Milko Cone & Baking Co., Inc.

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IN THE J\fATI'ER OF MILKO CONE & BAKING CO., INC.

COMPLAI~T, FINDINGS, AND ORDER IN REGARD TO Tile ALLEGED VIOL.\TION OF SEC. 5 OF AN ACT OF CO~GRESS APPROVED SEPT. 26, 1914 Docket 3046. Complaint, Feb. 1, 1937-Decision, Sept. 3, 1937 Where a corporation engaged in manufacture, sale, and distribution of ice cream cones, including cones packed and assembled with small printed slips bearing various legends, so as to involve use of a lottery scheme when sold and distributed by retail dealers to consumers thereof, and including legend "Your lucky day. Return this slip where you bought your Milko cone, and get a FREE package of gum," chance recipient of which printed slip, so placed in cones that ultimate consumer could not ascertain whether or not be was entitled to free package of chewing gum until after his purchase had been made imd cone partially consumed, became entitled thereby, and in accordance with verses on explanatory display circulars furnished bj' it free of charge, to such "5¢ package of chewing gum"- Sold, thus packed, said cones to wholesalers, jobbers, and ice cream manufacturers for use, sale, and distribution by their retail dealer purchasers In accordance with aforesaid sales plan, and thereby supplied to and placed in the hands of others the means of conducting lotteries in the sale of its product In accordance with such sales plan, contrary to public policy long recognized by the common law and crlmlnal·statutes and to an established public policy of the United States Government, and In competition with many who, unwilling to offer or sell lee cream cones with printed slips as above described, or otherwise arranged and packed for sale to purchasing public so as to involve game of chance, refrain therefrom, and in competition with many unwilling to adopt and use said or any method Involving game of chance to win by chance or any other method contrary to public policy;

Wtth capacity and tendency to induce purchasers to buy its said product ln preference to cones olTered and sold by its competitors, and with result that many dealers In and ultimate purchasers of ice cream cones were attracted by its said method and manner of inserting in a number thereof Printed slips entitling purchasers to free packages of chewing gum, anc, by element of chance involved in sale thereof as above described, ahd were thereby induced to buy its said products, containing such printed slips and sold by it, in preference to those olTered and sold by said competitors who do not use same or equivalent method, and with tendency and capacity, by reason of said game of chance, to divert to it trade and custom from its said competitors who do not use such or equivalent method, exclude from said trade all competitors who are unw1Filing to and do not use such method because unlawful, lessen competition therein, and tend to create a n10nopoly thereof in it and such other distributors of lee cream cones as do use same or equivalent method, deprive purchasing public of benefit of free competition in trade involved, and eliminate therefrom all actual, and exclude therefrom all potential, competitors who do not adopt and use said or t>qui\'nlent mt>thod:

Complaint 25 F.T. C. Ileld, That such method, acts and practices, under the conditions and circumstances set forth, were all to the prejudice of the public and competitors and constituted unfair methods of competition. Before Mr. Miles J. Furnas, trial examiner. Mr. llenry 0. Lank and lllr. P. 0. J{olinski for the Commission. Beach, Fathchild &! Scofield, of Chicago, Ill., for respondent. Complaint Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission having reason to believe that Milko Cone & Baking Co., Inc., a corporation, hereinafter referred to as respond· ent, has been and is using unfair methods of competition in com· merce 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, Milko Cone & Baking Co., Inc., is a. corporation organized and operating under the laws of the State of Illinois, with its pri1icipal office and place of business located at 431 North Lincoln Street, Chicago, Ill. Respondent is now, and for several years last past has been engaged in the manufacture of ice cream cones and in the sale and distribution thereof to wholesale dealers, jobbers, and ice cream manufacturers loc~ted at points in the State of Illinois and in other States of the United States, and causes and has caused its said products when so sold to be transported from its principal place of business in Chicago, Ill., to purchasers thereof in the State of Illinois and in other States of the United States at their respective places of business; and there is now and has been for several years last past a course of trade and commerce by said respondent in said ice cream cones 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 ice cream cones and in the sale and distribution thereof in coJll· merce between and among the various States of the United Stat~s. PAR. 2. In the course and conduct of its business as described 111 paragraph 1 hereof, re~pondent on or about May 1, 1935, began the sale and distribution, and since said date has continued the sale and distributio~1 to wholesale dealers and jobbers and ice cream man~facd tt1rers, of Ice cream cones packed and assembh'd with small printed slips therein so as to involve the use of a lottery scheme when sol MILKO CONE & BAKING CO., INC. 959 957 Complaint and distributed by retail dealers to the consumers thereof. Respondent has had printed small slips of papers bearing various legends, and a few of said printed slips beat the following legend, to wit: Your lucky day Return this slip where you bought your Milko cone, and get a FREE package of gum The ultimate consumer procuring a cone containing one of the above printed slips is entitled to receive, and is to be given free of ~charge, a package of chewing gum. The printed slips are so placed In the cones that the ultimate consumer cannot ascertain whether or not he is entitled to a free package of chewing gum until after his Purchase has been made and the cone partially consumed. The fact as to whether the ultimate purchaser receives a package of chewing gum free of charge is thus determinecl wholly by lot or chance. Respondent furnishes with cartons of ice cream cones containing ~he above described printed slips a display circular bearing the allowing legends, to wit:

Your FORTUNE told wit}) ice cream cold 5¢ Look for a lucky ticket.

Get your prize if you pick it I A FREE 5¢ package of chewing gum for the lucky ticket Milko SUR-PRIZE ice cream cone PAn. 3. The wholesale dealers and jobbers and ice cream manufacturers to whom respondent sells the above described ice cream cones containing printed slips, resell said cones as packed by respondent to retail dealers, and said retail dealers sell and distribute said cones ~after placing ice cream tf1erein to the purchasing public in accordance with the afor!'said sales plan. Respondent thus supplies to and .Places in the hands of others the means of conducting lotteries in the ~ale of its product in accordance with the sales plan hereinabove set orth, and said sales plan has the capacity and tendency of inducing Purchasers thereof to purchase respondent's said product in preference to ice cream cones offered for sale and sold by its competitors. . PAR. 4. The sale of said ice cream cones to the purchasing public In. the manner above alleged involves a game of chance or the sale of n chance to procure a package of chewing gum. The use by respondent of said method in the sale of ice cn•am cones, and the sall' of ice cr('Uill cones by and through the nse thl'rcof and by the aid of said ~ethod, is a practice of the sort which the common law and criminal8 atutes have long del'ml'd contrary to public policy and is contrary His}~l'"-3!>-63 Complaint 25F.T.C.

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 to create a monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the ice cream cone manufacturing business competitors who do not adopt and use the said method or an equivalent or similar method involving the same or an equivalent or similar element of chance or lottery scheme. Many persons, firms, and corporations who make and sell ice cream cones in competition with respondent, as above alleged are unwilling to offer for sale or sell said ice cream cones with printed slips as above alleged, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom.

PAR. 5. Many dealers and ultimate purchasers of ice cream cones are attracted by respondent's said method and manner of inserting printed slips entitling ultimate purchasers to free packages of chew· ing gum and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to purchase said ice cream cones containing said printed slips and sold by re· spondent in preference to ice cream cones 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 tend· ency and capacity because of said gallJe 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 trade all competitors who are unwilling to and who do not use the s1une or an equivalent method because the same is unlawful; to lessen coinpetition in said trade and to tend to create a monopoly of said trade' in respondent and such other distributors of ice cream cones as use the slime or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said trade. The use ~f said method by respondent has the tendency and capacity to elin11· nate fro!fi said trade all actual competitors and to exclude therefron\ all potential competitors who do not adopt and use said method or an equivalent method.

PAn. 6. Many of said competitors of respondent are unwillin~ to adopt and use said method or any method involving a game of chanceor the sa]e 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 a1l to the prejudice of the public and of respondent's competitors as hereinabove alleged. Said method, acts, and practices constitute unfair methods of competition in commerce within the- MILKO CONE & BAKING CO., INC. 961 1>57 Findings intent and meaning of Section 5 of an Act of Congress, entitled "An Act to create a Federal Trade Commission, to define its powers and duti!'s, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTs, AND Former Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Comh1ission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on February 1, 1937, issued and on February 4, 1937, served its complaint in this proceeding upon the respondent, Milko Cone & Baking Co., Inc., a corporation, charging it ~·ith the use of unfair methods of competition in commerce in violabon of the provisions of said act. After the issuance of said com- Plaint and the filing of respondent's answer thereto, the Commission, by order entered herein on August 9, 1937, granted respondent's request for permission to withdraw said answer and to file in lieu thereof its substitute answer dated July 9, 1937, a~mitting all the ~aterial allegations of the complaint to be true and waiving the tak- 111~ of further evidence and all other intervening procedure, which 8?bstitute answer was duly filed in the office of the Commission. lhereafter, this proceeding 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 ~0'Y fully advised in the premises, finds that this proceeding is in the ~nterest of the public and makes this lts findings as to the fads' and .lts conclusion dra\vn therefrom:

FINDINGS AS TO Tile FACTS P ARAOI~APH 1. Uespondent, Milko Cone & Baking Co., Inc., is a ~0~Poration organized and .operating under the laws of the State of ~hnois, with its principal office and place of business located at 431 orth Lincoln Street, Chicago, Ill. Respondent is now, and for sevetal years last past has been, engaged in the manufacture of ice ~cream cones and in the sale and distribution thereof to wholesale 1ealers, jobbers, nnd ice cream manufacturers located nt pob1ts inthe State of Illinois and in other States of the United States, and causes and has caust>d its said products, when so sold, to be trans- ~orted from its principal place of business in Chicago, Ill., to purbla.srs tlwreof in the State of Illinois and in other States of the nlted States at their respective places of business; and there i.s now' and has been for several years last past, a course of trade and connn~:>ree by Raid respondent in said ice cream cones between and 962 FEDERAL TRADE COMMISSJON DECISIONS Findings 2::>F.T.C. 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 ice cream cones and in the sale and distribution thereof in com· merce 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, on or about May 1, 1935, began the sale and distribution, and since said date has continued the sale and distribution to wholesale dealers and jobbers and ice cream manufacturers, of ice cream cones packed and assembled with small printed slips therein so as to involve the uso of a lottery scheme when sold and distributed by retail dealers to the consumers thereof. Respondent has had printed small slips of paper bearing various legends, and a few of said printed slips bear the following legend, to wit:

Your lucl>y day Iteturn this slip where yon honght your :\Iill;:o cone, and get a FREE paekuge of gum The ultimate consumer procuring a cone containing one of the above printed slips is entitled. to receive, and is to be given free of charge, a package of chewing gum. The printed slips are so placed in the c,ones that the ultimate consumer cannot ascertain whether or not he is entitled to a free paclmO'e0 of chewing'0 0O'Um until after his purchase has been made and the cone partially consumed. The fact as to whether the ultimate purchaser receives a package of chewing' gum :free of charge is thus determined wholly by lot or chance. Respondent :furnishes with cartons of ice cream cones containing the above described printed slips a display circular bearing the follow· ing legends, to wit:

Your l<'ORTUNE told with ice c·cream cold 5¢ Look for a lucky ticket Get your prize if you pick it ! A FREE 5¢ package of chewing gum for the lueky tiekct Milko SUR-PRIZE ice cream cone PAR. 3. The wholesale dealers and jobbe!'s and ice cream manufac· turers, to whom respondent sells the above describeu ice cream cowles contain~ng printeu slips, resell said cones as packed by responclc~Jt to retml dealers, and said retail dealers sell and distribute su~d J)lcones, a ft er P l acmg. 1ce. cream therein to the rmrchasinO' pub 1'IC 1accor d :wee Wit. 1l t h c aforesaid sales plan.' Respondent thus,.., supp res MILKO CONE & BAKING CO., INC. 963 Fin clings ~o and places in the hands of others the means of conducting lotteries In the sale of its products in accordance with the sales plan herein- ~bove set forth, and said sales plan has the capacity and tendency of ~ndueing purchasers thereof to purchase respondent's said product In preference to ice cream cones offered for sale and sold by its competitors.

. P.AR, 4. The sale of said ice cream cones to the purchasing public In the manner above found involves a game of chance or the sale of a chance to procure a package of chewing gum. The use by respondent of said method in the sale of ice cream cones, and the s~le of ice cream cones 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 te~1dency unduly to hinder competition or to create a monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the ice cream cone manufacturing business competitors ~\'ho do not adopt and use the said method or an equivalent or sim- Ilar rnethod involving the same or an equivalent or similar element of chance or lottery scheme. Many persons, firms, and corporations '''ho make and sell ice cream cones in competition with respondent ~~e unwilling to offer for sale or sell said ice cream cones with printed shps 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.

P.An. u. l\Iany dealers and ultimate purchasers of ice cream cones nr~ attracted by respondent's said method and manner of inserting ~ll'Inted slips entitling ultimate purchasers to free package of chew- ~llg gum and by the element of chance involved in the sale thereof In. the manner above uescribed, and are thereby inuuced to purchase ~Uld ice cream cones containing said printed slips and. sold by re- ~Pondent in preference to ice cream cones offered for sale and solu ~aid competitors of respondent who do not use the same or an:y qulvalent method. The use of said method by respondent has the :tendency aud capacity, because of said game· of chance, to divert 0 respondent trade and custom from its said competitors who do : 10t Use the same or an equivalent method; to exclude from said t~·ade all competitors who are unwming to and who do not use 1e same or an '-"(jHivulent method because the same is unlawful; to1 ~Ss(>~ competition in said trade and to tend to create a monopoly e sah.l trade in respondent and such other distributors of ice cream cones as use the same or an equi\'alent method; and to deprive the 964 FEDERAL TRAbE COMl\IISSION DECISIONS Order 251•'. T. C. purchasing public of the benefit of free competition in said trade. The use of said method by respondent has the tendency and capacity to eliminate from said trade all actual competitors and to exclude therefrom all potential competitors who do not a~opt and use said method or an equivalent method.

PAR. 6. .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 js contrary to public policy.

CONCLUSION The aforesaid method, acts and ,practices of respondent! Milko Cone & Baking Co., 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 Sectio~1 !:> of an Act of Congress, approved September 2G, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes." OnJ.>EH TO CEASE AND DESIST This proceeding having been heard by the Federal Tmde Corn· mission upon the complaint of the Commission and the substitute answer dated July 9, 1937, filed herein by the respondent admitting all the material allegations of the complaint to be true and wuiving the taking of further evidence and all other intervening procedure, and the Commission having made its findings as to the facts and its conclusion that said respondent lias 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 und duties, and for other purposes", It is ordered, that the respondent, :Milko Cone & Da.king Co., In~·' a corporation, its officers, agents, representatives, and employees, lYl connection with the offering for sale, sale and distribution in inter· ' . t state commerce 'of ice cream con<>s, do fortlnvith rease nnd deslS from:

1. Selling and distributing to jobbers and wholesale dealers for resale to retail dealers, or to retail dealers direct, ice cream cones so packed and assembled that sales of such ice cream cones to the general public are to be made, or may be made, by menn of a lottery, gaming device, or gift enterprise.

MILKO CONE & BAKING CO., INC. 965 957 Order .

. 2. Supplying to or placing in the hands of wholesale dealers and Jobbers or retail dealers packages or assortments of ice cream cones Which are used, or which may be used, without alteration or rearrangement of the contents of such packages or assortments, to conduct a lottery, gaming device, or gift enterprise in the sale or distribution of the ice cream cones in said packages or assortments to the public.

3. Packing or assembling in packages or assortments of ice cream cones, for sale to the public at retail, printed slips which are for use, or which may be used, in distributing or selling said ice cream cones to the public at retail.

4. Furnishing to. retail and wholesale dealers and jobbers printed slips, either with packages or assortments of ice cream cones or separately, a small number of which printed slips bear a legend or legends or statements informing the purchasing public that a 5¢ Package of chewing gum will be delivered free of charge or as a Prize .

. 5. Furnishing or supplying to wholesale dealers and jobbers, for d.1stribution to retail dealers or to retail dealers direct, display tnculars or other advertising material bearing a legend or legends or statements informing the purchasing public that the ice cream conl's are being sold to the public in accordance with a sales plan \Which constitutes a lottery, gaming device, or gift enterprise. It i8 further ordered, That the respondent, Milko Cone & Baking Co., Ine., a corporation, shall, within 60 days after service upon it ~f this order, file with the Commission a report in writing setting ~rth in detail the manner and form in which it has complied with t e order to cease and desist hereinabove set forth. .Syllabus 25F. T, C.