Federal Trade Commission v. Winsted Hosiery Co.
258 U.S. 483
SCOTUS
1922
Check Treatment
Mr. Justice Brandéis

delivered the opinion of the court.

. Thе Winsted Hosiery Company has for many years manufactured underwear which it sells to ■ retailers throughout the United States. It brands or labels the cartons in which the underwear is sold, as “'Natural Merino “ Gray Wool ”, “ Natural Wool ”, “ Natural Worsted ”, or “Australian Wool ”. None of this underwear is all. wool. ' Much of it contains only a small percentage of. wool; some as little as ten per cent. The Federal Trade' Commission instituted a complaint under § 5 of the Act.-, of September 26, 1914, c. 311, 38 Stat. 717, 719, and called upon the company to show cause why use of these brands and labels alleged to be false and deceptive should not be discontinued. After appropriate proceedings an order was issued which, as later modified, directed the company to “ cease and desist from employing or using as labels or brands on underwear or other knit goods not composed wholly of wool, or on thе wrappers, boxes, or other containers in which they are delivered to customers, the words ‘Merino’, ‘Wool’, or-‘Worsted’, alone or in combination with any other word or words, unless accompanied by a word, or words designating the substance, fiber, or material other 1 than wool of which the garments are composed in part (e. g., ‘Merino, Wool, .and Cotton’; ‘Wool and Cotton’; ‘Worsted, Wool, and Cotton’; ‘Wool, Cotton, аnd Silk’), or by a word or words otherwise clearly indicating that such .underwear or ether- goods- is not made wholly' of wool' (e. g., part wool).”

A petition for review of this ordér was tiled by the company in the United States Circuit Court of Appeals-for the ‍‌​​​​‌​‌​‌‌​‌‌​​‌‌​‌​‌‌​‌​​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‍Second Circuit. • The prayer that the order be set aside was granted; and a decree to that effect was entered. 1 That court sаid: “ Conscientious manufacturers may prefer not to use a label which.is capable of misleading, and it may be that it will be desirable to prevent the use. of the particular lаbels, but'it is in our opinion not within the province of the Federal Trade. Commission to do so.” 272 Fed. 957, 961. The case is here on'writ of certiorari. . 256 U. S. 688.

The order of the Commission rests upon findings of fact; and thesé upon evidence which fills three hundred and fifty pages of the printed- record:. Section 5 of the act makes -the Commission’s findings conclusive as .to .the .facts* * if supportéd by evidence..

• The. findings here involved are clеar, specific-and comprehensive : The -word “ Merino ” as applied to wool “ means primarily and popularly ” a fine long-staple wool, which commands the. highest' рrice. The words “Australian Wool.” mean a distinct commodity,, a fine grade ‍‌​​​​‌​‌​‌‌​‌‌​​‌‌​‌​‌‌​‌​​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‍of wool grown in Australia. The word “ wool ”' when used as an adjective means made of wool. The word “worsted ” means primarily and popularly a- yarn or fabric made wholly of wool. A substantial part of the consuming public, and also some buyers for retailers and sales people, understand the words “ Merino ”, “ Natural Merino ”, “ Gray Merino ”, “ Natural Wool ”, “ Gray Wool ”, “Australian Wool ” and “ Natural Worsted ”, as applied to underwear, to mean that the underwear is all wоol. By means of the labels and brands of the Winsted Company bearing such words, part of the public is misled into selling or into buying as all wool, underwear which in fact is in large part cotton. And thеse brands and labels tend to aid and encourage the representations of unscrupulous retailers and • their salesmen who knowingly sell to their customers as all wool, underwear which is largely composed of. cotton. Knit underwear made wholly of wool, has for many years-been widely manufactured and sold in this country and constitutes a substantial part of аll knit underwear dealt in. It is sold under various labels or brands; including “ Wool ”, “All Wool”, “Natural Wool” and “Pure Wool”, and also under other labels which do not contain any words descriptive of the composition of the article. Knit underwear' made of cotton and wool is also used in this country by some manufacturers who market it without any label or- marking describing the materiаl or fibres of which it is composed, and by' some who market it under labels bearing the words “ Cotton and Wool ” or “ Part Wool.” The Winsted Company’s product, labeled and branded as abоve stated, is being sold in competition with such all wool underwear, and such cotton and wool-underwear.

That these findings of fact are supported by evidence cannot be doubted. But it is contended that the method of competition complained of is not unfair within the .meaning of the act, because labels such as the Winsted Company employs; аnd particularly those bearing the word “ Merino ”, have long been established in the trade and. are generally understood by it as indicating goods partly of - cotton; that the trade is not deceived by them; that, there was no'unfair competition for which another manufacturer of underwear could maintain a suit against the Winsted Company; and that even if consumers are misled because they do not understand the trade signification- ‍‌​​​​‌​‌​‌‌​‌‌​​‌‌​‌​‌‌​‌​​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‍of the label or because some retailers deliberately. deceive them as to its meaning, the result is in nó way legally connected with unfair competition.

This argument appears to have prevailed with the Court of Appeals; but it is unsound. The labels in question are 'literally' false, and, except those which bear the word ■ “ Merino ”, are palpably so. All árej as the Commission-found, calculated to deceive and do in ‘fact deceive a substantial pоrtion of the purchasing public. That deception is due primarily to -the words of the labels, and not to deliberate deception by the retailers from whom the consumer purсhases. ■ While it is true that á secondary meaning of the word “ Merino ” is shown, it is not a meaning so thoroughly established that the description which the label carries has ceased to deceive the public; for even buyers for retailers, and salespeople, are found to have been misled. The facts show that it is to the interest of the public, that a proceeding to stop the practice be brought. And they show also-that the practice-constitutes -an unfair method of competition as against manufacturers of .all woоl knit Underwear and as against those manufacturers of. mixed wool and cotton underwear who brand their product truthffilly. For when misbranded goods attract customers.by means of the fraud whiсh they perpetrate, trade is diverted from thé producer of’truthfully marked goods. That these honest manufacturers might protect their trade.by also resorting to deceptive labels is no- de.ferise to this proceeding brought against the Winsted Company in ‘the public interest.

The fact that misrepresentation and misdescription hate become so cоmmon in the knit underwear trade that most dealers no longer accept labéls at their face value, does not prevent their use being an uqfair method ;of competition. A method inherently unfair does not cease to be so'because those competed against have become aware of the wrongful practice. Nor does it cease to be unfair because the falsity of the manufacturer’s representation has become so well known to the trade that dealers, as distinguished from consumers, aré nо longer deceived. The honest manufacturer’s business may suffer, not merely thróugh a competitor’s deceiving ‍‌​​​​‌​‌​‌‌​‌‌​​‌‌​‌​‌‌​‌​​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‍.his direct customer, the retailer, but also through the competitor’s putting intо the hands of the retailer an unlawful instrument, which enables the retailer to increase his own sales of the dishonest goods, thereby lessening the market for the honest product. That, а person is á wrongdoer who so furnishes another with the means of consummating a fraud has long been a part of the law of unfair competition. 1 . And trade-marks which deceive the public aré denied protection although members of the trade are not misled thereby. 2 As a substaritial part of the public was still misled by the use of the labels which the Winsted Company employed, the public had an interest in stopping the practice as wrongful; and since the business of its .trade rivals who marked their goods truthfully was necessarily affected by that practice, the Commission was justified in its conclusion that the practice constituted an unfair method of competition; and.it was authorized to order that the practice be discontinued. '

Reversed.

Mr. Justice McReynolds dissents.

Notes

1

The original order of the Commission was based on findings which rested upon an agreed statement of facts. • The petition for’ ‍‌​​​​‌​‌​‌‌​‌‌​​‌‌​‌​‌‌​‌​​​​‌‌​​‌‌​‌​​‌‌‌​​​​​​‍review urged, among other things, that the agreed statement did not support the findings. Thereupon .thfe Commission moved in t> Court of Appeals that the case be remanded to the Commission fo. additional evidence as provided in.the fourth paragraph of § 5 of the act. Under leave so granted the evidence was taken; and modified findings 'of fact were made. ■ The modified order was based on these findings.. It .is this modified’ order which was set asido by the Court of Appeals,- 'and we have no occasion to consider the original order or 'the proceedings which led up to it.

1

Von Mumm v. Frash, 56 Fed. 830; Coca Cola Co. v. Gay-Ola Co., 200 Fed. 720, 722; New England Awl & Needle Co. v. Marlborough Awl & Needle Co., 168 Mass. 154, 155.

2

Manhattan Medicine Co. v. Wood, 108 U. S. 218; Worden v. California Fig Syrup Co., 187 U. S. 516, 538.