Brief for the Respondent — Jacob Siegel Co. v. Federal Trade Commission

INDEX

Page

Opinions below.__.-._-.----- == -- te Aa age eae 1

Jurisdiction - -- - - - as Gee onan Peewee a6 a os 1

Questions presented. Ce aee Cee lr ees os ‘chat baling 2

Statute involved_ —_—_- SO eee 2

as incon aan aed Ohare ena Aah a a ekecns owe 3

Summary of argument_--2-_ _-- Ln EE Ba ae aed be 7

Argument:

I. The order of the Federal Trade Commission as to the

remedy is binding upon the courts in the absence of

abuse of discretion — — ———- ae ae 9

II. The Commission's order ptohibiting use e the word

“Alpacuna’”’ was a proper exercise of its discretion to

determine the relief necessary to prevent further

violation of the statute. ----..---. --- eS 19

Conelusion_---- == _ -- er eae Ke ot ae 24

CITATIONS ,

Cases:

American Power & Light Co. v. {Securities & Exchange Com-

mission, 141 F. 2d 606_- ; Sm |

Board of Trade v. United States, 314 U. S. 534 - ame ; 17

Charles of the Ritz Distributors Corp. v. Fede ral Trade Co om- ,

mission, 143 F. 2d 676____- BEN om: rae 4 ey

El Moro Cigar Co. v. Federal Trade ‘ommission, 107 FF. 2d

ee ERR ee ee ae eee 20

Federal Security Administrator v. Quaker Oats c 0. 318 U.s

218... ----- Ree eae e Ee eee ok wie thre 17

Federal Trade Commission ¥. Algoma Lumber C 0, , 291 :

__ Se nes ee © a MEE eee ee eee | . 23, 24

Federal Trade Commission v. Army & Navy Trading Co., 88

Pe eui6aechamann cam ank’:= 28 PS Dolley 20

Federal Trade Commission v. Raladam Co., 316 U.S. 149.25. 22

Federal Trade Commission v—Royal Milling Co., 288 U.S.

NE ahs aa uaa Nee ee ea On mae Ba tetath 7, 11, 12, 13

Federal Trade Commission v. Standard Education, Society,

Raga PS ie a fee eae Saree, CAR rap 24

Federal Trade Commission v. Winsted Hosiery Compan y, 2 58

See ere Sa goa de kca cad + 6 ke mc eens 21

Fluegelman, N., & Co. v. Federal Trade C ‘ommission, 37 F

RIE FEES CONS. bans 20

(I)

684673—46——-1

ti

Cases— Continued *

4

Franks Bros. Co. v. National Labor Relations Board, 321

So er gs ena Saha e stew Gok ee ar

Gelb vy. Federal Trade Commission, 144 F. 2d 580.

Herzfeld vy. Federal Trade Commission, 140 F. 2d 207

Heusner, Hl. N., & Son. v. Federal Trade Commission, 106 —

ya bo bat kale csweurtra sa awa sos

International Association of Machinists v. National Labor

Relations Board, 311 U.S. 72_--.... _-_-

Koolish v. Federal Trade Commission, 129 F. 2d 64, certiorari

denied, 317 U. 8. 683, rehearing denied, 317 U.S. 711_-

Lekas & Drivas v. Federal Trade Commission, 145 F. 2d 976

May Department Stores Co. v. National Labor Relations

. Board, No. 39, this Term._.-

National Labor Relations Board v. Cheney California ‘Euniter

ig ae As EE, sw inna. cn eo melanin op eelie cence os

National Labor Relations Board v. Express Publishing Com-

SS A a an ks Sacenss chaecade sane

New Haven R. R. v. interstate Commerce Commission, 200

Northwestern Electric Co. v. ». Fede ral P. ower Commission, 321

Le ere me a ‘ ae

Parke, Austin & Lipscomb, “Ine. \ v. . Federal Trade Commis-

sion, 142 F. 2d 437, certiorari denied, 323 U.S. 753___.

Perioff v.. Federal Trade Commission, 150 F. 2d 737___ _-

— Dodge Corp. v. National Labor Relations Board, 313

U.S De BREE Ra arr rey SA oe repennena ae

eA oi eels Seat

Uutra- Violet Pr Vv. ‘Federal Trade Commicsion, 143 F.

RE dha xa et Toa Ci ieee < Baia

Virginia Electric & Power Co. Vv. "National Labor Relations

Board, 319 U.S. 533 :

Statute:

Federal Trade Commission Act, See. 5, as sittin by the

ref March 21, 1938, 52 Stat. 111,15 U.S.C. 45____--

Report of the Attorney General’s Committee on

jinistrative Procedure, pp. 115-119_-..---__--

Handler, Unfair Competition and the Federal Trade Com-

mission, 8 Geo. Wash. L. Rev. 399... -_____----

Landis, The Administrative Process, pp. 146-152___---- ---

Outhe Supreme Gourt of the Hnited —

OcToBER TERM, 1945

No. 605

JACOB SIEGEL COMPANY, .PETITIONER

Uv,

FEepERAL TRADE COMMISSION

ON WRIT OF CERTIGRARI TO THE UNITED STATES CIRCUIT

COURT OF APPEALS FOR THE THIRD CIRCUIT

BRIEF FOR THE FEDERAL TRADE COMMISSION

OPINIONS BELOW

The findings, conclusions and order of the Fed-

eral Trade Commission (R. 646-656) are reported

at 36 F. T.-C. 563. The opinion of the Circuit

Court of Appeals (R. 883-892) and its per curiam |

affirmance on rehearing (R. 905) are reported at

150 F. 2d 751. r

_ JURISDICTION

The decree of the Circuit Court of Appeals was

entered November 30, 1944 (R. 893); its final

‘decree on rehearing was entered October 9, 1945

(R. 907-908). The petition for writ of certiorarl

(1)

2

was filed November 15, 1945, and was granted

January 2, 1946 (R.911). The jurisdiction of this

Court rests on Section 5 of the Federal Trade Com-

mission Act as amended, 52 Stat. 111, 15 U.S. C. 45,

and Section 240 ( a) of the Judicial Code as

amended by the Act of February 13, 1925.

3 QUESTIONS INVOLVED

1. Whether the court below correctly held that

a discretionary determination by the Federal

Trade Commission of the remedy to be embodied

in a cease-and-desist order directed against an

unfair method of competition and unfair acts and

- practices in interstate commerce is binding upon.

the courts in the absence of abuse of discretion.

2. Whether the Commission, having determined

that the use of the word ‘‘Alpacuna”’ was mis-

leading and deceptive as applied to coats made

of a fabric containing alpaca but not vicuna,

abused its discretion by forbidding further use of

the word with respect to such coats.

STATUTE INVOLVED

Section 5 of the Federal Trade Commission

Act, as amended by the Act of March 21, 1938, c.

49, 52 Stat. 111, 15 U. S. C. 45, provides in part

as follows: %

(a) Unfair methods of We scisiiniv in

commerce, and. unfair or deceptive acts or

practices in commerce, are hereby declared

unlawful.

*

* & * *

3

(ec) Any person,- partnership, or cor-

poration required by. an order of the

Commission to cease and desist from using

any method of competition or act or

practice may obtain a review of such order

in the circuit court of appeals of the United

States, within any circuit where the method

of competition or the act or practice in

question was used or where such person,

partnership, or corperation resides — or

carries on business, * * *. * * *

Upon such filing of the petition and

transcript the court shall have jurisdiction —

of the proceeding and of the question de- .

termined therein, and shall have power to

make and enter upon the pleadings,

evidence, and proceedings set forth in such

transcript a decree affirming, modifying, or

setting aside the order of the Commission,

and enforeing the same to the extent that

such order is affirmed * *. *. The

findings of the Commission as to the facts,

if supported by evidence, shall — be

conclusive, “ * *

STATEMENT

The Federal Trade Commission, after hearing

‘an. complaints’ ‘which it had issued against

1 The Commission's original complaint of May 6, 158, was

followed by a first amended complaint of November 5, 138,

td which answer was made and on which a hearing proceeded.

During the course of the hearing. the Commission entered

itd order directing that the amended complaint te amended

to\conform to the evidence previously taken and that such

evillence be adopted in connection with the second amended

con\plaint (R. 274-276).

respondent under Section 5 of the Federal Trade

Commission Act, made findings of fact (R. t4-

653) which may be summarized as follows:

Petitioner, a Pennsylvania corporation with

its principal place of business in Philadelphia,

manufactures, and sells and distributes in

interstate commerce in competition with others.

overcoats and topcoats’ which it designates as

*‘Alpacuna”™’ coats (R. 647-648). The overcoats

consist of a*face or pile which is composed of 50".

alpaca, 20% mohair and 30% wool, and the fibers

making up this face are worked into a cotton

backing (R. 648). The face comprises about: 70;

and the backingrabeut 350° of the entire fabric

(ibid.) andy since the coats are fully lined. a

prospective purchaser has little or no opportunity

to observe the cotton backing (R. 651). Peti-

tioner also makes and sells an ‘ Alpacuna™ topcoat

made of essentially the same raaterials as ‘tlie

face of the overcoating fabric, but without any | .

‘cotton backing and with very little lining (R. #49).

Petitioner’s coats are sold to the publie through

retail deniers to whom it furnishes in the course

of its business suggested advertising copy which

hAs been frequently used, and books: containing

samples of its fabrics which have been frequently

displayed to the purchasing publie (R. 649-050).

Such copy and books have contained representa-

Pa

5

tions that ** Alpacuna™ fabric is made from alpaca

obtained from the South American Andes, angora

obtained from Turkestan or elsewhere in Asia,

guanaco obtained from Peru, and wool from

Texas sheep (R. 649-650). Guanaco is net used

and the Angera goat hair or mohair is not im-

ported from Turkestan or elsewhere, but is ob--

tained from Texas goats (1bid. ).

The name * Alpacuna™ is deceptive and mis-

leading toa substantial portion of the purchasing

publie because it induces the erroncous belet that

the coats contain fiber obtained from the animal

known as the vieuna (R. 652). It also has the

tendency and capacity to mislead and deceive a

substantial portion of the public with respect to

the fiber content of petitioner's coats (R. 655).

On the findings so summarized the Commission

concluded that the acts and practices of petitioner

constituted unfair methods of competition and un-

fair and deceptive acts and practices in interstate

commerce (R. 653), and issued its order that peti-

tioner cease and desist: from the acts specified _

>There was undisputed testimony that) vieuna enjoys

a reputation as one of the finest fleeces CR. 24. 34. 67).

that its presence ina coat would lend additional value to

it (R. 34). It is, however. extremely rare. and coats made

of vicuna sell at prices-ranging between S600 and S000 CR.

$3.94 69). Petitioner's coats sold at retail for bet ween S30

and $45 (Comm. Exe. 71. 76.75: R. S64. 967. 800).

6

in six subparagraphs of its order (R. 654-655).’

Petitioner, seeking review of -the Commission's

order i in the court. below, challerged only so much

of \the order, contained in subparagraph 6, as

prohibited the- use of the name “Alpacuna”’ in

designating or describing its coats (R. 657). 7. ~

The court below held that the Commission's

findings respecting the use of ‘‘Alpacuna’’ were

supported by substantial evidence (R. 889) anid

that the prohibition of use of the word was not an

abuse of the discretion as to remedy vested in the °

*The Commission ordered petitioner to cease and desist

from:

1. Representing that respondent’ s coats contain guanaco

hair.

_ 2. Representing that the Angora’ goat hair or mohair

-tised in respondent’s coats is imported from Turkestan or

any other foreign country.

3, Representing through the use of drawings or pictorial

representations, or in any other manner, that respondent’ 5

ct tn fibers or materials which they do not in fact

contain

4. Representing that coats made of fabrics which have a

cotton: backing ‘are composed entirely of wool or of wool —

~ air,

Jsing any advertising matter or causing. aiding, en-

couraging, ‘or promoting the use by dealers of any advertis-

ing matter which purports to disclose the constituent fibers

or materials ‘of coats composed in ‘pert of cotton, unless

such advertising matter -elearly. discloses such cotton con-

ae along with } such other: fibers or materials.

6. Using the word “Alpacuna.” or any other word which

in whee or in part is indicative of the word “vicuna,” -to

designate or describe respondent's coats; or otherwise rep-

resenting, ole Be or by implication, that respondent's coats

contain vicuna fi kt .

searede?

p z

7

“Commission (R. 887-889). The court stated,

however, that it thought the prohibition ‘‘far too

harsh” and that it would modify the order to

permit use of the word with “qualifying lan-

guage’ if the ‘‘control of the remerdy”” which it

considered it possessed under the decision of this

Court in Federal Trade Commission v. Royal

Milling Co,5.288 U.S. 212, had not been limited

by subsequent decisions of this Court, involving

other administrative tribunals, vesting discretion

as to refiedy in the administrative agency (R.

_ 889-892).

Upon rehearing restricted to possible modifica-

tion of the Commission's order’ (R. 904), peti-

tioner displayed labels which added the words

“contains no vicuna’’ following the word ‘* Al-

pacuna”’? and sought modification to permit con-

tinued ‘use of the name ‘in this manne r. The

court, refusing the suggested modification, ad-

hered to and confirmed its -original decision.

(R. 905).

SUMMARY OF ARGUMENT

The Commission, having found upon sutifc ient

evidence that the use of « Alpacuna’ ** is mislead-

ing and deceptive, has disc) tionary authority te

determine the remedy; and the remedy selec ted:

will be modified or eliminated on revie w only if

the determination is so unwarranted as’ to ‘con-

stitute an abuse of discretion, as this Court held

684673—46 ——2

ss , /

a : 8 |

in its latest decision with regard to the remedial

feature of an order of the Commission, Federal

Trade Commission v. Algoma Lumber Co., 291

U. 8. 67. Such has been the consistent view of

the circuit, courts of appeals in recent hases in-

volving Federal Trade Commission orders directed

against deceptive firm names and product desig- -

nations; and the same principle has been followed

with respect to judicial review of the discretion-

‘ary determinations of other administrative

agencies. There is no question here of relation-

ship of the order to the evil to be prevented, since

_ the order deals with the exact violation of the

statute found to have been committed.

The Commission did not abuse its discretion

by prohibiting the use of the word “Alpacuna”’,

.since no lesser remedy would adequately

cure the deception. A contradiction, ‘‘Contains

no vicuna’’, of a portion of the meaning the term —

conveys, would introduce new ambiguities into its

uge and would’ not eliminate thé danger which

sHises from placing in the hands of dealers the

means of deceiving the public. Petitioner's con-

tention that the Commission cannot validly pre-

scribe a remedy without substantial evidence of

the inadequacy. of milder remedies, and that there.

was no such evidence here, misconceives the nature

of the administrative determination and would

give rise to-insoluble procedural problems.

Q “ f o

ARGUMENT

1 =

THE ORDER OF THE FEDERAL TRADE COMMISSION AS TO

THE REMEDY IS BINDING UPON THE COURTS IN THE

ABSENCE OF ABUSE OF DISCRETIC 1N . °

‘

Petitioner does not question the sufficiency of

the evidence to support the Federal Trade

Commission’s finding (R. 652) that “the mame

‘Alpacuna’ is misleading and deceptive to a sub-

stantial portion of the consuming public.’ The

sole contention is that some means of curing the

deception should have heen fouid short of pro-

hibiting the use of the word “ Alpacuna’’, such

as the addition of “qualifying words” to the label

and to advertisements making use. of the ‘name;

and it is urged that the Commissioy’s failure to

include permission in its order for the continued

‘use of “Alpatuna”’ if followed by the words ‘‘eon-

tains no“vicuna’”’ to that extent invalidates the

order. We submit, however, that the remedy re-

quired to correct an unfair method of Competition

lies distinctly within the discretion of the Com-

mission and that the order in this case is in no

sense an abuse ef the Commission's authority. It

‘fannot. therefore, be disturbed upon review.

_ Petitioner suggests (Br. 8) that the decision

of the court below is predicated upon the view

that a reviewing court is wholly without power,

to modify an order of the Commission as to the

remedy, however broad in seepe er unrelated to

10

the evil to be prevented the prescribed remedy

may be. Actually, however, the court below held, _

not that the courts are powerless, but that the

Commission’s determination of the remedy to be

applied in a given case may be modified by the

courts only if it is so unwarranted by the cirenm-

stances that it ean fairly be said to constitute

an abuse. of discretion. The court recognized

‘that there was no abuse here despite its view

that the Commission’s order is harsh; for CR.

892)— | |

| * * *- the discretion as to the remedy in

such controyersy as this has now been

vested. in the Federal Trade Commission.

° That discretion has been exercised to totally

prohibit the use of the name ‘ATpacuna”’ to

the petitioner. Sinee the Commission has

such power, we are unable, in view of the

evidence, to say that the power has been |

abused in this instance, though under the

same facts and circumstances, if we were

still in control of the remedy, we would

-modify‘the order as above indicated.

What petitioner is contending for, In ,contrast

to the basis upon which the court rested its de-_

cision, is power in a reviewing.court to substitute

its judgment for that of the Commission as to

the appropriateness.of the remedy to be applied.

Petitioner buttresses its contention with the

proposition (Br. 8-9) that, to support the remedy

adopted by the Commission, there must be sub- _

11

stantial evidence that a milder remedy would hot

suffice. Neither authority nor analysis of the

problem stipports any such bases of decision.

The court below applied the ‘proper test to the

Commission’s order and reached the © correct

result. .

The most recent case in which this Court has

considered modification of the remedy prescribed

in an order of the Commission directed.at unfair

practices is Federal Trade Com mission Vv. Algoma

Lumber Co., 291 U. S. 67. The Commission there

had found that the use of the words “California

white pine’? to describe’ products of the pinus

ponderosa, hotanieally a yellow pine, was’ decep-

tive and an unfair method of competition and

entered an order prohibiting use of the Lword

“white”? in conjunction with ‘pine’ to deseribe

such products. This Court, in sustaining the

order, concluded that “the Commission did not

abuse its discretion in reaching the conclusion. that

no change of the name short of the excision of the

word ‘white’ would give adequate protedion”’.

(291 U.S. at 81-82.)

Petitioner has entirely ignored this decision and

has relied upon the earlier case of Federal Trade

Commission v. Royal Milling Co., 288 U. 8S. 212.

There the Commission found that’ many . pur-

chasers of flour, including some dealers, believe

that the words ‘‘milling company” jean a con-

cem engaged in grinding wheat into flour and

| C

‘

Lr

12

also believe that the product of sueh a concern is

more desirable in price or quality than the prod-

uct of a concern which (as was the ease with the

respondents there) merely mixes and blends dif-

ferent kinds of flour purchased from others. He-

cause of these findings the. Commission entered

an order forbidding the use of the words “milling

company”’ or other similar terms in respondents’

corporate or trade names. This Court held, how-

ever, that the evil found by the Commission would

be corrected if the use of qualifying words in im-

mediate connection with the corporate names were

required. It directed modification of the order to

permit such qualified use, leaving the form and

manner of the qualifications to be fixed by the

-Comnhission. 288 U. 8, at 218.

The Algoma ease, lie the present one, involved

the use of a name for a product which tended to

mislead purchasers as to the identity of what they

were getting. The Royal Milling Co. case, on the

other hand, involved a misleading aspect of the

names under which sellers did business. It does

not follow that, because the Commission may have

gone too far in the latter case by attempting to

deprive merchants of their established names when

explanatory statements would inform purchasers

of the actual nature of their businesses, it must also

permit the continued use of a misleading product

designation which would continue to be a means of

deceiving the consuming public (see infra, p. 21).

J

eS.

13

The Algoma case holds to the contrary and, un-

like the Royal Milling Co. ease, clearly lays: down

‘the test which is to be applied in judgiag* the

validity of an order 6f the Commission in this

field. The decisions: in the Royal Milling and

Algoma cases are attributable, not to the applica-

tion. of different principles, but to factual dif-

ferences from which it might be concluded that

the Commission's determination constituted an

abuse of discretion in the ‘one case but net in

~ the other.

There was another important distinguishing eir-

cumstanee in the Royal Milling Co. case. The re-

, Spondents there had made an offer early in the

* proceedings before the Commission to place the

words “Not Grinders of Wheat" in conspicuous

lettering ot their letterheads, bags, invoices, ete.

288 U.S. at 215. No such offer was made in the

‘Commission procéedings in the Algoma case or in

the instant case. One who seeks a limitation of

the remedy against use of a misleading name

should be required to submit his proposal’ to the

Commission in order that it may exercise its. ad-

ministrative judgment as to the adequi acy, of the

remedy as it would be limited. The fproposal

“comes too late when it is initially put before a

reviewing court. Cf. National Labor Relations

Board v. Cheney California Lumber Co., No. 319,

this Term, decided February 25, 1946.

In the recent cases involving Federal Trade

Commission orders directed against deceptivefirm

—

>

14

names and product designations, the circuit courts:

of appeals have consistently followed the ‘‘abuse

of discretion’’ test laid down in the Algoma case

with respect to the appropriateness of the remedy.

Perloff v. Federal Trade Commission, 150 F. 2d 757

(C.C. A. 3) ; Charles of the Ritz Distributors Corp.

v. Federal Trade Commission, 143 F. 2d 676 (C. C. -

A. 2); Parke, Austin d: Lipscomb, Inc. v. Federal.

Trade Commission, 142 F., 2d 437 (C.C. A. 2), cer-

tiorari denied, 323 U. S. 753; Herzfeld v. Federal

Trade Commission, 140 F. 2d 207 (C. C. A. 2). In

all of these cases orders of the Commission which to-

tally forbade the use of specified words as mis-

leading and deceptive were sustained as against

the contention that qualifying words would rem-

edy the evil, on the ground that the Commission's

orders did not involve abuse of discretion.*

In several. recent cases cited by petitioner, in

which orders of the Commission directed against

the use of certain words were modified, the ground

of modification was, not that the Commission had

‘In the order in the Herzfeld case, the word “Mills” was

prohibited in the corporate title of a dealer in, but nonmanu-

facturer of, rugs, despite its relations with supplying manu-

facturers which amounted to rather complete control over

their production; in the Ritz case, “Rejwvenescence™ was

prohibited as part of the name of cosmetic preparation=

_ which the Commission found: did not possess rejuvenating

qualities; in the Perloff case, “Packing” was prohibited in

the firm name of distributors, but nonpackers, of meat: in

the Parke case, “Smithsonian Institution” was forbidden in

the corporate title of a private book-distributor enjoying

contractual relations with the Smithsonian Institution.

ae

°

15 >

committed reversible error in its det ermination of

the remedy, but that certain’ of the Commission’s

findings of fact ‘lacked substantial evidentiary

support. In Gelb v. Federal Trade Commission,

144 F. 2d 580 (C. GC. A. 2) a Commission order

prohibiting the representation that a hair-oil

product “reconditioned”? the hair was modified

because the court (p. 582) found nothing which

could be “regarded as substantial evidence that

Clairol is incapable of reconditioning the hair’,

whereas many witnesses affirmed from expericnce

that it did. In Lekas & Drivas.v. Federal Trade

Commission, 145 F. 2d 976 (C. CG. AL 2).a Com-

mission order restricting advertising claims i

regard to an olive oil was modified to permit

advertisement of a ‘* possible slight value as a laxa-

tive’, the sole witness in the proceeding having

testified that there was such an effect from its.

use. Ultra-Violet Products v. Fe pig fps

Commission, 143 F. 2d 814, R1G-817 (C. \. 9)

contains a similar holding.

As the court below recognized by its reliance

upon decisions of this Court whic h invelved orders

of the National Labor Relations Board, the ex-

tent to which a court may interfere in rev iew pro-

ceedings with the remedy prescribed in an order

of the Federal Trade Commission is determined

by the same prineiples as apply in re ‘lation to the

-orders of other administrative agencies. In the

present case, as this Court recently remarked ina

ry Sa oa

a

j

s/

ty

.

16

related connection, it is necessary to recall, as did

the court below, that thé courts *‘must not substi-

tute their notions of expediency and fairness for

those which have guided the agencies to whom the

formulation and execution of policy have been

entrusted’. Railroad Commission v. Rowan

Nichols Oil Co., 310 U.S. 573, 580-581. Clearly

the Federal Trade Commission is the body charged

with devising the means of eliminating the unfair

methods of competition and the unfair or decep-

tive acts and practices against which it is directed

to proceed. Fully applicable here is the holding

of this Court with respect fo the National Labor

Relations Board, that when’ the Board finds on

the basis of substantial evidence that unfair laber

practices have been conmitted, the dete ‘rmination

of appropriate remedies is within the peculiar

competence of the Board, so long as it renders an

‘allowable judgment."" Virginia Electric

Power ¢ ’o, V. National Labor Relations Board,

319 U.S. 533, 543-544; Franks Bros. tb v. Nw-

; ‘tional Labor Relations Board, 321 U.S. Jor, 704;

International Association of pala v. Nu-

‘tional Labor’ Relations Board, 311 U. S. 72, s2;

Phelps Dodge : ‘orp. v. National Labor Relations

Board, 313 U.S. 177, 194, 198-199; National Labor

Relations Board v. Cheney California Lumber Co.,

supra. |

The same principles have been enunciated with

respect to the discretionary features ef many types

of administrative orders other than cease-and-de-

sist orders. See, e. g., Northwestern ‘Electric CG.

17

v. Federal Power Commission, 321 U.S, 419, 124;

Federal Security Administrator v. Quaker Oats

Co., 318 U.S. 218, 298; Board of Trind v. United

States, 314-U, Ss. 534, 45-348: American Power

& Light Co. v. Securities d& Earghange Commis-

sion, 141 F. 2d 606, 619 (CC. A, 1). In the ease

at bar, as in these and other instances ef judicial

review of discretionary administrative action, the

issue turns, not upon the wisdom of the adminis-

trative determination as the court may view it,

but upon the existence of a rational relationship

between the purposes of the statute and the rem-

edy prescribed in the order.

The present case does not present any ques-

tion of reasonable relationship of the provision

embodied in the order to the statutory violations

found by the Commission, such as was involved in

National Labor Relations. Board v. Earpress Pub-

lishing Company, 312 U. 8. 426, 482-438, elabo-

rated upon in May Department Stores Co. V.

National _ Labor Relations Board, No. 39, this

Term, pp. 8-13 of slip opinion. Cf. National Labor

Relations Board v. Cheney California Lumber Co.,

supra. See also New Haven Rk. R. vy. Interstate

Commerce Commission, 200 U.S. 361, 402-405.

The 6rder of the Federal Trade Commission indis-

putably relates to the € ack unfair, a tice, namely,

use of the trade name + Alphe una’ which the Com-

*. mission found to be misle aching and de eoptive. Thes

order is therefore addressed to the precise vivlation | !

found to have beer committed. There is the closest

18

possible relationship of remedy to evil, and there

consequently is no basis for setting aside or modifv-

ing the Commission’s order upon the ground that it

is couched in unduly broad terms or eovers practices

not involved in the case.

Nor does the provision of the _ statute,

authorizing a reviewing court to modify as well .

as to affirm or set aside an order of the Federal

Trade Commission, establish a broader scope of

judicial review with respect to such orders than

would otherwise prevail. It is elementary that

any action taken by a court with respect to an

order of the Commission must have reference to

a feature of the order which lies within the

competence of the court to correct. The boun-

daries of that competence are set by the purposes

of the legislation establishing the Commission

and by the specific provision of Section 5 of

the Act (supra, p. 3), with respect to the finality

of findings of fact supported by evidence. If the

judicial power to modify an order of the Com-

mission were taken literally and without qualifi-

tion as stated in the statute, there would be

no limit te it except as respects the Commission's

_ findings of fact and, consequently, there would b«

no field within which the Commission's discre-

tionary judgment could operate with finality.

Such a result would conflict with the authoritie<

previously cited and with the entire philosophy

of judicial review which this Court consistently

follows. 7

a

19°

II

THE COMMISSIONS ORDER PROHIBITING USE OF THE

~

WORD “AMACUNA” WAS A PROPER EXERCISE OF ITS _ Ha

DISCRETION. TO DETERMINE THE KELMEF NECESSARY TO

PREVENT FURTHER VIOLATION OF THE STATUTE

The Commission, on the basis of the testimony

given in the course of elaborate hearings, found

Ahat the name *Alpacuna™ is misleading and

deceptive to a substantial: portion of the pur-

chasing public ‘in that it represents ‘or implies to

such persons that respondent's coats contain ma-

terial which they do not in fact contain” (R. 652).

There was direct testimony by experts in the trade

and members of the publie that to them the desig-

nation of a fabric as **Alpacuna™ implied that

the eonstitutents were alpaca and vicuna, and

nothing more.’ It is, indeed, somewhat difficult

to conceive any other implication te any whe

know, as many de, that alpaca and ‘vieuna are

animals whose hair is valuable. Whatever

petitioner's intention may have been. in coining

the term, the Commission's findings as to. the

capacity of *Alpacuna™ to deceive and mislead

the publie are clearly unassailable, and they are

not in fact attacked by the, petition.

* KE. g.. R. 89, 105, 110, 120, 201, 215.

* Witness Brown, president of the manufacturers of the

material sold by petitioner when asked what the term “.AI-

pacuna™ conveyed to him responded : “T would naturally

think it was a combination of *Alpaca’ and *Vicuna. ~ And,

later: "Q.-Can you imagine what-else it would come from

A. “Not with my knowledge of tibers. no.” KR. 26.

The ‘Commission, with its valid finding before

it, was entitled to conclude that nothing short of

prohibition of the term ‘‘Alpacuna”’ would give

assurance of preventing the deception springing

from the use of this name. As several courts

have noted, a word which is absolutely false in its

connotation “cannot be qualified; it can only be

contradicted’’;’ and there is a fundamental want

of logic in the suggestign that the false assertion

of a misleading word is cured by an accompanying

- contradiction; for, as the Heusner case just cited

points out (106 F. 2d at 597), customers are .

simply placed in the position of having to choose

at their peril between the false label and an ap-

pended correct statement. Moreover, if the contra-

diction ‘‘Contains no vicuna’’ were believed, the

name would still be deceptive; for in that event

**Alpacuna’’ would necessarily imply a fabrie com-

‘posed exclusively of alpaca. Petitioner’s coats are

not composed of alpaca but of a mixture of arimal

fibers containing only 50% of alpaca, supplemented

ily the overcoat by a cotton backing which constitutes

30% of the entire fabric (see supra, p. 4). We

. think this case fully supports the conclusion of a

recent commentator that ‘‘The addition of a quali-

7 Federal Trade Commission v. Army & Navy T rading

Co., 88 F. 2a 776, 779 (App. D.C.) : H. NV. Heusner & Son v.

| Federal Trade Commission, 106 F. 2d 596 (C. C. A. 3):

El Moro Cigar Co. v. Federal Trade Commission, 107 F.

2d 429 (C. C. A. 4). ae

21

fying phrase will rarely counteract the evil ef-

‘fects of the deceptive brand or name. If, the

Commission’s orders are to possess any vitality,

the restraint must be complete and unquali-

fied . . . in the long run the public interest will.

be best served if no compromise is nade with

falsity.’’ °

Even if the falsity of petitioner's labels and ad-

vertising could be regarded as neutralized by the

addition of “contains no vicuna”’ to the name

‘‘Alpacuna’’, petitioner would. still be permitted

to place in the hands of its customers, the retail-

ers of its product, without check, an instrument

of misleading the public; for, as _ petitioner's

sales manager testified (It. 726), the vetailer may

determine his own advertising and will, pre-

sumably, make such use of the name as he pleases.

This Court has recognized that-in the case of mis-

leading labels it isan unfair method of competi-

tion to put ‘into the hands of the retailer an un-

lawful instrument, which enables the retailer to

inerease his own sales of the dishonest goods,

thereby lessening the market for the honest prod-

uct.”” Federal Trade A ‘ommission Vo Winsted

Hosiery Company, 958 U.S. 483, 494. See also

Koolish v. Federal Trade Cominission, 129 F. 2d

64, 65 (C. C. A. 7), certiorari denied, 317 U. S.

683, rehearing denied, 317 U. S. 711. For the

: Handler. Unfair Compe tition and the ki de ral Trade

Commission, 8 Geo. Wash. L. Rev. 399, 405 (1939).

22

Commission to attempt to proceed against the

retailers.of ‘“‘Alpacuna’’ who might misuse the

name would be obviously impracticable if not be-

yond the Commission’s statutory power to deal

with practices arising in interstate commerce.

_ Petitioner’s attempt (Br. 8-9) to fasten upon

_the Commission the requirement that there musf

be substantial evidence of the inadequacy of |

milder remedies in order to sustain the remedial

provision contained in a Commission order, must

fail in this case for several obvious reasons. Not

only is there record evidence to which we have

pointed, relating to the deceptiveness of the name

‘* Alpacuna,”’ which sustains the order (ef. Federal

Trade Commission v. Raladam Co., 316 U.S. 149,

151-152), but the entire contention misconceives

the nature of the determination here involved.

The remedia] provision of an order relates to the -

future; there cannot be “evidence” in the ordi-

nary sense relating to its operation or to the oper-

ation of possible alternatives, but only opinion or

analogy or inferences as to tendencies. Factual

determinations are not involved in prescribing a

remedy, but, rather, decisions with regard to prob-

abilities and the gains and losses residing in al-

ternative courses of action—decisions which are

made in the light of facts and which must operate

in an established factual setting, to be sure, but

decisions primarily of policy—in short, discretion-

ary decisions which lie at the heart of the ad-

eros

ministrative process and are not to be disturbed

by courts unless arbitrarily or irrationally made.’

Procedurally, moreover, petitioner’s contention

would give rise to problems defying satisfactory

solution. It would inject into a late stage of

every proceeding. involving a misleading trade

name or trade-mark the litigable questien whether

an.explanatory or contradictory statement, rather

than outright discontinuance of the falsehood,

might not adequately correct the deception. A

party, no matter how misleading his trade name

or trade-mark was found to be, could after the

close of the long administrative process, fall backs,

on a second and distinct line of defense in the

courts by offering to use such™*qualifying’’ lan-

guage as his ingenuity might suggest, and thereby

east upon the Commission the burden of demon-

strating that his suggestion would be inadequate

to meet the need. Prolongation of the proceed-

ings would result, without compensating benefits;

‘and in the end the question of judgment would

remain—a question proper for administrative and

not for judicial solution, if our contention is

correct.

It should be observed finally, that it is no de-

fense that a misleading trade name was adopted

without fraudulent design (Federal Trade Com-

*°Cf. Final Report of the Attorney General's Committes

on Administrative Procedure (1941), pp. 115-119; Landis,

The Administrative Process (1938), pp. 146-152.

" 24 |

mission v. Algoma Lumber Co., 291 U.S. 67, 79) ;

or that it has been continuously used for many

years (ibid.) ; or that those who are “trained and

experienced”’ are not misled (Federal Trade Com-

mission v. Standard Education Sociéty, 302 U.S

112, 116) ; or that the name has been registered in

the Patent Office as a trade-mark (Charles of the

Ritz Distributors Corp. v. Federal Trade Commis-

sion, 143 F. 2d 676, 679 (C. C. A. 2)). Petitioner,

therefore, is not aided by the length of time the

name ‘Alpacuna”’ has “been used or by the as-

-serted want of intent to deceive which attended

its adoption. : |

P CONCLUSION .

For the reasons stated, we respectfully submit

that the decree of the Circuit Court of Appeals

should be affirmed. )

fis J. Howarp McGratH, 4

Solicitor General.

WENDELL BERGE,

> ; Assistant Attorney General.

ye | Ravpu F, Fucus,

| ty eh CHARLES H. WESTON,

. ~~ Rosert G. SEaks,

_ Special Assistants to the Attorney y General.

W. T. KELLEy, \

Chief Counsel, .

Federal Trade Commission. +

Marcu 1946.

‘“

B.S. GOVERNMENT PRINTING OFFICE: 1946