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April 26, 1967


The opinion of the court was delivered by: Will, District Judge.


This action arises under Section 5(l) of the Federal Trade Commission Act, as amended ("Act"), 15 U.S.C. § 45(l) and 28 U.S.C. § 1345. Defendant Standard Distributors, Inc. ("Standard") is a corporation organized and existing under the laws of Illinois and is engaged in the offering for sale, sale and distribution of the New Standard Encyclopedia and its supplement, World Progress, and other books in interstate commerce. Defendant Bimstein is the President of Standard.

On June 13, 1952, the Federal Trade Commission ("Commission") issued its decision and order to cease and desist in a proceeding wherein defendants were charged with violating Section 5(a) of the Act. Defendants petitioned for review of the order and on February 26, 1954, the United States Court of Appeals for the Second Circuit affirmed the Commission.

On March 31, 1954 the Second Circuit entered its decree of enforcement. On June 29, 1954, by operation of law, that order became final. On January 27, 1955 the Commission, upon defendants' petition, modified two paragraphs of the order and on November 17, 1955, upon the joint motion of defendants and the Commission, the Second Circuit entered its decree of enforcement of the order as modified. The final order as modified has remained in full force and effect up to the present time.

Section 5(l) of the Act provides that any person, partnership or corporation violating an order of the Commission to cease and desist after the order has become final, and while it is in effect, shall forfeit and pay to the United States a penalty of not more than $5,000 for each separate violation to be recovered in a civil action brought by the United States. Section 1345 of Title 28, United States Code, vests the several District Courts of the United States with original jurisdiction of all civil actions, suits or proceedings commenced by the United States.*fn1 Defendants have moved to dismiss or, in the alternative, to strike part of the complaint. In so doing they have raised four questions for the court's determination. We have orally ruled on the motions, denying each, but the novelty and importance of one of the questions requires that we enter this written opinion as to that issue.*fn2

Defendants have challenged the applicability of the civil penalty provision, § 5(l), to the instant case. Conceding the validity of a civil penalty action for alleged violations of orders which become final when no petition for review is filed with a court of appeals within the sixty day period provided in § 5(c) of the Act, 15 U.S.C. § 45(c), defendants nevertheless contend that in those cases where review is sought by a corporation, partnership or person ordered to cease and desist and where the appeals court affirms the Commission, entering an enforcement order, the only remedy by which the Commission may seek compliance is the contempt power of the court of appeals. Defendants' theory is founded on § 5(d) of the Act, 15 U.S.C. § 45(d), which provides that "Upon the filing of the record with it the jurisdiction of the court of appeals of the United States to affirm, enforce, modify, or set aside orders of the Commission shall be exclusive." In short, despite the absence of any supporting language in § 5(l), defendants theorize that the civil penalty provision which was added to the Act as a new enforcement measure applies to some final Commission orders but not to others.

For the reasons set forth below, we conclude that the Congress, in enacting § 5(l), did not intend to permit the easy avoidance of this important enforcement weapon. Easy avoidance would indeed be the result if "Upon the filing of the record" with a court of appeals one ordered to cease and desist would no longer be subject to § 5(l).

Enacted in 1914, The Federal Trade Commission Act was amended by the Wheeler-Lea Act of 1938 at which time Congress "completely changed the method of enforcement." Austern, Five Thousand Dollars a Day, 21 A.B.A. Antitrust Section 285, 289 (1962). Of equal and coordinate importance with the addition of the penalty provision was the 1938 procedural change relating to the finality of Commission orders. The new § 5(l) containing the penalty provision was made applicable to "(A)ny person," etc. violating a cease and desist order "after it has become final." (emphasis supplied) The new § 5(g) provides that cease and desist orders "shall become final" in any one of four situations including: finality if no petition for review is filed within the sixty day period and finality if no petition for certiorari is filed within the time provided following affirmance by a court of appeals.

The rationale behind the finality change is apparent from the legislative history and commentary. Congress wanted to "avoid the `three bites at the apple' of illegality — a first violation to sustain a Commission complaint and order; a second to secure a judicial order of enforcement; and a third violation to warrant punishment for contempt. Cease and desist orders not appealed within sixty days, were made automatically final." Austern, supra, page 289.

Although the legislative history contains no specific reference to the new enforcement remedy, it is self evident that Congress intended to coordinate finality with a new weapon which would put teeth into the enforcement machinery. The important procedural change triggers the substantive penalty addition. Finality, under either of the four situations stated in § 5(g), is the operative factor in § 5(l). We are satisfied that the Congress in enacting the new § 5(g) and § 5(l) intended the sections to be read together without limitation. With the benefit of hindsight we can say that additional language might also have been added to place § 5(l) in explicit harmony with § 5(d). Nevertheless, what is not explicit is clearly implicit, namely, that in those instances where review is sought and the Commission order is affirmed by a court of appeals, the Commission has two remedies which it may pursue to seek compliance. In the event no petition for review is filed, only a civil penalty action is available.

The cases and commentary consistently accept the doctrine of concurrent remedies.

    "If the respondent does not seek court review,
  the order becomes automatically final after 60
  days, and the only method of enforcement open to

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