FTC Milestones: Shared beginnings in the Circle Cilk case

In celebration of the FTC’s 100th anniversary, we’ve been examining the leaves on our family tree. The FTC’s founding is often associated with turn-of-the-century trust busting, but a closer look – including a study of the very first case published in Volume 1 of Federal Trade Commission Decisions – proves that the intertwined roots of consumer protection and competition run deep. That’s one of the themes of the FTC@100 Symposium on Friday, November 7, 2014. In addition, over the next few months, we’ll take a look at how certain milestones in FTC history have shaped the agency’s direction as it enters its second century.

That first published law enforcement action scrutinized the labeling and advertising of a Philadelphia thread manufacturer, the Circle Cilk Company. One popular line marketed by the company was “Circle Cilk Embroidery Floss.” But what was the “cilk” floss actually made of? Cotton.

Foreshadowing the “net impression” standard cited by the FTC in 1972 and incorporated in the 1983 Policy Statement on Deception, the Commission considered how prospective buyers would interpret “cilk.” The Commission concluded that “the natural result” of the use of the word was to “confuse, mislead, and deceive purchasers thereof and the public into the belief that cotton thread is genuine silk.” The order in the case barred the business, its corporate officers, agents, and employees from using the word “cilk” in reference to any product not made of silk. The provision applied to sales, as well as advertising, trademarks, trade names, and labels.

The reasoning in the case reflects the two lodestars in the FTC firmament: promoting competition and protecting consumers. Certainly, Circle Cilk’s deceptive practices injured competitors who played by the rules: “Whenever such confusion and deception occurs there also results a damage to the trade and manufacturers who deal in silk products.” But the Commission also held that Circle Cilk had “deceived some of the consuming public into believing they are buying and receiving a product made of silk when in fact they are not” – affirming consumer protection as a central focus of the then-new agency.

The FTC’s consumer protection mission was called into question in the Supreme Court’s 1931 Raladam decision. (More about the classic “Fat Girl Laughs and Grows Slim” ad campaign for Marmola diet pills later.) Congress responded by passing the Wheeler-Lee Act in 1938, which amended Section 5 to outlaw “unfair or deceptive acts or practices,” thereby ending any question about the centrality of consumer protection to the FTC mission.

Almost a century has passed since Circle Cilk, but the Commission remains the nation’s champion for truth in advertising, including the labeling of textiles and clothing. The Textile Fiber Products Identification Act, the Wool Products Labeling Act, the Fur Products Labeling Act, and related FTC rules ensure that consumers have accurate information about what they’re buying.

So next time you put on a sweater or take off your coat, think of the first case published in Federal Trade Commission Decisions and remember that at the FTC, we have your back – or neck, hem, waistband, or wherever else you see a label that truthfully discloses what the product is made of.

Next FTC Milestone:  Making the case for reform of public utility holding company laws