Kelly Brewing & Malting Co

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IN THE MATI'ER OF RELL Y BREWING & :MALTING COMPANY, TRADING AS ROSECREST DISTILLERS COlfPLAINT, FINDINGS, AND ORDim IN RIWARD TO Tile ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2451. Cornpla_,int, June 20, 1935-Decislon, Jan. 25, 1931 Where a rectifier and wholesaler of spirituous liquors, principal products of Which were blended whiskies, distilled gin, apple brandy, and bottled straight whiskies, and, excepting production of gin by redistillation of · tax-p.lld purchased alcohol over juniper berries and other aromatics, producing no spirits by distillation, and with no place therefor, but purchasing all its distilled spirits requirements from others, and selling its said products to wholesale and retail purchasers thereof in other States and In the District of Columbia, in substantial competition with those engaged In the manufacture by distlllation of whiskies, gins, and other spirituous beverages, and in selling same In trade and commerce as above set forth, and with those engaged in purchasing, rectifying, blending, and bottling such beverages and in similarly selling same, and including among said competitors those who, ns manufacturers and distillers of whiskies, gins, and other spirituous beverages sold by them, from mash, wort or wash as above set forth, truthfully usc wot'd>~ "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery and advertising and on the labels of the bottles In which they sell and ship their said products, and those who, engaged in purchasing, rectifying, blending, bottling, and selling such various products, do not use· aforesaid words as above set forth- IteprE>scnted, through use of word "Distillers" In Its corporate name, printed on Its stationery c.nd advertising and on the labels attached to the bottles In which It sells and ships its said products and In various other ways, to Its customers and furnished them with the means of representing to their vendees, both retailers and ultimate consuming public, that lt was a distiller and that the whiskies, gins, and other spirituous beverages contained In such bottles were by It Jn'Hle through process of distillation from mash, wort, or wash, notwithstanding fact It did not thus distill Raid various spirituous beverages, thus bottled, labled, sold, and transported by it, by process of original and continuous distillation as above set forth, through continuous closed pipes and vessels until manufacture Is complete, as long definitely understood from word "Distillers" in conne('tion with liquor Industry, in the trade and by the consuming public, and War not a distiller, !or the purchase of the bottled liquors of which there Is 1\ preference on the part of a substantial portion of tbe purchasing public; lVIth effect of misleading and deceiving dealers and purchasing public Into the beliefs that It was a distiller and that the whiskies, gins and other ~plrltuous be\'erages sold by it were by It made and distilled from mash, Wort, or wash as aforesaid, and of Inducing dealers ated purchasing publlc, ln such bel!Pfl'l, to buy Its said whbkles, etc., bottled and sold by It, and of thereby diverting trade to It from Its compl('tltors who do not, by their- Complaint 24F.T.C.

corporate or trade names or In any other manner, misrepresent that they are manufacturers by distillation from mash, etc., as above set forth, ot their said products; to the substantial injury ot substantial competition in commerce:

lleld, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Defore Mr. John L. Ilornor, trial examiner. llf r. PGad B. },forehouse for the Commission. Mr. Walter A. J(elly, of Paterson, N. J., for respondent. Col\IPLAINT 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 Kelly Brewing & Malting Company, a corporation, trading under the name and style Rosecrest Distillers, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "commerce" is defined in said act, and it appearing to the said 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. Respondent is a corporation organized, existing, and doing business under the laws of the State of New Jersey, with its principal office and place of business in the city of Paterson, in said State. It is now, and for more than one year last past has been, engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous bevernges and in the sale thereof in constant course of trade and commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its said business, it causes its said products when sold to be transported from its place of business aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers located in other States of the United States and the District of Columbia. In the course and conduct of its business as aforesaid, respondent is now, and for more than one year last past has been, in substantial competition with other corporations and whh individuals, 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 ROSECREST DISTILLERS 541 539 Complaint in the course and conduct of its business as aforesaid, respondent is now, and for more than one year last past has been, in substantial competition with other corporations, and with individuals, 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. · P .AR. 2. In the course and conduct of its business as aforesaid, respondent has upon its said premises a still which it uses in the production of gin by a process of rectification, whereby alcohol pur- <:based but not produced by respondent is redistilled over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondent a distiller as defined by Section 3247 of the Revised Statutes regulating Internal Revenue, nor as commonly understood by the public or the liquor industry. For a long period of time the word "Distillers" when used in connection with the liquor industry and the products thereof has had and still has a definite significance and meaning to the minds of the wholesalers and retailers in such industry and to the ultimate purchasing public, to wit: those who manufacture 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 completed; and a substantial portion of the purchasing public prefers to buy spirituous liquors prepared and bottled by distillers.

PAR. 3. In the course and conduct of its business as aforesaid, by the use of the word "Distillers" in its trade name, printed on its stationery and advertising, and on the labels attached to the bottles in which it sells and ships its said products, and in various other ways, respondent represents to its customers and furnishes them with the means of representing to their vendees, both retailers and the ultimate consuming public, that respondent is a distiller and that the Whiskies, gins, and other spirituous beverages therein contained were~ by it manufactured through the process of distillation from mash, Wort, or wash, as aforesaid, when, as a matter of fact, respondent is not a distiller, does not distill the said whiskies, gins, and other spirituous beverages by it so bottled, labeled, sold, and transported, and merely by the use of a still operated by it as aforesaid in the rectification of alcoholic spirits by redistillation over juniper berries and other aromatics does not distill the gins by it so bottled, labeled, sold, and transported in the sense in which the word "distilled" is commonly accepted and understood by those engaged in the liquor 14671l6'n-39-vol. 24-37 Complaint 24F.T.C.

trade and the public. Respondent does not own, operate, or control 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 respondent 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, as aforesaid, whiskies, gins, and other spirituous beverages sold by them and who' truthfully use the word "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery and advertising, and on the labels of tlu3 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, bottling, and selling whiskies, gins, and other spirituous beverages who do not use the word "distillery," "distilleries," "distilling," or "distillers" as a part of their corporate or trade names, nor on their stationery or advertising, nor on the labels attached to the bottles in which they sell and ship their said products.

PAR. 5. Representation by respondent, 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 beliefs that respondent is a distiller and that the whiskies, gins, and other spirituous beverages sold by the respondent are manufactured and distilled by it 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 public acting in such beliefs, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondent, thereby diverting trade to respondent from its competitors who do not by their corporate or trade names or in any other manner misrepresent that they are manufacturers by distillation from mash, wort, or wash, of such products, and thereby respondent does 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 respondent are to the prejudice of the public and the competitors of respondent and 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 Septembt>r 26, 1914. ROSECREST DISTILLERS 543 Findings Report, FINDINGS AS TO THE FACTs,· AND ORDER' 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, on June 20, 1935, issued and served its complaint in this proceeding upon respondent, Kelly Brewing & Malting Company, a corporation, trading under the name and style Rosecrest Distillers, charging it with the use of unfair methods of competition in commerce, in violation of the provisions of said act. After the issuance of said complaint and the filing of respondent's a.nswer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by PGad B. Morehouse, attorney for the Commission, before John L. Hornor, an examiner of the Commission, theretofore duly designated by it, and no· testimony was offered by respondent in opposition to the allegations of the complaint; and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter the ~roceeding regularly came on for final hearing before the Commis- 81~n on the said complaint, the answer thereto, testimony and other evidence, brief in support of the complaint (brief in opposition thereto and oral arguments of counsel having been waived); and the Commission having duly considered the same, and being now fully ltdvised 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 Tile FACTS PARAGRAPH 1. Respondent is a corporation, organized and existing u.nder the laws of the State of New Jersey, with its office and prin- ~Pal place of business at No. 122 Straight Street, in the city of ~terson in said State, where, from the date of its incorporation in 19'"3 until about July 1, 1935, it engaged in the business of a rectifier ~nd wholesaler of spirituous liquors under basic permit No. R-394: r.om the Federal Government. It had a capitalization of $1,000,000, ~.It~ $346,000 paid in. Its principal products were blended whiskies, f 18blled gin, apple brandy, and bottled straight whiskies. Except ~r the production of gin by the redistillation of tax-paid purchased 11 cohol over juniper berries and other aromatics, it never produced :ny spiritll by distillation, nor had a place therefor. Although charered to deal in malts and beers, it had no place or brewing house or buildings wherein and by means of which are carried out the customary actual processes of preparing beers or ales, and in fact it Findings 24F.T. C.

never handled such products in any manner, so that this case deals (!ntirely with its use of the word "Distillers" in its trade name. During the aforesaid period, while it was engaged in business, it purchased its alcohol from the Roseville Commercial Alcohol €orporation, and its entire quantity of other distilled spirits requirements from others. During its business operations it bottled and sold approximately 6,700 gallons of blended and straight whiskies and about 5,000 gallons of gin. In the course and conduct of its said business it caused its said products, when sold, to be transported from its place of business as aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers located in other States of the United States and the District of Columbia. In the course and conduct of its busi· ness as aforesaid, respondent was in substantial competition with other corporations and with individuals, 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 its business as aforesaid, respondent was in substantial competition with other corporations, and with individuals, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, t brins, and other spirituous beverages and in the sale thereof in c01n· merce between and among the various States of the United States and jn the District of Columbia.

PAR. 2. In the course and conduct of its business as aforesaid, i·espondent had upon its said premises a still which it used in the production of gin by a process of rectification, whereby alcohol purchased but not produced by respondent was redistilled over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondent a distiller, as defined by S£>ction 3247 of the Revised Statutes regulating Internal Revenue, nor as commonly understood by the public or the liquor industry. For a long period of time the word "distillers," when used in con· nection with the liquor industry and the products thereof, has had nnd still has a definite significance and meaning to the minus of the wholesalers and retailers in such industry and to the ultimate pur· .chasing public, to wit: the manufacturers of such liquors by the process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manu· facture thereof is completed.

PAR. 3. The attorney for the Commission called a large number of -witnesses, ten being members of the trade and twenty-two being ROSECREST DISTILLERS 545 539 Findings lllernbers of the purchasing public, and with few exceptions the Comlllission's witnesses testified that the word "distillers," or similar ":'o~ds such as "distilling," "distilleries," etc., indicate the initial dishlhng process of producing spirituous and alcoholic liquors from fermented grain mash, etc., the manufacturer thereof or the place of distillation of spirituous and alcoholic liquors. The greater num- ?er of these witnesses testified that the use of such words would Induce them or did induce them to purchase the products of the concern using such words in their corporate name or on the label of the bottle containing the product, in the belief that a distiller's prod- Uct would be more uniform and up to certain specifications, and a manufacturer's name should mean something. They testified that t?ey preferred buying in as direct a manner as is practical and con- Sidered distillers as having more responsibility than a rectifier or bottler of spirituous liquors. It was testified that the use of the :Yorcl "Distillers" in the corporate name of the respondent would Indicate to them that the respondent was the actual distiller of the Product and they would give preference in purchasing a product \Which bore a label containing such corporate name in competition with a product bearing a label which did not contain the word ''distiller" or any word indicating a distilling process in its corporate llarne or otherwise.

The Commission finds that there is a substantial portion of the pur- .chasing public which prefers to buy spirituous liquors prepared and bottled by distillers.

P.AR. 4. In the course and conduct of its business as aforesaid, by the use of the word "Distillers" in its corporate name, printed on its ~tationery and advertising, and on the labels attached to the bottles In which it sold and shipped its said products, and in various other w~ys, respondent represented to its customers and furnished them With the means of representing to their vendees, both retailers and the ultimate consuming public, that respondent was a. distiller, and th~t the whiskies, gins, and other spirituous beverages therein contained were by it manufactured through the process of distillation from mash, wort, or wash, as aforesaid, when, as a matter of fact, respondent was not a distiller, does not now and never did distill the said whiskies, gins, and other spirituous beverages by it so bottled, labeled, s:->ld, and transported, and merely by the use of a still ~Perated by it as aforesaid in the rectification of alcoholic spirits ! redistillation over juniper berries and other aromatics, did not distill the whiskies, gins, and other spirituous beverages by it so bottled, labeled, sold, and transported in the sense in which the word "distilled" is commonly accepted and understood by those engaged Findings 24F.T.C.

in the liquor trade and by the public. Respondent does not now and never did own, operate, or control any place or places where such beverages were manufactured by the process of distillation from mash, wort, or wash.

PAR. 5. There were among the competitors of respondent engaged in the sale of spirituous beverages, as mentioned in paragraph 1 here· of, corporations, firms, partnerships, and individuals who manufac· tured and distilled from mash, wort, or wash, as aforesaid, whiskies, gins, and other spirituous beverages sold by them and who truthfully used the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery and advertising, and on the labels of the bottles in which they sold and shipped such products. There were also among such competitors, corporations, firms, partnerships, and individuals engaged in the busi· ness of purchasing, rectifying, blending, bottling, and selling whiskies, gins, and other spirituous beverages, who did not use the words "dis· tillery," "distilleries," "distilling," or "distillers" as a part of their corporate or trade names, nor on their stationery or advertising, nor on the labels attached to the bottles in which they sold and shipped their said products.

PAR. 6. Representation by respondent, as set forth in paragraph 3 hereof, was calculated to and had the capacity and tendency to and did mislead and deceive dealers and the purchasing public into the beliefs that respondent was a distiller and that the whiskies, gins, and other spirituous beverages sold by the respondent were manufac· tured and distilled by it from mash, wort, or wash, as aforesaid, and was calculated to and had the capacity and tendency to and did in· duce dealers and the purchasing public, in such beliefs, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondent, thereby diverting trade to respondent from its com· petitors who did not by their corporate or trade names or in any other manner misrepresent that they were manufacturers by distillation from mash, wort, or wash, of such products, and thereby respondent did substantial injury to substantial competition in interstate commerce.

About July 1, 1935, respondent went into the hands of receivers and its assets were sold, with the exception of a building in which had been installed its gin still. It has retained its corporate existence, and the Commission can have no assurance that in the absence of a prohibitiv~ order, respondent may not at some future time renew the violations of law charged herein.

PAR. 7. Decause of existing regulations, and regulations proposed under the Federal Alcohol Administration Act, approved August 29, ROSECREST DISTILLERS 547 539 Order 1935 ( 49 Stat. 977), and which regulations became effective as of August 1~, 1936, providing that rectifiers who redistill purchased alcohol over juniper berries and other aromatics may label such re· suiting product "distilled gin," and requiring that the labels state who distilled it, the Commission has excepted gins produced by respondent by redistillation of alcohol over juniper berries and other aromatics from the prohibitions of its order.

CONCLUSION The aforesaid acts and practices of the said respondent, under the conditions and circumstances hereinbefore described, were to the Prejudice of the public and respondent's competitors, and were unfair ~ethods of competition in interstate commerce, constituting a violation 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 Com· mission upon the complaint of the Commission, the answer of re· spondent, testimony and other evidence taken before John L. Hornor, an examiner of the Commission theretofore duly designated by it, in support of the allegations of said complaint, and no testimony being offered in opposition thereto, brief filed herein by PGad B. Morehouse, counsel for the Commisslon (brief of counsel :for respondent and oral argument having been waived), and the Commission having Inade its findings as to the :facts and its conclusion that said respondent has violated the provisions of an Act of Congress approved S~ptember 26, 1914, entitled, "An Act to create a Federal Trade Comlrllssion, to define its powers and duties, and for other purposes." It i8 ordered, That the respondent, Kelly Brewing & Malting Com- ~any, a corporation, trading under the name and style Rosecrest Dist~llers, its officers, representatives, agents, and employees, in connection with the sale, offering for sale, and distribution in interstate commerce or in the District of Columbia, of whiskies, gins, and all <lther spirituous beverages, except gins produced by it throtigh a Process of rectification whereby alcohol purchased but not produced by respondent is redistilled over juniper berries and other aromatics, do cease and desist from:

Representing, through the use o{ the word "Distillers" in its cor- Porate name, on its stationery, advertising or on the labels attached to the bottles in which it sells and ships said products, or in any other Order 24F. T.C~ way by word or words of like import, (a) That it is a distiller of whiskies, gins, or any other spirituous beverages; (b) That the said whiskies, gins, or other spirituous beverages were by it manufactured through the process of distillation; or (c) That it owns, operates, or controls a place or places where any such products are by jt manufactured by a process of original and continuous distillation from masht wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is completed, unless and until respondent shall actually own, operate, or control such a place or places. It is further ordered, That the said respondent, within 60 days from and after the date of the service upon it of this order, shall file with the Commission a report or reports in writing, setting forth in detail the manner and form in which it is complying and has complied with the order to cease and desist hereinabove set forth. FEDERAL DISTILLERS CORP. 549 Complaint