63 F.2d 81 (3rd Cir. 1933), 4835, R. F. Keppel & Bro., Inc. v. Federal Trade Commission

Docket Nº:4835.
Citation:63 F.2d 81
Case Date:January 25, 1933
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 81

63 F.2d 81 (3rd Cir. 1933)

R. F. KEPPEL & BRO., Inc.,



No. 4835.

United States Court of Appeals, Third Circuit.

January 25, 1933

Page 82

Mohun & Elliott, of Washington, D. C. (George E. Elliott, of Washington D. C., and John A. Coyle, of Lancaster, Pa., of counsel), for appellant.

Robert E. Healy, Chief Counsel, Federal Trade Commission, Martin A. Morrison, Asst. Chief Counsel, Federal Trade Commission, Henry C. Lank, and G. Edwin Rowland, all of Washington, D. C., for appellee.

Before WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

This is a petition to review an order of the Federal Trade Commission requiring the petitioner to desist from certain of its trade practices. The petitioner manufactures, sells, and distributes in interstate commerce certain packages or assortments of candy. Each assortment is accompanied by a display card designed to be used by the retailer. One assortment known as 'Chocolate Penny Men 120's' is composed of 120 chocolate covered candies, identical in appearance, four of which conceal pennies placed there by the petitioner at the time it manufactures and packs the assortment. The purchaser pays one cent for the individual pieces of candy. Four of the 120 purchasers regain their money by obtaining the pieces which contain the pennies. Another assortment bears the name '1, 2, 3 Big Chief 60's,' and consists of peanut bars warapped in paper. Inclosed in the wrapper is a ticket showing the retail price to be paid by the purchaser. This may be one, two, or three cents. It cannot be known, until the candy is unwrapped, what price the purchaser must pay for the particular piece. The third assortment, 'School Days 200's,' consists of 200 chocolate covered creams of a uniform size and shape, which retail at one cent each. Of these the centers of eight are pink, four are chocolate, and the remainder are white. Packed with the creams are eight pieces of chocolate candy representing a boy or girl, and four double pieces representing twins. The package contains, in addition, a 'school companion.' For a cream with a pink center, the purchaser receives the chocolate boy or girl; for a chocolate center, the twins; and for the last piece in the box, the 'school companion.' This is a fairly complete outline of the three sales plans in use by the petitioner.

The Federal Trade Commission filed a complaint in which it charged the petitioner with selling and distributing its candy by means of a sales plan or method which constitutes a lottery. Testimony was taken, and the Commission concluded that the sales plans which we have described are, in effect, games of chance, that they are against public policy, and that they constitute unfair competition in commerce. The Commission ordered the petitioner to cease and desist from the use of such practices.

Congress has exclusive control over the regulation of commerce among the states. The manner in which it exercises this constitutional power is not limited. It may regulate commerce by means designed to promote the public welfare, and in matters which are ordinarily within the police powers of the states. Lottery Case, 88 U.S. 321, 23 S.Ct. 321, 47 L.Ed. 492; Hoke v. United States, 227 U.S. 308, 33 S.Ct. 281, 57 L.Ed. 523, 43 L. R. A. (N. S.) 906, Ann. Cas. 1913E, 905; Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442, L. R. A. 1917F, 502, Ann. Cas. 1917B, 1168. Congress therefore had power, had it seen fit, to prohibit business methods such as are practiced by the petitioner. The contention of the respondent is that Congress has done so in section 5 of the Federal Trade Commission Act (15 USCA § 45), which provides:

'Unfair methods of competition in commerce are declared unlawful.

'Power to prohibit. The commission is empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the Acts to regulate commerce, from using unfair methods of competition in commerce.'

The act contains no definition of the words 'unfair methods of competition in commerce,' and their meaning must therefore be arrived at through a reasonable construction of the language used.

In a recent case in the Second Circuit [Northam Warren Corporation v. Federal Trade Commission, 59 F.2d 196, 198], complaint was made to the Federal Trade Commission by a trade competitor that the respondent was using testimonials for advertising purposes for which it had paid, and that that fact was not disclosed to its customers.

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The Commission, holding that this was an unfair method of...

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