FTC v. Sperry & Hutchinson Co.

The Federal Trade Commission (FTC) entered a cease-and-desist order against Sperry & Hutchinson Co. (S&H), the largest and oldest trading stamp company, on the ground that it unfairly attempted to suppress the operation of trading stamp exchanges and other "free and open" redemption of stamps. S&H argued in the Court of Appeals that its conduct was beyond the reach of § 5 of the Federal Trade Commission Act, which it claimed permitted the FTC to restrain only such practices as are either in violation of the antitrust laws, deceptive, or repugnant to public morals. The Court of Appeals reversed the FTC, holding that the FTC had not demonstrated that S&H's conduct violated § 5 because it had not shown that the conduct contravened either the letter or the sprit of the antitrust laws.

Held:


 * 1. The Court of Appeals erred in its construction of § 5. Congress, as previously recognized by this Court, see FTC v. R.F. Keppel & Bro., 291 U.S. 304, defines the powers of the FTC to protect consumers as well as competitors and authorizes it to determine whether challenged practices, though posing no threat to competition within the letter or spirit of the antitrust laws, are nevertheless either unfair methods of competition, or unfair or deceptive acts or practices. The Wheeler-Lea Act of 1938 reaffirms this broad congressional mandate. Pp. 239-244.


 * 2. Nonetheless the FTC's order cannot be sustained. The FTC does not challenge the Court of Appeals' holding that S&H's conduct violates neither the letter nor the spirit of the antitrust laws and its opinion is barren of any attempt to rest its order on the unfairness of particular competitive practices or on considerations of consumer interests. Nor did the FTC articulate any standards by which such alternative assessments might be made. Pp. 245-249.


 * 3. The judgment of the Court of Appeals setting aside the FTC's order is affirmed, but because that court erred in its construction of § 5, its judgment is modified to the extent that the case is remanded with instructions to return it to the FTC for further proceedings not inconsistent with this opinion. Pp. 249-250.

432 F. 2d 216, modified and remanded.

WHITE, J., delivered the opinion of the Court, in which all Members joined except POWELL and REHNQUIST, JJ., who took no part in the consideration or decision of the case.

Assistant Attorney General McLaren argued the cause for petitioner. With him on the briefs were Solicitor General Griswold, Harold D. Rhynedance, Jr., Karl H. Buschmann, and Richard H. Stern.

Harold L. Russell argued the cause for respondent. With him on the brief were Samuel K. Abrams, Claus Motulsky, J. Sam Winters, Alan R. Wentzel, and Wayne T. Elliott.