Olson Rug Co

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IN THE MATTER OF OLSON RUG COMPANY COMPLAIN'r, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLA'J'IOJ\ OF SEC. li OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2916. Complaint, Nov. 9, 193-6-Dccision, Apr. 21, 19.'11 'Where a corporation engaged In the manufacture, distribution, and sale of rugsll.epresented and implied, through advertisements in periodicals of general circulation, and through letters of solicitation, price lists, sample books, Pamphlets, folders, and other advertising literature, and through its catalogs and order blanks, that the rugs sold by it were made from the identical materials sent In to it by each customer, together with other materials furnished by it, such as new wool, through such statements, among others, as "• • • you too will find it fascinating to send away a bundle of Your worn carpets, rugs, clothing, and other woolens and get back beautiful deep piled rugs that will win the praise of your family and friends," "Strange but true, one may send old carpets, rugs, or clothing and have them converted into new rugs of any color and design," ''By the magic Which turns your old wool into new rugs- • • •," "* • • woven from old wool which you collect and send in," and "Please make the Olson rugs as ordered below" ;

P'acts being that old materials sent in to it by customers are not segregated and used in the manufacture of a rug to fill the specific order of the Particular customers, but are commingled with other materials sent in by others and made into rugs to be carried In stock for sales to other purchasers, and it tills orders sent In with old materials with rugs already In stock and made from such materials previously sent In by other customers, or with rugs woven to special order of customers from old materials Previously sent in by others, and does not make a practice of manufacturing rugs sent to Its respective purchasers from the specific materials sent In by them· th capacity' and tendency to cause a portion of the purchasing public to"'' form the erroneous and mistaken impression and belief that when they sent in .Oll m11.,terlals and ordered rugs from it said products would be made in Part from ~pe~ific materials sent in, and to' cause them to purchase Its Raid rugs on account of such belief, and with result that trade was thereby diverted to It from competitors, Including those who make, distribute, and sen rugs made, in part at least, from specific materials sent in to them by customers, and those who do not make the rugs sold to customers from such materials sent In by the respective customers, but from other materials, and Who have not made nlle of any statements or represrntatlons calculated to cause purchasers to form erroneous Impression and belief that their respective products are made from materials other than those from which Ilrldth~>y Eire actually made; to the Injury of competition in commerce: • That such acts and practices wet·e to the prejudice of the pnl.Jlic uwl competitors and constituted unfair methods of comp~tltlon. • Complaint 24 F. T.C. ~~ r. J. T. lV elch for the Commission.

Kirkland, Fleming, Green, Martin & Ellis, of 'V'ashington, D. C., 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 Olson Rug Company, hereinafter referred to as respondent, has been and now is using unfair methods of competition in commerce as "commerce" is defined in said act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: P.ARACRAPII 1. Respondent, Olson Rug Company, is a corporation, existing and doing business under and by virtue of the laws of the State of Illinois with its principal office and place of business located at 2800 North Crawford Avenue, city of Chicago, State of Illinois. Respondent is now, and has been for a number of years, engaged in the business of manufacturing, distributing, and selling rugs, in commerce as herein set out.

PAn. 2. Respondent, being engaged in business as aforesaid, causes said rugs, when sold by it, to be transported from its office and principal place of business in the State of Illinois to the respective purchasers thereof located at various points in States of the United States other than the State of Illinois. For more than one year last past, the respondent has maintained a constant current of trade in the rugs manufactured, distributed, and sold by it, in commerce among and between the various States of the United States and in the District of Columbia.

PAn. 3. In the course and conduct of its business, respondent is now, and has been for many years, in substantial competition with other corporations and with firms and individuals likewise engaged in the business of distributing and selling rugs, in commerce among and between the various States of the United States and in the District of Columbia.

PAR. 4. In the course of the operation of said business, and for the purpose of inducing customers and prospective customers to pur· chase said rugs, respondent has, from time to time, caused advertise· ments to be inserted in newspapers, magazines, and periodicals of general circulation throughout the United States and has printed and drculated throughout the several States to said customers and pros· pective customers, through the United States mails and otherwise, OLSON RUG CO. 1057 1055 Complaint letters of solicitation, price-lists, sample books, pamphlets, folders, and other advertising literature, in which it has caused its corporate name, Olson Rug Company, to be prominently and conspicuously displayed, together with such statements as the following: Send your materials just as they are. You may order any rug pictured in this book, regardless of the colors in your old materials. It does not mattter whether the material you send Is all old carpets or rugs or a part of it is clothing. Don't hesitate to send even badly worn materials. There is more good material In them than you can Imagine.

I am sure you too will find it fascinating to send away a bundle of your worn carpets, rugs, clothing and other woolens and get back beautiful deep piled rugs that will win the praise of your family and friends. Within a week, we will weave Olson rugs in any of the fashionable, new Plain or two-tone colors, or exqui~ite oriental or early American patterns shown In this book regardless of the color of your materials. Though all illustrations in this book are reproduced from actual color photographs by the finest pt·intiug process known, I guarantee that the rugs we make for You will be even richer in character.

In its catalogue, respondent has also made use of statements attributed to editorial writers for various magazines. Through the use of these statements in its catalogue, it vouches for the correctness of the statements claimed to have been made by such editors. These statements are as follows:

Strange but true, one may send old carpets, rugs or clothing and have them converted Into new rugs of any color and design. By the magic which turns your old wool into new rugs-this Persian type rug comes from the looms of the Olson Rug Company. Think of being able to use your old carpets and materials to create a rug like this.

For it (the rug) is one of those amazing manufactured products woven from Old wool which you collect and send ln.

On its order blanks, is the following language: Gentlemen: Please make the Olson rugs as ordered below. All of said statements, together with other similar statements pur- Port to be descriptive of respondent's business and the product manufactured and sold by it. In the various catalogues, circulars, and Pamphlets distributed as aforesaid by the respondent, there appear numerous statements, including those hereinabove set out, wherein the respondent represents, either directly or through implication, that the rugs which it sells are made on the special order of the customer and are made from the identical materials sent in to it by each ~us~omer, together with other materials, such as new wool furnislwd y lt.

PAn, 5. In truth and in fact, when old materials are sent in to the respondent by customers, these identical materials are not segre- Findings 24F.T.C.

gated and used in the manufacture of a rug to fill the specific order of said customer, but are commingled with other materials sent in by other customers and made into rugs to be carried in stock for sales to other purchasers. 'Vhen customers send in old materials and order rugs to be made for them, the respondent supplies said customer with rugs already carried in stock which have been made from old materials previously sent in by other customers. The respondent does not make a practice of manufacturing the rugs which are sent to the respective purchasers from the specific materials sent in by said purchasers.

PAR. 6. Many of respondent's competitors, who manufacture, distribute, and sell rugs, truthfully represent the materials from which said rugs are made and when said competitors represent that the mgs sold by them will be made in part from the customers' own materials, they actually make said rugs in compliance with said representation.

PAR. 7. The false and misleading representations made by the respondent, as hereinabove set out, in the offering for sale and sale of its rugs were, and are, calculated to, and had, and now have, a capacity and tendency to mislead and deceive the purchasing public into the erroneous belief that when they send in old materials and order rugs from the respondent, that said rugs will be made, in part, from the specific materials sent in, and into the purchase of respondent's rugs on account of the erroneous beliefs induced as aforesaid. As a result thereof, trade has been unfairly diverted to the respondent from competitors likewise engaged in the business of distributing and selling rugs made from old materials, who truthfully advertise fmd represent the nature and character of their respective businesses and of their respective products. As a consequence thereof, subbtantial injury has been, and is now being, done by respondent to c:ompetition, in commerce among and between the various States of the United States and in the District of Columbia. . PAR. 8. The above and foregoing acts, practices, and representa· tions of the respondent have been, and are, all to the prejudice of the public and respondent's competitors as aforesaid, and constitute unfair methods of competition within the meaning and intent of Section 5 of an Act of Congress approved September 26, 1914, en· titled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes." REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Colll· OLSON RUG CO. 1059 1055 Findings mission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on November 9, 1936 issued and served its complaint in this proceeding upon respondent, Olson Rug Company, 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 answer, the Commission, by order entered herein, granted respondent's motion fon Permission to withdraw said answer and to substitute therefor an answer admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, which substitute answer was duly filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint and the substitute answer, briefs and oral arguments of counsel having been waived, and the Commission having duly considered the same ~nd being now fully advised in the premises, finds that this proceed- Ing 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, Olson Rug Company, is a corporation, existing and doing business under and by virtue of the laws of the State of Illinois with its principal office and place of business located at 2800 North Crawford Avenue, city of Chicago, State of Illinois. :Respondent is now, and has been for a number of years, engaged in the business of manufacturing, distributing, and selling rugs, in comlnerce as herein set out.

~AR. 2. Respondent, being engaged in business as aforesaid, causes s~1d rugs, when sold by it, to be transported from its office and prin- I"!Ipal place of business in the State of Illinois to the respective purchasers thereof located at various points in States of the United States other than the State of Illinois. For more than one year last past, the respondent has maintained a constant current of trade in the rugs manufactured, distributed, and sold by it, in commerce among and between the various States of the United States and in the District of Columbia.

PAR. 3. In the course and conduct of its business, respondent is now, and has been for many years, in substantial competition with other ~or~orations and with firms and individuals likewise engaged in the usmess of distributing and selling rugs, in commerce among and between the various States of the United States and in the District of Columbia.

Findings 24 F. T. C. PAR. 4. In the course of the operation of said business, and for the purpose of inducing customers and prospective customers· to purchase said rugs, respondent has, from time to time, caused advertisements to be inserted in newspapers, magazines and periodicals of general cir· culation throughout the United States and has printed and circulated throughout the several ~states to said customers and prospective cus· tomers, through the United States mails and otherwise, letters of solicitation, price-lists, sample books, pamphlets, folders, and other advertising literature, in which it has caused its corporate name, Olson Rug Company, to be prominently and conspicuously displayed, together with such statements as the following: I am sure you too will find it fascinatiug to send away a bundle of your worn carpets, rugs, clothing and other woolens and get back beautiful deep p;led rugs that will win the praise of your family and friends. Within a week, we will weave Olson rugs in any of the fashionable, new, plaht or two-tone colors, or exquisite oriental or early American patterns shown in this boolc regardless of the color of your materials. Though all iilustrations in this book are reproduced from actual color photo· graphs by the finest printing process known, I guarantee that the rugs we make for you will be even richer in character.

In its catalogue, respondent has also made use of statements at· tributed to editorial writers for various magazines. Through the use of these statements in its catalogue, it vouches for the correctness of the statements claimed to have been made by such editors. These statements are as follows:

Strange but true, one may send old carpets, rugs or clothing and have theJll converted into new rugs of any color and design. By the magic which turns your old wool into new rugs-this Persian type rug comes from the looms of the Olson Rug Company. Think of being able to use your old carpets and materials to create a rug like this.

For it (the rug) is one of those amazing manufactured products woven from old wool which you collect and send in. On its order blanks, is the following language: Gentlemen: Please make the Olson rugs as ordered below. All of said statements, together with other similar statements, purport to be descriptive of respondent's business and the product manufactured and sold by it. In the various catalogues, circulars, and pamphlets distributed, as aforesaid, by the respondent, there appear statements, including those hereinabove set out, which have the capacity and tendency to cause a portion of the purchasing pub· lie to form the mistaken belief that the rugs which the respondent OLSON RUG CO. 1061 1055 Findings sells are made from the identical materials sent in to it by each customer together with other materials, such as new wool, furnished by it.

PAR. 5. When old materials are sent in to the respondent by customers, these identical materials are not segregated and used in the manufacture of a rug to fill the specific order of said customers but are commingled with other materials sent in by other customers and made into rugs to be carried in stock for sales to other purchasers. 'Vhen customers send in old materials and order rugs to be lhade from them, the respondent either supplies said customers with rugs already carried in stock which have been made from old materials previously sent in by other customers, or with rugs woven to the special order of said customers from old materials previously Sent in by other customers. The respondent does not make a practice of manufacturing the rugs which are sent to its respective purchasers from the specific materials sent in by said customers. PAR. 6. There are among respondent's competitors those who manufacture, distribute, and sell rugs made, in part at least, from the specific materials which have been sent in to them by customers. '!'here are also among responde11t's competitors others who do not lhanufacture the rugs which they sell to their customers from the specific materials sent in by the respective customers but manufacture Said rugs from other materials. The aforesaid competitors have not lhade use of any statements or representations that have the capacity and tendency to cause purchasers to form the erroneous impression and belie£ that their respective products are made from materials other than those from which they are actually made. . PAR. 7. The use by the respondent of the statements and repre- ~entations hereinabove set out, in the offering for sale and sale of 1:s rugs had, and now has, the capacity and tendency to cause a por- ~Ion of the purchasing public to form the erroneous and mistaken 1lhpression and belie£ that when they send in old materials and order rugs from the respondent that said rugs will be made, in part, from the specific materials sent in, and to cause them to purchase re- Spondent's rugs on account of such belief. As a result thereof, trade has been diverted to the respondent from those competitors likewise engaged in the business of selling and distributing rugs described in paragraph 6 hereof. As a consequence thereof, injury has been, and 18 now being, clone by respondent to competition in commerce among and between the various States of the United States and in the Dis-t . rict of Columbia. Order 24F.T.C.

CONCLUSION The aforesaid acts and practices of the respondent, Olson Rug Company, 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 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 Commission upon the complaint of the Commission and the answer filed herein on December 21, 1936 by respondent admitting all the zna· terial allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of an Act of Con· gress 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 the respondent, Olson Rug Company, its officers, representatives, agents, and employees, in connection with the offer· ing for sale, sale, and distribution of rugs in interstate commerce or in the District of Columbia, do forthwith cease and desist from: 1. Representing, directly or through implication, that said rugs will be made, in whole or in part, from the specific materials sent in to it by the respective customers ordering said rugs; 2. ·Using in its advertising, or in any other manner, language descriptive of its product which has the capacity and tendency to cause members of the purchasing public to form the impression or belief that in sending materials to the respondent and ordering rugs, they will receive rugs made, in whole or in part, from the identical materials sent in by each of them.

It is further ordered, That the respondent shall, within 90 days after service upon it of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with this order.

PEDODYNE CO., INC., ET AL. 1063 Syllabus