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by any means for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase in interstate commerce of such product, the Commission could proceed against such person by complaint. However, before the Commission could sustain an order to cease and desist it would be necessary to establish by evidence that such advertisements are false and had the tendency and capacity to mislead and deceive the public into the erroneous belief that the product is a dairy product and because of such erroneous and mistaken belief into the purchase thereof.

The Food and Drug Administration has held several hearings looking toward the establishment of standards of indentity for ice cream but up to the present time no such standard has been promulgated. Many States have adopted standards for ice cream and these vary in many ways. The Commission has no record of any complaints that anyone is or has been selling ice cream containing coconut oil and representing it as a dairy product.

When Congress passed the Oleomargarine Act, Public Law 459, 81st Congress, chapter 61, 2d session, H. R. 2023 (64 Stat. 20) it amended section 15 (a) of the Federal Trade Commission Act by adding thereto a new paragraph as subsection (a) (2). This amendment lifted from subsection (a) (1) of section 15 the requirement as to what should be taken into consideration to determine whether advertisements for oleomargarine were misleading. By this amendment Congress itself declared that "in the case of oleomargarine or margarine an advertisement shall be deemed misleading in a material respect if in such advertisement representations are made or suggested by statement, word, grade designation, design, device, symbol, sound or any combination thereof, that such oleomarga. rine or margarine is a dairy product, except that nothing contained herein shall prevent a truthful, accurate, and full statement in any such advertisement of all the ingredients contained in such oleomargarine or margarine.”

Since the enactment of the above amendment to section 15 of the Federal Trade Commission Act the Commission has issued eight complaints charging a violation of this section. Under. the provisions of this section the Commission has interpreted the language to mean that all that is necessary to be alleged and proved is that an oleomargarine or margarine advertisement represents or suggests that the oleomargarine or margarine is a dairy product. Two of the complaints resulted in orders to cease and desist against the respondents and both appealed. One appeal is now pending in the United States Court of Appeals for the Second Circuit and the other is pending in the United States Court of Appeals for the Third Circuit. One of the complaints was closed without prejudice. In another complaint an agreement was entered into which enabled the Commission to issue a consent order. Three of the complaints are now in various stages of administrative procedure before the Federal Trade Commission. To sum up very briefly, the difference as the law now stands is that in proceeding against anyone selling ice cream made with cocoanut oil and representing it to be a dairy product, the Commission must allege and prove that the advertisements complained of are false and misleading and because of that have the tendency and capacity to induce the purchase of their product under the belief that it is a dairy product. In the case of oleomargarine or margarine the only thing the Commission has to allege and prove is that such advertisements represent or suggest that such product is a dairy product.

As requested, the transcript of testimony which accompanied your letter is returned herewith.

Very truly yours,

STAFF NOTE

ROBERT M. PARRISH,

Secretary.

It should be noted that the provisions of the Federal Trade Commission Act are applicable only to transactions in interstate commerce. While there are no decisions under section 12 in this respect, it appears probable, therefore, that retailers displaying oleomargarine in show cases labeled "dairy products" would not be subject to the Federal Trade Commission Act. Ward Baking Company v. Federal Trade Commission (264 F. 330); Wagner v. City of Covington (251 U. S. 95); Memphis Steam Laundry v. Stone (342 U. S. 389), except possibly in special fact situations. Ford Motor Company v. Federal Trade Commission (120 F. 2d 175). However, since the margarine is required to be clearly labeled as such under section 407 of the Federal Food, Drug, and Cosmetic Act, there seems little possibility that purchasers might be deceived.

The CHAIRMAN. I was just talking to Senator Aiken a minute about the matter of getting on the statute books laws to tell what it is, that that matter would not come before our committee. That is a matter of the Department of Justice and the Judiciary Committee would probably cover that. I am going to furnish to the Department of Justice, as well as to the Judiciary Committee, the problem.

If you have any specific cases, we should like to have them. You do not have to send them in today, but if you have any to offer, in which there has been a violation, either through advertising or labeling, anything like that, I wish you would make a note of that and give it to us. That applies not only to you, but to the other witnesses. We should like to have that, so as to point up what the problem is, and that we might work out some solution. I think it is wrong for anybody to label any commodity being a dairy product when it might be cocoanut oil from the Philippine Islands or somewhere else. We do not believe in that. It ought to be sold for what it is.

We have laws on the statute books to provide for that, and as to whether it covers the situation that you are complaining of we will look into.

Thank you.

Are there any further questions?

Senator HOLLAND. While you were chatting with Senator Aiken I made the request that counsel be requested to file in the record at this point a statement as to the adequacy of the present law, to go beyond the mere requirement of labeling, and to meet the two situations which have been mentioned by this witness. I hope that request may be in order.

The CHAIRMAN. Mr. Stanton will do that for us.

(The prepared statement of Mr. Griggs is as follows:)

Mr. name is L. E. Griggs. I am a dairy farmer from Morrisville, Vt., producing milk for the Boston market. I am president of Northern Farms Cooperative, Inc., with a membership of approximately 2,000 milk producers located in 10 counties of Vermont and 3 counties in New Hampshire. We work jointly with the Maine Dairymen's Association in representing the interest of producers in northern New England delivering milk to proprietary handlers who supply Boston and secondary markets in southern New England.

There is one phase of our dairy problem that I would like to present for the consideration of this committee that of honest labeling, advertising, and merchandising of substitutes for dairy products. In order to facilitate the hearing, I am limiting myself to this one subject.

Competition between dairy products and their substitutes in interstate commerce falls within the scope of the jurisdiction of the Federal Trade Commission to prevent unfair methods of competition and unfair or deceptive acts or practices. Section 5 (a) of the Federal Trade Commission Act states: "Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful." Thus we can see that misrepresentation of oleomargarine as butter; or vegetable fat, frozen dessert as ice cream; or other imitations as specific dairy products are prohibited by this section and in the past the Federal Trade Commission has proceeded against labeling and advertising practices which were deceptive in confusing the substitutes with the real dairy products.

It appears that the Federal Trade Commission has taken a firm stand in opposition to the use of dairy terms by oleomargarine manufacturers. In a recent complaint against Armour & Co. it objected strenuously to the use of the words "churn" or "freshly churned" on the package and in its advertising of oleomargarine. The Federal Trade Commission bases its action on the fact that the act of 1950 prohibits any representation or suggestion that oleomargarine is a dairy product by statement, word, device, or sound. Armour maintains that it actually does use a churn as a part of its equipment in the manufacturing operation. The use of the words "churned" or "fresh churned" on the oleo

package, however, is purely and simply an attempt to capitalize on the dairy industry and the well-established fact that in the minds of the public, butter is associated very closely with the word "churn" or "freshly churned."

The Federal Food, Drug, and Cosmetic Act prohibits interstate commerce or trade of any adulterated or misbranded food and contains several sections dealing with dairy products and their substitutes. Milk, butter, and nonfat drymilk solids are clearly defined in section 321. Filled milk is defined in section 61. The labeling and packaging requirements for oleomargarine are covered in section 347.

The competition from substitutes for dairy-products markets has been increasing rapidly during the past two decades and with technical developments and improved equipment it is expected that this competition shall become more severe. It is therefore, most essential that the Federal acts be closely scrutinized from the point of view of providing a background for fair and honest competition. Strict enforcement of our present laws and regulations dealing with this problem is most essential to the welfare of the dairy industry.

Although dairy products have built themselves a reputation as natures best and most nearly perfect foods, the price advantage still lays with the substitute products. Although there is need for further research to provide the full background of knowledge of the value of dairy products as well as the substitute products to national health, it is generally accepted that the health of the Nation's people is best encouraged through the use of real dairy products.

Everyone is more or less familiar with the inroads the oleo industry has made in our butter market. Undoubtedly some unwise legislation focused attention on this substitute product to the extent that it has probably increased more in sales in today's markets than would have otherwise been the case. It appears that the butter industry has lost more than half of its market to oleo as a table spread, based on per capita consumption figures, during and following World War II.

We have seen the increased use of vegetable fats in the production of imitation ice cream. We understand that 11 States now permit the sale of this imitation product and that when coconut oil is used in the manufacture of this imitation product it is rather difficult to distinguish by present tests between butterfat and coconut oil.

We expect to see further developments in the line of substitutes that will threaten the markets for each and every dairy product including fluid milk as the years go by. Chief reliance probably has to be placed on regulations that will insure fair competition and prevent the substitutes from taking advantage of those values that apply to dairy products and dairy products only.

We must maintain a constant vigilance against adulterations, misbranding and dishonest labelling, advertising, and merchandising practices.

The provisions on filled milk need to be carefully maintained and preserved under the Food and Drug Act. The constitutionality of this act appears to be established. It will be noted that under this section, there is prohibition of a compound sold in semblance or imitation of milk. How long we can maintain such a prohibition, only time will tell.

In the field of merchandising we find many substitute products carried in a refrigerator case which is clearly labeled dairy products. It is argued that the consumer is protected by the actual label on the individual package on the product. Nevertheless, this practice encourages dishonest merchandising, and this situation can be found in most any grocery store in the United States today.

The Department of Health, Education, and Welfare which has the responsibility of administering food and drug laws since 1953 does not maintain a staff in each State. They have district offices and the nearest one here in New England is in Boston. Their personnel cannot begin to cover the area they serve and, of course, their problems are much broader than those represented by dairy products and their substitutes. Although we have some rather extensive Federal legislation dealing with this problem, we are short on personnel for the enforcement of these laws and regulations.

The problem is not one so much of legislation as one of enforcement. Adequate funds for effective enforcement are essential to protect the consumer interest and preserve our great dairy industry.

The CHAIRMAN. Our next witness is Mr. Harold J. Smith.
Give us your full name for the record and your occupation.

STATEMENT OF HAROLD J. SMITH, PRESIDENT, BELLOWS FALLS COOPERATIVE CREAMERY, CUTTINGSVILLE, VT.

Mr. SMITH. Mr. Chairman and gentlemen of the committee, my name is Harold J. Smith, a dairy farmer, with a farm in Cuttingsville, Vt. And I am president of the Bellows Falls Cooperative Creamery. The CHAIRMAN. You have a prepared statement there?

Mr. SMITH. Yes.

The CHAIRMAN. Are you in agreement with the views expressed by the witnesses who preceded you?

Mr. SMITH. I am.

The CHAIRMAN. Do you differ in the answers to the questions asked of them?

Mr. SMITH. No.

The CHAIRMAN. Do you agree with those?

Mr. SMITH. I do.

The CHAIRMAN. Have you anything in your statement that enlarges on what they said or any new thought in the matter?

Mr. SMITH. This original bill called for $20 million in 1950 and 1951. This bill is the Research and Marketing Act of 1946, known as the Jones Enabling Act, the Bankhead Act. We recommend that we have $6 million more as there are only 6 States out of the 12 regional States that are receiving any money to go ahead with this research work.

The CHAIRMAN. Is this research work done on the local level or on the Washington level?

Mr. SMITH. It is done on the local level. Although the experimental stations and the colleges are working on different projects, like the flavor of milk and the pricing of different things.

The CHAIRMAN. I am not familiar with it at the moment, that is, the law. You speak of a total of $20 million. Is that the greatest amount?

Mr. SMITH. That is what was called for.

The CHAIRMAN. That is the authorization?

Mr. SMITH. Yes.

The CHAIRMAN. And Congress has failed to appropriate that much money?

Mr. SMITH. That is right.

The CHAIRMAN. Your suggestion is that the full amount or such amount as may be necessary within that range be appropriated so as to carry on this work?

Mr. SMITH. That is right.

The CHAIRMAN. I am happy to be on the Appropriations Committee. Senator Holland is also on it, as is Senator Aiken. That is on the subcommittee-not on the Appropriations Committee-but the subcommittee that provides all of this money. It is my recollection that during this last session of Congress, as well as the preceding session considerable advances have been made, that is, more and more money is being appropriated for research. My recollection is that there was an increase from prior amounts.

Do you have the figures?

Mr. SMITH. In 1955 they increased to $16,800,000.

The CHAIRMAN. What was it before that?

Mr. SMITH. In 1950 and 1951 it was five.

The CHAIRMAN. We are making a little progress there.

Mr. SMITH. You see, what we are asking for is for the 12 States. And only six have done anything in this work in this region.

The CHAIRMAN. Why is it that the other six are not doing any work like this?

Mr. SMITH. As I understand, I do not think they have had the money.

The CHAIRMAN. Is it not on a cooperative basis-must not the State do something, too?

Mr. SMITH. The States are to put in a certain amount.

The CHAIRMAN. Have you looked at the question as to whether or not it is due to the States' inability or a lack of interest that causes them not to participate?

Mr. SMITH. I do not know as they have qualified for it. I do not know just what the answer to it is.

Senator AIKEN. I think that I can explain part of the reason. When we stepped up the research program, we stepped it up a little bit faster than the Department could get it ready, as I recall. Certainly, that was the case in 1954. Whether they are ready now to go on further with it, I do not know.

I think Congress has shown a tendency to appropriate whatever is necessary for programs set up in the field of research.

I know there was a lag in the program. I think what is referred to is the Hope-Flannagan act. That is what it was called in 1946. It amended an earlier law.

For some years very little was done with it. The last 2 or 3 years they have tried to step it ahead a little faster than their experts could get the program ready.

The CHAIRMAN. I am glad that Congress is not to blame for that. We got the money for you. The fact that it was raised, as you indicated, from 5 to 162 million dollars, is quite an increase. I hope that we can urge the Department to go ahead. If you folks get busy in this area and see to it that the States get ready and get whatever is necessary to carry that out, then I think that we will work it out all right.

Mr. SMITH. That is a big field. There is a chance for a lot of work on this subject.

The CHAIRMAN. I think it will depend upon the ability of the States who contribute to this fund to carry it out, such as Vermont and other States are doing. That is something in which we do not have too much jurisdiction. All we can do is pass the laws. It is up to the executive to administer them.

I can give you assurance that the Committee on Agriculture and the Subcommitee on Appropriations that handle all this are pretty alert, I believe, and you can depend upon them to provide the money necessary, in fact all that you may use up for that purpose.

Senator AIKEN. I think you have noticed that the Minnesota station has recently claimed that instead of being vaccinated for smallpox or diphtheria, it is possible to vaccinate the cow and to drink her milk and save the discomfort that you might otherwise have. There is certainly a field for research there.

The CHAIRMAN. Thank you, sir.

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