Federal Trade Commission v. Mary Carter Paint Co.
Opinion of the Court
delivered the opinion of the Court.
Respondent Mary Carter Paint Company
Although there is some ambiguity in the Commission’s opinion, we cannot say that its holding constituted a departure from Commission policy regarding the use of the commercially exploitable word “free.” Initial efforts to define the term in decisions
The gist of the Commission’s reasoning is in the hearing examiner’s finding, which it adopted, that
“the usual and customary retail price of each can of Mary Carter paint was not, and is not now, the price designated in the advertisement [$6.98] but was, and is now, substantially less than such price. The second can of paint was not, and is not now, ‘free,’ that is, was not, and is not now, given as a gift or gratuity. The offer is, on the contrary, an offer of two cans of paint for the price advertised as ór purporting to be the list price or customary and usual price of one can.” 60 F. T. C., at 1844.
In sum, the Commission found that Mary Carter had no history of selling single cans of paint; it was marketing twins, and in allocating what is in fact the price of two cans to one can, yet calling one “free,” Mary Carter misrepresented. It is true that respondent was not permitted to show that the quality of its paint matched those paints which usually and customarily sell in the $6.98 range, or that purchasers of paint estimate quality by the price they are charged. If both claims were established, it is arguable that any deception was limited to a representation that Mary Carter has a usual and customary price for single cans of paint, when it has no such price. However, it is not for courts to say whether this violates the Act. “[T]he Commission is often in a better position than are courts to determine when a practice is ‘deceptive’ within the meaning of the Act.” Federal Trade Comm’n v. Colgate-Palmolive Co., 380 U. S. 374,
The Commission advises us in its brief that it believes it would be appropriate here “to remand the case to it for clarification of its order.” The judgment of the Court of Appeals is therefore reversed and the case is remanded to that court with directions to remand to the Commission for clarification of its order.
It is so ordered.
Hereinafter Mary Carter or respondent.
Book-of-the-Month Club, Inc., 48 F. T. C. 1297 (1952); Walter J. Black, Inc., 50 F. T. C. 225 (1953); Puro Co., 50 F. T. C. 454 (1953); Book-of-the-Month Club, Inc., 50 F. T. C. 778 (1954); Ray S. Kalwajtys, 52 F. T. C. 721, enforced, 237 F. 2d 654 (1956).
Guides Against Deceptive Pricing, Guide V, adopted October 2, 1958, 23 Fed. Reg. 7965; see also policy statement, December 3, 1953, 4 CCH Trade Reg. Rep. ¶ 40,210. For the current guide, Guide IV, effective January 8, 1964, see 29 Fed. Reg. 180.
Dissenting Opinion
dissenting.
In my opinion the basis for the Commission’s action is too opaque to justify an upholding of its order in this case. A summary discussion of the facts and Commission proceedings will suffice to show why I cannot subscribe to the majority’s disposition.
Since 1951 the enterprise now known as Mary Carter Paint Company has been manufacturing paint products for direct distribution through its own outlets and fran-. chised dealers. For most or all of this period, its practice has been to establish its prices on a per-can basis but to give each customer a second can without further charge for each can purchased. Mary Carter’s advertisements, while disclosing that the first can of each pair must be bought at the listed price, have always described the second can as “free”; typical slogans are: “Buy one get one free” and “Every second can free.” It is this advertising which the Commission now condemns as unfair and
To the extent that the Commission’s order may rest on the proposition that the second can is not “free” because its receipt is “tied” to the purchase of the first can, it is manifestly inconsistent with the rules governing use of the word “free” maintained by the Commission for over a decade. No one suggests that the additional can of Mary Carter paint is free in the sense that no conditions are attached to its receipt, but the FTC forsook this commercially unrealistic definition in 1953. In that year, first by its decision in Walter J. Black, Inc., 50 F. T. C. 225, and then a general policy statement, 4 CCH Trade Reg. Rep. ¶ 40,210, it sanctioned use of the word “free” to describe an item given without extra charge on condition of another purchase so long as the condition was plainly stated and the “tying” product was not increased in price for the occasion or decreased in quantity or quality. The FTC prefaced these rules in Black by saying that “[t]he businessmen of the United States are entitled to a clear and unequivocal answer” and it represented that its new position would be maintained until either Congress or the courts decided otherwise. 50 F. T. C., at 232, 235.
There is presently no .charge by the Commission that Mary Carter failed to comply with this general statement which continued in force through the proceedings and decision affecting Mary Carter. Rather, for the greater period of its advertising operations Mary Carter could properly claim to have relied on the FTC’s official pronouncement while it was establishing its “every second can free” slogan in the public mind, an investment now seemingly lost. Without inflexibly holding the Commission to its promise and avowed position, certainly solid justification should be demanded before the courts agree
At the very least the Commission should be required to demonstrate real deception and public injury in a decision that allows the courts to evaluate its reasoning and businessmen to comply with assurance with its latest views; these standards are not met by the FTC’s opinion in this case. The Department of Justice suggests that the FTC regards the advertisements as implying that Mary Carter regularly sells its paint for the present per-can price without giving an extra can free;
The temptation to gloss over the analytical failings of the rationale now asserted for the FTC by relying on agency expertise must be short-lived in this ease. Any findings by the FTC as to what the public may conclude from particular phrasings are most inexplicit, no distinction is taken between the various ads in question, and the conduct proscribed is never sharply identified. Surely there can be no resort to uninvoked expertise to buttress an unarticulated theory.
The opaqueness of the Commission’s opinion and order makes their approval difficult for yet other reasons. The
In administering § 5 in the context of the many elusive questions raised by modern advertising, it is the duty of the Commission to speak and rule clearly so that law-abiding businessmen may know where they stand. In proscribing a practice uncomplained of by the public, effectively harmless to the consumer, allowed by the Commission’s long-established policy statement, and only a hairbreadth away from advertising practices that the Commission will continue to permit, I think that the Commission in this instance has fallen far short of what is necessary to entitle its order to enforcement.
For these reasons I would not disturb the judgment of the Court of Appeals setting aside the Commission’s order.
Such an implication might be thought to run counter to the spirit of the now-superseded Guide V, Guides Against Deceptive Pricing, 23 Fed. Reg. 7965 (1958), requiring that the sales price for two articles in a two-for-the-price-of-one sale must be the usual and customary price for one. Mary Carter can, of course, reasonably claim to have complied with the letter of Guide V; assuming that it is making a two-for-the-priee-of-one offer in substance, the advertised sum is the usual and customary price which a purchaser has to pay in order to acquire a single can. There is evidence that on at least a few occasions customers took only one can, paying the advertised per-can price. There is no evidence that Mary Carter permitted or tolerated sales of single cans at less than the advertised per-can price.
I put aside the argument that might arise from Mary Carter’s practice of selling its paint in both gallon and quart cans. Conceivably, one might order a gallon and receive an unneeded extra gallon, never realizing that two quarts purchased plus two quarts free could be had for a smaller sum. The FTC ignored and the Government expressly disclaims reliance on any such argument. Moreover, many ads seem to give both quart and gallon prices.
Of the post-1952 cases cited in the majority’s note 2 (ante, p. 47), none is authority for condemning Mary Carter’s advertising. Puro Co., 50 F. T. C. 454 (1953), and Bay S. Kalwajtys, 52 F. T. C. 721, enforced, 237 F. 2d 654 (1956), both involved plain deceptions as to the usual prices of the items in question. Book-of-the-Month Club, Inc., 50 F. T. C. 778 (1954), and the Black case both exculpate sellers under the rule finally appearing in the 1953 policy statement, with whose terms Mary Carter has complied.
Reference
- Full Case Name
- FEDERAL TRADE COMMISSION v. MARY CARTER PAINT CO. Et Al.
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- 36 cases
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- Published