Winsted Hosiery Co.

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COMPLAINT IN THE "lfATTER OF Tile ALLEGED VIOLATION OF SECTION 5 OF AN ACT OF CONGRESS APPROVED SEPTEMilER 26 1 1914, Docket 214.-January 14, 1921.

SYLLABUS.

Where a corporation engaged in the manufacture and sale of knit underwenr, · In competition wlth manufncturers nnu importers of underwear composed wholly of wool, and also with manufacturers and importers of underwear composed partly of cotton, who either correctly branded and labeled their underwear with re_f~1·ence to composition or falletil. to brand and label the same at all in that respect; branded, labeled, advertised and sold certain lines of its underwear not composed wholly of wool, but the fabric of which, due to its mamifacture from "wool-spun" yarns composed of cotton and wool, was soft and woolly, as "Men's Natural 1\lerlno Shirts," "1\fen's Gray Wool Shirts,"·" 1\Ien's Natural 'Vorsted Shirts," "Australlan Wool Shirts," and "Men's Natural Wool Shirts," and thereby misled a substantial part ot the purchasing public into bellevlng that such goods w~re all wool, and also tended to encourage and nld represe-ntations to consumers to that effect by ignorant or unscrupulous retailers and sales people: lleld, That such branding, labeling, advCfl:tlslng and sales, under the circum• stances set forth, constituted unfair methods of competition. COMPLAINT.

The Federal Trade Commission, having reason to bclieYe from a preliminary investigation made by it that the Winsted Hosiery Co., hereinafter referred to as the responuent, has been and is using unfair methods of competition in interstate commerce in violation o£ the provisions of section 5 of the act of Congress, approved September 26, 1914, entitled "An net to create u Fedeml 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, 9n information and belief as follows:

PARAGRAPH 1. That the respondent, Winsted Hosiery Co., is a cor- Poration organized, existing, and doing business unqer and by virtue ?f the laws of the State of Connecticut, having its principal factory, office, and place of business lo~ated at the town of Winsted, in said State, now and for more than one year last past engaged in manufacturing and selling underwear throughout the States and Territories of · • Moull\l!d anll new lluuing"a. See footnote on pp. liJO, 191, anl orli\nal llndlnga iu ll F. '1', C. 202 et 1eq.

FEDERAL T.R.A.DE COMMISSION DECISIONS.

Findings. SF.T.C.

the United States, nnd that at all times hereinafter mentioned respondent has carried on and conuucted such business in competition with other persons, firms, copartnerships, and corporations similarly engaged.

r AR. 2. That the respondent, Winsted Hosiery Co., in the conduct of its business, manufactures such underwear so sold by it in its factory located at the town of Winsted, State of Connecticut, and purchases and enters into contracts of purchase for the necessary component materials needed therefor, in different States and Territories of the United States, transporting the same through other States of the United States in and to said town of Winsted, where they are made and manufactured into the finished product and sold and shipped to purchasers thereof; thllt after such products are so manufactured, they are continuously moved to, from, and among other States and Territories of the United States and the District of Columbia, and there is continuously and has been at all times hereinafter mentioned, a constant current of trade in commerce in said underwear between and among the various States of the United States, the Territories thereof, and the District of Columbia, and especially to and through the town of Winsted, State of Connecticut, and therefrom to and through other States of the United States, the Territories thereof and the District of Columbia. PAn. 3. That for more than one year last past the respondent, Winsted Hosiery Co., with the purpose, intent, and effect of stifling and suppressing competition in the manufacture and sale of underwear in interstate commerce, has in the conduct of its business manufactured and sold in commerce aforesaid, and labeled, advertised, and branded certain lines of underwear composed of but a small amount of wool as "l\fen's Natural Merino Shirts," ".Men's Gra.Y 1Vool Shirts," Men's Nat ural Wool Shirts," "Men's Nat ural Worsted. Shirts," "Australian Wool Shirts." That such advertisementa1 brands, and labels are false and misleading and calculated and designed to and do deceive the trade and general public into the belief that such underwear is manufactured and made and composed wholly of wool.

llEPORT, MODIFIED AND NEW FINDINGS AS TO THE FACTS, AND RECOMMENDED MODIFIED ORDER.* Pursuant to the provisions of an act of Congress approved Sep~ tember 2G, 1914, the Federal Tru.Je Commission issued and served a complaint upon the respondent charging it with the use of unftur • United State• Circuit Court !Jf .Ap~J('als tor tbe second circuit. Winsted Hosiery Company, petitioner, tl. Federal Trade Commission, respondent. The petitioner, Winsted Hosiery Co., having llled In tbls court, under tbe provisions of section li ot an act ot Congresa approved September 26, 1914, entitled ".An act to WINSTED HOSIERY CO. 191 lStl Flndlng!J. methods of competition in commerce in violation of the provisions of said act.

The respondent having entered its appearance by its attorney, and filed its answer herein, a statement of facts was agreed upon by counsel for the Commission and for the respondent, to be taken in lieu of evidence, and findings of fact and conclusion were thereupon adopted by the Commission and an order made thereon, dated Jan· nary 29, 1920, that the respondent cease and desist from using certain labels alleged in the complaint herein, except as provided in said order; thereafter the respondent, by its attorneys, filed with the United States Circuit Court of Appeals, Second Circuit, a petition to review said order as provided by law, and notice of the same was duly served upon the Commission; thereafter application was macte on behalf of the Commission to the said court for permission to take additional evidence, under the provisions of section 5 of the act of Congress approved September 26, 1914, and by an order dated October 18, 1920, the motion was granted and ninety days was allowed within which to take such evidence; such additional evidence thereafter having been introduced in support of the allegations ~f said complaint before Mr. James McKeag, an examiner of the Federal Trade Commission, theretofore duly appointed, and an opportunity having been given to the respondent to introduce evidence on its behalf, and respondent, by its attorneys, having rested without the taking of evidence.

Now, in accordance with the provisions of section 5 of the act of Congress approved September 26, 1914, the Commission having duly considered the record, and being now fully advised in the premises, modifies its findings as to the facts, as previously adopted, and makes new findings by reason of the additional evidence, constituting all its findings of facts herein, as follows: FINDINGS AS TO THE FACTS, P ARAGRAPII 1r The respondent, Winsted Hosiery Co., is and has been for the last 20 years a corporation duly incorporated under the create a Federal Trade Commission to dellne Ita powera and dutle~. and for other purposes," a written petition for review of an order Issued by the ~'ederal Trade Com- . mission, tbe respondent bPreln. dlrectln'f the petitioner to cease and dPslst from the use of certain lal>els on underwear manufactured by It, and the Federal Trade Commis· alon, under another provision ot said act, having applied to tbls court tor leave to adduce additional evidence and such leave having been granted by an order dated October 18, 1920, as follows; " A motion having bern made bPreln by counsel tor the respondent to remand this proceeding tor the purpose of taking further testimony~ Upon conshlera· tlon thereof It Is ordl'red that Ralcl motion be and herelly 11 granted, the respondent to have 90 days from the date hl'reof wlthln which to take such evidence"; and adclltlonnl evidence having been taken by J'e~pondent In pursuance of said order, now the respondent, the Federal •rrade Comml•~ion, mol1e11 return ot such Rddltlonal evidence to this court and file11 therewith its modified and new findings of tncta and Its recommendation tor the Dlodlllcatlon of Ita original order, as hereto attached: By the Commission 1 [SEAL.) (Signed) HUSTON TBOUPRON, Chairman. llated this 14th day of J'anuary, A. D. 1021. Attest:

(SI~:ned) J. P. YODER, S~e~aru.

192 FEDERAL TRADE COMMISSION DECISIONS. Findings. 3F.T.U.

laws of the 'State of Connecticut, and is ar,d has been during' that time engaged in the manufacture of knit underwear, shirts and drawers, and hosiery, having its principal place of business and factory at Winstead, Conn., and a branch factory at Norfolk, Conn., and one at Unionville, Conn.; the respondent for more than 10 years has sold, and now sells, its products of knit underwear, including men's shirts and drawers, throughout various States of the United States, and has conducted its business of manufacture and sale, as abon1 described, in competition with other persons, firms, and corporations similarly engaged. ' PAR. 2. The respondent in the conduct of its business, as 'stated in paragraph 1, has for more than 10 years prior to October 30, 1918, the date of the issuance of the complaint herein, sold and shipped its products, namely, knit underwear, to purchasers thereof located in different States of. the United States; and during the time named there has been a constant trade and commerce • in such products between and among various States of the United States. For the three years prior to October 31, 1918, the respondent's 'sales of its products of knit underwear aggregated $2,500,000. PAR. 3. Respondent admits by its answer that for more than one year prior to January, HH9, it has in the conduct of its business manufactured and sold in commerce (as set forth in the complaint herein) and labeled, advertised, and branded certain lines of underwear as "Men's Natural Merino Shirts," "Men's Gray 'Vool Shirts," "Men's Nat ural Worsted Shirts," "Australian Wool Shirts," and "Men's Nat ural '\Vool Shirts," and that such underwear is not composed wholly of wool.

PAR. 4; The methods rmployed by the respondent in labeling, ad~ vertising, nnd branding its product are effective to carry both to the retailer an(l the ultimate consumer thereof, the representation that such ~arments were composed wholly of wool, and in the absence of technical know ledge in either the retailer· or the consumer tended to create the belief that such garments were, in fact, wholly composed of wool.

r AR. 5. During the period of more thnn five ;rears prior to October 30, 1918, lapels bearing the various legends set out in paragraph 3 have been pasted on or attached by respondent to the boxes in which it sold and delivered to its customers underwear manufactured by it; said labels also bore respondent's trade-mark, consisting of the words " Winsted Hosiery Company" in a circle.

PAR. 6. The underwear so labeled, advertised, and sold, os set forth in para,zraphs 3 and 5, was not composed wholly of wool, being part WINSTED HOSIERY CO. 193 189 Findings. wool and part cotton, the percentage of wool therein varying generally from 25 per cent to 80 per cent, and in some cases being as low as 10 per cent; as a rule, for the underwear containing 50 per cent or less of wool respondent has used labels containing the word "Merino," _And on those containing more than 50 per cent of wool labels containin~ the word " vV ool."

PAn. 7. The percentage of wool in the underwear manufactured by respondent and sold under the labels stated above, varied from time to time according to the relative cost of wool and cotton and accord- 1ng to the loss in the process of fulling, the latter extending to 5 per cent. Respondent has not put any all-wool underwear on the market for a good many years.

PAn. 8. Respondent sells its product of underwear to retailers. PAR. 9. Respondent's boxes containing its underwear, labeled as set forth in paragraph 3, have been customarily placed by purchasers, namely, retailers, on their shelves, exposing said labels to the view of their customers, and retailers and their salesmen have sold the contents from the boxes so labeled to the public. PAR. 10. The word "merino" means primarily and popularly a breed of sheep whose fleece is a fine long-staple wool, and as applied to wool it signifies the fleece of that sheep or a grade corresponding to it in quality. It is so used commercially in the wool trade and eommands the highest price.

The noun " wool " means the fleece or coat of the domesticated sheep, and as an adjective the word means "made of wool." " vVorsted" means primarily and popularly a yarn or fabric made wholly of wool.

" Australian vVool " means primarily and popularly wool grown in Australia and is a distinct commodity in the wool and yarn markets, and is known generally as a fine grade of wool. PAR. 11. The merino sheep, meaning a sheep of the merino blood, has been celebrated for centuries in Europe for its fine wool, and was imported into this country early in the nineteenth century, and has Leen conserved and bred here ever since and recognized as the sheep producing the highest grade of fine wool. It has existed and now exists in large numbers in various parts of this country. The classification or grading of wool in the wool market is based on the standard of the wool of the merino sheep, the terms "fine," "three-fourths blood," "half-blood," etc., as grades of wool, referring primarily to full-blood, three-fourths and one-half blood, respectively, of the merino breed.

74636"--22----13 194 FEDERAL TRADE COMMISSION DECISIONS, Findings. 3F.T.C.

PAR. 12. A substantial part of the consuming public understand tho words " merino," "natural merino," " natural wool," " gray wool," '; natural worsted," "Australian wool," and gray merino " as applied to underwear to indicate all-wool underwear. PAR. 13. Some buyers for retailers and salespeople understand the words " merino," " natural merino," natural wool," " gray wool," ''natural worsted," "Australian wpol," and "gray merino," as applied to underwear to indicate all-wool underwear. PAR. 14. Some retailers and their salesmen rely on the labels on the boxes in which they sell their underwear, including respondent's, such as " ~Ierino," " Natural vVool," "Australian Wool," and " Gray Merino," and use them to sell underwear under such labels as all wool.

PAR. 15. The labels" Merino,"" Natural Merino," " Natural 'Vool," "Gray vVool," "Natural vVorsted," "Australian vVool," and "Gray Merino," used on garments composed partly of wool and partly of cotton, or their containers, tend to encourage and aid representations to consumers by ignorant or unscrupulous retailers and salesmen that the underwear so labeled is all wool. The pay of retail salesmen of underwear often depends in part on the amount of their sales. PAR. 16. The labels " Nat ural Merino," "Nat ural vVool," " Gray Wool,"" Nat ural 'Vorsted," "Australian vVool," and "Gray Merino," as used by respondent for its underwear composed partly of wool and partly of cotton, or on the containers, are calculated to and do mislead a substantial part of the purchasing public to believe that the garments sold under such labels are all wool. PAR. 17. The words "merino," "wool," and "worsted" as used by respondent in labels applied to their product of knit underwear severally tend to and do mislead a substantial part of the consuming public to believe that they indicate all-wool garments and into purchasing in that belief.

PAR. 18. The respondent makes and uses "wool-spun" yarns, composed of cotton and wool, in the underwear manufactured and sold by it under the labels as stated in paragraph 16, which make a soft, woolly fabric and tend to cause the purchasing public to believe that it is all wool.

PAR. 19. The terms "merino," "natural merino," and "natural wool" have been for many years used by some manufacturers as labels for underwear made entirely of cotton. The sales people of retailers can not tell from their own examination the proportions of wool and cotton in knit underwear composed partly of wool and partly of cotton.

WINSTED :S:OSIERY CO. 195 189 Findings. PAR: 20. The word " merino " is used by manufacturers of yam and knit underwear and largely by jobbers and retailers as a trade term, meaning a combination of cotton and wool. Yarns made partly of cotton and partly of wool fibres and known in the termi~ nology of the trade as " merino " yarns are sold and billed by yarn manufacturers to underwear manufacturers as containing definitely stated percentages of cotton and wool. The term "merino" when applied in the retail trade to underwear composed partly of wool and partly of cotton is used regardless of the percentages of wool and cotton and has no definite meaning.

PAR. 21. All-wool knit underwear has been widely manufactured and sold in this country for 20 years or more under various labels, such as "All-wool,"" "Wool,"" Natural Wool,"" Random Wool," and "Pure Wool," and under trade-mark brands without any words descriptive of the composition thereof. AU-wool knit underwear of domestic manufacture has constituted a substantial proportion of the total product of all-wool and wool-and-cotton underwear. According to the census of 1914, for manufacture of textiles, the latest available, the amount of all-wool knit underwear-namely, shirts and drawersas compared with the output of such underwear made partly of cotton and partly of wool, was for the year 1914 in quantity-that is, by dozens-373,045 dozens to 1,434,504 dozens and in value $3,448,575 to $9,228,686 or 20 per cent approximately in quantity and 27 per cent in value of the entire product of underwear in this country composed of wool in whol~ or in part.

PAR. 22. All-wool knit underwear has been imported for sale into this country by various retail dealers for 20 years or more, has been sold under various labels such as "All-wool," "Wool," "Natural Wool," " Pure "\Vool," " Lamb's Wool," and under trade-marks, e. g., " Demophilo," " Two Steeples," and some has been so imported and sold without any label indicating its composition. Knit underwear has been imported for sale into this country for 20 years or more, composed of various percentages of cotton and wool, under the labels " Cotton and "\Vool," " Cotton and "\Vool Mixed," " Gauze Merino," "'Vool and Cotton" or "Cotton and 'V'ool," according to whether the percentage of wool or cotton present was greater or less. ~ AR. 23. The knit underwear manufactured in this country consisting of cotton and wool in various percentages has been sold for 10 years or more under a variety of labels differing from respond· ent's as set out in paragraph 3; a large number of the total output of such garments have been made and sold by manufacturers without any label or marking describing the materials or fibers of which they 196 FEDERAL TRADE COMMISSION DECISIONS, Findings. SF.T.C.

a.re composed, such as cotton and wool, but under the private trademark or brand of the manufacturer or retailer alone. Manufacturer~ of knit underwear made partly of cotton and partly of wool have been accustomed to sell their underwear under labels in the form and language requested by their customers, and such labels include both trade-marks or brands without descriptive words and terms such as "Fine". and "Superior" in combination with the word "Underwear," without words descriptive of the composition, and :fancy or coined names. Such underwear has also been sold under the labels " Cotton and ·wool " and " Part 1-V ool." PAn. 24. Knit underwear composed partly of cotton and partly of wool, under the labels "Natural Merino," "Natural 1-Vool," "Gray \Vool," " Nat ural \Vorsted," " Australian \Vool," and " Gray Merino," has been sold by respondent in competition with underwear manufactured wholly of wool, imported and domestic, and manufactured and sold under labels indicating that fact, or under some of the labels named above in this paragraph or under private trade-marks or brands alone, without descriptive terms, and in competition with knit underwear composed partly of cotton and partly of wool, imported or domestic, manufactured and sold under labels indicating such composition or under trade-marks or brands alone, without descriptive terms or under labels bearing fancy or coined names. PAn. 25. Some retailers have ceased the use of" Merino" on underwear made partly of cotton and partly of wool since before the beginning of this proceeding, because of its uncertain,· ambiguous, and misleading meaning to the public.

PAn. 26. It is the sense of the underwear industry as expressed by the American Knit Goods Manufacturers, an organization representing approximately 75 per cent of manufacturers in this country of the class of knit underwear manufactured by respondent, that the use on knit underwear composed partly of wool and partly of cotton of the words" Wool Underwear,"'' Worsted Underwear,"" Natural Wool Underwear," ''Australian \Vool Underwear," and "Natural Merino," among others, are "improper," and the words " \Vool and Cotton" are recommended by said association for use as labels on underwear made partly of wool and partly of cotton, and the said organization has by official action requested its members to drop the use of the word "Merino " as a label on underwear made of cotton and wool unless followed by the words "wool and cotton." PAn. 27. It is the sense of retailers as expressed by the board of directors of the National Association of Retail Clothiers that the terms {1) "Natural Merino," (2) "Gray Wool," (3) "Natural WINSTED HOSIERY CO, 197 189 Order. Wool," (4) "Natural ·worsted," (5) "Australian ·wool," used as a brand or name on underwear that contained cotton or other adulter· ant than wool, or on the box containing such underwear, might mis. lead the consumer and in many instances retailers into the belief that garments so marked were not adulterated and that such misleading terms should not Le used.

PAu. 28. Respondent has continuously up to the present time manufactured and sold knit underwear under the labels set out in paragraph 3, and the proportions of wool and cotton therein have not differed materially from those stated in paragraph 6. CONCLUSIONS.

The practices of the said respondent, under the conditions and circumstances described in the foregoing findings, are unfair methods of competition in interstate commerce and constitute a violation of the 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."

RECOMMENDED MODIFIED ORDER TO CEASE AND DESIST, This proceeding having been heard by the Federal Trade Com· mission upon complaint of the Commission~ the answer of the re· spondent, the statement of facts agreed upon Ly counsel for the Com· mission and respondent, and upon the additional evidence taken for the Commission under an order of the United States Circuit Court of Appeals for the Second Circuit, dated October 18, 1920, and the Commission having, by reason of such additional evidence, modified some of its original findings and adopted new findings as to the facts and adopted its conclusions that the respondent has violated the pro· visions of the act of Congress approved September 26, 1914, en. titled, "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," it now recommends the following modification of its original order to cease and desist herein, dated January 20, 1920:

It is now ordered, That the respondent, the Winsted Hosiery Co., its officers, agents, representatives, servants, and employees, do cease and desist from employing or using as labels or brands on underwear or other knit goods not composed wholly of wool, or on the wrappers, boxers, or other containers in which they are delivered to customers, the word "Merino," " Wool," or "Worsted," alone or in combination with any other word or words, unless accompanied by a word or 198 FEDERAL TRADE COMMISSION DECISIONS. Order. 3F.T.C.

words designating the substance, fiber, or material, other than wool, of which the garments are composed in part (e. g., "Merino, Wool, and Cotton"; "Wool anl Cotton"; "Worsted, "\Vool and Cotton"; " Wool, Cotton and Silk"), or by a word or words otherwise clearly indicating that such underwear or other goods is not made wholly of wool (e. g., part wool).

Respondent is further ordered to file a report in writing with the Commission three months from notice hereof, stating in detail the manner in which this order has been complied with and _conformed to. THE T..UYO TR.ADmG co., INC. 199 Complaint.

FEDERAL TRADE COMMISSION v.

THE TAIYO TRADING COMPANY, INC.

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