291 U.S. 304 (1934), 194, Federal Trade Comm'n v. R. F. Keppel & Bro., Inc.

Docket Nº:No.194
Citation:291 U.S. 304, 54 S.Ct. 423, 78 L.Ed. 814
Party Name:Federal Trade Comm'n v. R. F. Keppel & Bro., Inc.
Case Date:February 05, 1934
Court:United States Supreme Court

Page 304

291 U.S. 304 (1934)

54 S.Ct. 423, 78 L.Ed. 814

Federal Trade Comm'n


R. F. Keppel & Bro., Inc.


United States Supreme Court

Feb. 5, 1934

Argued January 11, 1934




1. The Federal Trade Commission, proceeding under § 5 of the Act, ordered respondent, one of numerous candy manufacturers similarly engaged, to desist from selling and distributing in interstate commerce candy in a certain type of package, in assortments so arranged and offered for sale as to avail of the element of chance as an inducement to the retail purchaser. Each package contained

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display material, attractive to children and explaining the plan by which either the price or the amount of the candy received by the purchaser was affected by chance. The Commission found that the candy in this type of package was inferior in size or quality to that in other classes of packaged candy marketed without the aid of the chance feature, and that the competition between the two classes resulted in substantial diversion of trade from others to the manufacturers and distributors of the former; that this type of package was sold extensively in the retail trade to school children, among whom it encouraged gambling, and that many manufacturers refrained on moral grounds from making it, and as a result were placed in a disadvantageous competitive position.


(1) The practice complained of is a method of competition in interstate commerce. P. 308.

(2) The proceeding is "to the interest of the public" if otherwise within the purview of the Act. P. 308.

(3) The Commission correctly concluded that the practice was an unfair method of competition within the meaning of the Act. P. 314

2. The fact that a practice does not involve any fraud or deception and that competitors may maintain their competitive position by adopting it does not necessarily put it beyond the jurisdiction of the Commission. P. 309.

3. The types of practices held in earlier litigation in this Court to be subject to the Commission's prohibition do not mark the limits of the Commission's jurisdiction. P. 309.

4. The Act is not restricted in its operation to those methods of competition in interstate commerce which are forbidden at common law or which are likely to grow into violations of the Sherman Act. P. 310.

5. The phrase "unfair methods of competition," as used in the Act, does not admit of precise definition, but its meaning and application must be arrived at by a gradual process of judicial inclusion and exclusion. P. 312.

6. A method used by a competitor is not necessarily fair because others may adopt it without restricting competition between them. P. 312.

7. The normal meaning of the words used is the first criterion of statutory construction. P. 313.

8. A practice of the sort which the common law and criminal statutes have long deemed contrary to public policy, and which

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a large share of the industry regard as unscrupulous, would seem clearly to come within the meaning of the word "unfair." P. 313.

9. While it is for the courts finally to determine what are unfair method of competition under the Act, yet the conclusion of the Commission on this question are of weight, and should be sustained when based upon clear, specific, and comprehensive findings supported by evidence. P. 314.

10. It is unnecessary, even if it were possible, to define in advance what unfair methods are forbidden by the Act; new or different practices must be considered as they arise in the light of the circumstances in which they are employed. P. 314.

63 F.2d 81 reversed.

Certiorari, 290 U.S. 613, to review a judgment reversing an order of the Federal Trade Commission.

STONE, J., lead opinion

MR. JUSTICE STONE delivered the opinion of the Court.

This case comes here on certiorari to review a decree of the Court of Appeals for the Third Circuit which set aside an order of the Federal Trade Commission forbidding certain trade practices of respondent as an unfair method of competition. 63 F.2d 81; § 5, Federal Trade Commission Act, 38 Stat. 717, 719.

The Commission found that respondent, one of numerous candy manufacturers similarly engaged, manufactures, sells, and distributes, in interstate commerce, package assortments of candies known to the trade as "break and take" packages, in competition with manufacturers of assortments known as "straight goods" packages. Both types are assortments of candies in packages in convenient arrangement for sale by the piece at a small price

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in retail stores in what is known as the penny candy trade. The break and take assortments are so arranged and offered for sale to consumers as to avail of the element of chance as an inducement to the retail purchasers. One assortment, consisting of 120 pieces retailing at 1 cent each, includes four pieces, each having concealed within its wrapper a single cent, so that the purchasers of those particular pieces of candy receive back the amount of the purchase price and thus obtain the candy without cost. Another contains 60 pieces of candy, each having its retail price marked on a slip of paper concealed within its wrapper; 10 pieces retail at 1 cent each, 10 at 2 cents, and 40 at 3 cents. The price paid for each piece is that named on the price ticket, ascertained only after the purchaser has selected the candy and the wrapper has been removed. A third assortment consists of 200 pieces of candy, a few of which have concealed centers of different colors, the remainder having white centers. The purchasers of the candy found to have colored centers are given prizes, packed with the candy, consisting of other pieces of candy or a package containing lead pencils, penholder, and ruler. Each assortment is accompanied by a display card, attractive to children, prepared by respondent for exhibition and use by the dealer in selling the candy, explaining the plan by which either the price or the amount of candy or other merchandise which the purchaser receives is affected by chance. The pieces of candy in the break and take packages are either smaller than those of the competing straight goods packages, which are sold at a comparable price without the aid of any chance feature, or they are of inferior quality. Much of the candy assembled in the break and take packages is sold by retailers, located in the vicinity of schools, to school children.

The Commission found that the use of the break and take package in the retail trade involves the sale or distribution

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of the candy by lot or chance; that it is a lottery or gambling device which encourages gambling among children; that children, enticed by the element of chance, purchase candy so sold in preference to straight goods candy, and that the competition between the two types of package results in a substantial diversion of trade from the manufacturers of the straight goods package to those distributing the break and take type. It found further that, in some states, lotteries and gaming devices are penal offenses; that the sale or distribution of candy by lot or chance is against public policy; that many manufacturers of competing candies refuse to engage in the distribution of the break and take type of package because they regard it as a reprehensible encouragement of gambling among children, and that such manufacturers are placed at a disadvantage [54 S.Ct. 425] in competition. The evidence shows that others have reluctantly yielded to the practice in order to avoid loss of trade to their competitors.

The court below held, as the respondent argues here, that respondent's practice does not hinder competition or injure its competitors, since they are free to resort to the same sales method; that the practice does not tend to create a monopoly or involve any deception to consumers or the public, and hence is not an unfair method of competition within the...

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