1. Findings of fact made by the Federal Trade Commission are
conclusive when supported by evidence. P.
258 U. S.
491.
2. A manufacturer's practice of selling underwear and other knit
goods made partly of wool but labeled as "natural merino," "natural
worsted," "natural wool" and with other like terms taken by a
substantial part of the consuming public and sometimes in the
retail trade as indicating pure wool fabrics, with the result of
misleading part of the public into buying, as all-wool, garments
made largely of cotton and of aiding and encouraging
misrepresentations by unscrupulous retailers and their salesmen, is
an unfair method of competition as against manufacturers of like
garments made of wool or wool and cotton, who brand their products
truthfully, and is subject to be suppressed under § 5 of the
Federal Trade Commission Act. P.
258 U. S.
491.
3. Such a method of competition, inherently unfair, does not
cease to be so because competitors become aware of it or because
it
Page 258 U. S. 484
become so well known to the trade that retailers, as
distinguished from consumers, are no longer deceived by it. P
258 U. S.
493.
272 F. 957 reversed.
Certiorari to review a decree of the circuit court of appeals
setting aside an order of the Federal Trade Commission under § 5 of
the Act of September 26, 1914, C. 311, 38 Stat. 719.
Page 258 U. S. 490
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
The Winsted Hosiery Company has for many years manufactured
underwear which it sells to retailers throughout the United States.
It brands or labels the cartons in which the underwear is sold, as
"Natural Merino," "Gray Wool," "Natural Wool," "Natural Worsted,"
or "Australian Wool." None of this underwear is all wool. Much of
it contains only a small percentage of wool; some as little as ten
percent. The Federal Trade Commission instituted a complaint under
§ 5 of the Act of September 26, 1914, c. 311, 38 Stat. 717, 719,
and called upon the company to show cause why use of these brands
and labels alleged to be false and deceptive should not be
discontinued. After appropriate proceedings, an order was issued
which, as later modified, directed the company to
"cease and desist from employing or using as labels or brands on
underwear or other knit goods not composed wholly of wool, or on
the wrappers, boxes or other containers in which they are delivered
to customers, the words 'Merino,' 'Wool,' or 'Worsted,' alone or in
combination with any other word or words, unless accompanied by a
word or words designating the substance, fiber or material other
than wool of which the garments are composed in part
(
e.g., 'Merino, Wool and Cotton;' 'Wool and Cotton;'
'Worsted, Wool and Cotton;' 'Wool, Cotton, and Silk') or by a word
or words otherwise clearly indicating that such underwear or other
goods is not made wholly of wool (
e.g., part wool). "
Page 258 U. S. 491
A petition for review of this order was filed by the company in
the United States Circuit Court of Appeals for the Second Circuit.
The prayer that the order be set aside was granted, and a decree to
that effect was entered. [
Footnote
1] That court said:
"Conscientious manufacturers may prefer not to use a label which
is capable of misleading, and it may be that it will be desirable
to prevent the use of the particular labels, but it is in our
opinion not within the province of the Federal Trade Commission to
do so."
272 F. 957, 961. The case is here on writ of certiorari. 256
U.S. 688.
The order of the Commission rests upon findings of fact, and
these upon evidence which fills 350 pages of the printed record.
Section 5 of the act makes the Commission's findings conclusive as
to the facts, if supported by evidence.
The findings here involved are clear, specific and
comprehensive: the word "Merino," as applied to wool, "means
primarily and popularly" a fine long staple wool, which commands
the highest price. The words "Australian Wool" mean a distinct
commodity, a fine grade of wool grown in Australia. The word
"wool," when used as an adjective, means made of wool. The word
"worsted" means primarily and popularly a yarn or fabric made
wholly of wool. A substantial part of the consuming public, and
also some buyers for retailers and sales
Page 258 U. S. 492
people, understand the words "Merino," "Natural Merino," "Gray
Merino," "Natural Wool," "Gray Wool," "Australian Wool" and
"Natural Worsted," as applied to underwear, to mean that the
underwear is all wool. By means of the labels and brands of the
Winsted Company bearing such words, part of the public is misled
into selling or into buying as all wool underwear which in fact is
in large part cotton. And these brands and labels tend to aid and
encourage the representations of unscrupulous retailers and their
salesmen who knowingly sell to their customers as all wool
underwear which is largely composed of cotton. Knit underwear made
wholly of wool has for many years been widely manufactured and sold
in this country, and constitutes a substantial part of all knit
underwear dealt in. It is sold under various labels or brands,
including "Wool," "All Wool," "Natural Wool" and "Pure Wool," and
also under other labels which do not contain any words descriptive
of the composition of the article. Knit underwear made of cotton
and wool is also used in this country by some manufacturers who
market it without any label or marking describing the material or
fibers of which it is composed, and by some who market it under
labels bearing the words "Cotton and Wool" or "Part Wool." The
Winsted Company's product, labeled and branded as above stated, is
being sold in competition with such all wool underwear and such
cotton and wool underwear.
That these findings of fact are supported by evidence cannot be
doubted. But it is contended that the method of competition
complained of is not unfair within the meaning of the act because
labels such as the Winsted Company employs, and particularly those
bearing the word "Merino," have long been established in the trade
and are generally understood by it as indicating goods partly of
cotton; that the trade is not deceived by them; that there was no
unfair competition for which another
Page 258 U. S. 493
manufacturer of underwear could maintain a suit against the
Winsted Company, and that, even if consumers are misled because
they do not understand the trade signification of the label or
because some retailers deliberately deceive them as to its meaning,
the result is in no way legally connected with unfair
competition.
This argument appears to have prevailed with the court of
appeals, but it is unsound. The labels in question are literally
false, and, except those which bear the word "Merino," are palpably
so. All are, as the Commission found, calculated to deceive and do
in fact deceive a substantial portion of the purchasing public.
That deception is due primarily to the words of the labels, and not
to deliberate deception by the retailers from whom the consumer
purchases. While it is true that a secondary meaning of the word
"Merino" is shown, it is not a meaning so thoroughly established
that the description which the label carries has ceased to deceive
the public, for even buyers for retailers and sales people are
found to have been misled. The facts show that it is to the
interest of the public that a proceeding to stop the practice be
brought. And they show also that the practice constitutes an unfair
method of competition as against manufacturers of all wool knit
underwear and as against those manufacturers of mixed wool and
cotton underwear who brand their product truthfully. For when
misbranded goods attract customers by means of the fraud which they
perpetrate, trade is diverted from the producer of truthfully
marked goods. That these honest manufacturers might protect their
trade by also resorting to deceptive labels is no defense to this
proceeding brought against the Winsted Company in the public
interest.
The fact that misrepresentation and misdescription have become
so common in the knit underwear trade that most dealers no longer
accept labels at their face value does not prevent their use being
an unfair method of competition.
Page 258 U. S. 494
A method inherently unfair does not cease to be so because those
competed against have become aware of the wrongful practice. Nor
does it cease to be unfair because the falsity of the
manufacturer's representation has become so well known to the trade
that dealers, as distinguished from consumers, are no longer
deceived. The honest manufacturer's business may suffer not merely
through a competitor's deceiving his direct customer, the retailer,
but also through the competitor's putting into the hands of the
retailer an unlawful instrument which enables the retailer to
increase his own sales of the dishonest goods, thereby lessening
the market for the honest product. That a person is a wrongdoer who
so furnishes another with the means of consummating a fraud has
long been a part of the law of unfair competition. [
Footnote 2] And trademarks which deceive the
public are denied protection although members of the trade are not
misled thereby. [
Footnote 3] As
a substantial part of the public was still misled by the use of the
labels which the Winsted Company employed, the public had an
interest in stopping the practice as wrongful, and since the
business of its trade rivals who marked their goods truthfully was
necessarily affected by that practice, the Commission was justified
in its conclusion that the practice constituted an unfair method of
competition, and it was authorized to order that the practice be
discontinued.
Reversed.
MR. JUSTICE McREYNOLDS dissents.
[
Footnote 1]
The original order of the Commission was based on findings which
rested upon an agreed statement of facts. The petition for review
urged, among other things, that the agreed statement did not
support the findings. Thereupon the Commission moved in the court
of appeals that the case be remanded to the Commission for
additional evidence as provided in the fourth paragraph of § 5 of
the act. Under leave so granted, the evidence was taken, and
modified findings of fact were made. The modified order was based
on these findings. It is this modified order which was set aside by
the court of appeals, and we have no occasion to consider the
original order or the proceedings which led up to it.
[
Footnote 2]
Von Mumm v. Frash, 56 F. 830;
Coca-Cola Co. v.
Gay-Ola Co., 200 F. 720, 722;
New England Awl & Needle
Co. v. Marlborough Awl & Needle Co., 168 Mass. 154,
155.
[
Footnote 3]
Manhattan Medicine Co. v. Wood, 108 U.
S. 218;
Worden v. California Fig Syrup Co.,
187 U. S. 516,
187 U. S.
538.