Federal Trade Commission v. Standard Education Soc
| Citation | 58 S.Ct. 113,302 U.S. 112,82 L.Ed. 141 |
| Decision Date | 08 November 1937 |
| Docket Number | No. 14,14 |
| Parties | FEDERAL TRADE COMMISSION v. STANDARD EDUCATION SOC. et al. * |
| Court | U.S. Supreme Court |
Messrs. Homer S. Cummings, Atty. Gen., Robert H. Jackson, Asst. Atty. Gen., for petitioner.
Mr. Henry Ward Beer, of Washington, D.C., for respondents.
Upon application by the Federal Trade Commission this Court granted certiorari 301 U.S. 674, 57 S.Ct. 790, 81 L.Ed. 1335 to review that part of a decree of the Circuit Court of Appeals for the Second Circuit, which modified in part and reversed in part a 'cease and desist' order of the Commission. 86 F.(2d) 692. The Commission, after service of a complaint, and extensive hearings, made a finding of facts from the testimony and ordered two corporation respondents and three individuals controlling these corporations, to desist from certain practices used by respondents in furthering the sale of encyclopedias and other books in interstate commerce. The Commission not only found the practices to be 'unfair' but also 'false, deceptive and misleading.' The court below modified and weakened the Commission's order in material aspects, and the questions here are whether the testimony supported all the findings of the Commission, and whether these findings justified the entire order as against all the respondents.
All 'unfair' practices found by the Commission related wholly to methods of sale. The Commission's order against respondents was based, in part, upon the following findings:
That fictitious testimonials and recommendations had been used by respondents; that authorized testimonials and recommendations had been exaggerated and garbled; that authorized testimonials for a 'previous work' were later used to further the sale of another 'work, quite different in form, in material and in purpose.' 'For the purpose of selling their publications, Standard Reference Work and New Standard Encyclopedia' respondents advertised 'a list headed 'Contributors and Reviewers' and * * * In such list they include many who have not been either contributors or reviewers to either the Standard Reference Work or the New Standard Encyclopedia.' Respondents sold 'their publications at retail to the public by salesmen on the subscription plan' and in carrying out said plan they represented to prospects that they were selecting a small list of 'well connected representative people' in various localities, in order to present them with an 'artcraft deluxe edition' of the encyclopedia. Further carrying out respondents' scheme, their agents represented that 'they are giving away a set of books; that they are not selling anything; that the books are free; that the books are being given free as an advertising plan * * * that the prospect has been specially selected, and that the only return desired for the gift is permission to use the name of the prospect for advertising purposes and as a reference'; that the 'said prospects are paying only for the loose leaf extension service; * * * that the price of $69.50 is a reduced price and that the regular price of the books and the extension service is $150.00, sometimes even as high as $200.00.' The statements that the encyclopedia is being given away; that payment is only being made 'for the loose leaf extension service'; and that '$69.50 is a reduced price * * * are false, deceptive and misleading as $69.50 is the regular, standard price' for both the encyclopedia and the loose leaf extension and research privileges.
The Court of Appeals reversed clauses 1 and 3 of the Commission's order. These clauses ordered respondents not to represent falsely to purchasers of their publications that the publishing company was giving encyclopedias to them as a gift, and that purchasers were paying only for loose leaf supplements.
The Court of Appeals affirmed clauses 2 and 6 of the Commission's order. These clauses ordered respondents not to represent falsely to purchasers that sets of books had 'been reserved to be given away free of cost to selected persons' and that the usual price at which respondents' publications are sold is higher than the price 'at which they are offered to such purchasers.'
It is clear, both from the findings of the Commission, and the testimony upon which they rest, that the practices forbidden in clauses 1, 2, 3, and 6 are all tied together as parts of the same sales plan. As a first step under this plan, salesmen obtained an audience with prospective purchasers by representations made to them that by reason of their prestige and influence they had been selected by the company to receive a set of books free of costs for advertising purposes. After respondents' agents thus gained an audience by the promise of a free set of books, they then moved forward under the same general sales plan, by falsely representing that the regular price of the loose leaf supplement alone was $69.50, and that the usual price of both books and loose leaf supplements was much in excess of $69.50. The Commission ordered respondents not to engage in carrying out any part of this entire sale plan. However, as the Court of Appeals reversed clauses 1 and 3 of the Commission's order, a part of the sales scheme which the Commission condemned as unfair can yet be carried out by respondents. That is to say respondents, by that reversal, are left free to continue to obtain audiences with prospects and to sell encyclopedias and loose leaf supple- ments to them, by false representations that the company gives them a set of encyclopedias free, and that $69.50 paid by them to the company is for the loose leaf supplement alone.
In reaching the conclusion that respondents should be left free to engage in that part of the sales scheme prohibited by clauses 1 and 3 of the Commission's order, the court below (86 F.(2d) 692, 695) reasoned as follows: 'We cannot take too seriously the suggestion that a man who is buying a set of books and a ten years' 'extension service' will be fatuous enough to be misled by the mere statement that the first are given away, and that he is paying only for the second. * * * Such trivial niceties are too impalpable for practical affairs, they are will-o'-the-wisps, which divert attention from substantial evils.'
The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. There is no duty resting upon a citizen to suspect the honesty of those with whom he transacts business. Laws are made to protect the trusting as well as the suspicious. The best element of business has long since decided that honesty...
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