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Book-Of-The-Month Club Inc. v. Federal Trade Commission.

February 10, 1953

BOOK-OF-THE-MONTH CLUB, INC., HARRY SCHERMAN AND MEREDITH WOOD, AS OFFICERS OF THE BOOK-OF-THE-MONTH CLUB, INC.
v.
FEDERAL TRADE COMMISSION.



Author: Frank

Before AUGUSTUS N. HAND, CHASE and FRANK, Circuit Judges.

On May 23, 1940, the Commission by letter, bearing File No. 28-2-2309, advised petitioner that it had "given consideration to the facts developed in a preliminary investigation of an application for complaint involving alleged false and misleading advertising" by petitioner; that from the investigation the Commission had found that further proceedings by it were not warranted; and that the "files covering this application have, therefore, been closed without prejudice to the right of the Commission to reinstate the matter if conditions should warrant."

On July 8, 1947, the Commission by letter, bearing File No. 1-20162, advised petitioner as follows:

"The Commission has given consideration to the facts developed by a preliminary investigation made pursuant to an application for complaint alleging violation of the Federal Trade Commission Act through the alleged misleading and deceptive use of the terms 'free' and 'without cost' in the advertising and sale of books by the Book-of-the-Month Club, Inc., proposed respondent in the above numbered matter. Inasmuch as it appears from the facts disclosed by this preliminary investigation that the proposed respondent herein sets forth clearly and conspicuously the terms and conditions of the offer under which the 'free' books may be secured; and that the offer is made under circumstances and conditions that do not appear in any other respect to constitute an act, practice or method of competition calling for corrective action in the public interest, the Commission does not contemplate at this time further proceedings in the matter. You are advised, however, that the Commission may at any time take such further action as the public interest may require."

On January 14, 1948, the Commission adopted and published in the Federal Register what it there called "administrative interpretations with reference to the use of the word 'free' and the words of similar import under certain conditions to describe merchandise." These "interpretations" read as follows:

"The use or the word 'free' or words of similar import, in advertising to designate or describe merchandise sold or distributed in interstate commerce, that is not in truth and in fact a gift or grantuity or is not given to the recipient thereof without requiring the purchase of other merchandise or requiring the performance of some service inuring directly or indirectly to the benefit of the advertiser, seller or distributor, is considered by the Commission to be a violation of the Federal Trade Commission Act."

On January 30, 1948, the Commission in a letter to petitioner, bearing File No. 1-20162, after referring to those "interpretations" as a "statement of policy" and quoting those "interpretations," went on to say:

"Because of the use in advertising of such words and phrases as 'free,' and 'bookdividend' under circumstances requiring the prior purchase of certain books in order to receive the merchandise referred to as 'free,' etc., the Commission reconsidered and rescinded its action of June 6, 1947, closing this matter, reopened the case, and directed that an opportunity be extended to execute a stipulation to cease and desist; with the further direction that if a satisfactory stipulation not be tendered, formal complaint issue, in conformity with the statement of policy as above set out."

A proceeding subsequently began which, after a hearing, ended in findings and an order of the Commission directing petitioners to cease and desist from

"Using the word 'free,' or any other word or words of similar import or meaning, in advertising to designate or describe any book, or any other merchandise, which is not in truth and in fact a gift or grantuity or is not given to the recipient thereof without requiring the purchase of other merchandise or requiring the performance of some service inuring directly or indirectly to the benefit of the [Club]."

The advertising matter which was before the Commission at the hearing was the same in substance as that which was the subject of the letters of May 23, 1940, and July 8, 1947.

FRANK, Circuit Judge:

We feel obliged by Federal Trade Commission v. Standard Education Society, 302 U.S. 112, to deny the relief sought by petitioners and to hold that the Commission's order must stand. In that case, this court was reversed. We had said that, to the discharge of its duty, the Commission should not

"bring a pedantic scrupulosity; too solicitous a censorship is worse than any evils it may correct, and a community which sells for profit must not be ridden on so short a rein that it can only move at a walk. We cannot take seriously the suggestion that a man who is buying a set of books and a ten years' 'extension service,' will be fatuous enough to be misled by the mere statement that the first are given away, and that he is paying only for the second. Nor can be conceive how he could be damaged were he to suppose that that was true. Such ...


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