Opposition Brief — Southwest Sunsites, Inc. v. Federal Trade Commission

re | ; ai _ es |

FILED

. AUG 29 1996

D } JOSEPH F. SPANIOL, JR.

cRK

No. 85-2142 ~ ou

x.

Iu the Supreme Court of the United States

OCTOBER TERM, 1986

SOUTHWEST SUNSITES, INC., ET AL., PETITIONERS

Vv.

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE FEDERAL TRADE COMMISSION

IN OPPOSITION

CHARLES FRIED

Solicitor General

Department of Justice

Washington, D.C. 205380

(202) 633-2217

NOLAN E., CLARK

Acting General Counsel

ERNEST J. ISENSTADT

Assistant General Counsel

LESLIE RICE MELMAN

Attorney

Federal Trade Commission

Washington, D.C. 20580

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> we SP wut §

. PRY ha 1b

QUESTION PRESENTED

Whether the court of appeals correctly rejected pe-

titioners’ argument that the Federal Trade Commis-

sion’s finding that they had engaged in “deceptive

acts or practices’ was based on a standard to which

petitioners had no opportunity to respond.

(1)

TABLE OF CONTENTS

Opinions below

Jurisdiction

Statement

Argument . inaatipaiasadimenpestbebbaiebinseane

Conclusion

TABLE OF AUTHORITIES

Cases:

American Home Products Corp. Vv. FTC, 98 F.T.C.

136, aff’d, 695 F.2d 681 .

Avnet, Inc. v. FTC, 511 F.2d 79, cert. denied, 423

U.S. 833 eae tds

Bendix Corp. v. FTC, 450 F.2d 534

Bristol-Meyers Co., 85 F.T.C. 688. pot

Cinderella Career &- Finishing Schools, Inc. y.

FTC, 425 F.2d 583 pes

Cliffdale Associates. Inc., 102 F.T.C. 1106

Crown Central Petroleum Corp., 84 F.T.C. 639

FTC v. Colgate-Palmolive Co., 380 U.S. 374

FTC v. Southwest Sunsites, Ine., No. CA 3-80-

0258-F (N.D. Tex. May 19, 1980), aff’d in part

and rev’d in part, 665 F.2d 711, cert. denied, 456

U.S. 973 oe 2 as

FTC v. Sperry & Hutchinson Co., 405 U.S. 233

Firestone Tire & Rubber Co., 831 F.T.C, 35 9, aff’d,

181 F.2d 246, cert. denied, 414 U.S. 1112.

Ford Motor Co., 87 F.T.C. 756

Golden Grain Macaroni Co. y. FTC, 472 F.2d 882,

cert. denied, 412 U.S. 912

Heinz W. Kirchner, 63 F.T.C: 1282

International Harvester Co., 104 F.T.C. 949

Kroger Co., 98 F.T.C. 689 ; ee ees

L.G. Balfour Co. Vv. FTC, 442 F.2d ee

(IIT)

Page

14

4

10, 11

he et

coo Mm WS RP OO

IV

Cases—Continued : Page

NLRB vy. Mackay Radio & Telegraph Co., 304 U.S.

Statutes:

Administrative Procedure Act, 5 U.S.C. 554(b)... 6,7

Federal Trade Commission Act, 15 U.S.C. (& Supp.

II) 41 et seq.:

$5, 15 U.S.C. (& Supp. II) 45 3,10, 11

§ 13(b), 15 U.S.C. 53 (b) 3

Miscellaneous:

3 Trade Reg. Rep. (CCH) 22,251 (May 13,

1985) : 3

Iu the Supreme Court of the United States

OCTOBER TERM, 1986

No. 85-2142

SOUTHWEST SUNSITES, INC., ET AL., PETITIONERS

Ue

FEDERAL TRADE COMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE FEDERAL TRADE COMMISSION

IN OPPOSITION |

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-

12a) is reported at 785 F.2d 1431. The opinion and

final erder of the Federal Trade Commission (Pet.

Supp. App. la-128a) and the initial decision of the

administrative law judge are officially reported at 105

oe ba 8

JURISDICTION

The judgment of the court of appeals was entered

on April 1, 1986. The petition for a writ of certiorari

was filed on June 30, 1986. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

(1)

2

STATEMENT

1. Petitioners, three corporations and two individ-

uals, acquired three large tracts of land in a sparsely-

populated, semi-arid region of West Texas, subdi-

vided the tracts into small parcels, and resold those

unimproved parcels at per-acre prices that were 15

to 25 times higher than the prices petitioners had

paid (Pet. App. 2a-3a; Pet. Supp. App. 24a-25a)

and that “far exceeded the market value estimated by

expert witnesses for both [the Federal Trade Commis-

sion and the petitioners]” (Pet. Supp. App. 46a).

Petitioners marketed the property through a multi-

media campaign consisting of television, radio, and

newspaper advertising and in-home presentations that

touted the investment potential of the land, as well

as its suitability for homes, farming, and ranching

(id. at 26a-29a, 36a-44a, 55a-58a). Petitioners also

engaged real estate brokers, who sold the land by

telephone nationwide and to residents of the island

nations of the South Pacific. Petitioners supplied the

brokers’ salesmen with promotional literature and

approved scripts for their telepnone sales. /d. at 26a-

32a, 97a-100a.

The central theme of petitioners’ sales campaign

was that the land was a “good, safe investment” (Pet.

App. 2a). Buyers were told that “industrial develop-

ment was likely” and that “[o]il, rubber, nuclear and

uranium interests were all potential developments”

(id. at 2a-3a). In fact, however, the evidence showed

that the land was a poor investment. The selling

prices of the parcels “were far greater than [their]

fair market value” (Pet. Supp. App. 90a) and “there

was virtually no resale market for the land” (id. at

47a). Moreover, the steep initial expenditures re-

quired to obtain utilities, water, and other amenities

3

rendered the land unsuitable for use as homesites or

for farming (id. at 58a). Nor were the parcels suit-

able for small-scale ranching, because the “arid, semi-

desert land is capable of supporting only six to ten

head of cattle for each 640 acres of grazing area”

(id. at 70a).

2. On April 29, 1980, the Federal Trade Commis-

sion (FTC) issued an administrative complaint alleg-

ing that petitioners’ marketing techniques constituted

unfair and deceptive acts and practices in violation of

Section 5 of the Federal Trade Commission Act, 15

U.S.C. (& Supp. II) 45.’ The complaint alleged that

petitioners had (1) misrepresented that the undevel-

oped parcels were a good investment, involving little

or no financial risk, and deceptively failed to disclose

information concerning purchasers’ financial risk;

(2) misrepresented that the land was suitable for

residential use, farming, and ranching, and decep-

tively failed to disclose material information regard-

ing the suitability of the parcels for those purposes;

and (3) sold land that was of little or no value for

the purposes petitioners represented while unfairly

retaining the proceeds from the sales (Pet. App. 3a;

Pet. Supp. App. 23a-24a).?

‘The complaint also named one of petitioners’ brokers,

Porter Realty, Inc., and its president, Irvin Porter (Pet. Supp.

App. 22a n.1), both of whom ultimately entered into consent

agreements with the Commission. See 3 Trade Reg. Rep.

(CCH) 7 22,251 (May 13, 1985).

On April 9, 1980, the Commission, pursuant to Section

13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b),

sought a preliminary injunction in the Northern District of

Texas restraining petitioners’ land sales practices pending

final disposition of the administrative complaint. On May 19,

1981, the district court entered a preliminary injunction as to

4

On July 29, 1982, the administrative law judge

filed an initial decision and order dismissing the com-

plaint. Thereafter, on October 14, 1983, the Commis-

sion issued what has since been referred to as the

Commission’s ‘Deception Statement.” * The Decep-

the corporate petitioners, holding that the evidence demon-

strated a likelihood that they had misrepresented and failed to

disclose material facts concerning the investment potential and

suitability of the land for the represented purposes. FTC v.

Southwest Sunsites, Inc., No. CA 8-80-0258-F (N.D. Tex.),

slip op. 5. On the corporate petitioners’ appeal, the United

States Court of Appeals for the Fifth Circuit sustained the

district court’s grant of injunctive relief, holding that the

evidenve “suggests a large-scale systernatic scheme tainted by

fraudulent and deceptive practices.” FTC v. Southwest Sun-

sites, Inc., 665 F.2d 711, 723, cert. denied, 456 U.S. 973 (1982).

3 The ‘‘Deception Statement” is actually a letter sent by the

Commission to the Honorable John Dingell, Chairman of the

Committee on Energy and Commerce of the House of Repre-

sentatives, responding “to the Committee’s inquiry regarding

the Commission’s enforcement policy against deceptive acts

and practices” (Cliffdale Associates, Inc., 103 F.T.C. 110, 174

(1984) (footnote omitted) (reprinting text of Deception

tatement)). From past FTC and judicial decisions defining

and elaborating the statutory phrase “deceptive acts or prac-

tices,” the Commission identified three elements. The first

element—-that a representation, act or practice be “likely to

mislead”—reflects what the Commission noted was the long-

established principle that it need not find actual deception to

hold that a violation has occurred. /d. at 176. The second

element—that a representation, act or practice be considered

from the perspective of the reasonable. consumer—reflects

according to the Commission a longstanding position that the

law should not be applied so that honest representations are

found deceptive merely because they can be “ ‘unreasonably

misunderstood by an insignificant and unrepresentative seg-

ment of the class of persons to whom the representation is

addressed’ ” (id. at 178, quoting Heinz W. Kirchner, 63 F.T.C.

5

tion Statement, adopted by the Commission in Cliff-

dale Associates, Inc., 103 F.T.C. 110, 164-166, 176

(1984), provides that [T]he Commission will find de-

ception if there is a representation, omission or prac-

tice that is likely to mislead the consumer acting rea-

sonably in the circumstances, to the consumer’s detri-

ment.” See Pet. App. 4a.

On complaint counsel’s appeal from the administra-

tive law judge’s (ALJ) decision, the Commission in-

dependently considered the entire record, including

the initial decision and findings of the law judge, and,

applying the articulation of “deceptive practices” con-

tained in the Deception Statement, unanimously con-

cluded that petitioners had engaged in unfair and

deceptive conduct (Pet. Supp. App. la-128a).* The

Commission held that petiticners had misrepresented

the investment potential of the land and had decep-

tively failed to disclose the uncertainty of its f .ture

value as well as the total absence of a resale market

(id. at 45a-49a). Moreover, because of the steep costs

of developing the arid land, the difficulties of climate,

the problems of pest control and flooding, and the

virtual absence of local markets, the Commission de-

termined that the residential, farming, and ranching

uses petitioners claimed for the land were wholly im-

1282, 1290 (1963) ). The last element—-that a representation,

act or practice be material—reflects the Commission’s concern

that the law be applied only against misinformation that is

“important to consumers” and therefore “likely” to affect a

consumer’s choice of or conduct with respect to a product

(103 F.T.C. at 182).

* While accepting most of the factual findings of the ad-

ministrative law judge, the Commission rejected his deter-

minations on liahi’*~ because it concluded that the judge

had misapprehendex the allegations of the complaint (Pet.

Supp. App. 4la-42a, 58a-59a).

6

practical (id. at 58a-7la). Finally, the Commission

held that petitioners had engaged in “unfair prac-

tices” by deceptively inducing consumers to purchase

land that had no value for the advertised uses and by

using misrepresentations to induce purchasers to con-

tinue making payments on the parcels (id. at 94a-

96a).

To remedy these violations of law, the Commission

entered a cease and desist order that restricted peti-

tioners’ future sales activities. These restrictions re-

quired, among other things, that petitioners provide

prospective buyers with information concerning the

risks of =e ase and include in future sales contracts

specific buyers’ rights (Pet. Supp. App. 114a-125a).

The order alse directed petitioners to send a letter

to previous buyers, advising them of the Commis-

sion’s findings (id. at 125a-127a).

3. The court of appeals affirmed (Pet. App. la-

12a). It held, inter alia, that the Commission’s fac-

tual findings were supported by substantial evidence

(id. at 7a-lla) and that the cease and desist order

was clearly within the Commission’s remedial au-

thority (id. at 12a). The court also rejected peti-

tioners’ argument that the Commission had violated

due process and the Administrative Procedure Act

(APA), 5 U.S.C. 554(b), by applying the allegedly

narrower articulation of the meaning of “deceptive

acts or practices” set forth in the “Deception State-

ment” (Pet. App. 4a-5a). The court said, “The pur-

pose of the notice requirement in the Administrative

Procedure Act is satisfied, and there is no due process

violation, if the party proceeded against ‘understood

the issue’ and ‘was afforded full opportunity’ to jus-

tify his conduct” (id. at 4a (citation omitted) ). Ap-

plying that standard, the court held that “[t]his is

7

not a case in which” “a ‘substantially different stand-

ard was applied, to which [petitioners] had no oppor-

tunity to respond’” or in which “ ‘different defenses

and proofs would be used in defending against .. .

two theories’ of liability” (id. at 5a (citation omit-

ted) ).°

ARGUMENT

The court of appeals correctly rejected petitioners’

due process and Administrative Procedure Act argu-

ments. The court adopted what petitioners concede

is the correct test: whether after the hearing before

the administrative law judge ‘a substantially differ-

ent standard was applied [by the agency], to which

[petitioners] had no opportunity to respond” (Pet.

App. 5a). The court correctly applied that test to the

circumstances of this case, ruling that this was not

a case where “different defenses and proofs would be

used in defending against * * * two theories” (Pet.

App. 5a): the complaint gave petitioners ample no-

tice of the need to present any evidence and argu-

ments they might have that their representations and

practices were not likely to materially mislead rea-

sonable consumers, and petitioners had a full oppor-

tunity to do so. There is no conflict with any decision

of this Court or of another court of appeals, and

review by this Court is not warranted.

1. Under the Administrative Procedure Act, 5

U.S.C. 554(b), any person who is otherwise entitled

to notice of an administrative hearing must be in-

formed of “the matters of fact and law asserted.”

But to satisfy the notice requirements of the APA

and the Constitution, the agency need only give the

5’ The court also rejected several other legal claims not pre-

sented in the petition (Pet. App. 5a-12a).

8

affected party a reasonable opportunity to know and

meet the legal claims asserted. NLRB vy. Mackay Ra-

dio & Telegraph Co., 304 U.S. 333, 349-351 (1988) ;

Avnet, Ine. vy. FTC, 511 F.2d 70, 77 & n.18 (7th Cir.),

cert. denied, 423 U.S. 833 (1975) ; Golden Grain Mac-

aroni Co. v. FTC, 472 F.2d 882, 885-886 (9th Cir.

1972). cert. denied, 412 U.S. 918 (1973); Bendix

Corp. v. FTC, 450 F.2d 534, 539-542 (6th Cir. 1971) ;

L.G. Balfour Co. v. FTC, 442 F.2d 1, 19 (7th Cir.

1971). See also American Home Products Corp. vy.

FTC, 695 F.2d 681, 693-695 & n.21 (3d Cir. 1982).

This is precisely the legal standard applied by the

court of appeals. In rejecting petitioners’ due process

claim, the court held that ‘“‘[t]he purpose of the notice

requirement in the Administrative Procedure Act is

satisfied, and there is no due process violation, if the

party proceeded against ‘understood the issue’ and

‘was afforded full opportunity’ to justify his conduct”

(Pet. App. 4a (citation omitted)). The court dis-

agreed with petitioners only on the application of that

standard to the circumstances of this case, determin-

ing that this was not a case in which “ ‘different de-

fenses and proofs would be used in defending against

... two theories’ ” (ibid.).°

2. The court of appeals’ decision is entirely con-

sistent with the decisions of the Sixth Circuit in

® Petitioners err in relying on the court of appeals’ observa-

tion (Pet. App. 5a) that “[a]ll evidence relevant to the old

theory was necessarily relevant to the new” to show that the

court applied some “novel ‘relevan’.’ test.”” The quoted ob-

servation plainly was not intended as the legal basis for the

court’s decision. The critical point is that petitioners failed

to show that they had any evidence or argument that they did

not present to the administrative law judge because it became

relevant only under the Deception Statement articulation of

the meaning of “deceptive acts or practices.”

9

Bendix Corp. v. FTC, 450 F.2d 534 (1971), and the

District of Columbia Circuit in Rodale Press, Inc. v.

FTC, 407 F.2d 1252 (1968). Both of those cases

involved the post-hearing adoption of an entirely new

theory of liability, to which respondents had not had

a fair opportunity to present defenses and proofs.

In Bendix, the Commission determined that an ac-

quisition would lessen competition by eliminating the

possibility that the acquiring company would instead

enter the relevant market by making a so-called ‘‘toe-

hold” acquisition; during the hearing, however, the

Commission staff had relied on the quite different

theory that the acquisition would eliminate the pros-

pect that the acquiring company might enter the

market by internal expansion (450 F.2d at 539-541).

The court of appeals found that had the new theory

been advanced earlier, respondent would have offered

“different defenses and proofs” (id. at 541). Because

“Tt]he witnesses were questioned and cross-examined

in terms of [the initial legal theory]” and “[t]he doc-

umentary proof was keyed to these theories,” peti-

tioner “was not accorded the opportunity to present

proof and argument under the [new] theory of vio-

lation” (id. at 542).

In Rodale Press, the Commission ordered a pub-

lisher to cease placing particular advertisements pro-

moting the sale of certain publications. The Commis-

sion found that the offending advertisements falsely

represented that the publications would contain guar-

anteed cures for certain ailments when, in fact, the

publications contained only qualified claims of cure.

At the hearing, however, the parties had litigated on

a quite different theory: that the advertisements cor-

rectly reported the contents of the publications, but

that the cure-alls contained in the publications were

10

false. Judge Tamm, writing for the panel, held that

this “change [of] theories in midstream” had de-

prived petitioners of ‘‘the opportunity to present ar-

gument under the new theory” (407 F.2d at 1256-

1257 (emphasis in original)). Judge McGowan,

joined by Judge Robinson, concurred, noting that the

change in theories had denied the parties “an oppor-

tunity to defend, either by evidence or argument,

against a charge palpably different from the one

brought against them” (id. at 1258 (emphasis

added) ).

The court of appeals in this case applied the same

standard as the Sixth and District of Columbia Cir-

cuits; the circuits are thus fully in accord on the gov-

erning principles. Here, as in those cases, the court

inquired whether the new articulation of the mean-

ing of “deceptive acts or practices” had effectively

deprived petitioners of their opportunity to mount a

defense. After examining the record, the court held

that the application of the Deception Statement ar-

ticulation did not abridge petitioners’ full opportu-

nity to defend “by evidence or argument” (Rodale

Press, 407 F.2d at 1258 (McGowan, J., concurring) ).

Because the court of appeals applied the same stand-

ard as the courts in Bendix and Rodale Press, and

merely concluded that under the circumstances of this

case petitioners were not deprived of the opportunity

to present relevant evidence or argument, there is no

conflict and further review is unwarranted.’

7 This Court’s decision in FTC v. Sperry & Hutchinson Co.,

405 U.S. 233 (1972)—on which petitioners also rely (Pet. 6-7)

—simply does not address the issue posed in this case. There,

the Court held that the Commission has the authority under

Section 5 of the Federal Trade Commission Act to prohibit

unfair methods of competition not otherwise forbidden by

11

3. Petitioners claim that there are two points on

which, had they known that the Commission would

apply the Deception Statement’s articulation of the

meaning of “deceptive practices,” they would have

offered different evidence or made different argu-

ments. Both of these claims are plainly without

merit.

Petitioners first argue that under “the new theory

of deception * * * it would be relevant to survey

consumers to determine the likelihood of deception”

while “[u]nder the theory of deception at the time

of the adjudication such evidence would have been

irrelevant” (Pet. 7). But, first, petitioners ignore the

fact that the Commission has long considered con-

sumer surveys a valuable aid in determining the

meaning of advertising. See, e.g., American Home

Products Corp., 98 F.T.C. 136, 413-417 (1981), aff'd,

695 F.2d 681 (3d Cir. 1982); Bristol-Meyers Co., 85

F.T.C. 688, 706-712, 744-745 (1975); Firestone Tire

& Rubber Co., 81 F.T.C. 398, 454-455 (1972), aff'd,

481 F.2d 246 (6th Cir.), cert. denied, 414 U.S. 1112

(1973). Indeed, the law is clear that when a party

introduces extrinsic evidence on the meaning of ad-

vertising, the Commission must consider it. See

Cinderella Career & Finishing Schools, Inc. y. FTC,

the antitrust laws. However, because the Commission had

predicated its order on a finding that the conduct in question

did violate the antitrust laws—and had never relied on the

broader Section 5 theory accepted by the Court—the Court

was unable to uphold the order on its own terms. But the

Court in Sperry & Hutchinson did not have any occasion to

consider the standards that apply when a party asserts that its

due process rights have been violated by a purported shift in

an agency’s legal theory.

12

425 F.2d 583, 585-589 & n.38 (D.C. Cir. 1970).* More

important, the notion that petitioners had evidence

that their advertising campaign was not “likely” to

mislead, which they withheld because they thought

the relevant standard was “tendency” to mislead, is

neither plausible nor supported by any information

either in the record or tendered to the court of ap-

peals.

Equally mistaken is petitioners’ contention (Pet.

8) that under the Deception Statement ‘evidence that

the representations did not alter consumer behavior

could have been decisive” while “[u]nder pre-existing

law, it would have been unavailing for [petitioners]

to have offered evidence that consumer decisions were

not actually affected by the alleged representations.”’

The Deception Statement does not suggest that prac-

tices must actually “‘alter consumer behavior” in or-

der to be “deceptive.” To the contrary, the Deception

Statement states quite plainly, and consistently with

prior policy, that “[t]he issue is whether the act or

® Petitioners err in reading the Commission’s decision in

Ford Motor Co., 87 F.T.C. 756, 794 (1976), to mean that

survey evidence bearing on consumers’ interpretation of chal-

lenged advertising is irrelevant under the previous definition

of “‘deceptive practices” (Pet. 7). The Ford Motor Co. deci-

sion simply held that the Commission “is not required to sur-

vey public opinion” but may instead rely on its own “ ‘ex-

pertise * * * to interpret an advertisement’ ” (87 F.T.C. at

794, quoting FTC v. Colgate-Palmolive Co., 380 U.S. 374, 391-

392 (1965) ). Moreover, any trace of ambiguity in Ford Motor

Co. is dispelled by prior and subsequent decisions of the Com-

mission recognizing that agency’s duty to consider extrinsic

evidence submitted by the parties. See, e.g., Cinderella Career

& Finishing Schools, Inc. v. FTC, supra; Kroger Co., 98 F.T.C.

639, 728-729 & n.11 (1981) ; Crown Central Petroleum Corp.,

84 F.T.C. 1493, 1540 (1974); Firestone Tire & Rubber Co.,

81 F.T.C. at 454.

13

practice is likely to mislead, rather than whether it

causes actual deception” (103 F.T.C. at 176 (footnote

omitted)). Later FTC adjudicatory opinions apply-

ing the Deception Statement reaffirm that the Com-

mission is concerned with the risk of consumer harm,

not actual injury or reliance. See International Har-

vester Co., 104 F.T.C. 949, 1056 (1984); Thompson

Medical Co., 104 F.T.C. 648, 816 (1984); Cliffdale

Associates, Inc., 103 F.T.C. at 165. Thus, petition-

ers’ claim that the Deception Statement makes rele-

vant their supposed evidence that consumers did not

actually rely on their advertisements is based on a

misreading of the Deception Statement.

4, Petitioners also suggest (Pet. 8 (emphasis in

original) ) that had the articulation in the Decep-

tion Statemert been promulgated prior to the hearing

petitioners would have seized “the opportunity to ad-

dress the effect of the change on the staff’s case,” pre-

sumably by contending that the staff had failed to

meet its “burden of proof.” But petitioners do not

identify how, if at all, the staff’s proof failed to meas-

ure up under what they perceive as the new “burden

of proof”; nor do they challenge the court of appeals’

determination (Pet. App. 7a-lla) that the Commis-

sion’s findings were supported by substantial evidence.

The Commission regards the Disclosure Statement

as merely a synthesis of elements of prior case law.

See, e.g., 103 F.T.C. at 175 (citation omitted) (“We

have therefore reviewed the decided cases to synthe-

size the most important principles of general applica-

bility”); 7d. at 165 (“These elements articulate the

factors actually used in most earlier Commission cases

identifying whether or not an act or practice was

deceptive * * *.”). Petitioners’ contention that they

were found liable on a fundamentally new theory,

14

which they did not have a chance to rebut, is simply

without merit.

Finally, petitioners argue (Pet. 8) that the applica-

tion of the Deception Statement “denied [them] the

right to have the issues * * * decided in the first in-

stance by the ALJ who observed the witnesses.” But

the Commission accepted, for the most part, the ALJ’s

factual findings, disagreeing only with his under-

standing of the allegations of the Complaint. More-

over, petitioners fail to suggest how, if at all, a fresh

look at the evidence would have altered the factual’

findings or outcome of the case.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

CHARLES FRIED

Solicitor General

NOLAN E. CLARK

Acting General Counsel

ERNEST J. ISENSTADT

Assistant General Counsel

LESLIE RICE MELMAN

Attorney

Federal Trade Commission

SEPTEMBER 1986

W ov. S. GOVERNMENT PRINTING orrice; i986 491507 20308