Canterbury Candy Makers, Inc.

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IN THE MATTER OF CANTERBURY CANDY MAKERS, INC.

CO!Ill'LAINT, FINDINGS, AND ORDEU IN REGARD TO Tile ALLEGED VIOLATION 01<' SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2800. Complaint, May 11, 1936-Decision, July 6, 193"1 'Vhere a corporation engaged in manufacture and sale of so-called "draw" or "deal" us~ortments of candy, sale and distribution of which type candy, by retailers by lot or chance, has capacity and tendency to and does d<'crease sale of candy sold without any sales plan or device involving lottery or game of chance, i. e., the "straight" goods, and sale of which type, providing, in connection with its sale to public, means or opportunity of obtaining a box of candy us a prize or becoming a winner by lot or chance, teaches and encourages gambling, and is in violation of various municipal ordinances and regulations and State statutes and constitutions, and pro· vldes retail merchants with a menus of violating the laws of the several States, and sale of which cnndy, so packed and ass<'mbled as to enable re· tail dealers, without alteration, addition, or rearrangement, to resell same to consuming public by lot or chance, is contrary to public policy- Sold, to wholesale and retail dealers, certain assortments of candy which were so packed and assembled as to involve, or were designed to involve, use of a lottery ~cheme when sold and distribuled to consumers tlJCreof, and one of which included, together with a punchboard, a number of boxes of assorted chocolates of varying size and of a value in excess of five cents, for sale and distribution to consumiug public under a plan, and in accord· ance with said board's explanatory legend, under which persons punch· lug by chance certain numbers received specified box of candy, and pur· chaser of last punch on board received specified box, and others received nothing other than privilege of making a punch for the five cents paid i 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, nnd with knowledge and intent that such assortments could and would thus be resold to public by retail dealers without alteration, ad· dition, or rearrangement as above set forth, in competition with many who do not make and sell "draw" or "deal" assortments, but sell their "straight" goods In interstate commerce in competition with the others; With result that competitors wlJO refuse to, or uo not, sell candy so packed and assembled that it can be resold to public by lot or chance, were put to a disadvantage in competing with it and with others employing methods similar to those uescribed herein, trade was diverted to it and others using similar methods from those who do not use same, by reason of attraclion to customers of so-calleu "draw" or "deal" assortments, there was diversion of trade to it from its said competitors, and a restraint upon and a detrl· ment to the freedom of fair competition in trade concerned; to the preju· dice and injury of the public and of competitors: lleld, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. CANTERBURY CANDY MAKERS, INC, 435 434 Complaint Before Mr. Oharles P. Vicini and Mr. Ilenry 11!. White, trial examiners.

Mr. P. 0. [{olinski and Mr. Henry 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 Com. mission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Canterbury Candy :Makers, Inc., a corporation, hereinafter referred to ~s respondent, has been and is using unfair methods of competition In commerce, as "commerce" is defined in said act 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: PARAGRAPH 1. Respondent is a corporation organized under the laws of the State of 'Vashington, with its principal office and place of business located at 93 Marion Street, in the city of Seattle, State of 'Vashington. It is now, and for several years last past has been, ~ngaged in the sale and distribution of candy 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, Wash., to purchasers thereof in other States of !he United States at their respective places of business; and there Is now, and has been for several years last past, a course of trade ilnd commerce by said respondent in such candy between and among the States of the United States. In the course and conduct 0.£ said business, respondent is in competition with other corporahans and with partnerships and individuals engaged in the manufacture of candy and in the sale and distribution thereof in commerce b('tween and among the various States of the United States . . PAn. 2. In the course and conduct of its business, as described lll paragraph 1 hereof, respondent sells and has sold to wholesale and retail dealers packages or assortments of candy so packed and ll~!';embled as to involve the use of a lottery scheme when sold and dtstributed to the consumers thereof.

One of said assortments, manufactured and distributed by the respondent, is composed of a number of boxes of assorted chocolate ~ndies, together with a device commonly called a "punchboard.'' he said boxes of candy are distributed to the consuming public by 436 FEDEr.A.L TRADE CO:\Il\IISSION DECISIONS Complaint 2::iF.T.C. means of said punch board in the following manner: The sales by 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 five-pound box of chocolate cnndy. A purchaser who does not qualify by obtaining one of the numbers calling for one of the boxes of candy or by punching the la~t 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 5¢ each, and a purchaser who obtains one of the numbers ca-lling for a box of candy receives the same for the price of 5¢. The numbers on said board are effectively concealetl from the purchasers or prospective purchasers until a punch or selection hns been made and the particular punch scpamted 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. PAR. 3. The wholesale dealers and jobbers, to whom respondent sells its assortment, resell said assortment to retail dealers, and said retail dealers, and the retail dealers to whom respondent sells direct, expose said assortment for sale and sell said candy to the purchasing public in accordance with the aforesa-id sales plan. Respondent thtUJ supplies to and places in the hands of others the means of conducting lotteries in the sale of its product in accordance with the sales plan hereinabove set forth, and with the capacity and tende11cy of inducing purchasers thereof to purchase respondent's said product ill preference to candy offered for sale and sold by its competitors. PAR. 4. The sale of said candy to the purchasing public in the manner above alleged involves a game of chance or the sale of ll chance to procure a box of candy.

The use by respondent of said method in the sale of candy, antl the sale of candy by and through the use thereof and by the aid of said method, is a practice of the sort which the common law nnd criminal statutes have long deemed contrary to public policy; and is contrary to an established public policy of the Government of the United States. The use by respondent of said method has the dangerous tendency unduly to hinder competition or creatt> monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the branch of the candy trade involved in this proceeding competitors who do not adopt and use the same method or an CANTERllUltY CANDY MAKERS, INC, 437 43-! Complaint equivalent or similar method involving the same or an equivalent or silimar element of chance or lottery scheme. 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.

PAn. 5. Many 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 110t 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, an<l to tend to create a monopoly of sai<l candy trade in respondent and such other distributors of candy as use the same or an ef}nivalent lllethod, and to deprive the purchasing public of the benefit of free COJnpetition in said candy trade. The use of said met hod by the t·respondent has the tendency and capacity to eliminate from sai<l candy trade all actual competitors, and to exclude therefrom aU potential competitors who do not adopt and use said nwthod or an eqnivalent method.' PAn. G. Many of said competitors of respondent are unwilling to adopt and use 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. PAn. 7. The aforementioned method, acts, and practices of the respondent are all to the -prejudice of the public and of respondent's c?mpetitors, as hereinabove alleged. Said method, acts, an<l practices constitute unfair methods of competition in commerce within ~,he intent nnd meaning of Section 5· of an Act of Congress, entitled An Act to create a Federal Trade Commission, to <lefine its powers ltlld <luties, nnd for other purposes," approved September 26, 1914. Findings 25F.T.C.

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 Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on May 11, 1936, issued and on May 16, 193G, served its complaint in this proceeding upon the respondent, Canterbury Candy Makers, Inc., a corporation charging it with the use of unfair methods of competition in commerce in violation of tho 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 in· troduced by P. C. Kolinski, attorney for the Commission, and in opposition to the allegations of the complaint by Emmett G. Lenihan, attorney for respondent, before Charles P. Vicini and Henry 1\f. White, Examiners of the Commission theretofore duly desig· nated by it, and said testimony and other evidence were duly recorded aml 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 evi· dence, briefs in support of the complaint and in opposition thereto, and the oral arguments of Henry C. Lank, counsel for the Commission, and Emmett G. Lenihan, counsel for the respondent i and the Commission, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its firtdings as to the facts and its conclusion drawn therefrom:

FINDINGS AS TO THE FACTS PARAGRAPII 1. The respondent, Canterbury Candy Makers, Inc., is a corporation organized under the laws of the State of 'Vashing· ton, with its principal office and place of business located at 93 Marion Street, in the city of Seattle, State of Washington. Re· spondent 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, 1\Iontana, California, Wyoming, and the Territory of Alaska. It causes the said candy when sold to be shipped or transported from its principal place of business in the State of Washington to pur· chasers thereof in 'Vashington and in other States of the United States and the Territory of Alaska, as mentioned above. In so car· rying on said business, respondent is and has been engaged in inter· CANTERBURY CANDY MAKERS, INC. 439 434 Findings state commerce and is and has been engaged in active 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 and the Territory of Alaska. PAn. 2. In the course and conduct of its business, as described in Paragraph 1 hereof, respondent sells and has sold to wholesale and retail dealers, as above described, certain assortments of candy St) 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 varying sized 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 meano of said punch board in the following manner: The sales by means of said punchboarcl are 5¢ each,. and when a punch is made from Said board a number is disclosed. The numbers begin with one 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 customers and prospective customers as to which numbers receive a box of candy and the size thereof. The purchaser of the last punch on the board receives a specified box of candy. The purchaser who does not qualify by obtaining one of the numbers calling for one of the boxes of candy, o~· by punching the last number on the board, receives nothing for lns money other than the privilege of punching a number from the board. The boxes of candy are 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 boaru are effectively concealed from the purchasers or prospective Purchasers until a punch or selection has been made and the partic- Ular 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, and the fact as to whether a purchaser receives one of the boxes of candy or nothing other than the Privilege of punching a number from said board for his money is thu, determined wholly by lot or chance.

PAn. 3. The candy assortments involving the lot or chance feature, ~s above described, are generally referred to in the candy trade or 111.dustry as "draw" or "deal'' assortments. Assortments of candy 'Wlthout lot or chance features in connection with their resale to the 440 FEDERAL TRADE Cmil\IISSIO~ DECISJO~S Findings 25 F. T. C. public are generally referred to in the candy trade or industry as "straight" goods. These terms will be used hereafter in these findings to distinguish these separate types of assortments. PAR. 4. The wholf'sale dealers or jobbers to whom respondent sells its assortments resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortments for sale and sell said candy to the purchasing public in accordance with the sales plan as described above. · PAR. 5. All sales made by respondent, whether to wholesale dealers and jobbers or to ret~il dealers, are absolute sales and respondent retains no control over said assortments after they are delivered to the wholesale dealer or jobber or retail dealer. The assortments are assembled and packed in such manner that they are designed to be used and are used by the retail dealer for distribution to the pur· chasing public by lot or chance without alteration or rearrangement. 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, respondent 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 re· arrangement thereof it may be resold to the public by lot or chance by said retail dealers. . PAn. 6. There are in the United States many manufacturers of candy competing with respondent in the territory served by respond· ent who do not manufacture and sell "draw" or "deal" assortments of candy and who sell their "straight'' goods in interstate commerce in competition with the "draw" or "deal" assortments. The sale or distribution of candy 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 device involving a lottery or game of chance.

Several witnesses testified, and the Commission finds, that custom· ers coming into retail establishments and desiring candy similar to that distributed by respondent would take chances or make purchases by means of said push 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 cus· tamers; and that before making "straight" purchases it was not unusual for customers to endeavor to procure the candy desired by CANTERBURY CANDY 1\IAKERS, INO. 441 434 Conclusion llleans 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 candy 'which has connected with its sale to the lubric the means or opportunity of obtaining a box of candy as a prize or becoming a winner by lot or chance, teaches anJ encourages gambling and is in viol::ttion of various municipal ordinances and regulations and various State statutes and constitutions. lhe sale and distribution of candy by retailers by the method described herein is the sale and distribution of candy by lot or chance· and constitutes a lottery or gaming device, and the Comlllission finds that the sale and distribution of assortments of candy a~ described herein provides retail merchants with a means of VIolating the laws of the several States. Competitors who refuse to or who do not sell candy so packed and assembled that it can ?e resold to the public by lot or chance or put to a disadvantage ln competing with respondent and with others employing similar lllethods 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 nnd others using similar methods from competitors who do not lire such methods. The use of such methods by respondent in the sale and distribution of its candy is prejudical and injurious to the llUblic and to respondent's competitors, and has resulted in the di- Version of trade to respondent from its said competitors, and is a l·estraint upon and a detriment to the freedom of fair and legitilllate competition in the candy industry. PAn. 8. An officer of the respondent corpomtion testified, and the ~ommission finds, that the total annual volume of respondent's sales 18 approximately $100,000; that approximately 40% of respondent's total annual volume of sales is made to purchasers outsiue of the State of 1Vashinoton; and that approximately 40% of respondent's t 0 t l 0 a annual volume of sales consists of assortments of candy 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 nssembled as to enable retail dealers, without alteration, addition, ~r rearrangement, to resell the same to the consuming public by ot or chance, is contrary to public policy. CONCLUSION ~I The aforesaid acts and practices of respondent, Canterbury Candy " akers, Inc., a corporation, under the conditions and circumstances Order 25F. T. C.

set forth in the foregoing findings of fact, are all to the prejudice of the public and respondent's competitors, and constitute u11fair 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, the answer of respondent, testimony and other evidence taken before Charles 11• Vicini and Henry l\I. 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 HP.nry C. Lank, counsel for the Commission, and Emmett G. Lenihan, counsel for the respondent; 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 Congress, approved Septem· her 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 Canterbury Candy Makers, Inc., a corporation, its officers, representatives, agents, rnd 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 be 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 may be used, without alteration or rearrangement of the con· tents of such ass01·tments, 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 canuy for sale to the public at retail boxes of candy, together with a device com· monly called a "punchboard," which punchboarcl is for use, or which may be or is designed to be used, in distributing or selling said candy to the public at retail.

4. Furnishing to retail and wholesale dealers and jobbers a device commonly called a "punchhoard," either with assortments of candy CANTERBURY CANDY MAKERS, INO. 443 434 Order or separately, bearing a legend or le~ends or statements informing the purchasing public that the candy i\1 being sold to the public by lot or chance or in accordance with a sales plan which constitutes a lottery, gaming device, or gift enterprise. It is further ordered, That the respondent, Canterbury Cundy ~fakers, Inc., a corporation, shall, within 30 days after service upon It of this order, file with the Commission a report in writing setting forth in det:til the manner and form in which it has complicJ with the order to cease and desist hereinabove set forth. 444 FEDERAL TRADE COl\11\USSION DECISIONS Syllabus 25F. T. C.