Memorandum — Star Office Supply Co. v. Federal Trade Commission

No. ubtaasy

(See Segre Get of he Wed Sines

. Octoser TERM, 1971

_Srarn‘Orrice Suppry Company, ET AL., PETITIONERS,

~- Feperat Tribe Coxmsion. —*.

: . ” « : : "

ON PETITION FOR A WRIT tr CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

MEMORANDUM FOR THE FEDERAL TRADE COMMISSION

IN OPPOSITION -

ERWIN N. GRISWOLD,

.. Solicitor General,

Department of Justice,

_ Washington, D.O. 20539.

In the Supreme Court of the United States

OcroBbeR TERM, 1971

- No. 71-1092

Star Orrice Suppty Company, ET AL., PETITIONERS: |

yeas =

Feperat ‘TRaDE ComMMISSION

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

t

MEMORANDUM FOR THE FEDERAL TRADE COMMISSION

IN OPPOSITION

v

1. The Federal Trade Commission found that peti-

tioners, Star Office Supply Company and its president,

Henry Pinkwater, had engaged in unfair, false, mis-

leading and deceptive practices in the sale of office

supplies in violation of Section 5 of the Federal Trade

Commission Act, 15 U.S.C. 45, and entered a ten para-

_ graph cease-and-desist order (Pet. App. A 2, A 110-A

112). The court of appeals affirmed from the beneh

without opinion (Pet. 5).

The evidence showed that petitioners sali ited orders.

for office supplies by telephoning prospective pur-

chasers and misrepresenting the nature of their busi-

(1)

463-190—72

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2

ness and their affiliations. Petitioners’ jobber-salesmen

- would frequently claim that. they had been recom-

mended by another official of the prospect’s firm; that

they were attempting to liquidate a relative’s station-.

ery firm, and knew nothing of the business;.and that. ___

they were affiliated with organizations such as Radio

Free Europe. None of these assertions was true. See

e.g., Pet. App. A aaticadl 46, A 58-A 59, A 60-A 61,

A 66-A. 67.

There was also considerable evidence that petition-

ers deliberately shipped more merchandise to pur-

chasers than had been ordered (see, e.g., Pet. App. A

50, A 51, A 53, A 56-A 57, A 66, A 70-A 71, A 75,

A 88). Frequently, the price of goods would be billed

at 2 higher amount than the purchaser had-been led to

expect (see e.g., App. A 55-A 56; A 83). Merchandise *

sold this way was often returned, but frequently a por-

tion of the order would be inadvertently used, or re- -

tained, and paid for by the customer (App. A 51, A

53, A 56, A 57, A 60, A 73).

‘The Commission’s order (App. A 110-A 112) di-

rected petitioners to cease and desist such misrepre-

sentations; to furnish purchasers with. pre-shipment

written notification asyto the type, quantity and price

of the supplies to be shipped (para. 7); not to deviate--

from the pre-shipment w Nitten notification unless upon

express authorization of the purchaser (para. 8) ; and

not to thwart cancellation! of any orders obtained in

violation of the cease and desist order (para. 9).

2. Petitioners do not. question the Commission’s

' finding that their sales practices: were unfair and de-

ceptive in violation of Section 5 of the Fedgral Trade

Commission Act; they contend only that paragraph 7

of the order, requiring pre-shipment notification, was

- improper (Pet. 2). As this Court has repeatedly held,

the Commission has broad authority to determine’ the

nes ____type of order ‘necessary to-cope-with: the unfair prae-— = -

tices found.” Federal Trade Commission v. Colgate-

Palmolive Co., 380 -U.S. 374, 392; Federal Trade

Commission v. Ruberoid Co,, 343 U.S. 470, 473. Unless

the remedy selected ‘thas no reasonable-relation to the ~

unlawful practices found to exist,” the courts ‘will

not interfere.’’ Jacob. Siegel Co. v. Federal Trade

Commission, 327 U.S. 608, 613.

* The remedy chosen here is reasonably related to

petitioners’ practice of shipping larger quantities of

‘merchandise than were ordered. As the Commission

explained (Pet. App. A 8-A 9), pre-shipment notifi-

cation’ will give customers the opportunity to inform

petitioners of any variations between what was or-.

dered and what petitioners intend to ship, and thus

protect customers against excess shipment or increased — -

prices. Indeed petitioners’ continued areument in

favor of “*[S]ehlock’ pressure methods of competitive

selling” as “part of the enterprise energies in these ~~

fields of American business * * *** (Pet. 9, emphasis

in original) demonstrates the Commission’s wisdom

in requiring a prophy lactic. remedy rather than a

mere order to desist.

Contrary to petitioners’ assertion (Pet. 6), the

Commission’s remedy here is not unique. The Com-

mission has frequently required violators of Section 5

r

4

to take affirmative steps before making a sale to en-.

sure that their customers are aware of the seller’s

obligations; such orders have uniformly been upheld

by the courts. See, e.g., All-State I ndustries of North

Carolina, Inc. v. Federal Trade Comm ission, 423 F. 2d

423 (C.A. 4), certiorari denied, 400 U.S. °828; Port-

wood v. Federal Trade Commission, 418 F. 2d. 419

(C.A. 10); S d& S Pharmaceutical ‘Co. v. Federal

Trade Commission, 408 F. 2d 487 (C.A. 5). .

~~ 3. Petitioners allege that paragraph 7 is a drastic -

remedy which will destroy their business **within a

very short time’? (Pet. 8). Even assuming that pre-

shipment notification would be as onerous as_peti-

tioners claim,’ Section 5 gives the Commission a

mandate to stamp out unfair business practices, and,

if need be, those businesses **which persist in prac-

‘ticing them.”’ Slough v. Federal Trade Commission,

396 F. 2d 870, 872 (C.A. 5).

However, if the condition proves tuo onerotis peti-

tioner can apply to the Commission for relief. If that

relief is denied, petitioner “‘must remember that _

those caught: violating the Act must expect some fenc-

ing in.”’ Federal Trade Commission v. National Lead

Co:, 352 U.S. 419, 431.

‘ Petitioners have previously used a quite similar procedure

(Pet. A 93-A 94).

5

For the foregoing reasons the petition for a writ

of certiorari should be denied. |

Respectfully submitted.

: _” Erwin N. Griswop, -

= Solicitor General.

Ronatp M. Drerricn,

General Counsel, ;

Federal Trade Commission.

tr. 1079 : —_———

AVtaie

* U.S. GOVERNMENT PRINTING OFFICE: 1072