Rosten v. FTC, 63

• Decision Date: 16 February 1959
• Docket Number: Docket 25140.,No. 63,63
• Citation: 263 F.2d 620
• Parties: Bernard ROSTEN, t/a Bern Products Company, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Second Circuit

263 F.2d 620 (1959)

Bernard ROSTEN, t/a Bern Products Company, Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 63, Docket 25140.

United States Court of Appeals Second Circuit.

Argued January 7, 1959.

Decided February 16, 1959.

Jerome M. Schwartz, New York City (Horace J. Donnelly, Washington, D. C., on the brief), for petitioner.

Frederick H. Mayer, Atty. for Federal Trade Commission, Washington, D. C. (Earl W. Kintner, Gen. Counsel, and James E. Corkey, Asst. Gen. Counsel for Federal Trade Commission, Washington, D. C., on the brief), for respondent.

Before CLARK, Chief Judge, MOORE, Circuit Judge, and GIBSON, District Judge.

MOORE, Circuit Judge.

Petitioner seeks to review a cease and desist order of the Federal Trade Commission issued after proceedings upon a complaint charging petitioner with unfair acts and practices arising out of the sale and distribution of merchandise in interstate commerce by means of games of chance, gift enterprises or lottery schemes in violation of section 5(a) of the Federal Trade Commission Act, as amended, 15 U.S.C.A. § 45(a). The business was carried on by petitioner distributing in interstate commerce throughout the United States from petitioner's office, first in Chicago and then in New York, packages of advertising literature containing push cards. Accompanying the cards were instructions and circulars describing petitioner's plan of sale and distribution of merchandise. Briefly stated, a typical card contained a number of perforated disks (54 in number) bearing names which could be punched out by the customers. The punched out paper indicated the amount to be paid therefor, ranging in price from 1¢ to 39¢. Under a master seal was a name corresponding to one of the names on the disks. The person who by chance punched out this name became the prize winner. Certain other names received lesser prizes. Naturally the majority received nothing. The inducement to sell the push card was that the person selling the card and remitting its total value to petitioner would receive an article identical with that awarded as the first prize.

The Commission by subpoena obtained petitioner's testimony and that of three residents of the State of Indiana who had received the cards, sold them, remitted the proceeds to petitioner and received the merchandise and the reward for selling.

The proof definitely overcomes petitioner's argument that the lottery, if any, was intrastate. The underlying purpose of the merchandise selling scheme was interstate in character.

Petitioner next argues that since it was held in a criminal case, United States v. Halseth, 1952, 342 U.S. 277, 72 S.Ct. 275, 96 L.Ed. 308, that the mere mailing of punch board cards was not sufficient to establish an existing lottery, there was no violation of law. There is a substantial difference between a criminal proceeding and the type of situation the Commission is authorized to regulate. This distinction is to be found in the same Halseth case where the Commission's cease and desist order¹ against him was affirmed by the Court of Appeals for the Seventh Circuit and certiorari denied by the Supreme Court, Halseth v. Federal Trade Commission, 1955, 348 U.S. 928, 75 S.Ct. 340, 99 L.Ed. 727.

Petitioner also claims that there was a denial of due process of law because of involuntary testimony given by him under compulsion of the Commission's subpoena. This point appears to have been passed upon directly in Drath v. Federal Trade Commission, 1956, 99 U.S.App.D.C. 289, 239...