Federal Trade Commission v. Royal Milling Co.

Background

Several businesses in Nashville prepare and sell self-rising and plain flour by mixing flour bought from others rather than grinding wheat themselves. They use trade names containing “milling company,” “mill,” or similar words and circulate printed materials implying they manufacture the flour. The Federal Trade Commission filed complaints under §5, found these practices diverted business and deceived buyers, and ordered respondents to stop using such names and representations. The circuit court of appeals set aside the FTC orders, concluding the proceeding was not in the public interest.

Reasoning

The Court considered whether the practices were unfair, affected interstate commerce, and whether FTC action served the public interest. It held the methods were unfair and involved interstate commerce, and found many buyers prefer goods made by original grinders and were misled by respondents’ names and statements. The Court said the public has a substantial interest in protection from that deception. At the same time the Court concluded the FTC went too far by effectively suppressing long-used trade names, which are valuable goodwill. The Court directed the FTC to use a less drastic remedy: require qualifying words alongside the names and an explicit, fixed statement that the seller is not a grinder of the wheat, with the commission deciding precise form and any further evidence on remand.

Real world impact

Flour sellers using “milling” trade names will need to add clear disclosures that they do not grind the wheat. Competing grinders and truthful sellers gain protection from unfair diversion of business. The FTC must tailor remedies instead of banning long-standing trade names, and the case returns to the commission to implement the modified orders.

Dissents or concurrances

Justices McReynolds and Roberts would have affirmed the lower court’s decision to set aside the FTC orders.