Vacuum Cleaner Specialty Co., Inc.

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COMPLAIN'!' IN THE llfATTER OF THE ALLEGED VIOLATION OF SECTION II OF AN ACT OF CONGRESS APPROVED SEPTEMBER 20, 19U, Docket 530-May 16, 1921.

SYLLABUS.

Where a dealer in vacuum cleaners, handling most of the different makes on the market but with a special financial interest In one, I.

(a) Failed to disclose such interest in a "PRICF. LIST AND RATING SHEET" which It circulated among customers and preflpective customers, and which gave such make the highest rating, contalne!l a statement that its Rating Committee, for the members of which . - claimed long experience, " meets semimonthly, at which tlnie all cleaners are tcRted scientifically for EFFI· CIENCY and comparisons are ronde on the points of SIMPLICITY AND con• BTBUCTION," and In other ways was calculated to create the Impression that ratings given were the result of frequent, expert, and Impartial examination, and could ba relied on :

(b) Tampered with and knowingly used for demonstration purposes Improperly adjusted cleaners of a competitor:

(c) Made false and injurious statements to proRpecUve customers concerning the value, efficiency, and wearing qualities of such cleaners, and disparaged their makers:

IL Discontinued the use of the price list or rating sheet but thereafter (d) Published anli circulated among customer::~ and prospective customers a price list of its various cleaners, designating by stars certain machines as machines which lt was "especially intere!;ted in," but without disclosing whether such Interest \Vl!.S financial or otherwise: lield, That ,;uch acts, under tbe circumstnnces set forth, constituted unfair methods of competition.

COMPLAINT.

The Federal Trade Commission having reason to. believe from a preliminary investigation made by it that the Vacuum Cleaner Specialty Co., Inc., Imperial Vacuum Cleaner Co., F. R. Muenzen, W. H. Kappele, .J. P. McGrath, A. J. l\fuenzen, J. M. Leddy, and J. G. Waschen, hereinafter referred to as respondents,1 have been 1 Complaint dismissed by order dated June 25, 1920, aa to all respondellta except the Vacuum Cleaner SpeclalQ' Co., Inc.

378 FEDERAL TRADE COMMISSION DECISIONS. Complaint. 3l<'.T.C. during the year last past and now are using unfair methods of com· petition in interstate commerce in violation of the provisions of section 5 of an act of Congress, approved Septe.mber 2G, 1914, en· titled, "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:

PARAGnAPll 1. That the respondent, Vacuum Cleaner Specialty Co., Inc., is a corporation organized, existing, and doing business under· and by virtue of the laws of the State of New York, with its prin· cipal office and place of business located in the city and State of New York, now and at all times hereinafter mentioned engaged in the business of selling vacuum cleaners throughout different States of the United States and the District of Columbia, in direct compe· tion with other persons, firms, copartnerships, and corporations sim· ilarly engaged; and the respondents F. R 1\Iuenzen, W. H. Kappele, J. P. McGrath, and A. G. 1\Iuenzen are, respectively, president, vice president, treasurer, and secretary of said respondent corporation, having their residences and principal places of business in the city and State of New York.

PAn. 2. That in the conduct of its business, the respondent Vacuum Cleaner Specialty Co., Inc., from its principal place of business lo· cated in the city and State of New York, sells and transports vacuum cleaners of numerous manufacturers to customers located in various States of the United States; that after such vacuum cleaners are so sold they are continuously moved to, through, from, and among other States of th~ United States and the District of Columbia, and there is continuously and has been at all times hereinafter mentioned, a con· · stunt current of trade and commerce in said vacuum cleaners between and among various States of the United States and the District of Columbia, to and through the city and State of New York, and from there to and through other States of the United States and the Dis· trict of Columbia.

PAn. 3. That the respondent, Imperial Vacuum Cleaner Co., is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located in the city and State of New York, now and at all times hereinafter mentioned engaged in the business of selling a vacuum cleaner, for which it has adopted a trade name VACUUM CLEANER SPECIALTY CO., INC • 379 . 377 Complaint. of "Imperial," by and through its duly constituted and appointed agent, the respondent Vacuum Cleaner Specialty Co., Inc.; and the respondents J. M. Leddy, F. R. Muenzen, and J. G. ·waschen are, respectively, president, treasurer, and secretary of said corporation. PAR. 4. That the respondent Vacuum Cleaner Specialty Co., Inc., by extensive advertising in publications circulated in commerce aforesaid, and by correspondence with numerous customers and prospective purchasers in various States of the United States holds itself out to the public as a vacuum cleaner specialist or expert and impartial adviser and as such impartial adviser solicits inquiries from such said prospective purchasers and the public concerning the methods of various types of cleaners and within the year last past invariably recommended the Imperial vacuum cleaner and frequently disparages competitive devices whereas in truth and in fact the respondent is not an impartial adviser but, on the contrary, has a special interest in the said Imperial cleaner by reason of the fact that the said Imperial cleaner is manufactured especially for the Vacuum Cleaner Specialty Co., Inc., and said company is the agent for the sale of the said Imperial cleaner, and the further fact that the amount of profit on the said Imperial cleaner is considerably greater than the profit made on the sale of the majority of other types of cleaners so advertised by the respondent.

PAn. 5. That the respondent, Vacuum Cleaner Specialty Co., Inc., by extensive advertising in publications circulated in commerce aforesaid and by correspondence with numerous customers and prospective customers in various States of the United States holds itself out as a vacuum cleaner specialist or expert and impartial adviser, and as such, within the year last past, has demonstrated to prospective customers vacuum sweepers and cleaners produced by various manufacturers for the purpose of comparing the results obtained by such. sweepers and cleaners with the result obtained by cleaners in the sale of which the respondent is especially inter· ested; and for the purpose of making such demonstrations has tampered with and failed to properly adjust such competitive cleaners while properly adjusting the cleaners in which it is interested, thus giving prospective customers the impression that such competitive cleaners are less efficient than they are in fact, or that they are not adapted for the use for which they are intended to be put by sue}- prospective purchasers, thus facilitating the sale of the cleaners in which respondent is especially .interested. 380 FEDERAL TRADE COMMISSION DECISIONS, . Findings. 8F.T.C.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an act of Congress, approved Sep· tember 26, 1914, the Federal Trade Commis!?ion issued and served .a c9mplaint upon the respondent, Vacuum Cleaner Specialty Co., Inc., charging it with the use of unfair 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, hearings were had and evidence was thereupo~ introduced in support of the allegations of said complaint and on behalf of the respondent, Vacuum Cleaner Specialty Co., Inc., be· fore an examiner of the Federal Trad~ Commission, theretofore duly appointed.

And thereupon this proceeding came on for final hearing, and the Commission, having heard argument of counsel and duly con· sidered the record, and being now fully advised in the premises, makes this its findings as to the facts and conclusion: FINDINGS AS TO THE FACTS.

PARAGRAPH 1. That the respondent, Vacuum Cleaner Specialty Co., Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located in said city and State now and ever since the first day of August, 1918, engaged in the busi· ness of selling vacuum cleaners, sweepers and similar devices through· out different States of the United States and the District of Colum· bia in direct competition with other persons, firms, copartnerships, and corporations similarly engaged.

PAR. 2. That in the conduct of its business, respondent from its principal place of business, located in the city and State of Nevv York, sells and transports the vacuum· cleaners, s~epers and similar devices of various types to customers located throughout the States of the United States and after such vacuum cleaners are so sold they are continuously moved to, through, from and among other States of the United States and the District of Columbia, and there is con· tinuously and has beeri at all times hereinafter mentioned a constant current of trade and commerce in said vacuum cleaners, sweepers and devices between and among various States of the United States and the District of Columbia, to and through the city and State of New York and therefrom to and through other States of the United States and the District of Columbia. . PAR. 3. That tlle rrspondent. Vacuum Cleaner Specialty Co., Inc., in the conduct of its business in comnierce aforesaid, sells at VACUUM: CLEANER SPECIALTY CO., INC. 381 377 Findings. retail 24 different makes of vacuum cleaners or sweepers out of a. total of 29 such devices on the market made by various competing manufacturers, including the Imperial Electric Vacuum Cleaner, which has been owned by or especially manufactured for the respondent and its predecessor, Muenzen Specialty Co., for more than three years last past and on the sale of which the respondent makes a considerably greater profit than it does on the sale of the other types of cleaners advertised and sold by it. PAR, 4. That the respondent has sold and offered to sell such cleaners and sweepers in commerce aforesaid by means of advertisements placed in publications circulated throughout the United States and by correspondence with customers and prospective customers located in various States of the United States, and in pursuance of and as o. part of such selling plan or policy during the year from August 1, 1918, to August 1, 1919, circulated among such customers and prospective customers a rating sheet wherein it designated and named certain cleaners as Three Star Cleaners as an indication of their superiority over the other devices listed in such rating sheet or Three Star list, and respondent did not indicate or set out in any manner whatsoever therein its ownership of or especial interest in said Imperial Electric Vacuum Cleaner; that said rating sheet or Three Star list was in the words and figures following, to wit: " Per cent Three Star " Cleaners: perfect. 1st choice, Imperial----------------------------------------------- 94 2d choice, Victor--------------------------------------------------- 89 3d choice, noyaL ____ ---------------------------------------------- 89 4th choice, llegina __ ,--------------------------------------··------- 87 rith choice, Eureka _____ -------------------------------------------- 86 6th choice, Apex--------------------------------------------------- 85 PRICI:!: LIST AND RATING SHE!i:T.

All vacuum cleaners are good-some are better than others. 'Which Is the best? Customers Invariably ask us WHICH Is THE BEST VACUUM CLEANER? In order to answer that question briefly we append hereto a list ot the six best vacuum cleaners according to the judgment ot out· rating committee. The names are given In the order ot their merit. Our committee meets semimonthly, at which time all cleaners ar~ tested scientifically for EFFICIENCY and comparison.~ nre made on the points ot SIM- PLICITY AND CONSTRUCTION. Statistics as to DUI:ABILITY are furnished by the superintendent ot our repair department. Other points ot lesser hupo.rtance are also taken into consideration. Price is not considet·ed at all. Percentages are allotted to each cleaner for good points and pennltles deducted for disadvantages. The net percentage is shown below opposite the Jutme of Pnch cleoner. The !>IX cleaners with the hl10best percentage are what lve call "Three Star" Cleaners.

------------ iiliiiooiOll 882 FEDERAL TRADE COMMISSION DECISIONS. Findings. 3 F. T.C. Price com- Attach- plete Price. ments. with attach- ----ments.

America ...................... 1 S40. 00 19.75 149.75 W!s&-McCJun~ Mrg. Co., New Phfladelph!a. 65. ()() 10.00 Apex Elec. M g. Co. Cleveland, Ohio. -Apex ...................... ! 45.00 6~.50 7.50 45.00 AH~. Bab{rlnvlnc!ble............. Invincible Vac. Cl. Co., Dover, Ohio. Bee ode! "D" .............. 37.50 8.50 46.00 Blrtman Elec. Co., Ch cago, Ill. Cardiac...................... I 37. 50 8.50 46.00 Clements Mfg. Co., Chicago, Ill. Cadillac B lK Ben ............. 50. 00 8.50 68.50 Do. Cad!Uac Little Ben........... 1 89. 50 8.60 48.00 Do. CadiUao ReUable ...... : ...... J 29.60 8.60 88.00 Do. Duntley,B................... 42.00 7.60 49.60 DuntleyCo. NewYork,N. Y. Eoupse ....................... 37. 60 8.00 46.60 Erl!pse Mach. Co., Sidney, Ohio. -Eureka(eaMtofRookies)... 37.50 6.61) 4~00 Eureka Vao. Cl. Co., Detroit, Mich. Frantz. Premier.............. 1 39. 76 10.00 49.76 Frantz. Premier Co., Clevelan~ Ohio. Hoover ~Bah~) .............. 47.60 8.60 56.00 Hoover Suction Sweeper Co., ew Berlln, Ohio. Hoover srec al)............. 67,61) 11.60 69.00 Do. Hot Poln "L" ... ...... .. .. . 1 33. 00 10.00 43.00 Edison Elec. Appl. Co.,Inc., Chicago, m. H..,t Point "M" .............. • 311.00 10.00 4A.OO Do. ..•Imperlal. ................. l 46.00 10.00 M.OO Imperial Vao. Cl. Co., N.Y • Liberty Model "C" .......... ' 40.00 8.00 48.00 Innovation Elec. Co., N. Y. .lo[alc!aJ ...................... I 35.00 11.00 43.00 Ma!{:f Co., Newton, Ohio. Oh o-4 ....................... [ 45.00 10.00 M.OO Un t Elec. Co., Canton, Ohio. Pittsburf, ........... ·......... 30.00 7.60 87.60 P.ittsbu~ Eioo. ~oo. Co., New York, N.Y. Rel(lna' MC" ................ I 46.00 10.00 M.OO Regina o., New ork, N.Y. ••Regina Model "K" ....... 1 46.00 10.00 M.OO Do. -Royal. .................... l 45.00 10.00 65.00 P. A. Geier CoWCievelandi?hio. 49.50 8.60 68.00 Pneuvac Co., orcester, ass. Bwee':!r·Vao M. D ........... i 30.00 8.00 38.00 Hurley Mach. Co., Chicago, Ill. 1'bor o. 6 ................... Thor No. 1~ .................. :15.00 8.00 43.00 Do. 1 44.75 9. 75 64.50 N a tiona! Sweeper Co., Torrington, Conn. 10.00 37.50 or ..................... 47.60 Our own Er!vate brand. I 45.00 Elec. 7.60 62.50 Western lee. Co., New York.-vic-·eo··W Mtern ..................N o.ll ......... Western Elec. No.l2......... 49.50 8.50 MOO Do. Because of our belief In their superiority we Issue a special form of guarantee (see other side) on any cleaner sold while It is In the" Three Star" class. There are nine members on our rating committee whose combined vacuum· cleaner experience totals 61 years. This in e1fect means that if our decisions are correct you would gain as much knowledge by reading over this ratinlf sheet as you would by shopping 61 years for a vacuum cleaner. lor obvious reasons we would not care to giva the percentages of the cleanerll not on the "Three Star" list, but we would gladly give any other informs· tlon In connection therewith.

To stimulate cash payments on all other than "Three Star" cleaners we allow 7 per cent cash discount. On "Three Star" cleaners the cash discount Is 3 per cent.

VACUUH CLEANER SPECIALTY Co., INo., 131 West 42d St., New York.

N. B.-Of cour!'le, after all, these ratings are simply our opinions and you must disregard them entirely If they do not agree with your pet·soual opinion. No. 130.

The "8 Star" guarantee Is furnished by us wlth all "3 Star" vacuuru cleaners. Compare It wlth the guarantee below or any other vacuum cleaner ruarantee. After reading lt over you must realize that we have a lot of confidence in any make of cleaner on which we Issue such a liberal guamnteP Notice that there are no exceptions or provisos In this guarantee. It would be rather expensive for us to issue this guarantee on a vacuum cleaner that is lluble to get out of order. VACUUM CLEANER SPECIALTY CO., INC, 383 377 Findings; * • • THREE STAB GUARANTEE. • • • We hereby guarantee--- vacuum cleaner purchased by-- for a period of one year from date. Said guarantee to include FREE repair of ANY damage to· said cleaner resulting from ANY cause whatsoever. Moreover In the event of such repairs being needed we will call for and ueUver cleaner or Will pay expressage on it BOTH WAYS for out of town customers. VACUUM CLEANER SPECIALTY Co., INC.

Per-----, Secretarv.

Date---.

The below guarantee is the ordinary guarantee which we furnish with vacuum ~leaners that are not mentioned in the "3 Star List." It is substantially the same us manufacturers give, and it is quite dlt!erent from the one- ttbove. GUARANTEE.

We hereby guarantee- vacuum cleaner purchased by------ to be free from mechanical and electrical defects, and wlll repair or replace free of charge any part giving out within one year from date, provided directions for o!llng and care of cleaner have been carried out. (Misuse, accident, and natural wear and tear excepted.) AU cleaners to be repaired must be sent to us express charges paid. We wlll not be responsible for the above cleaner if it has been tampered with. V Acuu:u CLEANEB S:PECIALTY Co., INc.

Per ------, Secretarv.

Date--.

PAR. 5. That in August, 1919, the respondent discontinued the use of the aforementioned and above-described rating sheet or Three Star list, and thereafter published and circulated among its customers and prospective customers in commerce aforesaid a price list of various machines or devices handled by it wherein certain cleaners were designated by stars as ones in which the respondent was "especially interested in," but which did not disclose to the purchasing public the nature or character or extent of such "especial interest" or whether such interest was financial or caused by the relatively higher efficiency or merit of such designated machines; that such price list Was in the words anu figures following, to wit: 384 FEDERAL TRADE COMMISSION DECISIONS. Findings. 8F.T.C Price list.

Time payments Price or $3.60 Attach· cleaner Cash dis- down ments Name or cleaner. without count. and I addl· attach- monthly tional. ment. payments each.

---------------------1------------- America ~................................... $50.00 12. 50 S.'l. 81 SIO.OO Apex.......................................................... 57. 7~ 6. 25 Cl. 78 u.60 Smaller set or attachments for Apex .................................................... . 10.00 Cadlllac .................... , .................. , .. ,............. 4.'1.00 :1.25 6.19 10.00 Cadlllnc Big Ben............................................... 60.00 3. 00 7. 07 10.00 Cad lilac Little Ben ...... _..................................... 47. 40 2. 37 6. 60 10.00 Cadillac Reliable............................................... 39. 50 1. 97 4. 50 10.00 •Eureka....................................................... ·46.00 2.2.~ 6.19 8.50 Hot Point V-2. ................................................ 45.00 2. 2.; 6.19 10.00 •Imperial. ...... .. .. .. .. .. ... .. .. .. .. .. . .. .. . ...... ... .. ... .... 60. 00 1. 50 6. 81 11.00 Smaller set or attachments for Imperial ................................................. . 6. 73 Ohio......................................................... 65.00 5.00 6.44 10.00 . Premier" 14" ..... ............... ..... ... ... ... ..... • ... • ...... 45. 00 2. 50 6. 10 10.00 Premier" 19" ......................................... ......... 63. oe 3. oo 7. 44 10.00 ReglnaModei"K" .......... ,................................. 60.00 2.50 5.81 12.00 Royal.......................................................... 65.00 2. 75 6. 44 12.60 Smaller set of attachments for Royal ................................... , ............... .. 10.00 •Sweeper-Vac. M. D........................................... 63,00 5. 50 7. 44 10.60 Thor No. 12.................................................... 42.60 2.12 6. 00 9. 60 Torrington ........................................ ,............ 6<1. 00 6. 00 7. 06 •victor......................................................... 47.60 2. u 6.60 10.00'· 75 Western Elec. No. 12......... ... ... • .. .. ...... •• .... • .. .. • .. .. 63. 00 6. 50 7. 44 10.~0 VACUUM CLEANER SPECIALTY Co., INC.

1\fnln offices and sales rooms, 131 West 42d Street, New York, N. Y. Phone 6280 Bryant. Phone (1281 Bryant. 140 West 84th Street, Bet. Broadway and 7th Ave. Phone C!:!S3-G284 Bryant 107 West 42d Street. This store open evenings. FIVE CONVENIENT STORES.

Hudson Terminal Bulldlng, 30 Church Street, Booth 20, Phone 38~1, Cortlandt 412 Fulton Street, Brooklyn, N. Y. Phone "1030 Mnln. All express charges paid to any point. • We are especially Interested in these cleaners.

You are not obliged to purchase attachments with any make of cleaner; 1P fact, only about one-halt of our customers buy attachments with the cleaner 538-10--8. E.&. 0. E. These prices are subject to change without notice. No. 157. ·(Over 1 (THIS IS A FACSIMILE OF OUR GUARANTEE Bmi'D.] GUABANTEF. BOND, (Or Insurance policy.) We h£'reby guarantee --- vnruum cleaner No. --, pnrchnsed by - ---, for a p£'rlo<l of one year from dote. Said guarantee to Include free repair of any damage to snld cleaner resulting from any cause whatsoever. VACUUM CLEANER SPECIALTY CO., INO. 385 377 Conclusions. M~reover, In the event o! such repairs being needed we will call for and deliver the cleaner or will pay expressage on 1t both ways for out-of-town customers. VACUUM CLEANER SPECIALTY Co., !No., New York ana BI'DoMyn, Per ----, Secretary.

Date,- See other side tor price list and terms.

PAR. 6. That the respondent in selling and offering to sell vacuum cleaners and sweepers in commerce as aforesaid has demonstrated the machines of different competing manufacturers to such customers for the purpose of comparing the results obtained by such cleaners and sweepers with the results obtained by the Imperial Electric Vacuum Cleaner in the sale of which the respondent was interested, and in so demonstrating the Hoover Suction Sweeper made by the Hoover Suction Sweeper Co. of North Canton, Ohio, hc.s caused the sweeper to be operated improperly by- (a) Revolving the brush in the wrong direction, the effect of 'W'which was to cause the sweeper to throw dirt out on the carpet. (b) Permitting the handle hole cover to be partially off, which caused a passage of air to enter the machine at that point instead of through the nozzle, thereby reducing the suction of the machine.

(c) Arranging the lips of the nozzle so that they pressed down so closely to the floor that they did not allow a space for the air to pick the carpet up so that as the brush revolved it could create a vibration which would shake the dirt from the floor covering, nnd while so demonstrating has stated and held out to the purchasing public that the Hoover machine was not worth five cents; was made by a couple of harness makers; that if the Hoover machine '\Vas bought and lasted six months one would be lucky; that it was the worst machine on the market and its motor one of the most inferior on the market; that no one who manufactured cleaners cared for it and that it was absolutely no good and was never heard of outside of New Jersey, when in truth and in fact such Hoover machine compares favorably in efficiency, reliability, and effectiveness with other machines and is well known to manufacturers and the Vacuum-cleaner public.

CONCLUSIONS.

That 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 74G36°-22-2lS ----------- -.ol • 386 FEDERAL TR.ADE COMMISSION DECISIONS. Order. SF.T.O.

"An act to create a Federal Trade Commission, to define its powers and duties and for other purposes."

ORDER TO <:EASE AND DESIST, This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of the respondent, the testimony and evidence, and the argument of coun· sel, and the Commission having made its findings as to the facts with its conclusion that the respondent has violated the provisions of the act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its power and duties, and for other purposes.'' It i8 now ordered that the respondent, Vacuum Cleaner Specialty Co., Inc., its officers, agents, servants, and employees do cease and desist from directly or indirectly:

(1) Publishing or circulating among purchasers or prospective purchasers of vacuum cleaners or sweepers, or like devices, rating sheets, three-star lists, price lists, or any other similar advertising matter calculated or tending to induce the public to believe that the Vacuum Cleaner Specialty Co., Inc., does not own or have any special financial interest in any vacuum cleaner or sweeper, or like device, offered by it for sale to the public, when in fact it has some such interest in or ownership of such cleaners, sweepers, and like devices.

(2) Improperly demonstrating to purchasers and prospective purchasers sample vacuum cleaners or sweepers, or similar devices, which have been willfully tampered with or which have been intentionally improperly adjusted, or making such demonstrations in any manner whatsoever which do not fairly represent such cleaners, sweepers, or like devices to the purchasing public.

(3) Making false and misleading statements to customers or pros· pective customers concerning the efficiency, durability, reliability, quality, or effectiveness of competitive vacuum cleaners or sweeping devices.

It is further ordered that the respondent within 30 days after the date of service upon it of this order, file with the Commissi~.m a re· port in writing, setting forth in detail the manner and form in which it has complied with the order to cease and desist hereinbefore set forth.

UNIVERSAL MOTOR CO. ET AL. 387 Complaint.

FEDERAL TRADE COM~ITSSION v.

UNIVERSAL MOTOR COMPANY AND UNIVERSAL PRODUCTS COMPANY.