J. M. Tonkin and S. M. Modlin

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

IN THE MA TIER OF J.l\I. TONKIN AND S.l\L MODLIN, TRADING AS COLUMBIA DISTILLING COMPANY, TONKIN DISTRIBUTING COM- PANY, AND OLD ABBEY DISTILLING COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 15 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2422. Complaint, June 1, 1935-Dccision, Nov. 19, 1936 Where two inuiYiduals engaged as rectifiers and whole~alers of liquor, in purchasing, rectifying, blending, and bottling whi:skies, gins, and other spirituous beverages, and in making gin by redistillation of purchased alcohol, not produced by them, over juniper berrie3 and other aromatics, with still used therefor, and in selling such various prouucts at wholesale in competition with those engageu in manufacture by distillation of whi:skies, gins, nnd other spirituous beverages and in sale thereof, and with those engaged in purchasing, rectifying, blending, bottling, and selling such various beverages, anu including among their saiu competitors those who, engaged in manufacturing and distilling from mash, wort, or wash whiskies, gius, and other spirituous beverages solu by them, truthfully use worus "uh;tillery," "distilleriefl," ''distillerfl," or "distilling" as vart of their corporate uames and on their stationery and on the labels of the bottles in which they sell and ship such products, and those wllo, eng::ged in _purchasing, i'2ctifying, bL:uuing, and bottling such beverages, do not use such words as uboYe set forth- Represented, through use of word "Dh;tllling" in their trn<le names, printed on their stationery and on the labels attached to the bottles in which they sold and ~;hipped their products, together with the words, in some eases, "1\lade by," or "Prepnreu by," or "Dottlcd by," or "Dottled fot·," and in other ways to their customers, and furnished said customers with means of repre~enting to latters' yendees, both retailers and ultimate consuming public, that the whiskies, gins, and other spirituous beverages contained in such bottles were by them made through process of distillation from mash, wort, or wash ;

Notwithstanding fact they did not own, 01wrnte, or control any such places where such beverag(•s are made by aforesaid pt·orrss, were not £>ngnged in distilling their said beverages, a~ long llclinitl'ly umler~toou in the trade and by the consuming public, i. e., in making same by originul distillation from grain, fruit, or vegetable mash, and were not distillers, in- ,·estment and expenses of which in general are grf'ntf'r than those of rectifiers, and which have a prestige in the minds of the wholr~nie trade, of advantage to the seller of their products, us controlling the muking thereof from start to finish;

With effect of misleading and deceiving drulers and purrh!lsing public into bf'lief that such whiskies and other spirituous beverages sold by them were by them made and distilled from mash, wort, or wash, and of inducing dealers and pmchasing public, acting In such belief, to buy said whlski!'s, gins, lllltl otller spirituous hevemges bottled and sold by them, aP.d of therehy dh·erting trade to them from their competitors who do not, by their corporotf' names COLUMBIA DISTILLING CO., ETC. 919 ~18 Complaint or in an;y other mmmer, misrepresent that they are manufacturers l1y distillation, as allo,-e set forth, of such spirituous beYeruges, for purchase of which from actual distillers and manufacturers there is a preference on the part of a sub~tantial 110rtiou of the purchasing pnlJ!ic; to the substantial injury of substantial competition in commerce: Held, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Before ilfr. W. W. Sheppard and Mr. John W. Addison, trial examiners.

~Jr. Edw. TV. Th01nerson and },Jr. PGad B. Morehouse for the Commission.

1.1lr. Edmond F. Malwr, of San Francisco, Calif., for respondents. Complaint 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, having reason to believe that J. M. Tonkin and S. l\:1. Modlin, individuals trading under the names and styles, Columbia Distilling Co., Tonkin Distributing Co., and Old Abbey Distilling Co., hereinafter referred to as respondents, have been and are using unfair methods of competition in commerce, a~ "commerce" is defined in said act, and it appearing to the said Com mission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charge:o in that respect as follows:

PARAGRAPH 1. Respondents arc individuals, J. M. Tonkin and S. •l\I. Modlin, trading under the nanws and styles, Columbia Distilling Co., Tonkin Distributing Co., and OlJ Abbey Distillin~ Co., with offices and principal place of business in the city of San Francisco, State of California. They are now, and for more than one year last past have been, engagetl in the lmsiness of rectifiers until wholesalers of liquors purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and selling the same at Wholesale in constant course of trade nnd commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of their said business, they cause their said products when sold to be transported from their place of business aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers some located within the State of California and some located in other States of the United S~ates and in the District of Cnlul11bia. In the course and conduct of their business as aforesaid Complaint 23F. T. C.

respondents are now, and for more than one year last past have been,. in substantial competition with other individuals and with corporations, partnerships, and firms engaged in the manufacture by distillation of whiskies, gins, and other spirituous beverages and in the sale thereof in trade and commerce between and among the various, States of the United States and in the District of Columbia; and in the course and conduct of their business as aforesaid respondents are, and for more than one year last past have been, in substantial competition with other individuals and with corporations, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia. PAR. 2. In the course and conduct of their business as aforesaid respondents have, upon their premises, a still which they use in the production of gin by a process of rectification whereby alcohol, purchased but not produced by respondents, is redistilled over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondents distillers, as defined by Section 3247 of the Revised Statutes regulating Internal Revenue, nor as commonly understood by the public and the liquor industry. For a long period of time the word "Distilling" when used in connection with the liquor industry and with the products thereof has had and still has n. definite. significance and meaning to the minds of wholesalers and retailers in such industry and to the ultimate purchasing public, to wit, the manufacturing of such liquors by the process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is complete, and a substantial portion of the purchasing public prefers to buy spirituous liquors bottled by the actual distillers and manufacturers thereof.

PAn. 3. In the course and conduct of their business as aforesaidr by the use of the word "Distilling" in their trade name, printed on their stationery and on the labels attached to the bottles in which they sell and ship their said products, and in various other ways, respondents represent to th£>ir customers and furnish them with the means of representing to their vendees, both retailers and the ultimate consuming p1~hlic, that thr whiskies. gins, and other spirituous beverages therein contained were by them manufactured through the process of distillation from mash, wort, or wash, as aforesaid, wh£>n, as a matter of fact respondents are not distillers, do not distill the said whiskies, gins, or other spirituous beverages by th£>m so bottled, labeled, sold, and transported, and do not own, operate, or control COLUMBIA DISTILLING CO., ETC, 921 918 Findings any place or places where such beverages are manufactured by the process of distillation from mash, wort, or wash. PAR. 4. There are among the competitors of respondents engaged in the sale of spirituous beverages as mentioned in paragraph 1 hereof individuals, firms, partnerships, and corporations who manufacture and distill from mash, wort, or wash, as aforesaid, whiskies, gins, and other spirituous beverages sold by them and who truthfully use the Words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery, and on the labels of the bottles in which they sell and ship such products. There are also among such competitors individuals, firms, partnerships, and ~orporations engaged in the business of purchasing, rectifying, blend-· Ing, and bottling whiskies, gins, and other spirituous beverages who do not use the words "distillery " "distilleries " "distill in 0' " or "dis-· tillers" as a part of their corporate' or trade' names, noro! on their· stationery, nor on the labels attached to the bottles in which they sen and ship their said products.

PAR. 5. Representation by respondents, as set forth in paragraph 3 hereof, is calculated to and has the capacity and tendency to and does mislead and deceive dealers and the purchasing public into the belief that the whiskies, gins, and other spirituous beverages sold by the respondents are manufactured and distilled by them from mash, Wort, or wash, as aforesaid, and is calculated to and has the capacity and tendency to and does induce dealers and the purchasing pr·'·lic, acting in such belief, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondents, thereby dh·erting trade to respondents from their competitors who do not by their cor- Porate or trade name or in any other manner misrepresent that they are manufacturers by distillation :from mash, wort, or wash of whiskies, gins, and other spirituous beverages, and thereby respondents do substantial injury to substantial competition in interstate commerce. PAR. 6. The acts and things above alleged to have been done and the false representations alleged to have been made by respondents are to the prejudice o:f the public and the competitors of respondents ~nd 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 2G, 1914. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress approved Sept~mber 26, 1914, entitled "An Act to create a Federal Trade Commis- Sion, to define its powers and duties, and for other purposes," the Findings 23 F. '1'. C. Federal Trade' Commission on June 1, 1035, issued and served its complaint in thig proceeding upon the respondents J. l\f. Tonkin and S. 1\f. 1\forllin, individuals trading under the names and styles of Colmnbia Distilling Company, Tonkin Distributing Company, and Old Abbey Distilling Company, charp:ing them with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said complaint ana the filing of respondent's answer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by Edward ,V, Thomerson, attorney for the Commission, before ,V, '\V. Sheppard, an examiner of the Commission theretofore duly designated by it; and by PGad B. Morehouse, attorney for the Commission, before ,J olm ,V, Addison, ancl examiner of the Commission theretofore by the Commission duly substituted to take testimony and other evidrnce in the place and stead of the said ,V. '\V. Sheppard; and in opposition to the allegations of the complaint by Edmond F. Maher, attorney for the responclents; and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter the proceeding regularly came on for final hearing before the Commission on the said complaint, the answer thereto, testimony and othrr evidence, and brief in support of the complaint; brief in opposition th~?reto and oral arguments of counsel aforesaid having been waived; and the Commission having duly considered the same, and being now fully advised in the premises, finds that this proceeding is in tho interest of the public, and makes this its findings as to the facts and its conclusion drawn therefrom. FINDINGS AS TO TIIE F.\CTS PARAGRAPII 1. Respondents are individuals, J. l\1. Tonkin and S. 1\I. 1\fodlin, trading under the names and styles, Columbia Distilling Company, Tonkin Distributing Company, and Old Ahhey Distilling Company, with officrs and principal place of business at 440 Ninth Street in the city of San Francisco, State of California. They are. now, and for more than one )Car Just past have been, engaged in the business of reetifiers and wholesalers of liquors purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous bewrap:ts and selling the same at wholesale in constant course of trade and commcrcr between and among the various States of the United States and iu the District of Columbia. In the course and conduct of their said business, they cau<;e their said products when sold to be transported from tlwir place of business aforesaid into and throup:h various Statrs of the Unitrd States to the purchasers thereof, consisting of "vhnlesalrrs and retailers some located within COLUl\IBIA DISTILLING CO., ETC. 923 918 Findings the State of California and some located in other States of the United States and the District of Columbia. In the course and conduct of their business as aforesaid respondents arc now, and for more than one year last past have been, in substantial competition with other individuals and with corporations, partnerships, and firms engaged in the manufacture by distillation of whiskies, gins, and other spirituous beverages and in the sale thereof in trade and commerce between and among the various States of the United States and in the District of Columbia; and in the course and conduct of their business as aforesaid respondents are, and for more than one year last past have been, in substantial competition with other individuals and with corporations, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. Rectifying, in the distilled spirits rectifying industry, »leans the mixing of whiskies of different ages or types, or the mixing of other ingredients with whiskies, but reducing proof of whiskey by adding water is not rectifying. Rectifiers also blend whiskies With neutral spirits (grain alcohol).

A distiller, in the sense ordinarily understood by the liquor industry, is one who prepares distilled spirits by a process of original and continuous distillation ft:om mash, wort, or wash, through continuous closed pipes and vessels until the manufacture then•of is complete. Many distillers operate a separate establishment 600 feet or more away from their distillery, known as a rectifying plant, wherein they operate in the same manner as described above, for a rectifier-sometimes f'Xrlnsively with spirits of their own distillation, anfl sometimes with spirits purchased from other distillers, or both. Some distillrries have a tax-paid bottling room on the dis~ tillery bonded premises wherein their distilled spirits are bottled straight as they come from the still, or in a bonded warehouse after aging, or after reduction of proof. Any rectifying by a distiller, however, must be done in his rectifying plant under his rectifier's Permit. On all bottled liquors, whether bottled at a distillery rectifying plant, or at any other rectifying plant, appear the words "Bottled" or "Blended" (as the case may be) "by the ------------ ---------------------------- Company". If the distilled spirits therein contained are bottled by a distiller either in his distillery ?r are spirits of his own distillation bottled in his rectifylug plant, the distiller may, and does, put "Distilled and Bottled by -----·------------------- Company". If, in the distillery's rec- 924 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings 23 F. T. C. tifying plant, other spirits have been blended or rectified, he puts "Blended and Bottled by ------------------------ O:>mpany". Finally, blown (usually in the bottom) in each bottle is a symbol, consisting of a letter followed by a number, identifying the bottler, Yiz, a "D" for a distillery and "R" for rectifier, the number following said letter corresponding with the distiller's or rectifier's permit. Thus "R-107" designates these respondents. A distiller who also operates a rectifying plant, having both kinds of permits, may use either symbol, depending upon whether the liquor contained in the bottle was produced and bottled under his distiller's permit. It is not always possible to determine from the presence of the phrase ''Blended and Bottled by" or the phrase "Bottled by" on the label whether the package was bottled by a rectifier who is a distiller or by a rectifier who is not a distiller. PAR. 3. Respondents, in the course and conduct of their business, use one or the other of their said trade names on their stationery and on the labels attached to the bottles in which they ship and sell said beverages. On the labels for gin redistilled by respondents, the name is preceded by the words "Distilled by." On labels for cordials and some other products, the name is preceded by ''Made by" or "Prepared by." One of the labels received in evidence for Edgewood Straight Pennsylvania Bourbon Whiskey contained the trade name "Old Abbey Distilling Company," with nothing whatever to suggrst that respondents were not the distillers of the product. On other-r whiskey labels, the trade names are preceded by the words "Bottled by" or "Bottled for" and in the case of one label, to wit: a Pine Ridge Whiskey label, the name "Tonkin Distributing Company" is used followed by the designation "Sole distributors," with nothing on that label to indicate that it is a distillery-bottled package. The Commission finds that by the use which respondents make, and have made, of the word ''Distilling" in their aforesaid trade names printeu on their stationery and on their labels attached to the bottles in which they sell and ship their said products, and in various other ways, respondents represent to their customers and furnish them with the means of representing to their vendees, both retailers and the ultimate consuming public, that the whiskies, gins and other spirituous beverages therein contained were by them manufactured through the process of distillation from mash, wort, or wash, us aforesaid, when, as a matt"r of fact, respondents are not distillHs, do not distill the said whiskies, gins, or other spirituous beverages by them so bottled labeled, sold and transported, and do not own, operate, or control :any place or places where such beverages are manufactured by the process of distillation from mash, wort, or wash. Respondents are rectifiers and warehouse men, not distillers. COLUMBIA DISTILLING CO., ETC. 925 Ul8 Findings Respondents purchase most of the whiskies which they sell from distilleries located in Pennsylvania and Kentucky, and the alcohols which they use in the production of their gin from the Commercial Solvents Company.

Respondents have a still they use in making gin by redistillation of purchased alcohol, not produced by them, over juniper berries and other aromatics, but this redistillation does not make respondents distillers as commonly understood by the public and the liquor industry. As shown by the testimony of many witnesses who for long periods of time had been, and still were, actively engaged in the liquor industry, including distin~rs, v;holes:-Jers, and retailers, a1:d by the testimony of representative members of the consuming public, for a long period the word "distilling" when used in connection with the liquor industry and with products thereof has had, and still has, the d.efinite significance and meaning to the minds of wholesalers and retailers in such industry and to the ultimate purchasing public of the making of beverages by original distillation from grain, fruit, or vegetable mash.

In general, the investment and expenses of the distiller are greater than those of the rectifier.

Much of the "distilled" gin on the market is produced by companies who do distill their own alcohol and produce gin therefrom by redistillation in exactly the same manner that respondents produce their gins-not under any dfstillery permit, but under a rectifying permit. These distiller-rectifiers place on their gin labels: "Disti~led by --------------------Distillers." There are distilleries which produce gin by the same process in the distillery by one continuous Process and the tax is paid at the completion of the process, that is, after the alcohol becomes gin, so that although the final redistillation ~rocess is the same as that of respondents, yet it is all done in a disttllery, and the distiller has control over the process from the mash to the gin. Thus it includes original or primary distillation through dosed pipes and vessels, as well as the final process of redistillation -over the juniper berries.

Section 5 of the Federal Alcohol Administration Act, approved "~august 29, 1935, dealing with unfair competition and unlawful practices in the industry, provides that it shall be unlawful to sell in bottles any distilled spirits in interstate vr foreign commerce unless th~y are bottled, packaged, and labeled in conformity with such regulations, to be prescribed by the Administrator, as will prohibit deception of the consumer with respect to such products . . E~isting regulations under this act define "distilled gin" as the dt~hllate by original distillation or redistillation of neutral spirits 'With aroma tics.

Findings 23F.T C.

The regulations further provide that on labels of domestic distilled spirits bottled by or for the actual distiller thereof, there shall be stated the words "distilled by" and immediately thereafter the name of such distiller and the place where distilled. PAR. 4. There are among the competitors of respondents engaged in the sale of spirituous beverages as mentioned in paragraph 1 hereof corporations, firms, partnerships, and individuals who manufacture and distill from mash, wort, or wash whiskies, gins, and other spirituous beverages sold by them and who truthfully use the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate names and on their stationery, and on the labels of the bottles in which they sell and ship such products. There are also among such competitors corporations, firms, partnerships, and individuals engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages who do not use the words "distillery," "distilleries," "distilling," or "distillers" as a part of their corporate names, or on their stationery, or on the labels attached to the bottles in which they sell and ship their products.

PAR. 5. A substantial portion of the purchasing public does prefer to buy spirituous liquors bottled by the actual distillers and manufacturers thereof, and such representation is a misrepresentation in fact, and has a tendency to mislead and deceive dealers and the purchasing public, with the resultant tendency to induce them to buy respondents' products in preference to the products of truthful competitors. · The testimony clearly showed, and the' Commission finds, that a prestige attaches in the minds of the wholesale trade to the distiller, and that this prestige is an advantage in overcoming sales resistance; that in the minds of the wholrsale trade and the public, the belief that a distiller is controlling the making of such products from st[lrt to finish, with all the ingredients going- into them within its own establishment, is an advantage to the seller; and that the use of the word "distilling" or "distiller" in a trade or corporate name of a concern gives it a competitive advantage over concerns which do not pursue or practice such characterizations, and which do not purport to be manufacturers when they arc not.

The Commisc;ion, then•fore, finds that the repre>sl'ntati()n of re- Rpondents throug-h use of the word "Distilling" in their trade nawes as aforesaid is calculated to, and has the capacity and tendency to, and does, mislead and deceive dealers and the purchasing publk into the belief that the"\\ 1tiskies, gins, and other spirituous beverageg sold by the respondents are manufactured and distilled by them from. COLUMBIA DISTILLING CO., ETC. 927 918 Order mash, wort, or wash, and is calculated to, and has the capacity and tendency to, and does, induce dealers and the purchasing public, acting in such belief, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondents, thereby diverting trade to respondents from their competitors who do not by their corporate name or in any other manner misrepresent that they are manufacturers by distillation from mash, wort, or wash of wl1iskics, gins, and other spirituous beverages, and thereby respondents do substantial injury to substantial competition in interstate commerce. PAR. 6. Because of existing regulations, under the Federal Alcohol Administration Act approved August 29, 1935 ( 49 Stat. 977), which regulations became effective August 15, 1936, providing that rectifiers 'Who redistill purchased alcohol over juniper berries and other aromatics may sell such resulting product as "distilled gin," and re- -quiring that the labels state who distilled it, the Commission has excepted gins produced by respondents by redistillation of alcohol over juniper berries and other aromatics from the prohibitions of its order.

CONCLUSION The aforesaid acts and practices of the respondents, J. M. Tonkin and S. :M. Modlin, individuals trading under the names and styles of Columbia Distilling Company, Tonkin Distributing Company, and Old Abbey Distilling Company, are to the prejudice of the public and of respondents' competitors and constitute unfair methods of competition in commerce within the intent and meaning 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."

ORDER TO CEASE AND DESIST . This proceeding having been heard by the Federal Trade Commis- Sion upon the complaint of the Commission, the answer of respondents, testimony and other evidence taken before ,V. ,V, Shep- Pard, an examiner of the Commission theretofore duly designated by it, and before John W. Addison, a substituted examiner of the Commission theretofore duly designated by it to take testimony and ?ther evidence in the place and stead of the said W. W. Sheppard, In support of the allegations of said complaint and in opposition th;r:to, briefs filed herein, oral arguments of counsel for the Com- IY_l1SSlon and for respondents having been waived; anu the Commis- Slon having made its finuings as to the facts and its conclusion that FEDERAL TRADE COl\IMISSION DECISIONS928 Order 23 F. T. C. said 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."

It is ordered, That J. M. Tonkin and S. M. Modlin, individuals trading under the names and styles of Columbia Distilling Company, Tonkin Distributing Company, and Old Abbey Distilling Company, and. the officers, representatives, agents, and employees of each of them in connection with the offering for sale, sale, and distribution by them of whiskies, gins, or other spirituous beverages in interstate commerce or in the District of Columbia (except gins produced by them through a process of rectification whereby alcohol, purchased but not produced by respondents, is redistilled over juniper berries and other aromatics) do cease and desist from : Representing, through the use of the word "Distilling" in their trade names, on their stationery, advertising, or on the labels attached to the bottles in which they sell and ship their said products, or in any other way by word or words of like import, (a) that they are distillers of whiskies, gins, or other spirituous beverages; or (b) that the said whiskies, gins, or other spirituous beverages were by them manufactured through the process of distillation; or (c) that they own, operate, or control a place or places wherein such products are by them manufactured by a process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is complete, unless and until respondents shall actually own, operate, or control such a place or places.

It is further ordered, That the said respondents, within 60 days from and after the date of the service upon them of this order, shall file with the Commission a report or reports in writing setting forth in detail the manner and form in which they are complying, and have complied, with the order to cease and desist hereinabove set forth.

NATIONAL CIVIL SERVICE TRAINING BUREAU 929 Syllabus