Kerran v. Federal Trade Commission
Kerran v. Federal Trade Commission
Dissenting Opinion
(dissenting).
The majority opinion sustains the Federal Trade Commission in requiring the manufacturer of an admittedly high quality domestic product to disclose in its advertising and on its container labels the source of its product. It does so in the absence of any claim that such manufacturer has ever made a deceptive or misleading statement in connection with the marketing of the product, rc-refined lubricating oil. A deceptive practice is said to result from the marketing of the product “in containers indistinguishable from those used generally to market lubricating oil refined from virgin crude, without any disclosure that it is made from previously used oil.” The deception is inferred from the assumption that the buying public prefers a lubricant produced from so-called virgin crude oil.
Certain facts shown by the uncon-tradicted evidence are pertinent. After crude oil is taken from the ground it is refined first to secure the more volatile distillates such as gasoline. The residuum is then refined again to obtain lubricating oils. Oil does not lose its chemical composition or its molecular structure by use. It does not wear out. The petitioner takes oil which has been drained from automobile crankcases and refines it just as the residuum of crude oil is refined after the capture of the more volatile distillates. The product so obtained has as high quality as that obtained from the residuum of the gasoline distillation.
Many minerals are processed and reprocessed and used and re-used over and over again. In this regard oil is no different from iron, gold and silver. The saving, accumulation, reprocessing and re-use of dental gold, silver ornaments and automobile steel does not differ in basic concept from the similar operations in regard to oil disclosed by this record.
Section 5(a) of the Federal Trade Commission Act, as amended,
With due deference to administrative expertness in fact finding, I see nothing in the record to sustain a finding that the public prefers lubricating oil produced from virgin crude. As testified, in substance, by the only witness who covered the attitude of the public,
The product involved here is admittedly of high quality and the petitioner has admittedly made no false statements in regard to either the product or its use. Hence this is not a case for the Commission to exercise its well-recognized negative power of preventing falsity by forbidding certain conduct. Instead it is one where the Commission exercises an, affirmative power to require a statement as to origin for the prevention of a falsity which is not shown to exist.
In the foreign origin cases the power of the Commission to require an affirmative disclosure of origin has been upheld.
Royal Oil Corp. v. Federal Trade Commission, 4 Cir., 262 F.2d 741, involved reclaimed, not re-refined, oil,
Mohawk Refining Corp. v. Federal Trade Commission, 3 Cir., 263 F.2d 818, affirmed an order similar to that involved here and did so in a case concerning re-refined oil. Reliance was placed on the statement in Federal Trade Commission v. Algoma Lumber Co., 291 U.S. 67, 78, 54 S.Ct. 315, 78 L.Ed. 655, that the public is entitled to get what it chooses, though the choice be dictated by caprice or ignorance. Algoma was a case of mislabeling.
Mohawk quotes approvingly from P. Lorillard Co. v. Federal Trade Commission, 4 Cir., 186 F.2d 52, 58, that: “To tell less than the whole truth is a well known method of deception * * The validity of such statement is unquestionable but it has no applicability. The omission here of the statement of source has no relation to the quality or usability of the product. Nondisclosure may amount to a deceptive practice when it is accompanied by an affirmative act calculated to deceive, when it has a bearing on quality or usability, or when the non-disclosed facts pertain to national policy. None of these situations is found here.
It may be that advertisements and labels should be much more informative than they ordinarily are in current custom and practice. But Congress has never given to the Commission unrestricted power affirmatively to require informative statements. Its pertinent power is limited to the prevention of unfair methods of competition and unfair or deceptive acts or practices in commerce. Granting that the Commission is the expert body to determine the remedy necessary to eliminate such methods or practices,
I most respectfully dissent from the opinion of my associates.
. Tlie most common use and re-nse of a natural resource probably occurs in the utilization of water.
. 15 U.S.C.A. § 45(a).
. The witness, a distributor for a major oil company, was called by and testified for the Commission.
. See Ohio Leather Co. v. Federal Trade Commission, 6 Cir., 45 F.2d 39, 41.
. Eg. L. Heller & Son v. Federal Trade Commission, 7 Cir., 191 F.2d 954; American Tack Co. v. Federal Trade Commission, 2 Cir., 211 F.2d 239.
. See 19 U.S.C.A. § 1304.
. Reclaimed oil is used oil which has been strained or otherwise treated to remove contaminants. Re-refined oil is oil that has been produced by a refining process similar to that used in producing oil from virgin crude.
. “Vellow pine” lumber was falsely labeled as “white pine.”
. Jacob Siegel Co. v. Federal Trade Commission, 327 U.S. 608, 612, 66 S.Ct. 758, 90 L.Ed. 888.
. Cf. Alberty v. Federal Trade Commission, 86 U.S.App.D.C. 238, 182 F.2d 36, 39, certiorari denied 340 U.S. 818, 71 S.Ct. 49, 95 L.Ed. 601.
Opinion of the Court
This proceeding is here on petition to review an order of the Federal Trade Commission. Petitioners Frank A. Ker-ran and Cameron A. Kerran, partners doing business under the trade name of Double Eagle Refining Company, at Oklahoma City, Oklahoma, are engaged in the business of re-refining previously used lubricating oil, principally crankcase drainings collected at gasoline stations; packaging the re-refined oil in tin cans of the same general size, kind, and appearance as those used for packaging lubricating oil produced directly from virgin crude; and selling the re-refined oil without indicating on the containers or otherwise that the commodity is produced from previously used oil. Some of the supply of previously used oil comes to the refinery of petitioners from other states, and some of the finished product is sold and distributed in interstate commerce. The order of the Commission required petitioners to cease and desist from representing, contrary to the fact, that their lubricating oil is refined or processed from other than previously used oil; and from advertising, offering for sale, or selling lubricating oil that is composed in whole or in part of oil which had been reclaimed or in any manner processed from previously used oil, without disclosing such prior use to the purchaser or potential purchaser in advertising and sales promotion material, and by a clear and conspicuous statement to that effect on the container.
The order is challenged upon the ground that the Commission erred in holding that the methods of competition employed by the petitioners are unfair, because the Commission did not base its decision upon all of the pertinent facts of record but upon only a minor part of them; because there is little likelihood that the public is misled since re-refined oil is identical to that which is refined directly from virgin crude; because when previously used oil is re-refined it loses its identity as previously used oil and is new oil in every sense of the term; and because the circumstances which must accompany seller silence in order for it to constitute an unfair method of competition are not present in the proceeding. It is the position of petitioners that lubricating oil does not
Petitioners urge further that the order of the Commission is invalid because the purchasing public is not prejudiced by their methods of competition since the public preference is for quality in lubricating oil and not for any particular origin; because the competitors of petitioners are not prejudiced by the methods of competition which petitioners practice since petitioners do not enjoy any unfair advantage over their competitors; because enforcement of the order would result in actually restricting competition since it would destroy the business of petitioners and other re-refiners and thereby eliminate them as potential competitors of the major oil companies; because it is contrary to public policy to require useless disclosures which would result in injury to a company engaged in the business of re-refining oil and selling it in interstate commerce; and because it would result in wasting unnecessarily a precious natural resource. The general trend of the argument in support of the several grounds of challenge to the order is that the practices of petitioners do not prejudice the public; that they do not prejudice the competitors of petitioners;
A decree will be entered affirming and enforcing the order of the Commission.
Reference
- Full Case Name
- Frank A. KERRAN and Cameron A. Kerran, Individuals and Copartners Trading and Doing Business as Double Eagle Refining Company v. FEDERAL TRADE COMMISSION
- Cited By
- 3 cases
- Status
- Published