Sunnyland Distilling Co

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IN THE MATTER OF SUNNYLAND DISTILLING CO~IP ANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO Tile ALLEGED VIOLATION OF SEC. l:i OF AN ACT OF CONGRESS APPHOVED SEP'£. 26, 1914 Do{'T.-et 2419. Complaint, June 28, 1935-Dedsion, Auu. 2, 1937 Where n corporation engaged as rectifier of distilled spirits, in purchasing, rectifying, and blending whiskies, gins, and other spirituous beverages, and in producing gin with a still used therefor by redlst1llntion of purchased alcohol, not produced by it, over juniper berries and other aromatics, and in the sale or its aforesaid various products to wholesaler purchasers thereof in States other than State of origin of its said ship· ments, In substantial competition with those engaged in the manufacture by true distillation of whiskies, gins, and other spirituous beverages from mash, wort, or wash, and In selling same In trade and commerce among the various States and In the District of Columbia, and with those engaged in purchasing, rectifying, blending, and bottling such Yarious beverages and similarly selling same, and Including among !mid competitors those who, as manufacturers and distillers by original and continuous distillation from mash, wort, or wash, througiJ continuous closed pipes and vessels uutll manufactlll'e Is complete, of whiskies, gins, and other spirituous beverages sold by them, truthfully use words "distillery," "distilleries," "distillers," or "distilling," as a part of their corporate or trade names and on their stationery and udvert!Silng and on the labels of the bottles in which they sell and ship their said products, and those who, engaged in purchasing, rectifying, blending, bottling, and selling such rurlous products, do not use afot·e~;aid words as above set forth- Represented, through use of word "Distilling" in its corporate name, on its stationery, mulling cards, and invoices, and on the labels attached to the bottles in which it sold and shipped Its snld products, that 1t was a pt·oducer of distilled spirits from raw materials, and so represented to its customers, and turnishPd same with means of representing to their vendees, both wholesalers and ultimate consuming public, tllat it was a distiller, and that the whl~;kies and other spirituous beverages contained In Inch bottles were by it made through process ot distillation, as aforesaid, from mash, wort, or wash, notwithstanding fact it did not thus distill said various beverages, thus bottled, labeled, sold, and transported by It, through aforesaid process of original and continuous distillation, as long dPftnltely uudPrstood from word ''dlstllllng" used in connection with liquor industry and products thereof in the trade and by the ultimate purchasing public, and did not own, operate, or control any place or places where such beverages are made by process of distillation from mash, wort, or wash, aud was not n distiller, for the purchase of the bottled llquors of which there is a preference on the part of a substantial portion of the pun·haslng public;

Wu h eiTect of misleading and deceiving dealers and purchasing public into the bellet that it was u dlstlller, and that the whiskies and other spirituous beverages sold by It were by it made and distilled from mash, wort, or • 638 FEDERAL TRADE CO:Ml\IISSION DECISIONS Complaint 25 F. T. C. wash, and with capacity and tendency to induce dealers and purchasing public, acting in such beliefs, to buy its said whiskies and other spirituous beve1·ages bottled and sold by it, and of thereby diverting trade to it 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; to the substantial injury of competition in commerce: Ileld, That such acts and practices were to the prcjuulce of the public and competitors and constituted unfair methous of competition. Defore Mr. John L. Hornor, trial examiner.

llfr. De 1Vitt T. Puckett for the Commission. lllr. L. D. G1'eene, of Louisville, Ky., for respontlent.. Complaint Pursuant to the provisions of an Act of Congress approved September 26, 1!>14, 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 Sunnyland Distilling Co., 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 it appearing to the said Commission that a proceeding by it in respect thereof would be in the public interest, herrby issues its complaint, stating its chargrs in that respect as follows:

PARAGRAPH 1. Respondent is a corporation organized, existing, and doing business under the laws of the State of Kentucky, with its office and principal place of business in the city of Louisville, in said State. It is now, and for more than one year last past has been, engaged in the business of a 'vholesaler and rectifier, purchasing, rectifying, blending, and bottling whiskies, gins, and other alcoholic beverages and in the sale thereof in constant course of trade and commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its said business it causes its said products when sold to be transported frmn its place of business into and through various States of the United States to the purchasers thereof, consisting of wholesalers and re· tailers, located in other States of the United States and the District of Columbia. In the course and conduct of its business as aforesaid, respondent is now, and 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 alcoholic beverages frolll mash, wort, or wash, and in the sale thereof in trade nnu commerce between and among the various States of the United States and in the SUNNYLAND DISTILLING CO. 639 637 Complaint 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 alcoholic beverages and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. Upon the premises of respondent's place of business aforesaid there is a still for use in the production of gins by a process of rectification "·hereby alcohol, purchased but not produced by respondent, is re~listilled 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 324:7 of the Revised Statutes regulating Internal Revenue, nor as commonly understood by the public and the liquor industry. For a long period of time the word "Distilling" when used in connection with the liquor indust~·y and with the products thereof has ha<l anu still has a <.lefinite ~Ignificance and meaning to the minds of wholesalers and retailers In such industry and to the ultimate purchasing public, to wit, the ~manufacturing of r-;spirituous liquors by an original and continuous d~stillation from mash, wort, or wash, through continuous closed Pipes anu vessels until the manufacture thereof is complete, and a 8~bstantial portion of the purchasing public prefers to buy spirituous hquors bottled anu prepared by distillers.

PAn. :3. In the course nn(L conduct of its business as aforesaiu by the Use of the wonl "Distilling'' in its corporate name, printed on its ~tationpry, catalogs, aml on the labels attached to the bottles in which lt sells and rships its said protlucts, and in various other ways, re- ~Pondent represents to its customers anu furnishes them with the tneuns of rl'presenting to their vendees, Loth retailers and the ultimate c~lllsuming public, that it is a distiller and that the said whiskies, Rins, and other alcoholic bcveragl's therein containeu were by it. lnanufactm·t>d through the process of distillation from mash, wort, or Wash, when, as a matter of fact, respondent is not a distiller, docs tlot distill the said whiskies, gins, anu other alcoholic beverages by it 80. Lottleu, labtoleu, sold, and transported, and merely by the use of a. ~~:II orll.•rat.<>u .by it.ns afor<•saiu in t~t~ prouuction of gin, ~loes not dis- ! ~the Whiskies, gms, and other sp1ntuous beverages by It so bottled, t~]] cle<l, sold, and transported in the sense in which the word "dis- / eu'' is commonly acceptcu and understood by those engaged in the ciquor trade and the public. Respondent does not own, operate, or control any place or places where spirituous beverages are manufac· l5812tm---39----43 Findings 25F.T.C.

tured by a process of original and continuous distillation from mash, wort, or wash.

PAR. 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 spirituous beverages sold by them and who truthfully use the words "distil· lery," "distilleries," "distillers," or "distilling" as a part of their corporate' or trade names and on their stationery catalogs 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, bottling, and selling whiskies, gins, and other alcohohc beverages who do not use the words "distillery," "distilleries," "dis· tilling," or "J.istillers" as a part of their corporate or trade names, nor on their stationery, catalogs, advertising, nor on the htbels attached to the bottles in which they sell and ship their said products. PAn. 5. The representations by respondent, as set forth in para· graph 3 hereof, are calculated to and have a capadty and tendency to and do mislead nnd deceive dealers and the purchasing public into the beliefs that respondent is a distiller and that the whiskies, gins, and other spirituous beverages sold by respondrnt are manufactured or distilled by it from mash, wori, or wash, by one continuous process and are calculated to and have the capacity and tendency to and do induce dealers and the purchasing public, acting in such beliefs, to purchase the whiskies, gins, and other alcoholic beverages rectified and bottled by the respondent, thereby diverting trade to respond· ent from its competitors who do not by their corporate or trade name or in any other manner misrepresent that they are distille:Si and thereby respondent does substantial injury to substantia competition in interstate commerce. d I>An. 6. The acts and things above alleged to have been done an the false representations allrged to have been made by respondent are to the prejudice of the public and the competitors of responde~lt and constitute unfair methods of competition in commerce withl~ the intent and meaning of Section 5 of an Act of Congress, entitle "An Act to create a Fedrral Trade Commission, to dl>fine its pow~7 and duties, and for other purposes," approved September 26, 19 ' llEI'OUT, FINDINGS AS 1'0 TIIE FACTS ' AND ORDER Pursuant to the provisions of an Act of Congress approved Sep: tember 26, 1014, entitled "An Act to create a Federal Trade Corll . . d . " thl)m1sswn, to efine Its powers and duties, and for other purposes, SUNNYLAND DISTILLING CO. 641 637 Findings Federal Trade Commission on June 28, 1935, issued, and on July 1, 1935, served its complaint in this proceeding upon respondent Sunnyland Distilling Company, a corporation, 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 Dewitt T. Puckett, 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 R. E. Gordon, president of the Sunny land Distilling Company, appearing for respondent. Thereafter the proceeding regularly came on for final hearing before the Commission 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 made) : and the Commission having duly considered the foregoing and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion. drawn therefrom:

FINDINGS AS TO Tile FACTS · PARAGRAPH 1. Respondent is a Kentucky corporation organized February 7, 1934, and has been enga~ed since May 1934, in the distilled spirits rectifying business. During said period respondent has operated under a basic rectifier's permit from the Government known as "R-381" a rectifying E-establishment at 2119 'Vest Main Street, Louisville, Ky., rectifying whiskies, using distilled spirits purchased from Brown-Forman and other distillers. Upon its premises, aforesaid, there is a still for use in the production of gins by a process of rectification whereby alcohol purchased but not produced by respondent is redistilled over juniper berries and other aromatics. Since May 1931, the respondent has been engaged in the busiJWH!of purchasing, rectifying, and blending whiskies, gins, nnd other ~spirituous beverages in its aforesaid plant under its said permit, all<l In the sale thereof in constant course of trade and commerce between and among the various States of the United States. In the cour~:;e and conduct of its said business, it caused its said products when snhl to be transported from its place of business in Louisville, Ky., into and through various States of the United States to the purchasers thereof, consisting of wholesalers located in States of the United States other than the State of origin of said shipments. 642 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings 25F.T.C.

In the course and conduct of its business as aforesaid, respondent has been and is in substantial competition with other corporations and with individuals, partnerships, and firms engaged in the manufacture by true distillation of \Yhiskies, 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 and in the District of Coltm1bia; and in the course and conduct of its busint'ss as aforesaid, respondent has been and is 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 otlH•r spirituous l>cYerages in rectifying plants under rectifiers' p<'rmits, and in the sale thl'reof in commerre between and among the various States of the United States and in the District of Columbia. Jlar. 2. "Uectifying" in the distilll'd spirits rertifying industry means the mixing of whiskies of different ag<'s or tnws, or the mixing of other ingredients with whiskies, hnt reducing proof of whisk('y by adding water is not l'Pstifying. HPdifiers also bleJHl whiskies with nrutral spirits (grain alcohol.) l\fany distillers operate a separate establishment !JOO feet or moro awny from their distillery, known as a rec-tifying plant, wherein tlwy orwrate in the same manner as drsrribt>d abo,·e-for a rectilirrsometime<'s exclusively with spirits of thrir own distillation and sometimes with spirits purchased from othrr distillt'rs, or both. Some distillers have a tax pnid hottling room on the distill<'rY homletl prrmisPs wht'rein th<'ir distilhl spirits nre hottlrd stmight as they come from the still, Ol' in a ho!Hletl wnn•lwuse n after agin:.r, or n ftrr l'l'tluction of proof. Any rretifying hy a di"till<'r, ho\WV~r, must he done in his rectifying plant under his rc•ctifit•l·'s pl'l'llllt· On all bottled lifltwrs, wlwther bottletl nt the distillt'ry or at any rectifying plant, appear the words "Botth•d'' or "BI\'ndNl" (as t~.€ case may be) "Le the-------------------- Company." If the tl~s­ tillrd spirits therein contnint'd are hottlt-J. by n. distiller in his sellstillery or are spirits of his own distillation bottled in his rectifying plant, the distiller may anJ. d()('S put "Distilletl and Bottled by -------------------- Company." If, in the J.istiller's rectifying plant, other spirits have bren blend.ed or rectifipJ. he puts on the bottle "Blended aml Botth•d by ----------------~--- Company.'' li'innlly, blown in the bottom of each bottle is n. symbol consisting of a let~e~ followed. by n number, identifying the bottler, viz, "J?" for a d1shller and "R" for a rectifier, the number following s:lld letter corresponding with the distiller's or rectifier's 1)ermit. Thus,"R-381" d es1gna· t es t Ius· respondent. A distiller who also operates a SUNNYLAND DISTILLING CO. 643 637 Findings 1·rectifying plant, having both kinds of permits, 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 bottle<l by a rectifier "·lw is a distiller, or by a rectifier who is not a distiller.

This respondent does not now and never has produced or manufacture<] distilled spirits of any kind from mash or raw materials, although its charter would authorize it so to do. Its rectiJler's permit nuthoriz<'s it to engage in the business of rectifying and blending, and is conditioned upon compliance by re~pondent with all applicable regulations made pursuant to law, which are or may hereafter Le in force.

PAn. 3. The evidence adduced in this case from approximately eight competiti\'e trade witnesses (both rectifiers and distillers) and nincte<.'n members of the purchasing public shows, and the Commission finds, that for n long period of time the word "distilling," when llsed 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 ultimate Purchasing public, to wit, the manufacturing of such liquors by the Pt·ocess of original nnd continuous distillation from mash, wort, or Wash, through continuous closed pipes and vessels until the manufacture tlwreof 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 respondent as afores~id in the production of its gin, does not make or constitute it 11. dtstiller or a distilling company as defined by Sec. 3247 of the Revised Statutes of the United States regulating Internal Revenue. !he testimony of those having long exp<.'rience in both the distilled 8l)trits rectifying industry, and the distilling industry, e:otablishedt and the Commission finds that the foregoing rectification of alcoholic ~Spirits by redistillation over juniper berries and other aromatics ~n ~he. r.production of gin does not make or constitute this respo~dent . Uistlllmg company in the sense commonly understood by the hquorlndustry or by the general public.

644 FEDERAL TRADE COMl\IISSION DECISIONS Findings 25F.T.C.

PAR. 4. This respondent, by the use of the word "distilling" 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 wholesalers and the ultimate consuming public, that it was a distiller and that the whiskies and other spirituous beverages in said bottles contained were by it manufactured by the process of distillation from mash, wort, or wash, as aforesaid, when, as a matter of fact, respondent is not now and never was a distiller, does not now and never did distill the said whiskie~, or other spirituous beverages, by it so bottled, l.abeled, sold and transported, and does not now and never did own, operate, or control any place or places where such Leverages are or were manufactured by the process of distillation from mash, wort, or wash. 1) AR. 5. There were among the competitors of respondent engag£>d in the sale of spirituous beverages as mention£>d in paragraph 1 hereof corporations, firms, partnerships, and individuals who manufactured 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," "distilling," 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 they sold and shipped such products. There were also among such competitors, corporations, firms, partnerships, and individuals engaged in the busin£>ss of purchasing, rectifying, blending, hottlin~, and selling whiskies, gins, and other spirituous beverag£>s who did not use the words "distillery," "distilleries," "distilling," "distiller" or "distillers" as a part of their corporate or trade names, on their stationery or advertising, or on the labels attached to the bottl£>s in which they sold nnd shipped their said products.

PAn. 6. R£>presentations by the respondent as h£>reinnbove set foru had the capacity and tendency to and did mislead(l and deceive dCttlers and the purchasing public into the brlief that reiipondE>nt wns .n distiller, and that the whiskies and other spirituous beverngcs by 1t sold were manufactured and distilled by it from mash, wort, or wash, and had the capacity and tendency also to induce d£>akrs n~Hl the purchasing public, acting in such beliefs, to purchase the whiskJCS and other. spit:ituous beverages bottled and ~old by th.e responde>J~~l thereby thvertmg trade to respondent from 1ts compd1tors who d SUNNYLAND DISTILLING CO. 645 Order 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. 7. Decause of existing regulations promulgated under the Federal Alcohol Administration Act, approved August 29, 1935, ( 49 Stat. 977) 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, the Commission has excepted gins produced by respondent by redistillation of alcohol over juniper berries and other aromatics from the prohibitions of its order.

CONCLUSION . ~he aforesaid nets and practices of the respondent Sunnyland Distrllmg Company, are to the prejudice of the public and of respond- ·ent's competitors, and constitute unfair methods of competition in cornrnercc, within the intent and meaning of Section 5 of an Act of ·~congress approved September 26, 1914, entitled "An Act to create a ederal 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 Commis- Sion upon the complaint of the Commission, the answer of the respondent, testimony and other evidence taken before John L. Hornor, nn examiner of the Commission theretofore duly designated by it, in ~PPort of the allegations of the said complaint brief,filed herein by eWitt T. Puckett, counsel for the Commission (no testimony or ~tl;er evidence having be<>n o1fered on brhalf of respondent, and no hl'le.f having been filed on behalf of respondent, and no oral argument t avlng been made), and the Commission having made its findings as 0 the facts and its conclusion that said respondent has violated the ~provisions of an Act of Congress approved September 26, 1914, enti- . et} "An Act to create a Federal Trade Commission, to define its Powers and duties, and for other purposes", it It is ordered, That the respondent, Sunnyland Distilling Company, tl 8 officers, r£>presentati ves, agents, and employees, in connection with . lnle ofi'crin~ for sale, or sale and distribution by it, in interstate com- " :r~e or in the District of Columbia of whiskies, gins, or other ''Pll'lt·of u~us bcn~rages ( £>xcrpt gins produced by it through a process rectification whereby alcohol purchased but not produced by Order 25F. T. C.

respondent is redistilled over juniper berries and other aromatics), do cease and desist from :

Representing through the use of the word "distilling" in its corporate 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; or (c) that it owns, operates, or controls a place or places where any such products are by it manufac· tureu 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 mvn, operate, or control such a place, or places. It is further ordered, That the said respondent within GO 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 com· plied with the order to cease anu desist hereinabove set forth. AMERICAN TOY WORKS 647 Complaint