[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
 H.R. 4501, GUARANTEE OF A LEGITIMATE DEAL ACT, AND H.R. 2480, TRUTH IN 
                            FUR LABELING ACT 

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON COMMERCE, TRADE,
                        AND CONSUMER PROTECTION

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 13, 2010

                               __________

                           Serial No. 111-123


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

76-578 PDF                      WASHINGTON : 2013 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 



                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin 
    Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
        Subcommittee on Commerce, Trade, and Consumer Protection

                        BOBBY L. RUSH, Illinois
                                  Chairman
JANICE D. SCHAKOWSKY, Illinois       CLIFF STEARNS, Florida
    Vice Chair                            Ranking Member
JOHN P. SARBANES, Maryland           RALPH M. HALL, Texas
BETTY SUTTON, Ohio                   ED WHITFIELD, Kentucky
FRANK PALLONE, Jr., New Jersey       GEORGE RADANOVICH, California
BART GORDON, Tennessee               JOSEPH R. PITTS, Pennsylvania
BART STUPAK, Michigan                MARY BONO MACK, California
GENE GREEN, Texas                    LEE TERRY, Nebraska
CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
ANTHONY D. WEINER, New York          SUE WILKINS MYRICK, North Carolina
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina
JOHN BARROW, Georgia
DORIS O. MATSUI, California
KATHY CASTOR, Florida
ZACHARY T. SPACE, Ohio
BRUCE L. BRALEY, Iowa
DIANA DeGETTE, Colorado
JOHN D. DINGELL, Michigan (ex 
    officio)
  



                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. John Barrow, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     1
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     2
    Prepared statement...........................................     3
Hon. Anthony D. Weiner, a Representative in Congress from the 
  State of New York, opening statement...........................     4
Hon. Robert E. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................     5
Hon. Steve Scalise, a Representative in Congress from the State 
  of Louisiana, opening statement................................     5
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, prepared statement....................................    89
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................    92

                               Witnesses

James A. Kohm, Associate Director, Division of Enforcement, 
  Bureau of Consumer Protection, Federal Trade Commission........     9
    Prepared statement...........................................    11
Charles Bell, Programs Director, Consumers Union.................    20
    Prepared statement...........................................    22
Cecilia L. Gardner, Esq., President and CEO, Jewelers Vigilance 
  Committee......................................................    35
    Prepared statement...........................................    37
Michael Markarian, Chief Operating Officer, The Humane Society of 
  the United States..............................................    46
    Prepared statement...........................................    49
    Answers to submitted questions...............................    96
Keith Kaplan, Executive Director, Fur Information Council of 
  America........................................................    75
    Prepared statement...........................................    77

                   Submitted Materials for the Record

Letter of May 3, 2010, from Green Bullion Financial Services, LLC 
  (Cash4Gold) to the Subcommittee................................    94
Statement of the National Trappers Association...................    95


H.R. 4501, GUARANTEE OF A LEGITIMATE DEAL ACT, AND H.R. 2480, TRUTH IN 
                            FUR LABELING ACT

                              ----------                              


                         THURSDAY, MAY 13, 2010

              House of Representatives,    
           Subcommittee on Commerce, Trade,
                           and Consumer Protection,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:27 p.m., in 
Room 2322, Rayburn House Office Building, Hon. John Barrow 
[member of the subcommittee] presiding.
    Present: Representatives Weiner, Barrow, Whitfield, 
Scalise, and Latta.
    Also Present: Representative Moran of Virginia.
    Staff Present: Michelle Ash, Chief Counsel; Timothy 
Robinson, Counsel; Will Cusey, Special Assistant; Peter 
Ketcham-Colwill, Special Assistant; Sarah Fisher, Special 
Assistant; Daniel Hekier, Intern; Brian McCullough, Minority 
Senior Professional Staff; Shannon Weinberg, Minority Counsel; 
Sam Costello, Minority Legislative Assistant; and Robert 
Frisby, Minority FTC Detailee.

  OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Barrow [presiding]. The subcommittee on Commerce, 
Trade, and Consumer Protection will now come to order.
    Today the subcommittee will consider two bills, H.R. 4501, 
the Guarantee of a Legitimate Deal Act, introduced by 
Representative Weiner; and H.R. 2480, the Truth in Fur Labeling 
Act, introduced by Representatives Moran and Bono Mack.
    Before I move forward with the hearing, I would like to ask 
unanimous consent that the record be left open for 10 
legislative days so that members may be able to revise and 
extend their remarks. Without objection, Mr. Moran will sit in 
as a member of the subcommittee for purposes of this hearing.
    Today the subcommittee will hear testimony on two important 
bills to protect and inform consumers. The first bill we will 
consider is H.R. 4501, the Guarantee of a Legitimate Deal Act 
of 2010, introduced by Representative Weiner on January 21, 
2009, to acquire certain policies from businesses that purchase 
precious metals from consumers and solicit such transactions 
through an Internet Web site.
    The bill would require online purchasers of precious metals 
to wait until receiving an affirmative acceptance of the amount 
offered before melting down a consumer's jewelry. Online 
purchasers of precious metals will be required to promptly 
return jewelry to the consumer if the consumer declines the 
amount offered.
    In addition, the bill will set a standard for the amount of 
insurance provided by online purchasers of precious metals on 
shipments of jewelry or precious metals.
    With our second panel, we will consider H.R. 2480, the 
Truth in Fur Labeling Act, introduced by Representatives Moran 
and Bono Mack, on May 18, 2000. The bill would amend the Fur 
Products Labeling Act to require all fur apparel to have 
labels, not just those products valued at over $150. It would 
also instruct the Federal Trade Commission to update its fur 
products' name guide. H.R. 2480 is a bipartisan bill and 
currently has 165 cosponsors. A companion bill, S. 1076, had 
been introduced in the Senate.
    At this time I will recognize the ranking member, Mr. 
Whitfield, for 5 minutes to make an opening statement.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Mr. Chairman, thank you very much. And I 
want to thank the witnesses for being with us today.
    As has been said, this is a hearing on H.R. 2480, the Truth 
in Fur Labeling Act. I am one of the cosponsors of that 
legislation--and I believe there are 165 cosponsors as of 
today--introduced by Mr. Moran and Mrs. Bono Mack. This 
legislation would amend the Fur Products Labeling Act to 
provide the elimination of a current examination; also would 
call for a review by the Federal Trade Commission of its fur 
guidelines book and authority to revise such guidelines as 
appropriate. It also provides authority for the States to enact 
their own labeling requirements.
    I do have some concerns about the effectiveness of a 
Federal law if the States can require different labeling 
requirements because of the problems in interstate commerce 
that that sometimes causes, but I do look forward to the 
testimony from all the interested parties today.
    H.R. 4501, the Guarantee of a Legitimate Deal Act. The 
intent of this legislation is to protect consumers who sell 
precious metals to Internet-based purchasers. The most common 
complaints are usually regarding the amount of cash value the 
consumer receives and whether or not they have the ability to 
reject the offer and get their items back if they decide to 
cancel the transaction, and how easily is that accomplished?
    I also have a few questions about whether or not this 
legislation is broad enough and should it apply only to 
Internet-based precious metal purchasers or should it go beyond 
that?
    So I look forward to the testimony today on this 
legislation, and I yield back the balance of my time.
    Mr. Barrow. I thank the gentleman from Kentucky for 
yielding.
    [The prepared statement of Mr. Whitfield follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow. And the chair at this time recognizes Mr. 
Weiner of New York for the purpose of making an opening 
statement.

 OPENING STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF NEW YORK

    Mr. Weiner. Thank you, Mr. Chairman. I appreciate the 
witnesses and I appreciate my colleagues for being here.
    Today we're going to have a hearing that was prompted by 
the toxic combination of two things; that is, the downturn in 
the economy and the ignorance of consumers about what their 
rights are and what they can expect reasonably when they are 
trying to sell their gold. It was prompted by complaints and 
concerns about the largest company in the industry, Cash4Gold.
    Cash4Gold pays about between 11 and 29 percent of the 
market price for gold, effectively ripping off consumers. Their 
return policies are deceptive and put all of the cards in the 
hands of the business and none in the hands of consumers.
    For example, if you don't accept an offer within 12 days, 
it is considered accepted, the gold is melted down and you lose 
your right. Obviously, consumers have no way to know when that 
12 days begins or ends.
    We also know that, for example, their return policies are 
also stacked against consumers in a way that can only be called 
fraudulent. A consumer that ensures their gold when it is 
mailed finds that it is not insured when it is returned. And 
the United States Postal Service recently conducted an 
investigation that found over 1,300 losses associated with 
Cash4Gold, and when they looked at each and every one of them, 
they concluded that there were no irregularities on the part of 
the Postal Service, leading them and me and the regular 
consumer to conclude that losing their customers' gold is part 
of their business model.
    Now, we invited the CEO of the company to come here, and he 
was told that he could not, because he was speaking at a 
conference in San Diego. In fact, a brief look at the Internet, 
which we do have access to here at the Energy and Commerce 
Committee, showed that he did not speak today; he spoke 
yesterday. A grand total of 76 different flight options were 
available to him to be able to get here for as little as $169.
    When asked if they would offer anyone else that would 
explain some of these policies that led to investigations in so 
many States and so many disgruntled consumers, they said no. 
There apparently is no one that can speak for that company, 
even though they have a public relations director who, until 
recently, was a federally registered lobbyist.
    Now, this is not just a random problem that we have. This 
is an orchestrated effort by some businesses to take advantage, 
as I said, of consumers. When asked about these complaints--and 
there have been many of them--the Better Business Bureau gives 
them a C-minus, which is not very good, Mr. Chairman. They 
explained that, Oh, these are just our competitors trying to 
cause problems.
    We're going to find out today that, in fact, it's Cash4Gold 
causing many problems for consumers.
    Thank you, Mr. Chairman.
    Mr. Barrow. I thank the gentleman.
    And at this time the chair would recognize the gentleman 
from Ohio for purposes of making an opening statement for 3 
minutes, Mr. Latta.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Latta. Thank you very much, Mr. Chairman and Ranking 
Member Whitfield. Thanks very much for holding this hearing 
today to discuss the issues surrounding the fraud with 
Internet-based companies that appraise and purchase jewelry 
directly from consumers through the mail.
    I also look forward to hearing from our witnesses regarding 
H.R. 2480, the Truth in Fur Labeling Act.
    As with any bills that pass Congress we need to make sure 
that our small businesses and consumers are protected, but we 
must also look at the unintended consequences and make the 
necessary corrections that might occur. The Federal Government 
cannot continue to force more bureaucratic mandates on 
businesses and consumers, further hindering economic growth and 
job creation.
    In regards to H.R. 2480, I have spoken with citizens from 
Ohio who have very great concerns about the fur labeling bill 
and the intentions behind it. You know, we all have to make 
sure that we're truthful in our labeling, but we also have to 
be careful about the consequences that may occur.
    Being from Ohio, we've recently passed what was called 
Issue 2 in 2009, which created the Ohio Livestock Care 
Standards Board, because agriculture is the number one 
contributor to Ohio's economy and Ohio farmers have cared for 
flocks and herds for generations and provided people across 
this country with safe quality and affordable food.
    If Issue 2 had not been passed in the State of Ohio, and 
again looking at what could happen as we look at these pieces 
of legislation, what could happen is the amendments that could 
have come up, if they had been adopted, someone--the State of 
California would have put great burden on the hardworking 
farmers across the State of Ohio and would have driven up costs 
for eggs, meat, and dairy products.
    So there are very many unintended consequences that can 
happen, and we have to take these into consideration when 
passing this legislation.
    With that, I look forward to hearing from both panels this 
afternoon, Mr. Chairman, and I yield back. Thank you very much.
    Mr. Barrow. The chair thanks the gentleman for yielding.
    At this time the chair will recognize, for purposes of 
making an opening statement for not more than 3 minutes, the 
gentleman from Louisiana, Mr. Scalise.

 OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Scalise. Thank you, Mr. Chairman. I appreciate your 
holding this hearing.
    Today we're examining two bills, H.R. 4501, the Guarantee 
of a Legitimate Deal Act; and H.R. 2480, the Truth in Fur 
Labeling Act.
    First, I would like to discuss the GOLD Act. I am sure 
we've all seen the advertisements and commercials for the mail-
in-gold industry, which include assurances that consumers will 
get fairly compensated and will encounter a smooth transaction. 
Unfortunately, reports have shown that this is not always the 
case. Some consumers have been taken advantage of and have been 
outright deceived.
    The GOLD Act seeks to address these issues by regulating 
Internet-based companies that appraise and purchase jewelry 
directly from consumers through the mail. There are a few 
issues with the bill that I think need to be discussed today, 
such as the fact that this bill is only limited to online 
companies. I hope this and other issues can be sorted out 
through today's hearing.
    The next bill, the Truth in Fur Labeling Act, seeks to 
improve the accuracy of fur labeling. Current law requires that 
fur product labels include certain information such as the name 
of the animal that produced the fur, whether the product is 
real fur, and the country of origin of any imported fur used in 
the product.
    Unfortunately, we've seen a few bad actors in the industry 
that have not abided by these rules. I believe that consumers 
are entitled to accurate and meaningful information regarding 
the fur products they purchase, and our subcommittee must 
ensure that transparency and accuracy exist in the marketplace.
    Mr. Chairman, I look forward to hearing from our witnesses 
on these bills, particularly on whether these bills are needed 
for the goals both to be achieved, or whether the FTC has the 
necessary authority to implement their provisions.
    This subcommittee must continue to ensure that consumers 
are protected, which means that we must debate and pass quality 
legislation. But I believe that we must also place our focus on 
the greater issues at hand. As our unemployment rate hovers 
near 10 percent and our national debt continues to grow, I 
think most Americans would much rather us focus this 
committee's efforts on trying to find ways to improve the job 
outlook in the private sector; and, instead, all they see is 
more bad policies that focus on growing the Federal workforce 
at the expense of our small businesses.
    While government jobs and government spending continue to 
grow exponentially, families and small businesses in our 
districts are cutting back. While this Congress refuses to pass 
a balanced budget or, for that matter, any budget, American 
families are having to tighten their belts and make tough 
decisions on how to keep their household budgets fiscally 
responsible and manageable. I hope we finally start focusing on 
those problems.
    Thank you and I yield back.
    Mr. Barrow. I thank the gentleman for yielding.
    Mr. Barrow. We now move on to the introduction of the 
witnesses for our first panel, but before I make the 
introductions I would like to thank all of the witnesses for 
taking time out of their busy schedules to appear before us 
today.
    First on my left is seated Mr. James Kohm, the Associate 
Director of the Division of Enforcement with the Bureau of 
Consumer Protection at the Federal Trade Commission. Next is 
Mr. Charles Bell, who is Programs Director at the Consumers 
Union. And on my right is Ms. Cecilia Gardner, who is the 
President and CEO of the Jewelers Vigilance Committee.
    It's the practice of this subcommittee to swear in all 
witnesses. So I'd ask you to please stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Barrow. Please let the record reflect that the 
witnesses have each answered in the affirmative.

 STATEMENTS OF JAMES A. KOHM, ASSOCIATE DIRECTOR, DIVISION OF 
   ENFORCEMENT, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE 
 COMMISSION; CHARLES BELL, PROGRAMS DIRECTOR, CONSUMERS UNION; 
CECILIA L. GARDNER, ESQ., PRESIDENT AND CEO, JEWELERS VIGILANCE 
                           COMMITTEE

    Mr. Barrow. Mr. Kohm, you're now recognized for 5 minutes 
for the purposes of making an opening statement.

                   STATEMENT OF JAMES A. KOHM

    Mr. Kohm. Thank you very much. Chairman Barrow, Ranking 
Member Whitfield, and members of the committee, my names is 
James Kohm. I am the Director of the Division----
    Mr. Barrow. Mr. Kohm, there's a microphone in front of you 
and what I'd ask you to do is bring it close to you. You can 
move it around, manipulate it so it comes closer. It's a 
directional mike. And make sure it's turned on.
    Mr. Kohm. OK. It's on. Thank you. I apologize.
    Chairman Barrow, Ranking Member Whitfield, and members of 
the committee, my name is James Kohm. I am the Associate 
Director of the Division of Enforcement in the Federal Federal 
Trade Commission's Bureau of Consumer Protection. Let me begin 
by noting that the views expressed in my written testimony 
represent those of the Commission, while my oral testimony and 
responses to your questions reflect only my own views and not 
necessarily those of the Commission or any particular 
commissioner.
    Unfortunately, an increasing number of fraudulent operators 
have recently sought to take advantage of the economic downturn 
by preying on consumers in economic distress. The Commission is 
meeting this challenge by spearheading multiple law enforcement 
sweeps against operations that prey on financially strapped 
consumers.
    Most recently, the Federal Trade Commission announced 
Operation Bottom Dollar, a multiagency crackdown on 
organizations that fleeced unemployed consumers by taking their 
money in exchange for jobs or job placement opportunities that 
simply did not exist.
    Additionally, since October of 2008, the Commission has led 
four other law enforcement sweeps focused on protecting 
consumers from foreclosure rescue scams, job opportunity scams, 
deceptive get-rich-quick schemes, bogus government grant 
schemes, phony debt reduction service schemes, and credit 
repair scams.
    Today I appreciate the opportunity to discuss H.R. 4501, 
the Guarantee of a Legitimate Deal Act, a bill that also would 
protect consumers from unscrupulous marketers during this 
economic downturn. Most of the Commission's complaints about 
``cash for gold'' companies relate to violations of the do-not-
call rule. However, the Commission has received a growing 
number of complaints from consumers who send their gold jewelry 
or other items to companies and then were dissatisfied with the 
payments they received in exchange. When the consumers called 
to get their gold back, the companies told them that they'd 
already melted the gold and there was nothing they could do for 
them.
    The Commission has also received several complaints about 
lost jewelry that was returned without adequate insurance.
    The legislation before the committee would address both 
these concerns. Specifically, the bill would require online 
purchasers to afford consumers a right to consider and reject a 
specific monetary offer before a merchant melts or otherwise 
liquidates their precious metals, and would require purchasers 
to adequately insure items they ship to consumers who decline 
their offers.
    Additionally, the legislation gives the Commission civil 
penalty authority to ensure that the FTC can effectively 
enforce the law.
    The Commission, however, has three suggested corrections 
that should help effectuate the purpose of the legislation:
    First, the bill is currently limited to Internet sales. The 
same practice that led to the legislation, however, could be 
accomplished through telemarketing, direct mail, or television 
or radio ads. The committee therefore may want to consider not 
limiting the coverage to a single marketing avenue.
    Second, if the committee decides to limit the bill's 
coverage to Internet sales, we would suggest a slight amendment 
to ensure that all such sales are actually covered. 
Specifically, the bill covers those who maintain an Internet 
Web site. An unscrupulous marketer may argue that it's not 
covered because a third-party Web hosting company maintains 
their site. The committee can resolve this issue by changing 
the ``maintain'' language in the manner outlined in the 
Commission's written testimony.
    Finally, the Commission recommends that the committee 
modify the bill to clarify that purchasers of precious metals 
must make a firm offer to purchase the items for a specific 
price. Otherwise an unscrupulous marketer could claim that its 
vague offer to pay a good price or the best price is accepted 
when consumers ship their items, thereby avoiding the intent of 
the law altogether.
    Thank you for providing the Commission an opportunity to 
appear before the committee today to address this important 
issue. I will be happy to answer any of your questions.
    Mr. Barrow. Thank you Mr. Kohm.
    [The prepared statement of Mr. Kohm follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow Mr. Bell, you're now recognized for purposes of 
making an opening statement.

                   STATEMENT OF CHARLES BELL

    Mr. Bell. Chairman Barrow, Ranking Member Whitfield and 
members of the committee, my name is Charles Bell. I am 
Programs Director for Consumers Union, based in Yonkers, New 
York. Thank you so much for the opportunity to testify today on 
ways to protect consumers who respond to Internet and TV offers 
to exchange precious metals for cash payments through the mail. 
We commend you for holding this hearing to focus attention on 
ways to protect consumers and encourage a safer marketplace.
    Consumers Union is the independent nonprofit publisher of 
Consumer Reports, ConsumerReports.org, and the Consumerist.com 
blog, which empower consumers by informing and entertaining 
them about the top consumer issues of the day. And as part of 
our work, we regularly research and report on deceptive 
practices and misleading practices that affect consumers. We 
report on scams and frauds, both to alert consumers so they can 
protect themselves, and to alert law enforcement agencies and 
policymakers so they take action to directly curtail and stop 
these unethical, deceptive, or fraudulent practices.
    Over the last several years, Consumer Reports has 
researched and reported about consumer problems related to cash 
for precious metals services which we think are worthy of your 
attention by your subcommittee.
    Beginning in 2008, the Consumerist.com blog published a 
series of articles and blog posts regarding cash for precious 
metals services, including an in-depth investigative article 
entitled ``The Article that Cash4Gold Doesn't Want You to 
Read,'' on September 2, 2009, which is attached to our 
testimony. And through research and investigative reporting, 
the Consumerist uncovered a range of questionable practices 
that raised concerns that consumers are being misled or 
shortchanged by such services, many of which are heavily 
promoted through TV ads and Internet.
    Our overriding concern is that when financial circumstances 
lead consumers to make the difficult decision to part with 
their gold, silver, or other precious metals, items that may 
have both economic and sentimental value, they should be 
guaranteed a fair process.
    A 2009 study by Consumer Reports, which we discuss in our 
testimony, found that cash for precious metals services paid 
between 11 percent and 29 percent of the day's market price for 
gold, while local jewelers and pawn shops offered significantly 
higher amounts. Based upon our research and the negative 
experiences of a significant number of consumers, we believe 
that additional consumer protections are very much needed to 
create fair rules of the road for online cash-for-metal 
services.
    We generally do not recommend that consumers use such 
heavily advertised services because the high expenses that 
these companies spend for marketing make it unlikely that 
consumers will receive fair economic value for their jewelry or 
other items, and in general we think consumers would be better 
off to take their jewelry or other items to several local 
jewelers or pawn shops for appraisal and to solicit competing 
offers from reputable companies or third-party buyers.
    At the same time, however, we believe that consumers who do 
decide to use online services need to have a fair chance to 
negotiate a better offer and to promptly obtain the safe return 
of their gold or precious metal, with appropriate insurance if 
they decline that offer.
    And so we would emphasize that consumers who choose to use 
heavily advertised services will still be at risk of receiving 
lower prices, but at least they will have a fair chance to 
protect their interests and obtain a favorable offer within a 
prescribed period after submitting the items for appraisal.
    H.R. 4501, introduced by Representative Anthony Weiner, 
contains strong pro-consumer provisions that would strengthen 
consumer rights IN online cash-for-metals transactions and 
create fair rules of the road to prevent understandings and 
complaints. The bill would make it a crime to melt or 
permanently destroy any proffered items of jewelry or precious 
metal before the purchaser has received an affirmative 
acceptance of the offer from the consumer.
    H.R. 4501 would also require a fair return period for 
consumers who submit precious metals for sale through the mail 
or other delivery services. If consumers decide to reject the 
offered price, they should be guaranteed the swift return of 
their jewelry and proper insurance during shipment.
    And as discussed, H.R. 4501 would also give the FTC strong 
enforcement powers to ensure that these companies act favorably 
and do not engage in deceptive marketing and sales practices. 
These commonsense protections are consistent with both common 
sense and what customers have a right to expect from this 
relatively unique type of business.
    As mentioned above, the remote, relatively anonymous nature 
of the online mail-in cash-for-metals transaction introduces 
new types of risks or uncertainty for the consumer. H.R. 4501 
creates fair rules of the road to help address and minimize 
these risks and clarify the channels of communication so both 
the consumer and the purchaser have appropriate rules and 
protocols to follow to minimize bad outcomes.
    For these reasons Consumers Union strongly supports H.R. 
4501 and urges its swift passage by the Congress.
    Thank you very much for the opportunity to testify here 
today about this critically important issue, and we thank you 
for your efforts to protect consumers in these tough economic 
times and look forward to working with you as you move forward 
in addressing these issues.
    Mr. Barrow. Thank you, Mr. Bell.
    [The prepared statement of Mr. Bell follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow. The chair now recognizes Ms. Gardner for up to 
5 minutes for purposes of making an opening statement.

                STATEMENT OF CECILIA L. GARDNER

    Ms. Gardner. Thank you, Mr. Chairman, and thank you to both 
yourself and to Ranking Member Whitfield for inviting me here 
today. It's a pleasure to be here with you.
    My name is Cecilia Gardner and I am the President, CEO and 
General Counsel of the Jewelers Vigilance Committee, known as 
the JVC, not the electronics company. I am here today 
representing the organization and its members. It is a not-for-
profit trade association in the national jewelry industry.
    We were formed in 1912 to provide self-regulation within 
the industry and to facilitate compliance with the laws that 
affect the jewelry trade through supplying information on our 
Web site, presenting seminars, publications, newsletters, 
articles and trade publications; and we also serve the industry 
by receiving complaints regarding jewelry transactions and 
mediating disputes between consumers and jewelers that arise 
and--or between businesses.
    Our members include retailers, suppliers, manufacturers, 
wholesalers and gold-buying companies. I raise this because I 
want to remind the committee--the subcommittee--that this is an 
industry of small business. These are family--for the most 
part, family-owned small businesses who of late have been 
struggling with the economic downturn.
    You can imagine how it has impacted the economic life of a 
retail jewelry store. Jewelers at all levels of the industry 
have been hurt by the economic crisis of the last years, and 
that same crisis has driven up the cost of precious metals, 
creating a consumer interest in selling gold primarily in the 
form of unwanted jewelry.
    Many companies have weathered the drop in jewelry demand 
and managed to stay in business by buying gold from their 
customers and then selling it to refiners. New companies and 
business models have arisen, including gold-buying parties in 
homes and Web sites, that invite consumers to mail in their 
gold in exchange for money. For the most part, the purchase and 
sale of gold has been a benefit both to the industry and to 
consumers alike.
    We have had in our organization since 2008 a special 
category of membership for gold buyers, and we advise the 
industry on the laws and regulations that govern the practice 
of buying gold from consumers. This includes anti-money 
laundering requirements pursuant to the USA PATRIOT Act, as 
well as State and local laws regarding permits for second-hand 
dealers, and, finally, regulations that address antifencing 
laws which vary from jurisdiction to jurisdiction, but 
generally require that gold buyers obtain identification from 
sellers, keep purchased gold on their premises for a specific 
length of time, and maintain accurate records.
    We have received various complaints regarding the function 
of gold, the activity of gold buying. And the most frequent 
complaint that we get is that the amount of money paid for the 
gold is insufficient. It's too low. Since these prices and the 
offer is not regulated, it's a free, open market, there is 
really very little we can do if the complaint just centers 
around the price that was paid for the gold.
    Another complaint that we often receive, frankly, is that 
consumers mail in the gold to a company that they found online, 
and then the company simply disappears. This is an outright 
theft, a fraud, and we very often turn those complaints over to 
law enforcement for action.
    The JVC supports the goal of appropriate consumer 
protection in all aspects of the jewelry industry, and our 
interests are completely aligned with any effort to maintain a 
fair marketplace and to prevent consumer exploitation.
    To that end, we have reviewed the Guarantee of a Legitimate 
Deal Act of 2009, and our members fully support it. I also 
heard here today some suggested broadening of the coverage of 
the bill and we would agree--we would support the broadening in 
the sense that it would apply to purchasers who receive mailed-
in gold.
    I also should note for the committee that there are places 
in the United States where there is simply no alternative to--
to mailing in the gold. There are places in the United States 
where there just is no easily accessible bricks-and-mortar pawn 
shop or jewelry store or refiner that is willing to purchase 
the gold from a consumer. So the mail-in function is something 
that probably will still find a market in the United States.
    Consumers should be presented with a good-faith offer and 
not a fait accompli in the nature of a check for jewelry that 
has already been destroyed. All of the provisions of the bill 
that we read, the legislation that we see in this bill, seems 
equally fair and sensible. Consumers should be ensured that 
they are not going to be delayed in their efforts to further 
shop their jewelry or harmed by inadequate insurance on a lost 
return, and this legislation requires that care be taken in the 
online purchase of gold, without creating an undue burden on 
the buyer. One of our main----
    Mr. Barrow. Ms. Gardner, in the interest of the time of the 
other witnesses and the committee, can you please bring your 
statement to a close so we can move on to the examination of--
--
    Ms. Gardner. I will. I just want to mention that many of 
our members who buy gold online or in the mail often wait until 
their check is negotiated before they melt the gold, therefore 
protecting the consumer in that way.
    So thank you for the opportunity and I am sorry to have 
gone over my time.
    Mr. Barrow. Not at all. Thank you, Ms. Gardner.
    [The prepared statement of Ms. Gardner follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow. The committee now proceeds to an examination of 
the witnesses by members of the committee. The chair recognizes 
himself for 5 minutes for purposes of questioning the 
witnesses. In the interest of a more thorough and sifting 
examination of all of the issues raised by the legislation, the 
chair is happy to yield his 5 minutes to the sponsor and the 
author of this legislation, Mr. Weiner. Mr. Weiner, you're 
recognized for 5 minutes.
    Mr. Weiner. Thank you, Mr. Chairman. I thank all the 
witnesses for their testimony, particularly Ms. Gardner, with 
whom I have some history. We got to know each other some years 
ago as our paths crossed in political life, and I am a big fan 
of her husband as well, and I thank her for her service to the 
citizens of New York.
    Let me understand a little bit about the role that you're 
here in, Ms. Gardner. The Jewelers Vigilant Committee, does it 
include as a member--does it have as a member Green Bullion, 
the company Green Bullion, or Cash4Gold, the business--the 
active name of Cash4Gold, which is Green Bullion? Is that a 
member organization of yours?
    Ms. Gardner. Cash4Gold is in fact a member of the JVC, yes.
    Mr. Weiner. What does it take to be kicked out? Is there a 
standard--are there standards of conduct that are insisted 
upon? I mean, I see some of your members are Movado Group and 
GE Money and Patek Phillipe and Rolex, and in there is 
Cash4Gold, a company that the post office says is stealing 
people's stuff; that a review of the witnesses to your right 
say is giving people as little as 11 percent of the market 
price for gold. Is there a code of conduct that members of JVC 
agree to comply with?
    Ms. Gardner. Yes, there is. There is a 4-page document of 
due process procedural steps in order to institute and succeed 
to remove a member from the rolls of membership at the JVC.
    Mr. Weiner. If you would provide the committee with that 
document----
    Ms. Gardner. Certainly.
    Mr. Weiner [continuing]. It would be very helpful to us.
    Can I ask, in your experience in representing the 
organization as its general counsel, has there been another--is 
there another entity that has 300-some-odd complaints against 
it from the Better Business Bureau?
    Ms. Gardner. Yes.
    Mr. Weiner. Could you tell me which ones?
    Ms. Gardner. No.
    Mr. Weiner. For the purpose of future hearings, please 
provide that for me.
    Are there other members of your organization that have lost 
their accreditation of the Better Business Bureau and told they 
can't use their indicia in their advertising anymore?
    Ms. Gardner. I am not aware of that.
    Mr. Weiner. Are there any other organizations, to your 
knowledge, that are members of your organization that have 
behaved in the general way that Cash4Gold has, melting down 
gold or with an arbitrary amount of time--you said in your 
testimony, most of your members don't do that. Do you know of 
others that do? Is that a common practice in your industry to 
melt down gold before there has been an affirmative acceptance 
of an offer by a customer?
    Ms. Gardner. In the industry we have not received very many 
complaints of that nature. In fact, we haven't received any.
    Mr. Weiner. So Cash4Gold would be the only one?
    Ms. Gardner. To be honest, Congressman, we haven't received 
any complaints about Cash4Gold on that basis.
    Mr. Weiner. On what basis have you received the most 
complaints about Cash4Gold?
    Ms. Gardner. That they don't pay very much for the gold.
    Mr. Weiner. And do your other members who are--many of whom 
I see don't engage in mail order. They are actual physical 
places where you can go and take your gold. If you were going 
to give advice to consumers on where they can get the best 
service, where they can get the most accurate reflection, would 
you recommend--would your organization recommend that it's 
either/or; that you get an equal value if you mail it in than 
if you bring it into a pawn shop or bring it into a jeweler?
    Ms. Gardner. We don't recommend to consumers anything other 
than go to a reputable jeweler. We--we recognize that, given 
the complex marketplace for gold in the United States, that 
there are outlets where a consumer can get better prices than 
if they mail it into a mail-in buyer of gold. But not everybody 
has access to those better outlets. Certainly a refiner, a 
direct refiner, would give you a better deal.
    Mr. Weiner. When you have access to a deal or not, when you 
have access to alternatives or not, sometimes, Ms. Gardner, a 
bad deal and a rip-off is just a rip-off? Like sometimes if 
it's the only place you choose or you have five other options 
and you choose that one, a rip-off is a rip-off.
    When someone is getting 11 percent, which is what Consumer 
Reports found in its research, it's hard to interpret that 
absence of choice being a justification for a rip-off like 
that, wouldn't you agree?
    Ms. Gardner. I don't know how you're defining ``rip-off.'' 
I mean----
    Mr. Weiner. Well, let's start with 11 percent. Is that a 
rip-off, 11 percent----
    Ms. Gardner. It's a lousy deal.
    Mr. Weiner [continuing]. Eleven percent of the day's market 
price for gold, a lousy deal----
    Ms. Gardner. That is a lousy offer.
    Mr. Weiner [continuing]. Or as we might say in Brooklyn, a 
rip-off. So the question is----
    Ms. Gardner. I am not from Brooklyn.
    Mr. Weiner. We can't have everything, Ms. Gardner. But the 
point is----
    Ms. Gardner. I lived there for a while.
    Mr. Weiner. But the point is the same; is that whether or 
not there are many choices, no choices, one choice, a rip-off 
is a rip-off. And Cash4Gold is engaged in systematic ripping 
off of consumers. And what troubles me is your organization 
seems to be giving them a cloak of legitimacy. And I am going 
to take a look at the document that you suggested that you 
have, to see if they--if they don't qualify for being kicked 
out, I don't know who does.
    Thank you, Mr. Chairman.
    Mr. Barrow. I thank the gentleman for yielding.
    I am pleased to recognize the gentleman from Kentucky for 
purposes of questioning for up to 5 minutes. Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Thank you all for your testimony. It's my understanding 
that all of you support the concept of this legislation; is 
that correct?
    Mr. Kohm. That's correct.
    Mr. Bell. Yes, that's correct.
    Ms. Gardner. Yes, that's correct.
    Mr. Whitfield. OK. And all of you would agree that it could 
be improved by, one, making it a little bit more broad than 
just an entity that hosts a Web site in order to take care of 
direct mail and marketing and so forth; is that correct?
    Mr. Kohm. That's correct for the FTC, Congressman.
    Mr. Bell. Yes. We would support the measures discussed by 
Mr. Kohm as well. We think that would be a good enlargement of 
the scope of the legislation.
    Ms. Gardner. I have not discussed this particular concept 
of broadening, since I've only heard it here today in this 
room. You know, obviously I speak for the board of the JVC and 
its members. I would have to go back, but I don't see why that 
wouldn't make sense.
    Mr. Whitfield. Well, I think all of us agree that this is 
good legislation, and working with Mr. Weiner to make it even 
more effective, I am sure he would be supportive of that as 
well.
    And all of you also want to require a step that the seller 
would have to affirm the offer from the purchaser before the 
meltdown; is that correct?
    Mr. Kohm. That's correct. We think that there should be an 
offer for a specific price that's accepted before there's any 
meltdown.
    Mr. Whitfield. And all of you agree with that?
    Mr. Bell. Yes.
    Mr. Whitfield. And then all of you do believe that the 
insurance issue is something that needs to be addressed; if the 
material is mailed back that there must be adequate insurance 
in case it's lost?
    Mr. Kohm. That's correct.
    Mr. Bell. Yes.
    Mr. Whitfield. Now, do we--I am sorry, Ms. Gardner.
    Ms. Gardner. Yes.
    Mr. Whitfield. OK. Do we need to be concerned about the 
definition of ``precious metals,'' or does that need to be 
addressed?
    Mr. Kohm. Congressman, that doesn't seem to us to need to 
be addressed. We'd have to see how that played out in the 
marketplace.
    Mr. Whitfield. Well, I want to thank you. You all have 
given us some very good suggestions and I think it's a good 
piece of legislation.
    I yield back the balance of my time.
    Mr. Barrow. I thank the gentleman for yielding.
    The chair now recognizes Mr. Weiner of New York for 
purposes of asking his allotted 5 minutes of questioning.
    Mr. Weiner. Thank you, Mr. Chairman. I don't think I'll use 
the full 5 minutes. The fact is most of the questions that 
remain to be addressed should be addressed to Cash4Gold 
directly. They've made a decision not to attend this hearing. 
They've made a decision not to attend this hearing under the 
pretense of something better to do. And I probably, if I were 
they, would choose to avoid this hearing as well, because I 
think it's further attention being called to the fact that the 
way they function is truly exploitive of consumers.
    I think that we are in a circular kind of situation that 
consumers can find themselves caught up in. First, you've got 
many advertisements tied to many news reports that now this is 
the moment to buy gold, gold is going up. They then--those news 
reports get mated with TV commercials very often, right after 
those same news reports that say, find your gold, send it to 
us, and we will give you a good price. Once they do that, the 
experience of the consumer goes downhill from there.
    Imagine that. They are finding that in large numbers, the 
gold is being--they're getting paltry offers, and then if they 
have the wherewithal to ask for that gold back, they're 
finding, lo and behold, that it's already been melted down 
because the 12-day limit that they had started ticking the 
moment that their gold arrived, or the time it was mailed. No 
one really knows. It's not very clear from the literature.
    Then if they're lucky enough to have reached someone and 
they said, OK, we will send it back to you, shockingly we're 
finding that the Postal Service is getting all kinds of 
complaints about lost gold coming from Cash4Gold, 1,300 loss 
claims, so many so that the Postal Service does an 
investigation and finds that--they draw the conclusion that 
Cash4Gold didn't send it back. It didn't get lost. They just 
chose not to. They find if they insure it sending it to 
Cash4Gold, they happen to not insure it coming back, so then 
suddenly the consumer is out.
    When asked about these things, their defenders, and Ms. 
Gardner is among them, say, Look, there's lots of different 
ways to deal with gold. We provide something that others don't. 
What they provide is a rip-off.
    That is why I hope that we have an opportunity to have 
Cash4Gold come back and answer some of these questions. I have 
a feeling that barring a subpoena, which is probably something 
they are going to see visited upon them in Florida and other 
States around the country that are beginning these 
investigations, they probably will choose not to.
    They operate in that dark shadow, that corner of our 
economy where people prey upon the most vulnerable. And I think 
that after this hearing, I believe that some of the legitimate 
members of the Jewelers Vigilance Committee will say, You know 
what? We're tired of mopping up for these guys. These guys are 
an embarrassment. These guys are not doing a service for 
consumers. They're using our organization to help cleanse their 
good name, and our skillful, talented witness, who has a 
history of consumer protection, to help defend what essentially 
is indefensible.
    So we're going to pass this. We're going to try to take the 
counsel of Mr. Whitfield and others and some of the witnesses 
and broaden it further, and we're going to continue the 
investigation. But we're not going to allow a bad economy, 
people desperate for a few extra dollars, to think that if they 
put their jewelry in an envelope, it's not effectively the same 
as putting money in the envelope and just mailing it away.
    I want to thank the chairman. I want to thank this 
committee for holding this hearing. I have received assurances 
from the chairman of the full committee and the chairman of the 
subcommittee that we don't take kindly to the idea of witnesses 
pretending to be hiding somewhere rather than testifying before 
this committee, and so I am sure we will be revisiting it. 
Thank you.
    Mr. Barrow. I thank the gentleman for yielding. There being 
no other members of the committee present for purposes of 
questioning the members of the first panel, the chair will 
excuse the members of the first panel with the thanks of the 
chair.
    Now I would like to call up the witnesses for our second 
panel.
    All right, I think we're ready to proceed with the 
witnesses for the second panel.
    Since Mr. Kohm has been kind enough to stay with us, I will 
move on to introduce the rest of the members of this panel. 
Seated to Mr. Kohm's left is Mr. Michael Markarian, the Chief 
Operating Officer of the Humane Society of the United States. 
On Mr. Markarian's left is Mr. Keith Kaplan, who is Executive 
Director of the Fur Information Council of America.
    As stated earlier, it's the practice of this subcommittee 
to swear all witnesses. Since Mr. Kohm was sworn in on the 
first panel, he's still under oath and there's no need for him 
to be sworn again. So I will ask Mr. Markarian and Mr. Kaplan 
to please rise and raise your right hand.
    [Witnesses sworn.]
    Mr. Barrow. The record will reflect that each of the 
witnesses has answered in the affirmative.

 STATEMENTS OF JAMES A. KOHM, ASSOCIATE DIRECTOR, DIVISION OF 
   ENFORCEMENT, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE 
  COMMISSION; MICHAEL MARKARIAN, CHIEF OPERATING OFFICER, THE 
    HUMANE SOCIETY OF THE UNITED STATES; AND KEITH KAPLAN, 
     EXECUTIVE DIRECTOR, FUR INFORMATION COUNCIL OF AMERICA

    Mr. Barrow. Mr. Kohm, you're now recognized for 5 minutes 
for purposes of making an opening statement.
    Mr. Kohm. Thank you, Chairman Barrow, Ranking Member 
Whitfield, and members of the committee. For the record, my 
name is----
    Mr. Barrow. Mr. Kohm, if you'll excuse me, as a courtesy to 
a member who is sitting by unanimous consent today, I would 
like to give Mr. Moran the opportunity to make an opening 
statement, and then I will recognize you for the purposes of 
making your opening statement and the other witnesses, if 
that's OK with you.
    Mr. Kohm. Absolutely.
    Mr. Barrow. Thank you. The gentleman from Virginia is 
recognized for purposes of making an opening statement not 
longer than 5 minutes. Mr. Moran.
    Mr. Moran of Virginia. Thank you, Mr. Chairman. I thank Mr. 
Whitfield as well, the ranking member on this subcommittee. I 
appreciate the opportunity to make an opening statement on a 
bill that I think is well deserving of action by this 
subcommittee.
    The Fur Products Labeling Act, enacted in 1951, required 
labels of fur products that indicated the name of the animal 
whose fur was being used and the country of origin. The law, 
however, allowed for the exemption of products containing a de 
minimis amount of fur. Since 1998 the definition of ``de 
minimis'' has been set by the Federal Trade Commission at $150.
    In today's marketplace, with fur trim products rivaling 
full-length fur garments in total sales, this exemption--in 
fact, this interpretation exempts a significant percentage of 
fur products. More than one out of every eight fur products 
that are purchased create a situation where the consumer must 
rely exclusively on information provided by sales staff or 
product displays, neither of which may necessarily be reliable 
so as to guide the consumer's purchasing decision.
    This lack of clear and consistent information poses serious 
problems for consumers who may have allergies to fur, 
particularly to fur collars, which is oftentimes where that fur 
is located on a garment. They may have ethical objections to 
fur, or they may have concern about the animals, such as dogs 
and cats that supply that fur.
    The Truth in Fur Labeling Act that we are bringing up 
before the subcommittee today would correct this problem by 
removing the de minimis exemption and requiring labels on all 
fur products, regardless of value, Mr. Chairman.
    Now, let me head off any anticipated criticism. This is not 
a solution in search of a problem. That's oftentimes a 
criticism that is labeled at--that is thrown at much 
legislation. This is not the case. The Humane Society of the 
United States, as we know, a very credible national 
organization, as well as a number of other national 
organizations and media outlets, have conducted investigations 
documenting the confusion that has been created by retail 
personnel and consumers who buy fur products that lack labels.
    The Humane Society, in fact, have found that in a number of 
stores, 100 percent of supposedly faux fur was actually animal 
fur. Too often retailers don't know what they're selling and 
consumers don't know what they're buying, and that's what needs 
to change.
    I am pleased that there is a representative of the Fur 
Manufacturers and Retailers here to testify today. I have read 
your testimony and I appreciate the fact that the Fur 
Information Council of America supports the underlying purpose 
of this bill: to ensure consumers have the requisite knowledge 
to make informed choices consistent with their medical beliefs 
and their ethical beliefs as well. I should say, their medical 
needs and their ethical beliefs.
    I understand that FICA does have some concerns about 
section 4 that simply restates current policy that currently 
allows States to enact fur-labeling requirements in addition to 
the FTC standards. I think those concerns are, in fact, 
legitimate; and I'd be glad to work with FICA and the committee 
to address this provision in order to ensure that the larger 
public interest is served, because it is not intrinsic to the 
purpose of the legislation. In fact, it simply restates current 
policy, as I say.
    More than anything else, this is a consumer protection 
issue. I think the testimony will show that the right policy 
for consumers is to remove the small-value exemption and 
require all products containing fur to carry an accurate label.
    Again I want to thank you, Mr. Chairman, and the entire 
subcommittee for deciding to hold this hearing, and I look 
forward to working with all of you to advance what I know you 
will find to be commonsense legislation that I hope we can 
advance as expeditiously as possible. And I thank you very much 
for your indulgence, Mr. Chairman. Thank you.
    Mr. Barrow. On the contrary, I thank the gentleman from 
Virginia for his opening statement and I thank him for his 
leadership on this issue.
    Mr. Kohm, it is again your turn to make an opening 
statement, this time on the Truth in Fur Labeling Act.

                   STATEMENT OF JAMES A. KOHM

    Mr. Kohm. Thank you, Chairman Barrow, Ranking Member 
Whitfield, and members of the committee. For the record again, 
my name is James Kohm. I am the Associate Director of the 
Division of Enforcement in the Federal Trade Commission's 
Bureau of Consumer Protection.
    Let me again note that the views expressed in my written 
testimony represent those of the Commission, while my oral 
testimony and responses to your questions reflect only my own 
views and are not necessarily those of the Commission or any 
particular commissioner.
    I appreciate the opportunity today to discuss H.R. 2480, 
which would effectively require the Commission to rescind the 
fur rules exemption for garments with relatively small fur 
value. Without this de minimis exemption, manufacturers will be 
required to label all fur products, regardless of the fur's 
value, with the animal name, country of origin, fur treatment, 
a registered identification number, as well as other 
information that is material to consumers' purchasing 
decisions.
    The Commission supports this legislation based on changes 
in the marketplace. In 1952 the Commission exercised its 
authority under the Fur Products Labeling Act to exempt 
products containing a relatively small value of fur. At that 
time, fur garments generally represented a large investment, 
and consumers were primarily concerned that they received the 
value that they were paying for; in other words, that they 
actually received the type and quality of fur they purchased.
    However, when the value--when the value of the fur was 
small, for example, low-cost fur used in small quantities for 
trim, consumers' need for this information was greatly reduced. 
The Commission periodically reviews all its rules and guides to 
ensure that they remain relevant and appropriate in a changing 
marketplace.
    The fur rules last underwent such a review in 1998. At that 
time, the Fur Information Council of America submitted the only 
comment regarding the de minimis exemption, seeking to increase 
the amount of the exemption based on inflation. No other 
commenters suggested--no commenters suggested repealing the 
exemption at that time.
    The marketplace, however, now appears to have changed 
significantly. Many consumers remain concerned about the 
quality of the fur products they purchase, but there appears to 
be an increasing number of consumers who, for a variety of 
reasons, would prefer not to purchase real fur, or who object 
to certain types of fur even in small amounts.
    Accurate labeling of all garments containing fur, 
regardless of the fur's value, would help these consumers make 
informed purchasing decisions. Given this change, the 
Commission plans to explore rescinding its de minimis exemption 
for fur labeling during its currently scheduled 2011 fur rule 
review.
    However, the FTC could only effectuate such a change after 
establishing such a record and weighing the cost and benefits 
of eliminating the exemption. If enacted, H.R. 2480 would 
remove the Commission's authority to promulgate a de minimis 
exemption, thereby providing the most efficient and expeditious 
means of helping those consumers who wish to avoid fur products 
or certain types of fur, while maintaining the labeling 
framework for those consumers concerned about the type and 
value of their fur purchases.
    It goes without saying that if this legislation is enacted, 
the Commission would move quickly to revise the fur rules to 
comport with the new legal framework.
    Thank you for providing the Commission an opportunity to 
appear before the committee today to discuss the Truth in Fur 
Labeling Act. I will be happy to answer any of your questions.
    Mr. Barrow. Thank you, Mr. Kohm.
    Mr. Markarian, you're now recognized for 5 minutes for 
purposes of making an opening statement.

                 STATEMENT OF MICHAEL MARKARIAN

    Mr. Markarian. Thank you, Mr. Chairman and Mr. Ranking 
Member, and members of the subcommittee for holding this 
hearing on this important issue and for inviting the Humane 
Society of the United States here to testify. I want to thank 
Congressman Moran for his tremendous leadership on this issue, 
as well as Congresswoman Bono Mack and other members of the 
subcommittee who are cosponsors of H.R. 2480.
    We at the Humane Society of the United States strongly 
support this legislation, which we essentially view as a much-
needed upgrading or updating of the Fur Products Labeling Act, 
which was passed nearly 60 years ago and needs to be updated to 
reflect the present market realities.
    As we heard, when the Fur Products Labeling Act was passed 
in the early 1950s, there was an exemption in the law for a 
small quantity or value of fur, and in the last six decades the 
industry has really changed quite remarkably in a number of 
ways. There has been an increased use in fur trim where people 
are no longer just seeking full-length fur coats or other 
garments, but they're seeking parka jackets and sweaters and 
vests and hats and gloves that are trimmed with small amounts 
of fur.
    We've also seen an increase in the quality of the synthetic 
furs which are closer resembling real fur, and it makes it more 
difficult for people to distinguish between real fur and fake 
fur.
    We have also seen manufacturing techniques where real 
animal fur is dyed or sheared. If people see the fur trim on a 
jacket that is pink or blue or orange, they may not associate 
it with an animal, and they may not understand whether it's 
real animal fur or faux fur.
    And as the exemption is currently set at $150, which 
applies to the value of the fur material on the jacket, it 
allows for massive quantities of animal fur to be used without 
being labeled. And based on approximate pelt prices after 
tanning and dressing, the fur from 30 rabbits could be used at 
$5 each per pelt, without requiring labeling; 25 ermines at $6 
each; 15 muskrats at $10 each. The list goes on and on and on. 
And many animals--the pelts from many animals could be used and 
fall under that $150 threshold.
    So we believe that this is creating major confusion in the 
marketplace because people simply don't know what they are 
getting. And the Humane Society of the United States has tested 
dozens of jackets, many of which were advertised as fake fur, 
and we found that they contained real animal fur.
    We brought two posters to show the committee just two of 
these examples. I wanted to point them out to you. The one on 
the left is a Rocawear jacket, which was purchased at a store 
called Demo. You can see the blowup of the label. It says that 
it's polyester material; it says that it was made in China, but 
it does not say anything about the fur trim. We had that fur 
tested in a laboratory and concluded that it was fur from a 
raccoon dog species.
    The second example is a Burberry jacket which was purchased 
online from the saks.com Web site. It was advertised online as 
faux fur. And you can see when the consumer receives the jacket 
in the mail, they look at the label. It talks about cotton, it 
talks about polyester, it talks about some of the other 
materials, but it does not say anything about the fur material. 
We had that jacket tested and concluded that the fur trim was 
rabbit fur. And when we disassembled the trim, it looked like 
it was two individual rabbit pelts--and you can see a little 
bit how they're sewn together in the middle of the garment.
    But if those rabbit pelts were valued at $5 each and 
there's $10 worth of fur trim on that jacket--a jacket which 
costs hundreds of dollars--it fell below the exemption and did 
not require labeling.
    So we believe that if you don't have a label on the 
individual garment, there is so much room for consumers to be 
confused, and even for sales clerks in department stores to be 
confused, because they're not furriers, they're not experts in 
the material. But these are folks who work at department 
stores, they have inventory cycling through, they have 
customers trying on jackets and returning them to the wrong 
racks, and it's very easy for people not to know what the 
garments are made of unless there is a label attached to the 
individual garment.
    And we've, frankly, found sales clerks guessing in 
department stores. When they don't have a label on the jacket 
and consumers ask, What do you think this is made of, they say, 
It's not real fur, it's fake. If it's real fur, they would say 
real fur. Another clerk said I really don't think it's real 
fur. Another said it's goose down, so it's warm; it would say 
raccoon or rabbit, whatever. It doesn't say, I believe it's 
acrylic, fake fur; I believe it's fake.
    There is too much room for confusion, Mr. Chairman. We 
believe this is a limited bill which gives consumers the 
opportunity to make informed choices. It doesn't restrict the 
trade in any fur, it doesn't restrict the methods of producing 
fur, it gives consumers the information that they need.
    We thank you for your time and look forward to working with 
the committee on this bill.
    Mr. Barrow. Thank you, Mr. Markarian.
    [The prepared statement of Mr. Markarian follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow. Mr. Kaplan, you are now recognized for 5 
minutes for the purpose of making an opening statement.

                   STATEMENT OF KEITH KAPLAN

    Mr. Kaplan. Thank you, Chairman Barrow, Ranking Member 
Whitfield, and members of the subcommittee. Thank you for 
inviting me to testify before you today.
    My name is Keith Kaplan, and I am the Executive Director of 
the Fur Information Council of America. We represent the 
interests of over 1,100 fur retailers, fur manufacturers, fur 
wholesalers, and fur designers, most of whom are in fact small 
businesses.
    I am pleased to be here today to present our views on H.R. 
2480, the Truth in Fur Labeling Act.
    As has been stated, the fur industry is already covered by 
stringent labeling requirements under the Fur Products Labeling 
Act. Enacted in 1951, this act and the regulations implemented 
by the FTC require that fur product labeling provide a depth of 
information about the product, including the correct name of 
the fur type, whether the fur is bleached, dyed, or naturally 
colored, and the country of origin, as well as other relevant 
information. Similar information must be provided in connection 
with any and all advertising and marketing of fur products. 
This information provides consumers the detail they need to 
make educated decisions regarding their purchase of a fur 
product.
    Our industry has supported and continues to support the 
principles of transparency and dissemination of accurate 
information that underlie this law, and FICA's members are 
committed to compliance with the detailed requirements of this 
regulation. As evidence, I would like to submit labels from 
both single-unit and multi-unit retailers operating in a number 
of States, and ask that they be submitted for the record.
    Throughout the fur industry, our members understand the 
consequences of a failure to comply, and have exhibited this 
through nearly 60 years of practice. In the event of any 
infraction, the FTC's enforcement authority in this area is 
far-reaching and the legal tools available to it are 
significant. Historically, the agency has never shied away from 
using these tools to protect the consumer, and such has been 
the case within our industry.
    Consistent with our support for the principle of consumer 
transparency, we support the removal of the small value 
exemption of the Fur Products Labeling Act, with the result 
that all fur products would now carry the same comprehensive 
labeling.
    However, Mr. Chairman, we do have significant concerns with 
section 4 of the bill that's been presented which confers on 
States, or, for that matter, any political subdivision such as 
counties or towns, the right to adopt or enforce their own 
labeling requirements for fur products that would likely differ 
from or be more restrictive than existing Federal law.
    This provision, which would impact the sale of all fur 
products, would undermine the purpose of the current Federal 
statutory regime which has protected consumers for almost 60 
years. Indeed, the additional information that may result from 
local requirements opens the door to extensive consumer 
confusion and the potential for labeling to become a vehicle of 
harassment in its own right.
    Imagine in your own backyard that you visited Macy's in 
downtown Washington, D.C., where you find or your wife finds a 
fur garment you would like to purchase. Not having your size, 
the salesperson locates the same garment in the correct size at 
the Towson, Maryland store and they send it over to the 
Washington, D.C. store. When you arrive to pick up your coat, 
it looks identical, but the descriptive label now reads quite 
differently. This is the kind of confusion that would be 
created by section 4.
    We're also concerned that the FTC's jurisdiction and 
expertise will be undermined by local jurisdictions acting at 
the behest of anti-fur advocates whose only interest is to 
confuse consumers by disseminating false and misleading 
information, thereby denying customers the opportunity to 
really make informed choices.
    We have already seen examples of this in recent efforts by 
the HSUS, to link the use of Asiatic raccoon--a legitimately 
traded fur product for over a century--to domestic dog in an 
attempt to destroy the marketability of this product. In New 
York last year, legislators passed a bill removing the small-
value exemption and requiring that all product carrier labels 
specify it as real or faux fur.
    Amidst confusion over the exact requirements and 
specifications of this label on real fur products, our 
representatives approached the New York State Attorney 
General's Office. In the end, the Office informed us they could 
provide no further direction on this issue. Without further 
direction, our retailers were forced to create and affix their 
own real-fur labels, at considerable time and expense without 
any perceived benefit to the consumer. In fact, consumers are 
asking retailers today why this real fur designation now 
appears on an item they already understand as mink.
    Allowing States and local jurisdictions to enact their own 
fur-labeling regulations will likely lead to a significant 
increase in similar activities across all 50 States by well-
funded, anti-fur advocates.
    The primary purpose of the Fur Products Labeling Act was to 
facilitate consumer comparisons among similar products, 
providing consumers with all the relevant detail they would 
require to make educated, informed, and confident decisions 
before purchasing: apples-to-apples across all 50 States. 
Divergent State requirements might seriously undermine this and 
could lead to significant confusion among both consumers and 
retailers.
    Mr. Chairman and members of the committee, in your 
consideration of this bill, I reinforce our support for the 
removal of the small-value exemption, consistent with our 
belief that consumers are entitled to complete, accurate, and 
meaningful information to guide their purchase decisions. But I 
urge you to please strike section 4 from this bill to ensure 
that consumers remain protected from misleading, inaccurate, or 
confusing labeling that may adversely affect their purchasing 
decision process.
    Thank you for your attention. I welcome any questions you 
might have.
    Mr. Barrow. Thank you, Mr. Kaplan.
    [The prepared statement of Mr. Kaplan follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Barrow. We now proceed to an examination of the 
witnesses by the members of the committee. The chair recognizes 
himself for the purpose of questioning for up to 5 minutes.
    Mr. Markarian, let's begin with you. I want to get some 
idea of the scope and size of the universe of items that are 
covered by this proposed legislation. I want to talk about the 
significance of this.
    With regard to all of the items that would be covered, 
either those that just have a little fur in them or those that 
consist entirely of fur, are there any major categories of 
items that you can think of that would be covered by this 
proposed change? For example, are they mostly gloves with fur 
lining, or fur-trim hooded jackets? What are we talking about 
here?
    Mr. Markarian. Mr. Chairman, thank you for the question.
    The Fur Products Labeling Act applies to wearing apparel, 
so any clothing item that's made of fur. According to data that 
was in the Federal Register last February, the FTC estimated 
that 1,019,054 fur garments and fur-trimmed garments and fur 
accessories were sold in the United States. About 87 percent of 
those already require the labeling standard. Only 13 percent 
fell below the $150 threshold, so they had fur material that 
was below a $150 value. Thirteen percent of all fur garments 
sold in the U.S. did not require the labeling.
    So, essentially seven out of eight fur garments that are 
sold in this country already require the labeling standard, the 
standard that's been in place for almost 60 years. And this 
legislation would bring the other one out of eight garments 
into that same system, so there would be a consistent standard 
across the board.
    And with this one example I showed, the Burberry jacket, 
the jacket itself cost about $800, but the value of the fur 
trim we estimate was well below the $150 threshold, so that 
type of jacket would not require labeling at this current time.
    Mr. Barrow. Thank you.
    As was the chair's practice in the case of the former 
panel, I am pleased to yield the balance of my time to the 
author and sponsor of this legislation, Mr. Moran.
    Mr. Moran of Virginia. Chairman Barrow, I cannot thank you 
enough. I appreciate your giving me this opportunity.
    I understand that of the 13 percent we're talking about of 
fur products that are either unlabeled or inaccurately labeled, 
virtually all of them either come from China or Russia; a few, 
perhaps, from Finland.
    What I would like to do, perhaps I could ask the gentleman 
representing the Fur Information Council, are you aware of any 
American manufacturers who are attaching this unlabeled or 
mislabeled fur as trimming on any garments, or is this 
primarily foreign manufacturers who are shipping them here from 
China or whatever?
    Mr. Kaplan. I am not aware, sir. The labeling is attached 
to the garment at the retail level, not at the manufacturing 
level.
    Mr. Moran of Virginia. I understand that; except that, of 
those garments, my information is that none of the fur that 
isn't labeled or inaccurately labeled, none of that is coming 
from the United States. It doesn't affect any domestic 
producers of fur.
    Mr. Kaplan. I can't comment on that with certainty.
    Mr. Moran of Virginia. Do any of the witnesses know that, 
whether we would be affecting any American manufacturer?
    Mr. Kohm. I do not, Congressman.
    Mr. Moran of Virginia. Mr. Markarian.
    Mr. Markarian. Congressman, any garment that had fur 
material that was valued at less than $150 would require a 
label. So whether it's made in the United States or abroad, it 
would have to meet that same standard.
    Our concern is that it's more difficult for consumers to 
tell what the product might be, especially if it's coming from 
China, where dogs and cats were killed for their fur. We did an 
investigation on that in the 1990s, and Congress banned dog and 
cat fur in 2000. But without a label on the garment, it may be 
easier for those garments to slip into the country undetected. 
And with an accurate and consistent label on the garment 
itself, consumers will have more confidence that they know what 
they're buying.
    Mr. Moran of Virginia. Well, that's only partially what I 
was getting at. I appreciate the answer. I know we have mink 
farms here and we have other fur products that are grown 
locally, but I'm not aware that any of the fur that is being 
used for this purpose is actually being supplied by any 
American suppliers.
    I have a couple other questions with regard to section 4, 
but I don't need to take the subcommittee's time now. I know 
that the chair and Mr. Whitfield would like to ask questions, 
too. Thank you very much, Mr. Chairman.
    Mr. Barrow. I thank the gentleman. He will have another 
opportunity to raise questions with the witnesses before the 
end of the hearing.
    The chair is now pleased to recognize the gentleman from 
Kentucky, the ranking member, for the purpose of questioning 
the witnesses for up to 5 minutes. Mr. Whitfield.
    Mr. Whitfield. Thank you all for your testimony.
    My understanding, it sounds like from your testimony, is 
that everyone supports this legislation in concept, right, Mr. 
Kohm? Right, Mr. Markarian? Right, Mr. Kaplan?
    Mr. Kohm. Correct.
    Mr. Whitfield. And the only area of potential for Mr. 
Kaplan relates to the preemption issue, correct?
    Mr. Kaplan. Yes, section 4.
    Mr. Whitfield. OK. Now, Mr. Moran and Ms. Bono Mack are the 
primary authors of this legislation. And so from my 
perspective, I think it would be good to have Federal 
preemption myself, because when you're involved in interstate 
commerce, it is very difficult to try to meet the different 
standards from different States. But that's something that we 
can all explore and go from there on that.
    It is sort of disturbing to me--I was looking at some of 
this material that some of the major companies in the U.S., 
retailers, are selling things like domestic dog fur as faux fur 
and wolf as faux fur and raccoon dog as faux fur, and so forth. 
And of course, we do have a Federal law now that prohibits the 
use of domestic dogs and cats for fur purposes, it's my 
understanding. But to help me better understand this, the Fur 
Products Labeling Act, is it the responsibility of the retailer 
to put this label in, or is it the manufacturer? And if the fur 
is coming from China, how do you verify what that fur really 
is? Could someone help me understand that better?
    Mr. Kohm. Well, it is the retailers' responsibility to have 
an accurate label on their fur products.
    Mr. Whitfield. OK. So under the Fur Products Labeling Act, 
it is the retailer's responsibility. OK.
    So when the manufacturer purchases this fur from China, 
then what kind of verification do they receive from China as to 
precisely what it is?
    Mr. Markarian. Well, essentially, if it's the 13 percent 
that do not require labeling under the current law, they're 
trusting whatever the manufacturer tells them, or they're 
making their own guesses about what the product might be.
    We think it would better protect retailers if there is a 
labeling requirement, because then they would have more 
information on the garment itself about what type of fur was 
used in that jacket.
    Mr. Whitfield. But if it's the other 87 percent, Mr. 
Markarian, how do you verify that the fur is what it's supposed 
to be?
    Mr. Markarian. My understanding is the retailers are 
operating in good faith that the label that's on the garment is 
accurate. And if they have reason to believe that it's 
inaccurate, if they get a complaint from a customer they 
suspect that something that says it is faux fur is really 
animal fur, then they may look into it further and make 
corrections. Many of the retailers did make corrections in 
their stores when we brought these issues to their attention, 
and they wanted to make sure that they were getting it right.
    Mr. Whitfield. But the manufacturers would be importing 
these furs into the country; is that right, Mr. Kaplan?
    Mr. Kaplan. Yes. And I have to make clear, I speak for the 
1,100 retailers and manufacturers and designers who primarily 
are a bit of a different universe. You will find, if you go 
into our retailer stores, that virtually all the product is 
labeled. Virtually all of the product is of a value, although 
some is not. But they have incurred this practice for over 60 
years; they're used to the practice, it's not burdensome to 
them.
    Mr. Whitfield. And I just want to make sure that you 
support this legislation, except this preemption is a problem.
    Mr. Kaplan. With the exception of section 4, correct.
    Mr. Whitfield. And just another question out of curiosity, 
because I don't know a lot about this. But is there a 
difference between an Asiatic raccoon and a raccoon dog, or are 
they one and the same?
    Mr. Markarian. It's different terms for the same species. 
This is a species of animal that's native to Asia. It's a 
member of the canine family. The Fur Products Name Guide lists 
the species as Asiatic raccoon. We believe that that name may 
be out of date. There is more scientific literature that uses 
the term ``raccoon dog,'' and we hope that that that is 
something the agency will take a look at.
    Mr. Whitfield. That is why this legislation asks the agency 
to revisit this whole issue.
    Mr. Kohm. That's correct, Congressman. And this is an issue 
that the agency would revisit anyway in its 2011 rule review.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Barrow. I thank the gentleman for yielding.
    As an acting member of this subcommittee, under a unanimous 
consent agreement, I am pleased to recognize Mr. Moran for 5 
minutes for questioning.
    Mr. Moran of Virginia. Again, thank you so much, Mr. 
Chairman.
    With regard to section 4 that is under contention, it was 
our intent simply to restate what we understood to be existing 
law. If the committee chooses, they may want to consider simply 
leaving it silent and not addressing that because we're not 
trying to change State law, we are simply trying to pass this 
legislation.
    But with regard to other State laws, I don't know how they 
differ. I don't know why the problem--personally, it's probably 
ignorance on my part--but is it that New York and New Jersey 
and Massachusetts, Wisconsin, and Delaware have more 
restrictive labeling requirements?
    And if that's the case, I would like to ask the gentleman 
from the Council, do you comply with that? Is it a problem? I 
would think if you have to comply in New York, then that's the 
biggest market, so you would have to comply everyplace 
consistently.
    Mr. Kaplan. Within the six States that have passed fur-
labeling laws in the past 2 years, the focus of those laws, the 
sole focus has been the removal of the small-value exemption. 
And once again, as an industry trade association, we were in 
support of and worked with the legislators, in fact, on the 
language of those bills.
    New York is the exception. They also had the additional 
caveat of the real-fur label. And as I indicated in my 
testimony, this had led to some degree of confusion. We've gone 
to the Attorney General's Office to ask them about compliance. 
It's an issue that they can't even respond on. And the net 
effect has been confusion to consumers looking at a product 
they know to be real fur and not understanding why suddenly 
this additional label appeared; and it's burdensome to the 
retailers simply because they don't know really what the label 
is supposed to look like for compliance purposes. And the 
Office of the Attorney General has not been able to tell us.
    Mr. Moran of Virginia. Sounds like a New York problem. 
Maybe Mr. Weiner could clarify that.
    But would the FTC be able to clarify that, perhaps?
    Mr. Kohm. Well, I'm not able to clarify what the rules are 
in New York----
    Mr. Moran of Virginia. No, I understand; but in terms of 
the implementation of this.
    Mr. Kohm. Well, with regard to section 4, you are correct, 
Congressman, that the Fur Labeling Act and the fur rules are 
silent as to preemption. And what that means as a legal matter 
is that States can pass laws as long as they don't conflict 
with the Federal law. So they can pass additional protections. 
If the provision were stricken, that would be consistent with 
the rest of the Fur Labeling Act. As it is, it's consistent as 
well.
    Mr. Moran of Virginia. OK. So we're not necessarily 
imposing anything additional--any additional requirement. It's 
simply restating what we understand to be the law.
    Could you suggest what the Federal Trade Commission has 
done to implement the Fur Products Labeling Act, what actions 
you've taken to identify, correct, or prevent false 
advertising? I have a suspicion that FTC, over the last few 
years, has been less than aggressive, perhaps, particularly 
with regard to the situation we're talking about with the faux 
fur being mislabeled.
    Mr Kohm. Well, Congressman, the FTC, as you know, is a 
small agency with a very large mandate, and we have to deploy 
our resources to get the biggest bang for the buck. In this 
area we've been able to work with retailers, and we've done so 
publicly with a number of retailers--Macy's, Neiman Marcus, 
Saks, and a number of others--and found that they had 
relatively small problems; in other words, there were small 
numbers of coats. They were very willing to work with us and 
improve their supply chain so that they weren't having 
problems. And we've issued public closing letters to make sure 
that the industry knows what the problem is. And we have been 
able to address those concerns in a less resource-intensive way 
in that manner.
    Mr. Moran of Virginia. Well, that was very articulately 
put. I think you're suggesting it's largely a matter of 
prioritization of limited resources, but you've done what you 
could with the major retailers.
    Mr. Kohm. Everything is priority in resources, Congressman.
    Mr. Moran of Virginia. I understand. But just to sum up, 
obviously Mr. Markarian is aggressively in support of this 
because it is consistent with an issue that the Humane Society 
has identified and been working on for some years. The Federal 
Trade Commission does support it, and the Fur Information 
Council does not have a problem with it is what I gather.
    Mr. Kaplan. With the exception of section 4.
    Mr. Moran of Virginia. I understand. Which is a restatement 
of current law.
    Well, Mr. Chairman, thank you very much. Thank you for your 
indulgence, thanks for having the hearing, and thank you for 
your leadership.
    Mr. Barrow. I thank the gentleman.
    This concludes the time allowed for questioning the 
witnesses by members present.
    The chair will note that Mr. Kaplan asked to include a 
letter in the record of these proceedings, and without 
objection, it is so ordered.
    [The information was unavailable at the time of printing.]
    Mr. Barrow. The chair also asks unanimous consent to have a 
letter from Cash4Gold to be inserted into the record.
    Without objection, it is so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Barrow. I would like to thank all the witnesses for 
their testimony and for being here with us today.
    There being no further business for the subcommittee, the 
subcommittee stands adjourned.
    [Whereupon, at 2:47 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

