Document: 31 L.Ed.2d 170 92 S.Ct. 898 405 U.S. 233 FEDERAL TRADE COMMISSION, Petitioner,v.The SPERRY AND HUTCHINSON COMPANY. No. 70—70. Argued Nov. 15, 1971. Decided March 1, 1972. Syllabus The Federal Trade Commission (FTC) entered a cease-and-desist order against Sperry & Hutchinson Co. (S&H), the largest and oldest trading stamp company, on ground that it unfairly attempted to suppress operation of exchanges other 'free open' redemption stamps. S&H argued in Court Appeals its conduct was beyond reach § 5 Act, which claimed permitted FTC restrain only such practices as are either violation antitrust laws, deceptive, or repugnant public morals. reversed FTC, holding had not demonstrated S&H's violated because shown contravened letter spirit laws. Held: 1. erred construction 5. Congress, previously recognized by this Court, see v. R. F. Keppel Bros., 291 304, 54 423, 78 L.Ed. 814 defines powers protect consumers well competitors authorizes determine whether challenged practices, though posing no threat competition within nevertheless unfair methods competition, deceptive acts practices. Wheeler-Lea Act 1938 reaffirms broad congressional mandate. Pp. 239—244. 2. Nonetheless FTC's cannot be sustained. does challenge Appeals' violates neither nor laws opinion is barren any attempt rest unfairness particular competitive considerations consumer interests. Nor did articulate standards alternative assessments might made. 245—249. 3. judgment setting aside affirmed, but court 5, modified extent case remanded with instructions return for further proceedings inconsistent opinion. 249 250. 432 F.2d 146, remanded. Richard W. McLaren, Washington, D.C., petitioner. Harold L. Russell, Atlanta, Ga., respondent. Mr. Justice WHITE delivered Court. 1 In June 1968 held company industry,1 violating 38 Stat. 719, amended, 15 U.S.C. 45(a)(1), three respects. found improperly regulated maximum rate at stamps were dispensed retail licensees; combined others regulate dispensation throughout industry; (almost invariably successfully) orders accordingly. 2 appealed third these orders. Before Fifth Circuit conceded acted found, Act. That section provides, pertinent part, that: 3 'The commission empowered directed prevent persons, partnerships, corporations . from using commerce commerce.' 45(a)(6). 4 As sees empowers view, practice successfully prosecuting state federal courts restrained under theories. agreed Commission, Judge Wisdom dissenting. 146 (1970). lower court's view: 6 'To type has power declare 'unfair' act complained must fall one following types violations: (1) per se anti-trust policy; (2) Sherman, Clayton, Robinson-Patman Acts; (3) Acts Supreme United States.' Id., 150 (footnote omitted). 7 Holding vacated Commission's order. 8 petitioned review We granted certiorari questions presented petition. 401 992, 91 1234, 28 530 (1971). 9 * Challenged Conduct 10 been issuing stamps—small pieces gummed paper about size postage stamps—since 1896. 1964, year data litigation derived, 40% business an industry annually issued 400 billion more than 200,000 establishments distribution connection sales some 40 dollars. 60% all American saved Green Stamps. 11 normal course, operates follows. sells retailers, primarily supermarkets gas stations, cost $2.65 1200 stamps; retailers give (typically each 10¢ worth purchases) bonus their patronage; paste books 1,200 exchange 'gifts' 850 Redemption Centers maintained around country. Each book typically buys between $2.86 $3.31 merchandise depending location center goods purchased. Since development cycle 75 years ago, sold over trillion redeemed approximately 86% them. 12 A cluster factors relevant tends disrupt and, threaten business. An incomplete value. Even complete limited value most may obtained submission book. For reasons collector another who acquired small number green benefit exchanging opposite holdings preferences. Similarly, seasonal usefulness immediate utility2 object sought, want buy outright thus put himself position secure immediately 'priced' his current holdings. Or seek sell use resulting cash make basic purchases (food, shoes, etc.) centers normally provide. 13 Periodically past 70 professional have arisen service demand. Motivated prospect profit realizable result serving middlemen swaps, will consumers, or, fee, company's vice versa. Further, regular merchants offered discounts own Retailers do means competing area issue By offering price break stamps, redeeming merchant replaces incentive (to so able obtain gift center) attraction securing them discount store.3 14 fears activities they believed reduce proclivity green-stamp-issuing stores store's distribute attempts pre-empt 'trafficking' contractual provisions reflected notice inside cover every reads: 'Neither merchants, collectors times title thereto being expressly reserved Company you evidence payment same. right acquire said like present us redemption. You dispose without our consent writing. where application made permission turn your bona-fide Stamps; if transferred consent, we reserve by, take parties. It interest fill book, personally derive benefits advantages it.' (Reproduced App. 230.) 16 makes effort enforce condition when casually other, reportedly 20% change hands manner. But vigorously moves unauthorized commercial redeemers. Between 1957 1965, account filed 43 injunctions exchanged authorization, sent letters threatening legal action 140 175 businesses almost instances reality suit forced businessmen abandon II Reach Section 17 two petition certiorari, first '(w)hether directs 'unfair practices,' laws.' relates significance here lawful.4 Neither question requests decision proscribed Accordingly, intimate 18 reality, double one: First, empower define proscribe practice, even infringe laws? Second, effect upon regardless nature quality competition? think statute, legislative history, prior cases compel affirmative answer both questions. 19 When Congress created 1914 charted responsibility explicitly considered, rejected, notion ambiguity phrase competition' tying concept common-law statutory standard enumerating intended apply. Senate Report 597, 63d Cong., 2d Sess., (1914), presents reasoning led Committee avoid temptations precision framing Act: 20 committee gave careful consideration would many variable prevail forbid continuance would, general declaration condemning leave what unfair. concluded latter course better, reason, stated representatives Illinois Manufacturers' Association, there too define, after writing into law quite possible invent others.' 21 House Conference less explicit. 'It impossible frame definitions embrace There limit human inventiveness field. known specifically defined prohibited, once necessary begin again. If adopt method definition, undertake endless task.' H.R.Conf.Rep.No.1142, (1914). See also Rublee, Original Plan Early History Acad.Pol.Sci.Proc. 666, 667 (1926); Baker Baum, Continuing Process Redefinition, Vil.L.Rev. 517 (1962). 22 sweep flexibility approach crystal clear, twice judicial fence grounds finding unfairness. Gratz, 253 421, 572, 64 993 (1920), strong dissent Brandeis (who involved drafting Act), wrote while 'exact meaning' "unfair dispute,' subject characterization those 'heretofore regarded opposed good morals charterized deception, bad faith, fraud oppression, policy dangerous tendency unduly hinder create monopoly.' 427, S.Ct., 575. This view reiterated opinions next decade. See, e.g., Curtis Publishing Co., 260 568, 210, 67 408 (1923), Sinclair Refining 261 463, 475—476, 450, 453—454, 746 (1923). majority, citing support narrow leeway, tradition authorities. 23 Raladam 283 643, 51 587, 1324 (1931), unanimous paramount aim protection evils likely destruction restriction substantial degree .. Unfair trade competition.' (Italics original.) obvious,' continued, 24 'that word 'competition' imports existence potential competitors, injuriously affect tend competitors—that say, trader whose assailed rivals be, lessened otherwise injured. affairs given correct, affairs, authorized public. broader desirable conferred Congress.' 647—649, 590. 25 limiting interpretations survives buttress instant case. line cases, Gratz progeny, stood unimpaired, deference taken constrain 'deception, oppression' grant greater set perceives wrong panel acknowledges. frequent opportunity reconsideration consistently emphatically perspective confined. recently unanimously observed: 'Later rejected now unfair.' Brown Shoe 384 316, 320—321, 86 1501, 1504, 587 (1966). 26 leading role mapped out Bro., Inc., (1934), brought question; counts sets range jurisdiction measured today. Brothers penny candies 'break take' packs, form merchandising induced children lesser amounts concededly inferior candy hope luck hitting packs containing extra prizes. theory popular marketing scheme insofar tempted gamble compelled compete scruples similarly tempting children. 27 difficulty sustaining conclusion 'unfair,' competitor could maintain simply adopting practice. '(H)ere,' said, 'the exploit children, unable themselves (I)t clear sort common criminal statutes long deemed contrary policy.' 313, 426. En route met Keppel's arguments that, absent least incipient injury straitjacketed proscribing immoral held: 29 language history suggests confine forbidden fixed unyielding categories. afforded definition before enactment Sherman laid inhibition combinations monopolize interstate construed include restraints commerce. difficult feat draftsmanship restricted grow violations purpose legislation.' 310, 425. 30 Thenceforth, anticompetitive consequences manner laws; confined purely behavior. Keppel, displacing Raladam, legislatively confirmed adopted amendment, 52 111, amendment added practices' section's original ban through charged protecting competitors. summarized thinking: '(T)his consumer, injured equal concern, law, manufacturer dishonest competitor.' H.R.Rep.No.1613, 75th 1st (1937). S.Rep.No.1705, 74th 2—3 (1936). 32 Thus, authorities alike convince arrogate excessive itself if, measuring elusive, congressionally mandated fairness, it, equity, considers values enshrined encompassed laws.5 III 33 just enunciated requires hold Ordinarily reverse remand precepts 34 What deem proper concerns interaction administrative agencies courts, however, counsels argues however correct asserting measure according criteria. Proceeding premise, agree, major sustainable exercise consumers. Its minor properly apart propriety 35 look opinion, counsel, underpinnings 'Congress delegated official appellate counsel elaborating enforcing commands.' Investment Institute Camp, 617, 628, 1091, 1097, 367 read rests premised anything classic rationale restraint competition. 36 urges reversal approval because, words, '(t)he gives comprehensive anticompetitive.' Brief 15. says 'wrong ways: can impact violate regard cna uphold ground.' Tr. Oral Arg. 18. Though completely accurate, statements squared '(i)t essential matter, believe, heretofore indicated, impairment competition,' Opinion 175; '(r)espondent prevents reaction(s) thereby trade. believe hold,' 178; observation 37 'Respondent's individual activity part clearly restrictive pursued circumstances surrounding wholly separate collective making analysis 179, see, 176—178, passim. 39 indication root laws.6 derived concern finds 'stamp collecting consumers' freedom choice disposition stamps,' 176, alone guilty damage Arguably, findings, contrast go address noncompetitive well. findings evidentiary record. considered adequate foundation resting interests, still fail sustain action; rendered which, suggested, links conclusions. assessment interests independent actual effects doing referred developed. 41 Our urged based.' SEC Chenery Corp., 318 80, 92, 63 454, 461, 87 626 (1943). At failed 'articulate rational facts made.' Burlington Truck Lines, Inc. States, 371 156, 168, 83 239, 246, 207 42 flawed respect, '(T)he orderly functioning process agency disclosed adequately sustained.' Chenery, supra, U.S., 94, 462; 169, 246. label 45(a)(1). affirm vacate agency's effect. 'If valid determination made, judgment.' 88, 459. And repeated occasions: 'For substitute counsel's discretion incompatible review. deprecate, vindicate (see Phelps Dodge Corp. Labor Board, 313 177, 197, 61 845, 853, 854, 85 1271), process, rule 'propel(ling) domain exclusively agency.' (Securities Exchange Comm. Corp.) 332 (194), 196, (1575), 1577, 1995.' 44 circumstances, attacked remains undisturbed here, sustained grounds, affirmed. erred, 5; entertained section, preferable proceedings. 95, Burlington, 174, 248; FPC Gas Pipe Line 393 71, 89 55, 55 (1968). proceedings, appropriate. 45 Modified 46 POWELL REHNQUIST took On industry, generally Comment, Trading Stamps, N.Y.U.L.Rev. 1090 discussed Attack Stamps—An Expanded Use 57 Geo.L.J. 1082 (1969). Often used gift. efforts reissue H left free reissuance. 169. decisions approved H's reading leaves doubt erroneous determinations foreclose decision. therefore Government's second irrelevant focus contention. described determining nonetheless unfair: '(1) necessarily having unlawful, offends established statutes, whether, penumbra common-law, statutory, unfairness; immoral, unethical, oppressive, unscrupulous; causes (or businessmen).' Statement Basis Purpose Regulation Rule 408, Deceptive Advertising Labeling Cigarettes Relation Health Hazards Smoking. Fed.Reg. 8355 (1964). later portion statement commits misconduct respect criteria constraint concomitant showing wide variety interpreting elusive selling exploitive inequitable addition morally objectionable, seriously detrimental Ibid. (emphasis added). decline assess light States Arnold, Schwinn 388 365, 379, 1856, 1865, 1249 (1967), 'Under unreasonable restrict areas persons whom article traded parted dominion it. White Motor (White 372 253, 696, 738 (1963)); Dr. Miles (Dr. Medical U. Park Sons 220 373, 376, 502 (1911)). Such obviously destructive mere enough. parts product transfers risk loss another, he control destiny conditions resale.' doctrine. declined rely precedent, embedded instead 'technical' deeply rooted policy: '(W)e appropriate decide record technical basis alienation. much different products dealer resale. They complicated scheme. intend substance allegedly illegal rather formula.' 175—176.

Category: 7