Globe Readers Service, Inc. v. FTC

• Decision Date: 03 January 1961
• Docket Number: No. 13010.,13010.
• Citation: 285 F.2d 692
• Parties: GLOBE READERS SERVICE, INC., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

285 F.2d 692 (1961)

GLOBE READERS SERVICE, INC., et al., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

No. 13010.

United States Court of Appeals Seventh Circuit.

January 3, 1961.

Donald D. Martin and William N. Kenefick, Michigan City, Ind., for petitioners.

Alan B. Hobbes, Asst. General Counsel, Federal Trade Commission, Thomas F. Howder, Attorney, Washington, D. C., Daniel J. McCauley, Jr., General Counsel, John W. Carter, Jr., Attorneys for Federal Trade Commission, Washington, D. C., for respondent.

Before SCHNACKENBERG, CASTLE and MAJOR, Circuit Judges.

CASTLE, Circuit Judges.

Globe Readers Service, Inc., and Warren E. Brubaker, William P. Barry and James Riley, individually and as officers of the corporation, petitioners, seek review of a cease and desist order of the Federal Trade Commission, respondent. Our jurisdiction is invoked pursuant to 15 U.S.C.A. § 45(c). The petitioners were charged with violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45(a) (1)¹. The hearing examiner's initial decision dismissed the complaint. On appeal the Commission made its own findings of fact, conclusion and order.

The order directs petitioners and petitioners' representatives, in connection with the sale of subscriptions for magazines, to cease and desist from:

"A. Soliciting and accepting magazine subscriptions which respondents are not authorized to solicit.

"B. Refusing to refund payments received for subscriptions for magazines which are undeliverable.

"C. Requiring customers to accept the substitution of magazines other than those subscribed and paid for."

The complaint on which the order was predicated, naming petitioners as respondents, charged, inter alia, that:

"In many instances respondents\' solicitors sell subscriptions for magazines which are not on respondents\' authorized list of magazines and are undeliverable. In these instances, respondents refuse to refund the customers\' money and, in order to obtain some benefit for the money expended, such customers are required to accept a substitute magazine from the authorized list which they would not have otherwise ordered or accepted."

By their answer petitioners denied these charges and affirmatively alleged that the dealers or subscription crew managers are not employees of petitioners but are independent contractors.

The contested issues are:

1. Whether there is substantial evidence to support the commission's findings.

2. Whether the commission applied the correct legal criteria in concluding that under the facts petitioners are responsible for the acts and practices of the solicitors in the latter's solicitation of magazine subscriptions.

The facts as found by the commission insofar as pertinent to these issues may be summarized as follows:

The corporate petitioner Globe Readers Service, Inc., maintains its home office in Michigan City, Indiana. Petitioners Brubaker, Barry and Riley are officers of Globe.

The unlawful practices complained of arose in petitioners' conduct of its magazine subscription business. Certain publishers authorize petitioners to obtain subscriptions for their magazines from the public. To solicit such subscriptions, petitioners engage the service of individuals designated as "dealers" or "subscription crew managers." These, in turn, select "solicitors" who conduct the actual door-to-door canvassing of the public. In this manner, petitioners' subscription sales operations are carried on throughout the various states.

When subscriptions are sold, the solicitors record the orders on forms provided and accept payment from the customers. The orders and payments are subsequently turned over to petitioners' crew managers. After deducting commissions for themselves and the solicitors, the crew managers forward the monies along with the orders to petitioners. Petitioners are responsible for arranging with the various magazine publishers to see that the subscriptions are honored.

On many occasions the solicitors take subscriptions for magazines which are not on petitioners' authorized list. Orders and payments therefor are nevertheless transmitted to petitioners' home office. When customers do not receive the magazines ordered, they direct inquiry to petitioners' office, or cause inquiry to be made on their behalf by Better Business organizations.

After accepting payment for the sale of unauthorized subscriptions, petitioners send a form letter to these customers requesting them to accept a substitute periodical. Petitioners make no mention of a refund in this correspondence, even if the customer has requested one. Their sole effort is directed toward obtaining a subscription from the authorized list and they are often successful. To attain this objective, petitioners have for a time even represented to subscribers that a refund is not obtainable because commissions and allowances were deducted at the time of sale and cannot be recovered. If the subscribers persevere long enough in their efforts, however, they can eventually get their money back in spite of petitioners' attempts to dissuade them.

On the basis of these findings the commission concluded that the acts and practices of petitioners constituted unfair and deceptive acts and practices and unfair methods of competition in violation of the Federal Trade Commission Act.

The findings of the commission, if supported by substantial evidence on the record considered as a whole, are conclusive. Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 487-488, 71 S.Ct. 456, 95 L.Ed. 456. They may not be set aside because the reviewing court would have drawn different inferences. N. L. R. B. v. Southern Bell Telephone & Telegraph Co., 319 U.S. 50, 60, 63 S.Ct. 905, 87 L.Ed. 1250. In Universal Camera it was pointed out (340 U.S. 496-497, 71 S.Ct. 469) that the "substantial evidence" standard is not modified in any way because of disagreement between the Board and its examiner but that it is recognized "that...