Quality Distillers, Inc.

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IN THE MATTEII OF QUALITY DISTILLERS, INC.

COMPLAINT AND ORDER IN lli•XlARD TO THE ALLEGED VIOLATION OL•' SEC. 5 Ob' AN AC'l' OI<' C'ONGHESS APPHOVED SEPT 20, 1914, AND OF SEC. 3 OF TITLE I OL•' AN ACT OF CONGRESS APPROVED JUNE Hl, 19331 Docket 4391. Complaint, May 16, 19.15-order, Feb. 2, 1987 Consent order requiring re~pomlent <·orpnratlon, its officers, etc., in connection with sale or offer, in interstate commerce and in District of Columbia, of whiskies, gins, and other alcoholic beverages produced by it, but excepting gins produced by it through process of rectification whereby alcohol purchased, but not produced, by it is redistilled as specified, to cease and desist from representing, through use of word "Distillers" in its corporate name and on its stationery, advertising, rtc., or in any other way, that it is a distiller of whiskies, gins, or other alcoholic beverages or that said whiskies, etc., were by it made through process of distillation, or that it owns, operates, or controls a place where such products are thus made, unless and until it shall own, operate, or control a place or places where such products are by it manufactured through process of original and continuous distillation from mash, wort or wash through continuous closed pipes and vessels until manufacture is complete. lllr. PGad B. M orelwuse for the Commission. lllr. Paul Loewenthal, of Los Angeles, Cali£., for respondent. 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 Quality Distillers, Inc., hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "commerce" is defined in said act, and in violation of the Act of Congress approved June 16, 1933, known as the "National Industrial Recovery 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: Count 1 PARAGRAPH 1. Respondent is a corporation organized and existing and doing business under the laws of the State of California, with its office and principal place of business in Los Angeles, in the said t ('count Two of the £'omplalnt, undrr the National Industrial Recon•ry Act, dlsmlss('d. QUALITY DISTILLERS, INC. 623 '622 Complaint State. It is now, and since its organization in 1034 has been, engaged in the business of purchasing, rectifying, blending, and bottling whiskies, liqueurs, gins, and others spirituous beverages, 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 in Los Angeles aforesaid into and through various other States ·of the United States to the purchasers thereof consisting of whole- .salers and retailers, some located within 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 its business as aforesaid, respondent is now, and at all times since its organization has been, in substantial competition with other corporations and 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 is, and has been since its organization, in substantial competition with other corporations and with individuals, firms, and partnerships engaged :in the business of purchasing, rectifying, blending, and bottling whiskies, liqueurs, 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 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, purchased 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 Uevised Statutes regulating Internal Revenue, nor as commonly understood by the public and the liquor industry. For a long. period of time the word "distillers" when used in connection with the liquor indu~try and with the products thereof has had and still has a definite significance and meaning to the minds of whole- Ralers and retailers in such industry and to the ultimate purchasing public, to wit, the manufacture of such liquors by the process of distillation from mash, wort, or wash, and a substantial portion of the purchasing public prefers to buy spirituous liquors bottled by the actual distillers and manufacturers thereof. P.m. 3. In the course and conduct of its business as aforesaid, by the us~ of the word "Distillers" in its corporate name, printed on its 624 FEDERAL TRADE COr.IMISSION DECISIONS Complaint 24F.T.C.

stationery 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 the said whiskies, gins, liqueurs, and other spirituous beverages therein contained were by it manufactured through the process of distillation from mash, wort, or wash, when, as a matter of fact respondent is not a distiller, does not distill the said whiskies, liqueurs, or other spirituous beverages by it so bottled, labeled, sold, and transported, ami merely by the use of a still 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 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. PAn. 4. There are among the competitors of respondent engaged in the sale of spirituous beverages as mentioned in paragraph 1 hereof corporations, fhms, 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 rectifying, blending, and bottling whiskiest liqueurs, gins, and other spirituous beverages who do not use the won1s "<listill<>ry," "distilkries," "distilling," or "distillers" as a part of their corporate names, nor on their stationery, nor on the labels attached to the bottles in which they sell and ship their said products. PAn. 5. The representation by r<>spondent, as set forth in paragraph 3 hereof, is calrulat<>d to and has a capacity aml tendency to and does mislead aji(J. drceiYe dealers aJHl the purchasing pul1lic into the belief that the whiskies, liqueurs, g-ins, and other spirituous beverages sold by the respondent are manufactured an<l distilled by it from masht wort, or wash aml is calculat<>d to antl has the capacity and tendrncy to and clOf's induce dralers and tlu~ purcha,ing puhlic, acting in such hlief, to pnrc·hase the whiskit>s, liqueurs, gins, and other spirituous hcvrrngrs rPctifit><l, hknde<l and hottlr<l by the respondent, thereby diverting trade to respon<lent from its cmnpetitors 'vho do not by their corporate name or in any other manner misrrpresent that they are manuacturers hy <lif->til)a1 ion from mash, wort, or wash of whis- QUALITY DISTILLERS, INC. 625 1322 Complaint kies, liqueurs, gins, and other spirituous beverages, and thereby respondent does substantial injury to substantial competition in interstate commerce.

PAn. 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 September 26, 1914. Co,unt l2 PARAGRAPH 1. Respondent is a corporation organized and existing and doing business under the laws of the State of California, with its office and principal place of business in Los Angeles, in the said State. It is now, and since its organization in 1934 has been, engaged in the business of purchasing, rectifying, blen<ling, and bottling whislries, liqueurs, gins, and other spirituous beverages, 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 sol<l to be transported from its place of business in Los Angeles aforesaid into and through various other 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 States and the District of Columbia. In the course and conduct of its business as aforesaid, respondent is now, and at all times since its organization has been, 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 is, and has been since its organization, in substantial competition With other corporations and with individualc;, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, liqueurs, 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. PAn. 2. As grounds for this paragraph of this complaint, the Federal Trade Commission relies upon the matters and things set out in 626 ~'EDERAL TRADE COMMISSION DECISIONS Complaint 24 F. T. C"paragraph 2 of count 1 of this complaint to the same extent as though the allegations thereof were set out at length herein and' said paragraph 2 of count 1 of this complaint is incorporated herein by reference and adopted as the allegations of this paragraph of this count and is hereby charged as fully and as completely as though the several averments of said paragraph 2 of said count 1 were· repeated verbatim.

PAR. 3. As grounds for this paragz·aph of this complaint, the· Federal Trade Commission relies upon the matters and things set out in paragraph 3 of count 1 of this complaint to the same extent as though the allegations thereof were set out at length herein and said paragraph 3 of count 1 of this complaint is incorporated herein by reference and adopted as the alh'gations of this paragraph of this count and is hereby charged as fully and as completely as though the several averments of said paragraph 3 of said count 1 were repeated verbatim.

PAn. 4. As grounds for this paragraph of this complaint, the Federal Trade Commission relies upon the matters and things set out in· paragraph 4 of count 1 of this complaint to the same extent as though the allegations thereof were set out at length herein and said paragraph 4 of count 1 of this complaint is incorporated herein by reference and adopted as the allegations of this paragraph of this count and is hen•by charged as fully and as completely as though the several averments of said paragraph 4 of said count 1 were repeated verbatim.

PAR. 5. As grounds for this paragraph of this complaint, the Federal Trade Commission relies upon the matters and things set out in paragraph 5 of count 1 of this complaint to the same extent as though the allegations thereof were set out at length herein and said paragraph 5 of count 1 of this complaint is incorporated herein by reference and adopted as the allegations of this paragraph of this count and is hereby charged as fully and as completely as though the several averments of said paragraph 5 of said count 1 were repeated verbatim.

PAR. 6. Under and pursuant to Title I of the National Industria! Recovery Act, approved June 16, 1933 (48 Stat. 195 C. 90), the President of the United States, by Executive Order No. 6182, of June 26, 1933, as supplemented by Executive Order No. 6207, of July 21, 193:3, and Executive Order No. G345 of October 20, 1933, del0gated to II. A. 1Vallace as Secretary of Agriculture, certain of the powers veste<l in the President of the United States by the aforesaid Act. Under and pursuant to the delegation of such powers, the said Secretary of Agriculture pursuant to Section 3 (d) of the Act and QUALITY DISTILLERS, INC. 627 6~2 Complaint Executive orders under the Act, upon his own motion presented a Code of Fair Competition for the Distilled Spirits Rectifying Industry after due notice and opportimity for hearing in connection therewith had been afforded interested parties, including respondent, in accordance with Title I of the National Industrial Recovery Act and applicable regulations issued thereunder, to the President of the United States who approved the same on the 9th day of December 1933, thereby constituting the said code a Code of Fair Competition within the meaning of the said National Industrial Recovery Act, for the regulation of the aforesaid industry. In his written report to the President, the said Secretary of Agriculture made, among others, the following findings with respect to the said code in the following words, to wit: That said Code will tend to effectuate the declared policy of Title I of the National Industrial Recovery Act as set forth In Section 1 of said Act in that the terms and provisions of such Code tend: (a) to remove obstructions to the free flow of foreign commerce, which tend to diminish the amount thereof; (b) to provide for the general welfare by promoting the organization of Industry for the purposes of cooperative action among trade groups; (c) to eliminate Unfair competitive practices; (d) to promote the fullest possible utilization of the present productive capacity of industries; (e) to avoid undue restriction of Production (except as may be temporarily required); (f) to Increase the consumption of industrial and agricultural products by increasing purchasing power; and (g) otherwise to rehabilitate industry. By his approval of the said cotle on December 9, 1933, the President of the United States, pursuant to the authority vested in him by 'litle I of the National Industrial Recovery Act aforesaid, made and issued his certain written Executive ortler, wherein he adopted and approved the report, recommendations and findings of the said Secretary of Agriculture, and ordered that the said Code of Fair Competition be, and the same thereby was approved, and by virtue of the 'National Industrial Recovery Act aforesaid, the following provision of Article V of said Code became and still is one of the standards of fair competition for the Distilled Spirits Rectifying Industry and is binding upon every member of said Industry and this respondent: The following practices constitute unfair methods of competition and shall llot he engaged In by any member of the Industry: SPctlr>n 1. False Advet·fising.-To publish or disseminate In any manner any false advertisement of any rectified protluct. Any advertisement shall be deemed to be false it it Is untrue in any particular, or if directly or by ambiguity. Omh;sion or inference it tends to create a misleading Impression. PAn. 7. The use by respondent of the word "Distillers" in its corporate name, printed upon its stationery and on the labels attached to the bottles in which it sells and ships such products and in various CO~E\II::isio.Y I;ECISIONS628 0• FEDERAL TRADE Ordet· 2-!F.T.C. other ways, constitutes false advertising within the meaning of the aforesaid provision of said Article V and tends to and does create the misleading impression that respondent is engaged in the business of distilling spirits from mash, wort or wash and that the spirituous beverages by it so sold and transported have been bottled at a distillery by the original distillers thereof, all contrary to the provisions of Section 1, Article V, of the Code aforesaid. PAR. 8. The a have alleged methods, acts and practices of the respondent are and have been in violation of the standard of fair competition for the Distilled Spirits Rectifying Industry of the United States. Such violation of such standard in the aforesaid transactions in interstate commerce and other transactions which affect interstate commerce in the manner set forth in paragraph 5 of count 1 hereof, are in violation of Section 3 of Title I of the National Industrial Recovery Act and they are unfair methods of competition in commerce within the meaning of the Federal Trade Commission Act as amended.

ORDER TO CEASE AND DESIST This proceeding having come on to be heard by the Federal Trade Commission upon the complaint hereinbefore issued and served upon Quality Distillers, Inc., respondent herein, and the said respondent's written answer made thereto, waiving the taking of testimony, findings as to the facts, filing of briefs, oral argument and all other intervening procedure, and consenting that an order shall issue herein for it to cease and desist from methods of competition charged in the complaint, and the Commission being fully advised in the premises, having thereupon concluded that respondent has violated 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 du6es, and for other purposes." It is now ordered, That the respondent, Quality Distillers, Inc., its officers, representatives, agents and employees, in connection with the sale, offering for sale and distribution in interstate commerce and in the District o£ Columbia of whiskies, gins, and all other alcoholic beverages, except gins by it produced through a process of 1·ectification whereby alcohol purcl1ased but not produced by respond· ent is redistilled over juniper berries and other aromatics, do cease and desist from :

Representing through the use of the word "Distillers" in its cor· porate mime, on its stationery, advertising, or on the labels attached to the bottles in which it sells and shlps its said products, or in any QUALITY DISTILLERS, INC. 629 Ordet•022 other way by word or words of like import, that (a) It is a distiller of whiskies, gins and other alcoholic beverages; or (b) the snicl whiskies, gins, and other alcoholic beverages were by it manufnctured through the process of distillation; or (c) it owns, operates, or controls a place or places where, such beverages are nmnufactured by the process of distillation, unless and until the said respondent ~hall own, operate, or control a place or places where such whiskies, gins, and other alcoholic beverages are by it manufactmed through 11 process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is completed.

It is further onle1'ed, That the aforesaid complaint be, and the same is hereby dismissed as to count 2 thereof. It is fu1·thel· 01•dered, That the said respondent within 60 days from 11nd 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 . ..

G30 FEDERAL TRADE COMl\USSION DECISIONS Complaint 24F.T.C.