785 F.2d 1431 (9th Cir. 1986)
Southwest was accused of violating the Federal Trade Commission Act by engaging in unfair and deceptive practices – that they misrepresented the financial risk involved with the land, that the land was acceptable for residential use, and that they sold the land on the basis of these misrepresentations. The Administrative Law Judge dismissed the case, but the FTC then issues a cease and desist order, finding them at fault for violation of the act.
The ALJ dismissed on the basis of a deception standard that “any advertising representation that has the tendency and capacity to mislead or deceive a prospective purchaser is an unfair and deceptive practice.” In issuing the cease and desist order, the FTC applied a new standard that “The Commission will find deception if there is a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.”
Whether Southwest received proper notice – understood the issue and was afforded full opportunity to justify his conduct” to meet the requirements of the APA.
Yes, decision upheld. The court held that each of the standards in the new requirement impose a higher standard for proof on the FTC to show a violation of the Act. Because the standard was more stringent, the court refused to acknowledge that the notice requirement wasn’t met. “All evidence relevant to the old theory was necessarily relevant to the new. We cannot accept petitioners’ argument that a substantially difference standard was applied, to which they had no opportunity to respond.”