March of Time Candies, Inc

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IN THE MATTER OF MARCH OF TIME CANDIES, INC.

COl\IPLAIN'l', FINDINGS, AND ORDER IN RE:;ARD TO Tile ALLEGED VIOLATIO~ OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SI'!PT. 26, 1914 Doclcet 2806. Complaint, May 15, 1936-Decision, Jan. 13, 1938 Where a corporation engaged in manufacture and sale of candy, including certain assortments which were so packed and assembled as to involve use of a lottery scheme when sold and distributed to the consumers thereof, and one of which was composed of a number of penny pieces of uniform size and shape, together with number of packages of candy to be given as prizes to those purchasers of aforesaid penny candies IJrocuring piece, colored center of which differed from that of majority, and together with large candy bar to be given free to purchaser of last piece in assortment- Sold, to wholesalers and to retailers for display and resale to purchasing public, in accordance with aforesaid sales plans, said assortments, and thereby supplied to and placed in the hands of others the means of conducting lotteries in the sale of its products in accordance with aforesaid plans, 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 who, unwilling to offer or sell candy so packed and assembled, or otherwise arranged and packed for sale to purchasing public, as to involve game of chance or any other method of sale contrary to public policy, refrain therefrom; 'With result· that many dealers in and ultimate purchasers of candy were attracted by said method and manner of packing said product and by element of chance involved in sale thereof as above set forth, and thereby induced to purchase said candy, thus packed and sold by it, in preference to that offered and sold by said competitors who do not use same or equivalent method, and with tendency and capacity, because of said game of chance, to divert to it trade and custom from its said competitors as aforesaid, exclude from said trade all competitors who are unwilling to and ·do not use such or equivalent method as unlawful, lessen competition in trade involved and tend to create monopoly thereof in it and such other distributors as use same or equivalent method, deprive purchasing public of benefit of free competition in trade in question, and eliminate therefrom all actual and exclude therefrom all potential, competitors who do not adopt and use such or equivalent method: Held, 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, trial examiner Mr. Henry 0. Lank and Mr. P. O.J(oliwki for the Commission. ·Beach, Fathchild & Scofield, of Chicago, Ill., for respondent. MARCH OF TIME CANDIES, INC. 353 352 Complaint 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 March of Time Candies, 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 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, March of Time Candies, Inc., is a corporation organized and operating under the laws of the State of Illinois, with its principal office and place of business located at 446 North Hermitage Avenue, Chicago, Ill. Respondent is now, and for one year last past has been, engaged in the manufacture of candies and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers located at points in the various 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 the city of Chicago, Ill., to purchasers thereof in other States of the United States at their respective places of business; and there is now, and has been for one year last past, a course of trade and commerce by said respondent in such candy between and among the States of the United States. In the course and conduct of said bu~iness, 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 and retail dealers certain assortments of candy so packed and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers thereof.

One of said assortments of candy is composed of a number of pieces of candy of uniform size and shape, together with a number of packages of candy and a large bar of candy, which packages and large bar of candy are to be given as prizes to purchasers of said pieces of candy of uniform size and shape, in the following manner: The majority of the said pieces of candy of uniform size and shape in said assortment have centers of the same color, but a small Complaint 26F. T. C.

number of said pieces of candy have centers of a different color; the said pieces of candy of uniform size and shape retail at the price of 1¢ each, but the purchasers who procure one of the said candies having a center colored differently from the majority of said candies is entitled to receive, and is to be given free of charge, one of the said packages of candy heretofore referred to. The purchaser of the last piece of candy of uniform size and shape in said assortment is entitled to receive, and is to be given free of charge, the large bar of candy also contained in said assortment. The color of the center of the said pieces of candy of uniform size and shape is effectively concealed from purchasers and prospective purchasers until a selection has been made and the particular piece of candy broken open. The aforesaid purchasers of said candies, who procure a candy having a center colored differently from the majority of said pieces of candy in said assortment, thus procure one of the said packages or large bar of candy wholly by lot or chance. PAR. 3. The wholesale dealers to whom respondent sells its assortments resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortment for sale and sell said candy to the purchasing public in 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 with the capacity and tendency of inducing purchasers thereof to purchase respondent's said product in preference to candy offered for sale and sold by its competitors. PAR. 4. The sale of said candy to the purchasing public, in the manner above alleged, involves a game of chance or the sale of a chance to procure packages or a ]arge bar 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 tho United States. The use by respondent of said method has a dangerous tendency unduly to hinder competition or create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the branch of the candy trade involved in this proceeding competitors who do not adopt and use the same method or an 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 candy in competition with the respondent, as above alleged, are unwilling MARCH OF TIME CANDIES, INC. 355 :352 Findings 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.

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 oQffered 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 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 such other distributors of candy as use the same or an equivalent method, and to deprive the purchasing public of the benefit of free competitior in said candy trade. The use of said method by the 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. 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 is contrary to public policy.

PAR. 7. The aforementioned methods, acts and practices of respondent are all to the prejudice of the public and respondent's competitors as hereinabove alleged. Said methods, acts, and practices constitute unfair methods of competition in commerce within the 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 duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions, of an Act of Congress approved Septemb~r 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, on May 15, 1936 issued, and on May 18, 1936 served, its complaint in this proceeding upon respondent, March of Time Candies, Inc., charging it with the use of unfair 356 FEDERAL TRADE COl\IMISSION DECISIONS Findings 26 F. T. 0'. 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 hereinr granted respondent's request for permission to withdraw said answer and to Sllbstitute therefor an amended answer admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedurer which amended answer was duly filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint .and the amended answer; and the Commission having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public, and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, March of Time Candies, Inc., is a corporation organized and operating under the laws of the State of Illinois, with its principal office and place of business located at 446 North Hermitage Avenue, Chicago, Ill. Respondent is now, and for one year last past has been, engaged in the manufacture of candies and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers located at points in the various 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 the city of Chicago, Ill., to purchasers thereof in other States of the United States at their respective places of business. There is now, and has been for one year last past, a course of trade and commerce by said respondent in such candy between and among the States of the Un~ted 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 and retail dealers certain assortments of candy so packed and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers thereof.

One of said assortments of candy is composed of a numb•er of pieces of candy of uniform size and shape, together with a number of packages of candy and a large bar of candy, which packages and large bar of candy are to be given as prizes to purchasers of said MARCH OF TIME CANDIES, INC. 357 ::352 Findings pieces of candy of uniform size and shape, in the following manner: The majority of the said pieces of candy of uniform size and shape in said assortment have centers of the same color, but a small number ·of said pieces of candy have centers of a different color; the said pieces of candy of uniform size and shape retail at the price of 1¢ t>ach, but the purchasers who procure one of the said candies having a center colored differently from the majority of said candies are ·entitled to receive, and are to be given free of charge, one of the said packages of candy heretofore referred to. The purchaser of the last piece of candy of uniform size and shape in said assortment is entitled to receive, and is to be given free of charge the large bar of candy :also contained in said assortment. The color of the center of the said pieces of candy of uniform size and shape is effectively concealed from purchasers and prospective purchasers until a selection has been made and the particular piece of candy broken open. The aforesaid purchasers of said candies, who procure a candy having a center -colored differently from the majority of said pieces of candy in said :assortment, thus procure one of the said packages of candy wholly by lot or chance.

PAR. 3. The wholesale dealers to whom respondent sells its assortments resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortment for sale and sell said candy to the purchasing public in 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.

PAR. 4. The sale of said candy to the purchasing public, in the manner above found, involves a game of chance or the sale of a ehance to procure packages 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 this, to wit: that the use thereof has the tendency and capacity to exclude from the branch of the candy trade involved in this proceeding competitors who do not adopt and use the same-method or an equivalent or similar method involving the same or an equivalent or similar element of -chance or lottery scheme.

358 FEDERAL TRADB COl\:IMISSION DECISIONS Order 2GF. T. C.

Many persons, firms, and corporations who make and sell candy in competition with the 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, or any other method of sale that is contrary to public policy, 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 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 such other distributors of candy as use the same or an equivalent method, and to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said method by the 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 acts and practices of the respondent, March of Time Candies, Inc., are to the prejudice of the public and of 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 2-6, 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 amended answer of respondent, March of Time Candies, Inc., 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 its con- MARCH OF TIME CANDIES, INC. 359 352 Order elusion 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, March of Time Candies, Inc., its officers,, representatives, agents and employees, in connection with the offering for sale, sale and distribution of candy in interstate commerce or in the District of Columbia, do forthwith cease and desist: 1. Selling and distributing candy so packed and assembled that sales of such candy to the general public are to be made or may be made by means of a lottery, gaming device, or gift enterprise; 2. Supplying to or placing in the hands of dealers assortments of candy which are used or which may be used without alteration or rearrangement of the contents of such assortments to conduct a lottery, gaming device, or gift enterprise in the sale or distribution of the candy contained in said assortments to the public; 3. Packing or assembling in the same package or assortment of candy for sale to the public at retail pieces of candy of uniform size and shape having centers of different colors together with larger pieces of candy which said larger pieces of candy are to be given 1;\S prizes to the purchaser procuring a piece of candy having a center of a particular color.

It is further ordered, That the respondent, March of Time Candies, 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. Complaint 26F. T. C.