ment even tangentially has grown accustomed to seeing your name associated with just about every consumer advance that this Congress has enacted in the last several years.

I am sure I am not making any bold disclosures if I say it has become vogue to initiate and to introduce consumer protection legislation, so much so that we are facing a rather serious problem now.

There is so much floating around that it is rather difficult to put them all side by side to see how the consumer is really going to come out when and if any combination or all are finally enacted.

It is for this reason that we are particularly concerned with the need for a comprehensive consumer protection proposal and very much welcome the fact that you are considering it and have invited us to supply comments to you, and we hope that we could use the next several days to digest the morass of materials that we have now and perhaps supply to you something that could be more beneficial than I could suggest at this very moment.

Senator Moss. Thank you very much. I, of course, apreciate the comments of the Consumer Federation on that. As you say, we have been moving piecemeal in a lot of fields and there are a lot of bills pending. It seems that we ought to pull them together in a sort of comprehensive whole and make sure we are moving in the areas we need to and relate all the different statutes one to another so they can be effectively used by our consumers.

Just one or two more questions. You noted that class actions might be of greatest benefit to middle-income consumers. Could you elaborate on that point and give us examples of what you mean by that?

Mr. BERLIN. Certainly. When I said that, I should not be misunderstood to have been saying that they are not of benefit to low-income consumers. They are in my view of principal benefit to middle-income consumers because of the general availability now of legal assistance on a pro bono basis to low-income consumers. For example, the bank case I mentioned a few moments ago. The bank case involves installment loans being taken out by residents of this city. The loans range from $300, $400, $500 up to a maximum of $1,500, perhaps $2,000.

What is involved there is a usurious interest rate or so it is alleged in the complaint. The recovery would be the interest compounded in certain fashions as prescribed by statute, but all we are talking about there is a nominal amount for each particular claimant.

It is the middle-income consumer basically who takes out the $1,000, the $1,500 loan: yet, he cannot possibly go to court to recover the $150 or $200 excess interest payments that he has been made to pay. Another example that comes to mind is an experience that I recently had in the Washington area where a very middle-income consumer purchased a refrigerator from what I think would be classifield as one of the more reputable merchants in town, and it became very clear that the store was not standing behind the warranty.

It took my office about 9 months to work that out. The store eventually did satisfactorily do the work that was required to be done, but that took about 9 months of sporadic effort.

This is an area, the warranty area, where I think the middle-income consumer is being taken on a regular daily basis. Yet, again you cannot afford to go to court to perfect your right to $50 worth of repairs. There is one additional area that Mrs. Grant recently brought to

mind. Mrs. Grant held hearings before her commission up in New York on the problems that consumers are confronted with in the moving industry, and the record she developed there was astounding to say the least.

There you will find, if you examine that record, repeated fraudulent practices by intracity, intrastate and interstate moving companies, and again we are dealing with situations where the entire bill to the consumer is anywhere from $50 to $200 or $300, and although he has a very valid right to complain about perhaps $50 or $75 worth of that bill, he has no effective way of really negotiating that out.

Senator Moss. Just one other question. It was suggested on Tuesday in our hearings here that Congress should intentionally leave vague the law defining business' liabilities and duties, and the burden would then be upon business to determine the legality of their prac tice. Do you agree with that concept? This was aimed, I think, at the list of prohibitive actions that are in the administration bill.

Mr. BERLIN. I do not believe in vagueness. I believe that business has a right to know what standard of conduct is expected of it and that consumers have a right to know what standard of conduct they can expect from business. But specificity is not synonymous with rigidity.

The problem with the administration bill is that it does not attempt to be specific in terms of defining a comprehensive standard of conduct for business. It instead imposes a rigid list which unfortunately serves as the triggering element for the consumers' right to seek relief.

So I think we have to keep in mind that while specificity may well be a very desirable objective, both for the businessman and the consumer, we have to be careful that we do not confuse rigidity with specificity. That is the real difficulty in the administration bill.

I think we see developing now in our States and certainly in this city a fairly well-defined body of consumer law. I think this has come about largely as the result of the efforts of legal service programs and the remarkable work they have done on behalf of the consumer.

I think the business community knows what is expected of it. Sure, it would be desirable if we had a little more definiteness, but I cannot agree that the answer is to impose a rigid schedule as would the administration.

Also, the administration bill, I find this rather striking, really replaces State law with a new Federal code of conduct.

I think, especially in terms of the small merchants; that Senator Pearson referred to before, that we should defer to State law wherever possible. I think State law is evolving, people in the area know what it is and can adopt to it without great difficulty. Therefore, I am very much in favor of your concept which really builds on what is already developing in each local area.

Senator Moss. Thank you very much.

Senator Pearson.

Senator PEARSON. Just one, and I do not want to develop it very much. I understood that an action brought under an act of Congress affecting commerce did not require a jurisdictional amount.

Mr. BERLIN. I believe that is not entirely correct. We have to distinguish

Senator PEARSON. You mentioned some case last year.

Mr. BERLIN. The Snyder case-the Supreme Court case?

Senator PEARSON. Yes.

Mr. BERLIN. The Supreme Court has held that where the $10,000 jurisdictional amount applies, leaving aside for the moment the question of where it does apply, that yau cannot solve the jurisdictional amount by aggregating the claims of individual claimants to make up a class; that each of the plaintiffs must himself have a claim for $10,000 in order for the jurisdictional amount to be satisfied.

That does not go to the question of whether or not the jurisdictional amount applies in a particular case. There may well be situations-for example, antitrust actions-where the jurisdictional amount may not apply and where you have Federal jurisdiction.

This is not the case I think in most consumer claims that we are talking about here. Most of them, if you do get into Federal court, you will get into Federal court on the basis of diversity of citizenship and there the $10,000 amount will apply.

Senator PEARSON. I have a lawyer who raises this point, and I do not think we need to pursue it, but I understand a couple of the testimonies today raise this point. You might clear it up. We will check on it too.

Mr. BERLIN. The point of the Supreme Court case does not go to when the jurisdictional amount applies. It holds only that if it does apply, you cannot satisfy it by aggregating individual claims.

Senator PEARSON. It gets to be important in a class suit.

Mr. BERLIN. There is no question about that.

Senator Moss. Thank you very much, Mr. Berlin. We appreciate your testimony and place great value on it because you are working in this consumer field all the time. We are glad to have you before us.

Mr. BERLIN. Thank you.

Senator Moss. Mr. Herbert H. Schiff, who is chairman of the consumer relations committee of the American Retail Federation.

Mr.Schiff, we are glad to have you, sir, and look forward to your testimony here today.

STATEMENT OF HERBERT H. SCHIFF, CHAIRMAN OF THE BOARD AND PRESIDENT OF SCOA INDUSTRIES, INC.; ACCOMPANIED BY EUGENE A. KEENEY, PRESIDENT OF THE FEDERATION; AND JAMES M. GOLDBERG, VICE PRESIDENT, GOVERNMENT AFFAIRS DIVISION

Mr. SCHIFF. Thank you for inviting us here. On my right here is Mr. Eugene Keeney, president of the American Retail Federation, and on my left here is Mr. James Goldberg, vice president, government affairs division of the American Retail Federation.

Senator Moss. Welcome to you, gentlemen.

Mr. SCHIFF. Mr. Chairman and members of the subcommittee, my name is Herbert H. Schiff. I am chairman of the board and president of SCOA Industries, Inc., of Columbus, Ohio, and I am appearing here today as chairman of the consumer relations committee of the American Retail Federation.

The American Retail Federation is a national organization which, through its 50 state and 29 national retail trade association affiliates, represents more than 800,000 retail establishments of all types.

A ball park figure would be that we represent about $150 billion worth of retail volume and we employ somewhere around 10 million people. We appreciate the opportunity to appear here today to express retailing's views with regard to three bills which would broaden the authority of the Federal Trade Commission and which would provide access to the Federal court system for consumer class actions.

The retail industry, which acts as the purchasing agent for the consumer, believes that the interest of its customers is paramount. We believe that a customer who feels he has been defrauded, and who cannot obtain satisfaction through the normal complaint procedure, is entitled to a remedy.

In our own company, we have a policy to give the customer's money back immediately and then investigate the claim.

As Virginia Knauer, the President's Special Assistant for Consumer Affairs, has pointed out, the remedy should be "convenient, expeditious and effective." Underscoring these criteria is the fact that the vast majority of consumer complaints involve relatively small amounts, most often ranging from 10 cents to $100.

But what remedy is possible that would be fast, efficient, effective? No legislative proposal to date and that includes the class action proposals pending before this subcommittee-meets these requirements. Class actions, as we will explain later, are a particularly unsuitable remedy in these instances. There are, however, existing approaches which are available to the consumer, and which, if pursued with vigor, could provide the remedy that is needed.

ALTERNATIVES TO CLASS ACTIONS

First, there is Federal Trade Commission enforcement of its section 5 authority. The FTC has, of course, been the target of many criticisms and suggestions in recent months-first through the report of the socalled "Nader's Raiders" and later through the investigation of the White House-requested special commission of the American Bar Association.

With these reports as guidelines, the new FTC Chairman, Caspar Weinberger, has taken steps to speed up the internal procedures within his agency. We are pleased that the Chairman has indicated he will reactivate the Commission's long-dormant Office of Program Review. We believe that if Chairman Wienberger is given a free hand to reorganize the agency as he sees fit, the FTC can play what he foresees as an "aggressive role" in protecting the consumer.

Second, the Commission should be given the authority to obtain preliminary injunctions in cases of consumer fraud. Even a revitalized FTC, with its programs and priorities firmly in mind, is limited in its effectiveness without this authority.

For this reason, the American Retail Federation supports S. 2246, the Deceptive Sales Act, introduced by the Distinguished chairman of this subcommittee. We recommend that amendments be added to S. 2246 to make it conform to the version of this bill which was passed by the Senate nearly 2 years ago. We would be pleased to submit legislative language.

In addition, we believe that S. 2246 should be amended to require the issuance of an FTC complaint prior to the time that a preliminary injunction is sought. This will assure that the Commission will not

use the injunction technique as a substitute for actual investigation of an alleged violation of the laws which it administers.

A third alternative to class actions is more vigorous use of small claims courts throughout the country. We believe that such courts provide an effective means for fast, efficient, effective relief. If the procedures for using small claims courts are not widely known, then we suggest that more localities follow the lead of Mrs. Bess Myerson Grant in New York City. Her department of consumer affairs recently published a consumer-oriented brochure entitled, "How to Sue in Small Claims Court."

Fourth, the National Center for Dispute Settlement, an offshoot of the American Arbitration Association, has volunteered its efforts to help resolve consumer disputes.

In this same vein, it should be noted that Mrs. Knauer is using the authority of her Office of Consumer Affairs to help bring consumer and business together in settlement of the complaints which come across her desk. We support legislation which would make this Office a statutory one within the Executive Office of the President.

These are by no means the only alternatives to class actions. We believe, however, that they can work if used properly. We recommend efforts by both business and consumers to use these existing and suggested remedies more effectively.

The potential impact of indiscriminate consumer class actions on business is devastating. I might deviate to say this: We spend millions of dollars every year building up our names and our good will, and just one action calling it wrong can ruin everything you have done over the years.

Senator Moss. Even if it isn't a successful action?

Mr. SCHIFF. Even if it isn't successful. This is the horror of it. It is unfortunate.

Senator Moss. I am not sure I can accept that, but I am glad to have you respond.

Mr. SCHIFF. We have a difference of opinion, sir, but I respect

yours.

This subcommittee is aware, I am sure, of the pending class action on the west coast involving a nationally known manufacturer of auto accessories. Being sued because of some allegedly defective truck tires, this defendant's potential liability is in excess of $400 million.

Other consumer class actions which are pending, while they may not involve such an enormous figure, still pose a staggering threat to business.

Because of the great recoveries possible, consumer class actions are a harsh, vindictive remedy which are used, not against those who perpetrate so-called "hardcore" fraud, but against reputable business. I repeat, not against those who perpetrate so-called "hardcore" fraud, but against reputable business.

The consumer abuses against which class action legislation is being directed are those unconscionable practices which exploit the unsophisticated consumer on a widespread basis. But such consumer frauds are generally engaged in by fly-by-night operators or marginal businesses skirting the fringe of legality.

Such defendants would generally be judgment-proof against substantial awards, and for this reason would not fear the deterrent of a consumer class action. Further, class action lawyers will be uninter