A. B. C. Oil Burner Sales Corporation

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

IN THE MATTER 011' AUTOMATIC BURNER CORPORATION AND A. B. C. OIL BURNER SALES CORPORATION COMPLAINT (SYNOPSIS), FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1.1,9:2. Oomplai1tt,' May 11, 1928-Decisi.on, Sept. 10, 1928 Where a corporation engaged In the manufacture of oil burners, and in the sale thereof through its corporate selling agency, and said agency, adv£-r· tlsed that as a result of tests made by the United States Department of .Agriculture their burner had been officially proven and stated by said department to have an "over-all efficiency of over SO per cent" and "topped all other burners", the fact being that in the tests made upon the foregoing and other burners, a large number of separate "runs", showing wide variations, were made for each burner, that due to lack of proper equipment and other matters said tests were not regarded nor promul· gated by said department as conclusive, and that the most favorable "run" for the aforesaid burner was selected by said corporation; with the Intent and effect of creating the false Impression that there was presented a fair compilation and analysis of the. complete test, duly promulgated as a Government revort:

Held, That such false and misleading advertising, under the circumstances set forth, constituted unfair methods of competition. Mr. lV. T. Ohantland for the Commission.

Ryan, Oondon & Livingston, of Chicago, Ill., 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 Automatic Burner Corporation, engaged in the manufacture and sale of oil burners for heating homes and business establishments, and respondent A. B. C. Oil Burner Sales Corporation, its sales subsidiary, both Illinois corporations, with principal offices and places of business in Chicago, with claiming Government indorsement falsely or misleadingly and advertising falsely or mis· leadingly in regard thereto, in violation of the provisions of section 5 of such act, prohibiting the use of unfair methods of competition in interstate commerce.

Respondents, as charged, engaged as above set forth, following • (1) the undertaking of certain tests of various oil burners by the United States Department of Agriculture, which tests, for lack of 'Amended.

103133"-30-VOL 12--15 Complaint 12F.T.C.

proper equipment and for other reasons were not regarded by said department as conclusive, nor the results thereof compiled or promulgated as such nor given the department's sanction, and (2) the making of a report by a former employee of the department, theretofore engaged in said tests, and employed by respondents to make such report, in which report said former employee set forth only results shown by the most favorable of 51 "runs" made for respondents' burner, as for each of the others, and showing great variations for each, so that the only result of any fair value for each would be the average.

'Videly circulated said report, and by reference and advertising, intentionally so referred thereto as to create the impression that it presented a fair compilation and analysis of the complete test and that, as such, it was and had been duly promulgated as a Government report, making such false and misleading statements, on the basis of said report, in their advertising in a trade paper of general circulation, to wit, "Fuel Oil", as that, as a result of the tests made, the said "ABC Burner" of respondents had been officially proven and stated by the United States Department of Agriculture to have an "over-all efficiency of over 80 per cent" and "topped all other burners," 2 and, later, notwithstanding a promise to the aforesaid department, upon having their attention drawn to the false and misleading character of their advertising, resumed and knowingly and willfully continued false and misleading advertising of similar form and import.• Said false and misleading advertising, as charged "was calculated to mislead dealers and the purchasing public, to the prejudice of competitors, dealers, pm:chasers, and the public, and constitutes an unfair method of competition in commerce within the intent and meaning of section 5."

• The matter referred to, specifically, was as follows: 80.7 PEII CEST EFFICIENCY? ABC WINS AGAIN The Department of Agriculture, Washington, D. C., recently completed the most comprehensive t~st of oU burners ever made, ABC won easily the thermal efficiency test with the high mark of 80.7 per cent, etc.

• Some of said advertlsemcn ts were as follows : (a) " First In United States Government test." (b) "That's why 1t (referring to the ABC burner) was given highest heating efficiency rnttug In United States Government oil-burner test. Should we send you the Government reportt"

(c) "80. 7 per cent efficiency 'ABC wins again.' The Department of Agriculture, Washinllton, D. C., recently completed tbe most comprehensive test of oil burners ever made. • ABC won easily the thermal efficiency test with the high mark of 80.7 per cent." (d.) Another of such advertisements wblch then appeared, in several newspapers of wide and general circulation, of R!mllar tenor, is described In footnote relating to said advertisement (designated as exhibit (A)), but not published. See footnote on page 2H. AUTOMATIC BURNER CORPORATION ET AL. 211 209 Findings Upon the foregoing complaint, the Commission made the following REPORT, FINDINGS AS TO THE FAC'rs, AND Onnrn Pursuant to the provisions of an act of Congress approved September 26, 1914, the Federal Trade Commission issued and served its amended complaint upon the respondents, Automatic Burner Corporation and ABC Oil Burner Sales Corporation, charging them with unfair methods of competition in commerce in violation of the provisions of said act. Respondents having entered their appearance and having now tendered t~eir motion and substituted answer, waiving hearing and consenting to order to cease and desist, in accordance with Rule III (a) of the Rules of the Commission, in words and form as follows :

UNITED STATES OF AMERICA DF;FORE FEDERAL TRADE COMMISSION In the matter of Automatic Burner Corporation et al. (Docket No. 1492) MOTION AND SUBSTITUTED ANSWER m· RESPONDENTS, WAIVING HEARING AND CONSENTING TO OUDER TO CEASE AND DESIST Automatic Burner Corporation and ABC 011 Burner Sales Corporation, the above named respondents, move that they be given leave to substitute this as their answer to the amended complaint in the above matter, and answering say that they have long since ceased the publication of advertisements of the character complained of, and they have no intention to resume the publication thereof, and desiring to waive hearing on the charges set forth in said amended complaint and not to further contest the proceedings, these respondents now state that they refrain from contesting the said proceedings and they consent that an order to cease and desist be entered herein in accordance with Rule III (2) of the Federal Trade Commission.

AUTOMATIC BURNER CORPORATION, ABC OIL BURNER SALES CORPORATION, Respondent I.

Dy ------------------------ Their .Attorneys.

RYAN, CONGDON & LIVINGSTON, .Attorneys, 291 South Lasalle Street, Chicago, Illinois. The said motion and answer is hereby received and directed to be filed, and the motion of the counsel for Commission to proceed to make findings and order, on the pleadings in accordance with said rule, is hereby granted, and the Commission being fully advised in the premises makes this its findings as to the facts and its conclusions drawn therefrom :

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Automatic Burner Corporation is a corporation organized in 1921 under the laws of the State of Illinois, Findings 12 F. T. C. having its principal office and place of business in the city of Chicago in said State and for a number of years last past has been and now is engaged in the manufacture of oil burners designed for use in heating homes and business establishments, and in the sale of said oil burners through its selling agency, ABC Burner Sales Corporation, in and among the several States of the United States. Respondent Automatic Burner Corporation through its said selling agency causes said oil burners when sold to be transported from its said place of business in the State of Illinois into and through other States of the United States, to the purchasers thereof. PAR. 2. Respondent ABC Burner Sales Corporation is a corporation organized under the laws of the State of Illinois, having its principal office and place of business in the city of Chicago in said State, and since prior to 1925 has been and now is the selling agency of respondent Automatic Burner Corporation, and as such is engaged in the sale of said Automatic Burner Corporation's oil burners in and among the several States of the United States and causes said oil burners when sold to be transported from the said State of Illinois into and through other States of the United States, to the purchasers thereof.

PAR. 3. Since prior to 1925, there have been, and now are, numerous other persons, concerns, · and corporations engaged in the manufacture and sale in commerce of oil burners in competition with each other and with these respondents.

PAR. 4. In 1925 the United States Department of Agriculture undertook to make certain tests of various oil burners including those made and sold by the persons described in paragraphs 1 and 2 hereof. Due to the lack of proper equipment and other matters, said tests were not regarded by the Department of Agriculture as conclusive, and the results thereof were not compiled nor promulgated as final and conclusive, nor given the sanction of the Department of Agriculture as such. In the making of such tests for each of the various burners, 51 separate " runs " were made, which " runs " as to each burner showed great variations, so that the only result that could be regarded as of any fair value would be the average of the 51 "runs" made as to each burner. PAR. 1). Among the burners so tested in 51 "runs" was the burner made an4 sold by respondents, to wit, the ABC burner. Respondents employed a person formerly with the Department of Agriculture, who had been engaged in the making of said tests, to prepare a report for them. In said report was fully tabulated the result only of one " run," which is therein cnlled " test B " which was " run " No. 396, and the run which showed the highest degree of efficiency AUTOMATIC BURNER CORPORATION ET AL. 213 209 Findings of any of the " runs " as to respondent's burner. Said report has been widely circulated by respondents, and by reference and advertising so referred to, with the intent, purpose and effect of creating the impression that it presented a fair compilation and analysis of the complete test, and that, as such, it was, and had been duly promulgated as, a Government report.

P .AR. 6. Respondents, using said reports so made as a basis, in December, 1925, advertised in a trade paper of general circulation, to wit: " Fuel Oil " that as a result of the tests made the said "ABC burner " of respondents had been officially proven and stated by the United States Department of Agriculture to have an "over-all efficiency of over 80 per cent " and " topped all other burners," whereas in truth and in fact no such proof, comparison, finding, or statement was made by said Department of Agriculture, and the matter so used in advertisements was false and misleading. Specifically the false and misleading matter in the advertisement above referred to was as follows:

80.7 PER CENT EFFICIENCY, ABC WINS AGAIN The Department of Agriculture, Washington, D. C., recently completed the most comprehensive test of oll burners ever made. ABC won easily the thermal efficiency test with the high mark of 80.7 per cent, etc. PAR. 7. That in 1925, after the· appearance of said advertisement, the attention of respondents was called to the false and misleading character thereof by the Department of Agriculture, and respondents, in December, 1925, promised to desist from its use. Notwithstanding said promise, respondents thereafter, in 1926 resumed and knowingly and willfully continued their said false and misleading advertisements, of similar form and import. Some of such subsequent advertisements contained, among other things, the following:

(a) First in United States Government test. (b) That's why it (referring to the ABC burner) was given highest heating efficiency rating in United States Government oll-burner test. Should we send you the Government report.

(c) 80.7 per cent efficiency: "ABC wins again." The Department of Agriculture, Washington, D. C., recently completed the most comprehensive test of oil burners ever made. ABC won easily the thermal efficiency test with the high mark of 80.7 per cent.

(d) Another of such advertisements which then appeared, in several newspapers of wide and general circulation was as set out in Exhibit A, attached hereto and made a part hereof.' • Not publlslted, said exhibit (A), being a reproduetlon of an advert!Rement used by responden1s, captioned "Proof from U. S. Government AilC o!l burner saves you money," and featuring the allegl:'d Indorsement, "unbiased authoritative", by the United States Government, of respondents' said burner, with its hlgbest rating, along with further mutter setting forth the ndvantngea or alleged advantages ot said burner. . FEDERAL Tratle COMMISSION DECISIONS214 Order 12F.T.C.

CONCLUSION That said false and misleading advertising was calculated to mislead dealers and the purchasing public, to the prejudice of competitors, dealers, purchasers, and the public, and constitutes an unfair method of competition in commerce within the intent and meaning of section 5 of an "Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes", approved September 26, 1914.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the amended complaint of the Commission and the motion and substituted answer of respondents, and the Commission having made its findings as to the facts and its conclusion thereon, in accordance with Rule III (2) of its Rules of Procedure, that the respondents have violated 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", Now, therefore, it i8 ordered, That the respondents, Automatic Burner Corporation and ABC Oil Burner Sales Corporation, their officers, directors, agents, employees, and successors do cease and desist- From in any manner directly or indirectly representing or advertising that its ABC burner has, by tests made by the United States Department of Agriculture, been given a rating of an "overall efficiency of over 80 per cent," or " topped all other burners," or that as the result of any such tests made said burner was "first in United States Government tests," and from in any manner advertising or representing that the United States Department of Agriculture has promulgated the results of any tests concerning the oil burners of said respondents, or of comparative tests between their !'aid oil burner and the oil burners of others. It i8 further ordered, That the respondents, Automatic Burner Corporation and ABC Oil Burner Sales Corporation, shall, within 60 days after the service upon them of copies 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. SAMUEL BREAKSTONE 215 Syllabus