Cases of Interest: Fashion Originators Guild v. Federal Trade Commission

Case(s): Fashion Originators Guild v. Federal Trade Commission, 312 U.S. 457 (1941).

Facts: The Fashion Originators Guild of America (“FOGA”) is mostly made up of designers, manufacturers, sellers, and distributors of women’s garments. The garment manufactures claim to create original designs of clothes and that other manufactures make and sell copies of them at lower prices. The FOGA refers to this practice as “style piracy.” The FOGA admits to destroy competitions they have as a group boycotted and declined to sell their products to retailers who follow a practice of selling clothes copied by other designers.

FOGA members have agreed to sell their products only to those manufacturers who have in turn agreed to sell only to cooperating retailers. The FOGA has a system of trial and appellate tribunals to determine whether a garment is a copy of a FOGA member’s design and the FOGA audits its member’s books. Violators are subject to heavy fines. The FOGA also prohibits its members from participating in retail advertising, regulates the discount they may allow, and prohibits selling at retail.

Court of Appeals

The Court of Appeals affirmed a Federal Trade Commission (“FTC”) decree ordering petitioners to cease and desist from certain practices found to have been done in combination and to constitute unfair methods of competition tending to monopoly, and the FOGA appealed to the U.S. Supreme Court.

U.S. Supreme Court

The Supreme Court held that the FTC correctly concluded that the FOGA’s practices constitute an unfair method of competition. The FOGA practices run counter to the public policy declared by the Sherman and Clayton Acts and the FTC can suppress actions when they violates paragraph 3 of the Clayton Act declaring it unlawful for any person engaged in commerce to make a sale or contract for sale of goods on the condition, agreement or understanding that the purchaser thereof shall no use or deal in the goods of a competitor or competitors of the seller where the effect of such sale, or contract for sale may be to substantially lessen competition or tend to create monopoly in any line of commerce.