Progress Tailoring Co. v. Federal Trade Commission
| Decision Date | 28 January 1946 |
| Docket Number | No. 8411.,8411. |
| Citation | 153 F.2d 103 |
| Parties | PROGRESS TAILORING CO. et al. v. FEDERAL TRADE COMMISSION. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Frank W. Sullivan, of Chicago, Ill., for petitioners.
William T. Kelley, Chief Counsel, Federal Trade Commission, and Donovan Divet, Asst., Federal Trade Commission, both of Washington D., C., for respondent.
Before EVANS, SPARKS, and KERNER, Circuit Judges.
This is a petition to review, set aside, or modify a cease and desist order of the Federal Trade Commission, upon a complaint charging that petitioners have engaged in unfair methods of competition and unfair and deceptive acts and practices in commerce in violation of the Federal Trade Commission Act § 5, as amended 15 U.S.C.A. § 45.
The substance of the charges material under the points made here is that petitioners have violated the statute by disseminating false and misleading representations that they are manufacturers of the clothing which they sell, that they sell such clothing at wholesale prices, and that they give a suit of clothes "free" to salesmen accepting employment with them.
Petitioners answered the complaint, and after the matters involved in the charges had been heard upon the complaint and answer, the testimony of witnesses and supporting documentary evidence, the Commission, upon substantial evidence appearing in the record, found that petitioners, in competition with other merchants who sell similar goods, are all engaged in interstate commerce in the sale and distribution of men's suits and coats.
Petitioners act in conjunction with each other. They employ salesmen who sell their garments to the public, and in soliciting the services of these salesmen, they place advertisements in magazines, newspapers, and periodicals which have an interstate circulation. In the advertisements they represent that a free suit will be given to such salesmen. After prospective salesmen answer the preliminary advertisements, petitioners mail circulars to the inquirer in which they continue to refer to the suits as "free" but in which they also explain, in comparatively inconspicuous type, that the suit is not free but is sold to the salesman in return for his services. According to these circulars, if they are read and analyzed, the salesman will receive a commission for each garment he sells, and if he sells a certain number of garments, he will receive a suit for himself. The salesman must sell the required number of garments and pay petitioners their money before petitioners will deliver the suit to him. Petitioners make a profit on the entire transaction with each salesman after taking into consideration the cost of the suit delivered to the salesman for his services.
Upon these findings of fact the Commission concluded that the acts and practices of petitioners were unfair and deceptive, all to the prejudice and injury of the public and of petitioners' competitors and constituted unfair methods of competition in commerce, and entered an order that petitioners, among other things, cease and desist from: "Using the term `free' or any other term of similar import or meaning to designate, describe, or refer to wearing apparel or other items of merchandise which are furnished as compensation for services rendered."
Petitioners make the point that the Commission is an administrative body possessing only such powers as are granted by the statute, Arrow-Hart & H. E. Co. v. Federal Trade Commission, 291 U.S. 587, 54 S.Ct. 532, 78 L.Ed. 1007, and that § 5 of the Act authorizes the Commission to proceed only against business practices employed in interstate commerce. Federal Trade Commission v. Bunte Bros., Inc., 312 U.S. 349, 61 S.Ct. 580, 85 L.Ed. 881. They argue that their advertisement seeking a salesman, who may later engage in furthering interstate commerce, does not constitute interstate commerce, and that the Commission, because of lack of any grant of power over such matters, is without jurisdiction. We are of the opinion that under the circumstances here appearing, the advertisements are a part of the preliminary negotiations leading up to a sale in interstate commerce. They cannot be separated from the final sale, and are themselves a part of interstate commerce.
There can be no doubt that the sale of a suit by a seller in one State to a buyer in another State is a sale in interstate commerce. To constitute a sale, it is not necessary that the price be money only. 46 Am.Jur. § 60, page 251. In our case the advertisements offered a free suit, and when replies to or inquiries concerning these offers were received from prospective salesmen, petitioners mailed answers to inquirers offering to sell a suit to the prospective salesmen in return for their services. However, petitioners required the salesman to make payment for the suit with his services before the suit was delivered. Thus it is clear that these preliminary negotiations were all an essential part of the entire transaction.
Moreover, all interstate commerce is not sale of goods. Of course, importation into one State from another is the indispensable element, the test, of interstate commerce; but every negotiation and dealing between citizens of different States which contemplates and causes such importation, whether it be goods or information, is a transaction of interstate commerce. Butler Bros. Shoe Co. v. United States Rubber Co., 8 Cir., 156 F. 1, 17; International Text-Book Co. v. Pigg, 217 U.S. 91, ...
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