Federal Trade Commission v. Balme

• Decision Date: 09 January 1928
• Docket Number: No. 86.,86.
• Citation: 23 F.2d 615
• Parties: FEDERAL TRADE COMMISSION v. BALME.
• Court: U.S. Court of Appeals — Second Circuit

23 F.2d 615 (1928)

FEDERAL TRADE COMMISSION v. BALME.

No. 86.

Circuit Court of Appeals, Second Circuit.

January 9, 1928.

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Bayard T. Hainer, Chief Counsel, Federal Trade Commission, Adrien F. Busick, Asst. Chief Counsel, G. Edwin Rowland and James W. Nichol, all of Washington, D. C., for petitioner.

Munn, Anderson & Munn, of New York City (T. Hart Anderson and Charles A. Morton, both of New York City, of counsel), for respondent.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

MANTON, Circuit Judge.

The Federal Trade Commission issued an order against the respondent, directing him to cease and desist from certain practices found by it to constitute methods of unfair competition, in violation of section 5 of the act (38 Stat. 717). The order directed the respondent to cease and desist (1) from using the coined word "Oréal," either standing alone or in connection with any prefix thereto, as a trade-name or descriptive name for a henna hair dye, when sold and distributed in interstate commerce; (2) from using the same word upon the containers in which the hair dye is sold or distributed in interstate commerce; (3) from using the coined word in advertising, either circular, newspaper, or magazine; (4) from using on the container in which the henna hair dye is sold or distributed in interstate commerce the French words "la plante merveilleuse," or on any labels or circular or newspaper or magazine advertising henna hair dye in such a way as to confuse respondent's product with any competing product; (5) "from putting up the henna hair dye, sold and distributed in interstate commerce, by the respondent, in any container so similar in color and general appearance of lettering or device with that of a competitor as to confuse and mislead the public into believing that the henna hair dye of the respondent is one and the same as that of its competitor"; and (6) from using, either on the label of the container in which the henna hair dye is packed or in advertising, false or descriptive words or phrases, such as "New French discovery," or "the only harmless coloring in the world," or phrase or phrases of similar import, when sold or distributed in interstate commerce.

After the order of the Commission was made, the respondent complied with its prohibitions, except as to the fifth section. It is for this refusal to comply that the Commission has petitioned this court, asking for an order of enforcement. It bases its application under section 5 of the act, which provides:

"If such person, partnership, or corporation fails or neglects to obey such order of the Commission while the same is in effect, the Commission may apply to the Circuit Court of Appeals of the United States, within any circuit where the method of competition in question was used or where such person, partnership, or corporation resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the Commission. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person, partnership, or corporation and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the Commission. The findings of the Commission as to facts, if supported by testimony, shall be conclusive." 15 USCA § 45.

The same section gives the right of review to a respondent affected by an order to cease and desist, who seeks a modification or reversal or a setting aside of the order. The statute, in addition to conferring jurisdiction upon the Circuit Court of Appeals to enforce, set aside, and modify orders of the Commission, makes such jurisdiction exclusive, and requires precedence over other cases pending, so that causes may be expedited.

The Circuit Court of Appeals is an appellate court, reviewing decisions of the District Court. U. S. v. Mayer, 235 U. S. 55, 35 S. Ct. 16, 59 L. Ed. 129; 26 Stat. 826. The Federal Trade Commission Act confers special statutory jurisdiction, and the extent of such jurisdiction and the conditions of its exercise over subjects or persons must necessarily depend upon the terms in which the jurisdiction is thus conferred. It does not depend upon the rank of the court upon which it is conferred. It must be strictly pursued, because the court does possess jurisdiction over other subjects or persons more extended and general. Galpin v. Page, 18 Wall. (85 U. S.) 350, 21 L. Ed. 959; Chamber of Commerce of Minneapolis v. Federal Trade Commission (C. C. A.) 280 F. 45. The exercise of such power conferred is to make and enter, upon the pleadings, testimony, and proceedings set forth in the transcript of record, a decree affirming, modifying, or setting aside the order of the Commission, and is not dependent upon proof of the violation of the Commission's order, but upon proof of a violation of the law. The statute grants jurisdiction of the proceeding and of the question determined therein. The proceeding comprises (a) the complaint of the Commission; (b) the testimony taken; (c) the report by the Commission, in which shall be stated the findings as to the facts; and (d) the order to cease and desist. It thus will be seen that the proceeding does not contain any evidence with respect to a violation by the respondent of the Commission's order, but only with respect to respondent's original violation of the law; that is, as it engaged in the use of unfair methods of competition in interstate commerce. Therefore the primary question presented to us is whether the Commission's determination on this point was correctly reached. It is not conceivable that the court would take jurisdiction of the proceeding on the Commission's petition for the enforcement of the order, without first holding that the Commission's order was valid and enforceable. It would not dismiss the petition for want of proof of a violation thereof until it had first found a valid order to be violated. The act provides that "the court shall have the same jurisdiction to affirm, set aside or modify the order of the Commission as in the case of an application by the Commission for the enforcement of its order."

Manifestly, it is very apparent that the question of violation of the Commission's order would not be involved until a valid order was recognized by this court after having acquired jurisdiction. Therefore we must first examine the proceeding before the Commission and determine whether there has been a violation of the law. Until then, no good purpose can be served for determining disputed questions of fact as to a violation of the order. The statute does not impose any penalty for violation of the Commission's order, and the order is not binding until vitalized by the power of this court to punish for contempt, when the court shall have entered a decree affirming the order and commanding permanent obedience thereto, and it is not until the Commission presents a case of justifying the charge of violation that action will be taken to punish. It is then, and not until then, that the question of fact as to violation of order becomes a proper issue to be determined by the court.

The filing of an answer, or the receipt of affidavits disputing the alleged violation of the order, is of no importance until the order to cease and desist has received confirmation by the Circuit Court of Appeals. When confirmed, the order then entered is identical with the one entered by the Commission, unless, for good reasons, there should be a modification required. Q. R. S. Music Co. v. Federal Trade Commission (C. C. A.) 12 F.(2d) 730.

The power to modify the order of the Commission is given by statute, and includes the power to conform an order in point of law to the pleadings and findings. Federal Trade Commission v. Beechnut Packing Co., 257 U. S. 441, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882; L. B. Silver Co. v. Federal Trade Commission (C. C. A.) 289 F. 985; Sears, Roebuck & Co. v. Federal Trade Commission (C. C. A.) 258 F. 307, 6 A. L. R. 358. Even where the court may remand, with instructions to modify in accordance with its opinion, the decree continues to be that of the court. L. B. Silver Co. v. Federal Trade Commission (C. C. A.) 292 F. 753. But, under the act, the jurisdiction of the court is original. Butterick Co. v. Federal Trade Commission (C. C. A.) 4 F.(2d) 910. Where the fault in the Commission's order is in point of law, the court may correct it, but in doing so it recognizes that the Commission is purely a fact-finding body.

The words "unfair method of competition" are not defined by the statute, and their exact meaning is in dispute. It is for the courts, not the Commission, to determine as a matter of law what they include. Federal Trade Commission v. Gratz, 253 U. S. 421, 40 S. Ct. 572, 64 L. Ed. 993. The Commission is an administrative body. Federal Trade Commission v. Eastman Kodak Co., 47 S. Ct. 688, 71 L. Ed. ___, decided May 31, 1927. Therefore our first inquiry is to determine whether, on the facts found, as supported by the evidence, there has been a violation of the law, and the finding of fact by the Commission, having evidence to support it, is conclusive and binding upon the courts. Federal Trade Commission v. Curtis Publishing Co., 260 U. S. 568, 43 S. Ct. 210, 67 L. Ed. 408; Harriet Hubbard Ayer v. Federal Trade Commission (C. C. A.) 15 F.(2d) 274.

L'Oréal Henné is a mark or name of a hair dye originally imported from France, but later manufactured in this country, and it is claimed that the respondent simulated the dress of this product and name as prepared for the market. It was manufactured and sold in France...