## Facts

- The Federal Trade Commission (FTC) charged multiple Pacific Coast lumber manufacturers and dealers with using misleading trade names in interstate commerce in violation of § 5 of the Federal Trade Commission Act.
- Respondents manufactured and sold lumber derived largely from *Pinus ponderosa* and shipped products from California and Oregon to other states and foreign markets.
- Respondents marketed *Pinus ponderosa* lumber as “California White Pine,” and sometimes as “white pine.”
- In both botanical classification and commercial understanding, *Pinus ponderosa* was identified as a “yellow pine,” not a “white pine.”
- “White pine” commonly referred to other species (e.g., northern white pine and related varieties) that were generally viewed as more durable and commanded higher prices.
- The FTC found respondents’ label “California White Pine” misleading, confusing, and prejudicial to retailers, architects, builders, and consumers, and unfair to sellers of true white pine.
- The FTC issued cease-and-desist orders barring the use of “California White Pine” for ponderosa pine products.

## Issues

1. Whether, under the Federal Trade Commission Act, a reviewing court may reweigh evidence and substitute its inferences for the FTC’s findings of fact when those findings are supported by evidence.
2. Whether marketing ponderosa pine as “California White Pine” constitutes an “unfair method of competition” under § 5 of the Federal Trade Commission Act.
3. Whether long usage, good-faith adoption, a claimed secondary meaning, or inclusion of the term in a Bureau of Standards trade-name listing bars FTC relief against a misleading trade name.

## Decision

- The Supreme Court unanimously reversed the Ninth Circuit and sustained the FTC’s cease-and-desist orders (Justice Brandeis not participating).
- The Court held that the FTC’s findings of fact are conclusive on review if supported by evidence; the court of appeals lacked authority to reassess the testimony and select competing inferences.
- The Court held that selling yellow pine under the name “California White Pine” was deceptive and an unfair method of competition within § 5.
- The Court rejected defenses based on historical use, absence of fraudulent intent, alleged secondary meaning, and a Bureau of Standards “Simplified Practice” listing.

## Legal Principles

- Under the Federal Trade Commission Act, the FTC’s findings of fact are conclusive if supported by evidence; reviewing courts may not reweigh evidence or substitute their own factual inferences.
- Marketing a cheaper or inferior product under the name of a better-known or higher-grade product may be condemned as deception and as an unfair method of competition under § 5.
- Consumer prejudice exists when buyers are induced to accept a substitute believing it to be a different and better article, even if the substitute costs less; consumers are entitled to receive what they choose to buy.
- Deceptive product naming can harm competitors by diverting business from sellers who describe goods accurately, supporting a finding of unfair competition under § 5.
- A misleading trade name is not immunized by long usage, good-faith adoption, or partial governmental or trade recognition when its continued use is unfair and contrary to the public interest.
- A claimed secondary meaning does not defeat FTC action where substantial classes of buyers remain misled; a name acceptable in one locality may be prohibited when used in broader markets where it causes confusion.

## Conclusion

The Court upheld the FTC’s authority to prohibit the interstate marketing of ponderosa pine as “California White Pine,” holding that the deception both misled purchasers and diverted trade from honest competitors, and that FTC fact findings supported by evidence bind reviewing courts even when respondents acted without fraud and had used the term for years.


Federal Trade Commission v. Algoma Lumber Co., 291 U.S. 67 (1934)