Seekonk Freezer Meats, Inc

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IN THE MATTER OF SEEKONK FREEZER MEATS , INC., ET AL.

Docket 8880. Interlocutory Order, September 1990 ORDER It is ordered That this show cause proceeding is dismissed. Commissioner Strenio dissenting.

OPINION OF THE COMMISSIO;\ Per Curiam:

The Commission has reopened this matter to consider modifying our earlier decision and order, which found that respondents had violated the Truth-In-Lending Act and Regulation Z. Staff now urges that we find that respondents ' conduct constitutes an unfair act or practice under Section 5 of the FTC Act. The issue presented is nearly identical to that posed by Reliable Mortgage Corporation, et ai. D. 8956 where, in an accompanying decision, the Commission finds the record insufficient to support the proposed modification. For similar reasons we reject the arguments proffered here and dismiss this show cause proceeding.

I. Procedural History On March 15 , 1973 , the Commission issued an order against Seekonk Freezer Meats, Inc. and its chief executive officer Lawrence Fontes ("Seekonk" or "respondents ) for violations of Section 5 of the FTC Act, 15 U. C. 45 , the Truth-In-Lending Act ("TILA"), 15 C. 1601 et seq. and Regulation Z, 12 CFR 226, which implements TILA. Seekonk Freezer Meats, Inc. , et al. 82 FTC 1025 (1973) Seekonk" The Commission found that respondents advertised certain credit terms without disclosing others in violation of Regulation Z's triggering term provision 1 TILA and the FTC Act. Seelconk 82 FTC at 1052. The Commission s order, among other things I Regulation Z' g triggering term provision currently appears at 12 CFR 226.24(c) (1981) (prcyiously 12 CFR 226. 10(d)(2)) 2 Through advertising such as "only $4. 72 per week for 26 weeks" and "only $3.30 per week for 52 weeks respondents represented the amount of an installment payment, the number of installments and the period of repayment without also disclosing: (1) cash price; (2) amount of down payment required; (3) amount of finance charge expressed as an annual percentage rate; and (4) deferred payment price. Seekonk 82 FTC at 1052, SEEKONK FREEZER MEATS, INC" ET AL. 813 812 Opinion prohibited respondents from stating any of Regulation Z' s identified credit terms without stating all required terms. Seekonk 82 FTC at 1059. Predicating its findings on TILA, Regulation Z and the FTC Act generally, the Commission did not determine that the violations constituted unfair or deceptive practices under Section 5 of the Federal Trade Commission Act.

On January 31 , 1989 , the Commission issued an order to show cause to respondents in this matter ' as to why the Seekonk proceeding should not be reopened and the order modified to clarify that the True violation constitutes an unfair and deceptive act or practice in violation of Section 5. Seekonk D. 8880 (January 31 1989) (Show Cause Order). Respondents failed to answer the show cause order.

Consequently, on September 25 , 1989, the Commission issued an order reopening this proceeding and ordering the staff to file a brief addressing the proposed modification. Seekonk D. 8880 (September , 1989) (Order Reopening Proceeding to Consider Modification of Decision and Directing Submission of Briefs). The Commission invited interested parties to submit amicus curiae briefs on the proposed revisions to the Seekonk decision. 4 The staff fied their brief on January 2, 1990. No amici briefs were received. II. Discussion The issue presented is whether the credit advertising violation in Seekonk-advertising certain credit terms without disclosing other required terms constitutes an unfair practice under Section 5 of the FTC Act. 5 Staff advances two primary arguments in support of the proposed modification. First, staff claims that by enacting TILA Congress determined that this practice is unfair. Second, staff argues that the True violation independently meets the unfairness criteria. These arguments are nearly identical to those presented in Reliable where, in an accompanying opinion, we decline to adopt the proposed modification. Reliable Mortgage Corporation et ai. 8956 (FTC Sept. 21 , 1990), slip op. at 3- 7. Although Seekonk involves a different credit advertising violation than Reliable the same conclusions apply. First, we reject the argument that Congress' general concern with On the same date, the Commission issued a similar show cause order against respondents in Reliable Mm' tgage C017JOration, et al. 85 FTC 21 (1975) Reliable ). Reliable 8956 (January 1989) (Show Cause Order). OUf opinion denying the proposed modification accompanies this decision. 54 Fed. Reg. 47 826 (November 17 , 1989).

The reopeninl; order also invlted proof on whether the violation was deceptive under Section 5. Staff declined to brief this issue.

, Separate Statement 113 F.

unfair and misleading credit advertising practices amounts to a determination that a violation of TILA constitutes an unfair or deceptive act or practice under Section 5. Neither the statutory language nor the legislative history supports such an approach. Reliable 8956 , slip op. at 3- Second, we find the record insufficient to establish that a violation of Regulation Z' s triggering term provision independently meets the unfairness criteria. A finding of unfairness requires evidence of substantial unavoidable consumer injury. Orkin Exterminating Co. Inc. 108 FTC 263 , 360 (1986), afJd 849 F. 2d 1354 (with Cir. 1988), 6 Staff claims that Seekonk'cert. denied 109 S. Ct. 865 (1989). failure to disclose crucial credit terms obscured the true cost of credit and may have resulted in erroneous credit choices and unavoidable search costs. Br. at 15- 16. But no evidence is cited in support. 7 In short, absent a record with supporting evidence, we cannot find that Seekonk' failure to disclose was unfair. This is not to say that the practice might be deemed unfair in another case on a litigated record. We are simply reluctant to make new law in the context of a nonadversarial proceeding where the evidence is lacking. III. Conclusion For the reasons set forth above, and in our accompanying opinion in Reliable we find the record insufficient to support the proposed modification. Accordingly, we dismiss this show cause proceeding. SEPARATE STATEMENT OF CHAIRMAN JANET D. STEIGER I concur in the decision to dismiss this show cause proceeding, but reach that decision for different reasons than those stated by the Opinion of the Commission. My separate statement made in Reliable Mortgage Corporation Doc. No. 8956, applies here as well. 6 The Commission considers: (1) how substantial the injury is; (2) whether the practice produces offsetting benefits that outweigh the injury; and (3) whether the consumers could have reasonably avoided OI'kinit. , 108 FTC at 362; In/e1 national IIarv€stm' Co. 104 .FTC 949 , 1061 (1984). 7 At most, the record shows that Seekor.k failed to disclose annual percentage rates as high as 21% and down payments from $117.50 to $42. 50. Br. at 13- 14. We have no way of ascertaining whether this omitted information in fact imposed substantial consumer injury. 8 In certain circumstances half-truths" may be deceptive under Section 5 of the FTC Act. See Internationat Ha1"Vester 104 FTC at 1057-58. Here, however, the record contains no evidence or findings to support a conclusion that Scekonk' spartial disclosureconstitu ted deception under Section 5. SEEKONK FREEZER MEATS, I:C. , ET AL. 815 812 Concurring Opinion CONCURRI:-G OPIJ\ION OF COMMISSIONER DEBORAH K. OWEN I agree with the result and the underlying analysis of the Majority Opinion in this matter. The observations made in my Concurring Opinion in Reliable Mortgage Corporation Doc. No. 8956, apply here as well.

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Opinion 113 F.