Federal Trade Commission v. Standard Education Society

Background

The Federal Trade Commission investigated two corporations selling encyclopedias and three individuals who controlled them. After hearings and sworn testimony, the agency found the companies used a sales plan that falsely promised free books, used fake or unauthorized testimonials and contributor names, and misrepresented prices and what buyers were actually paying for.

Reasoning

The central question was whether the testimony supported the Commission’s findings and whether those findings justified banning the full sales scheme. The Court held the record did support the agency’s conclusions. It rejected the lower court’s view that the misleading statements were mere trivialities, noting testimony from buyers in ten States who were deceived. The Court therefore reinstated key parts of the Commission’s cease-and-desist order, enforced the ban on using false gift and price claims and unauthorized contributor names or testimonials, and included the individual managers in the order when the record showed they controlled the corporations and might evade enforcement.

Real world impact

The decision bars the companies from using the particular deceptive door-to-door and subscription sales techniques described by the Commission. It confirms that the agency may forbid unfair and misleading methods of selling goods in interstate commerce and that officers who control closely held companies can be required to obey such orders. The case was sent back to the lower court to apply these instructions for enforcement.