Alberty v. Federal Trade Commission , 182 F.2d 36 ( 1950 )

PRETTYMAN, Circuit Judge.

This is a petition to review an order of the Federal Trade Commission. Petitioners are engaged in selling food and drug products. They were charged by the Commission with disseminating false advertisements amounting to unfair and deceptive acts or practices in commerce. Four products are involved in this petition. They are Oxorin Tablets, Zen, Vitamin A Shark Liver Oil, and Alberty’s Phospho B. After hearing, the Commission made detailed findings and issued a cease and desist order. Petitioners contest the validity of two clauses contained in parts of the order.

The Commission found that typical of the advertisements in respect to Oxorin are; bition left, when every effort you make seems to leave you weak and spent then try Oxorin Tablets, a tonic for the blood.”

“Pep up your blood! Iron * * * A principal factor in Red Blood Cells * * * The disease Fighting Units of the Blood.”

“When you are weary, tired, run-down, just dragging yourself around with no am-

The Commission found as a fact that these tablets have no beneficial effect upon the blood except in cases of simple iron-deficiency anemia and that there are many causes of run-down conditions and lack of energy which will not be beneficially affected by the tablets. Petitioners do not object to that portion of the cease and desist order which forbids them to represent “That the preparation ‘Oxorin Tablets’ will have any therapeutic effect upon the blood or the red corpuscles thereof, except in cases of simple iron deficiency anemia; or that said preparation will relieve, correct, or have any beneficial effect upon the condition of lassitude characterized by such expressions as ‘weariness’, ‘tiredness’, ‘weakness’, ‘lack of energy’, or ‘general run down condition’, unless such representation be expressly limited to symptoms or conditions due to simple iron deficiency anemia”.

However, the Commission added to the foregoing the requirement that the advertisement also state “that the condition of lassitude is caused less frequently by simple iron deficiency anemia than by other causes and that in such cases this preparation will not be effective in relieving or correcting it.” This additional clause is one of the two which are the subject matter of the petition for review. It is applied to other products as well as to Oxorin Tablets.

The Federal Trade Commission Act gives the Commission authority to prevent persons from using unfair or deceptive practices in commerce,¹provides that the dissemination of false advertisement is an unfair or deceptive practice in commerce,² and defines a false advertisement as one which is misleading in a material respect.³ In determining, whether the advertisement is misleading, failure to reveal facts made material by existing representations and failure to reveal facts made material by reason of the consequences of using the product are to be considered.⁴ Thus, false advertising, by the terms of the statute, includes failure to reveal certain characteristics of the product which become important either because of certain things which are represented in the advertisement or because of consequences which arise from the use of the product. The Supreme Court has held that the act confers upon the Commission not only the powers specifically prescribed but all power falling within the penumbra of meaning in the statutory provisions. In Jacob Siegel Co. v. Federal Trade Comm.,⁵ the Supreme Court held that in these cases “the courts will hot interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist.”

. The question posed in the case at bar is not restricted to the peculiarities of these products. None involved is injurious or harmful in any sense. On the contrary, it is agreed that they have beneficial effects. The proposition that. an advertisement should limit claims of beneficial effect to the causes for which the product is helpful—-in the case of Oxorin Tablets simple iron-deficiency anemia—is not disputed. But the Commission says that these advertisers must go further 'and say that the condition of lassitude is caused less frequently by simple iron-deficiency anemia than by other causes and that in such cases the product will not be effective. In short, the Commission. requires that the advertiser tell the public that his product is more frequently valueless than it is valuable.

[2] If this rule applies to petitioners, it must also apply to all other products similarly advertised. The scope of the power thus claimed by the Commission will be seen if the advertisements which are currently customary in newspapers and magazines and on the radio are called to mind. Headaches, lack of energy, indigestion, and numerous other ailments may be due to any one or more of many causes, and remedies for these ills are usually beneficial only when the condition results from certain of those causes. It is admitted in this case that the Commission can require an advertiser of a product beneficial to a certain condition to specify which cause of that condition will yield to the product. But under the power claimed, the Commission could require every such advertiser to announce that in most cases the remedy will be useless. The question before us deals with an advertiser who states plainly that his product will aid a certain condition when that condition arises from one certain described cause. The question is whether that advertisement is, nevertheless, false and fraudulent unless it also' states that frequently, or less frequently, or more frequently, the described condition springs from other causes which will not be reached by the product.

Even if we give effect to the broadest possible concept of the power conferred by the Congress upon the Commission, we do not think that the Commission has the power here claimed. There is a limit to the Commission’s power. It is not given a general charter to police the expenditure of the public’s money or generally to do whatever is considered by it to be good and beneficial. The task assigned it by Congress is specific, and it has no other authority in respect to this subject. False advertising is defined by the act 'as including failure to reveal facts made important, or of some consequence, because of other things claimed, and failure to reveal facts made important, or of some consequence, because of the results of the use of the product. The Commission must find either of two things before it can require the affirmative clause complained of: (1) that failure to make such statement is misleading because of the consequences from the use of the product, or (2) that failure to make such statement is misleading because of the things claimed in the advertisement. There is no such finding here.

Nor do we see how a derogatory addendum to the advertisement, such as that required here by the Commission, has any reasonable relation to the purpose of preventing the 'advertisements from being misleading. As we have pointed out, there are no harmful consequences from use of these products. The limitations imposed by the first part of the Commission’s order reveal the stark, complete truth. In the case of Oxorin Tablets, petitioners can say that they help lassitude only if they specify lassitude due to simple iron-deficiency anemia. The Commission has found that such a statement is true. Moreover, it is the full truth. It is clear enough that an additional derogatory negative emphasizes the truth. No matter how clear and complete an affirmative statement is, it can be sharpened by a negative delimitation. Almost every advertisement of a food, drug or drink, no matter how accurately described and carefully limited in claims, would fall within the scope of the rule here sought to be established.

We are concerned with the scope of the power thus sought by the Commission. If it has this power, it could, if it chose, require an advertiser of a breakfast food rich in iron to state not only that the food is good for those deficient in iron but also that iron deficiency is less frequent than other ills and that for these others the advertised food is valueless; and similarly through the loAg list of foods, drugs and drinks good for one or a few of the ills of men but not for all. Such power seems to us to be no less than the power to control the marketing of all such products, because, if particular advertisers, selected by the Commission, can be required not only to state accurately the limited benefits of their products but also to call attention to what the products will not do, the effect on marketing is clear enough. Such a requirement seems to us to have no relation to the prevention of falsity in advertising. It is a wholly different power.

Our dissenting judge says that “The Act’s purpose is to encourage the informative function of advertising”. That view reflects clearly the difference between us. We think that neither the purpose nor the terms of the act are so broad as the encouragement of the informative function. Both purpose and terms are to prevent falsity and fraud, a negative restriction. When the Commission goes beyond that purpose and enters upon the affirmative task of encouraging advertising which it deems properly informative, it exceeds its authority. Of course, the truth of an advertisement affects its informative function. But the scope and nature of the information contained in an advertisement involve many more considerations than its mere truth. It would be ideal from the buyer’s point of view if all advertisements were required to describe the product with cold precision, to enumerate with fidelity its shortcomings, and to call attention to the circumstances in which it is valueless. And a plausible argument can be made that an advertisement is not really truthful unless it does all those things. But we think that the negative function of preventing falsity and the affirmative function of requiring, or encouraging, additional interesting, and perhaps useful, information which is not essential to prevent falsity, are two totally different functions. We think that Congress gave the Commission the full of the former but did not give it the latter. In our judgment, the Commission goes far across the line when it attempts to require the advertiser of a drug admittedly beneficial in one ailment to state affirmatively that there are other ailments not reached by the drug. This latter requirement is merely the encouragement of the informative function of advertising.

Congress has given us a definition of false advertisement and in it has specified the respects in which failure to reveal amounts to falsity. It has thus indicated, even though it has not prescribed precisely, the limits to which it meant the Commission could go. It seems to us that the limit of the Commission’s power is to require that a product be truthfully represented, and that it has no power to require additional negative statements except as the act itself indicates, i. e., where the affirmative representations require further explanation or where the consequences of using the product require further warning. Neither of these specifications is present in the case at bar.

The other part of the Commission’s order complained of relates solely to Phospho B. The Commission required that if the petitioners make any claim that this product possesses any therapeutic value in the treatment of sleeplessness, nervousness, etc., they must expressly limit such claims to “claims of value made for the preparation under the principles of the homeopathic school of medicine”. The homeopathic school is one of the two generally recognized schools of medicine, and, although it has considerably less supporters in number than has the ’allopathic school, it is nonetheless respectably established and practiced. According to the principles of the homeopathic school, this particular product is a medicine. We do not think that failure to designate which of two established schools of medicine recognizes a product as beneficial is misleading and makes the advertisement false.

We hold that failure to include the two disputed clauses in the advertisements under consideration' is not false advertising under the Federal Trade Commission Act, and that the Commission has no power to enforce such requirements.

The statute gives this court power not only to affirm or to reverse but also to modify orders of the Commission.⁶ The order under review is modified by striking from paragraph 1(d) the clause “and unless the advertisement reveals that the condition of lassitude is caused less frequently by simple iron deficiency anemia than by other causes and that in such cases this preparation will not be effective in relieving or correcting it”, and eliminating from other paragraphs similar clauses; and by striking from paragraph l(k) the phrase “under the principles of the homeopathic school of medicine”. As thus modified, the order is affirmed.

Order modified and affirmed.

1 . 38 Stat. 719 (1914), 52 Stat. Ill (1938), 15 U.S.C.A. §45 (a).

2 . 52 Stat. 114 (1938), 15 U.S.C.A. § 52 (!>)•

3 . 52 Stat. 116 (1938), 15 U.S.C.A. § 55(a), reads: “The term ‘false advertisement’ means an advertisement, other than labeling, which is misleading in a material respect; and in determining whether any advertisement is misleading, there shall be taken into account (among other tilings) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual. No advertisement of a drug shall be deemed to be false if it is disseminated only to members of the medical profession, contains no false representation of a material fact, and includes,, or is accompanied in each instance by truthful disclosure of, the formula showing quantitatively each ingredient of such drug.”

4 . Ibid. False advertising is defined in this section of the act for the purposes of Sections 12, 13 and 14. Section 12 (b), 52 Stat. 114 (1938), 15 U.S.O.A. § 52 (b) says that false advertising is an unfair or deceptive practice within the meaning of Section 5 of the act (supra note 1). Cf. Fresh Grown Preserve Corp. v. Federal Trade Comm., 2 Cir., 1942, 125 F.2d 917.

5 . 1946, 327 U.S. 608, 613, 66 S.Ct. 758, 760, 90 L.Ed. 888.

6 . 38 Stat. 719 (1914), 52 Stat 111 (1938), 15 U.S.C.A. §§ 45(e) and 45(d).