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Exposition Press Inc. v. Federal Trade Commission.

decided: November 6, 1961.

EXPOSITION PRESS, INC. AND EDWARD UHLAN
v.
FEDERAL TRADE COMMISSION.



Author: Lumbard

Before LUMBARD, Chief Judge, FRIENDLY and SMITH, Circuit Judges.

LUMBARD, Chief Judge: Exposition Press, Inc. and Edward Uhlan, its president, petition for review of an order directing them to cease and desist from certain deceptive advertising practices entered by the Federal Trade Commission pursuant of § 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.*fn1

Petitioners attack the order on a number of grounds; that the complaint before the Federal Trade Commission did not state a cause of action, that the Commission's findings of deceptiveness are erroneous, that on principles of res judicata the Commission's proceedings were barred by an earlier consent order, and that in any event the Commission's order is too broad and should be modified. We find these contentions to be without merit.

Exposition Press, Inc. is a "subsidy" or "vanity" publisher. Its business differs from that of most publishing houses in that normally most or all of the expense of publishing its books is paid in advance by their authors. Less than 10% of its authors recoup their investments and derive actual profit from their writing.*fn2

The Commission's complaint attacked Exposition's use of the following advertisement, which was inserted in a variety of newspapers and magazines:

"Free to Writers seeking a book publisher

Two fact-filled, illustrated brochures tell how to publish your book, get 40% royalties, national advertising, publicity and promotion. Free editorial appraisal. Write Dept. STM-3.

Exposition Press /386 4th Ave.,

N.Y. 16"

The hearing examiner found that the application of the term "royalty" to any payments from sales receipts made to an author before his entire investment had been returned was deceptive per se.

The Commission vacated the Examiner's findings and made more limited findings to the effect that the advertisement as worked tended to "mislead and deceive a substantial portion of the purchasing public with respect to the payment they will receive for the publication of their books. . . ." It entered an order that petitioners cease and desist from:

"Representing through the use of the term 'royalties' or in any other manner that they will make payments to an author based on sales of the author's book unless a disclosure is made in immediate conjunction therewith that such payments do not constitute a net return to the author but that the cost of printing, promoting, selling and distributing the book must be paid in whole or in substantial part by the author."

A subsequent motion to modify the order was denied.

1. Res Judicata - We agree with the hearing examiner and the Commission that the consent order agreed to between Exposition and the Commission in November 1957 does not bar the present proceeding. Exposition argues that this earlier order, which dismissed "all other charges in the complaint," disposed of the question whether the mode of advertising now attacked was unfair. Its argument is not that the earlier complaint specifically alleged misuse of the term "royalty," but rather that because of a statement by Commission counsel at the earlier hearing that ...


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