Federal Trade Commission v. Travelers Health Association

PETITIONER: Federal Trade Commission
RESPONDENT: Travelers Health Association
LOCATION: Bonneville Dam

DOCKET NO.: 51
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 362 US 293 (1960)
ARGUED: Dec 10, 1959
DECIDED: Mar 28, 1960

Facts of the case

Question

Media for Federal Trade Commission v. Travelers Health Association

Audio Transcription for Oral Argument - December 10, 1959 in Federal Trade Commission v. Travelers Health Association

Earl Warren:

Number 51, Federal Trade Commission, Petitioner, versus Travelers Health Association.

Mr. Weston, you may proceed.

Charles H. Weston:

Mr. Chief Justice, may it please the Court.

The question which is presented is whether the Federal Trade Commission is authorized to regulate deceptive practices of a company which does a mail order insurance business, if the state of incorporation has a law which prohibits a domicile insurance company from engaging in deceptive practices inside that state or outside the State.

The Commission filed a complaint against the respondent under Section 5 of the Federal Trade Commission Act.

Evidence was taken and hearing examiner issued and initial decision and this was appealed to the Commission.

It found that respondent's advertising was misleading in certain respects and it entered a cease-and-desist order.

The court below held by a majority vote, that Nebraska regulated respondent's advertising in other State and that this advertising, was thereby regulated by State law within the meaning of this proviso of Section 2 (b) of the McCarran Act.

The Court knows that that Act was passed to authorize state regulation and taxation of insurance companies free from Commerce Clause limitations.

It provides that no act of Congress which does not specifically deal with the insurance business shall invalidate or supersede any state legislation in this field.

The Act was passed to remove doubts as to validity of state legislation which is had been caused by the decision of this Court in Southeastern Underwriters case.

A special provision is made as to --

Felix Frankfurter:

To remove doubts or to displace it?

Charles H. Weston:

Excuse me?

Felix Frankfurter:

To remove doubts or to displace it?

Charles H. Weston:

Well, I think it did -- if the doubts were there, they were removed I suppose [Attempt to Laughter].

As to the antitrust laws, including the Federal Trade Commission Act, special provision was made.

These laws were not to apply to the insurance business before June 30, 1948, now there was a moratorium.

By the proviso of Section 2 (b), they were to apply after that date.

The proviso was before this Court in National -- in National Casualty case, at the 1957 term.

The companies there involved did business only through agents and they were licensed in every state in which they sold policies.

The advertising which the Commission had found to be deceptive was shipped to the agents and they distributed locally to potential purchasers.

The Court said that in view of this local distribution, the laws of the States regulating deceptive insurance advertising unquestionably were enforceable against the activity within their respective boundaries.

And it held that where States were regulating this kind of advertising under their own laws, it was regulated by State law within the McCarran Act provision.

The facts in the present case were -- presented a very different picture.

Respondent has no agents and all its business is solicited by mail.

It sells policies in all States, but it is licensed only in Nebraska and Virginia.

It sends a series of letters to prospect sometimes as many as 30, including in the letters, policy application, a policy application form and advertising material.

It issues all policies, pays all claims and conducts this promotion material from its home office which is in Nebraska.

The names of prospects are obtained from its own policy-holders and it solicits only white-collar workers, in fact only white, white-collar workers.