Wesleyan Diesel Service, Inc

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IN THE 1\IATfER OF WESLEYAN DIESEL SERVICE, INC.

COMPLAI~T, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATIO~ 01•' SEC. 1i OF AN ACT OF CO~G~ESS APPROVED SEPT. 26, 1914 Docket 3091. Complaint, Apl'. 6, 1937-Decision, Aug. 18, 1931 'Where a corporation engaged in sale and distribution of correspondence courses of study in the installation, care, and maintenance of Diesel engines to members of the publio in the various States and in the District of Columbia, in substantial competition with others engag(1d In sa\e anq distribution of such courses of study and instruction in the iome an(! l}llied fields in commerce among the various States and iu aforesaid District, anq including among those en~aged in sale of such courses pertaining to Diesel engines as afore;;aid, competitors who do not misrepresent .the nature of their course~ nor make untrue claims therefor; in soliciting sale of its said courses through statements and representations circulated among the various States in newspapers, periodicals, booklets, circulars, and general business correspondence, and through agents and radio broadcasts, to pupils and prospective pnpils- (a) Represented that there was 'a g.·eat demand for men trained to work with Diesel engiues, aud that 1t had not been able to fill the demand therefor, lilld that it wuuteu "to consider a few young men mechanically Inclined" null was sell'etlng and tnlining for service and lnstallqtlon work on such engi11es a llmltPd number of youug men, and that a job was "practically certain," facts l>Piug there wa~ nu great uemaud for such men, it was not selecting or resttictlng uumhPr of it~ pupils for such courses to. those Po~~o;es.~lng cPJ'taln qualifications, hut accppting ull members of the public {laying the reqnlt·ed price, und positions we~~e not available to all students comvletlng its courses;

(b) Represented that its instruction ~;ervice included careful handling aud grading of the wrlttPu work of litndcnts by Instructors who were competent and qualifieu to do such work, uud that students finishing its said course Were qualified to install, malntuill, anu service such engines, facts being Its said Instruction sen·ice diu not include ctu·eful handling and grading of Written wor·k, Anch work was not handled or graded by any competent Person m· persons qualltled so to do or to m11ke constructive suggestions in regaru thereto, and stndPnts finishing its course were not qualified and diu not acquire sutfldent knowlPuge therefrom to enable them properly to install, OJlPratP, or BPrvlce such engines; (c) Rt>presented that aftpr the completion of its !laid course, the students had the priv!IPge of enh•ling another institution for practical shop training at a named total tuition fee, and that sud1 tuition was "special" to such studl•nts and lower than the usual !llflOIIllt charged therefor, facts being Practical training In shop world• rPfPrrPd to as "special" in price of tuition to tlw~e f;( udent8 wns not such, In that tuition fpe to said students wol ( not lower than usual amount cluuged Uwrefor: 'and d) Repre~Pnted that it maintained bram·hcs of its sehool In certain named cltlPH (>fher than the dty of its location, nnd maintained a free employmeu, senf<oe for a Jleriou of two years for the benefit of those students com- Complaint 25F.T.C.

pletlng its course, and that tuition fee would be refunded if student was not satisfied with results obtained after such completion, facts being it had uo branches in any city other than that in which its said school was located, maintained no free employment service for any period of time whatever, or at all, for the benefit of its students, and made no such refunds;

With effect of misleading and deceiving substantial portion of the public into the erroneous belief that such representations were true, and of causing such members of the public to enroll and pay for Its said course as students, on account of such erroneous beliefs, and of thereby diverting trade from its aforesaid competitors who do not misrepresent the nature of their courses or make untrue claims therefor; to the substantial injury of competition in commerce:

Ueld, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Before Mr. Miles J. Furnas and Mr. Henry M. White, trial examiners.

Mr. Astor II ogg for the Commission.

Complaint Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commi~­ sion, to define its powers and duties, and for other purposes," the Federal Trade Commission having reason to believe that 'Vesleyau Diesel Service, 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 said Commission that a proceeding by it would be in the public interest, hereby issues its complaint, stating its charges in that respect ns follows:

PARAGRAPH 1. Respondent, ·wesleyan Diesel Service, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal office and place of business located at 2006 Leavenworth Street, Omaha, Nebr. Respondent is now, and has been for several years last past, engaged in the sale and distribution of correspondence courses of study in the installation, care and maintenance of Diesel engines, to members of the public located. in the various States of the United States and in the District of Columbia. It now causes, and during the time herein mentioned has caused, its corresponuence courses. when solu, to be shipped from its place of business in Omaha, Nebr., to the purchasers thereof located in various States of the United States other than the State of Nebraska, and in the District of Columbia. There is now, and has been at all tim£'s mentioned herein, tl constant current of trade and comm£'rce hy the respondent in Sltid WESLEYAN DIESEL SERVICE, INC. 877 875 Complaint correspondence courses between and among the various States of the United States, and in the District of Columbia. Respondent is now, and at all times mentioned herein has been in substantial competition with other corporations, and with persons, firms, and individuals engaged in the sale and distribution of correspondence courses of study and instruction in the same and allied fields in commerce among and between the various States of the United States and in the District of Columbia. PAR. 2. Respondent, in soliciting the sale of and in selling its correspondence courses, now circulates in and among the various ~states of the United States, and during all the time herein men· honed has so circulated, certain statements and representations in nE>wspapers, periodicals, booklets, circulars, and •general business correspondence, and through agents, and radio broadcasts to pupils and prospective pupils. Typical of such representations are the fol· lowing, to wit:

WE WANT-to select reliable young men to train immediately for service and installation work of Diesel engines, 90 days training, free employment service.

Diesel Engineering-we want to consider a few young men mechanically 1ncUned- 'lhe sch~ol had calls for 150 positions In lV35 that could not be filled because (Jf an lnsufiiclent amount of men taking the course; a job is practically certain. Instruction service Includes carefully handling and grading of all written Work.

b Points not made clear in the lessons will be explained tn personal letters Y the Chief Engineer.

Money Dnck AgTC('Dient-1 believe I have not benefitted by it, I may make 0Dl11l('ation within ten uays from graduation before a notary publlc, and the tun amount paid by me wlll be refunded.

'lwo years free CONSULTATION and I~MPLOY111ENT SEllVICE after completion.

Demand for Dlt•sel-trained men lncreasiug. Our 3-month training at small cost qualifies you with 193(1 Diesel Knowledge. nrnnch!'s are maintained at Tulsa, Oklahoma, Dallns, Texas, Los Angeles, California.

'l'o be occeptable, a man must be mechanically inclined or have machinery e:~:peril'nce, steady or good habits, as well ns reliable. I Speeiul Offer.-may have the privilege of f'nteriug The American Technical lll!tJtute-tor practical shop training-at a total tuition fee of $35.00. Such statements and rl'presentutions serve as representations on the part of the respondent to prospective pupils that several young lrlen possessing n•quired qualifications are to be selected and trains>d fot· sen ice anJ installation work on Diesel engines; that there is a gr·eat <lt'man1l for men trained to work with Diesel engines, and that good positions can be secured by students after completing the course of iustruction sold by respondent; that instruction service Complaint 25 F. T. C. includes careful handling and grading of all written work by instructors who are competent and qualified to do such work; that the tuition fee will be refunded if the student is not satisfied with the results obtained after the course has been completed; that a free employment service is maintained by respondent for a period of two years for the benefit of those students completing the course; that students finishing the course will be qualified to install, maintain, and service Diesel engines; that the respondent maintains branches of its school in various cities other than Omaha, Nebr.; that after the completion of the course, the students have the privilege of entering another institution for practical shop training at a total tuition of $35.00, and that such tuition is "special" to such students and is less than the usual amount charged therefor.

PAR. 3. The above and foregoing rrpresentations, and other repre· sentation made by respondent of similar import and effect, are false and misleading. Respondent does not select or restrict the number of its pupils for such courses to those possessing certain qualifications. In truth and in fact any and all members of the public who pay the required price for the course are accepted as students. There is no great demand for men trained in the installation, maintenance and repair of Diesel engines, and such positions are not available to all of the students completing the course. The instruction service does not include careful handling and grading of the written work, nor is such written work handled or graded by any competent person or persons qualified to do such work or to make constructive suggestions about such work. The respondent will not, and does not, refund the tuition fee if the student is not satisfied with the results obtained after the completion of the course. No free employment service is maintained by the respondent for the benefit of the students completing the course for a period of two years or for any period of timl', and in fact respondent does not maintain uny employment service for the benefit of its students. Students finishing the course are not qualified to, and they do not acquire suflicient knowledge from t~1e course to enable them to properly install, operate, service, or maint!tlll Diesel engines. Respondent does not maintain branches of its school in any city other than Omahtt, Nebr. The practical training in shop work referred to by the respondent as special in price of tuition to such students is not special in that the tuition fee to such students is not less than the usual amount charged therefor. PAn. 4. The use by respondent, of the statements and represeutn· tions set forth herein in paragraph 2 und others similar thereto, hns hall, and now has, the capacity and tendency to mish•ad and decei\'e, and has misled and does now mislead a substantial portion of the WESLEYAN :PlESE~ SERVICE, INC. 879 875 Findip~s public into the erroneous belief that such representations are true, and has cause.'d and now causes said members of the public to emoll as students of respondent on account of such erroneous belief. There are among the competitors of respondent mentioned in paragraph 1 hereof, corporations, individuals, partnerships, and firms engaged in the sale of correspondence courses pertaining to the study of installation, care, and maintenance of Diesel engines who do not misrepresent the nature of the business of the course offered, nor otherwise publish claims for the course which are untrue. By the representations aforesaid, trade is unfairly diverted to respondent from such competitors and thereby substantial injury has been done, and is being done, by respondent to competition in commerce among and between the various States of the United States and in the District of Columbia.

PAR. 5. The above alleged acts and practices of respondent are all to the injury and prejudice of the public and of respondent's competitors, and constitute unfair methods of competition in comlllerce within the intent and meaning of Section 5 of an Act of Congress, entitled, "An Act to create a Fedeml Trade Commission, to define its powers and duties, and for other purposes," approved September 26. 1914. · 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 April 6, 1937, issued, and on April 8, 1937, !:erv·ed, its complaint in this proceeding upon respondent, 'Vesleyan Diesel Service, Inc., 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, the Commission, by order entered herein, granted respondent's motion for pE.'rmission to withdraw said answer and to substitute therefor an answer admitting all the material allegations of the complaint tq be true and waiving the taking of further evidence ami all other intenening procedure, which substitute answer was duly filed in the office of the Commission. Thereafter, the proceelling r<>gularly came on for final hearing before the Comlni!'>sion on the said complaint and the answer then•to, and the Comn:ission having duly consitlerPd the same, aml being now fully nd- ''Ised 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 tonclnsion drawn therefrom:

Findings 25F.T.C.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Wesleyan Diesel Service, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal t)lace of business located at 2906 Leavenworth Street, Omaha, Nebr. It is now, and has been for several years last past, engaged in the sale and distribution of correspondence courses of study in the installation, care, and maintenance of Diesel engines to members of the public located in the various States of the United States and in the District of Columbia. It causes, and during the time mentioned herein, has caused its correspondence courses when sold to be shipped from its place of business in Omaha, Nebr., to the purchasers thereof located in the various States of the United States other than the State of Nebraska and in the District of Columbia. There is now, and has been at all times mentioned herein, a constant current of trade and commerce by the respondent in said correspondence courses between and among the various States of the United States, and in tho District of Columbia. Respondent is now, and, at all times mentioned herein, has been in substantial competition with other corporations, and with persons, firms, and individuals engaged in the sale and distribution of correspondence courses of study and instruction in the same and allied fields in commerce among and between the various States of the United States, and in the District of Columbia.

PAR. 2. In soliciting the sale of and selling its correspondence courses, respondent circulated and circulates in and among the various States of the United States, certain statements and repro· sentations in newspapers, periodicals, booklets, circulars, and general business correspondence, and through agents and radio broadcasts to pupils and prospective pupils. Typical of such representations are the following, tow it:

WE WANT-to select reliable young men to train imrneuintely for service and installation work of Diesel l'llgines, flo days training, free employmeut service.

Diesel Engineering-we want to consider a few young men mechanically inclined- The !"dwol had culls for 150 positions in 1!>35 that could not be filled because ot an insufficient amount of men taking the course; a job is practically certain. Instruction s<>rvke lndudcs carefully handling and grading of all work. Points not made d<>ar In the let::;ons wlll he explained in personal letters hy the Chief Engineer.

lllonry llack Agre<>rnent-1 believe I have not benefited by It, I may maj>e llilllllcation within ten days from graduation before a notary public, and tlle full amount paid by me will be refunded.

WESLEYAN DIESEL SERVICE, INC. 881 875 Findings Two years free CONSULTATION and EMPLOYMENT SERVICE after completion.

Demand for Diesel-trained men Increasing. Our 3-month training at small cost qualifies you with 1936 Diesel Knowledge. Branches are maintained at Tulsa, Oklahoma, Dallas, Texas, Los Angeles, California.

To be acceptable, a man must be mechanically inclined or have machinery €Xperlence, steady or good habits, as well as reliable. Special Offer-may have the privilege of entering The American Technlcal Institute-for practical shop training-at a total tuition fee of $35.00. In the manner and through the means above stated, the respondent represents and· represented that several young men possessing required qualifications are and were to be selected and trained for Bervice and installation work on Diesel engines; that there is a great demand for men trained to work with Diesel engines, and that good Positions can be secured by students after completing the course of instruction sold by respondent; that instruction service includes ('careful handling and grading of all written work by instructors Who are competent and qualified to do such work; that the tuition fee will be refunded if the student is not satisfied with the result.~ obtained after completion of the course; that a free employment ~ervice is maintained by respondent for a period of two years for the benefit of those students completing the course; that students finishing the course will be qualified to install, maintain, and service Diesel engines; that the respondent maintains branches of its school in various cities other than Omaha, Nebr.; that after the completion of the course, the students have the privilege of entering u.another institution for practical shop training at a total tuition of $35.00, and that such tuition is "special" to such stud!'nts and is le~s than the usual amount charged therefor.

PAn. 3. The above and foregoing representations are and were false and misleading in that respondent did not and does not select or restrict the number of its pupils for such courses to those possessing certain qualfications, but on the contrary, all members of the public Who pay the required price for the course are accepted as students. 'fhere is no great demand for men trained in the installation, main- 1enhance and repair of Diesel engines, and positions are not available to all students completing the course. The instruction service does llot include careful handling and grading of the written work, nor is ~nch written work handled or graded by any competent person or l)ersons qualified to do such work or to make constructive suggestions about such work. Respondent dot>s not refund the tuition fee paid hy the student if the student is not satisfied with the results obtained after the completion of the course. No free employment service is 882 FEDERAL TRADE COl\Il\IISSION DECISIONS Order 25 F. T. C, maintained by the respondent for the benefit of the students completing the course for a -period of two years, or for any period of time, and in fact respondent does not maintain any employment service for the benefit of its students. Students finishing the course nre not qualified to and they do not acquire sufficient knowledge from j he course to enable them properly to install, operate, service, or maintain Diesel engines. It does not maint11in branches of its school in any city other than Omaha, ~ebr. The practical training in shop work referred to by respondent as special in price of tuition to such students, is not special in that the tuition fee to such. students is not less than the usual amount charged therefor. far. 4. There are among the competitors of respondent, corporations, individuals, partnerships, and firms engaged in the sale of correspondence courses pertaining to the study of the installation, care, and maintenance of Diesel engines who do not misrepresent the nature of the course offered, or make claims for the course which are not true.

PAn. 5. The use by respondent of the foregoing false and misleading representations has had and now has the capacity and tendency to mislead and deceive, and has mislead and does now mislead, a substantial portion of the public into the erroneous belief that r;uch representations are true, and has caused and now causes such meJil· hers of the public to enroll and pay for such course as students of respondent on account of such erroneous beliefs. By the represen· tations aforesaid, trade in said commerce is unfairly diverted to respondent from such competitors and thereby substantial injury has been done and is being done by respondent to competition in commerce among and between the various States of the United States and in the District of Columbia.

CONCLUSION The aforesaid acts and practices of the respondent, Wesleyan Diesel Service, Inc., are to the prejudice of the public and of respond· ents competitors, and constitute unfair methods of competition in commerce, within the intent and meaning of Section 5 of an Act of Congress, approvell 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 Corn· mission upon the complaint of the Commission and the answer filed WESLEYAN DIESEL SERVICE, INC. 883 875 Order herein on July 28, 1937, by respondent admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, and the Commission having made its findings as to the facts and conclusion that said respondent has violated 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."

It is ordered, That the respondent, ·wesleyan Diesel Service, Inc., its officers, representatives, agents, and employees, in connection with the offering for sale, sale, and distribution of correspondence courses of study and instruction in installing, maintaining and servicing Diesel engines in interstate commerce or in the District of Columbia, do forthwith cease and desist from:

1. Representing in any manner, directly or indirectly, that a limited number of young men are to be selected and trained for service and installation work on Diesel engines;

2. That the demand for men trained to work with Diesel engines is in excess of the demand that actually exists or that positions are available to all of the students completing said course of instruction; 3. That the instruction service includes careful handling and grading of the written work of students by persons qualified to do such work· 4. That the' tuition fee paid by a student will be refunded if the student is not satisfied with the results obtained after the completion of said course of instruction;

. 5. That free employment service, or any kind of employment serv- Ice, is maintained for the benefit of the students completing the {!course of instruction;

6. That students finishing said course of instruction are qualified to install, maintain and service Diesel engines; 7. That branches of its school are maintained in cities other than Omaha, Nebr.;

8. That after the completion of said course of instruction students are privileged to enter another institution for practical shop training for a "special" tuition price or for a less price than the Usual amount charged therefor.

It is furthered ordered, That the respondent shall, within GO days ~after service upon it of this order, file with the Commission a report ln writing setting forth in detail the manner nnd form in which it has complied with this order.

884 FEDERAL TRADE COl\IMISSION DECISIONS Syllabus 25F. T. C.