Margarella, Pasquale

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IN THE MATTER OF PASQUALE 1\fAllGARELLA COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 15 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1190. Complaint, May 19, 1986'-Dccision, Nov. 21, 1936 Where an Individual engaged in manufacturing candies, Including assortments of penny pieces ot uniform size and shape in which the chance selection of one of a small number of said pieces, the colored centers of which differed from those of the majority, entit!Pd purchaser to one of the larger pieces included with such assortment without further charge, and in which purchaser of last of said penny pieces in assortment was given, free, a box of candy also included therewith- Sold said assortments, In competition with many unwilling to offer or sell candies so packed and assembled or otherwise arranged and packed for sale to the purchasing public as to involve a game of chance or the sale of a chance to win something by chance, or any other method contrary to public policy, as long expressed in the common law and criminal statutes, and to estab· lished public pollcy of the United States Government, to wholesalers and jobbers for Iiesale to retailers by whom said assortments were exposed for sale and sold to the purchasing public in accordance with aforesaid sales plan;

With result that many dealers in, and ultimate pnrchascrs of, candy, attrncted by said method and manner of packing said product and by element of chance Involved In the sale thereof as above set forth, were thereby induced to purchase his said candy, thus packed and sold, in preference to that of competitors who do not use same or equivalent methods, and were thereby supplled with the means of conducting lotteries in the sale of his product, in accordance with aforesaid sales plan and contrary to public policy, and with capacity and tendency to Induce as aforesaid, and to divert to him, by reason of said game of chance, trade and custom from his said competi· tors who do not use same or an equivalent method, to exclude from said candy trade all competitors who are unwilling to and who do not use such method as unlawful, lessen competition therein, and eliminate from said trade all actual, and exclude therefrom all potential, competitor~ who do not adopt and use such or an equ~valent method, and tend to create a monopoly of said trade in him and such other distributors of candy as use such a method, and deprive the purchasing public ot the benefits of free competition In trade in question:

Held, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. llefore Mr. },file.3 J. Furn(J)J, trial examiner. Mr. II enry 0. Lank for the Commission.

1 Amended and supplemental complaint. Original findings and order in this matter, whl·cb Issued on April 3, 1934 (18 F. T. C. 278), were vacated, etc., by order reopenlnlr case on May 19, 1936 (22 F. T. C. 912).

PASQUALE 11IARGARELLA 993 992 Complaint AMENDED AND SUPPLEMENTAL Complaint lVhe1·eas, the Federal Trade Commission did heretofortJ, to-wit on April 29, 1930, issue its complaint herein charging and alleging that respondent herein is and has been guilty of unfair methods of competition in interstate commerce within the meaning and intent of Section 5 of an Act of Congress entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other Purposes," approved September 26, 1914, and Whereas, this Commission having reason to believe that respondent herein has been and is using unfair methods of competition in commerce as "commerce" is defined in said act, other than and in addition to those in relation to which the Commission issued its complaint as ~foresaid, and it appearing to said Commission that a further proceed- Ing by it in respect thereof would be in the public interest; . Now, therefm·e, acting in the public interest, pursuant to the provi- Sions of the Act of September 26, 1914, aforesaid, the Federal Trado Commission charges that Pasquale Margarella has been and now is Using unfair methods of competition in commerce as "commerce" is defined in said act, and states its charges in that respect as follows: PARAGRAPH 1. Respondent has his principal office and place of business located at 477 Broome Street, in New York City, State of New ! ork. He is now and for several years last past has been engaged 111 the manufacture of candies llnd in the sale and distribution thereof to wholesale dealers and jobbers located at points in the various States of the United States and causes said products, when so sold, to be transported from his principal place of business in New York City, N". Y., to purchasers thereof in other States of the United States at their respective places of business; and there is now and has been for several years last past a course of trade and commerce by said respondent in such candy between and among the States of the United States. In the course and conduct of said business, respondent is in cox:npetition with other individuals and with corporations and partnersh.Ips engaged in the manufacture of candy and in the sale and distribution thereof i"n commerce between and among the various States of the United States.

par. 2. In the course and conduct of his business, as described in Paragraph 1 hereof, respondent sells and has sold to wholesale dealers and jobbers packages or assortments of candy so packed and assembled ~s to involve the use of a lottery scheme when sold and distributed to le consumers thereof.

?ne of said assortments consists of a number of pieces of candy of Uniform size and shape, together with a number of larger pieces of candy and a box of candy, which larger pieces of candy and the box of Complaint 23F.T.C.

candy are to be given as prizes to purchasers of said pieces of candy of uniform size and shape in the following manner: The majority of the said pieces of candy of uniform size and shape have centers of the same color, but a small number of said pieces of candy have centers of a different colol The said pieces of candy of uniform size and shape in said assortment retail at the price of 1¢ each, but the purchaser who procures one of said candies having a center colored differently from the majority is entitled to receive and is to be given free of charge one of the said larger pieces of candy heretofore referred to. The purchaser of the last piece of candy of uniform size and shape in said assortment is entitled to receive and is to be given free of charge the box of candy also contained in said assortment. The color of the centers of said pieces of candy of uniform size and shape is effectively concealed from the purchaser and prospective purchaser until a selection has been made and the piece of candy broken up. The aforesaid purchasers of said candies, who procure a candy having a center colored differently from the majority of said pieces of candy of uniform size and shape in said assortments, thus procure one of the said larger pieces of candy or box of candy wholly by lot or chance. PAR. 3. The wholesale dealers and jobbers, to whom respondent sells his assortment, resell said assortment to retail dealers, and said retail dealers expose said assortment for sale and sell said candy to the purchasing public in accordance with the aforesaid sales plan. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of his product in accordance with the sales plan hereinabove set forth, and said sales plan has the capacity and tendency of inducing purchasers thereof to purchase respondent's said product in preference to candy offered for sale. and sold by his competitors.

PAR. 4. The sale of said candy to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure larger pieces of candy or a box of candy. The use by respondent of said method in the sale of candy, and the sale of candy by and through the use thereof and by the aid of said method, is a practice of the sort which the common law and criminal statutes have long deemed contrary to public policy; and is contrary to an established public policy of the Government of the United States. The use by respondent of said method has the dangerous tendency unduly to hinder competition or create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the branch of the candy trade involved in this proceeding competitors who do not adopt and use the same method or an equivalent or similar method involving the same or an equivalent or similar element of chance or lottery scheme. PASQUALE ~fARGARELLA 995 Findings Many persons, firms, and corporations who make and sell candy in competition with the respondent, as above alleged, are unwilling to offer for sale or sell candy so packed and assembled as above alleged, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom.

PAR. 5. Many dealers in and ultimate purchasers of candy are attracted by respondent's said method and manner of packing said candy, and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to purchase said candy so packed and sold by respondent, in preference to candy offered for sale and sold by said competitors of respondent who do not use the same or equivalent methods. The use of said method by respondent has the tendency and capacity, because of said game of chance, to divert to respondent trade a,nd custom from his said competitors who do not use the same or an equivalent method; to exclude from said candy trade all competitors who are unwilling to and who do not use the same or an equivalent method because the. same is unlawful; to lessen competition in said candy trade, and to tend to create a monopoly of said candy trade in respondent and such other distributors of candy as use the same or an equivalent method, and to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said method by the respondent has the tendency and capacity to eliminate from said candy trade all actual competitors, and to exclude therefrom all potential competitors, who do not adopt and use said method or an equivalent method.

PAR. 6. Many of said competitors of respondent are unwilling to adopt and use said method or any method involving a game of chance. or the sale of a chance to win something by chance of any other method that is contrary to public policy.

PAR. 7. The aforementioned method, acts and practices of the respondent are all to the prejudice of the public and of respondent's competitors as hereinabove alleged. Said method, acts and practices ~onstitute unfair methods of competition in commerce within the Intent and meaning of Section 5 of an Act of Congress, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTS, AND OnnEn Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Comtnission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on April 29, 1930, issued and served its 78033m--39--vol.23----6a 996 FEDERAL TRADE Calif.IISSION DECISIONS Findings 23 F. T. C. complaint in this proceeding upon the respondent, Pasquale 1\brgarella, charging him with the use of unfair methods of competition in commerce in violation of the provisions of said act. Thereafter, on l\Iay 19, 1936, the Commission issued and served its amended and supplemental complaint on the respondent, charging him with the use of unfair methods of competition in commerce other than and in addition to those in relation to which the Commission issued 1ts complah1t on April 29, 1930, as aforesaid. On June 24, 1936, theo respondent filed his answer dated June 22, 1936, in which answer he admitted all the material allegations of the complaint to be true and stated that he waived hearing on the charges set forth in tha. said complaint and consented that, without further evidence ot other intervening procedure, the Commission might issue and serve upon him findings as to the facts and conclusion and an order to cease and desist from the violations of law charged in the complaint. Thereafter, the proceeding regularly came on for final hearing beforeA the Commission on the said complaint and the answer thereto, and the Commission having duly 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 PARAGRAPH 1. Respondent has his principal office and place of business located at 477 Droome Street, in New York City, State of ~ew York. He is now, and for several years last past has been, ~ngaged in the manufacture of candies and in the sale and distrilmtion thereof to wholesale dealers and jobbers located at points iu the various States of the United States, and causes said products, when so sold, to be transported from his principal place of business in New York City, N. Y., to purchasers thereof in other States of the United States at their respective places of business; and there is now and has been for several years last past a course of trade and commerce by said respondent in such candy between and among that States of the United States. In the course and conduct of said business, respondent is in competition with other individuals and ,with corporations and partnerships engaged in the manufacture of caudy and in the sale and distribution thereof in commerce between and among the various States of the United States. PAR. 2. In the course and conduct of his business, as described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers and jobbers packages or assortments of candy so packed and assembled as to in-rolve the use of a lottery scheme when sold and distributed to the consumers thereof.

PASQUALE MARGARELLA 997 B92 · Findings One of said assortments consists of a number of pieces of candy of uniform size and shape, together with a number of larger pieces of candy and a box of candy, which larger pieces of candy and the box of candy are to ~e given as prizes to purchasers of said pieces (Jf candy of uniform size and shape in the following manner: The Jnaj~rity of the said pieces of candy of uniform size and shape have centers of the same color, but a small number of said pieces of candy have centers of a different color. The said pieces of candy of uniform size and shape in said assortment retail at the price of 1¢ each, · Lut the purchaser who procmes one of said candies having a center colored differently from the majority is entitled to receive and i!;! to be given free of charge one of the said larger pieces of candy heretofore referred to. The purchaser of the last piece of candy of uniform size and shape in said assortment is entitled to receive and js to be given free o£ charge the box of candy also contained in said assortment. The color of the centers of said pieces of candy of uniform size and shape is effectively concealed from the purchaser and Prospective purchaser until a selection has been made and the piece of candy broken up. The aforesaid purchasers of said candies, who ~rocure a candy having a center colored differently from the majorlty of said pieces of candy of uniform size and shape in said assortment, thus procure one of the said larger pieces of candy or box of candy wholly by lot or chance, PAn. 3. The wholesale dealers and jobbers, to whom respondent sells his assortment, resell said assortment to retail dealers, and said retail dealers expose said assortment for sale and sell said candy to the purchasing public in accordance with the aforesaid sales plan. llespondent thus supplies to and places in the hands of others the lneans of conducting lotteries in the sale of his produci in accordance "With the sales plan hereinabove set forth, and said sales plan has the <'apacity and tendency of inducing purchasers thereof to purchase respondent's said product in preference to candy offered for sale and sold by his competitors.

PAR. 4. The sale .of said candy to the purchasing public in the lnanner above alleged involves a game of chance or the sale of a <'hnnce to procure larger pieces of candy or a box of candy. 'I'he use by respondent of said method in the sale of candy, and ~h~ sale of candy by and through the use thereof and by the aid of sa~d method, is a practice of the sort which the common law nnrl ~·rnninal statutes have long deemed contrary to public policy; nnd ~ c.ontrnry to an established public policy of the Government of the 111ted States. The use by respondent of said method has the dan- ~e~ous tendency unduly to hinder competition or create monopoly in us, to wit: that the use thereof has the tendency and capacity to FEDERAL TRADE COMMISSION DECISIONf998 Conclusion 23F.T.C.

exclude from the branch of the candy trade involved in this proceeding competitors who do not adopt and use the same method or an equivalent or similar method involving the same or an equivalent or similar element of chance or lottery scheme. Many persons, firms, and corporations who make and sell candy in competition with the respondent, as above alleged, are unwilling to offer for sale or sell candy so packed and assembled as above alleged, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom.

PAR. 5. 1\fany dealers in and ultimate purchasers of candy are attracted by respondent's said method and manner of packing said candy, and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to purchase !'laid candy so packed and sold by respondent, in preference to candy offered for sale and sold by said competitors of respondent who do not use the same or equivalent methods. The use o£ said method by respondent has the tendency and capacity, because of said game of chance, to divert to respondent trade and custom from his said competitors who do not use the same or an equivalent method; to exclude from said candy trade all competitors who are unwilling to and who do not use the same or an equivalent method because the same is unlawful; to lessen competition in said candy trade, and to tend to create a monopoly of said candy trade in respondent and such t)ther distributors of candy as use the same or an equivalent method, unu to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said method by the respond- ~nt has the tendency and capacity to eliminate from said candy trade all actual competitors, and to exclude therefrom all potential competitors, who do not adopt and use said method or an equivalent method. PAR. 6. Many of said competitors of respondent are unwilling to adopt and use said method or any method involving a game of chance or the sale of a chance to win something by chance or any other method that is contrary to public policy.

PAR. 7. The Commission further finds that the sale and distribution in interstate commerce of assortments of candy as described in paragraph 2 hereof are contrary to public policy. CONCLUSION The aforesaid acts and practices of the respondent, Pasquale Mar- ,garella, are to the prejudice of the public and of respondent's 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 PASQUALE MARGARELLA 999 992 Order Trade Commission, to define its powers and duti~s, and for other Purposes."

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Cominission upon the amended and supplemental complaint of the Commission and the answer of respondent, in which answer respondent admits all the material allegations of the complaint to be true, and states that he waives hearing on the charges set forth in said com- Plaint and consents that, without further evidence or other intervening procedure, the Commission may issue and serve upon him findings as to the facts and conclusion and an order to cease and desist from the violations of law charged in the complaint, and the Commission having made its findings as to the facts and conclusion that said respondent lias violated the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a F'ederal Trade Commission, to define its powers and duties, and fo1' other purposes."

It i8 ordered, That the respondent, Pasquale 1\fargarella, his representatives, agents, and employees, in the offering for sale, sale and distribution in interstate commerce of candy and candy products, do cease and desist from :

(1) Selling and distributing to jobbers and wholesale dealers for lesale to retail dealers candy so packed and assembled that sales of such candy to the general public are to be made or may be made by means of a lottery, gaming device, or gift enterprise; (2) Supplying to or placing in the hands of wholesale dealers and jobbers packages or assortments of candy which are used or may he used, without alteration or rearrangement of the contents of such Packages or assortments, to conduct a lottery, gaming device, or gift enterprise in the sale or distribution of the candy or candy products contained in said assortment to the public; ( 3) Packing or assembling in the same package or assortment, for sale to the public at retail, pieces of candy of uniform size and shape h~ving centers of a different color, together with a number of larger }:Ieces of candy and a box of candy, which said larger pieces of candy and box of candy are to be given as prizes to the purchaser Procuring a piece of candy with a center of a particular color. It i8 further ordered, That the respondent, within 30 days after the service upon him of this order, shall file with the Commission a report in writing setting forth in detail the manner and form in ''"which he has complied with the order to cease and desist hereinabove set forth.

1000 FEDERAL TRADE COM.MISSION DECISIONS Syllabus 23F. T.C.