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UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

At a regular session of the Federal Trade Commission, held at its office in the city

of Washington, D. C., on the 12th day of November A. D. 1943 Commissioners : Garland S. Ferguson, Chairman; Charles H. Marsh, Ewin L.

Davis, William A. Ayres, Robert E. Freer

Docket No. 5038
IN THE MATTER OF WYETH CHEMICAL COMPANY, ET AL.

ORDER GRANTING MOTION TO SUBSTITUTE RESPONDENT This matter coming on to be heard by the Commission upon the motion of The Larned Corp., that it be substituted as respondent for said Wyeth Chemical Company herein, and it appearing to the Commission that the name of the respondent herein, Wyeth Chemical Company, a corporation, has been legally changed to The Larned Corp., a corporation, and the Commission having duly considered said motion and the record herein and being now fully advised in the premises ;

IT IS ORDERED that the motion of The Larned Corp., that it be substituted as respondent for said Wyeth Chemical Company herein be, and the same hereby is, granted.. By the Commission. (SEAL]

OTIS B. JOHNSON,

Secretary. Mr. REECE. You will then submit, to accompany each complaint the stipulation and agreement which was drawn up?

Mr. CASSEDY. Prior to the complaint you mean? Mr. REECE. Yes. Mr. CASSEDY. I presume the usual procedure followed in those cases? Mr. REECE. In that case, I will just retain that copy of the "cease and desist."

To permit further clarification, so that we will have an understanding on this, it is my understanding that you will file with the copy of the complaints a copy of the stipulation and agreement which was offered to the company?

Mr. CASSEDY. Yes, sir.

Mr. REECE. And that they will come to the committee and appear in the record at the same place!

Mr. CASSEDY. Yes, sir. Mr. SADOWSKI. All right. You may proceed. Mr. CASSEDY. Let me point out, Mr. Chairman, that in the case of Miles Laboratories, which I mentioned a few moments ago, Mr. Hoge sought a declaratory judgment. That case was instituted in the District Court of the District of Columbia at the time that the stipulation referred to by Mr. Reece was offered to the respondent, and was prior to the issuance of the complaint in the case.

So the case is actually a decision in that regard as I have read on two occasions already: That the action and procedure of the Commission was not a regulation of labeling. The case was based upon the stipulation that was offered to the respondents. This stipulation follows identically the same procedure as outlined in the policy of the commission that I read.

I would like to file with the committee a copy of the decision in that case.

Mr. SADOWSKI. That will be admitted. (The decision is as follows:)

(140 F. 2d 683, cert. den., 322 U. S. 752 (May 29, 1944)]

Docket 4993

UNITED STATES COURT OF APPEALS

DISTRICT OF COLUMBIA

No. 8595

MILES LABORATORIES, INC., APPELLANT, V. FEDERAL TRADE COMMISSION, ETC., ET AL,

APPELLEES

Appeal from the District Court of the United States for the District of Columbia

Argued January 10, 1944-Decided February 7, 1944

Mr. James F. Hoge, with whom Messrs. Preston B. Kavanagh and Preston C. King, Jr., were on the brief, for appellant.

Mr. Cyrus B. Austin, member of the Bar of the Court of Appeals of the State of New York, pro hac vice, by special leave of Court, with whom Messrs. William T. Kelley, Chief Counsel, Federal Trade Commission, and Edward M. Curran, United States Attorney, were on the brief, for appellees.

Before GRONER, C. J., and EDGERTON and ARNOLD, JJ.

GRONER, C. J.: Appellant is an Indiana corporation and is engaged in the sale and distribution in interstate commerce of certain medical preparations described as “Dr. Miles' Nervine,” “Dr. Miles' Nervine Tablets,” and “Dr. Miles' Anti-Pain Pills.” The sales of these products amount to around a million dollars annually.

Stated in general terms, the present controversy grows out of the fact that some two or three years ago the Federal Trade Commission, after an investigation, reached the tentative conclusion that appellant's advertising material failed fully to reveal that these preparations, if used by individuals in excess of the dosage recommended, might result in harm to the users. In consequence the Commission addressed a communication to appeallant, notifying it of this finding, and suggesting the disposition of the matter by stipulation. This contemplated an agreement on the part of appellant to revise its advertising matter to include a warning to the public in line with the conclusions of the Commission; or, stated in the language of the Commission, so as to reveal to purchasers that its preparations, if used in excess of the dosage recommended on its labels, would be dangerous to health and cause mental derangement, skin eruptions or collapse or dependence upon the drug. The Commission offered as an alternative that if the directions for the use of the preparations appearing on the labels were changed to contain warnings, in similar language to that just used, of dangers of excessive use, the advertisements need contain only the cautionary statement, "Caution, Use Only As Directed.”

Appellant declined the Commission's offer to stipulate and brought this suit in the District Court under the Federal Declaratory Judgment Act, seeking a declaration as to the limits of the Commission's authority to dictate and control the contents of appellant's labeling and advertising. The suit was dismissed, on the Commission's motion, upon the ground that the court.was without jurisdiction of the subject matter. An appeal to this court followed.

The Federal Trade Commission Act defines unlawful advertising as that which is misleading in a material respect, or which induces the purchase of drugs injurious to health under the conditions prescribed in the advertisement or under such conditions as are customary or usual, and which fails to reveal material facts with respect to the consequences which may result from the use under the conditions advertised.? Appellant says that nothing appears in any of its advertising or labeling contrary to these provisions; that all of its labels, as well as its advertisements, contain accurate statements of the active ingredients in its medicines, the purposes for which they are to be used, as well as the safe and proper doses to be taken; and all of this is admitted on the motion to dismiss. Appellant, therefore, insists that the action of the Commission in demanding that it include in its advertisements, or at its option on its labels, a statement to the effect that the excessive use of any of the medicines may result in mental derangement or cause collapse or dependence upon the drug, is wholly beyond the power of the Commission. But appellant admits, as of course it must, that the Act does give the Commission power, after notice and hearing, to prohibit false advertising of drugs, as that term is defined in the Act; and that is the provision on which the Commission based its right to request a stipulation that appellant conform its advertising to the Commission's construction of the statute as an alternative to a proceeding by the Commission to seek to accomplish the same end through the issuance of a “complaint.” We see no objection to this procedure. Certainly, there can be no contention that the Commission is without statutory authority to issue a complaint when it “has reason to believe” that someone is using misleading matter in the advertising and sale of its medicinal products--for the Act specifically so provides. Whether, having issued a complaint and held a hearing, its decision on the facts or on the law is correct is a question which cannot be challenged in a District Court, either before or after the event, for in such case an appeal to an appropriate court of appeals is made the exclusive remedy.* Here, as we have seen, appellant's contention is that its advertisements are lawful and hence do not offend the Act, and that its labels are matters not within the scope of the Act, as the result of which the Commission has no lawful right to issue its complaint in the one case or the other, and that accordingly it ought to be saved the expense and embarrassment of a long and useless Commission proceeding. The Commission denies, and we think correctly, that it is attempting to regulate appellant's labels. All that it said on that subject was to offer that means of correction as a choice which appellant could take or leave as it pleased. However desirable it may be thought that appellant, when challenged as to its methods of business, should have recourse to a court of equity to construe the extent of the Commission's power in a case in which it is made to appear that a public hearing will result in irreparable injury, nevertheless, it has been held so often as not to require citation of authority, that for a Federal Court to assume the right to suspend the Commission's investigation, while it determines controversial questions of law or fact, would be a clear assumption of power it does not possess. The administrative remedy which Congress has provided must be first exhausted. To hold otherwise, the Supreme Court has recently and explicitly said, would

1 Miles Laboratories v. Federal Trade Com., 50 F. Supp. 434.

in effect substitute the District Court for the Board as the tribunal to hear and determine what Congress declared the

Board exclusively should hear and determine in the first instance.” That the Supreme Court will change or modify its views in this respect is an “iridescent dream,” for the trend is decidedly the other way. On no subject is the opinion of that Court, as I view it, more definitely fixed than it is on the lack of power of the courts to inject themselves or be injected into proceedings which Congress has committed to the primary jurisdiction of administrative agencies. Indeed, it has been held in some cases that even a right of review, if not provided in the statute, may not be supplied by the courts; o and this doctrine

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* 15 U. S. C. A., & $ 52 (a), 54 (a), 55 (a). § 55 (a) provides : “The term 'false advertisement means an advertisement, other than labeling, which is misleading in a material respect; and in determining whether any advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combinations thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual."

3 15 U. S. C. A. $$ 45 (b), 52 (b).
4 15 U. S. C. A. § 45 (d).
6 Myers v. Bethlehem Corp., 303 U. S. 41, 50.
* Louisiana v. McAdoo, 234 U. S. 627, 633.

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was recently extended to a case in which the claim was that the action of the Board was arbitrary and unreasonable. See Per Curiam, December 6, 1943, in re Brotherhood of Ry. & S. Clerks v. United T. S. E. of America.'

In the present case and on the present record—if the question were open-it might very well be argued that appellant's advertising is neither false nor misleading, when considered in the light of the statutory provision requiring no more than a revelation of all material consequences which may result from the use of the product in the customary way or under the conditions prescribed in the advertisement. But since the matter is not open, we have no occasion to examine or weigh questions of fact or law, since they are in the first instance within the exclusive jurisdiction of the Commission and its desicion when made is subject to challenge only as provided in the Act; nor is there anything in the Declaratory Judgment Act which changes this result or creates new rights or increases or extends the jurisdiction of the courts. Doehler Metal Furniture Co. v. Warren, 76 U. S. App. D. C. 60, 129 F. (20) 43, 45.

We are, therefore, of opinion that the District Court was in all respects correct in holding that it lacked jurisdiction of the subject matter of the complaint.

Affirmed.

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DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF COLUMBIA

Civil Action No. 18057

1

MILES LABORATORIES, INC., PLAINTIFF, vs. FEDERAL TRADE COMMISSION-WILLIAM A

A. AYRES, INDIVIDUALLY AND AS A MEMBER AND CHAIRMAN OF THE FEDERAL TRADE COMMISSION; GARLAND S. FERGUSON, INDIVIDUALLY AND AS A MEMBER OF THE FEDERAL TRADE COMMISSION ; Ewin L. DAVIS, INDIVIDUALLY AND AS A MEMBER OF THE FEDERAL TRADE COMMISSION; CHARLES H. MARCH, INDIVIDUALLY AND AS A MEMBER OF THE FEDERAL TRADE COMMISSION; ROBERT E. FREER, INDIVIDUALLY AND AS A MEMBER OF THE FEDERAL TRADE COMMISSION, DEFENDANTS

DECREE DISMISSING ACTION

This cause coming on to be heard upon the complaint and the defendants motion to dismiss, and the court having fully heard and considered said motion and being of the opinion that it lacks jurisdiction over the subject matter of the complaint for the reasons set forth in its opinion filed herein on the 21st day of June 1943,

IT 18 ORDERED, ADJUDGED AND DECREED that the Defendants' motion be, and the same hereby is, granted and that this action be, and it hereby is, dismissed, with costs to be borne by the Plaintiff.

O. R. LUHRING, Justice. Dated at Washington, D. C., this 23rd day of June 1943.

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF COLUMBIA

Civil Action No. 18057

MILES LABORATORIES, INC., PLAINTIFF, vs. FEDERAL TRADE COMMISSION, ET AL,

DEFENDANTS

The plaintiff, an Indiana corporation, is now, and for more than twenty-five years last past has been, engaged in the manufacture, sale, and distribution in interstate commerce of certain medicinal preparations known as “Dr. Miles'

? In this case we had held, on appeal from the National Mediation Board, that its certificate forcing some forty-five "Red Caps” employed in the Union Station in St. Paul, against their will and desire, to be represented as to hours of work, rates of pay, and redress of grievances by the Brotherhood of Railway Clerks, which they were not permitted to join because of their race, was arbitrary and in the teeth of both the word and spirit of the Act. The reversal by the Supreme Court on the authority of Switchmen's Union, etc., v. Nat. Mediation Board, decided November 22, 1943, determined that Congress had created a "right". which it had delegated authority to the Board alone to apply and which no court could review.

Nervine,” “Dr. Miles Nervine Tablets,” and “Dr. Miles' Anti-Pain Pills" with an annual sales in excess of $300,000, and a good will of more than $1,000,000.

Its product is packaged and sold in bottles, tins, and cartons, which bear labels containing statements and representations with respect to the conditions of use recommended for he same, the active ingredients, the purposes for which he products are effective and the safe or proper dosage. Specimens of cartons, labels, and package inserts, which constitute the complete packaging of said products, are filed with the complaint as Exhibits A-1 to A-3, inclusive. It is alleged that in this respect the plaintiff complies with all the provisions of the Federal Food and Drug and Cosmetic Act (21 U. S. C. A., $ 301 et seq.).

Insofar as the plaintiff advertises these products, their advertisements include one of the following statements : "Full Directions on Package—Read Them" or "Read Full Directions on Bottle."

The defendant, Federal Trade Commission, composed of the individual defendants, acting through its Chief Trial Examiner, notified the plaintiff that its packages, labels, and labeling failed adequately to reveal the potential danger of its products, and submitted a stipulation for the signature of the plaintiff wherein it would admit (a) that excessive use of “Dr. Miles' Nervine” and “Dr. Miles' Nervine Tablets” may result in mental derangement of the user and (0) that excessive use of "Dr. Miles' Anti-Pain Pills" may cause collapse or dependence upon said product and (c) that neither the “caution” appearing on its labels nor the advertisements disseminated by it include warnings to that effect.

The proposed stipulation contains an agreement that the plaintiff will forthwith cease and desist from “disseminating any advertisement pertaining to the preparations Dr. Miles' Nervine and/or Dr. Miles' Nervine Tablets which fails clearly to reveal that said preparation or preparations should not be used in excess of the dosage recommended; that such excessive use may be dangerous, causing mental derangement and/or skin eruptions, and should not be taken by or administered to children”; and, with respect to Dr. Miles' Anti-Pain Pills, from disseminating any advertisement "which fails clearly to reveal that said preparation should not be used in excess of the dosage recommended ; that such excessive use may be dangerous, causing collapse and/or dependence upon the drug, and that it should not be taken by or administered to children.” However, the proposed stipulation gives plaintiff the option to include such cautions or warnings on its labels and, in such case, the advertisements need contain only the cautionary statement : CAUTION, USE ONLY AS DIRECTED.

The defendants threaten, in event of refusal or failure on the part of the plaintiff to execute the stipulation, to institute proceedings immediately against said plaintiff.

The proposed stipulation entitled “stipulation as to the Facts and Agreement to Cease and Desist” is attached to the complaint and made part thereof and is marked Exhibit B.

The complaint characterizes the claims, demands, and threatened action of the Commission as “illegal, unlawful, arbitrary, and in excess of the powers and authority" vested in it (par. 24), and points out, in paragraph 25, that if plaintiff were to sign the stipulation, its good will would be destroyed and it would be required at great expense to discontinue use of all labels, tins, cartons, and advertising matter now on hand, and to obtain and recall from wholesalers, jobbers, and dealers all of said products in their possession and attach new labeling thereto at an expense to it in excess of Twenty-five Thousand Dollars ($25,000).

The complaint alleges (par. 26) that if plaintiff refuses to sign the stipulation, it would be (a) subjected to criminal prosecution; (b) required at great expense in money and time to defend; (c) receive adverse and harmful publicity; (d) required at great expenditures of money and time to try issues of fact which defendants are without legal authority to raise and have no jurisdiction to determine, and will suffer undue interference with its business and without means of a judicial determination of defendants' jurisdiction and authority, except at the conclusion of a long drawn-out and expensive proceeding before defendant and (e) if found guilty, be unable to obtain a judicial review if there is any evidence to support the charges, no matter how overwhelming the evidence it introduces to disprove the charges may be.

The plaintiff refused to sign the proposed stipulation on the ground that the actions of the defendants are illegal; and that the action of the Commission and its individual members is beyond the scope of statutory authority; and beyond the power conferred by statute upon the respective offices.

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