Benrus Watch Company v. FTC

• Decision Date: 04 November 1965
• Docket Number: No. 17692,17821.,17692
• Citation: 352 F.2d 313
• Parties: BENRUS WATCH COMPANY, Inc., a Corporation, Belforte Watch Company, Inc., a Corporation, and Oscar M. Lazrus, Individually and as an officer of Aforesaid Corporations, and Harvey M. Bond, Stanley M. Karp, Samuel M. Feldberg, Jay K. Lazrus, Robert Weil, Martin J. Rasnow, Leo Hyman, and Julian Lazrus, Individually and as officers of Benrus Watch Company, Inc., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. Clifford SEIGMEISTER, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

352 F.2d 313 (1965)

BENRUS WATCH COMPANY, Inc., a Corporation, Belforte Watch Company, Inc., a Corporation, and Oscar M. Lazrus, Individually and as an officer of Aforesaid Corporations, and Harvey M. Bond, Stanley M. Karp, Samuel M. Feldberg, Jay K. Lazrus, Robert Weil, Martin J. Rasnow, Leo Hyman, and Julian Lazrus, Individually and as officers of Benrus Watch Company, Inc., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

Clifford SEIGMEISTER, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

Nos. 17692, 17821.

United States Court of Appeals Eighth Circuit.

November 4, 1965.

COPYRIGHT MATERIAL OMITTED

Harry I. Rand, of Weisman, Allan, Spett & Sheinberg, New York City, for petitioners.

Harry I. Rand, Milton C. Weisman and Warren F. Schwartz, of Weisman, Allan, Spett & Sheinberg, New York City, for petitioners Benrus Watch Co. et al.

Harold W. Wolfram of Burke & Burke, New York City, for petitioner Seigmeister.

John Gordon Underwood, Atty., Federal Trade Commission, Washington, D. C., J. B. Truly, Asst. Gen. Counsel, Miles J. Brown, Atty., Federal Trade Commission, Washington, D. C., on brief for respondent.

Before VAN OOSTERHOUT and RIDGE, Circuit Judges, and HENLEY, District Judge.

HENLEY, District Judge.

These are petitions for judicial review of a final order of the Federal Trade Commission, issued on February 28, 1964, commanding petitioners to cease and desist from certain trade practices found by the Commission to violate section 5(a) (1) of the Federal Trade Commission Act, 15 U.S.C.A. § 45(a) (1). The basis for such review is 15 U.S.C.A. § 45(c).¹

The principal petitioners are Benrus Watch Company, Inc., and its wholly owned subsidiary, Belforte Watch Company, Inc. The individual petitioners are officers or former officers of the corporate petitioners. Throughout most of this opinion the individual petitioners will be ignored, and the corporate petitioners will be referred to collectively as Benrus.

Benrus is a New York corporation having its principal place of business in New York City. It manufactures and sells in interstate commerce men's and women's watches. There is no question that Benrus is subject to the jurisdiction of the Commission.

Benrus watches in general are sold to retail outlets and to mail order and catalog houses, which in turn sell the watches to consumers for cash or on credit. The Commission's complaint against Benrus was issued in January 1959, and the period covered by the evidence extended from 1955 onward. The complaint preferred eight charges of unfair and deceptive practices, which charges Benrus denied, although, as will be seen, Benrus admitted many of the underlying facts set forth in the complaint.

In an initial decision rendered on May 24, 1962, the Hearing Examiner in charge of the case found that Benrus had been guilty of illegal practices in two of the respects charged and recommended the issuance of a cease and desist order with respect to those practices. Other charges were dismissed.

Both sides sought and received review by the Commission. On July 31, 1963, the Commission filed an opinion in which it was found that the Examiner should be sustained to the extent that he had determined that Benrus was guilty of unlawful practices. The Commission further found, however, that other charges contained in the complaint had been established notwithstanding the contrary conclusion of the Examiner.

Contemporaneously with the filing of its opinion just mentioned, the Commission promulgated a proposed order substantially broader than that recommended by the Examiner. On September 11, 1963, petitioners objected to the proposed order; counsel supporting the complaint replied to the objections; and the Commission determined that the objections should be overruled. As indicated, the final order of the Commission was filed on February 28, 1964. The restraints contained in the final order are those set forth in the proposed order of July 31, 1963.

In the instant petitions it is claimed that the Commission's findings of violations of section 5(a) (1) of the Act are not sustained by substantial evidence, that in certain respects the order of the Commission is too broad, and that even if the Commission is not reversed outright, the cause should be remanded to the agency for further proceedings. The Commission contends that its order was properly issued, and that the case should not be remanded.

In substance, the complaint issued by the Commission charged Benrus with unfair and deceptive practices in connection with its "preticketing" of its merchandise with purported retail prices and in connection with activities and practices related to such preticketing, with unfair and deceptive practices in connection with Benrus guarantees of watches including the advertising of such guarantees, in connection with the description of Benrus watches as being "shock-proof" or "shock-protected," and in connection with the markings or absence of markings of its watches in relation to the composition of the bezels of the watches.²

The Commission found Benrus guilty of unfair and deceptive practices in the areas just mentioned and ordered Benrus to cease and desist from such practices. An original charge that Benrus had falsely advertised that certain low-priced watches were available to Benrus outlets, and another charge relating to the composition of the bezels were dismissed by both the Examiner and the Commission.

The principles governing our review of the challenged order are well established. We do not try the case de novo. It is for the Commission, rather than the courts, to weigh the evidence, appraise the credibility of witnesses, resolve conflicts in testimony, and draw legitimate inferences from the testimony and from the underlying facts proved by the evidence. If the Commission's factual findings are supported by substantial evidence, they are conclusive and binding upon us. But, Commission findings or rulings which are not supported by substantial evidence, or which are arbitrary or capricious, or which proceed from an erroneous view of the law cannot be sustained. Corn Products Refining Co. v. F. T. C., 324 U.S. 726, 65 S. Ct. 961, 89 L.Ed. 132; F T. C. v. Pacific States Paper Trade Association, 273 U.S. 52, 47 S.Ct. 255, 71 L.Ed. 534; Continental Wax Corporation v. F. T. C., 2 Cir., 330 F.2d 475; National Trade Publications, Inc. v. F. T. C., 8 Cir., 300 F.2d 790; United States Retail Credit Association v. F. T. C., 4 Cir., 300 F.2d 212; Chain Institute, Inc. v. F. T. C., 8 Cir., 246 F.2d 231.

I.

It is admitted by Benrus that during the period between 1955 and 1959, which was the period covered by the complaint and by the evidence, Benrus watches were "preticketed" before being distributed to the customers of Benrus. That is to say, each Benrus watch when it left the Benrus plant had attached to it or to its container a tag indicating a purported retail price for the watch.

Benrus admits further that during the period in question it advertised from time to time that prospective purchasers of Benrus Watches could obtain substantial trade-in allowances against the quoted or preticketed retail price by turning in old watches when new Benrus watches were acquired.

And Benrus admits still further that during a short period of time in 1958 it advertised, notably in the April 1958 issue of Reader's Digest, that an allowance of $5.00 could be obtained by presenting to Benrus dealers a detachable coupon or "allowance certificate" which was part of the ad.

The complaint charged that the preticketing itself was unfair and deceptive in that the preticketed price, which conveniently may be called the "list price", was substantially in excess of the prices at which Benrus watches were regularly and usually sold in the retail market, that the watches actually sold in the market at varying prices substantially below the list price, and that indeed during the relevant period there was no regular and usual retail market price for Benrus watches. It was and is the position of the Commission that this preticketing of list prices created the impression in the minds of a substantial portion of watch purchasers that the list prices were in fact the usual and regular prices at which Benrus watches were sold at retail in the trade area, and that this alleged impression caused many individuals to buy Benrus watches at prices lower than list under the mistaken belief that they were thereby effecting a saving or "getting a bargain." The Commission considered that the practice in question had the tendency to induce purchasers to buy from Benrus dealers without shopping further, and thus that it had an adverse effect on competition in the retail watch trade.

The Commission also took the position that the advertising about trade-in allowances and allowance certificates was false and deceptive because it was geared to the allegedly deceptive list prices of the watches, and that the allowances were in fact fictitious. Moreover, it was said that Benrus dealers did not uniformly honor the allowance certificates when presented.

The Examiner found against Benrus with respect to the preticketing itself and with respect to the advertising of the allowance certificates, but dismissed the charge based on the advertising of trade-in allowances. The Commission found against Benrus on all three counts.

It is settled that deceptive preticketing of retail prices by a manufacturer of a product is unlawful, and it is immaterial that the actual "marking down" from the preticketed price is done by a retailer rather than the manufacturer. See Rayex Corporation v. F. T. C., 2 Cir., 317 F.2d 290; Helbros Watch Co. v. F. T. C., 114 U.S.App.D.C. 63; 310 F.2d 868; Baltimore Luggage Co. v. F. T. C., 4 Cir., 296 F.2d 608; Clinton Watch Co. v. F. T. C., 7 Cir., 291 F.2d 838; Niresk Industries, Inc. v. F. T. C., 7 Cir., 278 F.2d 337. Benrus does not question those principles; it simply contends that its...