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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1986
- **Citation:** 479 U.S. 828

## Text

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

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