United States v. American Greetings Corporation

• Decision Date: 02 December 1958
• Docket Number: Civ. A. No. 32986.
• Citation: 168 F. Supp. 45
• Parties: UNITED STATES of America, Plaintiff, v. AMERICAN GREETINGS CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Ohio

168 F. Supp. 45

UNITED STATES of America, Plaintiff, v. AMERICAN GREETINGS CORPORATION, Defendant.

Civ. A. No. 32986.

United States District Court N. D. Ohio, E. D.

December 2, 1958.

Berry W. Stanley, Frank C. McAleer, Federal Trade Commission, Washington, D. C., Sumner Canary, U. S. Dist. Atty., Cleveland, Ohio, for plaintiff.

Robert W. Poore, James T. Lynn, Cleveland, Ohio, for defendant.

WEICK, District Judge.

This is a civil action, brought under Section 5(l) of the Federal Trade Commission Act 15 U.S.C.A. § 45(l), to recover $40,000 in penalties for alleged violations of a cease and desist order of the Federal Trade Commission. The complaint originally contained 11 counts, 3 of which have been dropped. A penalty of $5,000 on each count is sought in the eight remaining counts. The defendant denies violating any of the provisions of the Order.

The defendant is a corporation engaged in an interstate business in the manufacture and sale of greeting cards.

The provisions of the cease and desist order which defendant is alleged to have violated are as follows:

(A) Offering to buy or buying and taking over stocks of greeting cards sold and distributed by competitors to retail sellers.

(B) Agreeing or arranging with retail sellers to junk and destroy stocks of greeting cards distributed to such retail sellers by competitors.

(D) Agreeing or arranging with retail sellers of greeting cards distributed to such retail sellers by competitors to take over and remount so as to obscure and to make difficult the identification of trademarks and trade names of competitors.

(E) Acting to return, through interstate commerce, to retail sellers, greeting cards produced by competitors after identification has been obscured and otherwise made difficult through various ways and means, including those specified in the immediately preceding sub-paragraph; and

(F) Arranging or acting to have its salesmen and its other representatives make arrangements of displays of greeting cards in stores of retail sellers in such way that greeting cards produced by its competitors are displayed as if they were products of respondent.

Greeting cards are normally displayed for sale attached to mounts, and contained in a wood or metal cabinet. A mount is a stiff cardboard backing to which the greeting card is attached, either directly or in a transparent cellophane sleeve glued to the mount. In some instances the manufacturer's trade-mark or trade name appears on the mount itself, while in others the mounts are blank. These mounted cards are for display purposes only as the sales inventory is kept in drawers in the cabinet. By displaying the cards on mounts they are kept neat, clean and orderly and shoppers may handle and inspect them without soiling.

Defendant is alleged in Counts 1, 2, 3, 4, 7, 8 and 10 to have violated Paragraphs "D" and/or "E" of the Federal Trade Commission's Order when it removed competitors' greeting cards from mounts which bore the trade-mark and trade name of the producer or distributor of the greeting card and placed such competitors' greeting cards on mounts without any trade name or trade-mark appearing thereon.

These blank mounts were mounts of the American Greetings Corporation from which the American Greetings name was blanked out, originally by means of ink or china pencil and later by covering the name American Greetings with a black masking tape. This procedure was followed when American Greetings acquired a new account who had previously dealt with a competitor and had a carry-over inventory of the competitor's cards. It was necessary to do so to enable all greeting cards, old and new, to be displayed in an integrated manner in an American Greetings style display cabinet.

The Government contends that the Order was violated (1) in the removing of the competitor's cards from a mount bearing the competitor's legend and placing them in blank mounts, and (2) in placing the card in a sleeve which is glued to the mount, so that the trademark or trade name on the back of the greeting card itself may only be observed by bending the sleeve up or removing the card from the mount.

The defendant contends that Paragraph "D" of the Order is ungrammatical and ambiguous and was not intended to prohibit this practice of remounting competitors' cards, which it asserts was common in the industry.

Defendant asserts that the Order has reference only to obscuring trade names which appear on the cards themselves and that they are not obscured when placed in a transparent sleeve which reveals the names and marks when it is bent upward or when the card is removed from the mount. It is also the claim of defendant that the Order has no application to trade names on the mounts themselves.

The purpose of the Trade Commission Act was to outlaw unfair methods of competition and deceptive acts or practices in commerce. 15 U.S.C.A. § 45(a).

The Supreme Court has declared that:

"The object of the Trade Commission Act was to stop in their incipiency those methods of competition which fall within the meaning of the word `unfair'. `The great purpose of both statutes was to advance the public interest by securing fair opportunity for the play of the contending forces ordinarily engendered by an honest desire for gain.' Federal Trade Commission v. Sinclair Co., 261 U.S. 463, 476, 43 S.Ct. 450, 454, 67 L.Ed. 746 * * * In a case arising under the Trade Commission Act, the fundamental questions are whether the methods complained of are `unfair,' * * *." Federal Trade Commission v. Raladam Co., 1931, 283 U.S. 643, 647, 51 S.Ct. 587, 589, 75 L.Ed. 1324.

The Order proscribes remounting of cards of competitors "so as to obscure and make difficult the identification of trade-marks and trade names." It clearly applies with equal force to names which appear on the mounts themselves as well as to names printed on the cards.

If the competitors' cards had previously been mounted on blank mounts containing no trade-mark or trade name, then it could hardly be claimed to be an unfair practice for defendant to remount the cards in exactly the same manner as before.

It was certainly not intended by the Order to make illegal the practice of remounting competitors' cards, which was common in the industry.

Nor would it be unlawful to remount on blank mounts competitors' cards which previously had been displayed loosely and unmounted. There was no obligation on the part of defendant to advertise the products of its competitors.

By placing the cards in transparent cellophane sleeves, the trade-marks or trade names appearing on the back of the cards are in no manner defaced, destroyed or obscured. The trade names may be seen by simply turning up the sleeves and looking at them or by sliding the cards out of the sleeves.

It is an entirely different matter,...