De Gorter v. Federal Trade Commission

• Decision Date: 21 May 1957
• Docket Number: No. 15184.,15184.
• Parties: Jacques DE GORTER, and Suze C. DeGorter, as individuals and as co-partners, trading as Pelta Furs, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

244 F.2d 270 (1957)

Jacques DE GORTER, and Suze C. DeGorter, as individuals and as co-partners, trading as Pelta Furs, Petitioners, v. FEDERAL TRADE COMMISSION, Respondent.

No. 15184.

United States Court of Appeals Ninth Circuit.

April 17, 1957.

Rehearing Denied May 21, 1957.

Walley & Davis, J. J. Walley, Los Angeles, Cal., for petitioners.

Robert B. Dawkins, Asst. Gen. Counsel, John W. Carter, Jr., Earl W. Kinter, Washington, D. C., for respondents.

Before LEMMON and CHAMBERS, Circuit Judges, and YANKWICH, District Judge.

YANKWICH, District Judge.

Before us is a petition to review Order of the Federal Trade Commission to cease and desist entered on May 11, 1956, in a proceeding instituted by a complaint filed on February 25, 1955, which charged Jacques De Gorter and Suze C. De Gorter, as individuals and as partners, trading as "Pelta Furs", with the violation of the Fur Products Labeling Act¹ and Rule 44 of the rules promulgated by the Commission under the Act.²

More particularly, in addition to the violation of the regulation cited, they charged violation of ? 5(a)(1) and (6) of the special Act³ and what are now ?? 2(a)(1) and 2(a)(6) of the Federal Trade Commission Act, as amended in 1952.⁴

The De Gorters will be referred to as "the petitioners". However, as Jacues De Gorter was a witness in the case, we shall, in speaking of his testimony and admissions, for brevity, refer to him as "De Gorter".

After hearings were had before a Hearing Examiner, he rendered an Initial Decision on November 18, 1955. We need not concern ourselves with its details, for on appeal, the Commission, with two members dissenting, set it aside and filed its own Findings and Order on May 11, 1956, directing the petitioners to cease and desist from (a) misbranding fur products, (b) falsely and deceptively invoicing fur products and (c) falsely and deceptively advertising fur products, all in particulars to be referred to in detail hereafter.

The Order was based on the findings of the Commission that the petitioners had violated the sections referred to of the Fur Products Labeling Act and Regulation 44 enacted under it, and that their activities also constituted unfair and deceptive practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

I. The Scope of Review

On this type of review, this Court will not entertain questions not raised before the Administrative body.⁵ And the basic statute declares specifically that, on review, the Commission's Findings as to facts, if supported by evidence, shall be conclusive.⁶

The courts, including this Court, have applied this mandate consistently.⁷ In assaying the facts found by the Commission, the Courts are aware that, in dealing with unfair competition, Congress advisedly left the concept flexible to be defined with particularity by the myriad of cases from the field of business.⁸

The enactment of the Administrative Procedure Act⁹ has placed upon the courts the responsibility of reviewing the entire record with the object of determining whether, on the whole, substantial evidence sustained the action of the administrative body.¹⁰ This means that

"* * * the findings are to be accepted unless they are unsupported by substantial evidence on the record considered as a whole."¹¹

So doing, Courts will not substitute their judgment for that of the Commission. As stated by the Court of Appeals for the Second Circuit recently,

"It was for it, not for us, to pass upon the credibility of the witnesses and the weight to be given their testimony in the light of it all, conflicting or otherwise. * * * Having done so, the findings of the Commission, when, as here, the record as a whole gives them substantial support, are final even though the evidence is so conflicting that it might have supported the contrary had such findings been made.\'"¹² (Emphasis added.)

In view of the aim of the Congress to vest in the Commission the power to determine what unfair practices are detrimental to interstate commerce, in reviewing an order to cease and desist we should not segmentize the facts but rather take a comprehensive view of the whole record in order to determine whether the Commission has exercised, in a legal manner, the functions committed to it by the Congress.¹³

II. The Commerce Clause

Applying the rule which limits review to the questions presented to the Commission,¹⁴ three questions are involved: (1) whether the petitioners are engaged in interstate commerce, (2) whether the practices are unfair under the terms of the particular Act, Rule 44 of the Commission, and the Federal Trade Commission Act, and (3) if they are, whether the Rule is within the rule-making authority conferred on the Commission by the Fur Products Labeling Act.¹⁵

The three problems thus postulated are so interrelated that, while we shall, in what follows, attempt to give a definite answer to each, in the interest of brevity and to avoid repetition, no clearly defined line will be drawn in discussing the legal principles or facts as they relate to one or the other of the problems. We begin by stating that the constitutional grant of power to regulate commerce between the states¹⁶ gives the Congress a power which is both plenary and absolute. As stated by the Supreme Court in a noted case,

"This power over commerce when it exists is complete and perfect."¹⁷

As stated succinctly in the same case, in exercising it the Congress may prohibit purely local activities:

"Activities conducted within state lines do not by this fact alone escape the sweep of the Commerce Clause. Interstate commerce may be dependent upon them."¹⁸

And so we find, to refer only to some recent cases, that labor relations at local level, because they affect commerce, have been made the subject of federal regulation.¹⁹ And standards established under the Fair Labor Standards Act of 1938, 29 U.S.C.A. ? 201 et seq., for fixing minimum wages and maximum hours have been applied to local manufacturers whose products were destined for interstate commerce.²⁰ The same statute has been applied to employees engaged in the maintenance and operation of a building when it appeared that the tenants of the building were engaged in the production of goods for interstate commerce.²¹ An inspection statute of tobacco produced intrastate and destined to consumers within the state as well as without has been sustained.²² So have marketing agreements relating to agricultural products.²³ These cases promulgate no novel doctrines. They merely reassert a fundamental principal obscured at times²⁴ that the criterion for exercise of the Congressional power to regulate interstate commerce is the effect of an act upon it and not its source.²⁵

In passing upon regulatory measures enacted under the commerce clause the courts have not drawn any rigid distinction between articles which are in the flow of commerce and those which have come to rest. Illustrative is a case involving a section of the Federal Food, Drug and Cosmetic Act of 1938, 21 U.S. C.A. ? 301 et seq.²⁶ The section prohibits:

"doing of any * * * act with respect to, a * * * drug * * * if such act is done while such article is held for sale (whether or not the first sale) after shipment in interstate commerce and results in such article being adulterated or misbranded."²⁷

The court held that a retail druggist who had purchased sulfathiazole tablets from a wholesaler and who, six months after, removed them from a container labelled according to the Act and sold them in a container not so labelled was guilty of violation of the section. The court could find no constitutional infirmity in such application as the lower court had in relying on cases, some of which are relied on here.²⁸

In regulating intrastate transactions it is not necessary that the regulation be confined to persons who are also engaged in interstate commerce.²⁹

III. The Purpose of the Fur Products Labeling Act

As the Congress had the power to prohibit advertising in commerce of goods either originating in interstate commerce or which might be introduced into commerce, the question is (1) did it do so when it enacted the Fur Products Labeling Act and (2) was advertising relating to price and value within the interdictions of the Act?

The Federal Trade Commission answered in the affirmative by promulgating Rule 44 specifically prohibiting certain types of misrepresentations as to prices. The full text of the Rule is reproduced in the margin.³⁰

In addition to questioning the finding of the Commission that they were engaged in interstate commerce, the petitioners' chief attack against the findings of the Commission relates to Paragraph C(2) of the Order pertaining to pricing. It is reproduced in the margin.³¹

The claimed insufficiency of the evidence to support this finding will be treated further on in the Opinion. For the present we advert to the contention that the Act does not prohibit misrepresentations as to prices and that the Commission in enacting Rule 44,³² exceeded its statutory powers.

Our answer is that the Commission in enacting this rule correctly interpreted and carried into effect the intent of the Congress in passing the Act. It is obvious from the legal discussion which precedes that there is no constitutional inhibition against regulating purely local activities if, in the opinion of the Congress, they have a deleterious effect on the commerce between States.

The object of the Act under discussion is to make unlawful

"the introduction, or manufacture for introduction, into commerce, or the sale, advertising or offering the sale in commerce, or the transportation or distribution in commerce, of any fur product which is misbranded or falsely or deceptively advertised or invoiced."³³

The title of the Act and the subtitles to its various subdivisions indicate plainly that one of the evils sought to be stamped out is the advertising along with introduction...