Clinton Watch Company v. FTC
| Decision Date | 18 July 1961 |
| Docket Number | No. 13145.,13145. |
| Citation | 291 F.2d 838 |
| Parties | CLINTON WATCH COMPANY, a corporation, and Irving L. Wein, Bernard J. Cogan and Max Magnus, individually and as officers of said corporation, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Paul G. Annes, Frank E. & Arthur Gettleman, Franklin M. Lazarus, Chicago, Ill., for petitioners.
Alan B. Hobbes, Asst. Gen. Counsel, James McI. Henderson, Atty., Federal Trade Commission, PGad B. Morehouse, Acting Gen. Counsel, Washington, D. C., for respondent.
Before HASTINGS, Chief Judge, CASTLE, Circuit Judge, and GRUBB, District Judge.
Pursuant to Section 5(c) of the Federal Trade Commission Act, Title 15 U.S.C.A. § 45(c), petitioners seek review of a cease and desist order issued by the Federal Trade Commission.
In a complaint issued by the Commission, petitioners, Clinton Watch Company, a corporation, Irving L. Wein, Bernard J. Cogan, and Max Magnus, individually and as officers of said corporation, were charged with preticketing their merchandise at fictitious, excessive prices and with making false and deceptive representations as to the guarantee thereof. The hearing examiner dismissed the complaint as to Cogan and Magnus in their individual capacities only. He found that the charges were sustained by the evidence. Accordingly he entered a proposed order that petitioners cease and desist from falsely representing the retail price and the nature of the guarantee of their merchandise. The Commission adopted the initial decision and order in a final order issued July 19, 1960.
Petitioners seek relief on the ground that enforcement of the order to cease and desist from acts and practices which are prevalent throughout a substantial portion of the industry allegedly does not preserve or foster the competitive system. Petitioners claim that these acts and practices increase competition and lower prices and that they were, therefore, not to the injury of the public. Alternatively, they request that the order be held in abeyance until Commission proceedings against their competitors involving similar charges have been concluded to avoid serious financial loss and injury to petitioners' competitive status in the industry.
Further, it is objected that the provisions of the guarantee of petitioners' merchandise were not violated by the practice of imposing a service charge for reimbursement of out-of-pocket expenses. Petitioners have abandoned the guarantee practices objected to by the Commission and claim that an order to cease and desist is not proper in respect thereto. Lastly, it is requested that the complaint herein be dismissed against Cogan and Magnus as corporate officers because their activities and authority as said officers did not extend to the acts and practices in question.
The facts concerning petitioners' acts and practices which the Commission found in violation of the Act are undisputed. Petitioners are engaged in the manufacture of watches which are sold in interstate commerce to wholesale, mail order houses, to discount houses, and to retailers. A price tag is attached to each watch at the factory, reflecting a price substantially in excess of the normal and usual retail price. Ultimate purchasers of petitioners' products testified that they bought the watches at substantially lower prices than those indicated on the attached tickets. Preticketing at fictitious and excessive prices must be deemed to have the tendency of deceiving the public as to the savings afforded by the purchase of a product thus tagged as well as to the value of the product acquired. Petitioners' practice places a means of misleading the public into the hands of those who ultimately deal with the consumer. Notwithstanding the prevalence of these practices and the familiarity therewith among members of the trade, these activities are proscribed to protect the interest of the public. Federal Trade Commission v. Winsted Hosiery Co., 1922, 258 U.S. 483, 494, 42 S.Ct. 384, 66 L.Ed. 729.
Misrepresentation as to the retail value of merchandise by means of an attached, fictitious price and deception as to savings afforded by the purchase of the product at a substantially lower price than that indicated thereon constitute unfair methods of competition. Niresk Industries, Inc. v. Federal Trade Commission, 7 Cir., 1960, 278 F.2d 337, 340, certiorari denied 364 U.S. 883, 81 S.Ct. 173, 5 L.Ed. 2d 104; Harsam Distributors, Inc. v. Federal Trade Commission, 2 Cir., 1959, 263 F.2d 396, 397.
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