FTC v. Sterling Drug, Inc.

Decision Date06 May 1963
Docket NumberNo. 370,Docket 28118.,370
PartiesFEDERAL TRADE COMMISSION, Plaintiff-Appellant, v. STERLING DRUG, INC., Dancer-Fitzgerald-Sample, Inc., and Thompson-Koch Company, Defendants-Appellees.
CourtU.S. Court of Appeals — Second Circuit

Harold D. Rhynedance, Jr., Washington, D. C. (James McI. Henderson, Gen. Counsel, and J. B. Truly, Asst. Gen. Counsel, on the brief), for plaintiff-appellant.

Mathias F. Correa, of Cahill, Gordon, Reindel & Ohl, New York City (Thomas C. Mason and H. Richard Schumacher, New York City, on the brief), for defendants-appellees Sterling Drug, Inc. and Thomas-Koch Co.

Frank A. F. Severance, of Dunnington, Bartholow & Miller, New York City (Gordon M. Lucey, New York City, of counsel), for defendant-appellee Dancer-Fitzgerald-Sample, Inc.

Before SMITH, KAUFMAN and MARSHALL, Circuit Judges.

KAUFMAN, Circuit Judge.

The Federal Trade Commission, appellant here, instituted an action in the District Court for the Southern District of New York praying for a temporary injunction designed to prevent the dissemination of what the Commission alleged it had reason to believe was false and misleading advertising. Judge Dawson denied the injunction, 215 F.Supp. 327 (S.D.N.Y.1963), holding that the Commission had failed to make the showing required by the Federal Trade Commission Act, 15 U.S.C. § 53. We agree, and affirm the order denying the temporary injunction.

Section 5(a) (1) of the Federal Trade Commission Act, 15 U.S.C. § 45(a) (1), declares unlawful "unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce * * *," and proceeds to repose in the Commission the power to prevent such acts or practices, 15 U.S.C. § 45(a) (6). One such "unfair or deceptive act or practice" is defined in section 12, 15 U.S.C. § 52, as the dissemination of "any false advertisement" likely to induce the purchase of food, drugs, or cosmetics. The act expressly defines "false advertising" in section 15(a) (1), 15 U.S.C. § 55(a) (1), as an advertisement which is misleading in a material respect. Congress gave to the Commission the power to issue an administrative complaint and conduct a hearing whenever it has "reason to believe" that statutory violations such as false advertising are being committed. 15 U.S.C. § 45(b). In the usual case, the conduct of such a hearing, followed where appropriate by an administrative order prohibiting or modifying the advertising in question, is sufficient to guard the public from the evils proscribed by Congress in the act. Should the Commission feel, however, that delay during the pendency of administrative proceedings will work prejudice to the public due to the continued circulation of purportedly misleading advertising, it has available the recourse to the federal district court for a temporary injunction provided in section 13(a) of the act, 15 U.S.C. § 53(a):

"Whenever the Commission has reason to believe * * * that any person * * * is engaged in, or is about to engage in, the dissemination or the causing of the dissemination of any advertisement in violation of section 52 of this title, and * * * that the enjoining thereof pending administrative proceedings * * would be to the interest of the public, the Commission * * * may bring suit in a district court of the United States * * * to enjoin the dissemination or the causing of the dissemination of such advertisement. Upon proper showing a temporary injunction or restraining order shall be granted without bond."

The interpretation and application of section 13(a) is at the heart of this dispute between the Commission and the defendants-appellees, Sterling Drug, Inc., the manufacturer of Bayer Aspirin, and Dancer-Fitzgerald-Sample, Inc. and Thompson-Koch Company, advertising agencies employed by Sterling Drug. The Commission referred in the court below to an advertisement in Life Magazine, published in January 1963, which summarized the results of a scientific investigation of five leading analgesic products, their efficacy in bringing about relief from pain and their tendency to cause stomach upset; it was this advertisement which the Commission alleged it had reason to believe was false and misleading and designed to induce the purchase of Bayer Aspirin. Judge Dawson remained unconvinced that the Commission was reasonable in its belief that the public would be misled by the advertisement in question, and denied the injunction for failure to make a "proper showing" under section 13(a) of the act. This court "will not ordinarily interfere with the action of a trial court either in granting or withholding an injunction * * * and will not reverse such an order unless it appears that there was a palpable misapplication of well-settled rules of law on the part of the trial judge * * *." Federal Trade Commission v. Rhodes Pharmacal Co., 191 F.2d 744, 746-747 (7th Cir., 1951). We do not believe that Judge Dawson's conclusion was a "palpable misapplication" of the statutory standard or that he was "clearly erroneous" in finding as he did, Fed.R.Civ.P. 52(a).

I.

The controversy has its roots in the December 29, 1962 issue of the Journal of the American Medical Association, which carried an article written by two physicians and a medical statistician,1 titled "A Comparative Study of Five Proprietary Analgesic Compounds." The article analyzed the results of a study made of the efficacy as well as the unhappy after-effects of certain pain-relieving drugs, sold in pharmacies and supermarkets throughout the nation. These five were Bayer Aspirin, St. Joseph's Aspirin, Bufferin (aspirin with buffering agent), and two of the so-called "combination of ingredients" tablets, Anacin and Excedrin. Also used in the experiment, as a form of control, was a placebo, the name given a harmless non-medicinal substance administered in the form of a pill for those pill-poppers whose ailment is without organic origin and whose pain seems to be relieved by following the ritual of downing a tablet irrespective of size, shape, or content which the user believes has qualities of medicinal value; the placebo utilized by the three researchers was composed of lactose, or milk sugar, and a conventional cornstarch binder. After investigating the efficacy of the five analgesic agents as pain relievers, the study noted, "The data failed to show any statistically significant difference among any of the drugs (that is, excluding the placebo) at any of the check points fifteen minutes through four hours * * * There are no important differences among the compounds studied in rapidity of onset, degree, or duration of analgesia." Fifteen minutes after the drugs were administered, so-called "pain-relief scores" were computed, and Bayer earned a score of 0.94, while the next most effective drug at that point in time, Excedrin, earned a score of 0.90; the others were rated at 0.76 and lower. The chart on which these figures appeared indicated that the "standard error of mean," or the margin of statistical accuracy of the study, was 0.124. Upon investigating the incidence of stomach upset after the administration of the five drugs as well as the placebo, the researchers came to this conclusion: "Excedrin and Anacin form a group for which the incidence of upset stomach is significantly greater than is the incidence after Bayer Aspirin, St. Joseph's Aspirin, Bufferin, or the placebo. The rates of upset stomach associated with these last 4 treatments are not significantly different, one from the other." The accompanying table revealed that of the 829 doses taken of Bayer Aspirin, there were nine episodes of upset stomach, a rate of 1.1%; the placebo was administered in 833 cases, and caused stomach upset but seven times, a rate of 0.8%. The article concluded by stating, "This study was supported by a grant from the Federal Trade Commission, Washington, D. C."2

It is not difficult to understand the heartwarming reception this article received in the upper echelons of Sterling and its Madison Avenue colleagues; no sooner were the results of the study published in the Journal of the American Medical Association when Sterling Drug and its advertising agencies decided to make the most of them. This decision, we may fairly assume, did not surprise Sterling's competitors. The public had long been saturated with various claims proved by the study to be of doubtful validity. One of the products had boasted in its advertisements that it "works twice as fast as aspirin," and "protects you against the stomach distress you can get from aspirin alone"; another, that it "does not upset the stomach" and "is better than aspirin"; and yet another, that it is "50% stronger than aspirin." Believing that the Judgment Day has finally arrived and seeking to counteract the many years of hard-sell by what it now believed to be the hard facts, Sterling and its co-defendants prepared and disseminated advertising of which the following, appearing in Life Magazine and numerous newspapers throughout the country, is representative:

"GOVERNMENT-SUPPORTED MEDICAL TEAM COMPARES BAYER ASPIRIN AND FOUR OTHER POPULAR PAIN RELIEVERS."
"FINDINGS REPORTED IN THE HIGHLY AUTHORITATIVE JOURNAL OF THE AMERICAN MEDICAL ASSOCIATION REVEAL THAT THE HIGHER PRICED COMBINATION-OF-INGREDIENTS PAIN RELIEVERS UPSET THE STOMACH WITH SIGNIFICANTLY GREATER FREQUENCY THAN ANY OF THE OTHER PRODUCTS TESTED, WHILE BAYER ASPIRIN BRINGS RELIEF THAT IS AS FAST, AS STRONG, AND AS GENTLE TO THE STOMACH AS YOU CAN GET."
"This important new medical study, supported by a grant from the federal government, was undertaken to compare the stomach-upsetting effects, the speed of relief, and the amount of relief offered by five leading pain relievers, including Bayer Aspirin, aspirin with buffering, and combination-of-ingredients products. Here is a summary of the findings.
"UPSET STOMACH
"According to this report, the higher priced
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