L. B. Silver Co. v. Federal Trade Commission of America

DONAHUE, Circuit Judge (after stating the facts as above). The petitioner is a corporation and the successor in business of the partnership of E. B. Silver & Son, which partnership was the immediate successor in business of E. B. Silver, who for many years was a successful breeder of cattle, horses, and hogs. In 1863, in Ohio, L. B. Silver undertook to improve the Chester White hog that had originated in Pennsylvania. It is claimed by the petitioner that-E. B. Silver, in his initial efforts to improve the Chester White hogs, crossed that stock with a mammoth or large white English hog. This, however, is disputed. Silver is dead. There was at that time no herd book for either the O. I. C. or the Chester White hogs, and for that reason this disputed question is not susceptible of direct proof, but must rest on tradition only. But this tradition finds some support not only in the testimony of witnesses to whom L. B. Silver made this statement, but also in a pamphlet written and distributed by him in 1870, in which appears the following statement : “In-and-in breeding is recommended by some, but our observation goes to show that it should not be practiced to any great extent, as its tendency is to weaken the constitution of the future animal.” The claim that he crossed the Chester White stock with a mammoth or large white English hog is entirely consistent with this advice to other breeders contained in this pamphlet, entitled “Hints to Stock Breeders.” However that may be,' the Commission found that from the very beginning of E. B. Silver’s business, and down to the present time, the respondent and its predecessor in business never used boars of any breed other than the pure Chester White, and for the purposes of this case that finding of fact by the commission will be accepted as final and conclusive. _ . _ Regardless, however, of whether E. B. Silver originally crossed this stock with a mammoth or large white English hog, there is no conflict in — 988 — the evidence that by careful selection and systematic mating he did accomplish a substantial' improvement in the original stock and that the result of his efforts was a valuable contribution to progress in swine breeding. In 1870 E. B. Silver issued the pamphlet, “Hints to Stock Breeders,” to' which reference has heretofore been made.- In this pamphlet he made public and definite claim that the hogs bred by him were a distinct breed from the Chester White, which he had named Ohio improved Chester White breed, now known as the Ohio Improved Chester or O. I. C. It further appears from the evidence that E. B. Silver, his successors in business, including this petitioner and many other Ó. I. C. breeders for a half century prior to the filing of this complaint, have openly, notoriously, and persistently made the claim that the Ohio Improved Chesters are a separate and distinct breed of hogs from the Chester White and no action was taken by any one interested therein to challenge the truth of this claim until 1916, and again in 1918, when complaints were made to the postal authorities. Each of these complaints failed in the accomplishment of its purpose. ' While these claims, no matter how long" made, cannot change the facts, nevertheless they are of importance in determining the question of unfair methods of competition in this respect. It further appears from the evidence that other breeders, either inspired by Silver’s success, or acting upon their own initiative, have developed what is known as the “Modern Chester White,” which is also a decided improvement over the foundation stock. While it is conceded that the present O. I. C. hog is superior to and has many marked characteristics with power to transmit the same, that distinguishes it from the Chester White as it existed in Pennsylvania and New York in 1863, nevertheless it is insisted that the comparison should now be made between the Modern Chester White instead of with the original stock. The further claim is made that the O. I. C. hog has no characteristics that distinguishes it from the Modern Chester White. Upon this question there is a serious conflict in the evidence. There is also a sharp and irreconcilable conflict in the expert opinion evidence touching the question as to what constitutes a distinct and separate breed, but disregarding the claim of the petitioner that E. B. Silver crossed Chester Whites with a mammoth or large white English hog, there is practically no substantial conflict in the evidence tending to establish the facts from -which these breeders and experts reach different conclusions. One group of experts and breeders are of the opinion that there cannot be a distinct breed originated where title blood line goes back to the old foundation stock; that, while different strains or types may be developed in this way, it is nevertheless the same breed. Another group of breeders and experts are of the opinion that a distinct breed may be originated through selection and in-and-in breeding. Each of the individual members of these groups that have testified in this case or whose books on live stock breeding have been admitted in evidence, though differing in opinion, based on the same state of facts, appears to be entirely honest, sincere, and equally firm in the belief that his conclusion is the right one. — 989 — The situation presented by this conflict of opinion among experts and breeders is fully discussed and its effect determined by the Supreme Court in the case of American School of Magnetic Healing v. McAnnulty, 187 U. S. 94, 23 Sup. Ct. 33, 47 L. Ed. 90. In Bruce v. U. S., 202 Fed. 98, 120 C. C. A. 370, the Court of Appeals held that it- was error for the trial court to refuse to charge that “ * * * if the jury found that whether the substance was remedial' in character when exhibited as part of the treatment of morphinism was merely a matter of opinion among medical men, defendants must be acquitted” of the charge of using the mails for fraudulent purposes. It was also held by this court in the case of Harrison v. U. S., 200 Fed. 662, 665, 119 C. C. A. 78, 81, that a scheme to defraud “cannot be found in any mere expression of honest opinion.” As heretofore stated, in the early years of Mr. Silver’s activities as a breeder of swine there was no herd book for either the Chester White or the Ohio Improved Chester White. When a herd book known as the “National Chester White Swine Record” was established, Mf. Silver recorded his hogs in its hook, but at the same time insisted that his doing so should not be regarded as a surrender of his claim to a distinct breed. Rater, when “The International Ohio Improved Chester Breeders’ Association” was organized, Mr. Silver recorded his hogs in its book. In 1897, after this organization ceased to function, an organization known, as the O. I. C. Swine Breeders was formed and established a herd book, in which was eligible to registry only swine that could trace its origin to the R. B. Silver herd. ■ At the time this complaint was filed there were registered in this herd book about 950,000 hogs, tracing their ancestry to the Silver herd, and but 90,000 hogs registered in the herd books of the three Chester White associations. There is also evidence tending to prove that there are about 20,000 O. I. C. breeders, all of whom claim and advertise that it is a separate and distinct breed. It further appears from the evidence that the O. I. C. hogs were classed as a separate breed of hogs, by many stock journals and publications of like nature, including scientific books on stock breeding. While it is true that some of these editors and authors relied upon the claims and representations made by Silver and his successors, yet others made independent investigation of the facts upon which they based their conclusions. There is also substantial evidence in this record tending to prove that ihere is no sharp distinction between the term “breed” and “strain” as used by geneticists, and that these terms are used indiscriminately by a.great many breeders, so that in so far as affects the disposition of this case, it is not of controlling importance whether the one group of experts are correct in their opinion that the O. I. C.’s are but a strain of the Chester White or the other group are correct in the opinion that it is a distinct and separate breed. Aside from these considerations, it is apparent from the evidence in this case that this controversy does not vitally concern the general purchasing public. On the contrary, it is a controversy largely between rival breeders of hogs, or more particularly between rival hog breeders associations having and maintaining herd books. If the O. I. C. hogs — 990 — were inferior to the Chester Whites and not of their breed and the petitioner advertised them as Chester Whites, such practice would, no doubt, constitute unfair competition as against Chester White breeders; but it is admitted that not only are the O. I. C. hogs superior to the Chester White hogs of 1863, but that they are the equal of the Modern Chester Whites. That being true, it necessarily follows that neither the general public as consumers nor the small part of the public engaged in the breeding of swine and particularly in the breeding of O. I. C. and Chester White swine can be misled to their prejudice by this claim of the petitioner, nor induced thereby to purchase a hog inferior to the Modem Chester White. Whether the O. I. C. should or should not be classed or designated as a different and distinct breed, and whether they are or are not superior to the Modem Chester Whites, is a question that each breeder will decide for himself, and he will not change his individual opinion upon this subject no matter what this court or scientific experts on breeding may determine to be technically essential to the origination of a new and distinct breed. There is evidence in this record tending to prove, that breeders pay little or no attention to scholastic experts, who are designated by them as “book men” dependent upon breeders having actual experience, for the data upon which they base their conclusions. For the purpose pf this case it may be conceded that the conclusion reached by the Federal Trade Commission from the facts found by it that the O. I. C. and Chester White hogs are one and the same breed is a finding of fact within the meaning of section 5 of the Federal Trade Commission Act, and, as such, equally conclusive as other findings of fact made by that commission. But, in view of the fact that there is a substantial conflict of opinion upon this subject, as evidenced, by the testimony not only of scientific men, but also by the testimony of practical and experienced breeders of swine, it does not necessarily follow from this finding that the assertion of an honest opinion upon this subject either by way of advertisement or otherwise, by any one breeder or any number of breeders, constitutes unfair methods of competition where the facts upon which such opinion is based are generally known to that part of the public concerned in the controversy, even if it should appear from a scientific standpoint that such opinion is not technically correct. The statute does not define the term “unfair methods of competition,” therefore the question is one for the ultimate determination of the courts, as are the phrases “unsound mind,” “undue influence,” “unfair use,” “due process of law,” found in many other statutes. Federal Trade Commission v. Gratz, 253 U. S. 421, 427, 40 Sup. Ct. 572, 64 L. Ed. 993; Sears, Roebuck & Co. v. Federal Trade Commission, 258 Fed. 307, 311, 169 C. C. A. 323, 6 A. L. R. 358. In determining the meaning of “unfair methods of competition” within the meaning of the Federal Trade Commission Act, a court must give due consideration to the public policy declared in the Sherman Act (Comp. St. § 8820 et seq.), Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 441, 453, 42 Sup. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882, and cases there cited. — 991 — In the case of the Federal Trade Commission v. Winsted Hosiery Co., 258 U. S. 483, 42 Sup. Ct. 384, 66 L. Ed. 729, decided by the Supreme Court April 24, 1922, the Winsted Hosiery Company placed upon the cartons in which its underwear was sold the brands or labels, “Natural Merino,” “Gray Wool,” “Natural Wool,” “Natural Worsted,” or' “Australian Wool,” but none of this underwear was all wool, and much of it contained as little as 10 per cent. The Supreme Court held that these brands and labels are literally false and all except the label “Merino” palpably so; that all are calculated to deceive,, and do in fact deceive a substantial portion of the purchasing public, and therefore the proceeding to stop the practice was in the interest of the public. The court further found that the practice of using these brands and labels also constituted an unfair method of competition as against manufacturers of all wool and knit underwear and as against those manufacturers of mixed wdol and cotton underwear who brand their products truthfully. Section 5 of the Federal Trade Commission Act authorizes the filing of a complaint when such proceedings would be' to the interest of the public. Whether the Federal Trade Commission has jurisdiction to determine complaints as to unfair methods of competition where the general public, the ultimate consumer, is not misled, deceived, or prejudiced thereby, but involves only a controversy" between dealers and breeders, is a question unnecessary to decide in this. case. The claim that the O. I. C. hog is a separate and distinct breed from the Chester White is neither palpably nor literally false, as were the brands and labels used by the Winsted Hosiery Company. On the contrary, the truth of this claim finds equal support in the testimony of expert and experienced breeders, as does the claim that it is false and unwarranted by the facts. Nor does the claim tend to lessen competition or create monopoly in violation of the Anti-Trust Act. On the contrary, it places the O. I. C. hog in direct competition with the Chester White, while, if the O. I. C. are required to be advertised and marketed as Chester Whites the tendency of such requirement would be to destroy competition and create a monopoly in the breeding and marketing of Chester Whites. For the reasons above stated, a majority of this court is of the opinion that the petitioner is not guilty of unfair methods of competition by advertising the O. I. C. hog as a separate and distinct breed of hogs from the Chester White so long as it does not include in its advertisements the claim found to be-untrue by the Federal Trade Commission that the foundation stock of the O. I. C. was crossed by a. “Mammoth” or large white English hog. Paragraph 2 of tire order to cease and desist, as it now reads, is inconsistent with paragraph 1 as above modified. In the opinion of a majority of this court, paragraph 2 should be changed to read as follows: “That it has Chester White pigs for sale at a less price than O. I. C. pigs or at any other price, if it in fact has no Chester White pigs, as distinguished by. it from O. I. C. pigs, for sale at quoted prices or otherwise.” — 992 — There is substantial evidence in this record to sustain the findings of facts upon which paragraphs 3 and 4 of the modified order to cease and desist are predicated, and these paragraphs are approved. . Paragraph 5 is based solely upon paragraph 7 of the complaint. That paragraph charges in substance that respondent advertised that two O. I. C. hogs weighed 2,806 pounds, in such a way as to mislead a prospective purchaser to believe these hogs were then, or recently had been, in existence, whereas said representations refer to hogs which are alleged to have existed in the year 1868. There is no charge in the complaint that respondent advertised that it had for sale the progeny of these hogs. It follows that the allegations of this complaint do not support this paragraph. In view of the undisputed evidence that this claim was made in the advertising as early as 1883, that its truth is not challenged by complaint or evidence, that excessive weight hogs are not desirable or used for breeding purposes, that some years before the filing of this complaint, when respondent’s attention was called to the fact that its advertisement read, “Two hogs weigh 2,806 pounds,” it at once changed this to read “Two hogs weighed 2,806 pounds,” and it has continued so to read ever since, it would not appear that this would involve public interest or constitute unfair methods of competition. In any event, the evidence tending to prove that the respondent had in good faith abandoned this form of advertising long prior to the filing of this complaint, is not disputed by oral evidence or by circumstances. In the opinion of a majority of the court, the fifth paragraph of the modified order to cease and desist should be vacated. It is unnecessary to discuss in detail the other questions presented by the petition to review in reference to hearsay évidence, leading questions, the admission of opinion testimony as to the ultimate fact to be decided by the Commission, and other similar questions of a more or less technical nature. It is sufficient to say that from the whole record it does not appear that the substantial rights of the petitioner have been prejudiced in any way by these alleged errors. The first and second paragraphs of the order to cease and desist made and entered by the Federal Trade Commission will be modified to the extent hereinbefore stated and, as so modified, approved. Paragraphs 3 and 4 are approved as written without change or modification thereof. Paragraph 5 is vacated.