Mr. KNEIPP. There have been no prosecutions in the last 5 years for false advertising by ABC licensees, and there have been no citations in the past 5 years for false advertising by agency licensees.

The problem here, Mr. Chairman, is whether H.R. 684 would add anything. If there are no prosecutions under existing law, what reason is there to believe that there would be prosecutinos under H.R. 684?

Mr. MULTER. Because the testimony, if I recall it correctly, of the ABC Board before the last Congress was that there was opinion or legal advice given to them that they had no right to entertain these applications or complaints under this section for false advertising.

While there was some dispute as to whether or not there was any false advertising, I think the record is replete that there was false advertising and continual false advertising in this industry, and yet nothing done by anybody to stop it.

If this act or this proposed bill, H.R. 684, is not sufficient to give them authority to do it, I think you as the Corporation Counsel ought to indicate to us what should be done, how the statute should be changed so as to stop false advertising.

Mr. KNEIPP. Mr. Chairman, the position of the Commissioners is that there is sufficient authority in existing law, which is, incidentally, prosecuted by the U.S. attorney, to handle cases of false advertising. Mr. MULTER. Can you tell us why the ABC Board does not process complaints against false advertising?

Mr. SCHWENGEL. Mr. Chairman, I am sorry to interrupt you
Mr. MULTER. Surely.

Mr. SCHWENGEL. I am sorry I did not get around in time.

I want to, in behalf of Mr. Springer, who could not be here, who has given this matter a lot of thought, evidently, make the following request, if I may.

Mr. MULTER. Surely.

Mr. SCHWENGEL. On behalf of Mr. Springer, that S. 852, introduced by Senator Bible, which incorporates the Commissioners' amendments for the District of Columbia alcoholic beverage control law, be considered along with the two bills already scheduled.

Mr. MULTER. Do we have copies of those two bills?

The CLERK. Yes.

Mr. MULTER. Without objection, we will consider S. 852 at the same time we consider the other bills.

Mr. SCHWENGEL. Thank you.

Mr. MULTER. Yes, sir.

(S. 852 follows:)

[S. 852, 88th Cong., 1st sess.]

A BILL To amend the District of Columbia Alcoholic Beverage Control Act Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (c) of section 3 of the District of Columbia Alcoholic Beverage Control Act approved January 24, 1934 (48 Stat. 319), as amended (sec. 25-103 (c), D.C. Code, 1961 edition), is amended by striking ", other than champagne".

SEC. 2. Subsections (j) and (n) of section 3 of such Act approved January 24, 1934 (sec. 25-103 (j) and (n), D.C. Code, 1961 edition), are amended by striking "the chief source or revenue" and inserting in lieu thereof "a substantial source of the revenue".

SEC. 3. Section 7 of such Act approved January 24, 1934 (sec. 25-107, D.C. Code, 1961 edition), is amended by striking so much thereof as reads "to prescribe the hours during which beverages may be sold and to forbid the sale on

Sundays; but the Commissioners shall not authorize the sale by any licensee, other than the holder of a retailer's license, class E, of any beverages on Sundays other than light wines and beer, and any such sale is hereby prohibited," and inserting in lieu thereof "to prescribe the hours during which alcoholic beverages may be sold and to prohibit the sale of any or all alcoholic beverages on such days as the Commissioners determine necessary in the public interest".

SEC. 5. Section 14 of such Act approved January 24, 1934, as amended (sec. 25-115, D.C. Code, 1961 edition), is amended by adding at the end thereof the following new subsection:

"(e) Each corporation licensed under the authority of this Act shall, within five business days from the date on which there is any change in its officers or directors, in writing notify the Board of such change. Such written notification shall state the name and address of the new officer or director, and the name of the officer or director replaced by the new officer or director, if any. Each new officer or director shall be subject to a determination by the Board that he is of good moral character and generally fit for the trust to be in him reposed." SEC. 6. Section 18 of such Act approved January 24, 1934 (sec. 25-119, D.C. Code, 1961 edition), is amended by striking "not more than $10" each time such phrase appears, and inserting in lieu thereof "not more than such amount as the Commissioners may from time to time by regulation establish".

SEC. 7. Section 19 of such Act approved January 24, 1934 (sec. 25-120, D.C. Code, 1961 edition), is amended by striking "not more than $10" each time such phrase appears, and inserting in lieu thereof "not more than such amount as the Commissioners may from time to time by regulation establish".

SEC. 8. Section 26 of such Act approved January 24, 1934 (sec. 25–126, D.C. Code, 1961 edition), is amended (a) by inserting in the second sentence after "served" the phrase "within the District"; (b) by inserting after such second sentence the following: "Without the District, but not more than twenty-five miles distant from the United States Capitol Building, such summons shall be served by a United States marshal or his deputy."; and (c) by striking "United States District Court for the District of Columbia" and inserting in lieu thereof "United States district court for the district in which such witness resides".

SEC. 9. Nothng in this Act shall be construed so as to affect the authority vested in the Board of Commissioners of the District of Columbia by Reorganization Plan Numbered 5 of 1952 (66 Stat. 824). The performance of any function vested by this Act in the Board of Commissioners or in any office or agency under the jurisdiction and control of said Board of Commissioners may be delegated by said Board of Commissioners in accordance with section 3 of such plan. SEC. 10. This Act shall take effect sixty days after its approval.

Mr. KNEIPP. Reverting to your question, Mr. Chairman, I do not know why the Alcoholic Beverage Control Board has failed to refer to the U.S. Attorney cases of false advertising unless there have been

none.

Mr. MULTER. I am sure you are familiar with the record that was adduced before this committee in the last session of Congress.

Mr. KNEIPP. I am aware of the fact, Mr. Chairman, that you offered for the record the advertisements of a certain group of stores, group advertising. This is a matter of opinion, I believe, sir.

Mr. MULTER. Is it your opinion as a lawyer that there was no proof of false advertising submitted to this committee during the last session of Congress, during our hearings?

Mr. KNEIPP. As I read the advertisements, there was none, no. Mr. MULTER. Well, of course there is room for difference of opinion. That is what makes horse races. That is what makes lawsuits.

I take it, then, it is the opinion of the Commissioners, based on the record adduced before this committee last year, that there has been no proof of false advertising. Is that the view of the Commissioners? Mr. KNEIPP. No, I would not say that, sir. The opinion of the Commissioners is that there is no need for additional legislation in the field, added to what we already have in the way of law. The act of

May 29, 1916, in the way of regulation, section 2-107 of the Alcoholic Beverage Control Board regulations, and the provisions in existing law adequately take care of the situation, in the view of the Commissioners.

Mr. MULTER. Please ask the Commissioners to send us a supplemental statement answering the precise question whether or not, in their opinion, there has been any proof submitted to this committee of false advertising in this industry in the District of Columbia?

Mr. KNEIPP. Will the chairman make available to the Commissioners the record of the hearings in the previous session?

Mr. MULTER. Of course. It has been made available to them, and it is still available to them, of course. I should hope that by this time they are thoroughly familiar with that record. But if they are not, certainly it will be made available to them again.

Are there any other questions on H.R. 684 at this time?

Mr. Schwengel.

Mr. SCHWENGEL. Mr. Chairman, again I apologize for not havingbeen here from the begininng.

Let me ask this: If this bill or S. 852 were passed, how would this adversely, if it would, affect the present law, of the administration of this law, in dealing with what we propose or what is proposed to be resolved with this legislation?

Mr. KNEIPP. I think, sir, that if H.R. 684 should be enacted, it might—well, now, may I say that at this point I am going to have to speak personally because the Commission has not considered this aspect of the thing.

But it does seem to me that there might be some confusion arising from the enactment of H.R. 684. Existing law relating to fraudulent advertising is quite definite, it seems to me, in its language. It says:

It shall be unlawful ***

reading from the act of May 29, 1916, appearing in the code at 221411:

It shall be unlawful in the District of Columbia for any person

skipping a bit

to make any false, untrue, or misleading statement, representation, or advertisement with intent to sell, barter or exchange any goods, wares, or merchandise or anything of value.

The bill, H.R. 684, proscribes the making of—

any false advertisement by any means for the purpose of inducing or which is : likely to induce, directly or indirectly, the purchase of any alcoholic beverage.

Now, I am afraid that, if I were a prosecutor, I would find some difficulty in determining what is—

advertising for the purpose of inducing or which is likely to induce, directly or indirectly, the purchase of any alcoholic beverage.

To start with, your test is a subjective list: Likely to induce to whom? It depends on the degree of sophistication, I would think. As counsel for some licensee or for some communications medium, it seems to me that H.R. 684 would create some difficulties in the matter of advising the client as to whether the proposed scheme of advertising is or is not likely to induce, directly or indirectly, the purchase of any alcoholic beverage, which, if false, would be proscribed by the bill.

I think that, therefore-and again I have to say I have to speak for myself and not for the Commissioners on this point-that H.R. 684 might add a certain degree of confusion to the situation as far as false advertising is concerned.

Mr. SCHWENGEL. Could you get for us the Commissioners' viewpoint on the question that I have raised?

Mr. KNEIPP. All right.

Mr. SCHWENGEL. In regard to H.R. 684.

Now I go to S. 852 and ask the same question in regard to it: How would it adversely affect the administration of the law?

Mr. KNEIPP. Well, if you please, sir, I was going to cover S. 852, and I would like to offer, incidentally, a correct version of that bill. S. 852 has one section omitted in the printing on the Senate side.

I was going to cover that along with H.R. 2036. I can cover it now, if it is the wish of the Chair.

Mr. SCHWENGEL. I yield to the chairman on this.

First, though, I would like to ask the chairman if he would like to comment on the question that I raised. Knowing the chairman, presiding officer, and having the great respect that I have for him, I know there must be some reason that he sees a need for this legislation. If you would like to respond now, or maybe this is not the time and place. Mr. MULTER. I think while we are on H.R. 684 it would be a good time to indicate for the record that H.R. 684 has no criminal or penal penalties other than suspension or revocation of license. It provides for a suspension or revocation proceeding as against the licensee, without the criminal aspects that now attend the other provisions against false advertising.

So that we get into the administrative procedures which will permit the ABC Board to send for a licensee and warn him that what he is doing is wrong, and that he must correct it; and give him guidance as to how he should correct it and how he should avoid false advertising.

And then if he does not follow that admonition or warning, then to bring on a proceeding either to suspend or revoke the license, giving him ample opportunity, if he is acting in good faith, to correct his wrongdoing.

I must point out, in answer to what the Corporation Counsel has said, you cannot read subdivision (a) of section 42 alone; you must read it together with (b), (c), and (d). And when you read (b) particularly, you find that, despite the language which has been read from subdivision (a), in order to suspend or revoke the license there must be due notice and hearing, with the right of review by the Commissioners which, of course, carries with it the right of review thereafter by the courts. And in order to suspend or revoke, there must be a finding of fact that the false advertising was done with intent to defraud or mislead.

So I think that this is a salutary improvement of existing law, and possibly will remove the reluctance on the part of the administrative officials to proceed until they first get a conviction. Present law also gives rise to the argument that if they do get a conviction, there is going to be a penal sentence with a fine and imprisonment, or both; and in addition to that, once the man has been found guilty in the

criminal courts, it follows as a matter of law that they must revoke his license.

So we have a means set up by H.R. 684 to correct a bad situation without invoking all of these very severe penalties of the criminal statute.

I have not read S. 852, so I cannot make any comment on it, particularly since one of the sections is missing. I had better reserve any comment on that until we have a full presentation and we have had a chance to analyze it.

Mr. KNEIPP. May I say, Mr. Chairman, that section 17 of the Alcoholic Beverage Control law now provides for the suspension or revocation of licenses for failure to comply with regulations or with the provisions of the act?

As I mentioned earlier, one of the regulations which the licensees are expected to comply with is the regulation against false, deceiving, or disparaging advertising.

Then the section 33 of the Alcoholic Beverage Control Act presently provides that, where no specific penalty is otherwise specified, there shall be a fine of not more than $1,000 or imprisonment for not longer than 1 year, or both, for violation of the regulations, including this one on false advertising, or for violations of the act.

So as I have said earlier, the Commissioners believe that the proscriptions in existing law adequately take care of the situation. They see no need for the enactment of the bill.

Mr. MULTER. Is there any exception in the present statute, rule or regulation, which exempts the advertising media, newspaper or radio or television station, from prosecution under those laws, as is now incorporated in H.R. 684?

Mr. KNEIPP. Not that I know of, sir.

Mr MULTER. You can refer to subsection (c).

Mr. KNEIPP. Not that I know of.

Mr. MULTER. Under existing statute, then, a newspaper or any advertising medium or advertising agency placing the false advertising would be just as guilty as the person who issues it in the first place or buys the advertising, even though they may act innocently and in the belief that they are placing an ordinary ad that carries no criminal aspects along with it?

Mr. KNEIPP. No, sir.

Section 2-107 of the ABC regulations applies only to licensees. It does not apply to the communication media.

Mr. MULTER. What about the criminal statute to which you referred?

Mr. KNEIPP. That would apply to the licensee who might place false or deceiving or disparaging advertising.

Mr. MULTER. It does not apply to those carrying the advertising? Mr. KNEIPP. It would not, no, sir. It refers to section 2-107, which says:

(b) No licensee may, either directly or indirectly, publish or disseminate or cause to be published or disseminated, either through any radio or television broadcast or in any newspaper, periodical or publication, or by any sign, placard, or printed matter whatsover (not including the label on the container of the beverage) any advertisement of any alcohol, spirits or wine, which: