Federal Trade Commission v. A. McLean & Son

• Decision Date: 01 July 1936
• Docket Number: No. 5796-5799.,5796-5799.
• Citation: 84 F.2d 910
• Parties: FEDERAL TRADE COMMISSION v. A. McLEAN & SON et al.
• Court: U.S. Court of Appeals — Seventh Circuit

84 F.2d 910 (1936)

FEDERAL TRADE COMMISSION v. A. McLEAN & SON et al.

Nos. 5796-5799.

Circuit Court of Appeals, Seventh Circuit.

July 1, 1936.

W. T. Kelley, Chief Counsel, Federal Trade Commission, Martin A. Morrison, Asst. Chief Counsel, and Henry C. Lank and James W. Nichol, Sp. Attys., all of Washington, D. C., for petitioner.

Beach, Fathchild & Scofield, of Chicago, Ill. (Irvin H. Fathchild and L. A. Smoler, both of Chicago, Ill., of counsel), for respondents.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

SPARKS, Circuit Judge.

These are proceedings under section 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45, for the enforcement of orders issued by the Commission on June 21, 1935. The orders separately require the respective respondents to cease and desist from certain practices found to constitute unfair and forbidden methods of competition. The facts and the questions presented in all of these proceedings are identical, and a consolidated answer and brief of all the respondents was filed. Our discussion will, therefore, be directed to the McLean case as for all. The findings of the Commission¹ closely follow its complaint which was filed December 15, 1934. Aside from the presumption that the findings are supported by competent evidence National Harness Manufacturers' Ass'n v. Federal Trade Commission (C.C.A.) 261 F. 170, and Federal Trade Commission v. Inecto, Inc. (C.C.A.) 70 F.(2d) 370 we are assured of that fact from an examination of the record. It therefore follows that the findings are conclusive. Federal Trade Commission Act, § 5; Federal Trade Commission v. Winsted Hosiery Co., 258 U.S. 483, 42 S.Ct. 384, 66 L.Ed. 729.

It is contended by the respondents that the facts as found do not support an order to cease and desist. We hold otherwise on the authority of Federal Trade Commission v. R. F. Keppel, 291 U.S. 304, 54 S.Ct. 423, 78 L.Ed. 814; Walter H. Johnson Candy Co. v. Federal Trade Commission (C.C.A.) 78 F.(2d) 717; and Hofeller v. Federal Trade Commission (C.C. A.) 82 F.(2d) 647. Many questions of fact and law are raised by respondents, but most of them were decided adversely to respondents' contentions in the cases just cited. They contend that section 5 of the act violates the federal constitutional mandate of separation of governmental functions (article 1, § 1; art. 2, § 1; art. 3, § 1), and the due process clause (Amendment 5). We think there is no merit in this contention. Sears, Roebuck & Co. v. Federal Trade Commission (C.C.A.) 258 F. 307, 6 A.L.R. 358; National Harness Mfrs.' Ass'n v. Federal Trade Commission (C.C.A.) 268 F. 705; Arkansas Wholesale Grocers' Ass'n v. Federal Trade Commission (C.C. A.) 18 F.(2d) 866; Federal Trade Commission v. Balme (C.C.A.) 23 F.(2d) 615. See, also, the concurring opinion of Mr. Justice Cardozo in Schechter Poultry Corp. v. United States, 295 U.S. 495, at page 552, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A. L.R. 947.

It is further contended by certain of the respondents that the court failed to find that they had discontinued the manufacture and sale of the chance assortments on August 1, 1934. Discontinuance or abandonment is no defense to the order, for, if true, it would be no guaranty that the challenged acts will not be renewed. Federal Trade Commission v. Wallace (C.C.A.) 75 F.(2d) 733. The benefit to respondents of an abandonment may be fully protected by their report to the Commissioner as required by the Commission's order.

Respondents further contend that the orders of the Commission seek to control the method of retail sale of candies in intrastate commerce, and for that reason they, together with the Act under which they were promulgated, are invalid under the ruling in the Schechter Case. The orders, however, are expressly limited to interstate commerce and they do not apply to any intrastate business in which any of the respondents may be engaged.

We are convinced, however, that paragraphs (1) and (2) of the cease and desist order are too broad in that they prevent the sale and distribution to jobbers and wholesalers for resale to retailers of any candy so packed and assembled that retail sales may be made by means of a lottery, or gaming device. This clearly would prevent the sale of any candy which might afterwards be sold by the retailer by means of a lottery, gaming device or gift enterprise. Obviously, this was not the intention of Congress, and we think it was not the intention of the Commission. We have therefore stricken the word "may" from paragraphs (1) and (2) of the orders and substituted the words "are designed to," and as thus modified, the orders of the Commission² are affirmed, and respondents, their officers, directors, agents, representatives and employees are hereby ordered to comply therewith.

1 as to the Facts.

"Paragraph One. Respondent, A. McLean and Son, is a corporation organized under the laws of the State of Illinois, with its principal office and place of business in the City of Chicago, Illinois. Respondent is now and for several years last past, has been engaged in the manufacture of candy in Chicago, Illinois, and in the sale and distribution of said candy to wholesale dealers and jobbers in the State of Illinois and other states of the United States. It causes said candy when sold to be shipped or transported from its principal place of business in the State of Illinois to purchasers thereof in Illinois and in the states of the United States other than the State of Illinois. In so carrying on said business, respondent is and has been engaged in interstate commerce and is and has been in active competition with other corporations and with partnerships and individuals engaged in the manufacture of candy and in the sale and distribution of the same in interstate commerce.

"Paragraph Two. Among the candies manufactured and sold by respondent were several assortments of candy each composed of a number of pieces of candy of uniform size, shape, and quality together with a number of larger pieces of candy or small boxes of candy to be given as prizes to purchasers of said candies of uniform size, shape, and quality in the following manner:

"The majority of the said pieces of candy of uniform size, shape, and quality in said assortments have centers of the same color but a small number of said candies have centers of a different color. The color of the centers of these candies is effectively concealed from the prospective purchasers until a purchase or selection has been made and the candy broken open. The said candies of uniform size, shape, and quality in said assortments retail at one cent each but the purchasers who procure one of the said candies having a center of a different color than the majority of said candies, are entitled to receive and are to be given free of charge one of the said larger pieces or small boxes of candy heretofore referred to. The purchaser of the last piece of candy in said assortment is entitled to receive and is to be given free of charge a larger piece of candy or a small box of candy. The aforesaid purchasers of said candy who procure a candy having a center colored differently from the majority of said pieces of candy thus procure one of the said larger pieces or small boxes of candy wholly by lot or chance.

"Respondent manufactures, sells, and distributes several assortments involving the above lottery or chance feature. The pieces of candy of uniform size, shape, and quality are generally 160 in number but, occasionally, vary a few pieces more or a few pieces less, and the prizes are generally larger prizes of candy or small boxes of candy but occasionally other articles of merchandise are included as prizes, but the principle or sales plan is the same as to each of the said assortments.

"Respondent furnishes to said wholesale dealers and jobbers with said assortments of candy, display cards to be used by retail dealers in offering said candies for sale, which display cards bear a legend or statement informing the prospective purchaser that the said assortments of candies are being sold in accordance with the sales plan above described.

"Paragraph Three. Another assortment which respondent manufactures, sells, and distributes is contained within two boxes, one box having pieces of candy of uniform size, shape, and quality, the majority of which have centers of the same color but a small number of which have centers of a different color. The other box contains larger pieces or boxes of candy and the number of bars is approximately the same as there are pieces of candy with centers colored differently from the majority in the first box above mentioned and the two boxes are so packed that they may be displayed by...