Federal Trade Commission v. National Casualty Company

PETITIONER: Federal Trade Commission
RESPONDENT: National Casualty Company
LOCATION: First Unitarian Church of Los Angeles

DOCKET NO.: 435
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 357 US 560 (1958)
ARGUED: Apr 09, 1958 / Apr 10, 1958
DECIDED: Jun 30, 1958

Facts of the case

Question

Media for Federal Trade Commission v. National Casualty Company

Audio Transcription for Oral Argument - April 10, 1958 in Federal Trade Commission v. National Casualty Company

Audio Transcription for Oral Argument - April 09, 1958 in Federal Trade Commission v. National Casualty Company

Earl Warren:

Number 435, Federal Trade Commission, Petitioner, versus National Casualty Company and Number 436, Federal Trade Commission versus the American Hospital and Life Insurance Company.

Mr. Spritzer.

Ralph S. Spritzer:

Mr. Chief Justice, may it please the Court.

These two consolidated cases come here on the Government's petitions from decisions of the Sixth and Fifth Circuits respectively.

The question which they present is whether the Federal Trade Commission, in circumstances which I shall detail later, has been ousted by the McCarran-Ferguson Act of its jurisdiction to issue cease-and-desist orders directed against unfair and deceptive advertising by insurance companies.

Before I sketch the essential fact of these two cases, I should like to take a very few minutes to state by way of introduction that the Federal Trade Commission has been engaged these past several years in a very active campaign to eliminate from the channels of interstate commerce, false and deceptive advertising by companies selling hospital health and accident insurance.

There have been some 41 cases brought, many of them against major companies and there are various stages of development, the two here today being, of course, the first to reach this Court.

They are important in the Commission's view, these two cases, not only because they will determine in very large measure the phase of the remaining cases, but also because the general situation which has given rise to all of these 41 proceedings is one which the Commission deems of both pressing and truly national concern.

And that is so because health, hospital and accident insurance have grown so spectacularly in recent years.

It appears, for example, that more than two thirds of all persons in the United States now carry some form of hospitalization insurance.

And these forms of insurance are sold in very great part by companies which do business on a broad frequently national scale.

Some of them selling on a strictly mail order basis, others by other techniques.

Moreover, these companies more and more have come to employ techniques of mass advertising, in some cases, by television and radio or through national periodicals.

And as I suppose everyone who has a mailing address is where many of them has employed the techniques which the advertising business refers to as saturation mail advertising.

It was a consequence of the -- in consequence of this that Mr. Howrey, the then Chairman of the Federal Trade Commission in 1955, advised the House Committee on Interstate and Foreign Commerce, and I quote his words, “There has been more public interest in our investigation of this advertising than any investigation the Commission has undertaken in my memory.

We got not hundreds, but thousands of letters of complaint and the public interest in response have been overwhelming.”

Hugo L. Black:

Are you reading from your brief?

Ralph S. Spritzer:

No, I am reading from a House Report.

It is not quoted in our brief, Your Honor -- Your Honor.

And I might add that the Chairman of the Committee, before whom Mr. Howrey was appearing, then replied that it was the conviction of the Committee that there was a very great need for Federal Trade Commission action for the benefit of the companies insured.

Now, with this background, I turn to the facts of these two particular cases.

National, the respondent in 435, is incorporated and has its home office in Detroit, Michigan.

It has 350 to 400 agents who are located in all 48 States in the District of Columbia and the territory of Hawaii.

It's licensed to do business in all of those jurisdictions.

It sent some brochures and advertising materials directly from Detroit to people throughout the country who maybe prospective buyers of insurance.

However, the great mass of its material is apparently sent out in both ways to the agents and they, in turn, from such lists as they have or accumulated or accumulate, disseminate to the public.

National's advertising materials challenged by the Federal Trade Commission complaint in this case had been in use for two years or more when the complaint was filed.

The complaint charged and the Commission found that they were deceptive in some five major respects.

I shall just quick and very briefly since, as I indicated in a moment, our issue here is jurisdictional rather than factual.

The Commission charged and found that National's advertising first conveyed that the purchaser of the insurance could continue to renew this form of the insurance as he grew older and hence, obtained lifetime protection, whereas in fact, the policy has actually provided that they were cancellable at the option of the company.