2. A complaint may be filed under § 5 only "if it shall appear
to the Commission that a proceeding by it in respect thereof would
be to the interest of the public," and this requirement is not
satisfied merely by proof that there has been misapprehension and
confusion on the part of purchasers, or even that they have been
deceived.
Page 280 U. S. 20
To justify filing a complaint, the public interest must be
specific and substantial. P.
280 U. S.
27.
3. The Commission has jurisdiction of a complaint authorized by
its resolution declaring in appropriate form that the Commission
has reason to believe that the party complained of is violating § 5
of the Act and that it appears to the Commission that a proceeding
in respect thereof would be in the interest of the public; but its
action in authorizing the filing of a complaint, like its action in
making an order thereon, is subject to judicial review. P.
280 U. S.
29.
4. Whenever in the course of the proceeding before the
Commission the specific facts established show, as a matter of law,
that the proceeding is not in the public interest, the Commission
should dismiss the complaint, and if, instead, it enters an order
and brings suit to enforce it, the court, without inquiry into the
merits, should dismiss the suit. P.
280 U. S. 30.
5. S had long engaged in the business of making and selling
window shades in the District of Columbia under the name "The Shade
Shop," and in 1914 occupied part of K's store. In 1915, S removed
from K's shop in violation of his agreement. As a result of the
ensuing controversy, K, who had previously sold window shades only
incidentally to his principal business of painting and
paperhanging, opened that line in the space vacated by S and
advertised it as "Shade Shop," generally with the qualification
"Hooper & Klesner." Five years later, and after S's suit for an
injunction had been dismissed by the Supreme Court of the District,
the complaint before the Commission was filed. A desist order was
entered nearly two years later. This suit to enforce the
Commission's order was begun nearly nine years after K had
instituted the course of conduct complained of. No claim was made
that K's goods were inferior to S's or that the public otherwise
suffered financially.
Held, that the filing of the
complaint was not in the public interest, and that this suit should
therefore be dismissed. P.
280
U. S. 30.
25 F.2d 524 affirmed.
Certiorari, 278 U.S. 591, to review a judgment of the Court of
Appeals of the District of Columbia dismissing a suit to enforce an
order of the federal Trade Commission. The judgment is affirmed on
a ground different from that adopted by the court below. For
earlier decisions in the same case,
see 6 F.2d 701;
274 U. S. 145.
Page 280 U. S. 22
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This case is here on certiorari, for the second time. It was
brought in the court of appeals of the District of Columbia by the
federal Trade Commission under § 5 of the Act of September 26,
1914, c. 311, 38 Stat. 717, 719, to enforce an order entered by it.
The order directs Klesner, an interior decorator, who does business
in Washington under the name of Hooper & Klesner, to
"cease and desist from using the words 'Shade Shop' standing
alone or in conjunction with other words as an identification of
the business conducted by him, in any manner of advertisement,
signs, stationery, telephone, or business directories, trade lists
or otherwise."
That court dismissed the suit on the ground that, unlike United
States circuit courts of appeals, it lacked jurisdiction to enforce
orders of the Federal Trade Commission. 6 F.2d 701. On the first
certiorari, we reversed the decree and directed that the cause be
remanded for further proceedings.
Federal Trade Commission v.
Klesner, 274 U. S. 145.
Then the case was reargued before the court of appeals, on the
pleadings and a transcript of the record before the
Page 280 U. S. 23
Commission, and was dismissed on the merits, with costs. 25 F.2d
524. This second writ of certiorari was thereupon granted. 278 U.S.
591. We are of opinion that the decree of the court of appeals
should be affirmed -- not on the merits, but upon the ground that
the filing of the complaint before the Commission was not in the
public interest.
The conduct which the Commission held to be an unfair method of
competition practiced within the District had been persisted in by
Klesner ever since December, 1915. The complaint before the
Commission was filed on December 18, 1920. The order sought to be
enforced was entered June 23, 1922. This suit was begun on May 13,
1924. The evidence before the Commission, which occupies 394 pages
of the printed record in this Court, is conflicting only to a small
extent. The findings of the Commission are in substance as
follows:
Sammons has for many years done business in Washington as maker
and seller of window shades, under the name of "The Shade Shop."
Prior to 1914, that name had, by long use, come to signify to the
buying public of the District the business of Sammons. The concern
known as Hooper & Klesner has also been in business in
Washington for many years. Prior to 1915, its trade had consisted
mainly of painting and of selling and hanging wallpaper. It had
dealt also, to some extent, in window shades, taking orders which
it had executed either by Sammons or some other maker of window
shades. In 1914, Hooper & Klesner leased a new store pursuant
to an arrangement with Sammons, and sublet to him a part of it.
There, Sammons continued his business of making and selling window
shades as an independent concern under the name of "The Shade
Shop." His gross sales there were at the rate of $60,000 a year. On
a Sunday in November, 1915, he removed all his effects from
those
Page 280 U. S. 24
premises and established his business in another building four
doors away.
Sammons' removal was in confessed violation of his agreement
with Hooper & Klesner. An acrimonious controversy ensued.
Threats of personal violence led to Sammons' having Klesner
arrested, and this to bitter animosity. Out of spite to Sammons,
and with the purpose and intent of injuring him and getting his
trade, Hooper & Klesner decided to conduct on its own account,
in the premises which Sammons had vacated, the business of making
and selling window shades. It placed upon its show windows, and
also upon its letterheads and billheads, the words "Shade Shop,"
and listed its business in the local telephone directory as "Shade
Shop, Hooper & Klesner" and as "Shade Shop." A like sign was
placed on its delivery trucks. This use by Hooper & Klesner of
the term "Shade Shop" has caused, and is causing, "confusion to the
window-shade purchasing public throughout the District," and, on
certain occasions, customers who entered Hooper & Klesner's
shop were deceived by employees, being led to believe that it was
Sammons'. Meanwhile, Klesner had become the sole owner of the
business.
Such were the findings of the Commission. The court of appeals
concluded that there was no showing either that Klesner was
attempting to dispose of his goods under the pretense that they
were the goods of Sammons or that he was attempting to deceive or
entice any of Sammons' customers; that the evidence introduced to
show deception went no further than that some of the public may
have purchased from Klesner under a mistaken belief that they were
dealing with Sammons; that the words "Shade Shop" were being used
by Klesner always in connection with the words Hooper &
Klesner, and that the term "Shade Shop," as used by Klesner, merely
indicated
Page 280 U. S. 25
that his store was a place where window shades were made and
sold. The court of appeals ruled that these words, being
descriptive of a trade or business, were incapable of exclusive
appropriation as a legal trademark or tradename, and that there was
nothing in the facts to justify the charge of unfair competition.
It therefore dismissed the suit on the merits, the ground of
decision being that there was a lack of those facts which, in a
court of law or of equity, are essential to the granting of relief
for alleged acts of unfair competition.
We need not decide whether the court of appeals was justified in
all of its assumptions of fact or in its conclusions on matters of
law. For we are of opinion that the decree should be affirmed on a
preliminary ground which made it unnecessary for that court to
enquire into the merits. Section 5 of the Federal Trade Commission
Act does not provide private persons with an administrative remedy
for private wrongs. The formal complaint is brought in the
Commission's name; the prosecution is wholly that of the
government, and it bears the entire expense of the prosecution. A
person who deems himself aggrieved by the use of an unfair method
of competition is not given the right to institute before the
Commission a complaint against the alleged wrongdoer. Nor may the
Commission authorize him to do so. He may, of course, bring the
matter to the Commission's attention and request it to file a
complaint. [
Footnote 1] But a
denial of his request is final. And if the request is granted and a
proceeding is
Page 280 U. S. 26
instituted, he does not become a party to it or have any control
over it. [
Footnote 2]
The provisions in the Federal Trade Commission Act concerning
unfair competition are often compared with those of the Interstate
Commerce Act dealing with unjust discrimination. But, in their
bearing upon private rights, they are wholly dissimilar. The latter
Act imposes upon the carrier many duties, and it creates in the
individual corresponding rights. For the violation of the private
right, it affords a private administrative remedy. It empowers any
interested person deeming himself aggrieved to file, as of right, a
complaint before the Interstate Commerce Commission, and it
requires the carrier to make answer. Moreover, the complainant
there, as in civil judicial proceedings, bears the expense of
prosecuting his claim. [
Footnote
3] The Federal Trade Commission Act contains no such
features.
Page 280 U. S. 27
While the Federal Trade Commission exercises under § 5 the
functions of both prosecutor and judge, the scope of its authority
is strictly limited. A complaint may be filed only "if it shall
appear to the Commission that a proceeding by it in respect thereof
would be to the interest of the public." This requirement is not
satisfied by proof that there has been misapprehension and
confusion on the part of purchasers, or even that they have been
deceived -- the evidence commonly adduced by the plaintiff in
"passing off" cases in order to establish the alleged private
wrong. It is true that, in suits by private traders to enjoin
unfair competition by "passing off," proof that the public is
deceived is an essential element of the cause of action. This proof
is necessary only because otherwise the plaintiff has not suffered
an injury. There, protection of the public is an incident of the
enforcement of a private right. [
Footnote 4] But, to justify the Commission in filing a
complaint under § 5, the purpose must be protection of the public.
[
Footnote 5] The protection
thereby afforded to private persons is the incident. Public
interest may exist although the practice deemed unfair does not
violate any private right. In
Federal Trade Commission v.
Beech-Nut Packing Co., 257 U. S. 441, a
practice was suppressed as being against public policy although no
private right either of a trader or of a purchaser appears to have
been invaded. In
Federal Trade Commission v.
Winsted
Page 280 U. S. 28
Hosiery Co., 258 U. S. 483, an
unfair practice was suppressed because it affected injuriously a
substantial part of the purchasing public, although the method
employed did not involve invasion of the private right of any
trader competed against.
In determining whether a proposed proceeding will be in the
public interest, the Commission exercises a broad discretion. But
the mere fact that it is to the interest of the community that
private rights shall be respected is not enough to support a
finding of public interest. To justify filing a complaint, the
public interest must be specific and substantial. Often it is so,
because the unfair method employed threatens the existence of
present or potential competition. Sometimes because the unfair
method is being employed under circumstances which involve flagrant
oppression of the weak by the strong. Sometimes because, although
the aggregate of the loss entailed may be so serious and widespread
as to make the matter one of public consequence, no private suit
would be brought to stop the unfair conduct, since the loss to each
of the individuals affected is too small to warrant it. [
Footnote 6]
The alleged unfair competition here complained of arose out of a
controversy essentially private in its nature. The practice was
persisted in largely out of hatred and malice engendered by
Sammons' act. It is not claimed that the article supplied by
Klesner was inferior to that
Page 280 U. S. 29
of Sammons, or that the public suffered otherwise financially by
Klesner's use of the words "Shade Shop." It is significant that the
complaint before the Commission was not filed until after the
dismissal, in 1920, of a suit which had been brought by Sammons in
1915, in the Supreme Court of the District, to enjoin Klesner's use
of the words "Shade Shop." [
Footnote 7] When the Commission directed the filing of the
complaint Hooper & Klesner had been using those words in its
business for five years. They had been used for nearly seven years
before the order here in question was made, and for nearly nine
years before this suit to enforce it was begun. Whatever confusion
had originally resulted from Klesner's use of the words must have
been largely dissipated before the Commission first took action. If
members of the public were, in 1920 or later, seriously interested
in the matter, it must have been because they had become partisans
in the private controversy between Sammons and Klesner.
The order here sought to be enforced was entered upon a
complaint which had in terms been authorized by a resolution of the
Commission. The resolution declared in an appropriate form both
that the Commission had reason to believe that Klesner was
violating § 5 and that it appeared to the Commission that a
proceeding by it in respect thereof would be to the interest of the
public. Thus, the resolution was sufficient to confer upon the
Commission jurisdiction of the complaint. Section 5 makes the
Commission's finding of facts conclusive if supported by evidence.
Its preliminary determination that
Page 280 U. S. 30
institution of a proceeding will be in the public interest,
while not strictly within the scope of that provision, will
ordinarily be accepted by the courts. But the Commission's action
in authorizing the filing of a complaint, like its action in making
an order thereon, is subject to judicial review. The specific facts
established may show, as a matter of law, that the proceeding which
it authorized is not in the public interest within the meaning of
the act. If this appears at any time during the course of the
proceeding before it, the Commission should dismiss the complaint.
If, instead, the Commission enters an order, and later brings suit
to enforce it, the court should, without enquiry into the merits,
dismiss the suit.
The undisputed facts, established before the Commission at the
hearings on the complaint, showed affirmatively the private
character of the controversy. It then became clear (if it was not
so earlier) that the proceeding was not one in the interest of the
public, and that the resolution authorizing the complaint had been
improvidently entered.
Compare Gerard C. Henderson, The
Federal Trade Commission, pp. 52-54, 174, 228, 229, 337. It is on
this ground that the judgment dismissing the suit is
Affirmed.
[
Footnote 1]
The rules of practice adopted by the Commission require that the
application be in writing and
"contain a short and simple statement of the facts constituting
the alleged violation of law and the name and address of the
applicant and of the party complained of."
Rules of Practice, No. II.
See Annual Report of the
Federal Trade Commission for 1928, pp. 17, 18, 41, 42, and Exhibit
5, p. 132. As to changes made in the procedure and policy March 17,
1925, and September 17, 1928,
see id., Exhibit 1, pp.
117-119.
[
Footnote 2]
The sole privilege conferred upon private persons is contained
in the following provision of § 5:
"Any person, partnership, or corporation may make application,
and upon good cause shown may be allowed by the Commission, to
intervene and appear in said proceeding by counsel or in
person."
38 Stat. 719.
[
Footnote 3]
Prior to the Act of June 18, 1910, c. 309, § 11, 36 Stat. 539,
550, which in terms conferred upon the Interstate Commerce
Commission power to issue orders in proceedings initiated by it,
orders were, with a few exceptions, entered only on complaints
filed by shippers or others. Even after the Act of June 29, 1906,
c. 3591, 34 Stat. 584, it was asserted that the Commission was
without power to enter orders in proceedings initiated by it.
Report of the House Committee on Interstate and Foreign Commerce,
April 1, 1910, 61st Cong.2d Sess. No. 923, pp. 3, 10; 45 Cong.Rec.
Appendix, p. 88.
Compare In the Matter of Allowances for
Transfer of Sugar, 14 I.C.C. 619, 627. It had been stated earlier
(
Interstate Commerce Com. v. Detroit, etc., Ry., 57 F.
1005, 1008) that the power existed, and its existence was assumed
in
Interstate Commerce Com. v. Northern Pacific Ry. Co.,
216 U. S. 538,
216 U. S.
542.
Both the United States Shipping Board Act of September 7, 1916,
c. 451, § 22, 39 Stat. 728, 736, and the Packers and Stockyards Act
of August 15, 1921, c. 64, §§ 308, 309, 42 Stat. 159, 165, confer
upon private individuals the right to institute proceedings and
upon the administrative tribunal the power to award
reparations.
[
Footnote 4]
See American Washboard Co. v. Saginaw Mfg. Co., 103 F.
281, 284, 285;
Borden Ice Cream Co. v. Borden's Condensed Milk
Co., 201 F. 510, 513;
Rosenberg Bros. & Co. v.
Elliott, 7 F.2d 962, 965; Nims, Unfair Competition (3d ed.)
pp. 27-36.
[
Footnote 5]
See Royal Baking Powder Co. v. Federal Trade
Commission, 281 F. 744, 752;
Federal Trade Commission v.
Balme, 23 F.2d 615, 620;
Indiana Quartered Oak Co. v.
Federal Trade Commission, 26 F.2d 340, 342.
[
Footnote 6]
Compare Federal Trade Commission v. Beech-Nut Co.,
257 U. S. 441;
Federal Trade Commission v. Pacific Paper Assn.,
273 U. S. 52;
Wholesale Grocers' Assn. v. Federal Trade Commission, 277
F. 657;
Southern Hardware Jobbers' Assn. v. Federal Trade
Commission, 290 F. 773;
Oppenheim, Oberndorf & Co.,
Inc. v. Federal Trade Commission, 5 F.2d 574;
Toledo
Pipe-Threading Mach. Co. v. Federal Trade Commission, 11 F.2d
337;
Cream of Wheat Co. v. Federal Trade Commission, 14
F.2d 40;
Arkansas Wholesale Grocers' Assn. v. Federal Trade
Commission, 18 F.2d 866;
Kobi Co. v. Federal Trade
Commission, 23 F.2d 41.
[
Footnote 7]
The original rule to show cause issued in the action was
dismissed by the Supreme Court of the District on the 23d day of
December, 1915,
"upon consideration of the bill of complaint, the exhibits
thereto, and the rule to show cause issued thereon, and the answer
and exhibits to said rule, as well as the arguments of counsel
thereon."
No further proceedings were had in the action until its final
dismissal on May 24, 1920.