before the Commission upon the certification of the hearing examiner of respondent' s motion filed January 11 , 1966, requesting access to documents in the confidential files of the Commission, and the Commission having determined, for the reasons set forth in the accompanying opinion that the respondent's request should be denied: It is ordered That respondent's request for access to confidential documents in the Commission s fies be, and it hereby is denied.

INTERLOCUTORY ORDERS, ETC. 1117 Commissioner Elman dissented and has filed a dissenting statement.

MISSISSIPPI RIVER FUEL CORPORATION Docket 8657. rder, AP1'il20 , 1.96C Order denying respondent' s request to appeal from hearing examiner order denying its motion to dismiss complaint as to Richtcr Concrete Corporation.

ORDER DENYING REQUEST FOR PERMISSION TO FILE INTERLOCUTORY Appeal This matter is before the Commission upon the request of the respondent for permission to file under S 3.20 of the Commission Rules of Practice all interlocutory appeal from the hearing examiner s order, fied :Iarch 23, 1966, denying its motion to dismiss the complaint as to Richter Concrete Corporation (Richter), and upon the answer thereto filed by complaint counsel. Permission to file an interlocutory appeal under S 3.20 "will not be granted except in extraordinary circumstances where an immediate decision by the Commission is clearly necessary to prevent detriment to the public interest.

The argument which respondent states it would make if it were granted permission to appeal and which it made to the examiner is that Richter (which the complaint alleges was acquired in violation of Section 7 of the Clayton Act, as amended) was not and is not engaged in "commerce " as that term is defined by the Clayton Act, as amended, and that the ready-mixed concrete manufacturing business in Cincinnatti, Ohio, is not a " line of commerce" within the purview of the Clayton Act, as amended. It would argue that as a matter of Jaw these elements of "commerce" must be involved for the Commission to exercise jurisdiction and that since they are not and the Commission is thus lacking in jurisdiction, its proceeding as to Richter would be useless, futile and expensive.

The issues raised here are highly controvelted. This is apparent both from the arguments made to the examiner and those now made to the Commission. The parties disagree on the applicability and the significance of cases which relate to the issues such as F01' emost Dai1'ies, Inc. 60 F. C. 944 (1962), and Lone Star- Cement Corporation v. Federal Trade Commission 339 F. 2d 505 (9th Cir. 1964). Moreover, it is not altogether clear that there is agreement on what the record will show as to the facts when it is completed. Respondent itself recognizes that the factual circumstances may be crucial since it suggests that the court in Lone Star Cement Corporation v. Federal Trade Commission supra which rej ected, in similar circumstances, the asserted propposition that the Commission was without jurisdiction, would have reached a different result on somewhat different facts. Presumably it would argue that such different facts are here present. Finally, we note that in ruling upon respondent' s motion the hearing examiner held that its stipulation discloses that Richter is engaged in commerce within the meaning of Section 7 of the Clayton Act.

In the situation, we believe it would be inappropriate to decide such basic issues as have been presented on a fragmented or partial record. It is in no way a useless or futile act to continue a proceeding so that fundamental issues may be disposed of in light of al1 the facts. See also Lone Strw Cement Corporation v. Federal Trade Commission, supra.

Respondent has not justified its request to file an interlocutory appeal as required by S 3.20. Accordingly, It is ordered That respondent's request for permission to file an interlocutory appeal from the hearing examiner s order issued March 23, 1966, denying its motion to dismiss as to Richter Concrete Corporation, be, and it hereby is, denied. L. G. BALFOUR COMPANY Docket 8485. Order and Opinions, April 22, 1966 Order vacating hearing examiner s order of Sept. 29 , 1965 , and remanding the case for further consideration of whether certain parts of the witness interview reports should be made available to respondent' counsel pursuant to the Jencks Act.

OPINION OF THE COMMISSION This matter is before the Commission on the interlocutory appeal of complaint counsel from a ruling of the hearing examiner on September 29, 1965, allowing respondents access to certain interview reports from the Commission s files. The appeal and respondents' answer raise important issues concerning the requirements of the Jencks Act' insofar as Commission proceed- 118 C. 3500 (1958).

INTERLOCUTORY ORDERS, ETC. 1119 ings are concerned and the headng examiner s role in determining whether confidential reports from the Commission s files should be produced for impeachment purposes.

The events leading up to the appeal may briefly be summarized as follows: The complaint issued on June 16, 1961. In the ensuing period the case-in-chief was presented and the defense rested its case on August 17, 1965. Rebuttal hearings were held the following September. Subsequently, on September 14, 1965, the respondents moved for an order striking from the record the testimony of five Commission witnesses, namely, Messrs. Tanner Pollock, Buchroeder, Pennington, and Murray, on the ground that complaint counsel had failed to produce written statements, letters or other writings by " these witnesses covering the subject matter of their testimony in the case-in-chief. On September 29 , 1965, complaint counsel produced for the nearing examiner in camera inspection correspondence signed by the witnesses in question as well as reports of interview with four of the witnesses, namely, Tanner, Pollock, Buchroeder, and Pennington. Complaint counsel requested the hearing examiner to examine the interview reports and certain of the Buchroeder correspondence for relevancy and to determine whether these documents should be produced for purposes of cross-examination. Complaint counsel further suggested that respondents be permitted to recall at Government expense any of the five witnesses for additional cross-examination on the basis of such documents as the hearing examiner might decide should be made available to the respondents for the purpose of impeachment. The examiner, after inspecting the documents in question turned a11 of the records over to respondents despite complaint counsel's objections. After respondents ' counsel had briefly inspected these records in the hearing room, the documents were returned to complaint counsel for the purpose of having copies made for respondents. Complaint counsel, on October 6, 1965, filed a request for permission to file an interlocutory appeal from the hearing examiner s ruling ordering the field reports turned over to respondents. On October 22, 1965 , the Commission granted permission to file the interlocutory appeal. Copies of the correspondence signed by the five. witnesses were apparently turned over to respondents on October 26, 1965. The Commission has ruled that it will follow the substance of the Jencks statute in those instances involving a request for production of documents in the Commission s files for the purpose of impeaching witnesses who have testified. (See E,-nest Mark 1120 FEDERAL TRADE COMMISSION DECISIO:-S High Docket 6940 (1959) (56 F. C. 625J. ) Accordingly, it is this statute and the decisions construing its requirements which wi1 govern our disposition of this appeal. In essence complaint counsel's appeal charges that the examiner erred in failing to make a proper determination as to whether the field reports in question were statements of the witnesses within the scope of the Act as defined by subsection (e) of the datute. Complaint counsel further charges that the hearing examiner erred in failing to excise those portions of the interview reports which do not relate to the testimony of the witnesses or which on their face are not properly producible for purposes of impeachment. Complaint counsel also contends that with respect to Commission witnesses Tanner, Po1Jock and Murray, respondents had failed to make timely motion for the production of the interview reports with those witnesses.

Ordinarily, the question of whether a proper foundation has been laid and whether a timely motion for the production of documents has been made for impeachment purposes under the Jencks Act is a crucial consideration. Under the circumstances nresented by this appeal, however, we will not explore that issue. Tn effect, complaint counsel waived that objection in the hearing of September 29, 1965.' As a result, the examiner did not have before him the question of whether respondents had made timely motion for the production of the field reports in question. Accordingly, our ruling on the interlocutory appeal is Jimited to the question of whether all or any part of the interview reports should have been produced for impeachment purposes and whether the hearing examiner made propel' findings of fact on that issue. . Basic to any discussion of the application of the Jencks Act is a recognition that the purpose of the statute is restricted to facilitating impeachment. Palermo v. United States 360 U. S. 343, 349 (1959) ; United States v. Bernj, 277 F. 2d 826 (7th Cir. 1960), and that it is not to be used as a vehicle for general discovery. It is for that reason that the statute is limited to statements of the witnesses which are precisely defmed by this legislation for the purposes of the application of the Act. Section (e) of the statute limits production of documents to statements coming within the fo1Jowing categories: 1. a written statement made by said "\vitne::s and signed or othenvise adopted or approved by him; or 2. a stenographic, mechanical, electrical or other recording, or transcription thereof, which is a substantially verbatim recital of an oral state- 2 T1". 5794-95.

INTERLOCUTORY ORDERS , ETC. 1121 ment made by said witness to an aqent of the Government and recorded contemporaneously, with the making of such oral statement. In those instances where there is a question of whether a document comes within the terms of Section (e) of the Act the Supreme Court has specifically ruled: "we approve the practice of having- the Government submit the statement to the trial judge for an in camera determination. Indeed, any other procedure would be destructive of the statutory purpose. Palermo United States, supm at 354. The reasons for an in camem inspection by the trier of fact when there is a dispute as to the nature of the document are obvious, for " (iJt would indeed defeat this design to hold that the defense may see statements in order to argue whether it should be allowed to see them. fd. In other words, in the federal court system the trial judge has the fact finding function of determinin)! in disputed cases whether a docurrent comes within the terms of Section (e) of the Act. In our procedures the hearing examiner is in the position of the trial judge and has the same function. This is a function which the trial "judge must perform thoroughly and with care in order to ensure fairness to the respondent and to ensure at the same time that" (tJ he Act's maj or concern. . . with limiting and regulating defense access to g-overnment papers, and to deny access to those Etatements which do not satisfy the requirements of Section (e)" is effectuated. fd.

In this case, the hearing examiner has failed to fulfill that function. He made no findings of fact as far as we can determine from the transcript of the hearing of September 29 as to whether the interview reports in question fell within the ambit of Section he (e) of the Act and therefore should be produced. Rather, orderd the documents produced on a generalized finding of relevancy to the proceeding. It is evident that the hearing examiner finally examined the documents only with the greatest reluctance. At the outset of the hearing, he declared categorically: "I have no intention of reviewing the documents at all." (Tr. 5796. ) In effect the examiner strongly indicated that he did not intend to go into the question..' Although repeatedly asked to make a determination as to whether or not the field reports in question were verbatim 3 Illustrative of his approach to the problem is the following statement: . . . I have no intcntion- I don t know what cO:,rt it was that filed the procedure of bein an advocate in questioning the witness with respect to the documents add so on, but I hay" no intention of followjng that, nor at the moment as I told Mr. Barnes, with01Jt your comments, do J have any ir,tention of examining these ducuments, ;ind mrtking a judgment udore counse) for the resLJondent has an opportunity to ex;nnine th, that hi case can be helped OJ' hindered hy the use of the c1() uments and therefore deny him the right to lJut in his case as he sees fit to do. " ('11', 5806.

. . .

recitals of the witnesses within the scope of Section (e) (2) of that Act, the Examiner evidently held to his position that he did not intend to explore this issue. For example, subsequently, in the hearing, the examiner stated that with respect to the four field reports the purpose of his examination, to which he finally consented, was:

, . . solely for the purpose of determining ,,,whether or not the material contained in the documents is relevant to the issues in the proceeding or relevant to the proceeding, that he (the examiners then make a judgment and jf he finds so he should turn them over to (respondents). . . . (Tr. 5851- 52. ) In short, the examiner failed to make adequate findings of fact en the threshold issue, namely, were the interview reports in question statements of the witnesses producible under the terms of the Jencks Act.

The need for careful findings of fact on this point in order to protect a Government witness from unfair attack has been stated numerous times by the cOUJts. Ordinarily it would not be necessary to elaborate on this point. Under the circumstances presented by this appeal, however, a reference to one of the more recent statements on this issue should be helpful to all concerned. In this connection the Second Circuit held:

Congress intended to restrict defense access to statements of government .witnesses, for purposes of impeachment, to those statements for which the witness and not the government agf'nt is responsible, so as to avoid the unfairness that results from the use of distorted and inaccurate material. Palermo v. United States, supra, at 350. . . . Where a claimed past contradictory, \written or recorded statement of a witness is to be used to impeach and discredit him, it should be his o\vn statement and not someone else s interpretation of what the witness said 01' what he thought the witness said. United States v. Lammu, 349 F. 2d 338, 340 (2d Cir. 1965). Since the hearing examiner failed to make adequate findings on this crucial issue, the findings he did make as to relevancy are based on an el'oneous interpretation of the law. His findings, as a result, are not binding. United States v. A viles, 337 F. 2d 552, 557 (2d Cir. 1964), cert. denied 380 U. S. 906, 918 (1965), and the case will be remanded for proper findings on this issue. It may be helpful to outline for the examiner s guidance, as well as for the benefit of counsel, the considerations pertinent to such a determination. In most cases the ansv.. er as to whether the document is within the scope of Section (e) of the Act is plain from the statement itself without the aid of extrinsic evidence. v. Lmnma Palamo v. United States, supra at 355; United States "Upra at 340. Whether there is a need for evidence extrinsic to , , INTERLOCUTORY ORDERS, ETC. 1123 the statement to make such a determination should be decided by the trial judge in the light of the circumstances of the particular case. Palermo v. United States, supra at 354, 355. As the Second Circuit has held, the procedure to be employed for determining whether or not a "statement" is involved, rests within the sound discretion of the trial judge. United States v. Lamma, supra at 340.

The crucial determination here seems to be the question of whether the reports are within the scope of Section (e) (2). The question has been before the courts numerous times and there are a number of cases affording guidance. One of the more recent decisions in point is Dennis v. United States 346 F. 2d , 20 (loth Cir. 1965), cert. granted 34 U. L. Week 3171 (l965). The court found in that case that "The withheld documents were couched in the vernacular of 'Informant stated' Informant advised' or 'Informant related' , but none we have examined can be said to be a verbatim recital within the meaning of 3500 (e) (2). We think they were properly withheld." Or, as the Second Circuit ruled a very restrictive standard is to govern -only continuous, narrative statements made by the witness, recorded verbatim or nearly so qualify. United States v. Lamma supra at 340. It should be noted that the interview reports in the Commission s files ordinarily are agents ' summarizations. E1'nest Mark High, supra. In such cases, the examiner, if he orders an interview report produced, has the obligation of making concrete findings that the prerequisites of Section (e) of the Jencks Act have been met.

In this case, we note that the reports in question are to a considerable extent distinguished by phrases such as "informant stated." There were also included a few isolated direct quotations in these reports, set apart from the remainder of the reports by quotation marks. These should be produced as coming within the scope of Section (e) (2) unless the examiner finds that such quotations have been cited out of context or that they do not accurately reflect ::,e witness s statement for other reasons. As the Supreme Court has ruled Distortion can be a product of selectivity as weJJ as the conscious co' inadvertent infusion of the recorder s opinions or impressions. Pai i 'mo v. United States supra at 352. The citation of such isolated quotations suggests another question to which the examiner should address himself namely, do they indicate an intention to distinguish between what 4 There seems to be no serious contention that the reports are within the scope of Section (e) (1). The cross-examination of the witnesses gives no indication that they had adopted or affrmed the interview reports in issue or the :notes underlying such reports. the interviewee said and summarizations of the results of the interviews and interpretative comment by the individual preparing the report? Should the hearing examiner decide that he needs evidence extrinsic to the documents to determine whether they are statements within the meaning of Section (e) (2), he may then make such further inquiry as he feels appropriate to get information on that point. For example, he may interrogate the witness or the attorney who prepared the report. See Saunders v. United States 316 F. 2d 346 , 350 (D. C. Cir. 1963). In this connection, respondents, during the course of the hearing of September 29, requested that the notes from which the interview reports were prepared be also produced for inspection by the hearing examiner. ' Complaint counsel, during the course of the hearing, advised that the interview notes were either not in existence or not in the Commission s files. In view of respondents' motion, the hearing examiner is authorized to make further inquiry as to the disposition of such notes, if necessary, by examining the Commission attorneys who interviewed the witnesses in question. Assuming the notes are in existence and there is a dispute as to whether or not they are statements of the witnesses within the scope of Section (e) (2), then the examiner should, as in the case of the interview reports, examine these documents in CCL1nera. If he deems extrinsic evidence necessary for a proper determination, the examiner may question the Commission attorneys preparing the notes as to whether or not they were verbatim recordings of the witnesses' statements or whether they were a mere summarization of the results of the interviews. Should the examiner examine the interview notes underlying the reports in question to determine whether or not they are within the category of Section (e) (2) statements, a number of court decisions wi1 afford him guidance. For example, when notes are fragmentary and do not indicate that they conform to the language of the interviewee rather than of the Government attorney, where they contain interpolations of the interviewer and do not record a continuous narrative, there is no need to conduct a hearing to determine whether they are producible under Section (e) (2). United States v. Lamma, supm at 341. The District of Columbia Circuit, in Saunders v. United States 81'pm at 350, held if the Government attorney has recorded his own 5 Tr. 5814. 5845 , 585-1. Respondents made these motions apparently on the theory that the hearing examiner' had to compare the notes underlying the report with the report to determine whether it came within Section (e) (2) and that primary evidence of the nature of the interview reports were necessarily the interview notes. INTERLOCUTORY ORDERS , ETC. 1125 thoughts in his interview notes, then the notes are within the work product immunity doctrine and not the statutory definition of a statement. Similarly, where notes contain omissions from the interview or additions from other sources, it would be unfair to confront the witness with the notes as if they were his own statements. A viles v. United States, supm at 558-559. If the examiner however, finds that the notes constitute a substantially verbatim recital of the respondents' statements within the meaning of Section (e) (2), then they should be produced. See Ogden United States 303 F. 2d 724 , 737 (9th Cir. 1962); Saunders v. United States, supm at 350. "If the notes contain both verbatim remarks of the witness and personal observations of the attorney (making the notes) then paragraph (c) of the act requires that the district judge inspect the statement and excise the protected material, if this is possible. Saunders v. United States, supra at 350.

If the notes are not available, then the trier of fact must make a determination whether the notes were destroyed in good faith in the course of normal procedure. Furthermore, if the examiner finds that portions of the notes or the entire notes were producible statements within Section (e) (2), then the requirements of the Act are satisfied if a subsequent report accurately records the producible statements originally set forth in the notes. See Ogden v. United States 323 F. 2d 818, 821 (9th Cir. 1963), cert. denied 376 U. S. 973 (1964).

Finally, depending on the circumstances, the examiner may be in a position to determine from the face of the interview reports whether the underlying notes come within the scope of Section (e) (2). For example, the Tenth Circuit, in one case, inferred from the nature of the interview reports that the underlying notes were not verbatim recitals of oral statements of the witness but rather that the reports indicated quite clearly that the notes were not producible. As a result, the court held their destruction would not give rise to sanctions under subsection (d) of the Act. Dennis v. United States, supra at 21. Respondents, to rebut complaint counsel's argument that the interview reports were not producible because on their face they are mere summarizations, seem to rely on the holding of the Supreme Court in its second Campbell decision e (Campbell II). There the Court held that the district judge was entitled to infer that an agent of the FBI with considerable experience would Campbell v. United States, 373 U. S. 487 (1963). 1126 FEDERAL TRADE COMMISSION DECISIOI\S record a potential witness s statement with suffcient accuracy so as to obviate any need for the court to consider whether it would be grossly unfair to allow the defense to use the statements to impeach the witness, which could not be fairly said to be the witness s own. That holding, however, must be confined to the facts of that case. First, it must be noted that Campbell II involved a witness s statement under Section (e) (1) of the Act. In short the interview notes became the witness s statements because he approved their content after they were read back to him. The Court did not rule that without such approval the notes would have been _producible as a statement of the witness merely because the interview was summarized accurately. The Court, in CfLmpbell II on the facts of that case, merely held that once there is evidence that a witness has approved or adopted an agent' s notes or report within the meaning of Section (e) (1) so as to make it a statement of the witness as that term is contemplated by the Jencks Act, then the courts may infer that the notes or other (e) (1) statement of the witness wil be accurately transcribed in the subsequent interview report. In short the Court held merely that a transcription of a summary of a witness s statement is producible, assuming that the witness has adopted the summary of his statement in accordance with the terms of Section (e) (1). The Court did not hold that any and alj summarizations of a witness s statements or records of such summarizations are producible merely because it is reasonable to infer the Government agent was competent to record the gist of an interview with accuracy.

In this connection, of course, it is important to note as far as interview notes are concerned, that determination of whether or not they are within the scope of Section (e) (2) depends not only on the accuracy of the interviewing Government agent but also upon his intent in making the notes, namely, was it his purpose to provide a complete record of the witness s story or, on the other hand, was it merely the purpose of the notes and the subsequent report to serve as a future guide for interrogating the witness. See United Strdes v. A viles, s'"pm at 559. In the latter case, neither the notes nor the subsequent report would come within the scope of Section (e) (2) nor would either the notes or the report come within the scope of Section (e) (1) unless the witness had adopted or approved them.

In this case, as far as we can determine, the record thus far does not indicate that the witnesses in question either adopted or affrmed the interview notes underlying the reports in issue here or the reports themselves. Respondents' counsel did not raise g., INTERLOCUTORY ORDERS , ETC. 1127 that issue in his answer to complaint counsel's interlocutory appeal. That testimony on cross-examination bearing on the point apparently indicated to the contrary. Under Section (e) (1) it is generally incumbent on the defendant to explore the issue of whether there has been an approval or adoption, within the meaning of Section (e) (1). Absent other indications that approval or adoption has taken place,' it is not incumbent on the court- or trier of fact to make such a determination on his own motion. United States v. Lammn, gupm at 341. The examiner, of course is not foreclosed from going into that question should it prove desirable in the light of further facts developed on remand. In their appeal, complaint counsel also urge that the hearing examiner erred in failing to excise passages in the interview reports which on their face did not relate to summarizations or characterizations of what the witness said during the interview. The question wi1 assume importance if the examiner subsequently finds that the interview reports contain statements producibJe under the ,T encks Act. Upon our examination of the interview reports we have determined that the hearing examiner erred in refusing to excise those portions of the reports under consideration which on their face cannot be construed as a summary or characterization of what the witness said, let alone as a statement of the witness. For example, those passages in the reports which are clearly comments of the Commission attorney concerning the administrative detail of the investigation are not producible under any circumstances. By no stretch of the imagination could these passages be considered statements of the witness within Section (e). Further, we agree with complaint counsel' argument that those passages in the reports on their face reflecting the Commission attorney s own comments and observations on documents obtained during the interview, as well as the related exhibit lists themselves should not be produced. Such passages obviously cannot be used for the purpose of impeaching the witness nor do they have even the most tenuous relationship with a statement of the witness as contemplated by Section (e) of the Act. Further, we agree that those portions of the interview reports relating to the alleged statements of persons who did not testify in this proceeding should not be made available for impeachment purposes. Where the interview report is a record an interview with a number of persons, only one of whom testified, then the statements of the nonwitness cannot be used as a basis for impeaching the individual who took the stand. Material of this nature can, and should, be excised. As the 1 E. un the documents under consideration. Ninth Circuit has stated, if an interview report includes the statement of a witness within the scope of the Jencks Act but also includes other nonproducible material, this neither precludes production of the "statement" of the witness nor requires delivery of the entire report to the defendant. Ogden v. United States supra 303 F. 2d, at 735. See also West v. United States 274 F. 2d 885 , 890 (6th Cir. 1960), cert. denied 365 U. S. 811 , 819 (1961) .

Excision of such clearly extraneous matters from documents purporting to contain a Jencks Act statement of the witness is necessary for the protection of the witness and to achieve the other purpose of the Act, namely, to preclude the broad or blind fishing expedition' (into the Government's filesJ which the Supreme Court has condemned. Sells v. United States 262 F. 2d 815 , 823 (loth Cir. 1959), cert. denied 360 U. S. 913 (1959). In short, if, on remand, the examiner finds that any part of the interview reports should be produced as a statement within the scope of the Jencks Act, he is then directed to excise those passages in the reports referred to above and described with more particularity in complaint counsel's appeal which are clearly extraneous to any comments the witness may have made to the attorney interviewing him.

The proceeding wil be remanded to the examiner for further appropriate action in accordance with the views expressed in this opinion.

Commissioner Elman dissented and has filed a dissenting opinion.

Commissioner MacIntyre concurred and has filed a separate concurring statement.

DISSENTING OPINION APRIL , 1966 By ELMAN Commissioner:

While insisting that it fully accepts the rule established by the Supreme Court in Jencles v. United States 353 U. S. 657 the Commission has largely made that rule a dead letter as applied to F. C. proceedings.

In its actual application to F. C. proceedings, the Jencles rule will henceforth extend only to:

"Consolidated dissenting- opinion In the Matter of L. G. Balfour Co. Docket No. 8435 and In the Matter of Inter-State Builders, Inc., et 111. Docket No. 8624 , p. 1152 herein. , INTERLOCUTORY ORDERS, ETC. 1129 (1) Prior written statements of witnesses to Commission attorney-investigators, where such statements have been prepared, signed, adopted, or approved by the witness. Such written statements by witnesses are rarely submitted by them to the Commission.

(2) Prior oral statements made by witnesses to Commission attorney investigators, where such statements have been recorded "substantially verbatim" in reports which constitute "contemporaneously recorded" transcriptions of the witness own words." The Commission holds that it wjl not "extend" the Jencks rule to include interview reports which summarize the witness' statements.

The Commission s decision means, in practical terms, that C. interview reports wjl no longer qualify for production under the Jencks rule. As the Commission recognizes in the Balfour opinion, pp. 1118, 1123 herein the interview reports in the Commission s files ordinarily are agent's summarizations. They are not usually cast in the form of "substantially verbatim contemporaneously recorded" transcriptions of witnesses' oral statements. And it is safe to presume that, after today s rulings by the Commission, interview reports are not likely to be cast in that form in the future.

The Commission emphasizes its concern that the Jencks rule not be indiscriminately extended to require production of agents summaries of interviews regardless of their character or completeness. (Inter-State Builders pp. 1152, 1155 herein. ) Accordingly, the Commission wil exclude "anything which is merely an agent' summary of a witness' words. (Id. p. 1155. ) The Commission instructs its hearing examiners that, in applying the J eneks rule they "must be careful * * * so as to require production of what can fairly be said to reflect a witness' own words and to avoid production of what is in fact an attorney s summary of a witness' remarks. (Id. p. 1162. ) Statements of the witness "couched in the vernacular of 'Informant stated,' ' Informant advised' or ' Informant related'" will be withheld, because "a very restrictive standard is to govern-only continuous, narrative statements made by the witness, recorded verbatim or nearly so qualify. (Balfour p. 1123 herein. ) Even "direct quotations in these reports, set apart from the remainder of the reports by quotation marks" should not be produced if "the examiner finds that such quotations have been cited out of context or that they do not accurately reflect the witness' statement for other reasons. (Id. p. 1123.

, In justification of its exclusion of "summary" interview reports from the Jencks rule, the Commission states that "There is little doubt that any attorney s summaries of interviews which he conducts wii inevitably, by the very fact of selection, omission and emphasis, reflect the attorney s own state of knowledge at the time . of the interview and also his own thoughts and subj active impressions of what he is being told influenced as well by the type and form of the questions which he posed during the interview. To this extent, his summary may more accurately reflect his own views of the case and state of knowledge of the issues at the time of the interview than it wii of the witnesses state of knowledge. (Inter-State Builders p. 1164 herein. While interview reports, as "agent' s summarizations " will not be made available to respondents under the Jencks rule, they wii undoubtedly continue, for every other purpose, to be treated by the Commission and its staff as accurate and reliable documents used in our day-to-day work. To those of us who work within!) the Commission, an interview report is a familiar document. It is the basic raw material of F. C. investigations. As the Commission points out Commission attorneys almost always interview industry members, customers, suppliers and the like in the course of their investigations of whether violations of law have taken place. The attorney s investigating reports based on these interviews and on documents and other pertinent data are basic to the evaluation of the case which must be made first by his superiors, and ultimately by the Commission. (Intet- State Builders p. 1163 herein.

If agents' interview reports are not accurate and dependable the work of the Commission breaks down. For that fundamental reason, the methods and procedures followed by Commission attorney-investigators in preparing interview reports, as well as the format and style of the reports, are standard and routine. While the reports are not expected to be anything other than mere summaries " it is expected that they be entirely factual objective, and accurate. Attorney-investigators are specifically instructed that the function of an interview report is to record the witness statements, not the agent's subjective impressions or reactions.. I do not know where the Commission finds any basis in fact for its assertion that interview reports "inevitably" contain, or are infused by, the agent's " opinions views " or "interpretations." On the contrary, our attorney-investigators are specifically discouraged from expressing in the interview report any judgment or evaluation of the witness' statements. They are in- , INTERLOCUTORY ORDERS, ETC. 1131 structed that the appropriate place for stating their opinions comments, and recommendations is in the final report prepared when the investigation is completed.

As a general rule, therefore, F. C. interview reports faithfully and obj ectively report statements of witnesses. They are regarded by the members and the staff of the Commission as suffciently accurate and reliable reports of witnesses' statements to be used for determining whether a complaint should issue, or the case be closed, or an assurance of voluntary compliance be accepted, etc. But the Commission today holds that because they are mere "summaries " they are not suffciently accurate and reliable reports of witnesses' statements to be used by respondent's counsel for purposes of impeaching or discrediting the witnesses. Under the Jencks rule as now interpreted by the Commission, such reports wil no longer be available to respondents in Commission proceedings for use in cross-examination.

The result is a paradox: Despite the Commission s insistence that it accepts the rule of the Jencks case, that rule wil no longer play any significant role in F. C. proceedings or afford any real protection to respondents in adversary proceedings where they are charged by the Commission with having violated the law.

The history of liberty," as Mr. Justice Frankfurter stated in McNabb v. United States 318 U. S. 332, 347 has largely been the history of observance of procedural safeguards. " Elsewhere he pointed out that "the standards of what is fair and just set by courts * * . are perhaps the single most powerful influence in promoting the spirit of law throughout government. These standards also help shape the dominant civic habits and attitudes which ultimately determine the ethos of a society. (Of Law and Men p. 29. ) In the history of liberty, and of judicial evolution of standards of fairness and justice, a place of honor is held by the Supreme Court's decision of June 3, 1957 , in Jencks v. United States.

The issue presented for decision in Jencks went to the heart of the right of cross-examination in an accusatory proceeding initiated by the United States. The question is this: Where a witness is caJJed by the prosecution to testify against the defendant, and the Government has in its possession reports containing prior statements made by the witness which relate to 1132 FEDERAL TRADE COMMISSION DECISIO:-S the subject-matter of his testimony, must these reports be made available to defense counsel so that he may decide whether and how to use them in cross-examination for purposes of impeaching or discrediting the witness? The answer given by the Court was an unqualified and unequivocal Yes.

It could have been argued in opposition to Jencks and indeed it was, that such reports, being hearsay and inadmissible in evidence, should not be made available to the defense; that papers in the Government's possession should be treated as strictly "confidential" and privileged against disclosure; and that Governshouldment attorneys, Eke their brothers in private practice, be entitled to work in privacy, free from intrusion by opposing parties and their counsel. The Supreme Court recognized the force of these arguments and concerns; but it held that they must yield to even more persuasive arguments based upon more weighty concerns.

Two overriding considerations coalesced in, and formed the basis and rationale of, the rule established by the Supreme Court in the Jencks case: (1) the crucial importance of the right of cross-examination in an accusatory proceeding; and (2) the special status of the Government as a Etigant, and the particular obEgation of fair and honorable treatment which rests upon the Government when it brings a proceeding charging a citizen with violation of one of its laws.

The right of cross-examination is, of course, a fundamental protection to accused persons. In another landmark case, C"eene v. McEZ,' oy, 360 U. S. 474, the Supreme Court, in an opinion by the Chief Justice, quoted with approval Wigmore s "incisive summary statement" of the critical importance of cross-examinathe tion in an adversary proceeding: "For two centuries past, policy of the Anglo-American system of Evidence has been to regard the necessity of testing by cross-examination as a vital feature of the law. The beEef that no safeguard for testing the value of human statements is comparable to that furnished by cross-examination, and the conviction that no statement (unless by special exception) should be used as testimony unti it has been probed and subEmated by that test, has found increasing strength in lengthening experience." (360 U.S. at 497. The Chief Justice pointedly added that the Court "has been zealous to protect these rights r confrontation and cross-examinations from erosion not only in criminal cases but also in a1l types of cases where administrative and regulatory actions were under scrutiny. (Ibid.

, .

INTERLOCUTORY ORDERS, ETC. 1133 In J enelcs the Supreme Court recognized that to deny a defendant access to Government reports of prior statements of an adverse witness which may be useful in impeaching or discrediting his testimony has the practical effect of limiting and impairing the value of the right of cross-examination. The Court pointed out that these documents may be of crucial importance to the defendant:

Every experienced trial judge and trial lawyer knows the value for impeaching purposes of statements of the witness recording the events before time dulls treacherous memory. Flat contradiction between the witness testimony and the version of the events given in his reports is not the only test of inconsistency. The omission from the reports of facts related at the trial, or a contract in emphasis upon the same facts, even a different order of treatment, are also relevant to the cross-examining process of testing the credibility of a witness' trial testimony. *' * * Because only the defense is adequately equipped to determine the effective use for purpose of discrediting the Government' s witness and thereby furthering the accused' s defense, the defense must initially be entitled to see them to determine 'what use may be made of them. Justice requires no less. (353 U.S. at 667 , 668-69. The second basic principle reflected in J enclcs is found in the standards of fairness and decency applicable to the Government in relation to its citizens whenever it seeks to impose upon them the penalties, sanctions, or restraints of the law. The principle is simple and straightforward. It is proudly inscribed on the entrance to the offce of the Attorney General of the United States: "The United States wins its point whenever justice is done its citizens in the courts.

A Government lawyer is not a private litigant; he is a public offcer, for whom public offce is as much a public trust as it is for any other offcial. Standards fashioned for private litigants are not the measure of the standards of honor ana decency appropriate for those who represent the United States in its courts. A Government lawyer is an advocate for a client whose interest is not so much to win a case as to do justice.' And it is not just and not fair for the Government to withhold a document in its possession which, if made available to the accused, could exculpate him or assist him in making his defense. Thus, in J eneks the Court quoted with approval the statements in United States v. Reynolds 345 U. S. 1 , 12 , and United States v. Andolschek 142 F. 2d 503, 506 (2d Cir. 1944), that "since the Government which prosecutes an accused also has the duty Brad)) v. Maryland 31- U. S. 83 . 86-88: Berger v. United States, 295 U. S. 78, 88. 2 Bmdll v. Maruland !()Jra; Mooney v. Holohan 2.94 U. S. 103; R01Jiaro v. United States, 358 U. S, 53, 60-61: Re)!wlrlB v. U11ited States, 345 U. S. 1; United States v. AndQlschek 142 F. 2d 503 G06 (2d Cir. 1944).

1134 FEDERAL TRADE COMMISSION DECISIOI\S to see that justice is done, it is unconscionable to allow it to undertake prosecution and then invoke its governmental privileges to deprive the accused of anything which might be material to his defense. . . . (TJ he prosecution necessarily ends any confidential character the documents may possess; it must be conducted in the open, and wi1 lay bare their subject matter. The government must choose; either it must 1leave the transactions in the obscurity from which a trial wi1 draw them, or it must expose them fully. " (353 U.S. at 671.) The liberating principles which converged in the Jencks rule are fundamental. They should be construed and applied, not in a niggling, grudging fashion, but in harmony with the basic values involved.

The Jencks rule, as established by the Supreme Court, is forthright and free of fuzzy ambiguities. With no "iis" or "buts the Court directed the Government to produce "aJl reports" in its possession containing the prior oral statements of the witnesses. (353 U. S. at 668. ) Does it make any difference under Jencks that the report sought to be produced is "confidential" No. Does it make any difference that it is "hearsay" and inadmissible in evidence ? No. Does it make any difference that it is the "work product" of Government attorneys? No. Does it make any difference whether the report is a "summary, substantially verbatim recital continuous narrative statement or "contemporaneous transcription ? No. One searches the Court' s opinion in vain for any such distinctions or refinements. Does it make any difference that, in the opinion of the Government or the court, the report is not "relevant" in the sense of being useful or helpful to the defense? No. Whether and how the report is to be used in cross-examination, and whether or not it wi1 help the defense, is for the accused and bis counsel to determine, not the prosecutor or the judge. The essence of the Jencks rule is that, whatever the form or style of the report, if it contains or reports statements of the witness relating to the subject-matter of his testimony, the defendant is entitled to inspect the reports to decide whether to use them in his defense. Because only the defense is adequately equipped to determine the effective use for purpose of discrediting the Government's witness and thereby furthering the accused' defense, the defense must initially be entitled to see them to determine what use may be made of them. Justice ,'equires no less. (353 U.S. at 668-69; emphasis added. The use of an interview report for purpose of cross-examination Interlocutory ORDERS , ETC. 1135 , as the Court recognized, a matter whoUy separate from and broader than that of its admissibility in evidence. An interview report summarizing a witness' oral statements, or reporting them only in part, may be as useful to the defense in impeaching or discrediting his testimony as a signed affdavit or "substantiaUy verbatim" recording. As Mr. Justice Brennan has pointed out (PuleTmo v. United Steetes 360 U. S. 343, 365 (concurring opinion) ), "a statement can be most useful for impeachment even though it does not exhaust aU that was said upon the occasion. We must not forget that when confronted with his prior statement upon cross-examination the witness always has the opportunity to offer an explanation.

The purpose of the Jencks rule is not to shield a Government witness from embarrassment, discomfiture, or even the inconvenience of having to explain or justify aUeged inconsistencies between his testimony and prior statements contained in an interview report. If it transpires that there are in fact no inconsistencies, because the report is incomplete or inaccurate or for some other reason, the net result wil be to bolster his testimony. In any event, whether in the end his testimony is strengthened or weakened thereby, the Jencks rule is designed to subject it to the rigorous test of cross-examination-and by this the Court meant effective cross-examination conducted not in the dark but in the light of prior statements of the witness contained in reports in the Government' s possession. This, then, is the Jencks rule as declared by the Supreme Court on June 3, 1957. If there be any question as to the scope limits of that rule, it wiu ultimately be determined by the Supreme Court, not this Commission. The question, going as it does to the fundamental nature and protection of the right of cross-examiation in accusatory proceedings brought by the Government, aoes not involve the exercise of agency "expertise to which deference is owed the Federal Trade Commission, either by the Supreme Court or any other reviewing authority. As I read its opinions in these cases, the Commission agrees that the rule established by the Supreme Court in the Jencks case is a rule of fundamental fairness and justice whose application cannot be confined to criminal prosecutions. The Commission recognizes that the rationale of the Jencks rule, and the considerations of policy underlying- it, are no Jess applicable to administrative proceedings, accusatory and adversary in nature where an agency of the United States charges a person with having committed a violation of law and seeks to impose a legal sanction or restraint upon him.

The Commission does not suggest that the rule laid down by the Supreme Court in the Jencks case can, or should, be abridged or modified by action of this Commission. It does not assert that our views should prevail over the Court's as to how the various competing interests here should be balanced. The Commission , the J ene/cs rule is theseems to recognize that, like it or not law of the land" which we are not free to restrict or change and which it is our duty to apply to Commission proceedings fairly and conscientiously, neither nuJJfying nor diluting its fundamental protections.

Thus, the Commission proceeds here on a premise which appears to be neither challenged nor disputed: the fuJl and unof Jencks qualified applicability to these proceedings of the rule v. United States. What is challenged and disputed-and this is the crux of my disagreement with the majority-is whether the restrictive provisions of 18 U. C. 3500, the so.called "Jencks Act " limiting the production of interview reports in criminal cases to witnesses' statements which are recorded " contempo- " are a part of the Su- raneously" and "substantially verbatim preme Court' Jencks rule. It is the Commission s view that the Act "codifies " the Jencks rule, merely making explicit what was already implicit in the Court's opinion. I disagree. However, one thing should be wholly clear: The difference between the Jencks rule, as I understand its formulation by the Supreme Court, and the Jencks rule, as now "restated" by the Commission, is the difference between day and night. It is not difference in semantics. It is a difference of a fundamental character, vitally affecting the rights of respondents in Commission proceedings. In Commission proceedings, it is the difference between whether a respondent wiJ, or wil not, have access to 3 There can be no question as to the accusaio)'Y character of Commission proceedings such as these. "\Vhen the Federal Trade Commission issues a formal complaint charging Ii person th P. violation of law, the adjudicative "proecetHng that follows is wholly ad\"ersary in nature. Evidence is presented, and testimony is adduced, before the hearing examiner in much the same manner as in a trial befon a judge. The burden of proving the alleged violation of Jaw rest ))on the charging party (i. e" Commission complaint counsel). The decision mu;;t be based upon the reeo!"(1. Finding;; of fact must be supported hy reEable, probative, and suh;;tantial evidence. Ani;, n10st pertinent here, the JI'sponuent has the full and unqualified right of cross-e;,amination. In Section 7(c) of the Administrative Proc",dure Act, :) D. C. 1006(c), Cong-ress expressly providerl that a lJarty "shall have the light " , '1 to conduct such C1'OS5examination as may be requiJ'ed fol' a full Ilnd true disclosure of the facts. " To the same effect, Section 3. 16(b) of the C--mmission s Rules of Practice provides that a respondent shah have the right of " ., cross-examination " (, and all other rig-hts essential to a fair hearing.

INTERLOCUTORY ORDERS, ETC. 1137 F. T.C. interview reports, for use in cross-examining adverse witnesses, where such reports-as they customarily do-summarize the witness' oral statements and do not quote them verbatim and in full.

Let us take a simple example. Suppose that an interview report in the possession of the Commission reads in toto as follows: I interviewed the witness for two hours. Without going into details, the sum and substance of what he said was that respondent never made any representations to him of any kind." Suppose further that the Commission brings a proceeding charging the respondent with having made false and misleading representations, in violation of the F. T. C. Act. The witness is called by Commission counsel, and testifies that respondent made various fraudulent representations to llim.

Under the rule of the Jencks case as expressed by the Supreme Court, it is clear that withholding the report from respondent' counsel would impair his right of cross-examination and be inconsistent with the basic standards of fairness and decency applicable to the Government. Although it is a summary, and not signed or adopted by the witness or a "substantially verbatim recital, the report could be of great value in impeaching or discrediting his testimony. Indeed, in the view of Mr. Justice Brennan, who wrote the Court' s opinion in Jencks a refusal to produce such a report would present a " constitutional question close to the surface of our holding in Jencks. " (Palermo United States 360 U. S. 343, 361- , 364-65. This does not seem to give the Commission any concern. It holds today that the Jencles rule "should not be extended" so as to require production of "any summaries of such (oral) statements" made by the witness to a Commission attorney or investigator. (Intet-State Builders, Inc. p. 1165 herein. At the root of the Commission s error in these cases is its misunderstanding of what the Jencks rule is. To me, the Jencks rule is the rule declared by the Supreme Court in Jencles United Stedes decided June 3, 1957, and reported in Volume 353 of the U.S. Reports at page 657. To the other members of the Commission, however, the Jencks rule is to be found in a criminal statute enacted by Congress on September 2, 1957, as an amendment of Title 18 U. S. the Penal Code, captioned " Crimes and Criminal Procedure: the so-called "Jencks Act." According to the Commission, the Act is merely a codification or restatement in statutory form, of the rule declared by the Supreme Court in the J eneks case. This may come as a surprise to the Department of Justice, which moved so quickly after the Jencks case to obtain legislative delimitation of its impact on criminal cases; to the members of Congress, who enacted the law to avoid what they feared would be the calamitous effects of the Jencks decision in the prosecution of criminal cases; and to the Supreme Court and other federal courts, which have been endeavoring since September 2, 1957, to reconcile the restrictive provisions of the Jencks Act with the requirements of due process in criminal cases. Indeed, in the first case arising under the Jencks Act the Supreme Court accepted as a working premise that the Act restrictively" defined producible statements; the Court recognized that prior to the Act "other statements non-verbatim non-contemporaneous records of oral statements" were producible " under pre-existing rules of procedure. (Palamo v. United States, supm at 349.

It does not denigrate the Jencks Act to observe what its legislative history and provisions make indisputable: that while accepting the "basic principle " of the Jencks case that the interest in maintaining "confidentiality" of Government fies must yield to the requirements of fundamental fairness and justice, Congress decided that some restriction of the J eneks rule was appropriate in its application to criminal cases tried in the federal courts. But the Jencks Act is a criminal statute, and only a . criminal statute.

One need not consider here the extent of the constitutional power of Congress in regard to the trial of criminal cases in federal courts. It remains to be seen whether, as a result of the need for construing the statute so as to avoid constitutional doubts, the area of divergence, in criminal cases, between the Jencks Act and the J encles rule wiJ eventually be reduced or even eliminated. Cf, C"mpbell v. United St"tes 373 U. S. 487. That is for the Supreme Court to determine, not this Commission. What does concern us here is whether, in applying the Supreme Court' Jencles rule to administrative proceedings, the Commission may substitute the restrictive definition of "statements" contained in the Jencks Act, a criminal statute. To me, the short of the matter is that Congress, in the Jencks Act, was explicit in limiting its application to criminal cases tried in the federal courts. The Jencks Act bears that name only because its enactment was triggered by the Supreme Court' s decision in the Jencles case. To a layman, it might seem that, be- INTERLOCUTORY ORDERS, ETC. 1139 cause the Court's decision and the Act of Congress both bear the name of "Jencks " the two are identical1. But to lawyers it would certainly be a novel approach to statutory construction to have the scope of an Act of Congress determined by its popular name. Nothing in this Commission s "expertise" authorizes us to convert the Jencks Act into a statute of general application whose provisions apply not only to criminal cases, as specified in the Act, but to every other kind of non-criminal proceeding. If we follow here the usual process of statutory construction, we cannot escape the conclusion that 18 U. C. 3500 does not apply, and was not intended to apply, to any proceedings other than criminal cases tried in the federal courts. Nothing in the language or legislative history of the Jencks Act indicates that Congress thereby directed or authorized agencies like the Federal Trade Commission to apply to their own distinctive proceedings the specific provisions of the Jencks Act. In its application to such agency proceedings, the J enclcs rule established by the Supreme Court was left intact by Congress. One may speculate whether, and how, Congress might have extended the provisions of the Jencks Act to proceedings other than criminal cases, had visit chosen to legislate in the matter. But-to me at least-it decisive here that Congress did not so legislate, and that the Jencks Act is expressly limited to criminal cases. Restrictions on fundamental rights and fair procedures are not lightly implied. As the Supreme Court has held, courts and agencies of government must be careful that "traditional forms of fair procedure not be restricted by implication or without the most explicit action by the Nation s lawmakers, even in areas where it is possible that the Constitution presents no inhibition. Kent v. Dulles (G1' eene V. McElj' oy, 360 U. S. 474 , 508; see also 357 U. S. 116, 130. ) The Court has emphasized that even in criminal cases it win not enlarge the specific restrictions contained in the Jencks Act. As :vr. Justice Brennan stated in his concurring opinion (joined by the Chief Justice, Mr. Justice v. United States Black, and Mr. Justice Douglas) in Palermo 360 U. S. 343, 365: "Although it is plain that some restrictions on production have been introduced (by the Jencks Act), it would do violence to the understanding on which Congress, working at high speed under the pressures of the end of a session passed the statute, if we were to sanction applications of it exalting and exaggerating its restrictions, in disregard of the congressional aim of reaffrming the basic Jencks principle of assuring the defendant a fair opportunity to make his defense. , If the Supreme Court wii not "sanction applications of (the Jencks Acts exalting and exaggerating its restrictions " where is there authority for the Federal Trade Commission to do so? If the J encles rule is applicable to agency proceedings, as the Commission concedes it is, we should not be reluctant to give the rule full force and effect. Our duty is not to nullify its protections exalting and exaggerating" the restrictions of the Jencks Act by extending them into an area far outside the expressed scope of the law.

Thus, the short answer to the Commission s use of the Jencks Act as justification for excluding F. C. interview reports from the J encles rule is that the Act simply does not apply here; and that it would require "the most explicit action by the K ation lawmakers " which is wholly absent here, to permit such a restriction of the rule. However, some further comments should be made regarding the Commission s erroneous assumption that the considerations that persuaded Congress to restrict the J encles rule as applied to criminal cases are also applicable to F. proceedings.

One must recall the circumstances which led to the Jencks Act. The Jencles case was decided on June 3 , 1957 , and the Jencks Act became law on September 2, 1957 (71 Stat. 595). In that three-month period, as the Supreme Court later noted in Palermo v. United States 360 U. S. 343 , 346, there was considerable agitation over the scope and feared consequences of the J encles decision: "Defendants ' counsel began to invoke the J encles decision to justify demands for production far more sweeping than that involved in Jencles and under circumstances far removed from those of that case, and some federal trial judges acceded to those excessive demands," There was widespread "controversy and concern" that, particularly in criminal cases involving treason, espionage, and other offenses against national security, defense counsel might obtain unwarranted access to secret F. I. files. There was fear that the decision might unduly broaden the scope of pretrial discovery in criminal cases, again to the detriment of the Government. Pointing to the broad protections afforded defendants in criminal cases (e. the presumption of innocence, the requirement that guil be proved beyond a reasonable doubt, the privilege against self-incrimination etc. ), many persons contended that the Jencles decision unduly , Interlocutory ORDERS, ETC. 1141 tipped the scales a.o;ainst the Government in criminal prosecutions especially in cases involving national security. The Jencks Act's most important restriction is in its definition of the "statements" required to be produced. The legislative history reveals that Congress' concern was that summaries might be inaccurate or distorted, and hence that their use for impeachment purposes could be unfair to the witness and the prosecution.' To be sure when confronted with his prior statement upon cross-examination the witness always has the opportunity be con-to offer an explanation." 6 However, Congress seemed to cerned that, whatever explanation or disclaimer the witness might offer, the effect of the statement would not easily be expunged from a juror s mind and the damage to the prosecution could thus be irreparable.

Let us consider the applicabilty of the above factors to F. proceedings.

First, it is absurd to suggest that a threat to the "national security," which was so much in the minds of those responsible for the enactment of the Jencks Act and which its provisions so surely reflect, is in any way involved when a respondent requests an interview report in a Federal Trade Commission proceeding.

Second, the Commission s suggestion that requiring production of interview reports which are not "substantially verbatim would "hamper " or create "undue interference" with the work It is diffcult to see of Commission attorneys is rather strange. how a rule requiring production of interview reports " not substantially verbatim" would hamper the work of our attorneys any more than a rule requiring production of "substantially verbatim" reports. The Commission s view appears to be that the purpose of the distinction between "substantially verbatim reports and summaries is to afford a Government attorney some See generally H.R. Rep. No. 700 85th Cong-. , 1st Sess. (1957) ; S. Rep, No. 981 , 85th Cong-., 1st Sess. (1957) ; S. Rep. No. 569, 85th Con!'. , 1st Bess. (1957) ; Note The Jelwks Legislation: Prob1e1J8 in Prospect, 67 Yale L. J. 67. (1958); Note, The Aftermath of the Jencks Cabe, 11 Stan. L. Hev. 297 (1959).

Palermo v. United States, BUlJn)" at 350 , 352: Ca1!I1JbeU v. United States 373 U. S. 487, 491)-97; see especially id. at 50Z (Clark J. , dissenting). Palermo v. United States, BJlpra. at 365 (Brennan, J.. concurring). 7 It is clear t.hat umgress in defining "statements" clio not intend to draw n distinction basccl upon the firlmissibility of the documents. Under the Jencks Act, nc1missibilty is wholly irrelevant in detennining a request for production. Palermo v. United States. supra, at 353, n. 10. Indeed, "substantially verbatim" written l'epOl'ts of an interview made b ' an investigator are no le s hearsay t.han summaries. The original House hil did in fact limit "statements " to those signed 01' adopted by the, itness, for the reason that any other l' epor-u would be hearsay. H.R. Rei). Ko. 700 , 85th Cong., 1st Sess. (1950), p. 6. Congress specifically rejected this view by allowing "substantially vcrbatim " reports. , area in which his "work product" is protected. This would mean that the primary function of the distinction is simply to give Commission attorneys the option, and indeed the incentive take statements in a fashion calculated to insulate them from " 8production.

At a1l events, the members of Congress certainly had no such thoughts in mind in drawing the Act' s distinction between substantially verbatim" reports and summaries. In the legislative history, neither Hiclcmcm v. Taylor nor the work product rule is mentioned in this connection. Rather, as I have already pointed out, Congress' main reason for defining " statements" as it did was its fear that in a criminal case the danger of undue prejudice to the prosecution from the use of an inaccurate or distorted summary for impeachment purposes would outweigh any unfairness to the defendant. There may be some danger in a criminal case that the jury will be influenced, to the detriment of the prosecution, by cross-examination based on an inaccurate report, regardless of how well the witness explains away the report. But this danger does not exist in agency proceedings tried before a hearing examiner. Even under the rule now fashioned by the Commission, upon request that an interview report be produced, it must be turned over to the hearing examiner so that he may determine whether it is p,'ima facie substantially verbatim. " Thus, the trier of fact, the hearing examiner, wi1 see the report even if it is in fact "inaccurate" 01' not "substantially verbatim. " iNhat further "prejudice" or "unfairness to complaint counsel's case could result if the report were turned over to respondent? But there is a more fundamental reason for rejecting the Commission s conclusion that we are justified in restricting access to interview reports because they may be inaccurate or distorted. The Commission has a duty to deal with this problem in the light of realities, and not on the basis of hypothetical, unreal and unsubstantiated dangers. I do not think it serves the public interest, or increases the public s respect for the integrity of the Commission s processes, for us here to impugn the accuracy and trustworthiness of interview reports prepared by Commission attorney-investigators. It is a fact, and one that the members of the Commission surely should not seek to obscure or deny, that these reports, while "summaries " are generally characterized by objectivity, accuracy, and reliability. The Commission expects Palenno v. United States, S1pra at 366 (Brennan, J" concurring. INTERLOCUTORY ORDERS , ETC. 1143 and receives, such reports from its attorney-investigators. Were it otherwise, we could not do our work properly. It is incongruous and wrong for the Commission-in order to justify its restriction of the Jenck.s rule so as to make it inapplicable to F. C. interview reports summarizing oral statements of witnesses-to brand such reports as "inaccurate and misleading in many instances.

Nor does it accord with reality to suggest that allowing respondents access to interview reports could "easily convert the fact-finding process from a trial of the issues into a trial of the competency and accuracy of the work of the attorney" or that it would disrupt and confuse the hearing by injecting into it irrelevant side issues. " '" Under the Jencles rule, the presiding officer, whether he be a judge or hearing examiner, is well able to prevent cross-examination from degenerating into a trial of such collateral issues. If the respondent' s attorney formulates a question based upon his examination of the summary, he must accept the witness' response. If the witness explains that the summary is inaccurate, that is the end of the matter. There is neither " 11 disruption" nor a trial of "irrelevant side issues. A basic premise of the rule announced by the Supreme Court in the J encles case is that the standards of conduct for Government attorneys are high, and far more exacting than those applicable to attorneys in private litigation. We must do all we can to impress upon our attorneys that the Commission is primarily concerned with doing justice, not winning cases, and that no case is "won" if justice is denied.

Rather than instructing Commission counsel that high standards of fairness and justice require that they not withhold interview reports which may be vital to a respondent in making his defense, the Commission delivers an extraordinary paean to the interests of "confidentiality" and "executive privilege. " Its opinions in these cases establish an elaborate and complex set of distinctions which in practical effect wil serve as a manual on how to write interview reports so as to guarantee not having to produce them. In R. H. IVacy Co. Docket No. 8650, issued March , 1966 (p. 1108 hereina, the Commission goes even further. tells our attorneys that even where the hearing examiner has de- 9 If the other members of the Commission fee! that the interview reports submitted to us every day are in Inany instances inaccurate, distorted, and unreliable, the remedy is not to restrict the Jencks rule. Instead, we should proceed without delay to Collect the situation by making certain that all interview reports will ue as accurate, complete, and trustworthy as T, at least, believe they are now. 10 Inter-State Builders, Inc. p, 1152 herein. Jl 3 Wigmore, Evidence 1023 (1940). termined that an interview report fails within the Jencks Act definition of "statement " complaint counsel has the option of acquiescing in the striking of the testimony of a witness who has already testified, rather than having to produce the interview report. Such evasive tactics have no place in Commission proceedings." In the long run, they can have only a corrupting effect on agency processes.

Consideration of the procedural delays, confusion, and opportunities for- error engendered by the Jencks Act standards and procedures demonstrates that their extension, by implication, to Commission proceedings is not only unfair but imprudent. The Jencks Act restrictions have already been recognized as a principal source of delay in criminal trials. As the present cases demonstrate, they wi1 surely have that effect in Commission proceedings.

Even aSSllmmg that interview reports wi1 in some instances 12 The Jencks Act provides for the striking of testimony rather than dismissal of a prosecution where the Government refuses to comply with a district judge s direction to produce a witness statement. .Whatever the merits of that provision in criminal proceedings, it is wholly inappropriate in Commission proceedings where complaint counsel can file an interlocutory appeal to the Commission-which in the last analysis is responsible for maintaining confidentiality of agency files.

See also ote The Jencks Ru/e s Application to Adversary Adjudications of Administrative Agencies, 68 Yale L. J. 1409, 1422-23 (1959) ; The sanctions imposeu by the f Jencks Acts. . should not be incorporated into an administrative law Jencks Rule. . . . A statement by a witness which the prosecution conceals may well be of e:d)'emco importance. This Ekelihood is inc)' eased ,,,hen the prosecutor prefers to have the witness' testimony at trial expunged rather than permit the statement to be used on cross-examination.

13 Judge Hel'lands of the 1.united States District Court for the Southern District of New York thus describes the experience in criminal trials: fTJhe Jencks Aet, Title 18 United States Code, Section 3500, requires the United States Attorney to furnish defense counsel, upon request, with an pre-trial statements of a prosecution witness after the particular witness hus completed his direct testimony at the trial. \Vhat constitutes a ' statement' within the meaning of this Act has been the subject of B multitude of uecisions.

To determine whether the particular documents constitute ' statements' within the meaning of the statute, the trial judge must frequently devote considerable time to a close reading of voluminous papers. Often he must conduct extensive hearings to determine, for example, whether the particular paper correctly reflects the witness' statement; whether it has been revised; or whether it consists of selected excerpts. The Supreme Court has held that, in certain circumstances, the trial judge has the duty to hold a non-adversary hearing on his own motion and to have extrinsic evidence adduced on this issue.

These voir dire. proceedings stalJ the main trial. Any trial judge who attempts to cut corners in order to save time may easily run afoul of the controllng appellate rulings.

Then that"e is the provision of the Jencks Act that the statement must be turned over to the uefenrlant if it 'relates to the subject matter as to which the witness has testified,' and that the trial judge must excise such portions of the statement that do ' not relate to the subject matter of the testimony of the witness.' What is the scope and thrust of the words ' relate to' and the words 'subject matter ? Dictionary definitions wil not do. INTERLOCUTORY ORDERS , ETC. 1145 qualify as "Jencks-type" statements under the criteria now established, the examiner would usually have to conduct a voir dire hearing, at which it may even be necessary to call the interviewing Commission attorney away from some other task, perhaps in another city, to testify at such a hearing. Meanwhile the continuity of the hearing has been disrupted, and, as in the cases before us, for considerable periods of time. This process may be repeated for each succeeding witness. Moreover, in such cases the distinction between "substantially verbatim " and "summary reports may be hard to apply. Reference to hundreds of federal court decisions may be required. Some of these precedents are in theconflict with one another. Indeed, in the cases before us, issues may not have been finally disposed of. We have, for example, no guarantee that after remand we wi1 not have another appeal by respondent, if the examiner applies the Jencks Act provisions too narrowly, or by complaint counsel, if he applies them too broadly."

These delays are wholly unnecessary and can easily be avoided without sacrifice of any demonstrable interest. First, the simple rule of the Jencks case-which eschews the esoteric distinction between " substantially verbatim" and 'Isummary" reports will be easier to apply, wil be unlikely to create a source of error and, most important, wil never require the holding of a voir dire hearing.

Second, it is essential, if inexcusable delays and disruptions of Commission proceedings are to be eliminated, that requests for production of interview reports be handled during prehearing proceedings, and not be deferred until after the witness testifies at the hearing. Although we hardly need look beyond these cases for ilustration of the disruptive effects of the Jencks Act's postdirect requirement, it is significant that this procedure has been Nice questions ate presented with respect to the factual and linguistic rekv(ince oi thii witness ' pre-trial statements to his tdol testimony. Furthermore. assuming there is a relationship to such subject matter, how much should be turned over to the defem1ant? How much can be excised without eliminating Qualifying or otherwise significant contextual material? To answer these and related questions, the judge must take the time to read al! of the transcripts IlnaJyticalJy.

Every word of the witness' trial testimony and every word of the witness ' pre- trial statement must be searchingly studied ;n relationship to each other. \Vherc the trial testimony and pre-trial statements are voluminous . days must be requirer to complete the examinations, to designate and impound the excised excerpts, and to give defense counsel reasonable time to stlHly the portions turned over to him prior to cross-examination. As a result, the main trial is adjourned; and the jurors are recessed. This procedure and this delay can take IJ\ace with each trial witness as to whom the Government possesses a pre-trial statement. Judicial Conference of the Second Judicial Circuit The Problems of Long Criminal Trials 34 F. RD. 155 , 168-69 (1963).

14 Compare hier-SttLte Builders Inc., with L. G. Half01r Co. cause for considerable concern and dissatisfaction in criminal trials. In addition to its disruptive effects, defense counsel have found that examination of interview reports while the trial is in process does not afford them suffcient opportunity to assess the reports' utility for impeachment purposes. '" Accordingly, despite the Jencks Act' s formal requirement that production be allowed only after the testimony of the witness on direct, in many cases there has been informal agreement for production of all witness reports before trial or at an early stage.'" And one court of appeals has recommended this as a desirable procedure," Surely, in view of this, requests for production of witnesses statements should not be deferred unti after witnesses have testified on direct. That requirement in the Jencks Act refiects the variety of unique policy considerations in criminal cases which have traditionally been used to deny or limit pretrial discovery of the identity of prosecution witnesses." But no such policy considerations are involved in Commission proceedings. Our Rules of Practice specifically provide for prehearing disclosure of the names of witnesses to be called at the hearing." This, of course, also renders groundless the Commission s fears that production at a pre-hearing stage would permit "general access" to all interview reports in the Commission s fies. The only reports required ' Note The Jencks Act: After Six Years, 38 N. L. Rev. 1133, 1139-40 (1963); Junior Bar Section of the Bar Association of the District of Columbia, Discovery in Federal Criminal Cases, 33 F.R.D. 47, 118 (1963).

le Committee on Pretrial Procedure, Judicial Conference of the United States Report Q11 Recommended Procedures in Criminal PretrialB 37 F.R.D. 95, 102 (1965). Note The Je:ncks Act: After Six Years, 38 ::. . Rev. 1133, 1139-40 (1963). 11 Ogden v. United States, 303 F. 2d 724 , 734 (9th Cir. 1962) : (IJt was not error to deny defendant's pretrial Jencks Act demands for statements of this and other witnesses. This is not to suggest that it is always, or even normally, inappropriate for the government to produce such statements before trial. Where the identity of the government' witnesses and the probable nature of their testimony is known, speedy resoultion of Jencks Act problems by early and full disclosure may serve the interests of aJ! concerned. See also Junior Bar Section of the Bar Association of the District of Columbia., supra, n. 15 , at 122.

18 The reluctance to permit pretria.l production of witness lists a.nd witness statements in criminal cases refleets a belief that there are dangers, peculiar to criminal proceedings, perjury and manufactured evidence, and bribery and intimidation 'or prospective witnesses, as well as an assumption that the Government is entitled to the strategic advantages of surprise in enforcing the criminal laws. See Traynor Ground Lost and Found in Criminal Discovery, L, Rev. 228 (1964): Goldstein, The State and the Accused: Balance of Advantage in Criminal Procedure, 69 Yale L. J. 1149 (1960) ; Comment Federal Rules of Criminal Procedure Rule 16, Second Preliminary Draft of Proposed Al1 endment8, 113 U. Pa. L, Rev. 1295, 1296 (1965), Rule 3. 8 provides in relevant part:

(a) The hearing examiner in any case may, and upon motion of any party or where it appears probable that the hearing wjJ extend for more than five (5) days he shall, direct counsel for aJ! parties to meet with him for a conference to consider any or a.1I of the following: .. .. ..

(6) Such other matters as may aid in the orderly disposition of the proceeding, including disclosure of the names of witnesses and of documents or other physical exhibits which wil be introduced in evidence in the course of the proceeding. ) INTERLOCUTORY ORDERS, ETC. 1147 to be produced would be those reporting interviews with specific witnesses whom complaint counsel intends to call at the hearing. As the Ninth Circuit has pointed out (Ogden v. United States 303 F. 2d at 734), "Where the identity of the government' witnesses and the probable nature of their testimony is known * * * early and full disclosure may serve the interests of all concerned." The feasibility of this practice is demonstrated not only by the fact that it is a common and recommended procedure in federal criminal cases, but that, as the Commission observed in Viviano Macaroni Co. Docket No. 8666, issued March 9, 1966 (p. 1104 hereina, it is already an established practice in Commission proceedings.

Nor, finally, should there be any undue concern that production at a prehearing stage might result in the production of interview reports unrelated to the witness' testimony at the hearing. In the first place, it is most unlikely that the substance of the witness' statements in the interview reports wiJ be broader than the subject-matter of his testimony at the hearing. Second, even under the Jencks Act, the court's role in determining whether a statement is related to the witness' testimony is a very narrow one. The standard of relevancy is necessarily broad and must be loosely applied to be consistent with the principle, which the Jencks Act reflects, that only the defense attorney can surely assess the document's usefulness for impeachment purposes. Accordingly, there is little likelihood that under a rule allowing pre-hearing production, the respondent wiJ get substantially more than he would get under the wait-and-see Tule of the Jencks Act. At a1l events, if respondent does get a Jittle more-so what? Is it worth the costs in delay and disruption of adjudicative proceedings which the Commission s present approach entails? Unlike the Federal Rules of Criminal Procedure, the purpose of the Commission s Rules is to encourage maximum prehearing discovery which wi1 expedite hearings and assure that they are not conducted under the ' sporting theory' of Jitigation where 20 the goal is to surprise and confound your opponent. To allow the kinds of delay and interruptions which now prevail is inconsistent with the Commission s policy that adjudication be expeditious and continuous.

L. G. Half()1T Co" Docket No, 8435 (Order Directing Disclosure of Documents, issued May 10, 1963, pp. 3-4 (82 F. C. 1541 , 154, J). Rule 3. 16(cl) of the Commission s Rules of Practice provides: Hearings shall proceed with all reasonable expedition. Unless the Commission otherwise orders upon B certificate of necessity thcrefot. by the hearing examiner, an hearings shall be held at one place and shall continue without su pension until concluded. (This does not bar overnight, k end, or holiday ecesses. or other brief intervals of the sort normally involved in jurlicial proceerlinga.

VII Finally, I think a word is in order with respect to the Commission s decision in Viviano Macaroni Co. That decision ilustrates the Commission s misconception of its role in assessing the "relevance" of an interview report for purposes of discrediting a witness. " In Viviano respondent requested inspection of interview reports of conversations with prospective witnesses. Respondent' s counsel urged that a "number of the prospective witnesses are hostile to the respondent and that, if he can obtain the documents called for and if they demonstrate this hostilty, he wiJ be able, if not to attack the credibilty of the witnesses at least diminish the weight that should be given to their testimony. (Viviano pp. 1104, 1106 herein. ) The Commission held that respondent had failed to show good cause for the release of these documents under Section 1.134 of the Commission s Rules. It held that "what (respondent) seeks are the summary reports by agents as contained in interview reports. These reports would be the impressions of a third party as to what was said in a particular conversation. This, of course, would be inappropriate for impeachment purposes since such a report is not necessarily the statement of the prospective witness. (lez. p. 1106. ) The Commission also held that the claim "that there might be hostile witnesses in the group of prospective witnesses to be called by complaint counsel is clearly insuffcient to justify production of documents within the category of an attorney s work product as defined in Hickman v. Taylor." (ld. p. 1107. Suppose an interview report reads as follows: "I talked to the witness for over an hour. He was very frank and outspoken in tering me that he hates the respondent and would like to send him to jail if he can, even if he has to lie under oath to do it. Under the Commission s decision in Viviano such an interview report would not be producible since it would be merely an "agent' summarization" conveying "the impressions of a third party" and inappropriate for impeachment purposes since such a report is not necessarily the statement of the prospective witness." I disagree. For purposes of impeaching the witness, such an interview report would be invaluable to the defense, and in my view is clearly producible under the Jencks rule.' 22 The Commission in Viviano also concludes-erroneously in my view-that a. prehearing; request for intreview reports is subject to Rule 1.134 governing requests for confidential information. As the Commission holds in Inter-State, that rule is not applicable to such requests made during the hearing. I can conceive of no reason for making it applica.ble to an identical prehenring request. At whatever stage the request is made, a report whose use is " necessary in connection with adjudicfitive proceedings" is not "confidential information, " as. defined in Rule 1.33.

23 Cf. Rosenberg v. United States 360 U, S. 367, 370. INTERLOCUTORY ORDERS, ETC. 1149 SEPARATE CONCURRI:\C STATEMENT' By MACINTYRE Commissioner:

Here the avalanche of words and arguments have come close to overwhelming the Commission. Resolution of a simple issue has been made diffcult because it has become obscured in the mire of conflicting arguments.

The issue before the Commission is quite simple: Are respondents in Commission proceedings entitled, as a matter of right, to general access to Commission investigational files containing reports on work done in the field by Commission agents relating to persons who may be called as witnesses? I do not believe they are.

There is, of course, no question concerning the availability to respondents of Commission records necessary for their proper cross-examination of witnesses called by complaint counsel, such as the prior statements of persons who take the stand. The Commission, under its rulings in these cases, has made it clear that such documents are, or wil be made, available to respondents upon a proper showing under its established procedures. It has refused to indiscriminately turn over to respondents the reports of work performed by its attorneys merely because the reports relate to a witness called to testify. To do so would, in effect, grant general access to the Commission s investigational files. Specifically, the Commission s position, as I view it, is that a work report relating to a witness, containing no more than a summary of what the witness said or may have said and which is not the witness' own statement, is not producible. Its rulings are consistent both with the Jencks rule contained in the Supreme Court' s decision in Jencks v. United States 353 U.S. 657 (1957), and the requirements of that rule as they have been codified by the Congress in the so-called Jencks Act (18 U. C. 3500). This the Commission made clear in its opinion in Inter-State Builders, Inc. Docket No. 8624 (p. 1152 hereina.

The dissent apparently misconstrues the Jencks decision and consistently confuses the issue by equating the report of an interview with a witness with a statement of that witness. Neither the facts nor language of the Jencks decision afford a ground for a contention that the Court considered the two as necessarily one and the same thing. In fact, it seems clear that in referring to statements orally made to, and recorded by, an agent, the Court was not considering mere summarizations but rather the witness "Consolidated concurring statement in the Matter of L. G. Balfour Co. Docket No. 8435 and In the Matter of Inter-Stato Ruilder8, Inc. et al.. Docket No. 8624 , p. 1152 hereil1. own statements. It is also apparent from the Supreme Court' subsequent review of the Jencks decision in Palermo v. United States 360 U.S. 343 (1959), that the Court was satisfied that the statute was framed to preclude an "expansive reading" going beyond the holding of that decision.

Further, the dissent unmistakably implies that by applying the Jencks Act standards for determining whether a document is producible the Commission deprived respondents of the full right to cross-examination and of due process. This astonishing statement I suspect wil surprise the courts and the Congress. It deserves a reply. I think it goes without saying that in the light of the possible penalties in criminal proceedings the attendant procedures must comport to the highest Constitutional requirements of fairness and due process. As a result, the insinuation that the application of the Jencks Act to the administrative proceedings is somehow unfair is startling if not ludicrous. If application of the Jencks Act standard in administrative proceedings deprives a respondent of the right to a full cross-examination the same must be true in criminal proceedings. After some eight years of interpretation I have yet to see a judicial decision questioning the fundamental fairness of the guidelines spelled out in the Jencks Act by Congress. If the Jencks Act standard meets the requirements of fairness for criminal proceedings a fortiori it must meet the requirements for due process in a civil administrative proceeding which is nonpunitive. Finally, cross-examination on the basis of a summary, which mayor may not be complete, or a report of what a witness said or may have said, would not necessarily bring the proceeding closer to ascertaining the truth but might well result in the converse, namely, the confusion of the testimony and the record. For example, the Court in Palermo noted the legislative concern with the danger of misinterpretation ' inherent in a report merely relating portions, although accurately, from a lengthy oral recital. Cross-examination on this basis would be far more apt to contribute to a sporting type of trial than application of the careful1ly thought-out guidelines spec1ed out by Congress under the Jencks Act. The courts do not permit such procedure and there is no reason why an administrative agency should not show a similar concern for the witnesses appearing before it. There are one or two additional points which should be touched upon in passing. Noone seriously disputes the accuracy of our 1 The tlissents insistence that such It uanger is not inherent in administrative proceedings because no jury is involved ignores the fact that the Jencks Act applies equally to jury and nonjury criminal trials.

INTERLOCUTORY ORDERS, ETC. 1151 attorneys' field reports for the purposes for which they are written, namely, to give the Commission information on which it may act. The same is also true of the reports of the agents of the Federal Bureau of Investigation whose reports must also of course, meet the highest standards of probity and accuracy. Nor would anyone question that the Internal Revenue Service relies on the reports of its agents. Yet, the Court in Palermo in connection with an Internal Revenue agent' s memorandum of a conference with a witness, expressly recognized the Congressional preoccupation with the unfairness of allowing the defense to use statements to impeach the witness which could not fairly be said to be the witness' own, rather than the product of the investigator s selections, interpretations and interpolations. ' Why, on this issue, should a differentiation be made between the attorneys of the Federal Trade Commission, agents of the Federal Bureau of Investigation or agents of Internal Revenue? No respondent in these cases has been, nor should be, deprived of access to prior statements of witnesses necessary for its defense, and such access each wjJ have. Neither the law nor fairness demands more.

I concur in the decisions of the majority in Inter-State Builders Inc. Docket No. 8624 (p. 1152 herein), and L. G. Balfour Docket :'0. 8435, decided today (p. 1118 herein). ORDER RULING ON Il'TERLOCUTORY Appeal This matter is before the Commission upon complaint counsel' interlocutory appeal from the hearing examiner s order of September 29, 1965 , directing that certain interview reports be turned over to respondents. The Commission, upon consideration of the appeal and respondents' answer in opposition thereto, has determined that the order should be vacated and the proceeding remanded to the examiner for action consistent with the views expressed in the accompanying opinion. Accordingly, It is ordej" That the hearing examiner s order of September , 1965, be, and it hereby is, vacated.

It is further ordered That the proceeding be, and it hereby is remanded to the hearing examiner for further action consistent with the views expressed in the accompanying opinion. Commissioner Elman dissented and has filed a dissenting opinion. Commissioner MacIntyre concurred and has filed a separate concurring statement.

2 In the Commission s own proceedings, take, as an example, the case where one of our attorneys interviews !J number of witnesses at once. The resulting report would probably consist primarily of the attorney s impressions and evaluations of what went on at the session, and be more in the nature of reporting on an event rather than a recording of the persons' stl.tements. INTER-STATE BUILDERS, IKC., ET AL.

Docket 8624. Order and Opinion' , April, 1966 Order vacating initial decision and remanding proceeding to the hearing examiner for him to review the interview reports of witnesses and determine whether or not portions of the reports should be made available to respondent' s counsel under the Jencks rule. OPINION OF THE COMMISSIO:-* BY JONES Commissioner:

The complaint charges that Inter-State Builders, Inc., a corporation, and Milton S. Gottesman, who controls and directs the acts and practices of said corporation, violated Section 5 of the Federal Trade Commission Act by making certain misrepresentations in connection with the sale and distribution of aluminum and insulated siding products.

In his initial decision, the hearing examiner sustained the a1legations of the complaint and found that respondents had violated Section 5 as charged.

Respondents have appealed from the initial decision, urging among other things that the hearing examiner erred in refusing at the hearing to inspect certain Commission interview reports prepared by Commission investigators recounting interviews with the consumer witnesses who testified at the hearing on behalf of the Commission to determine whether or not such reports were required to be made available to the respondents for the purpose of cross-examining and impeaching such witnesses. Respondents maintain that the examiner should have ordered that the reports be made available if they were "written by the witness or, if written by another, (weren approved or adopted by the witness or were Hverbatim transcriptions of witnesses' statements " and specifically urge that the Commission apply "the criteria of the Jencks statute" (Respondents Brief on Appeal, pp. 11, 12). It is our view that the hearing examiner misconceived the proper rule to be followed in considering respondents ' counsel's request for production of prior statements made by the witnesses called by complaint counsel and that his refusal to inspect the interview reports in order to determine whether they came within the Jencks rule requiring production of certain types of pretrial statements given by witnesses to the Government constituted *For dissenting opinion of Commissioner Elman and concurring statement of Commissioner MacIntyre in this case, see consolidated opinion and statement In the Matter of L. G. Balfo1!T Co. Docket No. 8435. pp. 1128, 1149 herein. INTERLOCUTORY ORDERS, ETC. 1153 error requiring a remand of this case to the examiner with instructions to reopen the hearing and to reconsider this issue in the light of this opinion.

In view of our disposition of this ground of respondents' appeal we do not address ourselves to the remaining issues raised by respondents on this appeal.

The Jencks Decision find Act On June 3, 1957, the Supreme Court handed down its landmark decision in Jencks v. United States 353 U.S. 657, in which the Court held that the defendant was entitled to inspect a11 prior reports made to the F.B.I. by two witnesses, Ford and Matusow, whom the Government called during the trial concerning meetings about which they had testified at the trial. Ford had testified that his reports had been made "immediately following each meeting, while the events were still fresh in his memory. He could not recall, however, which reports were oral and which in writing" (p. 665). :l1atusow testified that he had made both oral and written reports to the F. I. The Supreme Court stated: We now hold that the petitioner was entitled to an order directing the Government to produce for inspedion all reports of Matusow and Ford in its possession, written and, when orally made, as recorded by the F. touching the events and activities as to which they testified at the trial. We hold further that the petitioner is entitled to inspect the reports to decide whether to use them in his defense. Because only the defense is adequately equipped to determine the effective use for the purpose of discrediting the Government' s ,vitness and thereby furthering the accused' s defense, the defense must initially be entitled to see them to determine .what use may be made of them. Justice requires no less (pp. 668-669). Thus, the rule laid down in the Jencks case by the Supreme Court was that for purposes of cross-examination, a defendant is entitled to the production of any statements made to the Government by the witness in writing or, when orally made, as "recorded" by the Government agent.

Shortly after the Jencks decision the rule laid down by that decision was codified in statutory form in what is known as the Jencks Act, 18 V. C. 3500. In a case decided after the Jencks case, but prior to the statute United Stf1tes v. Anderson, 154 F. Supp. 374, 375 (E.D. No. 1957), the Court held that a witness statement under the J enck8 case includes only continuous, narrative statements made by the witness recorded verbatim, or nearly so, by persons acting for the United States, and does not include notes made during the course of an investigation (or reports compiled therefrom) which contain the subjective impressions, opinions or conclusions of the person or persons making such notes. The report of the House Managers of the .Jencks bil, signed by all of the House Conferees, stated that the provisions of the bil were " in Ene with the standard enunciated" in the Anderson case. H. R. Rep. No. 1271 , 85th Cong. , 1st Sess. 3, quoted in Palermo v. United States 360 U. S. 343, App. B, p. 359 (1959). The Jencks Act provides as follows:

(a) In any criminal prosecution brought by the United States, no statement or report in the possession of the enited States which was made by a Government witness or prospective Government witness (other than the defendant) to an agent of the Government shall be the subject of subpena, discovery, or inspection until said witness has testified on direct examination in the trial of the case.

(b) After a witness called by the United States has testified on direct examination, the court shall, on motion of the defendant, order the United States to produce any statement (as hereinafter defined) of the witness in the possession of the United States which relates to the subject matter as to which the witness has testified. If the entire contents of any such statement relate to the subject matter of the testimony of the witness, the court shan order it to be delivered directly to the defendant for his examination and use.

(c) If the United States claims that any statement ordered to be produced under this section contains matter which does not relate to the subject matter of the testimony of the witness, the court shall order the United States to deliver such statement for the inspection of the court in camera. Upon such delivery the court shall excise the portions of such statement which do not relate to the subject matter of the testimony of the witness. With such material excised, the court shall then direct delivery of such statement to the defendant for his use. If, pursuant to such procedure, any portion of such statement is withheld from the defendant and the defendant objects to such withholding, and the trial is continued to an adjudication of the guilt of the defendant, the entire text of such statement shall be preserved by the United States and, in the event the defendant appeals, shall be made available to the appellate court for the purpose of determining the correctness of the ruling of the trial judge. Whenever any statement is delivered to a defendant pursuant to this section, the court in its discretion, upon application of said defendant, may recess proceedings in the trial for such time as it may determine to be reasonably required for the examination of such statement by said defendant and his preparation for its use in the trial. (d) If the United States elects not to comply with an order of the court under paragraph (b) or (c) hereof to deliver to the defendant any such statement, or such portion thereof as the court may direct, the court shall strike from the record the testimony of the witness, and the trial shall proceed unless the court in its discretion shall determine that t.he interests of justice require that a misirial be declared. (e) The term statement, as used in subsections (b), (c), and (d) of this section in relation to any witness called by the United States means- INTERLOCUTORY ORDERS, ETC. 1155 (1) a written statement made by said witness and signed or otherwise adopted or approved by him; or (2) a stenographic, mechanical, electrical, or other recording, or a transcription thereof, which is a substantially verbatim recital of an oral statement made by said witness to -an agent of the Government and recorded contemporaneously with the making of such oral statement. (Added Pub. L. 85-269 Sept. 2 , 1957 , 71 Stat. 595. One of the reasons motivating Congress to codify the Supreme Court' s decision in J enc/cs was its concern to reaffrm the basic J enc/cs principle but to protect Government files from unreasonable and unwarranted demands and to make certain that the rule laid down in the J enc/cs decision would not be indiscriminately extended to require production of agents' summaries of interviews regardless of their character or completeness. Palermo v. United States 360 U. S. 343 , 350 , 365 (1959); Campbell United States I 365 U. S. 85 , 92 (1961); John. on v. United States 269 F. 2d 72, 74 (loth Cir. 1959); Communist Party of the United States v. Subversive Activities Control Board, 254 F. 2d 314, 325 (D.C. Cir. 1958). Congress in enacting the Jencks Act, was concerned lest the Courts give an "overly expansive reading to the J enc/cs case. The Supreme Court pointed out in Palermo that:

Not only was it strongly feared that disclosure of memoranda containing the investigative agent's interpretations and impressions might reveal the inner workings of the investigative process and thereby injure the national interest, but it was felt to be grossly unfair to allow the defense to use statements to impeach a witness which could not fairly be said to be the witness' own. rather than the product of the investigator s selections interpretations and interpolations (p. 350). In general, the Courts in applying the Jencks rule as codified in the Act have sought to adopt a common sense approach to the definition of what constitutes a Jencks "statement" so as to require production of what is clearly the witness' words and to keep out of evidence anything which is merely an agent's summary of a witness' words.

In Palermo v. United States 360 U. S. supra at 352, the Supreme Court stated that the touchstone of the statutory definition of a "statement" was Congress s clear intent "that only those statements which could properly be caned the witness' own words should be made available to the defense for purposes of impeachment." The Court went on to point out that: It was important that the statements could fairly be deemed to reflect fully and without distortion what had been said to the government agent. Distortion can be a product of selectivity as well as the conscious or inadvertent infusion of the recorder s opinions or impressions. It is clear from the continuous congressional emphasis on "substantiaUy verbatim recital " and Ucontinuous, narrative statements made by the witness recorded verbatim, or nearly so OJ see Appendix B , post 79 S. Ct. page 1228, that the legislation was designed to eliminate the danger of distortion and misrepresentation inherent in a report which merely selects portions, albeit accurately, from a lengthy oral recital. Quoting out of context is one of the most frequent and powerful modes of misquotation. We think it consistent with this legislative history, and with the generally restrictive terms of the statutory provision, to require that summaries of an oral statement which evidence substantial selection of material, or which were prepared after the jnterview without the aid of complete notes, and hence rest on the memory of the agent, are not to be produced. Neither, of course, are- statements which contain the agent' s interpretations or impressions (pp. 352-53).

The Courts have held that the Jencks Act requirement that transcriptions of oral statements shall be made "contemporaneously" does not mean "simultaneously (United States IV/eke ever 271 F. 2d 669 , 675 (2nd Cir. 1959) and Urlited States Wnldmnn 159 F. Supp. 747, 749 (D. J. 1958)). Thus, in the Wnldmrm case, it was held that the transcription which was made while the agent's "memory was fresh" from notes taken while the agent was talking to the witness constituted a contemporaneous transcription.

The Courts have further held that a "substantially verbatim recital" of an oral statement does not mean "precisely verbatim (United States v. McKee1Jer, supm and Willinms v. United States 338 F. 2d 286, 288 (D.C. Cir. 1964)) and that a statement may be "substantially verbatim" even though it is made in the third person. Willinmil v. United States, supm. Furthermore variances such as "grammatical and syntactical changes, rearrangement into chronological order, (orJ omissions (or) additions of information immaterial for impeachment purposes" will not prevent a transcription from being "substantially verbatim. Campbell v. United States II 373 U.S. 487, 495, fn. 10 (1963); United States v. Aviles 337 F. 2d 552, 558 (2nd Cir. 1964). A summary of an oral statement, however, is not considered to be a substantially verbatim transcription. In Pnlermo v. United States 360 U. S. 343 (1959), the Court held that a 600-word summary of a 3-11 hour conference was not an oral statement within the meaning of the Act.

In United States v. McKeever, supm the Court suggested that certain factors be considered in determining whether or not a statement is substantially verbatim. These were: (a) the length of the report in comparison to the 1length of the interview (b) the lapse of time between the interview and its transcription INTERLOCUTORY ORDERS, ETC. 1157 and (c) the extent to which the report conforms to the language of the witness. In Williams v. United States, supra the fo1Jowing additional guidelines were proposed by the Government: (d) the appearance of the substance of the witness' remarks, (e) the use of quotation marks and (f) the presence of comments or ideas of the interviewer.

With respect to written statements, the Supreme Court has held that an interview report prepared from notes which have been read back to and approved by a witness constitutes a written statement" within the meaning of Subsection (e) (1) of the Jencks Act even though the report was made seven hours after an interview. Campbell v. United States 373 U. S. 487 (1963) .

Applicability of the Jencks Decision And Act to Administrative Proceedings Prior to the J enckE! decision, defendants in civil or administrative actions were genera1Jy denied witnesses' statements made to attorneys or investigators acting on behalf of plaintiffs in the course of their pretrial investigation and preparation of the ease either on the ground that they constituted the attorney s work product or, when the plaintiff was a Government agency, on the additional grounds of privilege or confidentiality of Government files. See N.L. B. v. Quest-Shan Mark Brassiere Co. 185 F. 2d 285 , 289 (2nd Cir. 1950) ; United States v. Deere 9 F. D. 523, 527-28 (D. ;l1inn. 1949) ; Alltmont v. United States 177 F. 2d 971 (3rd Cir. 1949), cert. denied 339 U. S. 967; United States v. Kelsey-Hayes Wheel Co. 15 F. R.D. 461, 462 (E. D. Mich. 1954) ; United States V. Shubert 11 F.R.D. 528 , 539 (S. 1951) .

The basis for the denial of production insofar as it was grounded on privilege or confidentiality rested mainly on the Court' s concern not to reveal unduly the identity of informants and on its general concern with maintaining confidentiality Government files. See United States v. Deere, supra at pp. 525- 527 and United Stcdes v. Kelsey-Hayes! Wheel Co. 15 F. D. 461 463- 64 (E.D. Mich. 1954). As the court in Kaiser Aluminum & Chemical Corp. v. United States 157 F. Supp. 939, 945-46 (Ct. Cl. 1958) noted, an important public policy consideration underlying the doctrine of executive privilege is to encourage the frank and open exchange of views and disagreements between government employees and their superiors which might be dis- (p.

couraged if government files were indiscriminately open to inspection by litigants. See also B. v. Botany Worsted Mill!! 106 F. 2d 263 , 267 (3rd Cir. 1939) and Machin v. Zuckert 316 F. 2d 336, 339 (D.C. Cir. 1963).

The bases for the denial of production of such statements on the ground that they represented the attorneys work product are elaborated in great detail in the Supreme Court' s decision in Hickman v. Taylor 329 U. S. 495 (1947). In that case, involving a private civil action for damages, plaintiff sought production of both signed and unsigned statements of certain witnesses taken by defendants' attorney in the course of preparing his case for trial.

The Supreme Court stated that the basic question at stake was whether any of the discovery devices "may be used to inquire into materials collected by an adverse party s counsel in the Course of preparation for possible Jitigation " (page 505). The Court pointed out:

Examination into a person s ides and records, including those resulting from the professional activities of an attorney, must be judged with care. It is not without Teason that various safeguards have been established to preclude unwarranted excursions into the privacy of a man s \vork. At the same time, public policy supports reasonable and necessary inquiries. Properly to balance these competing interests is a deEcate and diffcult task 497).

After weighing the purported need for the documents in question against the importance of preserving the freedom of the attorney to develop his case, the Supreme Court concluded that plaintiff had failed to make any showing which would justify the court in ordering the production of either the signed or the unsigned statements which had been gathered by defendants attorney. In reaching this conclusion, the Court discussed at some 1length the importance of maintaining intact the work product rule and pointed out:

HistoricaHy, a lawyer is an offcer of the court and is bound to work for the advancement of justice while faithfully protecting the rightful interests of his clients. In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel Proper preparation of a client' s case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference. That is the historical and the necessary \vay in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients ' interests. This work is reflected, of course, in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways-aptly though INTERLOCUTORY ORDERS, ETC. 1159 roughly termed by the Circuit Court of Appeals in this case as the HWork product of the lmvyer," Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney s thoughts, heretofore inviolate, would not be his own. Ineffciency, unfairness and sharp. practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served (pp. 510-511). The Court refused to entertain plaintiff' s argument that due process required that he be given fun discovery into an relevant material which in this case included signed statements of eye witnesses to the accident which was the subject of the lawsuit regardless of whether the statements had been gathered by the attorney.

Recognizing that the work product rule must bend where substantial prejudice or injustice would result, the Supreme Court discussed the circumstances under which some discovery of an attorney s files might be permitted: We do not mean to say that all written materials obtained or prepared by an adversary s counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and non-privileged facts remain hidden in an attorney s file and where production of those facts is essential to the preparation of one s case, discovery may properly be had. Such written statements and documents might, under certain circumstances, be admissible in evidence or give clues as to the existence or location of relevant facts. Or they might be useful for purposes of impeachment or corroboration. And production might be justified where the witnesses are no longer available or can be reached only with diffculty. Were production of written statements and documents to be precluded under such circumstances, the liberal ideals of the deposition-discovery portions of the Federal Rules of Civil Procedure would be stripped of much of their meaning. But the general policy against invading the privacy of an attorney s course of preparation is so wen recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a subpoena or court order. That burden, we believe, is necessarily implicit in the rules as now constituted (p. 394). However, with respect to oral statements the Court felt that they should never be produced: But as to oral statements made by witnesses to Fortenbaugh, whether presently in the form of his mental impressions or memoranda, we do not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. Under ordinary conditions, forcing an attorney to repeat or write out all that witnesses have told him and to deliver the account to his adversary gives 6se to grave dangers of inaccuracy and untrustworthiness. No legitimate purpose is served by such production. The practice forces the attorney to testify as to what he remembers or what he saw fit to write down regarding witnesses' remarks. , , , , Such testimony could not qualify as evidence; and to use it for impeachment or corro orative purposes would make the attorney much less an offcer of the court and much more an ordinary witness. The standards of the profession would thereby suffer (pp. 512-513). The Court concluded that:

(UJntil some rule or statute definitely prescribes otherwise, we are not justified in permitting discovery in a situation of this nature as a matter of unqualified right. When Rule 26 and the other discovery rules were adopted, this Court and the members of the bar in general certainly did not believe or contemplate that all the fies and mental processes of lawyers were thereby opened to the free scrutiny of their adversaries. And we refuse to interpret the rules at this time so as to reach so harsh and unwarranted a result (p. 514). It is against this background that the app1icabi1ty of the Jencks rule to civil and administrative proceedings must be viewed.

The courts which have considered the question of the app1icability of the principles announced in the Jencks decision to administrative proceedings have uniformly held that the Jencks rule is applicable to these proceedings because as the Supreme Court stated in Jencks justice requires no less. " Thus in B. v. Adhesi'ue Products Corporation 258 F. 2d 403, 408 (2nd Cir. 1958), the Court stated that "logic compels the conclusion that (the rules set forth in the Jencks decisions are applicable to an administrative hearing. " In Great Lakes Airlines, Inc. v. 291 F. 2d 354 , 364 (9th Cir. 1961), the Court declared that it has been "judicially recognized" that the underlying principle of the Jencks case and statute * is generally applicable in administrative proceedings " In Harvey Aluminum Co, v. 335 F. 2d 749, 753 notes 9 and 10 (9th Cir. 1964), the Court refused to decide "whether the compulsion of the rule is constitutional or statutory," but held nevertheless that the "underlying principle of Jencks must be followed" by an administrative agency (p. 753, n. 10). This same principle was enunciated by the Court in Communist Party of the United States v. S,'bversive Activities Control Board 254 F. 2d 314, 327-328 (D.C. Cir. 1958), where the applicability of the Jencks Act to administrative proceedings was again affrmed, the Court pointing out that it reached this result because:

the laws under which these agencies operate prescribe the fundamentals of fair play." Their proceedings must "satisfy the pertinent demands of due process.

See also BO$ic Books, Inc. v. F.T. 276 F. 2d 718 (7th Cir. 1960) ; N.L. RB. v. American Fedemtion of Television rmd Rad,:o INTERLOCUTORY ORDERS , ETC. 1161 Artists 285 F. 2d 902 , 903 (6th Cir. 1961); Schere v. Christenberry, 179 F. Supp. 900, 905-906 (S. Y. 1959), Carlisle Rogers 262 F. 2d 19 (D.C. Cir. 1958).

Thus, the courts in applying the Jencks rule to administrative proceedings have followed the principles of the Supreme Court' decision in the Jencks case. Recognizing that the Jencks Act merely represents a codification of those principles and is expressly applicable only to criminal cases, the courts have nevertheless followed substantially the same tests Jaid down by the Jencks Act as applied by the courts to criminal cases since the J enck" decision did not define the types of oral statements to be produced beyond describing them as those which were "recorded" by the Government agent. As the Court in the Ha1' vey Aluminum case stated in applying the Jencks principle to R.B. proceedings: just as "Congress did in enacting the Jencks Act" an administrative agency may adopt reasonable rules implementing this principle "so long, of course, as it observes the basic requirements designed for the protection of private as well as public interest" (335 F. 2d 749 , 753 , n. 10). ;\0 court has suggested that a more expansive test should be applicable to civil or administrative proceedings than is now applicable to criminal cases. Indeed, the Court of Appeals for the District of Columbia made it quite clear in its opinion in Communist Party of the United States v. Subversive Activities Control Board 254 F. 2d supra at 325, that it would be improper to go beyond the confines of the Jencks case in considering the production of witnesses' statements to administrative proceedings:

The new act of Congress requires the production of "statements" but defines statements as those written, signed or approved by the witness himself, or " a stenographic, mechanical, electrical, or other recording, or a transcription thereof, which is a substantially verbatim recital * * * recorded contemporaneously, Sw"ely the exeC'tive files of the Government are not to be invaded more easily and with less basis in a regulatory administrative proceeding of this sort than they would be in a criminal prosecution (p. 325). (Emphasis added.

In appeals from administrative decisions, as in criminal cases the courts have sought to distinguish carefully between those witnesses' words and those which represent merely attorneys summaries of such statements and have confined production of witnesses ' oral statements solely to written statements which reflect substantially the witnesses ' own words. Harvey Aluminum Co. v. R.B. , supra at 753; Communist Party of the United States v. Subversive Activities Control Board, supra at 325, and Basic Books, Inc. v. F. T. C., supr' at 722. ) ;

1162 FEDERAL TRADE COMMISSIOK DECISIONS The Commission has already recognized in general the applicability of the Jencks rule to its proceedings. Applying these considerations and legal1 principles to the instant case, we hold that respondents were correct in their contention that the Jencks rule is applicable to administrative proceedings and that under this rule any written statements in the possession of the Commission prepared or approved by the witness relating to the subject matter of such witness' testimony must be produced for inspection by respondents' counsel for possible use in cross-examination. We hold further that any written statement in the Commission s possession which represents a substantially verbatim transcription of any oral statements given to a Commission investigator by such witness must also be made available to respondents' counsel under the same circumstances.

In determining whether a statement represents a substantially verbatim transcription of the witness' oral words as recorded by the Government investigator, it is clear that the hearing examiner must be careful to apply the criteria laid down by the Supreme Court in the Palermo, Campbell and other related cases so as to require production of what can fairly be said to reflect a witness' own words and to avoid production of what is in fact an attorney s summary of a witness' remarks. As the Supreme Court' s decisions in the Jencks, Hickman Taylo,' and Palermo cases make clear, the problems raised in determining the discovery rights of defendants in this area of witness' statements are exceedingly complex. On the one hand, there is the basic consideration of fairness to administrative respondents. While the problem is of course more acute in cdminal proceedings, where defendants have more l1mitted discovery rights than are available in civil or administra- Ernest Marie High 56 F. C. 625 (Dkt. 6940, 1959). However, in the cases in which the Commission has advened to the Jencks rule it has denied production of interview reports to respoorlents on R variety of grounus which have been sustained by the Court "...here appeals on the issue were taken. PUTC Oil Co. , 54 F. C. 1892, 1894-95 (Dkt. 6640, 1958) '(production of interview report refused on the grounds that it was " privileged" ; it WliS not "used in any way during- the course of the hearings" and it ,vas hearsay since it was "prepared not by the witness but by an outside party Basic Books, Inc" 56 F. C. 69, 85-86 (Dkt. 7016, 1959), atf' d, 276 F, 2d 718 (7th eil'. 19(0) (production of witnesses' statements denied because " there was no evidence in the record of the existence of any written statements of any of the witnesses " and because an oral report by an attorney-examiner cannot be successfully used to impeach the testimony of a witness) ; Bakers Franchise Corp. 56 F. C. 1636 (Dkt. 7472 , 1959) -(production of reports 8-nd questionnaires denied became interview reports by Commission attorneys are privi:eged as "work product: each witness was subjected to cross-examination: and the investigating attorney fully described the substance of his interviews during the hearing) : Western Radio Corp, (Dkt. 746 , 19(3), !lff'd, 339 F. 2d 937 (7th Gir. 19(4) (reversal of hearing examiner s denial of request for examination of test report refused because report was skeletal and thus of no value for impeachment purposes and because no reliance was placed by the Commission on the testimony to ,,,which it related). INTERLOCUTORY ORDERS, ETC. 1163 tive proceedings and where the defendants' rights in jeopardy in such cases may go to the essence of an individual's Eberty, nevertheless, as the courts and the Commission have asserted many times, questions of fairness to civil defendants or respondents are basic to the administration of justice. The need for steadfast and zealous protection of defendants ' or respondents rights is not only the concern of the courts, but, where the also becomes of equal1 con-Government is the moving party, it eern to the administrative agency.

On the other hand, there are equany important poEcy eonsiderations involved in ensuring that the fact-finding process wi1 be advanced and not impeded in its fundamental objective of ascertaining truth and that attorneys, whose proper performance of their duties is also of fundamental concern to the proper functioning of our judicial system, be protected from any undue interference in the discharge of their duty to advance and protect the interests of their clients, HickmcLn v. Taylor, supra. In applying these general policy considerations to the issue at hand, we believe that the distinction drawn by the courts in prior cases, criminal and administrative, between requiring production of written or oral statements given by witnesses and refusing production of attorney s summaries of such statements is essential and that the same distinctions must be drawn in Commission hearings as wen. The vital importance of preserving inviolate the work product of attorneys so eloquently detailed by the Supreme Court in its opinion in Hickman v. Taylor apples with even greater force to the investigatory work of Government attorneys who are engaged not only in the representation of their client, but in the protection of the public interest. ' It is obvious that the Supreme Court' s concern that an attorney not be inhibited in the proper performance of his duties is of particular relevance and significance in the case of Government attorneys whose proper discharge of duties is essential not only to a single client, but to the general public whose interests are served by the effcient and effective administration of the Commission statutes. Commission attorneys almost always interview industry members, customers, sup peers and the like in the course of their investigations of whether violations of 1aw have taken place. The attorney s investigating reports based on these interviews and on documents and other pertinent data are basic to the evaluation of the case which must be made, first by his 2 See Unit d Stat v. Deere Co. 9 F. supra at 527-528, and United States v. Kelsey. Have8 Wheel Co. 15 F. D., supra at 462. 1164 FEDERAL TRADE COM'-ISSJON DECISIONS superiors, and ultimately by the Commission. The considerations noted by the Supreme Court for not in any way hampering the attorney in his work are thus of vital importance with respect to the work of the Commission attorney whose work represents the basis for the Commission s decision as to whether a Jaw violation has taken place or not, and if so, what enforcement steps should be taken. The Supreme Court's expressed fears as to the effect on the caliber of an attorney s work of undue liberality in permitting access of opposing counsel into the attorney files are, therefore, of even greater concern in the case of Government attorneys, where the potential effects of unreasonable rules in this area may be to hamper the proper investigation and evaluation of alleged law violations.

The Supreme Court' s concern in Palermo with the unfairness and distortions of the fact-finding processes. of trial which use of attorneys' summaries of a witness ' statements could generate applies with equal force to Commission hearings before trial examiners. In PaleT1no the Court emphasized Congress' concern in enacting the Jencks statute that it would be "grossly unfair to allow the defense to use statements to impeach a witness which could not fairly be said to be the witness' own rather than the product of the investigator s selections, interpretations and interpolations. " 360 U. S. supm at 350. The unfairness inherent in the use of summaries is as present in Commission hearings before an examiner as it is in a criminal case which mayor may not be conducted before a jury.

There is little doubt that any attorney s summaries of interviews which he conducts wil inevitably, by the very fact of selection, omission and emphasis, reflect the attorney s own state of knowledge at the time of the interview and also his own thoughts and subjective impressions of what he is being told influenced as wen by the type and form of the questions which he posed during the interview. To this extent, his summary may more accurately reflect his own views of the case and state of knowledge of the issues at the time of the interview than it wil of the witnesses' state of knowledge. Summaries prepared earlier in the case may be less representative of the witnesses' state of knowledge than those prepared at a later stage in the case. If respondents were given access to an these summaries for use in cross-examination, witnesses might well be far more confused and misled as to what they had thought or known at the time of the interview than their present recollection at the time of trial and their testimony as a result far Jess accurate than if counsel on I:-TERLOCUTORY ORDERS, ETC. 1165 both sides were required to probe the witnesses' memory without confronting the witness with what in many instances might be inaccurate and misleading summaries. Confronted with an attorney s summary purporting to reflect his remarks, the witness might be caused to retract or change his statement because of what he feels may have been a prior inconsistent statement by him. If the prior statement was in fact made by him no unfairness could result; but if the prior statement was an incorrect interpretation of his remarks, he might well be influenced to defer to the views of the examining attorney and modify his remarks to the obvious detriment of truth rather than to its advancement which is the purpose of a11 fact-finding and discovery. 1\101'cover, use of attorney s summaries of' witnesses' statements could easily convert the fact-finding process from a trial of the issues into a trial of the competency and accuracy of the work of the attorney. Such a result would not only demean the professional status of the attorney but it would disrupt and confuse the hearing by injecting into it irrelevant side issues. For a11 of the foregoing reasons, we conclude that the Jencks rule should be applied to Commission proceedings but that the principles of that case should not be extended beyond the rule Jaid down in that case and subsequently codified in the Jencks Act. We should make clear that in reaching this conclusion we are in no way suggesting that we are laying down here in this case any absolute rule respecting a1l materials which may be contained in Government files or in attorneys' interview reports. In some situations a litigant' s need for data in Government files may be so compelling and the adverse effects of disclosure so minimal, or at least relatively so, that disclosure would be appropriate. We do not pass on this question since it is not involved in this case. We hold only that with respect to Jencks statements respondents shall be entitled to inspect any written statement made by a witness to a Commission attorney or investigator or any written report or portions thereof which reflect in substantially verbatim form any oral statement given by the witness to such attorney or investigator but that any summaries of such statements made by the attorney or investigator should not be produced.

With respect to the timing of the production of Jencks statements, subsection (a) of the Jencks Act expressly provides that no statement or report made by a prospective Government witness to an agent of the Government shall be the subject of inspection until said witness has testified on direct examination in the trial of the case. " Cases applying the principles of this statute to administrative proceedings have held that "Jencks statements" need not and should not be produced until after a witness has testified on direct examination. See B. v. Vapor Blast Company, 287 F. 2d 402 , 407 (7th Cir. 1961); B. Chambers Manufacturing Corporation 278 F. 2d 715, 716 (5th Cir. 1960) ; Raser Tanning Camp,,,)! v. 276 F. 2d 80, 83 (6th Cir. 1960), cert. denied 363 U. S. 830; Local No. 320 Internntionnl Union of Operating Engineers, AFL-CIO, 150 R.B. No. 47 (1964); Wnlsh Lumpkin Wholesale Drug Co. 129 N. R.B. No. 31 (1960).

We believe that this procedure which has been followed in criminal cases and in administrative proceedings as well without any undue delay or unfairness resulting to defendants should be applicable to Commission hearings. It is dear that the Jencks rule was designed solely as a rule to ensure that defendants would be fully protected in their rights of cross-examination. The rule was never envisaged as a general rule of discovery. Viewing. the rule in this manner it is dear that demands for production of Jencks statements in advance of a witness ' testimony would be premature. In some instances the witness might not ultimately be called upon to testify. In other instances a witness' testimony might be unrelated to prior statements which he made to the Government. It is obvious, therefore, that the rules laid down by the Supreme Court and Congress for the production of Jencks statements apply with equal force to Commission hearings.

There is an additional consideration of particular pertinence to Commission hearings which under1ies our conclusion that production of these statements should not be made until after the witness has in fact testified. Persons interviewed by Government attorneys in Commission investigations are frequently customers, suppliers, or even competitors of the proposed respondent with interests which might be adverse to respondent and which could be injuriously affected if respondent was totally free at any time to discover what they have told Commission counsel. Indeed, if any general access to statements of such interviewees was unnecessarily granted they might choose to remain silent rather than risk any adverse reaction on the part of the respondent to their having talked to Commission investigators. This could have serious and lasting effects on the Commission ability to conduct effective investigations of its cases. Since the Commission depends on investigations to discharge its statutory INTERLOCUTORY ORDERS, ETC. 1167 obligations of law enforcement, and since the persons to whom it must go for information may be subject to economic coercion or intimidation, we must strike a balance between those needs and the respondent's legitimate interest in perparing for trial. Respondent is at all times free to interview any and all industry members who in its judgment have facts which bear on the issues in the complaint and on its defense. Thus, respondent has no need to preparing its case for trial to have access to any statements which Commission counsel has procured in the course of his investigation. By the time pretrial under Commission rules has advanced to the point of exchanging witnesses' names respondent wiJ have in most cases substantially completed his own trial preparation, formulated his defenses and probably even p1canned his trial strategy. :\ioreover, he is entirely free to conduct such interviews with or about such designated witnesses as in his judgment are necessary. What the witness may have told Commission counsel is still not necessary for respondent' trial preparation even at this point. Moreover, the witness though listed by counsel, may never even be called to testify. It would not appear, therefore, that even at this point in pretrial does respondent have any need for Jencks statements. Indeed, respondents themselves in their brief recognized that the use of Jencks statements " is for impeachment only after a witness has testified" and need not be produced in pretrial discovery (Respondents' Reply Brief, p. 6). (Emphasis in original.) For all of these reasons, we conclude that Jencks statements may not be demanded unti after the witness in question has in fact testified on direct examination.

Application of the Jencks Rule to Respondents' Demand At the hearing, which took place in Cincinnati between October 13 and October 16, 1964, complaint counsel called 19 witnesses, consisting of the individual respondent, :\1ilton S. Gottesman, and 18 consumers who had purchased respondents products. Subsequent to the testimony on di,ect examination of the first witness, ;VIr. Gottesman, the following discussion appears in the transcript (Tr. 100-102):

Mr. Ostrander Erespondents ' counse1J . . . I was going to, if I could, before recess, move that any statements 'which the examination of this witness ,vas based now that the testimony is completed be made available to me, prior statements of Mr. Gottesman that were made to other Government attorneys that conducted this investigation which we don t have. Mr. Whitehead: The only thing that I have that I am reading from is the interviewer s report. Of course, that' s privileged. Hearing Examiner Poindexter: Counsel says he has none. Mr. Ostrand r: "fell, as I understand the rule, your Honor, I think perhaps I am entitled to look over what he has.

Hearing Examiner Poindexter: You mean you are entitled to look over the investigating-Commission " investigator s report to the Federal Trade Commission of his interview '\'with the respondent? Mr. Ostrander: I think there was some direct quotes here taken and I think we have a right to have this made available to us to examine. Mr. \Vhitehead: I ohject.

Hearing Examiner Poindexter: Just a minute, onc at a time, please. Counsel supply:.ting the complaint says he has no written statement by the witness, is that correct? Mr. "VVhitehead: I have none.

Hearing Examiner Poindexter: All right. No\v, he says he does have a statement by the Commission s investigator who interviewed Mr. Gottesman. Now, is that the statement that you are asking to be produced? Mr. Ostrander: Yes, if there is a narrative statement of their conversation which I presume that' s what he is talking about I think that I should be entitled to look at that narrative statement. Hearing Examiner Poindexter: Well, you are not entitled to see that :\l'. Ostrander, and the request wil be denied. Mr. Ostrander: \Veil, your Honor, I don t think that I am asking for the work product here and I know that \ve are not. . . . Hearing Examiner Poindexter: Counsel states that it is a report by the Commission investigator of his interview with ),11'. Gottesman. Now if that's not a work product I don t know \vhat you would call it and that is privileged and not subject to examination by Respondent' s counsel. It' s not a written statement by the witness. Mr. Ostrander: Note my exception.

Respondents' counsel made no attempt to examine any pretrial statements with respect to the three witnesses who immediately followed J\Ir. Gottesman or even to establish that these witnesses had made statements to any agent of the Commission. The fifth witness was another consumer, ?vers. William D. Ross. At the conclusion of her testimony on direct, the following colloquy took place (Tr. 168-171):

Mr. Whitehead: All right, I have no further questions. Hearing Examiner Poindexter: You wish to cross-examine, Mr. Ostrander? Mr. Ostrander: Yes. First I would like to know if the Government has a statement taken from this witness during the examination and jf so I would like to see it.

Mr. \Vhitehead: I have nothing. The field report of the investigating attorney is all I have.

Mr. Ostrander: Which I presume does not include any statements by the witness? Mr. Whitehead: Ko \written statement by the witness. The intervie\ver report in the terminology of the investigating attorney. I:-TERLOCUTORY ORDERS, ETC. 1169 Mr. Ostrander: 'Well, again, your Honor- Hearing Examiner Poindexter: Do T interpret your statement, Mr. Whitehead. the "\vitness, Mrs. Ross, has given no written statement to the Federal Trade Commission? Mr. Whitehead: That's right. your Honor. Hearing' Examiner Poindexter: And you have none in your possession? Mr. Whitehead: That's right, your Honor. Mr. Ostrander: Well, I would like to ask one additional question. Did Mrs. Ross give a statement that the agent of the Federal Trade Commission then wrote down? Hearing Examiner Poindexter: I didn t understand your question. Mr. Ostrander: Wen, I want to be sure that we aren t just concerning ourselves with something that might be in her handwriting that she personally wrote out. It might be that she dictated a statement to an agent of the Federal Trade Commission.

Hearing Examiner Poi ndexter: If she did, so what? You have spent time and found that ::he gave no written statement to the Commission. The Commission has no ,written statement according to counsel. :Mr. Ostrander: I am not questioning counsel, I just want to be sure that it isn t her statement '''written by ::omeone else. H!:aring Examiner Poindexter: Well, counsel, the investigator I presume that he wrote-he questioned her and wrote down .what she said or tried to but you are not entitled to see that.

Mr. Ostrander: I think we are if it' s in her language, if it's something that she dictated.

Hearing Examiner Poindexter: \Vell, I presume that he did his best to state what ::he said in her language. I assume that he did that. Mr. Ostrander: If so T think we are entitled to that: Hearing Examiner Poindexter: Well, I ruled yesterday and you are not entitled to see that. That's the work of the Commission investigator, Mr. Ostrander.

Mr. Ostrander: I am sure the Court wil bear with me if I prepare my record as I think it has to be prepared. Hearing Examiner Poil1dexter: Wen, let's not go through this on every ,,,itness. You are not entitled to see it. There is no need to spend all this time on something that T previously ruled on and I thought ,ve had it clear. Mr. Ostrander: Well, as it relates to different witnesses I want to be sure the situation ,vas the same, but I won t come back to it again. Subsequently, complaint counsel called 14 additional consumer witnesses. No further attempts were made by respondents' counsel to obtain prehearing statements.

Respondents urge that the examiner erred in refusing to inspect the reports made bv the Commission s investigators of intervie\vs with 1'\1rs. Ross, as well as with the other consumer witnesses called by complaint counsel at the hearing. Respondents in this appeaJ have not pressed their demand with respect to the pretrial statements made by respondent :'dilon S. Gottesman but have limited their request to the consumer witnesses called by complaint counsel.

1170 FEDERAL TRADE COMMISSIO:- DECISIONS Complaint counsel argues that the hearing examiner s ruling was not in error since respondents' counsel did not present his demand in accordance with the requirements of the Commission rules as reflected in Rule 1. 134 in that respondents ' request should have been directed to the Commission and should have set forth good cause; second, that the reports demanded respondents were attorney s work product and hence not producible; third, that in view of the exhaustive cross-examination of the witnesses in question by respondents' counsel, production of the reports would be of no conceivable value to him; and finally that no proper foundation had been laid for the documents demanded and hence that the demand was invalid. We find no merit in any of these contentions put forward by complaint counsel.

Complaint counsel argues that since interview reports constitute confidential information within the meaning of Rule 1.133 (see Baker" Franchise Corporation 56 F. C. 1636 (1959J ), respondents were required under Rule 1.134 to make a request to the Commission for the interview reports. There is no support either in the express language of the Commission s rules or in considerations of practicality for complaint counsel's interpretation of these two rules. The procedure provided for in Rule 1.134 respecting applications for confidential data to be addressed to the Commission is not applicable to " Jencks statements" since these statements are clearly within the exception provided in Rule 1.133 (a) which excepts from confidential status documents "whose use may become necessary in connection with adjudicative proceedings. There is EttIe doubt that possible Jencks statements are "necessary" to respondent for use in cross-examination and thus come within this exception clause. This would appear to have been the conclusion of the Commission in Ernest Marie High 56 F. 625, 633 (1959), where the Commission stated "that where there is doubt as to the nature of the report, the examiner should inspect it and make a determination. This conclusion as to the applicability of the exception clause to Rule 1.133 to "Jencks statements" is reinforced by the possible invalidity of the Rule 1.134 procedure if it were to be applied to such statements and by the impracticability and unfeasibility of using this procedure to secure copies of such statements for cross-examination purposes in the middle of a hearing. The inth Circuit has held that an administrative agency may not avoid Cthe Jencks rules by adopting regulations incong, INTERLOCUTORY ORDERS, ETC. 1171 sistent with its requirements. Harvey Aluminum v. 335 F. 2d 749, 753 (9th Cir. 1964). One of the basic ingredients of the Jencks rule is that the statement is "to be turned over at the time of cross-examination (Palermo v. United States, 360 S. 343, 345 (1959)) to "facilitate proper cross-examination United States v. Rosenbe1' 257 F. 2d 760 , 763 (2nd Cir. 1958), aft'd 360 U. S. 367 (1959); Basic Books v. 276 F. 2d 718, 722 (7th Cir. 1960). A court might rule that delaying cross-examination pending submission of an application for production to the Commission and a ruling by the Commission does not constitute production at the time of cross-examination. However, of even greater importance is the delay in the hearing and the unfairness to complaint counsel which would result from such a procedure. Requiring such application to be addressed to the Commission would interrupt the hearings contrary to the intent of the Commission Rules 3. 1 and 3. 16 (d), would inconvenience the witness, would present respondents from conducting an immediate cross-examination and might severely prejudice complaint counsel in that the delay would give respondent additional time to study and prepare for cross-examination and might therefore encourage him to make demands for production which he might not otherwise make. For all of these reasons, we hold that respondents' counsel was correct in directing his demand for .Jencks statements to the hearing examiner and that the examiner should have called for the reports in question, examined them and should have held whatever hearings were necessary in order to establish whether any statements contained therein had been approved or adopted by the witness and the circumstance of the recording by the attorney in order to determine whether they are summaries or substantially verbatim transcriptions.

Complaint counsel's argument that respondents' demand must fail because the interview reports in question are privileged as attorney s work product was rejected implicitly by the Supreme Court in its J enc1cs decision and directly by a1l other courts in cases under the Jencks Act in which the issue has been raised. United States v. HilbTich 341 F. 2d 555 , 557 (7th Cir. 1965); United States v. Aviles 315 F. 2d 186 (2nd Cir. 1963), vacated and remanded sub nomine Evola v. Unded States 375 U.S. 32 (1963), alJ'd. on remand 337 F. 2d 552 (1964), ccrt. den., 380 S. 906 (1965); and Saunders v. United Stides 316 F. 2d 346 (D. C. Cir. 1963), ceTt. den. 377 U. S. 935. In the Saunders case, the Court explained its reasoning in refusing to read the "work product" rule in the Jencks Act; The work product rule protects the mental processes of the attorney rIJt is possible to produce "statements" taken down by an attorney, and stil preserve the sanctity of the attorney s work product. If a government attorney has recorded only his own thoughts in his interview notes, the notes \vould seem both to come within the work product immunity and to fall without the statutory definition of a "statement." But if the attorney has made only a substantially verbatim record of his interview then, quite the contrary, his notes constitute a "statement" and include no protected material flowing from the attorney s mental processes. * * * If the notes contain both verbatim remarks of the witness and personal observations of the attorney, then paragraph (c) of the act requires that the district judge inspect the statement and excise the protected material if this is possible (pp. 349 350).

Thus, the Court in Saunders made very clear its view that Jencks constituted a limitation on the work product rule and not vice versa. In view of the Jimited nature of the Jencks rule, it is clear that the policy considerations underlying the work product rule which were so emphatically stressed by the Supreme Court in Hic/cman v. Taylor are still operative whenever Jencks statements are not involved. We hold that the same considerations are present in administrative hearings and that the work product rule must give way to the principles enunciated in the J enc/cs decision to the extent of statements which reflect in substantially verbatim form the words of the witness. Complaint counsel's further contention in his brief that nothing could be gained from further cross-examination with the aid of Commission interview reports " is equally without merit as a ground for sustaining the examiner s refusal to consider respondents' request for the production of statements. The Palermo v. United States, 360Supreme Court in its decision in clear that its Jenc/cs decision S. 343, 346 (1959) made it related solely to the production for impeachment purposes of specific statements relating to the subject matter of a witness testimony after proper demand and not to their admissibi1ty and that the trial court' s duty was to determine whether Jencks statements existed and not to determine whether such statements were of "value" for impeachment purposes. Thus any questions of "value" are irrelevant where in fact a Jencks statement exists. Complaint counsel's final obj ection that respondents' counsel failed to make a proper demand or to Jay an adequate foundation for his demand seems to us in the context of what transpired at this hearing to be without substance.

The courts have never imposed rigid requirements with respect to the form of demand which must be made. 1\0 "ritual of words is stated to be required for the demand of Jencks statements. INTERLOCUTORY ORDERS, ETC. 1173 Howard v. United States 278 F. 2d 872, 874 (D. C. Cir. 1960). The reason for this flexibility was explained by the Court in United States v. Aviles 315 F. 2d 186 (2nd Cir. 1963) ; vacated and remanded sub nomine Evola v. United States 375 U. S. 32 363); aff'd. on remand, 337 F. 2d 552 (1964); cert. denied 380 U.S. 906 (1965):

Ours is an adversary system of criminal justice. It is not, however, a game of verbal jackstraws " the object of which is to see whether the actions of either the Government or the defense can be pulled out from under the language of the applicable statutes, the demands of opposing coumel, or the orders of the court, without disturbing any of the latter. Of course the Act does not require that demands for statements must be of precise nicety, and we are unwilling to hold that such requests be couched in formal or technical language (pp. 190, 191). N'everthe1ess, the courts have generally insisted that regardless of the form in which a demand for a "Jencks statement" is made counsel must make some showing that a statement has been made to the Government or that a report of an interview with the witness has been prepared by a Government agent. Ogden United States 303 F. 2d 724 (9th Cir. 1962) Communist Pa1'ty of the United States v. Subversive Activities Control Board 254 F. 2d 314 (D. C. Cir. 1958). Whether or not counsel must go further and introduce facts indicating that a statement fits within one of the definitions set forth in the Jencks Act would appear to depend on the type of statement requested. To form the basis for a written statement as defined in Section (e) (1) of the Jencks Act counsel must normally make some showing on cross-examination that the statement or report was prepared by or shown to and approved by the witness. Ogden United States 303 F. 2d supm at 737; United States v. Lamma 349 F. 2d 338 (2nd Cir. 1965). However, with respect to an oral statement within the meaning of Section (e) (2) of the Jencks Act, defendant is not usually required by the courts to attempt to establish that a substantially verbatim transcription was made of the statement. Saunders v. United States 316 F. 2d 346, 349 (D. C. Cir. 1963), cert. denied, 377 U. S. 935. Thus, in the Ogden case s"pm one of the witnesses testified on crossexamination that he had been interviewed by F. I. agents and had observed them taking notes. The Court held that this testimony was suffcient to indicate the creation of an oral statement within the meaning of Section (e) (2) of the Jencks Act but that the defendant had not properly raised the issue under Section (e) (1) since he could have and did not explore the matter on cross-examination. The reason why different standards have been applied with respect to oral and written statements was set forth in the Lamma decision at page 341 : '" * * enn the (e) (2) situation * * * defense counsel, unlike the court has not seen the reports or notes, and is not in a position to formulate intel1gent questions as to the circumstances surrounding the recording of the oral statement in order to determine whether a substantially verbatim recital exists. On the other hand, in the (e) (1) situation, when the issue is adoption or approval, the defense labors under no such disadvantage for its lack of access to the document does not prevent defense counsel from asking the witness appropriate questions. In the instant case, as noted above, respondents have limited their demand for prehearing statements to the 18 consumer witnesses. The only consumer witness with respect to whom a prehearing statement was directly requested by respondents during the hearing was Mrs. Ross, the fourth consumer witness. Respondents' counsel had made such a demand previously with respect to complaint counsel's first witness Milton Gottesman. On both occasions he was t01d flatly by the hearing examiner that he was not entitled to any interview reports and that he should not raise the issue again.

Complaint counsel had admitted at the hearing that an interview report was in existence with respect to the witness Ross but did not disclose whether similar reports were available with respect to later consumer witnesses because of the hearing examiner s denial of counsel's request for IVIl's. Ross' report and his admonition to counsel not to come back to the issue. Respondents counsel did not make or attempt to make any showing that the report respecting Mrs. Ross was a substantially verbatim transcription of the witness' remarks or that she had adopted or approved it. Nor did he make any demands for possible Jencks statements of any of the other consumer witnesses called by complaint counsel.

The case at bar is in sharp contrast to United States v. Lamma supra where the Court, in holding that the trial judge had not erred in failing to conduct a hearing to determine adoption or approval1 , noted that the defense counsel had had "every opportunity" to explore the issue but had failed to do so. In the instant case the examiner made his ruling denying counsel access to this report with such finality that respondents counsel had no choice but to declare, as he did: " I won t come Howanl v. Unitedback to it again. " As the Court declared in States 278 F. 2d 872, 874 (D. C. Cir. 1960) : :Vloreover, the court' s hostility to\vard this entire line of questioning emphasizes the futility of efforts to further pursue the matter. INTERLOCUTORY ORDERS , ETC. 1175 In view of the hearing examiner s attitude, we cannot now speculate as to what counsel might have done or inquired about had he not been so abruptly cut off. Nor can we h01d that respondents have waived their right to statements with respect to the witnesses who were called after Mrs. Ross. The issue is Jess clear with respect to the three witnesses who preceded Mrs. Ross. Although the examiner had refused to order the production of reports with respect to the first witness, Milon S. Gottesman, he did not at that point permanently close the door to further requests as he later did at the conclusion of Mrs. Ross' testimony. Thus, there might be some basis for concluding that respondents were not concerned with gaining access to any previous statements which may exist with respect to these witnesses. Nevertheless, the point is not free from doubt on the record in this case.

In the light of the record in this case and the hearing examiner s erroneous conception as to the nature and scope of the Jencks rule, we hold that he erred in refusing to consider counsel's request for production of possible Jencks statements with respect to Mrs. Ross and the consumer witnesses who followed her. Since this case wiJ have to be remanded to enable the examiner to consider this request in the light of this opinion, it would seem to be the preferable course for the examiner to consider the issue with respect to each of the consumer witnesses who preceded Mrs. Ross as well.

The final point to be considered is the procedure to be followed by the hearing examiner in making a determination as to whether or not a statement or report is a "Jencks statement." The initial document in camera. He may be step is for him to inspect the able to determine from its face whether it is a mere summary or has been approved by the witness. If it is unclear whether the document qualifies as a Jencks statement the examiner should on his own motion conduct a voir dire examination into the circumstances surrounding its making. At this hearing extrinsic evidence, including, where appropriate, testimony by the witness as well as by the person who transcribed the statement or made mo v. United States, 360 the report, may be introduced. Palm' S. 343 (1959) ; Campbell v. United States 365 U. S. 85 (1961); CamrJbell v. United Sta.tes 373 L:S. 487 (1963). Thereafter the hearing examiner should prepare findings embodying the factual bases for his conclusions on this point so that the point can be examined on appeal.

The hearing examiner s initial decision is vacated, and the case is remanded to the examiner to examine the interview reports made with respect to each of the consumer witnesses ca1!ed by complaint counsel to determine, by appropriate procedures, whether or not such reports contain " Jencks statements" The examiner should deliver to respondents' counsel any reports or portions thereof which are found by him to be "Jencks statements" and to relate to the witness' testimony on direct examination. If requested by respondents ' counsel, the examiner should reconvene the hearing-in-chief to permit respondents counsel to utnize such reports or portions thereof for the purpose of cross-examining those consumer witnesses whom respondents counsel requests be reca1!ed for such purpose. Finally, the examiner should issue a new initial decision which should include specific findings with respect to the issues presented on this remand. An appropriate order will issue. Commissioner Elman dissented and has filed a dissenting opinion.

Commissioner MacIntyre concurred and has filed a separate concurring statement.

ORDER DIRECTING REMAKD This matter having been heard by the Commission upon the the appeal of respondents from the initial decision of the hearing examiner and upon the briefs - and oral argument in support thereof and in opposition thereto, and The Commission having rendered its opinion, determining that the initial decision should be vacated and that the matter should be remanded to the hearing examiner for further proceedings as outlined in said opinion, and having considered only the procedural issues referred to in said opinion, and having made no determination with respect to any of the substantive issues raised by respondents in their appeal:

It is oTdej' That the initial decision be, and it hereby is vacated and the proceeding be, and it hereby is, remanded to the hearing examiner to:

(1) examine the interview reports made with respect to each of the witnesses (other than :l1ilton S. Gottesman) called by counsel supporting the complaint to determine by appropriate procedures, including a hearing if necessary, whether or not such reports contain pre-hearing statements which should be made available to respondents' counsel under INTERLOCUTORY ORDERS , ETC. 1177 the " Tencks rule" as described in the Commission s opinion of this date;

(2) deliver to respondents' counsel any of such reports or portions thereof found by him to be statements within the meaning of the "Jencks rule" and to be relevant for the purposes of cross-examination;

(3) if requested by respondents' counsel, reconvene the hearing-In-chief to permit respondents' counsel to uWize such reports or portions thereof for the purpose of cross-examining any of such witnesses whom respondents ' counsel requests be recalled for such purpose; and (4) issue a new initial decision which should include specific findings with respect to the issues presented on this remand.

Commissioner Elman dissented and has filed a dissenting opinion. Commissioner MacIntyre concurred and has filed a separate concurring statement.

DEAN FOODS COMP ANY ET AL.

Docket 8674. Order April 25, 1966 Order vacatin,( hearing examiner s order denying respondent's request for subpoenas duces tecum directed to four dairies and ordering hearing examiner to reconsider the matter.

ORDER GRANTING APPEAL, VACATING RULI:-G DENYING REQUEST FOR SUBPOENAS AND DIRECTING RECONSIDERA TION This matter is before the Commission upon the appeal of complaint counsel under 17 (f) of the Commission s Rules of Practice from the hearing examiner s ruling contained in his memorandum to complaint counsel, dated March 29 , 1966, denying their request to issue subpoenas duces tecum directed to four named persons to appear and to testify and to produce documents, for the reason that a hearing had not been scheduled in the proceeding. The hearing examiner stated, in his memorandum, that the time and place of hearings wi1 be fixed at a prehearing conference scheduled for May 23 , 1966, that he sees no necessity to require the appearance of the parties prior to the time of the "regular hearings " and that the said counsel's request could be renewed after hearings have been scheduled. INTERLOCUTORY ORDERS , ETC. 1177 the " Tencks rule" as described in the Commission s opinion of this date;

(2) deliver to respondents' counsel any of such reports or portions thereof found by him to be statements within the meaning of the "Jencks rule" and to be relevant for the purposes of cross-examination;

(3) if requested by respondents' counsel, reconvene the hearing-In-chief to permit respondents' counsel to uWize such reports or portions thereof for the purpose of cross-examining any of such witnesses whom respondents ' counsel requests be recalled for such purpose; and (4) issue a new initial decision which should include specific findings with respect to the issues presented on this remand.

Commissioner Elman dissented and has filed a dissenting opinion. Commissioner MacIntyre concurred and has filed a separate concurring statement.

DEAN FOODS COMP ANY ET AL.

Docket 8674. Order April 25, 1966 Order vacatin,( hearing examiner s order denying respondent's request for subpoenas duces tecum directed to four dairies and ordering hearing examiner to reconsider the matter.

ORDER GRANTING APPEAL, VACATING RULI:-G DENYING REQUEST FOR SUBPOENAS AND DIRECTING RECONSIDERA TION This matter is before the Commission upon the appeal of complaint counsel under 17 (f) of the Commission s Rules of Practice from the hearing examiner s ruling contained in his memorandum to complaint counsel, dated March 29 , 1966, denying their request to issue subpoenas duces tecum directed to four named persons to appear and to testify and to produce documents, for the reason that a hearing had not been scheduled in the proceeding. The hearing examiner stated, in his memorandum, that the time and place of hearings wi1 be fixed at a prehearing conference scheduled for May 23 , 1966, that he sees no necessity to require the appearance of the parties prior to the time of the "regular hearings " and that the said counsel's request could be renewed after hearings have been scheduled. Respondent Dean Foods Company filed a statement on April , 1966, in which it states it takes no position on whether the nding appealed from should be affrmed or reversed, but that it does not want to be prejudiced in the securing, at a 1after time of the information obtained.

The hearing examiner, under 15 (c) of the Commission Rules of Practice, has the power and duty, inte,' alia to take aJ1 necessary action to avoid delay in the disposition of proceedings and has aJ1 powers necessary to that end, including, among others, the power to issue subpoenas. The examiner s authority to issue subpoenas in a particular proceeding begins the moment he is designated as the hearing examiner in the matter. Thus here the examiner had the power to issue the subpoenas requested by complaint counsel even though hearings had not yet been scheduled.

It seems to us that the examiner, considering complaint counsel' s representations to him that the subpoenas are necessary because of thc refusal or failure of four dairies to provide information necessary to such counsel in an attempt to obtain accurate market share data, took a very narrow view of his responsibilities in failing to provide such process so as to prevent future delay in the preparation for trial and in the trial of this case. We believe that it would be whom1y appropriate in the circumstances to issue such subpoenas. The information sought would be obtained as an aid in the trial of the case. Such subpoenas are not considered, and are not to be considered, as investigational subpoenas.

This appeal wi1 be entertained because the ruling complained of involves substantial rights, wi1 materially affect the final decision, and because a determination of its correctness before the conclusion of the hearing wi1 better serve the interests of justice. Accordingly, It is O1'dered That complaint counsel's appeal from the examiner s ruling denying their request for subpoenas duces tecum , and it hereby is, granted.

It is further ordered That the hearing examiner s ruling denying the request of complaint counsel for subpoenas duces tecum be, and it hereby is, vacated.

It is further ordend That the hearing examiner forthwith reconsider, in the light of this order and the views of the Commission stated herein, the request of complaint counsel for the issuance of subpoenas duces tecum.

INTERLOCUTORY ORDERS, ETC. 1179 HU:\1PHREYS MEDICINE COMPANY, INC. , Docket No. 8640 E. C. Dewitt & CO., INC. , Docket No. 8642 GROVE LABORATORIES, INCORPORATED, Docket No. 8643 THE MENTHOLATUM COMPANY, Docket No. 8644 01'der, Apr. Q6, 1966 Order denying petitions of respondents that hearing examiner reconsider his denial of motion to suspend proceedings in all four cases pending the outcome of the American Home P1' oducts case, Docket 8641, and directing hearing examiner to offer respondents the opportunity to settle their cases through stipulation.

ORDER RULING ON MOTIONS CERTIFIED BY THE HEARING EXAMINER This matter is before the Commission on the certification to the Commission, on April 20, 1966, by the hearing examiner of motions by the respondents in Humphreys Medicine Company, Inc. Docket 1\0. 8640 The Mentholatum Company, Docket 1\0. 8644, Grove LabomtoTies, Inc. Docket No. 8643 , and E. Dewitt Co. , Inc. Docket 1\0. 8642. In each case respondent requested the hearing examiner to certify to the Commission its motion that the Commission permit reargument of; and reconsideration of, the motion of complaint counsel to suspend hearings in these proceedings pending issuance of the Commission s decision In the Matter of American Home Products Corporation Docket :'0. 8641 (70 F. C. 1524J. Complaint C0U11se1's motion to suspend was denied in each case by orders of the Commission, dated March 16, 1966.

Respondent E. C. Dewitt & Co. also moves, in the alternative that the proceeding in Docket No. 8642 be joined and consolidated with the Matter of American Home Products Corporation Docket No. 8641. In this connection, Dewitt requests permission to withdraw its answer and to file an amended answer by which respondent "shah agree to be bound in the manner, and at the time and to the extent appropriate, by any order which the Commission may enter in said Matter of American Home Products Corporation. Such order, according to respondent's motion, may include an affrmation of the hearing examiner s initial decision in that proceeding but is not limited to such a result or the Commission may take substantiaHy the same action in Docket 1\0. 8642 as it deems appropriate In the Matter of "De\Vitt requests the Commission to authorize the hearing examiner to reinstate his order of February 14 , 1966.

1180 FEDERAL TRADE COMMISSION DECISIO:-S American Home P"oducts C01'pomtion Docket "'0. 8641. Dewitt' motion, in the alternative, further provides that the Commission may grant such additional1 relief as is deemed appropriate and in the public interest.

The hearing examiner, in the case of a1l four certifications recommended that the motions certified be granted. The Commission has determined that the motions certified have not stated grounds justifying further suspension of the hearings in these proceedings and that the hearing examiner should be directed to go forward with the hearings in these cases unless respondents are willing to stipulate in the course of the prehearing conferences that they wi1 submit these proceedings to the Commission for disposition on the basis of the record in American Home Products COTpomtion Docket No. 8641, and that they waive any further intervening procedural steps before the hearing examiner. In this connection, if any of the respondents wish to dispose of their proceeding on that basis they should further stipulate, if they are able to, on the basis of the facts applicable in their proceeding, that:

1. The advertising of the particular respondent had no significantly different effect upon the reader than the effect of the advertisements in American llome Prodl(cts; 2. The effect of the use of respondent's preparation is not significantly different from the use of the preparation of American Home Products;

3. If there are any significant differences between the advertisements of respondents and the advertisements in the record in Am, e1'ican H01ne Products then the Commission, in its order disposing of the case may include appropriate provisions to take into consideration such differences.

If any respondent wishes to avail itself of this procedure, it will also be necessary for it to attach to the stipulation the relevant advertising, which it has utilized, for inclusion in the record. Finally, those respondents desiring to conclude their proceeding without hearings before the examiner should include in their stipulations a provision that the Commission may dispose of their proceeding at the time A meTicnn Home Products is decided by such order as it deems necessary to the public interest in the light of the record of the particular case. Such stipulation should contain the further provision that the record, on which the Commission is to make its final disposition of this case and for the purposes of judicial review, is limited to the record of the INTERLOCUTORY ORDERS , ETC. 1181 proceeding at the time the stipulation is fied, the stipulation and the attached advertisements as wen as the record in American Home Products. Accordingly, It is ordered That the hearing examiner is directed to proceed with the hearings in these cases forthwith: Provided, howev",' That the examiner wi1, without further action, certify the record in the particular case to the Commission if the respondent that proceeding and complaint counsel, within 30 days of the service of this order upon them, file a stipulation providing that: 1. They wi1 submit the case to the Commission on the record in Docket ::0. 8641 American Home Products C01'poration and such other facts and records as provided for below; 2. (a) The facts applicable to the case support the stipulation that advertisements in the case had no significantly different effect upon readers from the effect of the advertisements in American Hom,e PToducts (b) The facts applicable to the case support the stipulation that the effect of the use of respondent's preparation is not significantly different from the use of American Home Products preparations;

3. To the extent that a respondent's advertisements differ significantly from those in American Home Products the Commission may, in its order disposing of the proceeding, include appropriate provisions to take into consideration such differences; 4. The advertisements attached to the stipulation are representative of respondent's advertising claims and are to be included in the record of such proceeding; 5. Respondent waives any intervening steps before the hearjng examiner;

6. The Commission may, on the basis of the stipulation, the attached advertisements and the record in A american Home Products issue such order as it deems necessary to the public interest;

7. The Commission is to issue its order disposing of such proceeding concurrently with the order setting forth its final decision in A me1' ican Home Products; and 8. The record on which the Commission is to make its disposition of such proceeding and for the purpose of judicial review is limited to the record at the time the stipulation is filed, the stipulation with the attached advertisements and the record in AlIwrican H01ne ProcZu.cts.

ALHAMBRA MOTOR PARTS ET AL.

Docket 6889. Order, May, 1966 Order setting aside cease and desist order of December 17 , 1965 , 68 C. 1039, as to respondents Earl Crawford, Lester L. Congdon Margaret A. Ludwick, Otis M. Ludwick, E. L. Covey, Edward Gaughn Carl D. Haase and Emma F. Wright.

ORDER SETTI:-G ASIDE CEASE AND DESIST ORDER AS TO CERTAIN RESPO:-DENTS Earl Crawford, Lester L. Congdon, Margaret A. Ludwick and Otis M. Ludwick have filed motions to set aside the cease and desist order of December 17, 1965 as to them and complaint counsel has filed a motion in behalf of E. L. Covey, Edward Gaughn, Carl D. Haase and Emma F. Wright to set aside this order as to those respondents. These motions are made pursuant to a provision in the order providing:

It is further ordered That those respondents who severed their connection with Southern California .Jobbers, Inc. , prior to January 17, 1963 , be, and they hereby are, granted permission, within sixty (60) days of the service of this order upon them, to file a motion requesting the Commission to set aside as to them the above order relating to warehouse distributor discounts.

It appears from respondents' motions, complaint counsel' motion and the supporting affdavits that this requirement has been satisfied in the case of Earl Crawford, Lester L. Congdon Margaret A. Ludwick, Otis M. Ludwick, E. L. Covey, Edward Gaughn, Cad D. Haase and Emma F. Wright. Accordingly, It is ordered That the cease and desist order of December 17 1965 rela:ing to warehouse distributor discounts be, and it hereby is, set aside as to Ead Crawford, Lester L. Congdon, Margaret A. Ludwick, Otis M. Ludwick, E. L. Covey, Edward Gaughn Cad D. Haase and Emma F. Wright.

SUBURBAN PROPANE GAS CORPORATIO/\ Docket 8672. Order, June, 1966 Order remanding certification of question of postponing hearing date to hearing examiner \with instructions that he expedite the proceedings in this case.

INTERLOCUTORY ORDERS , ETC. 1183 ORDER RULING ON CERTIFICATION OF NECESSITY FOR POSTPONING HEARING DATE This matter has come on for a hearing upon the examiner certification of the question of the necessity for postponement of formal hearings until October 1966.

On May 18 , 1966, the examiner directed counsel to file not later than June 10, 1966, their requests, if any, for hearings at more than one time and place and designating the earliest feasible dates and places of such hearings, with their reasons a list of witnesses and exhibits, such stipulations as have been agreed upon, and a11 other motions and requests which would further the expedition of the hearings.

In a motion fied May 25, 1966, complaint counsel assert among other things, that the fiings required by the examiner order would be premature and could not be made with the aura of finality which should accompany such filings, and they contend that a different prehearing timetable as suggested by such counsel would dispose of many pending prehearing matters and point toward commencement of the hearings at the earliest possible date. Specifically, on the question of setting the date of hearings complaint counsel assert that when they advised the examiner mid-October 1966 was the earliest possible hearing date, they were dealing with many areas of guesswork which are stil uncertain " and that while they stil adhere to their original date, they emphasize that this is merely an estimate. The examiner states that in light of the record, which includes complaint counsel' s motion of May 25, 1966, he is of the opinion that the request of such counsel is reasonable and that the hearings should be deferred until October 1966. He requests the authority for such deferment.

The examiner, we believe, misconceives his role and his authority in connection with the conduct of a Commission proceeding. The examiner clearly must guard against any unwarranted delays in the prehearing stage and exercise his powers in such a way as to bring the matter to trial at the earliest possible date. However, within that limitation, if such it be, he has broad discretion in a11 pretrial procedures and arrangements and specifically in the matter of fixing an appropriate date for the formal hearings. We note that even at this time it apparently is uncertain whether or not the hearings can be set for October 1966 since the time for these hearings wi1 depend upon the disposition of various pretrial matters. In such circumstances, the Commission is not in a position to make a sound decision in the matter. This is something peculiarly within the hearing examiner s province, especially since he is in a position to call the parties together and to iron out diffculties, if any, so that the hearings can commence with a1l possible speed.

The Commission notes that the formal complaint in this proceeding was issued more than six months ago, and the hearing examiner has not yet fixed a definite date for the commencement of hearings. The Commission believes that altogether too much time for utilization of prehearing procedures has already elapsed. We do not know where the faux, if any, lies; but it is the special duty of complaint counsel and the hearing examiner to carry out both the Commission s statutory obligation to "proceed with reasonable dispatch" (Section 6 (a) of the Administrative Procedure Act) and its expressed policy that adjudicative proceedings "shall be conducted expeditiously" (Section 3. 1 of the Commission s Rules of Practice). We stress that the examiner should brook no undue delay. He has, we believe, a1l of the powers necessary to see to it that the parties dispose of a1l pretrial matters in a reasonable time and to get on with the trial of the case. He should use them.

It is oTdej' ed, That this matter be, and it hereby is, remanded to the examiner for further conduct of the proceedings in accordance with the views herein expressed. THE lIENTHOLATUM COMPANY Docket 8644. Order and Opinion, June, 1966 Order rejecting stipulation of respondent pursuant to order of April 26 , 1966 and remanding case to hearing examiner for trial unless, within 10 days respondent submits a new stipulation. OPINION OF THE COMMISSION This matter is before the Commission on the certification to the Commission on May 27, 1966, by the hearing examiner of a stipulation entered into by counsel supporting the complaint and counsel for respondent pursuant to the Commission s order dated Aprij 26, 1966, which provided that the hearing examiner was to proceed with the hearing in the case forthwith unless a stipulation was filed within 30 days of service of said order containing the provisions set forth in said order. INTERLOCUTORY ORDERS, ETC. 1185 Paragraph 2 (b) of the Commission s order of April 26, 1966 stated that to comply with its terms the stipulation entered into by counsel must provide that:

The facts applicable to the case support the stipulation that the effect of the use of respondent's preparation is not significantly different from the use of American Home Products' preparations. Paragraph 2 (b) of the stipulation submitted by counsel provides as follows :

The effect of the use of respondent' s preparation is not significantly different from the use of the preparation of American Home Products other than as se t Im'ih in advertisements hereto attached which show that the Menthalatum p?"oduct contains benzocaine, technically Ethyl p-Aminobenzoate, as listed in offcial compend1:a (U.S. Pharmacopeia, U.S. Formulary) as a local anesthetic and hexachlorophene listed in the U.S. Phannacopeia as a local anti-infective. (Emphasis added. The qualified agreement entered into by counsel clearly does not comply with the requirements set forth in Paragraph 2 (b) of the Commission s order and would seemingly require the Commission to make a scientific evaluation of the merits of respondent' s alleged ingredients "Benzocaine" and "Hexachlorophene. Since the stipulation contains no agreement among counsel concerning the significance and effects of these alleged ingredients, the Commission would be unable to determine the effect, if any, of the presence of these ingredients in respondent's preparation on the issues in the case.

Paragraph 3 of the stipulation provides: That the Commission in its order disposing of the case may include appropriate provisions and take into consideration such differences as the inclusion of the anesthetic and local anti-infective. This language does not state directly that it is designed to encompass differences in advertising as wen as in the product. It is, therefore, not in direct conformity with the requirements of Paragraph 3 of the Commission s order of April 26, 1966 which states:

To the extent that a respondent's advertisements differ significantly from those in A?neTican Home PToducts the Commission may, in its order disposing of the proceeding, include appropriate provisions to take into consideration such differences.

It would appear, therefore, that the stipulation submitted counsel does not fully comply with the requirements of the Commission s order of April 26, 1966 , and that it contains some omissions and ambiguities which should be clarified before it can be accepted. It is accordingly rejected for these reasons and counsel are granted an additional 10 days within which to resubmit an amended stipulation.

ORDER 0:- STIPCLATION CERTIFIED BY HEARING EXAMINER The Commission in an order dated April 26, 1966 (p. 1179 hereinj, having directed the hearing examiner to proceed with the hearing in the case forthwith unless the parties entered into a stipulation in accordance with the provisions set forth in said order in which event the hearing examiner was ordered to certify the record to the Commission; and counsel supporting the complaint and counsel for respondent having on May 20 , 1966 , entered into a stipulation purportedly complying with the provisions of said Commission order dated April 26, 1966; and the matter having been certified to the Commission by the hearing examiner on May 27, 1966; and the Commission having determined that said stipulation does not comply with the requirements set forth in its order of Aprij 26, 1966:

It is ordered That the stipulation submitted by counsel be and hereby is rejected and the matter returned to the hearing examiner who shall proceed with the hearing in this case forthwith unless, within 10 days after the service of this order upon respondent, a stipulation is filed with the hearing examiner complying with the requirements set forth in the Commission order of April 26, 1966, whereupon the hearing examiner shall again certify the record in this case to the Commission without further action.

MISSISSIPPI RIVER FUEL CORPORATION Docket 8657. Order, June 8, 1966 Order denying motions to quash several subpoenas duces tecum directed to offcials of ready-mix concrete companies, and further providing that the subpoenaed documents be turned over to an accountjng firm selected jointly by Commission and respondent' s counsel. ORDER ENTERTAINING AND DENYING Appeals FROM HEARING EXAMINER' S DENIAL OF MOTIONS TO QUASH OR LIMIT SUBPOENAS In January 1965, the Commission issued the complaint in this case charging that respondent's acquisitions of ready-mix concrete firms in Kansas City, Missouri, Memphis, Tennessee, and Cincinnati, Ohio, during the period from September 1963 through INTERLOCUTORY ORDERS , ETC. 1187 January 1964, violated Section 7 of the amended Clayton Act. On the application of respondent' s counsel, the hearing examiner on January 27, 1966, entered an order for the taking of depositions and the issuance of subpoenas duces tecum to 33 portland cement manufacturers and 30 ready-mix concrete distributors and their offcials, many of whom have moved to quash or limit these subpoenas. On April 12, 1966, the hearing examiner heard oral argument and conducted a conference on the motions to quash or Jim it the subpoenas. Thereafter, on April 28, 1966, the hearing examiner issued an order denying the motions to quash but modifying and limiting the subpoenas in some respects. The matter is now before the Commission on the appeal from the hearing examiner s order of a number of those persons subpoenaed.

Section 3. 17 of the Commission s Rules of Practice provides that an appeal to the Commission from the hearing examiner ruling granting or denying a motion to limit or quash any subpoena "wil be entertained by the Commission only upon a showing that the ruling complained of involves substantial rights and will materially affect the final decision and that a determination of its correctness before conclusion of the hearing wil better serve the interests of justice." The Commission has determined that the requisite showing has been made in this case and it therefore entertains the appeals. Complaint counsel and respondent's counsel have stipulated for the purposes of this proceeding only, that if a cement consumer had or has one or more of the relationships described below with a portland cement manufacturer, then during the existence of that relationship, the cement consumer is likely to be influenced to buy a significant part of its cement requirements from such manufacturer:

(1) Any debt due of a cement consumer to a manufacturer which has been owing for more than 60 days; (2) Debts of a cement consumer guaranteed by a cement manufacturer;

(3) Any lease between a cement manufacturer and a cement consumer for assets used by the consumer in the production or distribution of ready-mixed concrete or concrete products; (4) Any lease-purchase agreement between a cement manufacturer and a cement consumer for assets used by the consumer in the production or distribution of ready-mixed concrete or concrete products;

(5) Any right or option of a cement manufacturer to acquire any of the stock or assets of a cement consumer; (6) Any sale of equipment or other property where the deferred purchase price is secured by lien or retention of title by a cement manufacturer to a cement producer; (7) The furnishing of equipment or other property by a cement manufacturer to a cement consumer without charge or for a consideration less than the fair value of the property; (8) Any contribution of capital by a cement manufacturer to a cement consumer;

(9) The placing or retaining on the payroll of a cement manufacturer of any offcer or employee of a cement consumer; and (10) The presence on the Board of Directors of a cement consumer of one or more directors common to a cement manufact urer.

The subpoenas at issue here seek documents and writings which reflect any of these relationships . for the years 1963 through 1965 and, as modified by the hearing examiner, the geographic area covered is that defined in the complaint. The hearing examiner s order provided that the subpoenas may be complied with by mailing the specified papers to respondent' counsel in lieu of personally appearing and testifying. The order contains further provisions with reference to the copying of documents and disclosure of their contents, alj designed to protect the confidentiality of the information submitted in response to the subpoenas.

Appellants launch a broadly based attack on the validity of the subpoenas. They argue first that the subpoenas constitute an effort on the part of respondent to engage in a discovery proceeding unauthorized by the Commission s Rules. We disagree. By the subpoenas, respondent proposes to gather evidence by which it expects to prove certain aspects of the structure of the cement and ready-mix markets in the relevant geographical areas. The subpoenas cover a limited and specified class of documents relating to specifically defined relationships-relationships which constitute elements of the economic setting in which the challenged mergers took place. On this basis, we reject appellants' contention that "respondent' s purpose is not to obtain evidence but to conduct an expedition in the hope of discovering something helpful."

;'The hearing examiner s order modified the subpoenas to require data as to debts owing for more than 90 days rather than the 60 days stipulated. INTERLOCUTORY ORDERS, ETC. 1189 Although it is not necessary to decide now, and we do not decide, whether the type of evidence that respondent seeks to elicit by the subpoenas wi1 constitute a defense to the Section 7 violations charged in this case, it does appear that the material sought is relevant to an appraisal of market conditions in the cement industry and pertinent to the issues in this case. Respondent is entitled to gather such information for purposes of making its defense. It is clear that the information sought would not be given voluntarily and that it is available to respondent only through compulsory process. If respondent is denied the opportunity to collect this material, it wi1 be unable to lay the foundation for whatever legal arguments, based on market conditions, it may wish to make. It is to be emphasized that the Commission does not imply its acceptance or rej ection of any legal argument that respondent may choose to make in its defense. We merely hold that respondent is not to be foreclosed at this stage of the proceeding, from attempting to make its defense by being denied the opportunity to obtain the necessary evidence. We also reject appellants' contentions that some items of the subpoenas are not relevant.

Appellants contend also that respondent's real purpose is to gather highly confidential competitive data which wil be " incalculable value to respondent in competing with movants. The Commission believes that the data sought is not of so confidential or sensitive a nature as alJpellants claim and, moreover that the protective provisions of the examiner s order render it highly unlikely that the material submitted by appellants can be put to unfair or improper competitive use by respondent. However, out of an abundance of caution and in order to avoid any possibility that the allegedly confidential data wi1 be improperly used, we direct that material submitted in response to the subpoenas should be submitted to a reputable and disinterested accounting firm, to be selected by the hearing examiner in consultation with the parties, which shail compile and present the material to respondent's counsel in such manner that no individual1 company s confidential arrangements or data wil be revealed. This shail be in addition ta the protective provisions already contained in the examiner s order. The request for oral argument is denied.

It is so ordered.

Commissioner MacIntyre not participating. MODER:\ 1larketing SERVICE, INC., ET AL. C. H. ROBINSON COMPANY AND NASH-FINCH CO:VIPANY Dockets 8783, 4589. Order, June, 1966 Order denying respondents' request to either terminate case or to defer filing of proposed findings until the Supreme Court has ruled on C. v. Jantzen, Inc. 356 F. 2d 253 (9th Cir. 1966), but granting a 80 day extension to prepare findings.

ORDER DE1-YING RESPONDENT S MOTIO:- TO TERMINATE PROCEEDING, OR, IN THE ALTERNATIVE, TO DEFER FILING OF PROPOSED RECOMMENDATIOXS AND GRANTI:-G REQUESTED EXTENSIO:- OF TIME FOR FILING RECOMME:-DATIONS This matter is before the Commission upon the hearing examiner s certification, under (\ 3. 6 (a) of the Commission Rules of Practice, of a motion of respondent, Nash-Finch Company, filed :Vlay 4 , 1966 , requesting that the proceeding be terminated, or, in the alternative, that the filing of proposed recommendations and other submissions with the examiner be deferred until such time as the United States Supreme Court has ruled that the Commission has authority to conduct a proceeding for enforcement of a pre- 1959 Clayton Act order which was commenced subsequent to the enactment of the Clayton Act Finality Act. In addition, respondent, on May 6, 1966 , filed a motion to extend from June 9 , 1966, to August 9 , 1966, the time to file its proposed recommendations with the examiner in the event that its May 4, 1966, motion is denied. In his certification of :vay 20, 1966, the examiner recommended that the Commission deny both parts of the first motion and grant the second.

Respondent' s contention in support of the requested termination is that the Commission has no authority to prosecute this proceeding, inasmuch as all statutory provisions for the enforcement of pre-1959 Clayton Act orders, by a proceeding commenced after July 23 , 1959, were repealed by enactment of the Clayton Act Finality Act. Respondent cites in support the recent decision of the Court of Appeals for the Ninth Circuit in Fedeml Tmde Commission v. Jantzen, Inc. 356 F. 2d 253 (1966). Respondent supports its alternative request for a deferment of the filing of proposed recommendations until the Supreme INTERLOCUTORY ORDERS , ETC. 1191 Court has ruled upon the Jantzen doctrine with a plea against subjecting it "to irreparable injury in the form of the costs of briefing and preparing and submitting proposed findings and conclusions, in a highly complex and confusing legal1 and factual context.

Commission counsel urge that both alternatives be denied. They argue that the decision of the Ninth Circuit conflicts 'with other judicial1 precedents and does not warrant immediate termination or deferment of a11 pending compliance matters relating to pre- Finality Act orders; that Jantzen does not curtaiJ the Commission s investigative authority; and that the requests for termination or deferment "are but two more of respondents continuing efforts in this 31/2 year-old proceeding to stall and frustrate the Commission s inquiry.

The order directing an investigational hearing in this matter issued on February 1, 1963 (62 F. C. 1486J. The record was finally closed by the hearing examiner on Aprij 25, 1966. There remains only the submission by the parties of proposed recommendations and the subsequent examiner s report to the Commission. The Commission considers the decision of the Ninth Circuit in Jantzen as being limited to that respondent only and does not find in the motion of Nash-Finch Company a valid reason for either terminating or staying this proceeding. Aecordingly, It is ordered That respondent's motion to terminate the proceeding or, in the alternative, to defer the filing of proposed recommendations with the hearing examiner be, and it hereby , denied.

Counsel for respondent in their second motion represent that they have insuffcient time to prepare adequate proposed recommendations in this matter. As reasons they list the length of the record (approximately 3 000 pages), the number of exhibits involved (over 300), the complexity of the issues, and the fact that they are presently engaged in the preparation of proposed findings in a matter currently before another Commission hearing examiner. Counsel for the Commission have no obj ection to an extension, but would limit it to 30 days. We find that a reasonable extension to both sides is warranted. Accordingly, It is furthe,- orde,-ed That respondent and counsel for the Commission are granted an extension to July 25, 1966, to file their proposed recommendations with the hearing examiner. Commissioner Elman not concurring and Commissioner Mac- Intyre not participating.

BEST & CO., INC.

Docket 8669. OTder, June, 1966 Order denying- respondent's request to appeal from hearing examiner order setting June 21, 1966, as date on which hearings wil commence. ORDER DENYING REQUEST FOR PERMISSION TO FILE INTERLOCUTORY Appeal FROM HEARING EXAMINER ORDER SCHEDULING HEARI:-GS Upon consideration of respondent' s request for permission to file an appeal from the hearing examiner s order dated May , 1966, and filed ;Vlay 31 , 1966, setting hearings in this proceeding to commence on June 21 , 1966, the Commission has determined that the request should be denied. The Commission now has before it respondent' s appeal, filed May 19 , 1966, from the hearing examiner s order of May 10, 1966, denying respondent' s motion for depositions from 14 supplier witnesses and for subpoenas ad testificandum and duces tecum in aid of such depositions. The Commission also has before it respondent' request for permission to appeal from the hearing examiner order of May 10 , 1966 , denying respondent's motion to suspend and bar complaint counsel from further participation in this proceeding, also filed on May 19, 1966. Complaint counsel' answers were filed on May 27, 1966. On June 6, 1966, the Commission granted respondent's motion of June 1 , 1966 , and permitted respondent to submit a reply to complaint counsel' answers on allegedly new matters raised by complaint counsel and allegedly not considered by the hearing examiner. This reply has not yet been received. In connection with its motions, respondent' s rights wi1 be fully protected. After the Commission has decided respondent's appeal and request for permission to file an interlocutory appeal filed on May 19, 1966, the hearing examiner wil be authorized to take whatever steps are necessary to carry out that decision. There has been no showing here, as required by S 3. 20 of the Commission s Rules of Practice, of extraordinary circumstances necessitating an immediate decision by the Commission to prevent detriment to the public interest. Accordingly, It is ordered That respondent's request for permission to file an interlocutory appeal from the hearing examiner s order scheduling hearings be, and it hereby is, denied. Commissioner Elman not concurring.

INTERLOCUTORY ORDERS , ETC. 1193 BEST & CO., INC.

Docket 8669. 01"der and Opinion, June 23, 1966 Order denying respondent' s an peal from hearing examiner s motion for depositions from 14 supplier corporations, and from his denial of motion to suspend complaint counsel, and remanding the suspension motion to the hearing examiner.

OPINION OF THE COYIMISSION On N ovomber 1 , 1965 , the Commission issued its complaint stating it has reason to believe that respondent violated the Federa! Trade Commission Act by inducing or receiving promotional allowances not made available on proportionally equal terms to its competitors. This matter is now before the Commission on respondent's appeal from the hearing examiner s order of May 10, 1966 , denying respondent's motion for depositions from fourteen supplier corporations, respondent' s request for permission to file an interlocutory appeal from the hearing examiner s order of the same date refusing to suspend complaint counsel from further participation in this proceeding, complaint counsel's answers and respondent' s reply. The crux of respondent's appeal relating to the deposition issue seems to be the contention that the hearing examiner prehearing order of December 21 , 1965, has not been observed by complaint counsel. Respondent contends in this connection that had complaint counsel complied with that order the need for depositions would have been either wholly obviated or at least the scope of the request would have been materially reduced. The prehearing order in question provided, in pertinent part that complaint counsel should furnish to respondent's counsel the following data:

a. A statement of the issues of fact and of law which they regard as being involved in the proceeding, and of the party s position on each such issue. Such statement shall include each party s version of the facts, transactions or events out of 'which the complaint or any defense thereto arises, and shall not be a mere repetition of the pleadings. b. A list of the witnesses which the party proposes to call in support of his or its position on each issue of fact. Such list shall include the name address, occupation and business connection of each witness, , and the issue with respect to which it is expected he wil testify. c. A narrative statement of the testimony which it is expected each witness named in subparagraph b, above, wil give in support of the party version of the issues.

d. A list of the documentary evidence which the party proposes to offer in support of his or its position on each issue of fact, and the issue with respect to which it wil be offered. Such list shall include a brief description of the document, the date (if any), by whom prepared or written, and to whom sent.

€. Copies of a1l documents proposed to be offered, unless the documents came from the flies of the opposing party or there is otherwise reason to believe that such party has a copy thereof. In the event it is not feasible to Rupply copies of particular documents by reason of the size or nature thereof, compliance with this subparagraph may be effected by affording opposing counsel a reasonable opportunity to inspect and make appropriate notes regarding the document in advance of the prehearing conference. 1 Respondent, in its appeal, claims that disclosure by complaint counsel, although formidable in bulk, is more superficial than real. (Page 3, respondent' s appeal brief. The hearing examiner, in ruling on respondent's motion for depositions, stated it is his opinion that the taking of such depositions is unnecessary and would result in undue delay of the proceeding, involving to a large extent a duplication of the trial in this case. In supporting this conclusion, he pointed to the fact that two prehearing conferences had already been held. He stated further that as a result of his order scheduling the initial prehearing conference and additional directions to counsel that complaint counsel has turned over, or will have completed turning over, substantially in advance of the hearing, a list of their witnesses, narrative statements of the testimony of such witnesses, a list of their documents and copies of a11 but those voluminous documents for which summary tables have been substituted. ' The examiner, in denying the motion for depositions, stated that he is satisfied that counsel for respondent has been supplied with suffcient information so as to be reasonably prepared for cross-examination and the offering of defense evidence. He further stated that in large part the information which counsel for respondent seeks to elicit by the deposition procedure is irrelevant, since it involves such matters as other alleged forms of discriminatory payments and services, and a possible cost justification defense.

It is important to note that the examiner further stated that to the extent that there may be relevant information which respondent may have to obtain from such supplier witnesses, he 1 According to respondent' s appeal, comp iance with items a throug-h d would apparently have given it suffcient infol"mation to prepare ils defense and for the trial of this case so fis to obviate2 Thesethe summarydepositionstablesin questionarc apparentlyor at leastthepermitmmmarizationsmaterialreferredreductionto asinTablestheir scope.T, II and III in the pleading-s. Table I pUrpOJ'ts to reflect certain suppliers' total sales and advertising allowances in 19S2 and 1963 to respondent and certain other retailers. Table II purports to reflect advenisements by re jJondent during the years 1962 and 1963, to the cost of ,which certain suppliers contributed. This data, according to the motions filed, includes the names of the publications, the suppllel's and style numbers of merchandise featured in such advertisements. Finally, Table III purports to reflect sales by such suppliers to restJondent in 1962 and 1%3, of the style numbers shown in Table II . as weJI as the sales by certain suppliers of identic!!l styles during the same period to other retailers. INTERLOCUTORY ORDERS , ETC. 1195 is satisfied that despite the alleged failure of one of fourteen suppliers to cooperate that the respondent would be able to obtain such information by voluntary processes. The examiner went further, stating that if he were wrong in this assumption that appropriate arrangements could be made without undue delay in the hearings to secure such information by compulsory process. In this connection, we note that S 3. 10 of the Commission s Rules of Practice specifically states that at any time during the course of a proceeding the hearing examiner, in his discretion, may order that the testimony of a witness be taken by deposition and that a witness produce documentary evidence in connection with such testimony.

It is apparent that the examiner carefully weighed the possibility of obtaining substantial results from the deposition procedure which respondent seeks against the delay which, in his opinion, would entail an interruption of many months in the trial of this proceeding and that he came to the conclusion that such a delay is simply not warranted in light of the extremely tenuous possibiliy that substantive results would be achieved.

In effect, the examiner, in his order of May 10, 1966, held that his directions for pretrial disclosure by complaint counsel have been complied with. This, of course, is a factual determination which the hearing examiner is far better equipped to make than we. The hearing examiner is in a position to discuss these matters with counsel for both sides and to thoroughly examine the material submitted pursuant to his order. In his capacity as trier of fact and in his proximity to the proceeding in the trial stage, the examiner is in a far better position than the Commission to determine what is necessary for either side to prepare for the trial of the case and for cross-examination of the other party s witnesses. We affrm, therefore, in this case the rule that as to matters of discovery the hearing examiner has broad discretion and that he wil not be reversed absent a clear showing of abuse of such discretion. See A mer'icem Bmke Shoe Compcm1l, Docket No. 8622, Order Denying Appeal From Denial Of Applications For Depositions And Subpoenas, issued September 1 , 1965 (68 F. C. 1169). We have little hesitation in applying that rule in this instance since it is clear that the examiner is keenly av.ral'€ of his responsibility to respondent to ensure it has the information necessary for the preparation of its defense and for cross-examination of complaint counsel's witnesses. In this connection, we have already noted the examiner has stated his wilingness to grant respondent compulsory proc- 1196 FEDERAL TRADE COMMISSIO:- DECISIONS ess for such information as it may need for these purposes should that need become apparent during the course of the hearing. We also note the statement of the examiner, brought to our attention by complaint counsel's answer, that if respondent is unable to cross-examine certain witnesses because they do not have the requisite information or if the witnesses called by respondent in its defense are not familar with the transactions under consideration, he would then recess the hearing unti respondent could obtain appropriate witnesses. The examiner specifically stated, in this connection, that he would follow this procedure to ensure that respondent would not be precluded from being able to make a full cross-examination and to offer a complete defense. It is clear that the hearing examiner wil fully protect respondent' s rights during the course of these proceedings and there is no need for Commission intervention at this time.

Finally, it is apparent that the examiner has only followed the mandate of the Commission to exert positive control of the proceedings, to define the relevant issues, and to exclude irre1evant material in the prehearing stage of the case. Here the examiner has exercised the responsibility of isolating the essentia1 issues, which is primarily his. He should not be reversed for taking that initiative. See Topps Chewin,g Gum, Inc. Docket No. 8463, Opinion And Order Disposing Of Motions, July 2 1963 (63 F. C. 2196J.

We turn now to respondent' s request for permission to file an interlocutory appeal from that part of the examiner s order denying respondent' s motion to suspend complaint counsel from further participation in this proceeding. The ground for that motion was that complaint counsel allegedly communicated with a prospective witness so as to induce it not to make available to respondent certain information material to the defense. According to respondent, complaint counsel communicated with counsel for such witness in order to encourage the witness not to cooperate with respondent's counsel in verifying data contained in tables which had been turned over to respondent. The examiner, in his order of May 10, found the conduct of complaint counsel regarding the communication with the witness in question did not come within the scope of 9 3. 15(d) of the Rules of Practice, whereunder the examiner is authorized to suspend attorneys who refuse to comply with his direction, are guily of disorderly conduct, dilatory tactics or contemptuous language. He found, however, that complaint counsel's action was il-advised under the circumstances in view of the fact that INTERLOCUTORY ORDERS , ETC. 1197 counsel for respondent had given assurance during the prehearing conference that the confidentiality of the tables would be maintained and that complaint counsel had given no ink1ing of the need to communicate with any witness before turning over the tables in question. The examiner further found that nevertheless the tables had been turned over to respondent' s counsel and there had been no prejudice to respondent as a result of the communication with the witness. The examiner stated that it was his understanding that the witness would cooperate with respondent' s counsel in verifying the information in Table II' and that any delay in completing the work has not been the result of any communication from complaint counsel. In making these findings, he took into consideration the fact that it is to the advantage of complaint counsel that the checking of this data be completed as soon as possible so that the table may be offered in evidence by agreement without the necessity of the calling of a witness.

Respondent, not satisfied with this disposition, filed a request for permission to file an interlocutory appeal from the order of the examiner refusing to suspend Commission counsel. In this connection, respondent, on the basis of its. reconstruction of complaint counsel's contact with the supplier witness, asserts that Commission counsel, in the course of such conversations made various misrepresentations to the witness and concealed certain material facts in order to obstruct respondent's opportunity to secure information within the possession of such witness. Complaint counsel, in their answer before the Commission, deny having made the alleged misstatements or concealing material facts from the witness as alleged by respondent. Respondent in its reply, claims this denial raises new matters not previously considered by the hearing examiner.

The Commission accepts the hearing examiner s finding that no harm has resulted to respondent as a result of the activities complained of. N everthe1ess, it believes that in view of respondent' s insistence on pressing its charges against complaint counsel the matter should be remanded to the hearing examiner lor a specific finding on the issue of whether complaint counsel made misstatements to the witness in question and concealed from it material facts with the intent of preventing respondent from gaining access to information to which it is entitled. Merely contacting a witness to inform him that data he furnished the Commission will be turned over to a respondent or a third party without more is, of course, a neutral act not warranting charges S See note 2, supra.

1198 FEDERAL TRADE COMMISSIO:- DECISIONS of impropriety. A determination of whether respondent's allegations have any basis in fact involves factual questions, including a resolution of the evident dispute between respondent's counsel on the one hand and complaint counsel and counsel for the witness on the other. The hearing examiner, in his position as trier of fact, is in a much better position to resolve such issues than the Commission. In fairness to all concerned, specific findings should be made on the questions outlned above. The examiner may make such findings on the basis of the information now available to him or, if it is necessary in his opinion, he may, in his discretion, at a suitable time in this proceeding, call as witnesses before him all those having knowledge of the facts relevant to respondent's charges against complaint counsel. There should, however, be no interruption of those hearings now schedu1ed to commence on June 29, 1966. When the examiner has made his findings on these points, he is to certify the matter to the Commission with his recommendation for disposition. ORDER DENYING Appeal AKD Request FOR PERMISSION To FILE AN INTERLOCUTORY Appeal This matter is before the Commission on respondent' s appeal from the hearing examiner s order of :day 10, 1966 , denying respondent' s motion for depositions from fourteen supplier corporations, respondent's request for permission to file an interlocutory appeal from the hearing examiner s order denying respondent's motion to suspend complaint counsel, complaint counsel' s answers in opposition thereto and respondent' s reply. The Commission has determined that the appeal and the request for permission to file an interlocutory appeal should be denied. The Commission has further determined that the dispute in connection with respondent's motion to suspend complaint counsel should be remanded to the examiner for further findings and action in accordance with the instructions set forth in the accompanying opinion. Accordingly, It is ordered That respondent's appeal from the hearing examiner s order of May 10 , 1966 , denying depositions, and respondent' s request for permission to file an interlocutory appeal from the hearing examiner s order of May 10, 1966, denying the illotion to suspend complaint counsel, be, and they hereby are denied.

It is juTther ordered That this matter be, and it hereby is remanded to the examiner for findings and further action in connection with respondent' s motion to suspend in accordance with the directions set forth in the accompanying opinion. INTERLOCUTORY ORDERS , ETC. 1199 BEST & CO., INC.

Docket 8669. Order, June Q8, 1966 Order denying respondents' appeal from hearing examiner s order denying issuance of subpoenas duces tecum directed to complaint counsel's witnesses.

ORDER DENYING RESPONDENT S Appeal AND REQUEST FOR A STAY OF THE PROCEEDING Upon consideration of respondent' s appeal from the hearing examiner s order denying application for issuance of subpoenas duces tecum filed June 27, 1966 , and respondent's request for a stay in the hearing pending disposition of this appeal, the Commission has determined that the appeal should be denied. The examiner denied respondent's request for subpoenas against complaint counsel's witnesses on the ground that it made an insuffcient showing of relevance to justify their issuance at this time in view of the magnitude of the request for information. The examiner further determined that much of the data which respondent desires to subpoena is either patently irrelevant, its relevance has not been adequately demonstrated or is largely covered by the subpoenas issued on the application of complaint counsel. The examiner also took into consideration the fact that granting respondent's application to any substantial extent at this time would create a grave risk of a substantial postponement of the hearings.

We also note that the examiner recognized that respondent might more appropriately develop certain of the evidence which it seeks during its defense rather than in the course of crossexamination. In this connection, we further note that the examiner has stated his willingness, during the course of the hearings, to make compulsory process avai!able to respondent if necessary. What respondent requires in the way of additional information for cross-examination will become apparent during the course of the hearings and the examiner has indicated that he wi1 make ample provision to ensure that respondent wi1 be able to fully cross-examine complaint counsel's witnesses as it is entitled to do. (See our Order Denying Appeal and Request for Permission To File Interlocutory Appeal issued June 23 1966 (p. 1193 hereina.

In short, at this time there is no indication that the examiner has abused his discretion in denying respondent the subponeas which it seeks, and there is no reason for the commission to intervene at this stage and to interfere with his conduct of the proceedings. At this time the examiner is in a better position to make such determination than the Commission. Accordingly, It is ordered That respondent's appeal from the hearing examiner s order denying application for issuance of subpoenas duces tecum filed June 27, 1966 be, and it hereby is, denied. Commissioner Elman not participating.

DEVCON CORPORA TIO:- ET AL.

Docket C-607. O?'de1', April 7, 1966 Order directing hearing examiner to receive evidence on question of whether Commission s order of Oct. 11 , 1963, 63 F. C. 1034, should be changed to focus on the applied properties of the products in question rather than on their metal content.

ORDER DIRECTIC\G HEARINGS The Commission on October 25, 1965, having issued its order to respondents to show cause why the order to cease and desist in this matter issued October 11 , 1963 (63 F. C. 10341. should not be changed so that the order s proscriptions should focus upon the applied properties of the products in question rather than upon their metal content, and Respondents having filed a response to said order to show cause averring that the change proposed by the Commission raises questions of fact requiring evidentiary hearings, and The Commission being of the opinion that the public interest will be best served by reopening this proceeding for the reception of evidence for and against the alteration and modification of Paragraph 1 (a) of its order to cease and desist dated October 11 1963, and setting aside Paragraph 1 (b) of said order in accordance with proposed order to cease and desist contained in its show cause order of October 25, 1965.

It is ordered That this matter be assigned to a hearing examiner for the purpose of receiving evidence in support of and in opposition to the question whether the public interest requires that the Commission s order to cease and desist of October 11 1963 , be altered, modified or set aside in accordance with the Commission s order to show cause dated October 25, 1965. It is further ordered That the hearings be conducted in accol' dance with Part 3, Subparts C, D, E and F of the Commission Rules of Practice.

It ':8 further o1'dered That the hearing examiner, upon conclusion of the hearings, certify the record together with his recommendation to the Commission for final disposition of this matter. ADVISORY OPINION DIGESTS* No. 12. Promotional assistance-Publisher payments to a single reseller of the publisher s periodical.

The Federal Trade Commission announced today that it had recently advised a publisher of a periodical that the proposed promotional assistance Plan described below would be violative of Section 2 (d) of the Robinson-Patman amendment to the Clayton Act. Section 2 (d) provides in essence that it is unlawful for a supplier in interstate commerce to offer promotional assistance to his customer in reselling the supplier s product unless a proportionally equal offer also is made to the customer s competitors who sell the same product.

Essentially, the proposed Plan provided for a payment of $75 weekly to the operator of a chain of newsstands. In return, the operator would (1) place the publication on sale on the newsstands, (2) submit daily sales reports to the publisher for each newsstand, (3) favorably display the publication on the stands and (4) provide stock control to avoid sell outs. The Plan was deemed violative of Section 2 (d) because it was to be offered only to the one operator of newsstands. Under the Plan, his competitors in selling the publication were not to be offered promotional assistance-proportional or otherwise. The Commission s Guides for Advertising Allowances discuss the requirements for such promotional assistance Plans in considerable detail and wi1 be of assistance to persons comtemplating their use. Copies of the Guides are available from the Secretary, Federal Trade Commission, Washington, D.C. 20580. (File 1"0. 6637020, released Jan. 5, 1966.

No. 13. Discount-buying membership organization. A recent Federal Trade Commission advisory opinion informed a promoter that there were no actionable trade restraints inherent in his proposed plan.

As explained by the promoter, the plan involved the formation "In conformity with lJolicy of the Commission, advisory opinions are confidential and a.re not available to the public. only digests of !irlvisol'Y opinions arc of public 1'('co)'(1. D:g-ests of advisory opinions ale curnmtJy published in the Federal Register. 1202 FEDERAL TRADE COMMISSIO:- DECISIONS of a membership organization. Membership, available at an annual fee to the general public without restriction, confers the right to purchase at a stated discount from the prevaiJng prices of retail merchants. Local retailers can participate in the plan without restriction.

The Commission pointed out that its approval1 was limited to the proposed plan itself and no views were expressed as to the plan s implementation. Without imputing any lack of good faith to the requesting party, the Commission noted that if, for example, members of the purchasing public were misled or deceived, or could be misled or deceived, as to benefits available under the plan, such result might be actionable. (File No. 663 7029, released Feb. 1, 1966.

No. 14. Exclusive use of trademark in designated trading area. In an advisory opinion announced today the Federal Trade Commission disapproved a contemplated license agreement modification which would give a licensee the exclusive right within a designated trading area to use the licensor s trademark in connection with the licensee s sale of produce purchased from third-party growers.

As the request for an advisory opinion was presented, the requesting licensor, a state agency, owns a registered trademark or certification mark which it licenses through one (1) year nonexclusive agreements with wholesale distributors for use connection with their sale of repackaged produce purchased from third-party growers. The purpose of the mark is to advertise and encourage greater use of a particular product, and to protect its original identity.

As a condition for the renewal of a license agreement, the licensor is requiring that the requesting licensee submit his operations to continuous inspection by a designated inspection agency. The requesting licensee indicated that it wi1 be necessary to remodel his plant facilities, and that the initial capital investment and expense of a resident inspector wi1 be considerable. In return for this added expense, the licensee requested that the licensor revise the present license agreement to give him the exclusive right within a designated trading area to use the trademark in connection with his sale of certain produce. It was said that the proposed exclusive license is intended to prevent use of the trademark by competitors in the described trading area in connection with their repackaging and sale of similar produce. Unlike the ordinary trademark owned by a single producer and ADVISORY OPINION DIGESTS 1203 applied solely to his goods, the mark here involved is a certification mark owned by a state agency. Such a mark is intended to identify goods produced by many competing growers. Since it is intended that the public take the certification mark as a representation that the only bona fide produce of that type is the produce sold under this mark, restriction of its use to the requesting licensee could result in giving him an unfair competitive advantage over other wholesale distributors who are in fact sellng the same produce but who do not have the right to use the certification mark. The result could be to impose an unreasonable restraint, not upon intrabrand competition (as would be the case with the usual exclusive trademark license), but upon competition between competing brands of the produce involved. The fact that the right to use the certification mark is conditioned upon utilzation of the inspection procedure required by the licensor is no justification for insulating the requesting licensee s company from the competition of other repackers of similar produce.

The Federal Trade Commission advised that it is of the opinion that the proposed exclusive license agreement would probably be in violation of Section 5 of the Federal Trade Commission Act. (File 1\0. 663 7012, released Mar. 5, 1966. Ko. 15. Proposed trade association resolution by wholesalers suggesting pricing and business policies to their suppliers. A trade association composed of wholesalers of rebuilt products has requested an advisory opinion from the Commission as to the legal1ity of a proposed Resolution suggesting certain conduct to the trade association of rebuilders who supply the wholesalers. The Resolution would provide, among other things, that rebuilders should give wholesalers 120 days notice in writing of any change in the allowance to be granted for used products turned in for rebuilding purposes; that during this period the wholesalers should receive credit at the old rate on such return products; and that the rebuilders should incorporate a 30 percent gross profit for the wholesalers when establishing prices for the used products in view of the fact that the wholesalers give an allowance to the retailers who turn in the used product for rebuilding purposes. The association added that there was no agreement not to do business with those rebuilders who declined to follow the practices contained in the Resolution.

The Commission advised that it could not give approval to the adoption of the Resolution. Though the Resolution may be , 1204 FEDERAL TRADE CO IMISSION DECISIONS motivated by a purpose to remove evils affecting the industry, it appears to go further than is reasonably necessary to accomplish such result. Even if it were accompanied by disclaimers there is implicit in the Resolution too grave a danger that it wi1 serve as a device whereby the concerted power of the members of the association is brought to bear to coerce the members of the rebuilders' trade association to conform their pricing policies to the restrictive standards of the Resolution, or at the very least as an invitation to enter into agreements among themselves to do so. (File No. 663 7036, released Mar. 8, 1966. No. 16. Advertising by a manufacturer in a customer-connected trade publication.

The Federal Trade Commission recently rendered an advisory opinion dealing with the proposed advertising by a manufacturer of drug items in a drug trade catalogue published by an organization of wholesale druggists.

The manufacturer was informed that several months previously the Commission had approved the organization s proposed plan of reorganization of the publication which provided that (1) the publication is to be published by a separate corporate subsidiary, (2) the advertising rates to be charged wi1 be no higher than necessary to realize a normal profit for such a publication, and (3) in any event, the profits resulting from the publication will be donated annually to a charitable organization. Unless and until the Commission announces the rescission of such approval " the advisory opinion stated it wi1 not take the position that any supplier s payment for advertising in * * * (the publication in questions constitutes a payment indirectly to the wholesaler members " " " (of the organizations, subject to Section 2 (d) of the amended Clayton Act. However, the Commission pointed out that it wi1 continue to regard a supplier who advertises in a publicati011 such as this as in effect furnishing, through the intermediary of the publisher, a promotional service to those wholesalers who make use of the publication. In order to assure compliance with Section 2 (e) of the amended Clayton Act, the supplier should ascertain whether in a practical business sense the publication is available for use by all of his wholesaler customers who are in competition with the wholesaler customers who do in fact use it; if it is not so available for use by some customers, the supplier must offer those customers a reasonable alteI'ative. " (File No. 663 7007, released Mar. 16, 1966.

; ;

ADVISORY OPI:-ION DIGESTS 1205 for a flockedNo. 17. Use of descriptions "velvet" and "suede" fabrie.

A recent Federal Trade Commission advisory opinion informed a manufacturer that the unmodified terms "velvet" and "suede could not properly be used to describe a flocked fabric. The manufacturer had described the material in question as one formed of microcut flock fibers upstanding on end and adhered to a suitable backing. The resulting fabric, it was said, has the appearance and feel of velvet and suede. The Commission believes the consuming public understands the unmodified term "suede" to connote leather and the unmodified term "velvet" to connote, among other things, a particular kind of warp pile fabric.

The fabric in question, therefore, may properly be designated fabric" oronly as "suede fabric suede cloth" velvet-like velvet-like cloth" or by words of similar import. The expressions sueded iabric slleded cloth" velveted iabric" or "velveted cloth" or words of similar import are also unobjectionab1e. (File No. 663 7040, released Mar. 22, 1966.

No. IS. Exclusive franchise arrangements. A concern proposing to establish a service in principal American cities through exclusive franchises was recently advised that, with two exceptions, the Federal Trade Commission has no objections to the program as now proposed by its exclusive licease agreement.

The first exception involved the contractual provision requiring the licensees to purchase their equipment, supplies and services through a central procurement offce operated by the licensor. On the facts which you have furnished us, we are not able to make a determination as to the reasonableness" of this requirement, the Commission said. "We c,mnot determine, for example which of the various products subject to that clause require such a degree of uniformity as to justify such a central procurement obligation. Similarly, as to those products where uniformity might be necessary, we cannot determine whether it could not be achieved by specifications or by some other less restrictive means than that provided for * * * . Accordingly, we cannot give you any opinion as to the lawfulness or unlawfulness of this provision.

The other exception noted in the advisory opinion concerned the article of the agreement providing that after termination , , the licensee may not, for a period of three years, and without geographic limitatjoll, engage in business in "similar fields, The Commission said While the duration and geographic scope of this article are, in our view, reasonable, the term ' similar fields' is so general and ambiguous that, unless clarified and reasonably limited, it might impose an unreasonable restraint on the licensee.

The licensor was cautioned by the Commission With respect to the agreement as a whole, you should bear in mind that the legality of any franchise system depends to a large extent upon the manner in which such agreements are implemented. If apparently reasonable reservations of rights by the licensor are in practice administered in an unreasonable manner so as to unfairly encroach upon the freedom of the licensees, an agreement which is legal on its face can become megal in effect, " (File No. 6637004, released Mar. 23, 1966.

No. 19. Advertising promotions addressed to new mothers. In a recent Advisory Opinion announced today the Federal Trade Commission informed an advertising agency that the Plan described below would not violate Commission administered law.

The Plan Having first made arrangements with suppliers, not retailers an advertising agency proposes to mad to new mothers, whose names would be obtained from public sources, an envelope containing a variety of "savings " coupons advertising products such as baby foods, powder, soap, lotions and the like. By redeeming the coupons at any stocking retail outlet of her choice, the mother would save five or six cents on a purchase of the advertised product. A line might appear on the cover of the envelope calling attention to the fact that it contains a coupon for an advertiser s product but no part of the mailing would mention the name of, or contain any coupons advertising "house brands" of, any particular outlet at which a coupon might be redeemed.

It is the Commission s view that advertisers participating in such a plan would not specifically, or implicitly, be furnishing promotional assistance to a particular outlet from which the advertiser s products could be obtained by the new mother. An advertiser in interstate commerce who offers promotional assistance to pa,.ticular outlets, specifically or implicitly, for his ADVISORY OPINION DIGESTS 1207 prcducts is required under the laws administered by the Commission to make the offer to each of his competing customers so that the assistance is realistically available to each of them on proportionally equal terms.

The Commission s Guides for Advertising Allowances discuss the requirements for promotional assistance plans in considerable detail and wil be of assistance to persons contemplating their use. Copies are available from the Secretary, Federal Trade Commission, Washington, D.C. 20580. (File ;\0. 663 5032, released Mar. 24 1966.

No. 20. Necessity to disclose foreign origin of strain release device if servomotor is labeled as "Made in U. The Commission has issued an advisory opinion in which advised a manufacturer that it would be improper to label its servomotors as "Made in U. " since that would constitute an affrmative representation they were entirely made in this country, which is not the fact, unless the label also discloses in a clear and conspicuous manner that the strain release device is imported from West Germany.

The Commission s opinion was rendered in response to a factual situation where all components of the servomotor, except the strain release device, are of domestic origin. The strain release device is to be imported in an assembled state from West Germany, and it represents approximately 5 percent of the total cost of all the components. The servomotors wil be s01d in the United States and in foreign countries.

In its opinion the Commission also took the position that the disclosure requirement would also be applicable, even though the manufacturer decided at a later date to import the strain release device unassembled and assemble it here in the United States. Finally, the Commission s opinion noted that it would have authority to impose the same requirement in connection with the sale of servomotors in foreign countries, provided they were being sold in competition with other American manufacturers. (File No. 663 7041, released Mar. 29 1966. No. 21. "Free" offer of merchandise.

The Federal Trade Commission recently rendered an advisory opinion on a retailer s proposal to offer a stereo record player for "absolutely nothing" with the purchase of one stereo record a week for fifty weeks.

The concern had asserted that it does not retail the record , , player by itself for less than $249 and that the records are high quality stereo records which it retail1s for $4.98 and it does not know of anyone else selling them for less. Thus, it stated, the customer would pay $249 for the record player and the records which is the price normally paid for the set alone. The Commission informed the retailer Since the matter you have presented is wholly dependent upon the facts, it is diffcult to render a categorical opinion. When a seller offers to supply one article 'free ' or ' at no extra cost ' or for ' absolutely nothing in conj function with the purchase of another article, he is thereby representing to prospective customers that the article required to be purchased is being sold at no more than the price at which it is usually sold in substantial quantities. You wi1 note that we are not dealing here with abstract evaluations, but rather with concrete sellng prices.

Thus, if the records which are to be offered those who accept this offer are currently being sold in substantial quantities for $4. , there could be no objection to the offer on that score. On the other hand, if such records are what is known in the trade as 'low cost cut-outs,' ' budget lines ' etc. , which normally command a much lower selling price, the offer would be deceptive even though the records may be listed at $4. 98 for advertising or preticketing purposes. In that event, instead of purchasing current records at the prevailing market price and receiving a record player at no extra cost, the purchaser would be paying a high, nationally advertised, price for records worth a fraction of that value, the substantial markup thereby defraying the cost of the record player.

Aithough the sample of the promotion letter you furnished contains no representation of the value of the record player, the same general principles would apply if such representations are made. Thus, to avoid any basis for deception, representations of price or value of the record player must reflect the actual1 or prevailing market price at which sales of that product are currently being made in substantial quantities. The Commission also noted that the promotion letter states Have you ever been called 'Lucky ? Well Congratu1ations and urges the customer to "come in before the expiration date. , in fact/' the advisory opinion commented the offer is available to more than a few selected persons, or continues for an extended or indefinite period of time, then the representations in the promotion letter would be false and deceptive. " (File No. 6637008, released Mar. 29, 1966.

, , ADVISORY OPINION DIGESTS 1209 No. 22. Impropriety of description "Made in U. " for kit with substantial amount of foreign components. A recent advisory opinion made public today by the Federal Trade Commission notified a marketer of toys that it would not be permissible to use the labeling description "Made in U. for a tool kit containing two Japanese components. The kits wiu contain 20 items, 18 of American origin and 2 imported from Japan which wiu represent 16 percent of the total value of the entire kit.

The Commission advised that "the claim Made in U. A.' would constitute an affrmative representation that the entire kit was of domestic origin. Since a substantial portion of the components therein would be of foreign origin, the Commission is of the opinion that it would be improper to label the kits as Made in U. A.''' (File No. 653 7062 , released Mar. 30, 1966. No. 23. Establishment of buying corporation by broker. An advisory opinion rendered recently by the Federal Trade Commission notified a broker-distributor of fresh fruits and vegetables that either of his proposed alternative plans to establish a buying corporation would involve grave risk of ilegality. The businessman had inquired whether or not under the Perishab1e Agricultural Commodities Act and FTC 1aw he may lawfully:

(1) establish a corporation as an exclusive buying company for a purchaser for resale, this corporation to buy and be billed in its own name. The purchaser for resale would own one or more shares of the common stock of the buying company and would participate in the brokerage received by that company, or (2) establish a corporation as above for the above described purposes, the difference being that shippers would directly invoice and be paid by the purchaser for resale rather than the proposed corporation.

The Commission advised him that it had no comment on the Perishable Agricultural Commodities Act because it does not administer this 1aw.

The immediately applicable statute is " continued the advisory opinion as you know, Section 2 (c) of the Clayton Act as amended by the Robinson-Patman Act, which makes unlawful the payment or receipt of brokerage or allowances in jieu thereof in certain commercial contexts.

In the Commission s view, either of the plans you propose if adopted, would carry with them grave risk that the statute wi1 be violated.

Absent any indication to the contrary, they appear to amount merely to a means whereby both the letter and the spirit of the statute are to be avoided. " (File No. 663 7002, released Apr. 1 1966.

No. 24. Food store promotional plan.

An advisory opinion made public today by the Federal Trade Commi sion informed a company of the "very serious possibi1ity" that a proposed promotional plan would subject participating food supplier advertisers to a charge of law violation. The plan involved the distribution of reprints of advertisements to the public through retail food stores, the cost of the reprints to be shared by participating suppliers. No mention would be made of any specific retailer in the advertising and 10 000 000 reprints would be offered at no cost. Each retailer would receive the number requested provided the total ordered did not exceed this available supply. If the orders exceeded 10 000,000, this number would be divided by the total number of check stands in stores requesting copies to determine how many each store would receive.

It appears, the FTC's advisory opinion stated, "that no problem would arise under the laws administered by this Commission unless and until the requests for reprints exceed the available supply of 10 000 000. In such event, it is doubtful that the basis chosen for distribution of the reprints among competing retailers would result in the proportional equality required the 1aw (Section 2 (e) of the Robinson-Patman Actj. While the Act does not specify any single standard for proportionalizing merchandising services and facilities, it does not appear that the required result wi1 be achieved when the standard selected is the number of checkstands in the stores requesting copies. This standard bears no ascertainable relation to the volume of business which any of the retailers involved might conduct with any of the participating suppliers. In fact, it could result in a situation in which retailers who have a small volume with the participating suppliers would receive more reprints than competing retailers with a much larger volume solely because of a greater number of checkstands. We cannot conclude then that the plan as it is presently proposed would necessarily result in the proportionally equal treatment of a1l competing customers that the law requires. Consequently, there is a very serious possibility ADVISORY OPINION DIGESTS 1211 a charge ofthat it would subject the participating suppliers to (Fileviolation of Section 2 (e) of the Robinson-Patman Act." No. 633 7018, released Apr. 1 , 1966.

Tripartite Promotional Program Amendment' July 11, 1968 This is in reference to the above-numbered matter and to the Commission s advisory opinion dated April 1, 1966 in which you were advised as to the Commission s view with respect to the proposed promotional1 program there involved. The Commission has been reexamining this and other advisory opinions rendered in recent years concerning three-party (supplier, promoter, customer) promotional assistance plans which have received its fuU or partial approval and has decided to modify this opinion.

This step is necessary because information which has subsequently come to the Commission s attention in connection with many such opinions which have been issued indicates that in some instances the customers of the participating suppliers have not been adequately advised as to the availabilty of the opporadvised astunity to participate in these plans or have not been to the alternatives which are supposed to be available to those of eoursewho are unable to use the basic plan. This step is, absolutely essential to the ilegal operation of such proposal1 , for a promotional assistance plan cannot be said to be available to customers who do not know of its existence or who do not understand its terms. It is not the Commission s desire at this time to rescind any of the opinions which have been issued, but, in view of these developments, it is the Commission s view that, as a condition of its continuea' appfoval of your plan, reasonable steps must be taken to see that the required notice is given to each customer who is entitled to participate, and that participants in your plan are put on notice of their obligations under the laws administered by the Commission.

Accordingly, the advisory opinion in the above-numbered matter is hereby modified to provide that: (a) The promoter must make it clear to each supplier and each retailer that even though an intermediary is employed in this plan, it remains the supplier s responsibilty to take aU reasonable steps so that each of the supplier s customers who '"To the following Advisory Opillion Digests: No. 24 , p. 1210; No. 34, p. 1216: No. 35, p. 1217; No. 50 , p. 1226; No. 51, p. 1227; No. 52., p. 1228: No. 53, 1229; No. 56, p. 1231; No. , p. 1236.

, compete with one another in resellng his products is offered either an opportunity to participate in the promotional1 assistance plan or proportionally equal terms or a suitable alternative if the customer is unable as a practical matter to participate in the plan; if not, the supplier, the retailer and the promoter participating in the plan may be acting in violation of Section 2 (d) or (e) of the Clayton Act and/or Section 5 of the Federal Trade Commission Act.

(b) You are directed to submit a written report to the Commission within six months from the receipt of this letter indicating the manner and extent of your compliance with the requirement out1ned in the preceding paragraphs. No. 25. Impropriety of description "14 K" for item not entirely gold.

The Federal Trade Commission recently rendered an advisory opinion that it is improper to mark or describe an earring as having a "14 K post" when the post is not entirely gold. Under Rule 22 (c) (1) of the Trade Practice Rules for the Jewelry Industry, " the Commission advised an article may not be so designated unless it is ' composed throughout of an alloy of gold' ; since this article will contain substantial e1ectrop1atings of base metals, it plainly is not composed throughout of g01d. The requesting party had stated that the earring in question would be constructed as follows:

1. The ornamental front part would be basically brass, but no quality claim is contemplated as to this part of the article. 2. The front part is attached to a post made for penetration of pierced ears and held in place by a clutch type back made basicaly of brass. "'0 quality claim for the clutch type back is contemplated.

3. The post wil he 14 karat gold. After being soldered to the ornamental front the entire article wil be electroplated with copper, then electroplated with nickel, and finally electroplated with high karat gold. (File 1\0. 663 7003, released Apr. 2, 1966. No. 26. Paying advertising allowances based upon certain percentage of purchases from the supplier.

The Commission announced today it had given approval to a proposed promotional plan which called for the payment of advertising allowances to a1l competing customers based upon 5 percent of the customer s annual dollar volume of purchases from the supplier paying the allowance. Its approval was granted ADVISORY OPINION DIGESTS 1213 after it had pointed out several steps which must be followed in the implementation of the plan.

Under the terms of the plan which is designed to stimulate the sale of couch throws, the customer must place local advertisements promoting the sale of said products before he is entitled to the advertising allowance. Noting that no single way to proportionalize is prescribed by law and that any method which treats competing customers on proportionally equal terms may be utilized, the Commission pointed out that one of the most widely used and acceptable methods is to base the payments on the dollar volume of goods purchased during a specified period of time. Since that is precisely what the party requesting the advisory opinion proposes to do, namely, make advertising payments which amount to 5 percent of the customer s annual dollar volume of purchases of couch throws, the Commission gave its approval to the plan. (File No. 663 7046, released Apr. 8, 1966. No. 27. Affrmative misrepresentation of domestic origin. The Commission was requested to advise whether or not it would be permissible to label boxes containing toy sets as "Made in U. " when some of the parts or components inside the box were imported.

The Commission advised that it would not be proper to label these boxes as made in U.S.A. since that would constitute an affrmative representation that the contents were entirely made in this country, which is not the fact, unless, of course, the label also discloses in a clear and conspicuous manner the fact that certain of the contents are imported. (File No. 663 7042, released Apr. 8, 1966.

No. 28. Selection of customers by a single trader. A recent Federal Trade Commission advisory opinion informed a publisher that no actionable trade restraints appeared to be involved in his proposal to select the customers to whom he wil sell a menu and recipe pamphlet.

As explained by the requesting party, the pamphlet wi1 published weekly and will contain authoritative information on buying, preparing and serving food products. It will be s01d to selected food chains operating fewer than 500 retail outlets whose general trading areas do not overlap. Copies of the pamphlet wi1 be given free to customers of the food chains as a promotional1 device. The pamphlet wil not mention any products by brand name, and wil not be available as a medium for advertising by any supplier or association of suppliers, nor wil , 1214 FEDERAL TRADE COMMISSIOK DECISIONS any of them contribute financially towards its publication or distribution.

The Commission pointed out that the antitrust laws do not restrict the right of a seller who does not have monopoly power to select those customers to whom he wil sell his product, provided that the right is not exercised for the purpose of monop01ization or is otherwise Jinked to an unlawful course of conduct in restraint of trade. (FiJe No. 663 7045, released Apr. 12, 1966. No. 29. Affrmative domestic origin representation on products containing imported components.

An American concern proposing to market shaving brushes containing plastic handles imported from England has been informed by the Federal Trade Commission that it wil not be necessary to disclose the English origin of the handles, assuming there is no affrmative representation they are domestic. The Commission added that its advisory opinion, of course does not relieve one from complying with any applicable statutes or regulations administered by the Bureau of Customs. The company intends to insert and cement the bristle into the imported handles here in the United States. The cost of the completed brush is $2.25 and the cost of the imported handle wil be 359. (FiJe No. 663 7006, released Apr. 12, 1966. No. 30. Origin disclosure on package for Canadian-made automotive part.

An American concern has been advised of the Federal Trade Commission s disapproval of its proposal to use a modified version of its present cardboard containers to distribute in this country a replacement automotive part to be manufactured in Canada. The advisory opinion noted that the part wil be marked Made in Canada" but that, under normal conditions, the ultimate purchaser is not likely to observe this marking prior to purchase. On the cardboard container appear the company s American address plus a legend which it proposes to obliterate Iade in USA.

The Commission s advice was that permanent obJiteration of this legend "on the outside of the cardboard containers would not be suffcient since the presence of your company s address on the container may lead many persons to believe that the * * (productsJ were manufactured in the United States. Thus it would also be necessary to disclose the Canadian origin on the container in a clear and conspicuous manner. " (FiJe No. 663 7001, released Apr. 13, 1966.

, ADVISORY OPINION DIGESTS 1215 No. 31. Rebate pricing plan.

The Federal Trade Commission has informed a photoengraving company that its proposed rebate pricing plan granting a ten percent discount to all purchasers to whom it provides photoengraved plates through advertising agencies wm not violate Section 2 (a) of the amended Clayton Act. As it understands the plan, the Commission said, the concern wm offer a direct year-end across-the-board rebate of ten percent of the dollar value of purchases of photoengraved plates to aU purchasers to whom it provides photoengraved plates through advertising agencies. The rebate is to be contingent upon the advertisers specifying the use of the engraver s facilities to their respective advertising agencies. The concern wm provide photoengraved plates to the extent of its facilities to all purchasers classified as buying photoengraved plates through advertising agencies, and will affrmatively disclose and offer this rebate to all customers and prospective customers in this classification. (File No. 6337006, released Apr. 13, 1966. No. 32. Advertising by manufacturer planning to make both wholesale and direct mail sales.

The Federal Trade Commission has made public an advisory opinion on whether a supplier selling by direct mail, to a retail chain and to individual retailers, all of whom are located 10 or more miles from any chain outlet, may properly feature only his own direct mail operations and his chain customer in his national advertising.

The applicant specifically queried as to whether or not the 10 miles or more distance between the individual retailers and the chain outlets negates the possibility of competition between them. As a general rule " the Commission said a supplier s ordinary unilateral advertising expenditures are not subject to the Clayton Act, as amended by the Robinson-Patman Act. In consequence a supplier s advertising which makes clear the direct mail availability of a particular item through the supplier, without more would raise no questions under the Act.

Whether or not the chain outlets and the other retailers supplied are competitive, however, is a matter of fact to be determined by the facts. A particular distance between them is not determinative of whether they do or do not compete. If they in fact compete then under the statute the advantages to be accrued from the supplier s advertising program, if accorded at all, must , be proportionally accorded. If they do not in fact compete, then otherwise, Under the circumstances, the Commission concluded it is not practicable" to answer that part of the applicant's question dealing with mention of chain store availability in his national advertising. (File No. 633 7008, released Apr. 15, 1966. No. 33. Affrmative misrepresentation of domestic origin. The Federal Trade Commission has rendered an advisory opinion that i would not be permissible to label dental X-ray film as "Made in U. " if it consists in part of a raw safety base film imported from a foreign country, the remaining ingredients to be made in the United States.

The Commission s advice was that the imported raw safety base film "is the principal1 and essential component of the finished product. Without it there can be no X-ray picture." Thc manufacturing and packaging processes described in the letter from the requesting party "would not change the basic structure or composition of the imported film to such an extent that its identity would be lost. It is concluded, therefore, that it would not be proper under Section 5 of the Federal Trade Commission Act to label the dental X-ray film as 'Made in U. A.''' (File No. 6337014, released Apr. 15, 1966.

:So. 34. Promotional assistance; Lse of sales message announcing device in retail stores.

In an advisory opinion made public today the Federal Trade Commission gave qualified clearance to the proposal1 by a manufacturer of an electronic device to offer selected manufacturers an opportunity to present a sales message to the public in retail stores by means of the device.

The proposed plan provides that any manufacturer contracting for use of this device wil supply its manufacturer with a list of a1l retailers of his products in a geographic area to be selected by him. The device producer, upon receiving such list, will within a reasonable time effectively offer all retailers located in the selected geographic area an opportunity to avail themselves of the use of the electronic device at equal1 rates datermined by the number of units to be installed in a particular location. The advisory opinion called attention to the admonition in the FTC' s Guides for Advertising Allowances that a seller must be careful not to discriminate against customers located on the ADVISORY OPI:-ION DIGESTS 1217 fringes but outside the area selected for the special1 promotion since they may be actually competing with those participating. With this caveat, the Commission advised, "the above-outlined plan wil not offend Section 2 (e) of the Clayton Act, as amended by the Robinson-Patman Act. " ':' * Since under the facts available to us we have no way of knowing whether or not fringe area competing customers wil exist in the actual operation of your proposed plan we expressly exclude this point from our opinion that your proposed plan is unobjectionable. " (File 6337022, released Apr. 23, 1966.

Modified July 11 1968, p. 1211 herein.

No. 35. Promotional plan in selected areas. A sales promotion company has been advised by the Federal Trade Commission that with one reservation its proposed promotional plan is not violative of 1aw.

Under the plan, the promoter wil sell to food processors booklets containing recipes featuring the processors' products together with additional promotional and advertising materials. The promoter wi1 directly or indirectly give all food retailers within a selected geographic area an effective opportunity to obtain a continuing supply of such booklets plus file boxes and a display rack at what amounts to administrative costs. With one reservation " the FTC's advisory opinion stated, the plan does not appear to offend the provisions of Section 2 (e) of the Clayton Act, as amended by the Robinson-Patman Act. From the facts presented, however, it is impossible to determine the nature and extent of the competition, if any, which may exist between retailers close to, but on different sides of, the boundaries of the selected geographic area. As to this particular point therefore, we withhold our opinion. Noting that the plan may be extended to manufacturers of household and housekeeping items other than food, the Commission said it is impracticable to provide an opinion on this point because "the nature, importance and extent of competition between food retailers and non-food retailers sellng the same items is unknown to us and cannot readily be ascertained. " (File No. 6337032, released Apr. 23, 1966.

Modified July 11 1968, p. 1211 herein.

1\ 0. 36. Functional discounts, meeting competition. The Federal Trade Commission announced today that it has recently answered inquiries from a manufacturer of items used in the automotive, trucking and marine trades regarding functional discounts and meeting competition. The Commission advised the inquirer that: It may sell to fleet truck operators at regular jobber prices but that competing truck fleet operators must be accorded nondiscriminatory treatment.

It might establish a "specialized" classification for jobbers sellng to fleet operators-entitling such jobbers to discounts which the manufacturer s distributors are afforded-but that it may not discriminate against any of its other resale customers which compete with the "specialized" jobbers. It could offer such discounts to meet the lawful price of a competitor provided the offer is in response to an individual1 competitive situation rather than in response to a pricing system. (File No. 633 7030, released Apr. 26, 1966. No. 37. Affrmative Misrepresentation of Domestic Origin. The Commission was requested to advise whether or not it would be permissible to describe as "Made in U. " imported black angle iron which had been cleaned in this country and then ga1vanized to required specifications by means of submerging in hot molten zinc, the finished product to be known as galvanized angle iron.

The Commission advised that it would not be proper to describe the finished galvanized angle iron as "Made in U. " since that would constitute an affrmative representation that the entire product was made in this country, which is not the fact, unless, of course, the fact is also disclosed in a clear and conspicuous manner that the black angle iron is imported. (File No. 6637047, released Apr. 29, 1966.

No. 38. Promotional allowance program.

The Federal Trade Commission announced today that it has advised a men s clothing manufacturer that a proposed twopart promotional allowance program "would satisfy the requirements of the law " but that a subsequently proposed modification of one part of the plan "would be clearly i1ega!." Under one part of the originally proposed plan-participation in cooperative advertising allowances-the manufacturer would offer an advertising allowance of 2 percent of net sales at regular prices up to a maximum of 50 percent of the actual1 cost of advertising its products in newspapers, magazines and other printed media. New accounts and customers of Jess than one , ADVISORY OPINION DIGESTS 1219 year would be offered the same allowance based upon their first quarter s purchases. If this offer is made known and offered to a11 competing customers, the Commission said, this part of the plan would not violate the law.

Under the other part of the plan-participation in sales or promotions-the manufacturer would make available to a11 customers a total of 20 percent of their net purchases of basic products at regular prices at a special reduced price of $4 off the net price, which the customer may accept at one time or in two installments during the year for sales in January and/or June. In other words, if a customer purchased $1 000 worth of such products during the year at regular prices, he would be entitled to purchase 20 percent or $200 worth of this product at the stated reduction for sales purposes during January and/or June. Likewise, this would not violate the law, the Commission said. However, subsequent to Commission approval of the plan, the manufacturer proposed a modification of its cooperative advertising program. The concern proposed to increase its advertising payments by offering a 3 percent allowance to accounts whose yearly volume is $50 000 minimum, a 4 percent allowance to accounts whose yearly volume is $75,000 minimum and 5 percent to those whose yearly volume is $100 000 and over. To receive the increased payment, the customer would have to match the allowance and use either the manufacturer s label or that label in combination.

The Commission said that "under no circumstances can a program which pays a higher percentage to larger volume buyers when buyers in smaller quantities receive smaller percentage of net sales be held to meet the proportionally equal requirement of Section 2 (d) of the Chyton Act, as amended by the Robinson- Patman Act. Substantially identical1 programs have previously been held i1ega!." (File No. 633 7021, released Apr. 29, 1966. No. 39. Cooperative advertising program. The Federal Trade Commission announced today that it has advised a manufacturer of women s wear that its proposed cooperative advertising allowance program and a furnishing of services or facilities if in practice worked out as presented, would be unobjectionab1e under Sections 2(d) and (e) of the Clayton Act, as amended by the Robinson-Patman Act. Under the supplier s first offer, a11 vendees (who are to be effectively informed of the offer) wi1 be paid, on request and on proof made, for one-half their cost of cooperative advertising. , Supplier s contribution at anyone time wi1 be Jimited to, and wi1 amount to, 10 percent of the dollar value of a single sale to a requesting vendee. Over a year s time, however, supplier contribution is to be restricted to 2. 5 percent of the dollar value of a vendee s annual purchases. Any vendee who has received in excess of this amount wi1 be biled therefor and a refund wi1 be required.

The Commission cautioned the manufacturer, however that should one or more, but not al1, competing vendees fail to refund an excess allowance as determined by yom plan, Robinson-Patman Act questions would arise, Upon supplier s second offer, statement enclosures wi1 be provided, the number furnished being based on the number of items purchased by a vendee. Enclosures wi1 be imprinted for those entitled to quantities of 5, 000 or more; unimprinted enclosures wi1 be furnished to those entitled to fewer than 5,000 enclosures. (File No. 633 6020, released April. 30, 1966. No. 40. . Sales promotion plan a lottery. The Federal Trade Commission announced today that it has advised processor of a grocery item that its proposed sales promotion plan would constitute a lottery and its use would be actionable under Section 5 of the FTC Act. Under the plan, the concern proposed to insert at random either certificates of no value or of varying redeemable cash values in containers of its product to be sold at retail. At the time of retail sale, equivalent certificates in equal proportions would be made available at wholesale distributors to the general public without cost or obligation.

The Commission said that "In our view the existence of the free certificates will not cure the diffculty presented by the transactions at the retail level which, standing alone, dearly involve a lottery in the sale of merchandise of a kind often heretofore made subject to a Commission order. " (File No. 633 7029, released Apr. 30, 1966.

No. 41. Additional discount to mail order seller of paperback books, A seller of paperback books planning to obtain additional1 discounts from publishers for selling through a mail order catalogue has been advised of the possible law violations involved in the plan and that the Federal Trade Commission is unable to give him an unqualified opinion on its legality. , ADVISORY OPINION DIGESTS 1221 The Commission pointed out that any plan which results in discriminations in price or allowances between different resellers immediately raises problems of possible violation of the Robinson- Patman Act, and that on the basis of the information supplied there appear to be two possible ways of viewing this plan. Firstly, the Commission said If the plan involves simply the granting by the publishers of a lower price to you than to their other customers, its legality from the publishers' point of view would be governed by Section 2 (a) of the Robinson-Patman Act which prohibits discriminations in price which may adversely affect competition. In spite of the fact that your sales would not be made through the same channels of distribution as those of other purchasers of paperback books, it seems likely that you would nevertheless compete with these purchasers to some extent, and that this competition might be lessened by the proposed price discriminations, in violation of Section 2 (a). Although price discriminations otherwise unlawful under Section 2 (a) may be justified by cost savings on the part of the seller, the information which you have submitted does not indicate the presence of such 'cost justification' in your plan. If the discounts granted to you by sellers should violate Section 2(a), your knowing inducement or receipt of such discriminations would also violate Section 2 (f) of the Act.

Continuing, the Commission said the problem would be somewhat different if the discounts granted to the requesting party were considered as promotional or advertising allowances for his listing of the publishers' books in his catalogue. Granting or receiving such allowances would be unlawful " they were not made available on proportionally equal terms to competing customers " the Commission advised. "Thus, if your suppliers of paperback books granted proportional advertising or promotional allowances or facilities, such as cooperative advertising allowances, display racks and the like, to their other purchasers, their granting to you of an allowance for the listing of their books in your catalogue would not be unlawful." (File No. 633 7041, released May 10, 1966.

No. 42. Advertising service disclosing where manufacturers products are sold.

The Federal Trade Commission today made public its advice that a plan to furnish manufacturers a new form of advertising service disclosing where their products are sold would not be ilegal.

, Under this proposed plan, a manufacturer wil publish an advertisement in a national magazine, and wil furnish to the proposed corporation represented by the requesting party a complete listing of an retailers sening the advertised product, classified according to the major shopping areas throughout the country. The advertisement wil contain a descriptive symbol for the proposed service, with a reference to the page in the same publication containing a telephone number list, also classified according to the major shopping areas throughout the country. Each answering service included in this list wil be equipped by the proposed corporation with the manufacturer list of his retailers in that trade area, which wil be given to any consumer who reads the advertisement and cans the number provided to learn where he can purchase the product. The cost of the entire service win be borne by the manufacturer. The FTC's advisory opinion said Since it appears that any potential customer callng wil be furnished with the names and addresses of an dealers handling a particular product in a trade area, it is our opinion that the proposed plan described would not subject participating manufacturers or your client to a charge of violating the 1aw. We should caution, however, that great care must be exercised in defining the boundaries of the various trade areas into which the country is to be divided so as not to discriminate against customers located on the fringes but outside the area served by the answering service, since they may be in actual competition with those who are within the area and thus receive the benefit of the service. " (File No. 633 7045, released May 10 1966.

No. 43. Goods of like grade and quality. The Federal Trade Commission announced today that it had advised a manufacturer producing iron castings to special order of its customers that such goods are not of like grade and quality within the meaning of that section of the amended Clayton Act prohibiting price discriminations.

The Commission was informed by the manufacturer that: Its castings are produced in accordance with individual1 customer specifications;

It submits samples to the customer for approval; The customer further processes the casting prior to use; and Castings are not shipped off the shelf but are produced to order with several weeks lead time. (File No. 633 7035, released May 11 , 1966.

ADVISORY OPINION DIGESTS 1223 No. 44. Agreement among retailers for uniform store hours. A retail dealers association of a certain city of substantial size has been advised that a proposed agreement among downtown retailers to establish uniform store hours would not, under the circumstances presented, be in violation of any laws administered by the Federal Trade Commission.

to 5: 30 The stated existing downtown shopping hours are 9 a.m. m. with Monday and some Thursday hours from 9 a.m. to 9 p.m. The proposed change would make the hours from 11 a. to 8 p.m. weekdays and 9 a.m. to 5: 30 p.m. Saturday. The basic reason advanced for the proposed change in hours is to place the downtown retailers in a more effective competitive position with suburban shopping centers by establishing more convenient shopping hours for offce workers and by enabling spouses to meet for dinner and shop. Any business establishment wil have the free choice as to wehther or not to conform to the proposed change in shopping hours. (File No. 633 7037, released May 11, 1966.

No. 45. Merchandising by means of a chance or gaming device. The Commission was recently requested to furnish an advisory opinion with respect to a proposal to distribute prizes to users of trading stamp books. Under this proposal, distributors of trading stamps would receive from the stamp company not only trading stamps that are to be pasted in the books but the books as well. The books would bear a seal which when broken after the book is completely filled and presented to the store manager would reveal1 a prize ranging from $1.50 to $100.00. Books carrying prizes larger than $1.50 would represent approximately 10 percent of the total books distributed. The stamp user would also have the option of not breaking the seal and receiving $2.00 in cash or $2. 15 in merchandise.

It was contended that of the three essential elements of a lottery, namely, consideration, chance and prize, the first would be missing since merchants would distribute the stamps not only to their customers in proportion to purchases made, as is normal for trading stamp operations, but also to anyone who would register in the merchant's store whether a purchase was made or not. Extensive advertising would inform the general public that they may receive eighty stamps per week by just registering with the merchants without the necessity of making a purchase.

, The Commission advised that it did not need to decide the question of whether or not consideration would exist, so that the proposal could be held to constitute a technical lottery, for it was still of the view that the plan would involve an ilegal effort to sell or dispose of merchandise by means of a chance or gaming device. In the Commission s view, lotteries are not the only method by which the public s gambling instinct may be aroused, for other methods are comprehended within the general concept of merchandising by gambling. This proposal1 appeared to fall into that category, for even though each participant would always receive something of value if he persisted long enough to fill the book with stamps, the amount of his return would vary greatly with his wilingness to "take a chance. " Consequently, the Commission declined to give its approval1 to the proposed plan.

Commissioner Elman did not concur. (FiJe No. 663 7049 , released May 18, 1966.

No. 46. Common sales agency.

The Federal Trade Commission has advised a manufacturers agent that its proposed plan to be the sales agent for a number of producers of the same product involves grave risk of ilegality because one of its stated objectives is marketing stabilization. The mere use of a common sales agency will not, in and of itself, result in a violation of law " the FTC's advisory opinion stated. However, it continued, in view of the requesting party statement that one of the plan s purposes is to stabilize the market it is reasonable to conclude that the use of a common marketing agency by a number of different producers of the same product would inevitably lead to a violation of the Federal Trade Commission Act as well as the Sherman Act. This is especially true when the common agent would be quoting a common price for all the producers he represents. The Commission pointed out it is common experience that any arrangement aimed at stabilizing the market, "even if not initially so designed, has within it the seeds of price fixing, allocation of markets, or restriction of production, all of which are classic antitrust violations. " (File No. 633 7050 , released :v1ay 1966.

No. 47. Leather terms may not be used for nonleather gloves even if true composition is disclosed-manner and place of disclosing foreign origin.

The Federal Trade Commission has made public its advice ,. ,. . , ADVISORY OPINION DIGESTS 1225 to a marketer of gloves that it would be improper to use a leather-connoting description for gloves which in fact contain no leather, even though qualifying language is used to describe their true composition.

Noting that the gloves are to be imported from Japan and the requesting party intends to disclose their origin on the paper bands and box labels, the Commission further advised that to avoid possible deception, disclosure of the Japanese origin must also be made on each pair of gloves by marking or stamping or on a label or tag affxed thereto. This disclosure must be readily visible upon casual inspection of the gloves and of such permanence as to remain on them unti consummation of sale to the ultimate purchaser. (File No. 633 7058, released May 19 1966. No. 48. Legality of licensee and sub-licensee selling to competing jobbers.

An exclusive licensee of a patented article has requested advice from the Federal Trade Commission concerning the legality of his sales and those of a manufacturing sublicensee to competing jobbers.

The licensee proposed to sublicense a manufacturer to produce the article and sell it to its own jobbers. At the same time, the licensee, on his own account, would sell the same article under a different name to his own jobbers. The sublicensee manufacturer would ship direct to customers of the licensee, some of which may be in competition with its own jobbers, and bil the licensee at an agreed price.

The Commission advised that in general, the Robinson-Patman Act "does not apply unless there is a discrimination attributable to the same seller in dealing with different purchasers. Consequently, it said, if the manufacturer, a separate business entity, has and exercises sale and independent control over the prices at which it sells and the licensee has and exercises sole and independent control over the prices at which he sells questions cannot well arise under Section 2 (a) of the Robinson- Patman Act.

However, the Commission pointed out that on the basis of the facts available it is unable to say that the plan "would not violate any of the trade regulation laws. For example, we do not know what, if any, price agreements are contemplated between . (the licensees and the manufacturer or the nature thereof or whether such agreements may hereafter come into being, (File No. 633 7059, released May 19, 1966. , , No. 49. Cooperative advertising plan with no ceilng on suppliers' payments.

A retailer has been advised by the Federal Trade Commission that its proposed standard cooperative advertising agreement with its suppliers is not objectionable. The contemplated agreement states that the supplier (1) agrees to pay a fixed percentage of the requesting retailer s cost of advertising and (2) is offering proportionally equal allowances to the retailer s competitors.

The Commission noted that the plan provides for promotional payments without limitation as to amount and that it is more customary for suppliers to limit their obligation by a percentage of a dealer s purchases.

However, this might be " the advisory opinion said the Commission has concluded that no objection will be raised suppliers decide to eliminate ,. ,. * (thisJ limitation and undertake to pay a stated percentage of all the advertising conducted by their dealers. This presupposes, of course, that the suppliers will make the same offer available to a1l competing customers and that the offer is functional1ly usable by a1l competing customers, The plan, the advisory opinion added does contain features which might conceivably be used to greater advantage by larger retailers. But these prospects appear so remote, the Commission is not inclined to object unless and until future experience should produce presently unexpected evidence that some customers actually received favored treatment. Objection then would be taken only after proper and adequate notice that the plan had not developed as anticipated. " (File No. 633 7060, released May 20 1966.

No. 50. Furnishing and servicing projection equipment in grocery outlets.

A marketer of projection equipment has been advised by the Federal Trade Commission that his proposed plan to lease equipment and furnish associated services to suppliers of grocery products for advertising purposes in grocery outlets would not subject him to a charge of violation of law. Suppliers would lease space from grocery store operator-customers they select. The marketer would prepare advertising of the supplier s product and install and maintain the equipment in the selected stores. He would take no part in the selection of retail stores and would not act as agent or intermediary for the ADVISORY OPINION DIGESTS 1227 suppliers in making the necessary contracts or agreements for the placement of leased projection equipment in the stores. The Commission advised the marketer that his leasing of the projection equipment plus the preparation of advertising material and performance of installation and maintenance services would not subject him "to a charge of violation of Sections 2 (d) or (e) of the Robinson-Patman Amendment to the Clayton Act which sections are set forth in the Commission s Guides for Advertising Allowances.

However, the Commission said that it "should be clearly understood'" " " that participation in this plan by suppliers may involve a violation of Law on their part unless the payments made and the services or facilities furnished, are made available to all competing purchasers in a non-discriminatory manner. (File No. 633 7061 , released Iay 20 1966. Modified July 11, 1968, p. 1211 herein.

No. 51. Discount stamp advertising plan. The Federal Trade Commission has advised that a proposed promotional plan involving the use of discount stamps would not be iJega! if properly implemented.

The requesting party proposes to issue a set of stamps to customers in grocery stores and other types of retail outlets in certain trading areas. The stamps wiJ feature particular brands of products. When forwarded affxed to labels, wrappers or boxtops of the products featured, the requester wiJ send a check to the customer in an amount equal to ten cents for each stamp plus ten cents additional1 if an entire set has been forwarded. Suppliers or products featured would pay the requester for managing the promotion. Grocery store and other operators of retail outlets competing in and on the fringes of the trading areas in which the plan is attempted would be offered the opportunity to participate. To this end, such retail outlet operators would be furnished the stamps, promotional kits and money allowances on the basis of their annual dollar volume of sales. The advisory opinion said it is the Commission s understanding that although the requesting party would concentrate its promotional efforts on operators of grocery stores it would also offer the plan to operators of other types of retail outlets competing in the sale of the products of supplier-advertiser-participants in the promotion and would admonish al1 such supplier-advertiser-participants of their responsibility to accord proportionaly equal treatment to all of their competing customers, whether engaged in grocery retaiJing or other fields. The Commission further assumed that the proposed notices would adequately inform all prospective participants of all details of the offer. The Commission advised that its opinion is that "implementation of the plan as outlined would not be violative of Sections 2 (d) or (e) of the Robinson-Patman Amendment to the Clayton Act. " (FiJe No. 643 7004, released June 1 , 1966. Modified July 11, 1968, p. 1211 herein.

No. 52. Food manufacturer, retailer promotion program. In an advisory opinion, the Federal Trade Commission has informed a promotional concern that its proposed advertising program to be utnized by food manufacturers and retailers would not be in violation of existing law if the program is modified to take into account "exceptions and caveats" pointed out by the Commission.

The promoter proposed to design a number of aisle-end displays, each promoting the name of a food manufacturer and a seasonal recipe incorporating a product of that manufacturer. Displays for twelve participating manufacturers and decorative material would be packaged in a kit (which may be divided into 12 segments) for distribution to retail stores taking part in the program.

According to the plan, each manufacturer would pay a proportionate share of the cost of the program, retailers would bear none of the cost but must agree to provide aisle ends for displays and stack the manufacturers' products, and the number of kits each retailer would receive would be determined by the number of retaij stores each owns.

The Commission advised the promoter, among other things that if all retailers sell the products of all the manufacturers and all can use the entire kit, he would not be required to break down the kit just because a particular retailer' so desired. However, the Commission said, if there are certain customers who do not sell the products of all the manufacturers or who cannot because of space limitations, use the entire kit, then the 1aw would be violated if the promoter insists the retailer take the entire kit or nothing.

After pointing out the requirements concerning notice to all competing customers that the plan is available, the Commission said participating manufacturers would not be obligated to meet the demands for cash by retailers, who could utilize the program ADVISORY OPINION DIGESTS 1229 simply because they refuse the kit or sell products of only one manufacturer.

As to manufacturers requiring signed agreements from retailers who wish to receive the kits, the Commission advised that the law permits manufacturers to require that dealers who are to receive the benefit of such promotions must agree to reasonable display requirements so that the purposes of the promotion may be carried out. However, it noted, retailers desiring less than the full kit could not be expected to sign an agreement which would require them to accept the full display kits. Concerning a manufacturer limiting the program to only one of his products and his responsibility to retailers who handle his products only on a "sporadic basis " the Commission said the law imposes no requirement that a seller must give advertising allowances or services on al1 his products if he elects to accord them on one or more articles. Problems concerning products of like grade and quality which differ in only minor respects or trade names can be avoided if the suppliers include entire product lines and thus avoid fine distinctions between products. As to the second query. the Commission stated that would not be safe to exclude any retailer who was in fact customer of one or more of the manufacturers during the course of this promotion.

The Commission pointed out that if there are some grocery outlets which are too small to use the entire kit-or that part of it which represents all the manufacturers with whom they do business-because of actual space limitations, then some a1ternative must be provided to keep the plan from being one which is tailored primarily for larger retailers. If the plan results in any of the manufacturers furnishing facilties to some customers which are not readily usable by others, the suppliers are likely to find themselves in violation of the 1aw. By furnishing alternative method of participation to the smaller customers such as posters and counter displays, this result can be avoided. (File No. 633 7062, released June 1 , 1966. Modified July 11, 1968, p. 1211 herein.

1\ o. 53. Self-locating shopping guide promotional program. The Federal Trade Commission has advised a sales promotion company that its proposed plan, to furnish self-locating shopping guides to wholesalers for redistribution to their competing retail customers, would not be objectionable provided that smaller retailers are able to obtain proportionally equal treatment. , The Commission noted that some of the aspects of the plan are of interest only to relatively large retailers, and that it appears likely that some, at least, of a participating wholesaler competing customers may be quite small retailers for whom the proposed plan would have litte practical value. The Commission advised that the "statute requires that any services or facilities made available to the larger of two competing customers must be made proportionally available to the smaller.

Assuming the existence of small competing customers, the Commission said it appears clear that if (thej plan is to conform to statutory requirements some provisions should be included therein which would provide for the needs of the smaller customers. " (File No. 633 7064 , released June 2, 1966. Modified July 11, 1968, p. 1211 herein.

No. 54. Promotional assistance; Newsstand display. The Federal Trade Commission recently rendered to the publisher of a magazine a favorable advisory opinion regarding his promotional assistance plan providing basically for payments of 991 per issue, per newsstand and alternatively, at the newsstand operator s option, payment at a rate of 1121 per copy sold, per issue. Payments would be subject to a $75 maximum per issue to any single newsstand operator. Payments would be made quarterly provided the operator had reported daily sales and permanently displayed the magazine in a high traffc location full cover exposed within easy reach of customers. The plan would be offered each calendar quarter by a notice on the magazine cover with details printed on an inside page. Plans such as this come within the purview of Section 2 (d) of the Robinson-Patman amendment to the Clayton Act. Section 2 (d) provides in essence that it is unlawful for a supplier in interstate commerce to offer promotional assistance to his resell1ing customer unless a proportionally equal offer also is made to the customer s competitors who sell the same product. The Commission s Guides for Advertising Allowances discuss the requirements for such promotional assistance Plans in considerable detail and wil be of assistance to persons contemplating their use. Copies of the Guides are available from the Secretary, Federal Trade Commission, Washington, D.C. 20580. (File No. 6637020, released June 11, 1966.

ADVISORY OPINION DIGESTS 1231 No. 55. Dissemination of uniform warranty plans by trade association to its members.

In an advisory opinion announced today the Federal Trade Commission informed a trade association of manufacturers that its dissemination to members of a bulletin outlning two warranty plans and encouraging each member to adopt its own individual warranty would not be violative of any laws administered by the Commission, provided the association uses no coercion for the adoption of either plan. (File No. 633 7063, released June 11 1966.

No. 56. Legality of plan to display signs at newsstands callng attention to advertisements in magazines. An advisory opinion made public today by the Federal Trade Commission informed an advertising company that its plan for display on newsstands of signs relating to specific magazine advertisements will not subject the company itself or participants to adverse action by the Commission, if the plan is carried out as outlined below.

It is proposed that the requesting company will arrange for the display of advertising promotional signs directly below or adjacent to copies of magazines on newsstands in high traffc areas, which wil remain on the newsstand for the same period of time as the magazine. This sign will direct attention to an advertisement which appears in the magazine in question. The cost of the signs wil be borne by the manufacturer or seller of the product advertised, who will also assume the cost of rental payments to the operators of the newsstands for the display of the signs. A1l payments are to be made through the requesting company, which wil act as an intermediary between the advertisers and the newsstands. A1l signs will be of a uniform three and one-half inches in height and of the same width as the magazine involved.

It is understood, the Commission advised the requesting party, that there wil be no business relationship, direct or indirect between you and the magazines involved, other than may be necessary to secure permission to refer to the magazines in your signs; it is further understood that you in no way participate in any price concessions, direct or indirect, made to your advertisers by the magazines as a result of your program. " (File No. 643 7005, released June 16, 1966.

Modified July 11, 1968, p. 1211 herein.

No. 57. Sales promotion plan disapproved-Lottery. An advertising company has been informed by the Federal Trade Commission that implementation of its proposed sales promotion plan would result in several1aw violations. The requesting party explained it would sell paper bags to retail grocery outlets for use in bagging customers' purchases. There would be no variation in price between customers purchasing the same quantity; however, purchase of different quantities would result in different prices. The bags would have advertising of products sold in the store, plus a serial number printed on them. A drawing would be held periodically and the holder of the "lucky number" would win a prize. Advertisersuppliers would pay the requesting company for the advertising and it would make the bags available to any grocery operator wishing to purchase them. Grocery store operators would provide the bags free to customers.

In its advisory opinion the Commission raised the following objections to the plan:

The fact is that competing purchasers of different quantities of the bags would be paying varying prices apparently arrived at on the sole basis of the quantity purchased rather than differences in the cost of manufacture, sale or delivery of the bags. Unless the differences were cost or otherwise justified it likely that implementation of the plan would be violative of Section 2(a) of the amended Clayton Act.

Advertiser-suppliers would be furnishing a service or facilty within the meaning of Section 2 (e) of the same statute to those of their customers purchasing bags from the requesting party, and thus would be under an obligation to provide customers which compete with those buying the bags with a realistically available alternative. "The feasibi1ty of participating advertisersuppliers fulfilling this requirement is believed remote. The "lucky number" feature of the plan would constitute a lottery, since consideration (the customer s patronage), chance (the periodic drawing) and prize (the reward to the "lucky number" holder), make up all the essential elements of a lottery; hence an unfair trade practice violating Section 5 of the FTC Act. (File No. 643 7006 , released June 16, 1966. No. 58. Foreign origin-Toy balloons.

The Commission was recently requested to furnish an advisory opinion concerning the labeling as to origin of toy balloons ADVISORY OPINION DIGESTS 1233 mounted on display cards. The balJoons were to be imported from England mounted on 8"x16" display cards, with either 36 or 72 balJoons to a card, which wil selJ for 5 or 10 per balloon. The card is to be clearly marked as "Made in England " but the individual balJoons wil not be so marked. The Commission advised that if the display card is clearly marked "Made in England " no real purpose would be served by requiring each individual balloon to be similarly marked so long as the ba1100ns are not removed from the card prior to sale. (File No. 663 7051 , released June 17, 1966. No. 59. Disapproval of private group advertising review board. The Federal Trade Commission today announced an advisory opinion disapproving a proposed private group advertising review board to control advertising practices in a particular locality. The requesting party stated that the review board is to consist of not more than 20 representatives of business and trade groups in the area, and its function is to consider comp1paints of violations of advertising standards established by the organization representing such business and trade groups.

Hearing on such complaints are proposed to be held by a panel of 7 or more members of the review board, none of whom shall be in direct competition with the advertiser. This procedure is to be invoked only after other efforts to correct the practice have been exhausted. Decisions on the merits of each case wi1 be made by the panel and shall be considered as setting precedent for succeeding panels. Where an advertiser has been cited by a panel for violating the standards and fails to comply within a specified time, a letter is to be sent to local media requesting them to require the advertiser to comply with the decisions of the panel. Although expressing sympathy with the 1audable motives of the requesting party, the Commission advised that "approval cannot be given the proposed Advertising Review Board in its present form. Long ago the courts recognized that voluntary action to end abuses and to foster fair competitive opportunities were in the public interest and could be even more effective than legal processes. However, the law has also long recognized that this right of businessmen to police themselves is not without limitations and is certainly not a 1license for private groups to employ ilegal methods in the pursuit of desirable objectives. The Commission pointed out that "absolute regulation of a11 advertising practices down to and including the determination of individual1 rights and the imposition of a penalty in the form of interference with the individual's right to advertise . * * is the ultimate authority which can only be exercised pursuant to legislative grant and subject to proper judical review. Were a private group to assert this power for itself it would mean that the judicial process of interpretation and enforcement would be carried on without the carefully developed safeguards which the Jaw normally imposes upon the process. Unlike the government agency and the courts, the only restrictions private bodies are subject to are those restrictions they see fit to impose upon themselves. " (File No. 643 7015, released June 17, 1966. No.-60. Advertising of diamonds as "clear, pure, color. The Federal Trade Commission has advised a jewelry firm proposing to advertise diamonds as "clear, pure color" that a substantial segment of the purchasing public would understand the claim to mean a top grade white (or colorless) diamond and that it should not be used to describe a diamond which shows any color when viewed under normal, north daylight or its equivalent. (File No. 643 7020, released June 18, 1966. No. 61. Improper use of terms such as "gold filled" or "rolled gold plate.

The Federal Trade Commission has informed a marketer of jewelry that it would be improper to use terms such as "goldfilled" or "rolled g01d plate" in describing gold filled jewelry articles which are electroplated with nickel and finished with either gold flash or g01d electroplate.

The Commission said that a purchaser of such an article would not get the type of performance expected from gold filled articles because points of wear would expose the coating of white nickel at a very early stage and the ornamental value would be seriously reduced.

Being electroplated with nickel " the Commission said, the gold filled material would not serve its function and a person buying the article on that basis would not get what he had been led to believe he was getting. In fact, Rule 22(b) (4) of the Trade Practice Rules for the Jewelry Industry specifically contemplates that the surface coating, not the inner portion, be made of 'gold filled' or ' rolled gold plate " (File No. 643 7024, released June 18, 1966.

No. 62. Suppliers and grocery chain exhibition, in-store promotion.

The landlord of an exhibition building has been advised by , ADVISORY OPINION DIGESTS 1235 the Federal Trade Commission that a proposed promotional plan in which suppliers and a grocery chain would lease exhibition display space with the chain also providing in-store promotion of suppliers' displayed products would probably result in violation of Commission administered statutes.

According to the proposed plan, part of the exhibit in the building would be displays provided and maintained by manufacturers, processors and distributors of food products and grocery store items. These exhibitors, the suppliers, may give away samples, take orders for "off premise" delivery and sell at retail. The grocery chain s contract with the landlord would provide that the chain would conduct one-week, chain-wide, in-store promotions of the exhibitors' products; that exhibitors may be required to furnish the chain with materials for the promotion; that the landlord and the chain would cooperate in setting up the exhibitors' displays; and that the chain would have the right to approve only exhibitors whose products are sold in its stores. The Commission advised the landlord that implementation of the plan probably would result in violation of Section 2 (d) and (e) of the Robinson-Patman Amendment to the Clayton Act and Section 5 of the FTC Act unless promotional payments or services were made available to the exhibitor-suppliers' competing customers on proportionally equal terms. The 2 (d) and (e) aspects, the Commission said, stem from the fact that exhibitor-suppliers would be vulnerable to a charge that they were illegally discriminating between their customers in according promotional benefits. The Section 5 aspects involve questions as to whether the chain and the landlord would be inducing a violation of Section 2 (d) by participating exhibitorsuppliers. (File No. 6437022, released June 21 1966. No. 63. Disclosure of terms and conditions in guarantee ad. vertising.

A television station has been advised by the Federal Trade Commission that it would be improper in commercials it produces for local automobile dealers to mention the manufacturer guarantee but to refer viewers to the manufacturer s national advertising for a description of the guarantee s terms. In brief " the Commission s advisory opinion stated the law requires that when a guarantee is mentioned in the advertising of a product al1 the material terms and conditions of the guarantee must be clearly and conspicuously disclosed in the same advertisement. The objective is to avoid the possibility of , a reader or hearer being misled by concluding, erroneously, that the guarantee is broader or affords more protection than is in fact the case, and, obviously, this objective is not attained by a mere reference in the advertisement to the fact that one may ascertain the terms and conditions of the guarantee by looking elsewhere.

The Commission is aware of the fact that the advertising of automobile guarantees may present complications because of the numerous conditions which the guarantees contain. But this factor alone makes the disclosure aU the more important in order to avoid deception of consumers. " (File No. 643 7028, released June 22 1966.

No. 64. Pledge of adherence to FTC trade practice rules as condition to membership in trade association. A trade association proposing to require applicants for membership to certify to it that they are fonowing the Federal Trade Commission s Trade Practice Rules for the industry involved, as a condition of membership, has been advised by the Commission that this would not be iUega1. The association informed the FTC it is aware of the fact that it is not authorized to enforce the 1aw, but that it feels those who do not observe the rules are not operating their businesses in a manner which is strictly in the public interest and therefore should not be eligible for membership. It stated that it contemp1ates no enforcement program beyond requiring the pledge and referral of appropriate cases to the Commission. " the On the basis of the information you have presented FTC' s advisory opinion said the Commission has concluded that the inclusion of this pledge on the application for membership would not, in and of itself, appear to violate any of the laws administered by the Commission. This, of course, assumes that the pledge wil be required of an applicants alike. " (File No. 6437030, released June 22, 1966.

No. 65. Broadcast of suppliers' commercials in retail stores conditionally approved.

In an advisory opinion announced today, the Federal Trade Commission has given conditional approval to the proposal of a promotional concern to arrange for the broadcast of suppliers commercial1s in retail stores.

The concern presently provides-for a monthly charge-re- , ADVISORY OPINION DIGESTS 1237 tailers with a tape player unit, necessary speakers and tapes for retailer controlled in-store background music. The concern proposes to add on the tapes commercial1 messages of various manufacturers who supply products sold by retailers. The commercials wil play at timed intervals. The concern wiu solicit various manufacturers for the commercials on a contract basis, record the messages, retain all money paid by suppliers for the service, and offer the background music"commercial1 tapes and equipment free of charge to all retailers on a nondiscriminatory basis in particular classifications of retailers in each geographic area in which the promoter markets his service. The Commission said the issue here "is whether this particular program is likely to result in the discriminatory furnishing of services or facilities by the manufacturers who might participate. The answer is wholly dependent upon the manner in which it is administered. "

The Commission pointed out that the proposal as submitted would not be subject to objection if (1) all customers entitled to participate are notified of the program s availability, (2) the selection of trade areas and the definition of the same, in fact include all customers competing in the distribution of the products of all participating manufacturers, and (3) the classification of retailers chosen to participate, such as food stores, does not exclude any retailers in another classification who in fact compete in the distribution of the products of the participating manufacturers.

Simply stated " the Commission said the law in this area requires a seiler to treat his customers with fairness, whether in respect to the prices he charges, the allowances he pays, or the services he furnishes. This obj active cannot be achieved by resort to mechanical formulas, but only by constant attention to the prevailng facts in any given situation. What may look fair on the drawing board may be found unfair in the market and, if , the market must prevail. With the reservations above as to actual market conditions, it is the Commission s opinion that this proposal is not otherwise subject to objection. " (File No. 643 7031, released June 25, 1966.

Modified July 11, 1968, p. 1211 herein.

No. 66. Magazine publisher s promotional allowance program approved.

In an advisory opinion announced today, the Federal Com- , mission approved a promotional1 allowance program proposed by the publisher of a magazine.

The publisher intends to grant newsstand operators an allowance of ten cents per copy sold upon their certification that the magazine in question was displayed flat on a magazine stand or full cover vertical in a rack at each checkout position. The publisher wii communicate this offer to magazine retail1ers by printing the display offer on an inner page of the magazine with an appropriate and conspicuous notice or "slug" on the outside cover a1erting the retail1er to the availabilty of the plan details of which may be found on a page specified. Since it appears " the Commission advised that aU newsstand operators handling your publication would be a1erted to the availabilty of the display allowance by reason of the conspicuousness of the ' slug,' it is our opinion that your promotional1 program, so Jong as it is implemented as described, complies ith the requirements of Section 2 (d), amended Clayton Act and newsstand operators receiving payments thereunder would not be liable to a charge of violating the Jaw. In reaching this conclusion the Commission has assumed that the promotional allowance offer wii be repeated in Eke manner from time to time so that its availability wii be made known to newsstand operators who begin selling your magazine subsequent to the date of the initial offer. " (File No. 643 7033, released June 25 J966.

1\0. 67. Functional discount to "premium" book jobbers. The Federal Trade Commission today announced that it has advised a publisher of soft cover books that its proposed planif implemented as outlined-to grant an extra discount to "premium jobbers" would not violate the 1aw. The publisher distributes its books through retailers, wholesalers and book jobbers and grants identical discounts to the latter two who are in competition with each other. According to the plan as submitted to the Commission, the publisher proposes to grant an extra discount to al1 premium jobbers who sell books to institutional customers (savings banks insurance companies, industrial corporations, etc. ) for use as promotion pieces, premiums or prizes on a giveaway basis. To the extent that any premium jobber also sells to the regular trade in competition with other wholesalers and retailers, the publisher will either refuse to fill orders or grant only a normal wholesale discount.

, , ADVISORY OPINION DIGESTS 1239 The proposed extra discount, the Commission advised obviously functional in nature" and whiJe the Clayton Act, as "mended by the Robinson-Patman Act does not mention functional pricing the Commission has held that a seller is not forbidden to sell at different prices to buyers in different functional classes provided that injury as contemplated in the law does not result. *"* Applying the law to the facts presented by this request, it would appear that the granting of the extra discount to the premium jobbers would not result in a violation of 1aw if the facts are exactly as represented * * * and if the proposal is implemented precisely as outlined.

The "discount must be granted only for those sales made to the institutional customers described who use the books as giveaways and not for resale" and the "discount must be made available" to al1 customers of the publisher who in fact compete with each other in the resale of the publisher s books to insitutional accounts, the Commission continued. It cautioned, however, that if the publisher should classify certain distributors or wholesalers as premium jobbers and permits no one else to sell to the institutional customers, which could be accomplished by granting the extra discount only to those so classified, a serious question could be raised if the so-called premium jobbers also sell to regular retailers in competition with other wholesalers. " (File No. 643 7027, released .June 28 1966.

No. 68. Clearance given for use of pseudonym for doctor s real name on radio programs.

The Federal Trade Commission has issued an advisory opinion that it would not obj ect to the use of a pseudonym in lieu of the doctor s real name on radio programs under the following circumstances.

The requesting party proposes to produce two radio feature programs offering medical advice to be written and supervised by licensed physicians whose ethics prohibit the use of their real names. Both programs wil be sponsored commercially but the commercials wil be separated distinctly and clearly from the medical advice being given, and there wil be no endorsement express or implied, of the product by the doctor. (File No. 643 7035, released June 28, 1966.