Keeley'S, Inc

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IN THE MATIER OF KEELEYS, INC.

COl\li'LAI:-<T FINDINGS AND ORDER IN REGARD TO THE ALLEGED VIOLATJO:>l OF SEC. 5 OF AN ACT OF CO:-<GRESS APPROVED SEPT. !!G, lou Docket 811!. Complaint, Apr. 21, 1987-Decision, Aug. 17, 1987 Where a corporation engaged in manufacture and sale of candy, including numerous assortments which were so packed and assembled as to involve use ot a lottery scheme when sold and distributed to consumers thereof, and some of which, along with punchboard supplied, were composed of a number of boxes or packages of candy of varying size, for sale and distribution to customers under a plan or scheme, and in accordance with said board's explanatory legend, by which purchaser received, for the five cents paid, one of said boxes or nothing other than privilege of making a punch, dependent upon number punched by chance, or the making of the last punch In each of the sections into which board was divided, or the making of the last punch of the entire board- Sold, to wholesalers and jobbers and to retailers for display and resale to purchasing public In accordance with afor~.>said sales plan, said assortments, and thereby supplil'd to and placl'd In the hands of others the means ot conducting lotteries in the sale of such products in accordance with such plan, and thus sold, itself, in retail establishment of its own, such assortments, contrary to public policy long recognized by the common law and criminal statutes, and to an established public policy of the United States Government, and in competition with many wlJO, unwilling to offer and sell candy so packed and assembled, as above described, or otherwise arranged and packed for sale to purchasing public as to involve a game of chance, refrain therefrom;

With capacity and tendrncy to induce purchasers of Its said products to buy same in prefprenee to eandy of'J'Pred and sold by competitors, and with result that many deall'rs in, and ultimate purehasl'rs ot, candy were attraeted by said method and mmml'r of packing same and by plemeut of chance lnvohwl In sale tlwreof as aforl'said, and thereby induced to buy its said candy, thus pnckE>d and ~>old by it, in preference to tbflt offered and sold by said competitors who do not use same or equivalent method, and wlth tendeney aud capaeity, because of said game ot ehance, to divert to it trade from Its competitors, as aforesaid, who do not use such or equivalent method, exclude from said trade all competitors who do not use such ml'thod because unlawful, lE>ssen competition In candy trade, and tend to create a monopoly thereof in It and in such other eompetltors as do use such lliPthod, and dl'prive purchasing publlc ot benefit of free comvet!tlon in trade In question, and eliminate therefroJll all actual, and Pxelude therefrom all potential, competitors who do not adopt and use such or equlvall'nt method:

Jlcld, That such methods, nets and practicl's, under the conditions and clrcumstances set forth, WPre all to the prejudice of the public and com· petitors and constituted unfair methods of competition. 1\:EELEY'S, INC. 845 Complaint Before Mr. Ilenry M. White, trial examiner. Mr. Ilenry 0. Lank and. Mr. P. 0. [(oltMlci for the Commission. Mr. II. Hartland Hallida:y, of Salt Luke City, Utah, for respond.ent.

COMPLAINT Pursuant to the provisions of an Act of Congress, approved September 2G, 1914-, entitled, "An Act to create a Federn.l Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that l\:eeley's, Inc., a corporation, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, 1ls "commerce" is defined in said act, 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 and doing business under the laws of the State of Utah, with its principal <>ffice and place of business located at 258 South State Street in Bait Lake City, Utah. It is now, and for several years last past has been, engaged in the manufacture of candy and in the sale and distribution thereof to wholesale dealers and jobbers and. to retail <lealers located at points in the various States of the United States, and is also engaged in the sale and distribution of candy and candy Products to the consuming public in the State of Utah. It causes ~nd has caused its said candy when sold. to be transported from lts principal place of business in Salt Lake City, Utah, to whole- .sa}e and retail purchasers thereof in the State of Utah and. in other States of the United States at their respective places of business. ''fhere is now, and has been for several years last past, a course of trade and. commerce by said. respondent in such candy between and ntnong the States of the United States. In the course and conduct 0.f said business, respondent is in competition with other ~orpora­ hons and with partnerships and individuals engaged in the manufacture of candy and in the sale and distribution thereof in comlllerce between and among the various States of the United States . .. PAn. 2. In the course and conduct of its business, us described. 111 paragraph 1 hereof, respondent sells and has sold. to wholesale dealers and jobbers and to retail dealers assortments of candy so l)acked and assembled as to involve the use of a lottery scheme when ~old and distributed to the consumers thereof, and it has also, in Jts retail establishment, sold to the consuming public such assortlnents by means of a lottery scheme.

846 FEDERAL TRADE COl\Il\IISSION DECISIONS Complaint 25F. T. C.

Such assortments are composed of a number of boxes or packages of candy of varying size, together with a <levice commonly called a ''punchboard." The boxes or packages of candy contained in said assortments are distributed to purchasers in substantially the following manner:

Said punchboard contains a number of holes divided into sections. A slip of paper bearing a printed number is secreted in each hole. The punchboard also bears at the top thereof a number of printed legends or statements informing customers and prospective customers which numbers receive a box of candy and the size thereof. Sales are 5¢ each, and a purchaser who obtains one of the numbers calling for a box of candy is entitled to receive the same as a prize and without a<lditional charge. The purchaser of the last punch in each section and the purchaser of the last punch on the board are entitled to receive a specified box or package of candy as a prize and without additional charge. Purchasers of punches, who do not procure one of the numbers calling for a box of candy, receive nothing for their money other than the privilege of punching a number from said board. The numbers on said printed slips secreted in said punchboard are effectively concealed from purchasers and prospective purchasers until a selection has been made and the printed slip punched from the board. The boxes or packages of candy are thus d.istributed to the consuming public wholly by lot or chance. Respondent sells and distributes numerous assortments, all of which involve substantially the same principle or sales plan as described above, but varying in detail.

PAn. 3. The wholesale dealers and jobbers to whom respondent sells its assortments resell the same to retail dealers, and such retail dealers and the retail dealers to whom respondent sells direct, and the respondent in ~ts retail establishments, expose said assortmen.ts for sale and sell said packages of candy to the purchasing public 1n accordance with the aforesaid sales plan. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of its products in accordance with the sales plan hereinabove set forth; and respondent in its retail establishments conducts lotteries in the sale of its products to the consuming public. Such sales plan has the capacity and tendency of inducing purchaser~ thereof to purchase respondent's said products in preference to candy offered for sale and sold by its competitors. PAR. 4. The sale of candy to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure a box or package of candy.

KEELEY'S, INC. 847 844 Complaint The use by respondent of said method in the sale of candy, and 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 and 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 tendency unduly to hinder competi"tion or create monopoly in the candy trade in this, to wit: that the use thereof has the tendency and capacity to exclude from said trade competitors of respondent who do not adopt and use the same method or an equivalent or similar method involving the same or an equivalent or similar element of chance or lottery scheme.

l\fany 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 nnd ultimnte 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 in such other competitors of respondent as use the same or an equivalent l11ethod; and to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said method by respondent has the tendency and capacity to eliminate from said candy trade all actual competitors and to exclude therefrom all potential competitors who do not adopt and use said method or an equh·alent method.

PAn. G. The aforenwntioned method, acts and practices of respond- ~nt are all to the prejudice of the public and of respondent's compet- Itors, as hereinabove alleged. Said method, acts, and practices 158121m--30----56 848 FEDERAL TRADE COMl\IISSION DECISIONS Findings 25F.T.C.

constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of nn Act of Congress, approved September 2G, 1914, entitled "An Act to create a Federal Trade Com· mission, to define its powers and duties, and for other purposes." REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress, approved Sep· tember 2G, 1914, entitled "An Act to create a Federal Trade Com· mission, to define its po,vers and duties, and for other purposes," the Federal Trade Commission, on April 24, 1937, issued and on April 27, 1937, served its complaint in this proceeding upon the re· spondent, Keeley's, Inc., a corporation, charging it with the use of unfair methods of competition in commerce in violation of the pro· visions of said act. After the issuance of said complaint and the filing of respondent's answer thereto, the Commission, by order en· tered herein, granted respondent's motion for pennission to withdraw said answer and to file in lieu thereof its substitute answer dated August 4, 1937, admitting all the material allegations of the com· plaint to be true and waiving the taking of further evidence and all other intervening procedure, which substitute answer was duly filed in the office of the Commission. Thereafter, this proc{'eding regularly came on for final hearing before the Commission on the said complaint and the substitute answer, and the Commission having duly considered the matter and being now fully ndvised in the premises finds that this proceeding is in the interest of the public nnd makes this its findings as to tim facts nnd its conclusion drawn therefrom. FINDINGS AS '1'0 Tile FACTS PAnAGRAPII 1. Respondent is a corporation organized and doing business under the laws of the State of Utah, with its principal office and place of business located at 258 South State Street in Salt Lake City, Utah. It is now, and for several years last past has been, engaged in the manufacture of candy nnd in the sale and distr·ibution thereof to wholesale dealers and jobbers and to retail dealers located at points in the various States of the United States, and is also engaged in the sale nnd distribution of candy nnd candy products to the consuming public in the State of Utah. It causes and has cnused its said candy when sold to be transported from its principal place of business in Salt Lake City, Utah, to wholesale and retail purchasers thereof in the State of Utah and in other States of the United Stutes at their respecth·e places of business. There is now, and has been for several years last past, a course of trade nml commerce by said KEELEY'S, INC. 849 844 Findings respondent in such candy between and among the States 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.

PAR. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers and jobbers and to retail dealers assortments of candy so packed and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers thereof, and it has also, in its retail establishments, sold to the consuming public such assortments by means of a lottery scheme. Such assortments are composed of a number of boxes or packages of candy of varying size, together With a device commonly called a "punchboard." The boxes or packages of candy contained in said assortments are distributed to purchasers in substantially the following manner: Said punchboard contains a number of holes divided into sections. A slip of paper bearing a printed number is secreted in each hole. The punchboard also bears at the top thereof a number of printed legends or statelllents informing customers and prospective customers which numbers receiye a box of candy and the size thereof. Sales are 5¢ each, and a purchaser who obtains one of the numbers calling for a box of candy is entitled to receive the same as a prize and without additional charge. The purchaser of the last punch in each section and the purchaser of the last punch on the board are entitled to receive a specified box or package of candy as a prize and without additional charge. Purchasers of punches, who do not procure one of the numbers calling for a box of candy, receive nothing for their money other than the privilege of punching a number from said board. 'I'he numbers on said printed slips secreted in said punchboard are effecth·ely concealed from purchasers and prospective purchasers Until a selection has been made and the printed slip punched from the board. The boxes or packages of candy are thus distributed to the consuming public wholly by lot or chance. Respondent sells and distributes numerous assort~ents, .all of Which involve substantially the same principle or sales plan as described above, but varying in detail.

PAR. 3. The wholesale dealers and jobbers to whom respondent sells its assortments resell the same to retail dealers, and such retail dealers and the retail dealers to whom respondent sells direct, and the respondent in its retail establishments, expose said assortments for sale and sell said packages of candy to the purchasing public in 850 FEDERAL TRADE COl\IMISSION DECISIONS Findings 25F.T.C.

accordance with the aforesaid sales plan. Respondent thus supplies to and phtces in the hands of others the means of conducting lotteries in the sale of its products in accordance with the sales plan hereinabove set forth; and respondent in its retail establishments conducts lotteries in the sale of its products to the consuming public. Such sales plan has the capacity and tendency of inducing purcha:-ers thereof to purchase respondent's said products in preference to candy offered for sale and sold by its competitors. PAR. 4. The sale of candy to the purchasing public in the manner above found in,,olves a game of chance or the sale of a chance to procure a box or package of candy. The use by respondent of said method in the sale of candy, and 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 and 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 tendency unduly to hinder competition or create monopoly in the candy trade in this, to wit: that the use thereof has the tendency and capacity to exclude from said trade competitors of respondent who do not adopt and use the same method or an equivalent or similar method involving the same or an equiva· lent or similar element of chance or lottery scheme. Many persons, firms, and corporations who make and sell candy in competition with respondent are unwilling to offer for sale or sell candy so packed and assembled as above described, 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. 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 not use the same or an equivalent method. 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 in such other competitors of respondent as use the same or an equivalent method; and to deprive the purchasing public of the 1\:EELEY'S, INC. 851 Order benefit of free competition in said candy trade. The use of said method by respondent has the tendency and capacity to eliminate from said candy trade all actual competitors and to exclude therefrom all potential competitors who do not adopt and use said method or an equivalent method.

CONCLUSION The aforesaid method, acts and practices of respondent, Keeley's, Inc., a corporation, under the conditions and circumstances set forth in the foregoing findings of fact, are all to the prejudice of the public and respondent's competitors, and constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the substitute answer dated August 4, 1937, filed herein by respondent, admitting aU the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, ~nd the Commission having made its findings as to the facts and lts conclusion that said respondent has viol:.tted the provisions of an Act of Congress, approved September 26, 191-1, 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, Keeley's, Inc., a corporation, lts officers, agents, representati,·es, and employees, in connection "·ith the offering for sale, sale and distribution in interstate commerce {)f 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 uevice, or glft enterprise .

. 2. Supplying to or placing in the hanus 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 <:ontents of such assortments, to conduct a lottery, gaming device, ?r gift enterprise in the sale or distribution of the candy contaiued 111 said assortments to the public.

852 FEDERAL TRADE COl\!1\fiSSION DECISIONS Order ~G F. T. C. 3. Packing o.r 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 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 "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 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 ju1·ther ordered, That the responden£, Keeley's, 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 detail the manner and form in which it has complied with the order to cease and desist hereinabove set forth.

PUBLIC SERVICE INSTITUTE, INC. 853 s~·llabus