Delapp, William

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

IN THE MAT.rer OF R. C. JENNER AND WILLIAM DELAPP, DOING BUSINESS I AS JENNER MANUFACTURING COMPANY AND JENNER SALES COMPANY I COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC, l'i OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2863. Complaint, June 30, 1936-Decision, Sept. 21, 1996 II "'llere two individuals engaged in business of making or assembling smail, cheap electric contrivance for beating small quantities of water or other liqnld, and in marketing said "Wonder Electric Water Heater"- (a) Ad,·ertised "Man with car to deliver and make collections. $40.00 weekly, No selling. 1\Iust have reference and $100.00 In cash to secure goods • • ... in "Help \Vanted" or "l\lan \Vanted" section of news- Papers, and as below set forth represented in advertisements or to applicants that said two individuals had or would establish, through missionary agents or salesmen, large list of dealers in a city or vicinity, to handle said heaters on consignment, and that all that would be required ut applicants would be to distribute products to replace those sold, and to make weekly collections and remittances therefor, facts being no dealers had been established nor was establishment of such a list contemplated and duties required of applicants Included selling, and whole business as conducted by said Individuals was fraudulent scheme to extract money through falsely representing to persons nec_>dfng employment, nature of business and character and value of product and what was to be done by those answering and by themselves, and purpose of Initial payment or deposit of applicant and terms of employment and salary to be paid; (b) neprcsented that "Initial deposit" required of each applicant was In lieu ot temporary fidelity bond, and would be refunded in short time, facts being such "deposit" money, In most instances credited as payment for heaters shipped forthwith to depositor at price profitable to them, though In some instances retained outright, without explanation or consideration, was llt•ither bond nor refunded · (c) Falsely represented that ;ach applicant would receh·e $5 for each new dealer secured and that they would furnish servicing distributor with automobile or compensate for use of his own, facts being no such dis- ( d tri.butor wag ever thus supplied or compensated; and . ) lhsrepresented demand on part of public for said heaters through sendmg employee In guise of customer to dealers or prospective dealers to make Inquiry about product and purchase small number thereof and return . shortly thereafter and order much larger number, thereafter left on hands \\'! ot dealer and never called tor;

th result that large numbers of Individuals In need of employment a.nd relying upon truth of said representations were induced to buy quantities ot said product in frequently unrealized hope of profitably reselling same to consuming public, and trade was unfairly diverted thereby to them 494 FEDERAL TRADE COI\IMISSION DECISIONS Complaint 23 F.T.C.

from competitors engaged in distributing and selling through salesmen and dealers similar products without promoting sale thereof through false and misleading representations, plans, or methods; to the substantial injury of competition in commerce :

II cld, That such acts and practices, under the conditions and circumstances set forth, were to the prejudice of the public nnd competitors and constituted unfair methods of competition.

Before Mr. Roberts. Hall, trial examiner.

Mr. Wm. T. Ohantland for the Commission.

Complaint Pursuant to the provisions of an Act of Congress, approved September 26, l!H4, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that R. C. Jenner, 'Villiam DeLapp, Jenner Manufacturing Company, and Jenner Sales Company, hereinafter referred to as "respondents," have been, and are now, using unfair methods of competition in commerce as "commerce" is defined in said act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: PARAGRAPH 1. Respondents R. C. Jenner and William DeLapp are copartners doing business and trading under the firm names and styles of Jenner Manufacturing Company and Jenner Sales Company with their principal place of business at 31 Allison Street, Pontiac, Mich. They are now, and for some time have been engaged in buying parts, assembling them, and selling in interstate commerce, as herein set out, a small electric water heater called "'Vonder Electric 'Vater Heater" alleged to be useful in heating small quantities of water and other liquids.

PAR. 2. Said respondents bling engaged in business as aforesaid caused said hrater when sold to he transported from their place of business in the State of Michigan to purchasers thereof located in various points in States of the United States other than the State from 'which shipments are made. UPspondents now maintain a constant current of trade in commerce in said ]waters distributed and sold by them between and among the various States of the United States.

PAR. 3. In the course and conduct of their said business respomlents are now, and ha,·e been, in substantial competition with other individuals and with firms and corporations likewise engaged in the business of distributing and selling electric water heaters in commerce among and between the various States of the United States. JENNER l\IANUFACTURING CO., ETC. 495 4!:)3 Complaint In the course and operation of said business and for the purpose of inducing purchase of said heaters respondents advertised in newspapers having an interstate circulation in the "Help 'Vanted" or "l\Ian anted" section in letter or substance as follows: 'V Man with car to deliver and make collections. $40.00 weekly. No selling. Must have reference and $100.00 ln cash to secure goods. Give phone number It possible to Box N-0 care of News.

Said advertisement was false and misleading and a fraud upon those in need of employment who answered it. The whole business as conducted by respondents is a fraudulent scheme to extract money from persons in need of employment by falsely representing to them the nature of respondents' business and the character and value of their product, the character of the work to be performed, the mission- ~ry work that will be performed by respondents, the purpose of an Initial payment or deposit of from $GO.OO to $100.00 by applicant for Work, the terms of employment, and the salary to be paid. Among the misrepresentations made are:

1. That respondents are manufacturers whereas they are merely assemblers of a cheap and inefficient small electric water heater contrivance.

2. That respondents have or will establish through missionary !>alesmen a large list of dealers in a city handling their heaters on consignment, whereas no such list exists or is contemplated. 3. That the initial "deposit" required of each applicant is a tem- Porary fidelity surety bond, whereas the money is either retained by ~·respondents outright without return, or the applicant is furnished for It a supply of the heaters, usually two dozen, at a price highly profitable to respondents.

4. That applicant will receive $5.00 for each new dealer he secures, Whereas no such sum has ever been paid.

5. That respondent will furnish the servicing distributor with an ~automobile or compensate him for the use of his own, whereas neither Is done by respondents.

6, In some instances respondents sent representatives to dealers to inquire for a supply of respondents' heaters, who then buy ~ny 8Inall stock and place orders for larger additional quantities which, "When bought by such dealers, are never called for. PAR. 4. As a result of said respondents' false and misleading repre- ~entations, plans, and methods as above set out, large numbers of Individuals in need of employment, believing and relying upon the truth of rt•!;pomlents' representations as set forth in paragraph 3 hereof, have been induced to and have bought large and small q11an- Findings 23F. T. C.

tities of respondents' aforesaid "Wonder Electric ·water Heater" in the hope of profitably reselling the same to the crmsuming public, which hopes were in many cases unrealized and said sales to these salesmen and dealers fraudulently induced and obtained by respond· ents and each of them as aforesaid have operated and do operate unfairly to divert trade to respondents from those of its competitors who are likewise engaged in the business of distributing and selling through the medium of salesmen and dealers, similar products in interstate commerce and who do not promote or attempt to promote the sale thereof to salesmen and dealers by false and misleading representations, plans, or methods, and as a result thereof, substan· tial injury has been and is now being done by respondents to com· petitors in commerce among and between the various States of the United States.

PAR. 5. The above and foregoing acts, practices alll representations of the respondents have been, and are, all to the prejudice of the pub· lie and respondents' competitors as aforesaid, and have been, and are, unfair methods of competition within the meanit,P.' and intent of Section 5 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." llEPOnT, FINDINGS AS 'l'O Tile FACTs, AND OnuEn Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commis· sion, to define its powers and duties, and for otht'r purposes," the Federal Trade Commission, on the 30th day of June 1936, issued and served its complaint in this proceeding upon respondents, R. C. Jenner and William DeLapp, copartners, trauing under the firm names and styles of Jenner Manufacturing Company and Jenner Sales Company, charging them with the use of unfair methods of competition in commerce in violation of the provisions of said act. On the 18th day of September respondents filed their amended and substituted answers in which they admitted all the material nllegations of the complaint to be true and stated that they have waive~ hearing on the charges set forth in the said complaint and consente that, without further evidence or other intervening procedure, the Commission might issue and sene upon them findings as to the f~cts lllll conclusion and an order to cease and desist from the violatwns of law charged in the complaint. Thereafter, the proceeding reg~~ larly came on for final hearing before the Commission on the sal complaint and the answers thereto, and the Commission having duly JENNER MANU~'ACTURING CO., ETC. 497 493 Findings considered the same, and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PAR.AGRAJ'H 1. Formerly respondents, R. C. Jemwr and 'William DeLapp were copartners doing business and trading under the firm names and styles of the Jenner .Manufacturing Company and Jenner .. S~les Company, with their principal place of business in Pontiac, ~hch. At this time R. C. Jenner is the sole ownrr of the Jenner Manufacturing Company and \Villiam DeLapp is the sole owner of the Jenner Sales Company.

The sole business engaged in by all of the respondents, insofar as this proceeding is concerned, is the business of making or assembling a small, cheap, electric contrivance for heating small quantities of Water or other liquid, known as the ""\Vonder Electric \Vater Heater", and of marketing the same by the methods hereinafter set forth. PAR. 2. Said respondents bein(l'0 eiwa(led0 0 in business as aforesaid cause said heaters when sold to be transported from their place of bus~ness in the State of Michigan to purchasers thereof located in Various points in States of the United States other than the State from which shipments are made. Respondents now maintain a con- ~tant current of trade in said heaters distributed and sold by them In commerce between and among(l' the various States of the United States. o PAR. 3. In the course and conduct of their said business respond- ~nts are now and have been in substantial competition with other lnd'1VI'd uals and' with firms and' corporations likewise· engage d ll1· the business of distributin(l' and sellin(l' electric water heaters in com- :rn 0 0 • erce among and between the various States of the Umted States. pan. 4. In the course and operation of said business and fo~ the P?rpose of inducing the purchase of said heaters respondents, either directly or throu(l'h their general a(lents advertised in newspapers . o o, M h '~VIng an interstate circulation in the "Help Wanted'' or " an "anted" section in letter or substance as follows: Man With car to deliver and make collections. $40.00 weekly. No selling 111 It ust have reference and $100.00 in cash to secure goods. Give phone number Dossible to Dox N-6, care of News.

PAR. 5. Said advertisements as above set out were false and mis- 1 eading and a fraud upon those in need of employment who answ d t . f ered them. The whole business as conducted by resp9n en s IS a raudulent scheme to extract money from persons in need of employ- 498 FEDERAL TRADE COl\11\USSION DECISIONS Findings 23 F. ~r. c. ment by falsely representing to them the nature of respondents' business and the character and value of their product, the character of the work to be performed, the missionary work that will be performed by respondents, the purpose of an initial payment or deposit of from $60.00 to $100.00 by the applicants for work, the terms of employment, and the salary to be paid.

PAn. 6. Among the representations contained in the advertisements, or made to the applicants for work are:

1. That respondents have established or will establish through missionary agents or salesmen a large list of dealers in a city or vicinity to handle their heaters on consignment and that all that will be required of applicants for positions will be to distribute heaters to replace those sold and to make weekly collections and remittances for heaters that have been sold; that an initial "deposit" is required of ~>ach applicant which is represented to be in lieu of a temporary fidelity bond which would be refunded in a short time; that each applicant was to receive $5.00 for each new dealer he secures; that respondents would furnish the servicing distributor with an auto· mobile for his use or compensate for the use of his own. All of these representations were deceptive and false. The facts are that no dealers had been established, nor was any such establishment of a Jist of dealers contemplated, and the duties required of applicant, included that of selling. The "deposit" money was not a bond, but was in some instances retained outright, without explanation or con· sideration, but in most instances it was credited as payment for heaters which were shipped forthwith to depositor, at a price profitable to respondents. No distributor was ever furnished with an automobile for his use, nor was any allowance paid to a distributor for the use of his own car.

2. In some instances respondents' agents sent an employee in the guise of a customer to dealers or prospective dealers to inquire about respondents' heaters. Such purported customer would buy a small number of the heaters, and would shortly thereafter return and place an order for a much larger number of heaters, which, when bought on the strength of such supposed order by the dealer from respond· ents' distributor, were never called for, but were left on the hands of such dealer.

PAn, 7. As a result of said respondents' false and misleading repre· sentations, plans, and methods as above set out, large numbers of individuals in need of employment believing and relying upon the truth of respondents' representations, have been induced to and have bought quantities of respondents' aforesaid "Wonder Electric Water Heater'' in the hope of profitably reselling the same to the consuming JENNER MANUl'ACTURING CO., ETC. 499 493 Order public, which hopes were in many cases unrealized. Said sales to these salesmen and dealers, fraudulently induced and obtained by respondents and each of them as aforesaid, have operated to and do unfairly divert trade to respondents from those of their competitors. who are likewise engaged in the business of distributing and selling, through the medium of salesmen and dealers, similar products in interstate commerce and who do not promote or attempt to promote the sale thereof to salesmen and dealers by false and misleading representations, plans, or methods. As a result thereof, substantial injury has been, and is now being, done by respondents to competition in commerce among and between the various States of the United States. CONCLUSION The aforesaid acts and practices of the respondents, R. C. Jenner· and 'Villiam DeLapp, copartners, trading under the firm names and styles of Jenner Manufacturing Company and Jenner Sales Company,. are to the prejudice of the public and of respondents' competitors, und. constitute unfair methods of competition in commerce, within the mtent and meaning of Section 5 of an Act of Congress, approved Sept~mber 2G, 1914, entitled "An Act to create a Federal Trade Com-· nusf':wn, to define its powers and duties, and for other purposes." ORDER TO CEASE AND DESIST . This proceeding having been heard by the Federal Trade Commis .. 81011 upon the complaint of the Commission and the nnswer of respondents, in which answer respondents admit all the material alle~a­ hons of the complaint to be true and state that they waive hearmg: on the charges set forth in said domplaint and consent that, without !urther evidence or other intervening procedure, the Commission may issue and serve upon them findin{Ts as to the facts and conclusion and an order to cease and desist fro~l the violations of law charged in the complaint, and the Commission having maJe its findings as to ~.1 e. facts ami conclusion that said respondents have violated the. pro- " ISions of an Act of Congress, approved September 2G, 1914, entitled, An Act to create a Federal Trade Commission, to define its powers and d t" u Ies, and for other purposes." La/t iB .or~e~ed, That the respondents, R. C. _Jenner, and William DeanPP, mdividually, and as copartners, tradmg under the firm names r. d styles of Jenner Manufacturin{T Company and Jenner Sales'-'0 b 1 . rnpany, their servants representatives, agents, and emp oyees, m co_nnection with the adv~rtisin{T and offerin..., for sale, sale, and <lis-trib · b b • Ubon of their said electric heaters in interstate commerce or m j,o{l.l;j•»-::'l-v<"l. 23 -34 .500 FEDERAL TRADE COMl\IISSION DECISIONS Ot·der 23F. T. C.

the District of Columbia, do forthwith cease and desist from .representing:

1. That the services required of applicants after selection by re- .sponclents, are only to make deliveries of and collections for said electric heaters and that no selling is required of said selected employees.

2. That dealers in any number have been or will be established in the city or territory in question, by the respondents or by their field agents, when in fact no such dealers have been established, and the .establishment of no such dealer list is contemplated. 3. That the initial payment required of each applicant is in the nature of, or in lieu of, a temporary bond and that the sum will be refunded, when such is not the fact.

4. That the initial payment required is for anything else than payment for a certain number of their said heaters at a specified price. 5. That applicants will receive $5.00 for each new dealer they se- .cure, when no such sum is in fact paid or such service contemplated. 6. That applicant will be furnished a car by respondents for his use in tho work, or will be given a weekly allowance in lieu of such -car, when no such car is furnished or payment made or contemplated. 7. That the demand on the part of the public for their said heaters is greater than it is in fact, through the use of agents or employees who purchase small quantities of said heaters from dealers and either -order additional large quantities which they do not purchase, or induce said dealers to order additional quantities in the belief that there is a demand therefor, or through any other means or subterfuge induce dealers to buy excessive quantities of heaters for which there is no substantial demand.

It i8 further ordered, That the respondents shall, within GO days after service upon them of this order, file with the Commission !l J·eport in writing setting forth in detail the manner and form in ·which they have complied with this order.

L. W. GillSON 501 .... Syllabus '-.