384 U.S. 316 (1966), 11, Federal Trade Commission v. Brown Shoe Co., Inc.

Docket Nº:No. 11
Citation:384 U.S. 316, 86 S.Ct. 1501, 16 L.Ed.2d 587
Party Name:Federal Trade Commission v. Brown Shoe Co., Inc.
Case Date:June 06, 1966
Court:United States Supreme Court

Page 316

384 U.S. 316 (1966)

86 S.Ct. 1501, 16 L.Ed.2d 587

Federal Trade Commission


Brown Shoe Co., Inc.

No. 11

United States Supreme Court

June 6, 1966

Argued April 25, 1966




The FTC filed a complaint against respondent, the country's second largest shoe manufacturer, under § 5 of the Federal Trade Commission Act, charging unfair trade practices by the use of a "Franchise Stores Program" through which respondent sells its shoes to more than 650 retail stores. In return for special benefits from Brown Shoe Company, the franchise stores agree to buy Brown shoe lines and to refrain from buying competitive lines. After hearings the FTC concluded that the restrictive contract program was an unfair method of competition and ordered respondent to cease and desist from its use. The Court of Appeals set aside the FTC's order, holding that there was "complete failure to prove an exclusive dealing agreement" violative of § 5 of the Act.

Held: the FTC acted well within its authority under the Act in declaring respondent's franchise program an unfair trade practice. Pp. 319-322.

(a) On this record, the FTC has power to find such anticompetitive practice unfair. Federal Trade Comm'n v. Gratz, 253 U.S. 421, relied on by the Court of Appeals, has been rejected by this Court. Pp. 320-321.

(b) The franchise program conflicts with the policy of §1 of the Sherman Act and § 3 of the Clayton Act against contracts which remove freedom of purchasers to buy in an open market. P. 321.

(c) Under § 5 of the Federal Trade Commission Act, the FTC has power to arrest restraints of trade in their incipiency without proof that they are outright violations of § 3 of the Clayton Act or other antitrust provisions. FTC v. Motion Picture Adv. Co., 344 U.S. 392, 394-395. Pp. 321-322.

339 F.2d 45, reversed.

Page 317

BLACK, J., lead opinion

MR. JUSTICE BLACK delivered the opinion of the Court.

Section 5(a)(6) of the Federal Trade Commission Act empowers and directs the Commission

to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce.1

Proceeding under the authority of § 5, the Federal Trade Commission filed a complaint against the Brown Shoe Co., Inc., one of the world's largest manufacturers of shoes, with total sales of $236,946,078 for the year ending October 31, 1957. The unfair practices charged against Brown revolve around the "Brown Franchise Stores' Program" through which Brown sells its shoes to some 650 retail stores. The complaint alleged that, under this plan, Brown, a corporation engaged in interstate commerce, had

entered into contracts or franchises with a substantial number of its independent retail shoe store operator customers which require said customers to restrict their purchases of shoes for resale to the Brown lines and which prohibit them from purchasing, stocking or reselling shoes manufactured by competitors of Brown.

Brown's customers who entered into these restrictive franchise agreements, so the complaint charged, were given in return special treatment and valuable benefits which were not granted to Brown's customers who

Page 318

did not enter into the agreements. In its answer to the Commission's complaint, Brown admitted that approximately 259 of its retail customers had executed written...

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