American Grain Distillers, Inc.

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IN THE l\IATTER OF AMERICAN GRAIN DISTILLERS, INC.

COMPLAINT, FINDINGS, ANP ORDER lN REGARD TO THE ALLEGED VIOLATION O.F SEC. r;,OF AN• ACT OF CONGRESS APPROVED SEPT. 26, 1914, AND OF SR<;. 3 OF TITLEl I OF AN ACT 01<' CONGRESS APPROVED JUNE 16, 1933 1 Docket 2420. Comp/{lfnt, iJlay 27, 1935-Derision, June 17, 19J7 Where a corporation engaged, as rectifier of all kinds of whiskies at its rectifying plant, In purehafllng, rectifying, and blending whlski~!', gins, and oth~r spirituous beverages, and in producing gin with a stlll us~l therefor by redistillation of purchased alcohol, not produced by it, over juniper berries and other aromatics, and in selling its aforesaid variou>1 products between and among the various States and In the District of Columbia, h1 substantial competition with those engaged in manufacture by true distlllation of whiskies, gins, anti other spirituous beverages f1·om mash, wort, or wash, and In selling same In trade and commerce among the various States and in said District, and with those engaged in purchasing, rectifying, blending, and bottling such various beverages and similarly selling same, and Including among said competitors those who, us manufacturers aml !list1Ilers by original and continuous distillation from mash, wot·t, or wash, through con· tlnuous closed pipes and vessels untll manufacture Is complete, of whiskies, glns, and other splrltuonl! brvrr11ges solu by thrm, truthfully use words "distillery," "lli:<tlll~rics," "tlistlllers," or "dl~tiller" os part uf tlwh· rorpnrate or trade names and on their stationery and advertising, and on the labels of the bottles ln which they sell and ship their said products, and those who, engaged ln purchasing, rectifying, blending, bottling, and selling such various products, do not use aforesaid words as above set forth- Represented, through use of word "Distillers" In Its corporate name, on its stationery, malllng cards, nnu Invoices, anu on the labels attached to the bottles in which lt soltt anu shipped Its salu products, that 1t was a producer of distlllt>d spirits flom raw materials, null thus represented to Its cu~;tomers, and furnished same with a means of representing to their Yendees, .both . rctul!ers and ultimate consuming public, that 1t was a distlller, and that the whiskies nnd other Aplrltuoul'! beYernges contained In such bottles were by 1t made throu~h process of distillation from mash, wort, or wnsh ns aforesaid, notwlthHtandlng fact it did not thus distill said various beverages thus bottled, lalwled, sold, nnd transported by it, as definitely understood from word "dlstlllers," used in connection with liquor Industry and products thereof in the trade and hy the purchasing pnhlle, Ill! meaning, when used in connection with liquor Industry and products thereof, manufacture of such liquors by process of original anll continuous dlstillntlon from mash, wort, or wash through rontlnuous closed I•lpcs and ,·essels until manufacture Is complete, and did not own, operate, or control any place or places where such beverages are made by proce!!ll of dlstlllntlon from mnrd1, w.ort, or wa;:;b, and was not a distiller, for the purchase of the bottll'd liquors of which there Is a prl'fer<'llce on the part of a subl'tantlnl portion of the pnrchaslng public: 1 Count hro of the complaint, und~>r the National Industrial Reco\'ery Act, dismissed. AMERICA~ GRAlN DISTILLERS, INC. 157 100 Complaint With e1lect of misleading and decelying dealers und purchasing public into the belief that 1t w11s a distiller, and that the whiskies, gins, and other spirituous beverages sold by it were by it made and distilled from mash, wort, or wash, and with cllpaclty nnd tendency to Induce dealers and purchasing public, acting In such beliefs, to buy its said whiskies and other ~pirltuous beverages, bottled and sold· by it, and with result of thereby diverting trade to it 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 whiskies or other spirituous beverages; to the substantial injury of 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 Mr. John L. Hornor, trial examiner.

Mr. PGad B. M01·ehouse for the Commission.

Complaint Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Com- :rnission1 to define its powers and duties, and for other purposes,'' the Federal Trade Commission, having reason to believe that American Grain Distillers, Inc., a corporation, 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:

Oownt 1 PARAGRAPH 1. Respondent is a corporation organized, existing and doing business under the laws of the State of Michigan, with its office lind principal place of business in the city of Detroit, 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, a.nd other spirituous beverages in a rectifying plant Under a rectifier's permit, and in the sale thereof in constant course of trade and commerce between and among the various States of the lJnited 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 "ar,i.ous States of the United States to the purchasers thereof, consisting of wholesalers and distributors, some located within the Statl~ of Michigan and some located in other States of the United States and the District of Co1nmbia. In the course and conunct of its 158 FEDERAL TRADE CO:\IniiSSION PECISIONS Complaint 25F.T.. C.

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, partnerships, and firms engaged in the manufacture by true distillation of whiskies, gins, and other spirituous beverages from mash, wort, or wash, and in the sale thereof in trade and commerce between and among the various States of the United States aml in the District of Columbia; and in the course and conduct of its business as aforesaid respondent is, and for more th1m one year last past has been, in substantial competition with other C<rrporations and with individuals, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other epirituous beverages in rectifying plants under rectifiers' permits 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. Upon the premises of respondent's place of business afore· said there is a still for use in the production of gins by a process of rectification whereby alcohol, purchased but not produced by re· spondent, is redistilletl over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondent a distillery or a distiller, as defined by Section 3247 of the l{revised 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 industry and with the products thereof has had and still has a definite significance and meaning to the minds of wholesalers and retailers in such industry and to the ultimate purchasing public, to wit, those who produce alcoholic liquors by an original and continuous distilla· tion 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 and prepared by the actual distillers thereof. PAR. 3. In the course and conduct of its business as aforesaid, by the use of the words "Grain" and "Distillers" in its corporate name, , printed on its 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 uld· mate consuming public, that the said whiskies, gins, and other spirit· uous beverages therein contained were by it manufactured througl1 the process of distillation from mash, wort, or wash, when, qs !il matter of fact, respondent is not a distiller, does not distill the said AMERICAN GRAIN DISTILLERS, INC. 159 156 Complaint 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 re-distillation over. juniper berries and other aromatics, does not distill the whiskies ' gms, and other spirituous beverages by it so bottled, labeled, sold, and transported in the sense in which the word "distillers" is com- Inonly 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 alcoholic beverages are manufactured by a process of original and continuous 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, firms, partnerships, and individuals who manufacture and distill from mash, wort or wash, whiskies, gins, and other spirit- Uous beverages sold by them and who truthfully use the words "distillery" "distilleries" "distillers" "distilling'" or "grain" as a part of their corporate' or trade' names and' on their stationery,""' advertising 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 in rectifying plants under rectifiers' permits who do not use the words "distillery," "distilleries," "distilling," "distillers," or "grain" as a part of their corporate or trade names, nor on their stationery, advertising nor on the labels attached to the bottles in which they sell and ship their said products.

PAR. 5. The representation by respondent, as set forth in paragraph 3 hereof, is calculated to and has a capacity and tendency to and does lnislead and deceive dealers and the purchasing public into the belief that the whiskies, gins, and other spirituous beverages sold by the respondent are manufactured or distilled by it from mash, wort, or ''"'ash by one continuous process and is calculated to and has ihe capacity and tendency to and does induce dealers and the purchasing Public, acting in such belief, to purchase the whiskies, gins, and ()ther spirituous beverages rectified and bottled by the respondent, thereby diverting trade to respondent from its competitors who do llot by their corporate or trade name or in any other manner misl'rpresent that they are manufacturers by distillation from mash, 'Yort, or wash of whiskies, gins, or other spirituous beverages, and thereby respondent does substantial injury to substantial competition in interstate commerce.

Complaint 2;JF.T.C.

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. Count f PARAGRAPH 1. Respondent is a corporation organized, existing, and doi11g business under the laws of the State of Michigan, with its office and principal place of business in the city of Detroit, 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 beverages in a rectifying plant under a rectifier's permit, and in the sale thereof in constant course of trade and commerce between and among the various States of the U11ited States and in the District of Columbia. In the course and colllluct of its said business it causes its said products when sold to Le transported from its place of business aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and distributors, some located within the State of Michigan 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, respomlent is now, anc.l for more than one year last past has been, in substantial competition with other corpora· tions and with individuals, partnerships, and firms engaged in the manufacture by true distillation of whiskies, gins, and other spirit· uous beverages from mash, wort, or wash, 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 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 in rectifying plants under rectifiers' permits and in the sale thereof in commerce between and UJnon..,..., tlte yurious States of the United States and in the District of Columbia.

PAns. 2, 3, 4, and 5. As grounds for these paragraphs of this complaint, the Federal Trade Commission relies upon the matters and things set out in paragraphs 2, 3, 4, and 5 of count 1 of this A.AMERICAN GRAIN DISTILLERS, INC. lgl 156 Complaint complaint to the same extent as though the several allegations thereof were set out at length and in separate paragraphs herein and the SUI'd paragraphs 2, 3, 4, and 5 of count 1 of this complaint' are in~ corporated herein by reference and adopted as the allegations of pamgraphs 2, 3, 4, and 5, respectinly, of this count, and are hereby charged as fully anJ as completely as though the several a \'erments of the said paragraphs of connt 1 were separately set out aml repeated Verbatim.

PAn. (i. Under and pursuant to Title I of the National Industrial Recovery Act, approved June 10, 1933, ( 48 Stat. 193 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, 1933, and Executive Order No. G345, of October 20, 1933, delegated to H. A. 'Vall ace as Secretary of Agriculture certain of the powers Vested in the President of the United States by the aforesaid act. Under and pursuant to the delegation of such powers, the said Secrct<1ry of Agriculture pursuant to Section 3 (d) of the act and Executive orders under the act, upon his own motion presented a code of Fair Competition for the Distilbl Spirits Rectifying Industry after due notice anJ opportunity for hearing in connection there- With huJ 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 Dniterl States who approwd the same on the 9th day of December 1933, thereby constituting the said code a Code of Fair Competition Withill the meanillg of the said National Industrial Recovery Act, for the r~:gulation of the aforesaid industry. In his written report to the President, the said Secretary of Agriculture made, among othrrs, the following findings with respect to the sai<l Code in the following words, to wit: 'that said Code will tend to effectuate tile declared poliry of Title I of the 1\'atioual Industrial Rf'covery Act as set forth in Section 1 of said act in that the terms and provisions of such Code teud: (a) to remove obstructions to the free flow of foreign commerce, which tend to diminish the amount that·enf; (b) to provide for the general welfare hy promoting the organization of ln- <lu~;try for tbe purposes of cooperative action among trade grunps; (c) tu eliminate unfair competitive practices; (d) to promote the fullest pos;;ihl·• Utilization of the pre!'ent productive capacity of industries; (e) to avoid undue re~triction of production (except as may be H·mporarily required) ; (f) to 111<'rease the consumption of ilHlnstrlnl and agricultural products by ill(.'leasing l•urchasing power; and (g) otherwise to reilnhilitnte industry. Dy his approval of the said code on December D, Hl33, the President Of the U11ited States, pursuant to the authority vest£>d in him by Title l of the N atio11al I11du,trial Hecon'ry ~\ct aforesai(l, ma<le anJ issut>d 162 FEDERAL TRADE COl\Il\IISSIOX DECISIO:NS Findings 25 F. T. C. his certain written Executive order, 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 com~ petition for the Distilled Spirits Rectifying Industry and is binding upon every member of said Industry and this respondent: 'lhe following pradices couf;titute unfulr methods or competition and shall not be engaged in by any mcmbt•r of the industry: Section 1. False Adt:crtising.-To publi;-;h or di:;semiuate in any manner any false udvertisement of uny redifil·dprodnct. Any udwrtbemeut shall bE:> deeuwd to be false if it is untrue iu any particular, or If directly or by ambiguity, omi:-;sion or inference it tends to cr!:'ute a misleading impression. PAn. 7. The usc by respondent of the 'Words "Distillers" and "Grain" in its corporate name, printed on its stationery and on the labels attached to the bottles in which it sells un<l ships such prod~ nets and in various other ways, constitutes false alh·ertising within the meaning of the aforcsaill provision of said Article V and tends to and does create the mish•a<ling impression that respomlent is en~ gaged in the business of distilling whiskies, gins, nml other spirituous beverages from mash, wort, or wash, and that the whiskies, gins and other spirituous beverages by it so sold and transported have been bottled by the original distillers thereof and have been. produced by a true process of distillation ft·om mash, wort, or wash, all con~ trary to the provisions of Section 1, Article V, of the Code aforesaid. PAn. 8. The above alleged methods, acts antl practices of the re~ spondent are and have been in violation of the standarll of fair com~ }>etition for the Distill£>d Spirits Hectifying Industry of the United States. Such violation of ,such standard in the aforesaid transac~ tions in interstate commerce and other tran~actions which affect inter· .state 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 JnJus· trial Recovery Act and they are unfair nwthods of competition in commerce within the meaning of tlle FNleral Tnulr Commission Act as nmenued.

Ib:l'oirr, Fnanxos AS TO Tile F.-\CTS, ANn Om>F.n l)ursuant to tlte provisions of an Act of Congress appro\·ed Srp· tember 26, 1914, entitlrd ''.An Act to create a Fedrral Tn11le Commis· sion, to define its powers nn<l duties, and for other purposrs," the Felleral Traue Commission on l\Iny 27, 1935, i~stwd, uml on May 29, 1935, ~served its complaint in this proceeding upon respondent .Amer· AMERICAN" GRAIN DISTILLERS, INC. 163 156 Findings ican Grain Distillers, Inc., 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 thereto, testimony and other evidence in support of the allegations of the 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 said testimony and other evidence were duly recorded and filed in the office of the Commission. No testimony or other evidence in opposition to the allegations of the complaint were introduced by Maurice Nathanson, president of the American Grain Distillers, Inc., appearing for respondent. Thereafter the proceeding regularly came on for final hearing before the Conunission on the said complaint, the answer thereto, testimony and other evidence and brief in support of the complaint (no brief in opposition thereto having been filed and no oral argument having been maue); ami the Commission having duly consideretl the for~going and being now fully advisctl in the premises, finds t.hat this proceeding is in the intere~t of the public and makes this its findings as to the facts and its conclusion drawn therefrom:

J:'INDISGS AS TO THE FACTS PARACRArii 1. Respondent is a Michigan corporation organized August 24, 1933, and "·as engaged in the distilled spirits rectifying Lusiness from the time of repeal of the Eighteenth Amendment to the Constitution of the United States up to some time in April of 1936, when it ceased to engage in the aforesaid business. During said period responuent operated, under a basic rectifier's permit from the Government known as "R-248," a rectifying establishment with a capacity of 5,000 cases a day, rectifying all kinds of whiskies, purchasing its distilled spirits from Publicker Commercial Alcohol Company and other distilleries. Upon its premises, aforesaid, there was a still for use in the production of gins by a process of rectification Whereby alcohol purchasrd but not produced by respondent was redistilled over juniper berries and other aromatics. During the period betw£>en repeal of the Eighteenth Amendment ~nd April 193G, respondent was engaged in the business of purchas- Ing, rectifying, and blending whiski£>s, gins, and other spirituous beverages in its aforesaid plant under its said permit, and in the sale thn·eof in constant course of trade and commerce between and among the various States of the United States antl in the District of Columbia. In the course and conduct of its said business it caused its said Products when sold to be transported from its place of business in CO::\Il\IIS~IOX DECISIONS164 FEDERAL TRADE Finuings 25 F. T. C. Michigan into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers located in Statps of the United States other than the States of origin of said shipments, and in the District of Columbia. In the course and conduct of its business as aforesaid, respondent, dming said period, was in substantial competition with other corporations and with individuals, partnerships, and firms engaged in the manufacture by true distillation of whiskies, gins, and othrr spirituous beverages from mash, wort, or wash, 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 courso and conduct of its business as aforesaid, respondent was in snbstantial eompdition with other corporations and with individuals, firms, and partnerships, engaged in the business of purchasing, rectifying, hlrnding, and bottling whiskies, gins, and other spirituous bew'rages in rectifying plants under rectifiers' permits, and in tho sale thereof in commerce between anJ among the various States of tlle United Stntrs and in the District of Columbia. P,m. 2. "Rectifying" in the distilled spirits rectifying industry mrnns the mixing of whi~kies of differe-nt a[.!rs or typef', or the mixin~~ of otlwt· ingrt-!clients with whiflkies, but 1wlncing proof of" hi~key l1y Ml!ling water is not rectifying. Hretifiers al::o blend "hi~kiPs with JJeutral "Spirits (grain alcohol).

1\fany di~tillers operate a separate E-establishment 500 feet or more aw:ty from their <listi1lrry, known as a rectifying plant, wherein they operate in tltc E:ame manner as described above-for a rectifiersometimrs exclusively with spirits of their own di~tillation and ~orne­ times with ~spirits pmchased from other distillers, or both. Some distillers have a tax paid bottling room on the distillery bonded pr<'mises wlwrein their distilled spirits are bottled straight ns they come from the> still, or in a. bonded warehouse after aging, or after t'ellurtion of proof. Any rectifying by a distiller, however, must bo done in his rectifying plant undrr his rectifier's permit. On all bottled Jiq11ors, whether bottled at the distillery or at any rectifying plant, appear the words ''Bottled" or "Blended" (as the case may be) "by the-------------------- Company." If the distillrd spirits therein containNl are bottled by a distiller in his distillery or are Rpirits of hil m' n distillation bottled in his rectifying plant, the distiller may and docs put "Distilled and llottletl by --------------~ Company." If, in the distiller's rectifying plant, other spirits lwse been blendt'd or rectifird, he puts on the bottle "lllt>nded and llottled by -------------------- Company."

Al\IEUICAX GRAIN DISTILLERS, INC. 165 15G Findings Finally, blown in the .bottom of each bottle is a symbol consistin(J' of a letter followed by a number, identifying the bottler viz "D~ for a disfiller and "R" for a rectifier, the number follo~incr' said letter corresponding with. the distiller's or rectifier's pennit. o Thus "R-248" designates this respondent. A distiller who also operate~ a rectifying plant, having both kinds of pennits, may use either symbol depending upon whether the liquor contained in the bottle Was produced and bottled under his distiller's or his rectifier's permit. This number is placed on the bottle to identify the bottler. Knowledge of these details is not widespread among the retail trade and is very limited among the general public. All whiskies, Whether coming from a distillery or rectifier, are generally conceded to be "distilled" products. Therefore, it is not possible to determine from the presence of the phrase "Blended and Bottled by" alone, or the phrase "Bottled by" alone on the label whether the package was bottled by a rectifier who is a distiller, or by a rectifier who is not a distiller.

This respondent does not now and never has produced or manufactured distilled spirits of any kind from mash or raw materials, although its charter would authorize it so to do. Its rectifier's permit authorizes it to engage in the business of rectifying and blending, and is conditioned upon compliance by respondent with all applicable regulations made pursuant to Jaw, which are or may hereafter be in force. · PAn. 3. The evidence adtluccd in this case from approximately eight competitive trade witnesses (both rectifiers and distillers) and eixteen members of the purchasing public bhows, and the Commission finds, that for a long period of time the word "distilling," when l!Sell 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 ultiJiate Purchasil!O' 1mLlic to wit the manufacturina of such liquors by the Process of,.., orig"inal' and continuous' distillation<J from mash, wort or '"ash, throtwl~ continuous closed pipes and '£'Ssels until the manufacture ther;of is completed; and a substantial portion of the purchasing public prefers to buy spirituous liquors prepared and bottled by distillers.

The rectification of alcoholic spirits by this re~pondent as aforesaid in the production of its gin, does not make or constitute it a distiller or a distillin(J' company as defined by Sec. 3247 of the Re- Vised Statutes of the "'united States regulating Internal Revenue. The testimony of those having long experience in both the distilled spirits rectifying industry and the\ distilling industry, established, Findings ~5 F. T.C. and the Commission finds that the foregoing rectification of a lcohollc spirits by redistillation over juniper berries and other ar.omatics in the production of gin does not make or ~onstitute this respondent a distilling company in the sense commonly understoou by the liquor industry or by the general public.

I) AR. 4. This respondent, by the use of the word "distillers" in its corporate name, on its stationery, mailing cards, invoices, and on the labels attached to the bottles in which it sold and shipped its products in interstate commerce, represented itself as a producer of distilled spirits from raw materials, and was so regarded, by virtue of said representations, by the trade and purchasing public. It thus represented to its customers and furnished them with the means of representing to their vendees, both retailers and the ultimate con· surning public, that it was a distiller and that the whiskies and other spirituous beverages in said bottles contained were by it manu· factured by the process of distillation from mash, wort, or w·ash, as aforesaid, when, as a matter of fact, respontlent is not now and never was a distiller, does not now and never did distill the said whiskies, or other spirituous beverages, by it so bottled, labeled, sold, and transported, and does not now anJ never diu own, operate, or control any place or places where such beverages are or 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 hereof corporations, firms, partnerships, and individuals who manu· factureJ 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 "distiller" as a part of their corporate or trade names and on their stationery and advertising, and on the labels of the bottles in which th<:y sold and shipped such products. There were also among such competitors corporations, firms, partnerships, and incliYiduals pn· gaged in the business of purchasing, rectifying, blending, bottling, and Reiling whiskies, gins and other spirituous beverages who did not use the words "distillery," "distilleries," "distiller," or "distillers" as a part of their corporate or trade names, on their stationery or adver· tising, or on the labels attached to the bottles in which they sold and shipped their said products.

PAR. 6. Representations by the respondent ns hereinabove SPt forth l1ad the capacity and tendency to and did mislead and deceive dealers and the purchasing public into the belief that respondent was a dis· tiller, and that the whiskies and other spirituous beverages by it sold AMERICAN GRAIN DISTILLERS, INC. 167 156 Findings 'Were manufac_tured and distilled by it from mash, wort, or wash, and ~ad the capacrty and tendency also to induce dealers and the purchaslng public, acting in such beliefs, to purchase the whiskies and other spirituous beverages bottled and sold by the respondent, thereby diverting trade to respondent from its competitors 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 Whiskies or other spirituous beverages. Thereby respondent did substantial injury to competition in interstate commerce. PAn. 1. At the time the hearings in this case were held, to wit, Octo- ?er 1936, respondent had no stock and no plant. On August 3, 1936, lts basic permit had been amended by changing its address from 2431 Scotten Avenue, to 634 Lafayette Building, Detroit, Mich., which is a ~mall temporary office where respondent gets its mail and is conductlng certain correspondence in an endeavor to sell its rectifying equipment now located in Cincinnati, Ohio, with the Ansonia Copper Com- Pany. Respondent is attempting to sell its machinery and all its ?ther assets in order to pay its creditors and close its books. It is now lnsolvent but there will bo no bankruptcy proceedings as the chief creditors are financially interested in the respondent company, and the company expects to turn any proceeds over to its creditors and dissolve the company. Its labels, bearing the name "American Grain Distillers" were disposed of as junk. However, from the record before the Commission the company still maintains its corporate existence, and the Commission docs not feel assured that upon a reorganization the name might not be resumed in interstate commerce in the absence of a prohibitive order.

l)AR. 8. Because of existing regulations promulgated under the Federal Alcohol Administrntion Act, approved August 29, 1935, ( 49 Stat. ?77), providing that rectifiers who redistill purchased alcohol over Juniper berries and other aromatics may label such resulting product "Distilled Gin," and requiring that the labels state who distilled it, t?e Commission has excepted gins produced by respondent by redishllation of alcohol over juniper berries nnd other aromatics from the Prohibitions of its order.

PAn. 9. The Commission's complaint in this case was issued on the same day ns the decision of the United States Supreme Court in the case of A.. L.A. Schechter Poultry Corporation, et al, vs. United States (205 U. S. 495), and contained two counts. Count 1 specifically charged a violation of the Federal Trade Commission Act, and count 2 charged that the practices of respondent, as hereinbefore set out, 'Were unfair methods within the meaning of the Federal Trade Com- DECISIO~S 168 FEDERAL TRADE COl\Il\IISSION Order 25 F. T. C. mission Act because they were in violation of Section 3 of Title I of the National Industrial Recovery Act, which was invalidated by the aforesaid decision. For that reason the Commission is dismissing the complaint as to count 2 thereof.

CONCLUSION . The aforesaid acts and practices of the respondent American Grain Distillers, Inc., were to the prejudice of the public and of respondent's competitors, and constituted 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 pmYers 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, the answer of the respondent, testimony and other evidence taken before J olm L. Hornor, an examiner of the Commission then•tofore duly designated by it, in support of the allrgations of the said complaint, brief filed herein by PGad D. Morehouse, counsel for the Commission (no testimony or other evidence having been offered on behalf of respondent, and no brief having been filed on behalf of respondent, and no oral argument having been made), 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 Congr£'ss approved S£'ptember 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, American Grain Distillers, Inc., its officers, representatives, agents, and employees, in connection with the offering for sale, or sale and distribution by it, in interstate commerce or in the District of Columbia of whiskies, gins, or other spirituous beverages (except gins produced by it through a process of rectification whereby alcohol purchased 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 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 way by word, or words of like import, (a) that it is a distiller of whiskies, gins, or other spirituous beverages; or (b) that the said whiskies, gins, or other spirituous beverages were by it manufactured through the process of distillation; nr (c) that it owns, operates, or AMERICAN GRAIN DISTILLERS, INC. 169 156 Order controls a place or places where any such products are by it 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 completed, unless and until respondent shall actually own, operate, or control such a place, or places. It is further ordered, That the said complaint be, and the same hereby is dismissed as to count 2 thereof.

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 herein ahove set forth. 170 FEDERAL TRADE CO::\IMISSIOX DECISIONS Syllubm; 25 F. T. C.