Waverly Brown

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COliPLAINT IN THE l\IATTER OF THE ALLEGED VIOLATION OF SECTION IS OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1914, Docket 574.-Deceruher 21, 1020.

SYLLABUS:

Where persons regularly engaged In the manufacture, and sole by mull, of phonographs resernbl!ng well-known makes, (a) Adopted the trade names Illinois Storage Co., Chicago Storage Co., and Chicago Storage Sales Co., for the purpose, and with the elrect, of deceiving purchasers and the public generally as to the true nature of their business; (b) Falsely advertised under one of their various trade names ( 1) that the phonographs advertised had been stored for safe-keeping and were offered for ~ale to cover unpaid storage charges; (2) that in the course of their storage and warehouse business t11ey had come into possession of a single phonograph or single lots of phonographs, never removed from the original crates In which shipped from the factory, now offered for sale for the purpose of covering unpaid storage;

(c) Advertised under their individual names, o:l'l'erlng for sale slightly used phonographs of standard makes of great value, at abnormal and unusual reductions from full standard prices, for the purpose, and with the effect of, misleading purchasers and the public generally Into bcllevlng that the advertiser, as a householder, was offering an Instrument theretofore purchased for his own use, the fact being that the phonographs offered we1·e manufactured to 11ell, and were customarily sold, by said persons at less . than om•-third of the price at which advertised; All for the purpose of disposing of new phonographs manufactured by them under the name of the Tyrolla Talking Machine Co.: lleld, That such false and misleading advertising, under the circumstances set forth, constituted unfair methods of competition. COMPLAINT.

The Federal Trade Commission, hn ving reason to believe from a preliminary investigation made by it that 'Vaverly Drown, :Mrs. Waverly Drown, and T. F. Conley, copartners trading under the name and style of Illinois Stornga Co., Chicago Storage Co., Chicago Storage Sales Co., and Tyrolia Talking Machine Co., hereinafter referred to as respondents, have been and are using unfair methods WAVERLY BROWN ET AL. 157 15G Complaint. of competition in interstate commerce in violation of the provisions of section 5 of an act of Congress, approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect on information and belief as follows: PARAGRAPH 1. That the respondents are now, and since Mareh, 1919, have been operating a business in the city of Wilmette, in the State of Illinois; that the business so conducted consists and has consisted of the manufacture and sale in commerce among the several States and Territories of the United States, and the District of Columbia, of phonographs, resembling in appearance but inferior in quality to phonographs made by well-lrnown manufacturers, said phonographs being sold direct to purchasers and users thereof by means of catalogue and other advertising matter, in direct competition with other firms, corporations, copartnerships, and persons. · l)AR. 2. That said respondents in the course of their said business, made use of catalogues and other advertising matter which is given general circulation throughout the States and Territories of the United States, and the District of Columbia; that said catalogues and advertising matter contain representations and statements calculated to deceive and do deceive the purchasing public into the belief that slightly used phonographs of standard make of highest value are being offered for sale by private owners at abnormal and unusual reductions from full standard resale values, when in truth nnu in fact said phonographs are not privately owned, but are new and unused and of grade and quality much inferior to phonographs of the standard makes which they are made to imitate, and are manufactured by respondent to sell to purchasers and users thereof, and are sold by respondent to purchasers and users thereof for less than one-third of the stamped resale price at which they are listed in respondent's s:tid catalogues.

PAn. 3. That said respondents, in the course of their said business, make use of catalogues and other advertising matter which is given general circulation throughout the States and Territories of the United States, and the District of Columbia; that s:tid advertisements are worded so as to deceive and do deceive the purchasing public into the belief that phonographs so advertised have been stored for safe-keeping with one or the other of respondents, Illinois Storage Co., or Chicago Storage Co., or Chicago Storage Sales Co., and are being offered for sale for the purpose of reimbursing one or" 158 FEDERAL TR...\.DE COMMISSION DECISIONS. Findings. 3F.T.C.

the other of said respondents for unpaid storage charges, when in truth and in fact such phonographs have never been so stored, nor do said respondents now nor have they or any of them at any time since March, 1919, conducted a storage or warehouse business of any kind, but respondents have been and are using the titles Illinois Storage Co., Chicago Storage Co., and Chicago Storage Sales Co., as sham trade names for the purpose and with the effect of accomplishing said deceptions in selling phonographs of their own manufacture.

UEPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an act of Congress, approved September 26, 1914, the Federal Trade Commission issued and served upon two of the respondents, 'Vaverly Brown and Mrs. Waverly Brown, a complaint charging each of them with the use of unfair methods of competition in commerce in violation of the provisions of said act. John T. Conley, properly a respondent in the said proceeding in the place and stead of one T. F. Conley, named in the original complaint as one of the respondents, waived the issuance and service upon him of a complaint amended so as to name him a respondent and agreed to come into this proceeding and submit, for the purpose of jurisdiction, to such order as the Commission might make in disposing of this proceeding, with the same force and effect as if the said John T. Conley had been originally made a party to the said proceeding by being named as n respondent in the complaint and by having been served with a copy of the complaint and by having been given an opportunity to answer the said complaint.

Hearings were had and evidence was thereupon introduced in support of the allegations of said complaint before an examiner of the Federal Trade Commission, theretofore duly appointed. Thereupon this proceeding came on for final hearing, and the Com~ mission having duly considered the record and being now fully advised in the premises, makes this its ·findings as to the facts and its conclusions:

FINDINGS AS TO TIIE FACTS.

PARAGRAPH 1. That the respondents, Waverly Brown and John T. Conley, in the period from March, 191!>, to nnd until August, 1910, were engaged as partners at Wilmette, Ill., in the business of manufacturing phonographs, resembling in appearance those made by wellknown mnnufncturers, and in selling the same in commerce among the several States and Territories of the United States and the Dis- WAVERLY BROWN ET AL. 159 156 Findings. trict of Columbia, in competition with other persons, firms, and corporations similarly engaged.

The said respondents in the sale of the phonographs made by them used the following trade names, to wit: Illinois Storage Co., Chicago Storage Co., and Chicago Storage Sales Co. The phonographs made by the said respondents were manufactured by them under the trade name of the Tyrolia Talking Machine Co. Mrs. Waverly Drown, one of the respondents, assisted ·waverly Drown and John T. Conley, respondents, in the sale of the phonographs manufactured by the said Waverly Brown and .John T. Conley, respondents. PAR. 2. The phonographs sold by the respondents, 'Vaverly Brown nnd John T. Conley, were advertised for sale by means of newspaper advertisements, catalogues, correspondence, and such other ways peculiar to what is known commonly as the mail-order business. The newspaper advertising done by the respondents was of the following two classes, viz :

(a) Advertisements in the classified advertising columns in newspapers circulating in Illinois and Wisconsin, in which the names of the advertisers were given as Mrs. ·waverly Brown or 'Vaverly Brown, which advertisements offered for sale slightly used phonographs of standard makes of great value, at abnormal and unusual reductions from full standard resale prices. These advertisements did not disclose that the advertiser was engaged in the business of selling phonographs or was selling phonographs for the manufacturers, but conveyed the impression that the advertiser was a householder and was offering for sale a phonograph which had been purchased by such householder for his own use and which had been used by such householder only a short time; (b) Advertisements in which the respondents, Waverly Drown and John T. Conley, used the following trade names: Illinois Storage Co., Chicago Storuge Co., and Chicago Storage Sales Co., which newspaper advertisements, together with the catalogues and letters used by said respondents, contained certain false and misleading statements as follows:

(1) That the phonographs so advertised had been stored for safekeeping with one or another of the storage concerns intended to be indicated by the title used, and that such phonographs wero offered for sale for the purpose of reimbursing such storage concern for unpaid storage charges.

(2) That said respondents were regularly engaged in the storage and warehouse business, and by reason of conducting such business, cnmo into possession of a single phonograph, or single lots of phonographs, which had never been removed from the cases in which they 160 FEDERAL TRADE COMMISSION DECISIONS. Findings. SF.T.C.

were crated when they left the factory, and were being offered for sale by said respondents for the purpose of reimbursing them for unpaid storage charges.

PAn. 3. The phonographs advertised for sale by respondents, Waverly Brown and John T. Conley, which advertisements were in the name of ·waverly Brown and Mrs. Waverly Brown, were new and unused phonographs, and the supply was limited only by the capacity of Waverly Brown and John T. Conley, respondents, storeplenish through manufacture such needs as the said ·waverly Brown, respondent, and Mrs. 'Vaverly Brown, respondent, might have through answers to such advertisements.

PAn. 4. That the respondents, Waverly. Brown and John T. Conley, from l\Jarch, 1919, to and until the month of August, 1919, during which period they were engaged in the manufacture and sale of phonographs in the manner herein described, were not engaged in the storage and warehouse business, but were regularly engaged in the business of manufacturing and selling phonographs of a grade nnd quality which were manufactured to sell at resale and were customarily sold by respondents in.the regular course of their business at less than one-third of the resale price ($250), at which such phonographs were listed in the advertising matter of respondents; that the phonographs dealt in by such respondents in the period hereinbefore mentioned were not stored, and the number of phonographs offered for sale by such respondents' advertisements were not limited ns advertised, but were taken from respondents' regular stock, which respondents were replenishing from time to time. PAn. 5. That each and every one of the trade names, Illinois Storage Co., Chicago Storage Co., and Chicago Storage Sales Co., was used by the respondents, Waverly Brown and John T. Conley, for the purpose and with the effect of deceiving purchasers and prospective purchasers anti the public generally into believing that such respondents were conducting the business of storing household goods, and for the purpose and with the effect of accomplishing the deception intended by the use of the false and misleading statements mentioned in subdivision (b) of paragraph 2 hereof. PAn. 6. That such respondents, ·waverly Brown and John T. Conley, used the name of Mrs. Waverly Drown, respondent, with her consent, and used the name of vVaverly Drown, in advertisements offering phonographs for sale for the purpose and with the effect of deceiving the purchasers and prospective purchasers and the public generally into believing that such purchasers and prospective purchasers were being offered a phonograph of standard make of certain resale price, to wit, $250, which said phonograph had been slightly WAVERLY BROWN ET AL. 161 1156 Order.

.used; when in truth and in fact the respondents intended, by the us~ of such advertisements, to dispose of new phonographs manufactured by them under the name of the Tyrolia Talking Machine Co. CONCLUSIONS.

The practices of the respondent under the cot.ditions and circum· stances described in the foregoing findings are unfair methods of competition in interstate commerce and constitute a violation of the net of Congress, approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

ORDER TO CEASE AND DESIST.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the testimony, and evidence, and the Commission having made its findings as to the facts with the conclusion that the respondents have violated the provisions of section 5 of an act of Congress, approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," · It is now ordered, That the respondents, Waverly Brown, Mrs. Waverly Brown, and John T. Conley, do cease and desist from selling in interstate commerce, new and unused phonographs, manufactured by them or any of them, or dealt in by them or by any of them as a business, by means of advertising matter, circulated throughout the States and Territories of the United States, having a tendency to mislead the public into believing that slightly used phonographs of standard make of highest values are being offered for sale by private owners at abnormal and unusual reductions from full standard resale prices, when in truth and in fact said phonographs are new and unused and are manufactured by 'Vaverly Drown and John T. Conley, respondents, to sell to purchasers and users thereof and are sold by such respondents to purchasers and users thereof for less than one-third of the stamped resale price at which they are listed in the catalogues of said respondents. It is further ordered, That the respondents, Waverly Brown and John T. Conley, do cease and desist from using in their advertising matter, circulated throughout the States and Territories of the United States, and in the sale in interstate commerce of phonographs, any of the following trade names, to wit: Illinois Storage Co., Chicago Storage Co., Chicago Storage Sales Co., or any other trades name which might have a tendency to lead the public into believing: 74636"-22-11 • 162 FEDERAL TRADE COMMISSION DECISIONS. Order. 3F.T.C.

that the business conducted by the said Waverly Brown and John T. Conl~y is that of storing household goods. It is further ordered, That the ·said Waverly Brown, Mrs. Waverly Brown, and John T. Conley, shall within 60 days after the service of a copy of this order upon them, file with the Commission n report in writing stating in detail the manner in which this order has been complied with and conformed to.

' ·r • HOUSEHOLD STORAGE CO, (P, TYRRELL WARD), 163 Complaint.

'' I I FEDERAL TRADE CO].U.HS:SION v.

P.,TYRRELL "WARD, TRADING UNDER THE NAME AND STYLE OF HOUSEHOLD STORAGE CO.

COMPLAINT IN THE lfATTER OF THE ALLEGED Viol..<\TION OF SECTION II ' OF AN .ACT OF CONGRESS APPROVED BEPTEllBER 20, 1914. I ' Docltet 5i5.-Decemhet~ 21.• 1920.) SYLLABUS. I Where a person regularly engaged In the sale by man of phonographs resembling well~known makes, ' ' (a) Adopted the trade name Household Storage Co. for the purpose, and with the eflect, of deceiving purchasers and the public generally as to the· true l nature of his business: , ,, ( lJ) Falsely advertised (1) that in the course of his storag~ and warehouse business he had come into possession of a single phonograph or single lots of phonographs, never removed from the original crntes in which ship11el1 from the factory, of·a value greatly In exc~ss of the price at ~hlch oflered: nud (2) that such offers were limited to a single -phonograph or lot, and would not again be made: and (c) Oflered said phonographs at less than one-third of the prices at which, listed In his advertising matter, the fact being that such phonographs were manufactured to sell, and were customarily sold, by him at the prices at which offered: ' l Ileld, That such false nnd misleading advertising, under the circumstances set forth, constituted unfair wetholls of competition. COMPLAINT.

I The Federal Trade Commission, having reason to believe from a preliminary investigation maJe by it, that'P. Tyrrell Ward, trading under the name and style 6~ the Household Storage Co., hereinafter referred to as respondent, has been, and is, using unfair methods of competition in interstate commer(·e in violation of the provisions of section 5 of an act of Congress, approved Septem~er 2G, 1911, entitled "An act to create a F"ecleral Trade Commission, to define its powers and duties, and for other purposes," anJ. it' appeari1ig that :i proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect on information and belief as follows:

PARAGRAPH 1. That the respondent now is, and for more than a ye11r last past has been, operating a business in the city of Chicago, in the State of Illinois; that the business so conducted consists and 164 FEDERAL TRADE ·COMMISSION DECISIONS. Complaint. BF.T.C.

has consisted of the sale in commerce among the several States and Territories of the United States, and the District of Columbia, of phonographs resembling in appearance but inferior in quality to phonographs made by well-known manufacturers, which respondent sells direct to purchasers and users thereof, by means of catalogues and other advertising matter, and in direct competition with other persons, firms, and corporations similarly engaged. PAn. 2. That said respondent, in the course of his business, made use of catalogues and other advertising matter which is given general circulation throughout the States and Territories of the United States, and the District of Columbia; that said catalogues and advertising matter contain certain false and misleading statements and representations concerning 'respondent's said business and alleged benefits which the public,might derive from trading with respondent; that among such false and misleading statements and representations are statements and representations to the effect that respondent is regularly engaged in the storage or warehouse business, and by reason thereof comes into possession of a single phonograph, or of single lots of phonographs, which have never been removed from the cases in which they left the factory; that, these new phonographs are advertised by respondent as of value vastly in excess of the value at which respondent is offering them for sale to purchasers and prospective purchasers i that such offers of sale are limited to n single phonograph, or a single lot of phonographs, and will not again be so offered, when in truth and in fact respondent is not now, and for more than a year last past, has not been engaged in the storage or warehouse business, but is regularly engaged in the business of merchandizing phonographs of a grade and quality which are manufactured to sell at resale and are customarily sold at resale by respondent in the regular course of his business at less than one-thlr~ of the resale price at which they are listed in respondent's said catalogues; that said phonographs have not been so stored, and the number so offered for sale ar~ not limited as so advertiscu, but are taken from responucnt's regular trade stock which can be and is replenished by respondent at will; and that the said trallc name is so used by respondent for the purpose and with the effect of accomplishing said deceptions in the sale of phonographs. HOUSEHOLD STORAGE'CO, (P, TYRRELL WARD). 165 163 . F!ndlngs. 'REPORT, FINDINGS AS TO THE F,ACTS, AND ORDER. . Pursuant to the provisions of an act of Congress approved SeptE~mber 26, 1914, the Federal Trade Commission issued and served "'.complaint upon the respondent, P. Tyrrell Ward, trading under the name and style of Household Storage Co., charging him with the use of unfair methods of competition in commerce in violation of the provisions of said act .

. The respondent having entered l1is appearance and having filed his answer herein, hearings were had, aJILl evidence was thereupon h1trocluced in support of the allegations of said comphirit and on ,behalf of the respondent before an examiner of the Federal Trade Commission theretofore duly appointed .

. . And thereupon this proceeding came on for final hearingr and the Commission, having duly considered the record and being now _fully aclvised in the premises make this its findings ns to the facts and conclusions: ; ' FINDINGS AS TO THE FAOTS, PARAGRAPH 1. That the respondent, in the period from November, 1918, to and until the month of March, 1!)20, operated a business in tho city o~ Chicago, in the State of Illinois, under the name anq style of Household Storage Co., which business consisted of the sale in commerce among the several States and Territories of· the United States and the District of Columbia, of phonographs resembling in appearance those made by well-known manufacturers; that the respondent, in competition with other persons, firms, and corporations engaged in the sale of phonographs throughout the various States and Territories Qf the United States and the District of Columbia, sold phonographs to purchasers, dir~ctly, by means of advertising ·matter, catalogues, correspondence, and such other ways peculiar to 'vha~ is known. commonly as the mail-order business. PAR. 2. That the advertising matter used by respondent in the course of his business contained certain false and misleading statements, among which were the following, viz: (a) That respondent was regularly engaged in the storage and warehouse business and by reason of conducting such business came into possession of a single phonograph or single lots of phonographs . which had never been removed !rom the cases in which such phonographs were crated when they left the factory. (b) That such phonographs were of ·a vah:~e vastly in excess' of the price nt, which respondent offered them for sale to 'p_uchasers and prospective purchasers; that such offers of sale were li~item ~o 166 FEDERAL TRADE COMMISSION DECISIONS. Order. 8F.T.C.

a single phonograph or to a lot of single phonographs that would not again be made.

PAn. 3. That respondent in the period from November, 1918, to and until the month of March, 1920, during which period he was engaged in the sale of phonographs in the manner hereinbefore described, was not engaged in the storage or warehouse business but was regularly engaged in the business of selling phonographs of n grade and quality which were manufactured to sell at resale and were customarily sold at resale by respondent in the regular course of his business at less than one-third of the resale price ($250) at which such phonographs were listed in the advertising matter of respondent; that the phonographs dealt in py the respondent in the period hereinbefore mentioned were not stored, and the number of phonographs offered for sale by respondent's advertisments were not limited as advertised but were taken from respondent's regular stock, to replenish which the respondent had made arrangements with the manufacturer.

PAR. 4. That the trade name Household Storage Co. was used by the respondent for the purpose and with the effect of deceiving purchasers and prospective purchasers and the public generally into believing that the respondent was conducting a business principally of storing household goods and incidentally selling phonographs, and for the purpose and with the effect of accomplishing the deceptions intended by the use of the false and misleading statements set forth in paragraph 2 hereof.

CONCLUSIONS, The practices of said respondent, under the conditions and circumstances described in the foregoing findings, are unfair methods of competition in interstate commerce and constitute a viola.tion of the act of Congress, approved September 26, 1914, entitled "An net to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

ORDER TO CEASE .AND DESIST, This proceeding having been heard by the Federal Trade Com· mission upon the complaint of the Commission, the answer of the respondent, the testimony and evidence, and the Commission having made its findings as to the facts with its conclusions that the respond· ent has violated the provisions of the act of Congress approved Sep· tember 2G, 1914, entitled "An act to create a Federal Trade Com· mission, to Jefine its powers and duties, and. for other purposes," HOUSEHOLD STORAGE CO. (P. TYRRELL WARD), 167 163 Order. It is now ordered, That the respondent, P. Tyrrell Ward, and his agents and employees do cease and desist from using in the sale in interstate commerce of phonographs the trade name of Household Storage Co., or any other trade name which might have a tendency to lead the public into the belief that the business conducted by the said P. Tyrrell Ward is that of storing household goods. And it is further ordered, That the said P, '.fyrrell Ward shall, within 60 days after the service of a copy of this order upon him, file with the Commission a report in writing, stating in detail the manner in which this order has been complied with and conformed to. lGS lrEDEf.AL, Tr.ADE COMMISSION DECISIONS. r Syllabus. 3F.T.C.

FEDERAL TRADE COMMISSION '1).

DOSTON PIA~O & MUSIC COl\IP ANY~ COUrLAINT IN 'TIIE. MATTER OF THE ALLEGED VIOLATION OF SECTION u OF AN ·ACT OF CONGRESS Al'PROVED SEPTEMBER 26t 1014. Docket 277.-December. 30, 1V20.

SYLLABUS.

Where a corporation engaged in the purchase, and sale to retailen>, of talking machines, as a part of its sales plan or scheme, and acting through its agents, . (a) Used a printed paper or instrument, consisting in part of a contract and ln part of a promissory note, which printed instrument (l) was falsely and deceptively worde<l; (2) contained the false and mislead<ling word "order" in large type on that part of the instrument or paper constituting the contract; (3) contained the words" Masterphone Talking Machine Co., Owned and Operated by Doston Plano & Music Co. (Inc.)," In large type on that part of the Instrument constituting the contract, the fact being that "l\Iasterphone Talking Machine Co." was a mere trade name Ulled by said corporation for tile purpose 1md with the eflect o:t. misleading its customers into believing it engaged in manufacturing; (b) Falsely represented that (l) said printed Instruments were merely orders for machines to be sent on approval; (2) its advertising and service campaign would of Itself sell the machines; (3) its agents woulu personally canvass retail merchants' tmde and lend personal service in a selling campaign; ( 4) If customers failed to sell the machines so ordered!l, the corporation would return their money; anu (5) customers took no risk nnd could not lose on the transaction ;

(c) Misrepresented (1) the kind und quality of the machines, (2) their purchase price and terl'ls of payment; (3) the amount, quality, anu cilaructer of advertising matter and ouvertlslng service furnl:-:bec\; and ( 4) terms and conditions under which the machines would I.Je taken back; (d) Published and circulated among customers, lis a part of its plan for securing the signatures to said printed Instruments, a catalogue containing a cut representing a manufacturing plant, together with the wortls "Homt> of the 1\Iasterphone, Adrian, Mich.," for the purpose and with u tendency and capacity to mislead ~>aid customers into believing that tile corporation manufactured the machines sold by It, the fact being that it uid not manufacture, and did not own, lease, occupy or operate the plant represented; With the eflect that, as a rc:mlt of the varioulil misrepresentations above set forth, said corporation continuously secured signatures of customers to said printed instruments;

(e) Stated to customers seeking to cancel their contracts that such action wus Impossible because commissions hud been paiu agents and printi~ chargi.JII jncurred, which statements were false; and. BOSTON PIANO & MUSIC CO. 169 163 Complaint. (1) Actin~ in collusion with, and using the name of, a third party, wrote such customers that the promissory notes were now in the .hands of an innocent third party for value, and t11ut payment thereof was demanded under penalty, of lilUit, nnd tllereby enforced th~ provisions of sui~ printed .instruments, and deceived customers into acquiescence therein, the fact being that the. notes in the hands of said third party were subject to the same defenses by the maker as that1gh they had remained in the hands of the p!iyee:

Ueld, That such practices, under the circumstances set forth, constituted unfair methods of competition.

COMPLAINT. . . The Federal Trade Commission, having reason to l;>elieve from a preliminary investigation made by it that the Boston Piano & Music Co., hereinafter referred to as the respondent, has been and is using unfair methods of competition in interstate COIJ1merce in. violation of the provisions of section 5 of an act of Congress approved Sep~ tember 26, 1914, entitled "An net to create a Federal Trade Commission, to define its powers and duties, and for other purposest and it appearing that a proceeding by it in respect thereof would be to the interest of the public~ issues this complaint, stating its charges in that respect on information and belief as follows: PARAGRAPH 1. The respondent is now, and for more than two years last past has been, a corporation duly organized and existing under and. by virtue of the laws of the State of Iowa, with its principal office and place of business· at Iowa City, in said State, and engaged in the business of buying1 selling, and shipping talking machines and talking-machine recorus generally in commerce to retail mer~ chants located in the various States of the United States, in direct competition with other personsj firms, copartnerships, and corpora. tions similarly engaged. . , · PAR. 2. The respondent in carrying on its business, purchases talking machines with the name "l\Iasterphone" imprinted thereon and talking-machine records from manufacturers thereof, and under .the trade name Masterphone Talking Machine Co. sells and ships the Inachines and records. so purchased and certain advertising matt~r to be used in advertising the same to various :retail merchants located in numerous States of the United States. That respondent is now, nnd for more than two years l11st past has been, negotiating, effecting, and consummating such sales and shipments as the .result, and by th~ Use 1 of, a sales plan consisting of false representations, fraudulent schemes, devices, and practices, among ·which are the following: ·~ Respondent _employs .numerous traveling .salesmen, who ,travel throughout the various States, calling .upon: retail merchants nnq' soliciting orders for respondent's machines, records, and advertising FEDERAL TRADE CO?.IMISSION DECISIONS. 170 Complaint. 8F.T.C.

matter. Respondent supplies its salesmen with printed forms that appear to be orders or offers to purchase, but which, in fact, are, when signed by the prospective purchaser and the respondent's salesman, written contracts. Such contracts contain, among other things, a detailed description of the kind, quality, and dimensions of the machine, the number and kind of records, and the quantity and character of advertising matter and advertising service to be furnished by the respondent thereunder; a statement of the amount of the purchase price and the terms of payment thereof; the price, tenns, and conditions under which subsequent purchases may be made; an enumeration of various acts agreed to be performed by the parties thereto; and recitals to the effect that any changes of the printed contract to be binding on the respondent must appear in writing thereon; that all of the tenns and conditions under which the machines and records are purchased appear therein, and that the purchaser has read and understands the same. Respondent's salesmen, with the ~nowledge, acquiescence, and active cooperation of respondent, its officers, and employees, and for the purpose and with the effect of selling respondent's machines, records, and advertising matter, and inducing purchasers thereof to sign such contracts without reading or understanding the nature, terms, and conditions thereof, misrepresent, among other things, the kind, quality, and dimensions of respondent's machines, the quantity and character of the advertising matter and advertising service that will be furnished by respondent to purchasers thereof, the amount of the purchase price and the terms of payment thereof, the price at and the tenns under which subsequent purchases may be made, the various acts to be perfonned by the respondent and said purchasers; and falsely represent, among other things, that such printed forms are merely orders, and that the machines ordered thez:ein would be sent on approval, that respondent operates its own factory and manufactures the machines sold by it, that the purchaser can lose no money on the transaction, that respondent's machines are better than the standard makes of machines, and that dealers are abandoning the sale of Victor, Edison, and other standard talking machines and engaging in the sale of respondent's; that such purchasers will be granted the exclusive selling rights for their respective territories, that the kinds, quality, and value of the machines, records, advertising matter, an<.l advertising service to be sold are as described and the purchase price is as stated by such salesman, that respondent will conduct an advertising campaign that will in itself sell the machines for the purchaser, and that such salesman will return and lend his personal aid in a' selling campaign. 1 < ' DOSTON PIANO & MUSIC CO. 171 168 Findings. That the effects, among other effects, produced by respondent's acts in negotiating, effecting, and consummating the sale of its talking machines in the manner hereinbefore described is to stifle and suppress competition in the sale and shipment of talking machines in inter- . state commerce and to deceive and mislead purchasers and prospective purchasers of such talking machines.

llEPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an act of Congress approved September 26, 1914, the Federal Trade Commission issued and served a complaint upon the respondent, Boston Piano & Music Co., charging it with the use of unfair competition in commerce in violation of the provisions of said act.

The respondent having entered its appearance by its attorney, and having filed its answer herein, hearings were had and evidence was thereupon introduced in support of the allegations of said complaint, before John R. Dowlan, an examiner of the Federal Trade Commission, theretofore duly appointed, the respondent appearing before said examiner, but declining to introduce evidence in denial thereof. And thereupon this proceeding came on for final.hearing, and the Commission, having heard argument of counsel and duly considered the record, and being now fully advised in the premises, makes this its findings as to the facts and conclusions: FINDINGS AS TO THE FACTS.

PARAGRAPH 1. That the respondent is a corporation organized and existing under and by virtue of the laws of the State of Iowa, having its principal office and place of business located at the city of Iowa City, in said State, and is now, and since April, 1917, has been, engaged in the business of purchasing talking machines from the :Manophone Corporation, of Adrian, Mich.; the Vitanola Talking Machine Co., of Chicago, Ill., and the Knittel Co., of Quincy, Ill., and in selling and shipping said talking machines, together with certain talking machine records and advertising matter, in interstate commerce, to purchasers thereof, located throughout the different States of the United States, in direct competition with other persons, firms, copartnerships, and corporations similarly engaged. . PAn. 2. That the respondent, in the conduct of its business, is now, and since April~ 1917, has been, selling and shipping to retail merchants located throughout the different States of the United States its talking machines, talking-machine records, and advertising matter by the use and as the result of a sales plan or scheme conceived anc! 172 FEDERAL TRADE COMMISSION DECISIONS. Findings. 3F.T.C.

devised by· respondent; that respondent, as a part of said sales plan or scheme, employed agents who, acting within the scope of their employment, traveled throughout the different States of the United States and secured signatures of said retail merchants to certain printed instruments supplied said agents by respondent; that said printed instruments consisted of one paper, part of which consisted of a form of contract and part of which consisted of a form of promissory note; that said printed instruments are hereinafter referred to and designated " printed instruments "; that said '.' printed instruments" are identical with or similar to Commission's Exhibits Nos. 1 and 15, in e~idence in the record herein. ' PAn. 3. That the "printed instruments" designed a:qd ~sed by respondent in the conduct of its business, as aforesaid, are "falsely and deceptively worded and are surrounded with language that conceals and covers the real meaning, character, nature, and effect of said ,, printed instruments"; that said respondent, through the acts o;f its agents acting within the ~cope of their employment, has continuously secured signatures to said "printed instruments" as tho result of the deceptive and misleading character and nature of said ''.printed inst~uments" and as the result of false and misleading statements and representations of its said agents concerning the character, nature, terms, and provisions of said " printed instruments." PAR. 4. That respondent, for the purpose and with the intent of deceiving and misleading retail merchants into signing " printed instruments," printed or caused to be printed nnd appear in large type on the parts of said "printed instruments" constituting forms of contracts the word "order"; that said " printed instruments" constituting forms of contracts are not orders; that tho word "order" appearing in said "printed instruments" is false and misleading and has resulted in deceiving and misleading said retail merchants nnd has enabled respondent to secure signatures of said retail merchants to said " printed instruments." . : PAR. 5. That the respondent, for the purpose and with the intent of dceeiving and misleading retail merchants into signing ~'printed instruments," printed or caused to be printed and appear in large type on the parts of said ~printed instruments,'' constituting forms of contracts, the following statement or representation- Masterphone Talking Machine Co., owned and operated by Boston Piano & Muslc Co., Inc.- '. . which statement or misrepresentation is misleading and has resulted m leading said.retail merchants to believe that respondent was en· gaged in manufactu:ing talking machines, whereas, in truth and in BOl:;TON PLAN 0 & MUSIC CO. 173 168 Findings. fact, respondent has never manufactured talking machines, and in truth and in fad the "Mastcrphone Talking Machine Co." is not a company operated by respondent, but is a mere trade name used by -respondent for the purpose and with the intent as aforesaid. PAR. 6. That the respondent, for the purpose and with the intent of deceiving and misleading retail merchants into signing "printed instruments,!! is now1 and since April, 1917, has been, publishing and circulating among retail merchants catalogues in which appeared a certain cut or picture representing ri manufacturing plant, and in which appeared the following statement or representation:" Home of the Masterphon~, Adrian, Mich."; that said cut or picture, and statement or representation are designed and calculated, and have a tendency and capacity to deceive and mislead said retail merchants into believing that respondent manufactured the talking machines sold by it, whereas, in truth and in fact, respondent, during the time in which it published and circulated said catalogues, had no manufacturing plant and did not manufacture talking machines and did not own, lease, occupy, or operate the manufacturing plant represented and indicated by said cut or picture, and in truth ·and in fact the word "l\fasterphone" is a mere trade name, imprinted or stenciled on talking machines purchased by respondent from independent manufacturers the reo f.

PAR. 7. That respondent's agents, acting within the scope of their employment, and with the knowledge, acquiescence, and support of respondent, have continuously secured signatures of retail merchants to "printed instruments" as the result of the following statements and representations, all of which were, in truth and in fact, false, misleading, and deceptive; that '·' print('.d instruments" were merely orders and that talking machines ordered therein would be sent on approval and could be returned if not satisfactory; that respondent's advertising and service campaign would itself sell talking machines; that respondent's agents would personally canvass retail merchant's trade and lenu personal service in a selling campaign; that if retail merchants failed to sell talking machines ordered under "printed instruments," respondent would return the money paid for same; that retail merchants took absolutely no risk and could not. lose money on the transaction.

, PAR. 8~ That respondent's agents, acting within the scope of their employment, and with the knowledge, acquiescence, and ·support of rc>spondent, have continuously secured signatures of retail merchants to respondent's "printed instruments" as the result of false and misleading statements and representations concerning (a) t~e kinds FEDERAL TRADE COMMISSION PECISIONS. 174:

Conclusions. 3F.T.O.

and quality of respondent's talking machines; (b) the purchase price and the terms of payment of respondent's talking machines; (c) the amount, the quality, and the character of the adv-ertising matter and the advertising service respondent furnishes; (d) the terms and the conditions under which respondent will repurchase or buy back talk· ing machines.

PAR. 9. That the respondent, as a part of its sales plan, after receiving the· executed "printed instruments," detached that part thereof which constituted the promissory notes and delivered them to one 0. A. Byington, whose office is on the same floor of the same building as that of respondent, under pretence of sale for valuable consideration; that 0. A. Byington knew the methods and pretences by which the execution of said notes was procured and that the notes in his hands ·were subject to the same defenses by the maker as though they had remained in the hands of the payee. PAR. 10. That by agreement between Byington and the respondent, the latter was· responsible to Byington for the notes if and when actually discounted by the said Byington and the respondent was permitted by Byington to act jn Byington's name and stead for the purpose of enforcing payment of such notes by the makers thereof; that pursuant to such agreement it was the practic~ of the respondent by its president to write letters to retail merchants who desired to cancel their contracts, stating that the cancellation of the ,contract was impossible because commissions had been paid to the agent thereon and printing charges incurred, which statements were false, and in conjunction therewith to write to the same merchants letters signed with the name of 0. A. Byington, and purporting to be ex· pressions by him ns a holder of the merchants' notes, for value and without notice of any defects therein or de~lenses thereto, in which payment was demanded· under penalty of suit, which letters were false representations ruade by the respondent company; that as a result of such false represent:ttions respondent enforced the pro· visions of its said "printed instruments" and deceived its customers into an acquiescence therein.

CONCLUSIONS.

The practices of the said respondent1 under the conditions and circumstances described in the foregoing findin~s, are unfair"methods of competition in interstate commerce, and constitute a violation of the ·act of Congres~ approved September 26, 1014, entitle'd "An act to create a Feueral Trade Commission, to define its powers 4nd duties, and for other purposes."

BOSTON PIANO & MU~IC CO. 175 168 Order. ORDER TO CEASE AND DESIS'l'.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of respondent, testimony and'evidence, and the argument of counsel, and the Commission having made its· findings as to the facts with its conclusions, that the respondent has violated the pro"visions of the net of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," · It is now ordered, That the respondent, Boston Piano & Music Co.,· and its officers, representatives, agents, servants, and employees, do cease and desist from directly or indirectly: (1) Using any instrument or document or instruments or documents identical with or similar to those it made use of in negoti-. ating and consummating sales of its 'talking machines, talking-machine records, and advertising matter without fully explaining to purchasers the true nature, character, terms, and conditions thereof. (2) Defrauding or misleading or attempting to defraud or mislead purchasers by malring any false or misleading oral statement or representation, or by circulating any false or misleading statement or representation, in any letter, advertisement, catalogue, or any other printed matter whatsoever; (a) concerning the terms or the conditions or the provisions of any contract, order, note, or other instrument used by respondent in negotiating and consummating the sales of its talking machines; (b) concerning the purchase price or the terms of payment of the kind or the quality of the respondent's talking machines; (c) concerning the amount or the quality or the character of respondent's advertising matter and advertising service; (d) that respondent is engaged in the business of manufacturing talking machines or that conveys the impression that respondent is engaged in the business of manufacturing talking machines. (3) Defrauding or misleading or attempting to defraud or mislead purchasers by writing, sending forth, or forwarding, as the agent of, or on behalf of, any person or persons any letter or other. communication containing any false, misleading, or deceptive statement or representation.

(4) Using cuts or prints or pictures in advertisements, catalogues, letterheads, or other printed matter whatsoever, wherein respondent represents to purchasers or leads purchasers to believe that respondent is engaged in the b11siness of manufacturing talking machine~. Respondent is further ordered to file a report in writing with the Commission 60 dn.ys from notice hereof, stating in detail the manner. in which this order has been complied with and conformed to. 176 FEDERAL TRADE COMMISSION DECISIONS, Order; 8 F.T.C FEDERAL TRADE COMMISSION v.

ATLANTIC REFINING COMPANY.

Docket 131.-December 31, 1920.

ORDER OF RESCISSION.

WHEREAS a complaint was heretofo!e, to wit, on the 13th day of .May, 1918, issued by the Federal Trade Commission against the respondent named above, charging certain violations of section 5 of an act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and charging further that the respondent has violated section 2 of an act of Congress approved October 15, 1914, entitled "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," and WHEREAS testimony was taken in said cause, and it appears that. the complaint should have been amended in order to conform to the evidence and that such action was not taken: It is, therefore, Ordered, That the findings and conclusions and the order to cease and desist, dated April 27, 1920,* in the above-entitled cause be, and the same are hereby, rescinded and vacated. • See 11 F. T. C, S:i7.

·) .• io\ ... AMERICAN MUTUAL SEED CO • 17~ •:-1. Syllabus. FEDERAL TRADE COMMISSION / v.

AMERICAN :MUTUAL SEED CO~IPANY.