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MILES LABS., INC. v. FTC

June 21, 1943

MILES LABORATORIES, Inc.,
v.
FEDERAL TRADE COMMISSION et al.



The opinion of the court was delivered by: LUHRING

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' Nervine," "Dr. Miles' Nervine Tablets," and "Dr. Miles' Anti-Pain Pills" with annual sales in excess of $900,000, 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 the same, the active ingredients, the purposes for which the 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, Drug and Cosmetic Act, 21 U.S.C.A. § 301 et seq.

 In so far 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 (b) 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 Cases 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) subject 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 drawnout 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.

 The relief sought is a declaratory judgment pursuant to Section 274d of the Judicial Code, as amended, 28 U.S.C.A. § 400, that (a) defendants have no authority to determine the legality of the language used on the labeling of plaintiff's products; (b) that defendants have no authority to force plaintiff to vary such language; (c) that defendants exceed their authority in seeking to compel plaintiff to include in its advertising the warnings demanded by defendants; (d) that defendants have no lawful authority to require plaintiff to include in its advertising warnings concerning consequences which might result in the use of the products contrary to the directions on the labels, and (e) that plaintiff has fully complied with all legal requirements imposed by the Federal Trade Commission Act upon its advertising of its products.

 The defendants move to dismiss the complaint on the grounds (1) that this court lacks jurisdiction over the subject matter of the complaint and (2) that the complaint fails to state a claim against the defendants upon which relief can be granted.

 By the Act approved September 26, 1914, Congress created the Federal Trade Commission, defined its powers and prescribed its duties. Section 5 of that Act, as amended, 15 U.S.C.A. § 45(a), denounced "unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce" and declares them unlawful. The Commission is "empowered and directed to prevent persons, partnerships, or corporations [with certain exceptions not material ...


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