All-State Industries of North Carolina, Inc. v. FTC, 13568.
| Decision Date | 19 March 1970 |
| Docket Number | No. 13568.,13568. |
| Citation | 423 F.2d 423 |
| Parties | ALL-STATE INDUSTRIES OF NORTH CAROLINA, INC., ABC Storm Window Co., Inc., All-State Industries of Tennessee, Inc., All-State Industries, Inc., and All-State Industries of Illinois, Inc., corporations, and William B. Starr, individually and as an officer of said corporations, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Jacob A. Stein, Washington, D. C. (Joseph J. Lyman, Washington, D. C., on the brief) for petitioners.
Robert E. Duncan, Atty., Federal Trade Commission (John V. Buffington, Gen. Counsel, J. B. Truly, Assistant Gen. Counsel, and Alvin L. Berman, Atty., Federal Trade Commission on the brief) for respondent.
Before HAYNSWORTH, Chief Judge, and SOBELOFF and BRYAN, Circuit Judges.
The Federal Trade Commission on June 19, 1967 complained in due form of unfair and deceptive acts and practices by All-State Industries of North Carolina, its four affiliates and principal executive officer (All-State). Federal Trade Commission Act, section 5(b), 15 U.S.C. § 45(b). Upon the accused's responsive denial of the charges and after a plenary administrative hearing, the Commission declared the complaint justified and ordered desistance and cessation of the imposture. Respondents appeal, but we perceive no infirmity in the order.
I. At the start, respondents moved to disqualify the Commission on the grounds that prior to the initiation of this proceeding, its Chairman had written the United States Senate Committee on Commerce decrying the prevalence of practices in national trade paralleling those of All-State. The respondents branded the communication a pre-judgment of their cause, obliging the Commissioners to recuse themselves.
The argument is superficial. The Commission was performing its overriding duty under the Act — to investigate appearances and apprehensions of activities hurtful to the economy of the country. It was incumbent upon this body to speak out, as it did, upon commercial behavior thought to be of overtopping importance because of its apparently deceiving character and potential expansion. FTC v. Cinderella Career and Finishing Schools, Inc., 131 U.S.App.D.C. 331, 404 F.2d 1308, 1313-1314 (1968). Cf. Lehigh Portland Cement Co. v. FTC, 291 F.Supp. 628 (ED Va.1968, Lewis, J.), aff'd per curiam, 416 F.2d 971 (4 Cir. 1969).
II. The respondent companies engage in the interstate sale and installation of residential aluminum siding, storm windows, doors, and appurtenant fixtures. From the Hearing Examiner's findings of fact, the following account unfolds of how they vend their products. These are of two grades. The "ADV" is the cheaper. It is extensively advertised, primarily through mailouts to people whose names and addresses are culled from telephone directories. "PRO", the other grade, is of a higher quality and not so widely publicized.
Respondents' sales technique, or "pitch", is devised to create, first, a demand for the "ADV" product. Through inflated promotion it is presented as a "special offer" with "limited time" prices. But the Examiner found the "ADV" is actually priced uniformly and without time limit. He held as untrue All-State's claim that they deal directly from their factory with the output "100% guaranteed".
Inquiries or "leads" are answered by a supposed "sales manager". He attempts to pressure the prospect into signing a contract, a note and a deed, committing him to the purchase of "ADV" articles but leaving blank the monetary obligation. As soon as the contract is executed, the salesperson brings out a sample of the "ADV" and points out deficiencies in it, "whether real or imaginary". The "PRO" is then shown in contrast, to the detriment of the "ADV". Whenever possible the "PRO" is then sold "at the highest price obtainable from the individual customer". The salesmen have incentives to substitute the "PRO" — they receive no commission on "ADV" but only on "PRO" sales.
This "bait and switch" artifice, the Examiner discovered, was fully set forth in the sales force's training manual and was employed generally. He also reported that All-State's agents utilized "gimmicks whereby the original prices quoted for respondents' products can be reduced." For example, the representative would promise a...
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