Holland Furnace Company v. FTC

• Citation: 269 F.2d 203
• Decision Date: 14 August 1959
• Docket Number: No. 12451.,12451.
• Parties: HOLLAND FURNACE COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

269 F.2d 203 (1959)

HOLLAND FURNACE COMPANY, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 12451.

United States Court of Appeals Seventh Circuit.

June 16, 1959.

Rehearing Denied August 14, 1959.

Stuart S. Ball, Chicago, Ill., Robert H. Trenkamp, Cleveland, Ohio, Richard J. Flynn, Chicago, Ill., Edward A. McLeod, Cleveland, Ohio, for petitioner. Sidley, Austin, Burgess & Smith, Trenkamp & Coakley, Cleveland, Ohio, of counsel.

James E. Corkey, Asst. Gen. Counsel, E. K. Elkins, Atty., Federal Trade Commission, Washington, D. C., Earl W. Kintner, Gen. Counsel, Miles J. Brown, Washington, D. C., Atty., Federal Trade Commission, for respondent.

Before SCHNACKENBERG and HASTINGS, Circuit Judges, and WHAM, District Judge.

WHAM, District Judge.

Petitioner, Holland Furnace Company, a corporation, filed its petition in this court for review of a final order of the Federal Trade Commission, dated July 7, 1958, which directs Holland to cease and desist from certain practices found to be deceptive and to constitute unfair competition. Thereafter, Holland filed a motion under the provisions of Rule 15(f) of this court, 28 U.S.C.A., moving for a determination of jurisdictional issues in advance of a hearing on the merits. This motion was granted. In the motion Holland says that the Commission had no jurisdiction to enter said final order for two reasons, namely, (1) that the findings of fact upon which said final order is based, together with the stipulated facts and documents of record, affirmatively demonstrate that the practices enumerated in the Commission's order were not employed in commerce and (2) that said findings of fact are wholly inadequate to sustain the jurisdiction of the Commission in that they fail to demonstrate that the practices enumerated in the Commission's order were employed in commerce.

The Commission rests its claim to jurisdiction upon the whole case. For a proper understanding and discussion of this claim it seems essential that the substance of the pleadings, findings and conclusions in so far as they bear on jurisdiction should appear. To conserve space they appear in marginal notes.

The substance of the Commission's complaint appears in the margin.¹

Holland's answer.²

After extensive hearings before the Commission's examiner on the issues framed by the complaint and answer the examiner determined the issues in favor of the Commission and made his initial decision with his findings, conclusions and his order directing Holland, its officers, agents, representatives and employees, to cease and desist from the wrongful and deceptive practices therein found in connection with its offering for sale, sale or distribution in commerce of furnaces, heating equipment and parts therefor.

In the initial decision the examiner preliminary to his findings made this statement: "This matter being now before the Hearing Examiner for final determination based upon the record as an entirety, he having presided at all hearings, observed all witnesses, considered and ruled upon all testimony and exhibits of record, finds that this proceeding is in the interest of the public and hereinafter makes his findings as to the facts, conclusions drawn therefrom, and order."

The examiner's findings pertinent to the jurisdiction of the Commission appear in the margin.³

The examiner in his initial decision listed as issue number one: "Is the respondent engaged in interstate commerce within the purview of the Federal Trade Commission Act?" In his first conclusion the examiner said: "The contentions of the respondent to the contrary notwithstanding, it is found that respondent was, at all times touched upon herein, engaged in interstate commerce as such is defined in the Federal Trade Commission Act and under the many court decisions interpretative of said Act." The examiner ordered that Holland and its "officers, agents, representatives, and employees, * * * in connection with the offering for sale, sale or distribution in commerce, as `commerce' is defined in the Federal Trade Commission Act, of furnaces, heating equipment, or parts therefor, do forthwith cease and desist from" various designated representations, misrepresentations and acts which the examiner had found to be unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce.

Holland appealed to the Commission from the initial decision and order of the examiner. After hearing, the Commission rendered its opinion and entered a final order adopting as its own the hearing examiner's initial decision, including its findings, conclusions and order.

The pertinent language used by the Commission in its opinion appears in the margin.⁴

To clarify the issues and make clear the positions of the respective parties, excerpts from their briefs appear in the margin.⁵

The controlling legislation is found in paragraphs (1) and (6) of Sec. 5(a) (15 U.S.C.A. § 45(a)(1) and (6) of said act which read:

"(1) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful. * * *

"(6) The Commission is empowered and directed to prevent persons, partnerships, or corporations * * from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce."

The quoted sections of the statute plainly disclose that the reach of the act is controlled and limited by the phrase "in commerce". That the statute should not be applied to transactions which are not "in commerce" was declared in the case of Federal Trade Commission v. Bunte Bros., Inc., 312 U.S. 349, 61 S.Ct. 580, 584, 85 L.Ed. 881. The court said:

"This case presents the narrow question of what Congress did, not what it could do. And we merely hold that to read `unfair methods of competition in (interstate) commerce\' as though it meant `unfair methods of competition in any way affecting interstate commerce\', requires, in view of all the relevant considerations, much clearer manifestation of intention than Congress has furnished."

By its decision the Supreme Court affirmed this court which in disposing of the same question in the same case had said:

"The only practices with which the Commission may concern itself are transactions `in interstate commerce.\' * * * The words, the meaning of which we are to construe, are definitely `in commerce\' not `affecting interstate commerce.\'

* * * * * *

"* * * If an extension of the Federal Trade Commission\'s jurisdiction be advisable so as to include practices affecting interstate commerce, it is for Congress, not the court to make the change." Bunte Bros., Inc. v. Federal Trade Commission, 7 Cir., 110 F.2d 412, 416.

Holland concedes that it is engaged in interstate commerce but claims that it is also engaged in intrastate commerce and that all acts of unfair competition and deception by its salesmen and servicemen found by the Commission were committed in the intrastate phase of its business. This contention is based on the claim that all of its sales, distribution and installations are made within any given state subsequent to the time when its products have come to rest in its warehouse or warehouses in such state and are no longer in interstate commerce. This claim seems to be refuted in part, at least, by the findings that Holland made sales in the District of Columbia through a branch and subbranch located in said District over a period of many years and through a subbranch from 1952 to June 30, 1954, and made other sales therein through the Baltimore, Maryland, branch; made other sales of respondent's equipment and repair service through the instrumentality of the Washington, D. C. office in the states of Virginia and Maryland, as well as in the District of Columbia; that the Niles, Michigan, branch sold in Indiana; that the South Bend, Indiana, branch sold in Michigan; Missouri branches sold in Illinois and Kentucky branches sold in Ohio; also, a sale from an Indiana branch of respondent to an Illinois customer. Though these particular findings of interstate transactions may be applicable to a comparatively small portion of the vast operations conducted by Holland they seem sufficient to negative Holland's contention that the Commission under its findings, is wholly without jurisdiction. Whether or not the findings just mentioned are sufficient to uphold an order by the Commission to cease and desist requires a consideration of the merits and from this we refrain.

After due consideration of the principles declared in Bunte and other applicable decisions we are of opinion that under the facts found by the Commission, as hereinbefore set out, the Commission was correct in its holding that it had jurisdiction in the case. We hold as did the Commission that the acts, representations and conduct of Holland's employees in selling and distributing Holland's furnaces and parts, whether before or after such products had been warehoused in the state where sold and distributed, were in commerce within the meaning of the Federal Trade Commission Act. In its opinion the Commission said, correctly we think:

"* * * The heating equipment involved is manufactured in Holland, Michigan, and shipped from there and sold by respondent\'s authorized representatives on a nationwide basis in some 45 states through respondent\'s own retail outlets. A realistic view of respondent\'s activities in moving its products from Michigan across state lines to accomplish its stated purpose of direct sales to ultimate consumers through `500 Direct Factory Branches Serving Over 15,000,000 Customers\' admits of no other conclusion than that respondent is engaged `in commerce.\'

"Contracts between respondent and branch managers and salesmen; correspondence between the home office in Michigan and field personnel; those contracts between respondent\'s salesmen and the purchasing public on respondent\'s behalf which must be accepted by the home office; and

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