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OR L2/G74 . 9T28
Oregon. L e g is la t iv e
Assembly. House o f
Testimony, November
1969, Salem, Ore
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G O V E R N
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TESTIMONY, NOVEMBER,18, 1969, SALEM, ORE.
R E O R G A N I Z A
T?_i o N
November i b , L'-Jb
TESTIMONY OF
BEN D. ALLEN
to the
HOUSE TASK FORCE ON GOVERNMENT REORGANIZATION
Mr. Chairman and members o f the Committee, I am Ben D. A lle n ,
A s s is ta n t D ir e c to r , Oregon Department o f A g ric u ltu re .
I appear here today a t your requ est to c o n trib u te what I can
to your studies concerning the c re a tio n o f a Department o f Consumer
S e rv ic e s .
I hope th at my remarks w i l l be h e lp fu l.
My comments w i l l be d iv id e d in to three main c a te g o r ie s :
1.
A gen era l statem ent about the Department and i t s r o le
in Consumer s e r v ic e s ,
2.
A statement concerning cooperation w ith other agen cies,
both fe d e r a l and s ta te ; in a d d itio n , our exp erien ce w ith
a d visory com m ittees, and
3.
Suggestions intended to be h e lp fu l in the conduct of
your s tu d ie s .
THE DEPARTMENT
The Department o f A g r ic u ltu r e was created in 1931 by c o n s o li­
d atin g seventeen boards and commissions concerned w ith a g r ic u lt u r a l
r e g u la tio n in to one a d m in is tra tiv e u n it, rep re se n tin g the f i r s t major
c o n s o lid a tio n in s ta te government.
The wisdom o f merging th is group
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o f r e la te d a c t i v i t i e s has been proven in the t e s t o f tim e.
Today
we operate under 40 some Chapters o f Oregon Law, h a lf o f which are
d ir e c t ly concerned w ith consumer s e r v ic e s .
Most o f the r e s t can be
shorn to have a r e la tio n s h ip to the consumer.
A ft e r a l l ,
the u l t i ­
mate g o a l is to assure the consumer o f a wholesome, h e a lth fu l p ro­
duct and to op tim ize a g r ic u lt u r e 's c o n trib u tio n to the s t a t e 's
economy.
This in v o lv e s an unbroken chain o f r e g u la tio n and in ­
sp ection from h a rvest through r e t a i l o u t le t , export market, or to
the "back d oor" o f resta u ra n ts.
In th is in sta n ce, the term
" a g r ic u ltu r e " does not stop on the farm - - i t embraces the f u l l
spectrum.
About 400 pages o f re g u la tio n s have been promulgated to
in t e r p r e t the manner in which the Department intends to ca rry out
i t s assignments under these many s ta tu te s .
The c o n s o lid a tio n of
r e s p o n s ib ilit ie s mentioned b e fo r e , added to others assigned since
then, has r e s u lte d in programs th at touch the liv e s o f a l l Ore­
gonians .
These programs range from Ragweed C on trol to N on alcoh olic
Beverages and are concerned w ith s a n ita tio n , sta n d a rd iza tio n ,
w eights and measures, r e g is t r a t io n ,
la b e lin g ,
lic e n s in g , bonding,
in s p e c tio n s , sampling, la b o ra to ry a n alyses, grad in g, p a s te u riz a ­
t io n , d isease c o n tr o l, packaging, a d d itiv e s , re s id u e s , e tc .
They
encompass a l l r e g u la to r y a c t i v i t i e s r e la t in g to the produ ction ,
p ro cessin g, packaging, d is tr ib u t io n and s a le o f a l l food products
or commodities o f a g r ic u lt u r a l o r ig in .
To implement these programs the Department has an ab le s t a f f
o f in s p e c to rs , tech n ician s and s c ie n t is t s such as s a n ita ria n s ,
chem ists, m ic r o - b io lo g is t s , en to m o log ists, p a th o lo g is ts , v e t e r i ­
narians and ad m in istrators thoroughly knowledgeable in t h e ir f i e l d
and dedicated to th e ir work.
The budget fo r the current biennium
is $11,225,485, comprised o f $4,094,384 from the General Fund,
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$97 8 , 5 0 5 fe d e r a l funds and $ 6 , 1 5 2 , 5 9 6 other funds.
We are cu rren t­
l y authorized 637 f u ll- t im e , p a rt-tim e and seasonal p o s itio n s r e ­
p resen tin g about 450 fu ll- t im e e q u iv a le n ts .
The number o f p o s itio n s
u t i l i z e d w i l l vary from month to month depending upon the demands
connected w ith the h a rv e s tin g , p rocessin g and d is tr ib u t io n o f the
s t a t e 's a g r ic u lt u r a l produ ction .
A t y p ic a l monthly p a y r o ll in ­
cludes about 550 em ployes.
Because o f the flu c tu a t in g seasonal workload inherent in our
assignments, we are c o n tin u a lly working a t c r o s s -tr a in in g o f our
personnel in hopes o f c re a tin g a more competent and s ta b le work
fo r c e through year-around employment.
o f f in reduced unemployment c o s t.
This e f f o r t a ls o is paying
D ire c tio n and su p ervision o f
the work fo r c e is managed through ten d i s t r i c t o f f i c e s , s t r a t e g i c a l ­
l y lo c a ted according to the d ic t a t e s ’ o f our assignments, and the
headquarters o f f i c e s in Salem".
In a d d itio n , many employes work
out o f th e ir homes in s p e c if ic areas where assignment to a d is ­
t r i c t o f f i c e would not be fe a s ib le .
C o rre la tio n between programs is achieved through o rg a n iza ­
t io n a l stru ctu re and r e g u la r ly e s ta b lis h e d s t a f f m eetings.
COOPERATION
The v e ry nature o f the Department's assignments re q u ire s a
g re a t d eal o f cooperation w ith both s ta te and fe d e r a l agencies as
w e ll as industry groups.
Because our v a r ie d and complex a s s ig n ­
ments a f f e c t the p rod u ction , p ro cessin g, d is tr ib u t io n and marketing
o f a l l a g r ic u lt u r a l production in Oregon, i t is r e a d ily apparent
th at we con sta n tly come in con tact w ith other p u b lic agencies whose
assignments in g iv e n areas are r e la te d but not id e n t ic a l to ours.
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For the most part th is c o o p era tio n is v o lu n ta ry, based upon a r e ­
cognized need by those agen cies concerned, and works w ith q u ite a
high degree o f success.
O c c a s io n a lly , as the need a r i s e s , coopera­
tio n is fo rm a lize d through w r itte n agreements.
W ritten agreements
are u su a lly used when monetary co n sid era tion s are in v o lve d or where,
f o r le g a l reasons, r e s p o n s ib ilit ie s need to be c le a r ly d e lin e a te d .
An example o f the form er is our agreement w ith Consumer and Market, in g S ervices o f the U nited S tates Department o f A g ric u ltu re concern­
ing red meat inspection, under which the fe d e r a l government under­
w r ite s a percentage o f program c o s ts .
An example o f the la t t e r is
our agreement w ith the F e d e ra l Food and Drug A d m in istration wherein
the ru le s o f each agency sometimes overlap and the w r itte n agreement
is used to reduce d u p lic a tio n and make the b est use o f resources
by c le a r ly d e fin in g areas o f r e s p o n s ib ilit y .
In a d d itio n to co o p e ra tio n from other re g u la to ry a g en cies,
the Department a p p re c ia te s the a s sista n ce o f the School o f A g r ic u l­
ture' at Oregon S tate U n iv e r s ity .
The Dean and his s t a f f have pro«
vid ed us w ith a s s is ta n c e by t h e ir s c ie n t is t s , helped us conduct both
s t a f f and indu stry tr a in in g courses, served on our many committees
and promoted understanding o f our programs through t h e ir exten sion
personnel.
Experience has taught us th at one o f our most w orthw hile coopera
t i v e e f f o r t s has come about through the use o f n e a rly 30 a d visory
committees.
Comprised o f r e p r e s e n ta tiv e s from produ ction , process-
in g , d is tr ib u t io n and m arketing o f variou s segments o f A gri-b u sin ess
these committees are used to the f u l l e s t ex ten t in su ggesting l e g i s ­
la tio n , promulgating r e g u la t io n s , intex*preting program goals and
seeking understanding and a p p re c ia tio n o f those goals from those to
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be re g u la te d .
Some o f these committees were created by s ta tu te ,
i
but most o f them are vo lu n ta ry , w ith membership s e le c te d by th e ir
cou n terp arts.
By and la r g e , they serve w ithout rem uneration, g iv in g
u n s e lfis h ly o f t h e ir time and resources to a s s is t s ta te government
w ith e f f e c t i v e a d m in is tra tio n in those areas assigned to the De­
partment o f A g r ic u ltu r e .
The f a c t th at we can c a rry out re g u la to ry programs o f the
magnitude we do w ith so l i t t l e
lit ig a t io n is ,
in our opin ion,
testim ony to the r e a l s e r v ic e rendered by these committees.
SUGGESTIONS
When I was g iv e n th is assignment, I was asked to make some
recommendations to your committee.
I s h a ll endeavor to do th is by
su ggestin g some p o in ts f o r your co n sid e ra tio n .
F i r s t , and in my judgment the most im portant, I would ask
th at you remember th at a g r ic u ltu r e is Oregon's number two
in d u stry and th a t exp erien ce has shown th at the necessary
r e g u la tio n s imposed on th at in d u stry need to be adm inistered
by those who b e s t understand the in t e r - r e la t e d problems in ­
herent in the p rod u ction , p rocessin g and d is tr ib u t io n o f the
food and f i b e r upon which we as consumers depend.
R egu lation
o f segments o f th is in d u stry by those u n fa m ilia r w ith these
problems could unknowingly p lace economic p e n a ltie s upon
a g r ic u ltu r e th a t would be d etrim en ta l to the s t a t e 's economy
and c o s t l y 't o the consumer.
Second, I would remind you of the p u b lic investm ent in the
Department's s t a f f and f a c i l i t i e s
th at a re , in my judgment,
m eeting assigned r e s p o n s ib ilit ie s to p ro te c t the consumer to
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the ex ten t p o s s ib le under a v a ila b le resou rces.
T h ird , I would suggest as h ig h ly d e s ir a b le , some type o f o r ­
g a n iz a tio n a l alignm ent th at would in v o lv e the Department of
A g ric u ltu re in the mainstream o f s ta te government.
I know
th at our Governor and h is a d m in istra tio n are g r e a t ly con­
cerned and working hard to ach ieve th is from an o v e r a ll stand­
p o in t.
We in the Department support th is e f f o r t .
For too
long we have f e l t th a t the problems o f a g r ic u ltu r e and our
Department, as w e ll as the s e r v ic e s provided by the s ta te
through the Department to both a g r ic u ltu r e and the consumer,
were not adequately reco gn ized in planning at the s ta te l e v e l .
So much of what we do is r e la te d in one way or another to the
aims and goals of other agencies or departments th at more in v o lv e ­
ment on our p a rt, we b e lie v e , would help to improve Oregon’ s economy,
i t s government and, as a consequence, improve the s e r v ic e to con­
sumer s .
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November 17, 1969
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PUI -i TLAHO
House Task Force on
Government Reorganization
Room I2l|, State Capitol
Salem, Oregon
97310
Gentlemen:
Because o f illn e s s I was unable to appear as scheduled before
your committee on November 18.
I t was my in ten tion to o f f e r the
fo llo w in g testimony:
I am Tom Scanlon, representing the Oregon AFL-CIO and appearing
b e fo re th is committee in response to an in v ita tio n o f the committee
to present the views o f the Oregon AFL-CIO concerning consumer
p rotection and ijlaat should be the r o le o f s ta te government in the
areas o f p rotection o f the consumer*
The fe d e r a l government, through the executive branch, is taking
i t s f i r s t steps fo r the p ro tectio n o f consumers, as consumers,
although a t the fe d e r a l le v e l as w e ll as the s ta te le v e l in Oregon
many e x is tin g agencies serve vario u s areas o f consumer p ro tec tio n .
In the fin a l analysis — and a ft e r the worst has happened —
the consumer needs the protection o f law, and i t s enforcement, and
vie know- that this committee has already heard and w i l l hear fu rth er
222-7103
2 — House Task Force — November 17, 1969
competent testimony from Attorney General Lee Johnson,
We assume that th is committee w i l l examine and catalo g a l l o f
the consumer p rotection se rv ic e s alre a d y fu n ctio n in g or a v a ila b le
a t the fe d e r a l and s ta te le v e ls — keeping in mind, a ls o , p riv a te
agencies working in the f i e l d
— and then proceed to recommend
le g is la t io n to the 1971 session o f the s ta te le g is la t u r e .
I t should not be d i f f i c u l t to document the fa c t that much
p rotection f o r the consumer alrea d y e x ists i f he is aware o f and takes
advantage o f what i s a v a ila b le to him.
That he i s not doing th is
in many cases i s because he does not know o f the protection that
e x is ts or does not know how to proceed to obtain i t .
The consumer i s
not to be condemned fo r th is because the c itiz e n has a n atu ral relu ctan ce,
i f not fe a r ,
to approach the government through i t s myriad o f a g e n c ie s.
And, he should not be ashamed in the le a s t because o f h is lafe^: o f
s u ff ic i e n t knowledge in what to him appears to be the in t r ic a c ie s
o f governmental organ ization and operation.
We have, in our own
o rga n izatio n , informed one s ta te agency or another o f serv ices or
inform ation a v a ila b le one from the other.
We have heard that i t has been suggested to th is committee that
a consumer p ro tectio n agency should include under i t s umbrella such
labor-management areas as workmen's compensation.
We are opposed to
such a view o f what a consumer agency should in clu d e .
The g e n e ra lly
recognized view o f a consumer p rotection agency i s that i t i s to
protect the c itiz e n as a member o f the p u b lic at la rg e and as such
w i l l n e c e s s a rily seek the advice o f members o f the p u b lic .
Our
experience w ith p ublic members o f groups named to advise in areas
re o u irin g p a r t ic u la r and p ro fe s s io n a l exp ertize — such as workmen's
compensation - - has been an unhappy one.
Areas o f p ro fe s s io n a l
exp e rtise are b e s t served by those who have p r a c t ic a l, working knowledge
3 — House Task Force — November 17, 1969
o f
the su b ject under study.
Our experience, th e re fo re , moves us to
oppose in c lu s io n o f any labor-management re la te d function o f government
in a consumer protection agency..
I f th is committee should decide to recommend establishm ent o f
a consumer p rotection agency under s ta te government we would hope
that i t would not recommend establishment o f an a d d itio n a l state
agency, b u t , ra th er, th a t such an agency, i f recommended, b e made a
p art o f an appropriate e x is t in g s ta te agency«
F in a lly , i t i s our observation that p ro tectio n o f the consumer
by law w i l l not, b y i t s e l f ,
solve the problems o f many consumers.
I f a consumer pro tectio n agency i s e sta b lish ed i t s prime fu n ction
should be consumer education and in form ation,
A
knowledgable,
informed consumer population could save the s ta te o f Oregon money
because i t would not need the other s ta te s e rv ic e s which come in to
p lay when a consumer ac ts without s u f f i c i e n t education and in form ation.
Very t r u ly yours >
Thomas L. Scanlon
f o r the OREGON AFL-ldlQ
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ANG 1 9 h
Eugene,
Oregon
OREGON BOARD OF EDUCATION
942 Lancaster Drive N.E.
Salem, Oregon 97310
Dale P a r n e ll, Superintendent
Community C olleges and Career Education
November 18, 1969
Recommendations and p roposals fo r developing an Oregon Council on Consumer
Education have been under co n sid eration f o r some time.
At the June 18, 1969, Board o f Education meeting the Board appointed a
nine member Advisory Committee on P erson al Finance.
The charge and duties
from the Board:
The committee i s to act in the capacity o f 'a review and advisory
group fo r e s ta b lis h in g the o b je c tiv e s and content o f consumer
curriculum .
They w i l l work with the Oregon Board o f Education s t a f f , teacher
education re p re s e n ta tiv e s , lo c a l school d i s t r i c t s , educators,'
and in te re s te d c itiz e n s to promote the development o f an acceptable
P erson al Finance Teacher Guide.
Due to s t a f f re sign atio n s and reassignments o f r e s p o n s ib ilit ie s the
committee h eld i t s f i r s t meeting on October 16 with the second meeting
scheduled fo r November 21.
Beyond studying resource m aterials a v a ila b le ,
d iscu ssin g needs, and p o s s ib le d ire c tio n s the committee has not
developed any o b je c tiv e s , as yet,.
Therefore i t i s im possible to make
commitments at th is time, as to what the committee w i l l plan to p u blish
or recommend fo r implementation. ■
PG:ah
605-2
OREGON BOARD OF EDUCATION
942 L ancaster D rive N .E.
Salem, Oregon 97310
Dale P a r n e ll, Superintendent
OREGON BOARD OF EDUCATION
GOVERNMENT REORGANIZATION FOR THE
70's
Department of Commerce and Consumer Services
Testimony before the HouseTa.sk Force on
Government Reorganization
November 18, 1969
Room 105 State Capitol
Salem
Oregon
by
James R. Faulstich
Assistant to the Governor for Economic
Development and Consumer Services
Mr. Chairman and members of the House Task Force
on Government Reorganization:
I welcome this opportunity to appear before you this
afternoon and share with you some of my thou.gh.ts concerning the
challenges of the ?0's for Oregon State Government as they relate
to the broad area of commerce and consumer and employe services
The State's Role in Economic Regulation.
To quote from
Governor McCall's report on Oregon State Government for the
197 0's - "the regulation of private economic activity and the
protection of citizens from the physical hazards of working and
living in a modern technological society are major related
functions of state government. "
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In our modern, complex, interdependent economy,
individuals who buy goods and services and sell their labor often
are highly dependent upon the actions of others they do not know
and over whom they have no control.
Therefore, citizens look
to the state to establish and enforce some minimum standards
of justice, - honesty and safety in the market place for goods,
services and labor.
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"The basic reason for state government regulation of
the private economic market place is to protect consumers and
employes and the general public - - those citizens who have to
take what is offered by the impersonal market place for goods,
services and human labor. "
The main purpose of departmental
grouping is to bring together broad areas of naturally related
activities in order to obtain the advantage of the better planning
and coordination that such a grouping could yield.
It would be my suggestion that the department be so
organized that the director does not presume to carry out any
of the functions of the various agencies brought together, but
rather that the director and the agency heads operate under a
system analogous in the private sector to a holding company with
various operating subsidiaries.
In this broad program grouping
it seems to me three inter-related functional areas can be
identified.
The first would be protecting the public as a
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consumer or a user of goods and services.
The second would be
protecting the employe and the third would be encouraging the
development of private economic enterprise.
The inter-relation
of our private enterprise system and governmental regulatory
functions are obvious.
It is my belief that government should
strive to preserve a balanced view-point between regulation and
the development of our free enterprise system.
The pressures of the 70's will bring on an ever
increasing involvement by the national government in our every­
day concerns.
If the states are to continue to bave a role under
our federal system and if the needs of Oregon are to be met by
Oregonians working in concert and not met by some national
program, the very institution of state government needs to be so
designed that.it is capable of continuous, self-renewal.
One of the reasons that change is desirable within
our existing patterns of regulation in state government is that over
the years people interested in improving our society never have
quite come to grips with the complex and technical processes by
which it functions.
that must
They are preoccupied with specific evils
e corrected.
The result is that each reformer comes
to his task with a little bundle of desired changes.
The implication
is, that if his reforms are carried through, the society will be
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wholly satisfied.
It seems to me that this approach may have been
suited for* the early 1900's but is no longer suitable as we go into
the 1970's in Oregon.
Scientists tell us that in the next 20 years
our society will be as technologically different from today as
today is different from 1900.
If we had a Department of Commerce
and Consumer Services with broad responsibility to the people of
our state for regulating elements of the economic enterprise,
perhaps we would not now be faced with the anachronistic
situation of having a law revision committee in studying the Public
Utilities Law voting on the deletion from such laws of provisions
requiring fendors on street cars or prohibiting scalpers of railroad tickets at the very time that Apollo 12 was streaking for the
moon.
Such an institution would be designed for continuous change,
continuous renewal, continuous responsiveness to the people. Such
an institution would be concerned in particular program areas and
make meaningful recommendations to legislative sessions for
state action to meet the problems of the 70's - - t o stay abreast of
rapid technological change.
As an example, such an institution
»
*'
would be concerned with the sale of shelter to the citizens of the
state rather than the sale of real property exclusively.
With
one-fourth or more of our housing starts being made in the form
of mobile homes or modular units, this becomes an ever increasing
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concern for state government with no particular state agency with
the responsibility to develop programs and to make recommendations
to the legislature.
Likewise the repair of the bountiful technological
products of our society has become of increasing concern to its
citizens.
Yet the state continues to focus exclusively on the repair
of watches, not on. the repair of other marvels of our technological
society sxich as colored T. V. sets.
I do not believe that this
represents a conscious decision by state legislative leaders that the
regulation of the repair of watches is more vital to its citizens than
the repair of other products.
Rather I see it as a lack of state
governmental institution that can review and prepare for legislative
action a well considered balanced approach to the regulation of
perhaps repairs of other products.
Consumer Services.
In recent months we have seen
one after another of our great institutions, public and private,
national and local, come under seige and the seige was usually laid
down by people the institution was created to serve - - its students,
its citizens or its customers.
These events do not mean that our institutions have
suddenly gone bad but only that different things are now expected
of them anf that, when vigorously measured against new expecta­
tions, the institutions are found wanting.
The events dramatize
how difficult it is for an institution, especially a large and complex
one, to adapt to the changing expectations of its constituents.
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If institutions generally are not good at adapting to
changes in their environment, government regulatory institutions
may have special difficulty and be in special danger, for the
regulatory process may bring out those traits that are most
resistant to change.
In most regulation, the public is only fitfully interested,
and the regulator is insulated from public scrutiny by the complexity
|
■'and obscurity of the regulatory process, just as the industry is
insulated by the mere existence of the regulator.
Left alone with each other, the regulator and his
industry unconsciously find a mutual interest in ritualizing their
relationship.
The regulator must emphasize law and irregularity
against the day he is challenged in court or denounced in public.
He thus must look to form and detail, and may look away from the
operating realities of the industry and from the expectations of the
public.
The industry relies on the rituals of regulation to make
government behaviour predictable and to keep the regulator
occupied in areas where interference can be tolerated.
Inevitably
both regulator and regulated come to measure their effectiveness
by their impact on each other, and come to live, often quite
comfortably, within a closed system.
,To what areas do the rituals of regulation tend to
confine the attention of government?
Often to matters internal
to the regulated industry, such as restricting entry to the market,
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attenuating competition, preserving the institutional structure of
the industry, and balancing competitive advantage among entities
of different form, sponsorship or regional allegiance.
As a
result, too much regulatory energy is diverted into policing the
status quo in the regulated industry and into refereeing contests
within it.
These tendencies - - t o quarantine itself, to exalt
ritual in detail, and to become distracted with internal problems
of the industry - - are, on the record, discernible in regulations
of many kinds.
It does not seem to matter what is being
regulated or by whom or, in a narrow sense, how well.
For the
competent regulator, the snare is not error, it is irrelevance.
A broad grouping of inter-related regulatory agencies reciprocal
in their support one for another and capable of developing common
thrusts in efforts to meet problems as they emerge, will avoid
the aforementioned closed system of regulation.
Employe Protection.
Regulatory employment
protections in the state are currently scattered among various
agencies.
These include the Bureau of Labor, Department of
Agriculture, Public Utilities Commissioner, the Workmen's
Compensation Board, the State Accident Insurance Fund, the
State Board of Health and perhaps others.
By bringing these
regulatory functions together and giving them the prominence that
is due them, a more rational integrated approach to the multitude
of problems of .farm labor, wage and hour collection, protection
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of women and minor employees, safe working conditions etc. can
be more efficiently and effectively implemented.
Safety Standards.
The creation of a national commission
on product safety has pointed out the real lack of an integrated
comprehensive program for reviewing the need for safety standards
with respect to the multitude of products offered to the public.
Here
again the traditional approach in Oregon as well as in other states,
!is to develop statutes to meet particular crises as they occur and has
led to state interest in such products as coupling devices on railroad
cars, vehicles to transport workers, swimming pools, elevators
and burial vaults.
A program area of safety standards would not
only provide appropriate and current legislative recommendations
but also provide an integrated system of inspections and enforcement
••
programs.
Encouraging the Development of Private Economic
Enterprise .
Many of our state programs consciously or
unconsciously are involved to one degree or another in the develop­
ment of our private economic system.
The most identifiable such
pfogram is.the Economic Development Division itself.
However,
we also have programs such as the Grain Inspection Program as
conducted by the Department of Agriculture which is designed
primarily to insure the free flow of commerce in our grain
products.
Again, a lack of coordination in these areas can thwart
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and stifle state initiative and growth.
The work of our more than
a dozen commodity commisions could perhaps be integrated through
exchanges of ideas and thoughts into an overall economic
development thrust for our state.
As our mar;kets become more
widespread, stretching over countless miles of ocean in many cases,
a coordinated effort for the economic developinent of our state
becomes increasingly imperative.
The philosophies, ideas and.
•Jdmygh'ts 0f those working in this area are ic+er-related with the
overall regulatory processes of state government as it regulates
elements of our economic enterprise.
The synergistic effects of
bringing these program areas together would further st renghthen
the role of state government in the 70's.
TESTIMONY OF MRS. J1JDSON SMITH BEFORE THE GOVERNMENTAL REORGANIZATION
TASK FORCE — NOVEMBER 18, 1969
Mr. Chairman; members o f the committee:
I was very glad to d is co v er that some of the items not covered
by the la s t le g is la t u r e are to be given s p e c ia l con sid eration dur­
ing the in terim p e rio d , and th at one o f these areas is consumer
p ro te c tio n .
A c tu a lly , o f course, the problem is consumer frau d ,
not p ro te c tio n ----f o r without the frau d , p ro te c tio n would be un­
necessary and a waste o f the taxpayers' money.
I would lik e to
help whoxtf you why tax d o lla rs spent on consumer p ro te c tio n at
the s ta te le v e l is a necessary and proper expenditure.
Last summer, I was o ffe r e d what was fo r a law student an un­
usual opportu n ity.
For the f i r s t tim e, an Oregon p u b lic lav; o f ­
f i c e o ffe r e d a le g a l "in te rn s h ip 11 which was to la s t f o r three
months and would in a very p r a c t ic a l way introduce fu tu re lawyers
to the p ra c tic e o f p u blic s e rv ic e law.
Four o f us, rep resen tin g
a l l three o f Oregon's law schools, worked in every d iv is io n and
department o f the Multnomah County D is t r ic t A tto rn e y 's o f f i c e .
My s p e c ia l assignment, under a grant from a t i t l e
o f the Federal
Omnibus Crime Control Act o f 1968 was to study in d e t a il the use­
fu ln ess o f a proposed Consumer P ro te c tio n D iv is io n to be estab ­
lis h e d w ith in the o f f i c e o f the State Attorney General.
I'm here
today to b r ie f ly summarize th a t r e p o rt f o r you.
The t i t l e o f the paper is "The Consumer Fraud Inform ation Gap",
and i t is based p rim a rily , but by no means e x c lu s iv e ly , on p er­
sonal interview 's w ith 13 Oregonians who have w re s tle d , are w rest­
lin g , or would lik e to more e f f e c t i v e l y w restle w ith the problem
o f Consumer Fraud in the sta te o f Oregon.
these people are:
1.
In a lp h a b e tic a l ord er,
S gt. Ed Clark, C hief o f the Fraud D e ta il, P o rt­
land P o lic e Bureau; N e ll Goldschmidt, head o f the Legal Aid o f f i c e
in P o rtla n d ’ s A lbina d i s t r i c t ; Lyle Jantz, P re s id e n t, Portland
B etter Business Burwn^,; Lee Johnson, Attorney General o f the State
o f Oregon; Prank K night, D is t r ic t Attorney f o r Benton County;
O liv e r Larsen, E xecutive Vice P resid en t, Portland Chamber o f Com­
merce; Governor Tom McCall; Mrs. Jan Rathe, E xecutive S ecreta ry,
Oregon Consumer League; Roland A. Severtson, P ostal In sp ecto r
fo r Oregon, Idaho, and Southern Alaska; David S. Shannon, Deputy
D is t r ic t A ttorney and Consumer Fraud Desk f o r Multnomah County;
Robert Y. Thornton, Attorney General, State o f Oregon, 195>3-1969;
Donald H. Turner, D is t r ic t Attorney f o r Wasco County; and Edward
W esterdahl, E xecutive A s s is ta n t to the Governor.
In ad d ition to the in te rv ie w s , the paper is based on spe­
c i f i c refe ren c es from 32 law review a r t ic le s , books, o f f i c i a l
re p o rts , paiaphlets and magazines cu lled from l i t e r a l l y hundreds
o f examined sources.
101.
There are over 100 fo o t n o t e s .. . .in f a c t ,
I'm bc5^arding you w ith these s t a t is t ic s in an attempt to
impress you w ith the f a c t th a t th is i^as no casual undertaking,
and
lend credence to the conclusions the paper reaches.
The research wasn’ t a l l th at dry.
The in terv ie w s were f a s ­
c in a tin g , and in one law review there was a gootnote quoting a
Mad Magazine a r t i c l e .
The paper, to reduce i t
to i t s most e s s e n tia l element, con­
cludes that there is_ an immediate and ra p id ly -in c re a s in g need to
e s ta b lis h a Consumer P ro te c tio n D iv is io n in the o f f i c e o f the
State Attorney G eneral.
And now, to expandj^that k ern el:
Every person in terview ed agreed that a c e n tra l "c le a r in g
house" was needed to serve as a d ep ository and d is tr ib u to r o f
in form ation concerning ongoing and p o te n tia l consumer fraud ac2.
t i v i t i e s in the s ta te .
In most Oregon cou n ties, there is a lack
o f personnel to research and prosecu te.
Of the 36 cou n ties, more
than on e-th ird ( 1 3 ) employ no deputies or in v e s tig a to r s in the
o f f i c e o f the d i s t r i c t a tto rn e y .
In a few small counties which
have one-man o f f i c e s , even th a t one man works on ly p a rt-tim e .
The Portland m etropolitan area has the e q u iva len t o f three-Bourths
manpower on consumer p ro te c tio n , as the "consumer desk" deputy
estim ates he can g iv e no more than s ix hours a day to consumer
fraud because o f his other d u tie s .
The p lig h t o f the sm all-
county DA is shown by W alter Edmonds, J r ., d i s t r i c t attorn ey fo r
J e ffe rs o n County, who p oin ts out th a t " . . . . t h e law enforcement
agencies f o r J e ffe rs o n County are as fo llo w s :
iff,
three deputies and one j a i l e r ;
One county sher­
three Oregon State Policem en;
one Madras C ity Chief o f P o lic e and three patrolmen; one county
d i s t r i c t a tto r n e y ,"
■*
With an adequately-funded and - s t a ffe d consumer d iv is io n in
the A ttorney G en eral’ s o f f i c e , s m a ll-s ta ff DA’ s in Oregon would
have at t h e ir fin g e r t ip s inform ation that otherw ise would be im­
p o ssib le f o r them to accumulate independently.
Over tw o-thirds
(29) o f the counties have two or le s s deputies to a s s is t the DA.
They have inadequate time or personnel to d ig e s t Federal Trade
Commission or S e c u ritie s Exchange Commission r u lin g s , absorb
case law outside Oregon*s ju r is d ic t io n , read law review a r t i c l e s ,
or even adequately examine Oregon statu tes that might apply ( e . g . ,
"Blue Sky Laws" to franahise a c t i v i t i e s ) .
So prosecution is
never attempted’ except in the most aggravated o f cases.
N e il Goldschmidt, head Legal Aid attorney in P o rtla n d ’ s
Albina area, sees the Attorney General as a p o te n tia l lo b b ie s t
in b eh alf o f b e tte r consumer p ro te c tio n law 3 .
3
He comments:
The Attorney G e n e ra l.. . . could go to the le g is la t u r e
i f he c a n 't win w ith what h e 's got and say so, making sug­
g estio n s fo r improvement o f the law . He w i l l be lis te n e d
to .fa s te r than Legal Aid or is o la te d d i s t r i c t a tto rn eys.
The s ta te A ttorney G eneral, rep resen tin g a l l the p eop le, can
do what people o f middle and low incomes can’ t p o s s ib ly
a ffo r d to do,
The Attorney G e n e ra l,.working d a ily w ith in the framework
o f Oregon's sta tu tes, would b e able to suggest any changes that
w
be needed in the law to b e tte r e ffe c tu a te ju s t ic e , in clu d in
changes in p e n a ltie s .
S p e c if ic a lly consumer-oriented laws are found a t fo u r chap­
ters o f the Oregon Revised S ta tu tes; and those charged w ith th e ir
enforcement fin d that in d iv id u a lly - t a ilo r e d sta tu tes are f r a g ­
mentary methods o f meeting the challenge o f consumer frauds and
they are, as crim inal s ta tu te s , not le g itim a te ly expandable to
res o lve frau d u len t devices newly created to avoid the S p e c ifie d
sta tu to ry p ro h ib itio n s .
The fou r chapters are ORS 8 3 --R e ta il Instalment Contracts;
ORS 725“ -Small Loans; ORS 8 2 --In te r e s t and Usury (a law which has
narroxtf a p p lic a tio n and is used almost e x c lu s iv e ly to set
in te r e s t ra te s fo r court judgment purposes); and f i n a l l y ,
there
is Chapter 6I46, Oregon's Deceptive Trade P ra c tic e s A ct, which
provides no crim inal p e n a ltie s unless the v io la t io n is a w ritte n
advertisem ent.
tary compliance.
I t sets up machinery fo r in ju n ction or volun­
There are varyin g a ttitu d e s throughout the
sta te on whether crim inal p e n a ltie s should be a tta ch ed ..
Then there is the problem o f the "h o ld er in due co u rse."
Except in a very few s ta te s , and Oregon is not one of them, f i n an cia l In s titu tio n s are not held accountable under the lav/ f o r
deceptions, u n fa ir p ra c tic e s or promises broken
from which they purchase consum er-credit co n tra cts.
the firm s
They become
what is c a lle d holders in due course, and you must continue pay­
ing them under almost any circum stances.
The r ig h ts o f the fin an ce company h old er in due course in
Oregon are s p e lle d out at ORS 73.30^0.
I t is apparent th a t there
needs to be a d iffe r e n t ia t io n between consumer tran saction s and
transactions between merchants.
As between merchant and consumer,
there is an extrem ely unequal fo o tin g w ith the standardized forms
h e a v ily weighted in fa v o r o f the s e l l e r .
T h erefore, there is
a f e e l i n g in some le g a l and fin a n c ia l c ir c le s
that the holders
in due course concepts need r evamping to insure f a i r
treatment
o f the consumer-vendee.
The s itu a tio n that cu rren tly confronts Oregon consunesrs who
f e e l they have been defrauded is a confusing array o f agencies
both p u b lic and privateN sj^TTn some way or another have been
id e n t ifie d w ith consumer p ro te c tio n or redress o f g rieva n ces.
An in d iv id u a l could expect some kind of assistance or moral sup­
p ort from th e ir lo c a l p o lic e , the D is t r ic t Attorney f o r th e ir
county, the fe d e r a l p o s ta l in s p e c to r, the state Attorney General,
the B e tte r Business Bureau, a consumer leagu e, trade or lab or as­
s o c ia tio n s , fe d e r a l agencies lik e the PTC, or even the s ta te motor
v e h ic le department----ju s t to scratch the su rface.
With such pro-
l i f e r a t i o n and s p e c ia liz a tio n , heaver, the odds against a tta in in g
meaningful r e l i e f are ra th e r high.
Few consumers know a l l the
avenues a v a ila b le .
P lacin g the r e s p o n s ib ility in a c e n tra l o f f i c e w i l l also
improve the s t a t e 's communications with the o f f ic e s o f (father
s ta te s .
I t would provide a p o s s ib le link-up w ith the proposed
new T eletyp e A le r t Network, an in te r s ta te consumer a f f a ir s in ­
form ation wire s e rv ic e ,
5>.
Three major p riv a te organ iza tion s in Oregon Which are con­
cerned in one way or another with examining the problem o f con­
sumer fraud are the Chamber o f Commerce, the B etter Business Bur­
eau, and the Oregon Consumer League.
The f i r s t two are groups
made up almost e x c lu s iv e ly o f members o f the business community;
only the l a t t e r purports to speak only f o r consumers-~-and y e t
th e ir in te r e s ts are not com pletely d iv e rg e n t.
P riv a te groups l i k e the Consumer League have w o efu lly in ­
adequate funding to be able to launch probes or b rin g class ac­
tio n s .
Their major task is to educate the p u b lic about the methods
used by persons attem pting to defraud consumers.
The th ru st of
th e ir e f f o r t is piore to a s s is tin g the consumer in g e t tin g the
most f o r his money, apart from being defrauded.
The League can
bring no sanctions again st defrauders.
Public agencies fa c e d if fe r e n t kinds o f problems.
area o f concern can be too s p e c ific
Their
(p o s ta l a u th o r itie s , motor
v e h ic le departm ents); th e ir geographic area o f a c t iv it y s t r i c t l y
defined and lim ite d
( d i s t r i c t a tto r n e y s ); th e ir r e la t io n to the
s t a t e 's s p e c ific problems too remote (as some fe d e r a l a gen cies'
a r e ); t h e ir funding inadequate; or th 6 i r p r i o r i t i e s and the d i f ­
f i c u l t y o f consumer frau d in v e s tig a tio n can push such in v e s t i­
gation deep under the stack of paperwork (as can be the case
w ith p o lic e fraud d e t a i l s ) .
I 'l l
e d ie s .
touch on
the inadequacy o f p riv a te law su its as rem­
In the area o f small claim s, Oregon has a more p ro gres­
s iv e approach than many other s ta te s .
I f the claim amounts to
le s s than $200, i t can be taken to Small Claims Court, and no
attorneys can en ter the case without the consent o f the judge.
S t i l l , hovjever, the problem o f c o lle c t io n remains,
6
as when the
defendant has placed a l l h is money in another’ s name, ren dering
the judgment again st him w o rth less.
I t should be noted also
#hat such things as autom obiles, home appliances, and house s id in gs, the sales o f which bring about the most numerous consumer
com plaints, a l l have an i n i t i a l cost w e ll over the small claims
lim it .
Just how e x ^ n s iv e are le g a l fe e s ?
ate th e ir amount?
Do we Tbendl to exagger­
An eye-opening b oo k let not a v a ila b le to the
general p u b lic is the Oregon State Baris schedule o f Minimum Pees
and Charges--July 1, 1969, wherein i t is revealed that the min­
imum hourly charge a lawyer can le v y is $30.
In f a c t ,
below th at fig u re are su b ject to ju s t if ic a t io n by the attorn ey
to avoid a charge o f u n eth ica l p ra c tic e ’
The r e s t o f the book­
l e t makes good readin g, to o .
So, in taking a case to a p riv a te a ttorn ey, the consumer is
confronted by le g a l costs which make l i t i g a t i o n o f a sm all claim
e,
qu ite im practical*
Legal aid societies or neighborhood le g a l s e r­
v ic e agencies are a lre a d y burdened w ith undermanned s t a f f s .
In a d d itio n , most in d iv id u a ls must be e s s e n tia lly p o vertys tric k e n b efore these agencies w i l l take th e ir cases.
In Ore­
gon, to be e l i g i b l e f o r Legal Aid s e r v ic e s , a fa m ily o f fou r
would have to make an income o f le s s than $330 monthly,
The
head o f the household is allowed $200 per month, plus $10 per
week f o r each dependent.
A ls o , Legal Aid won’ t take any case
that might produce an a tto r n e y 's fe e , lik e most t o r t actio n s.
Does the th re a t o f a p riv a te la w su it have a d eterren t e f f ­
e c t on an unscrupulous dealer?
According to Legal A id ’ s Gold­
schmidt, "G en erally, the con tracts signed in these situ a tio n s
are unconscionable and can be beaten one at a tim e.
7
But th is is
so piecem eal, incomplete and time-consuming that p ro p o rtio n a te ly
few cases are f i l e d . "
<2/
The class a ctio n is a rr^hod whereby s e ve ra l p l a i n t i f f s can
but o fte n i t is awkward
brin g
to fin d a s ig n ific a n t number o f people whose complaint is pre­
c is e ly the same or where the f a c t situ a tio n s in each p erson 's
case is on a l l fou rs w ith the r e s t.
Both C a lifo r n ia and Washington have a c tiv e c e n tra liz e d con­
sumer fraud d iv is io n s in the o f f ic e s o f th e ir attorneys g en era l,
and w ith the assistan ce o f strong consumer fraud laws, they c re ­
ate a p in cer e f f e c t on Oregon which almost every person in t e r ­
viewed r e fe r r e d to .
In conclusion, I would emphasize that the only adamant op­
p o s itio n to the id ea o f e s ta b lis h in g a Consumer P ro te c tio n D iv­
is io n , be i t in the o f f i c e o f the Attorney General or under the
G overnor's wing, voiced in any in te rv ie w or l e t t e r in connec­
tio n with th is paper was th at o f Robert E. Brasch, d i s t r i c t a t­
torney f o r Coos County, which s h a ll be quoted here fo r it s s in ­
g u la r ity ;
i/e r e c e iv e numerous complaints each month regarding
what are a lle g e d to b e consumer fraud s itu a tio n ^ , but each
tim e, a ft e r in v e s tig a tio n , we fin d that there is no ffa u d
in vo lved whatsoever. U sually i t is a case of a smart s e l ­
l e r and a stupid or c a rele s s buyer.
Prom my experien ce, consumer fraud does not e x is t ;
ra th e r, consumer carelessn ess, consumer n egligen ce or con­
sumer ignorance is in volved in each case. In each instance,
nib crime has been committed and my s t a f f and I merely ad­
v is e the complaining p a rty o f p o s s ib le le g a l avenues that
may be pursued to g e t th e ir money back, rescin d th e ir con­
t r a c t , e tc .
Mr. Brasch's contention to the con trary, the evidence in ­
d icates that the State of Oregon needs a Consumer P ro te c tio n D iv­
is io n , and th at the most lo g ic a l place f o r i t is in the O ffic e
o f the Attorney General.
8.
There should be a branch in Portland
because o f Multnomah County’ s locus as a cen ter f o r o n e-th ird o f
the s t a t e ’ s p op u lation and because o f I t s p o s itio n as the hub o f
business fo r the s ta te .
I f such a d iv is io n is e s ta b lis h e d , an
exten sive p u b lic ity campaign should fo llo w th at would make the
ex is te n c e o f the o f f i c e well-known to the c it iz e n s o f Oregon as
w e ll as cooperating a gen cies.
In c lo s in g , I ’ d lik e to quote something said by L y le Jantz,
p resid en t of the la r g e s t B etter Business Bureau in Oregon:
” I ’ ve
never been the kind to think that the quick answer to a l l prob­
lems is to pass a law, but t h is would not only be in the in t e r e s t
o f the consuming p u b lic but would also aid the business community.”
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