Opinion · Court of Appeals for the Second Circuit

Elizabeth Arden, Inc. v. Federal Trade Commission

Elizabeth Arden, Inc. v. Fed. Trade Comm’n, 156 F.2d 132 (2d Cir. 1946)

Type
Opinion
Court
Court of Appeals for the Second Circuit
Jurisdiction
Federal
Date
1946-06-05
Topic
general

FRANK, Circuit Judge. 1. We agree with Elizabeth Arden Sales Corporation v. Gus Blass Co., 8 Cir., 150 F.2d 988, 991-993, certiorari denied 66 S.Ct. 231 1 in rejecting petitioners’ contention that § 2(e) is unconstitutional because of the omission of the words “engaged in commerce” (i.e., interstate commerce), found in the other subsections of § 2. The fact that the purpose of Congress in enacting the Robinson-Patman Price Discrimination Act was patently to exercise its well-recognized constitutional power to regulate interstate commerce, and the clear interrelation of (d) and (e), serve to show that the omission was inadvertent. 2 The Supreme Court has repeatedly held that a statute should be read in such a way as to carry out the Congressional intention, despite a contrary literal meaning, especially in, order to avoid unconstitutionality. 3 2. We 'reject the contention that the standard in § 2(e) is so indefinite that men of common intelligence cannot adequately grasp its meaning and that therefore it is invalid as an improper delegation of legislative power and violative of due process.

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ELIZABETH ARDEN, INC. v. FEDERAL TRADE COMM.,156 F.2d 132(2nd Cir. 1946)
ELIZABETH ARDEN, Inc., et al. v. FEDERAL TRADE COMMISSION.
No. 60.
Circuit Court of Appeals, Second Circuit.
June 5, 1946.
Petition for Review of an Order of the Federal Trade Commission.

Petition by Elizabeth Arden, Inc., and others for review of an order of the Federal Trade Commission, consolidated with a cross-petition by the commission for enforcement of its order.

Petition for review dismissed, and enforcement of commission's order granted.

The Commission, after a hearing, held that petitioners had violated subsection 2(e) of the Robinson-Patman Price Discrimination Act — 15 U.S.C.A. § 13(e). The Commission's findings may be summarized as follows:

Petitioners are a single business entity, the corporate petitioners being merely instrumentalities through which Florence N. Lewis (Elizabeth Arden) in New YorkPage 133conducts her business of producing and selling several million dollars' worth of Elizabeth Arden cosmetics yearly in interstate commerce to department stores, women's specialty shops and drug stores, located throughout the United States, for resale to consumers. Arden cosmetics are a so-called "prestige" line, being designed to appeal to consumers on the basis of fashion and exclusiveness. Petitioners, for that reason, do not sell their cosmetics indiscriminately to all department stores, specialty shops, and drug stores but only to those who, in petitioners' judgment, have the appropriate services and facilities to merchandise them in a way which appeals to those consumers having fashion and exclusiveness as buying motives. All retailers selected and retained as customers must "cooperate" to petitioners' satisfaction by so using their services and facilities as to promote the resale of Arden cosmetics to the consumers for whom they were designed. Under this policy of selection of customers, petitioners sell to only 3000 retailers, approximately of which 725 are department stores, 25 are women's specialty shops, and 2,250 are drug stores.

Many years ago petitioners adopted the practice of furnishing the services of retail sales-persons (demonstrators) to some of their more important customers, to resell Arden cosmetics. They continued this practice, unmodified, after the passage of the Robinson-Patman Price Discrimination Act in 1936, furnishing a few more demonstrators each year, until they employed and directly or indirectly paid all or part of the compensation of about 287 demonstrators in the retail establishments of about 265 (less than 10%) of their approximately 3,000 customers who purchased less than 40% of the petitioners' total sales, at a cost of about $250,000 a year. Almost all of the 265 demonstrator accounts were from among the 725 department stores and 25 specialty shops.

Petitioners did not furnish any demonstrator service to the remaining 90% of their customers who purchased 60% of their total sales. Petitioners' terms were designed to be ineffectual to enable this large segment of their customers to receive the minimum quantity of demonstrator service, for petitioners were "well aware" when they established them that all but a few "could not qualify," and they "tailored" them to accomplish the exclusion. The terms which precluded 90% of petitioners' customers from being accorded any demonstration service were the ability to "cooperate" satisfactorily with petitioners by reciprocally furnishing to them the use of some indeterminate aggregate of services and facilities to promote the resale of Arden cosmetics, such as carrying a representative stock, making available adequate counter-displays, advertising once or twice a month, furnishing a reasonable number of window displays, and mentioning Arden cosmetics in fashion shows.

In selling their cosmetics to retail customers, petitioners are in competition with many other well-known interstate sellers of cosmetics, and to beat and not to meet that competition, petitioners furnished demonstrators whose duties in the retail establishments of the customers where they are employed are to sell Arden cosmetics exclusively unless the customers specifically ask for the cosmetics of a competitor.

Customers located in the same city are in competition with each other in the resale of Arden cosmetics to consumers, and in many cities there are customers who are furnished demonstrator service and customers who are not. Where demonstrators are furnished, sales of Arden cosmetics to consumers by the favored customers are increased, sometimes as much as tripled, and at a lessened or no cost for sales clerks' salaries.

Based upon these findings, the Commission found that petitioners had not shown that they furnished demonstration service in good faith to meet such services furnished by competitors. The Commission concluded that petitioners had violated Subsection 2(e) of the Robinson-Patman Price Discrimination Act in not according any demonstration service on any terms to purchasers who were in competition with purchasers to whom they did furnish such service, the Commission being of the opinion that the subsection required a seller who elected to furnish any service or facility to any purchaser to proportion bothPage 134service or facility and terms so as not to exclude any competitive purchaser. The Commissioner entered an appropriate order directing petitioners "in connection with the sale of cosmetics in commerce, as `Commerce' is defined in the * * * Clayton Act [15 U.S.C.A. § 12 et seq.], * * * to cease and desist from discriminating, directly or indirectly, among competing purchasers" of its products:

"1. By furnishing or contributing to the furnishing of demonstrator services to any retailer purchasing their products when such services are not accorded on proportionally equal terms to other retail purchasers located in the same city, or other retailer purchasers who in fact resell such products in competition with retailers who receive such services.

"2. By furnishing or contributing to the furnishing of any services or facilities connected with the handling, sale, or offering for sale of products purchased from [petitioners] to any retailer upon terms not accorded to competing retailers on proportionately equal terms."

Petitioners have petitioned this court to review and set aside the order; they do not dispute the Commission's findings of fact. The Commission has filed a cross-petition asking a decree affirming and enforcing its order.
Townley, Updike Carter, of New York City (J. Howard Carter and Weymouth D. Symmes, both of New York City, of counsel), for petitioners.

W.T. Kelley, of Washington, D.C. (Walter B. Wooden and Philip R. Layton, both of Washington, D.C., of counsel), for respondent.
Before CHASE, CLARK, and FRANK, Circuit Judges.
FRANK, Circuit Judge.
1. We agree with Elizabeth Arden Sales Corporation v. Gus Blass Co., 8 Cir.,150 F.2d 988, 991-993, certiorari denied 66 S.Ct. 2311in rejecting petitioners' contention that § 2(e) is unconstitutional because of the omission of the words "engaged in commerce" (i.e., interstate commerce), found in the other subsections of § 2. The fact that the purpose of Congress in enacting the Robinson-Patman Price Discrimination Act was patently to exercise its well-recognized constitutional power to regulate interstate commerce, and the clear interrelation of (d) and (e), serve to show that the omission was inadvertent.2The Supreme Court has repeatedly held that a statute should be read in such a way as to carry out the Congressional intention, despite a contrary literal meaning, especially in order to avoid unconstitutionality.3

2. We reject the contention that the standard in § 2(e) is so indefinite that men of common intelligence cannot adequately grasp its meaning and that therefore it is invalid as an improper delegation of legislative power and violative of due process. We have read portions of petitioners'Page 135brief in the Blass Company case which show that they experienced no difficulty in giving the standard a clear meaning. Aside from that, subsection (e) fully conforms to the doctrines as to delegation and due process enunciated in many recent decisions.4

3. We also reject petitioners' contention that subsection (e) must be construed to mean that the furnishing of services and facilities is unlawful only when — as expressly provided in subsection (a) — the Commission finds that the practice has had an adverse effect upon competition. Congress validly made the decision that conduct coming within the more definite standard of (e) was unlawful. We see no reason why the limitations contained in (a), or their equivalent, should be read into (e).5

4. Petitioners ask us, in any event, to modify the provision of the Commission's order which makes it applicable to "other retail purchasers who in fact resell such products in competition with retailers who receive such services." Petitioners assert that "Arden does not sell any of its products to wholesalers who in turn sell them to retailers." But the evidence shows that petitioners have, before 1941, sold to retailers directly and also indirectly through wholesalers or jobbers, and have discriminated in favor of some indirect purchasers and against some competitive retailers who made direct purchases, although furnishing some demonstrator services to other direct purchasers. The order appropriately prevents a resumption of that practice. Petitioners express an apprehension that it may compel them to accord demonstrator services "on proportionately equal terms" to retail stores which acquire Arden products from so-called "bootleg sources." As that question did not arise in the proceedings before the Commission, we construe the order as not intended to cover it.6

Petition for review dismissed; enforcement of the Commission's order granted.
  1. Cf. Corn Products Refining Co. v. Federal Trade Commission,324 U.S. 726, 744, 745, 65 S.Ct. 961, 89 L.Ed. 1320. ↩
  2. Cf. Kennedy v. Gibson, 8 Wall. 498, 506, 19 L.Ed. 476; First National Bank v. Williams,252 U.S. 504, 511, 40 S.Ct. 372, 64 L.Ed. 690. ↩
  3. Markham v. Cabell,326 U.S. 404, 66 S.Ct. 193; United States v. N.E. Rosenblum Truck Lines,315 U.S. 50, 55, 62 S.Ct. 445, 86 L.Ed. 671; Butts v. Merchants' Miners' Transportation Co.,230 U.S. 126, 33 S.Ct. 964, 57 L.Ed. 1422; The Abby Dodge,223 U.S. 166, 32 S.Ct. 310, 56 L.Ed. 390; United States v. Walter,263 U.S. 15, 44 S.Ct. 10, 68 L.Ed. 137; United States v. American Trucking Associations,310 U.S. 534, 542-544, 60 S.Ct. 1059, 84 L.Ed. 1345; United States v. Dickerson,310 U.S. 554, 561, 562, 60 S.Ct. 1034, 84 L.Ed. 1356; S.E.C. v. C.M. Joiner Leasing Corp.,320 U.S. 344, 350, 351, 64 S.Ct. 120, 88 L.Ed. 88; Johnson v. United States, 1 Cir., 163 F. 30, 32, 18 L.R.A., N.S., 1194; Van Beeck v. Sabine Towing Co.,300 U.S. 342, 351, 57 S.Ct. 452, 81 L.Ed. 685; United States v. Hutcheson,312 U.S. 219, 235, 61 S.Ct. 463, 85 L. Ed. 788; Keifer Keifer v. R.F.C.,306 U.S. 381, 391, 59 S.Ct. 516, 83 L. Ed. 784, Note 4; Federal Deposit Ins. Corp. v. Tremaine, 2 Cir.,133 F.2d 827, 830; cf. Stone, The Common Law in The United States, 50 Harv.L.Rev. (1936) 4, 13-16; Burstein v. United States Lines Co., 2 Cir.,134 F.2d 89, 93; Commissioner v. Beck's Estate, 2 Cir.,129 F.2d 243, 245. ↩
  4. See, e.g., Mahler v. Eby,264 U.S. 32, 40, 41, 44 S.Ct. 283, 68 L.Ed. 549; United States v. Shreveport Grain Elevator Co.,287 U.S. 77, 85, 53 S.Ct. 42, 77 L.Ed. 175; Sunshine Anthracite Coal Co. v. Adkins,310 U.S. 381, 397, 398, 60 S.Ct. 907, 84 L.Ed. 1263; Opp Cotton Mills v. Administrator,312 U.S. 126, 142-146, 657, 61 S.Ct. 524, 85 L. Ed. 624; Yakus v. United States,321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834; Mulford v. Smith,307 U.S. 38, 48, 49, 59 S.Ct. 648, 83 L.Ed. 1092; Guiseppi v. Walling, 2 Cir.,144 F.2d 608, 615-623, 155 A.L.R. 761; United Business Corp. v. Commissioner, 2 Cir.,62 F.2d 754, 755, 756. ↩
  5. Cf. Corn Products Refining Co. v. Federal Trade Commission, 7 Cir.,144 F.2d 211, 215; and see324 U.S. 726, 745, 65 S.Ct. 961, 89 L.Ed. 1320; Oliver Bros. v. Federal Trade Commission, 4 Cir.,102 F.2d 763, 766-769; Biddle Purchasing Co. v. Federal Trade Commission, 2 Cir.,96 F.2d 687, 690, 691, certiorari denied305 U.S. 634, 59 S.Ct. 101, 83 L.Ed. 407; Great Atlantic Pacific Tea Co. v. Federal Trade Commission, 3 Cir.,106 F.2d 667, 673-678, certiorari denied308 U.S. 625, 60 S.Ct. 380, 84 L.Ed. 521; Southgate Brokerage Co. v. Federal Trade Commission, 4 Cir.,150 F.2d 607, 609, 610, certiorari denied 66 S.Ct. 230. ↩
  6. We do not consider the question whether persons buying from "bootleggers" are "purchasers" within the meaning of subsection 2(e). ↩