Through its agency, it enters into leases and contracts with exhibitors, agreeing to furnish the exhibitors over a fixed period, its current releases and grants the right to exhibitors to exhibit the same to the public for a stated number of performances. The president of the petitioner, in effect, testified that it has never been the general practice or policy of the petitioner to exploit, sell or lease old pictures under new names or to reissue pictures under any names other than those of their original release. That the practice or policy of reissuing of old pictures under new names is obnoxious to him. and to the motion-picture industry "and indefensible from any ethical or business standpoint; that of the multitude of motion pictures or photoplays produced by respondent, he knows of no instance except those involved in this proceeding, in which respondent has reissued any old pictures under new names; that with respect to the above pictures, there was no attempt to mislead the exhibitors, or the public that said pictures were not reissues." The order to cease and desist provides "That the respondent, Fox Film Corporation, its agents, servants and employees, cease and desist from directly or indirectly advertising, selling or leasing, or offering to sell or lease, reissued motionpicture photoplays under titles other than those under which such photoplays were originally issued and exhibited, unless the former titles of such photoplays and the fact that they theretofore have been exhibited under such former titles, be clearly, definitely, distinctly, and unmistakably stated and set forth, both in the photoplay itself and in any and all advertising matter used in connection therewith in letters and type equal in size and prominence to those used in displaying the new titles." While the findings of the Commission embraced but three pictures where the unfair methods were practiced, that is sufficient to support the order to desist. It is now well recognized that the act refers specifically to unfair methods of competition. This does not mean the general practice of the offender must be unfair in competition. General practice may involve many methods each conceived and to be applied for its particular desired result. One act that constitutes an unfair practice may of itself be offensive to the act. Congress had in mind, in this legislation, the prevention of acts which amount to unfair methods of competition, whatever their inception.2 (Federal Trade Comm. v. Gratz, 253 U. S. 421.) To meet 2 Senator Cummins, chairman of the committee which reported the bill, said (Cong. Rec., vol. 51, p. 11455): "Unfair competition must usually proceed to great lengths and be destructive of competition before it can be seized and denounced by the anti-trust law. In other cases it must be associated with, coupled with, other vicious and unlawful practices in order to bring the person or the corporation guilty of the practice within the scope of the Anti-Trust Law. The purpose of this bill in this section, and in other sections which I hope will be added to it, is to seize the offender before his ravages have gone to the length necessary in order to bring him within the law that we already have. "We knew little of these things in 1890. The commerce of the United States has largely developed in the last twenty-five years. The modern methods of carrying on business have been discovered and put into operation in the last quarter of a century; and as we have gone on under the Anti-Trust Law and under the decisions of the courts in their effort to enforce that law, we have observed certain forms of industrial activity which ought to be prohibited, whether in and of themselves they restrain trade or commerce or not. We have discovered that their tendency is evil; we have discovered that the end which is inevitably reached through these methods is an end which is destructive of fair commerce between the states. It is these considerations which, in my judgment, have made it wise, if not necessary, to supplement the Anti-Trust Law by additional legislation, not in antagonism to the Anti-Trust Law, but in harmony with the Anti-Trust Law, to more effectively put into the industrial life of America the principle of the Anti-Trust Law, which is fair, reasonable competition, independence to the individual, and disassociation among the corporations this, the Anti-Trust Law was supplemented. To violate the Sherman Act, it is necessary to find that the practice has grown to such proportions and strength that the business and practice is obnoxious as a trust or monopoly and restrains trade. No better illustration may be exampled than the instant case of these three offenses or acts which are unfair restraints of trade and damage the competitor who sells to the exhibitors. The Federal Trade Act was intended to reach such unfair business methods when the Anti-Trust Law could not do so. The Commission may restrain an act which tends so unduly to hinder competition as to permit the act to be classed as an unfair method of competing. An act which involves such fraud in competition as to render it unfair, is an act within the condemnation of this statute. It is by stopping its use before it becomes a general practice that the effect of an unfair method in suppressing competition is destroyed and competitors. protected. 66 False and misleading advertising or representations concerning hosiery was held to be an unfair method of competition. (Winsted Hosiery case, 258 U. S. 483.) In that case a manufacturer's practice of selling underwear and other knit goods made partly of wool, was to label it "Natural Merino," "Natural Worsted" and Natural Wool." This product was purchased by the consuming public in the retail trade as indicating pure wool fabrics. It misled part of the public into buying as all wool garments, garments made largely of cotton, and aided and encouraged misrepresentation by unscruplous retailers and other salesmen. It was held to be an unfair method of competition as against manufacturers of like garments made of wool and wool and cotton who branded their products truthfully, and therefore should be suppressed under Sec. 5 of the Federal Trade Act. It was held further that such method of competition does not cease to be so because competitors became aware of it or because it becomes so well known to the trade that retailers as distinguished from consumers are not deceived by it. The pictures in the instant case were presented in the advertising matter and misrepresented by the petitioner to the exhibitors as new pictures when they were in fact old. The exhibitors in the trade had a right to expect that a new name described a new picture. The exhibitors were accordingly deceived. It had been the custom to entitle the photoplay products truthfully. Fox's stipulated testimony concedes this. In Royal Baking Powder Co. v. Federal Trade Comm., 281 Fed. 744, the petitioner, due to the increased cost of cream of tartar, discontinued manufacturing its widely advertised brand of cream of tartar baking powder which had been on the market for sixty years, and began to manufacture a phosphate baking powder and advertised it for sale at about one-half the former price, under practically the same trade name and put up in the same containers. This court held that the finding to the effect that this was misleading to the public and unfair to other manufacturers selling cream of tartar baking powder, was justified and that false and misleading labeling and advertising, induced the public to believe that the phosphate baking powder it was manufacturing was the same as the more expensive cream of tartar baking powder which it had formerly manufactured, was an unfair method of competition and could be prevented by the Trade Commission. The fact that the petitioner has discontinued this misrepresentation and promises a business practice which will forbid the publishing of false advertising in the future, does not deprive the Commission of authority to command the company to desist from such advertising, for it is not obliged to assume that false representations or publications or advertising will not be resumed. (Guaranty Vet. Co. v. Federal Trade Comm., 285 Fed. 860.) This record establishes that exhibitors were actually misled by the contracts and the advertising matter into the belief that the pictures purchased for exhibition were new pictures. The case, therefore, presents the instance of a producer and distributor misrepresenting the quality of his goods in his contracts and in his advertising matter, misrepresenting them so that the trade, apart from the public, was misled and deceived. In the reissuance of the old pictures under the new titles, without any intimation or notice concerning their origin or history, the petitioner was passing off one of its products for another of its products, that is to say, one of its old productions for a new production. This order to desist will not prohibit the remaking of a photoplay in which an entirely new cast is used or an entirely new produc tion is made, or where the original title is used or reference made thereto in the advertising of the picture. There is no objection to the use of the former photoplay if the name be not changed and no deception be practiced in its release to the exhibitors or its exhibition. The order of the Commission is affirmed. FEDERAL TRADE COMMISSION v. RAYMOND BROS.CLARK CO.1 (Supreme Court of the United States, January 7, 1924.) No. 102. 1. TRADE-MARKS AND TRADE NAMES AND UNFAIR COMPETITION KEY No. 68REFUSAL TO PURCHASE FROM MANUFACTURER, UNLESS SALES TO COMPETITOR CEASE, NOT UNFAIR COMPETITION; "UNFAIR METHOD OF COMPETITION." A wholesaler's refusal to purchase further from a manufacturer, unless the manufacturer discontinued sales to a competitor, held not an "unfair method of competition," within the Federal Trade Commission Act (Comp. St. Secs. 8836a-8836k); no element of conspiracy being involved. 2. TRADE-MARKS AND TRADE NAMES AND UNFAIR COMPETITION KEY No. 68"UNFAIR METHOD OF COMPETITION DEFINED. The words "unfair method of competition," as used in the Federal Trade Commission Act (Comp. St. Secs. 8836a-8836k), are inapplicable to practices not previously regarded as apposed to good morals, because characterized by deception, bad faith, fraud, or oppression, or as against public policy, because of their dangerous tendency unduly to hinder competition or create monopoly. 1 263 U. S. 565. 3. TRADE-MARKS AND TRADE NAMES AND UNFAIR COMPETITION KEY No. 68– INDIVIDUAL RETAINS REASONABLE DISCRETION IN BUSINESS METHODS UNDER FEDERAL TRADE COMMISSION ACT. Under the Federal Trade Commission Act (Comp. St. Sections 8836a8836k), the individual retains the right to exercise reasonable discretion in respect of his own business methods. 4. CONSPIRACY KEY No. 24-ACT LAWFUL WHEN DONE BY ONE MAY BECOME WRONGFUL WHEN DONE BY MANY ACTING TOGETHER. An act lawful when done by one may become wrongful when done by many acting in concert, taking on the form of a conspiracy, which may be prohibited, if the result be hurtful to the public, or to the individual against whom the concerted action is directed. (The syllabus is taken from 44 Sup. Ct. Rep. 162.) On Writ of Certiorari to the United States Circuit Court of Appeals for the Eighth Circuit. Mr. Adrien F. Busick, of Washington, D. C., for petitioner. Mr. JUSTICE SANFORD delivered the opinion of the Court. This writ brings up for review a decree of the Circuit Court of Appeals which set aside an order of the Federal Trade Commission requiring the Raymond Bros.-Clark Company to desist from a method of competition held to be prohibited by the Trade Commission Act of September 26, 1914, c. 311, 38 Stat. 717. By Section 5 of that Act "unfair methods of competition" in interstate commerce are declared unlawful, and the Commission is empowered and directed to prevent their use. The Commission, in January, 1920, issued a complaint charging the Raymond Company with acts and practices the purpose and effect of which was to cut off the supplies purchased by the Basket Stores Company, a competitor, from the T. A. Snider Preserve Company, stifle and prevent competition by the Stores Company, and interfere with the right of the Stores Company and the Snider Company to deal freely with each other in interstate commerce. Raymond Company answered, and evidence was taken. The Commission made a report, stating its findings of fact and conclusions. The The material facts shown by the findings are: The Raymond Company and the Stores Company are dealers in groceries, with their principal places of business and warehouses in Nebraska. They buy groceries in wholesale quantities from manufacturers in other States, which are shipped to their warehouses and resold to customers within and outside of Nebraska. Each does an annual business of approximately $2,500,000. The Raymond Company sells exclusively at wholesale. The Stores Company operates a chain of retail stores, but also sells at wholesale. In its wholesale trade, which constitutes. about ten per cent of its total business, it is a competitor of the Raymond Company. The Snider Company is a manufacturer of 280 Fed. 529. Also reported in 4 F. T. C. 625. groceries, with its office in Illinois. In September, 1918, it sold groceries to the Raymond Company, the Stores Company, and other neighboring dealers. These groceries were shipped in interstate commerce in a "pool" car to the Raymond Company, for distribution among the several purchasers. The Raymond Company, upon thus learning of the sale to the Stores Company, delayed the delivery of its portion of the groceries, to the hindrance and obstruction of its business, and wrote to the Snider Company, protesting against the sale direct to the Stores Company and asking for the allowance of the jobber's profit on such sale. Later, the Raymond Company declined to pay the Snider Company until this commission was allowed, and threatened to cease business with it and return all goods purchased from it then in stock, unless it allowed this commission and discontinued direct sales to the Stores Company; and, thereafter, an attempted settlement of the controversy having failed the Raymond Company ceased to purchase from the Snider Company. The conclusions of the Commission were: That the conduct of the Raymond Company tended to, and did, unduly hinder competition between the Stores Company and others similarly engaged in business; that the purpose of the Raymond Company was also to press the Snider Company to a selection of customers, in restraint of its trade, and to restrict the Stores Company in the purchase of commodities in competition with other buyers; and that the conduct of the Raymond Company tended to the accomplishment of this purpose. The Commission thereupon adjudged that the method of competition in question was prohibited by the Act, and ordered the Raymond Company to desist from directly or indirectly hindering or preventing any person, firm, or corporation in or from the purchase of groceries or like commodities direct from the manufacturers or producers, in interstate commerce, or attempting so to do; hindering or preventing any manufacturer, producer, or dealer in groceries and like commodities in or from the selection of customers in interstate commerce, or attempting so to do; and influencing or attempting to influence any such manufacturer, producer, or dealer not to accept as a customer any firm or corporation with which, in the exercise of a free judgment, he has, or may desire to have, such relationship. Upon a petition of the Raymond Company for review of this order, the Circuit Court of Appeals held that the findings of fact did not show an unfair method of competition by the Raymond Company as to the Stores Company or others similarly engaged in business. The court said: "There is no finding that petitioner combined with any other person or corporation for the purpose of affecting the trade of the Basket Stores Company, or others similarly engaged in business. So far as petitioner itself is concerned, it had the positive and lawful right to select any particular merchandise which it wished to purchase, and to select any person or corporation from whom it might The facts that the Snider Company's office is in Illinois and that it shipped these groceries in interstate commerce are not stated in the findings, but they otherwise appear in the record and are not disputed. It otherwise appears from the record that the ground of its protest and claim was Its assertion that the Stores Company was "nothing but a retail store." |