Helen Ardelle, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF HELEN ARDELLE, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD '1'0 Tile ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2"175. Complaint, Apr. 20, 1936-Decision, June SO, 1931 Where n corporation engaged In manufacture and sale of so-called "draw" or "deal" assortments of candy, sale and distribution of which type candy, by retailers by lot or chance, has capacity and tendency to and does decrease sale of can<ly sold without any sales plan or device involving lottery or game of chance, I. e., the "straight'' goods, and sale of which type, provid,ing, in conneetlon with its sale to public, means or opportunity of obtaining a box of candy as a prize or becoming a winner by lot or chance, teaebes and encourages gambling, and is in violation of various municipal ordinances and regulations and state statutes and constitutions, and pro• viles retail mercbants with a means of violating the laws of the several states, and sale of which candy, so packed and assembled as to enable retail llealers, without alteration, audition or rearrangement, to resell same to consuming public by lot or chance, ls contrary to public policy- Sold, to wholesale and retail dealers, certain assortments of candy which were so packed and assembletl as to involve, or were designed to Involve, use of lottery scheme when sold and distributed to consumers thereof, and which included assortment composed of a number of boxes of assorted chocolate canuies, together with a punchboard, for sale to consuming public under a Plan, and in accordance with said board's explanatory legend, pursuant to which purchaser received, for five cents paid, and dependent upon number punched by chance or purchase of last punch on board, one of aforesaid boxes, value of which was ln excess of aforesaid ·amount, or nothing other tha<l privilege of making a punch; so assembled and packed that such assortments might be and were displayed and sold to consuming public by retail dealer purchasers thereof by lot or chance, and with knowledge and intent that such assortments could and would thus be resoll.l to public by retail dealers without alteration, addition, or rearrangement as above set forth, in competition with many who do not make and sell "draw" or "deal'' assortments, but sP-ll their "straight" goods In Interstate· commerce ln competition with the others;

'With result that competitors who refused to, or do not, sell candy so packed and ass('mbied that it con be resold to public by lot or chance, were put to a disadvantnge by competing with it and with others employing methods similar to tbnse dcscrlbrd herein, tradt> was dh·ertl'd to lt and others usin~ similar methods frnm those who do not use same, by reason of attraction to cwstomers of so-called "draw" or "den!" af<sortments, there was div£>rslon of trade to 1t from its said competitors, and a restraint upon and a detriment to the freedom of fair competition In trade concerned; to Il the prejutliee and injury of the public and of competitors: Cld., That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. 362 FEDERAL TRADE CO::\l1IISSION DECISIONS Complaint 25l<'.T.C. Before Mr. Charles P. Vicini and Mr. Henry M. White, trial examiners.

Mr. P. 0. Kolinski and Mr. llenry 0. Lank for the Commission. Flood, Lenihan & Ivers, of Seattle, 'Vash., 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 Helen Ardelle, Inc., a corporation, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, ns "commerce" is tlefineJ. in said art of Congress, and it appearing to 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:

PARAGRAI'II 1. llespond€'nt is a <'orporation organized under the laws of the State of Washington, with its principal office and place of business located at 1401 East 41st Street, in the city of Seattle, State of 'Vashington. It is now, and for several years last past has been, engaged in the manufacture of candies and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers, located at points in the various States of the United States, and causes and has caused its products, when so sold, to be transported from its principal place of business in the city of Seattle, 'Vush., to purchasers thereof in other States of the Unit<'ll States at their respective places of business; and thrrl' is now, and has been for several years last past, a cour::;!' of tru<le and commerce by said respondent in such candy between and among- the Stutes of the United States. In the course and conduct of said business, respondent is in competition with other corporations and with partnerships and individuals engaged in the manufacture of candy and in the sale and distribution thereof in commerce between and among the various States of the United States. PAn. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent Rells nnd has sold to wholesale und retail dealers packag<'s or assortments of candy so packed and assembled as to involve the use of a lottery scheme when sold and uistributed to the consumers thereof.

One of saitl assortments, manufactured and distributed by the re· spondent, is composed of a number of boxes of assorted chocolate candies, together with a device commonly called a "punchboard.'' The said boxes of candy are distributed to the consuming public by means of said punchboard in the following manner: The sales by HELEN ARDELLE, INC. 363 Complaint means of said punchboard are 5¢ each, and when a punch is made from said board a number is disclosed. The numbers begin with 1 and continue to the number of punches there are on the board, but the numbers are not arranged in numerical sequence. The board bears a statement or statements informing the prospective customer as to which numbers receive a box of candy. The purchaser of the last punch on the board receives a three-pound box of chocolate candy. A purchaser who does not qualify by obtaining one of the numbers calling for one of the boxes of candy or by punching the last number on the board receives nothing for his money other than the privilege of punching a number from the board. The boxes of candy arc worth more than 5¢ each, and a purchaser who obtains one of the numbers calling for a box of candy receives the same for the Price of 5¢. ·The numbers on said board are effectively concealed f.rom the purchasers or prospccti \'e purchasers until a punch or selec~ hon has been made and the particular punch separated from the board. The boxes of candy in said assortment are thus distributed to purchasers of punches from said board wholly by lot or chance. PAn. 3. The wholesale dealers and jobbers, to whom respondent Sells its assortmt:>nt, resell said. assortment to retail delllers, and said retail dealers, anrl the retail dealers to whom respondent !:iells direct, e.xpose baid assortment for sale and sell said candy to the purchasing PUblic in accordance with the aforesaid sales plan. Respondent thus ~llpplies to and places in the hands of others tho means of conduct~ Jng lotteries in the sale of its product in accordance with the sales Plan hereinabove set forth, as a means of inducing purchasers thereof to purchase respondent's said product in preference to candy offered for sale and sold by its competitors.

PAR. 4. The sale of said candy to the purchasing public in the 'nlanner above allcrred involves a game of chance or the sale of a chance to procure a""box of candy.

The use by respondent of said method in the sale of candy, and th? sale of candy by and through the use thereof and by the aid of 8a1u method is a practice of the sort which the common law and ;criminal statutes have long de<'med contrary to public policy; and Is ronh·ary to an t:>stablished public policy of the Government of the lJnited States. The use by rrspondent of said method has the ?angerous tendency unduly to hinder competition or create monopoly In this, to wit: that the use thereof has the tendency and capacity to exclnde from the branch of the candy trade involved in this proceeding com · h d ·l Pchtors who do not adopt and use the same met ,o or an cqmvalllt or similar method iJlYolvinO' the same or an equivalent or similar ~l' 1:> ment of chance or lottery scheme.

Findings !!5l!'.T:C. Many persons, firms, and corporations who make and sell candy in competition with the respondent, as above alleged, are unwilling to offer for sale or sell candy so packed and assembled as above alleged, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom.

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

PAn. 6. Many of said competitors of respondent are unwilling to adopt and usc said method or any method involving a game of chance or the sale of a chance to win something by chance or any other method that is contrary to public policy. P.m. 7. The aforementioned method, acts and practices of the respondent are all to the prejudice of the public and of respondent's competitors, as hereinabove alleged. Said method, acts, and prac~ tices 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 nnd duties, and for other purposes," approved September 26, l!H4. REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to tlle provisions of an Act of Congress, approved Sep· tember 26, 1914, entitled ''An Act to create a Federal Trade Coid~ mission, to define its powers and duties, and for other purposes," the HELEN ARDELLE, INC. 365 361 Findings Federal Trade Commission on April 20, 1936, issued and served its complaint in this proceeding upon the respondent, Helen Ardelle, Inc., a corporation, charging it with the use of unfair methods of competition in commence 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 said complaint were introduced by P. C. Kolinski, attorney for the Commission, and in opposition to the allegations of the complaint by Emmett G. Lenihan, attorney for the respondent, before ~hades P. Vicini, and Henry M. White, examiners of the Commis- Sion theretofore duly designated by it, and said testimony and other €Vidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on said complaint, the answer thereto, testimony and other evidence, briefs in support of the complaint and in oppo- ~ition thereto, and the oral arguments of Henry C. Lank, counsel for the Commission, and Emmett G. Lenihan, counsel for the :respondent; and the Commission, having duly considered the matter ~nd being now fully ndvis('d 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. The respondent, Helen Ardelle, Inc., is a corporatron organized under the laws of the State of ·washington, with its principal office and place of business located at 1401 East 41st Street, In the city of Seattle, State of Washington. Respondent is now, and for several years last past has been engaged in the manufacture of candy in the city of Seattle and in the sale and distribution thereof to retail and '\'\"wholesale dealers and jobbers located in the State of Washington and in the States of Oregon, Idaho, :Montana, and 'Wyoming. It causes the said candy when sold to be shipped or transported from its principal place of business in the State of Wash- Ington to purchasers thereof in '\Vashington and in other States of the United States, as mentioned above. In so carrying on said business, respondent is and has been engaged in interstate commerce Und is and has been engaged in active competition with other corl>orations and with partnerships and individuals engaged in the lllanufacture of candy and in the sale and distribution thereof in -commerce between and among(l' the various States of the United States. PAn, 2. In the course and,.,conduct of its business, as described in Paragraph 1 hereof, respontlent sells and has sold to wholesale and retail dealers, as above described, certain assortments of candy so Findings 25F. T. C.

packed and assembled as to involve, or which are designed to involve, the use of a lottery scheme when sold and distributed to the consumers thereof.

One of said assortments is composed of a number of boxes of assorted chocolate candies, together with a device commonly called a "punchboard." The boxes of candy contained in said assortment are distributed to the consuming public by means of said punchboard in the following manner: The sales by means of said punchboard are 5¢ each, and when a punch is made from saill board a number is disclosed. The numbers begin with 1 and continue to the number of punches there are on the board, but the numbers are not arranged in numerical sequence. The board bears a stateme11t or statements informing the prospective customer as to which numbers receive a box of candy. The purchaser of the last punch on the board receives a three-pound box of chocolate candy. A purchaser who does not qualify by obtaining one of the numb(.'rs calling for one of the boxes of candy or by punching the last number on the board receives nothing for his money other than the privilege of punching a number from the board. The boxes of candy are worth more than tJ¢ each, and a purchaser who obtains one of the numbers calling for a box of candy receives the same for the price of 5¢. The numbers on said board are effectively concealed from the purchasers or prospective purchasers until a punch or selection has been made and the particular punch separated from the boartl. The boxes of candy in said assflrtnwnt arc thus distributed to purchasers of punches from said Loanl wholly by lot or chance.

PAn. 3. The candy assortments involving the lot or chance feature ns nhove described, arc generally referred to in the candy trade or industry as "draw" or "<real'' assortments. Assortments of candy without lot or chance features in connection with their resale to the public are generally referred to in the candy trade or industry as "straight" goods. These terms will he used hereafter in these findings to <listinguish these separate types of assortments. PAn. 4. The "wholesale dealers or jobbers to whom respondent sells its :u,sortments resell the same to retail Jealers, and said rlt:til deall.'rs and the retail dealers to whom n•sponuent sells direct expo;-,e saitl assortments for sale and sell sahl candy to the purchasing pu!Jlic in accordance with the sales plans as described ahove. PAn. 5. All sales made by respondent, whether to wholesale deulers uml jobbers or to retail deal<>rs, are absolute sales nnll respondt'nt retains no control over sai<l assortnu•nts after they are deliven•d to the wholesale dealer or jobber or retail dealer. Tile nssortments arc u3sembled and packed in such mann('r that they are designed to· HELEN ARDELLE, INC. 367 861 Findings be used and are used by the retail dealer for distribution to the purchasing public by lot or chance without alteration or real:rangement. In the sale and distribution to jobbers and wholesale dealers for resale to retail dealers and to retail dealers direct of the assortments of candy described in paragraph 2 hereof, rei'pondent has knowledge that said candy will be resold to the purchasing public by retail dealers by lot or chance, and it packs such candy in the way and manner described so that without alteration, addition or rearrangement thereof it may be resold to the public by lot or chance by said retail uealers.

PAn. G. There are in the Unitetl States many manufacturers of ca11dy competing with respondent in the territory served by respondent who do not manufacture and sell "draw" or "deal" assortments of• cantly and \Yho sell their "straio·ht"~ Mrroods in interstate commerce Ill competition with the "draw" or "deal'' assortments. The sale or distribution of caiHly by retail dealers by lot or chance, has the capacity and tendency to and does decrease the sale of candy sold without any sales plan or uevice involving a lottery or game of chance. Seve>ral witnesses testified, al1!l the Commission finds, that customets coming into retail e~tablislunents and desiring canuy similar to that distributed by respondent would take chances or make purchases by nwaus of saiu pu.sh cards or punchboards, and that in such cases When unsuccessful in obtaining candy by means of said push card or Punchboard some of such customers would then purchase candy as a "straight" purchase and without the use of the lottery device; that the gambling feature connected with the sale of respondent's assortments as described above, was attractive to customers; and that before making "straight" purchases it was not unusual for customers to endeavor to procure the candy desired by means of such lottery devices rather than to make a "straight" purchase. PAn. 7. The sale and distribution of "draw" or "deal" assortments of candy, or of canuy which has connected with its sale to the public the means or opportunity of obtaining a box of candy as a prize or ~e:oming a winner by lot or chance, teaches and encourages gamllllg and is in violation of various municipal ordinances and n•gulations and various State .statutes and constitutions. The sale and ?istribution of candy by retailers by the methods described herein 18 the sale and distribution of candy by lot or chance and constitutes a lottpry or gamin(J' device, and the Commission finds that the sale n~d distribution of assortments of candy as described herein pro- "Hlt>s retail merchants with a means of violating the laws of the sevet·al Stntl's. Competitors who refuse to or who do not sell cawly 1G8t2tm 39----~G 368 FEDERAL TRADE COl\Il\IISSION DECISIONS Order 2rif.T.C.

so packed. and. assembled that it can he resold to the public by lot or chance are put to a disadvantage in competing with respondent and with others employing similar methods to those described herein. Because the "draw" or "deal" assortments are attractive to customers purchasing from retail dealers, the Commission finds that trade is diverted to respondent and others using similar methods from competitors who do not use such methods. The use of such methods by respondent in the sale and distribution of its candy is prejudicial and injurious to the public and to respondent's competitors, and has resulted in the diversion of trade to respondent from its said competitors, and is a restraint upon and a detriment to the freedom of fair and legitimate competition in the candy industry. PAH. 8. Rrspomlent sells its mercha11<lise in the States of 'Vashington, Idaho, :Montana, Oregon, and in Alaska. In the State of 'Vashington, the respondent sells to wholesale dealers and jobbers and to retail dealers. In the States other than the State of Washington, :~approximately 00% of respondent's sales are to jobbers, making only niJOut 10% of its sales direct to retail dealers. In Alaska, the respondent sells to retail dealers exclusively. The total annual volume of respondent's sales is between $100,000 and $150,000. Between 40% and 50% of the total annual Volume of its sales is made up of assortments with which a punchboard is furnished. PAn. 9. The Commission further finds that the sale and distribution in interstate commerce of assortments of candy so packed and U!;~embled as to enable retail uealers, without alteration, addition, or rPaiTangement, to resell the sa.me to the consuming public by lot or chance, is contrary to public policy.

CONCLUSION The aforesaid acts and practices of respondent, Helen Atuelle, Inc., a corporation und<'r the conditions and circumstances set forth in the foregoing findings of fact, are all to the prejudice of the public and respondent's cOinpt•titors, and constitute unfair methods ~ of Sec-of. competition in commerce within the int('nt and mE'aninO' twn 5 of an Act of Congress, approY<'tl St'ptembcr 2G, 1!)14, entitled "An Act to create a Federal Trade Commission, to 1lefine its pow£'rs and duties, and for other purpos<'s."

ORDER TO CEASE AND DE..C:.JST This proce£'ding having been heard by the Federal Trade Com· mission upon the complaint of the Commission the answer of re- . 'spondent, testlmony and other evidence taken before Charles p, HELEN ARDELLE, INC. 369 -361 Order Vicini and Henry :M. 'White, examiners of the Commission theretofore duly designated by it, in support of the allegations of said complaint and in opposition thereto, briefs filed herein, and oral arguments of Henry C. Lank, counsel for the Commission, and Emmett. G. Lenihan, counsel for the r£>spondent; and the Commission having lllade its findings as to the facts and its conclusion that said respondent has violated the provisions of an Act of Congress, approved September 2G, 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, Helen Ardelle, Inc., a corporation, its officers, representatives, agents, and employees, in connection with the offering for sale, sale, and distribution in interstate -commerce of candy, do forthwith cease and desist from: 1. Selling and distributing to jobbers and wholesale dealers for resale to retail dealers, or to retail dealers direct, candy so packed and assembled that sales of such candy to the general public are to b~ made, or may be made, by means of a lottery, gaming device, or gift enterprise.

. 2. Supplying to or placing in the hands of wholesale dealers and Jobbers or retail dealers assortments of candy which are used, or Which·h may be used, without alteration or rearrangement of the cont~nts of such assortments, to conduct a lottery, gaming device, or gift enterprise in the sale or distribution of the candy contained in said assortments to the public.

3. Packing or assembling in the same assortment of candy for sale to the public at retail boxes of candy, together with a device commonly called a "punchboard," which punchboard is for use, or "'~lich may be or is designed to be used, in distributing or selling Satcl candy to the public at retail.

4. Furnishing to r£>tail and wholesale dealers and jobbers a device cornmonlj called a "punchboard," either with assortments of candy or separately, bearing a legend or legends or statements informing the purchasing public that the candy is being sold ~o the p1~blic by lot or chance or in accordance with a sales plan which constitutes a lottery, gaming device, or gift enterprise. It i.~ furtlwr ordered That respondent, Helen Ardelle, Inc., a cor- Poration, shall within' 30 days after service upon it of this order, file With the C~mmission a report in writing setting f01th in detail the manner and form in which it has complied with the order to cease and d<>sist hereinabove set forth.

370 FEDERAL TRADE COl\IMISSION DECISIONS Syllabus 25 F. T. cr.