Federal Trade Commission v. Sperry & Hutchinson Company

PETITIONER: Federal Trade Commission
RESPONDENT: Sperry & Hutchinson Company
LOCATION: Major League Baseball Commissioner’s Office

DOCKET NO.: 70-70
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 405 US 233 (1972)
ARGUED: Nov 15, 1971
DECIDED: Mar 01, 1972

ADVOCATES:
Harold L. Russell - for respondent
Richard W. Mclaren - for petitioner

Facts of the case

Question

Media for Federal Trade Commission v. Sperry & Hutchinson Company

Audio Transcription for Oral Argument - November 15, 1971 in Federal Trade Commission v. Sperry & Hutchinson Company

Warren E. Burger:

The Federal Trade Commission against Sperry Hutchinson.

Mr. Mclaren?

Richard W. Mclaren:

Mr. Chief Justice, may it please the Court.

This matter is before the Court on writ of certiorari for the Fifth Circuit which overturned the Federal Trade Commission decision that respondent Sperry and Hutchinson, frequently referred to as S&H, has engaged in certain unfair activities in its Green Stamp business in violation of Section 5 of the Federal Trade Commission Act.

The complaint in this case was in three counts.

Count one was in the nature of a resale price maintenance charge that S&H issued stamps to retailers and required the retailers to dispense them to consumers in ratio of one stamp to each 10 cents worth of purchase.

Second count charged conspiracy to carry out this program, the 1:10 ratio and count three was in the nature of an unreasonable restraint on the alienation charge that is that S&H carried out a policy of suppressing trading stamp exchanges and preventing anyone other than S&H from redeeming S&H stamps.

And this count also contained a charge of conspiracy by S&H with other stamp firms to carry out this program.

In all three counts, the complaint alleged that the practices were anti-competitive and to the detriment of the consuming public.

Commission found violation under all three counts but S&H appealed only on count three and the Fifth Circuit vacated the Commission's order in a 2:1 decision.

Judge Wisdom dissenting that majority decision is now here for review.

There are two questions presented.

The first principle question is whether the Fifth Circuit was in error in holding the FTC’s power under section five to declare particular methods of competition and particular acts and practices unfair is limited to conduct which violates the letter or the spirit of the antitrust laws.

A subordinate question is whether the Commission erred as the Circuit Court seems to indicate in failing to give sufficient weight to decisions under State Law that operations of stamp exchanges and the retailers who redeemed S&H stamps were unlawful.

The government’s position on these two questions since the first one is that FTC’s power is not limited to declaring practices unfair simply when they are antitrust type of conduct.

Rather, we think the Commission has a broad mandate to consider the circumstances of particular cases to determine what is unfair in the light of the public interest and without trying to define the outer limits of this power.

We think it is clear first that a practice maybe held unfair by FTC where it has analyzed all the facts and circumstances of particular case considered reasons for the practice, the need forth by the practitioner.

Its impact on the various factors in Commerce and if FTC determines on this basis, that the practice may have or has had a significant adverse effect on competition.

Secondly, we think that the practice maybe held unfair where it is detrimental to the interest of the consuming public entirely without regard to the question of effect on competition.

On the second question, the State Law question, our position is that State Courts decisions on matters as between private parties are to be given little rate in a Government case where the issue involves the public interest and particularly where broad public policy considerations such as those found in Section 5 case are present.

I have no doubt that the arrangements for example in the Brown Shoe case and the Gasoline Company TBA cases were entirely legal under State Law but as the Court will recall, those arrangements had to give way to the overriding policy of the Federal Trade Commission Act and its intent to protect a competition.

Turning to the facts of the particular case, they are relatively simple and I think substantially undisputed.

S&H is trading operation as the promotional service for retailers.

Under the system S&H licenses, limited number of retailers to handle its stamps in each area.

The retailers receives the stamps from S&H on consignment and the retailers pay a service charge in proportion to the number of stamps they received.

This runs an average of $2.68 a book of 12 hundred stamps.

The retailers in turn dispense the stamps to consumers in proportion to their purchases and this has been as I indicate earlier on a one for ten basis, one stamps to instant purchase and this book says, the S&H book says is compensation for cash payment.

In other words, nature of the cash discount.

Consumers however are only authorized to paste the stamps in books and to redeem the books with S&H for merchandise, nothing else.

The books worth about three dollars on redemption and merchandise and the record indicates that somewhere between 5% and 14% of stamps go unredeemed as the records shows also that as of 1964 there were several hundred million worth of unredeemed stamps outstanding.