Federal Trade Commission v. Mary Carter Paint Co.
15 L. Ed. 2d 128, 382 U.S. 46, 1965 U.S. LEXIS 2405 (1965)
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Rule of Law:
An advertiser's offer to give a "free" item with the purchase of another is a deceptive practice under the Federal Trade Commission Act if the advertiser has no history of selling the purchased item alone at the stated price, as this means the stated price is effectively for both items.
Facts:
- Mary Carter Paint Company manufactured and sold paint and related products.
- For a significant period, Mary Carter's business practice was to price its paint on a per-can basis.
- The company's advertisements stated that for every can of paint a customer purchased at a listed price, they would receive a second can of equal quality and quantity for 'free.'
- These advertisements used slogans such as 'Buy one get one free' and 'Every second can free.'
- Mary Carter had no established history of selling single cans of paint at the advertised price; its regular and customary offer was always two cans for that price.
Procedural Posture:
- The Federal Trade Commission (FTC) initiated a proceeding against Mary Carter Paint Company.
- Following a hearing, the FTC found Mary Carter's advertising to be deceptive and issued a cease and desist order.
- Mary Carter, as petitioner, appealed the FTC's order to the United States Court of Appeals for the Fifth Circuit.
- The Court of Appeals for the Fifth Circuit set aside the Commission's order, ruling in favor of Mary Carter.
- The Federal Trade Commission, as petitioner, petitioned the Supreme Court of the United States for a writ of certiorari, which was granted.
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Issue:
Does a company's 'buy one, get one free' marketing campaign constitute a deceptive practice in violation of § 5 of the Federal Trade Commission Act when the company has no history of selling the single item at the advertised price, thereby making the advertised price the regular price for two items?
Opinions:
Majority - Mr. Justice Brennan
Yes. A "buy one, get one free" offer is deceptive when the seller's usual and customary practice is to sell two items for the advertised price of one, meaning the second item is not a gift or gratuity. The court must give deference to the Federal Trade Commission's expertise in determining what constitutes a 'deceptive' practice. Here, the Commission found substantial evidence that Mary Carter had no history of selling single cans of paint and was instead 'marketing twins,' allocating the price of two cans to one can and misrepresenting the second as 'free.' This determination was neither arbitrary nor clearly wrong and should have been sustained.
Dissenting - Mr. Justice Harlan
No. The Commission's decision is an arbitrary and opaque departure from its own long-standing policy, which permitted 'free' offers tied to a purchase so long as the conditions were clearly stated. Mary Carter appeared to comply with the FTC's established rules, and the Commission failed to demonstrate any real consumer deception or injury. The FTC's refusal to consider evidence of the paint's quality and its failure to provide a clear rationale for its new position makes its order unenforceable. The Commission has a duty to rule clearly so that businesses may know where they stand, and it failed to do so here.
Analysis:
This decision solidifies the authority of the Federal Trade Commission (FTC) to regulate 'free' offers and reinforces the principle of judicial deference to the agency's expertise in identifying deceptive advertising. The ruling establishes that the substance of a transaction, not just its form, determines whether it is deceptive. It requires advertisers to have a genuine, customary price for a single item before they can credibly offer a second one for 'free,' significantly impacting the legal landscape for 'two-for-one' and similar promotional marketing strategies.
