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Federal Trade Commission v. McLean


July 1, 1936


On Application for Enforcement of an Order of the Federal Trade Commission.

Author: Sparks

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

SPARKS, Circuit Judge.

These are proceedings under section 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45, for the enforcement of orders issued by the Commission on June 21, 1935. The orders separately require the respective respondents to cease and desist from certain practices found to constitute unfair and forbidden methods of competition. The facts and the questions presented in all of these proceedings are identical, and a consolidated answer and brief of all the respondents was filed. Our discussion will, therefore, be directed to the McLean case as for all. The findings of the Commission*fn1 closely follow its complaint which was filed December 15, 1934. Aside from the presumption that the findings are supported by competent evidence [National Harness Manufacturers' Ass'n v. Federal Trade Commission (C.C.A.) 261 F. 170, and Federal Trade Commission v. Inecto, Inc. (C.C.A.) 70 F.2d 370] we are assured of that fact from an examination of the record. It therefore follows that the findings are conclusive. Federal Trade Commission Act, § 5; Federal Trade Commission v. Winsted Hosiery Co., 258 U.S. 483, 42 S. Ct. 384, 66 L. Ed. 729.

It is contended by the respondents that the facts as found do not support an order to cease and desist. We hold otherwise on the authority of Federal Trade Commission v. R. F. Keppel, 291 U.S. 304, 54 S. Ct. 423, 78 L. Ed. 814; Walter H. Johnson Candy Co. v. Federal Trade Commission (C.C.A.) 78 F.2d 717; and Hofeller v. Federal Trade Commission (C.C.A.) 82 F.2d 647. Many questions of fact and law are raised by respondents, but most of them were decided adversely to respondents' contentions in the cases just cited. They contend that section 5 of the act violates the federal constitutional mandate of separation of governmental functions (article 1, § 1; art. 2, § 1; art. 3, § 1), and the due process clause (Amendment 5). We think there is no merit in this contention. Sears, Roebuck & Co. v. Federal Trade Commission (C.C.A.) 258 F. 307, 6 A.L.R. 358; National Harness Mfrs.' Ass'n v. Federal Trade Commission (C.C.A.) 268 F. 705; Arkansas Wholesale Grocers' Ass'n v. Federal Trade Commission (C.C.A.) 18 F.2d 866; Federal Trade Commission v. Balme (C.C.A.) 23 F.2d 615. See, also, the concurring opinion of Mr. Justice Cardozo in Schechter Poultry Corp. v. United States, 295 U.S. 495, at page 552, 55 S. Ct. 837, 79 L. Ed. 1570, 97 A.L.R. 947.

It is further contended by certain of the respondents that the court failed to find that they had discontinued the manufacture and sale of the chance assortments on August 1, 1934. Discontinuance or abandonment is no defense to the order, for, if true, it would be no guaranty that the challenged acts will not be renewed. Federal Trade Commission v. Wallace (C.C.A.) 75 F.2d 733. The benefit to respondents of an abandonment may be fully protected by their report to the Commissioner as required by the Commission's order.

Respondents further contend that the orders of the Commission seek to control the method of retail sale of candies in intrastate commerce, and for that reason they, together with the Act under which they were promulgated, are invalid under the ruling in the Schechter Case. The orders, however, are expressly limited to interstate commerce and they do not apply to any intrastate business in which any of the respondents may be engaged.

We are convinced, however, that paragraphs (1) and (2) of the cease and desist order are too broad in that they prevent the sale and distribution to jobbers and wholesalers for resale to retailers of any candy so packed and assembled that retail sales may be made by means of a lottery, or gaming device. This clearly would prevent the sale of any candy which might afterwards be sold by the retailer by means of a lottery, gaming device or gift enterprise.Obviously, this was not the intention of Congress, and we think it was not the intention of the Commission. We have therefore stricken the word "may" from paragraphs (1) and (2) of the orders and substituted the words "are designed to," and as thus modified, the orders of the Commission*fn2 are affirmed, and respondents, their officers, directors, agents, representatives and employees are hereby ordered to comply therewith.

It is further ordered that respondents within thirty (30) days after the service upon them of this order, shall file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with the order to cease and desist hereinabove set forth.

And it is hereby further ordered by reason of the decision of the Supreme Court of the United States in A.L.A. Schechter Poultry Corporation v. United States of America, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570, 97 A.L.R. 947, decided May 27, 1935, Count Two of the complaint in this proceeding be, and the same hereby is, dismissed.

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