Joan Bernstein Text of Interview: December 4, 1998

-88- ORAL HISTORY OF JOAN Z. BERNSTEIN – THIRD INTERVIEW DECEMBER 4, 1998 Professor Jackson: Today is December 4, 1998, and this is the third in a series of oral history interviews with Jodie Bernstein. I guess I should ask you generally if there were anything relating to what we talked about last time which sort of took us up to the first couple of months of your tenure at the FTC, that in thinking about it or looking over the transcript you want to add anything to or elaborate on in any way or whether we’re at a point of moving forward. Ms. Bernstein: I think we can move forward. I was pretty satisfied with that. Professor Jackson: When we ended our last talk I think that you had been describing how you came to the FTC and your first assignment which was with Nancy Buc on Deceptive Children’s Advertising. And we discussed the change in strategy that you developed of not trying to negotiate a settlement ahead of time, but going public with the complaint and its effectiveness. And I guess one question is whether there is anything you want to add to that wonderful beginning tale of your time at the FTC. Or if it’s time to ask then maybe who some of your other colleagues were who were significant to you in your early years at the FTC? Ms. Bernstein: Okay, good. That was a significant move for the entire agency. We happened to be among the first to take one of the first assignments of no longer accepting what used to be called assurances of voluntary compliance, a three-step process, before anyone was ever in violation of an order. Professor Jackson: Jodie, was that change in agency practice something that was developed initially as an agency-wide policy? Did you and Nancy develop it? How did that come -89- to be? Ms. Bernstein: It came about (and maybe I mentioned this, perhaps I didn’t), Vicki, in 1969. Ralph Nader did an investigative report on the FTC and concluded that in the previous decade nothing of significance had occurred at the FTC. It was an extraordinary report. And with a lot of very negative, very negative and true commentary on people who read the newspaper all day, who went out to lunch and stayed out to lunch all day– really horror stories of bureaucratic slough. President Nixon then asked the American Bar Association to constitute a committee to do its own investigation and make recommendations to the President. It had been a really terrible time at the FTC. That report, the chairman of the committee that did the report for the ABA was Miles Kirkpatrick who became chairman of the FTC. I should interject that the first new chairman, the new appointee, appointed by Nixon, was Caspar Weinberger. Professor Jackson: I didn’t know that he ever served there. Ms. Bernstein: Six months. He was there six months. And he began to reform the commission. He began it. Interesting, I have since learned that Bob Pitofsky, now chairman of the FTC, headed the staff that did the ABA investigation and report. Professor Jackson: The staff of the ABA commission, or was he already at the FTC? Ms. Bernstein: No, he was a professor at NYU. And he headed it and hired two or three students, two of whom became good friends of mine. One still is. They were students at NYU Law School at the time, very smart, very capable and obviously led by Bob. What I was going to tell you, which I think is interesting, that Pitofsky told me, was that Paul Rand Dixon had become the chairman of the FTC for the decade of the ’60s from 1960 to 1970. He was from Tennessee. He was appointed by President Johnson. President Johnson told him, and Rand told this story himself to Bob. He said, “Rand, I want you to go down there to the FTC and I don’t -90- want you to do nothing. Do you know what I mean, Rand? Don’t do nothing.” So Rand did nothing. Professor Jackson: That’s a great story. Ms. Bernstein: It’s true I think, too, because there had been some scandals at the FTC at an earlier period and Rand then hired only white males from Tennessee. And you know people who were hired to do nothing for ten years end up reading a newspaper all day, that’s what happened. But the particular changes that were recommended by the report, one of the things that I was describing to you in connection with the kids’ advertising, had been recommended in the report. Not the subject matter, that was already a public issue of what is television doing to our children. Professor Jackson: The bypassing of the AVC – Ms. Bernstein: Going right to complaint. Professor Jackson: Did the agency in response to the report adopt a formal written change policy or was it left open to the new staff coming in? Ms. Bernstein: It was left open to new staff. So it didn’t really require a change in the Rules of Practice; it really required just new people with new initiatives. Professor Jackson: You had legal discretion? Ms. Bernstein: Oh yes, we had legal discretion. Professor Jackson: That’s fascinating. You hadn’t talked about it last time, and I didn’t realize that was really part of Bob’s involvement. Ms. Bernstein: Yes, that was really part of Bob’s, and Vicki, I believe although I don’t think I’ve ever seen it, I heard later that the Kennedy School conducts case studies of institutional change. I believe they did one on the FTC that focused on that area – and the role of -91- Basil Mezines who is still around town. He is Jake Stein’s partner and was here for long time. He had been on staff at the FTC and became the executive director in the new regime of the FTC. Yes, Weinberger, Kirkpatrick, and he really were the ones who devised and implemented the vast job of getting rid of the – these old people. So now that new people could be hired. And he did a fabulous job. Professor Jackson: What’s Basil’s last name again? Ms. Bernstein: Mezines, it’s Greek, of Stein, Mitchell and Mezines – one of the exception to the “Tennessee origin rule.” Professor Jackson: Okay. Now it is interesting because the next question that I had written down to ask you about we’ve already touched on, which is the effects of the emergence, I had in the early ’70s but obviously I was off, the emergence in the late ’60s of sort of modern public interest-oriented groups, including Nader’s consumer efforts, and the relationship that that had to the work that you were involved in. Obviously Nader’s ’69 report was really important. Ms. Bernstein: Yes. Key. Mark Green was on that staff, I believe. On Nader’s staff, Chris White, who is still here. It’s kind of interesting who was on his staff and subsequently came here. Mark never did. Mark went to New York instead. It was really the peak of hiring competent investigators, and reporting/publicizing was the work of the Nader organization, not to take away what they did with the cars and other matters. Professor Jackson: Was that the organization that was important at the time or were there any other that were around? Ms. Bernstein: Well Consumers Union was in existence and identifying issues. Professor Jackson: They have been in existence for some time. Ms. Bernstein: Yes. -92- Professor Jackson: And they had some role, I may be jumping a little ahead, I know. The Consumers Union’s positions were referred to in the materials published in SFR in connection with the rule on care labeling. But I don’t remember myself and I don’t know how aggressive an advocacy organization they were. Ms. Bernstein: My recollection, and it may not be right, was that they were not an aggressive advocacy organization. I believe they were already publishing Consumer Reports. But I don’t think of them as that kind of advocacy group. Sometime during the ’70s they began to develop a lobbying capacity on Capitol Hill, and a couple of people who worked here went to that organization and are still there. The other is Consumer Federation of America and – Professor Jackson: Was that Esther Peterson? Ms. Bernstein: Esther headed that organization I believe. Professor Jackson: Were they involved or did they support the Nader study or did they take a hands-off position? Ms. Bernstein: Can’t remember. Professor Jackson: Okay. Now in addition to the work on children’s advertising, can you describe other of your work at the FTC in what I think of as your first stint at the FTC? Ms. Bernstein: Yes, and we still talk about this, Bob and I sometimes. You know Bob was the bureau director, and I was down there in a division, quite happily working with the division director at the time, who was a man named Jerry Thain. He had been teaching at Wisconsin for many years. He was a terrific boss for me. I liked him a lot, he was really smart and he was a manager who would give you an assignment and let you do it. He actually hired me. Can we talk how I was hired? Professor Jackson: I think we did and I remember, I would have to look back but -93- Pitofsky he . . . your resume saying hire her. Ms. Bernstein: Yes, but it was Bob Wald who sent over my resume to Basil, and then Basil gave it to Bob, and he said fine, and Jerry actually interviewed me. Or maybe Basil interviewed me, too, I don’t know, but anyway it all went very quickly. So I will describe one other fairly far-reaching project that I got. Somebody was investigating, and I don’t believe I was investigating it, a proposal, and I don’t know how we got into it even. Gillette was planning a marketing program for a new razor blade, and they were going to enclose it in a Sunday supplement. Professor Jackson: The razor blade? Ms. Bernstein: The razor blade, the actual razor blade in a plastic package with the ad. You know how you get those insert things in the newspaper on Sunday. Well that struck us – everybody – as outrageous, too. As I say, I didn’t work on that part of it, particularly. Here was my part, and mind you everybody was kind of new here. Bob asked Jerry to have somebody research whether or not we could go into court and enjoin the distribution in the supplement that would carry the sample razor blade. So Jerry comes to my office and says look this up, see what you can find. So I’m thinking to myself because I am something of an experienced lawyer, none of them were, none of them had ever been in court. Bob was a scholar, he hadn’t had much “hands-on” experience except at Dewey Ballentine – antitrust documents, et cetera. Jerry had never litigated. I don’t think any of them had, and the commission people who had been at the commission hadn’t done anything. I didn’t really understand all of that. Because I didn’t know all these people. So I’m thinking to myself, and I said, “How soon does Pitofsky want it?” And he said, “Oh you know, as soon as possible.” I said, “Well, I presume that prior research has been done. The commission has been in business since 1918. Somebody has looked to see if -94- there is injunctive authority.” “No,” Jerry said. I was very suspicious. I really thought it was some sort of setup to trick a new lawyer into something or other because it was hard to believe that nobody ever researched a topic like that. Professor Jackson: I don’t remember whether the FTC was in existence, but the misbranded eggs case, which is a federal commerce claims case, I always thought that had to do with eggs and commerce and getting them off retail shelves and the commerce power reach that far but I would have assumed that if there was a federal regulatory power someone would have tried an injunction – no one had done this before. Ms. Bernstein: The results of my research was that nobody had done it at the FTC. There was no mention of injunctive authority in the FTC Act, which had been around a long time. The amendments to the FTC Act that had passed in the late ’30s that were the food, drugs, and cosmetics portion that we share with the FDA did not have injunctive power for this kind of product. And it appeared that agencies that had specific injunctive authority was in the statute and it said you can go into X court and get this kind of relief and so forth. We didn’t have that. But I thought to myself, I used to think because I was Yale-trained, this is ridiculous, you know this is ridiculous, and then I would start thinking – powers in court, surely there must be a way to do this. And I was conjuring, you know, trying to do that. And then, and I don’t remember exactly how I came across this, but I was, I think I know, I was close with a number of lawyers at Wald, which was then Wald Hardkrader, including my dear friend Selma Levine, whom I may have mentioned to you before. Professor Jackson: Yes, she was the one who advised you not to take anything below a GS-12. Ms. Bernstein: Yes, right. And I called her up and said, “Selma, you have been -95- doing research here, you guys have been doing a lot, what do you think about this?” She said, “I don’t do anything about things like that, Jodie. You know I do labels on cosmetics, but talk to Joel Hoffman, he’s my associate and he graduated from Yale recently and he’s really a scholar.” So I said okay. I think I went to lunch with Joel Hoffman. He was truly a scholar, he is a scholar. Difficult person but he’s a really good one. And he said to me, you must find a way. I said yes, but instead of my just saying do it – Professor Jackson: Oh no, no, this is great. I love this story. Ms. Bernstein: It’s a wonderful story. And he said to me, I think that because he had done a lot of research about the FTC, because they were doing FTC practice, he said, “I think that there is an old statute called the Rivers and Harbors Act of 1896 or something that is almost identical to the FTC Act in structure. Why don’t we take a look at that because that was pre-environmental stuff.” I subsequently used Rivers and Harbors Act for other things. He was right. There was no provision for any injunctive relief, but the courts upheld the ability to enforce the Rivers and Harbors Act, joining together with what the purpose of the statute were with the equitable powers of a federal court. I wrote that up and after I got out the Act and all, looked up the cases, and so forth. Whether I would have ever come across the Rivers and Harbors Act case, I doubt it, but I might have because I might have read a text about the development of the FTC Act or something like that, had I had time. And I wrote that up and sent it up to Bob, and he took it to show the General Counsel, and the General Counsel’s view was “I don’t think we even need this.” He said, “No court would tell me I can’t enjoin this.” Professor Jackson: Who was General Counsel? Ms. Bernstein: Oh a wonderful guy who is now dead. He was an older experienced lawyer, Joe Martin. There was a law firm, I think no longer in existence, called -96- Petit and Martin, and it was a San Francisco firm with no office here. Wonderful seasoned lawyer. So we got it all together and that is exactly what we were planning to do when Gillette came in and pulled the thing. So I don’t believe we ever went into court, but we were ready to. Professor Jackson: Did Gillette pull it in response to pressure? Ms. Bernstein: Yes. Bob called them in. Professor Jackson: I’m sure many parents thank you. Ms. Bernstein: I’m sure they do. Children and dogs. Professor Jackson: Oh gosh, yes, dogs, I hadn’t even thought of that. Ms. Bernstein: That was a wonderful episode, and Bob remembers it vividly. He sometimes doesn’t remember what I told him last week, but he remembers things like this. Professor Jackson: That’s marvelous and thinking about how electronic databases have changed the way we research, now you would go online or you would have one of your colleagues go online to do a word search and – Ms. Bernstein: Yes, and it would come up in five minuets. Professor Jackson: Really interesting. I know that from our prior discussions another major initiative that you were involved in, but I don’t remember whether it was when you were still in the division or you became acting before you left the FTC. I thought you had…acting consumer protection chief in 1975 is that – Ms. Bernstein: Yes, well it’s before that. What happened was after I was down in the division for a year, a year and a half, and partly because of this stuff I had done, Bob asked me to come up here to be one of his assistants. He had three assistants, no chief of staff, and we basically ran the bureau, the four of us. One of them left, Bob Skital left, and then it was me, Mort Needleman, and Bob Pitofsky. I never worked harder in my life. But I obviously learned -97- enormously because then I was not doing just advertising cases, I was doing a whole work of the bureau, everything that came up for the approval of the bureau director went either to me or Mort. At that time we still didn’t have– we have so much more superior staff now than we had then because we were still in transition and still had what I call clunker people. Professor Jackson: Was the bureau, or is the bureau, forgive my ignorance, divided into divisions? What are the divisions? You worked in advertising? Ms. Bernstein: The divisions are advertising practices. At that time there was one that dealt with credit. There still is– it’s now given a new name. Then there were Marketing Practices that did things like undelivered merchandising in mail order and land sales and things like that. Enforcement, enforcing administrative orders, and flammable fabrics included jurisdiction now at the Consumer Product Safety Commission. It was transferred over there when the CPSC was established. We now still have five divisions. They are slightly different, but pretty much the same. Professor Jackson: I didn’t realize there was this structure. Ms. Bernstein: The agency was reconstructed pursuant to the ABA report. It had previously had a lot of bureaus. One of them was called Rules and Guides, and they put out a lot of anti-competitive guides that basically helped industries protect themselves. It was protectionist out of the ’30s. It was still going on. Professor Jackson: How big was the advertising division when you were in it in the early ’70s? Ms. Bernstein: I would say 15-17 lawyers. Professor Jackson: And how big was the bureau at the time when you moved up to be bureau director? -98- Ms. Bernstein: I suppose it got to be about 300-350 people. And that doesn’t count the regional offices – we had then ten regional offices, and still do. They didn’t do anything useful at the time, nothing. Professor Jackson: I’m stepping out of order, but now as director, do you have to go out and visit your regional offices to – Ms. Bernstein: I visited them all when I first got here. I don’t do it routinely and partly the reason I don’t is we have teleconferencing now and instant communications, and they come in here twice a year. One of my management initiatives was to move them into the planning process that I established for the bureau so that I no longer have what was my worst problem then. It was as follows: a case would come up to me fully developed that I was supposed to approve, and it would be one I’d consider a useless case. Then when you’re in a position to have to kill off people’s work, I knew it had to change. It was wrenching kind of change but it has worked. The regional offices are now doing very good consumer protection work with our guidance and interaction. We put them together with people in the divisions and it works extremely well. They are now productive. Professor Jackson: Sounds like a much better way to have it organized. Let me take you back to the ’70s and the care labeling regulations, which I know when we had our first lunch you told me I should when I asked you what you were proudest of, I think you said care labeling regulations. So I have actually read the old stuff; I brought it with me in case you wanted to look at it, to refresh your own memory. Ms. Bernstein: …process of amending it or possibly amending it. Professor Jackson: I did see that when I first went online to LEXIS, but that’s the old one and – -99- Ms. Bernstein: Oh look how short it is, Vicki. Isn’t that wonderful? It really was historic, too, I thought. Professor Jackson: You really don’t have to read it. I just thought you would enjoy seeing it, and I didn’t think to bring a copy with me, but I would love to just ask you to tell about your involvement with the care labeling regulations. Ms. Bernstein: I don’t know where it originated in the bureau; I just don’t remember it. But I recall that one of the things Bob said to me as soon as I got up here is this thing is just emerging as an issue, and he said I want you to play a central part in whatever we’re going to do with it. Professor Jackson: Can I just interrupt for one minute? When you said as soon as I got up here, is that as soon as you got to the division or when you moved up from division to Bob’s okay? Ms. Bernstein: We were across the street in the Indiana building. Our division was over there. We had the most wretched office you had ever seen over there. Professor Jackson: I’ve seen some pretty wretched offices. Ms. Bernstein: Yes, you probably have. You wouldn’t be surprised at this. I used to say I was going to put a sign in the window because it was over the drug store, People’s Drug Store. I was going to put a sign in the window that said “Attorney at Law, One Flight Up.” Anyhow, I came over here, and Bob was in this very office, so I started at the bureau when there was another very significant legal issue. It wasn’t clear that the FTC had rule-making authority; in fact most people thought we didn’t. There was no provision in the statue, nothing. Professor Jackson: Is that right? Had the FTC been involved in cigarette labeling at all? -100- Ms. Bernstein: Yes, yes. Professor Jackson: Would there have been a similar issue then? Ms. Bernstein: Yes, there would have been; it was in the ’60s. I can’t remember, Vicki, because I wasn’t here, but the FTC had done a fabulous job on recommending health warnings. They were cut off by Congress. But there was a famous, we used to consider it famous, Statement of Basis and Purpose about the rationale for cigarette labeling that we used for years as a precedent for various things, written by Judge Posner, who is now on the 7th Circuit Court of Appeals. It’s brilliant, brilliantly written. I don’t know if I have a copy of it anymore. And I can’t remember – I don’t know if they were purporting to do that by rule or what they were purporting to do, but I do know this was an early issue, and I got involved with it quite early with Bob, who was managing or trying to manage it from here. And he had 48 million other things to do as well, and I kind of worked with him until I could get grounded in what needed to happen. As I may have mentioned before, it was enormously controversial – couldn’t possibly do this, and it was expensive, et cetera. Professor Jackson: But it can’t hurt for the tape to hear your description of it. I would encourage you to describe this one, which was a major initiative. Ms. Bernstein: It was a major initiative, and there were articles in Women’s Wear Daily with headlines that the FTC was putting them out of business and why do we need to do it. It was “big brother run amok.” “There was already plenty of information on the hangtags.” Of course our response to that was– mind you it became almost my issue because most of the men didn’t buy anything, then. They also had no responsibility in washing and dry cleaning because all their wives did everything for them then. I knew what it was like to buy a blouse and not be able to find the damn hang tag because it was lost somewhere and not know what to do with it. -101- And I think importantly this really came about because the nature of the fabrics had changed by then. Prior to World War II there had been basically four fabrics in the market: linen, wool, cotton, and some rayon. There wasn’t anything else. So as sort of a historic matter people knew how to care for these things. It was cotton and you knew what to do with it. Now post-War comes all these mixtures of materials, synthetics mixed with this and that and the other thing. A whole new array of materials that people and consumers were complaining that they were ruining them because they didn’t know how to take care of them. That was the genesis of it. But it was considered by some as sort of a woman’s issue which wasn’t very important at the time. But it became my issue in part because of that. I must say Bob was enormously supportive of it. Even though he certainly was no different from any other man who had no idea what we were talking about half the time. Here’s what he contributed to this. I’m going to skip ahead a little bit. We went to the hearings and then, as we did in those days, either Mort or I would sketch an outline – here is what we ought to provide, the rule, kind of do an outline. We’d come in here usually late in the evening, after everyone else had gone, and sit down with Bob, the three of us, and go through what we thought it should be like, and he would say yes or no or maybe and so forth. Then we had to go to the commission with a position. And that’s pretty much the way we did that. We sent it to the commission, and among the things that subsequently became very important in terms of Bob’s legal judgments, there were provisions for exemptions. And one of them was, there were two as I recall, one was “Completely Washable and under $5 or under $10”– then no label was required. The other one was “Completely Reversible” – the rationale was there would be no place to put the label. And it applied only to textiles. Professor Jackson: Help me out here, textiles was distinguished from – Ms. Bernstein: Leather, fur. It was wearing apparel; those were the principle -102- exemptions. We went to the commission on the first one, “Completely Washable,” and I think it was under $5 initially, but I can’t remember. Because we had said $15, it didn’t seem unreasonable, but Mary Gardner Jones, our consumer advocate on the commission, thought that was way too broad– down to $5. And there were things you could buy then for $5: underwear and other things you could buy for that, stockings. In fact I think I must have done the hosiery exemption myself. Then we set up a little provision saying “petition the commission if you want an exemption.” They delegated the exemption authority to the bureau director, specifically nondelegatable. That was very radical and nearly unique for the commission to delegate any kind of authority to the bureau director. Professor Jackson: Radical in that the commission didn’t keep it for itself? Ms. Bernstein: Yes, though only in a limited way because it established a negative option. The bureau director was to make a decision, put it on the public record for three or five days, so then the commission could then object, if it wanted to; if not, it was done. So we did the rule. Now, at the same time, before I got to the bureau level, or at least I had nothing to do with it, the commission had published the octane rule, which required disclosure at the pump of the octane levels of gasoline. That rule had been challenged in court. And it was pending in the D.C. Circuit. So Bob said to me and Mort as we went through what the issues with care labeling were and what we would provide and what we wouldn’t, he said, “This rule can’t be challenged. I don’t want this rule challenged. And the reason is I don’t want it to go to another court of appeals. If it gets in another court it gets to another circuit court and we have different decisions, it’ll go to the Supreme Court on our rule-making authority.” I don’t think that would have occurred to me at the time. I just wasn’t experienced enough in administrative law to think about that. So he said, “Now we can’t discuss this publicly obviously;” he said, “We’re not even -103- going to discuss it, but I want you to write a rule that would not be challenged, it will be one that industry decides it can live with and not have to challenge.” So my instruction was to see what I can do to talk any company out of challenging. Which we did. And I think the other advantage we had was that the textile industry consisted of small companies; there were no big companies. It wouldn’t have been in anybody’s interest at that time. I mean it may have been in all their interests, but it was hard to get them organized. Oh, I almost forgot one thing. The thing that was really the most brilliant, I think, on Bob’s part was we did not require the retailers to do the labeling or to have any responsibility for the labeling, but we informally said to them, “You are not going to sell unlabeled merchandise are you?” They said, “No.” And they said to their suppliers, “You better get those labels on.” Retailers then had much more economic power than the manufacturers. Manufacturers were a lot of little Jewish guys in New York that were manufacturing all the wearing apparel in the country. And there wasn’t anything coming in; there was no foreign merchandise except Chanel. Professor Jackson: It’s interesting that none of the textile manufacturers filed a challenge. With a fair number of small companies any one of them I suppose could have done so. Ms. Bernstein: Any one of them could have done so. But they were small and they had this pressure coming from the retailers. The retailers called the shots. Professor Jackson: And how did you informally get the retailers on board? Ms. Bernstein: There is a National Retail Manufacturers Association, and we met with them, Vicki. Bob would say call them up, ask them to come in here, and we would do that. We went up to New York one time because on the issue of comparative advertising, the NAB had a code of conduct that prohibited ads that name a competitor and hence the “Brand X” ads. -104- Remember Brand X? Well Bob had this antitrust theory that voluntary restriction was probably anti-competitive and they shouldn’t do it. But we didn’t challenge it. He sent us up to New York, we got appointments with the networks and the NAB and said to them, “You know you guys better be thinking about dropping those provisions” – it was in terms of “disparagement,” but that’s what it really meant. They stopped doing it before they were ordered to and said the threat was that we would make them. Allow it, that’s all, we weren’t saying you have to do it. We were just saying you just have to allow. Professor Jackson: So it’s thanks to you that I get to hear that we’re Canon copies not Xerox. Ms. Bernstein: Yes. These were very exciting times, Vicki. Professor Jackson: That’s absolutely marvelous. Now on care labeling, I remember from our lunch a year ago, wonderful stories about particular products ending up in your office or in an office that you were responsible for, but I’ve lost the details. Ms. Bernstein: I can tell you what the segue is into that because what we’ve been talking about is the challenge to the rule and avoiding it, but the most difficult part for me was Bob then. Remember I told you it was delegated to the bureau director, specifically nondelegatable. As soon as the rule was final, the exemptions started piling in, petitions from all the little guys. He turned it over to me. And he said, “Just get it right.” So I said, “Well, how? What will I do if I have to deny one because there will be a challenge?” He said, “We’ll just have to work it through to get people to do what you want them to do without denying it.” Which was some kind of fun because I have wonderful stories from that that I used for years, years. Professor Jackson: What are some of your best ones? -105- Ms. Bernstein: I told you I think at lunch that I tried to first of all put out a little statement saying if you want an exemption, just write a letter and tell us. If it’s completely washable, tell us that, and if you run a test, give us the test results. We didn’t say you had to do that but so forth. Very simple. And we said, “Do not send samples. Do not send samples.” Samples were not going to help us with this. That did not stop them from sending samples. They sent samples. And it was piling up in my office. I’ll tell you my best story of all, which I’ve used over the years. My way of dealing with this was, because it became pretty routine, most of them I would just say your exemption is granted and slap it on the public record. I mean I showed some of them to Bob; most of them I didn’t. There wasn’t a conflict; he trusted me to do it. And the commission wasn’t fussy or anything. But I would save them until like Friday afternoon from 3:00 to 6:00 or so to work them through when I was tired, and it was pretty much routine. So I got one one Friday afternoon, and they really hadn’t supplied any information, this little manufacturer in New York. I used to call them, I don’t remember what the real name was, it really was a real story. So I thought instead of sending them back to him and saying you know – because his letter had said, “Please exempt this,” and it just wasn’t enough for me to do anything. So I thought I’d call him instead. So I call. And some woman with a very Yiddish accent answered the phone, “ ____Manufacturers.” I think they were making kids’ clothes or something like that, and I said, “Is Mr. Cohen there?” “Who’s calling please?” Mr. Cohen was the president. I said, “Well I was Jodie Bernstein for the Federal Trade Commission.” There’s a long pause, and I hear her saying, “Hymie, Hymie it’s the government.” When I don’t have a cold I tell this story better. And so Hymie gets on the phone and immediately says, “What do you need? What do you want?” She said to him, “It’s the government,” and he said, “It’s the IRS,” and she said, “No, no, it’s something else.” I tried to walk him through and tell him what -106- to put in the letter. I practically dictate it to him, and he ends up saying, “Fine, fine, so I send it to this Mr. Pitofsky?” “Yes, send it to this Mr. Pitofsky,” and okay, okay. And he said, “Do I have to do anything else?” “Oh no, just write the letter.” “Oh thank you, thank you, Mrs. Bernstein,” blah, blah, blah. So I said, “Just write the letter please, Mr. Cohen and send it in.” The letter comes in and it says,”Dear Mr. Pitofsky, Forty years I’m in the underwear business, never have I met such a wonderful person as your Mrs. Bernstein.” Honestly, literally in the letter, Vicki. I said to Bob, “What am I going to do with this? I have to put this on the public record.” He said, Put it on the public record, it’s wonderful.” So I had all those things. It was a balance, and we got through all them. Professor Jackson: Did you have any favorite items of apparel that ended up in your office? Samples that you didn’t want? Ms. Bernstein: There were huge numbers of bikini underwear and brassieres that they claimed could not be labeled because they were too small or they were reversible or this and that. I had tons of them, and I just didn’t know what to do with them. I think I may have told you. This is another funny story. I had all this stuff and everybody was hysterical over my room full of merchandise. Professor Jackson: Sort of a precursor to Victoria’s Secret. Ms. Bernstein: Yes, and bathing suits, we had a lot of bathing suits because they were really hard to label. Bob came in and looked in my office, and I wasn’t there, and he turned and said to Mort, “Where’s Jodie?” And Mort, who had this wonderful sense of humor, said, “I think she took the spring line on the road.” The other wonderful one is a Mort story. I had a huge petition from the furriers because the lining of the fur coats were textile, so they had to write. Do they have to label the lining? And I worked around it and called people, and I -107- concluded that it was very impractical to require anybody to clean the lining of a fur coat in part because there is no home care for fur coats. It’s professional care only for the whole thing. So really the whole basis for the rule and giving the people information was not significant, and it would tell you professional care, so it didn’t quite fit into the categories of exemption. I had to be fairly creative in writing it to say the purpose of the rule would not be served and so forth. So I had done that, and I had talked to Mort about it because I knew it would get a fair amount of attention because it was going to basically exempt the whole industry as opposed to other little things that were individual. So we went to talk to Pitofsky at 6:30-7:00 at night, and mind you, Sally Pitofsky did not have a fur coat. If he ever had anything to do with the fur industry, it would have been a surprise. So I walked him through all this, and the basis really is individual consumers don’t have to take care of fur coats. So he looks up and in his usual way of probing questions he said, “Jodie, it is a textile.” I said, “Yes I know,” but then I launch into it, and so he says, “Are you sure that the only way to clean fur coats is to take it back to the place you bought it or some other place and have them do whatever they do?” I’m about to say yes, and Mort says, “Well there’s one other way.” I looked at him and Bob says, “What’s that?” He said, “Well if you’re wearing a leopard coat, you can go to the zoo and stick your arm through and have the leopard lick it. That’s the only other way.” I just thought this was a hilarious comment. So that is how we did that one. Professor Jackson: Were you able to get the manufacturers of the brassieres, for example, the last 15 years is that they do have little labels on them; at least they have size labels. And I don’t know if I’ve ever looked for a care label because I know I always hand wash them. Did you ever get them to put labels, but are they able to permanently affix the size labels? Ms. Bernstein: I don’t remember even what we did with them. It was mostly -108- bikini underpants that they said didn’t have room. Professor Jackson: Okay. Did you ever have to negotiate with anybody or were most petitions that came in were ones that you were able to grant? Ms. Bernstein: Most of them I was able to grant. But some of them I had to negotiate. But some of them I would push into saying I really think you can do it. I don’t even know whether– I think a couple of them we did deny, after I was satisfied they weren’t going to challenge the rule. Professor Jackson: Now once a rule like this is promulgated, I assume the FTC has some sort of enforcement authority, that is if you found a major manufacturer who was not in compliance, were there enforcement actions that you were aware of following adoption of the rule? Ms. Bernstein: Not that I was aware of then, but there have been subsequently. And there still are now. We brought some cases last year – I think they also had Section 5 violations as well. Professor Jackson: What’s Section 5? Ms. Bernstein: Deception and unfairness – general – Professor Jackson: All right. I wondered if you had a most unusual garment. We may have covered that. Ms. Bernstein: We have. Professor Jackson: Here’s a more general question. I suppose that there are law and economics people or libertarians who would even today be critical of an initiative like this, the Big Brother objections that you mentioned earlier, and I guess I’m just interested in your response after so many years, both earlier in your career and now, in the field of consumer -109- protection to claims that either the market would take care of it or that the cost that you end up imposing on the garment industry which then get passed on to the consumers really actually don’t confer benefit. Ms. Bernstein: I guess part of my response, and we still hear those things today– now mind you the commission does almost no rule-making now, unless it is directed by statute, and the reason is that in the Perchuk era, which occurred in the Carter administration, Mike Perchuk became the chairman, and it became a very aggressive regulatory agency, which it really wasn’t in the ’70s. It was aggressive, but not in the way it became. And the agency’s existence was at risk in that period. Professor Jackson: Was that the lemon rule? Ms. Bernstein: Yes. It was called the national –in the Washington Post because of the so-called kid rule, which never passed. The Congress then moved because there was a consensus about the FTC had moved. It was not even such a big – I don’t think anybody knew at the time in the Carter administration what was in fact happening. The country was turning conservative and in part it was because of this so-called over-regulatory zeal, et cetera. Congress passed the Magnuson-Moss Act, which authorized rule-making at the FTC but also imposed very heavy procedural requirements. It’s a difficult, hybrid rule-making procedure, so it’s just slightly less than formal rule-making, formal hearings, right to cross-examine, and so forth. After that in the whole decade of the ’80s, I don’t think the commission issued a single rule. Professor Jackson: Do those requirements apply to amendments to existing rules? Ms. Bernstein: No, they do if the rule was promulgated pursuant to Mag-Moss; if it wasn’t – Professor Jackson: So your care labeling rules can be amended without going -110- through – Ms. Bernstein: I think that’s right. I’m not absolutely positive of that, Vicki, for this reason. After Mag-Moss was adopted, the commission in the ’80s imposed additional procedural requirements that made it even more rigorous than the statute required. The commission’s own Rules of Practice. This is just a tidbit on the side. When we first came back here, Bob and I, one of the things that was a priority for him and for me was, like all government agencies, there was this re-inventing government programs which meant you should go back and look at all your old stuff and eliminate what you don’t need any more. The commission had started such a project a couple of years before Bob and I looked at it. They hadn’t accomplished very much. It was very slow. Professor Jackson: Is this in the ’70s or ’90s? Ms. Bernstein: ’90s. Professor Jackson: ’90s okay. Ms. Bernstein: It started in ’92 even though Bob didn’t get here till later on. Janet Steiger was still the Chair, but they started some of those initiatives. So Bob and I asked the people to come in and tell us why it took so long and why so little could be done. And they said because in order to eliminate a rule or amend a rule you have to go through Magnuson-Moss procedures, including the encrustations that the commission had imposed on itself. Well it was just the most unbelievable process you ever saw. Bob said to me, “Should we do anything about that?” I said, “I think so.” So we took away the crusts, some of them. But now I’m thinking – and what we ended up with, even where you allegedly have to follow the statute, and it is true that courts have said you have to follow the statute, to undo a rule the same way you do. But by that time I had removed the crusts pretty much and given us a lot more ability to proceed. For -111- example, if you must hold one of those formal hearings, if there are disputed issues of material facts, you can find a lot of ways to make a finding that there are none or one merely disputed issue. And so you eliminate a hearing, or you have to hold one on that one issue. We had moved the ruler and the staff in a more expedited direction, and now we’ve got a very vigorous program. We have now eliminated, I believe, 50 rules since we’ve been here. But I think we’re going through that same thing with the amendments – that is, there were no disputed issues of material facts. Professor Jackson: Disputed facts. Ms. Bernstein: Yes right, disputed issues of material fact, whichever one it is. And so we’re going to hold a hearing, but it’s not going to be a formal hearing. Professor Jackson: I tell you what. I need to conclude today because of this unexpected event with my daughter, so we will take up the story at our next meeting.