S. 3201: The comments which I have already made with regard to S. 2246 are equally applicable to Title I of S. 3201 dealing with preliminary injunctions. The only difference between the two bills in this department is the addition, in S. 3201, of the words "of need" following "upon proper showing" (p. 2, line 20).

I don't believe this makes any substantial difference, except, perhaps, to relax the traditional prerequisites to exercising the drastic procedure. Ordinarily these are a demonstration of the likelihood of the plaintiff's ultimate final victory in the case plus proof of his need for the immediate relief. By expressly mentioning only the latter, the reference phrase might be construed as dispensing with the former.

I also reiterate, with respect to section 204 ("Suits by Consumers Adversely Affected"), my criticisms of S. 3092. It does not seem to me that there is any meaningful distinction between the two.

The supposed limitation of class actions under this section to the unfair or deceptive practices listed in section 201 (a) loses whatever purpose it might have had by the generality in section 201 (a) (11) covering representations "that goods or services have . . . characteristics of . . . performance, . . . uses, benefits...". There is virtually no exercise by F.T.C. of its broad powers under section 5(a) (1), such as I have earlier described by illustration or in principle, which could not be brought within one or more of those characterizations. The "knowingly" requirement could be readily satisfied in almost any case by a court's or a jury's liberal application of the "disregard of reasonable safeguards or care" definition.

Similarly, the imposed condition precedent to a class action of a successful government action is rendered practically meaningless if it can be satisfied by an F.T.C. cease and desist order. The almost unlimited ability of the Commission to issue such orders, which I have documented above, makes that a very low hurdle indeed. Ironically, it may prove prejudicial to small businesses, which are less able than larger ones to bear the expense and the drain on manpower to vigorously contest an F.T.C complaint and, therefore, may find themselves compelled, however reluctantly, to consent to the cease and desist order.

The President was quite aware of the different qualities of court judgments and Commission cease and desist orders; and he intended to distinguish between them as qualifications for launching a consumer class action. In his consumer message he stated, "I will recommend legislation to give private citizens the right to bring action in a Federal court to recover damages, upon the successful termination of a Government suit under the new consumer protection law." While this language fits perfectly a suit which has been brought by the Attorney General in a federal court, it is inappropriate to an F.T.C. cease and desist order, which is the result of an administrative proceeding (not a "suit") brought under the long existent Federal Trade Commission Act (not "the new consumer protection law"). I therefore respectfully recommend deletion from S. 3201 of section 201 (a) (11), of section 201 (b), and of that portion of section 204 which commences on page 6, line 15 immediately following the word "decree" and extends to line 22 immediately preceding the word "any".

With such changes and those indicated with respect to Title I, the Association of National Advertisers will support S. 3201.

Senator Moss. Our next witness is Mr. John Banzhaf, attorney, who is president or chairman of the Legislative Action on Smoking and Health.

We are glad to have you before us, Mr. Banzhaf, and we are looking forward to your testimony.

STATEMENT OF JOHN BANZHAF, CHAIRMAN, LEGISLATIVE ACTION ON SMOKING AND HEALTH, ACCOMPANIED BY DONALD W. SALTER

Mr. BANZHAF. Thank you, Mr. Chairman.

By leave of the committee, Mr. Donald W. Salter, a third year law student at George Washington University, who has done some work in this area under me, is sitting at my left.

Before I begin, I think I might reply to a number of points raised in the last discussion while they are fresh in your minds, starting particularly with the sandpaper case.

He used the word "ridiculous" with respect to it, and I would certainly agree with him, but I think for very, very different reasons. Just to refresh you on that case, this is a case in which a nationally advertised product, a shave cream, claimed that if you sprayed or put this cream onto sandpaper you could then shave sandpaper, purported to demonstrate it before the eyes of a TV audience by spraying it on and instantly shaving.

The FTC found, and it is not disputed, that in fact this was a fraud because you could not shave the sandpaper unless and until you soaked it some 80 minutes in the shaving cream, probably anybody else's shaving cream, probably water, you could shave it. This was a blatant fraud.

The only issue that did finally reach the Supreme Court was the question of using the mockup. It took many, many years going through FTC proceedings, going up through two courts of appeals, two Supreme Court appeals, back down to the court of appeals and eventually back down to the FTC.

By the time there was a final action, the ads had long since disappeared, so that even the normal slap on the wrist penalty of a ceaseand-desist order had very little effect.

I might point out that order was issued against the ColgatePalmolive Co. which I think has a rather long history of being up before the FTC on such things.

The FTC spent quite a lot of time on this particular TV mockup, a lot of time, a lot of money, a lot of court time and lawyers. They thought they had it licked and they issued a cease-and-desist order but this cease-and-desist order was so very weak that today we have another one before the FTC which concerns Baggies which are manufactured by the same defendant, Colgate-Palmolive Co., and according to the FTC the commercial is done like this:

A Baggie and a competitor sandwich bag which have a sandwich placed in them are swished around under the water for a few seconds and according to the FTC the water is forced into the competitor bag, thus presumably demonstrating a Baggie is better whereas the FTC has charged and is prepared to issue another consent decree to the effect that the demonstration proves nothing.

So what do we have? We have a long and involved proceeding taking many, many years, not even a slap-on-the-wrist penalty, and here they are right back up to their old tricks again.

No doubt there will be a cease-and-desist order again, perhaps some more appeals, and then Colgate will go back and dream up something else.

In the meantime we do not know how many countless people may have gone out and bought their particular shaving cream believing that it had these properties or who are now buying Baggies pretending or believing they have these properties.

You asked the question about whether or not many of these things are national in scope. You were told either that they were not, they were principally local, or if they were national they came under the postal fraud section, the implication clearly being that you ought to

get out of the business and go back into the more important work of Congress.

One could sit down and draft an immense list of the major problems in the consumer area and one would find that many of them are in fact, national and the great majority are not in fact covered by the postal fraud sections.

I would cite some which I made notes on listening to the testimony. What about your deceptive gasoline ads over television, the detergent gasoline, which contains no more detergent than any other gasoline, gasoline with remarkable properties which it does not in fact have, gasolines which claim remarkable properties and in fact sell somebody else's gasoline to the consumer?

You go up to your Esso station to get the gasoline with go go go, you may very well be buying Shell gasoline which may or may not have the go go go, and we all remember the famous gasoline with or without the platformate. You could not buy a gasoline without platformate.

Take the analgesic ads on the air that contain these mysterious ingredients. It is only aspirin. They do not tell you that. How many people are going out spending a great deal of extra money on them, perhaps believing that it gives them something more than aspirin, perhaps delaying them going out and seeking and getting competent medical help and stronger medicine in this belief?

The same thing could be said for a wide number of the detergent ads, all of which have magic, miracle ingredients which upon tests by reputable organizations like the Consumers Reports, Consumers Union, prove to be very, very ineffective and perhaps even rather damaging to the environment.

We have nationwide games; Congress has investigated this-gasoline games, foodstore games, giveaway games, prizes being given out misleading. There are in some cases no prizes or almost no prizes. This is certainly a nationwide thing affecting everyone.

We have Firestone tires, they stop 25 percent quicker, so says Firestone, in direct violation of the FTC's longstanding regulation against dangling comparatives. We find that 25 percent of them tested, according to the very minimal standards, do not stand up. Clearly a major national problem.

We have problems of auto prices, both in the so-called list price which nobody ever pays or even in these so-called comparisons with last year's prices, except they change the vehicles slightly to make you think you are getting a better buy.

We have advertisements of dangerous products. We have 10,000 colored television sets which will catch fire this year, and everybody says we cannot do anything about it. Perhaps some of those 10,000 will be radiating the consumers watching them. If not, surely others will be.

Even articles that you do not think of as dangerous. Raleigh bike, it has a coaster brake and a gearshift. What they neglect to tell you is if your little 6- or 8-year-old child tries to put it in gear, it is often very difficult to get in gear, and if by any chance he does not get into gear, the brakes are disconnected.

The case came up when a father bought such a bike for a child, trying to protect the child because he felt the need for the coaster brake,

the child's hands were too small to operate handlebar brakes. The child found, much to his distress, going downhill that the brake was disconnected and broke both of his arms, a rather hard lesson for a 6-year-old child.

All of these national, not one of them so far as I can see, coming under the postal statute.

Senator PEARSON. The point has been made that if we are to correct some of these consumer problems we are going to add a great deal to the cost in the field of the environment today. If you really go ahead with the programs we are talking about, it is going to cost a lot of money. It is probably going to be passed on either in the form of taxes which the Government gets from people or increased costs of products. Do you believe, and your testimony is most impressive, that many of these things that you have spoken of involve substantial costs which can be passed on and which may or may not be worthwhile to the consumer?

Mr. BANZHAF. No, quite frankly, I suggest just the opposite, that many of the things that I am suggesting and that have been suggested and which are proposed in the legislation would in fact reduce the cost. This nonsense it will be passed along to the consumer is nothing more than nonsense. I refer you to Samuelson's basic text on economics. It is called one of his famous five fallacies. By making the Federal Trade Commission more efficient, presumably it should be able to do more with every dollar rather than less; that with the money Congress is already spending it will get more for its money, because the Commission will be able to do more and be more effective in what it is doing.

The beauty of class actions is they do not cost anything directly because they are brought by private attorneys, not paid by the Government; if they are paid at all, it is eventually out of the pocket of the manufacturer or in some cases, in fact, in most cases, what you will find is when there is a substantial recovery, the fee for the attorney comes out of the recovery, each consumer in effect paying 1 percent of the recovery for an attorney's fee.

So I think it would be just the opposite, but even if it were for just a moment, I think it is worth it. We are talking here about things like 10,000 TV sets every year catching fire in American homes, radiating fuel; we are talking about bicycles which injure, perhaps kill, young children; we are talking about hospital equipment which allegedly electrocutes I do not know how many thousands; we are talking about dangerous space heaters.

Even if we should take the less dangerous and more mundane things like aspirin, bleach, gasoline, does not the consumer deserve to get a high quality product? If the price increases a little bit, I think it will be worth it. I do not think it is going to cost very much to have a gasoline company advertise honestly rather than dishonestly. I do not think it will cost very much to make an automobile manufacturer advertise honestly rather than dishonestly. I do not think it is going to cost the consumer any money to get rid of misleading or deceptive giveaway games, green stamp and other such trading stamp programs. It is not going to cost him money. If anything, this is going to save him money. You are talking about a very, very slight increase in cost for a problem

which has already become very, very clearly one of the leading problems in the country, nationwide.

It is certainly a problem toward which many people feel the most personal dissatisfaction. Yes, we are aroused about the war in Vietnam, but it is somewhat far away for many of us.

Many of us are aroused about the problem of race relations, but for many of us it is far away or it is a crime which occurs somewhere else. I have asked my class in law school-I said, "How many of you feel you have been cheated in one way or another by an automobile dealer, having not received what you deserved?" I did not see anybody who did not put his hand up. These are young people. They have not been around that long, so they have not bought that many cars.

I asked them how many of them felt they had gotten the short end of the stick recently from a manufacturer or a dealer, and again their hands go up and again these are consumers. If it is happening to college students, law students, if it happens to a guy like me who is not afraid to take a man to court, a lawyer who is an engineer and a mechanic to boot, and I cannot get my car fixed in accordance with the warranty, goodness help the consumer who does not know the carburetor from a clutch and who has not any idea what his legal remedies

are.

Mr. Chairman and members of the committee, recently Congress passed, among others, two laws designed to protect the consumer. One was designed to guarantee him truth in packaging and labeling, the other truth in lending. Weak as they were, at least they were a step in the right direction. Congress has now been asked by the administration to pass a new law, the so-called Consumer Protection Act. This bill. however, is so bad that it fails to meet even the comparatively low standards set by these prior acts. By this I do not mean that it is just not as good. I believe S. 3201, proposed by the administration. judged by the standards of a consumer product, would fall afoul of these two acts.

In reality S. 3201 is a product, a product a clever merchandiser is trying to sell to the Congress and to the American people. I therefore suggest that we examine it and measure it by these meager standards of the prior acts.

The Consumer Protection Act is a product packed in a box bearing a very deceptive label. A closer examination shows that the box also has a false bottom, lots of stuffing and little substance, and upon a longer examination actually begins to smell. The consumer is made to think he is getting something for nothing, whereas in fact the value is low and the cost-in many cases a hidden cost-may be very high. Section 101 changing "in commerce" to "affecting commerce" is a small change of little importance because the Commission already exercises a wide jurisdiction covering, for example, interstate

advertisements.

Section 102 providing for injunctions pending long and drawn-out Commission proceedings is a step forward which has been long overdue. Yet the first part of that section appears to be deceptive because under section 13, the Commission already has the right to seek injunctions for violation of section 12 by "any person, partnership, or corporation" whereas the proposed section 102 appears to limit this to action against "any person." The Lord giveth and the Lord taketh