Federal Trade Commission v. Royal Milling Co

• Decision Date: 06 February 1933
• Docket Number: No. 393,393
• Citation: 53 S.Ct. 335,77 L.Ed. 706,288 U.S. 212
• Parties: FEDERAL TRADE COMMISSION v. ROYAL MILLING CO. et al
• Court: U.S. Supreme Court

288 U.S. 212

53 S.Ct. 335

77 L.Ed. 706

FEDERAL TRADE COMMISSION

v ROYAL MILLING CO. et al.

No. 393.

Argued Jan. 20, 1933.

Decided Feb. 6, 1933.

To sustain Federal Trade Commission's orders to cease certain practices, they must be unfair methods of competition in interstate commerce and commission's proceeding must be in public interest (Federal Trade Commission Act § 5 (15 USCA § 45)).

Sale of flour under names falsely importing or false representations that sellers manufactured flour held unfair methods of competition within Federal Trade Commission Act (Federal Trade Commission Act § 5 (15 USCA § 45)).

Public interest must be specific and substantial to justify proceeding by Federal Trade Commission to prevent unfair competition; mere misrepresentations and confusion or deception of purchasers being insufficient (Federal Trade Commission Act § 5 (15 USCA § 45)).

Purchasing public's interest in protection from deception into purchasing flour from others than original grinders of grain held specific and substantial, so as to justify proceeding by Federal Trade Commission to prevent such sales (Federal Trade Commission Act § 5 (15 USCA § 45)).

Federal Trade Commission's order to cease selling flour under long-used trade-names falsely importing that sellers manufactured flour held improper; it being sufficient to require use of proper qualifying words (Federal Trade Commission Act § 5 (15 USCA § 45)).

Federal Trade Commission's orders to cease unfair competition should go no further than reasonably necessary to correct evil and preserve rights of competitors and public (Federal Trade Commission Act § 5 (15 USCA § 45)).

Federal Trade Commission in first instance should determine whether unfair competition can be prevented without suppressing long-used trade-names by requiring proper qualifying words (Federal Trade Commission Act § 5 (15 USCA § 45)).

The Attorney General and Mr. John Lord O'Brian, Asst. Atty. Gen., for petitioner.

Mr. Thomas H. Malone, of Nashville, Tenn., for respondents.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

This writ brings here for consideration six orders made by the Federal Trade Commission under section 5 of the Federal Trade Commission Act, c. 311, 38 Stat. 717, 719, title 15, U.S.C., § 45 (15 USCA § 45), which declares that unfair methods of competition in interstate commerce are unlawful. Proceeding under the act¹ the commission filed separate com- plaints against respondents, each of whom operates a business, either as a corporation, partnership or an individual, in the city of Nashville, Tennessee. All are engaged in preparing for the market self-rising flour and plain flour and selling the same in interstate commerce. None of them grind from the wheat the flour which they thus prepare and sell, but only mix and blend different kinds of flour purchased from others engaged in grinding. After being mixed and sifted, the flour, either plain or made self-rising, is packed into bags for the market. Most of the concerns grinding wheat into flour and selling in the same market also make self-rising flour and blended plain flour, ground from different sorts of wheat.

One of the respondents does business under the names, 'Royal Milling Company,' 'Richland Milling Company,' and 'Empire Milling Company.' The others use trade-names of similar import, all containing the words 'milling company,' or 'mill,' or 'manufacturer of flour'—words which are commonly understood by dealers and the purchasing public to indicate concerns which grind wheat into flour.

There are other concerns engaged in the business of producing plain and self-rising flour, by a process of mixing and blending, and selling the product in the same market in competition with respondents and with the grinders; but these do not name themselves millers, mills or milling companies, or hold themselves out in any way as grinders of grain. The business involved is large and the competition among the several concerns substantial; and the use of the enumerated trade-names by the respondents tends to divert and does divert business from both the grinders and those blenders who do not use such trade-names or an equivalent therefor. Respondents have circulated written and printed circulars among the trade which either directly assert, or are calculated to convey the impression, that their product is composed of flour manufactured by themselves from the wheat. These statements and the use of the trade-names under which respondents do business have induced many consumers and dealers to believe that respondents are engaged in grinding from the wheat the product which they put out. The respondents, early in the proceeding before the commission, offered 'to place on their letterheads, bags, invoices, etc., in conspicuous lettering the words: 'Not Grinders of Wheat." This offer the commission evidently thought it unnecessary to consider, in view of the more comprehensive conclusion which it reached as to the remedy.

The findings of the commission, supported by evidence, in substance embody the foregoing facts, and much else which for present purposes it is unnecessary to repeat. From these findings the commission concluded that the practices of respondents were to the prejudice of their competitors and of the public and constituted unfair methods of competition within the meaning of section 5 of the Federal Trade Commission Act. Thereupon, the commission issued its orders against respondents to cease and desist from carrying on the business of selling flour in interstate commerce under a trade-name or any other name which included the words 'milling company,' or words of like import, and from making representations, designed to affect interstate commerce, that they or either of them manufacture flour or that the flour sold by them comes direct from manufacturer to purchaser, etc.

Upon review the Circuit Court of Appeals set aside all orders of the commission, upon the ground that the proceeding by the commission did not appear to be in the interest of the public. 58 F.(2d) 581.

To sustain the orders of the commission, three requisites must exist: (1) That the methods used are unfair; (2) that they are methods of competition in interstate commerce; and (3) that a proceeding by the commission to prevent the use of the methods appears to be in the interest of the public. Fed. Trade Comm. v. Raladam Co., 283 U.S. 643, 646, 647, 51 S.Ct. 587, 75 L.Ed. 1324, 79 A.L.R. 1191. Upon the first two of these we need take no time, for clearly the methods used were unfair and were methods of competition. Federal Trade Comm. v. Winstead Hosiery Co., 258 U.S. 483,...