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72 ing its judgment in determining the price of its new product. How then could it really know whether it was selling below cost? It could not, even though an accounting firm might make some estimates of the firm's minimum unit cost which showed the sales prices to be below cost. The court found such latter evidence to be insufficient since it was based on the inadequate data provided by the manufacturer. Proof of sales below cost may be prima facie evidence of intent to injure competitors or destroy competition. But even if actual sales below cost can be demonstrated, can you prove the seller guilty? Not if he does not know his own unit costs and is simply exercising his judgment in pricing. So said this court. 4. Sales Below Cost, South Carolina, CCH 1[34,486 (June, 1965) and Washington, CCH 1135,286 (March, 1965). [M.C.H.] The legislature of the State of Washington has passed a law which puts a limitation on the amount of fresh fruit that a buyer may purchase when the sale is made at a price which is below the seller's cost. And in the State of South Carolina selling milk below cost with a limitation on the quantity that may be purchased by a buyer now raises a presumption of intent to injure competition and is therefore unlawful. These two statutory changes appear to be inconsistent. But they undoubtedly have their own specific objectives. Washington's placing a limit on the quantity of fresh fruit sold to any one buyer could prevent a discriminatory sale of a product that a seller might try to justify on the grounds that he was unloading a perishable product. South Carolina's legislative action might be explained, on the other hand, as an effort to inhibit lossleader selling. If a seller places a limit on the quantity one consumer of milk can purchase at a below-cost price, the loss-leader item can be assured of going around to all possible buyers and thus effectively serving as a "come on" to many customers. IV. REGULATION OF CHANNELS OF DISTRIBUTION B. Relations between Buyers and Sellers: Exclusive Dealing Arrangements, etc. Federal Trade Corrrniission v. Texaco, Inc., and B. F. Goodrich Company, 85 S. Ct. 1798 (June, 1965). [M.C.H.] In this decision a sales-commission agreement between a major oil company marketer and a tire manufacturer is remanded to the Federal Trade Commission by the United States Supreme Court for further proceedings. The Court of Appeals of the District of Columbia had previously set aside a Commission order condemning the agreement on the grounds that the evidence had not been sufficient. It had gone even further and remanded the case to the Commission with instructions to dismiss the complaint. (See Texaco, Inc. V. Federal Trade Commission and B. F. Goodrich Co. V. Federal Trade Commission, this section, JOURNAL OF MARKETING, January, 1965.) In reopening this case the Supreme Court had in mind its own recent decision supporting a Commission order against a similar sales commission agreement between another oil marketer and another tire manufacturer. Within the context of that case, the agreement in this case was found to be an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act. (See The Atlantic Refining Journal of Marketing, January, 1966 Co. V. Federal Trade Corn-mission and The Goodyear Tire & Rubber Company v. Federal Trade Commission, this section, JOURNAL OF MARKETING, September, 1965.) V. REGULATION OF UNFAIR COMPETITION A. Advertising In re Cigarette Labeling and Advertising, CCH 1150,263, (June, 1965) ; 1150,266, (June, 1965) ; 1150,274, (August, 1965); BNA ATRR No. 208 (July 6, 1965) A-9; BNA ATRR No. 209 (July 13, 1965) A-13, X-4; BNA ATRR No. 212 (August 3, 1965) A-2. [D.C] The new Federal Cigarette Labeling and Advertising Act (Public Law 89-92) passed on July 27, 1965, and effective January 1, 1966, requires that every package of cigarettes must display the following statement conspicuously and legibly: "Caution: Cigarette Smoking May Be Hazardous to your Health." Violation of this requirement is made a misdemeanor subject to a fine of not more than $10,000. The act prohibits the requirement of any other statement of caution by any federal, state, or local authority and also provides that for a period terminating on July 1, 1969, no such statement shall be required in any cigarette advertising. Accordingly on August 3, 1965, the Federal Trade Commission vacated its Trade Regulation Rule for the "Prevention of Unfair and Deceptive Advertising or Labeling of Cigarettes in Relation to the Health Hazards of Smoking" issued in June, 1964, (see this section, JOURNAL OF MARKETING, July, 1964) which required that both cigarette advertising and labeling contain an affirmative statement of the health hazards of smoking. The Commission, in vacating its order, hastened to set forth in what respects the new act limits its authority and in what respects its responsibilities remain unimpaired. The act places a moratorium on any cautionary requirements in cigarette advertising for a period of three years, ostensibly to permit the effectiveness of the packaging requirement to be evaluated. The Commission noted that, except as specifically provided, the FTC's authority with respect to unfair or deceptive acts or practices in the advertising of cigarettes is not affected. Moreover, particular attention will be paid by the Commission to "any advertisement which tends to negate the warning which must be placed on the package in accordance with" the act. Congressional policy on which this new law was based may be summarized briefly as follows: "The production, processing and distribution of cigarettes . . . affect commerce and the national economy" and Congress wishes to insure that "commerce and the national economy may be . . . protected to the maximum extent consistent with this policy." The act represents an attempt to take appropriate remedial action concerning a health hazard. It purports to present the individual with freedom of choice—the right to smoke or not to smoke—and in addition provide him with "the right to know that smoking may be hazardous to his health." Since people have come to rely on the federal government for cautionary labeling, it seemed appropriate that Congress should take action. Moreover, it seemed appropriate that a warning requirement be uniform so that a multiplicity of state or local requirements do not create chaotic marketing conditions; therefore, the bill precludes any other authority from requiring a different statement. Furthermore, according to Congress, since the cigarette manufacturing industry has set up its own advertising Legal Developments in Marketing 73 code, and since the Department of Health, Education and Welfare is conducting informational and educational programs in the field of smoking and health, it appeared unnecessary to require health warnings in cigarette advertising. The effects and effectiveness of this new law are yet to be tested. However, a number of deficiencies appear at the outset. An initial question may be raised as to whether this act represents "remedial action against a health hazard." Remedial action requires more than just informative activities; it calls for the curtailment of cigarette smoking. The fact that the cautionary message must appear on the package of cigarettes only, prescribes that at least one package must be purchased before the message be read. Moreover, it has been established that people perceive selectively (that is, they may see what they wish to see), and a message on a cigarette package can be easily overlooked— particularly since the act does not designate the exact place in which the message must appear. The prohibitions against any other required affirmative disclosure notes on packages and the exemption of advertising from all cautionary requirements seriously limit the positive effects of the act. As one dissenter to the proposed bill noted: "it would in effect make a 'sacred cow' out of the cigarette industry in the United States commerce by shielding this industry from any future requirements concerning health warnings in tobacco and advertising which might be otherwise imposed by federal, state or local authorities." A number of cigarette manufacturers have recently announced plans for increased advertising expenditures, which raises the issue as to the Federal Trade Commission's ability to prevent any "representations that tend to undermine the warning placed on the package." It seems that if this policy is to receive strict implementation, every advertisement must be viewed as having the potential to undermine the warning that cigarette smoking may be hazardous to health. action. Section 5(a) of the Clayton Act deals with the use of "a final judgment or decree" obtained "in any civil or criminal proceedings" under the antitrust laws as "prima facie evidence against such defendant" in a subsequent damage action. Rather, the Court asserted that Section 5(b)—which tolls the four-year statute of limitations—assists the private litigant in that Section 5(b) takes effect regardless of whether a final decree or judgment is ultimately entered. Therefore, the Commission proceedings lengthen the time period during which a private treble damage suit may be instituted. Furthermore, the pleadings, transcripts of testimony, exhibits, and documents used in the Federal Trade Commission proceedings will be available to the private-suit plaintiff in a treble damage action. The practical illustration of this tolling process is exemplified in the New Jersey Wood Finishing case itself. New Jersey Wood instituted a treble damage suit against Minnesota Mining and Manufacturing, attacking its 1956 acquisition of another company and alleging a violation of Section 7 of the Clayton Act and Sections 1 and 2 of the Sherman Act. The suit was not filed until November, 1961. Under Section 4(b) of the Clayton Act this suit would have been barred by the four-year statute of limitations. However, in 1960 the Commission had filed an anti-merger complaint against Minnesota Mining and Manufacturing and was able to secure a consent order. Prior to the New Jersey Wood Finishing decision this case would have been barred regardless of the Commission proceedings. Now it becomes possible to institute the private treble damage suit without difficulty. Perhaps all this appears somewhat legalistic, but the important point is that a private treble damage suit plaintiff has now received a legthened time period in which to institute his suit against an unwary defendant who has lost count of the days or who has been involved in proceedings before the Federal Trade Commission on the same matter. VI. PROCEDURAL AND MISCELLANEOUS DEVELOPMENTS 1. Minnesota Mining and Manufacturing Co. v. New Jersey Wood Finishing Co., 85 S. Ct. 1473 (May, 1965) ; BNA ATRR No. 208 (July 6, 1965), B-1. [G.E.H.] In the New Jersey Wood Finishing case the Supreme Court has provided another weapon to plaintiffs in private treble damage suits. The Court held that a Federal Trade Commission proceeding under the Clayton Act suspends ("tolls") the running of the four-year limitation for bringing a damage suit based on the same violation. The Court noted that "the limitation provisions of Section 4(b) of the Clayton Act is tolled by Commission proceedings to the same extent and in the same circumstances as it is by Justice Department actions." Justice Clark stated that it was necessary to give the same tolling privilege for Commission proceedings as for Justice Department proceedings; "otherwise the benefits flowing from a major segment of the government's enforcement effort would in many cases be denied to private parties." It is not the purpose of this brief note to analyze the complex legal problems inherent in the tolling section of the antitrust laws. Suffice it to note that the private litigant in treble damage suits benefits greatly from this Supreme Court decision. The Supreme Court did not rule as to the use of Federal Trade Commission proceedings as prima facie evidence against the defendant in a subsequent damage 2. U.S. V. Pennsylvania Refuse Removal Association, CCH 1171,488 (D.C. Pa., June, 1965); BNA ATRR No. 206 (June 22, 1965), A-13; A.B.T. Sightserirq Tmcrs, Inc. V. Gray Line New York Tours, Corp., CCH 1171,477 (D.C. S. N.Y. June, 1965) ; BNA ATRR No. 2U5 (Jane 15, 1965), A-12; U.S. v. Bowling Proprietors' Association of America, Inc., CCH 1171,474 (D.C. S. N.Y. May, 1965) ; Cathay Mortuary-Wah Sang v. Funeral Directors of San Francisco, Inc., CCH 1171,505 (D.C. N. Calif., June, 1965). [G.E.H.] These four cases illustrate the widening of the definition of what constitutes interstate commerce. Since the interstate commerce element is an important jurisdictional factor in antitrust cases the scope of the definition of interstate commerce becomes a crucial factor. In the main, antitrust cases utilize two theories in satisfying the interstate commerce jurisdictional requirement. One theory is based on the occurrence of the acts in the "flow of commerce"; the other theory contends that although the acts occurred in intrastate commerce, nevertheless they substantially affect interstate commerce. In the cases cited, both theories were utilized. The Pennsylvania Refuse Removal case involved the "in commerce" theory. The court held that since the refuse-removal business involves both the collection and disposal of refuse the jurisdictional element was satisfied. Since the trade association of trash collectors collected the refuse in Pennsylvania but disposed of the refuse in New Jersey, the activities of the association were in commerce and subject to the Sherman Act.