Federal Trade Commission v. Mary Carter Paint Co.

Background

Mary Carter Paint Company manufactures and sells paint and advertised that for every can purchased a buyer would receive a "free" can of equal quality and quantity. The Federal Trade Commission ordered Mary Carter to stop those advertisements as deceptive under §5 of the FTC Act. A federal appeals court set aside the FTC order, and the Supreme Court took the case on review.

Reasoning

The main question was whether the FTC’s finding of deception was supported and consistent with agency policy about using the word "free." The Court explained that FTC guides permit advertising an item as "free" when the offer’s terms are clearly stated, the required purchase price is not raised, and quality and quantity are not reduced. The FTC, however, found that Mary Carter had marketed paired cans rather than single cans and that the customary per-can price was substantially less than the advertised per-can price, so the second can was not truly a gift. The Court held there was substantial evidence supporting the FTC’s determination and declined to substitute judicial judgment for the agency’s expertise. The Court reversed the appeals court and directed a remand so the FTC can clarify its order.

Real world impact

Advertisers who describe tied or bonus items as "free" may be vulnerable to enforcement if price allocation or past selling practices could mislead buyers. The ruling gives the FTC room to challenge ‘‘buy one, get one free’’ offers when the record shows consumers could be misled, but the agency must clarify its order before final enforcement takes effect.

Dissents or concurrances

Justice Harlan dissented, arguing the FTC’s reasoning was too opaque, inconsistent with earlier FTC guidance that allowed conditional "free" offers, and unfair to a company that had long relied on that policy.