Minter v. Federal Trade Commission

• Decision Date: 14 February 1939
• Docket Number: No. 6795.,6795.
• Citation: 102 F.2d 69
• Parties: MINTER et al. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Third Circuit

102 F.2d 69 (1939)

MINTER et al. v. FEDERAL TRADE COMMISSION.

No. 6795.

Circuit Court of Appeals, Third Circuit.

February 14, 1939.

David H. Kinley, of Philadelphia, Pa., for petitioners.

W. T. Kelley, Chief Counsel, Federal Trade Commission, Martin A. Morrison, Ass't. Chief Counsel, and James W. Nichol, Sp. Atty., all of Washington, D. C., for respondent.

Before BIGGS, CLARK, and BUFFINGTON, Circuit Judges.

CLARK, Circuit Judge.

This case seems to us a futile continuation of earlier litigation. The trade practices of these petitioners have already been expressly condemned in a unanimous opinion of the United States Supreme Court, Federal Trade Commission v. Keppel & Bro., 291 U.S. 304, 54 S.Ct. 423, 78 L.Ed. 814, February 5, 1934. As the high court there adopted, or rather amplified, the view of the then minority of this court, we can be supposed to be thoroughly familiar with the holding.

The particular practice whose ceasing and desisting was there and here ordered is known in the marts of commerce as selling by "break and take" (pick and take, draw deals, punch cards and punch boards) rather than by "straight goods" packages. The nomenclature furnishes a clue to the disapproval both of the judicial bodies and encouragingly, of the "better element" in the trade itself.

The "break and take" method is the sale of merchandise (or amusement as in the case of motion picture bank nights, 12 Wisconsin Law Review 251, 17 Boston University Law Review 238), by the inducement of a lottery. The customer does not buy only a chance represented by a ticket, he pays for a chattel and a chance for another unpaid chattel, the ticket being the opportunity for fortuitous selection of a differentiated article. It is, so to speak, a lottery with trimmings, and one might observe that a lottery by any other name will smell as bad.

This selling by lottery seems to have prevailed largely where it least should have prevailed, namely, in the sale of penny candy to little children. The Federal Trade Commission's brief cites eighteen of these candy cases initiated by it and sustained by the Circuit Courts of Appeal and the United States Supreme Court since the decision of the Keppel case above cited. These cases are collected in the notes to Section 45 of Title 15, U.S.C.A. on pages 66-75 of the supplement, and see note 5 of 43 Yale Law Journal 1339. See also In the matter of Boyd Houser Candy Company and In the matter of The Newton Products Company, Vol. 4 Federal Register, No. 27, p. 607. It has not always been so limited. As long ago as 1918 we find the Federal Trade Commission prohibiting the sale of tea and coffee with coupons for prizes concealed in certain packages, Federal Trade Comm. v. Brumage-Loeb Co., Successor to Buddha Tea Co., 1918, 1 F.T.C. 159, Federal Trade Comm. v. Everybody's Mercantile Co., 1920, 3 F.T.C. 60, and only recently the commission was sustained in its objection to the sale of silk stockings by punch cards, Chicago Silk Co. v. Federal Trade Commission, 7 Cir.1937, 90 F.2d 689, certiorari denied, 1938, 302 U.S. 753, 58 S.Ct. 281, 82 L.Ed. 582. And see also as to the sale of gas and oil an injunction by competitor, Jones v. Smith Oil & Refining Co., 1938, 295 Ill. App. 519, 15 N.E.2d 42; 29 Journal of Criminal Law and Criminology 598.

The petitioners and the other practitioners of this type of merchandising have followed that ancient precept of the sea, "women and children first", except that they pervert instead of protect weakness. Taking candy from children has never been highly regarded. Forcing it upon them through their possession of an instinct that the adult world recognizes and has always recognized as at the bottom of many of its troubles, seems to us shameful. We have rarely seen of a more unpleasant example of commercial cynicism than is disclosed by the testimony of the petitioners' president, Ira W. Minter:

"Q. In your opinion, Mr. Minter, is this form of advertising injurious to the public? A. The public benefits by it.

"Q. In what way would you say the public benefits by it? A. By getting additional value for the purchase of the particular goods that it is being offered with". Record, p. 148.

The "benefit" and "additional value" so euphemistically referred to, is our old friend "something for nothing", the consequences of too enthusiastic pursuit of which are known to judges in their official capacities.

In view of the controlling decision of the Supreme Court in Federal Trade Commission v. Keppel & Bro., above cited, any extended discussion of the law is inappropriate. Petitioners attempt three distinctions. Two of them touch upon the judicial history of its interpretation. They say, first, that the Federal Trade Commission has no statutory power because the whole candy manufacturing business is infected with the "break and take" virus. In the light of the sentiments we have just expressed, we should be loath to believe this of any body of business men. Happily we do not have to. First, the witnesses making this depressing assertion, Minter and Coughlin, the president and candy broker of the petitioners, are somewhat interested. Second, it is flatly contradicted by two other candy manufacturers called by the Commission, Voneiff, p. 39, and Roskamm, p. 102. Although the latter's business reformation was not altogether voluntary (cease and desist order), he did not limit himself to his own business but referred to earlier and, to him, more Halcyon days in the trade generally, saying: "In the days when break and take were so actively sold in a much larger volume than they are today, we used to receive constant requests from our salesmen, wanting to know why, if other firms could make these packages, we would not make them, and advised us that in many instances their customers were buying a general line of merchandise such as ours, from sources who could supply them with break and take, and vigorously demanded therefore that we also give them a similar assortment to do business with so that they can get their normal share of the distribution and earn their pro rata commission". Record, p. 102.

The Commission's finding, paragraph 6, Record pp. 200-201 is supported by evidence and is by well-settled law conclusive, Federal Trade Commission v. Algoma Lumber Co., 291 U.S. 67, 73, 54 S.Ct. 315, 78 L. Ed. 655, January 8, 1934, Federal Trade Commission v. Standard Education Society, 302 U.S. 112, 117, 58 S.Ct. 113, 82 L.Ed. 141, November 8, 1937.

Even if this had not been so and if the entire penny candy trade had indulged in the practice alleged to be obnoxious, we believe the present trend of decision under section 45, Title 15, U.S.C.A., supports the order. That trend is away from the requirement of injury to a particular competitor and toward the protection of the general consumer.

The direction of that judicial current depends, of course, upon the construction of a very general word "competition". The issue is whether it may be construed to include situations where the practices to be struck down are rife in an entire industry, Jurisdiction of Federal Trade Commission Over False Advertising, 31 Col.Law Rev. 527, or whether the Commission can only intervene when one honest competitor enters the field, Scope of the Jurisdiction of the Federal Trade Commission over False and Misleading Advertising, 40 Yale Law Journal 617 (comment), The Meaning of Methods of Competition in Commerce, 31 Michigan Law Review 808.

Light has, very properly, been sought in the halls of Congress. An entire article has been devoted to a collection of excerpts from the Debates in the Senate, Unfair Methods of Competition, 25 Yale Law Journal 20, and further references to the Congressional Debates are collected in note 18 on page 532 of Mr. Handler's (a leading authority on the subject) article in 31 Col. Law Review 534, above cited. A perusal of these debates leaves us with the impression that general words were employed to make possible the meeting of future contingencies. We say this although we recognize the danger voiced by Mr. Justice Cardozo in repeating the words of Professor Gray in his lectures on the Nature and Sources of the Law: "`that the difficulties of so-called interpretation arise when the legislature has had no meaning at all; when the question which is raised on the statute never occurred to it; when what the judges have to do is, not to determine what the legislature did mean on a point which was present to its mind, but to guess what it would have intended on a point not present to its mind, if the point had been present'". Cardozo, The Nature of the Judicial Process, p. 15.

Surely emasculation of the Commission in proportion to the prevalence of the roguery involved would be a failure to recognize such contingency. The contrary or strict construction by some of the courts arises, as we think, from too long judicial considerations of the technical difficulties in the enforcement of common law private and public sanctions against dishonest trade practices, Handler, False and Misleading Advertising, 39 Yale Law Journal 22, The Meaning of Methods of Competition in Commerce, 31 Michigan Law Review 808, above cited, Handler, Jurisdiction of Federal Trade Commission over False Advertising, 31 Col.Law Review 527, above cited, Scope of the Jurisdiction of the Federal Trade Commission over False and Misleading Advertising, 40 Yale Law Journal 617 (comment), above cited.

It is not unreasonable to suppose that the very purpose of the legislative body, here as often, was to stop the gaps of judge made law. If we can indulge in a priori reasoning, we might note the addition by Congress on June 23, 1938 of the phrase "unfair or deceptive acts or practices in commerce" to the former "unfair methods of competition in commerce", 52 Stat. 1028, 15 U.S.C.A. § 45.

Petitioners' second ground for distinguishing the Keppel case opens up another vista of interpretation as to the meaning of another...