202 F. 2d 486 - Book-of-the-Month Club v. Federal Trade Commission

We feel obligated by Federal Trade Commission v. Standard Education Society, 302 U.S. 112, 58 S.Ct. 113, 82 L.3d. 141, to deny the relief sought by petitioners and to hold that the Commission's order must stand. In that case, this court was reversed. We had said that, to the discharge of its duty, the Commission should not 'bring a pedantic scrupulosity; too solicitous a censorship is worse than any evils it may correct, and a community which sells for profit must not be ridden on so short a rein that it can only move at a walk. We cannot take seriously the suggestion that a man who is buying a set of books and a ten years' 'extension service,' will be fatuous enough to be misled by the mere statement that the first are given away, and that he is paying only for the second. Nor can we conceive how he could be damaged were he to suppose that that was true. Such trivial niceties are too impalpable for practical affairs, they are will-o'-the-wisps, which divert attention from substantial evils.'¹ But the Supreme Court held we were mistaken, saying, 302 U.S.at page 116-117, 58 S.Ct.at page 115: 'The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. * * * It was clearly the practice of respondents through their agents * * * to mislead customers into the belief that they were given an encyclopedia, and that they paid only for the loose leaf supplement.'

1. We regret that we perceive no legally significant difference between the pivotal facts of that case and those of the instant case. The crucial factor here is that the Book-of-the-Month Club typically publishes an advertisement which states in large print at the top, 'Free * * * to new members of the Book-of-the-Month Club' a copy of some designated book. This advertisement contains, at the bottom and in much smaller print, a coupon which, when signed and sent to the Club, constitutes a contract between it and its new 'member'; this coupon states that he is to 'receive free' the designated book, and that he agrees 'to purchase at least four books-of-the-month a year from the Club.' The evidence shows that the so-called 'free book' is not, in fact, a gift: If the member fails to buy four books-of-the-month within a year after joining the Club, the Club demands and expects to collect from him the retail price of the 'free' book, although sometimes the Club will relinquish this demand provided the 'free' book is returned to it. Although there was some evidence in addition to the foregoing which may have further supported the Commission's findings, we think it was not necessary in the light of the cited Supreme Court decision.

2. Petitioners contend that the 'administrative interpretations' issued by the Commission on January 30, 1948, constituted a 'rule' which the Commission invalidly adopted; that the Commission relied on that 'rule' in deciding against petitioners; and that, at any rate, by uttering the 'rule,' it unfairly and unlawfully prejudged the case against petitioners. But the so-called rule- in effect a rough restatement of the Supreme Court's decision in the Standard Education case- was not at all essential to the Commission's order; for, once the Commission began the proceeding, it could not help deciding as it did, thanks to that Supreme Court decision.

3. The letters of May 23, 1940, and July 8, 1947, could not estop the Commission. But we think it proper to note that, in the circumstances, petitioners' practices, although they have been validly prohibited for the future, involved no moral impropriety.

Petition to set aside the order of the Commission is denied, and pursuant to 15 U.S.C.A. § 45(c) it is ordered that petitioner comply with the order of the Federal Trade Commission.