Federal Trade Commission v. R. F. Keppel & Bro. Inc.
Headline: Court upholds federal ban on 'break-and-take' lottery-style candy packages, finding they exploit children and unfairly divert trade, which lets regulators stop that sales method and protect competing manufacturers.
Holding: The Court holds that the Federal Trade Commission properly found 'break-and-take' chance candy packages to be an unfair method of competition and reversed the Court of Appeals, allowing the agency to forbid the practice.
- Empowers the FTC to ban similar chance-based candy sales in interstate commerce.
- Protects manufacturers who refuse to use gambling-like sales devices.
- Reduces marketing tactics that entice children near schools.
Summary
Background
A candy maker that sells “break-and-take” assortments—packages that use chance to determine price or prizes—was challenged after the Federal Trade Commission ordered the practice stopped. The packages include examples like 120-piece assortments with a few wrappers hiding a penny, 60-piece assortments with concealed price slips, and 200-piece assortments with colored centers that win prizes. The Commission found these packages are sold near schools, appeal to children, and often contain smaller or lower-quality pieces than competing "straight goods" packages sold at comparable prices.
Reasoning
The central question was whether the sale of these chance-based candy packages is an "unfair method of competition" under the Trade Commission Act. The Court said the Act's prohibition is broad and not limited to previously litigated categories. It accepted the Commission’s findings that the device exploits children who cannot protect themselves, encourages gambling-like behavior, and forces honest competitors to adopt the same device or lose sales. Because the Commission’s conclusions were supported by clear and specific evidence and the agency has special expertise, the Court held the practice was unfair.
Real world impact
The ruling reverses the lower court and allows the FTC to forbid these break-and-take sales practices. The decision affects many manufacturers, retailers, and consumers in the penny candy trade, and it resolves numerous similar complaints awaiting the Commission. The Court did not attempt a complete definition of all unfair methods, but it affirmed the agency’s authority to stop this particular practice.
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