David Bernsteen

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IN THE MATTER OF DAVID BERNSTEEN AND REPUBLIC PRODUCTS COMPANY.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SECTION 5 OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26 , 1914 . Docket 1093-July 24, 1924.

SYLLABUS .

Where a concern acquired through a receiver's sale the right to the trade name or brand " Paramount Pennsylvania Auto Oil," under which there had theretofore been sold an extensively advertised, well and favorably known automobile lubricating oil, together with the business concerned and trade name and good will thereof; and thereafter the former owner of said business, acting in behalf of a corporation managed and controlled by him, used a list of names of former customers turned over to him by said receiver for his use during the period of the receivership, to send to such customers circulars captioned " To Our Old Customers Only," inviting them to purchase an automobile lubricating oil therein designated as " Paramount Pennsylvania Automobile Oil " ; with the capacity and tendency to mislead and deceive customers of the old business in reference to the identity or source of the oil so advertised and offered to them, and with the effect of enabling said corporation to sell said Paramount Pennsylvania Automobile Oil as and for the Paramount Pennsylvania Auto Oil of said concern, which was practically forced to discontinue its efforts to sell the same :

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

Mr. O. R. Stites for the Commission.

COMPLAINT.

Acting in the public interest pursuant to the provisions 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," the Federal Trade Commission charges that David Bernsteen and Republic Products Company, hereinafter referred to as respondents, have been and are using unfair methods of competition in interstate commerce in violation of the provisions of Section 5 of saidAct, and states its charges in that respect as follows :

PARAGRAPH 1. Respondent Bernsteen for some time prior and up to the incorporation of respondent Republic Products Company, as hereinafter set out, was engaged in the business of selling lubricating oils and allied commodities under the trade name and style Great Lakes Refining Company,and was also further engaged in the sale DAVID BERNSTEEN ET AL. 67 66 Complaint., ofpaints, and ingredients entering into the same,and allied products under the name and style Republic Paint and Lead Works. With regard to both said enterprises, respondent Bernsteen had his principal place of business in the city of Cleveland, State of Ohio , He sold said products to purchasers located at points in various States of the United States and caused said products when so sold to be transported from his said principal place of business in the city of Cleveland,Ohio, into and through other States of the United States to said purchasers at their respective points of location. In the course and conduct of his said business enterprises said respondent was in competition with other individuals, partnerships and corporations similarly engaged in the sale of like products in interstate commerce. In the year 1921 certain creditors of respondent Bernsteen procured the appointment by the District Court of the United States for the Northern District of Ohio, of a receiver for respondent Bernsteen doing business under his aforesaid several trade names, and thereafter said receiver under due authorization by said court and for a good and sufficient consideration sold to the Klein Manufacturing Company, a corporation organized under the laws of the State of Ohio, with its principal place of business in the city of Cleveland, in said State, all of the property and assets belonging and appertaining to the business of said Bernsteen done under the trade name and style Great Lakes Refining Company, and under the trade name and style Republic Paint and Lead Works, including the good will thereof. Upon said sale being consummated and completed, said Klein Manufac turing Company proceeded to continue aforesaid business enterprise of respondent Bernsteen, and in the course thereof has ever since said time sold in interstate commerce the products formerly sold by said Bernsteen under said trade names as hereinbefore referred to, in like manner as said Bernsteen, before said receivership, had done. During the pendency of said receivership respondent Bernsteen, together with others, caused to be incorporated respondent Republic Products Company, a corporation organized under the laws of the State of Ohio with its principal place of business in the city of Cleveland, in said State. Said Bernsteen was one of the incorporators of respondent company and became and still is its secretary, in which capacity said Bernsteen conducts and manages the business and affairs and dictates and directs the policies of respondent company. Ever since its said organization respondent company under the direction and control of respondent Bernsteen, as above set out, has engaged in the sale of lubricating oils and other products to customers located at points in the various States of 68 FEDERAL TRADE COMMISSION DECISIONS. Complaint. 8 F. T. C.

the United States. It causes said products when so sold to be transported from its said principal place of business in the city of Cleveland, Ohio, into and through other States of the United States to said purchasers at their respective points of location. In the course and conduct of its said business respondent company is in competition with other individuals, partnerships and corporations similarly engaged in the sale of products of like kind in interstate commerce, one of said competitors being aforesaid Klein Manufacturing Company.

PAR. 2. Amongst the products formerly sold by respondent Bernsteen under the trade name, Great Lakes Refining Company, the sale whereof was carried on and continued in the regular course of business by the Klein Manufacturing Company after the aforesaid purchase of the assets and business of said Bernsteen, as hereinbefore set out, was a lubricating oil named and called by said Bernsteen "Paramount Auto Oil," under which said name said oil was by said Bernsteen sold in interstate commerce in the course of his business hereinbefore referred to, and in and under said name was listed in catalogues, price lists and other trade literature by said Bernsteen and by him advertised in sundry newspapers, trade journals and other publications of general circulation in the various States in which said Bernsteen did business. Said Klein Manufacturing Company after aforesaid purchase from said receiver continued to sell aforesaid lubricating oil under said name "Paramount Auto Oil" and to list and advertise said oil under said. name as said Bernsteen had theretofore done. Upon its organization respondent Republic Products Company, under the management, direction and control of respondent Bernsteen, as hereinbefore set out, began, and still continues, to sell in interstate commerce a lubricating oil under thename "Paramount Auto Oil." Respondent Bernsteen acting for and on behalf of respondent company chose said trade name for said last named lubricating oil with the purpose and intention of selling same in interstate commerce as and for the "Paramount Auto Oil" of aforesaid Klein Manufacturing Company. In furtherance of said intention and purpose and the better to effectuate same, respondent Bernsteen caused respondent company to solicit business with the former customers of said Bernsteen with whom he had theretofore dealt under the trade name Great Lakes Refining Company, as hereinbefore set out, and in connection with said solicitation and the carrying out of said purpose and intention, respondent Bernsteen made use of a list of said customers abstracted from amongst the effects of his said former business and used the same, and respondent company since its organization has used the same in and about the DAVID BERNSTEEN ET AL. 69 66 Complaint.

marketing and sale of lubricating oil under the name "Paramount Auto Oil," as hereinbefore set out. As a further means of effecting aforesaid purpose and intention, said Bernsteen chose and selected the name " Republic Products Company," inwhichname he procured and brought about the incorporation of the respondent company, as hereinbefore set out, for the reason that many of his aforesaid former customers were familiar with said Bernsteen's aforesaid former trade name of Republic Paint & Lead Works. By reason of the abstraction and retention of said list of customers by said Bernsteen, said Klein Manufacturing Company, since aforesaid purchase from said receiver,has been and still is unable to identify or discover alarge number of aforesaid former customers of respondent Bernsteen who dealt with him under and in connection with his aforesaid trade name, the Great Lakes Refining Company, and said Bernsteen and respondent company have been, and still are, enabled to solicit and secure the business of aforesaid customers in and about the sale of lubricating oil under the name " Paramount Auto Oil," as hereinbefore set out, in all respects as though respondent company and respondent Bernsteen were engaged inthe uninterrupted prosecution of said Bernsteen's former business done under aforesaid tradename, Great Lakes Refining Company.

PAR. 3. The acts and practices of respondents hereinbefore set out, have the capacity and tendency to and do mislead and deceive the trade and public, including aforesaid customers of the Great Lakes Refining Company, into the belief that the lubricating oil sold by respondent company under the name" ParamountAuto Oil " is the "Paramount Auto Oil" sold by the Klein Manufacturing Company, and to purchase respondent company's said product in that belief. Further said acts and practices prevent the aforesaid Klein Manufacturing Company from securing and enjoying the benefit of the business formerly transacted by respondent Bernsteen under the trade name Great Lakes Refining Company and the good will connected therewith, and which good will and business were purchased by said Klein Manufacturing Company from said receiver for a good and sufficient consideration as hereinbefore set out. PAR. 4. The above alleged acts and practices done and engaged inby respondents are all to the prejudice of the public and respondents' competitors and constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress entitled "An Act To create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914.

47005°-27-VOL 8- -6 70 FEDERAL TRADE COMMISSION DECISIONS. Findings. 8 F. T. C.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions 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," the Federal Trade Commission issued and served a complaint on the respondent, Republic Products Company and its secretary, David Bernsteen, charging it with the use of unfair methods of competition inviolation of the provisions of said act. The respondent having filed its answer herein, evidence was thereupon introduced in support of the allegations of the complaintbefore an examiner of the Federal Trade Commission. Thereupon this proceeding came on for final hearing, and the Commission having duly considered the complaint, the answer thereto and the evidence adduced and being fully advised in the premises, makes this its report stating its findings as to the facts and conclusion : FINDINGS AS TO THE FACTS.

PARAGRAPH 1. The respondent, Republic Products Company, is a corporation organized and existing under the laws of Ohio, with its principal place ofbusiness located at Cleveland, Ohio. Respondent, David Bernsteen, is now and has been since its incorporation, secretary of the aforesaid Republic Products Company, in which capacity he manages the business and dictates and directs the policies of the said company. Respondent corporation is engaged in selling lubricating oil to purchasers located in the several States of the United States. In the conduct of its business the respondent corporation sends circulars and price quotations by mail to prospective purchasers. It receives orders by mail for its product and in fulfillment of such orders causes its product to be shipped from Cleveland, Ohio, and from Freedom, Pa., into and through the several states direct to the aforesaid purchasers. The principal product sold by the respondent corporation is automobile lubricating oil which it advertises and sells under the trade name or brand " Paramount Pennsylvania Automobile Oil." In the conduct of its business, as above described, the respondent corporation is in competition with other persons, firms and corporations likewise engaged in selling and shipping lubricating oil in interstate commerce. PAR. 2. For some years prior to November, 1920, respondent Bernsteen conducted a business in Cleveland, Ohio, said business being that of selling lubricating oil and other commodities including house paint, roofing cement and linseed oil. In the conduct of his business, DAVID BERNSTEEN ET AL. 71 66 Findings.

as described herein, respondent Bernsteen made most of his sales bymail order, however, he also employed anumber oftraveling salesmenwho sold respondent's commodities by personal solicitation. In the conduct ofhis business, as described herein, respondent Bernsteen operated as the Great Lakes Refining Company, Republic Paint & Lead Works, National Linseed Company, Industrial Refining Company.

One of the products sold by the respondent Bernsteen operating as the Great Lakes Refining Companywas lubricating oil. The said oil was advertised and sold under the trade name or brand " Paramount Pennsylvania Auto Oil." It was extensively advertised under the name of the Great Lakes Refining Company, by circulars, circular letters and pamphlets and became well and favorably known to consumers throughout the United States. PAR. 3. In November, 1920, the United States District Court for the Northern District of Ohio appointed a receiver for the respondent Bernsteen,doing business as the Great Lakes Refining Company, and under the various other trade names mentioned inparagraph 2. The receiver took over the entire business and assets of the respondent Bernsteen and continued to operate said business as it had been conducted prior to the receivership. PAR. 4. On February 21, 1921, the receiver entered into a contract with respondent Bernsteen whereby the said receiver agreed to lend to the respondent Bernsteen the list of names of customers of the Great Lakes Refining Company. Respondent Bernsteen was given the right by this contract to circularize the persons whose names appeared on said list for the purpose of selling them lubricating oil during the term of the receivership. The aforesaid list of names came into the possession of the respondent Bernsteen who solicited orders and still solicits orders from said customers for " Paramount Pennsylvania Automobile Oil" in behalf of the Republic Products Company.

PAR. 5. Among the aforementioned circulars sent by the respondent corporation to the former customers of the Great Lakes Refining Company was a circular sent to each of such customers under date ofMay1, 1922, which was headed as follows: " To Our Old Customers Only."

PAR. 6. During the month of March, 1921, the Klein Manufacturing Company, an Ohio corporation,with itsprincipal office in Cleveland, purchased from the aforementioned receiver the merchandise thenonhand which had come into his hands as receiver for respondent Bernsteen. In April, 1921, another contract was entered into by the receiver and the Klein Manufacturing Company whereby the 72 FEDERAL TRADE COMMISSION DECISIONS . Findings. 8F. T. C.

receiver sold tothe saidcompany the balance of the assets of respondent Bernsteen, including the office furniture,books, advertising matter, et cetera. The contract provided further that the receiver was to convey, and did convey to the Klein Manufacturing Company, all right, title, interest and financial use in and to the good will of the Great Lakes Refining Company, including the right to use the trade names and trade-marks which had been used in connection with the business of the aforesaid Great Lakes Refining Company, both prior and subsequent to the appointment of the aforementioned receiver. PAR. 7. The Klein Manufacturing Company, after acquiring the business assets of respondent Bernsteen, as set forth in paragraph 6, continued the said business of the Great Lakes Refining Company and endeavored to sell Paramount Pennsylvania Auto Oil under thename of the Great Lakes Refining Company. The Klein Manufacturing Company was unable to send advertising matter and solicit business from the former customers of the Great Lakes Refining Company because it was unable to discover or secure the names of such former customers. The Klein Manufacturing Company thenmade an effort to sell Paramount Auto Oil by employing salesmen who had formerly sold this oil for the respondent Bernsteen prior to the receivership. These salesmen were unable to secure and are still unable to secure any appreciable amount of business for the reason that customers of the Great Lakes Refining Company had already purchased " Paramount Pennsylvania Automobile Oil " from the respondent corporation, in response to circular letters,pamphlets, and circulars sent to them by the respondent corporation. PAR. 8. The circulars, pamphlets, and other advertising matter sent by respondent corporation to the customers of the Great Lakes Refining Company, and the adoption and use of the name " Paramount Pennsylvania Automobile Oil" in simulation of the trade name " Paramount Pennsylvania Auto Oil" of the Klein Manufacturing Company, trading as the Great Lakes Refining Company, had the capacity and tendency to mislead and deceive customers of the Great LakesRefining Company into the belief that the lubricating oil so advertised and offered for sale was identical to that which theyhad previously purchased from the Great Lakes Refining Company and enabled the respondent corporation to sell its product as and for that of the Great Lakes Refining Company. The respondent corporation's practices, as hereinbefore described, practically forced the Klein Manufacturing Company, trading as Great Lakes Refining Company, to discontinue its efforts to sell aforesaid Paramount PennsylvaniaAutomobile Oil.

DAVID BERNSTEEN ET AL. 73 66 Order.

CONCLUSION .

The acts and practices of the respondent corporation and respondent Bernsteen as hereinabove set forth, and under the conditions and circumstances set forth in the foregoing findings as to the facts, are unfair methods of competition in commerce and constitute aviolation of Section 5 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. ORDER TO CEASE AND DESIST.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer thereto and the testimony and evidence submitted, the trial examiner's report upon the facts, 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 powers andduties,and for other purposes," Now, therefore, it is ordered, That the respondent,Republic Products Company, a corporation organized and existing under the laws of Ohio, David Bernsteen, its secretary, its agents, servants, representatives and employees cease and desist from : 1. Making use of,by advertisement or otherwise, the word " Paramount " alone or in combination with other words, or in any way whatsoever, in connection with the sale or offering for sale of lubricating oil in interstate commerce unless the said oil is the product of the Klein Manufacturing Company trading as the Great Lakes Refining Company.

2. Representing or suggesting inconnection with the sale or offering for sale of lubricating oil in interstate commerce that the Republic Products Company and the Great Lakes Refining Company are oneand the same company, or that the Republic Products Company is the successor of the Great Lakes Refining Company and is selling the product formerly sold by the Great Lakes Refining Company. 74 FEDERAL TRADE COMMISSION DECISIONS . Syllabus. 8F. T.C.