Federal Trade Commission v. Mary Carter Paint Co, 15
| Decision Date | 08 November 1965 |
| Docket Number | No. 15,15 |
| Citation | 15 L.Ed.2d 128,382 U.S. 46,86 S.Ct. 219 |
| Parties | FEDERAL TRADE COMMISSION, Petitioner, v. MARY CARTER PAINT CO. et al |
| Court | U.S. Supreme Court |
Nathan Lewin, Washington, D.C., for petitioner.
David W. Peck, New York City, for respondents.
Respondent Mary Carter Paint Company1 manufactures and sells paint and related products. The Federal Trade Commission ordered respondent to cease and desist from the use of certain representations found by the Commission to be deceptive and in violation of § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 52 Stat. 111, 15 U.S.C. § 45 (1964 ed.). 60 F.T.C. 1830, 1845. The representations appeared in advertisements which stated in various ways that for every can of respondent's paint purchased by a buyer, the respondent would give the buyer a 'free' can of equal quality and quantity. The Court of Appeals for the Fifth Circuit set aside the Commission's order. 333 F.2d 654. We granted certiorari, 379 U.S. 957, 85 S.Ct. 661, 13 L.Ed.2d 553. We reverse.
Although there is some ambiguity in the Commission's opinion, we cannot say that its holding constituted a departure from Commission policy regarding the use of the commercially exploitable word 'free.' Initial efforts to define the term in decisions2 were followed by 'Guides Against Deceptive Pricing.' 3 These informed businessmen that they might advertise an article as 'free,' even though purchase of another article was required, so long as the terms of the offer were clearly stated, the price of the article required to be purchased was not increased, and its quality and quantity were not diminished. With specific reference to two-for-the-price-of-one offers, the Guides required that either the sales price for the two be 'the advertiser's usual and customary retail price for the single article in the recent, regular course of his business,' or where the advertiser has not previously sold the article, the price for two be the 'usual and customary' price for one in the relevant trade areas. These, of course, were guides, not fixed rules as such, and were designed to inform businessmen of the factors which would guide Commission decision. Although Mary Carter seems to have attempted to tailor its offer to come within their terms, the Commission found that it failed; the offer complied in appearance only.
The gist of the Commission's reasoning is in the hearing examiner's finding, which it adopted, that
In sum, the Commission found that Mary Carter had no history of selling single cans of paint; it was marketing twins, and in allocating what is in fact the price of two cans to one can, yet calling one 'free,' Mary Carter misrepresented. It is true that respondent was not permitted to show that the quality of its paint matched those paints which usually and customarily sell in the $6.98 range, or that purchasers of paint estimate quality by the price they are charged. If both claims were established, it is arguable that any deception was limited to a representation that Mary Carter has a usual and customary price for single cans of paint, when it has no such price. However, it is not for courts to say whether this violates the Act. '(T)he Commission is often in a better position than are courts to determine when a practice is 'deceptive' within the meaning of the Act.' Federal Trade Comm'n v. Colgate-Palmolive Co., 380 U.S. 374 385, 85 S.Ct. 1035, 1043, 13 L.Ed.2d 904. There was substantial evidence in the record to support the Commission's finding; its determination that the practice here was deceptive was neither arbitrary nor clearly wrong. The Court of Appeals should have sustained it. Federal Trade Comm'n v. Colgate-Palmolive Co., supra; Carter Products, Inc. v. Federal Trade Comm'n, 5 Cir., 323 F.2d 523, 528.
The Commission advises us in its brief that it believes it would be appropriate here 'to remand the case to it for clarification of its order.' The judgment of the Court of Appeals is therefore reversed and the case is remanded to that court with directions to remand to the Commission for clarification of its order.
It is so ordered.
Judgment of Court of Appeals reversed and case remanded to the Commission.
Mr. JUSTICE STEWART took no part in the decision of this case.
In my opinion the basis for the Commission's action is too opaque to justify an upholding of its order in this case. A summary discussion of the facts and Commission proceedings will suffice to show why I cannot subscribe to the majority's disposition.
Since 1951 the enterprise now known as Mary Carter Paint Company has been manufacturing paint products for direct distribution through its own outlets and franchised dealers. For most or all of this period, its practice has been to establish its prices on a per-can basis but to give each customer a second can without further charge for each can purchased. Mary Carter's advertisements, while disclosing that the first can of each pair must be bought at the listed price, have always described the second can as 'free'; typical slogans are: 'Buy one get one free' and 'Every second can free.' It is this advertising which the Commission now condemns as unfair and deceptive under § 5 of the Federal Trade Commission Act, as amended, 52 Stat. 111, 15 U.S.C.A. § 45 (1964 ed.).
To the extent that the Commission's order may rest on the proposition that the second can is not 'free' because its receipt is 'tied' to the purchase of the first can, it is manifestly inconsistent with the rules governing use of the word 'free' maintained by the Commission for over a decade. No one suggests that the additional can of Mary Carter paint is free in the sense that no conditions are attached to its receipt, but the FTC forsook this commercially unrealistic definition in 1953. In that year, first by its decision in Walter J. Black, Inc., 50 F.T.C. 225, and then a general policy statement, 4 CCH Trade Reg.Rep. 40,210, it sanctioned use of the word 'free' to describe an item given without extra charge on condition of another purchase so long as the condition was plainly stated and the 'tying' product was not increased in price for the occasion or decreased in quantity or quality. The FTC prefaced these rules in Black by saying that '(t)he businessmen of the United States are entitled to a clear and unequivocal answer' and it represented that its new position would be maintained until either Congress or the courts decided otherwise. 50 F.T.C., at 232, 235.
There is presently no charge by the Commission that Mary Carter failed to comply with this general statement which continued in force through the proceedings and decision affecting Mary Carter. Rather, for the greater period of its advertising operations Mary Carter could properly claim to have relied on the FTC's official pronouncement while it was establishing its 'every second can free' slogan in the public mind, an investment now seemingly lost. Without inflexibly holding the Commission to its promise and avowed position, certainly solid justification should be demanded before the courts agree that this departure is not 'arbitrary, capricious, (or) an abuse of discretion.' Administrative Procedure Act, § 10(e), 60 Stat. 243, 5 U.S.C. § 1009(e) (1964 ed.).
At the very least the Commission should be required to demonstrate real deception and public injury in a decision that allows the courts to evaluate its reasoning and businessmen to comply with assurance...
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