Exposition Press, Inc. And Edward Uhlan v. Federal Trade Commission

295 F.2d 869, 1961 U.S. App. LEXIS 3266, 1961 Trade Cas. (CCH) 70,146
CourtCourt of Appeals for the Second Circuit
DecidedNovember 6, 1961
Docket17, Docket 26840
StatusPublished
Cited by57 cases

This text of 295 F.2d 869 (Exposition Press, Inc. And Edward Uhlan v. Federal Trade Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Exposition Press, Inc. And Edward Uhlan v. Federal Trade Commission, 295 F.2d 869, 1961 U.S. App. LEXIS 3266, 1961 Trade Cas. (CCH) 70,146 (2d Cir. 1961).

Opinions

LUMBARD, Chief Judge.

Exposition Press, Inc. and Edward Uhlan, its president, petition for review of an order directing them to cease and desist from certain deceptive advertising practices entered by the Federal Trade Commission pursuant to § 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45.1

Petitioners attack the order on a number of grounds; that the complaint before the Federal Trade Commission did not state a cause of action, that the Commission’s findings of deceptiveness are erroneous, that on principles of res judicata the Commission’s proceedings were barred by an earlier consent order, and that in any event the Commission’s order is too broad and should be modified. We find these contentions to be without merit.

Exposition Press, Inc. is a “subsidy” or “vanity” publisher. Its business differs from that of most publishing houses in that normally most or all of the expense of publishing its books is paid in advance by their authors. Less than 10% of its authors recoup their investments and derive actual profit from their writing.2

The Commission’s complaint attacked Exposition’s use of the following advertisement, which was inserted in a variety of newspapers and magazines:

“Free to Writers
seeking a book publisher
Two fact-filled, illustrated brochures tell how to publish your book, get 40% royalties, national advertising, publicity and promotion. Free editorial appraisal. Write Dept. STM-3.
Exposition Press / 386 4th Ave., N. Y. 16”

The hearing examiner found that the application of the term “royalty” to any payments from sales receipts made to an author before his entire investment had been returned was deceptive per se.

The Commission vacated the examiner’s findings and made more limited findings to the effect that the advertisement as worded tended to “mislead and deceive a substantial portion of the purchasing public with respect to the payment they will receive for the publication of their books. * * * ” It entered an order that petitioners cease and desist from:

“Representing through the use of the term ‘royalties’ or in any other manner that they will make payments to an author based on sales of the author’s book unless a disclosure is made in immediate conjunction therewith that such payments do not constitute a net return to the author but that the cost of printing, promoting, selling and distributing the book [872]*872must be paid in whole or in substantial part by the author.”

A subsequent motion to modify the order was denied.

1. Res Judicata — We agree with the hearing examiner and the Commission that the consent order agreed to between Exposition and the Commission in November 1957 does not bar the present proceeding. Exposition argues that this earlier order, which dismissed “all other charges in the complaint,” disposed of the question whether the mode of advertising now attacked was unfair. Its argument is not that the earlier complaint specifically alleged misuse of the term “royalty,” but rather that because of a statement by Commission counsel at the earlier hearing that “respondents have dubbed it a royalty when it is only a percentage paid back” the question was put in issue, or in any event should have been.

The advertisement here in question was first used by Exposition only after the completion of the earlier proceeding. There is no indication that pri- or to the earlier proceeding similar representations had been made to the public at large that Exposition was a regular trade publisher which paid extraordinarily high compensation to its authors. In any event, new violations will support new proceedings dealing with different periods of time, as least where there is no indication of harassment by the Commission. See F.T.C. v. Raladam Co., 1942, 316 U.S. 149, 62 S.Ct. 966, 86 L.Ed. 1336; 2 Davis Administrative Law Treatise 570-71 (1958); cf. Grandview Dairy, Inc. v. Jones, 2 Cir., 157 F.2d 5, certiorari denied, 1946, 329 U.S. 787, 67 S.Ct. 355, 91 L.Ed. 675. Incidental mention in the earlier hearing of misuse of the word “royalty” could not possibly have put in issue the questions raised by this advertisement.

2. Findings and Conclusion of the Commission — Considering the record as a whole, see Universal Camera Corp. v. NLRB, 1951, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456, we find substantial support for the Commission’s finding that Exposition’s advertisement had “the tendency and capacity to deceive a substantial portion of the purchasing public.” Great weight must be given by us to the Commission’s factual inferences. Corn Products Ref. Co. v. F.T.C., 1945, 324 U.S. 726, 65 S.Ct. 961, 89 L.Ed. 1320. Although only one of the author-witnesses testified to having been actually deceived by the advertisement in question, a majority of the Exposition clients who testified said that, although they had begun their dealings with Exposition prior to the use of this advertisement, it would have deceived them but for their present sophistication. Considering this testimony, the dictionary definition of “royalty” as “a duty or compensation paid to the owner of a * * * copyright for the use of it * * 3 and the somewhat ambivalent testimony of publishers as to the technical usage of the word, we find ample reason to believe that the ordinary reader of the advertisement would be misled as to Exposition’s terms of publication. Actual consumer testimony is in fact not needed to support an inference of deceptiveness by the Commission. Charles of the Ritz Distributors Corp. v. F. T. C., 2 Cir., 1944, 143 F.2d 676, 680; cf. E. F. Drew & Co. v. F. T. C., 2 Cir., 1956, 235 F.2d 735, certiorari denied, 1957, 352 U.S. 969, 77 S.Ct. 360, 1 L.Ed. 323. In evaluating the tendency of language to deceive, the Commission should look not to the most sophisticated readers but rather to the least. F. T. C. v. Standard Educ. Soc’y, 1937, 302 U.S. 112, 116, 58 S.Ct. 113, 82 L.Ed. 141; Book-of-the-Month Club, Inc. v. F. T. C., 2 Cir., 202 F.2d 486, certiorari dismissed, 1953, 346 U.S. 883, 74 S.Ct. 144, 98 L.Ed. 388. For this reason we must reject the argument that any reasonable author should have known enough not to expect a free-and-clear 40% royalty; the fact that a person has produced a manuscript does not necessarily mean that he has any knowledge of publishers’ prevailing rates.

[873]

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295 F.2d 869, 1961 U.S. App. LEXIS 3266, 1961 Trade Cas. (CCH) 70,146, Counsel Stack Legal Research, https://law.counselstack.com/opinion/exposition-press-inc-and-edward-uhlan-v-federal-trade-commission-ca2-1961.