Ben Cohen trading as Benton Furs

Text (OCR of the scan at left; may contain errors)

IN THE 1\'1--\ TTER OF BEN COHEN TRADING AS BENTON FURS ORDER, ETC., IN REGARD TO THE AI~LEGED VIOLATION OF THE FEDERAL TRADE COMl\IISSlON AND THE FUR PRODUCTS LABELING ACTS Docket 0501. Complaint, Feb. 1956-Decision, Aug. , 1957 Order requiring a furrier in Los Angeles, Calif., to cease violating the Fur Products Labeling Act by failing to comply with labeling and invoicing requirements, by setting forth on invoices the name of an animal other" than that producing the fur in certain products, and by advertising which falsely represented prices of certain products as less than wholesale. FINDINGS AS TO THE FACTS, CONCLUSIONS AND ORDER Pursuant to the provisions of the Federal Trade Commission Act and the Fur Products Labeling Act, the 11 ec1eral Trade Commission on February 9, 1956, issued and subsequently served its complaint in this proceeding upon the respondent named above charging him with the use of unfair methods of competition and unfair and deceptive acts and practices in violation of the provisions of said Acts and the R.ules and R.egulations promulgated under the Fur Products Labeling Act. After the filing of answer by the respondent, a hearing was held before a hearing examiner of the Commission and testimony and other evidence was received into the record including evidentiary matters stipulated by agreement between counsel. September 6, 1956, the hearing examiner filed his initial decision in which he held that certain of the complaint's charges were sustained by the greater weight of the evidence and that others should be dismissed for reasons of lack of jurisdiction or other proof. The Commission having considered the cross-appeals filed from the initial decision of the hearing examiner and the entire record in this proceeding and having determined that the appeal of counsel supporting the complaint should be granted and the appeal of the respondent denied and that the initial decision should be vacated and set aside, the Commission further finds that this proceeding is in the interest of the public and now makes this its findings as to the facts lieu ofconclusions drawn therefrom and order, the same to be in said initial decision.

FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent Ben Cohen is an individual trading as Benton Furs. l-Ie engages 111 the sale at retail of fur garments 528:j"ii-GO- Findings 54 F.

his office.e and place of business being located at 714 South Hill Street Los Angeles, California.

PAn. 2. Subsequent to the effective date of the Fur Products Labeling Act on August 9, 1952, the respondent has advertised and offered for sale his fur products in commerce and he also has sold advertised, offered for sal~, transported and distributed fur products which have been made jn whole or in part of fur which has been shipped and received in commerce, as "commerce fur " and "fur produce are defined in the Fur Products Labeling A.ct. have been mis- PAn. 3. Certain of the aforementioned fur products branded in that they were not labeled as required under the provisions of Section 4 (2.) of the Fur Products Labeling Act and in the manner and form prescribed by the Rules and Regulations promulgated thereunder.

PAR. 4. Certain of the aforementioned fur products have been misbranded, in violation of the Fur Products Labeling Act, in that they were not labeled in accordance with the Rules and Regulations promulgated thereunder in the following respects: (a) Required information ,vas mingled with non-required information on labels, in violation of Rule 29 (a) of the aforesaid Rules and Regulations;

(b) Required information was not completely set forth on one side of the labels, as required by Rule 29 (a) of the aforesaiel Rules and Regulations;

(c.) Respondent failed to set forth an item number or mark on labels assigned to fur products, in violation of Rule 40 ( a) of the aforesaid Rules and Regulations;

(d) Required information was set forth in abbreviated 1'01'111 011 labels, in violation of Rule 4 of the aforesaid R.ules and Regulations. PAR. 5. Certain of said fur products have been falsely and deceptively invoiced, in that they were not invoiced by the respondent as required under the provisions of Section 5(b) (1) of the Fur Products Labeling Act, and in the manner and form prescribed by the Rules and Regulations promulgated thereunder. PAR. 6. Certain of said fur products were falsely and deceptively invoiced in that the respondent, on invoices furnished to purchasers of said fur products, set forth the name of an animal other than the name of the animal which produced the fur, in violation of Section 5(b) (2) of the Fur Products Labeling Act and the Rules and Regulations promulgated thereunder.

PAR. 7. Celiain of the aforementioned fur products were falsely and deceptively invoiced, in violation of the Fur Products Labeling BENTON FURS 205 208 Conclusions Act, in that they were not invoiced by the respondent in accordance with the Rules and Regulations promulgated thereunder in that required information was set forth in abbreviated' form, in violation of Rule. 4 of the aforesaid Rules and Regulations. PAR. 8. Certain of the respondent's aforementioned fur products were falsely and deceptively advertised in violation of the Fur Products Labeling Act and of Rule 44 (a) of the Rules and Regulations as heretofore promulgated thereunder. In such connection, the respondent has caused the dissemination in commerce, as "commerce is defined in the Fur Products Labeling Act, of newspaper advertisements concernb1g- his fur products which advertisements were not in accordance with the provisions of Section 5 (a) of the Fur Products Labeling Act and of the R.ules and R,egulations promulgated t hereunder and which advertisements -were intended to and did aid prom 01 e and assist, directly and indirectly, in the sale and offering for ~ale of said fur products.

I1Jnstrutive tJJereof "-ere ndvel'tis€111eJ1ts of the respondent which appeared in various issues of the Los Angeles Examiner, a publication having wide ('ircl1Jation in the State of California and subst, ntial circulation in areas of other St.ates of the United States which fire adjacent thereto. Certain of such advertisements have included the: follmying statemellt:

OUIt PRICES Aile LOWER than the wholesale houses COME UP AND SAVE MONEY! Thereby, the respondent has represented that the prices at which his fur products are offered for sale are less than wholesale prices which representation was false and deceptive. The respondent hilnself buys at wholesale prices and sells at a profit, and his prices necessarily are in excess of wholesale prices.

PAR. 9. The respondent in the regular course of his business has been in substantial competition with other individuals, corporations and firms likewise engaged in the sale and distribution of fur products.

CONCL USIOXS The aforesaid Hcts and practices of the respondent, as herein found, have been in violation of the Fur Products Labeling .Act and the Rules and Regulations promulgated thereunder and, as specified under the provisions of the nforesaid Act, ac1djtionally constitute unfair methods of competition and unfair and deceptive acts and practices in commerce ",ithjn the meaning of the Federal Trade Commission Act.

rder 54 F.

Evidence also was submitted at the hearing relevant to the charges of alleged violation of Rule 44(f) of the Rules and Regulations prescribed by the Commission under the Fur Products Labeling Act incident to alleged use by the respondent of illustrations depicting more' valuable fur products than those actually available at the respondents advertised selling price. Those charges are not supported by the greater ,veight of the evidence, and provision for their dismissal accordingly is included in the order appeadng hereafter. ORDER it is ordered That respondent Ben Cohen, an individual doing business as Benton I-j urs or under any other name, and respondent's representatives, agents and employees, directly or through any corpol' ate or other device, in connection with the introduction into commerce, or the sale, advertising or offering for sale in commerce, or the transportation or distribution in commerce, of any fur product or in connection with the sale, advertising, offering for sale, transportation or distribution of any fur product which is made in whole or in part of fur which has been shipped and received in commerce as "commerce fur " and "fur product" are defined in the Fur Products Labeling Act, do forthwith cease and desist from: A. :M:isbranding fur products by:

(1) Failure to affix labels to fur products showing: (a) The name or names of the animal or animals producing the fur or furs contained in the fur product as set forth in the Fur Products Name Guide and as prescribed under the Hules and Regulations;

(b) That the fur product contains or is composed of bleached dyed, or otherwise artificially colored fur, when such is the fact; (c) The name of the country of origin of any imported furs used in the fur products;

(d) The name or other identification issued and registered by the Commjssion, of one or more persons who manufactured such fur product for introduction into commerce, introduced it into commerce sold it in commerce, advertised or offered it for sale jn commerce, or transported or distributed it in commerce. (e) That the fur product consists of used or second-hand fur or furs, when such is the fact;

(f) That the fur product is composed in whole or in substantial part of paws, tails, bellies, or waste fur, when such is the fact. (2) Setting forth on labels attached to fur products: (a) Non-required informatjon mingled with required information; BENTON FURS 207 203 Order (b) Required information in abbreviated form. ( 3) Failing to (a) Set forth on labels attached to fur products an item number or mark assigned to such products;

(b) Set forth on labels attached to fur products all required information on one side of such labels. B. Falsely or deceptively invoicing fur products by: (1) Failing to furnish invoice to purchasers of fur products show- Ing:

(a) The name or names of the animal or animals producing the fur or furs contained in the fur products, as set forth in the Fur Products Name Guide and as prescribed under the Rules and Regulations;

(b) That the fur product contains or is composed of used fur when such is the fact;

(c) That the fur product contains or is composed of bleached dyed, or artificially colored fur, when such is the fact; ( d) That the fur product is composed in whole or in substantial part of paws, tails ~ bellies or waste fur, when such is the fact; of the person issuing such invoice: (e) The name. and address (f) The name of the country of origin of any imported furs eontained in the fur products.

(2) Using on invoices the name or names of any animal or anima.ls other than the name or names provided for in paragraph B(l) (a) above, or furnishing invoices which misrepresent the country of origin of imported furs cont:lined in the fur product, or which contain any form of misrepresentntion or deception, directly or implication, with respect to such fur products. (3) Setting forth on invoices pertaining to fur proc1uets, required information in abbreviated form.

e. Falsely or c1ecepbyely advertising fur products through the use of any ndvertisemenL representation, public announcement, nointended to aid, promotetiee, or in any other manner which is sale. of fur assist, directly or indirectly in the sale or offering for pro(h~dS ~ :mc1- which represents, directly or by implication, that the equivalent to the wholesale price of any fur product is less than or not the fact. price, when such is this proceeding relating It is f'l1?'the-r ordel'ed That the charges of to alleged violations of Rule 44 (f) be, and the same hereby are dismissed.

It is fu.rtthe1' owleTed That respondent Ben Cohen shall, within sixty (60) days after service upon him of this order file with the Opinion 54 F.

. Commission a report in "Titing setting forth in detail the manner and form in which he has complied therewith. Commissioners Gwynne and Tait dissenting.

OPINION OF THE CO)DIISSIOX By KERN, Commissioner:

The respondent operates a store in Los .,Angeles for the retailing of fur garments and is charged in this proceeding with misbranding and false and deceptive invoicing and advertising oJ certain of his fur products and in violation of both the Federal Trade Commission Act and the Fur Products Labeling Act and of designated rules anclregulations promulgated pursuant to the latter Act. Counsel for the respondent and counsel supporting the complaint have appealed from such rulings of the hearing examiner as were adverse to their respective contentions.

brief analysis of pertinent provisions of the Fur Products Labeling Act and the pleadings is necessary since we must dispose of a procedural question presented by counsel supporting the complaint. The particular offenses relevant here are. those contained in subsections (a) and (b) of Section 3 of the Fur Products Labeling Act. Subsection (a) renders unlawful the introduction, or manufacture for introduction, into commerce, or the sale, advertising or offering for sale in commerce, or the transportation or distribution in commerce, of any fur product which is misbranded or falsely or deceptively advertised or invoiced; and subsection (b) proscribes the manufacture for sale, sale, advertising, offering for sale, transportation or distribution, any misbranded or falsely advertised or invoiced fur product which is made in "Thole or in part of fur which has been shipped and received in commerce. Thus, the legal violations which arc defined in s11bsection (a) are. limited to and concern distributional and promotional ac.tivities " in commerce which else\vhere in the Act is defined to include commerce between any state and any place outside thereof. On the other hand, the sanctions imposed under subsectlon (b) do not turn upon the interstate aspects of promotional activities. Instead, violation results when the deceptlvp. acts OCC11l' in furtherance of the marketing of fur products made in "hole or in part of fur which has beeil shipped and received in commerce.

Paragraph 'l\yo of the c.complaint alleges that the ;' respondent has sold, advertised, offered for sale, transported and distributed fur prodllcts which have been mack in \\'hole or in part of fur which has been shipperl nncl received in commerce. The fln' succeeding paragraphs of the complaint c.contain spec.ific allegations as to the . .

BENTON FURS 209 203 Opinion manner in which certain of the respondent s fur products in that category allegedly were misbranded and falsely invoiced. It is not disputed that the respondents labeling and invoicing were not in accordance with requirements specified in the Act and applicable rules and regulations of the Commission as charged in the complaint. The allegations of two additional paragraphs of the complaint (Paragraphs Eight and Nine) were directed to advertising practices relating to "Certain of said fur products . in violation of the Fur Products Labeling Act. . . Thus the complaint might be construed to concern only those fur products made in whole or in part of fur previously shipped and received in commerce. Under Paragraphs Eight and Nine, the respondent was charged in substanee with the dissemination in commerce of advertisements which were alleged to be in violation of law because they were not in accordanee with the provisions of Section 5 (a) of the Act (which section defines false advertising of fur products and furs ) and because they misrepresented the products~ price and their grade~ quality and value in contravention of the provisions of subparagraphs (a) and (f) of Rule 44 of the Rules and Regulations promulgated by the Commission. IIence, alleged interstate aspects of the respondent' s promotional activities also were brought within the scope of the proceeding under those charges.

Counsel supporting the complaint moved that Paragraph Two the complaint be amended to include charges more expressly challenging the lawfulness of the respondent's labeling and invoicing practices as well as his advertising practices under' Section 3 (a) the Act and irrespective of the garments' legal.l status under Section 3 (b) as fur products allegedly made from furs which had been shipped and received in commerce. It was requested that such paragraph be revised to read as follows:

Subsequent to the effective date of the Fur Products Labeling Act on August 9, J952, res!)ondent has sold, advertised, offered for sale, transported and distributed fur products in commerce, and has sold, advertised, offered for sale, transported and distributed fur products which have been made, in whole or in part, of fur which has been shipped and received in commerce, as the term commerce " the term "fur " and the term "fur products" are defined in the Act. The hearing examiner denied the, motion.

The. requested amendment was closely related to other charges in the complaint and the general tenor of certain of the. amendatory matters conformed to proof theretofore received in the record. It seems obvious that the parties regarded the issues of the case as broader than those presented under a very strict interpretation of the complaint. Both counsel appear to have regarded the issues , 210 FEDERAL TRADE COMMISSIOJ,I DECISIONS Opinion 54 F.

presented under the pleadings and proof to include the extent to which the distributional methods and promotional activities adopted by the respondent come within the scope of both subsections (a) and (b) of Section 3. Attesting to this is the fact that the first of various listed conclusions of law submitted by the respondent for the hearing examiner s adoption requested a finding that the respondent had not introduced or manufactured for introduction or sold or advertised for sale or transported or distributed in interstate commerce. any fur product or fur "as contemplated by Section 3 (a) of the Fur Products Labeling Act."

",Ve think it would have been more appropriate had the hearing examiner granted in pali. the motion for amendment, pursuant to Section 3.9 of the Commission s Rules of Practice. ",Ve have decided to direct amendment of the complaint in conformity with such of the respondent's practices as the record indicates have been engaged in by him, namely, those relating to the advertising and offering for sale in commerce of the respondent' s fur products. The respondent's appeal challenges as erroneous the examiner holding that certain of the respondent's fur products have been advertj~ed and offered for sale in commerce within the meaning of the Act and that. false advertisements which the. respondent caused to he disse.minated in such connection have constituted violations of Section 3 (a) of the Fur Products Labeling Act and the rules and regulations promulgated thereunder by the Commission. "\Vhile the record does not disclose instances of actual sale and shipment by the respondent of his fur products to out-of-state customers and indicates instead consummation of sales at the respondent's place of business, the evidence establishes that the respondent's fur products were advertised on various occasions ill a Los Angeles newspaper. Daily circulation (except Sunday) for that publication has represented approximately 332 000, of which 5 000 copies have gone outside the State of California; and Sunday circulation has approximated 686 000, of which some 40 000 have gone to subscribers or others outside the State. It is thus clear that the respondent has advertise. his fur products in commerce. J acqlles De Gorter G. (C.A. 9, Decided April 17, 1957.

The respondent contends, however that such advertising does not constitute advertising for sale in commerce of that merchandise within the meaning of the Act for the reason that evidence of interstate delivery or resale is absent. Section 3 (a) forbids, among other things advertising or offering for sale in commerce" of fur products which are misbranded or falsely or deceptively advertised or invoiced. Its proseriptions are stated in the disjunctive. It, there- BENTON. FURS 211 203 Opinion fore, is impossible to reconcile with the language of the Act itself respondent' s contention that Congress intended a sale in. commerce as prerequisite to jurisdiction under Section 3(a). That " advertising . . . for sale in commerce " i. , advertising in commerce for sale is sufficient under the Act also is apparent from its legislative history. This subsection "makes unlawful the manufacture for introduction into commerce or the sale, advertising, or transportation in commerce of fur products which are misbranded or falsely or deceptively advertised or invoiced. (S. Rep. No. 78, 82nd Cong. 1st Sess. (1951, p. 3).

Since it is shown that the respondent has engaged in distributional and promotional activities in violation of Section 3 (a) of the Act, our order which is being issued in lieu of that contained in the initial decision includes appropriate prohibitions with respect thereto. Respondent' s appeal also challenges the validity of the Commission s authority under the Act to promulgate Rule 44 of its Rules and Regulations prohibiting pricing misrepresentations with respect to fur products and furs. In the De Om'tel' case referred to above and decided subsequent to the filing by the respondent of its appeal in this proceeding, the COlmnission s authority to promulgate such rule was judicially approved, however. Considered by us also have been the exceptions additionally interposed under the respondent' appeal from the initial decision. Since they are related in vein to those discussed above, their denial is similarly warranted. The respondent's appeal is denied accordingly.

The appeal of counsel supporting the complaint except to the initial decision s ruling dismissing the charges under Section 3 (b) of the Act. As previously noted, these charges allege that the respondent has sold, offered for sale, advertised and distributed fur products made in whole or in part of fur which has been shipped and received in interstate commerce and that such fur products were misbranded and falsely and deceptively advertised and invoiced. It was stipulated by the parties that the major portion of the respondent' s fur garments have been obtained from sources outside the State of California. The appeal, however, does not except to the initial decision s finding that there is no showing of record that the respondent ever received fur skins in commerce. It is conceded by the respondent that the prime issue presented under counsel's appeal concerns whether the offering for sale and sale of the respondent's misbranded and falsely invoiced fur products which were made in whole or part. of skins shipped and received in eomme.rce. prior to acquisition by the respondent of such garments are wit.hin the purview of subsection (b). InchlCled among the fur Opinion 54 F.

products offered for sale by the respondent were garments made froin peltries originating in Asia and Russia. It therefore is esta blished for the purpose of this proceeding, and the Commission so finds, that included among the misbranded and falsely advertised and invoiced fur products offered for sale and sold by the respondel1t were garments made in whole or part of furs shipped and re.ceived in commerce prior to the respondent' s receipt of those garments. Expressing the view that the Act's legislative history contains no clear indication of a contrary congressional intent, the hearing examiner, in effect, held that jurisdiction under Section 3 (b) attaches only when the patty charged with violation himself rece.ives the fur skins in commerce and makes them into fur products. The respondent in opposing counsel's appeal concurs in this interpretation and contends that if the proscriptions of Section 3(b) with respect to intrastate sales were not limited to industry members processing skins shipped and by them received in commerce, then the subsection would represent an unconstitutional exercise of legislative H llthorityby the Congress. of this As to the latter contention, it is not within the prmrinee of legislation whichCommission to pass upon the constitutionality vz:ce v. 8eC11,it is charged with administering. Enginee1'8 Public Set' Tities Exchange Com1nis8i011 138 F. 2d 936, 952 (C.A. D. , 1943). Beyond determining whether the statute is being properly interpreted In the .11 atteJ'and applied, we lack authority to declare further. Blanton Com,pany, Docket No. 6197 (decided December 2G. 1956). locH 1 salesHad Congress elected however to declare unlawful misbranded fur products theretofore shipped and received in commerce, such a provision manifestly would be valid under the principles enunciated by the Supreme Court of the United States in its decision in S. v. l.lllivan 332 U.S. 689 (1947). In that. ease, the exercise of legislative authority for CongressCourt held it a valid sales of misbranded drugs and that applicationto forbid intrastate local resale of thethere.of properly extended to situations in which misbranded article occurred,d more than six months after its original shipment in commerce and wherein the local reseller also purchased in intrastate commerce the drug which he snbseqnent1y caused to be misbranded.

s interpretation of Section 3 (b) ",Ve deem the hearing e:examiner manu-to be erroneous. Subsection (b) explicitly provides that the for sale: transportation or distri-facture., sale, advertising. offering whole or in part of fur which hasbution of any product made in been shipped and received in commerce: and which is misbranded ), BENTON FURS 213 203 Opinion or falsely or deceptively advertised or invoiced, within the meaning of the Act or duly promulgated rules, shan be unlawful. Section 3 (b) is unequivocal and is not ambiguous. The words being clear they are decisive, and there is nothing to construe. Van Ga1np Sons v. A1ne' r-loan Can OmnpmlY, 278 U.S. 245, 253 (1929). The plain meaning of the statute will prevail as long as it does not lead S.to absurd results or clash with policy behind the legislation. A1n~1'ican 1'1'uckin.g Associatio. , Inc. 310 U.S. 534 543 (1940). Our consideration of the legislative history furthermore convinces us that the interpretation advocated in counsers appeal squares with the policy behind the legislation. The Fur Products Labeling Act its presentwas enacted by the 82nd Congress and Section 3 (b) in form appeared in the original drafts of relevant bins there introduced, including S. 508 and I-LH. 2321. After disagreeing votes by 2321the two I-Ionses and report by duly designated conferees, R.H. ,with certain amenclrnents was enacted by the Congress and approved on .A ngllst 8 ~ 1 0i)1. Both the 80th and 81st Congress had considered and held hearings, however, on legislative proposuls l'eJnting to the marketing of furs.

The first bill in which the legislative approach reflected in subsection (b) appears to have been adopted \Vas introduced in the I-Iouse on .June 15, 1040 (R.H. 5187, 81st Cong. nnd passed by it on July 14~ 1949. Prior to that action by the :House, this Commission in response to invitations to comment on other pending bills had suggested that consideration be given to broadening their scope in order to cover' products manl1:factured for local sale when made in whole or in part from furs purchased HIHl received in commerce. (Printed Heport of Hearings on I-I.I-L 4202, I-LR. D7 and H:.Jl. 3755 before a Subcommittee of the Committee on Interstate and Foreign Commerce ~ Rouse of Hepresentatives, 81st Congress, 1st Session pages 29-31.) The amendatory lnngunge proposed in the Commisas en-sion s letters ,vas identical to that contained in Sedion 3(1) acted two years later.

The House Committee Report recommending enactment of J-LR. , dated5187 sets out a letter from the Federal Trade Commission June 27 , 104D, which commented on this subsection as follows (E. Hept. :No. D19, 81st Cong. : 1st Sess., p. 5) : Section 3 (h) of the proposed bill brings within juri!:'(liction of tile statute the furrier who manufactures his products from furs whkh he has received in interstate commerce and markets the jinished products locally. Such amendment was suggested in our report on B.H. 375;:-, and is in our opinion d(~sjrable and necessary in placing lotaI manufacturers OI! an equal tolnpetitive basis will! out-of-state concerns.

Opinion 54 Ji' Though the first sentence of this comment may appear to limit the application of the proposed subsection (as then understood by the Commission) to the case of the manufacturer of fur products who h~:17uJelf receives the component furs in interstate commerce, the succeeding sentence makes it clear that the Commission then understood that the subsection would place all local manufacturers of fur products on an equal footing with out-of- State manufacturers. Obviously such an equalization cannot be achieved if local manufacturers of fur products who do not themseh-es receive their raw materials in interstate commerce are to enjoy an exemption from the statute. The above-quoted comment makes reference to a prior Commission report on an earlier fur measure, H.R. 3755. That report, dated April 21 , 1949, is also included in the House Committee R.eport (pp. 6-7) and is, in our estimation of equal force in determining the intended scope of Section 3 (b). Proposing- the addition to l-LR. 3755 of language identical with Section 3 (b) of R. 2321, as finally enacted, the Commission wrote:

During the course of hearings on the proposed legislation, however, it would be well to consider the possibility of broadening the scope of the bill to cover. locally manufactured fur products made in whole 01' in part from furs pm' chased and received in commerce. Such action is fully within the power 01' Congress (United States v. SuUivan 332 D. S, 698 (1948), and would place local manufacturers on an equal competitive basis with out-of- State concerns * * * The citation of Tlnitecl States v. uJli1)(J. as precedent for extending federal jurisdiction to "locally manufactured fur products made in whole or in part from furs purchased and received in commerce is definitive proof that the purpose of the subsection was to reach the fur products of the local manufacturer regardless of whet.her he himself had been party to the interstate transaction which brought the component furs into his State.

The novel point decided in the 8ulli.uan case was that the Federal prohibition a.against misbranded foods and drugs applied to the seller of such articles even though they had passed from the hands of him who had brought them into the State. Distinguishing the facts from those of the earlier case of ill CDe1' 1Jwtt v. lViscon~in 228 U. S. 115 but holdino. the rule of that case applicable, the Supreme Court said: (11 n the JI cDennott case the possessor of the labeled cans held for sale had himself received them by way of an interstate sale and shipment; here, while the petitioner had received tlle sulfathiazole by way of an intrastate sale and shipment, he bought it from a wholesaler who had received it as the direct . In discussing the applicability of the RUbsection to "manufacturers" there was no intentioll to limit it to that cla~s of merchant, for the slIhRection not only applies to the "manufacture for sale" but f'XIHessly to the " sale, advertising, offering for sale, transportation or distribution of fur products us well. \. y. \. BENTON FURS 215 203 Opinion consignee of an interstate shipment. These variants are not sufficient we think to detraet from the applicability of the McDennott holding to the present decision. In both cases alike the question relates to the constitutional power of Congress under the commerce clause to regulate the branding of articles that have completed an interstate shipment and are being held for future sales in purely local or intrastate commerce. The reasons given for the McDennott holding therefore are equally applicable and persuasive here. And many cases decided since the McDennott decision lend support to the validity of ~ 301 (k). See UnUed States Walsh 331 V, S, 432; Wickard v. Filburn 317 U. 111; VnUed Sta.tes Wrightwood Dah.y Co. 315 U, S, 110; United States Dm. by, 312 V, S. 100; see United States Olsen 161 F. 2d 669. (332 u.S. at 698) There would have been no point in citing the S'UJlivan case rather than the Jl cD e'l'77'W tt ease as authority for the proposed subsection if the Commission had not intended to manifest to Congress that. the subsection was drawn in terms broad enough to encompass constitutiona))y the extreme ease of the fur merchant or manufacturer who misbrands or falsely advertises fur products made of furs which have. been received in interstate eommel'te by another. Later events in the Act's history which occurred more contempoaneously with final enactment of the legislation indicate that understanding preyaiJed in the enacting Congress that the area of jurisdiction conferred under the subsection extended to distributional situations other than those involved in the manufacture of fur products for local sale by the person purchasing the furs in commerce. For example, in its report of ,June 11 , 1951, on H.H. 2321 (which with amendments subsequently \vas enacted by the 82nd Congress j, the Committee on Interstate and Foreign Commerce of the House or R.representatives described the bin as requiring mandatory invoicing of furs and labeling of fur products in interstate commerce. and as applicable to furriers who manufactured fur products from furs received in interstate commerce. The report significantly added however ~ that, when furs or fur products were advertised in COlnmerce. or were advertised after having been shipped and received in such commerce, the Act' s aflhmative requirements with respect to advertising were to be applicable. This clearly suggests an intention by Congress that the requirements prescribed in the Act were to extend not only to fur skins whose interstate journeys had terminated but also to fur products which were made of such fur skins. Another subsequent aspect of the legislative history likewise indicating that a narrow construction of subsection (b) was not contemplated appears in connection with the proposal for c.ertnin amendments presented on the floor of the Senate on February 22, 1951. One of those amendments looked to authorizing nn Hclditional c)ass Opinion 54 F.

of resellers to substitute (under subsection (e)) their own labels for those originally placed thereon by the manufacturers, and the Senator sponsoring them presented a statement for the record which had been prepared by an organization of retailers. Included in the statement was the following in reference to subsection (b) : .;. Seetion 3 (B) confers jmiscliction on every fur product made in whole or in part of fur which has been shipped or received in commerce. This means that such a fur product remains subject to all of the provisions of the proposed law' and to the jurisdiction of the Commission up to the time it reaches the ultimate consumer, irrespective of ,vhether or not such garments pass in commerce when sold by the retailer.

Because it will nft'onl the retailer a ver~~ importn.nt right without weakening the underlying pu I'p05e of the bill. it is respectfully urged that the proposed amel1(lm~:nt be incorporated into the fur-labeling bill. (D7 Congo Rec. 1462 (19~1). ) T11nt amendment to subsection (e) relating to label substitution was later adopted by the Senate and in further revised form remained in the bill as ultimately enacted. It thus appears that legislative action respecting a companion subsection ensued after the advisability of such revision was urged on grounds that the sweep of subsection (b) included "every" fur product made in whole or in part of fur which had been shipped nnd rec.eived in commerce and on assurances that the amendment notwithstanding, retailers would continue to be bound by the disclosure requirements of the Act. These matters occurred almost contemporaneously with the statute s enactment and their import. refutes c.conclusions that the scope of the subsection was to be restricted to local marketing activities of furriers processing garments from furs shipped and by them received in commerce. The. express language of the subsection and the Aces legislative history support the conclusion that su bse.ction (b) confers jurisc1ict ion over the local marketing of eveTY fur product processed from furs which theretofore have moved in c.ommerc.e. The order issued the 111 atter of i acq'ucs De aoTte' , et (d. by the Commission In Docket :No. 6297 (decided :May 11 , 1956 L was based on this interpretation. That order was aflirmed on review. iacques De GO1'te'J' v. Federal Trade CO1n17'Liss.ion, supra.

The hearing examiner erred in failing to make appropriate findings relating to the respondent's violation of Section 3 (b) of the Fur Products Labeling Act. and we are granting this aspect of the appeal of counsel supporting the complaint. The errors urged in c.ounsers appeal incident to denial of the motion to amend the complaint ill interests of broadening its charges under Sec.tion 3 (a) to conform to the proof of record have been discussed previously. Those excepti oils ate being granted, including counsel's additional exceptions to . )3ENTON FURS 217 2()3 Qpinion the scope of the initial deeision s order to ceas~ and desist. Our findings as to the facts, responsive to the allegations of the com,. plaint .as amended, and conclusions and order to cease and desist are. separately issuing herein.

. Commissioners Gwynne and Tait dissented to the decision herein. DISSENTING OPINION By TAIT, Coinmissione.r: The majority errs in holding that the jurisdiction of the Commission is likewise established under Section 3(b). The record does not support the majority finding "that included among the misbranded and falsely advertised and invoiced fur prodllcts offered for sale and sold by the respondent were garments made. in whole or part of furs shipped and 1'eceived in CO1nrnerce prior to the respondent's receipt of those garments. (Emphasis supplied. The evidence supports nothing more than . a conclusion that some of the fur products sold by respondent cO1Jtahwd Fnr of aninw1s lwvir/.g nO' 7JWZ lwbdat in Asia and Russia. "\Vhether the pelts were, in fact from animals raised in Asia and Russin whether the pelts themselves were subsequently shipped from these geographical areas, or whether the pelts were first made into garments and the garments subsequently shipped therefrom is purely conjectural. To infer from the mere fact that these animals normally have a foreign habitat the further fact that the pelts were shipped and received in commerce is an unwarranted assumpdon.

, as There is no evidence in this record establishing that any furs such, were ever "shipped and received" in commerce by anyone. should be kept in mind~ of course, that the Fur Products Labeling Act consistently distinguishes between furs a.nd fur products. Secondly, even if the Commission s determination as to the source of the fur were supported by the re.cord, which it is not there is no finding and corresponding proof that respondent was engaged in , sale, advertising, offering for sale tJhe manufacture for sale transportation or distribution, of any fur product which is made in ,whole or in part of fur which has been shipped and received in eomn1erce * * * .As more fully demonstrated below, applicability of Section 3 (b) 01' inhinges on local manufacture of fur products made in whole part of fur (the skins) which has been received in commerce by the manufacturer who distributes such garments locally. Yet the major'- (b) are metity view is satjsfied that the requirements of Sectjon 3 as long as ~H1yone is found to have marketed or advertised fur prod- Opinion 54 F.

ucts (the finished garment) made from out-of-state fur by another party.

The majority rests its conclusion principally. on the legislative history of that subsection; however, the comfort which the Commission seeks to derive therefrom is quite illusory. :My examination of the pertinent data does, in fact, lead to a wholly different conclusion. Above all, it was the Commission which suggested the enactment of Section 3 (b) to Congress. Consequently, the reasons for the Commission s recommendation will be given great weight by the reviewing court. United States v. A 17U3i'l(;an Trucking Associ(ttim1~ Inc. et al. 310 U. S. 534, 549 (1940).

The need for legislative action relating to the marketing and advertising of fur products was considered by the 80th and 81st Congresses, which held hearings on various proposals. During the 81st Congress, the following bills were introduced: I-LR. 97, I-LR. 3755 and ultimately H. . 5187. ' In response to an official request to comment on I-LR. 97, the Commission by letter of February 15, 1949, suggested to the Committee on Interstate and Foreigl1 Commerce of the House of Representatives the advisability of expanding the purview of the legislative proposal by:

* * * broadening the scope of the bill to cover locally manufactured fur products made in whole or in part from furs purchased and received in commerce. Such act ion is fully within the power of Congress. (Uni.ted States v. S:uUivan 332 U. S. 689 (1948)) and would place local manufacturers on an equal competitive basis with out-of-state concerns and might easily be accomplished by amending section 3 of the proposed bill by inserting immediately following section 3 (a) the following subsection:

II (b) The manufacture for sale, sale, advertising, offering for sale, transportation or distribution, of any fur product which is made in whole or in part of fur which has been shipped and received in commerce, and which is misbranded or falsely or deceptively advertised or invoiced, within the meaning of this Act or the llules and Regulations prescribed under Section 8 (b), is unlawful and shall be an unfair method of competition, and an unfair and deceptive act or practice, in commerce, under the Federal Trade Commission Act." Hearings Before Subcommittee of the Committee on Interstate and Foreign Commerce, 81st Cong., 1st Sess" May J949, p, 29. And when the Commission was asked to present its views on I-I. 3755, it repeated in its letter of April 21 , 1949, word for word the above-quoted Fe.bruary statement (Id. at 31). The attention of the majority centers on the SuZlil/Jan decision which the Commission had cited to indicate the fun range of Congressional power to legislate in that twilight area of commerce where the distinction between interstate and intrastate. activities often be- BENTON FURS 219 203 Opinion comes blurred. But this is a fat cry from the majority s position that the mere citing of the Sulli.1.~an decision manifested an intent to include under Section 3 (b) "all" local manufacturers irrespective of whether they or other parties received the out-of-state fur which was to become a component part. of the finished product. l\ioreover, in a strained effort to push the ambit of the subsection beyond reasonable bounds, the majority seeks to bring within the scope of the provision "the fur mere-hant (presumably meaning the retailer) or manufacturer who misbrands or falsely advertises fur products made of furs which have. been received in interstate commerce by another.

Such a misconception should definitely and can easily be dispeIJed by presenting the events of 1949, as they relate, to the subsection, in chronological sequence and considering them consequently in their proper perspective. Following the April letter of the Commission R. 5187 was introduced on June 15~ 194D, and passed by the House on July 14, 1949. This bin incorporated verbatim subsection (b) as it had appeared in the proposed amendment to R. 91 and H. 3755; the. wording of that subsection is identical with present Section 3 (b). The Committee which favorably reported H.R. 5187 (Report No. 919, 81st Cong. ~ 1st Sess. ) appended a letter from the Commission dated June 27 1949, stating in part: Section 3(b) of the proposed bill brings within jurisdiction of the statute the jurrier 'Who man-uractl/res his product tram jUTS 1ohich he has 1oeceivcd in intel"state CO1Jl.1nerCC and 'markets the finished products 7.ocaUll. Such BIuendment \vas suggested in our report on H.R. 3755 and is in our opinion desirable aml necessary in placing local mallujacture1's on 'an equal. cO1npetUive basis 1Oi,t1l out-oj-State concerns. (Emphasis supplied, The difference between the language of the statements in the February and April letters, on the one hand, and the language of the above-quoted excerpt from the June letter, on the other hanel, is striking. The February and April pronouncements merely related to local manufacturers whereas the final June response specified the local manufacturers whom the Commission intended as the target of the recommendation, i. , those who received the out-of-state fur and subsequently marketed locally the finished products made by was the fur-J'ecelllJi. ng local manufacturer whom thethem. And it Connnission sought to place "on an equal competitive basis with outof-State concerns.

The. omission, in the above-quoted extract from the June Jetter, of any reference to the S'll. Ui?)a.11. case is also significant. If the citation of the 8u1lililan case in fI. previous Jetter is definitive proof of a sig- ) G 52R577-60- Opinion 54 F.T~C.

nificant purpose, as claimed by the majority, why was this reference omitted? Clearly it would not have been omitted if it were of such jmportance as is now claimed.

In. the 'J une letter the emphasis conspicuously was on the words received in interstate commerce" which the majority now simply reads out of the statute. As distinguished from Section 3 (b), the focal point of the SuZli' oan provision (~301 (k) of the Food, Dr~g; and Cosmetic Act of 1938) was an article held for sale after ship- 7nent in interstate commerce. Section 3 (b), however, concerns a commodity, not alone shipped but both shipped and received in interstate commerce. Thus, the language used in Section 3 (b) had the effect of contracting the reach of the Sullvan decision which was based on the statutory term "shipment" without reference to the receipt of goods in commerce.

The Commission s proposal as embodied in Section 3 (b) was submitted in order to close a loophole through which manufacturers who did not market, in commerce, fur products made of out-of-state fur received by them but who disposed of such products locally could slip away from the jurisdiction of the Commission. The argument of the majority that its point has been proved by the Commission s citing of the Sulli. can rather than the 111 CDe1'11wtt case (ill Edel'17wtt v. 1Visco11sin 228 U.S. 115 (1913)) in the first two letters is misleading, for :Mr. Justice Black merely discussed the 1If cDe7'1nott decision in the context of the constitutionality of the Food, Drug and Cosmetic Act. The incidental fact that respondent in the ill cDeTllwtt case had received the article in commerce was not the decisive issue since only shipment, not receipt, in commerce was the test under the 1938 Act as ,yell as under the 1906 Act, which was attacked in the 31 cDermott case. N everthe-Less, the majority coneludes that since the Commission did not mention the ill cDeJ' 7l1ott case but did cite the uZlivan decision, there was evidence of the intent "to encompass constitutionally the fur merchant or manufacturer who misbrands or falsely advertises fur products made of fuls which have been received in interstate commerce by another. One can only express astonishment at such a strained deduction. If the majority is correct, any manufacturer who would acquire out-of-state. pelts through a chain of preceding purchasers years after the furs had entered the state would come within the purview of the provision. The majority contends that this efiect-and I cannot possibly ac.eept sneh rensoning-fiows from the fact that "the subsection not only applies to the 'manufacture for sale.: but expressly to the 'sale, advertising, oflering for sale, transportation or distribu- BENTON FURS 221 203 Opinion tion' of fur products as well." Does the majority seriously believe that a manufacturer does not intend to sell, does not intend to adver..: tise, does not intend to offer for sale, does not intend to transport or distribute his product? Be that as it may, it is simple logic that any goods shipped in commerce must likewise be received in commerce unless they are lost or destroyed in transit. It is therefore inconceivable that the words and received" (in commerceJ were added purely as linguistic embellishments of a redundant nntnre. It follows that neither Congress nor the Commission could have aimed indiscriminately at all consignees without considering whether or not they received the fur in commerce. Thus, the objective of Section 3 (b) must have been and continues to be, to cover exclusively those consignees who not only receive fur in commerce but also use such fur to manufacture products for marketing purposes, receipt alone being insufficient to come within the purview of that subsection. In R. further etl'ort to bolster its contention that the scope of Section 3 (b) goes beyond the statutory Janguage and intent, the majority draws for support on a statement made in Report No. 546 of Tune 11 , 1951 , 82d Cong. , 1st Sess., p. 2, which accompanied J-LH. 2321, i. , the bill finally enacted by the 82d Congress. There it is said:

It (the bm) further requires that ,vllen fur or fur products are advertised in snell. COlli'll/Cree, or after havi'llfJ /)ccn shipped or received in 81Wh commerce the!':e vital facts be truthfully stated in tile advertising. (Emphasis supplied. I fail to see any reasonable relntion between the above statement and the instant. question of whether only a local manufacturer who made a finished garment from out-of-state fur received. by him eommeree. is subject to Section 3 (b).

Next, the majority seeks to strengthen its view with a statement by a private organization of retailers submitted through Senator Lodge, for the record, to exphin a proposed amendment to subsection (e), not subsection (b), of Section 3 dealing with label substitution and relating to S. 508, the companion bill to I-I.R. 2321. In the course of their presentation, the retailers incidentally mentioned that Section 3 (b) conferred juriscbction over every fur product made of fur shipped and received in commerce and that such product remained subject to all the mandatory requirements of the law regardless of whether or not such garments passed in commerce when sold by a retailer.

The majority has chosen to quote, in addition to the foregoing paraphrased version, the paragraph immediately following the re- Opinion 54 F.

tailers reference to Section 3 (b) thus giving the. impression that the latter paragraph would likewise relate to Section 3 (b) . Read in its proper context, that paragraph une.quivocally relates not to subsection (b) but to the amendment to subsection (e) proposed by the retailers.

It is plain that the view expressed by the retailers, a private organization, was nothing more than their interpretation, to which we cannot attach any weight. In any event, the amendment which was adopted pursuant to the request of this trade group was confined to subsection (e).

:Moreover, the very same subsection (e), which was the object of the amendment proposed by the retailers, clearly identifies them (certainly for present purposes) as the "person (s) selling, advertising, ofl'e-ring for sale or processing a ful' product* which has been shipped and received in commerce not as persons selling, advertising, oflering for sale or processing a fur product made f?Y)1n fllt which has been shipped and received in commerce. The distinction between the two classes.s of persons is so obvious and the dissimilarity between the. language of subsection. (e) and the language of subsection (b) so startling as to lead to the inescapable conclusion that the latter subsection cannot and does not cover retailers. Hetailers are covered by other subsections of Section Not even in the mainstay of the. majority's argument, namely the Febrmlry and April letters, was there the slightest intimation that Congress and the Commission intended to include retailers in the purview of Section 3 (b). Throughout the legisbtive history of that. subsection reference was made only to manufacturers. Finally, in basing the Commission s jurisdiction on Section 3(b) as well as on Section 3 (a) , the maj ority relies on the recent decision of the Circuit Court of Appeals for the Ninth Circuit in Jacques De Gorter and gaze O. De Gorte?' as 'l~ndi(/)-idu.(lls and as co-padnei' trading as Pelto F1tts v. Fede?' aZ T1'(tde 001nm-i88'l~On No. 15 , 184 decided April 17, 1957, D. 6297 (hereinafter called the Pelta case). The reason for the majority s leaning on the Pelta decision is the Court' s unqualified affirmance of the Commission s order, which. without supporting findings to that effect, included as jurisdictional grounds Section 3 (b). Yet, the. reasons for assuming jurisdicbon over Pelta as stated in the Commission s findings, were: * * * the activities of the respondents in procuring fur products from sources outside the State of California, and thereafter advertising and offering for sn!(:' in IW'YSpapers of interstate circulation, and then selling and shipping and c1e- .. Emphasis Bupplied.

.

BENTON FURS 223 '203 Opinion Jivering such fur products in commerce clearly bring their business activities within the concept of "commerce" under the Fur P1'oducts Labeling Act. (p. 2 of the Findings As to the Facts) And, though omitting the acts of selling and shipping and delivering fur products in Cmn7nerce the Commission s opinion confirmed the existence of these jurisdictional grounds as follows: * * * Since the record clearly discloses that respondents procured fur products outside of California and thereafter advertised them ill newspapers with interstate circulation, their business activities clearly come "within the concept of commerce under the Fur Products Labeling Act." We are of the opinion that the Hearing Examiner s conclusion that respondents' business activities come within the ambit of both acts is correct and is substantiated on the record. Our conclusion that respondents are ellga(1ed in intel"state commerce both as defined by the Fur Products Labeling Act and by the Federal Trade Commission Act, as indicated above, and our rulings hereinafter on respondents second plea on appeal and on the appeal of counsel in support of the complaint render it unnecessary specifically to discuss in this opinion respondents' exceptions on appeal as such. (Emphasis supplied; p. :2 of Commission s opinion) (Respondents' first plea was that they " were not engaged in interstate commerce. Their second plea and the plea of counsel supporting the complaint related to Rule 44 matters). The determination of the Commission is prominently characterized by the fact that its findings and its opinion, as far as they relate to the issue of jurisdiction, concerned interstate business activities. Thus for the purpose of establishing the Commission s jurisdiction the practices which the Pelta respondents were charged with and found t.o have engaged in were violations of Section 3 (a) and not Section 3 (b), and the Court' s findings and conclusions did not go beyond that.

The attention of the Court. was focused solely on Section 3 (a) when it described the object of the Act as making unlawful: * * * the introduction, or manufacture for introduction, into commerce or the sale, advertising or offering for sale in commerce, or the transportation 01. the distribution in commerce, of any fur product which is misbranded 01' deceptively advertised or invoiced. (p. 9 of the Court's decision) The Court, just like the Commission, did not refer anywhere in the opinion to the provisions of Section 3 (b). Nothing could more etfectively reveal the Court's thinking on the question of jurisdiction than the very language of its decision: The ~nles to persons residing outside California, the advertising in newspapers of interstate circulation, and the out-of-state origin of approximately one-follrth of the products sold, taken together, establish the fact that the peti.tior)ers weJ'lJ eng-ng-ec1 in interstate commerce ns that term is defined in the special Act llnder consideration and in the Federal Trade Commission Act. (Emphasis supplied: p. l(-j of tile Collrt' s dedsion.l Opinion 54 F.

This determination follows in every respect the Commission s findings quoted above. Neither that determination nor those findings conta.in the. slightest reference to fur products made from fur shipped and received in commerce.

The legislative history of Section 3 (b) which was not called to the Pelta case andattention of the Commission and the Court in the indeed, was not presented to the Commission in the instant ca.se not satisfy themakes it eminently clear that shipping alone does statutory requirements for the Commission s jurisdiction. The fur must also be received in commerce by the manufacturer-the paramount condition precedent which must ,exist in order to invoke the application of Section 3 (b). The practice of receiving fur in commerce by local manufacturers who marketed the. finished product improperly within their community was the evil at which the Commission sought to strike and of Section 3 (b).was the sole reason for causing the enactment' of the majority s position The foregoing review and evaluation leave no alternative but to conclude (1) that Section 3 (b) jurisdiction ean be established only on a finding (absent in the instant. case) t hat respondent has locally manufactured and distributed fur products made from fur which was received by him in commerce and (2) ' that violations of Section 3 (b) constitute a basis for the Comindependent and entirely apartmission s jurisdiction wholly from the grounds enumerated in Section 3 (a). Infractions occur of interstate promotion a.nd distri-under Section 3 (a) in the event butjon of fur products by retailers manufacturers and others; and under Section 3 (b) in cases of intrastate advertising and marketing products from furby only local manufacturers who make their ~hiell that receive in interstate commerce. Chairman Gwynne concurs in this dissent.

.. .AH well fie OTJiDiou.

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ARTISTIC MODERN; INC., ET . AL. 225 Decision