Progress Paint Manufacturing Company

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF PROGRESS PAINT MANUFACTURING COMPANY AND REGULATION PAINT COMPANY COMPLAINT ( SYNOPSIS ) , FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SECTION 5 OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1914 Docket 1293-September 25, 1926 SYLLABUS Where a corporation and its subsidiary, engaged in the manufacture of certain paints which did not conform with the requirements or specifications of the Army, Navy, or other branches of the Government, and in the sale of a large part thereof through concerns, which were generally known and referred to as "Army and Navy goods stores," and which dealt in Government surplus, and merchandise conforming to the aforesaid requirements or specifications, (a) Sold paints denominated, described, represented and conspicuously branded as " CAMP mixed paint" and as " REGULATION PAINT," together with the red, white and blue shield or emblem associated with and commonly used by the United States Government, on the label thereof ; (b) Advertised their aforesaid " Regulation " paint under the above caption and label in a trade periodical published primarily for and circulating among the aforesaid stores, and in circulars distributed among them for use in selling such paint, with the result that said stores, with their knowledge, aid and encouragement, advertised, displayed and sold such paints as part and parcel of their stocks of war surplus, or merchandise made in accordance with Army or Navy specifications, and in some instances specifically sold the same as such surplus or merchandise; With the capacity and tendency to mislead and deceive the purchasing public into believing the aforesaid paints to have been declared and sold as surplus by the United States Government or to have been manufactured in accordance with Army or Navy specifications, and thereby induce the purchase thereof by many of the purchasing public in the aforesaid erroneous belief; and (c) Sold their paints in short measure quantities in standard gallon, half gallon, and quart containers and in containers advertised, labeled and branded as respectively containing the aforesaid quantities, with the capacity and tendency to mislead and deceive the purchasing public and induce the purchase of the aforesaid paints in their containers as above set forth as and for the full standard liquid measures associated therewith or branded thereon ;

With the effect of diverting trade from and otherwise injuring the business of competitors who packed, sold, and distributed their paints under truthful representations including those as to the character, quality, or quantity thereof:

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

43256°-29 VOL1024 Complaint 10 F. T. C.

Mr. Henry Miller for the Commission.

Mr. George A. Prevost, of Washington, D. C., and Mr. Allen P. Dodd, of Louisville, Ky., for respondents. SYNOPSIS OF COMPLAINT Reciting its action in the public interest, pursuant to the provisions of the Federal Trade Commission Act, the Commission charged respondent, Progress Paint Manufacturing Co., engaged in the manufacture and sale of paints, colors, varnishes and kindred products, and respondent Regulation. Paint Co., its selling subsidiary, Kentucky corporations with principal office and place of business in Louisville, with naming product misleadingly, misbranding or mislabeling, advertising falsely or misleadingly, and using ostensibly standard containers for short measure quantities, in violation of the provisions of section 5 of the aforesaid act, prohibiting the use of unfair methods of competition in interstate commerce, in the following acts and practices :

Respondents, as charged, for more than one year preceding the complaint and as a means of inducing the purchase of their paints, denominated, described and labeled their product as "Regulation Paint " and " Camp Mixed Paint," advertised the same under the former name, in some cases also placed upon the labels of said paints the United States shield or crest, and marketed the same through Army and Navy stores which advertise and sell merchandise declared and sold as surplus by the Government, or merchandise made in accordance with Army specifications or Government requirements, notwithstanding the fact that the products in question were not surplus declared and sold as such by the Government, or made in accordance with Army specifications or Government requirements ; with the capacity and tendency to mislead and deceive the purchasing public into believing said paint to have been so made or declared and sold and/or with the effect of so doing and of inducing the purchase thereof in such erroneous belief and thereby diverting trade from truthfully marked products.

Respondents further, as charged, sold and distributed their paints to dealers and the consuming public in paint cans or containers appearing to be of the shape and size " of the commonly used and well-known paint cans or tin containers of the capacity of one gallon, one-half gallon and one quart, but containing amounts less than said standard measures, and falsely advertised, stamped, branded, labeled and otherwise represented said cans or containers 66 as being filled with paint to their full respective capacities, and/or as containing full standard measure of said paint, to wit one gallon, PROGRESS PAINT MANUFACTURING CO . ET AL. 355 353 Findings one-half gallon and one quart standard measure respectively," with the capacity and tendency to mislead and deceive, and with the effect of misleading and deceiving purchasers and the purchasing public generally in respect of the quantity content of the aforesaid cans or containers, and of causing purchasers to buy said paint in such mistaken belief, and of thereby diverting trade from truthfully marked and advertised paints of competitors, a number of whom, in accordance with the well-known custom and practice in the paint trade and industry, of advertising, offering, selling and distributing paint by standard liquid measure of one gallon, one-half gallon and one quart respectively, in cans or containers respectively containing such quantities, manufacture and/or sell and distribute paint in one gallon, one-half gallon and one quart cans or containers respectively holding one gallon, one-half gallon and one quart of the paints thus marketed.

The aforesaid acts and things done by respondents were, as charged, all to the prejudice of the public and respondent's competitors.

Upon the foregoing compaint the Commission made the following REPORT, 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 and an amended complaint upon the respondents, Progress Paint Manufacturing Co., a corporation, and Regulation Paint Co. , a corporation, charging them with the use of unfair methods of competition in commerce in violation of the provisions of said act. Respondents having entered their appearances and filed their answers herein to said complaint and amended complaint, hearings were had and evidence and testimony was thereupon introduced in support of allegations of the complaint and amended complaint, and in opposition thereto, before a trial examiner of the Federal Trade Commission theretofore duly appointed.

And thereupon, this proceeding came on for decision; and counsel for the Commission and for the respondents having submitted briefs and oral argument, and the Commission having duly considered the record and being now fully advised in the premises, makes this its findings as to the facts and its conclusion drawń therefrom : FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Progress Paint Manufacturing Co. is a corporation organized, existing and doing business under and by Findings 10 F. T. C.

virtue of the laws of the State of Kentucky, having its principal office, place of business and manufacturing plant located in the city of Louisville, in said State. It is now and has been since prior to the year 1918, engaged in the business of manufacturing, selling and distributing in interstate commerce, to wholesale and retail dealers throughout the United States, paints, colors, varnishes and kindred products. This respondent, in the course and conduct of its business, causes, and at all times since prior to the year 1918 has caused, it said products, when sold, to be shipped or transported in interstate commerce from its said place of business and manufacturing plant located in the State of Kentucky, through and into other States of the United States, to the purchasers thereof located in such other States. In so carrying on its said business, respondent is now, and has been at all times mentioned, in direct, active competition with many individuals, partnerships and other corporations similarly engaged in the sale and distribution of paints, colors, varnishes and similar products in interstate commerce between and among the several States of the United States .

PAR. 2. Respondent Regulation Paint Co. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Kentucky, having its principal office and place of business located in the city of Louisville, in said State. It is a subsidiary of respondent Progress Paint Manufacturing Co., and is now and has been at all times since the date of its organization, in the year 1921, or 1922, engaged in the business of selling and distributing in interstate commerce to wholesale and retail dealers throughout the United States, paints, colors and varnishes manufactured by respondent Progress Paint Manufacturing Co. In the course and conduct of its business this respondent, Regulation Paint Co. , causes, and at all times since said date of its organization has caused, said products, when sold by it, to be shipped or transported in interstate commerce from its said place of business in the State of Kentucky, or from the manufacturing plant of respondent Progress Paint Manufacturing Co. also in the State of Kentucky, through and into other States of the United States to the respective purchasers of said products located in such other States. In so carrying on and conducting its said business, respondent Regulation Paint Co. was at all times since the date of its organization as aforesaid, and still is, in direct, active competition with many individuals, partnerships, and other corporations similarly engaged in the sale and distribution of paints, colors and varnishes in interstate commerce between and among the several States of the United States. PAR. 3. In the course and conduct of its aforesaid business, and as ameans of inducing the public to purchase their paint, respondent PROGRESS PAINT MANUFACTURING CO . ET AL. 357 353 Findings Progress Paint Manufacturing Co. at all times since prior to the year 1920, and respondent Regulation Paint Co. at all times since the date of its organization as aforesaid, have caused large quantities of said paint to be denominated, described, branded, and represented to the purchasing public as " Regulation Paint," through and by means of labels attached by them to the containers in which they packed, sold and distributed said paint, which labels carried the words " Regulation Paint " in large and conspicuous letters, also through and by means of advertisements in magazines of general circulation, circulars and similar trade literature, which advertisements contained photographic reproductions of a can of said paint displaying said label bearing the words "Regulation Paint," and in which advertisements said paint was denominated, described and represented as " Regulation Paint." The labels on large quantities of so-called " Regulation Paint" so represented and marketed by respondents contained, in conjunction with the words " Regulation Paint," a large and conspicuous crest, shield, emblem or insignia, bearing the colors of the United States in the customary design of red and white stripes surmounted by white stars in a blue field, and simulating the shield or emblem of the United States Government, or that which appears on the flag of the President of the United States. Said shield, crest, emblem or insignia so used by respondent, is by the general public understood to be, and recognized as, an insignia, emblem or shield of the United States Government and is commonly used by the Federal Government as such . PAR. 4. In the course and conduct of their aforesaid business, and as a further means of inducing the trade and public to purchase their paint, respondents, Progress Paint Manufacturing Co. and Regulation Paint Co., for more than three years last past have caused, and still cause, other large quantities of their paint to be denominated, described, branded, and represented to the purchasing public as " CAMP Mixed Paint," through and by means of labels bearing the words " CAMP Mixed Paint" in large and conspicuous letters, which labels they attached to the containers in which they packed, sold, and distributed said paint; also through and by means of letters, circulars, and similar trade literature which they used in soliciting business for said paint, and in which they denominated, described, and represented said paint as " CAMP Mixed Paint." PAR. 5. Respondents, Progress Paint Manufacturing Co. and Regulation Paint Co., in the course and conduct of their aforesaid business (and as a further means of marketing their said paints) , for more than three years last past have sold, and still sell, the principal part of said so-called "Regulation" paint and " CAMP " paint, Findings 10 F. T. C.

at least much more than half thereof, to a certain class of dealers hereinafter described and generally known and referred to in the trade and by the purchasing public as "Army and Navy goods stores," and which were and are resold by such stores to the consuming public in the containers and under the descriptions, brand names, and labels in which said paints are packed, sold, and distributed by respondents as aforesaid. Said term "Army and Navy goods stores " is used herein to mean and include retail, and some wholesale, merchants or stores, or departments of stores, who deal in merchandise which has been declared and sold by the United States Government as surplus war materials, or made in accordance with the specifications of the United States Army or Navy. Said "Army and Navy goods stores" are very numerous and are located in almost every community throughout the United States. Since the signing of the Armistice of the World War, said "Army and Navy goods stores " have advertised, dealt in, and were and are understood and recognized by the general purchasing public as advertising and dealing in, merchandise declared and sold as surplus war materials by the United States Government, and merchandise made for and in accordance with specifications of the United States Army or Navy. In marketing their said so-called " Regulation" and " CAMP" paints, respondents caused their traveling salesmen to frequently visit the places of business of, and to sell said paints to, said "Army and Navy goods stores "; and further, respondents supplied said socalled "Army and Navy goods stores " with certain advertising matter to be, and which was, used by such stores in furthering the sale of said " Regulation" paint to the consuming public, in which advertising matter said paint was described, represented, and referred to as "Regulation Paint," and said advertising matter contained photographic reproductions of a can of said so-called "Regulation" paint bearing a label containing the words "Regulation Paint " in conjunction with aforesaid crest, shield, emblem, or insignia of the United States. Also, in furthering the sale of said so-called " Regulation" paint, during all the period of time mentioned in this paragraph hereof, respondents caused advertisements tobe published in a periodical publication known as " Sales," through and by means of which advertisements they solicited trade for said so-called " Regulation" paint, and which advertisements carried a photograph reproduction of acan of said paint displaying the label containing the prominent and conspicuous words "Regulation Paint" in conjunction with the said crest,shield,emblem,or insignia hereinbefore described. Said periodical "Sales" is a publication ofwide circulation throughout numerous States ofthe United States, PROGRESS PAINT MANUFACTURING CO. ET AL. 359 353 Findings and is one which caters principally to the needs of said "Army and Navy goods stores," and is largely devoted to news and advertisements of merchandise declared, offered for sale, and sold as surplus war materials by the United States Government, and merchandise made in accordance with specifications of the United States Army andNavy.

With the knowledge, aid, and encouragement of respondents, said "Army and Navy goods stores " advertised, displayed, and sold respondents' aforesaid so-called "Regulation" paint and " CAMP " mixed paint as part and parcel of their stocks of such surplus war merchandise, or merchandise declared and sold as surplus by the United States Government, or made in accordance with United States Army or Navy specifications. Many of said so-called "Army and Navy goods stores," customers of respondents, advertised and displayed respondents' said so-called "Regulation" and " CAMP " paints to the public under such captions as " Government Goods," "Army and Navy Surplus Stocks," "New Shipments of Government Goods," "Army and NavyGoods," "Genuine Regulation House Paint." "Army and Navy Sales Company," and other captions of similar import. In some instances said "Army and Navy goods stores," customers of respondents, specifically claimed and represented to their customers, the consuming public, that said so-called "Regulation" and "CAMP" paints were manufactured in accordance with specifications of the United States Army, and also that this was indicated by the word "Regulation " as used by respondents, as hereinbefore set forth. During respondents' use of the foregoing practices, their total sales of said so-called"Regulation" and " CAMP " paints have been in excess of 75,000 gallons per annum, which sales are steadily increasing.

PAR. 6. It has been the policy of the United States Army, Navy, and similar long established branches of the United States Government, to supply their needs with materials of the best quality and to use only materials, including paint, of uniform high quality. The general purchasing public, including purchasers and consumers of respondents' aforesaid paints, are well aware of this policy of the Army, Navy, and similar long established branches of the United States Government, and believe and understand that materials, including paint, manufactured in accordance with specifications of, or so as to meet the requirements demanded by, the United States Army, Navy, and similar branches of the United States Government, to be of uniform high quality and of a quality superior to the quality of respondent's aforesaid so-called "Regulation " and "CAMP " paints.

Findings 10 F. T. C.

PAR. 7. In truth and in fact, respondents' said so-called " Regulation" and " CAMP " paints were not paints declared and sold as surplus paints, or surplus war material by the United States Government, or manufactured for the United States Government, or in accordance with the requirements or specifications of the United States Army, Navy, or other branch of the Federal Government. Said paints of respondents are considerably inferior in quality to similar paints made in accordance with requirements or specifications of the United States Army, Navy, or similar branch of the Federal Government, in that said respondents' paints are deficient in weight and in basic lead carbonate, basic lead sulphate and zinc oxide, and contains an excessive amount of water. PAR. 8. The word " Regulation," as generally and commonly used by said "Army and Navy goods stores" and by members of the armed branches of the United States Government, is a descriptive term for and in connection with (a) the supplies and equipment, including paint, of the said armed branches of the United States Government; (b) surplus war materials; and (c) materials made in accordance with specifications of the United States Army or Navy, to indicate that the particular article, including paint, to which said word " Regulation" is so applied, is made in accordance with specifications of, or so as to meet the requirements demanded by, the United States Army or Navy. Further, said word "Regulation" is particularly used and applied by the trade and purchasing public to the merchandise, including paint, dealt in by said "Army and Navy goods stores " to mean and indicate that the particular articles to which the same is applied is surplus war material, or was made in accordance with specifications of the United States Army or Navy.

PAR. 9. In connection with the merchandise, including paint, dealt in by said "Army and Navy goods stores," the word " CAMP " is generally and commonly used by the trade and purchasing public, particularly those members of the purchasing public who patronize said "Army and Navy goods stores," to mean and indicate that said merchandise to which it is applied is surplus war material disposed of by the United States Government, and/or that said merchandise came from, or was made for use at, camps or cantonments of the United States Army or Navy, and that such said merchandise is made in accordance with the specifications of, or so as to meet the requirements demanded by, said Army or Navy.

PAR. 10. The use by respondents, as hereinbefore set forth, of the said so-called "Regulation" shield label, being the label bearing the large conspicuous words "Regulation Paint" in conjunction with the aforesaid prominently displayed crest, shield, emblem or insig- PROGRESS PAINT MANUFACTURING CO. ET AL. 361 353 Findings nia, all as described in paragraph 3 hereof, is misleading, has and had the capacity and tendency to mislead and deceive the purchasing public into the erroneous belief that said paint was declared and sold as surplus paint of the United States Army or Navy, or was manufactured in accordance with specifications of, or so as to meet the requirements demanded by, the United States Army or Navy, and to thereby induce many of the purchasing public to buy said paint in such erroneous belief.

PAR. 11. The use by respondents of the words " Regulation" and " CAMP" in advertising, describing, branding and labeling the aforesaid paints which they marketed through said so-called "Army and Navy goods stores," all as hereinbefore set forth, is false and misleading, has and had the capacity and tendency to mislead and deceive the purchasing public into the erroneous belief that said paints were declared and sold as surplus paints by the United States Government, or manufactured in accordance with specifications of the United States Army or Navy, and to thereby induce many of the purchasing public to purchase said paints in such erroneous belief. PAR. 12. It is now, and for a long period of years last past has been, the well-known custom and practice in the paint trade and paint industry, to advertise, cffer for sale, sell and distribute paint by full standard liquid measure of one gallon, one-half gallon and one quart, respectively, and to pack, sell and distribute paint in cans or tin containers of the respective capacities of one gallon, onehalf gallon and one quart. In the course and conduct of their said business, respondents, for more than two years last past, packed, sold and distributed their paints as aforesaid in cans or tin containers which appear, purport to be and are, of the customary shape and size of the commonly used and well-known cans or tin containers of the respective sizes of one gallon, one-half gallon and one quart ; and they also advertised, labeled, branded, sold and distributed said paint content of their said cans or tin containers as and for the amounts or quantities of one gallon, one-half gallon and one quart full standard liquid measure, respectively. In truth and in fact, the amounts or quantities of paint contained in said cans or tin containers so packed and sold by the respondents were and are considerably and substantially less than the respective full standard liquid measure of one gallon, one-half gallon and one quart. Tests of a large number of fair samples of the paint content of respondents ' cans or containers showed an average shortage of more than 5 per cent, or nearly two gills per gallon.

PAR. 13. The representing, advertising, stamping, branding, labeling, packing, selling, and distributing by respondents, as aforesaid, Order 10 F. T. C.

of their paints in said cans or tin containers as and for the respective amounts or quantities of one gallon, one-half gallon and one quart full standard liquid measure, is false and misleading, has and had the capacity and tendency to mislead and deceive the purchasing public into the erroneous belief that the amounts or quantities of the paint contained in said cans or tin containers are the full standard liquid measure of one gallon, one-half gallon and one quart, respectively, and to thereby induce purchasers of said paint to buy the paint content of said containers as and for such respective full standard liquid measure.

PAR. 14. There are, among the competitors of respondents mentioned in paragraphs 1 and 2 hereof, many who pack, sell and distribute paints in interstate commerce in competition with respondents under truthful representations including representations as to the character, quality or quantity of their said paints, and the misleading practices indulged in by respondents, as hereinbefore set forth, tend to and do divert trade from, and otherwise injure, the business of said competitors, and are to the prejudice of the public. CONCLUSION The acts and things done by the respondents under the conditions and circumstances described in the foregoing findings are to the injury and prejudice of the public and respondents' competitors, and 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." ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint and amended complaint of the Commission, the answers of the respondent thereto, the testimony and evidence and the argument of counsel; and the Commission having made its findings as to the facts, with its conclusion that respondents have 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 and duties, and for other purposes ", It is now ordered, That respondents Progress Paint Manufacturing Co. and Regulation Paint Co., and each of them, their officers, directors, agents, representatives, servants and employees, do cease and desist- PROGRESS PAINT MANUFACTURING CO . ET AL. 363 353 Order (a) From using, inthe advertising, branding, labeling, describing, or displaying of paints sold and distributed by respondents, or either of them, and with or without the word "Regulation," or other word or words of like import, any device, crest, shield, emblem, or insignia, containing or purporting to represent red and white stripes surmounted by white stars on a blue field, and simulating the shield of the United States Government, or the crest, shield, emblem or insignia appearing on the flag of the President of the United States, or on the coat-of-arms of the United States ; (b) From using in labels, advertisements in newspapers, magazines, circulars, catalogues, or similar trade literature, or in any other manner whatsoever, the words " Regulation" and " Camp," or either of them, or word or words of like import, as descriptive of, or in or as a brand name for, any paint marketed by respondents , or either of them, through the so-called "Army and Navy goods stores," or stores or departments of stores whose stock in trade consists, or is represented to the public to consist, in whole or in part, of surplus war materials, merchandise declared and sold by the United States Army or Navy as surplus, or merchandise made in accordance with specifications of the United States Army or Navy ; unless said paint so marketed by respondents, or either of them, has been declared and sold by the United States Government as surplus paint, or is manufactured in accordance with specifications prescribed by the official authority or regulations of the United States Army, Navy, or similar branch of the Federal Government ; (c) From offering for sale and selling any paints in cans or other containers of recognized standard sizes of one gallon, one-half gallon and one quart, respectively, when the quantity of paint in said cans or other containers is less than one gallon, one-half gallon and one quart, standard liquid measure, respectively; unless said cans or containers are conspicuously marked, labeled or branded so as to clearly denote and indicate to the purchasing public the actual quantity or amount said paint content is less than one gallon, one-half gallon, or one quart, standard liquid measure, respectively. (d) In connection with the sale and distribution by respondents, or either of them, of paint in cans or other containers, from advertising, branding, labeling, or representing in any other manner whatsoever, the paint content of any of said cans or other containers to be full standard liquid measure of one gallon, one-half gallon, or one quart, when, in truth and in fact, the paint content of such cans or other containers is less than the respective full standard liquid measure so represented.

Order 10 F. T. C.

It is further ordered, That respondents, Progress Paint Manufacturing Co. and Regulation Paint Co., shall, within sixty days after the service upon them of a copy of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with the order to cease and desist hereinbefore set forth.

SIEWIN CO . 365 Complaint