Pages 537-640 - Federal Trade Commission

HUBER HOGE AND SONS ET AL. 537

Syllabus

IN THE MN1"I'ER OF

CECIL c., HAMILTON, JOHN AND SIDNEY C. HOGE ANDBARBARA OBOLENSKY DOING BUSINESS AS HUBER

HOGE AND SONS ET AL.

CONSENT SETTLEJliENT IN REGARD TO THE ALLEGED VIOLATION OF THEFEDERAL THADE COMMISSION ACT

Ducleet 6091. 007nl laint , May 1958-Dccision, Dec. , 195.

"Vhere four pnrtncrs engaged in bURiness as an advertising agency Hnd mail

order prolT!Otion house , and two individuals engaged in the lnail order saleand distribution of various itelDs, induding books; in advertising a bookentitled "TV Owner s Guide to Operation and Repair" in newspapers andperiodicals of general circnlation , nnd through hroadcasts tlnd direct Inailadvel'Lisillg

(a) Ilcpresent€Cl falsely that the nsual teleyision recpiving set pnrchased afterthe spring of 1947, jf cared for according to the instructions in their saidbook , would give sharp and distinct reception without special electronicequipment up to 100 miles away from the transmitting station;

(h) Itepre"ented falsely that through the information ami inst.ructions containedin saiel book , an owner would be able to trace each trouble to its source,make needed repairs, and locate and replace worn-out parts; that the booka ye an effective method of locating burned-out tubes, and. that, through

follo\ving" sueh instrnctions , the OW)H r could prevent Inajar breakdowns andkeep his set in perfect operating condition;

(c) Represented falsely that such instructions would enable the owner to conyerthis set to color, Rave $65 to $100 per year in service charges , and obtain40r; discount when pure-hasing a new set; and

(d) Falsely represented tJmt by following snch instructions, repairs of andreplacements in television sets might be made by inexperieuced personswithout d.anger:

lIe7d That such acts find l1raetices , under the eircuTlstances set forth, were allto the prejudice and injury of the public and of competitors and constitutedunfair and deceptive acts and practices in COlnmerce and unfair methodsof competition therein.

Before Mr. AbneT E. Lip8eom.b hearing examiner.

J1h W. J. 1'01nplcns for the Commission.11fT. James R. WithTOW , JT. MT. Tho11sJ. McFadden and Donovan

Le'tSUTe , Newton Irdne of New Yark City, for Huber Hoge andSons.

Conrad SlIdth of New York City, for Harry Schneiderman andLouis Linetsky.

538 FEDERAL TRAm; COMMISSION DECISIONS

Consent Settlement 50 F. T. C.

CONSENT S JTTLEMENT

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission on May 6, 1953, issued and servedits complaint on the respondents named in the caption hereof, chargingthem with unfair and deceptive acts and practices in commerce withinthe intent and meaning of said Act.

The respondents, desiring that this proceeding be disposed of bythe consent settlement procedure provided in Rule V of the Commis-sion s Rules of Practice, solely for the purpose of this proceeding, anyreview thereof and the enforcement of the order consented to, andconditioned upon the Commission s acceptance of the consent settle-ment hereinafter set forth, and as to respondents Cecil C. HogeHamilton Hoge, John Hoge, Sidney C. Hoge and Barbara Obolenskyin lieu of answer to said complaint, and as to respondents HarrySchneiderman and Louis Linetsky, also known as Louis Linett, inlieu of the answer to said complaint heretofore filed by them andwhich, upon acceptance by the Commission of this consent settlementis to be withdrawn from the record, hereby:

1. Admit all of the jurisdictional allegations set forth in the com-plaint.

2. Consent that the Commission may enter the matters hereinafterset forth as its findings as to the facts , conclusion and order to ceaseand desist. It is understood that the respondents in consenting to

the Commission s entry of said findings as to the facts, conclusion andorder to cease and desist specifically refrain from admitting or denyingthat they have engaged in any of the acts or practices stated thereinto be in violation of law, or that such acts and practices, if engaged

, would be in violation of law.3. Agree that this consent settlement may be set aside in whole or

in part under the conditions and in the manner provided in Paragraph(f) of Rule V of the Commission s Rules of Practice.

4. Assert that they have ceased advertising and sel1ng the productshere involved, namely, a book entitled "TV Owner s Guide to Opera-tion and Repair.

The admitted jurisdictional facts, the statement of the acts andpractices which the Commission has reason to believe are unlawful

1 The Commission s "Notice " announcing and promulgating the co-nsent settlement aspublished herewith , follows:

The consent settlement tendered by the parties in this proceeding, a copy of which Isserved herewith, was accepted by the Commission on December 16, 1953, and orderedentered of record as the Commission s findings as to the facts, conclusion, and order in

disposition of this proceeding.

The time for flUng report of compliance pursuant to the aforesaid order runs from thedn te of service hereof.


587 Findings

the conclusion based thereon and the order to cease and desist, all ofwhich the respondents consent may be entered herein in finaldisposition of this proceeding, are as follows:

FINDINGS AS TO THE FACTS

PARAGRAPH 1. Respondents Cecil C. Hoge, Hamilton Hoge, JohnHoge, Sidney C. Hoge and Barbara Obolensky are individuals andcopartners and prior to October 1 , 1952, were engaged in business asan advertising agency and mail order promotion house under thetrade name of Huber lIoge and Sons with their offce and principalplace of business at 699 Madison Avenue, New York, New York.Effective October 1 , 1952 , the business known as Huber Hoge and Sonswas incorporated under the laws of the State of New York as HuberHoge and Sons , Inc. , with respondents Cecil C. Hoge, Sidney C. Hogeand John Hoge as directors and president, vice president and secretary,respectively. Respondent Harry Schneiderman is an individmtldoing business under the trade name of Bedford Company with hisoffce and principal place of business at 799 Broadway, New YorkNew York. He is engaged in the mail order business and sells anddistributes in the course of such business various items, includingbooks. Respondent Louis Linetsky is an individual and is employedin the business known as Bedford Company. He is also kDown asLouis Linett. His address is the same as that of respondent HarrySchneiderman. All of the respondents have participated in the per-formance of the act.s and practices hereinafter set forth, exeept asotherwise specifically st.at.ed.

PAR. 2. BeginniDg in 1952 the respondents eDgaged in the sale anddistribution of a book entit.led "TV Owner s Guide to Op ration andRepair . Respondents caused said book , when sold, to be transportedfrom the St.ate of New York to purchasers thereof located in variousother St.ates of the United States and in the District of Columbia.Respondent.s maintained a substantial course of trade in their saidbook in commerce, as "commerce" is defined in the Federal TradeCommission Act.

PAR. 3. In the course and conduct of their said business , and forthe purpose of inducing the purchase of said book , respondent.s havemade many st.atements with regard t.o the ability of owners of televi-sion set.s to keep their set.s in proper working order by following theinstructions contained in said book. These represent.ations have beenmade by means of advertisements inserted in newspapers and otherperiodicals having a general circulation in the United States, by radiobroadcast.s, aDd by means of direct mail advertising.

540 FEDERAL TRADE COMMISSION DECISIONS

Findings 50 F. T. C.

PAlL 4. Through the use of various statements made in said adver-tisements, respondents represented, directly and by implicatioD, thatif cared for according to the instructions in their book, the usual tele-vision receiving set purchased after the spring of 1947 will give a sharpand distinct reception , without special electronic equipment, up to 100miles away from the transmitting station; that through the informa-tion and instructions contained in said book a television owner will beable to trace each trouble to its source , make needed repairs , locate andreplace wornout parts; that the book gives an effective method oflocating burned-out tubes; that by following the instructions in thebook the owner can prevent major breakdowns and keep his set inperfect operating condition, convert his set to color , save $65 to $100pel' year ill service charges and obtain 40% discount when purchasinga new set; and that, by folJowiug the instructions in said book , repairs

, and replacements in , television sets may be made by inexperiencedpersons without d:mgcl"

PAR. 5. The said representations as set forth in Paragraph Foul'hereof arc false , deceptive , and misleading. In truth and in fact , theI'ilure to receive sharp and distind pictures over a television receiveris sometimes governed by factors outside of the receiving set. Manytelevision sets are so Joc:lted as to make sharp and distinct picture re-ception an impossibility. Even those set owners whose sets are favor-ably located cannot always get sharp and distinct pictures becausepresent day telecasting conditions make perfect or even satisfactoryreception impossible in many instances. By using the most moderneJectronic equipment. available and by following all of the instructionscontained in respondents ' book , a sbarp and distinct. picture receptioncannot uJller all circumstances be obtained on present. day televisionreceivers from a telecasting station located as much as or slightly lessthan 100 miles away. The book cont.ains infornmtion that should en-able the television o,vner to make a number of different kinds of simplerepairs but will not enable him to t.race every trouble to its source ormake all needed adjustment.s. The book docs not inform. the set owneras to how he may himself locate or replace worn out parts. The in-formrct.ion contained therein may enrcble the owner to locate burned-out t.ubes in some instances. The majority of tube failures, howeverare not due to burnout. The method of detecting defect.ive tubesrecommended is not an effective method of detecting rc defective tube.Compliance with the instructions sct out in this book will not enablea set owner to maintain his set in perfect working condition or preventmajor breakdowns , will not enable a set owner to convert his set forcolored recept.ion ; furthermore, colored television pictures are not nowobtainable.


537 Order

It is impossible to estimate the annual cost of television upkeep.:Many sets give good reception for a year or longer without any servic-ing either by the owner or a repairman. It is therefore not possible

to state what amount , if any, can be sa.ved by reason of the informationcontained in said book. ' While information in the book may enable aperson to select a television set more suitable for his purposes thanwould ordinarily be possible without such information , its use willnot enable him to obtain a discount, the matter of price being entirelyllndeT sole control of the (leaIer. There is an element of danger to anillexperienced person who attempts to repair or replace parts in atelevision receiver. Sorne pictnre tubes retain an electric charge fora considerable time after the wall plug is removed and are capable ofgiving a shock which may have serious consequences.

CONCLUSION

The afOles id acts and practices of the respondents , as herein foundaTe all to the prejudice and injury of the public and of respondentscompetitors and constitute unfair tlld deceptive acts and practicesand unfair methods of competition in commerce within the intent andmeaning of the Federa1 Trade Commission Act.

OHDEH TO CEASE AND DESIST

ItiB ordered That respondents Cecil C. Hoge , Hamilton Hoge , .JohnHoge, Sidney C. Hoge and Ba.rbara Obolensky, individually and ascopartners doing business under the name of Huber Hoge and Sonsor under any other name , and respondent Harry Schneiderman, doingbusiness under the name of Bedford Company or under any othel-name, and respol1lent Louis Linetsky, also known as Louis Linett, andthe respective respondents' agents, representatives, and employees

directly or through a.ny corporate or other device, in connection withthe offering for sale, sale or distribution of the book entitled "Owner s Guide to Operation and Repair " whether sold under the sameor any other name , or any book of substantially the same contents , incommerce , as "commerce" is defined in the Federal Trade CommissionAct, do forthwith cease and desist from:

1. Representing that ownership of and compliance with the instruc-tions set forth in the "TV Owner s Guide to Operation and Hepairwill enable a television set owner to maintain his set in perfect oper-atillg condition or prevent major breakdowns;

(fl) Trace the source of all troubles;(b) :\fake all needed repairs;(c) Locate or replace a 1) worn-ant pm.ts;


Order 50 F. T. C.

(d) Convert television sets to color;(e) Save any stated amount in service charges;(f) Obtain a discount upon purchase of a television set.2. Representing that said book gives an effective method of detect-

ing defective tubes.

3. Representing that, by following the instructions in said bookrepairs or replacements may be made without danger.

4. Misrepresenting the distance from transmitting stations a,t whichtelevision sets , maintained in accordance with the instructions in saidbook, wil give sharp and distinct reception.

It is further or'dered That the respondents shall, within sixty (60)days after service upon them of this order , file with the Commissiona report in writing setting forth in detail the manner and form inwhich they have complied with this order.

Dated: Oct. 20 , 1953.(sgd.

Dated: Oct. 23 , 1953.(sgd. )

Dated: Oct. 20 , 1953.(sgd. )

Dated: Oct. 23 , 1953.( sgd. )

Dated: Oct. 23 , 1953.(sgd.

Dated Oct. 21 , 1953.(sgd. )

Dated: Oct. 21 , 1953.

Cecil C. 110geCECIL C. HOGE

11 amilton H oge

HAMILTON HOGE

John 110ge

JOHN HOGFJ

Sidney C. 110ge

SIDNEY C. HOGE

Barbara Obolensky

BAHBARA OnOLENSKYIndividually and as copart-ners doing business asHuber Hoge and Sons.

11a1' ry SclneidermanHARRY SCHNEIDERMANdoing business as Bedford

Company.

(sgd. Louis LinettLouIs LINETSKYalso known as Louis Linett.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and ordered entered of record on the 16th day ofDecember 1953.

CHARLES AN JLL CO. , INC. , ET AL. 543

Syllabus

IN THE MATTR

CHARLES ANTELL CO. INC. ET AL.

DECISION IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADECOMMISSION ACT

Docleet 610:2. Oomplaint , June 1958-Decision , Dec. 19, 1953

Where the corporation and its three offcers, joint owners of its entire stockengaged in the interstate sale and distribution of their "Charles Ant.ellFormula NO. 9" for the hair

, "

Charles Antell Shampoo," and "Hexachloro-phene Soap ; together wlth an advertising agent whose principal clientthey were; in advertising their said " Formula No. g" and " Shampoo" indaily papers and by broadcasts from many radio and television stationsdirectly and by implication-

(a) Represented falsely that t.he main ingredient. in said "Formula No. 9" wasl'lIolin , that lanolin was the only natural oil or grease that is absorbed bythe hair or scalp, that the lanolin therein would reach the roots of t.he hairand that it would cleanse the hair;

(b) Represented that. the use of said ormula" would loosen the scalp andconst.itute an effective treatment for infected scalp, dandruff, and crackedand split hair; and would remedy the damage emsed by improper dyeingpermancnts , burning and other harmful practice

The facts being that it would not alone loosen the scalp; while use thereof as

directed with massage and brushing' would remove dandruff , it was not aneffective treatment. for said condition or infected scalps; and while its Ilsewould make the hair less brittle and more pliable and improve the appear-ance of hair which was cracked , split , or otherwise damaged ny' improperdyeing, pernUlnents , burning and other harmful practices, it would notremedy the cause of cracked or split hair;

(c) Represented that use thereof would promote t.he growth of hair and im-prove the hair by imparting to it. health and vitality, would change thecolor thereof, and would not leave grease on the hair;

The facts being that , while brushing, pullng, and massaging the hair regularlywith said "Ko. 9" served as a stimulant to the circulation in and aroundthe hair roots and thus helped maintain normal scalp and hair health, itwould not. grow hair; and , while nsed in excessive amounts , it. might. darkenand leave grease on the hair of some persons , use as directed or in moderateamounts would not bring about sllch results;

(d) Represented falsely that use thereof would canse the hair to curl and

wonld prevent loss of hair and haldness ;(e) Represented that the hormones contained in said " Shampoo" cleaned or

aided in the cleaning of the hair and scalp; the facts being that it had notcontained hormones for more than a year , aud hormones have no cle nsingaction;

(f) Ilepresented faJsely that their said "HexachJorophene Soap" would removetwenty-five times more dirt and other foreign matter from the skin thanordinary soap;

(g) Falsely represented that said soap would prevent the development. ofimpetigo and cradle cap in the case of habies; and pimples , boils, black-heads , or other skin blclnishes of external origin generally; and

544 FEDEHAL TRADE COMMISSION m;CISIONS

Findings 50 F. 'l' . C.

(11) Represented that said " ol"lUla No. 9" came in sizes that normally sellat $3.98 and $4.95, but that said prices were reduced to $2.00 and $3.00respectively, as special introductory offers; when in fact said so-calledspecial introductory prices were the regular prices at which said producthas heen sold for a long time;

Held. That such acts and practices constit.uted unfair and decept.ive act.s andpractices in com,merce.

Before JJlr. John, Le1m:/j hearing examiner.

JJ1T. lVilliam L Pencke for the Commission.lIfT. Bernard II. Hersfeld of BaJtimore, Md. , for respondents.

DECIHIUJ\ OF TIlE CO n,IISSJON

Pursnant to TIllIe XXII of the Commission s Rules of Practice , andas set furth in the Commission s "Decision of the Commission andOrder to File Heport of Compliance , dated December ID , ID5,1, theinitial deeision in the instant matter of he:ting examiner .r ohn Lewisas set out as follows , became on that elate thl' decision of the Com-mISSJOn.

IJ\ITL\L DECISION BY .JOHN LEWlS J mARING EXA:\1!NEH

Pursuant to the provisiuns of the Federal Trade Cummission Actthe Federal Trade Commission on .J une R , 1 D5:\, issued and subse-

qnently served its complaint in this proceeding upon the respondentsuned in the caption hereof, charging them with the use of unfair and

elec2;)tive acts and practiees in commerce in violation of the provisionsof said Ad. After the issuance of said eomplaint and the filing ofrespondents ' answer thereto , hearings were held before the above-

named hearing examiner , theretofore duly designated by the Commis-sion , at which hearings eOlmsel for respondents and counsel support-ing the complaint entered into a stipulation as to the facts in thispl'oeeeding in lieu of oral testimony and other evidence in support ofor in opposition to the allegations of the complaint, said stipulationbeing spread upon the reeord at said hearings and duly fied in theoffee of the Commission. Thereafter , the proce.eding regularly eameon for final consideration by the hearing examiner upon t.he complaint.answer, and stipulat.ion , eounsel having eleeted not to flle proposedflndings and conclusions for eonsideration by the hearing examinerand oral argument not having been requested; and said hearing exam-iner, having duly considered the record herein , finds that this proceed-ing is in the interest of the publie lld makes the following finclings asto the faets, conclusion drawn therefrom , 'Iud order:


PARAGRAPH 1. Respondent Charles Antell, Ine. , (incorrectly namedin t.he complaint as Charles Antell Co. , Inc. ) is a corporation, organ-

CHAHLES ANTELL CO., lKC., ET AL. 54;')

543 Fjndin

ized and existing under the laws of the State of Maryland , with itsoffce and principal place of business Jocated at 112 South Street, Balti-inol'e Maryland.

Respondent T. A. A. , Inc. , is a corporation , organized and existingnnder the laws of the State of New York with its offce and principalplace of business located at 1710 Broadway, New York, New York , andanother place of business at 4 vYest Eager Street, Baltimore , Mary-land. The individuals named in the complaint are not offcers ofT. A. Inc.

Respondent ChaTles D. Kasher is President of Charles AntelJ , Inc.Respondent Leonard L. Rosen is Vice President, Secretary and Chair-man of the Board of ClmrJes Antell , Inc. These individuals directmanage and control the policies and activities of said corporate re-spondent. Respondent Julius .J. Rosen is Vice-President and Trea-surcr of Charles Antell , Inc. This individual participates in the direc-tion , mawlgement and control of the policies and aetivities of saidCharles Antell , Inc.

The principal offce and place of business 0:1' respondent Charles D.

Kasher is located at 1710 Broadway, Xew York , New York; that ofJulius J. Ilosen is located at 112 South Street, Ihltimore , Marylandand that of respondent Leonard L. Rosen is located at 4 vVest EagerSt reet , Baltimore , Mary land.

PAn. 2. For more than two years last past, respondents CharlesAntell, Inc. , Charles D. Kasher, Leonard L. Rosen and Julius J.Hosen , have been , and are now , engaged in the Bale and distribution ofcertain cosmetic products, as "cosmetics" are defined in the FederalTrade Commission Act, and a soap.

Respondent T. A. Inc. , has been and is , the advertising agent fol'respondent Charles Antell , Inc. , and it, as well as the individual re-spondents Charles D. Kasher and Leonard L. Rosen have prepared andcaused the dissemination of, or participated in the preparation anddissemination of, the advertising matter to which reference is herein-after made.

Respondents Charles D. Kasher , Leonard L. Rosen and Julius J.Hasen, jointly own all of the stock of respondent Charles Antell, Inc.Said corporate respondent is the principal client of respondentT. A. Inc. , and there exists a close business relationship betweenall of said respondents.

The designations used by respondents for said cosmetic productsand soap, the essential information in regard to the compositionthereof, and the directions for use of the cosmetic products, are asfollows, except that hormones have not been used in either CharlesAntell Formula No 9 or Charles Antell shampoo since approximatelyJune 1052:

40::"1-1;:- ;)7 - at)


Ji' indings 50 F. T. C.

Designation: OHARLES ANTELL Po' rmula #9

Composition: PartsLanolin -------------- 13

Petroleum ------------ 8

Mineral OiL___------- 20. 5Paraffn -------------- 8. 05

Cetyl AlcohoL-_------- . 49

Stearic Acid----------- 10. 4TEA (triet.hanolamine) - 2.

Propylene Glycol ----- 3. 21Vee Gum (colloidal

clay) -

------------- .

Methyl ParasepL-----

- .

092Water --------------- 32.Perfume

------------- .

Hormone9 cc of a 3% Alpha Estradiol inPropylene Glycol solution for every1000 Ibs. of fiished cream.

Directions for use:

Before applying, massage scalp thoroughly with finger tips to stimulatecirculation. Then apply a small portion of Formula No. 9 to finger tips. Liquefyby rubbing in palms of hands. Massage thoronghly into scalp and throughhair. Should be repeated daily for best results.Designation: OHARLES ANTELL SHAMPOO

Composition: Percent

Oleic Acid---n-

--_------___

_n_n_

_---- -------------

---- 7.

Coconnt Oil Fatty Acid_

--- ___

___n

----

--n_ ___n__n 6.1441 (derivative of lanolin sorbitol)__-----

-----------------

--- 0. 883

MEA (monoethanolamine) -----

--___

___n___-------------------- 2. 19

TEA (triethanolamine) ______n____nn_-__

-----

--------------- 3.

Protovac 8894 (protein caseinate derivative) ---------------------- 0. 475

Propylene Glycol__

---------------------------------------------

8. 94

Sequestrene AA (ethylene diamine tetra acetic acid)__------------ 0. 357

Perfurne-- - --- - - -

---- - - --- - --- -- -- -- ------------ ----- ----- - ----

O. 208

Water - ----

----------------- --------------------------------

- 69. 5

Horomone (Alpha estradiol 160cc of a 3% solution of Alpha Estradiol inPropylene Glycol for 42 000 lbs. of finished shampoo.Directions for use:

Wet Hair Thoroughly and Apply a small amount of Shampoo. Work Shampoointo Generous Lather. Rinse with tepid water. Repeat these steps For aThorough Cleansing.Designatiou: HEXAOHLOROPHENE SOAP

Composition: ilIa",. %

Moisture and matter volatile at 105 degrees C._----

--------

15. 0

Sum of free alkali , total matter insoluble in alcohol and so-di urn chloride- - -- -

-- - -- - - - -- - - -- --- - - - - - - -- -- - - ----- ---

Free alkali , calculated as NaOHn---_ n---n

-------

Matter insoluble in lJ,O____n___n_

_-----______ ---__-

IJnsaponified saponifiable (free fat) -----

--- -------------

Anhydrous Soa p-

- -- - - - ----- - - - - - - - - - - - - - - - - - - -- - -- - ------

Lanolin-one percentChlorophyll-1/100 percentHexachlorophene-Two percent

Min. 0/

83.

CHARLES ANTELL CO. , INC. , ET AL. 547

543 Findings

PAR. 3. Respondents Charles Antell, Inc. , and Charles D. KasherLeonard L. Rosen and Julius J. Rosen cause said cosmetic productsand soap, when sold, to be transported from their place of businessin the State of Maryland to purchasers thereof located in various otherStates of the United States and in the District of Columbia. Saidrespondents maintain, and at all times mentioned herein have main-tained, a course of trade in said products and soap in commercebetween and among the various States of the United States and in theDistrict of Columbia, and such trade has been and is substantial.

PAR. 4. In the course and conduct of said business , respondents havedisseminated and caused the dissemination of certain advertisementsconcerning said cosmetic products by the United States mails and by

various means in commerce, as "commerce" is defined in the FederalTrade Commission Act, including, but not limited to newspaper ad-vertisements in the Evening Bulletin , Providence, Rhode Island , ofFebruary 19 1952, the Baltimore, Maryland, Kews Post of November

, 1951, and the Sunday Star, Washington, D. of May 18 , 1952;and radio and television broadcasts entitled "Hair Raising TaleSome of My Best Friends are vVomen

" "

HolJywood Story" andHare Magic " transmitted over radio and television stations vVFIL-

TV and 'VIP at Philadelphia , Pennsylvania , KFRC at San FranciscoCalifornia, and many other radio and television stations in the UnitedStates, said broadcasts being of suffcient power to carry them acrossState lines, for the purpose of inducing and which were likely to in-duce, directly or indirectly, the purchase of their said products; andrespondents have also disseminated , and caused the dissemination ofadvertisements concerning said products by various means including,but not limited to newspaper advertisements and the aforesaid radioand television broadcasts , for the purpose of inducing, and which werelikely to induce, directly or indirectly, the purchase of their said cos-metic products in commerce, as "commerce" is defined in the FederalTrade Commission Act.

In the further course and conduct of said business , respondents madecertain statements more than a year ago and which have not beenrepeated since that time concerning their hexachlorophene soap includ-ing, but not limited to, television broadcasts over television stationWMAL- TV at Washington, D. C. Among and typical of said state-ments, but not all inclusive, were the i'ollowing:

Even if yon are one of t.he two ont of five people who bathe daily, you re only1/25 as clean as you could be. For if we re really clean after a bath why do wespend milions of dollars on deodorants to prevent bOdy odor. . . . A beautify-ing, soothing soap becanse of the lanolin , and a soap that wil make you 25times cleaner than ordinary soap because of the hexachlorophene.

548 FEDERAL TRADle COMMISSION DECISIONS


Why is a baby that is bathed carefully every day in danger of impetigodiaper rash and cradle cap? Why do people have externally caused skin blem-ishes-pimples, boils and blackheads? Becanse ordinary soap cannot killthe milions of skin bacteria that are the cause of body odor of babies ' impetigoand skin rashes and of skin blemishes of external origin. All ordinary soapcan do is wash" few of these bacteria away

' , '

. . For the first time thereis an ingredient that, added to soap, wil kil these ba(;teria on contact and wilcontinue to kil them as t.hey get on yonr skin. One bath with this soap is effective as 3 bath every hour for 24 hours with ortlinary soap.

P AH. 5. Through the use of the advertisl1wnts referred to in Panl-graph 4 with respect to Charles Antell Formula No, \) and CharlesAntell Shampoo and the advertisements quoted in said paragraph withrespect to Hexachlorophene Soap, respondents have made , directlyand by implication , the following representations:

A. With respect to Charles Antell Formula No.1. That the main ingredient in said product is lanolin ; that the

lanolin is fun strength or maximum potency and that. no other oils vI'greases are present.

2. ThHt lanolin is the only natural oil which will or can be absorb'"d

by the hair and scalp and that the lanolin in said product will beabsorbed to the 'Cxte.ut that it willreach thl' l"ob of the hair; thatlanolin will cleanse. the hair.

:3. That the use of said Formula No. , according to directions, willloosen dry sCHlp and constitute an effective treatment for infectedscalp, dandruff and cracked and split hair: wil remedy the damagecaused by improper dyeing, permanents , burning and other harmfulpractices; will promote the growth of hair and iinprove the hair byimparting to it health and vitality; will not change the color of thehair and will not leave grease on the hair.

4. That the use of said product will cause the hair to curl.5. That its use wil prevent loss of hair and baldness.

B. With respect Charles Antell Shampoo:That ooid shampoo contains substantial quantities of lanolin and

that the hormones contained in said product clean or aid in the

e1c 1ling of the hail' and. scalp.C. ,Vith respect to Hexachlorophene Soap:1. That said soap will remove twenty- five times more dirt and other

foreign matter from the skin than ordinary soop.

2. That said soap wil prevent the development of impetigo andc.adle cap in t.he case of babies, and pimples, boils, blackhea,ds orothcr skin blemishes of external origin generally.

PAR. 6. Th foregoing representations with repect to the said cos-

metic products and soap are false and misleading in material re-:;peets and , wit.h respect to said cosmetic products, constitute "false

CUARLES ANTELL CO. , INC., ET AL. 549

543 FindIngs

advertisements" 'IS that te11n is defined in the Federal Trade Com-mission Act. In truth and in fact:

A. With respect to Charles Antell Formula No.1. The main ingredient in said product from a percentage stand-

point is not l,molin , but the lanolin present in the product is of fullstrength or maximum potency.

2. LanoEn is not the only natural oil or grease that is absorbed bythe hair or scalp. Lanohn may be absorbed into the scalp but wilnot reach to the roots of the hair. LanoEn will not cleanse the hair.

:3. Said Formula No. alone wil not loosen the scalp. While the

nse of said product as directed with massage and brushing of thehair will effectively remove dandruff, it is not an effective treatmentfor dandruff or infected scalp. "While the use of said product willma.ke the hair less britte and more pliable and improve the appear-ance of hair that is cracked , split or otherwise damaged by improperdyeing, permanents , burning and other harmful practices, its use willnot remedy the cause of cracked or split hair. Formula No. will notgrow hair. However, brushing, pulling and massaging of the hairwith Formula No. regularly, serves as a stimulant to the circulationin and around the hair roots fwd , since a healthy condition of the hairand scalp is aided by proper circulation, stimulation by this proce-

dure wi)) help maintain normal scalp and hair health. Formula No. 9used in excessive amounts may darken the hair :1nd leave grease onthe hair of some persons. However, the use of Formula No. 9 as

directed , or in moderate amounts, wil not darken the hair nor leavegrease on the hair.

4. ,Vhen the hair has been set in curls or in some other manner:Formula No. wil help keep it as so set or arranged. However, saidproduct will not curl the hair.

I). It will not prevent the loss of h:1ir or baldness.B. "With respect to Charles Antell Shampoo:S:1id shampoo does contain lanolin by the presence of G-1441.whieh

is described as a modified or refined or processed lanolin product.

However, said shampoo has not contained hormones for more thanone year and has not been so advertised for more than one year.:Moreover, hormones, if present, have no cleansing action.

C. ,Vith respect to Hexachlorophene Soap:1. Respondents' soap is no more effective than ordinary soap as

cleansing agent for the removal of dirt, grit, and other soil.2. Respondents' soap wil not prevent impetigo and cradle cap in

case of babies nor prevent the development of pimples, blackheadsor other skin blemishes generally, however caused.

PAR. 7. In the course and conduct of their business, respondentsrepresent and have represented that said Formula No. 9 comes in sizes


Order 50 F. T. C.

that normally sell at $3.98 and $4. , respectively, but that said pricesare reduced to $2.00 and $3. , respectively, as special introductoryoffers. In truth and in fact, said so-calledspecial introductory pricesare the regular prices at which said products are and have been soldfor a long period .of time.

PAR. 8. The use by respondents of the said fal e advertisements

with respect to the cosmetic products and the false, misleading anddeceptive statemcnts made with respect to the said soap, has had, andnow has, the capacity and tendency to mislead and deceive a sub-stantial portion of the purchasing public into erroneous and mistakenbelief that the statements and representations contained in the adver-tisements are true; and into the purchase of substantial quantities ofsaid products by reason of said erroneous and mistaken belief.

CONCLUSION

The acts and practices of respondents, as hereinabove found, are allto the prejudice and injury of the public and constitute unfair anddeceptive acts and practices in commerce, within the intent andmeaning of the Federal Trade Commission Act.

ORDER

It is o1'dered That the respondent Charles Antell , Inc. , a corpora-tion, and its offcers, and respondents Charles D. Kasher, LeonardL. Rosen and Julius J. Rosen , individually, and respondent T. A.

Inc., a corporation, and its offcers, and respondents ' respective agentsrepresentatives and employees, directly or through any corporate orother device, in connection with the offering for sa1e , sale or distribu-tion of Charles Antell Formula No. 9 and Charles Antell Shampooor any products of substantially similar composition or possessing

substantially similar properties , whether sold under the same namesor any other names, do forthwith cease and desist from , directly orindirectly:

1. Disseminating or causing to be disseminated any advertisementby means of the United States mails or by any means in commerceas "commerce" is defined in the Federal Trade Commission Actwhich advertisement represents, directly or through inference

(a) 'With respect to Charles Antell Formula No.(1) That the main ingredient in said product is lanolin;(2) That lanolin is the only natural oil or grease that is absorbed

by the hair or scalp or that the lanolin in said product is absorbed

by the scalp to the extent that it will reach the roots of the hair;(3) That the lanolin in said product wil cleanse the hair;

CHARLES ANTELL CO.. INC. , E'l AL. 551

543 Order

(4) That its use will loosen the scalp or constitute an effectivetreatment for dandruff or infected scalp;

(5) That it will remedy the CRuse of cracked or split hair or wilremedy the damage caused by improper dyeing of the hair, perma-nents, burning or other harmful practices having to do with the hair;

(6) That the use of saiel prodncts, as directed or otherwise, wilpromote the growth of the hair;

(7) That the use of said product will give the hair health or

vitality, except to the extent that brushing, pulling and massagingof the hair and scalp with said product regnlarly serves as a stimu-lant to circulation around the hair roots and thereby helps maintainnormal scalp and hail' health;

(8) That the use of said products will not. ehange the color of thehair or will not leave grease on t.he hair, unless such representationis limited to cases where said product is nsed in moderate amountsas directed;

(9) That its use wil cause t.he hail' to curl;(10) That its use wil prevent the loss of hail' or baldness.(b) With respect to Charles Antell Shampoo:That the hormones present in said product win have any cleansing

action on the hair.2. Disseminating, or causing the dissemination of any advertisement

by any means for the pl1pose of inducing or which is likely to inducedirectly or indirectly, the purchase in commerce, as "commerce" isdefined "" the Federal Trade Commission Act, of either of said prod-ucts, which advertisement contains any of the representations pro-hibited in Paragraph 1 hereof.

It is further' or'dered That respondents Charles Antell , Inc. , a cor-poration , and its offcers, and respondents Charles D . Kasher, LeonardL. Rosen , and .T ulius .T. Rosen , individually, and respondent T. A.

Inc. , a corponltion , and its offeers, and respondents ' respective agentsrepresentatives and employees, directly or through any corporate orother device, in connection with the offering for sale, sale or distribu-tion in commerce as "commerce " is defined in the Federal Trade Com-mission Act, of the product known as Hexaehlorophene Soap, or anyother soap or product of substantially similar properties, whether soldunder the same name or any other name, do forthwith cease anddesist from:

1. Misrepresenting, directly or by implication, the effectiveness ofsaid soap as a cleansing agent.

2. Representing, directly or by implication , that the use of said soapwin prevent impetigo or cradle cap in case of babies or prevent thedevelopment of pimples, boils, blackheads or other skin blemishes

generaJly.

552 FEDERAL TRADE COMMISSION DECISIOKS

Order 50 . T. C.

It is fu'rther ordered That respondents Charles Antell, Inc. , a cor-poration , and its offcers, and respondents Charles D. Kasher, LeonardL. Rosen , and Julius J. Rosen , individually, and respondent T. A.

Inc., a corporation , and its offcers, and respondents ' respective agentsrepresentatives and employees, directly or through any corporate orother device, in connection with the offering for sale, sale or distribu-tion in commerce, as "commerce" is defined in the Federal TradeCommission Act, of any article of merc:handise do forthwith cease anddesist from representing, directly or by ilnplication:

That it is being sold at a reduced price when sUl:h price is the price atwhich the article is usuaJJy and regularly sold.

ORDER TO FILE HEPORT OF CO:1IPLIANCE

It is ordered That the respondents herein shall within sixty (60)days after service upon them of this order, file with the Commissiona report in writing setting forth in detail the manner and form inwhich they have complied with the order to cease and desist (as re-quired by said declaratory decision and order of December 19 , 1953J.

MANCO WATCH STRAP CO,) INC. 553

Decision

IN THE MA'IR

MANCO WATCH STRAP CO. INC.

Docket 5854. OompllLint , Feb. 1951-Decision, Dec. , 1958

Charge: Advertising falsely and neglecting to disclose source of watch bands.

Before MT. Clyde M. Hadley and MT. Earl J. Kolb hearing examin-ers.

. Jesse D. Kash for the Commission.Sperry, Weinber

'7

&;

Huskay, of New York City, for respondent.

ORDER GRANTING RESPONDENT S ApPEAL FHOM INITIL DECISION OFHEARING EXA.'UNER AND DECISION OF THE COMMISSION DISMISSINGCO:/IPLAINT

This matter came on to be heard upon the complaint of the Commis-sion , respondent's answer thereto, testimony and other evidence in

support of and in opposition to the allegations of the complaint, initialdecision of the hearing examiner and the appeal t.herefrom by re-spondent, and briefs and oral argument. of counsel.

The complaint alleges that the respondent imports watch bandsfrom Occupied Japan and ChimL in bulk and also expansion b tDdsfrom China, to which respondent attaches end pieces of domestic

manufacture to make completed bands, and that these bands bear

words showing the country of origin imprinted on a link on the insideof a band in words so small and indistinct as to be practically illegibleto the naked eye. Those of such products as are not resold in bulkare attached to cards , in a manner which conceals the aforesaid mark-ings, the cOITlplaint additionally alleges, and it is further chargedthat the sale thereof in commerce under the manner aforesaid hasthe tendency and capacity to mislead retailers and members of thepurchasing public into the erroneous and mistaken belief that. saidbands are wholly of domestic origin.

The hearing examiner in his initial decision concluded that. the al-legations of the complaint in substance have been supported by theevidence in the record , and the order contained in such initial de-cision would require respondent., among ot.her things, to cease offeringwatch or wrist bands or similar products imported from any foreigncountJ'y without affrmat.ively disclosing thereon, or in immediateconjunction therewith, t.he fact that they are of foreign origin.

It appears from the record that many of the bands distributed byrespondent in commerce are sold to the purchasing public through thechannels of variety store chains.


Order 50 F. T.

The evidence in the record indicates that there are no domesticwatch or wrist bands which are sold at prices comparable to the pricesat which respondent' s imported bands are sold. There is no evidencein the record showing a preference on the part of a substantial numberof members of the purchasing public for the higher priced domesticbands over respondent's lower priced imported bands. The Com-mission is therefore of the opinion that the complaint herein shouldbe dismissed. This determination accordingly renders it unnecessaryto rule more specifically on each of the objections to the initial de-cision raised in respondent' s appeal.

The Commission having duly considered the matter and being nowfully advised in the premises, and having concluded in such connec-tion that respondent's appeal should be granted:

It is oTdeTed, theTefoTe That respondent's appeal from the initialdecision of the hearing examiner be, and it hereby is, granted, andthat the complaint herein be, and it hereby is , dismissed.

Commissioner Mead dissenting and Commissioners Howrey andGwynne not participating for the reason that oral argument respondent' s appeal from the initial decision of the hearing examinerwas heard prior to their appointment to the Commission.

PILLSBURY MILLS, INC. 555

Interlocutory Order

IN TIlE J\lATTEH OF

PILLSBURY MILLS , INC.

Docket 6000. Order and opinions, Dee. , 1953

Bdom i1h' . E'oerett F. Haycraft hearing examiner.

Mr. L. E. Creel, Jr. , Mr. J. Wallace Adair and lJlr. Broc7cman Hornefor the Commission.

Hogan il Hartson and Mr. E. Barrett Prettyman, Jr. of 'Washing-ton , D. and Mr. Terrance Hanold of Minneapolis, Minn. , forresDondcnt.

ORDER GRANTING ApPEAL IN PAHT, SETTING ASIDE INITIAL DECISIONANn REI,TANDING PROCEEDING TO HEARING EXAMINER

This matter is before the Commission upon an appeal by counselsupporting the complaint from an initial decision of the hearingexaminer dismissing the complaint without prejudice, briefs in sup-port of and in opposition to said appeal and oral argument of counsel.

In support of this appeal , it is contended that the hearing examinerprroneously held that the allegations of the complaint are not sup-

ported prima facie by reliable, probative and substantial evidence.

For the reasons stated in the written opinion of the Commission , whichis being issued sirnultanecusly herewith, the Commission is of theopinion that a prima facie case has been made out and that the com-plaint was improperly dismissed.

Counsel supporting the complaint in their appeal also take exceptionto rulings of the hearing examiner excluding evidence relating toalleg(jd priee diseriminations by respondent in Arkansas and Louisi-arm , exdnding eCit in market surveys made by several Scripps-HOWleI'd newspapers , by Good Housekeeping Magazine and by theNew York "Vorld-Telcgram, excluding a summary of family flour andmix purchases made by the Weona Food Stores of Memphis andgranting respondent's motion to strike all evidence relating to OvenReady Biscuits.

The evidence as to the aUeged price discrimination relates to pricesat which respondent sold family flour in regions outside of the south-east area. At the most, such evidence could only tend to show thatrespondent in the past may have abused economic power in the familyflour market in other areas than the flour market with which this pro-ceeding is concerned. It is believed that such evidence was properlyexclDded from this record.


Interlocutory Order 50 F. T. C.

The hearing examiner did not reject all evidence of the results ofmarket surveys. His rulings on this type of evidence which areexcepted to in this appeal are based on the lack of materiality of theresults of the surveys rejected. He excluded the Scripps-Howardsurvey which shows the brands of family flour and mixes on the storeshelves in a cross section of stores in twelve cities in 1950 and inthirteen cities in 1951 as not having aDY bearing on sales. He excludedthe Good Housekeeping survey, consisting of the answers of 1 717of its subscribers as to the brands of mixes they used , and the sur-vey of the New York World-Telegram showing the sales of mixes in200 retail stores in the New York City area, conducted in 1949 and1950 , respectively, as being too remote in time to be of any value determining the eiTect of the acquisitions. The Commission is of theopinion that this evidence was elToneously excluded. Market infor-mation for 1949 and 1950 is of value in determining the issues in thisproceeding. Such surveys, if properly conducted, while certainly

not conclusive are indicators of market trcnds and the existence ofcompctitive products in the market surveyed. Such indicators, alongwith other information , may be of value in assisting the Commissionin determining the actual market conditions.

The summary of purclmses of family Hour and mixes by the WeonaFood Stores of Memphis was properly rejected as the employee of thatcompany who identified the rejected exhibits was not sure that theywere complete or correct. His testimony as to the circumstancesunder which the date in dlese exhi'bits were collected casts seriousdoubts on their correctness.

The evidence as to Ballard' s Oven Heady Biscuits was properlystricken. Respondent did not make any comparable product anddid not compete in the biscuit market. The fact that Oven ReadyBiscuits are made from biscuit mixes does not make these productscompetitive except indirectly.The Commission, therefore, being of the opinion that the complaint

herein should not have been dismissed and being of the further opinion

that certain evidence was erroneously excluded from the record:It is ordered That the appeal of counsel supporting the complaint

from the initial decision is granted in part and denied in part in themanner and to the extent hereinabove indicated.

It is furthel' ordered That the initial decision is hereby set aside.It is furthel' ordered That this matter is hereby remanded to the

hearing examiner for further appropl.jate proceedings in due coursein accordance with this order.


555 Opinion

OPINION OF THE COJlIMISSJON

Chairm m I-OWHEY delivered the Opinion of the Commission.The complaint in this case charges the respondent Pillsbury Mills

Inc. has violated Section 7 of the Clayton Act , as amended, by acquir-ing the assets of two of its competitors, namely, Ballard and BallardCompany and Duff's Baking Mix Division of American Home Prod-ucts Corporation. It alleges that Pillsbnry and Duff were, priorto the acquisitions , leaders throughout the United States (includingthe southeast) in the sale of flour-base mixes and that Pillsbury andBallard were leaders in the southeastern part of the United States inthe sale of family flour, bakery flour , and mixes.

considerable amount of testimony was taken by attorneys insupport of the complaint in Minneapolis , Louisville, Cincinnati , NewYark City and in many cities throughout the southeastern states.Subpoenas duces tecum were served on respondent to produce pro-duction and saJes figures for a period of time before and after thedates of acquisition , and to produce other daUl to show competitiveumrket shares and universe figures prepared for respondent by theMarket Research Corporation of America. Respondent refused tohonor these subpoenas and refused to produce the data requested.Instead of seeking enforcement of the subpoenas in court Hurl

instead of seeking to subpoena figures from respondents ' competitorsas suggested by t.he hearing examiner, counsel supporting the com-plaint relied on figmes and estimates for the fiscal year 1948- 1950 fur-nished by respondent during the course of the preliminary investiga-tion. In an effort to corroborate these estimates, counsel introducedsurveys of spe( ific market areas made by newspapers and other inde-pendent agencies.

At the close of the casein-chief of attorneys supporting the com-plaint, respondent moved to dismiss on the gl' ound that a prima faciecase had not been made.

,/Vithout expressing an opinion as to whether Section 7 had beenviolated, the hearing examiner gnmted the motion to

dismiss on tlwground that the "allegations of the complaint were not supported byreliable, probative and substantial evidence in the record as requiredby t.he Administrative Procedure Act."

Section 7 of the Clayton Act , as amended December 29 , 1950, whichis now before us for construction for the first time, provides inrelevant part:

That no corporation engaged in commerce shall acquire, directlyor indirectly, the whole or any part of t.he stock or other share capitaland no corporatioJl subject to the jurisdiction of the Federal Trade


Opinion 50 F. T. C.

Commission shall acquire the whole or any part of the assets ofanother corporation engaged also in commerce, where in any line ofcommerce in any section of the country, the effect of such acquisitionmay be substantially to lessen competition, or to tend to create amonopoly." 1

The salient facts as shown by the partial record now before us-respondent has not yet put in its case-are set forth below. Wereserve until later the question as to the reliability of the evidence.

Respondent Pillsbury is the second largest flour miller in the

United States. Prior to the acquisition it was the 2nd largest sellerof family flour, the 2nd largest seller of flour-base mixes, the 3rdlargest seller of bakery flour , and among the 15 largest sellers offormula feed in the United States.

In the southeast, that is, the area east of the Mississippi River ,Lnd

South of the Ohio and Potomac Rivers , respondent was the 5th largestseller of family flour , the 3rd largest seller of bakery flour, and thelargest seller of mixes.On June 12 , 1951 , respondent acquired all the assets of Ballard i'm'

approximately $5 172 000. On March 7 , 1952, it acquired Duff forabout $2 238 000.

By these acquisitions respondcnt increased its capacity for millingflour approximately 6 percent, for manufacturing mixes about 40percent,. and for manufacturing commercial feed by almost 57 per-cent; its total sales of bakery flour increased 2.8 percent, family flour23.8 percent, feeds 34.4 percent, and mixes 40.9 (32.8) perccnt; ' its

feed position improved from " among the first fifteen" to tenth place.

In the southeast respondent's sales of bakery flour increased 40 per-cent, mix sales increased 78 percent, and family flour sales increased154 percenL" Respondent's feed sales in this market increascd from

101 Stat. 1125 , 15 U. S. C., sec. 18.2 Purchase was accomplished by issuing 115 000 shares of respondent' s stm..:1\ and turning

tl1em over to Ballard in exchange for all its assets and liabiJities. Ballard's net worth Ufo

stated in its balance sheet of May in , 1951 , was $5 172000. 3 This amount was set forth in a statement which respondent fied with Secnriti 8 and

Exchange Commission.j The attorn€)'s supporting the complaint claim that the acquisitions iU(;l':Hseu n

spondent's mix capacity about 48 percent. W e think this should be 40 rather than 48

percent. The latter fignre seems to be based aD the assumption that the capacity in-creased at Springfield, Illinois , resulted from the acquisition. Xt ith(' DufI nol" Bailard

bad a plant at that locatioll.tJ These percentage figurf , except the 40.H percent for mixe , were anived :1 by dividing

the Pillslmry Ilet dollar sales for the fiscal year ending lay 31 , 1950, into. the Ballard netdollar sales for a similar fiscal year. Comparable fiscal year figures for Duff 'vere notavailable so 1949 calendar year net sales were used to arrive at the 40.9 percent iig-ure formixes; if 1930 calendar year net sales were used the figure would be 32. 8 percent.

6 These pereentage figures for the southeast were based on the 1949 19()O sales 0f re-

::vondeut and the aequireu companies and were arrived at by dividing the derived df)lhn"

PJLLSBURY MILLS, INC. 559

555 Opinion

000 tons per year to 175 000 tons per year.

Attorneys supporting the complaint contend that the foregoing

shows a "substantiality" of acquisitions suffcient to bring the merg-ers within the "substantiality doctrine " of the Standard Stations andInterntional Salt cases.

The record, however, contains much more in the way of economicand business facts-facts about Pillsbury, Ballard and Duff, abouttheir respective shares of the market, and about the structurebehavior and characteristics of the flour market in general.

During the 11 year period ending in 1951 Pillsbury s net sales grewfrom approximately $47 000 000 to $224 500 000 ; its total assets

increased from $30 000 000 to $95 500 000; and its net worth grewfrom $23 000 000 to $42 000 000. Its history during this period wasmarked by a number of acquisitions. It acquired a California milingcompany, two Iowa companies , four grain elevators in different partsof the country, and two Canadian flour mills.

During the 10 year period from 1940 to 1950 Ballard' s net salesgrew from approximately $8 000 000 to $30 000 000 and its assets in-creased from $2 600 000 to $11 300 000. The market for all of Bal-lard' s relevant products was within the southeastern region. In thisarea it was the 3rd largest seller of family flour, the 3rd largest sellerof mixes, and the 9th largest seller of bakery flour.

Duff, in 1950, was the 5th largest seller of mixes in the United States.and the 5th largest seller of mixes in the southeast. Its gross salesfor the 11 month period ending November 30 , 1951 were !tbout $6 500000 and its gross profits were $1 919 404. Duff's inventory and fixedassets as of November 30 , 1951 were $2 396 320.

By the acquisitions respondent was promoted in the southeasternarea from 5th to 2nd place in family flour, from 3rd to 1st place inbakery flour, and increased its 1st place position in the mix market inthe southeast from 22.7 percent to almost 45 percent.

sales figure for respondent into the actual dollar sales figures for Ballard and the dcrivl'dsales figures for Duff.

The figures for the three companies were arrived at as follows:Ballard' s actual dollar sales for each class of products for the fiscal year 1949-1950 an:.

in the record. As it sold only in the southeast, these were its dollar figures in that area.For respondent and Duff, the record contains total dollar sales, total unit sales by

product, and unit sales for each class of product in the southeast. Dollar sale in thesoutheast were calculated from its do11ar sales for the country on the assumption that thepercentage of its total dollar sales in the southeast would be the same as the percentageof unit sales in that area.

Standard Oil Co. of Califonlia v. United States (Standard Stations), 337 U. S. 2aa(1949) ; Internationa! Salt Go. v. United State8 332 U. S. 392 (1917).8 Market positions and percentage figures were arrived at by combining respondent'

figures with those of the acquired companies for lB50 and llsing them as a basis for e ti-mating sales positions after the acquisitiolls.

560 FEDEUAL TRADE COMMISSION DECISIONS

Opinion 50 F. T. C.

The wheat flour miJJing industry in the United States has decreasedin size from a peak of 11 6U1 mils in lUau to 1 7U9 mils in 1951. In1945 there were 2 571 mils with a total capacity of 1 349 699 cwt. daily.

By 1951 the country s 1 799 mils had an aggregate daily capacity of282 796 cwt. with about 97 percent of all flour products being ac-

c01wted for by the 355 largest mills.In 1945 the ten largest firms in the United States, measured by mil-

ing capacity, controlled about 34 percent of the industry s capacity.

In 1951 the ten largest companies-the same firms as in 1945-had10 percent of the capacity. Between 1945 and 1951 , while the indus-try was losing about 67 000 cwt. in daily capacity, the ten largestcompanies increascd their daily capacity by 57 000 cwt. Of this totalincrease, over 39 000 cwt. or 68 perccnt resultcd from acquisitions.If the acquisition of Ballard by Pillsbury is included , the daily capac-ity gain is 62 000 cwt. with acquisitions accounting for over 71 percentof the increase.

Although the southeast had 21 percent of the country s population(1950) and 34 percent of the number of mills (January, 1951), it hadonly 11 percent of the nation s mining capacity. The number ofmills in this area declined from 805 in 1945 to 660 in 1951; the totaldaily capacity declined from 154 073 cwt. to 142 907 cwt. No new

mils, of any size , have bcen established in the southeast in recentyears.

For many years Ballard had offered effective competition to Pills-bury in the southeast. In 1945 the BaJJard flour mill had the largestcapacity of any mil in this area. In 1951 it shared this distinctionwith the General Mills plant in Louisvile. At the time it was ac-

quired by Pillsbury it owned and operated one of the largest and mostmodern formula feed plants in the southeast. The Ballard brands offlour, formula feeds and prepared mixes enjoyed widespread consumeracceptance. Ballard had shown a profit for many years prior to itsacquisition. It had sizable net earnings for the eleven month periodjust before its acquisition. It was an important factor in the com-petiti ve 'market.

Through its acquisition of Ballard respondent increased its shareof the family flour market in the southeast from 3.66 percent to 8.

!! Aecording to the trade puhlication , The Nortlnv(':-tern Iil('J' , there were 805 mills insouthf'ast in HH5 of which capacity figures were given for only 757: namely, 154 073

nvt. Similarly, there were Gf)O mills in the ;outhenst in 10G1 oj' whidl capacity figures

\\"('

1'' giveo 1'01" only 61Ci , namply, 142 D07 cwt. It is nssumcd that the Usted mills for\\"hkh 'Illi NOl"tll\\'esh rn Miller conle1 gt.t uo figures , \vere ypry sl\al1.

10 Bnllard's unit volume of s:iJes of l'nmil:'T flour and bater;; flour combined in the south-t for the fnwal ye:1r 194 l!)50 \vas slightly larger than rcspondent's and second only

tiJ (;,'H"l'nl :'fills.


555 Opinion

percent; it increased its share of the bakery flour market from 4.percent to 8.55 percent.

While there were a large number of mills sellng flour in the south-east, respondent' s sales were more concentrated in :.rban areas and competed with relatively few flour milers in each of said urban areas.

Respondent' s and Ballard's prices differed in different locationsprior to the acquisition. Afterwards the prices of the two brandsbecame identical.In the mix market, prior to the acquisitions, respondent was the

largest seller in the southeast (22.7%) and the second largest seller inthe United States (16%). It was in competition with both Ballardand Duff in the southeast and with Duff on a national basis. As aresult of the acquisitions respondent increased its share of the marketin the southeast to 44.9 percent.13 In the national mix market, itsposition advanced from second to first place, or approximately 23 per-cent of the national market.

Three questions are presented by brief and argument on appeal:1. Do recent cases decided under Section 3 of the Clayton Act

apply to Section 7 eases; that is , where "substantiality" of the acquisi-

1ion has been established , is it necessary to examine economic eonse-quences or determine the probable effects of the acquisition?

2. If Section 3 cases are not applicable, what tests do apply underSection 7; do Sherman Act tests apply or does Section 7 have testsof its own?

3. Does the record show prima facie by reliable evidence, that theeffect of the acquisitions may be substantially to lessen competition ortend to create a monopoly in certain market areas?

The attorneys supporting the complaint rely, in the first place, on thesubstantiality " doctrine of International Salt , Standard Stations and

U These figures were arrived at by combIning Ballard's and respondent'H Pf'l'cputage ofthe market during the 1949-1950 fiscal year.

12 It is the policy of the chain stores to carry the leading national brands, the top one

or two local br Ulds , and one or two cheap priced brands or a total of five or .six brands.Store movement records of certain chain ::tor-es, teRtimony 01' grocery wholrsalel' IIHI

testimony of certain of respondent' s regional managers tal\( n together sho\\' that l'N'l)()IHl-

ent' s sales of flour in urban areas in the wutheast are a much great.er IJercent:lg-( of th(:total sales in such markets than its percentage of the entire soutl1east tJonr market. ' rlll'also show tlIat only a few brands are sold in all areas. Many local brands are impor1:nntonly in their own areas.

13 This percentage figure was arrived at by combining respondent' , Ballard' , and Dllfl'percf'ntages of the market during the fiscal year 1949- 1950.

14 Id.

15 Stan(l.ard Oil Co. of Cnlifornia Y. "United States su,pra . InternaUonal Salt Co.

Unit(;d States , su.pra.. United Statf8 v. Richfield Oil COTp. U. S. 922 (1952) ; Auio-matic Canteen Co. of America v. P. 1'. 194 F. 2d 433 (C. A. 7, 1052), reversed OlJ

grounds not prps-rntly pertinent , 346 U. S. 61 (1953).44;:J-57-


Opinion GO F.

other Section 3 eases. '6 To be on the safe side , however, they alsointroduced proof of market structure and eharacteristics which theyclaim are suffcient, even if the Commission rejects the substantialitytheory, to show that respondent's acquisitions will substantially lessen.competitioD.

Section 3 of the Clayton Act prohibits the use of tying and exclu-

sive dealing contracts the effect of which "may be to substantiallylessen competition or tend to create a monopoly. " 17 The InternationalSalt case " brought under this section , involved a tying of the com-pany s salt to the patented salt dispensing machine it leased to itscustomers. The tying device was struck down by the Supreme Courtwhich held that the test of potential injury to competition was satis-fied by proof that in one year the company had sold for use in itsmachines 119 000 tons of industrial salt valued at $500 000. Such amarket, the Court said , was not "insignificant or insubstantial" anditis " unreasonable per se to foreclose competitors from any substan-tial market. " 19

In the Stamarrl Stations case 20 also brought under Section 3 , theSupreme Court applied a like doctrine to requirements contracts inthe retailing of gasoline by a major company through independentstations. In its holding, . the Court fLppeared to read out of the quali-fying clause any real consideration of the effect upon competition anddeclared that the requirement was satisfied by proof that a substantialshare of the market was affected by the practice. Under the exclusivesuppJy contracts which Standard Oil had entered into with inde-pendent service stations in a 7 State market area , $57 6'16 233 worthof gasol ine, amounting to 6.7 percent of the total , was held to be asubstantial share. " 21

Although there is a considerable difference between the two casesit may be assumed for present purposes that in each case the Courtheld that the "qualifying clause of Section 3 is satisfied by proof thatcompetition has heen foreclosed in a substantial share of the line ofcommerce affected.

It does not follow , however, that because the qualifying clauses ofSections 3 and 7 lre expressed in the same language they prescribe the

1d.17 3R Stat. 731 , 15 U. S. C. sec. 14."332 U. S. 392 (1947).

Id. at :-J96.

'" 337 U. S. 293 (1949)."ld. 295 , 3J4 (J949).22 In the Standard Stations case-unJike the Salt case-the Supreme Court spoke of the

share" of the market foreclosed; it also showed a full awarene of the important dif-ference behveen tying contract8 and requirement contracts.

"" 337 U. S. 293, at 304 , 314, and 332 U. S. at 394-397.


555 Opinion

same tests. "Familial' but loose language affords too ready a tempta-tion for comprehensive but loose construction. " 2'

It is not unusual for the same word to be used with different mean-ings in the same act, and thcre is no rule of statutory construction

which precludes the courts from giving to the word the meaning whichthe legislature intended it should have in each instance.

" 25 Accord-

ingly, the respective tests prescribed by Sections 3 and 7 are to bedetermined in thc light of the purpose of each section.

The primary purpose of Section 3 is the protection of buyers andsellers in the marketing process-to guarantee to buyers the right tohandle any goods they see fit, and to sellers the opportunity to obtainthe business of any buyer whose trade they wish to seek.

Section 7 , on the other hand , is directed toward adverse changes incompetitive patterns that may result from mergers. It is concernedwith the effects of acquisitions on the character of competition, withthe maintenance of competition in every market to the end that busi-ness rivalry may produce better products at lower costs.

Ii\hile both sections arc designed to protect the competitive processthey reach this goal by difJ.erent routes-one by protecting the sellerand buyer segment of our economy, the other by protecting competi-tion on an over-all basis.

The impact of a tying contract or a requirements contract is differ-ent from that of an acquisition. The forces of the former falls prin-cipally upon buyers 01' upon competitors of the company which im-poses the contract, the effect of such contracts is thus to cut off thesecompetitors from what would otherwise be part of their natural mar-ket. In contrast, an acquisition seldom has such an immediate in-pact upon competitors. The reason that acquisitions are, under cer-tain circumstances, to be regarded as illegal is not because of theireffect on buying and selling practices but because of their probableeffect on competition.

24 Autouwtic Ca'ntetm, Co. oj America v. P. '1. CO 346 U. S. 1 at 65 (1953).2: .iltlantic Cl,eaner and Dyers v. Uniterl States 286 U. S. 427, at 433 (1932); see also

F. '1. C. v. Jforton S(ult Co. 4 e. S. :-n , at 4fj, Footnote 14.Of. l\IcAllistel'

, "

\Vhere the effect may he to substantially lrssE'n compptition or tendto create a monopoly, " Proceedings of the American Bar Association , Section of AntitrustLaw , August 26-27, 1853 , p. 131.

Specifically, exclusive dealing and tying arrangements are for hidden ,vhen the rp-strieted freedom of the buyer to purchase from competing suppliers injures his competitiveposition or that of the competing supplier.

'..'1 As the Commission said In the M-utter of Automatic Ca,nteen Company oj Arnerfca, 46F. '1. C. 861 , and 894 (1950), " It is apparent that (respondent' s exclusive dealing contracts) entirely foreclosed the sale and leasing of vending machines to respondent' s uig-tributors by anyone but respondent and that other sellers and suppliers of candy, gum , nutsand other confectionery products have been completely and effeetively foreelosed fromselling these products to respondent's distributors. Affrmed 194 F. 2d 433 (C. A. 7,1952), reserved on grounds not presently pertinent , 346 U. S. 61 (19G3).

28 In determining the effect on competition under Section 7 the Commission is, of course,concerned \-'lith the relationships between nn acquiring company and other parties, such a,;competitors, snpplh rs and outletR , insofar UH such relationships may affect competition illa given market.


Opinion 50 F. T. C.

Moreover, a further distinction can be drawn from the fact thattying and exclusive dealing contracts are frequently coercive, whileacquisitions are usually voluntary in nature.

Competition cannot be directly measured; no single set of standardscan be applied to the whole range of American industries. No singlecharacteristic of an acquisition would of itself be suffcient to deter-mine its efi'ect on competition. For this reason it would not be suff-cient to show that an acquiring and an acquired company togethercontrol a substantial amount of sales, or that a substantial portion ofcommerce is affected.

Much as the simplified test laid down in Standard Stations andlntemational Salt may aid in the presentation of proof in cases underSection 3 , it is not in itself a reliable guide for the Commission incarrying out its long-run responsibility to prevent reductions in com-petition through acquisitions of assets or stock.

Furthermore , neither case can be construed as depriving the FederalTrade Commission, as an administrative agency, of the right to exam-ine relevant economic factors and competitive effects (even in Section3 cases) in the event it desires to do so.

In creating the Federal Trade Commission, Congress had two prin-cipal ideas in mind: first, to create a "body of experts" competent todeal with complex competitive practices "by reason of informationexperience, and careful study of business and economic conditions ; 31

and second, to authorize this body of experts to deal with unfair com-petitive methods in their incipient stages.

The driving impulse in creating this , and other administrative agen-cies, was the need for specialization and expertise.'" The complexitiesof modern American trade, and industry had made it apparent thateii'ective trade regulation could neither be accomplished by "self-executing legislation nor the judicial process. " See F. C. C. v. Potts-1Jile Broadcastinq Co. 309 U. S. 134, 142 (1940) ; Oppenheim FederalAntitru8t Legislation: Guideposts to a Revised National AntitrustPo7ir?l. fiO Mich. L. Rev. 1139 , 1221 , n. 215 (1952).

::!J The attorneys supporting the complaint sngge::t thf- following te t for Section 7 cases:

'Vhpre a IC;HHng factor in the l' Jcn1It Ilmrket having' a suhstantial share of that market,Requires another factor in that market also IHlYing a substantial share of that market , thetnfcrf'ncc ari ('s tllnt competition mny be substantially lessened in the lines of commerceinvolypu.

:!o In the Matter of The Ma1:co Company, hlC. decided by Ii' . T. C. l)cccmber 7, 1953.31 Sen. Rf'p. r-" o. 597 , f)3d Cong" 2d S ss.. vP. 9 , 11 (1914) ; P. T. C. v. The Cement Insti

tute 333 L. S. 683, 727 (lD48) ; P. 1'. O. v. H. P. J(eppel

'"

Bro., Inc. 291 U. S. 305 , 314(1934).

Strmrlani Fa.shion Co. v. qrane- lJ()wdon Co. 258 U. S. 346, 356 (1\)22).33 The Commission was to be staffed with Inw:vers , economists , accountants , statisticians

nn(l otl1(r businp:,s rxprrts. It was understood that tIlis staff would become specialists inpn' vf'nting imprOr1Cl' '111sinpss practicI- 8 which intt'rfered with the competitive process or"\'er' e against the IJublic interest. Cf. United States Y. Morton Salt Co. 3.38 U. S. (-32

640 (1940).

PILSBURY MILLS, INC. 565

555 Opinion

The laws given to the Commission to administer are, for the mostpart, general in nature and not clear of policy elements. "Congressadvisedly left the concept flexible to be defined with particularity

the myriad of cases from the field of business." 34 It contemplatedclarification and completion by the Federal Trade Commission. Ifthe administrative tribunal to which such discretion is delegated doesnothing but promulgate per se doctrines, the rationale for its creationdisappears.35 If a particular competitive act is automatica1ly to bepresumed unlawful, the administrative process of the Commissionloses its purpose , and the justification for limiting the scope of judi-cial review and for exempting the Commission from executive controlno longer remain. In such event the administrative agency may aswell give way to the prosecutor.

As we understand it, the Federal Trade Commission has a greatertask than this in administering the broad provisions of Section 7

of the Clayton Act. There must be a ease-by-case examination ofa1l relevant factors in order to ascertain the probable economic

consequences.The most recent decision interpreting Section 7, prior to its amend-

ment , is l'ranswnerica Oorporation v. Board of Governors of theFedeJ' ul Reserve System 206 F. 2d 163 (1953), cert. den. November

, 1953. The Federal Heserve Board had ordered divestiture ofstock in a number of banks comprising the so-ca1led Giannini groupin the 'IVest Coast and Rocky Mountain area. The Board pointed outthat the Giannini banks did a large proportion of the banking busi-

ness in five western states , invoked the Standard 8tations case, andheld that Section 7 was violated. The Third Circuit reversed, saying:

"* *

", such acquisition is a violation only if its eITect may be in factto substantia1ly lessen competition between such corporations, to re-strain commerce or to tend to create a monopoly. Otherwise theacquisition is entirely lawful , so far as Section 7 is concerned. Itnecessarily follows that under Section 7, contrary to the rule underSection 3 , the lessening of competition and the tendency to monopolymust appear from the circumstances of the particular case and befound as facts before the sanctions of the statutes may be invoked.Evidence or mere size and participation in a substantial share of theJine of business involved , the 'quantitative substa tiality ' theory re-lied on by the Board , is not enough. " 30

The court was impressed by the "tremendous concentration of bank-ing capital" " " in the hands or the Transamerica group," and

34 P. '1' C. v. fotion Pir-ture Aclvert'sino Service Co. Inc. 344 U. S. 392 (1952) ; F. ')1

V. Keppel a Bro. , supra , 310-312.3" See dissenting opinion of Mr. Justice Jaclison in The Ruberoid CA. V. F. '1. C' 343

U. s. 470 (1852).206 F. 2d 1G3, at 170 (C. A. 3, 1953), cert. den. Nov. 30 , 1953.


Opinion 50 F. T. C.

thought that legislative or administrative action might well be de-sirable to decrease it. But the Court held that no case had been madeunder Section 7. Lessening of competition or tendency to monopolywere market phenomena , and could only refer to some particularmarket or set of markets. But the Board had not attempted to showany undesirable effect or dangerous probability in any given markets.The five state area was but an artificial segment of the United Statesunrelated to any market activity. Hence , said the Court, the con-tention of the Reserve Board could not be sustained.

While the l'ransarnerica case does not question Standard Stations

far as Section 3 is concerned, it does seem to seal off Section 7 from theper se rule of that case. The fact that the l'ransarnerica case was de-cided under old Section 7 does not in our opinion lessen its applicabil-ity in this respect. While the 1950 amendment modified Section 7 inmany ways it did not change the basic purpose to protect competitionin a given market.

This does not mean that we are thrown back on Sherman Act tests.In fact, one of the purposes of amended Section 7 was to reestablishthe difference between Sherman Act and Clayton Act violations andto restate the legislative view , largely repudiated by the case law,""that the tests of the Sherman Act have no proper place in the appli-cation of Section 7.

Monopoly and coinpetition , as economic facts , are the same no mat-ter what law is applied to them." 40 Market control , restraint of tradeinjury to competition, tendency toward monopoly are the subjectsof both the Sherman and CJayton Acts. But the standard of ilegalityis different; otherwise Congress would have been wasting its timeby enacting duplicating legislation. The difference is usua1ly said tobe that under Section 7 the undesired condition may not yet be inexistence; there is only a reasonable probability that it wi1l come topass if nothing is done to stop it. This , of course , was the underlyingpurpose of the original Clayton Act. It was designed to "supplement"the Sherman Act, to prohibit practices which singly and in themselves

37 Id. 169.

33 Id.

Intertl,ational Shoe CO. V. F. T. C. 280 U. S. 291 (1930) ; V. Vivaudou. v. F. T. C., 54

F. 2d 273 (C. A. , 1031) ; Temple AnthTacite Coal Co. v. F. T. C., ::1 F. 2d 656 (C. A. 31931) ; UnHed Sta, tcs v. Republic Steel Corp. 11 F. Supp. 117 (N. D. Ohio, 1935) ; seeIrvine

, "

The Uncertainties of Section 7 of the Clayton Act," 14 Cornell L. Q. 28 , 40 (1928)for a review of the earlier cases.

40 See Adelman

, "

Acquire the Whole or Any Part of the Stock or Assets of Another Cor-poration " Proceedings of the American Bar Association , Section of Antitrust Law , Aug.

27, 1953, pp. 111 , 117.


555 Opinion

were not eovered by that act, to arrest potential violations of theSherman Act in their incipiency and before consummationY

The trouble is that his sort of language, lawyer s language somecall it, is not very meaningful until applied to a particular set of facts

fads wJ1ichsuffce for the Clayton Ad but do not constitute a show-ing of evidence suffciently impressive under the Sherman Act. Thecourts and the Commission have frequeDtly paid homage to the in-cipiency doctrine and the difference between the Sherman and Clay-ton Aet tests, but not detar standards have emerged.

Putting aside the broad concepts of competition and monopoly,the essential difference seems to be that the Clayton Act requires alower standard of proof of the same kind of facts- evidence whichis quantitatively or qualitatively less impressive than where the Sher-man Act is invoked."'2 More

speeifjcally, the merger in U. S.

Oolumbia Steel 00. 334 U. S. 495 (1948), which was examined underthe Sherman Act, would probably not have been approved had newSection 7 been in existence and invoked against it.

Section 7, before it was amended, prohibited corporate acquisitionsof stock which might have anyone of the following effects: (1)substantial lessening of competition between the merging companies(2) restraint of commerce in any section or community, or (3) tend-ency to create a monopoly. This language, if taken literally, wouldhave precluded almost every merger where competition existed be-tween the two merging companies. As we have ir:dicated, the courtsshied away from this drastic interpretation and invoKed the rule ofreason of the Sherman Act..

Section 7 , as amended, prohibits the acquisition of assets as well asstock, thus closing the long-standing loophole on this point. Theacquisition is prohibited "where in any line of commerce in any sec-tion of the country, the effect of such acquisition may be substantiallyto lessen competition , or to tend to create a monopoly. " 45

The earlier test as to competition between the acquiring and acquir-ed companies is eliminated and so is the earlier alternative test to restrain such commerce in any section or eommunity." The

elimination of the first test eliminates the possibility of a strict andliteral interpretation which would strike down local and unimpor-tant acquisitions; the elimination of the second test removes any likeli-hood that broad Sherman Act tests will again be applied.'6 Thelegislative history is clear on this point.

41 Sen. Rep. No. 698, 63d Con

.,

2d Sess., p. 1 (1914); Standard Fashion Company

JIagrane-lIouston Co. 258 G. S. 346 , 356 (1922).42 See Adelman 8upra, 118... H. R. Rep. No. 1191 , 81st Cong. , 1st SeBs. , pp. 10-11 (1949).44 See alSQ McAllister supra, 142-143."64 Stat. 1125 , 15 U. S. C.. Sec. 18..w See McAllister 8Up1" , 143.


Opinion 50 F. T. C.

The Senate Committee said:The purpose of H. R. 2734 was to make this legislation extend to

acquisitions which are not forbidden by the Sherman Act. * * The Committee believe that the excessive sweep that has been

given to Section 7 of the present Clayton Act by these two featuresof that Section has been largely responsible for the tendency of the

court in cases under that Section to revert to the Sherman Act test.By eliminating the provisions of the existing Section that appear toreach situations of little economic significance , it is the purpose ofthis legislation to assure a broader construction of the more funda-mental provisions that are rebined than has been given in the past.The Committee wish to make it clear that the bill is not intended torevert to the Sherman Act test. The intent here , as in other parts ofthe Clayton Act, is to cope with monopolistic tendencies in their in-cipiency and well before they have attained such effects as wouldjustify a Sherman Act proceeding. " 41This is confirmed in the House Report:

Acquisitions of stock or assets by which any part of commerce ismonopolized or by which a combination in restraint of trade is createdare forbidden by the Sherman Act. The present bill is not intendedas a mere reenactment of this prohibition. It is not the purpose ofthis committee to recommend duplication of existing legislation.

Acquisitions of stock or assets have a cumulative effect, and con-trol 0:1' the market suffcient to constitute a violation of the ShermanAct may be achieved not in a single acquisition but as the result of aseries of acquisitions. The bill is intended to permit intervention insuch a cumulative process when the effect of an acquisition may be asignificunt reduction in the vigor of competition , even though thiseffect may not be so far-reaching as to amount to a combination inrestraint of trade, create a monopoly, or constitute an attempt tomonopolize. Such an effect may arise in various ways: such aseJimination in whole or in material part of the competitive activityof an enterprise which has been a substantial factor in competitionincrease in the relative size of the enterprise making the acquisition tosuch a point that its advantage over its competitors threatens to bedecisi ve, undue reduction in the number of competing enterprises, orestablishment of relationships betwecn buyers and sellers which de-prive their rivals of a fair oppol'tnnity to compete. " 48

The House and Senate committees also took the occasion to makeclcar that "may be" mcans reasonable "probability," not "possibility.Thc Senate Hcport said:

47 Sen. Hep. 1'0. 177:3 , 8ist Cong. , 2d Ses , pp. 4-5 (lD50).'" II. R. Rep. No. 1191 , 81st Cong. , 1st Sess. , p. 8 (J 949).


555 Opinion

The use of these words l"may be J means that the bill, if enactedwould not apply to the mere possibility but only to the reasonableprobability of the prescribed effect, as determined by the Commissionin accord with the Administrative Procedure Act.

" ""

Under amended Section 7 "the Government must define and provethe relevant market and the relevant products involved in the acqui-sitions. The ' line of commerce ' need not be industry-wide; any partof the domestic commerce is included. 'In any section of the countryapparently is intended to cover any market area in the United Statesin which the acquiring or acquired corporation is doing business andto embrace potential as well as actual competition. * * " TheGovernment, therefore, has a lesser burden of proof under Section7 than under the Sherman Act, which requires a proof of an un-reaasonable restraint of trade. " 50

As we see it, amended Section 7 sought to reach the mergers em-braced within its sphere in their incipiency, and to determine theirlegality by tests of its own. These arc not the rule of reason of th\\Sherman Act, that is, unreasonable restraint of trade , nor are Section7 prohibitions to be added to the list of per 8e violations. Somewherein between is Section 7, which prohibits acts that "may" happen in aparticular market, that looks to "a reasonable probability," to " sub-stantial" economic consequences, to acts that "tend" to a result. Overall is the broad purpose to supplement the Sherman Act and to reachincipient restraint.

While these are far from specific standards-specificity would inany event be inconsistent with the "convenient vagueness" of anti-trust prohibitions-they can , we believe, be applied on a case-by-casebasis. 'Ve think the present case is the type Congress had in mind--one that presents a set of facts which would be insuffcient underthe Sherman Act but nonetheless establishes prima facie a violationof Section 7 of the Clayton Act.

Commission action, under Section 7 (c) of the AdministrativeProcedure Act, must be supported by "reliable, probative, and sub-stantial evidence." 52 It is said that "These are standards or prin-ciples usual1y applied tacitly and resting mainly upon common sensewhich people engaged in the conduct of responsible affairs in-stinctively understand." 5:J This is in reality a restatement of the

4\J Sen. Hep. No. 1775 , Hlst Cong., 2d Sess. , p. 6 (19GO).50 Oppenheim

, "

Federal Antitrust Legislation: Guideposts to a Revised National Auti-

trust Policy, " 50 Mich. L. Rev. 1197 (1952).51 See :\JcAlli t!:r supra , 148.

"60 Stat. 241 5 U. S. C. , Sec. 1006e.53 II. R. Rev. o. 1980 , 79th Cong. , 2(1 Sess. , p. 36 (1946) ; Sen. Her. No. 752, 79th Congo.

1st Sess. , p. 22 (19'15) ; (Sen. Doc. 1\0. 248 , 79th Cong., 2d Sess. , pp. 208 , 270 (1946).

570 FEDERAL TRADE COMMlSSION DECISIONS

Opinion 50 F. T. C.

substantial evidence rule." 54 Substantial evidence "means such

relevant evidence as a reasonable mind might accept as adequate tosupport a conclusion. Consolidated Edison Co. v. National LaborRelations Board 305 U. S. 197 229 (1938).

Under Section 7 (c) it is clear that, as heretofore, the technical

rules of evidence are not applicable to administrative hearings.

Thus it is stated that " the mere admission of evidence is not to betaken as prejudicial error (there being no lay jury to be protected

from improper influence)." 56 "But this assurance of the desirableflexibility in administrative procedure does not go so far as to justifyorders without a basis in evidence having rational probative force. " 57

The principal evidence in this case which the hearing examinerrefused to accept as reliable, consists of several letters addressed tothe Commission, in which respondent set forth (1) its sales of therelevant products in the southeast and in the nation (2) the ac-

quired companies ' sale of the relevant products in the southeast andin the nation,"9 and (3) respondent' s best estimates of its major com-

petitor s shares of the relevant markets. Respondent's counsel didnot object to the introduction of these letters as not being competentevidence. In fact, respondent said at the time that there were accurate, absolute figures available in the flour industry showing com-petitors' sales or total sales.

1Vhether or not respondent's estimates of competitors' shares of aparticular market can be accepted as reliable depends upon thecircumstances. According to the testimony of respondent's marketanalyst, the best data available showing the market position andtrend of sales of respondent and certain of its competitors in theflour industry are surveys prepared by the Market Research Corpora-tion of America. This organization makes a random sample auditof retail stores which the witness described as the only randomsample available which he considered projectionable. Respondentmust have considered this information reliable enough for its ownpurposes inasmuch as it paid about $50 000 per year for sameY

MAttorney General's Manual on the Administrative Procedure Act , p. 76 (1947).55Id. "Furthermore, administrative agencies lil e the l\-'ederal Trade Commission have

never been restricted by the rigid rules of evidence. Interstate Commerce Cornm n. V. Baird194 U. S. 25, 44. And , of course , rules which bar certain types of evidence in criminal orquasi-criminal cases are not controlling in proceeding like this , where 'the effect of theCommission s order is not to punish or to fasten . liability on respondents for past conductbut to ban specific practices for the future in accordance with the general mandate ofCongress. F. T. C. v. The Oement Institute ct al. 8upra 705.

68 See footnote 53.

57 Consolidated Edison Co. v. National Labor Relations Board 8upra p. 230 (1938).

58 The letters contained actual figures for respondent for the fiscal year 1949-1950.5\1 The letters set forth actual sales for Ballard for the fiscal year 1949-1950 and re-

spondent' s best estimates for Duff for the same period.60 The admissibility of commercial reports is well recognized. As Wigmore points out

The . . . (exception to the Hearsay rule) is capable of liberal expansion to include


555 Opinion

Respondent prepares periodic market analyses of flour and mixmarkets for its use in the regular course of business, in which it usesthe information supplied by the Market Research Corporation. Themarket position information contained in these reports was usedtogether with respondent's own data, in the preparation of the esti-mates in question.

The reports containing the data supplied by the Market ResearchCorporation were subpoenaed by cOllnsel supporting the complaintbut respondent refnsed to comply on the ground that it was not liberty to divulge such information.

The estimates were prepared by respondent and submitted to theCommission during the course of the preliminary investigation , andrespondent asked the Commission to rely upon them in reviewing

the case prior to the culmination of the acquisitions. Presumablyrespondent at that time, as an advocate

, "

put its best foot forward.Under all the circumstances " it is believed that the "common sense

and "reasonable mind" tests have been met and the estimates areprima facie evidence of respondent' s market position, the market po-sition of the acuired companies and the market position of its majorcompetitors. Prima facie evidence is the minimum quantity necesaryto raise a presumption of fact or is suffcient, if not rebutted, to estab-lish the fact. Otis

&:

Co. v. S. E. C. 176 F. 2d 34 (C. A. D. 1949).Respondent, when it puts in its case wil have full opportunity torebut, explain, or contradict. It is important to remember in .thisconnection that the issue here does not go to the absolute sales ofrespondent, the acquired companies or its competitors, but to thequestion as to the effect which the mergers may have on competition.

A few words should be said about the problem of proof in antitrustcases. Competition is a complex and constantly changing phenom-enon. It has never been sharply defied. Injury to competition, asdistinguished from injury to a competitor, is seldom capable of proofby direct tetimony and may therefore be inferred from all the sur-rounding circumstances. "An antitrust charge may * * * be provedby circumstantial evidence, and the circumstances may include actionsaffecting any of the broad issues of fact posed in the complaint. " 62

Analysis of the competitive effects of an acquisition should beginwe believe, with the relevant facts concerning the competitive pattern

* ,. '"

commercial and industrial records , made by perso-ns disinterested in the particularlitigation , published or kept accessible to third persons, and customarily relied upon bythem in the conduct of particular occupations." 6 Wigmore on Evidence, sec. 1708 (3rded. 1940), p. 38.

61 These circumstances include the fact that respondent refused to comply with Com-mission subpoenas seeking the basic data upon which the estimates were based.

62 See McAllister

, "

The Big Case: Procedural Problems in Antitrust Litigation " 64

Harvard L. R. 27 at 28.

572 FEDERAL TRADE COMMISSIOK DECISIOKS

Opinion 50 F. T. C.

of the industry as a whole and its markets, particularly in the periodpreceding the acquisition. From such facts, and from informationabout the specific mergcr, it should be possible to determine whatchanges the acquisition can be expected to make in the character of

competition in the markets concerned.Counsel supporting the complaint say they have made such an

analysis; that the evidence was not limited to the application of Sec-tion 3 cases to Section 7, but included in addition "an extensive show-ing of the character of the markets and the market setting in whichthe acquisitions took place.

To summarize the evidence , respondent, whose rapid growth duringthe past few years has been due in part to acquisitions and mergershas now acquired two more substantial competitors. By these ac-quisitions it has substantially increased its millng and productioncapacity and its market position. In one of the relevant productsnamely, mixes , its position in the southeast increased to about 45percent.

These acquisitions have taken place in an industry which has

steadily declined in size and capacity, and in which the big companieshave increased their percentage share. This increase has been largelydue-71 percent of it-to mergers. In the southeast the number ofmills has not only declined but there have been no new entries of anysize into the industry. The number of competitors in the southeastmore particularly in the urban markets, has been materially reducedby the acquisitions; in the mix business, for example, Ballard with12 percent and Duff with 10.2 percent of the market, have beeneliminated.

This establishes , it seems to us, a prima facie case."3 The patternof competition in the southeast, particularly in the cities , has under-gone a considerable change as a result of the mergers. Unless ex-plained, contradicted, or rebutted, and respondent will have every

opportunity to do this when it puts in its case, it is a change whichconstitutes a move away from hcalthy competitive conditions.

There is nothing in the record to indicate that the mergers will atpresent convert the industry in the southeast from a competitive toa noncornpet,itive pattern. The inference, in fact, must be to the con-trary inflslluch as large national distributors , such as General Millsand Quaker Oats, and large regional distributors remain to furnisheffective competition to Pillsbury Mills However, in the urban

U3As f'tatf'd In re Chicago Rys. Co. 175 F. 2d 282 (C. A. 7 , 1940), cert. denied, (Illinoi8

v. Sullivan), 338 U. S. 850 (1949), a !)rima facie case is established by eyidellCe adlluced

by the plaintiff in sUDPort of its case up to the time such evidence stands unexplaine'l anduncontradicted.


555 Opinion

markets at least, the mergers lead in the direction of what is some-times called oligopolistic or "monopolistic" competition, that is, to asituation where the remaining competition in the particular marketis between big companies.

, for example, respondent should continue to acquire competitorsat the rate it has since 1940 , and other large companies should do thesame, the urban markets in the southeast may come to be dominatedby a few large milling companies. This, of course, has been thetrend in other industrie.s. In some of them , under the policy of theSherman Act, competition between the big companies continues toprotect the consumer interest. But , as we understand it, it was thissort of trend that Congress condemned and desired to halt when adopted the new Clayton Act antimerger provision.

This matter, therefore, should be remanded to the hearing examinerfor further consideration in conformity with this opinion.

Mr. Mead , while concurring in the result, will file a separate con-

. .

CUlTmg oplIllon.

CONCUHHING OPLNION OF COJlIJlIlSSIONER MEAD

The Chairman in the very able Opinion of the Commission hasstated the fads in this case and has discussed the applicable law indetail. I concur with his analysis of the fads and with his conclu-sion that the reveJant evidence now in the record estahlishes "primafacie" that PiJJsbury violated Section 7 of the Clayton Act by b"yingBallard and BaJJard Company and the Duff Division of AmericanHome Products Corporation.

In view of the very important questions discussed in the Opinionand of the fact that this is the first case considered by the Commissionunder the revised Section 7 of the Clayton Act, I deem it advisableto comment briefly.

The Opinion of the Commission in this matter (as weJJ as in the

recently decided 1:aico case, Docket 5822, brought under Section 3 ofthe Clayton Act) discusses broadly the necessity of "a case by clctse

examination of aJJ relevant factors in order to ascertain the probableeconomic consequences." In my opinion this language should not beinterpreted as encouraging the introduction into trial records of re-motely relevant economic evidence which is unnecessary for a de-

termination of the issues.Certain court opinions have suggested that the Commission is Lotter

equipped than courts to consider economic data. As to the extent64 Sen. Rep.

o. 1775 , 81st Cong. , 2d Sess. , p. 5 (1950); H. R. Rep. No. 1191 , 81st Cong.1st Bess. . p. 8 (lD49).


Opinion 50 F.

to which economic or other data is necessary in trial records, I believethere is a difference between the Federal Trade Commission Act andthe Clayton Act. In the Federal Trade Commission Act the Con-gress used broad sweeping language. It declared illegal unfairmethods of competition in commerce. The Act does not define whatthe Congress meant by unfair methods of competition. The defi-

nition is left initiany to the Federal Trade Commission. The onlymethod by which the Commission c m properly and adequately definesuch term is by a process of administrative inclusion and exclusion ascomplaints are issued and cases decided. Under the Trade Act, ifthe Commission in issuing its complaint has reason to believe that apractice not theretofore determined to be ilegal is illegal, then thetrial of such case should fully develop the facts so that the Com-

mission in its role of expert would be fully iDformed in deciding theoase of first impression. The Commission should then make adequatefindings "with suffcient clarity" to enable a court to review the order.(See the dissent of Mr. Justice Frankfurter in FTC vs. jJ otion PictureA.dvertising Service Co. , Inc. 344 US 392 which was a Trade Actcase. )

In Section 7 of the Clayton Act as distinguished from the FederalTrade Commission Act, the Congress specifically declared that themerger of certain types of corporations is ilegal provided only thatthe effect of the mergers may be substantially to lessen competitionor tend to create a monopoly. Other sections of the Clayton Actalso describe in comparatively specific language the act or practicewhich may be illegal.

Mr. Justice .Jackson in his dissent in FTC vs. R11beroid Co. , 343

US 470 (a Section 2(a) Clayton Act case) had specific reference tothe remedy in the order to cease and desist and not to the elements ofproof or evidence necessary to support a finding of illegality by theCommssion. As I understand it, Mr. Justice Jackson indicated thatthe Congres, in writing legislation in the antitrust field, must neces-sarily limit the legislation to principles or policies. The Commissionin drafting its orders to cease and desist, should give meaning andpurpose to the general legislative policy. This should be done wherefeasible, not by parroting the words of the statute but by prescribinga definite remedy within the general policy. The remedy should beadapted to the facts of the particular case. The Commission , guidedby the Congresional mandate and using its expertness , should deviseremedies which are effective and informative.

The question of whether or not certain types of corporate mergersarc questionable has been determined by the Congress. The onlyissues other than jurisdictional which the Commission must decide


555 Opinion

are whether or not the particular merger may cause the injury de-scribed in the statute. The extent and character of economic or otherdata which is necessary in any particular case in order for the Com-mission to make an informed decision is a matter which must be de-termined by the facts of that particular case.

Economics is not an exact science. The economic factors and eco-nomic theories available for exposition relating to what effect amerger, an exclusive dealing contract or a discriminating price mayhave on competition may be so many and so changiDg that proceedingsattempting to explore thoroughly all facets would have no foreseeabletermination dates.

Many distinguished offcials of Government and members of theBar have been disturbed because of the length of trial records in ad.ministrative hearings. Consideration is now being given to variousmeans to shorten these records so as to reduce the expense for all theparties, including the Government. Shorter yet adequate recordsshould result in a reasonably prompt determination of issues. Wecertainly do not desire to take any action which will unnecessarily

lengthen the records in cases before this Commission.In my opinion the Commission does not desire economic or other

data in trial records just for the sake of the data. Weare tryingcases in order to determine public legal rights. We are not in thisforum making ext msive economic investigations for the purpose ofadding to the general store of knowledge. The facts to be determinedmay be so apparent that a reasonable man could fairly decide theissues without the benefit of extensive data. In such cases extensive

hearings should be avoided.

The ' Commission was established so that the public would getprompt informed action when there is a reasonable probability thata trade act or practice will injure competition. Prompt informedaction is particularly necessary in cases of mergers which may befinally found to be iJlegal. The passage of time may make muchmore diffcult the task of unscrambliDg the assets of the merged com-panies and restoring competition to its original form.

In short, I agree with the result of the Commission s action in thiscase. I approve of the dispatch with which this decision was reached.In my opinion, however, the Commission does not desire to "gildthe lily" by encouraging hearing examiners to admit in trial recordsinteresting but unnecessary factual data. An expert can practicehis expertness and yet act decisively and with dispatch. An expertcan also be a reasonable man.


Decision 50 F. T. C.

IN TIlE MATTER OF

MERCANTILE STORES COMPANY, INC. , ET AL.

I'EGISION IN REGARD TO THE ALLEGED VIOLATION OF TIlE FEDERAL 'l'RAD

COMMISSION ACT

Doclcet 6094. Oomplaint , Apr. 24, 1953-Decision, Dec. , 1958

\VllPre a corporation and its wholly owned subsidiary engaged in the int.erstatesale and distribntion of children s shoes undcr the brand name "I-ealth-Fiex" which , thus stamped ann boxed , were shipped from their place ofmanufacture to a number of retail stores ' wholly ownen subsidiaries invariol1s otber states and were by said stores in turn advertised and soldas "1-IeaHh-Flex shoes with the knowledge , consent, and approval of theaforesaid corporation-

Ilepresented directly and by implication that said shoes were constructed insuch a manner tha t their use would prevent and correct abnormalities anddeformities and ailments of the feet and keep them healthy, through useof the word "Healt.h" as a part of tlle trade or brand name therefor , andas stamped in and on said shoes and on the boxes in which they were sold;

The facts being said shoes were mereiy stock shoes , made on order by quantityproduction methods by the manufacturer from which said subsidiary boughtthe same and npon \vhieb , and upon the containers thereof , said llalne wasstamped at its direction; and while said shoes might contain some featuresnot found in other stock shoes, effect thereof upon the feet in the preventionor correction of abnormalities , deformities, or ailments or in keeping thefeet healthy ,vas insignificant:

Held That. such acts and practices constituted unfa.l and deceptive acts andpractices in commerce.

Before lIfr. James A. Purcell hearing examiner.

Mr. B. G. Wilson and lIfr. George E. Stei' rvetz for the Commission.

DECISION or THE COMMISSION , AND OHDER TO FILE REORT OF

COMPLIANCE

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission, on April 24 , 1953, issued and subse-quently served its complaint in this proceeding upon the respondentsnamed in the caption hereof, charging them with the use of unfairand deceptive acts and practices in commerce in violation of the pro-visions of said Act. The respondents fied a joint answer admittingall of the material allegations of the complaint and waiving all in-tervening procedure and further hearing as to the said facts, but re-serving the right to withdraw said answer if the Commission fai.ledto grant respondents' request for an extension of the effective date ofany order to cease and desist which might be entered to a date specified

MERCANTILE STORES CO. , INC., ET AL. 577

576 Findings

by respondents.

initial decision.

The Commission, having reason to believe that said initial decisiondid not constitute an adequate and appropriate disposition of thismatter, subsequently placed this case on its own docket for review.On October 5, 1953 , the respondents filed their consent to the with-drawal of the portion of their admission answer relating to the effec-tive date of the order to cease and desist which might be entered, andthe Commission , on November 9 , 1953 , issued , and thereafter servedupon the parties , its order setting time within which objections to atentative decision of the Commission attached to said order, and replythereto , might be filed. No objections having been filed within thetime permitted, the proceeding regularly came on for final consid-eration by the Commission upon the rccord herein on rcview; andthe Commission, having duly considered the matter and being nowfully advised in the premises, finds that this proceeding is in the in-terest of the public and makes this its fuldings as to the facts, con-clusion drawn therefrom, and order, the same to be in lieu of theinitial decision of the hearing examiner.

On July 24, 1953, the hearing exammer fied his


PARAGRAPH 1. Respondent Mercantile Stores Company, Inc. , is acorporation organized and existing under and by virtue of the lawsof the State of Delawarc, with its offce and principal place of businesslocated at 100 West 10th Street., Wilmingt.Qn , Delaware. RespondentMercantile Stores Company, Inc. (N. Y.) is a corporation organized

under and by virtue of t.he laws of the State of New York, with itsoffce and principal place of business locat.ed at. 128 West. 31st. Street.New York 1 , Nev,' York The said New York corporat.ion is a whollyowned subsidiary of t.he said Delaware corporat.ion. The t.wo cOr-porations act in conjunct.ion and cooperat.ion with each ot.her in theperformance of t.he acts and practices hereinafter set fort.h.

PAR. 2. Respondents are now , and for more t.han two years last.past have been, engaged in the sale and distribution in commerce ofchildren s shoes bearing the brand name "Health-Flex. Respondentscause, and have caused, t.heir said shoes, when sold, to be transportedfrom t.he place of t.heir manufact.ure in Ephrata, Pennsylvania, t.o

purchasers t.hereof locat.ed in various States of t.he Unit.ed Stat.es.Respondents maintain , and at. all t.imes ment.ioned herein have main-tained , a substantial course of trade in commerce in said shoes.PAR. 3. Respondents ' method of operation is as follows: Said

shoes are manufactured on order of respondent. New York corpora-40;j4..: 57- :18



tion by the Eby Shoe Corporation of Ephrata, Pennsylvania. At thetime of manufacture, in accordance with the direction of respondentNew York corporation, the name "Health-Flex" is stamped in and onthe shoes and on the boxes in which they are packed and sold. Thisis done with the consent and apprDval of, and inures to the benefit

, respondent Delaware corporation, which is the owner of theregistered trade-mark "Health-Flex . Respondent New York corpo-ration sells and causes said shoes , so stamped and boxed , to be shippedfrom the place of their manufacture in Pennsylvania to a numberof retail stores, located in various other States of the United Stateswhich are wholly owned subsidiaries of respondent Dehtware corpora-tion. These various retail stores in turn advertise and sell said shoesas "Health-Flex" shoes with the knowledge, consent and approvalof respondent, the Delaware corporation.PAH. 4. Through the use of the word "Health" as a part of the

trade or brand name for said shoes and as stamped in and on saidshoes and on the boxes in which they are sold, respondents have repre-sented, directly and by implication, that said shoes are constructed

in such a manner that their use will prevent and correct abnormalitiesdeformities and ailments of the feet and will keep the feet healthy.PAR. 5. The said representation is false , deceptive, and misleading.

In truth and in fact, the use of said shoes will not prevent or correctany abnormalities, deformities or ailments of the feet or keep thefeet healthy. Respondents' shoes are merely stock shoes , made byquantity production methods , and while they may contain some fea-tures not found in other stock shoes , the effect of such features uponthe feet in the prevention or correction of abnormalities, deformitiesor ailments of the feet or in keeping the feet healthy, is insignif1cant.

PAR 6. The use by the I'espondents of the foregoiDg false , decep-tive and misleading representation with respect to said shoes has hadand now has the tendency and capacity to , and does, mislead and de-ceive a substantial portion of the purchasing public into the erroneousand mistaken belief that said shoes are constructed in such a mannerthat their use will prevent and correct abnormalities , deformities andailments of the feet and will keep the feet healthy, and into the pur-chase of substantial quantities of said shoes because of such erroneousand mistaken belief. Furthermore, respondents' said practices placein the hands of retailers of said shoes and others a means and in-strumentality to mislead and deceive members of the purchasing pub-lic into the erroneous and mistaken belief that s tid shoes are con-

3tructed in such a maIlleI' that their nse will prevent and correct ab-10rmalities, deformities and ailments of the feet and keep the feetteal thy.

MERCANTILE STORES CO., INC., ET AL. 579

576 Order

CONCLUSION

The aforesaid acts and practices of the respondents, as herein foundare all to the prejudice and injury of the public, and constitute un-fair and deceptive acts and practices in commerce, within the intentand meaning of the Federal Trade Commission Act.

ORDER

It is oTdered That the respondents , Mercantile Stores Company,Inc. , a corporation , and Mercantile Stores Company, Inc. (N. Y. ), acorporation, their offcers, agents, representatives, and employees, di-rectly or through any corporate or other device, in connection withthe offering for sale, sale, and distribution in commerce, as "com-merce" is defined in the Federal Trade Commission Act, of shoesnow designated as "Health-Flex " or any other shoe of substantially

the same constitution, do cease and desist from:1. Using the name "Health-Flex" or any name in which the word

"'Health" appears as a trade or brand name therefor.2. Representing, directly or by implication, that the said shoes are

onstructed in such a manner that their use will prevent or correctabnormalities, deformities, or ailments of the feet or will keep thefeet healthy.

It is jwrther ordered That the respondents shall, within sixty (60)days after service upon them of this order, fie with the Commissiona report in writing setting rorth in detail the manner and form inwhich they have complied with the order to cease and desist.

580 FEDERAL TRADE COMJ\IISSlON DECISIONS

Syllabus 50 F. T. C.

IN THE Jl1ATTER OF

GEORGE' S RADIO AND TELEVISION COMPANY, INC.ETAL.

CONSENT SETTLEMENT , IN HEGAHD TO THE ALLEGED VIOLATION OF THEFEDERAL TRADE COJ\i nSSION ACT

Docket 6140. Oomplaint , Nov. 4, 1953-Dccision, Dec. , 1958

Where a corporation and its two offeers , engaged in the District. of Columbiain the sale of electrical appiiances including home freezers and televisionsets in selling their said freezers in connection with arrangclnents wherebypurchasers were enrolled in a food distributing organization operated bya concern unaffiiated with them and under which members were entitledto purchase certain food items in Imik quantities-

(a) Uepresented through radio broadcasts and other means of advertising thatparticipants in said plan could buy food at wholesale prices or from awholesaler; when in fact said organization was not a wholesaler and theprices at which participants purchased were not wholesale prices;

(b) Itepresented that participants therein could effect overall monetary savingsthrough the general use or frozen foods in place of corresponding foods in

othcr forms;The facts being, in the main , frozen foods thus pnrchased would cost more per

edible pound than corresponrling foods in other available forms normallyconsumed by the public; and no overall saving in food costs would be ac-compiished by the general substitution of frozen foods , thus available forcorresponding foods in other forms;

(c) Heprescnted that substantial overall reductions in food costs would beefIected by participation in said plan; the facts being that, in the mainfood plan prices were considerably in excess of usual retail prices of cor-responding foods in other forms, and were close to and in some instancesidentieal with usual retail prices of similar frozen foods; and no sub-stantial overall rednctions in food costs would thereby ' be efIected; and

(d) Hepresented that net monetary savings could be effected by all who pur-chased and used their home freezers;

The facts being that in a substantial number of instances increase in expensedirectly attributable to the purchase and use of a home freezer includingcost of financing where credit is used , and (;08t of operation , maintenance.and depreciation would eliminate savings , if any, which might be effectedthrough the purchase of food in bulk quantities and in such instances pur-chase and use of such a product would not result in net monetary savings;and

Where said corporation and individuals in thus advert.ising their televisionset.s

(e) Represented through such statements as "brand new , that the particularsets offered were scts of thc current year s models when in fact many ofsaid sets were not such when a')vertised;

(f) llepresented that higher prices shown for their " l\:1irrortone" sets in ad-vertisements in which they were oJlered at a lower figure represented theusual price at which they were customarily offered for sale and sold in therecent regular course of their husiness

GEORGE' S RADIO & TELEVISION CO., IKC.) ET AI,. 581

580 Consent Settlement

When in fact said higher price greatly exceeded the usual price at which saidsets were customarily thus ofIered and sold by them;

(g) Falsely represented that t.he price at which such sets were ofIered andsold was lower by 50% than the usual price at which they were thuscustomarily offered and sold by them; and

(h) Represented that they were making bona fide offers to sell such sets for$99 and various other prices stated from time to time;

When in fact such advertised prices were not genuine or bona fide offers , butwere made to induce persons to visit their stores or to obtain leads as topersons interested in the purchase of television sets in order that they

might be solicited in said person s home by their salesman; and they andtheir salesmen in many instances displayed great reluctance or refusedto demonstrat.e or improperly demonstrated such sets or disparaged thedesign, workmanship, and performance thereof and attempted to dem-onstrate and sell different ano. Inore expellsive setA than those advertised:

Held That such acts and practices, under the circumstances set forth , wereall to the prejudice and injury of the public and constit.uted unfair anddeeeptive acts and practices in commerce.

Before Mr. W illiwn L. P!Uk hearing examiner.

lib. Ames W. Williams and Mr. John J. McNally for the Commis-SIOn.

Grossberg, Yochelson Brill of Washington , D. for respon-

dents.CONSENT SETTEMENT 1

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Tradp Commission on November 4 , 1953, issued its com-plaint, which was duly served on the respondents named in the cap-tion hereof, charging them with the use of unfair and deceptive actsand practices in violation of the provisions of said Act.

The respondents, desiring that this proceeding be disposed of bythe consent settlement procedure provided in Rule V of the Commis-sion s Rules of Practice, solely for the purpose of this proceeding,any review thereof and the enforcement of the order consented to , andconditioned upon the Commission s acceptt"nce of the consent settle-ment hereinafter set forth and in lieu of answer to said complainthereby:

1. Admit all the jurisdictional allegations set forth in the complaint.2. Consent that the Commission may enter the matters hereinafter

set forth as its findings as to the facts, conclusion and order to cease

1 The Commission s "Xotice" announcing and promulgating the consent settlement aspublishetl herewith , follows:

The consent settlement tendered by the parties in this proceeding, a copy of which isserved herewith, was accepted by the Commission on December 22, lD53 and ordered

entered of record as the Commission s fin(1ings as to the facts, conclusion , and order in-disposition of this proceeding.

The time for filing r(;))ort of compliance vursuant to the aforesaid order runs from thedate of service hereof.



and desist. It is understood that the respondents in c.nsenting to

the Commission s entry of said findings as to the facts, conclusion andorder to cease and desist, specifically refrain from admitting or deny-ing that they have engaged in any of the acts or practices stated

therein to be in violation of law.

3. Agre that this consent settlement may be set aside in whole orin part under the conditions and in the manner provided in paragraph(f) of Rule V of the Commssion s Rules of Practice.

The admitted jurisdictional facts, the statement of the acts andpractices which the Commission had reason to believe were unlawfulthe conclusion based thereon, and the order to cease and desist, all

of which the respondents consent may be entered herein in finaldisposition of this proceediDg, are as follows:PAHAGRAPH 1. George s Radio and Television Company, Inc. , is a

corporation, organized, existing and doing business under and byvirtue of the laws of the State of Maryland, with its principal offce

and place of business located at 816 F Street NvV. , WashingtonD. C. George vV' asserman is president and treasurer, and PhilipKeller is general manager of the corporate respondent George s Radioand Television Co. Inc. These individual respondents formulatedcontrolled and directed the affairs aDd policies of the corporate re-spondent at the time the acts and practices hereinafter set forthtranspired. Said individual respondents have their offces at the sameplace as corporate respondent.

Individual respondents George Wasserman and Phillip Keller haveexecuted affdavits dated November 24, 1953, which state that indi-vidual respondents Leopold Freudberg and Solomon Grossberg aroffcers for convenience purposes only, and during their tenure ofoffce as Vice President and Secretary, respectively, have had no voicewhatever in the formulation , control or direction of the affairs, policiesor advertising practices of respondent George s Radio and TelevisionCompany, Inc.

By reason of the matters set forth in said affdavits, the Commissionfinds that the complaint herein, insofar as it relates to the respondentsLeopold Freudberg and Solomon Grossberg as individuals, shouldbe dismissed , and accordingly, the term respondents, as hereinafterused, shall refer to respondents George s Radio and Television Com-pany, Inc., and George Wasserman and Phillip Keller, individuals.

PAR. 2. Respondents are now , and for more than one year last pasthave been , engaged in the sale of electrical appliances, including homefreezers and television sets. Respondents have made arrangementswhereby purchasers of said home freezers are enrolled in a food dis-tributing organization operated by a concern unaffliated with re-

GEORGE' S RADIO & TELEVlSION CO. , ING., ET AL. 583

580 Consent Settlement

spondents, which entitles members to purchase certain food items inbulk quantities.PAR. 3. In the course and conduct of their business , respondents

caused their home freezers, television sets and other electrical ap-pliances, when sold, to be transported to the purchasers thereof attheir places of residence in the District of Columbia and in the Statesadjacent thereto , and at all times material herein have maintained acourse of trade in said home freezers , television sets and other electri-cal appliances in commerce in the District of Columbia and adjacentStates. Respondents maintain, and at all times mentioned hereinhave maintained, a course of trade in commerce as "commerce" is de-fined in the Federal Trade Commission Act.

PAR. 4. In the course and conduct of their business , respondentsthrough the use of radiO' broadcasts and other means of advertising,have made certain statements and representations of which the follow-ing are typical:

Continuity broadcast over Station W ARL, Arlington, Virginia, onJune 7, 1952.

. . . I riends , if you ve been doing without--if you ve been denying yourselfbig necessities and little luxurie- because you just. can t see where t.he moneycoming from: this revolutionary plan may alter your whole life. Now Georgemakes it possible for you to buy food the way your grocer does-buy it packagedthe way you want-meats cut the way you want-buy It at tremendous sav-ings-buy it at George s Jj'ood Chest Plan Way. Call George s at RE 7420 nowfor all the details at no obligation. Wind out what the Food Chest. way canmean to your standard of living now that prices are going up again in foods' * A plan that wil save you hundreds of dollars and stil let your family eat

better than before. Has the cost of living got you down? Are you const.antlyworried about how you can make your bUdget stretch? Friends , savings on yourfood bil can be the difference between poverty and plenty. George s has gottentogether with nationally famous food distribut.ors and now you can buy directwith fantastic savings * . . Call Ril 7420 now to see how you can buy as yourgrocer buys, direct, and save hundreds of dollars

' . .

. . . If you ve ever been worried about money-if you re seriously concernedabout how your salary can stretch-or how your husband's salary can meetever-increasing expenses-a simple phone call can open up a whole new wayof running your household.

Continuity broadcast over Station WTTG, Washington, D. June1952.

. . * I'm going to tell you how you can eat. better than you ve ever eaten, andspend less. How you can put money in the bank , not for one month, not forone year, but. for the rest of your life! George s'" Washington s great ap-pliance dealer and the nation s famous food distributors have got.ten together.Famous brands like Snow Crop, Armour , Swift, dozens more. They ve cookednp a fantastic plan to let you buy direct wit.h incredible savings. You act.uallybuy as your grocer himself buys, with foods packaged and meat cut the way


Consent. Settlement 50 F. T. C.

you specify. You buy direct , and save hundreds of dollars, with no moneydown , for your food , and convenient installments * . " This revolutionary newway t.o eat better and actually save money is as close as your telephone * * .Call George s and ask about the fant.astic I"ood Chest. Food Plan , to save youhundreds of dollars " . * it' s money in the bank , tremendous lifetime savings" " "

Continuity broadcast over Station vVARL, Arlington, Virginia , onJune 12 , 1952.

Republic 7420-that' s the number to call now for the Ianta,tic GeurgeFoud Plan-the food plan that's swceping the whole country--the food chestyou ve heard so many incredible things about. Yes , it's an amazing new idea-and here s the lowdown on how you can save hundreds of dollars * " * Be-cause now with a Food Chest not only can you buy food in "eason, not only

can you buy it in quantity, but you can actually buy it with a big quantitydiscount! Yes , because of a special new arrangement ''lith the big nationaldistributors , you get the benefit of huyin?; with a discount that saves you anincredible percentage of your whole food bUdget and you pay no money downfor your food. Imagine being able to buy rneats , fish , fruits , and vegetables , atactual discount that will mean fantastk savings for you and your falnily

* '" *

Continuity broadcast over St:lbon ,VTOP, ,Vashington , D.June 13, 1952.

OW for years people have been buying food chests and saving money everyyear by having the facilties to huy in quantity. When beef is luw they buy100 pounds of beef. In the summer they buy strawberries and eat them allyear around. And now something sensational has been added , because nowwith a Food Chest not only can you buy food in season , not only can you buyit in qnantity, but you ean aetual1y huy it with a big qnantity discount

or '"

PAl!. 5. Through the use of the foregoing statements and repre-sentations ami others of the same import, but not specifically set outherein , respondents represented , directly or by implication:

1. That participants in said plan can buy food at wholesale pricesor from a wholesaler.

2. That participants in said food plan ean effect over-all monetarysavings through the general use of Jr07;en foods in place of correspond-ing foods in other forms.

3. That substantial over-all reductions in food costs will be effectedthrough participation in said food plan.

4. That net monetary savings can be effected by all who purchaseand use respondents ' home freezers.

P AU. 6. The aforesaid statements and representations are falsemisleading and deceptive. In trut.h and in fact:

1. The food distributing organization from which participants insaid plan purchase is not a wholesaler and the prices at which partici-pants purchase are not wholesale prices.

2. In the main , Jrozen foods, purch:lsed through said plan , will costore per edible pound than corresponding foods in other available

GEORGE' S RADIO & TELEVISION CO. , I , ET AL. 585

580 Consent. Set.tlement.

forms normally consumed by the public. No over-all saving in foodcosts wi1l be accomplished by the general substitution of frozen foodsavailable under said plan , for corresponding foods in other forms.

3. In the main , food plan prices are considerably in excess of usualretail prices of corresponding foods in other forms, and are close toand in some instances identical with, usual retail prices of similarfrozen foods. As a consequence , substantial over-a1l reductions in foodcosts wi1l not be effected through participation in said food plan.

4. In a substantial number of instances, the purchase and use of ahome freezer wiJl not result in net monetary savings. In such in-stances the increase in expenses directly attributable to the purchaseand use of a home freezer will eliminate savings, if any, which maybe effected through the purchase of food in bulk quantities. Amongthe expenses which will be thus incurred are the costs of financing

where credit is used, and the costs of operation , maintenance and de-preciation of the home freezer.

PAn. 7. In the course and conduct of their business, respondentsthrough the use of radio broadcasts , newspaper advertisements, andother means of advertising, have made certain stat.ement.s with re-spect. to t.heir t.elevision sets. Among and t.ypical , but. not. all in elusiveof said stat.ement.s , are t.he foJlowing:

In t.he Washington , D. Evening Star " issue of April 11 , 1952.

Brand-New $309.95 MAJESTIC 20" CONSOLE TELEVISION. Fully guar-anteed-on sale at all stores. $188.

Brand-New $279.95 MA.JESTIC 20" TABLE MODEL TELEVISION. Fullyguaranteed-on sale at all stores. $134.New 19fj2 $259.91) MIRROR TONE 20 In. TV l!'ully guaranteed-on sale at allstores. $99.

Brand-New $299.95 CBS COLUMBIA 20 In. TV. In full supply at all stores.$149.

In t.he Washington , D. Evening Star" issue of April 18 , 1952.

* * *

We may be stepping on toes but for once and for all let' s get the recordstrnight. George s has served the Wasbington area for over a quarter century.

vVe ve grown and prosvcrefl with your patronage and "vp did it by honef',straight-forward selling. The rec.ord proves it! Over a Inillion satisfied cus-tomers. Satisfied with Bargains 1\0'1' BAlT! When George s advertises such

Specials as uppeul' on this page you can he sure of qnality and value. A Qnarrer-Century of Successful business proves it!

DnA NEW 1952 MIRRORTONE TV REG. $24f1.95. $99. !)fj

In t.he ' Washingt.on , D. C.

, "

Times Herald" issue of April 25, 1952.

50%OFF!

Brand-Newarnous :Make Television


Consent Settlement 50 F.

Brand-New $459.95 EMEIlSON 19" Console. This merchandise on saleat. all stores. $229.

Brand-New $525 ADMIRAL 20" Console. This merchandise on sale atall st.ores. $262.

Brand-New $369.95 PHlLCO 17" Console. This merchandise on sale at allstores. $184.

Brand-New $299.95 MOTOROLA 20" Ensemble. $149.Brand-New $299 CBS-COLUMBlA 20" table model. This merchandise onsale at all stores. $149.

Brand-New $279.95 HALLICIlAFTEHS 20" Table model. $139. , Base

extra.Brand-New $249.95 1952 MIRRORTONE 20" tahle model. This merchandiseon sale at all stores. $99Brand-New $299.n5 1952 MIRRORTONE 20" 'l' V Console. This merchandiseon sale at all stores. $129

Continuity Broadcast by Station "VRC, "Vashington , D. on .J une, 1952.

. . . Georges , makes a special offer of 20-inch table model television for just99 dollars plus tax and warranty. A fabulous price and a great value you canafford to miss. A 99 dollar price tag on any television is going some-but whenits a 20 inch television from George s its the buy of a lifetime! George s invit.es

yon to look this set over at no cost , no obligation. Hight now special operatorsare waiting to take your calls at HE-H20. We ll rush a 20- inch television tojour home this vel'S afternoon for a free look.

* :

PAn. 8. Through the use of the foregoing statements and others ofthe same import, but not specifically set out herein, respondents repre-sented, directly or by implication:

1. That their television sets which are described as bl'nd new , aresets of the current year s model.

2. That the higher price for "Mirrortone" sets shown in said adver-tisements, represents the usual price at which said sets were custom-arily offered for sale and sold by respondents in the recent regularcourse of their business.

3. That the price at which said "Mirrortone" sets are offered is lowerby 50% than the usual price at which they were customarily offeredfor sale and sold by respondents in the recent regular course of theirbusiness.

4. That respondents were making bona fide offers to sell "Mirror-tone" television sets for $99 and various other prices stated from timeto time.

PAR. 9. The aforesaid statements and representations are false , mis-leading and deceptive. In truth and in ftct:

1. Many of the television sets described as brand new were not cur-rent models at the time the said advertisements were published.

2. The higher price for "Mirrortone" sets shown in said advertise-ments does not represent, but on the contrary greatly exceeds , the usual

GEORGE' S RADIO & TELEVISION CO., INC., ET AL. 587

580 Order

price at which said sets were customarily offered for sale and sold byrespondents in the recent regular course of their business.

3. The price at which said "Mirrortone" sets are offered is not 50%less than the usual price at which said sets were customarily offeredfor sale and sold by respondents in the recent regular course of theirbusiness.

4. Respondents ' offers to sell "Mirrortone" television sets at t.hevarious advertised prices were not genuine or bona fide offers t.o sellsuch sets. On t.he contrary, said offers were made for the purpose ofinducing persons t.o visit respondents ' stores or to obtain leads as topersons interested in the purchase of television sets in order that theycould be solicited in their homes by respondents ' salesmen.

Respondents and their salesmen, at their places of business and incalling upon persons at their homes , in many instances displayed greatreluctance or refused to demonstrate or gave an improper demonstra-tion of said television sets, or disparaged the design, workmanshipand performance of said sets and attempted to demonstrate and selldifferent and more expensive sets than those advertised.

PAR. 10. The use by respondents of the said false and misleadingstatements and representations, had the capacity and tendency to mis-lead and deceive a substantial portion of the purchasing public intothe erroneous and mistaken belief that the statements and representa-tions contained therein were true and to induce the purchase of sub-stantial quantities of respondents ' freezers and television sets by rea-son of such erroneous and mistaken belief.

CONCLUSION

The aforesaid acts and practices of respondents , George s Radio andTelevision Co. , Inc. , and George 'Wasserman and Phillip Keller, indi-vidually, as herein found, are all to the prejudice and injury of thepublic and constitute unfair and deceptive acts and practices in com-

merce within the intent and meaniDg of the Federal Trade Commis-sion Act.

OHDER TO CEASE AND DESIST

It is orde1' That respondents, George s Radio and TelevisionCompany, Inc. , a corporation, and its offcers , and George IVassermanand Phillip Keller, individually, and respondents' representativesagents and employees, directly or through any corporate or otherdevice, in connection with the ofleriDg for sale, sale or distribution ofhome freezers and television sets in commerce, as "commerce" isdefined in the Federal Trade Commission Act, do forthwith ceaseand desist from representing directly or by implication:

588 FEDEHAL THADE COMMISSION DECISIONS

Order 50 F.

1. That participants in a food purchasing plan can buy food atwholeo"le prices or from a wholesaler, contrary to the fact.2. That overal1 monetary savings can be eft'eded through the gen-

eraluse of frozen foods in place of corresponding foods in other forms.3. That substantial overall reductions in food costs will be effected

through participation in a food purchasing plan.

4. That net monetary savings , however expressed, can be effected

through the use of freezers purchaoed from respondents, unless thecosts of operation, maintenance and depreciation and , in the event

that the freezer is purchased on credit, the COi'ts of sHch creait , aretaken into account.

5. That television sets which arc not of the currcnt year s model arenew , through the use of such terms as "Brand-X ew" or any other termswhich describe i'aid sets as new , unless the year in which said sets werecurrent models is disclosed.

6. As t.he usual price of television sets , any price or v:tlue which isin excess of the price at. which said sets were customarily offered forsale and sold by respondents in the recent regnlar conrse of theirbusiness.

7. That t.he price at which respondents' t.elevision sets are of1'Pl'edis lower by 50% or any other designated percentage , than the ui'ualprice at which said sets were cnstomarily offered for i'ak and sold byrespondent.s in the recent regular course of their business.

8. That television sets arc being ofIered for sale when snch offer isnot a genuine and ball a fide offer to sell t.he set.s so offered.

It is furthn' ol'dcj' That. respondent.s , George s Radio and Tele-vision Comp'tny, Inc. , and George 'Vassennan and Phillip Kellerindividually, shall , wit.hin sixt.y (60) days aHer service upon t.hem ofthis order, file with t.he Commission a report in writ.ing, setting fort.hin det.ail the manner and form in which they have complied t.herewith.

It is further ordered That the complaint be , and it hereby is, dis-missed as t.o the respondents Leopold Frelldberg and Solomon Gross-berg, individually.

(Sgd)

George s Radio and TelevisionCompany, Inc.

George'VassermanGeorge IYasserman, President and

Treasurer.George 'YassermanGeorge IVasserman , individually.Phillip P. Kel1er

Phillip Keller, individually.

By (Sgd)

By (Sgd)

Date: December 4 , 1953.The foregoing conscnt i'ettlement is hereby accepted by the Federal

Trade Commission and ordered entered of record on this the 22nd dayof Deeember 1953.

CHAIN INSTITUTE, INC., ET AL. 589

Order

IN THE MATTEH OF

CHAIN INSTITUTE , INC. ET AL.

Docket. 4818. Order and opiniun.. , Dec. , 195.

Before Mr. Web8ter Ballinger hearing examiner.

Mr. Everette JJlaclntyre and Mr. Karl E. Steinhmter for the Com-mlSSlOIL

Kittelle

&;

La?nb of 'Vashington , D. C. , for respondents generaIJy,and along with-

Mr. Clarence M. Din7cin8 of 'Vashington , D. C. , for Chain InstituteInc. and George J. Campbell , Jr. ;

Mr. Frede1'ick S. Duncan of New York City, for American Chain& Cable Co. Inc. , St. Pierre Chain Corp. and 'Vm. D. Kirkpatrick;

Alvord

&:

Alvord of Washington , D. C. , and Reed, Sndth , Sha?1J

McClay, of Pittsburgh , Pa. , for The McKay Co. and Frank A. Bond;Ganger

&;

Ganger of Cleveland, Ohio, for Bridgeport Chain &Manufacturing Co. , Cleveland Chain & Manufacturing Co. , HoundCalifornia Chain Co. and SeaLte Chain & Mfg. Co.

Thompson , II ine

&;

Flory, of Cleveland , Ohio , for HodelJ Chain Co. ;Mr. Charle8 R. Fay, of W'orcester , Mass., for St. Pierre Chain

Corp.Sidley, AU8tin, Burge88

&;

Smith of Chicago , III. , for S. G. TaylorChain Co. ;

Finck lIuber of Buffalo, N. Y. , for Columbus McKinnon ChainCorp.

Mr. Frederic7c B. Gerber of York, Pa. , for Campbell Chain Co.Lawrence , Goldberg, Lawrence

&;

Lewin of Chicago, IlL, for Nix-dorff-Krein Manufacturing Co. , Peerless Chain Co. and DennisA. Merriman;

Mar8h , Day Calh01ln of Bridgeport , Conn. , for ,Tohn M. RussellManufacturing Co. , Inc. and Turner & Seymour Manufacturing Co.

ORDER DISPOSING OF MOTIONS FOR MODIlICATlON OR SETTIKG ASIDE OFFINDIKGS AS TO THE FACTS , CONCLUSION , AND ORDER To CEASE AND

DESIST; 1 ;VrODIFYING ORDEH To CEASE AND DESIST AXD DISJlISSINGCOMPLAIKT AS TO RESPONDENT FRAKK A. Bo

This matter came on to be heard by the Commission upon the appli-cation and motion , with supporting affdavits and memorandum , formodification or setting aside of the findings as to the facts conclusionand order to cease and desist, filed by respondents Chain Institnte

1. Reported in 49 F. T. C. 1041.

590 jDERAL THADE CG:IMISSION DECISIOKS

Order 50 F. T. C.

Inc. , American Chain & Cable Company, Inc. , The Bridgeport Chain& Manufacturing Company, The :McKay Company, Hodell ChainCompany, St. Pierre Chain Corporation, S. G. Taylor Chain Company,Cleveland ChaIn & Manufacturing Company, Campbel1 Chain Com-pany, Nixdorff-Krein .NIanufacturing Company, Peerless Chain COll-pany, Round California Chain Company, The .John M. Russell:Manufaeturing Company, Inc. , Seattle Chain & Mfg. Company,Turner & Seymour Manufacturing Company, vVestern Chain ProductsCompany, ,Yoodhouse Chain ,Yorks , Dennis A Merriman , ,Ym. D.Kirkpatrick, and George .J. Campbel1

, .

Jr. ; the motion , with support-ing affdavit, to vacate or modify the findings as to the facts , con-clusion, and order to cease and desist ) fiJed by respondent ColnmbusMcKinnon Chain Corporation; ans\ver to said motions filed by counselsupporting the complaint; and reply to said answer fied by certain ofthe respondents.

The Commission having duly considered the motions filed by certainof the respondcnts herein for the setting aside or lnodification of theJindings as to the facts , conclusion , and order to cease and desist, andthe requests for permission to file bl'iefs and to be heard in oral argu-ment on such motions , answer of coullsel snpporting the complaintreply by certain of the respondents , and pertinent portions of therecord , and being of t.he opinion , for t.he reasons appearing in t.heaccompanying opinion of the Commission , t.hat said mot.ions and re-quests are without merit except for t.he request t.hat the complaint bedismissed as t.o respondent Frank A. Bond:

It is oTClend That the application and motion for modification orsetting aside of the findings as to t.he fact.s, conclusion , and order tocease and desist, filed by respondent.s Chain Institut.e, Inc. , AmericanChain & Cable Company, Inc. , The Bridgeport Chain & "Tfanufactur-ing Company, The McKay Comptmy, HodelJ Chain Company, 81.Pierre Chain Corporation , S. G. Taylor Chain Company, ClevelandChain & Manufacturing Company, Campbel1 Chain Company,Nixdorff-Krein Manufacturing Company, Peerless Chain Company,Round California Chain Company, The .John M. Russell Manufac-turing Company, Inc. , Seattle Chain & Mfg. Company, Turner &Seymour Manufacturing Company, vVestern Chain Produets COJJ-pany, ,Yoodhouse Chain ,Yorks, Dennis A. Merriman , ,Ym. D. Kirk-patrick, and George .T. CampbelJ

, .

Tr., and the motion to vacate ormodify the findings as to the facts , conclusion , and order to cease anddesist., fied by respondent Columbus McKinnon Chain Corporationand the requests for permission to file briefs and to be heard in oralargument on said motions , be , and t.hey hereby are , denied except for

CHAIN INSTITUTE , INC., ET AL. 501

589 Opinion

the request that the complaint be dismissed as to respondent Frank A.Bond.

It is fnrther o'J'lered That the order to cease and desist hemtoforeentered in this matter be , and it hereby is , modified by striking there-from Frank A. Bond as a respondent against whom said order wasdirected.

I t is lUTtheT OTdcrcd That the amended complaint herein be, andit hereby is, dismissed as to respondent Frank A. Bond.Commissioner CAHRETTA dissenting in part and concurring in part.

Chairman HOWHEY delivCl'ed the Opinion of the Commission.This is one of a number of motions, filed in recent months , to reopen

and reconsider matters , previously adjudicated , upon the ground tlUltthere Imve been changes in the membership of the Commission.

This particular case was decided during February 1053 , when t.heCommission ,vas comprised of Commissioners Mead , Mason , CarsonSpingarn and Carretta , and is now pending before t.he United Stat.esCOllrt of \ ppeals for the Eighth Circuit. Of the present CommissionCommissioner :\Jead is the only member who voted with the majoritywhen the case was adjudicated on the merits. Commissioner :\lasondissented. Commissioner Carretta did not participate for the reasonthat oml argument was heard before he became a member. Chair-man lIowrey and Commissioner Gwynne have not, of eourse, partici-pated in any phase oi' the proceeding.

The complaint was issued on December 22 1942. Lengt.hy hearingswere held before a hearing examiner and concluded in August 1$)48.The examiner issued a recommended deeision on September 25 , 1948and an amended decision at a later date. Thereafter, an appeal wastaken to the full Commission , and oral argument was heard on April, If)49. The case was re- argued beJore the Commission on Septem-

ber 2'1 , 1950.On April 20 , 195iJ, respondents filed their petition for review wit.h

the court of appeals. However , prior t.o t.he time the record was certi-fied to t.hat court and following the aforementioned changes in themembership of the Commission , respondents filed the present motionasking us to reopen and reconsider a number of enumerated questions.

It appears to us that the controlling ground offered by respondentsin support of the motion is this change in membership.

vVe are not disposed to grant a motion predicated principally uponsuch a ground. The Commission is an independent and continuingstatutory body. The terms of its members were arranged by Congress

1 Chairman HowI'P)' became a J1('mhf'r of the Commission on April 1 , 1953 , an(l Com-missi(ITlf'J' (;wynne on S('ptemlH'r 27. 105:3.

592 FEDERAL TRADE CO.YMISSION DECISIONS

Opinion 50 I" . T. C.

in a manner to prevent any abrupt dislocations in the discharge of itsresponsibilities.More importantly, the Commission, like the courts , operates pros-

pectively, not retroactively. This principle is fundamental, we be-lieve, to our system of law, both administrative and judicial. vVhilethe views of individual commissioners may differ, each is like a memberof the judiciary in the sense that he customarily makes decisions onupcoming issues on a case-by-case basis. A judge appointed to fill avacancy on the bench does not set abollt to reopen and retry previouslyadjudicated cases simply because he is a new member.

The machinery of the quasi-judicial agency, like the courts, con-t.emplates a continuing process; it looks to cllrrent Jitigation , not pastlitigation. I f our procedures were otherwise, delay and inactionwould surround enforcement of the statutes committed to the Com-mission s jurisdiction. To grant the present motion would be to re-quire a third review of a voluminous record made many years ago.

The principal question precsented by the motion , as we see it, iswhether t.he Commission , in prescribing a remedy in a conspiracy casecan require respondents not only to cease and desist their aJ1eged con-spiratorial activity but also to stop the individual use of certain de-jivered pricing methods. This is an important question and if it werenot for the overriding considerations already stated , the motion mightbe we11 grouncled. However , since the question of the remedy is one oflaw, the respondents will not be prejudiced. They wiJ1 , we are certainreceive L fu1J hearing on this question in the court of appeals.

SEPARATE A)fD CONCURRING OPINION OF COMMISSIONER MEAD

The Commission , on February 16 , 1953, made its findings as to thefacts and conclusion based thereon and issued its order to cease anddesist in this matter. All of the respondents against whom the orderto cease and desist is directed , except Frank A. Bond ( who died sub-sequent to the time the case was originally presented to the Commis-sion) and Pyrene Manufacturing Company, have fied motions re-questing that the findings as to the facts, conclusion , and order tocease and desist be vlLcated or set aside or, in the alternative, that thefindings and order be modified in material respects. Permission tofile briefs and to be heard in oral argument on the motions wasrequested.

The Commission has denied the motions and the requests for per-mission to fie briefs and to be heard in oral argument for the reasonthat the respondents have presented no matters which were not beforethe Commission at the time it made its decision , and an order to that


589 Opinion

effect is being entered herewith. I am in entire agreement with theCommission s action in denying the motions for the reasons stated.The respondents in their motions have raised questions as to the valid-ity of and necessity for the provision in the order to cease and desist

which prohibits each of the respondent manufacturers from using anyone of the three delivered pricing methods they have heretofore usedas a part of their conspiracy " for the purpose or with the effect ofsystematically matching the delivered-price quotations or the de-livered prices of other sellers of chain or chain products flId therebypreventing purchasers from finding any advantage in price in dealingwith one or more sellers as against another." I was a member of theCommission at the time the original decision was made. I deemit in the public interest to issue this opinion setting forth some of theconsiderations which led me to conclude then and to conclude nowthat the inclusion of such prohibition in the order to cease and desist

was not only valid but necessary for effective relief from the con-spiracy in which the respondents have engaged. In this opinion I amspeaking only for myself.

The validity of and necessity for a prohibition such as that hereunder consideration in a situation whcre, as lwre, the maintenance ofand ftdherence to a delivered pricing method ol"oysLem constitutedthe very heart of the conspiracy found are fully discussed in the

opinion of the Commission in the matter of National Lead Company,et al Docket 5253, January 12, 1953. The reasons there sct forthfor including such a prohibition in the order to cease and desist in thatcase are applicable to this case.The Commission, having found that the respondents had engaged

in a conspiracy to restrain and suppress competition in the sale ofchain and chain products, had the duty to determine the remedy

necessary to suppress and insure against a revival of the trade-restrain-ing conspiracy. In making such detcrmination we considered a num-ber of factors, including the fact that each of the respondent manufac-turers quoted and sold chain and chain products at prices calculatedpursuant to and in accordance with the particular method or systemof computing delivcred prices applicable to the products it sold withthe knowledge that all other rcspondent manufacturers selling thesame products were simultaneously doing likewise. The various co-operative and coJJective activities which the evidence clearly showsthat the respondents engaged in would not have brought about theresults desired in thc absence of an understanding bctween all of therespondents that each of the rcspondent manufacturers would con-tinue to use the particular delivered pricing method applicable to theproducts it sold. The use of the different delivered pricing methods

403443--57--


Opinion ' F. T. C.

or systems thus constituted an integral part of the over-all conspiracyamong and between the respondents. A majority of the Commissionwas of the opinion that an effective order in this case must not onlyprohibit the respondents from "entering into, continuing, cooperating

, or carrying out any planned common course of action, understand-ing, agreement, combination , or conspiracy" to engage in the particu-lar practices by which the conspiracy had been effectuated, but mustalso prohibit the individual use of a particular delivered pricing sys-

tem or method "for the purpose or with the effect of systematicallymatching the delivered-price quotations or the delivered prices of othersellers of chain or chain products and thereby preventing purchasersfrom finding any advantage in price in dealing with one or more sellersas against another." Such a prohibition was necessary not because itis unlawful in all circumstances for an individual seller, acting inde-pendently, to sell its products on a delivered-price basis, but to makethe order fully effective against the trade-restraining conspiracy inwhich each of the respondents participated.

There were three different kinds of chain involved in this proceed-ing, namely, welded chain , weldless chain, and tire chain. As shownin the Commission s findings, welded chain was generally quoted andsold on a "Pittsburgh plus" or single basing point delivered-pricemethod or system. Weldless chain was generally quoted and sold ona freight equalization delivered-price method or system. Tire chainwas generally quoted and sold on a single zone, or as respondentsprefer to call it, a universal delivered-price method or system. All ofthe respondent manufacturers did not manufacture all three types ofchain, but some of them did. Each of them used the particular de-livered pricing method or system applicable to the products it sold.

The maintenance of the different delivered pricing systems consti-tuted the very cornerstone of the conspiracy among and between therespondents. The adherence to the applicable system by each of therespondent manufacturers was necessary to make the conspiracy '1ffec-tive. The matching of delivered prices was one of the objectives ofthe conspiracy and this was accomplished through the USlJ of the dif-ferent delivered pricing systems. Unless and until each of the re-spondent manufacturers is prohibited from so adhering to a particulardelivered pricing system, the evils springing from the conspiracy,one of which is to eliminate price competition, may well continue in-definitely. Unless the respondent manufacturers, representing prac-tically the entire economic power of the industry, are deprived of thedevice which made the combination effective, an order merely pro-hibiting the combination may well be a useless gesture.

CHAli'\ INSTITUTE , INC., ET AL. 595

589 Opinion

If the usual type of -conspiracy order had been entered in this casethe respondents would have been prohibited from agreeing to fixprices and from agreeing to do a number of other specified thingsthey had been doing as a part of their conspiracy. The respondentmanufacturers would not have been prohibited from continuing touse, without any agreement between them, the same delivered pricingsystems they had been using and thus continuing to enjoy the fruitsof their conspiracy. The effects of the conspiracy, one of which wastho elimination of price competition, might continue for some timeunless effective measures to break it up were taken. That is the pur-pose of the prohibition in the order to cease and desist directedagainst each of the respondent manufacturers individually. In myopinion, the effect of the order to cease and desist will be to restorea condition of sharp and healthy competition in the chain industry.I realize that in such competition the weak may be hurt, but socialsecurity is not the province of the Commission. The only way tohave competition is to compete. If, after competition is restored inthe industry, any of the respondents can make a proper showingthat this prohibition or any other prohibition in the order is nolonger necessary or llesirable , the Commission , of course, will at thattime take such action as may be appropriate in the light of the factsand the law.

In my opinion the Commission has the power to take the stepsnecessary to correct the evils found to exist in this industry. Thecourts in addition to recof,mizing the power of the Commission tostop any method of competition , even though individually pursuedif it has a dangerous tendency unduly to hinder competition or createa monopoly, have also clearly indicated the extent to which the Com-mission may go in an effort to make its orders effective and to preventevasion. In the case of Hershey Chocolate Corporation v. FederalTmde Commission for example, the Court of Appeals for the ThirdCircuit, in upholding the Commission s order notwithstanding attackon the ground that it went beyond the scope of the complaint, said:"* * " the Commission s power would be limited indeed if it were

restricted to enjoin unfair acts of competitors only as evidenced inthe past. To be of any value the order must proscribe the methodof unfair competition as well as the specific acts by which it has beenmanifested. In no other way could the Commission fulfill its remedialfunction. (121 F. 2d 968 971-972.

In the case of Local 167 v. United States 291 U. S. 293 299 , involvingconspiracy among a number of defendants, the defendants sought toeliminate from the injunction certain provisions enjoining conductwhich they contended had not been proved to be a part of the con-spiracy. The Court held-


Opinion 50 1!' . T.

The United States is entitled to effective relief. To that end thedecree should enjoin acts of the sort that are shown by the evidence

to have been done or threatened in furtherance of the conspiracy. should be broad enough to prevent evasion. In framing its provisionsdoubts should be resolved in favor of the Government and againstconspirators.

In National Labor Relations Board v. Express Yublishinr; C011-pany, 312 U. S. 426 , 435--37, the Supreme Court said-

A federal court has broad power to restrain acts which are of thesame type or class as unlawful acts which the court has found to havebeen committed or whose commission in the future, unless enjoinedmay fairly be anticipated from the defendant' s conduct in the past.

It is a salutary principle that when one has been found to have com-mitted ads in violation of a law he may be restrained from committingother related unlawful acts.

Having found the acts which constitute the unfair labor practicethe Board is 1'ree to restrain the practice and other like or related un-lawful acts. '" '" '" The breadth of the order , like the injunction of acourt, must depend upon the circmnstances oi' each case , the purposebeing to prevent violations, the threat of which in the future is indi-cated because of their similarity or relation to those unlawfulacts '" '" '" found to have been committed'" '" '" in the past.

In the case of Haskclite 111 fr;. Corpomtlon

v. Fedeml Trade COm/mis-

sion the Court of Appeals for the Seventh Circuit accepted and ap-

plied the same principle and held that the Commission could prescribereasonable requirements and "guarantees against a recurrence of thepast unfair and deceptive acts" and which " were. calculated to aid in

dispelling for the. future the unfair and deceptive practices of thepast" (127 F. 2d 765 , 766) .

N or is the relief to which the. Commission is entitled limited to thepe.rformance of "other related unlawful acts " referred to by the

Court in the Express Publishing Company case. Even acts lawful inthemselves may be prohibited when they cannot be separated from

the unlawful scheme of which they arc a part. The applicable lawhas been settled by the Supreme Court. In the Ethyl Gasoline case(Ethyl Gasoline Corpomtion, et al v. United States 309 U. S. 436),the Supreme Court disposed of a contention that the decree should notextend to the. prohibition of a de.vice. that could be. lawfully used, as

follows:Since the unlawful control over the jobbers was established and

maintained by resort to the licensing device., the decree rightfullysuppre.sse.d it e.ven though it had been or might continue to be used forsome lawful purposes. The court was bound to frame its decree so as

CHAIN INSTITuTE , INC. ET AL. 597

589 Opinion

to suppress the unlawful practices and to take such reasonable mea-

sures as would preclude their reviva1." (P. 461.) Two years laterin the casc of United States v. Univis Lens Company, Inc. , et al. , 316U. S. 241 , the Court again applied the same rule. It said that evenassuming the validity of certain licensing restrictions

, "

these featuresare so interwoven with and identified with the price restrictions whichare the core of the licensing system that the case is an appropriate onefor the suppression of the entire licensing scheme even though some ofits features, il1lependently established , might have been used forhwf111 purposes." (P. 2:"5.

Under all the circumstances, in the light of the entire record , in-eluding the motions now before the Commission, I am of the opinionthat the prohibition in the order against the persistent, continuing,and intended matching of prices through the use by each of the re-spondents of one or more delivered pricing systems was particularlyappropriate.

OPINION OF ALBERT A. CARRETTA

DISSENTlKG IX PART AXD CONCuRRING IX PART

WITH THE OHDER OF THE COM IISSION

This matter is before the Commission upon an "Application andMotion for .\iodification or Setting Aside of Findings as to the FactsConelusion and Order to Cease and Desist" filed in behalf of ChainInst.itute, Inc., awl 19 other corporate and individual respondents.Included in said application was also a motion to the effect. that theOrder t.o Cease and Desist. herein be modified by including therein aprovision dismissing the amended complaint against respondentFrank A. Bond , for the reason t.hat said respondent died on July 31950.

There is also before the Commission a "'Motion of Respondent Co-lumbus McKinnon Chain Corporation to Vacate or .iiodify Findingsas to the Facts , Conclusion and Order to Cease and Desist. Thismotion is somewhat similar to the Applic ttion and Motion filed inbehalf of Chain Institute, Inc. , and others , and it includes the addi-tional request that the proceedings be dismissed as to respondent.Columbus McKinnon Chain Corporation.

In t.he two motions which have been filed , permission was requestedto file briefs and to be heard in oral argument.The Commission , by order, has denied both motions except insofar

as the first motion requested dismissal of the proceedings as to re-spondent Frank A. Bond. While I concur in the decision of theCommission to the extent t.hat. t.he proceeding herein should be dis-


Opinion 50 F.

nlssed as to respondent Frank A. Bond, I disagree with the conclusionreached by my colleagues in denying respondents the opportunity

be heard orally upon their mot.ions.Because the above-mentioned separate motions are somewhat sim-

ilar, I shall limit my discussion to the contents of the Applicationand Mot.ion filed in behalf of Chain Institute, Inc. , and others. How-ever, my comments and my conclusion apply with equal force to themotion filed in behalf of respondent Columbus McKinnon ChainCorporation.

This dissent is being filed with full knowledge and appreciat.ion ofthe fact that the original complaint in this matter was issued by theFederal Trade Commission on December 22, 1942-more than 11 yearsago. It is also realized that the granting of respondents ' motionswould necessitate a further delay in the final disposition of this oose.However, the Federal Trade Commission , when acting in its quasi-judicial capacity, must be more concerned with due process and withequity than with speed in arriving at its decisions.

In its Application and Motion for Modification or Setting Asideof Findings as to the Facts , Conclusion and Order to Cease and De-sist, the respondents Chain Institute, Inc. and others , prayed for thefollowing relief:

1. That the Findings as to the Facts, Conclusion and Order toCease and Desist issued by the Commission in said proceeding onFebruary 16 , 1953 , be set aside in their entirety by the Commissionand that the Commission, in lieu thereof, issue Findings as to theFacts to the effect that the allegations of the amended complaint insaid proceeding have not been established by the evidence in saidproceeding, and a Conclusion to the effect that the respondents insaid proceeding have not violated either of the statutes mentionedin said amended complaint , and an Order to the effect that saidamended complaint be dismissed with prejudice; or in the alterna-

tive2. That said Findings as to the Facts issued by the Commission in

such proceeding on February 16 , 1953 , be modified in certain enumer-ated respects.

3. That said Order to Cease and Desist issued by the Commissionin said proceeding on February 16 , 1953 , be modified in the followingrespects:

(a) That there be deleted in its entirety from sltid Order to Ceaseand Desist the subparagraph numbered " (6)" which appears as oneof a series of numbered subparagraphs under a main paragraph whichbegins with the words It is ordered" and


589 Opinion

(b) That there be deleted in its entirety from said Order to Cooseand Desist the paragraph thereof which begins with the words

i8 further ordered That each of the corporate respondents" and endswith the words "one or more sellers as against another.In an afdavit submitted by counsel representing the respondents

Chain Institute, Inc. and others, various grounds were therein setforth in support of the application and motion, and in support ofrespondents ' request for permission to argue orally before the Com-mission. For the majority of the Commission to have reached itsconclusion that respondents ' application and motion should be denied(except insofar as it applied to the dismissal of the proeeeding againstFrank A. Bond), it was necessary for the Commission to conclude

that each and every grown cited by respondents was without merit.I oanot reach the same conclusion as the majority of the Commissiondid because I feel that at least one ground cited by the respondentsentitles them to the privilege of being heard in oral argument beforethe Commission. That particular ground is stated in Paragraph6 (a) (6) on Pages 5 and 6 of the "Affdavit of Sumner S. Kittelle inSupport of Application and Motion of Respondents for Modificatiol1or Setting Aside of Findings as to the Facts , Conclusion and Orderto Cease and Desist." That particular ground refers to the Para-graph in the Order of the Commission to Cease and Desist date:February 16 , 1953, which reads as folJows:

It i8 further or'dered That each of the corporate respondents (thevarious respondents are then named), its offcers, representativesagents , and employees, in or in connection with the oilering for salesale, and distribution of chain or chain products in commerce, ascommerce' is defined in the Federal Trade Commission Act, do forth-with cease and desist from quoting or selling chain or chain productsat prices calculated or determined pursuant to or in accordance witha single basing point delivered-price system, a freight equalization

delivered-price system, or a zone delivered-price system, for the pur-pose or with tbe effect of systematically matching the delivered-pricequotations or the delivered prices of other sellers of chain or chainproducts and thereby preventing purchasers from finding any ad-

vantage in price in dealing with one or more sellers as against another.With respect to the foregoing quoted paragraph, the respondents

state:Respondents had no opportunity to argue the merits or demerits

of the paragraph of the Order to Cease and Desist herein which, insubstance, prevents any respondent, individually and noncollusively,from using any of the delivered pricing methods to meet competition


Opinion 50 Jj . T. C.

regularly or systematically. N a such paragraph was incorporatedin the proposed order to cease and desist filed by the Trial Examinerin this proceeding, nor was there anything in the record, briefs orarguments to indicate that any such drastic and far-reaching para-graph was contemplated. No provision like said paragraph was everinserted by the Commission in any of its orders in any contestedproceeding prior to the National Lead Company case, Docket No. 5253

and both the majority and dissenting opinions in said case demonstratethat said paragraph was and is a highly novel and controversial one.The Order in the National Lead case was issued .J anuary 12, 1953

only about a month before the Order in this proceeding.Without passing upon the question as to whether a paragraph of

this nature is proper or improper in an order of the Commission , it

is my opinion that the respondents herein should have been affordedthe opportunity to submit arguments to the Commission against theinclusion of such a paragraph. Of course, counsel in support of thecomplaint should also have been heftrd l:n support of the inclusion of

such a paragraph in an order of the Commission. This opportunitynot having been afJorded to the respondents and to counsel in supportof the complaint by the then existing Commission , it appears to meimperative that the existing Commission should correct such defectin the proceedings. This position I would hold whether or not anychange in the personnel of the Commission had occurred betweenthe date of the Order of the Commission and the date of filing of themotion lor review. It cannot be denied that this paragraph enjoinsthe respondents from individually engaging in certain practices whichthey may not engage in in concert with others, I do not want it to beunderstood that I would not, myself, vote for the inclusion of sucha paragraph in an order of the Commission after being fully advisedof the best arguments which could be presented by both sides.

It is to be noted that in this proceeding, the Trirtl Examiner, nnderdate of September 23 , 1948 , filed his "Recommended Decision" whichwas also included as part thereof a "Hecommended Order." It wasthat Order which was briefed by both sides, and it was tJmt Orderwhich was argued omlly before the Commission. An examinationof that Ordcr will disclose that thc subject paragraph was not con-tained in the Hecommended Order of the Trial Examiner. Howeverafter twice hearing oral argument upon the Hecommended Decisionof the Trial Examiner , the Commission , out of a clear sky, decided

to impose the restrictions contained in the above-quoted paragraph.Tow consistent is the Commission in guamnteeing "due process" 1

to respondents before the Commission? At the present time, and I1 Due proc('s of la w implies the right of the person affected thereby to he present before

the tribunal which pronounces judgment upon the question of life, liberty, or property,in itR tno8t c01nprr-;he'lulive sense to be heard. by tcstim.ony or otherwi8e and to have theright of controverting, by proof. every material fact which bears on the question of rightin the matter involved.


589 Opinion

understand that the fol1owing has been the practice for more thanthree years, when a Hearing Examiner completes a case, he fies withthe Secretary of the Commission an "Initial Decision" which includesa form of Order to Cease and Desist which becomes the Order of

the Commission unless (1) either side files an appeal with the Com-mission; or (2) the Commission , by order, stays the effective dateof the decision; or (3) the Commission, upon its own initiativeissues an order placing the case on its own docket for review. l\Thenthe Commission places the case on its own docket for review, it con-

siders the record therein , and if, for any reason , the Commission isof the opinion that the Findings or Order to Cease and Desist shouldbe modified in any respect, it serves upon the respondent and uponcounsel in support of the complaint a "Tentative Decision of the

Commission." This "Tentative Decision of the Commission" includesmodified Findings as to the Facts, Conclusion and Order to Ceaseand Desist. These papers apprise the respondent and counsel insupport of the complaint of the changes which the Commission in-tends to make in the findings and order as submitted by the HearingExaminer. Each side is then offered an opport.unity to file, within20 days, an appropriate memorandum or brief setting forth anyobjedions which they may haTe to the changes cont.emplated by t.heCommission in the Hearing Examiner s Init.ial Decision. Furt.herafter such objections , if any, are filed , each side is afforded the oppor-tunity to reply to the objections of the other party within a periodof 10 days after the filing of such objections.

If the foregoing is the current practice , why should not the partiesin the subject case be afforded the same opportunity to argue eitherfor or against the changes which the Commission made in the orde.as recommended by the Trial Examiner 1

To say that the respondents herein have a remedy in the courtsis for the Commission to pass its burden upon the alrmuly over-crowded dockets of the courts. It is our duty to be fully advised inall matters upon which we sit as judges , and we cannot shirk our dutyby saying that parties have an adequate remedy in the courts.

Consequently, it is my opinion that both motions filed herein shouldhave been granted by the Commission but only to the extent that bothcounsel for the respondents and counsel in support of the complaintshould have been afforded the opportunity to fie briefs and to argueorally before the Commission upon any provisions contained in theOrder to Cease and Desist issued by the Commission which were atvariance with the provisions in the "Hecommended Order" containedin the "Hecommended Decision" filed by the Trial Examiner herein.This same opportunity should be afforded all respondents whenever


Opinion 50 F.

the Commission intends to make a "change of substance" in anyrecommended order of a Hearing Examiner. If the change .contem-plated by the Commission is "de minimis " then I might hold that

denial of an opportunity to be heard would not deprive the respondentof "due process.

Because the opinion of the Commission in this matter, as preparedby Chairman Howrey, discusses at some length the matter of reopen-ing previously adjudicated cases upon the ground that there have beenchanges in the membership of the Commission , I should like to statethat I concur in the reasoning of the mfLjority of the Commissionin concluding that 8tanding alone a change in the membership ofthe Commission is without merit to support a petition of a respond-ent for an opportunity to argue orally before the Commission upona matter already decided.

I also concur with the majority of the Commission in concludiugthat the Order to Cease and Desist heretofore entered in this matterbe modified by striking therefrom Frank A. Bond as fL respondentagainst whom said order was directed, and in concluding that theamended complaint herein be dismissed as to him.

MERCURY VACUUM STORES, ETC. 603

Syllabus

IN THE .MATTER OF

HA Y R. GOLDIE AND DAVID BACHMAN DOING BUSINESSAS MERCURY VACUUM STORES AND MERCURY VAC-UUM CLEANER STORES

CONSENT SETTLEJlIENT IN HEGARD TO THE ALLEGED VIOLATION OF THEFEDERAL THADE COJHJlHSSlON ACT

JJw,/, e! (;064. C(Jm'JJI(li' u. 4, 19,

;),

Decisi.on Jan. 14, 1954

Where two parties engaged in the competitive interstate sale and distribution oflIe\V alid rebuilt sewing machines and vacuum cleaners through retail storesin California , 'VashingtoIl , and OregoIl , to purchasers in various other statesand in Alf1ska , including among the former products several brands madein Japall , upon the back of the vertical arm of which machines the word

Japan , when sold to members of the purchasing public , became coveredby thf' motor and upon which the word "Japan" as displayed in someinstances upon a medallon on the front of the vertical arm was so smalland indistind as not to constitute adequate notice that. the heads wereimported-

(a) Offered and sold such machincs withont. placing any other mark thereonor otherwise informing the public that the heads thereof were of foreignorigin;

(b) Represented falsely, directly or by implication, that one of the sewing

machines sold by them was rnanufaciured by or connected in some manner\Yith the \Yell and favorably known American firm or firms with which theword "Universal" had long been associated through use of said \vard as atrade or brand name for said product and conspicuous display thereof on

its front horizontal arm and use thereof in their adyertising matter; andthroug' h use of such trade or brand names enhanced the belief on the partof the public tha t their said machines were of domestic origin;

(c) l requently advertised rebuilt sewing machines and vacuum cleaners atextremely low prices through their retail stores;

'''hen in fact such advertisements were not genuine or bona fide offers to sellthe articles advertised but were run to obtain the names of persons whowere interested in the purchase of such products; while their salesmen

when re.sponses were obtained , demonstrated said products, their sole pur-

pose was to sell new and much higher prieed machines and cleaners; andproducts in question were not intended to do satisfactory work and veryfew of them were sold;

(d) Made use in the advertising of their rebuilt vacuum cleaners of such termsas "complete with attachments

, "

3 days only , and " year guarantee

When in fact attachmcnts were frequently not furnished; offers were continu-ous, the only changes being slight variations in the priceS' charged; noguarantee was given without payment of a substantial snm therefor inaddition to the purchase price of the machine; and use of the word "guar-antee" without a statement of the terms and conditions and the mannerin which the guarantor would perform was misleading and confusing and

constituted a rnisleading and deceptive practice;

604 FEDERAL THADE COMMISSION DECISIONS


(e) :B'alsely reI'resented through their salesmen that their said machines eOll-taining- heads imported from Japan were manufactured by the SingerSewing i\fnchine Co. ; and

(f) Quoted directly and through their salesmen fktitious prices for yariousmachines as their usual selling" prices and represented that they were ableto offer same at a much lower price since they had been used as demon-strators or fOT S'Olnc other reason:

\Vhen in fact snch machines were ll ually new machines and the price at whiththey were offered constituted their uS11al selling price and not, as theprospective purchaser was thus led to believe , a reduced one:

Held That such acts and practices , under the circumstonces set forth , were allto the prejudice and injury of the public and of their competitors , and con-stituted unfair methodR of competition in commeree and unfair and deceptiveacts and practices therein.

Before Mr. TVilliam . Pack hearing examiner.

Mr. William L. Tag,qart and Mr. J. C. Williams for the Commission.lJlr. lJlyer K oonin of VVashington , D. c. , for respondents.

CONSENT SE'l'rLKilIENT 1

Pursuant to the provisions 01' the Federal TrfLde Commission Actthe Federal Trade Commission , on November 24 , 1932 , issued and sub-sequently served its complaint on the respondents named in the captionhereof, charging them with the use 01' unfair and deceptive acts andpractices and unfair methods of competition in commerce within theintent and meaning of the Federal Trade Commission Act.

The respondents desiring that this proceeding be disposed of by theConsent Settlement procedure provided in IluJe V of the CommissionRules of Practice, solely for the purpose of this proceeding, and re-view thereof, and the enfo)'cement of the order consented to , and con-ditioned upon the Commission s acceptance of the Consent Settlementhereinafter set forth and in lieu of the answer to said complaint here-tofore fied , and whieh, upon acceptm1ce by the Commission of thissettlement, is to be withdm wn from the record , hereby:

1. Admit all of the j urisdietion allcgations set forth in the com-plaint.

2. Consent that the Commission may enter the matters hereinafterset forth as its findings as to the facts , conclusions and order to ceaseand desist. It is understood that the respondents , in consenting to

1 The Commission s "Notice" announcing and promulgating the consent settlement aspublished herewith , follo,vs :

The consent settlement iendcre(l by the parties in this procerding, a copy of which isserved herewith , was accq)tNl by the Conli1i,o;sion on Jannary 14 , HJ54, and orderedentered of record as the Commission s finding:: as to tlw facts , conclusion , and order indisposition of tbis procecuing.

The time for iiing report of compliance pursuant to the aforesaid order runs from t11edate of service hereof.


603 indings

the Commission s entry of said findings as to the facts , conclusion andorder to cease and desist, specifically refrain from admitting or deny-ing that they have engaged in any of the acts or practices stated there-in to be in violation oflaw.

3. Agree that this Consent Settlement may be set aside iD whole orin part under the conditions and in the manner provided in para-graph (f) of Rule V of the Commission s Rules of Practice.

The admitted jurisdictional facts, the statement of the acts and prac-tices which the Commission had reason to believe were unlawful, theconclusion based thereon and the order to cease and desist, all of whichthe respondents consent may be entered herein in final disposition ofthis proceeding are as follows:


PARAGRAPH 1. Respondents , Ray R. Goldie and David Bachman arecopartners doing business under the names of Mercury Vacuum Storesand Mercury Vacuum Cleaner Stores with their principal place business at Room 216 , Fleming Building, San Bernardino , California.

PAH. 2. Respondents are now, and for some time in the past havebeen , engaged in the sale and distribution of new and rebuilt sewingmachines and vacuum cleaners through retail stores located in theStates of California

, '

Washington, and Oregon. Included in the sew-ing machines sold by them are several brands, the heads of which aremanufactured in Japan.

PAR. 3. In the course and conduct of their business, respondentscause certain of their said products , when sold, to be transported fromtheir places of business in the States of California, Washington , andOregon to purchasers thereof located in various other States of theUnited States and in the Territory of Alaska, and at all times men-tioned herein have maintained , a course of trade in said products incommerce between various States of the United States and the Terri-tory of Alaska.

PAR. 4. When the sewing machines are sold by respondents to mem-bers of the purchasing public, the word "Japan" appears on the backof the vertical arm but such name is covered by the motor so that it isnot visible. In some instances, the heads are marked with a medallionplaced on the front of the vertical arm upon which the word "Japanappears. This word is, however, so small and indistinct that it doesnot constitute adequate notice to the public that the heads are imported.Respondents place no other mark on said sewing machines or other-wise inform the public that the heads thereof are of foreign origin.

PAR 5. When articles of merchandise , including sewing machinesare exhibited and offered for sale by retailers to the purchasing public



and such articles are not marked or are inadequately marked showingthey are of foreign origin, or if marked and the markings are coveredover or otherwise concealed , such purchasing public understands andbelieves such articles to be wholly of domestic origin.

There is among the members of the purchasing public a large num-ber who have a decided preference for products originating in theUnited States over products originating in whole or in part in foreigncountries, including sewing:machines.

PAR. 6. Hespondents use the word "Universal" as a trade or brandname for one of the sewing machines sold by them, which word isprinted or embossed on the front horizontal arm of the head in large

conspicuous letters and use said trade or brand name in their adver-tising matter. The word "Universal" is the name or a part of thename of or used as a trade name, mark or brand by one or more busi-ness organizations transacting and doing business in the United Stateswhich are and have been well and favorably known to the purchasingpublie and which are and have been well and long established in vari-ous industries.

PAR. 7. By using the trade or brand name "Universal" respondentsrepresent, directly or by implication , that their prodnct is manufac-tured by or connected in some manner with the well and favorablyknown American firm or firms with which said name has long beenassociated , which is contrary to the fact.

PAH. 8. There is a preference among members of the purchasingpublic for products manufactured by well and long established con-cerns whose identity is connected with the word "Universal." Theuse of s lid trade or brand name by respondents enhances the beliefon the part of the public that the said sewing machines are of domesticongm.

PAR. 9. In the course and conduct of their business, respondentsthrough their retail stores frequently advertise rebuilt sewingmachines and vacuum cleaners at extremely low prices. Such adver-tisements are not genuine or bona fide offers to sell the articles adver-tised but are run for the purpose of obtaining the names of personswho are interested in the purchase of sewing machines or vacuumcleaners. When responses are obtained to such advertisements , sales-men for respondents demonstrate the rebuilt sewing machines andvacuum cleaners but their sole purpose is to sell new and much higherprieed sewing machines and vacuum cleaners. As a matter of factthe rebuilt sewing machines and vacuum cleaners are not intended todo satisfactory work. As a result , very few of the rebuilt sewingmaehines or vacuum cleaners are sold.


603 Findings

PAR. 10. Respondents, in the advertising matter of their rebuiltvacuum cleaners, make use of such terms as "complete with attach-ments

" "

three days only," and "2 year guarantee." Such statementsare misleading and deceptive. In truth and in fact, attachments arefrequently not furnished. The offers are continuous, the only changesbeing slight variations in the prices charged. The use of the wordguarantee" without a statement of the terms and conditions thereof

and the manner in which the guarantor will perform is misleading andconfusing and constitutes a misleading and deceptive practice. Intruth and in fact, no guarantee is given without the payment of asubstantial sum therefor in addition to the purchase price of themachine.

PAR. 11. Respondents ' salesmen , in soliciting the sale of sewingmachines containing heads imported from .Japan, represent, con-

trary to the fact, that the machines were manufactured by the SingerSewing Machine Company. The respondents and their salesmen alsoquote fictitious prices for various machines as the usual seJJing pricesand represent that, because the machines have been used as demon-strators or for some other reason , they are able to ofier the machinesat a much lower price thus inducing the prospective purchaser tobelieve that the price asked is a reduced price. .As a matter of factthe machines so ofiered are usually new machines and the price atwhich the machines are ofiered for sale are the usual selling prices.

PAR. 12. RespondeDts , in the course and conduct of their businessare in substantial competition with other individuals and with firmsand corporations engaged in the sale in commerce of sewing machinesand vacuum cleaners.

PAR. 13. The failure of respondents to adequately disclose on thesewing machine heads that they are manufactured in .Japan and theuse of the trade or brand name "17niversal" have the tendency andcapacity to lead members of the purchasing pnblic into the erroneousand mistaken belief that their sewing machines are of domestic originand manufactured by the well and favorably known firm or firms withwhich said trade or brand name has 10nO' been associated.

Furthermore, the other misleading and deceptive statementsenumerated above have the capacity and tendency to lead members ofthe purchasing public into the erroneous and mistaken belief that suchstatements are true. All of the aforesaid practices have the capacityand tendency to induce members of the public to purchase respond-ents ' sewing machines and vacuum eleaners because of the erroneousbelief engendered thereby.


Order 50 F. T. C.

CONCLUSION

The aforesaid acts and practices of the respondents , as herein foundare all to the prejudice and injury of the public and of respondentscompetitors and constitute unfair methods of competition and unfairand deceptive acts and practices in commerce within the intent andmeaning of the Federal Trade Commission Act.

ORDER TO CEASE AKD DESIST

It is ordered That the respondents Hay R. Goldie and David Bach-man , individually and as copartners doing business as MercuryVacuum Stores and .Mercury Vacuum Cleaner Stores, or doing busi-Iless under any other name , and their representatives, agents and em-ployees , directly or through any corporate or other device in connectionwith the oflering for sale, sale and distribution of sewing machinesvacuum cleaners or other merchandise in commerce, as "commerce" isdefined in the Federal Trade Commission Act, do forthwith cease anddesist from:

1. Offering for sale, selling or distributing sewing machines, ofwhich foreign made heads are a part, without clearly and conspicu-ously disclosing on the heads the country of origin thereof.

2. Using the word "Universal" or any simulation thereof as a brandor trade name or in any other manner to designate, describe, or referto sewing machines or representing, through the use of any other wordsor in any other manner that their sewing machines or any part thereofare made by any other than the actual manufacturer.

3. Hepresenting, directly or by implication , that certain merchan-dise is offered for sale when such offer is not a bona fide offer to sell themerchandise so offered.

4. Representing, directly or by implication, that attachments are

included with their rebuilt vacuum cleaners unless such is the fact.5. Hepresenting, directly or by implication, that offers are limited

as to time when they are continuous offers.6. Hepresenting, directly or by implication , that any merchandise

is guaranteed unless the nature and extent of the guarantee and themanner and form in which the guarantor will perform thereunder areclearly and conspicuously disclosed.

7. Hepresenting, directly or by implication, that the usual or cus-

tomary price of any merchandise is in excess of the price at which saidmerchandise is regularly and customarily sold in the normal courseof business , or that the price at which any merchandise is regularlyand customarily sold in the normal course of business is a reducedpnce.


603 Order

It is further ordered That the respondents, Ray R. Goldie andDavid Bachman, individually and as copartners doing business asMercury Vacuum Stores and Mercury Vacuum Cleaner Stores, shallwithin sixty (60) days after service upon them of this order file withthe Commission a report in writing setting forth in detail the mannerand form in which they have complied with this order.

( Sgd. ) Ray R. GoldieRAy R. GOLDIE

David BachmanDAVID BACHMANindividually and as copartners

doing business as Mercury Vac-uum Stores and Mercury VacuumCleaner Stores.

Date: November 6 , 1953.

(Sgd. )

(Sgd. ) Myel' KooninMYER KOONIN721 Shcraton Building,

Washington D. C.

Attorney for Respondents.

Date: November 10 , 1953.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and ordered entered of record on this the 14th dayof January 1954.

403443--57--


Syllabus 50 F. T. C.

IN TIlE MATT

ROYAL APPLIANCE COMPANY, INC. AND DA VID E.RESNICK

CONSENT SETTLEMENT IN REGARD TO THE ALLEGED VIOI,ATION OF THEFEDEHAL TRDE COMMISSION ACT

Docket 6122. Oomplaint , Aug. 1953-Dccision, Jan. 14, 1954

Where a corporation and its responsible offcer competitIvely enr;aged in thesale and distribntion in the District of Columbia and adjoining Statesamong other things , of television receivers and replacement parts and in thefurnishing of television repair services under contracts whercby they under-took to keep sets in good repair; in advertising their products in newspapersand other advertising mcclia-

(a) Ileprcsented that they would keep television receivers sold by them in goodworking order for a period of two years , any necessary repairs to be madewithin a reasonable time after being requested;

The facts being that while such contracts, issued for a consideration, so pro-

vided , they did not in many instances comply with such contracts duringthe second year or provided such service only after unduc and unreasonabledelay;

(b) Represcnted that they would either remove television receivers t.o one oftheir four places of business and return them the same day fully repairedand in proper working order , or repair such receivers in the homes of theowners;

The facts being their repairmen constantly refused to repair such receivers inthe home; and when they were removed to respondents ' place of business forrepair , respondents returned them to their owners in many instances onlyafter many days or weeks of delay;

(c) Falsely represented that they would estimate the cost of necessary parts

or services or both parts and services to place television receivers in properworking order and would provide such service and parts for approximatelythe amount of such estimate;

'l' he facts being their estimates were not bona fide; prices ultimately charged

by them for repair in virtually all instances did not approximate theirestimates and sometimes exceeded them by more than twice as much; andin most instances where the final charge exceeded the estimate , they failedto apprise the customers of such increase to obtain authorization for theperformance of the work, but required nevertheless the payment of thetotal amount before they would release the receivers to the owners; and

(d) Hepresented that they owned, operated , or maintained offces or branches infour different locations in the metropolitan area of Washington, D. C.when in fact they operated one place of business only in said area:

Held That such acts and practices were all to the prejudice and injury of thepublic and of their competitors, and constituted unfair and deceptive acts

and practices in commerce and unfair methods of competition therein.

Before Mr. John Lewis hearing examiner.

Mr. Harold A. J( ennedy for the Commission.Oostantini

&:

Raffel of vVashington , D. for respondents.

ROYAL APPLIANCE CO,) INC.) ET AL. 611

610 Findings

CONSENT SETTLEMENT 1

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission on August 31 , 1953 , issued and subse-quently served its complaint on the respondents named in the captionhereof, charging them with the use of unfair and deceptive acts andpractices and unfair methods of competition in commerce within theintent and meaning of the Federal Trade Commission Act.

The respondents, desiring that this proceeding be disposed of by theconsent settlement procedure provided in Rule V of the CommissionRules of Practice, solely for the purposes of this proceeding, any re-view thereof, and the enforcement of the order consented to, and con-ditioned upon the Commission s acceptance of the consent settlementhereinafter set forth and in lieu of answer to said complaint, hereby

(1) Admit all the jurisdictional allegations set forth in thecomplaint.

(2) Consent that the Commission may enter the matters hereinafterset fort.h as its findings as to t.he fact.s , conclusion, and order to cease

and desist. It is understood t.hat t.he respondents, in consenting to theCommission s entry of said findings as to the facts, conclnsion, andorder t.o cease and desist, specifical1y refrain from admitting that t.heyhave engaged in any of the acts or practices stated therein to be inviolation of law.

(3) Agree that this consent settlement may be set aside in whole or inpart under the conditions and in the manner provided in Paragraph(f) of Rule V of the Commission s Hules of Practice.

The admitted jurisdictional facts , the statement of the acts and prac-tices which the Commission had reason to believe were unlawful , t.heconclusion based thereon , and the order to cease and desist , all of whichrespondents consent may be entered herein in final disposition of thisproceeding, arc as fol1ows :


PARAGRAPH 1. Respondent Royal AppJiance Company, Inc. , is a cor-poration, organized and existing under the laws of the Stat.e of 1fary-land , which had it.s principal offce and place of business at 1911

:l The Commi8sion s "Notice" announcing and promulgating the consent settlement aspublished herewith , follows:

The consent settlement tendered by the parties in this proceeding, a copy of which isserved herewith, was accepted by the Commission on January 14, 1954, and orderedentered of record as the Commi,ssion s findings as to the facts , conclusions, and order indisposition of this proceeding.

The time for fiing report of compliance pursuant to the aforesaid order runs fromthe date of service hereof.


indiIlgs 50 F. T. C.

Nichols Avenue SE. , in the City of 'Washington, D. C. , until approxi-mately ,July 1 , 1953 , at which time, both it and respondent suspendedthe operation of said business.

Respondent David E. Resnick is an individual and , although pres-ently president of said corporation , was secretary-treasurer during thepertinent and applicable time period. He individually formulated allthe policies and controlled and managed all of the affairs of saidcorporation and would do so in future. His principal offce and place

of business had been the same as that of the corporate respondent.PAR. 2. Respondents , until approximately .July 1 , 1953 , were engaged

in the sale and distribution , among other things , of television receiversand replacement parts. An essential and integral part of respondentssaid business was the furnishing of television repair services. Inconnection with their said repair service, respondents issued contractswhereby they agreed to keep television sets in good repair for a periodof two years. Respondents caused their said television sets , when soldto be transported from their place of business in the Distriet of Colmn-bia to purchasers located in the District of Columbia and in the Statesof Maryland and Virginia and caused their said service contracts andvarious other written instruments of a commercial nature , issued andmade use of in conneetion therewith , to be transported by means of theUnited States mails and otherwise to various persons located in theDistrict of Colnmbia and in the States aforesaid.

llespondents maintained a course of trade in said products and serv-ice contracts and various other instruments issued in connection there-with in commerce in the District of Columbia and between the Districtof Columbia and other Stat.es , and such course of trade was substantial.

PAR. 3. In the course and conduct of their said business , respondentshave been in substantial competition in commerce with other corpora-tions and with individuals and partnerships engaged in the sale oftelevision receivers and repair parts therefor.

PAlL 4. In the course and conduct of their aforesaid business , re-

spondents have made certain statements and representations concern-ing said products by means of adyertisements inserted in newspapersand other advertising media of general circulation in the States ofMaryland and Virginia and in the District of Columbia. Typicalbut not all inclusive, of such representations are the following:

IlOYAL GIVES YOU THIS SE"-SATIONAL 2 YEARS SERVICE 0"' ANY TVSET Ol,' YOI;n CHOICE. The only Appliance Store in Washington * . . andin the United States t.o o1Ier yon one fuiJ year of unconditional gnarantee * " *and an extra year of service free of any cost.

ROYAL APPLIA.,,CE CO,) INC.) ET AL. 613

610 Findings

ROYALAPPLIANCE CO. INC.

SALES S JRVICE

Picture ofman holdingt.elevision set

SHE' S O. K. NOWand BACK HOMETHE SAME DAY!

ON CALL24 HOURS A DAY

AJ\Y MAKE T JLEVISION REPAIIlED2 YEAIlS SEIlVlCE

FUEE PICK UP , DELIVERY & ESTIMATESTV REPAIRS

IN YOl:R HOME

1 DAY SEIlVICE

FREEES'.rIMATES

REI' AIRSON CIlEDIT

DU. 1400 LU 4-7000

SILVER SPlU)JG, ARL. ALInX.

JU. 7-5484 .fA. 4-1883

IlOYALCOKSOLIDATED TV SERVICES

PAR. 5. By means of the foregoing statements and representationsrespondents , directly and by implication , represented:

1. That they would keep television receivers sold by them in goodworking order for a period of two years , any necessary repairs to bemade within a reasonable time after being requested.

2. That they would either remove television receivers to one of their

four places of business and return them the same day fully repairedand in proper working order or repair such receivers in the homes ofthe owners.

3. That they would estimate the cost of necessary parts or servicesor both parts and services to place television receivers in propel' work-ing order and would provide such service and parts for approximatelythe amonnt of such estimate.

4. That they owned , operated , or maintained offces or branches infoul' different locations of the metropolitan area of 'Vashington , D. C.


Conclusion 50 F. T. C.

PAR. 6. All of the aforesaid representations, statements and implica-tions were false, exaggerated, deceptive , and misleading. In truthand in fact:

1. While rcspondents issued service contracts to purchasers of tele-vision receivers , for a consideration , which provided that they wouldrender necessary scrvice to keep such receivers in good working orderfor a period of two years, they did not in many instances comply withsuch contracts during the second year or provided such service onlyafter undue and unreasonable delay.

2. Respondents ' television repairmen consistently refused to repairtelevision receivers in the home; and when said receivers were removedto respondents ' place of business for repair , respondents returned themto their owners in many instances only after many days or weeks of

3. The estimates given by respondents on the cost of televisionrepairs were not bona fide estimates. The prices ultimately chargedby respondents for television repairs in virtually all instances did notapproximate the estimates given by them, and sometimes exceeded saidestimates by more than twice as much. In most instances where thefinal charge exceeded the estimate, respondents failed to apprise theircustomers of such increase in priee or to obt.ain aut.horizat.ion for thework prior t.o performing t.he same, but nevertheless required thepayment of the total amount before they would release the televisionreceivers to the owners.

4. Respondents operated only one place of business located at IDllNichols Avenue S. K , Washington , D. C.

PAR. 7. The use by the respondent.s of the aforesaid false , mislead-ing and deceptive statements and representations has had the tendencyand capacity to lead a substantial portion of the purchasing public intothe erroneous and mistaken belief that such statements were true , andto induce the purchase of said products and the entering into servicecontracts because of such erroneous and mistaken belief. As a resultthereof, substantial trade in commerce has been unfairly divertedto respondents from their competitors and substantial injury has been

done to competition in commerce.

CONCLUSlON

The aforesaid acts and practices of respondents were all to theprejudice and injury of the public and of respondents ' competitorsand constituted unfair and deceptive acts and practices and unfairmethods of competition in commerce, within the intent and meaning ofthe Federal Trade Commission Act.

ROYAL APPLIANCE CO. , INC., E'l AL. 615

610 Order

ORDEn

It is ordered That respondents , Royal Appliance Company, Inc. , acorporation, and its offcers, and David E. Rcsnick, individually, andrespondents' representatives, agents, and employees, directly orthrough any corporate or other device, in connection with the offer-ing for sale, sale and distribution of television rcceivers or otherelectronic equipment and service contracts, in connection therewith , incommerce, as "commerce" is defined in the Federal Trade CommissionAct, do forthwith cease and desist from:

1. Representing, directly or by implication, that they will keepsuch products in good working order for a period of two years or forany other specified period of time, unless in fact the services necessaryto accomplish that result be provided within a reasonable time afternotification by customer or vendee during such specified time period.

2. Representing, directly or by implication , contrary to the factthat repairs on such products will be made either in the home or inone day or in any other specified period of time.

3. Either giving so-called estimates or representing that they wilgive estimates for repRirs on such products, which are not in fact bOllafide estimates or which bear no reasonable relationship to the pricesultimately charged for such repairs.

4. Representing, directly or by impljc ttion , that they maintaillmoreplaces of business than is actually the fact.

It is fv,rtheT ordered That the respondents herein shall within sixty(60) days after service upon them of this orcler file with the Commis-sion a report in writing setting forth in detail the manner Rnd form inwhich they have complied with the order to cease and desist.

(Sgd. ) Royal Appliance Co. , Inc.ROYAL ApPLIANCE CmIPANY, INC.

(Sgd. ) By David E. Resnick, Pres.(Sgd. ) David E. ResDick

DAVID E. RESNICK , individually.Date: December 1 , 1953.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and ordered entered of record on this the 14th dayof January, 1954.



IN THE "MATTEH OF

Y AMI YOGURT PRODUCTS , INC., AND RICHARD TILLEINDIVIDUALLY AND AS AN OFFICER THEREOF ANDALSO DOING BUSINESS AS INTERNATIONAL YOGURTCOMPANY

COXSENT SETTLE IENT IN I1EGARD TO THE ALLEGED VIOLATION o ' THEFEDERAL TRADE CO BllSSION ACT

Ducket 6066. Cornplaint , No' v. 1952-Deci8ion , Jan. 1!J54

Where a corporation and an offcer thereof WllO did business also at the sarnoaddress nnder a separate trade name, engaged in the interstate sale anddistribution of food products for , use in making yogurt , respectively knownin the case of the product of the forller as "Yalli Yogurt Culture " anu illthat of the latter as "International Yogurt Culture" and " InternationalHoselle Yogurt Culture ; in advertising their said products in newspapersand magnzilles , etc. and by radio-

(a) Falsely represented that proteins in yogurt are in predigested form , thatproteins and Ininerals are Inore rapidly assimilable and Inilk nutrients moreeasily absorbed by the blood by reason of being in the form supplied by

yogurt, and that the casein and albumin of cow s milk fermented with

yogurt culture arc transformed into more highly digestible form;(b) Falsely represented that yogurt. promotes digestion and intestinal hygiene

J1elvs to digest other foods, promotes longevity and helps to prevent senilty;

that its use builds , restor8S , and insures good health is e1'ective in preventingtyphoid , paratyphoid , diphtheria and dysentery, and is a cure or remedy forconstipation , ulcers , gastritis, enteritis , colitis , dyspepsia , diarrhea , dysen-tery, celiac dis€nse, colon troubles , and stomach distress;

(c) Falsely repl"e ented that it is a benefit in cases of pulmonary diseases , keepsthe cJigestiye tract clean , lessens the nausca or stomach sickness associatedwith pregnancy, results in fine complexions or improves the complexion; and

(d) Falsely represented that. yogurt softens or tenderizes meat and that throughyogurt one Jnay eat himself to health:

II elrl Tl1at such acts and practices , un!ler the circumstances set forth , wcre allto the prejudice and injury of the public and constituted unfair and deceptiveacts and practices in commerce.

Before Mr. Earl J. J( olb hearing examiner.Mr. J. W. Brookfield , Jr. for the Commission.Mr. Alfred L. Fox of Los Angeles , Calif. , for respondents.

CONSENT SET'l'LE:\IENT 1

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission, on November 25 , 1952, issued and

1 'rhe Comrnis ;;on s "Notice" announcing and promulgating the consent settlement aspublished herewith , follows:

The consent settlement tendered by the parties in this proceeding, a copy of which is

YAMI YOGURT PRODUCTS.. INC. , ET AL. 617

616 Findings

subsequently served its Complaint on the respondents named in thecaption hereof , charging them with the use of unfair lld deceptive

acts and practices in violation of the provisions of said Act.

Subsequent to the issuance of the Complaint in this matter it wassuggested that respondent Richard Tille was deceased , and by agree-ment there was substituted for respondent Richard Tille respondentReny Tille, both as an individual respondent doing business as Inter-national Yogurt Company and as an offcer of corporate respondentY ami Yogurt Products , Inc.

The respondents , desiring that this proceeding be disposed of bythe consent settlement procedure provided in Rule V of the Com-mission s Rules of Practice, solely for the purpose of this proceeding,any review thereof, and the enforcement of the Order consented to

and conditioned upon the Commission s acceptance of the Consent

Settlement hereinafter set forth , and in lieu of answer to saidcomplaint , hereby;

1. Admit all the jurisdictional allegations set forth in the com-plaint.

2. Consent that the Commission may enter the matters hereinafterset forth as its Findings as to the Facts and Conclusion and Orderto Cease and Desist. It is understood that the respondents in con-

senting to the Commission s entry of said Findings as to the FactsConclusion and Order to Cease and Desist specifically refrain fromadmitting or denying that they have engaged in any of the acts orpractices st.ated therein to be in violat.ion of the Iftw.

3. Agree that the Consent Settlement may be set aside in whole or inpart under the conditions and in t.he manner provided in Paragraph(f) of Rule V of the Commission s Hnles of Pmctice.

The admitted jnrisdictional facts , the statement of the aets andpractices which the Commission hadreasoll to believe were unlawfulthe conclusion based thereon and the Order to Cease and Desist., all ofwhich t.he respondents consent. may be entered herein in final disposi-tion of this proceeding, are as follows:

FIKDINGS AS TO TI-IE FACTS

PAHAGHAPH 1. Respondent Yami Yogurt. Products , Inc. , is a corpora-tion organized , existing and doing business nnder ftnd by virtue of the

serveu herewith , was accepted hy the Commission on ,Trulllf1l' " 21, 19:14 and orderedentered of rer.or(l as the ComlJis don s findings as to the fnds, conclnsion , and order

disposition of this procl'cding.

'l' be time faT' fiing- report of cOJnvlhnc(; pl1J' 1!;lnt to t.he afol'(' said order rllns fromthe date of scrYice hereof.



laws of the State of California, with its offce and principal place ofbusiness located at 8478 Melrose Place , Los Angeles, California.Respondent Heny Tile is an individual and offcer of corporate

respondent, Yami Yogurt Products, Inc., and participates in thepolicies and practices of said corporation.

Respondent Heny Tile also trades and does business under the tradename, International Yogurt Company, whose offce is also located at8478 Melrose Place, Los Angeles, California. All of said respondentshave cooperated and acted together in the performance of the actsand practices hereinafter described.

PAR. 2. Respondents are now , and for more than one year last pasthave been, engaged in the selling and distribution of food products asfood" is defined in the Federal Trade Commission Act. The prod-

uct sold by corporate respondent is known as Y ami Yogurt Cultureand that sold by Reny Tille as International Yogurt Culture and Inter-national Hoselle Yogurt Culture. Both of these products are used inmaking yogurt.

PAH. 3. Hespondent Yami Yogurt Products , Inc. , receives ordersfrom customers located in the various States of the United States , andhas its product shipped to these customers at their various locationsin the United States from the RoseJJe Bacteriological Dairy Institutein La Trappe, Province of Quebec, Canada. Respondent Heny Tilletrading as International Yogurt Company, causes her said food prod-uct, when sold , to be transported from her place of business in LosAngeles, California, to purchasers thereof located in various otherStates of the United States. Hespondents maintain, and at all timesmentioned herein have maintained , a course of trade in said food prod-ucts in commerce between and among the various States of the UnitedStates. Respondents ' volume of business in commerce in said foodproducts is and has been substantial.

PAR. 4. In the course and conduct of their aforesaid business , re-spondents , subsequent to March 21 , 1938 , have disseminated, and arenow disseminating, and have caused , and are now causing, the dis-semination of advertisements concerning their said food products bythe United States mails and by various other means in commerce, ascommerce" is defined in the :Federal Trade Commission Act, includ-

ing, but not limited to, advertisements inserted in newspapers andmagazines of general circulation , by means of radio continuities andin circulars and leaflets for the purpose of inducing, and which areand were likely to induce, directly or indirectly, the purchase of saidfood products; and respondents have also disseminated, and are nowcausing the dissemination of, advertisements concerning their saidfood products by the aforesaid means for the purpose of inducing, and

e16 Findings

which are and were likely to induce, directly or indirectly, the purchaseof their said food products in commerce, as "commerce" is defined inthe Federal Trade Commission Act.

PAR. 5. Through the use of said advertisements, respondents repre-sented , directly and by implication , that the proteins in yogurt are inpredigested form; that proteins and minerals are more rapidly assim-

ilable, and milk nutrients are more easily absorbed by the blood, byreason of being in the form supplied by yogurt; and that the caseinand albumin of cow s milk fermented with yogurt culture are trans-formed into more highly digestible forms. Further , through the useof said advertisements , respondents represented that yogurt promotesdigestion and intestinal hygiene, helps to digest other foods , promoteslongevity and helps to prevent senility; that its use builds , restores , and

insures good health, is eiTeetive in preventing typhoid, paratyphoiddiphtheria and dysentery, and is a cure or remedy for constipationulcers, gastritis , enteritis , colitis , dyspepsia , diarrhea , dysentery, celiacdisease, colon troubles and stomach distress; that it is of benefit in casesof pulmonary diseases , keeps the digest.ive tract c1ean, lessens thenausea or stomach sickness associated with pregnancy, results in finecomplexions or improves the complexion; that yogurt softens or

tenderizes meats; and that through yogurt one Inay eat himself tohealth.

PAH. 6. The aforesaid statements and representations are misleadingin material respects and constitute false advertisement.s as that term isdefined in the Federal Trade Commission Act. In trut.h and in factthe proteins in yogurt are not predigested. The proteins and mineralsare not more rapidly assimilable and milk nutrients arc not more easilyabsorbed by the blood , by reason of being in the form supplied byyogurt. The casein and albumin of cow s milk fermented with yogurtcultures are uot, because of that treatment made more highly digestible.Yogurt does not promote digestion or intestinal hygiene , does not helpto digest other foods. Its use does not promote longevity nor help toprevent senility. It does not build, restore or insure good health.Y ugurt is not effective in preventing typhoid , paratyphoid , diphtheriaor dysentery. It is not a cure for constipation , ulcers, gastritis , enter-itis, colitis, dyspepsia, diarrhea, dysent.ery, celiac disease, colontroubles or stomach distress , nor is its use of benefit in cases of pulmon-ary diseases. Yogurt does not keep the digestive tract clean , nor is ita competent treatment for nausea or stomach sickness aSiiociated withpregnancy. The use of yogurt will not in itself result in fine complex-ion or improve the complexion. The application of yogurt to meatswill not soften or tenderize them. The use of yogurt wil not enableone to cat himself to good health.


Order 50 F. T. C.

P AI1. 7. The use by respondent of the forcgoing false and misleadingstatements and representations contain cd in said advertisements hashad , and now has, the capacity and tendency to mislead and deceive asubstantial portion of the purc hasing public into the erroneous andmistaken belief that said statements and representations are true andinto the purchase of said products because of such erroneous and

mistaken belief.PAIL 8. The acts and practices of respondents, as herein found , are

all to the prejudice and injury of the public and constitute unfair anddeceptive acts and practices in commerce within the intent and mean-ing of the Federal Trade Commission Act.

OHDEH

It i8 ordered That the respondent Yami Yogurt Products , Inc. , acorporation , and its officers , and respondent Reny Tille, an individualtrading under the name of International Yogurt Company or underany other name. and respondents ' agents , representatives and em-ployees, directly or through any corporate or other device, in con-nection with the offering for sale, sale or distribution of yogurt cul-tures do forthwith cease and desist from:

1. Disseminating, or causing to be disseminated , any advertise-ment, by means of the United States mails, or by means in commerceas "commerce" is defined in the Federal Trade Commission Act , whichadvertisement represents, directly or by implication:

(a) That the proteins in yogurt are in predigested form;(b) That proteins or minerals are more rapidly assimilable hy

reason of being in the form supplied by yogurt;(c) That milk nutrients lle more easily absorbed by the blood by

reason of being in the form supplied by yogurt;(d) That the casein or albumin of cow s milk by being fermented

with yogurt culture are transformed into more highly digestibleforms'

(e) That yogurt promotes digestion or intestinal hygiene or helpsto digest other foods;

(f) That yogurt promotes Jongevity or helps prevent senility;(g) That yogurt builds , restores or insures good health;(h) That Yogurt is effective in preventing typhoid , paratyphoid

diphtheria or dysentery or is a cure or remedy for constipation, ul-cers , gastritis , enteritis, colitis , dyspepsia , diarrhea, dysentery, celiacdisease, colon trouhles or stomach distress;

(i) That yogurt is of benefit in cases of pulmonary diseases;(j) That yogurt keeps the digestive tract clean;

YAMI YOGURT PRODUCTS, INC., ET AL. 621

616 Order

(k) That yogurt lessens the nausell or "stomach sickness" associatedwith pregnancy;

(1) That yogurt results in fine complexions or improves the com-plexion ;

(m) That the application of yogurt softens or tenderizes meats;(n) That one may eat himself to good health by using yogurt.Provided , however That nothing herein contained shall be con-

strued as preventing respondents from advertising or otherwise rep-resenting that Yami Yogurt is a remmmended dietary supplement forindividuals suffering from certain intestinal or digestive disturbances.

It is further ordered That the respondents herein shall within sixty(60) days after service upon them of this order, file with the Com-mission a report in writing setting forth in detail the manner andform in which they have complied with the Order to Cease and Desist.

Yami Yogurt Products , Inc.Heny Tille TreascurerHeny TilleIlK"" y TILLE , trading as Intel'm-

tional Yogurt Co.(Sgd) Alfred L. Fox Cmtnsel for Respondents.Date: Nov. 20 , 1953.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and entered of record on this 21st day of January1954.

By (sgcl)(sgd)

622 FEDERAL THADE COMMISSION DECISIONS

Decision 50 F.

IN THE MATTR

THE B. F. GOODRICH CO.

Docket 5U77. Oomplaint , July 191,9-Deci8iun, Jan. 24, 1954

Charge: Discriminating in price by sellng rubber and canvas footwear tosome customers at higher prices than to others competitively eng-aged with theforme!' in the resale of said products, in violation of subsection 2 (a) of the

Clayton Act, as amended.

Before Mr. Webster Ballinger hearing examiner.Mr. James 1. Rooney and Mr. James S. Kelaher for the Commission.Mr. G. T. Kilmon and Mr. R. G. Jeter of Akron , Ohio , and Kirk-

land, Fleming, Green, Martin Ellis of WashiDgton , D. forrespondent.

DECISION OF THE CO:'fMISSION

Pursuant to Rule XXII of the Commission s Rules of Pradice, theattached decision of the hearing examiner shall , on January 24 , 1954become the decision of the Commission.Commissioner IIoWREY not participating.

INITIAL DECISION BY WEBSTER BALLINGEH , HEARING EXAMINER

Pursuant to the provisions of the Federal Trade Commission Adthe Federal Trade Commission on .July 8, 1949, issued and subse-quently served its complaint in this proceeding upon the respondentThe B. F. Goodrich Company charging it with having since June 191936 , violated and now violating the provisions of subsection (a) ofSection 2 of the Clayton Act as amended by the Robinson-PatmanAct approved June 19, 1936. After the filing and service of saidcomplaint respondent answered. Issues joined hearings were there-after held at which testimony and other evidence in support of theallegations of the complaint and in opposition thereto were introducedbefore the above-named Hearing Examiner theretofore duly desig-nated by the Commission. The testimony and other evidence offeredand admitted were duly filed and recorded in the office of the Com-mission. Thereafter, the proceeding regularly came on for finalhearing upon a motion by counsel for respondent, uncontested bycounsel for the complaint, to dismiss the complaint, and the Examinerafter a careful reviewal' the entire record finds that this proceedingis not in the interest of the public.

The complaint charges respondent with having since June 19 , 1936violated and "now" violating the provisions of subsection (a) of

622 Decision

Section 2 of the Clayton Act as amended by the Robinson-Patman Actby "discriminating in price between purchasers of its rubber andcanvas footwear of like grade and quality in so selling said productsto some of its customers at higher prices than it sells such productsof like grade and quality to other of its customers who are com-petitively engaged one with the other in the resale of said productswithin the United States." It is further charged that the effect ofthe discriminations in price "has been or may be substantially to lesseninjure, destroy or prevent competition in the sale and distribution ofrubber and canvas footwear between those of respondent's purchaserswho receive the benefits of such discriminations and competing pur-chasers who do not receive the same benefits." The discriminationin price, it is charged , is effectuated through quantity discounts de-picted in 10 quantity discount brackets set forth in the complaint.

Respondent denied that it had or was violating the provisions ofthe statute referred to and pleaded "cost justification" for the quantitydiscounts set forth in the ten brackets it allowed purchasers.

After the taking of approximately 650 pages of testimony and theintroduction of a number of exhibits, the hearings were arrested toafford Commission accountants an opportunity to make a more thor-ough examination of the books and records of the respondent than wasmade prior to the issuance of the complaint, which resulted in a stipu-lation wherein it is stated:

"* * * that all price differences are * * * cost justified, exceptingtherefrom the 13% discount from list price bracket in relation toother higher discounts applicable to waterproof 1'ootwea1'

"* .. * that the total sales made by respondent pursuant to its pricepolicy in the said 13% discount from list price bracket amounted tosubstantially less than 11 of 1% of the total sales of waterproof foot-wear made by respondent for the year 1949. (The last full yearreferred to in the complaint.

There can be no public interest, and the Commission would not bewarranted , in pursuing an inquiry relating to a discount bracket af-fecting such an insignificant proportion of respondent' s business fromwhich no possible substantial injury to competitors could result.

The motion to dismiss recites the above facts and counsel for thecomplaint make no objection to the granting of the motion.

It is therefore ordered That the complaint be and it is herebydismissed.


Order 50 l!'

IN THE .MATTER OF

STANDARD MOTOR PRODUCTS INC.

Ducket 5721. Order and opinion, Jan. , .1954

Before Mr. E ad J. K olb hearing examiner.Jlfr. Eldon P. Schrup, Mr. James E. Corkey and Mr. Frwncis C.

Mayer for the Commission.Mr. Edwa:rd S. St. John of New York City, for respondent.

ORDER DISPOSING OF ApPEALS FROM ORf)jeHS OF THE HEARING EXAMINER

This matter having corne on to be heard by the Commission uponappeals, under Hule XVI of the Commission s Rules of Practice, byP. Sorensen Manufacturing Co. , Inc. , P. and D. Manufacturing Co.Inc. , and the respondent, Standard Motor Products , Inc. , from ordersof the hearing examiner pertaining to certain subpoenas duces tecumissued by him at the request of the respondent; andThe Commission having duly considered said appeals, briefs of

counsel , and pertinent portions of the record herein , and being of theopinion , for the reasons appearing in the accompanying opinion ofthe Commission, that the appeals of P. Sorensen Manufacturing Co.Inc. , and P. and D. J\Janufacturing Co. Inc. , should be sustained andthat the appeal of the respondent, Standard Motor Products , Inc.should be denied , and being of the further opllion that oral argumenton the appeals , which was requested by P. Sorensen J\TanufacturingCo. , Inc. , and P. and D. J\fanufacturing Co. Inc. , is unnecessary:

It is ordered That the said appeals of P. Sorensen ManufacturingCo. Inc. , and P. and D. Manufacturing Co. Inc. , be, and they herebyare, granted , and that the requests for oral argument on said appeals

, and they hereby are , denied.It is further ordered That the said appeal of respondent Standard

Motor Products , Inc. , be, and it hereby is , denied.It is further ordered That the subpoenas duces tecum issued by the

hearing examiner on October 19 , 1953 , directing P. Sorensen Manu-facturing Co. Inc. , and P. and D. Manufacturing Co. Inc. , to producespecified documents and records be, and they hereby are, quashedbut with the understanding that, if respondent so requests, new

subpoenas , limited as indicated in the accompanying opinion, will beissued.

STANDARD MOTOR PRODUCTS, INC. 625

H24 Opinion

OPINION OF THE COM:;USSION

By CARRETTA , Commissioner:During the course of the hearings in this matter, the hearing ex-

aminer, upon the request of the respondent, issued a subpoena ducestecum directing P. Sorensen Manufacturing Co. , Inc. (herein referredto as Sorensen) to produce specified documents and records pertainingto Sorensen s transactions with certain of its customers during certainyears. A subpoena duces tecum was also issued by the hcaring ex-aminer, at the request of the respondent, directing the P. and D.Manufacturing Co. , Inc. (herein referred to as P. and D. ) to producesimilar documents and records pertaining to its transactions withcertain of its customers during certain ycars. Upon the return ofthese subpoenas, Sorensen and P. and D. each med a motion with thehearing examiner requesting that the subpoenas be quashed; thatrespondent be required to establish which , if any, of the documentsdemanded are relevant and material to the respondent's alleged de-fense; or that the subpoenas be limited in their scope and eiTect.After hearing argument on the motions , the hearing examiner enteredorders on the record limiting the scope and effect of the subpoenas incertain respects and otherwise denying the motions. Appeals fromthese orders have been filed under Rule XVI of the CommissionRules of Practice by Sorensen and P. and D. and also by the respond-ent. Oral argument is requested in the appeals of Sorensen andP. and D.

Respondent Standard Motor Products, Inc. , is charged in the com-plaint in this proceeding with violation of Section 2 (a) of the Clay-ton Act , as amended , by seJIing its automotive parts and supplies tosome customers at higher and less favorable prices than it sold saidproducts and supplies to other customers. As one of its defenses to thecharge of price discrimination , respondent alleges that any discounts or

. allowances granted by it were made solely for the purpose of meetingprice competition from its competitors. Respondent contends that thedocuments and records demanded in the subpoenas as originally issuedare necessary to enable it to establish its said defense. Sorensen andP. and D. , competitors of the respondent, contend in their appeals thatthe subpoenas as originally issued, and also as subsequently limited bythe hearing examincr , require them to produce documents and recordswhich are in no way rclevant or material to the issues in this proct'ed-ing; that respondent should be required to establish which, if: all). ofthc numerous documents demanded by the subpoenas are relevant andmaterial to its defense; that the only records of theirs which are rele-

403443-57--


Opinion 50 . '1. C.

vant to the respondent's defense are those pertaining to transactions

with concerns who were customers of the respondent at the time and towhom the respondent gave a lower price than it gave to other cus-tamers; and that any data which they are required to produce withrespect to their transactions with such customers should be limited tothe year in which the lower prices were given by the respondent.

The respondent is entitled to subpoenas directing the producti!Ju ofsllch docllnents and records as are relevant to its defense that its lowerprices were nwde in good faith to meet a lawful equally low price of acompetitor. Respondent is not entitled to access to documents and

I"econls of its competitors which arc not relevant to that defense. Thequestion for determination in these appen Is is whet.her or not respond-ent has made an adequat.e showing that the documents and recordsdemanded by the subpoenas as originally issued, or as subsequently

limited by the hearing examiner, are relevant to respondent's said

defense.In order to establish its defense uuder Section 2 (b) of the Clayton

Act, respondent must show that the lower prices which constit.uted thebasis for the price discrimiuation charge were mnde in good faith tomeet a lawful equally low price of a competitor. The lower pricesgiven by the respondent must be shown to have been the direct result ofspecific offers by respondent' s competitors to the cnstomers receivingthe lower prices. The subpoenas as originally issued, and also as

limited by the hearing examiner, demand the production dat.a per-taining to trans LCtions with concerns which were formerly customers

of the respondent as well as with con(oerns which have never been cus-tomers of the respondent. Hespondent states that these documents andrecords are desired for the purpose of showing the pricing practices ofits competitors. There is no showing as to how the pricing practicesof its competitors with respect to customers to whom the respondentdocs not sell and did not sell are relevant to the respondent's allegeddefense.

The record in this jJrocecrhng contains evidence that respondent hasmade salcs to ccrtain customers at prices lower than those chargedother custonwrs. Under all the circmnstances , the Commission is ofthe opinion that nnless and nntil the respondent show" the relevancy toits defense of data pertailling- to transactions by competitors withconcerns other than those to whom the respondent has sol,l at the lowerprices, any snbpoenas llirectillg a competitor of the respondent to pro-(lnce documents and records should be limited to docl1nents and recordspertaining to sales 'Iud ofrers to sell by such competitors to customersof the respondent ,,'110 the record shows were sold at the lower prices.

(iU Opinion

Any such subpoenas should be further limited to requiring the pro-duction of documents and records pertaining only to sales and offers tosell during the time period in which the responrlent soJd at the lowerprices which make out the prima facie case.

In view of the foregoing, the Commission is of the opinion thatsubpoenas issued by the hearing examiner directing Sorensen and P.

and D. to produce specified documents and records should be quashedbut with the understanding that, if respondent so requests , new sub-poenas, limited as herein indicated , wil be issued.

The Commission is of the further opinion that oral argument on the\ppeaJs, which was requested by Sorensen and P. and D. , is unneces-sary.


Decision 50 F. T. C.

IN THE MATTR

CUSTOM UPHOLSTERING & CARPET CO., INC., ET AL.

Docleet 6111. Oom.plaint , July :BI 1958-Decision

, .

Jan. SO, 19.54

Charge: Advertising falsely as to prices and free goods or service; in con-nect:ion with the business of sellng upholstery materials and upholsteringfurniture.

Before lJf'r. J. Earl Oox hearing exam.iller.Mr. Jesse D. Kash for the Commission.Mr. Frank A. Kaufman and Frank Oppenheimer of Baltimore

Md. , for respondents.

DECISION OF TI-IE COMJlHSSION

Pursuant to Rule XXII of the Commission s Rules of Practice , theattached initial decision of the hearing examiner shall, on .J anuary

, 1954 , become the decision of the Commission.

INITIAL DECISION BY J. EARL cox , HEARING EXAMINER

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission, on the 27th day of July 1953 , issuedand subsequently served its complaint in this proceeding upon therespondent Custom Upholstering & Carpet Company, Inc. , a corpo-ration, and respondents Charles D. 'Weisberg, Melvin Weisberg, andSeymour S. 'Weisberg, individuaJJy, charging them with the use ofunfair and deceptive acts and practices in commerce in violation ofthe provisions of said Act. After the issuance of said complaint andthe filing of respondents ' answer thereto , hearings were held at whichevidence in support of and in opposition to the aJJegations of said

complaint was introduced before the above-named hearing examinertheretofore duly designated by the Commission, and said testimonyand other evidence were duly recorded and filed in the offce of the Com-mission. Thereafter the proceeding regularly came on for final con-sideration by said hearing examiner upon the complaint, the answerthereto, testimony and other evidence, and proposed findings of factand conclusion presented by counsel for the respondents , counsel insupport of the complaint not submitting proposed findings of fact orconclusion.

The respondents are engaged in the business of reupholstering fur-niture with their main offce at 4103 Reisterstown Road, BaltimoreMaryland, and branch offces in Washington , D. C. , and Philadelphia

628 Order

Pennsylvania. They have used three types of special advertising.In the first type they offer big savings

, "

as much as $100," on reup-holstery and slipcover work; in the second type they offer to reup-holster a third chair free in connection with the reupholstering of athree-piece living room suite; in the third type they offer for $7.a chair valued up to $149 if the customer has a two-piece suitereupholstered at the regular price.

Since the imposition of price controls in 1951 by the U. S. Govern-ment, the respondents have maintained regular, uniform prices forproducts and services and approximately two-thirds of their businesshas been conducted at these regular prices. The balance of their busi-ness has been conducted pursuant to their special advertising offersand the evidence establishes clearly that during the periods when suchadvertising was effective sales were made and work performed strictlyin accordance with the terms of the special offers. Numerous in-voices of actual sales were presented in evidence which clearly estab-lish that fact.

The advertising relating to "free" goods and services was discon-tinued in the latter part of 1952. However, respondents stated

through their counsel, that it was their expectation in the future tomake use of the word "free" and other similar words strictly in ac-cordance with the decision of the Commission in the matter of Walter

. Black, Inc. , Docket No. 5571 , which use would be in conformitywith the new trade practice rule on use of the word " free" as adoptedby the Commission on December 3, 1953. Respondents ' past use ofthe word also was in conformity with this rule.

The reliable, probative and substantial evidence does not establishthat the respondents have violated any of the provisions of the FederalTrade Commission Act and the complaint must therefore be dismissed.

ORDER

It is or'dered That the complaint herein be , and the same hereby isdismissed as to an respondents.

630 FEDERAL TRADE COMMISSION DECISIONS-

Order 50 F. T. C.

IN THE MATTER OF

HEARN DEPARTMENT STORES, INC.

Docleet 3458. COn/plaint , June 1988-Qrder, Feb. , 1.954

Charge: Advertising falsely and misbranding as to nat.ure and compositionof product; in connection with the sale of fabrics , garments, etc.

Before lIfr. Edward E. Reardon hearing examiner.

Mr. George W. Williams and 11/1. R. P. Bellinger for the Commis-SIOn.

Mr. Jay Leo Rothschild of New York City, for respondent.

ORDER DISMISSING COMPLAINT WITHOUT PRJi;,TUDlCE

This matter coming on to be heard by the Commission upon a mo-tion, filed by counsel in support of the complaint, requesting that thecomplaint herein be dismissed without prejudice, which motion wasunopposed by the respondent; and

It appearing from said motion and from the record that the com-plaint was issued in .J une 1938 and was hased upon practices allegedto have been engaged in prior to that time; that the case was placedupon the Commission s suspense calendar on December 14 1944, pend-ing the final disposition of Docket No. 4934, Celanese Corporation ofA;nerica, and that the Celanese case was finally disposed of by theCommission on August 2, 1953; and

The Commission being of the opinion that because of the lapse oftime since the complaint was issued there is now insuffcient publicinterest in the subject matter to warrant a continuance of the pro-ceeding at this time:

it is ordered that the complaint herein be, and it hereby is, dis-

missed , without prejudice , however, to the right of the Commissionto take such further action against the respondent at any time in thefuture as may be warranted by the then existing circumstances.

Opinion

IN THE MATTEH OF

ASSOCIATED GREETING CARD DISTRIBUTORS OFAMERICA ET AL.

Docket 5983. Complaint , !,lay 195.8-0rde' , etc., and opinion, Feb. , 1951,

Charge: Conspiring with respect to prices , terms and conditions of sale ofgreeting cards , gift-tying ribbons and gift wrapping paper.

Before Mr. J. Earl Oow hearing examiner.

Mr. Floyd O. Oollins for the Commission.Dunning, Nellis Lundin of vVashington, D. for respondents.

OHDER DISPOSING OF ApPEALS FHoM INITIAL DECISION OF HEAHINGEXAMINlm, AND DECISION m' THE COMJllISSION DIS1VIISSING COM-PLAINT

This matter came before the Commission upon cross-appeals ofcounsel for respondents and counsel supporting the complaint froman initial decision of the hearing examiner dismissing all of the alle-gations of the complaint except those relating to respondents' allegeduse of their combined purchasing power to secure discounts and ad-vertising allowances.

For the reasons stated in the written opinion of the Commissionwhich is issued herewith, the Commission is of the opinion that theappeal of counsel supporting the complaint should be denicd and thatrespondents ' appeal should be granted and the complaint herein dis-missed.

The Commission has considered all of the exceptions of counseland is of the opinion that the rulings of the hearing examiner are freeof prejudicial error. In reaching its decision, Commission s Exhibit126 for identification , which contains the opinion of the Secretary ofthe respondent Association that all of the large distributors in the

field belong to the Association, was fully considered.It is ordered therefore, that respondents ' appeal from the initial

decision is hereby granted; that the appeal of counsel supporting thecomplaint is hereby denied; and that the allegations of the complaintare hereby dismissed.

OPINION OF THE COJIBIISSJON

Chairman I-IoWREY delivered the opinion of the Commission:This case is before us upon cross appeals of counsel for respondents

and counsel supporting the complaint from an initial decision of thehearing examiner dismissing all but one phase of the case.

632 FEDERAL TRADle COMMISSION DECISIONS

Opinion 50 F. T. C.

Twenty-seven wholesale distributors of greeting cards and acces-sories throughout the United States, all members of the AssociatedGreeting Card Distributors of America , are charged with hinderingand suppressing competition in violation of Section 5 of the FederalTrade Commission Act. Also named as respondents are the Asso-ciation s Secretary-Treasurer , members of its merchandise committeeand Charmeraft Publishers , Inc. , a corporation owned by membersof the Association through which they buy certain of their greetingcards and related products. This line of merchandise, which is espe-cially designed and produced for respondents by a variety of manu-facturers, is designated "Charmcraft" and is handled by Associationmembers exclusively.

Respondent Association members compete with wholesalers whoare not members of the Association and with manufacturers who selldirectly to the retail trade. In some instances , members compete witheach other in the buying and selling of their products. In an indus-try which does a total volume of approximately 250 million annually,respondents, whose total annual sales are something like $3 000 000are not, as the Examiner found, in either a dominant or a monopolisticposition.

The case involves six practices alleged in Paragraph Eight of theComplaint. At the completion of the case-in-chief of counsel sup-porting the complaint, the hearing examiDer ruled 3 that a prima faciecase had been made out on only one phase of the case; namely thatrespondents had obt tined favorable prices on Charm craft lines andwere awarded discounts and advertising allowances based on theircombined purchasing power. The examiner dismissed the remainingcharges in the complaint, including the general allegation in the

initial paragraph of Paragraph Eight to the effect that respondentshad conspired to suppress competition.

An examination of the record shows that his ruling dismissing allof the other allegations of the complaint was correct..

lOne Association member testified that Charmcraft cards accounted for 12% of his totalrequirements; another testified that about 15% of his needs were supplied by Charmcraft.

2 There are no figures in the record , however, indicating total annual sales by wholesalersand there are no figures showing the number of wholesalers of greeting cards in the UnitedStates.

2 The examiner s fallure to issue an initial decision following this ruling as requested bycounsel in support of the complaint is subject to an exception by Commission s counsel.

However , we fail to see that 70ne has been prejudiced by the ruling.4 The complaint alleges that respondents have falsely represented that they are publishers

of Charmcraft cards. Counsel supporting the complaint was able to show that respondentssalesmen had been furnished pictures of press rooms and printing equipment not owned byrespondents. The examiner disregarded this evidence because there was no showing that

uch pictures were ever used. In any event. however, while the use of such pictures mightwell imply that respondents own their own printing facilities , it does not establish tl1at theyare publishers as that term is used and understood in the greeting card trade.

G:n Ol)inion

After completion of respondents ' case , the examiner filed his initialdecision containing the same ruling in substance and an order whichprohibited respondent from exerting the influence of their combinedpurchasing power to obtain any price discount or otIer preferentialtreatment not allowed, accorded or made available by such manu-facturer or manufacturers to competitors of respondent or any of them.The examiner s order also prohibited respondents from misrepresent-ing the volume of purchasing power 5 and from receiving any discount

or other preferential treatment as a result of the use of such misrepre-sentation or combined purchasing power.

While the complaint charges respondents with misrepresentingthemselves as publishers and with engaging in certain other unlawfulpractices, the crux of the case against respondents is that, by poolingtheir combined purchasing power to obtain favorable prices and termson greeting cards, tying ribbons and wrapping paper, they have en-gaged in unfair methods of competition in violation of Section 5

of the Act.We may assume that collusive activit.y by buyers to coerce a seller or

sellers , through boycott. , t.hreat. of boycot.t., int.imidation , or like meansis unreasonable and t.herefore unlawful. See Eastern States LumberAssociation v. United State8 234 U. S. 600 (1914); Faddon Or-igina-tors ' Guildv. Federal Trade Com1nission 312 U. S,457 (1941) ; UnitedStates v. 8m,thern Oalifornia Grocers' Association 7 F. 2d 944

(S. D. Calif. 1925) ; Adcansas Wholesale Groeers ' Assoeiation et al.v. F. T. C. 18 F. 2d 866 (C. A. 8 , 1927) (cert. den. 275 U. S. 533);

Southern Har&ware Jobbers ' Assoeiation et al. v. F. T. 0. 290 Fed.773 (C. A. 5 , 1923); Wholesale (fl'oeers ' Assoeiation v. F. T. 0. 277Fed. 657 (C. A. 5 , 1922) .

The record in t.his case, however , cont.ains none of thcse elemellt.s ofillegality. There is no evidence , moreover, showing injury to com-peting wholesalers or t.o t.he mrdlUfact.uring segment. Likewise , thereis no evidence that retailers have been adversely ai1ected.

The facts indicate nothing more than a relatively simple practice ofjoint purchasing by small business wholesalers in an industry markedby the predominant use of other distribution methods. These smallconcerns have purchased Charmer aft greeting cards and accessoriesas a result of open bargaining, and such purchases have been madefrom numerous manufacturers. Furthermore, individual association

I) \Ve find no allegation in the complaint affording any basis for this part of the orderexcept the reference to the use of "pretense of cooperative purchasing" in Paragraph Eight(B). The examiner found, however, and we think properly so, that "The record docs not

establish'"

'" '"

that'"

* '"

pretense of cooperative purchasing

. * *

(was) used by

respondents

* '"

$I". We conclude , therefore , that there is no basis for a provision in theorder prohibiting misrepresentations of the volume of purchasing power.

634 FEDERAL TRADE CO;\IMISSIOX DECISIONS

Opinion 50 F. T. C.

members haH coutinued to buy frolIl the regular stock of manufac-turers, including many that have never produced Charmcraftmerchandise.

In brief, this appears to be an instance in which a few small con-

cerns have joined together as buyers in It non-collusive effort to wagecompetition, not to restrict it.

Quite unlike the present case was United State8 v. New Yorh: Great

A. P. Tea Co. In F. 2d 7D (C. A. 7 194D), (affrming 67 F. Supp.(;26), in which it was the use of monopoly power to obtain preferencesin price and other terms tllltt brought the grocery chain s buyingpractices within the purview of the Shenmm Act. See also UnitedState8 v. Cre8cent Amu8cment Company et al. 323 U. S. 173 (1944) ; ,Schine Chain Theatre8 , Inc. , et al. v. United State8 334 U. S. 110

(1948) ; United States v. Griffth 334 U. S. 100 (1948) ; United State8v. Paramount PictuTe8 , Inc. 334 U. S. 131 (1948), which involved theuse of mass buying power to obtain first runs and other preferencesin the motion picture industry.

At the hearing, evidence was adduced in an attempt to show thatcertain of the discounts and aJJowances received by respondents werejustified by savings in cost. However, the hearing examiner foundthat these discounts and alJowances were not justified by savings inview of the fact that, while they were based upon the total purchasesof an members of the association , there was no single billing or de-livery point. Assuming these facts as found by the examiner to becorrect, we are unable to agree that it follows that Section 5 of theFederal Trade Commission J"-ct has been violated. This is not a casebrought under Section 2 (f) of the Clayton Act. If there is reason tobelieve that respondents have knowingly induced or received thegranting of a discriminatory price in violation of the Clayton Actthen such a violation should be pleaded and proved. Suffce it to saythat the evidence does not persuade us tllltt Section 5 of the FederalTrade Commission Act has been violated.

It should be noted that the case involves no issue as to intermediariesor of brokerage, or discounts in lieu thereof , nnder Section 2 (c) of theClayton Act. , as amended.

The complaint. should be dismissed.

G The Commission s order in the Southern Jobber8' Hardware case 8upra which involveda conspiracy among the members of a hardware jobbers association to dominate the whole-sale and jobbing trade, was issued to protect an association of retail dealers who, likethe respondents in this case, were organized for the purpose of obtaining their suppliesfrom manufacturers to effect savings.

'I The Supreme Court in the Cre8cent Amu8ement case appears to have had in mind thekind of situation before us here and! intimates that it would not consider it unlawful.it win not do to analogize this to a case where purchasing power is pooled so that the

buyers may obtain more favorable terms. The plan here was to crush competition and tobuild a support for the exhibitors. 1323 U. S. at page 183.

Consent Settlement

IN THE MATTH

MEL VIN MARCUS , DOING BUSINESS AS TELERON COM-ANY AND CECIL C. HOGE ET AL. , DOING BUSINESS AS

HUBER HOGE AND SONS

CONSENT SETTLJ MENT IN REGARD TO THE ALLEGED VIOLATION OF THEFEDERAL THADE COMMISSION ACT

Docleet 6083. Complaint , Feb. 1953-Decision, Feb. 4, 1954

Where an individual, and an advertising agency and mail order promotionhouse, engaged, under an agreement entered into between them, in thecompetitive interstate sale and distribution of a television accessory origi-nally designated as an " Interference Absorber" and later as a "TV WaveTrap" or "Teleron TV Wave Trap ; in advertising their said product in

newspapers and other perioclcals-

(a) Represented that the same was a new invention or development, notwith-standing the fact that high pass filters , the technical name of the devicehad been in use since 1946 and was standard equipment. on some TV sets;

(b) Represented that the use of said product would immediately and perma-nently eliminate all forms of TV interference and enable owners of TV setsto get picture-clear reception at all times;

The facts being that while it would block out certain types of interference, therewere a number of forms that it would not eliminate and some that it wouldonly partially eliminate; and since they could not. determine the forms ofinterference that might. be present. in the case of any owner, they could nottruthfully claim that the use of their product would enahle any owner t.o getpictnre-clear reception at any time; and

(c) Representcd that the regular price of their jJrodnct. was $5; not.withstandingthe fact that the price thereof was $3 and not $5

Held That such acts and practices constituted unfair and deceptive acts ",ndpractices in commerce and unfair methods of competition therein.

Before Mr. Earl J. K olb hearing examiner.

Mr. W. J. Tompkins for the Commission.Mr. Joseph A. Mitschel of Ridgewood , Queens , N. Y. , for Melvin

Marcus.M1'. George Landesman , Mr. James R. Withrow , Jr. , Mr. Thomas J.

M of adden and Donovan , Leiswl'e , Newton Irvine of N ew York City,for Huber Hoge and Sons.

CONSENT SETTLEMENT 1

Pursuant to the provisions of the Federal Trade Commission Actthe Federal Trade Commission on February 19 , 1953 , issued and sub-sequently served its complaint on the respondents named in the cap-

J See footnote on following page.


Consent Settlement. 50 F. T. C.

tion hereof, charging them with unfair and deceptive acts and prac-tices and unfair methods of competition in commerce within the in-tent andmeaning of said Act.

The respondents, desiring that this proceeding be disposed of by theconsent settlement procedure provided in Rule V of the CommissionRules of Practice, solely for the purpose of this proceeding, any re-view thereof and the enforcement of the order consented to and con-ditioned upon the Commission s acceptance of the consent settlementhereinafter set forth and in lieu of the answers to said complaint here-tofore filed and which, upon acceptance by the Commission of this set-tlement , are to be withdrawn from the record , hereby:

1. Admit all the jurisdictional allegations set forth in the com-plaint.

2. Consent that the Commission may enter the matters hereinafterset forth as its findings as to the facts , conclusion and order to ceaseand desist. It is understood that the respondents in consenting to theCommission s entry of said findings as to the facts , conclusion andorder to cease and desist specifically refrain from admitting or deny-ing that they have engaged in any of the acts or practices stated there-in to be in violation of law , or that such acts and practices, if engaged

, would be in violation of la w.3. Agree that this consent settlement may be set aside in whole or

in part under the conditions and in the manner provided in Para-graph (f) of Rule V of the Commission s Rules of Practice.

4. Severally assert:(a) That the respondent copartners have ceased advertising and

selling the product here involved , namely, a television accessory desig-nated "Teleron TV Wave Trap

(b) That the respondent Melvin Marcus , although still engagedin selling the said product has eliminated from his adveTtisinO" matterrelatmg thereto the statements and representations alleged in thecomplaint herein to be false, deceptive and misleading.

The admitted jurisdictional facts, the statement of the acts andpractices which the Commission has reason to believe are unlawfulthe conclusion based thereon and the order to cease and desist, all ofwhich the respondents consent may be entered herein in final disposi-tion of this proceeding, are as follows:

1 The Commission s "Notice" announcing and promulgating the conscnt settlement aspublished herewith , follows:

The consent settlement tendered by the parties in this proceeding, a CODy of which isserved herewith, was accepted by the Commission on Webrllary 4, 1\)54, and orderedentered of record as the Commission s finuings as to the facts, conclusions, and order

disposition of this proceeding-.

The time for tiling report of compliance pursuant to the afo1'('said order Jonns fromthe dntf' of sf'rvice hereof

63G Findings

IT:\lJXUS - S TO THE F,ICTS

PARAGRAPH 1. Hespondent Melvin Marcus is an individual doingbusiness under the trade name of Teleron Company, with his offceand principal place of business located at 21-02 122nd Street, CollegePoint, Long Island, New York. Respondents Cecil C. Hoge, JohnHoge, Sidney C. Hoge and Barbara Obolensky are individuals andcopartners and, prior to October 1 , 1952, were engaged in business asan advertising agency and mail order promotion house under thetrade name of I-lubeI' Hoge and Sons , with their offce and principalplace of business at 699 Madison Avenue, New York, New York.Effective October 1, 1952, the business known as Huber Hoge andSons was incorporated under the laws of the State of New York asHuber Hoge & Sons, Inc. , with respondents Cecil C. Hoge, SidneyC. Hoge and J olm Hoge as directors and president, vice presidentand secretary, respectively.

PAR. 2. In the year 1950 respondent 1\1:elvin Marcus began ach-el'-

tising and sening a television accessory originany designated as anInterference Absorber and later denominated as a TV Wave Trapor Teleron TV Wave Trap. In February 1952 respondent MelvinMarcus entered into an agreement with respondents Cecil C. HogeJohn Hoge, Sidney C. Hoge and Barbara Obolensky, doing businessas Huber I-oge and Sons, whereby he agreed to give the latter theexclusive right to advertise the aforesaid product. Respondent Mel-vin Marcus further agreed to purchase from the respondent copart-ners an of the orders they received for the product at a price of $1.75per order, later reduced to $1.65 per order. Beginning in February,1952, the respondents engaged in the sale and distribution of the saidTV accessory under the aforementioned agreement.

Ut. 3. At aU times mentioned herein , respondents htlVe been insubstantial competition with other firms and individuals and withcorporations in the sale and distribution of similar television acces-

sones In commerce.PAR. 4. In the course and conduct of their respective businesses re-

spondents caused their said product , when sold, to be transported fromthe State of 1\ ew York to pUl'chasers thereof located in other states ofthe United States and in the District of Columbia. Respondents all times mentioned herein have maintained a substantial course oftrade in their said product in commerce , as "commerce" is defined inthe Federal Trade Commission Act.

PAR. 5. In the course and conduct of their respective businesses , asaforesaid , and for the purpose of inducing the purchase of their TVaccessory, respondents have made numerous statements and repre-

638 FEDERAL TRADE COMMI88W.N l.l0 U..'IO


sentations concerning their said product by means of advertisementscaused to be published in newspapers and other periodicals having alarge circulation outside the State of N ew York. Among and typicalof such statements and representations, but not all inclusive thereofare the following:

STOP TV INTERFERENCE AT ONCE

STOP IT FOR GOOD

2 WAYS TO STOP TV INTERFERENCE FOR GOOD

The only way t.o permanently remove your interference is to block it out, hefore

it reaches your set , in exactly the same way sunlight glare is blocked out byung-lasses before it reaches your eyes!Either you can go out and purchase a cust.om-made electronic interference

absorber and have it installed in your set by your repairman. This wil ,;top

your TV interference. It wil cost yon anywhere from $30 to $40.Or you can do what thousands of other TV owners did-you can fix your set

yourself in just 45 seconds-simply by clipping onto the back of your set a newlyinvented bypass filter ca1led the Teleron Wave Trap. This new miracle ofmodern science, automatica1ly biocks out interference waves before they can

reach your set, and is guaranteed to stop TV interference once and for all.

WHICH OF THESE TV HEADACHES DO YOU WANT TO STOP FORGOOD-IN JUST 5 MINUTES?

(Here follow six picturizations of TV interferences designated as StreaksDistortion , Wavy Lines , Borer Effect, Snow and TV St.atic.

PICTURE-CLEAR RECEPTIOK 365 DAYS A YEAR!ORDER TODAY Ai\'D SAVE $2.

If you order your TELERON WAVE TRAP today, you do not pay the $5 that:150 000 other TV owners paid. Due to mass demand and mass production forthe TELERON WAVE l'RAP this amazing invention is now yours for only$2.98 wit.h this amazing no-risk guarantec.

PAR. 6. By and through the use of the foregoing statements andrepresentations, and others of similar import but not specifically setout herein, respondents have represented, either directly or by impJi-cation , that their product, technically known as a high pass filter, is a

new invention or development; that it will immediately and perma-nently eliminate all forms of TV interference; that it wiU enableowners of TV sets to get picture-clear reception at all times; and thatthe regular price of their product has been $5.00.

PAR. 7. The aforesaid statements, representations and imp1i ations

as set forth in Paragraph Five hereof , are false , misleading and decep-tive. In truth and in fact, respondents ' product is not a new invention

or development. High pass fiters have been in use since the year 1946

635 Order

and are standard equipment on some TV sets. There are a number offorms of TV interference that will not be eliminated by respondentsproduct and some forms that will be only partially eliminated. Itwill , however, block out certain types of interference. Respondentscannot determine the forms of interference that may be present in thecase of any television owner and consequently cannot truthfully claimthat the use of their product will enable any TV owner to get pictnre-clear reception at any time. The regular selling price of respondentsproduct has been $3.00 and not $;"5.00.

PAH. 8. The nse by respondents of the foregoing false, misleadingand deceptive statemcnts and representations had the tendency andcapacity to mislead and deceive a substantial portion of the purchasingpublic into the erroneons and mistaken belief that such statements

and representations were true and to induce the purchasing public topurchase substantial quantities of respondents ' product as a result ofsuch erroneous and mistaken belief. As a consequence thereof, sub-stantial trade in commerce has been unfairly diverted to respondentsfrom their competitors and substantial injury has been done to com-petition in COlllnerce.

CONCLUSION

The aforesaid acts and practices of the respondents, as herein foundwere all to the prejudice and injury of the public and of respondentscompetitors and constituted unfair and deceptive acts and practicesand unfair methods of competition in commerce within the intent andmeaning of the Federal Trade Commission Act.

ORDER TO CEASE AND DESIST

It is ordered That the respondent Melvin Marcus , doing businessas Teleron Company, or under any other name, and respondents CecilC. Hoge, John Hoge, Sidney C. Hoge and Barbara Obolensky, indi-vidually and as copartners doing business as Huber Hoge and Sonsor under any other name , and said respondents ' agents , representativesand employees, directly or through any corporate or other device, inconnection with the offering for sale, sale and distribution in com-merce , as "commerce" is defined in the Federal Trade Commission Actof their TV accessory designated as Interference Absorber, TV WaveTrap or Teleron TV Wave Trap, or designated by any other nameor any other product of substantially similar design, do forthwithcease and desist from representiDg directly or by implication:

1. That the said product is a new invention or development;2. That the use of said product will eliminate or reduce interference

with television reception irrespective of the form of interference;


Order 50./' . T. C.

3. That the use of said product will result in picture-clear televisionreception, irrespective of circumstances;

4. That any price is , or was, the customary or usual price for saidproduct which is in excess of the price at which it is, or was

customarily sold by respondents in the usual course of business.It is further ordered That the respondents shall , within sixty (60)

days after service upon them of this order, file with the Commissiona report in writing setting forth in detail the manner and form inwhich they have complied with this order.

(Sgc1. )

Dated: Nov. 10, 1953.

(Sgd.

Dated: Oct. 20, 1953.

(Sgd.

Dated: Oct. 21 , 1953.

(Sgd.

Dated; Oct. 23, 1953.

(Sgd.

Dated Oct. 23, 1953.

Melvin MarcusMELVTN MAHCUS, doingbusiness as TeleronCompany.

Cecil C. HogeCECIL C. IIoGE.

John HogeTOHN I-Iom:.

Sidney C. RageSIDNEY C. HOGE.

Barbara Obolensky,

BARBARA OnOLENSKYIndividually and as co-

partners doing business

as Huber Hoge andSons.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and ordered entered of record on the 4th day February, 1954.

640 FEDERAL TRAD ; COMMISSION DECISIONS

Order GO r. C.

3. That the use of said product will result in picture-clear televisionreception, irrespective of circumstances;

4. That any price is, or was, the customary or usual price for saidproduct which is in excess of the price at which it is, or was

customarily sold by respondents in the usual course of business.It is further ordered That the respondents shall , within sixty (60)

days after service upon them of this order, fie with the Commissiona report in writing setting forth in detail the manner and form inwhich they have complied with this order.

(Sgd. )

Dated: Nov. 10, 1953.

(Sgd. )

Dated: Oct. 20, 1953.

(Sgd.

Dated: Oct. 21 , 1953.

(Sgd. )

Dated: Oct. 23, 1953.

(Sgd.

Dated Oct. 23, 1953.

Melvin :Marcus

JlIEI,vIX MAHGCS, doingbusiness as TeJeronCompany.

Cecil C. RageCECIL C. lIoGE.

John H age

Ten IN I-Tom:.

Sidney C. RageSIDNEY C. HOGE.

Barbara ObolenSk),

BARBARA OBOLEXSKY

Individually and as co-partners doing business

as Huber Hoge andSons.

The foregoing consent settlement is hereby accepted by the FederalTrade Commission and ordered entered of record on the 4th day ofFebruary, 1954.

Pages 537-640 - Federal Trade Commission

Documents

Transcript of Pages 537-640 - Federal Trade Commission