quirements for an item of safety equipment. The study must take into account research and test data available from any source. For this purpose, the Commission may "collect, correlate, analyze and evaluate" research and tests carried on by other agencies, public and private. But except for such "librarytype" research, it is not authorized to carry on any research and testing of its own. It may contract for research and testing, but only if requested to do so by a state or governmental agency, and then only if the requesting agency provides the necessary funds. The Commission may not accept private funds for any purpose.

On the basis of its study of need, the interstate agency must publish a report. No less than sixty days later, it must hold one or more public hearings.

Finally, after these steps are completed, "and with due regard for standards recommended by appropriate professional and technical associations and agencies," the Commission may issue recommended rules, regulations or codes.

Party states are obligated to consider the rules, regulations or codes issued by the Commission, but they are not obligated to accept them. One of the two alternative methods of adoption requires amrmative action by the state legislature for the rule, regulation or code to take effect. The second alternative method is adoption by administrative action of a party state's motor vehicle agency. If a state chooses this alternative, its motor vehicle agency must adopt the rule, regulation or code within six months. The administrative agency may "decline to adopt" but only after public hearing, a specific finding that a variation from the Commission's recommendation "is necessary to the public safety," and a recital of the reasons on which the finding is based. Fortyfour states and the District of Columbia are now members of the compact. In all but a few of the member states the enabling legislation provides that the legislature must pass upon standards proposed by the VESC.

We may only guess how long the adoption of motor vehicle safety standards by the VESC might take, since it has never yet adopted one, although Congress authorized the formation of interstate compacts in the field of tramc safety by passage of the Beamer resolution in 1958 and the VESC was organized in 1963. Surely, however, the study of need, publication of a report, holding of one or more hearings after an interval of at least sixty days, consideration of standards recommended by appropriate professional and technical associations and agencies, and finally formulation of a standard would consume a very considerable period of time. Moreover, since the proposed act would authorize the automobile manufacturers col

lectively to propose standards to the VESC and the compact requires the VESC to consider standards recommended by "appropriate professional and technical associations and agencies" before acting, the automobile manufacturers would be able to some extent to influence the timing on introduction of new safety devices.

The industry proposal would require the Secretary to allow such initial time (not exceeding two years from the date of enactment of this Act) as he considers reasonable for motor vehicle manufacturers to propose and for the VESC to adopt a particular motor vehicle safety standard. Presumably, this means the Secretary must allow reasonable time for the procedure which has been outlined to be carried out. It may be somewhat optimistic to think that this procedure could be carried out even within the two-year maximum time limit which would be imposed. In any event the Secretary would have to allow reasonable time for the VESC to act on its own before he would even be

permitted to propose an appropriate standard to the VESC for its consideration, a step which would be a prerequisite to promulgation of a federal standard by the Secretary. Although the industry proposal would provide that the Secretary could request the VESC to act upon his proposal within 180 days or such longer time as he might specify, it would appear that the VESC compact, the organization's legally binding constitutional document, would require it to adhere to the time-consuming procedure which has been outlined above. If the VESC had not previously recommended a standard on the particular subject, it would probably have to conduct the entire proceeding. Even if it had previously studied the particular subJect, it would, at a minimum, have to publish a new or amended report, hold new hearings after allowing a sixty-day interval, and consider the opinions of appropriate professional and technical associations and agencies before acting on the Secretary's proposal. It seems extremely unlikely that such a procedure could be carried out within 180 days or anything approximating this period of time, and the proposed scheme appears to be not only unnecessary and undesirable but completely unworkable if one assumes that the Secretary would request the VESC to act within the 180-day period. The Secretary would no doubt be under heavy pressure to exercise the discretion which the industry bill would give him to allow a longer period within which the VESC could respond to his proposal.

In order for the Secretary to act under the industry proposal, however, not only would it be necessary to carry out these VESC proccedings, but the Secretary would then have to hold an APA section 4 proceeding as well. It is easy to envision it requiring five years or more before the Secretary is able to promulgate enforceable standards, with the automobile manufacturers themselves controlling the timing to a great extent.

Although Mr. Bugas stated before the House Committee on Interstate and Foreign Commerce that the amendments proposed by the industry "would involve no delay in the development and establishment of national safety standards," we believe it is obvious that this is far from the case.

In his remarks upon signing Proclamation 3718, declaring the week of May 15 as National Transportation Week, President Johnson stated that the Highway Safety Act of 1966 "will establish a program of strict safety standards for our automobiles." "The alternative to Federal standards," he said, "is unthinkable: 50 different sets of standards for 50 different States." The industry proposal, while it would not result in 50 different sets of standards, would permit differences among the States to delay for a very long period of time the introduction of federal standards.

One additional respect in which power might be taken from the Secretary and transferred to the VESC under the industry proposal warrants comment. The industry proposal, in section 102(d), would require, rather than authorize, the Secretary to establish as a motor vehicle safety standard any standard issued by the VESC which he found appropriate and necessary to accomplish the purposes of the Act. Since under that section the Secretary would be authorized to establish other standards only if any existing motor vehicle safety standard is inadequate, he would probably be barred from issuing any standard except the standard adopted by the VESC, unless he were willing to and that the VESC standard was inadequate. The Secretary might well believe that another standard was preferable to the standard recommended by the VESC, although he might not be prepared to determine that the standard recommended by the VESO

the very large and able companies that comprise the automobile industry can accelerate the development of safety devices. The collaboration authorized by the industry proposal, however, may well have a braking effect upon the development of safety devices.

For example, section 102(c) (3) would authorize the automobile manufacturers to agree to comply voluntarily with standards proposed to the Secretary or VESC before the government adopted standards. The danger in allowing the manufacturers to agree on minimum standards is that in practice these standards might well be regarded by the industry as absolute standards, which are not to be exceeded. Nor is it clear why agreements are necessary in this area. If, having proposed a standard, companies unilaterally determine that public opinion requires that they comply with or exceed that standard, antitrust liability is not a real threat.

Second, section 102(c) would authorize the manufacturers to work jointly "in designing, testing, and producing motor vehicles or motor vehicle equipment" for the purpose of developing, evaluating or complying with proposed standards. Some of this activity might well raise serious problems under the antitrust laws-such as joint production of motor vehicles to comply with proposed standards-in effect a partial merger in an industry already characterized by extreme concentration.

On the other hand, other activity covered by the provision, such as joint testing of new safety devices, would not ordinarily raise antitrust problems. The point is, however, that in an industry of so few participants, each of which is a large corporation with substantial resources, the valid need for collaborative action, weighed against the possible adverse consequences of such collaboration, does not warrant any special protection from ordinary antitrust principles. Such principles are not unduly inhibiting; they do not threaten to impede progress in the development of safe cars. The Hearr doctrine affords ample room for consultation among the companies in invoking the governmental processes. Consultation with the Antitrust Division under the Business Review Procedure can assure the industry of the safety from antitrust prosecution of any collaborative effort.

Although the industry amendment would provide that the statute would not make lawful anything otherwise forbidden by the antitrust laws, such language is not an adequate safeguard. In a rule of reason situation a court could not help but be affected to some extent by the fact that the statute explicitly authorizes and encourages cooperation in the production of motor vehicles and equipment. Similarly, the court could not help but be impressed by the fact that the statute authorizes and encourages the members of the industry to agree to comply with the standards they are proposing even before these standards are adopted. If, as may well be the case, most of the antitrust problems raised by such collective action are not of a per se variety, the fact of legislative authorization and encouragement would undoubtedly affect a court's disposition of the antiissue, despite any explicit disclaimer. At this point, it is not at all clear from either a competitive or a safety point of view that this type of collaborative effort is essential or wise.

(4) The Inappropriate Standards of Judicial Review: The industry proposal would make various amendments relating to Judicial review of action taken by the Secretary and the procedure to be followed by the Secretary. These amendments are contained in proposed sections 102(1) and 103.

The industry proposal would amend section 103(a) (3) to substitute a new standard

for judicial review of determinations made by the Secretary. Under the Administration bill findings of the Secretary as to facts, if supported by substantial evidence, would be conclusive. The industry proposal provides that findings of the Secretary with respect to questions of fact "shall be sustained if based upon a fair evaluation of the entire record of the proceedings on which the Secretary based his order."

This new standard for judicial review represents an attempt to obtain a form of trial de novo in the Courts of Appeals, which would review the orders of the Secretary. Such review would be inappropriate and extremely burdensome on the Courts of Appeals, which are accustomed to reviewing determinations of fact under a "substantial evidence" test. The latter test is the one generally contained in statutes providing for court review of decisions or orders of regulatory agencies. See, eg, 15 U.S.C. 21(c) and 16 U.S.C. 825(1), relating to FTC and FPC orders. We see no reason why similar language should not be used here.

The industry proposal would aleo amend section 103 (a) (3) to provide specific authorization to the reviewing court to stay the order of the Secretary pending final determination of the review proceedings, and would make jurisdiction in this respect, as well as to affirm or modify the Secretary's order, exclusive. This amendment seems undesirable in two respects. First, the specific authorization to the reviewing court to stay the Secretary's order is unnecessary, since such power, subject to appropriate limitations, is already given to the reviewing court under section 10(d) of the APA Act (5 U.S.C. 1009 (d)). While the industry proposed statutory authorization is unnecessary, it might also have the undesirable effect of removing the limitations on the power to grant stays contained in section 10(d), since these limitations are not contained in the proposed statutory amendment. Second, by making the court's jurisdiction to stay the Secretary's order exclusive, this provision might take away the power which the Secretary otherwise would have under section 10(d) to postpone the effective date of action taken by him pending judicial review. It is probably desirable that the Secretary retain this power.

Section 103 (a)(3) would also be amended by the industry proposal to provide that, "The Court shall not sustain the order of the Secretary if he failed to comply with any requirement imposed upon him by section 102." Section 10(e) of the APA Act provides that the reviewing court shall hold unlawful and set aside agency action which is not in "observance of procedure required by law." The industry provision might invalidate action of the Secretary taken in substantial compliance with the specified procedure but with some minor deficiency not prejudicial to any party, whereas the provision of the APA Act would not. Accordingly, we oppose all the amendments which the industry proposal would make to section 103 (a) (8).

The industry proposal would also provide in section 102(1) that the Secretary "shall base each such order upon a fair evaluation of the entire record which is before him pursuant to such section 4, and he shall set forth in such order findings of fact and conclusions on all relevant matters."

Act (5 U.S.C. 1003), which prescribes the rule making proceeding. We prefer the flexibility of the Administration bill and suggest that the agency should retain the discretion, provided by section 4 of the APA Act, to determine whether to hold formal hearings with opportunity for cross-examination.

(5) The Unwarranted Narrowing of Prohibitions: The industry proposed amendments to sections 107, 108, 109 and 110 would severely restrict the acts which would be prohibited by the statute and reduce the penalties which might be imposed for violations. In a number of respects these changes may impair the emciency of the proposed legislation.

(a) Under section 107(a)(1) of the Administration bill it would be unlawful for any person to manufacture for sale, sell, offer for sale, or introduce or deliver for introduction in interstate commerce, or import into the United States any motor vehicle or item of motor vehicle equipment unless it is in conformity with such standards as are prescribed by the Secretary. This would be a strict liability standard. The industry proposal would only prohibit "knowingly and willfully" selling motor vehicles or equipment falling to meet federal standards. The standard of liability would be that of intentional torts.

Especially in view of the fact that the Administration bill does not in the version we have studied provide for criminal sanctions, an intentional tort standard seems far too permissive. Under the industry proposal manufacturers may not be found in violation of the act although they sold vehicles in reckless disregard of whether they complied with federal standards.

Unlike 8. 3005, the Brake Fluid and Seat Belt Standards legislation, which only prohibit knowing and willful violations, are criminal statutes.

We have no objection to the certification device for protecting sellers who are assured by the manufacturer or importer of compliance with safety standards. Section 107(a) (3), b(1).

(b) The industry proposal would amend section 108 (a) to place a $100,000 limitation on the penalty which could be imposed for any "related series of violations" of the Act. It would also delete the provision that a violation of section 107 or regulations issued thereunder shall constitute a separate violation with respect to each motor vehicle or item of motor vehicle equipment. We are opposed to these amendments. While some overall limitations may be desirable for a related series of violations, a limit of $100,000 would seem unreasonably low and would not act as a strong deterrent. Deletion of the provision defining what constitutes a separate violation of the act would leave this matter uncertain. Since the definition in the Administration bill appears to be a reaBonable one, we oppose the deletion.

The industry proposal would also eliminate the seizure remedy provided in section 110 (a). This is undoubtedly an extraordinary remedy to be used rarely. It may be desirable to provide such a remedy, both to have it available for an extraordinary situation and because it may act as a powerful deterrent to violation of the act. However, if adequate deterrents are otherwise provided, we see no strong need for the provision.

(c) A new section 107(c) would provide that nothing in the act shall be construed to require the Secretary to report for imposition of a civil penalty or institution of inJunction proceedings minor violations of the act whenever the Secretary believes that the public interest will be adequately served by a suitable written notice or warning. No definition of what would constitute a "minor violation" is given. This provision seems unnecessary but if it is retained "minor violations" should be defined.

A new section 109 (a) would provide that before any violation of the title is reported by the Secretary to the Attorney General or any United States Attorney for institution of an injunction proceeding, the person against whom the proceeding is contemplated shall be given notice and opportunity to present his views, either orally or in writing, with regard to such contemplated proceeding, and, except where knowing and willful Conduct is involved, such person shall also be given a reasonable opportunity to take corrective measures to achieve compliance. This would permit a period of delay before an injunction could be obtained, although swift action may be necessary in the interest of public safety.

The report submitted with the industry draft bill states that this provision is consistent with section 305 of the Federal Food, Drug, and Cosmetic Act (21 U.8.C. 335). However, that section calls for notice and hearing "before any violation • • • is reported for institution of a criminal proceeding⚫ • •.” (Emphasis supplied.)

The courts, moreover, have construed this provision to be inapplicable in a civil action for injunction. The report also cites section 9 of the Administrative Procedure Act, which offers interested parties a reasonable opportunity to take corrective measures to cure a violation before proceedings can be instituted. However, that section only applies to proceedings relating to revocations and suspensions of licenses.

We would generally not favor imposition of criminal penalties for violation of the Act. Were criminal sanctions created, the statute might have to be narrowed in the respects we have noted, and it would also undoubtedly receive a narrower judicial construction. There would also be some dimculty in determining on which individuals criminal penalties chould be imposed. Under the antitrust laws criminal sanctions are imposed upon individuals who have been participants in conspiratorial activity. The individuals responsible for noncompliance with safety standards, however, would not be as readily identifiable.

(6) Other Limiting Amendments: A number of other amendments proposed by industry would limit the power and discretion of the Secretary in various ways.

(a) The authority of the Secretary to establish standards would be limited to protecting the public against death and personal injury, whereas the Administration bill would also authorize him to formulate standards to protect against property damage. See sections 2, 101(a), 102(c) (2) and 104(a). In support of this limitation, the industry argues only that standards to protect against death or personal injury may be inconsistent with standards to protect against property damages. While it is true that these goals may be inconsistent in some circumstances, it is clear enough that priority should be given to protection against death and personal injury in such cases. Surely, the fact that the Secretary's ability to protect against property damages would be limited to some extent by the priority to be given to protecting life and person is no reason for denying him the power to protect against property sistent with other alms. damages where this can be accomplished con

one.

(b) Section 102(g) of the industry bill would require the Secretary to comply with the same procedure in amending or withdrawing a standard as in originally issuing The Secretary would first have to request the VESC to issue such an amendment or withdrawal. It seems particularly undesirable to limit the Secretary's power to withdraw a standard and to require such time-consuming proceedings, since experience may demonstrate a standard to be inadequate or, perhaps, even harmful.

(c) The industry proprosal would eliminate from the present section 111(b) the requirement that manufacturers establish and maintain such records as the Secretary may reasonably require and also the provision that manufacturers shall permit officers designated by the Secretary to inspect appropriate hooks, papers, records and documents. These provisions in the Administration bill are important means for the Secretary to ensure compliance with the Act and should not beliminated.

(d) Section 113 of the Administration bill would require the Secretary to utilize the services. research, and testing facilities of other departments and agencies to the maximum extent practicable in order to avold duplication in facilities and services. The industry proposal would add to this provision the requirement that the Secretary utilize the facilities of competent private agencles to the maximum extent practicable. It would be undesirable to limit the flexibility of the Secretary in this manner. He should be free to use private facilities to the extent he c'etermines to be desirable. Moreover, in this connection we believe the Administration bill should clearly state that the Secretary has power to undertake research and development of experimental automobiles. In view of the highly concentrated structure of the industry this additional source of research and innovation would be valuable. (e) Section 102(b) [102(f) of the industry bill would be amended to require the Secretary to give due consideration to the criteria of Section 102(h), discussed at length in part (2) above, in determining the effective date for standards. Our comments earlier with respect to these criteria apply here as well.

(1) The industry proposes to add a new section 114 which would provide that in a civil action for infringement of a patent of the United States where the defendant establishes that the infringement was necessary for compliance with a federal motor vehicle safety standard, relief shall be confined to a reasonable royalty for making or using the patented invention. While it appears to be intended that this provision apply to all patents, "patents of the United States" might be interpreted to mean patents owned by the United States Government, in which case the provision would have very limited effect. Perhaps a different description of the patents covered should be chosen.

This provision can unnecessarily dull the incentive for any member of the industry or any independent part manufacturer to push research. The possibility of a new defense in infringement actions, which will be passed upon by a number of different courts and may lead to diverging conclusions as to the "necessity" for licensing, would increase patent litigation and would substantially qualify the expectation for rewards of prospective patent holders.

On the other hand, we recognize that there may be situations in which the advancement of safety requires that a patented invention be available generally on a reasonable royalty basis. We believe that if the Secretary should promulgate a standard that requires the use of a device for which there is but one patent holder, he should be empowered and required to provide for compulsory licensing of that patent on a reasonable royalty basis on the request of any prospective licensee. If alternative patented devices are available, he should be authorized in his discretion (upon his determination that availability at a reasonable cost of equipment needed for compliance with the safety standards so requires) to provide for compulsory licensing on a reasonable royalty basis of each such alternative patent on the request of any prospective licensee.

(g) Under section 102(b) of the Administration bill, if federal standards were in

effect with respect to a motor vehicle or itcm of motor vehicle equipment, state standards with respect thereto would be null and void.

The industry section 102(f) would preempt state standards only if they differ from federal standards, consistent with the approach followed in the Tire Safety Bill.

Such an amendment seems desirable and may be necessary to enable the states to impose standards for used cars.

The Bureau of the Budget has advised that there is no objection to the submission of this report from the standpoint of the Administration's program.

Sincerely.

RAMSEY CLARK, Deputy Attorney General.

DEPARTMENT OF JUSTICE.

April 6, 1966.

Honorable WARREN G. MAGNUSON, Chairman, Committee on Commerce, United States Senate,

Washington, D.C.

DEAR SENATOR MAGNUSON: In response to your request for comments upon the testimony before the Committee on Commerce on April 5, 1966 by Mr. John S. Bugas, VicePresident of the Ford Motor Company and Chairman of the Automobile Manufacturers Safety Administrative Committee, we have the following preliminary observations.

We have not as yet had the opportunity for a full consideration of specific legislative proposals, or of the question whether, in the context of specific legislation on joint action, a narrowly drafted antitrust immunity provision is either necessary or desirable. However, we understand Mr. Bugas to have contended generally that concern over the application of the antitrust laws has prevented and would prevent joint research and other cooperative endeavors to forward the use of safety devices by members of the automobile industry, and has also prevented and would prevent the exchange of information concerning appropriate standards of safety. To document his concern, Mr. Bugas stated that the automobile industry is presently under antitrust investigation with respect to exhaust emission devices.

As for the investigation referred to by Mr. Bugas, we note first that it was commenced only within the past fifteen months and could not have been the basis for previous industry inactivity. More importantly, the charges being investigated by the Antitrust Division are of cooperative efforts to suppress, not to promote, the utilization of auto emission devices a possible type of abuse which hardly strengthens the case for a grant of antitrust immunity.

Nor is there anything persuasive in the general argument that the vagueness of the antitrust laws prevents the formation of any cooperative effort to develop safety devices or to exchange Information concerning standards. The antitrust laws do not prohibit such arrangements where joint efforts seem necessary and constructive and are not accompanied by unduly restrictive collateral agreements. Moreover, clarification of the applicability of the antitrust laws to any particular proposal has always been readily available by consultation with the Department of Justice and submission of a proposal under the Business Review Procedure or for other review. (As an example, the major networks and press associations requested the Division to review a proposal for industrywide cooperative efforts in the compilation of returns in the forthcoming national elections. After consultation and revision, the industry was advised the Division did not intend to take action under the antitrust laws against the arrangement.)

General arguments for blanket statutory Immunity from the antitrust laws for cooperative endeavors, therefore, do not appear sound. Buch immunity seems to be not only