Royal Baking Powder Co. v. Federal Trade Commission

• Decision Date: 01 May 1922
• Docket Number: 263.
• Citation: 281 F. 744
• Parties: ROYAL BAKING POWDER CO. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Second Circuit

281 F. 744

ROYAL BAKING POWDER CO. v. FEDERAL TRADE COMMISSION.

No. 263.

United States Court of Appeals, Second Circuit.

May 1, 1922

Moore Hall, Swan & Cunningham, of New York City (William A. Moore and John H. Jackson, both of New York City, of counsel), for petitioner.

W. H Fuller, Chief Counsel Federal Trade Commission, and James T Clark, both of Washington, D.C., for respondent.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS Circuit Judge.

The Congress has passed what is known as the Federal Trade Commission Act. This act was approved on September 26, 1914, 38 Stat.c. 311, p. 717 (Comp. St. Secs. 8836a-8836k). The act authorized the creation of the Federal Trade Commission, to be composed of five commissioners, to be appointed by the President with the advice and consent of the Senate. It declares that unfair methods of competition in commerce are unlawful. The commission is empowered and directed to prevent persons, partnerships, or corporations, except banks and common carriers, from using unfair methods of competition in commerce.

The constitutionality of this act was challenged in Sears, Roebuck & Co. v. Federal Trade Commission, 258 F. 307, 169 C.C.A. 323, 6 A.L.R. 358. The act invests the commission with certain quasi legislative and quasi judicial power, and it was argued that there was an unlawful delegation both of legislative and judicial power. The Circuit Court of Appeals in the Seventh Circuit in the above-named case had no difficulty in sustaining the validity of the statute, and it pointed out that grants of similar authority to administrative officers and bodies had not been found repugnant to the Constitution, citing cases. In the cases which have been heretofore before us no attempt has been made to deny the validity of the act, and its validity is not questioned in the case now before us.

The Federal Trade Commission on February 4, 1920, caused a complaint to be issued against the Royal Baking Powder Company, a corporation organized under the laws of the state of New Jersey. The Royal Baking Powder Company, hereinafter referred to as the petitioner, is engaged in manufacturing and selling in interstate commerce, and in competition with many other concerns similarly engaged, baking powders not only under its own name, but in the name of its constituent companies, and particularly the Price Baking Powder Company, which was one of four pre-existing corporations with which it was consolidated.

The complaint alleges that the petitioner is engaged in violating the provisions of section 5 of the Act of Congress approved September 26, 1914. 38 Stat. 717. That is the act which created the Federal Trade Commission and defined its powers and duties. The petitioner in due time filed its answer and testimony was taken, and after oral argument before the commission the commission made its findings and issued the order which we are now asked to review.

Section 5 of the act (Comp. St. Sec. 8836e) among other things declared:

'That unfair methods of competition in commerce are hereby declared unlawful. The commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, and common carriers subject to the acts to regulate commerce, from using unfair methods of competition in commerce.'

The commission in carrying into effect the provisions of the act is authorized to institute proceedings against those it has reason to believe are violating the terms of the statute. The proceedings which the commission is authorized to institute are not punitive, and no form of punishment is provided. It is not intended that compensation is to be made for any injuries which may have been suffered. The intent of the act is the prevention of injury to the general public. What the commission is created to deal with is, not acts of unfair competition, but the use of unfair methods of competition.

The act provides that, if at the hearing the commission is of the opinion that the method of competition in question is prohibited by the act, it shall make a report in writing in which it shall state its findings as to the facts, and that it shall issue an order requiring the person, partnership, or corporation found to be engaged in such unfair method 'to cease and desist from using such method of competition,' and the act also provides that in any application to this court, either to enforce the order, or to affirm, set aside, or modify it:

'The findings of the commission as to the facts, if supported by testimony, shall be conclusive.'

The transcript of record which in this case has been filed in this court contains voluminous findings made by the commission, covering 20 printed pages. These findings seem to us to be supported by the testimony, and they are therefore to be accepted and treated as conclusive.

The length of the findings makes it undesirable to incorporate them herein ipsissimis verbis, and we are compelled to confine ourselves to a statement of the substance thereof. From the findings as made it appears that the petitioner has been engaged since its organization in 1899 in the manufacture of baking powders and in their sale and shipment in interstate and foreign commerce. In 1899 it acquired the entire capital stock of the Price Baking Powder Company, the Cleveland Baking Powder Company, and a former corporation also known as Royal Baking Powder Company. The baking powder manufactured by the Price Baking Powder Company was known as 'Dr. Price's Cream Baking Powder.' The Cleveland Company manufactured the 'Cleveland Superior Baking Powder,' and the former Royal Baking Powder Company the 'Royal Baking Powder.' And after the petitioner acquired the stock of these companies it continued the manufacture and sale of these three brands of powder. From 1899 to 1917 it had sold 'Dr. Price's Cream Baking Powder' under the name of the Price Baking Powder Company, but in 1917 and thereafter, up to September, 1919, it manufactured and sold it under its own name.

Baking powder consists of (1) a carbonate, usually bicarbonate of soda, mixed with (2) an acid ingredient capable of reacting with the alkaline carbonate, when moistened, and setting free carbonic acid gas, which gas raises the dough, and (3) a filler, usually flour or corn starch, which tends to prevent any premature reaction caused by the moisture in the air. The baking powder known as 'Dr. Price's Cream Baking Powder' was originated in 1853 by Dr. Vincent C. Price, a physician, and was manufactured by him, and by various firms of which he was a member, up to 1884, when the Price Baking Powder Company acquired the business and continued the manufacture and sale of said baking powder until the business was taken over by the petitioner, and during all of said time and until September, 1919, the said baking powder was a cream of tartar baking powder, and was advertised and sold exclusively as such. Dr. Price never manufactured a phosphate baking powder.

For a period of over 60 years prior to September, 1919, the 'Dr. Price's Cream Baking Powder' had been marketed and advertised exclusively as a cream of tartar baking powder, and for at least 35 years (1884-1919) the petitioner and its predecessor, the Price Baking Powder Company, carried on an extensive advertising campaign, throughout 22 states in the middle and western sections of the country, to establish in the minds of consumers the superiority, especially from the point of view of healthfulness, of its cream of tartar baking powder, and the inferiority of the baking powders manufactured and sold by competitors and containing phosphate or alum, or both, as their acid ingredients, which competing powders were represented by the petitioner to be unwholesome and deleterious.

Through circulars, pamphlets, cook books, newspapers, and other forms of advertising, the petitioner for many years prior to September, 1919, warned the purchasing public against the use of phosphate baking powders, and asserted that cream of tartar was the only acid ingredient which should be used in baking powder. It emphasized the wholesomeness and food value of cream of tartar, and maintained that phosphate was unwholesome and dangerous as an ingredient, was produced either by dissolving bones in oil of vitriol, or from rocks formed by the action of the excreta of birds and animals on limestone. It referred to phosphate as 'bone acid' or 'lime phosphate,' and alleged that it was of purely mineral origin, left objectionable mineral residues in the food, and many other statements to the same or similar effect. It further asserted that it had never manufactured any but exclusively cream of tartar powders, that no cream of tartar baking powder ever contained phosphate, and that no phosphate powder ever contained cream of tartar.

By means of such advertising the petitioner was able to sell large quantities of its cream of tartar baking powder, under the name 'Dr. Price's Cream Baking Powder,' in competition with phosphate baking powders and alum baking powders selling for about one-half and one-fourth, respectively, of the selling price of petitioner's said cream of tartar baking powder. The petitioner continued up to May 28, 1919, to publish and circulate disparaging advertisements concerning baking powders containing such phosphate.

In July, 1919, because of the scarcity and increased cost of cream of tartar, respondent determined to change Dr Price's Cream Baking Powder, which had been well known for 60 years as a cream of tartar baking powder, to a phosphate powder, and to conserve the available supply of cream of tartar for its other brands. Cream of tartar had increased in price until at that time it cost more than five times as much as phosphate. In a 'news...