Federal Trade Commission v. Algoma Lumber Co

• Decision Date: 08 January 1934
• Docket Number: No. 240,240
• Parties: FEDERAL TRADE COMMISSION v. ALGOMA LUMBER CO. et al
• Court: U.S. Supreme Court

291 U.S. 67

54 S.Ct. 315

78 L.Ed. 655

FEDERAL TRADE COMMISSION

v ALGOMA LUMBER CO. et al.

No. 240.

Argued Dec. 14, 15, 1933.

Decided Jan. 8, 1934.

[Syllabus from 68 intentionally omitted] The Attorney General and Harold M. Stephens, Asst. Atty. Gen., for petitioner.

Mr. Allan P. Matthew, of San Francisco, Cal., for respondents.

Mr. Edward S. Rogers, of New York City, amicus curiae.

Mr. Justice CARDOZO delivered the opinion of the Court.

In May, 1929, the Federal Trade Commission filed and served complaints against a group of fifty manufacturers on the Pacific Coast charging 'unfair competition in interstate commerce' in violation of section 5 of the Federal Trade Commission Act. 38 Stat. 717, 719, c. 311, § 5, 15 U.S.C. § 45 (15 USCA § 45).

After the service of answers the proceedings were consolidated and many witnesses examined. The outcome was a series of reports sustaining the complaints as to thirty-nine manufacturers, with orders to 'cease and desist' from the practice challenged as unfair. Twelve companies thus enjoined petitioned the Circuit Court of Appeals for the Ninth Circuit to review the orders of the Commission. Such review being had, the orders were annulled. 64 F.(2d) 618. A writ of certiorari brings the case here.

The practice complained of as unfair and enjoined by the Commission is the use by the respondents of the words 'California white pine' to describe lumber, logs, or other forest products made from the pine species known as 'pinus ponderosa.' The findings as to this use and its effect upon the public are full and circumstantial. They are too long to be paraphrased conveniently within the limits of an opinion. We must be content with an imperfect summary.

The respondents are engaged in the manufacture and sale of lumber and timber products which they ship from California and Oregon to customers in other states and foreign lands. Much of what they sell comes from the species of tree that is known among botanists as 'pinus ponderosa.' The respondents sell it under the name of 'California white pine,' and under that name, or at times 'white pine' simply, it goes to the consumer. In truth it is not a white pine, whether the tests to be applied are those of botanical science or of commercial practice and understanding.

Pine trees, the genus 'pinus,' have for a long time been divided by botanists, foresters, and the public generally into two groups, the white pine and the yellow. The white pine group includes, by common consent, the northern white pine (pinus strobus)The sugar pine, and the Idaho white pine. It is much sought after by reason of its durability under exposure to weather and moisture, the proportion of its heartwood as contrasted with its sapwood content as well as other qualities. For these reasons it commands a high price as compared with pines of other species. The yellow pine group is less durable, harder, heavier, more subject to shrinkage and warping, darker in color, more resinous, and more difficult to work. It includes the long leaf yellow pine (pinus palustris), grown in the southern states, and the pinus ponderosa, a far softer wood, which is grown in the Pacific Coast states, and in Arizona and New Mexico as well as the 'inland empire' (Eastern Washington, Oregon, Idaho, and Western Montana).

Of the varieties of white pine, the northern or pinus strobus has been known better and longer than the others. It is described sometimes as northern white pine, sometimes as white pine simply, sometimes with the addition of its local origin, as Maine white pine, Michigan, Wisconsin, Minnesota, Canadian, New Brunswick. It is native to the northeastern states and to the Great Lakes region, as far west as Minnesota. It is found also in Canada and along the Appalachian highlands. It was almost the only building material for the settlers of New England, and so great is its durability that many ancient buildings made from it in the seventeenth and eighteenth centuries survive in good condition. The sugar pine is native to the upland regions of California, Southern Oregon and parts of Nevada. The Idaho white pine grows in the mountainous sections of Idaho, Washington, and Oregon and in parts of British Columbia. The white pine species 'still holds an exalted reputation among the consuming public' and 'in general esteem is the highest type of lumber as respects the excellences desired in soft wood material.' 'It is coming more and more to be a specialty wood, largely devoted to special purposes, as it becomes scarcer and higher in price. It is in great demand.'

About 1880 the pinus ponderosa, though botanically a yellow pine, began to be described as a white pine when sold in the local markets of California, New Mexico, and Arizona, the description being generally accompanied by a reference to the state of origin, as 'California white pine,' etc. By 1886, sales under this description had spread to Nevada and Utah with occasional shipments farther east. About 1900, they entered the middle western states, and about 1915 had made their way into New England, though only to a small extent. The pines from the inland empire traveled east more slowly, and when they did were described as western white pine, a term now generally abandoned. The progress of the newcomers both from the coast and from the inland empire was not wholly a march of triumph. In their movement to the central and eastern markets they came into competition more and more with the genuine white pine with which those markets had been long familiar. Mutherings of discontent were heard. In 1924, partly as a result of complaints and official investigations, many of the producers, notably those of the 'inland empire,' as well as some producers in California and Arizona, voluntarily gave up the use of the adjective 'white' in connection with their product, and adopted the description 'pondosa pines,' pondosa being a corruption or abbreviation of the ponderosa of the botanists. 'Pondosa pine is the term employed for ponderosa by the representatives of producers of slightly more than half of the ponderosa marketed.' The respondents and others, however, declined to make a change. During the next five years California white pine and its equivalents became an even more important factor in the lumber markets of the country. Accumulating complaints led to an inquiry by the Commission, which had its fruit in this proceeding.

The confusion and abuses growing out of these interlocking names have been developed in the findings. Many retail dealers receiving orders for white pine deliver California white pine, not knowing that it differs from the lumber ordered. Many knowing the difference deliver the inferior product because they can buy it cheaper. Still others, well informed and honest, deliver the genuine article, thus placing themselves at a disadvantage in the race of competition with the unscrupulous and the ignorant. Trade has thus been diverted from dealers in white pine to dealers in pinus ponderosa masquerading as white pine. Trade has also been diverted from dealers in pinus ponderosa under the name pinus pondosa to dealers in pinus ponderosa under the more attractive label. The diversion of trade from dealers of one class to dealers of another is not the only mischief. Consumers, architects, and retailers have also been misled. They have given orders for the respondents' product, supposing it to be white pine and to have the qualities associated with lumber of that species. They have accepted deliveries under the empire of that belief. True indeed it is that the woods sold by the respondents, though not a genuine white pine, are nearer to that species in mechanical properties than they are to the kinds of yellow pine indigenous to the south. The fact that for many purposes they are halfway between the white species and the yellow makes the practice of substitution easier than it would be if the difference were plain. Misrepresentation and confusion flourish in such a soil. From these findings and others the Commission was brought to the conclusion that the respondents compete unfairly in transacting business as they do, and that in the interest of the public their methods should be changed.

'The findings of the Commission as to facts, if supported by testimony, shall be conclusive.' 15 U.S.C. § 45 (15 USCA § 45). The Court of Appeals, though professing adherence to this mandate, honored it, we think, with lip service only. In form the court determined that the finding of unfair competition had no support whatever. In fact what the court did was to make its own appraisal of the testimony, picking and choosing for itself among uncertain and conflicting inferences. Statute and decision (Federal Trade Commission v. Pacific States Paper Trade Association, 273 U.S. 52, 61, 63, 47 S.Ct. 255, 71 L.Ed. 534) forbid that exercise of power.

First. The argument is made that unfair competition is disproved by the 'simplified practice recommendations' of the Bureau of Standards when read in conjunction with the testimony as to the comparative utility of the genuine white pine and pinus ponderosa.

The Court of Appeals concedes that the recommendations of the Bureau will not avail without more to control the action of the Commission. Cf. Brougham v. Blanton Mfg. Co., 249 U.S. 495, 499, 39 S.Ct. 363, 63 L.Ed. 725; Piedmont & Northern Ry. Co. v. Interstate Commerce Commission, 286 U.S. 299, 312, 52 S.Ct. 541, 76 L.Ed. 1115. The view was expressed, however, that alone they are in a high degree persuasive, and that in conjunction with other evidence they are even controlling. In particular that result was thought to follow in this case because the substituted wood, in the judgment of the court, is so nearly equal in utility that buyers are not injured, even though misled.¹

Such a holding misconceives the significance of the Government's endeavor to simplify commercial practice. It misconceives even more essentially the...