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Fedders Corp. v. Federal Trade Commission

decided: January 21, 1976.


Petition to review cease and desist order issued by Federal Trade Commission against Fedders Corporation. Petitioner's claim is that the FTC order applies to unsubstantiated "performance" claims although its advertising was deceptive only insofar as it claimed "uniqueness." Petition denied.

Mulligan, Oakes and Meskill, Circuit Judges.

Author: Oakes

OAKES, Circuit Judge:

Petitioner seeks review of a final order entered against it by the Federal Trade Commission. The order stems from an investigation and determination by the Commission that petitioner has made serious misrepresentations in the advertising claims it has used to promote sales of its air conditioning equipment. Specifically, the Commission found that Fedders has claimed in its advertising that its air conditioners are unique, because they have "reserve cooling power," a term which the parties agree was intended to imply an unusual ability to produce cold air under extreme conditions of heat and humidity. In fact, however, the Fedders conditioners had no objective technical advantage over the equipment manufactured by its competitors. Accordingly, the Commission concluded that petitioner was engaging in misrepresentations in its advertising in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a).*fn1 A cease and desist order was entered by the Commission which prohibits Fedders from:*fn2

1. Representing, directly or by implication, that any air conditioner, on the basis of a comparison thereof with the air conditioners of other manufacturers then being marketed in the United States in commercial quantities, is unique in any material respect, unless such is the fact;

2. Making, directly or indirectly, any statement or representation in any advertising or sales promotional material as to the air cooling, dehumidification, or circulation characteristics, capacity or capabilities of any air conditioner, unless at the time of such representation respondent has a reasonable basis for such statement or representation, which shall consist of competent scientific, engineering or other similar objective material or industry-wide standards based on such material. . . .

Review is sought here under 15 U.S.C. § 45(c).

Fedders does not challenge the Commission's finding that Fedders' advertising involved misrepresentations.*fn3 Instead, it contends that the Commission's order is impermissibly broad in that it prohibits practices which are not sufficiently related to the unlawful practice actually found by the Commission and that these practices are, therefore, outside the proper scope of the Commission's remedial order. See Jacob Siegel Co. v. FTC, 327 U.S. 608, 90 L. Ed. 888, 66 S. Ct. 758 (1946); FTC v. Royal Milling Co., 288 U.S. 212, 77 L. Ed. 706, 53 S. Ct. 335 (1933). More specifically the claim is, as it has been all along,*fn4 that the order appealed from covers not only "uniqueness" claims of the type which has been found false by the administrative law judge, but also covers advertising claims with respect to "performance characteristics" of the product, i. e., air cooling, dehumidification and circulation, which Fedders claims were not involved in the FTC proceeding. Since Fedders quite properly agrees that the Commission has the power within its discretion to enjoin "like and related acts" to the one condemned, FTC v. Mandel Bros., Inc., 359 U.S. 385, 393, 3 L. Ed. 2d 893, 79 S. Ct. 818 (1959), the question before us is whether the Commission's order is sufficiently narrow to come within that standard. We hold that it is and deny the petition for modification of the order.

There is much broad language in the cases that the Commission has a wide discretion in its choice of a remedy to "cope with the unlawful practices" disclosed by the record. Id. at 392; Jacob Siegel Co. v. FTC, supra, 327 U.S. at 611. The Commission

is not limited to prohibiting "the illegal practice in the precise form" existing in the past. FTC v. Ruberoid Co., 343 U.S. 470, 473, 96 L. Ed. 1081, 72 S. Ct. 800 [1952]. This agency, like others, may fashion its relief to restrain "other like or related unlawful acts." Labor Board v. Express Pub. Co., 312 U.S. 426, 436, 85 L. Ed. 930, 61 S. Ct. 693 [1941].

FTC v. Mandel Bros., Inc., supra, 359 U.S. at 392. "One cannot generalize as to the proper scope of these orders. It depends on the facts of each case and a judgment as to the extent to which a particular violator should be fenced in." Id. Congress has placed the primary responsibility for fashioning orders upon the Commission, and for this reason the courts should not lightly choose to modify the Commission's orders. FTC v. Colgate-Palmolive Co., 380 U.S. 374, 392, 13 L. Ed. 2d 904, 85 S. Ct. 1035 (1965); FTC v. Cement Institute, 333 U.S. 683, 726, 92 L. Ed. 1010, 68 S. Ct. 793 (1948). So long as the remedial order is reasonably related to the unlawful practices found to exist, the Commission's order should be upheld. FTC v. National Lead Co., 352 U.S. 419, 428, 1 L. Ed. 2d 438, 77 S. Ct. 502 (1957); Hoving Corp. v. FTC, 290 F.2d 803, 806 (2d Cir. 1961).

At the same time we take full cognizance of the petitioner's point that, as we expressed it in Country Tweeds, Inc. v. FTC, 326 F.2d 144, 149 (2d Cir. 1964), the overall concept of "reasonableness" has required the narrowing of deceptive advertising orders so that they more closely relate to the offending conduct while "still sufficiently prohibiting 'variations on the basic theme.'" See Vanity Fair Paper Mills, Inc. v. FTC, 311 F.2d 480, 487 (2d Cir. 1962). See also Spiegel, Inc. v. FTC, 411 F.2d 481 (7th Cir. 1969). Mr. Justice Jackson's admonitions in his Ruberoid dissent, 343 U.S. at 480 et seq., have not gone unheeded in the courts. And we are fully aware of the suggestion in FTC v. Henry Broch & Co., 368 U.S. 360, 367-68, 7 L. Ed. 2d 353, 82 S. Ct. 431 (1962), reiterated in FTC v. Colgate-Palmolive Co., supra, 380 U.S. at 392, that the stiff penalty procedures under § 45(l), see Brown & Williamson Tobacco Corp. v. FTC, 527 F.2d 1115 (2d Cir. 1975), may well require a more specific and precise order than would have been necessary prior to the enactment of those penalties in 1959.*fn5 We note, however, that no problem of lack of specificity or precision in the order is involved here. Fedders' argument is that a false "performance" claim is not simply a "variation upon the basic theme" of a false "uniqueness" claim. A performance misrepresentation, the argument runs, is an offense so distinct from and so much greater than a false claim of uniqueness as not to be "like or related."

There is no dispute that paragraph 1 of the Commission's order is reasonably related to the unlawful misrepresentations Fedders has engaged in. Ordering Fedders to cease and desist from making claims that its air conditioners are "unique in any material respect, unless such is the fact," is obviously directly responsive to the Commission's finding that Fedders' claim that its products possessed a "reserve cooling power" was a spurious claim of unique product quality. Petitioner properly concedes that the Commission has authority "to frame its order broadly enough to prevent [the petitioner] from engaging in similarly illegal practices in future advertisements." FTC v. Colgate-Palmolive Co., supra, 380 U.S. at 395. Clearly, paragraph 1 of the order in this case was made well within that authority.

Paragraph 2 of the FTC order, we think, stands on no different footing. This part of the order, which forbids petitioner from making advertising claims as to the "air cooling, dehumidification, or circulation characteristics, capacity or capabilities of any air conditioner" unless substantiated is also reasonably related to the prior misrepresentations which Fedders employed in its sales program. The false claim made by Fedders that its air conditioners possessed "reserve cooling power" implied that some feature of the cooling, dehumidifying or circulation systems of the equipment allowed them to perform better than other air conditioners would at extreme temperature and humidity conditions. That is to say, the vague design claim relating to a reserve cooling power implicated the basic performance characteristics of the entire product. The administrative law judge put it somewhat confusedly when he said that "Respondent has admitted disseminating a false performance claim for its room air conditioners relating to the uniqueness of the ability of its room air conditioners to function satisfactorily at conditions of extreme heat and humidity." The respondent, petitioner here, made no such admission but rather admitted only false claims of uniqueness, the only deceptions charged in the complaint. But as ...

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