# Petition — Federal Trade Commission v. Beneficial Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1217%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 - **Citation:** 430 U.S. 983 ## Text Supreme Court, U. 3, 76-1088 — FILED FEB 4 1977 —— | MICHAEL RODAK, JR., CLERK In the Supreme Court of the United States OCTOBER TERM, 1976 FEDERAL TRADE COMMISSION, PETITIONER Vv. BENEFICIAL CORPORATION AND BENEFICIAL MANAGEMENT CORPORATION PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT DANIEL M. FRIEDMAN, Acting Solicitor General, DONALD I. BAKER, Assistant Attorney General, ROBERT J. LEWIs, ROBERT B. NICHOLSON, General Counsel, FREDERIC FREILICHER, Attorneys GERALD P. NORTON, ; ‘ Deputy General C. el, Department of Justice, Washington, D.C. 20530. JEROLD D. CUMMINS, Acting Assistant General Counsel, DAVID M. FITZGERALD, Attorney, Federal Trade Commission, Washington, D.C. 20580. eS a a a ee ae INDEX eee eee Cee TOE A Od Question presented. Statute involved . ae 616 SE ae as ee! A a A a Reasons for granting the petition 5 ss See ee Appendix A Se ee ae AEE er AAR Ee, Re CE gi lie aa aa aa RE Rea aN, a ame ee ee Ce gg RII SS SE a tld CITATIONS Cases : Bakers Franchise Corp. v. Federal Trade Commission, 302 F. 2d 258 Bigelow v. Virginia, 421 U.S. 809 Carter Products, Inc. v. Federal Trade Commission, 268 F. 2d 461, certiorari denied, 361 U.S. 884 Federal Trade Commission vy. Algoma 11 Lumber Co., 291 U.S. 67.10, 11, 18, 14 Federal Trade Commission v. Army and Navy Trading Co., 88 F. 2d 776 _ - Federal Trade Commission v. Colgate- Palmolive Co., 380 U.S. 374 sits ~~ 11 10 Cases—Continued " Page Federal Trade Commission v. National Lead Co, 968 US. 419 ——________ 10 Federal Trade Commission v. Royal Mill- jie C., Cs. Se 9, 12, 13, 14 Federal Trade Commission v. Ruberoid SS SR ee 10 Jacob Siegel Co. v. Federal Trade Com- mission, 327 U.S. 608... 9, 10, 12, 13, 14 Resort Car Rental System, Inc. v. Federal Trade Commission, 518 F. 2d 962. 11 United States Navy Weekly, Inc. v. Fed- eral Trade Commission, 207 F. 2d 17. 11 Virginia State Board of Pharmacy v. Vir- ginia Citizens Consumer Council, Inc., ee Ee AR eee 15 Young v. American Mini Theatres, Inc., No. 75-312, decided June 24, 1976... 16 Constitution and statutes: United States Constitution, First Amend- STE ATR eC A ARP NENT ~ ENTE, 9,15, 16 Federal Trade Commission Act, Section 5, 38 Stat. 719, as amended, 15 U.S.C. 45, and as amended by 88 Stat. 2193 and 89 Stat. 801, 15 U.S.C. (Supp. V) 45 et seq.: Section 5, 15 U.S.C. 45... 5 Section 5(a), 15 U.S.C. 45(a) ss 2 Section 5(b), 15 U.S.C. 45(b) —. 2, 3, Section 5(a)(1), 15 U.S.C. (Supp. i _, _. p ee RS ar Ca es 2 Section 5(a)(2), 15 U.S.C. (Supp. ee MID” Nicntiniinedntitiduatsiandeilaiaiine 2 Iu the Supreme Court of the Auited States OCTOBER TERM, 1976 No. FEDERAL TRADE COMMISSION, PETITIONER Vv. BENEFICIAL CORPORATION AND BENEFICIAL MANAGEMENT CORPORATION PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT The Solicitor General, on behalf of the Federal Trade Commission, petitions for a writ of certiorari to review the portion of the judgment of the United States Court of Appeals for the Third Circuit that set aside the first paragraph of the Commission’s order. OPINIONS BELOW The opinion of the court of appeals (App. A, infra, pp. la-30a) is reported at 542 F.2d 611. The deci- sion (App. D, infra, pp. 35a-140a) and order (App. E, infra, pp. 141a-145a) of the Federal Trade Com- mission are reported at 86 F.T.C. 119. (1) 2 JURISDICTION The judgment of the court of appeals (App. B, infra, pp. 3la-32a) was entered on September 8, 1976, and modified on September 28, 1976 (App. C, infra, pp. 33a-34a). On November 27, 1976, Mr. Justice Brennan extended the time to file a petition for a writ of certiorari to and including February 5, 1977. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether the court of appeals applied an erroneous standard of judicial review of remedies of adminis- trative agencies when it set aside an order of the Federal Trade Commission prohibiting the use of a deceptive advertising slogan, where the order rested on the Commission’s considered judgment that quali- fying language or anything less than elimination of the deceptive slogan would not adequately protect the public. STATUTE INVOLVED Section 5(a) and (b) of the Federal Trade Com- mission Act, 38 Stat. 719, as amended, 15 U.S.C. 45(a) and (b), provided in pertinent part:’ ‘ After the complaint issued in this case, Section 5(a) and (b) were amended by adding the words “or affecting” before commerce and by the renumbering of paragraph (a) (6) as paragraph (a) (2). 88 Stat. 2193, 89 Stat. 801, 15 U.S.C. (Supp. V) 45(a) (1), (2). ae i ee amie ote CO ADI Biya Pe) ee ee FB — ae Co a NE CE GO tO NES (a)(1) Unfair methods of competition in commerce, and unfair or deceptive acts or prac- tices in commerce, are declared unlawful. (6) The Commission is empowered and di- rected to prevent persons, partnerships, or cor- porations, * * * from using unfair methods of competition in commerce and unfair or decep- tive acts or practices in commerce. (b) * * * If upon such hearing the Commis- sion shall be of the opinion that the method of competition or the act or practice in question is prohibited by this Act, it * * * shall issue * * * an order requiring such person, partnership, or corporation to cease and desist from using such method of competition or such act or practice. ses STATEMENT In 1969 respondent Beneficial Corporation,‘ which was in the consumer loan business, established an in- come tax preparation service (App. D, infra, p. 35a). Beneficial then began to advertise what it called an “instant tax refund” with commercials and print ad- vertisements which ran during the early months of each year* (id. at 43a-45a, 90a). The “instant tax * Both Beneficial Corporation and its wholly-owned sub- sidiary, Beneficial Management Corporation, petitioned for judicial review of the Commission’s order. They are referred to here collectively as Beneficial. Beneficial Corporation is the parent of some 1,500 separately incorporated local loan offices known as the Beneficial Finance System. (App. D, infra, p. 37a.) * Beneficial’s 1969 and early 1970 advertising used texts such as the following: [Footnote continued on page 4] 4 refund” was in fact Beneficial’s ordinary consumer loan service and was entirely unrelated to tax re- funds (id. at 45a). Although Beneficial made a series of modifications (see p. 3, n. 3, supra), this adver- tising campaign continued to focus on the “instant tax refund” theme despite Beneficial’s awareness that it was being misinterpreted by consumers. * [Continued] Do you have a refund coming to you on your income taxes this year? Well, there’s no need to wait weeks for your refund check. Get the money right now—even be- fore you mail your return—with a cash advance from Beneficial. We call it the Instant Tax Refund, a special service of Beneficial Finance. Instant Tax Refund. At Beneficial you’re good for more * * *. [App. A, infra, p. 5a.] By February 1970, Beneficial had changed its advertise- ments in response to confusion that had developed concern- ing the nature of the “instant tax refund” service (Apps. A and D, infra, pp. 5a, 44a). Beneficial continued to modify its advertising, so that, by 1973, Beneficial’s typical radio and television advertisement was: ANNCR: This year, have your taxes prepared a better way * * * SINGERS: At Beneficial (toot, toot) * * * ANNCR: at Beneficial Finance. Beneficial’s Income Tax Service does your taxes by computer * * * for as little as five dollars. And listen to Beneficial’s “Instant Tax Refund” Plan: if you have a refund coming, you don’t have to wait weeks for a Government check. The instant you qualify for a loan, Beneficial will lend you the equivalent of your refund, in cash, instantly. It’s the “Instant Tax Refund” Plan * * * at Beneficial Finance. The place to have your taxes done this year. [App. A, infra, pp. 5a-6a.]} Pe 5 In April 1973, the Federal Trade Commission is- sued an administrative complaint against Beneficial, charging that the Commission had reason to believe that the “instant tax refund” advertising was an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.‘ Beneficial conceded, and the Commission and the Administrative Law Judge found, that the “in- _ Stant tax refund” advertised by Beneficial was only Beneficial’s ordinary consumer loan service, with nor- mal finance charges and repayment period, and was unrelated to tax refunds or the customer’s use of Beneficial’s tax preparation service (App. A, infra, p. 4a). Neither a customer’s eligibility for a tax refund, nor the amount of any refund to which he might be entitled, affected either his eligibility for or the amount or terms of, a loan, both of which depended entirely on his meeting Beneficial’s ordi- nary credit standards. (App. D, infra, p. 45a.) The Commission further found that the use of the words “instant tax refund,” in even the most modified form of Beneficial’s advertising, had the capacity and ten- ‘The complaint also alleged that other Beneficial practices violated Section 5, including misuse of information provided by its tax service customers, and misrepresentations concern- ing its reimbursement policy, its competence to prepare tax returns, and the number of customers for whom it had se- cured refunds. Beneficial consented to entry of an order pro- hibiting some of these practices (App. D, infra, p. 36a). The Commission found that Beneficial had misused tax informa- tion its customers provided and barred such misuse; the court of appeals upheld that determination (App. A, infra, pp. 2la-24a) and it is no longer in issue. 6: dency to mislead the public about the true nature of Beneficial’s loan offer, in violation of Section 5 of the Act (Apps. A and D, infra, pp. 6a, 47a-48a).° Both the Administrative Law Judge and the Com- mission considered at some length the possibility of permitting Beneficial to continue to use the slogan with explanatory language, including that proffered by Beneficial, but concluded that qualifying language couid not cure the deception inherent in Beneficial’s use of the words “instant tax refund” (App. D, infra, pp. 54a-55a, 110a-112a, 132a-134a). The Com- mission explained (App. D, infra, pp. 54a-55a): In fact, since its inception in 1969, the Instant Tax Refund phrase has deceived continuously, and Beneficial’s repeated efforts to explain it have not cured the false impression it leaves. Beneficial’s inability to remedy the deception, which persists even in the qualifying phrase it offers on this appeal as a settlement, confirms what we believe to be obvious. No brief lan- guage is equal to the task of explaining the * As the Commission found, the record demonstrated that customers had in fact been substantially misled by Benefi- cial’s advertising. For example, a report from Beneficial’s advertising agency stated: “Many [customers] thought they could simply get their government checks immediately at Beneficial. * * * There were many loud arguments and un- pleasantnesses * * * including one or two incidents of violence being threatened” (App. D, infra, p. 49a). Even after Beneficial modified its advertising to include references to a loan, consumers testified that their “impression was that they would pay only a small fee and that the main qualifica- tion for the Instant Tax Refund was being due an actual Government refund” (App. D, infra, p. 52a). AA te Bet me eed he RD A) tO ORE wig ONG Ot OE ete — el ye, 7 Instant Tax Refund slogan, for the phrase is inherently contradictory to the truth of Bene- ficial’s offer. In truth, the Instant Tax Refund is not a refund at all, but only Beneficial’s every- day loan service, complete with normal finance charges and credit checks; nor is it in the least related to any tax refunds, for the size of the loan Beneficial wishes to sell is geared to the customer’s credit limit instead of his govern- ment refund and many people due a government refund do not qualify for an Instant Tax Re- fund loan at all; moreover, depending on the season of the year or the customer’s sales re- sistance, the Instant Tax Refund may be called a Vacation loan, a Taxpayer loan, or a Bill Con- solidation loan. Accordingly, the Commission ordered Beneficial to cease and desist from “[u]sing the term ‘instant tax refund,’ or any other word or words of similar import or meaning” in advertising its consumer loan business (App. D, infra, p. 137a).* The court of appeals upheld the Commission’s find- ing that Beneficial’s advertising, even in its most qualified form, was deceptive (App. A, infra, p. 15a). The court, however, set aside that portion of the Commission’s order which prohibited use of the slo- gan “instant tax refund” or words of similar im- port. *The Commission noted that if Beneficial began offering a loan service actually related to income tax refunds, it could seek to reopen the order (App. D, infra, p. 55a). See 15 U.S.C. 45(b). The court noted the Commission’s determination that no qualifying language could adequately dispel the deception inherent in Beneficial’s use of the phrase “instant tax refund” (App. A, infra, p. 19a), but stated that “[w]e do not believe” that. certain examples of advertisements (which the court, but not Beneficial, suggested) would be deceptive’ (App. A, infra, p. 19a). The court concluded that the Com- mission had “exceeded its remedial authority” be- cause it failed “to consider fully the feasibility of requiring merely that advertising copy be rewritten in lieu of total excision of the offending language ** *” (App. A, infra, p. 19a), and remanded the case “for further proceedings consistent with * * * this opinion” (App. A, infra, p. 24a). Recognizing that it was establishing a new stand- ard of judicial review, the court stated (App. A, infra, p. 17a): We acknowledge of course, that we are ordi- narily obliged to defer broadly to the Com- mission’s exercise of informed discretion in *The examples of permissible advertisements were as fol- lows: Beneficial’s everyday loan service can provide to regu- larly qualified borrowers an Instant Tax Refund Antici- pation Loan whether or not the borrower uses our tax service. or Beneficial’s everyday loan service can provide to any regularly qualified borrower an instant loan in antici- pation of his tax refund. We call it an instant Tax Re- fund Anticipation Loan. [App. A, infra, p. 19a.] framing remedial orders that bear some rational relationship to the removal or prevention of an established violation. * * * But we are dealing in this case with the government regulation of a form of speech. The first amendment requires, we believe, an examination of the Commission’s action that is more searching than in other con- texts. The court concluded that this result was com- pelled by Federal Trade Commission v. Royal Milling Co., 288 U.S. 212, and Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, which it read as establishing what has become a “constitutional prin- ciple” that the Commission cannot require excision of a misleading trade name or advertising slogan unless it determines that a narrower remedy would be inadequate to correct the deception (App. A, infra, p. 20a). Judge Van Dusen, dissenting, noted that the Com- mission had already fairly considered and rejected a limited remedy, and concluded that neither the First Amendment nor decisions under the Act re- quire more (App. A, infra, pp. 28a-30a). REASONS FOR GRANTING THE PETITION 1. This Court repeatedly has emphasized the broad discretion of the Commission in formulating appro- priate remedies to deal with unfair and deceptive acts and practices and the limited scope of judicial review of those orders. “The Commission has wide discre- tion in its choice of a remedy deemed adequate to 10 cope with the unlawful practices in this area of trade and commerce. * * * [J]udicial review is limited. It extends no further than to ascertain whether the Commission made an allowable judgment in its choice of the remedy. * * * The Commission is the expert body to determine what remedy is necessary to eliminate the unfair or deceptive trade practices which have been disclosed. It has wide latitude for judgment and the courts will not interfere except where the remedy selected has no reasonable rela- tion to the unlawful practices found to exist” (Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 611-613; footnote omitted). See, also, Federal Trade Commission v. Colgate-Palmolive Co., 380 U.S. 374, 394-395; Federal Trade Commission v. National Lead Co., 352 U.S. 419, 428-429; Federal Trade Com- mission v. Ruberoid Co., 343 U.S. 470, 473. The Court in Siegel also held that these principles apply to the issue in this case, namely, “whether the Commission abused its discretion in concluding that no change ‘short of the excision’ of the [deceptive advertising slogan] would give adequate protection. Federal Trade Commission v. Algoma Lumber Co., [291 U.S. 67] pp. 81-82” (327 U.S. at 612). Under these principles, the court of appeals should have upheld the Commission’s order prohibiting re- spondent from using the advertising slogan “instant tax refund” or similar words. Where the Commission finds that a trade name (and, a fortiori, an advertis- ing slogan) is inherently so deceptive that no qualify- ing language would be adequate to correct the de- ee ee eee ee eee ne OO ee ee Oe Ge ee ee ee Ee ee ‘ a ee ee - 11 ception, it may prohibit use of the misleading lan- guage altogether. Thus, in Federal Trade Commis- sion v. Algoma Lumber Co., 291 U.S. 67, this Court upheld a Commission order prohibiting the use of the words “California white pine” on lumber that was botanically yellow pine. Similarly, in Resort Car Rental System, Inc. v. Federal Trade Commission, 518 F. 2d 962 (C.A. 9), the court sustained the Commission’s ban of the trade name “Dollar-A-Day” by rental agencies that did not, in fact, offer auto- mobiles for rent at a dollar per day.* The Commission explicitly considered whether some- thing less than elimination of the deceptive phrase would suffice to protect the public, but justifiably con- cluded that any lesser remedy would be inadequate. As the Commission explained (App. D, infra, pp. 54a- 55a), “the phrase is inherently contradictory to the truth of Beneficial’s offer,” since “the Instant Tax Refund is not a refund at all, but only Beneficial’s everyday loan service, complete with normal finance charges and credit checks; nor is it in the least re- lated to any tax refunds, for the size of the loan Beneficial wishes to sell is geared to the customer’s credit limit instead of his government refund and many people due a government refund do not qualify ® See, also, Bakers Franchise Corp. v. Federal Trade Com- mission, 302 F. 2d 258, 262 (C.A. 3); Carter Products, Inc. v. Federal Trade Commission, 268 F. 2d 461, 498 (C.A. 9), certiorari denied, 361 U.S. 884; United States Navy Weekly, Ine. v. Federal Trade Commission, 207 F. 2d 17, 18 (C.A. D.C.) ; Federal Trade Commission v. Army and Navy Trading Co., 88 F. 2d 776 (C.A.D.C.). 12 for an Instant Tax Refund loan at all * * *.” The inherently deceptive character of Beneficial’s use of the words is confirmed by the fact that Beneficial itself was unable to change the wording of the ad- vertisements so as to dispel the confusion and mis- understanding the words had created among Benefi- cial’s customers. (See the Statement, swpra, pp. 4, 6). Since, as Beneficial conceded and the Commission found, Beneficial’s “instant tax refund” loan has no relationship to whether a customer is entitled to a tax refund but is “only Beneficial’s everyday loan service” to which Beneficial applies its normal stand- ards for making loans, the Commission reasonably concluded that any use of those words necessarily is inherently deceptive. For no matter how the words may be qualified, they present a false concept: that the availability of a Beneficial loan is related to a customer’s right to a tax refund. The only function those words could serve would be to fool customers into thinking that their prospects for obtaining a loan were enhanced if they had a tax refund coming, which in fact is not the case.° The present case is therefore significantly different from Siegel, supra, and Federal Trade Commission v. Royal Milling Co., 288 U.S. 212, upon which the *The two advertisements that the court of appeals sug- gested would not be deceptive (App. A, infra, p. 19a) are subject to the same infirmity. Both of them permit use of the words “Instant Tax Refund Anticipation Loan” even though the availability of the loan has nothing to do with any possible tax refund and eligibility for a refund does not expedite or improve chances for obtaining a loan. es ee Se dell weed Boe. = Pine ete (Mee Bs tel lt Hic pean thd Pinas titel ee 5. eer va whe rack See ROW ae em i a 13 court of appeals relied (App. A, infra, pp. 18a-20a). In each of those cases, this Court set aside a Commis- sion order requiring the elimination of a trade name. In both cases, however, the rationale was that the agency had not considered whether something less than elimination of the offending name would cure the deception. As the Court explained in Siegel, where it remanded to the agency a Commission or- der prohibiting the use of the trade name “Alpacuna”’ on coats containing no vicuna, “we are left in the dark whether some change of name short of excision would in the judgment of the Commission be ade quate. Yet that is the test, as the Algoma Lumber Co. and the Royal Milling Co. cases indicate” (327 U.S. at 613).” Here, in contrast, the Commission fully examined the question “whether some change of [the slogan] short of excision would * * * be adequate,” and justi- fiably concluded that it would not. In so ruling, the Commission “made an allowable judgment in its choice of the remedy” and the court of appeals should not have “interfere[d]” by substituting its judgment for that of the agency that “no change ‘short of excision,’” would give adequate protection (Siegel, supra, 327 U.S. at 612-613). *° In Royal Milling, this Court held that the Commission had gone “too far” in prohibiting the use of trade names contain- ing the word “milling,” which the Commission found was deceptive because the companies did no milling; the Court stated that requiring qualifying language indicating that the companies do not grind grain would suffice (288 U.S. at 217- 218). Siegel, however, also involved a deceptive trade name, 14 2. The court of appeals was of the view, however, that different principles govern the authority of the Commission to frame remedial orders and the scope of judicial review of those orders when the order in- volves “government regulation of a form of speech” (App. A, infra, p. 17a). Although recognizing “that we are ordinarily obliged to defer broadly to the Com- mission’s exercise of informed discretion in framing remedial orders that bear some rational relationship to the removal or prevention of an established vio- lation,” the court concluded that “[t]he first amend- and the Court there recognized the broad discretion of the Commission to decide whether excision of the deceptive trade name was necessary to protect the public. Indeed, as noted, in Siegel the Court remanded the case to the agency to deter- mine “whether some change of name short of excision would in the judgment of the Commission be adequate.” (327 U.S. at 613). Siegel thus itself recognizes that the Commission has the authority to require excision of a trade name where necessary, a principle which it stated both Royal Milling and Algoma Lumber (see, supra, p. 18) recognize. However, assuming arguendo that Royal Milling does limit the Commission’s authority to prohibit use of deceptive trade names, the agency properly declined to extend that deci- sion to advertising slogans (App. D, infra, p. 54a, n. 6). There are significant differences between trade names and mere ad- vertising slogans that justify giving the Commission broader authority to deal with the latter. A trade name identifies a business or product in the mind of the public and its excision necessarily eliminates whatever good will that name has de- veloped. An advertising slogan, on the other hand, ordinarily relates only to the qualities and characteristics of a particu- lar product and frequently is used for only brief periods. The impact upon a company of prohibiting a particular advertis- ing slogan ordinarily will be far less than prohibiting use of a trade name. shied ali at ee eae a re WA bathe ation. ee 15 ment requires, we believe, an examination of the Commission’s action that is more searching than in other contexts”; and that the recent decisions of this Court holding that the First Amendment protects commercial speech" “mean that the remedy for the perceived violation can go no further in imposing a prior restraint on protected commercial speech than is reasonably necessary to accomplish the re- medial objective of preventing the violation” (App. A, infra, pp. 17a-18a). Even under that standard, however, the court of appeals should have sustained the Commission’s or- der. The Commission did not here “go * * * further * * * than is reasonably necessary to accomplish the remedial objective of preventing the violation” in re- quiring excision of the advertising slogan “instant tax refund,” since it justifiably concluded that any- thing less would not correct the inherently deceptive character of that slogan and its inevitable consequence of misleading and deceiving the public. In any event, this Court’s decisions that the First Amendment protects commercial speech do not limit the Commission’s power effectively to prevent decep- tion accomplished through such speech or change the scope of judicial review of Commission orders. In Virginia State Board of Pharmacy v. Virginia Citi- zens Consumer Council, Inc., 425 U.S. 748, the Court noted that commercial speech is distinguishable from " Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748; Bigelow v. Virginia, 421 U.S. 809. 16 other forms of speech (id. at 771, n. 24) and that the First Amendment does not bar effective regula- tion of false, misleading or deceptive advertising (id. at 771-772; footnote omitted) : Untruthful speech, commercial or otherwise, has never been protected for its own sake. * * * Ob- viously, much commercial speech is not provably false, or even wholly false, but only deceptive or misleading. We foresee no obstacle to a State’s dealing effectively with this problem. The First Amendment, as we construe it today, does not prohibit the State from insuring that the stream of commercial information flow cleanly as well as freely. See, also, Young v. American Mini Theatres, Inc., No. 75-312, decided June 24, 1976, slip op. 18, n. 31: “The power of the Federal Trade Commission to re- strain misleading, as well as false, statements in labels and advertisements has long been recognized.” 3. The issue is important in the Commission’s administration of the Federal Trade Commission Act. A major portion of the Commission’s work under the Act involves the elimination and prevention of false and misleading advertising. Those objectives cannot be achieved unless the agency has authority effectively to deal with such advertising, which may require the elimination of deceptive language where necessary to protect the public. The restrictions that the court of appeals’ decision imposes upon the Commission’s ability to frame effective remedies in such cases and the expanding role of the courts in reviewing those 17 orders which that decision presages would seriously « handicap the agency’s ability properly to perform its duties in this important aspect of its work.” * Although the court of appeals stated that the Commission had improperly failed “to consider fully the feasibility of re- quiring merely that advertising copy be rewritten in lieu of total excision of the offending language” (App. A, infra, p. 19a), it remanded the case “for further proceedings consistent with * * * this opinion” (id. at 24a). The opinion leaves little doubt that in the court’s view the Commission could not pro- hibit Beneficial from using the advertising slogan “instant tax refund,” but was limited to requiring the use of qualify- ing language. Indeed, the court itself proposed two suggested advertisements containing qualifying languaye which it did “not believe” would be deceptive (id. at 19a). The opinion did not merely remand the case to the agency to consider anew whether something less than excision of the slogan would be adequate to correct the deception ; the Commission already had considered that issue and concluded that a lesser remedy would not suffice. Accordingly, the issue presented in this petition is now ripe for review by this Court, despite the court of appeals’ remand of the case to the agency for further proceed- ings. 18 la CONCLUSION . APPENDIX A The petition for a writ of certiorari should be UNITED STATES COURT OF APPEALS granted. FOR THE THIRD CIRCUIT Respectfully submitted. | | No. 75-2102 DANIEL M. FRIEDMAN, Acting Solicitor General. DONALD I. BAKER, a RoBERT J. LEWIS, ; General Counsel, Aerutant Atteraty € BENEFICIAL CORPORATION, a Delaware corporation, GERALD P. NORTON, ROBERT B. NICHOLSON, | and BENEFICIAL MANAGEMENT CORPORATION, Deputy General Counsel, * = - 7 on a Delaware corporation, PETITIONERS JEROLD D. CUMMINS, Acting Assistant General Counsel, DAVID M. FITZGERALD, Attorney, Federal Trade Commission. Sie de v8. _s FEDERAL TRADE COMMISSION, RESPONDENT (Federal Trade Commission No. 8922) FEBRUARY 1977. So | an a * ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL TRADE COMMISSION Argued June 8, 1976 Before VAN DUSEN, GIBBONS and ROSENN, Circuit Judges 2a 3a OPINION OF THE COURT GIBBONS, Circuit Judge (Filed Sep. 8, 1976) We here consider a petition for review of a final E. NORMAN VEASEY, Esq. R. FRANKLIN BALOTTI, Esq. RICHARDS, LAYTON & FINGER 4072 Du Pont Building Wilmington, Delaware 19899 Attorneys for Petitioners ROBERT J. LEWIS General Counsel GERALD P. NorRTON Deputy General Counsel GERALD HARWooD Asst. General Counsel WILLiaM A. E. Doyinc Attorney Washington, D.C. 20580 Attorneys for the Federal Trade Commission eee eee sen this, erties bs Slane cea SNM bie betas ht RIS sete api pala acne wise: Precise, Ptr 9 3h, a ee order of the Federal Trade Commission, filed pur- suant to 15 U.S.C. § 45(c). The order directed the petitioner Beneficial Corporation to cease and desist from certain practices in connection with its loan and tax preparation businesses.’ Beneficial chal- lenges both the Commission’s violation determinations and the breadth of its remedy. We enforce the Com- mission’s order in part, but vacate and remand in part because we conclude that the order is overbroad in one respect. I. The Commission Proceedings On April 10, 1973, the Federal Trade Commission filed a complaint charging Beneficial with unfair and deceptive trade practices in connection with the prep- aration of income tax returns and the making of consumer loans in the loan offices of the Beneficial Finance System, in violation of section 5 of the Fed- eral Trade Commission Act, 15 U.S.C. § 45. Benefi- cial, through 1400 branches operated by wholly-owned subsidiaries comprising the Beneficial Finance Sys- tem, engaged in the business of making loans to * The petitioners are Beneficial Corporation and Beneficial Management Corporation, both of which are corporations incorporated under the laws of Delaware with their principal places of business in Delaware and New Jersey, respectively. The loan offices in the Beneficial Finance System are operated by subsidiaries of Beneficial Corporation. Both of the peti- tioners will be referred to collectively as “Beneficial”. 4a members of the public based on their credit-worthi- ness. In the spring of 1969 Beneficial decided to go into the business of income tax return preparation. Because of developments in computer technology, Beneficial’s loan officers were able to gather the in- formation necessary for a computer to prepare tax returns accurately and at reasonable cost. The deci- sion to enter the tax return preparation business was based on the belief that customers for the service who needed funds to pay the tax found to be due would find it convenient to borrow such funds from Beneficial. It soon became apparent, however, that most such customers would actually receive tax re- funds. Beneficial decided to advertise a loan provid- ing for an immediate use of money in anticipation of the tax refund, thus eliminating the wait for a refund check from the government. The Commission and Beneficial agreed that the tax refund loan is nothing other than Beneficial’s usual loan service, based on the credit-worthiness of the borrower as to which the anticipated tax refund may have no bear- ing. The parties differed on (1) whether the adver- tising of the loan deceived customers as to its nature, and (2) whether Beneficial improperly used the tax information it obtained in its tax return preparation service to solicit customers for loans. After an evi- dentiary hearing an administrative law judge on October 21, 1974, found Beneficial to be in violation in both respects. The Commission affirmed this deci- sion on July 15, 1975, and entered a cease and desist order which, among other things, prohibited Bene- Pa he hee As a alae’. ficial from using in its copyrighted advertising the term “ ‘instant tax refund,’ or any other word or words of similar import or meaning,” and from using customer tax information in loan solicitations except under prescribed conditions. The evidence before the administrative law judge established that Beneficial’s 1969 and early 1970 ad- vertising typically used a text such as the following: “Do you have a refund coming to you on your income taxes this year? Well, there’s no need to wait weeks for your refund check. Get the money right now—even before you mail your return—with a cash advance from Beneficial. We call it the Instant Tax Refund, a special service of Beneficial Finance. Instant Tax Re- fund. At Beneficial you’re good for more... .” By February 1970 Beneficial added a reference to a loan, and to the fact that the customer would have to qualify for that loan. There were additional modi- fications and qualifications with the result that Bene- ficial’s radio and television advertisements at the time of the Commission’s order typically were like the following: “ANNCR: This year, have your taxes pre- pared a better way... SINGERS: At Beneficial (toot, toot) ... ANNCR: At Beneficial Finance. Beneficial’s Income Tax Service does your taxes by computer . . » for as little as five dollars. And listen to Beneficial’s ‘Instant Tax Refund’ Plan: if you have a refund coming, you don’t have to wait weeks for a Government check. The instant you 6a qualify for a loan, Beneficial will lend you the equivalent of your refund, in cash, instantly. It’s the ‘Instant Tax Refund’ Plan .. . at Bene- ficial Finance. The place to have your taxes done this year.” The Commission concluded that both the original ad- vertising and the modified copy were false and mis- leading, and that the proper remedy was a total pro- hibition against the use of the copyrighted terms “Instant Tax Refund Plan” or “Instant Tax Refund Loan”, no matter how qualified by the preceding or following text. The evidence before the administrative law judge also established that from late 1969, when it started its tax return preparation business, until December 1971, Beneficial routinely used information obtained from its tax return customers for the purpose of soliciting loans. Indeed, the generation of loan busi- ness was the principal motivation underlying the de- cision to expand into the tax return preparation busi- ness. On December 10, 1971, § 316 of the Revenue Act of 1971, 26 U.S.C. § 7216, was enacted, effective January 1, 1972. Subject to exceptions not material here, § 7216(a) provides General rule-—Any person who is engaged in the business of preparing, or providing services in connection with the preparation of returns of the tax imposed by chapter 1, or declarations or amended declarations of estimated tax under section 6015, or any person who for compensa- tion prepares any such return or declaration for any other person, and who— 1 aA Saleh Wateate” Gey Ailaaba Nes (dE Dati le ba elle en ge ea SY Bia ta ei ee TL ee Se Sa Ae Prt Br al SS ET Lcd an Poo tee Ta (1) discloses any information furnished to him for, or in connection with, the prep- aration of any such return or declaration, or (2) uses any such information for any purpose other than to prepare, or assist in preparing, any such return or declaration, shall be guilty of a misdemeanor, and, upon con- viction thereof, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution. This statute establishes a general prohibition against the disclosure or use for non-tax purposes of tax information gathered by a tax preparer like Benefi- cial. Treasury regulations adopted in 1974 under the authority of § 7216(b) (3), however, permit’ the 2 (2) Written consent to use or disclosure—(i)_ Solici- tation of other business. (i) If a tax return preparer has obtained from the taxpayer a consent described in para- graph (b) of this section, he may use the tax return infor- mation of such taxpayer to solicit from the taxpayer any additional current business, in matters not related to the Internal Revenue Service, which the tax return pre- parer provides and offers to the public. The request for such consent may not be made later than the time the tax- payer receives his completed tax return from the tax return preparer. If the request is not granted, no follow up request may be made. This authorization to use the tax return information of the taxpayer does not apply, however, for purposes of facilitating the solicitation of the taxpayer’s use of any services or facilities furnished by a person other than the tax return preparer, unless such other person and the tax return preparer are mem- bers of the same affiliated group within the meaning of section 1504. Thus, for example, the authorization would 8a use of such information with the customer’s written consent.’ The new law compelled Beneficial to alter not apply if the other person is a corporation which is not affiliated with the tax return preparer within the meaning of section 1504(a). Moreover, this authorization does not apply for purposes of facilitating the solicitation of additional business to be furnished at some indefinite time in the future, as, for example, the future sale of mutual fund shares or life insurance, or the furnishing of future credit card services. It is not necessary, however, that the additional business be furnished in the same locality in which the tax return information is furnished. Treas. Reg. § 301.7216-3(a) (1974). * The form of consent is specitied and illustrated in Treas. Reg. § 301.7216-3(b)-(c) (1974): (b) Form of consent. A separate written consent, signed by the taxpayer or his duly authorized agent or fiduciary, must be obtained for each separate use or dis- closure authorized in paragraph (a)(1), (2) or (3) of this section and shall contain— (1) The name of the tax return preparer, (2) The name of the taxpayer, (3) The purpose for which the consent is being furnished, (4) The dates on which such consent is signed, (5) A statement that the tax return information may not be disclosed or used by the tax return preparer for any purpose (not otherwise permitted under § 301.7216-2) other than that stated in the consent, and (6) A statement by the taxpayer, or his agent or fiduciary, that he consents to the disclosure of use of such information for the purpose described in subpara- graph (3) of this paragraph. (c) Illustrations. The application of this section may be illustrated by the following examples: Example (1). In order to stimulate the making of loans, a bank advertises that it is in the business of Dre 80 ee, en Ph SET NID ad eek! te aby hea oP a et ciel) Rl nd Cae a 9a its solicitation practices. In attempting to comply with the requirements, Beneficial adopted a Form BOR-56, reproduced in the margin in its entirety,‘ preparing tax returns. A taxpayer goes to the bank to have his tax return prepared. After the return has been completed by the bank, the employee of the bank who obtained the tax return information from the taxpayer explains that the taxpayer owes an ad- ditional $400 in taxes and that the bank’s loan de- partment may be able to offer the taxpayer a loan to pay the tax due. If the taxpayer decides to accept the opportunity offered to apply for a loan, the bank must first have the taxpayer execute a written con- sent described in paragraph (b) of this section for the bank to use any of such information which is re- quired in determining whether to make the tax loan. AUTHORIZATION TO I hereby authorize and request you to use my name and address for the purpose of soliciting me in connection with any business in which you or your associated com- panies or affiliated corporations may engage. Further- more, I acknowledge that this and any other information which may appear in any loan or finance application by me or on my behalf or in any loan or finance statement or information form, given in connection therewith, was not given to you for the purpose of preparing any tax return on my behalf. Dated: Signature Name (Print) Address City State Zip 10a and required that its loan officers first procure a tax return customer’s signature on that form before so- liciting the customer for a loan. The Commission held that the pre-1972 use of tax information for loan solicitations was an unfair and deceptive trade practice amounting to an abuse of a confidential re- lationship, in violation of § 5. It also held that Form BOR-56 was inadequate as an informed consent. Without deciding whether Beneficial’s present prac- tices violated the Revenue Act of 1971, the Commis- sion held that those practices continued to violate § 5 and entered an order prohibiting Beneficial from: “7. Using information concerning any cus- tomers of respondents, including the name and/ or address of the customer, for any purpose which is not essential or necessary to the prepa- ration of a tax return if such information was obtained by respondents as a result of the prepa- ration of the customer’s tax return which in- cludes any information given by the customer after he has indicated, in any way, that he is interested in utilizing respondents’ tax prepara- tion services, unless prior to obtaining such in- formation respondents have both (1) specifically requested from the customer the right to use the tax return information of the customer and (2) have executed a separate written consent signed by the customer which shall contain: 1. Respondent’s name 2. The name of the customer 3. The specific purpose for which the con- sent is being signed tote a I iE EME LI SANE Sidd e tie ek PASI ss iS he DE Tit at RET WN ala ed ai habe Se niin ncaa thd ate Shae io igh siai Root Seren lla 4. The exact information which will be used 5. The particular use which will be made of such information 6. The parties or entities to whom the in- formation will be made available 7. The date on which such consent is signed 8. A statement that the tax return infor- mation may not be used by the tax re- turn preparer for any purpose other than that stated in the consent, and 9. A statement by the taxpayer that he con- sents to the use of such information for the specific purpose described in sub- paragraph (3) of this paragraph; Provided, however, that nothing herein shall prohibit respondents from using names and ad- dresses only of customers for the purpose of communication with such customers solely con- cerning respondents’ income tax preparation business. Nothing in the above provision is intended to relieve respondents of any further requirements imposed on them by the Revenue Act of 1971, Pub. L. 92-178, title III, § 316(a), December 10, 1971; 26 U.S.C. § 7216 or regulations issued pursuant to it.” The instant petition for review followed the Com- mission’s decision and order. 12a II. Deceptive Advertising A. At the outset, Beneficial contends that the Com- mission’s finding that its “Instant Tax Refund” ad- vertising campaigns were deceptive lacks evidentiary support, and that in the absence of such a finding, supported by record evidence, no order could properly have been entered respecting its advertising. Section 5(c) of the Act, 15 U.S.C. § 45(c), provides that “t]he findings of the Commission as to the facts, if supported by evidence, shall be conclusive” upon review in the Courts of Appeals. The law is clear that properly interpreted, the statute requires re- view by the substantial evidence in the record as a whole standard.’ The parties agree that the tendency of the advertising to deceive must be judged by view- ing it as a whole, without emphasizing isolated words or phrases apart from their context. An intent to deceive is not an element of a deceptive advertising ’ See, e.g., Adolph Coors Co. v. FTC, 497 F.2d 1178, 1184 (10th Cir. 1974) cert. denied, 419 U.S. 1105 (1975) ; Ameri- can Cynamid Co. v. FTC, 363 F.2d 757, 772 (6th Cir. 1966) ; Continental Wax Corp. v. FTC, 330 F.2d 475, 477 (2d Cir. 1964); Regina Corp. v. FTC, 322 F.2d 765, 768 (3d Cir. 1963) ; Snap-On Tools Corp. v. FTC, 321 F.2d 825, 835 (7th Cir. 1963) ; Carter Products, Inc. v. FTC, 268 F.2d 461, 493 (9th Cir.), cert. denied, 361 U.S. 884 (1959). See also FTC v. Colgate-Palmolive Co., 380 U.S. 374, 386 n.14 (1968) (cit- ing Universal Camera Corp. v. NLRB, 340 U.S. 474 (1951) ). * See, e.g., FTC v. Sterling Drug, Inc., 317 F.2d 669, 674 (2d Cir. 1963); Aronberg v. FTC, 132 F.2d 165, 167 (7th Cir. 1943). 13a charge under § 5.” Moreover, the FTC has been sus- tained in finding that advertising is misleading even absent evidence of that actual effect on customers; the likelihood or propensity of deception is the cri- terion by which advertising is measured.* Whether particular advertising has a tendency to deceive or mislead is obviously an impressionistic determina- tion more closely akin to a finding of fact than to a conclusion of law. Cf. FTC v. Colgate-Palmolive Co., 380 U.S. 374, 385 (1965). At the same time, evi- dence that some customers actually misunderstood the thrust of the message is significant support for the finding of a tendency to mislead. The initial advertising quoted above (1969-early 1970) did not indicate, at least in words, that the offered “advance” was actually a loan, that the cus- tomer would have to meet regular standards of credit- worthiness, or that if the customer had a satisfac- tory credit rating, he could obtain a Beneficial loan even though he was not a tax return preparation customer. Beneficial’s own advertising agency re- ported that the initial campaign resulted in fairly widespread public confusion as to the nature of the “refund” being offered. The Commission concluded: * Regina Corp. v. FTC, 322 F.2d 765, 768 (3d Cir. 1963). * Bankers Security Corp. v. FTC, 297 F.2d 403, 405 (3d Cir. 1961); Resort Car Rental Sys. v. FTC, 518 F.2d 962, 964 (9th Cir. 1974) (per curiam) ; Montgomery Ward & Co. v. FTC, 379 F.2d 666 (7th Cir. 1967) ; Feil v. FTC, 285 F.2d 879, 896 (9th Cir. 1960). * l4a “The early Instant Tax Refund advertising is, on its face, totally misleading about the true nature of Beneficial’s offer. Instead of making clear that Beneficial is simply offering its every- day loan service, the advertising implies that Beneficial will give a special cash advance to income tax preparation customers with a govern- ment refund due, in the amount of their refund. The natural impression, since the Instant Tax Refund is stressed as exclusive and special is that this cash advance is different from a normal consumer loan.” This finding is supported by substantial evidence. While not conceding the validity of the Commission’s finding with respect to the initial advertising, Bene- ficial does not seriously dispute that we must accept it. It contends, however, that because the early text was soon abandoned with no prompting from the Commission, the finding cannot support a cease and desist order. But this and other courts have held that at least where a discontinued deceptive trade practice could be resumed, the prior practice may be the subject of a cease and desist order.’ Here the Commission’s complaint was not filed until three years after the early advertising was discontinued, and there is no evidence from which the Commission could infer that it would in the early form be re- peated. Beneficial urges that the entry of a cease *Hershey Chocolate Corp. v. FTC, 121 F.2d 968, 971-72 (3d Cir. 1941); P. F. Collier & Son Corp. v. FTC, 427 F.2d 261, 271-72 (6th Cir.), cert. denied, 400 U.S. 926 (1970); Feil v. FTC, 285 F.2d 879, 886 n.15 (9th Cir. 1960). 15a and desist order in such circumstances, based solely on the early violations, would amount to an abuse of discretion.” We need not decide that issue in this case, how- ever, for we conclude that the Commission’s finding that even the later advertising had a tendency to deceive or mislead has a sufficient evidentiary sup- port in the record as a whole. The testimony of some consumers, credited by the Commission, was that during the later period they failed to understand that Beneficial was offering only its normal loan service with normal finance charges. Their impression was that the main qualification for the Instant Tax Re- fund loan was entitlement to an actual government refund. These consumers may well have been singu- larly dense.“ They were, nevertheless, a part of the %” See Rodale Press, Inc. v. FTC, 407 F.2d 1252 (D.C. Cir. 1968); FTC v. Civil Service Training Bureau, 79 F.2d 113 (6th Cir. 1935); John C. Winston Co. v. FTC, 3 F.2d 961 (3d Cir.), cert. denied, 269 U.S. 555 (1925). But see C. Howard Hunt Pen Co. v. FTC, 197 F.2d 273, 281 (3d Cir. 1952). 1 =6h “The general public has been defined as ‘that vast multitude which includes the ignorant, and unthinking and the credulous, who, in making purchases, do not stop to analyze but too often are governed by appearances and general impressions.’ The average purchaser has been variously characterized as not ‘straight thinking,’ subject to ‘impressions,’ uneducated, and grossly misin- formed; he is influenced by prejudice and superstitution ; and he wishfully believes in miracles, allegedly the result of progress in science .. . . The language of the ordinary purchaser is casual and unaffected. He is not an ‘expert in grammatical construction’ or an ‘educated analytical 16a audience te which the advertisements were directed. We cannot second guess the Commission’s finding re- specting the later advertising. FTC v. Colgate-Pal- molive Co., supra; Fedders Corp. v. FTC, 529 F.2d 1398, 1403 (2d Cir. 1976), petition for cert. filed, 44 US.L.W. 3652 (U.S. Apr. 19, 1976). Thus whether or not the Commission could have acted solely on the basis of the earlier advertising, it cer- tainly did not abuse its discretion in concluding that some remedy was still appropriate since the confu- sion persisted. B. Both the administrative law judge and the Com- mission concluded that the only appropriate remedy for the violation found was a total ban on the use of the Instant Tax Refund phrase or any words of similar import. Beneficial contends that explanatory words could cure any tendency to mislead, and that an order forcing it to abandon entirely its copyright- ed and heavily promoted phrase is unwarranted. The Commission reasoned: “No brief language is equal to the task of ex- plaining the Instant Tax Refund slogan, for the phrase is inherently contradictory to the truth of Beneficial’s offer. In truth, the Instant Tax Refund is not a refund at all, but only Benefi- reader’ and, therefore, he does not normally subject every word in the advertisement to careful study.” 1 Callman, Unfair Competition and Trademarks § 19.2 (a) (1), at 341-44 (1950) quoted in FTC v. Sterling Drug, Inc., 317 F.2d 669, 674 (2d Cir. 1963). 17a cial’s everyday loan service . . .; nor is it in the least related to any tax refunds, for the size of the lean Beneficial wishes to sell is geared to the customer’s credit limit instead of his govern- ment refund and many people due a government refund do not qualify for an Instant Tax Re- fund loan at all... .” We do not believe that the Commission’s conclusion as to the capacity of qualifying language to apprise Beneficial’s audience of the true nature of the oifered service can be sustained. We acknowledge, of course, that we are ordinarily obliged to defer broadly to the Commission’s exercise of informed discretion in framing remedial orders that bear some rational re- lationship to the removal or prevention of an estab- lished violation. See FTC v. National Lead Co., 352 U.S. 429 (1957); FTC v. Colgate-Palmolive Co., supra; Windsor Distributing Co. v. FTC, 437 F.2d 443, 444 (3d Cir. 1971) (per curiam); Conswmer Products of America, Inc. v. FTC, 400 F.2d 930, 933 (3d Cir. 1968). But we are dealing in this case with the government regulation of a form of speech. The first amendment requires, we believe, an examina- tion of the Commission’s action that is more search- ing than in other contexts. It is now established beyond dispute that there is no commercial speech exception to the first amend- ment. See Virginia State Board of Pharmacy v. Vir- ginia Citizens Consumer Council, Inc., 44 U.S.L.W. 4686 (U.S. May 24, 1976); Bigelow v. Virginia, 421 U.S. 809 (1975); see also Young v. American Mini 18a Theatres, Inc., 44 U.S.L.W. 4999 (U.S. June 24, 1976). That does not mean that an advertiser may engage in speech that is an essential part of a scheme to violate an otherwise valid law. Pittsburgh Press Co. v. Pittsburgh Commission on Human Relations, 413 U.S. 376, 388 (1973). It does mean that the remedy for the perceived violation can go no further in imposing a prior restraint on protected commer- cial speech than is reasonably necessary to accom- plish the remedial objective of preventing the viola- tion. See, e.g., United States v. O’Brien, 391 U.S. 367, 382 (1968); New Jersey State Lottery Commis- sion v. United States, 491 F.2d 219 (3d Cir. 1974) (en banc), vacated as moot, 417 U.S. 907 (1975); Veterans & Reservists For Peace in Vietnam v. Re- gional Commissioner of Customs, 459 F.2d 676 (3d Cir.), cert. denied, 409 U.S. 933 (1972); Linmark Associates, Inc. v. Township of Willingboro, No. 75- 1448, at 49-54 (3d Cir. 1976) (Gibbons, J., dissent- ing). Even before the demise of Valentine v. Chresten- sen, 316 U.S. 52 (1942), was heralded in Virginia State Board of Pharmacy v. Virginia Citizens Con- sumer Council, Inc., supra, and Bigelow v. Virginia, supra, the Supreme Court held that the Federal Trade Commission abused its discretion in ordering the excision from advertising of a valuable business asset like a trade name without considering whether modification of the message could eliminate the ob- jectionable portion. Jacob Siegel Co. v. FTC, 327 19a U.S. 608 (1946); FTC v. Royal Milling Co., 288 U.S. 212 (1933). The Second Circuit has said that where qualifying explanatory language does not in- herently contradict the advertiser’s identifying lan- guage it should be accepted in preference to requir- ing excision. Elliott Knitwear, Inc. v. FTC, 266 F. 2d 787, 790 (2d Cir. 1959). The Commission at- tempts to distinguish these authorities on the ground that no combination of words in which “instant” and “refund” appear in a proximate relationship can avoid conveying the impression that Beneficial is of- fering an instant tax refund from the government rather than an instant loan. We do not believe that the following examples convey that impermissible impression : “Beneficial’s everyday loan service can pro- vide to regularly qualitied borrowers an Instant Tax Refund Anticipation Loan whether or not the borrower uses our tax service.” or “Beneficial’s everyday loan service can pro- vide to any regularly qualified borrower an in- stant loan in anticipation of his tax refund. We call it an Instant Tax Refund Anticipation Loan.” In failing to consider fully the feasibility of re- quiring merely that advertising copy be rewritten in lieu of total excision of the offending language, the Commission would appear to have exceeded its re- medial authority under §5 as shaped by the Jacob Siegel-Royal Milling line of cases. The Commission’s 20a opinion dealt with the Royal Milling case in a foot- note: “Though we believe the Royal Milling line of cases is compatible with our normal responsi- bility to enter effective but not overbroad orders, to the extent it may actually be a limitation or exception to the Commission’s authority to de- vise fully effective remedies, then we decline to expand the exception from trade names to ad- vertising slogans.” We reject the limiting construction that the Com- mission attaches to Royal Milling. This conclusion is based in part upon the difficulty we have in accept- ing the Commission’s differentiation between trade names and copyrighted advertising material—a dis- tinction without a difference in the spirit of Royal Milling. The conclusion is reached not unmindful of the long shadow cast by the first amendment, how- ever, for doubtless the Commission’s broad construc- tion of its §5 remedial authority cannot survive the demise of the commercial speech exception to the first amendment. While Royal Milling in terms merely describes a statutory limitation upon the Commis- sion’s remedial power in a particular class of cases, the rule it announced has subsequently evolved into a general statement of constitutional principle. The Commission, like any governmental agency, must start from the premise that any prior restraint is suspect, and that a remedy, even for deceptive ad- vertising, can go no further than is necessary for the elimination of the deception. The Commission’s 2la order proscribing use of the term instant tax refund or any other word or words of similar import or meaning, without consideration of the context in which the words appear, went further than was per- mitted for that purpose and was an abuse of the Commission’s remedial discretion. It cannot in that form and without such consideration be affirmed or enforced. III. The Tax Information Use Violation. In its complaint the Commission charged that the retention and use of the customer tax information violated §5 in two respects. First, it charged that the special relationship between a tax return pre- parer and a customer had the capacity and tendency to mislead the customer into the erroneous and mis- taken belief that the information provided would be used solely for the preparation of the tax return and would remain confidential. Thus the failure to disclosed anticipated use in loan solicitation was said to be a false, misleading and deceptive practice in- juring the customers. Secondly, the Commission charged that because Beneficial had competitors in the tax return preparation business, from whom business could be diverted, the failure to disclose an- ticipated use of the tax information in loan solicita- tions was an unfair method of competition. Beneficial does not contend that the use of the tax information in loan solicitation, absent § 316 of the Revenue Act of 1971, is a subject matter beyond the reach of the Commission’s §5 authority. Rather, it 22a contends that the latter statute and the Treasury Regulations issued thereunder preempt the field, that it is now in full compliance with those regulations, and that the Commission’s order requiring more is invalid. While admitting that § 5 originally gave the Commission authority to find unfair trade practices in relation to tax preparation services, Beneficial ar- gues that §316 was intended by Congress to cir- cumscribe that power. Nothing on the face of § 316 supports that construction, and we have been re- ferred to no legislative history which would tend to suggest such an intention.” The criminal prohibition in §316 appears to be directed at preserving the confidentiality of tax return information except un- der specified circumstances. Enforcement under § 5 of the Federal Trade Commission Act, in contrast, is aimed at preventing unfair and deceptive acts and practices. There is nothing inconsistent between the two policies, and there is no reason for attributing to Congress the intention of reducing the Commis- sion’s power to prevent deception or unfairness. If the Commission had directed conduct which is incon- sistent with the confidentiality policy of § 316, we could understand Beneficial’s objection. But in this case the Commission is pursuing a separate govern- mental objective in a manner wholly consistent with that policy. That the Commission’s order goes beyond 122The House, Senate, and House Conference Reports on the Revenue Act of 1971 are reproduced in 1971 U.S. Code Cong. & Admin. News 1825-2079. There does not appear to be any discussion of § 316 in any of these reports. 23a the requirements of Treasury Regulation 301.7216-3 in several insignificant respects seems to us unex- ceptionale. Nor does Beneficial’s contention * that the Internal Revenue Service has approved its Form BOR-56 change our view. Assuming such approval, nothing in the Revenue Act of 1971 or any other statute confers on the Internal Revenue Service au- thority to determine what is an appropriate remedy for a violation of §5 of the Federal Trade Commis- sion Act. The Commission’s finding that Beneficial’s prac- tices, both prior to the enactment of § 316 and there- after, were misleading because of the failure of Form BOR-56 to adequately disclose the nature and purpose of the waiver of confidentiality is supported by substantial evidence in the record as a whole. The remedial order, which permits Beneficial to so- licit tax return customers for loan business, only requires the observance of certain procedural formali- ties. Items (1), (2), (8), (7), and (8) and (9) duplicate the six requirements of the Treasury Reg- ulation. The additional items required to be disclosed are: 4. The exact information which will be used. 5. The particular use which will be made of such information. 6. The parties or entities to whom the infor- mation will be made available. 8 That contention is disputed by the Commission as un- supported by the evidence. We need not resolve that dispute. 24a These additional requirements are rationally related to the unfair practices which the Commission found. We cannot in these circumstances hold that the Com- mission abused its discretion in fashioning the remedy it did. IV. Conclusion The petition for review will be granted insofar as the Commission’s order requires total excision of the words “Instant Tax Refund” from all Beneficial advertising. That part of the order will be set aside and the case remanded to the Commission for further proceedings consistent with Part IIB of this opinion. In all other respects the petition for review will be denied. | To THE CLERK: PLEASE FILE THE FOREGOING OPINION. Circuit Judge Se — 25a VAN DUSEN, Circuit Judge, dissenting and concur- ring in part: I respectfully dissent from part II-B of the ma- jority opinion,’ which states that the Commission did not consider whether modification of the message advertised could eliminate the objectionable, decep- tive portion of such message. The majority opinion overlooks this language of the Commission’s opinion (part II-C) : “The law judge’s order bans the use of the Instant Tax Refund phrase or similar words. He found no qualifying language could remedy The majority apparently does not challenge the following findings of the Commission, which are supported by substan- tial evidence on the whole record (1193a) : “In truth, it is admitted, what Beneficial is offering is its everyday loan service. The Instant Tax Refund is not a refund at all but a personal consumer loan, with regular finance charges, costs, and repayment period. . . . Such a loan is always available to anyone meeting Beneficial’s credit standards, whether or not the cus- tomer is owed a tax refund by the government, but Beneficial will not make any loan to a person failing to meet its credit standards, even if the customer is due a government refund. The size of the loan Beneficial wishes to sell is not related to any tax refund, but to the customer’s credit limit.” [References to record omitted.] The testimony of more than five consumers, credited by the Commission, was that they were misled during the later period and “failed to understand that Beneficial was offering only its normal loan service with normal finance charges” (majority opinion at 12). As stated by the majority, “[t]heir impression was that the main qualification for the Instant Tax Refund loan was entitlement to an actual government refund.” 26a the deception and that only purging Beneficial’s advertisements of the phrase would suffice. Bene- ficial vigorously contends that explanatory lan- guage could cure any fault and that forced aban- donment of its copyrighted and heavily promoted phrase is unwarranted. “In some instances, it is true, respondents have been allowed to retain trade names which had become valuable business assets, because the misleading qualities of the names could be dis- pelled by explanation. . . . If explanatory lan- guage is insufficient to qualify a deceptive trade name or is inherently contradictory, its effect is simply to confuse the public and the Commission in framing a proper remedy must excise the offending phrase altogether. [Citations omitted. ] Moreover, the Commission has wide latitude in judgment, particularly in determining whether qualifying words will eliminate a deceptive trade name. ... “In light of these principles, we see no reason for allowing Beneficial to retain the offending slogan. The Instant Tax Refund advertisements, we have held, have the capacity and tendency to mislead and have in fact misled consumers. In fact, since its inception in 1969, the Instant Tax Refund phrase has deceived continuously, and Beneficial’s repeated efforts to explain it have not cured the false impression it leaves. Bene- ficial’s inability to remedy the deception, which persists even in the qualifying phrase it offers on this appeal as a settlement, confirms what we believe to be obvious. No brief language is equal to the task of explaining the Instant Tax Refund slogan, for the phrase is inherently con- 27a tradictory to the truth of Beneficial’s offer. In truth, the Instant Tax Refund is not a refund at all, but only Beneficial’s everyday loan serv- ice, complete with normal finance charges and credit checks; nor is it in the least related to any tax refunds, for the size of the loan Bene- ficial wishes to sell is geared to the customer’s credit limit instead of his government refund and many people due a government refund do not qualify for an Instant Tax Refund loan at all; moreover, depending on the season of the year or the customer’s sales resistance, the In- stant Tax Refund may be called a Vacation loan, a Taxpayer loan, or a Bill Consolidation loan. * * ® “Beneficial argues that excision of the Instant Tax Refund slogan and words of similar import would prevent any reference to the concept of tax refund loans. This is quite true. The record is absolutely clear that, in Beneficial’s business at least, no such concept exists. If, however, Beneficial should begin offering a special loan service actually related in some way to income tax refunds, it may seek to reopen the order. For now we believe the absolute prohibition necessary.” [Footnotes omitted.] (1198a-1200a) I do not believe that the advertisements suggested at page 16 of the majority opinion would make it clear to these consumers that the loan being offered is an everyday consumer loan having no relationship to tax refunds and no special features. Furthermore, on this record I believe the Commission was entitled to conclude that the words “tax refund loan” in- 28a herently contradict the idea of an everyday loan un- related to refunds. The words “tax refund” imply something free and “unique” and the word “Antici- pation” in the court-suggested advertisements might only underline the non-existent relationship between the loan and any refund. It is noted that the Com- mission gave Beneficial the right to reopen its order if a relationship between tax refunds and the loans was shown to exist in future advertisements (see page 2 above). Given the Commission’s consideration of the pcs- sibility of a lesser remedy, its broad discretion, and Beneficial’s inability to produce an advertisement which was not misleading, I believe the excision or- der should be sustained. See Baker’s Franchise Corp. v. FTC, 302 F. 2d 258, 262 (8d Cir. 1962), where this court said: “The matter of the choice of remedy is one for the Commission.” See also cases cited at the top of page 14 of the majority opinion. At the least, I believe the Commission in the first instance should be permitted to consider any new advertisements using the Instant Tax Refund lan- guage before they are used. I would affirm the conclusion reached in part II-C of the Commission’s opinion in view of these legal principles adopted by the Supreme Court of the United States: A. The Commission may prohibit statements which, though literally true, are potentially deceptive. Although it is now clear that commercial speech enjoys “some” First Amendment protection, the Su- preme Court has been careful to state that “regula- tory commissions may prohibit businessmen from making statements which, though literally true, are potentially deceptive.” Young v. American Mini Theatres, Inc., 44 U.S.L.W. 4999, 5004 and n. 31 (U.S., June 24, 1976); see Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 44 U.S.L.W. 4686, 4693 and n. 24 (U.S., May 24, 1976), where the Court said: “The First Amend- ment, as we construe it today, does not prohibit the State from insuring that the stream of commercial information flows cleanly as well as freely.” In Young v. American Mini Theatres, Inc., supra at 5004 n. 31, the Court stated: “The power of the Federal Trade Commission to restrain misleading, as well as false, statements in labels and advertise- ments has long been recognized [citing cases].” B. The federal courts are limited in their right to review the exercise by an administrative agency of its discretion. In Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608 (1946), the Court repeatedly emphasized the “limited” scope of our review of Commission discretion. In Siegel, the record did not indicate whether a remedy short of excision had been con- sidered or would be adequate. The Court declined to 30a hold that excision was inappropriate and simply re- manded for consideration of a more limited remedy. See also Federal Trade Commission v. Algoma Lum- ber Co., 291 U.S. 67 (1934) (upholding an excision order). Here the Commission has considered and rejected a more limited remedy, and the Siegel case states at page 613 that: “The courts will not interfere ex- cept where the remedy selected has no reasonable relation to the unlawful practices found.” Applying the standard enunciated in Jacob Siegel, which appears to survive the demise of the former commercial speech doctrine, I believe the choice of the remedy of total excision was permissible on this record. In all other respects, I concur in the majority opinion. 3la APPENDIX B UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 75-2102 BENEFICIAL CORPORATION, a Delaware corporation and BENEFICIAL MANAGEMENT CORPORATION, a Delaware corporation, PETITIONERS v8. FEDERAL TRADE COMMISSION, RESPONDENT (Federal Trade Commission No. 8922) ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL TRADE COMMISSION JUDGMENT Present: VAN DUSEN, GIBBONS and ROSENN, Circuit Judges This cause came to be heard on the record from the Federal Trade Commission and was argued by coun- sel. On consideration whereof, it is now here ordered and adjudged by this Court that the petition for re- view is granted insofar as the Order of the Federal Trade Commission entered July 15, 1975, requires total excision of the words “Instant Tax Refund” from all Beneficial advertising, and it is further or- dered that such part of said order is set aside and the cause remanded to the Federal Trade Commission for further proceedings consistent with Part II B of the opinion of this Court. In all other respects, the petition for review is denied. ATTEST: /3/ Thomas F. Quinn Clerk September 8, 1976 sda APPENDIX C No. 75-2102 BENEFICIAL CORPORATION, a Delaware corporation and BENEFICIAL MANAGEMENT CORPORATION, a Delaware corporation, PETITIONERS v8. FEDERAL TRADE COMMISSION, RESPONDENT (Federal Trade Commission No. 8922) ON PETITION FOR REVIEW OF AN ORDER OF THE FEDERAL TRADE COMMISSION AMENDED JUDGMENT Present: VAN DUSEN, GIBBONS and ROSENN, Circuit Judges This cause came to be heard on the record from the Federal Trade Commission and was argued by counsel. On consideration whereof, it is now here ordered and adjudged by this Court that the petition for re- view is granted insofar as the Order of the Federal Trade Commission entered July 15, 1975, requires total excision of the words “Instant Tax Refund” from all Beneficial advertising, and it is further or- dered that such part of said order is set aside and the cause remanded to the Federal Trade Commis- sion for further proceedings consistent with Part II B of the opinion of this Court. In all other respects, 34a the petition for review is denied. To the extent that the petition has been denied, the order of the Com- mission is affirmed and the petitioners are com- manded to obey it. ATTEST: /s/ Thomas F. Quinn Clerk September 28, 1976 Certified as a true copy and issued in lieu of a formal mandate on October 26, 1976. 35a APPENDIX D UNITED STATES OF AMERICA BEFORE FEDERAL TRADE COMMISSION COMMISSIONERS: Lewis A. Engman, Chairman Paul Rand Dixon Mayo J. Thompson M. Elizabeth Hanford Stephen Nye Docket No. 8922 In the Matter of BENEFICIAL CORPORATION, a corporation, and BENEFICIAL MANAGEMENT CORPORATION, a corporation. OPINION OF THE COMMISSION By Engman, Commissioner: In this case respondents Beneficial Corporation and Beneficial Management Corporation, which we shall refer to jointly as Beneficial unless otherwise noted, appealed from the Administrative Law Judge’s Initial Decision and Order. Beneficial operates a nationwide system of consum- er loan offices and, starting in late 1969, the loan of- fices began offering a personal income tax prepara- tion service. The complaint in this matter, which was issued on April 10, 1973, charged Beneficial with a variety of offenses under Section 5 of the Fed- eral Trade Commission Act (16 U.S.C. § 45), stem- ming from the advertising and operation of the in- come tax service. During adjudication, counsel for the parties signed a Stipulation for Partial Adjudi- cated Settlement, by which Beneficial admitted viola- tions, and consented to appropriate order provisions, concerning advertising misrepresentations of Bene- ficial’s reimbursement policy, its competence to pre- pare tax returns, and the number of customers for whom it has secured government refunds. The law judge accepted this stipulation and we see no reason to overrule him. However, the order provisions which the law judge entered respecting these issues do not correspond in some particulars to the stipulated order provisions, and, on the joint motion of Bene- ficial and complaint counsel, we shall substitute the latter. After the partial admission, the remaining issues to be adjudicated were the lawfulness of Beneficial’s advertisements featuring its “Instant Tax Refund” slogan, the lawfulness of Beneficial’s soliciting loans with information given by its tax service customers, and the liability of respondent Beneficial Corpora- tion. The law judge found against respondents on each of these issues in an Initial Decision filed Oc- tober 21, 1974. Respondents have appealed on each issue. We affirm the Administrative Law Judge. Except to the extent that they are inconsistent with this opinion, the findings and conclusions of the law judge are adopted as those of the Commission. 87a I. LIABILITY OF BENEFICIAL CORPORATION Every local loan office of what is known as the Beneficial Finance System is a separate corporation wholly owned, with the exception of a few shares of a few companies, by Beneficial Corporation. At the end of 1972, 1,505 of these local loan corporations operated domestically. (CX 18 at 8)* Beneficial Cor- poration also wholly owns respondent Beneficial Man- agement Corporation, which provides management services, at cost, to the local loan subsidiaries. Other wholly-owned Beneficial Corporation subsidiaries in- clude Beneficial Management Corporation of Ameri- ca, which implements the local loan policies set by Beneficial Management Corporation, and Beneficial Data Processing Corporation, which provides ac- counting services for the local loan subsidiaries. (1D. 99 7, 20). It is undisputed that the conduct challenged in this matter was performed, directly at least, by subsidiaries, and that Beneficial Corpora- tion must be subject to vicarious liability or none at all. In determining a parent corporation’s liability, we examine the “pattern and framework of the whole 1 The following abbreviations are used in this opinion: LD.—Initial Decision of Administrative Law Judge (cited by paragraph where adopted without change) Tr. —Transcript of Testimony CX —Commission Exhibit RX —Respondents Exhibit 38a. enterprise.” Art National Mfgs. Dist. Co. v. Federal Trade Commission, 298 F.2d 476, 477 (2d Cir.), cert. denied, 370 U.S. 939 (1962). And if the facts demonstrate even latent control, the applicable stand- ard is met: [W]here a parent possesses latent power, through interlocking directorates, for example, to direct the policy of its subsidiary, where it knows of and tacitly approves the use by its subsidiary of deceptive practices in commerce, and where it fails to exercise its influence to curb illegal trade practices, active participation by it in the affairs of the subsidiary need not be proved to hold the parent vicariously responsible. Under these circumstances, complicity will be presumed. P. F. Collier & Son Corp. v. Federal Trade Com- mission, 427 F.2d 261, 270 (6th Cir.), cert. denied, 400 U.S. 926 (1970). Despite this clear statement, respondents contend that we should be governed instead by the common law rule, restated in National Lead Co. v. Federal Trade Commission, 227 F.2d 825, 829 (7th Cir. 1955), rev’d on other grounds, 352 U.S. 419 (1957), that to pierce the corporate veil we must find evidence of such complete control of the subsidiary by the parent that the subsidiary is a mere tool and its corporate identity a mere fiction. We reject the con- tention that any such stringent standard applies. Manifestly, where the public interest is in- volved, as it is in the e~forcement of Section 5 of the Federal Trade Commission Act, a strict adherence to common law principles is not re- quired in the determination of whether a parent should be held for the acts of its subsidiary, where strict adherence would enable the cor- porate device to be used to circumvent the policy of the statute. P. F. Collier, supra, 427 F.2d at 267. See also, e.g., Goodman v. Federal Trade Commission, 244 F.2d 584, 590 (9th Cir. 1957). Accordingly, we have examined the overall pattern of Beneficial Corporation’s relation with its sub- sidiaries, and we find for several reasons that an order should issue against the parent. First, respondent Beneficial Corporation shares a common management with respondent Beneficial Management Corporation. The President of the for- mer serves as President and Chairman of the Board of the latter, and sits on the Executive Committee of each. The First Vice President of Beneficial Cor- poration also sits on both Executive Committees. Beneficial Corporation’s Chairman of the Board is additionally General Counsel of Beneficial Manage- ment Corporation and, likewise, a joint Executive Committee member. These three men were a ma- jority of Beneficial Corporation’s Executive Com- mittee and were the entire Executive Committee of Beneficial Management Corporation during much of the relevant period. The Executive Committee of Beneficial Management Corporation approved the 40a start of the income tax preparation business. (I.D. 30, 31, 32). . Through its domination of the service subsidiaries, Beneficial Corporation also controls each of its local loan subsidiaries. While no officer or director of the parent serves directly as an officer or director of any local loan subsidiary, Beneficial Corporation chooses local officers and directors from the ranks of the management subsidiaries, Since at least 1969, Beneficial Corporation has in- stalled each Regional Vice-President of Beneficial Management Corporation as a Director of all local loan subsidiaries in his region; typically, the same man also serves as President of all. the local loan subsidiaries in the region. The remainder of each local Board is filled by a small group of employees of Beneficial Management Corporation of America. Thus, the President of Beneficial Management Cor- poration of America and two other employees of that corporation serve on the Boards of all 1,143 local loan subsidiaries outside New York, and are a majority of those Boards; the same three men are also, respectively, Secretary, Vice-President, and Treasurer of these 1,143 subsidiaries. (CX 145a; Tr. 198-201, 221, 226). The Administrative Law Judge correctly called these patterns of control “a pervasive web of inter- locking directories and managements.” (I.D. at 40). Here, as in P. F. Collier, supra, 427 F.2d at 268, the men who directed the policy and operations of the 4la parent also directed the policy and operations of the wholly-owned subsidiaries. Second, Beneficial Corporation also exercises com- plete financial control over the affairs of its sub- sidiaries. The local loan offices receive all cash for making consumer loans from the parent company, either by capitalization or by loan. Beneficial Data Processing Corporation performs all of the account- ing for the local loan subsidiaries. The service sub- sidiaries provide their services to the local loan com- panies at cost, and themselves borrow needed funds from Beneficial Corporation. (1.D., 119, 20). With- out the continuing support and intervention of the parent, neither the local loan subsidiaries nor the service subsidiaries would be independently viable. Third, Beneficial Corporation also allows or en- courages local loan subsidiaries to hold themselves out as part of a single nationwide Beneficial entity. Each of them is similarly named—Beneficial Finance Company of Pittsburgh, or of Knoxville, or of Char- lotte. Moreover, they are jointly identified through advertising as the Beneficial Finance System, with offices nationwide and around the world. Consumers believed themselves to be dealing with a nationwide Beneficial organization. (Tr. 375, 426). As in P. F. Collier, supra, 427 F.2d at 269, Beneficial Corpora- tion allowed its subsidiaries to trade on its own name and good will. Moreover, by clothing its subsidiaries with apparent authority to act for it, Beneficial Cor- poration is liable when they use that authority to de- 42a — ceive the public. Cf. Goodman v. Federal Trade Com- mission, supra, 244 F.2d at 591-93. Fourth, Beneficial Corporation has set up a retire- ment plan for all employees of the local loan com- panies and the service subsidiaries and has contrib- uted several million dollars to the plan. Beneficial Corporation has also set up various other employee plans, such as a stock plan and a Thrift Club plan. (Tr. 208-20; I.D. 9 22). Finally, the very advertising slogan which is a subject of this case is copyrighted by Beneficial Cor- poration. That the parent owns the slogan while the subsidiaries use it is further evidence, if any is needed, of the closely intertwined nature of Bene- ficial Corporation and its flock of subsidiaries. But the copyright ownership by itself is also sufficient to fix liability on Beneficial Corporation. As respond- ents vigorously point out when arguing to keep the slogan, the copyrighted phrase is a property right. And the law is clear that one who places into an- other’s hand the instrumentality by which unfair or deceptive acts or practices are accomplished may be held responsible for those practices. Federal Trade Commission v. Winsted Hosiery Co., 258 U.S. 483, 494 (1922); C. Howard Hunt Pen Co. v. Federal Trade Commission, 197 F.2d 273, 281 (3d Cir. 1952). As we have noted, a sufficient standard is whether the parent, having latent power to halt illegal prac- tices of its subsidiary, instead tacitly approved them. That standard is clearly met. In fact, Beneficial 43a Corporation’s control was more than latent, for the parent was intimately entwined with the manage- ment, the finances, the employees, and the marketing practices of its subsidiaries. The paper division of Beneficial’s business into 1,800 separate companies does not mask overall existence of a single enterprise. See Zale Corporation, et al. v. Federal Trade Com- mission, 473 F.2d 1317 (5th Cir. 1973). Whether looking at the pattern or framework of the whole enterprise or at the individual factors mentioned, we find Beneficial Corporation liable. Indeed, even though the common law standard argued by respond- ents is inapplicable, in this case that more stringent standard is met as well, for the subsidiaries were simply convenient fictions for Beneficial Corpora- tion’s use. — Il. INSTANT TAX REFUND ADVERTISING As the Administrative Law Judge found, substan- tially all of Beneficial’s tax preparation advertising has featured the “Instant Tax Refund” theme. The first advertisements, in late 1969 and early 1970, gave little or no explanation of what Beneficial was actually offering. For example, one radio commer- cial states: . . . Do you have a refund coming to you on your income taxes this year? Well, there’s no need to wait weeks for your refund check. Get the money right now—even before you mail your return—with a cash advance from Bene- ficial. We call it the Instant Tax Refund, a 44a special service of Beneficial Finance. Instant Tax Refund. At Beneficial you’re good for more. ... (CX 85(f)). By February, 1970, after initial public response demonstrated widespread misunderstanding of the Instant Tax Refund (Tr. 65-66), Beneficial began to alter its advertising. Broadcast advertisements since then have variously referred to the “ ‘Instant Tax Refund’ Plan” or “ ‘Instant Tax Refund’ loans,” and have included such explanatory language as “lend you the equivalent of your refund in cash” or “qualify for a loan.” A typical television advertise- ment is: . . . And the Beneficial ‘Instant Tax Refund’ Plan. If you have a refund coming, Beneficial will lend you the equivalent of your refund in cash the instant you qualify for a loan... . (CX 84(f)). Print advertisements also changed somewhat from their original form. After 1970 Beneficial placed an asterisk after the Instant Tax Refund reference with a corresponding asterisk below accompanied by ex- planatory language, or otherwise used the words “loan” or “Plan” with explanatory language. For example, CX 63 states: New income Tax Service offers ‘Instant Tax Refund’ Plan * oe * & a * When you get your taxes prepared at Bene- ficial you can take advantage of our ‘Instant Tax Refund’ Plan. The instant you qualify for 45a a loan, Beneficial will lend you the equivalent of your refund—in cash—instantly . . . even before you mail your return... . In truth, it is admitted, what Beneficial is offering is its everyday loan service. The Instant Tax Refund is not a refund at all but a personal consumer loan, with regular finance charges, costs, and repayment period. (Complaint, {7(1); Ans., {7; I.D. § 48). Such a loan is always available to anyone meeting Beneficial’s credit standards, whether or not the cus- tomer is owed a tax refund by the government, but Beneficial will not make any loan to a person failing to meet its credit standards, even if the customer is due a government refund. The size of the loan Bene- ficial wishes to sell is not related to any tax refund, but to the customer’s credit limit. (CX 143e, 143i; Tr. 169). A. Beneficial takes a narrow view of the dispute on appeal. According to Beneficial, the only issue which its Instant Tax Refund advertising presents is wheth- er Beneficial offers real tax refunds. The broader issue, whether consumers are deceived over what Beneficial actually does offer, is presumably irrele- vant. Beneficial suggests that deciding this case on other than the narrow issue of actual refunds will import a new theory neither charged nor litigated. We reject the idea that any such narrow question is before us. Beneficial had ample notice of the is- sues in this case, which were, and are, whether the 46a Instant Tax Refund advertising is unfair or decep- tive under the Federal Trade Commission Act, and specifically whether the Instant Tax Refund adver- tising misrepresents that Beneficial is offering no more nor less than its normal consumer loan service with its normal finance charges. The complaint raises these issues by quoting Beneficial’s advertising ({ 5), charging that it seems to offer some “instant refund” (6(1)), and then alleging that in fact Beneficial is offering not a refund at all but a per- sonal loan with finance charges (f 7(1)).? A clearer and more precise allegation is difficult to conceive. It certainly goes beyond the minimum standards of no- tice pleading acceptable in administrative hearings. A. E. Staley Mfg. Co. v. Federal Trade Commission, 135 F.2d 453, 454 (7th Cir. 1943). During litigation, Beneficial clearly understood that this case related to the total truth of its offer and not just to actual tax refunds. Consistent with ? The full charging paragraphs read PARAGRAPH SIX: [Respondents have represented that] 1. Respondents will provide taxpayers who have their returns prepared by respondents and to whom a refund is owned by the Internal Revenue Service with an ‘in- stant refund’ at the time their returns are prepared. e * * * PARAGRAPH SEVEN: In truth and in fact: 1. Respondents’ ‘instant tax refund’ is not a refund but a personal loan and the recipient of the loan is re- quired to pay finance charges and other costs for such loan. 47a the position taken in is pre-hearing brief before the law judge that its advertisements “fairly and fully inform the public precisely what is involved,” * Bene- ficial asked each of its consumer witnesses if they realized consumer loans with normal finance charges were offered. (E£.g9., Tr. 364-65, 401, 460, 469-73). Beneficial also attempted to show that consumers un- derstand the word “loan” to imply finance charges. (E.g., Tr. 56-58, 114-15). Even assuming that only the narrow issue of actual tax refunds was alleged in the complaint, which we do not find, we have con- sistently held that a party cannot subsequently chal- lenge as beyond the pleadings an issue which was litigated, if he has had actual notice and opportunity to defend. Grand Caillou Packing Co., 65 F.T.C. 799, 20-821 (1964), rev’d in part on other grounds sub nom. LaPeyre v. Federal Trade Commission, 366 F. 2d 117 (5th Cir. 1966). See also, e.g., Armand Co. v. Federal Trade Commission, 84 F.2d 973 (2d Cir.), cert. denied, 299 U.S. 597 (1936); Rule 3.15(a) (2), 16 C.F.R. § 3.15(a) (2). In short, Beneficial has had a full and fair opportunity to litigate whether its advertising misrepresented the total truth of its of- fer, and we will decide that point. B. Turning, therefore, to Beneficial’s advertising, we conclude that the Instant Tax Refund advertisements, in both their plain and adorned forms, had a capacity *’ Respondent’s Trial Brief, before the law judge, October 30, 1973, at 4. 48a and tendency to mislead the public about the truth of Beneficial’s loan offer, and thus violated Section 5. We find this both on the basis of our own expertise and judgment, from having examined the advertis- ing, see, e.g., Federal Trade Commission v. Colgate- Palmolive Co., 380 U.S. 374, 391-92 (1965), and on the basis of ample record evidence. (Z.9., Tr. 53-55, 115-18, 506-07, CX 159). The early Instant Tax Refund advertising is, on its face, totally misleading about the true nature of Beneficial’s offer. Instead of making clear that Bene- ficial is simply offering its everyday loan service, the advertising implies that Beneficial will give a special cash advance to income tax preparation customers with a government refund due, in the amount of their refund. The natural impression, since the Instant Tax Refund is stressed as exclusive and special, is that this cash advance is different from a normal consumer loan. Beneficial was acutely aware that the early adver- tising was misleading consumers about the nature of its offer, for it made all the subsequent changes in an attempt to clarify the real meaning. (Tr. 53-55, 115-19, 504-08). The extent of the early advertising’s deception is epitomized by a report from Beneficial’s advertising agency on the consumer impact of its first Instant Tax Refund campaign (CX 159): Results of this initial wave of interest depend on the office and its location. In center-city of- fices, particularly those near ghetto areas, the impression gathered from managers was that 49a many of the phone calls came from totally un- creditworthy ‘riff-raff’ . . . people with no steady job record, with very low incomes, whose sole concern was. in the Instant Tax Refund. Many thought they could simply get their government checks immediately at Beneficial. Others didn’t have the required $5 deposit. There were many loud arguments and unpleasantnesses . . . in- cluding one or two incidents of violence being threatened. Managers in these situations tend to agree that advertising should have dealt more directly with the qualifications required to ob- tain an Instant Tax Refund. In other offices—in steady, stable white middle class neighborhoods—many customers also need- ed explanations about the loan aspects of the Instant Tax Refund. But naturally there were fewer hopeless applicants, and managers in places like that feel much better about the high response level and are much calmer about the advertising claim.‘ In the face of this, we are unpersuaded that, as Bene- ficial argues, consumers could decipher the real mean- ing of its advertising because the Instant Tax Re- fund phrase was placed in quotations or because Beneficial’s identity as a consumer loan business may have given a clue. At any rate, consumers are not obliged to guess about the meaning of advertising. ¢ Although we have rejected Beneficial’s narrow construc- tion of the complaint, we note that this memorandum indi- cates some consumers at least did believe Beneficial actually would provide real tax refunds. 50a Cf. Federal Trade Commission v. Standard Educa- tion Society, 302 U.S. 112, 116 (1937). Beneficial contends that it eliminated any early faults by adding the explanatory language character- istic of its later advertising. Although, as we dis- cuss infra, the later advertising is not appreciably less misleading than the early, even assuming that Beneficial did discontinue its early deception in this case we find it an insufficient defense. Whether a cease and desist order should be entered when dis- continuance is claimed rests within the discretion of the Commission. Benrus Watch Co. v. Federal Trade Commission, 352 F.2d 313, 322 (8th Cir. 1965), cert. denied, 384 U.S. 939 (1966). And the Commission has required respondents to meet a heavy burden to prevail on such a claim. Compare, e.g., Argus Camera, Inc., 51 F.T.C. 405 (1954), with Fed- ders Corp., Dkt. 8932, 3 CCH Trade Reg. Rep. ] 20,825 (Jan. 14, 1975). Assuming discontinuance of the early deception to have occurred, we can de- tect no reason to accept that discontinuance as a defense here, for we have no assurance that the de- ception will not be resumed. Beneficial is still in the tax preparation business and could revert at any time to similar deceptive practices. See Giant Foods, 61 F.T.C. 326, 357 (1962), aff’d., 322 F.2d 977 (D.C. Cir. 1963), cert. denied, 377 U.S. 967 (1964). More- over, such changes as it made in its advertising came partly from the prodding of various regulatory agencies, so were not totally voluntary. (Tr. 11, 55, 70-71, 506-07). See Eugene Dietzgen Co. v. Fed- 5la eral Trade Commission, 142 F.2d 321, 330 (7th Cir.), cert. denied, 323 U.S. 730 (1944). , At any rate, no discontinuance occurred, for, as we have noted, despite continual revision Beneficial’s later advertising did not succeed in shedding the de- ceptive and misleading characteristics. The addition of the words “loan” and “plan” and “qualify” was not, in our view, sufficient to clarify exactly what Beneficial was really offering. As the law judge noted, the advertising at best is open to two inter- pretations. Though some consumers may understand that regular consumer loans are offered,’ another in- terpretation is that Beneficial is offering a special, tax-related service apart from its everyday loan busi- ness. Of course, where two interpretations of an ad- vertisement are possible, one of which violates Sec- tion 5, the advertising is unlawful. Murray Space Shoe Corp. v. Federal Trade Commission, 304 F.2d 270, 272 (2d. Cir. 1962). Beneficial insists that we examine the later ad- vertisements in their entirety, and consider the over- all explanation of the Instant Tax Refund phrase. Cf. Parker Pen Co. v. Federal Trade Commission, 159 F.2d 509, 512 (7th Cir. 1946). We have done so. But as noted we find the explanation confusing and misleading. For example, addition of the sup- 5’ Beneficial produced a number of such consumers. It ap- pears from their testimony, however, that most of them understood the Instant Tax Refund for what it was because of their prior dealings with loan companies and not because they independently comprehended the advertising. (E.g., Tr. 871, 391, 423, 472, 480-81, 495). 52a posedly explanatory word “plan” seems to us to heighten the implication of the Instant Tax Refund’s uniqueness, rather than clarify that it is not unique at all. Thus, we have no occasion to determine whether the explanation, considering the advertis- ing as a whole, was sufficiently conspicuous to dispel the impression generated by the dominant Instant Tax Refund slogan, for nothing amounting to real ex- planation was included. : The testimony of consumers confirms our view that the later advertising has a capacity to mislead in a material respect. A number of consumers failed to understand that Beneficial was offering only its nor- mal loan service with normal finance charges. Their reasonable impression was that they would pay only a small fee and that the main qualification for the Instant Tax Refund was being due an actual Gov- ernment refund. (Tr. 663, 691, 713-16, 775, 808- 09). The consumers, had they realized from the ad- vertising that the “Instant Tax Refund” was simply Beneficial’s ordinary loan business, would not have gone to Beneficial’s offices at all. (Tr. 665, 729, 745- 46, 778). We may assume, as Beneficial would have us, that respondents never intended to deceive consumers. But intent is not an element of a deceptive advertis- ing charge under Section 5. Regina Corp. v. Federal Trade Commission, 322 F.2d 765, 768 (3d Cir. 1963). The simple fact is that Beneficial’s Instant Tax Re- fund advertising had a capacity and tendency to de- ceive, and did in fact deceive, the consuming public. 53a C. The law judge’s order bans the use of the Instant Tax Refund phrase or similar words. He found that no qualifying language could remedy the deception and that only purging Beneficial’s advertisements of the phrase would suffice. Beneficial vigorously con- tends that explanatory language could cure any fault and that forced abandonment of its copyrighted and heavily promoted phrase is unwarranted. In some instances, it is true, respondents have been allowed to retain trade names which had become valuable business assets, because the misleading qualities of the names could be dispelled by explana- tion. E.g., Federal Trade Commission v. Royal Mill- ing Co., 288 U.S. 212 (1933). But Royal Milling and its progeny are not limitations on the Commis- sion’s authority to enter a fully effective order. If explanatory language is insufficient to qualify a de- ceptive trade name or is inherently contradictory, its effect is simply to confuse the public and the Com- mission in framing a proper remedy must excise the offending phrase altogether. See, ¢.g., Resort Car Rental Systems, Inc. v. Federal Trade Commission, F.2d —— (4th Cir. April 14, 1975); Bakers Franchise Corp. v. Federal Trade Commission, 302 F.2d 258, 262 (3d Cir. 1962); Carter Products, Inc. vy. Federal Trade Commission, 268 F.2d 461, 498 (9th Cir.), cert. denied, 361 U.S. 884 (1959) ; United States Navy Weekly, Inc. v. Federal Trade Commis- sion, 207 F.2d 17, 18 (D.C. Cir. 1953). Moreover, the Commission has wide latitude in judgment, par- 54a ticularly in determining whether qualifying words will eliminate a deceptive trade name. Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 613 (1946).° In light of these principles, we see no reason for allowing Beneficial to retain the offending slogan. The Instant Tax Refund advertisements, we have held, have the capacity and tendency to mislead and have in fact mislead consumers. In fact, since its in- ception in 1969, the Instant Tax Refund phrase has deceived continuously, and Beneficial’s repeated efforts to explain it have not cured the false impression it leaves. Beneficial’s inability to remedy the deception, which persists even in the qualifying phrase it offers on this appeal as a settlement, confirms what we believe to be obvious. No brief language is equal to the task of explaining the instant Tax Refund slogan, for the phrase is inherently contradictory to the truth of Beneficial’s offer. In truth, the Instant Tax Re- fund is not a refund at all, but only Beneficial’s ev- eryday loan service, complete with normal finance charges and credit checks; nor is it in the least re- lated to any tax refunds, for the size of the loan Beneficial wishes to sell is geared to the customer’s * Though we believe the Royal Milling line of cases is compatible with our normal responsibility to enter effective but not overbroad orders, to the extent it may actually be a limitation or exception to the Commission’s authority to de- vise fully effective remedies, then we decline to expand the exception from trade names to advertising slogans. The Instant Tax Refund slogan is unlike the established company names in Royal Milling, for it is not the name of anything. It is an empty promotional phrase referring to nothing. 55a credit limit instead of his government refund and many people due a government refund do not qualify for an Instant Tax Refund loan at all; moreover, depending on the season of the year or the customer’s sales resistance, the Instant Tax Refund may be called a Vacation loan, a Taxpayer loan, or a Bill Consolidation loan. Nor are we inclined to temper our conclusion to ban the phrase simply because Beneficial has copy- righted it and promoted it heavily. The phrase, which is only six years old, has been deceptive from the start, so to protect it is to protect Beneficial’s investment in deception. We reject the idea that the more heavily a false claim is advertised, the more tenderly we must treat it. Beneficial argues that excision of the Instant Tax Refund slogan and words of similar import would prevent any reference to the concept of tax refund loans. This is quite true. The record is absolutely clear that, in Beneficial’s business at least, no such concept exists. If, however, Beneficial should begin offering a special loan service actually related in some way to income tax refunds, it may seek to re- open the order. For now we believe the absolute pro- hibition necessary.’ 7 We are likewise unpersuaded by Beneficial’s argument that the First Amendment bars this order. It is too clear to war- rant discussion that the First Amendment does not protect commercial speech which has been found to be deceptive and misleading. Murray Space Shoe Corp. V. Federal Trade Com- mission, supra, 304 F.2d at 272. There is no constitutional 56a In light of what we have said we must affirm the law judge’s order and reject Beneficial’s offer of set- tlement. Ill. MISUSE OF CONFIDENTIAL RELATIONSHIP Finally, respondents appeal the law judge’s con- clusion that Beneficial misused confidential informa- tion gathered in the course of its tax preparation business, by using it to solicit loans without consent. The law judge held Beneficial’s practices exploitative, unscrupulous, deceptive, and unfair. The essential facts are not contested. Beneficial entered the tax preparation business for the explicit purpose of generating loan customers. (I.D. § 54; Tr. 84). In practice the tax service, which Beneficial operated from the same offices as its loan business, fulfilled this goal; it was in fact the greatest source of new borrowers which Beneficial had developed in some time. (I.D. J 55; Tr. 508). Beneficial used two different procedures to turn tax customers into borrowers. First, from the beginning of its tax preparation venture in 1969 until De- cember, 1971, Beneficial made no effort whatever to limit the use of customers’ tax data to the prepara- tion of tax returns. Under the procedure in effect during this period, Beneficial’s employees prepared a tax interview sheet for each customer who pre- right to disseminate false or misleading advertising. EF. F. Drew & Co. V. Federal Trade Commission, 235 F.2d 735, 740 (2d Cir. 1956), cert. denied, 352 U.S. 969 (1957). 57a sented himself for tax preparation. This sheet, which contained a variety of financial information, was sent to a computer firm for actual preparation of the re- turn, and the customer frequently had to return a second time to pick up his completed return. (1.D. 958). Beneficial explicitly instructed its personnel to use the tax data appearing on the information sheet to solicit loans. For example, CX 26 states: Right on the Tax Interview Form it shows you what banks or loan companies the customer owes. It is an easy matter to go on from there and list other debts and show how all the bills ean be consolidated, the bank loan can be paid off, the loan company can be paid off, the balance on the car can be cleared—all with a Bill Con- solidation Loan. In addition, if the customer were not sold a loan during the first interview, Beneficial solicited again during the second visit and continued to solicit there- after by telephone and otherwise. (1.D. {|| 62, 64). Personnel were instructed to run a credit check on those who, on their first visit, were reluctant to borrow money, (I.D. { 63), and to present these cus- tomers on their second visit with completed loan papers awaiting only a signature. (I.D. {| 62). After December, 1971, Beneficial revamped its pro- cedure because of the enactment of the Revenue Act of 1971. Section 316 of that Act, 26 U.S.C. § 7216, imposed criminal penalties upon commercial tax pre- parers for using customers’ tax data for non-tax pur- poses without consent. Under the new procedure, 58a Beneficial continued to stress turning tax customei's into loan customers, but Beneficial’s employees re- quired each tax customer to sign a supposed consent form before soliciting any loan. The form, which Beneficial called a BOR-56 Authorization, purported to authorize Beneficial to solicit the customer for “any business” in which Beneficial may engage, and to stipulate that any data appearing on a loan ap- plication was not given for tax preparation. In ad- dition to completing a tax interview sheet, Bene- ficial’s employees were instructed to complete for each customer a loan interview sheet containing similar or identical financial information and to base their loan solicitation on the latter document. Bene- ficial maintained a separate “customer loan folder” for the loan information. (1.D. {| 65, 66). A. Beneficial contends for two reasons that our con- sideration of its loan solicitation practices should be limited. First, the pre-Revenue Act conduct is sup- posedly irrelevant, because, according to Beneficial, the law judge drew no legal conclusions from his ex- tensive factual findings on this issue; apparently Beneficial argues that he tacitly dismissed this part of the case and the Commission should not alter his disposition. Second, the law judge’s post-Revenue Act findings are, Beneficial says, beyond the scope of the complaint and thus should be dismissed.“ * Apparently in connection with this second argument, Beneficial also seems to argue that the law judge was im- 59a Neither of these arguments is supportable. As to the pre-Revenue Act conduct, the law judge’s opinion clearly considered and drew legal conclusions from the record evidence. In addition to entering detailed factual findings (I.D. {] 53-64), the law judge ex- plicitly held that Beneficial’s pre-Revenue Act prac- tices were “offensive to the public policy, unethical, unscrupulous, unconscionable and clearly unfair to the consumer.” (1.D. at 36). Of course, even had the law judge actually ignored Beneficial’s pre-Revenue Act conduct, the Commission on review could itself fully consider its lawfulness. Rule 3.54(a), 16 C.F.R. § 3.54(a). Beneficial’s second argument—that the law judge’s theory of post-Revenue Act violation is beyond the scope of the complaint—must be rejected on the same grounds that its similar claim respecting the tax re- fund advertising was rejected. According to Bene- ficial, the complaint, which alleged misuse of the “tax return” and the tax “financial profile,” does not encompass Beneficial’s post-Revenue Act procedure of preparing a separate loan information profile for loan solicitation instead of referring directly to the tax documents. But we do not read the complaint so restrictively. It plainly alleges misuse of a con- fidential relationship by soliciting loans, without con- properly influenced by a personal belief that a dual loan and tax business is per se unfair. However, the law judge of- fered no such opinion and in fact specifically declined to rule on the issue. (I.D. at 37). The legality of dual opera- tion was eliminated as an issue by complaint counsel on March 13, 1974. 60a sent, using information given for tax purposes. (Com- plaint, 8). Since the law judge explicitly found the post-Revenue Act consent form inadequate to dif- ferentiate tax information from so-called loan in- formation in customers’ minds, the law judge cor- rectly construed the complaint when he applied it to the post-Revenue Act procedures. Moreover, even ac- cepting the argument that the complaint does not by its explicit terms encompass the post-Revenue Act procedures, we see no indication that the real sub- stance of the dispute was not clarified for Beneficial during adjudication. As we noted before, an ad- ministrative complaint is a flexible document: seman- tic deficiencies will not preclude full resolution of the issues where the party proceeded against has a reasonable opportunity to know the matters in con- troversy. Avnet v. Federal Trade Commission, 511 F.2d 70, 76 (7th Cir. 1975). Beneficial has offered utterly no information suggesting it was prejudiced, or unfairly surprised, or otherwise unable to litigate the legality of its post-Revenue Act conduct. In fact, Beneficial itself highlighted the issue by raising the supposed lawfulness of its post-Revenue Act conduct as an affirmative defense. We conclude, therefore, that the substantive law- fulness of Beneficial’s conduct, both pre-Revenue Act and post-Revenue Act, is properly before us. B. We first consider Beneficial’s pre-Revenue Act con- duct. The law judge found this conduct unfair, be- 6la cause it violated basic public policy respecting the confidentiality of tax data, and deceptive, because it was premised on omission of material facts. In determining whether Beneficial’s conduct was unfair, the appropriate standard is a broad one. The Commission does not arrogate excessive power to itself if, in measuring a practice against the elusive, but congressionally mandated standard of unfairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws. Federal Trade Commission v. Sperry & Hutchinson, 405 U.S. 233, 244 (1972). In accordance with this mandate, the law judge de- termined the applicable public policy relating to use of tax data from a wide range of relevant statutory anid ethical sources. However Beneficial argues that applicable public policy can only be found in a law or canon running by its terms to Beneficial, and that public policy deducted and synthesized from analogous situations cannot govern its conduct. Ac- cordingly, for the period before the Revenue Act ex- plicitly applied a standard of confidentiality to its business, Beneficial would find no applicable policy. This argument totally misapprehends the scope of unfairness under Section 5 of the Federal Trade Commission Act. There is no doubt at this point that the Commission may adapt the substance of Section 5 to changing forms of commercial unfairness, and is not limited to vicariously enforcing other law. 62a Therefore, in this case, as in others, those who engage in commercial conduct which is contrary to a gen- erally recognized public value are violating the Fed- eral Trade Commission Act, notwithstanding that no other specific statutory strictures apply. Federal Trade Commission v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 3138 (1934); Federal Trade Commission v. Sperry & Hutchinson, supra. The passage of the Revenue Act reiterated, but certainly did not create, the policy of tax confidentiality which we apply here.’ The policy we apply is evident in the numerous incarnations of our society’s concern for the con- fidentiality and proper use of personal tax data. This theme, broader than the letter of any one law, plainly links those public statutes which variously impose criminal penalties upon federal employees for revealing a tax return,” or allow disclosure of income tax returns only under Presidential order or regulation,” or forbid disclosure of state income tax *In light of the pervasive and specific policy of tax con- fidentiality, we, like the law judge, have no need to decide whether a broader consideration of personal privacy could govern this case. In declining to reach that issue, however, we do not suggest that a generalized right of personal privacy and personal control over private data is an inadequate foundation on which to ground a finding of unlawfulness under Section 5. In fact, the right of privacy has become a widely-valued public policy, with constitutional and statutory underpinning. Cf., e.g., Roe v. Wade, 410 U.S. 113, 152 (1973); Privacy Act of 1974, 5 U.S.C. § 552a. Its violation in a commercial context would likely be unlawful under the Federal Trade Commission Act. ™ 26 U.S. § 7218. 26 U.S. § 6103. 63a returns.” The same policy of tax confidentiality is also manifested in the ethical standards of other commercial tax preparers. Accountants,” certified public accountants,“ and lawyers* would all be in violation of their ethical canons if they used tax information received from a customer to solicit a loan without consent. While it is not our intent to inject entire professional ethics codes into Beneficial’s busi- ness, we believe the various similar fiduciary require- ments of professional income tax preparers reflect a basic ethical consideration which by its nature is equally applicable to anyone in a position to abuse the confidence of a client.” The reason for this statutory and ethical concern is obvious. Personal financial data is the private business of ‘the individual to whom it relates. Its in- herent confidentiality requires that the relationship 1 Code of Virginia, § 58-46; see also I.D. at fn. 5. Tr, 134, 136, 148. “Tr. 252, 255, 263. ** See Canon 4, Code of Professional Responsibility of the American Bar Association (Disciplinary Rule 4-101) and Ethical Consideration 4-5). 6 Beneficial argues that some professional income tax pre- parers also solicit other business from their clients. However, in using tax data to identify other specialized needs of their clients, accountants and lawyers are fulfilling a professional obligation markedly different from Beneficial’s practice of try- ing to sell loans to each of its tax customers. (Tr. 142-45, 257-59). The point in looking to other income tax preparers is not to make Beneficial and them indistinguishable, but only to identify an irreducible minimum quantum of fairness and commercial integrity. .. 64a between the tax preparer and his customer be a fidu- ciary one. This basic fiduciary nature is reflected in the personal expectations of consumers. (Tr. 256, 778). Numerous witnesses testified that they expect confidentiality from tax preparers and regard loan solicitation based on tax data as breach of confidenti- ality. (F£.g., 493-94, 666, 724-25, 809-10). Beneficial argues however, that its misuse of tax information was minimal because the information was not transferred out of the company. However, even putting aside the evidence that Beneficial did in fact transfer the names of its tax customers out- side the company while running credit checks, (CX 27, 34d; Tr. 37, 721-22), this argument ignores the fact that the confidential relationship is breached whenever the customer’s information is used for the financial gain of the preparer. Whether or not re- spondents brokered the confidential information to other businesses, or simply capitalized on it them- selves, is thus unimportant. By the same token, re- spondents’ argument that customers expected to be solicited for loans because of Beneficial’s reputation as a consumer loan business, and were not shocked at being solicited, ignores the record evidence that customers would not approve of any such loan so- licitation made on the basis of their confidential tax data. (Tr. 667, 725). The fact that some tax cus- tomers initiated loan discussions themselves, typically by volunteering the amount of their anticipated re- funds, demonstrates to us not their disinte [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1217%3A1. Public record. Not legal advice.