Reichgott, Donald

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IN THE MATTER OF DOXALD REICHGOTT, INDIVIDUALLY AND TRADING AS A~IERICAN NOVELTY COMPANY COMPI.AI:\'T, FINDI!i!GS, AND ORDER IN REGARD TO THE ALLEGED VIOJ,ATION 01!' SEC. 5 OF AN ACT OF CO!iiGRESS APPROVED SEPT. 26, 1914 Docket 3260. Complaint, Nov. 4, 1937-Dedsion, Apr. 9, 1938 "Where au iudi¥itlual engaged in sale aud distribution of various articles of lllerchandi:-;e, including ele<'tiie r11zors and pln and pencil sets, to whole- }' s_ale dealers and jouuersurm~hed push cards for distribution of such merchandise to ultimate consumer, Wl1olly by lot or chance, under plan or scheme by which number selected by £"hance, as disclosed under disc, determined amount paid by Player, and in whi<·h correct ehance selection from card's list of feminine llntue~ of name eorresponding to that disclosed under master seal after sale of <:hances, resulted in player's receiving, without further cost, article of lll«'rchandise ~<pedfied on card, and in which those selecting certain indicate«\ numbers alt;o similarly receivf'd articles of merchandise, which Yllrious articles wpre of a greatet• Yalue than cost of single push or punch, '\V' and normal retail prices of which were much in excess of such cost; lth result of supplying to and pl<lclng in bands of others, through practice of forwarding said ennis, descriptive literature and instructions to mem- U(>rs of public, mpaus of C'Onducting lotteries, in accordance with such plan, in sale of his m(>rclJandise, purchased, sold, and distributed by many, attracted by said method and element of chance inyoh·ed in sale or distribution that·eof, in preference to that offered and sold by compf'titors, who (]O not use same or equivalent method, and with effect of unfairly diverting to him trade and custom from said competitors, including many who are unwilling to adopt and use said or any method involdug game of chance or sale of a chance to win something by chan('(>, or any other method contrary to public policy, and refrain therefrom, and do not use same or II equivalent methods, and with tendency and capacity so to divert: eld, 'fbat such acts and practices were all to the injury and prf'judiC'e of the PUblic and competitors and constituted unfair methods of competition. Before Afr. Miles J. Fwrnas, trial examiner. M'I'.1Ienry 0. La-nk and Mr. P. 0. Kolinski :for the Commission. COMPI.AINT t .Pursuant to the provisions of an Act o£ Congress approved Sepe~ber 26, 1914, entitled "An Act to create a Federal Trade Com- ~lssion, to define its powers and duties, and for other purposes," R ~Federal Trade Commission having reason to believe that Donald h 81 C~Igott, individually and trading as American Novelty Company :rne~~nafter referred to as respondent, has been and is using unfair e ods of competition in c()mmerce, as "commerce" is defined in CO~Il\IISSIO~ DECISIOXS1046 FEDERAL TRADE Complaint ~6 F. T. C. said act, and it appearing to said Commission that a proceeding ~y it in respect thereof would be in the public interest, hereby issues Jts complaint stating its charges in that respect as follows: PARAGRAPH 1. Responde.nt is an individual doing business und~r the trade name and style of American Novelty Company, with his principal office and place of business located at 1841 Broadway, New York, N. Y. He is now, and for several months last past has be.en, engaged in the sale and distribution o£ various articles o£ merchandise, including, among others, electric razors and pen and pencil sets, to wholesale dealers and jobbers and to members of the public located at points in the various States o£ the United States. Respondent causes and has caused such merchandise when sold to be transported from his principal place o£ business in New York City to purchasers thereof in the State of New York and in other States o£ the United States at their respective places of location. There is now, and has been for several months last past, a course of trade and commerce by said respondent in such merchandise between and among the various States o£ the United States. In the course and conduct of said business, respondent is in competition with other individuals and with partnerships and corporations engaged in the sale and distribution of similar or like articles o£ merchandise in commerce between and among the various States of the United States. . PAR. 2. In the course and conduct o£ his business, as described ~n paragraph 1 hereof, the respondent, .in soliciting the sale of and Jn selling and distributing the said merchandise, has furnished variou: devices and plans of merchandising which involve the operation ? games o£ chance, gift enterprises or lottery schemes by which said merchandise is distributed to the ultimate consumers wholly by lot or chance. Said devices and plans o£ merchandising consist of push cards, the use of which, in connection with the sale and delivery to the purchasing public, was and is substantially as follows: The push cards have a number of partially perforated disks, and when a pu.sh is made and the disk is separated from the card a number is dis· closed. There are as many separate numbers as there are disks on the card, but the numbers are varied or assorted and are not arranged in numerical sequence. The number on said disks are effectively concealed from purchasers and prospective purchasers until a selection has been made and the disk separated from the card. The price or terms of sale vary, depending upon the number obtained. Number~·s from 1 to 10, inclusive, are free, and numbers from 11 to 35 pay 1n cents the amount o£ the number, and numbers over 35 pay 35 cents. Directly above each disk there is printed a girl's name, and the card has a space prepared £or recording the name of each purchaser AMERICAN NOVELTY CO. 1047 1045 Complaint <>f a disk opposite the corresponding girl's name. The card also has a master seal which, when removed exposes a girl's name corresponding to one of those appearing under said disks. The purchaser who pushed the disk corresponding to the name under the ltlaster seal is entitled to a specified article of merchandise, and the Purchasers selecting certain indicated numbers also receive a specified article of merchandise. The name under the master seal is e~ectively concealed from purchasers and prospective purchasers until all sales have been made and the master seal removed. Purchasers Who select names other than the name appearing under the master seal, or numbers other than those indicated as winning a prize, do llot receive anything for their money other than the privilege of Pnshh1g a disk from said card. The said articles of merchandise are Qf a greater value than the cost of a single push from said card. 'I'he fact as to whether a customer receives his chance free or pays for the. same, and the fact as to whether a purchaser receives a specified article of merchandise, is thus determined wholly by lot or chance. ?ther push cards furnished and distributed by respondent for use ln the sale and distribution of his merchandise involve the same principle, but vary in detail.

P .AR. 3. Respondent forwards his push cards, together with variou.s descriptive literature and with instructions as to how to operate Sal~ push cards or explaining what to do in order to obtain said articles of merchandise, to various members of the public, and a substantial amount of such merchandise is sold or distributed by such ?ersons by means of said push cards and in accordance with the Instructions furnished by respondent. Respondent thus supplies to ~nd places in the hands of others the means of conducting lotteries ~n t~1e sale of his merchandise in accordance with the sales plan eremabove set forth.

par. 4. The sale of merchandise to the purchasing public in the ~anner above alleged involves a game of chance or the sale of a \ ance to procure articles of merchandise at a price much less than t e. normal retail price thereof. Many persons, firms, and corporations who make or sell merchandise in competition with the respondent, as above alleged, are unwilling to adopt and use said ~ethod or any method involving a game of chance or the sale of a. c lange to win something by chance, or any other method that is Mntrary to public policy, and such competitors refrain therefrom. any persons are attracted by respondent's said method and by the 1~hement of chance involved in the sale or distribution thereof in e ~an.ner above described, and are thereby induced to buy and sell or (hstnbute respondent's merchandise in preference to merchandise Findings 26F. T.C.

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, because of said game of chance, has the tendency and capacity to, and does divert trade and custom to respondent from his said competitors who do not use the same or an equivalent method.

PAR. 5. The aforesaid acts and practices of respondent are all t:o the injury and prejudice of the ptiblic and of respondent's competl· tors, 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."

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Actr the Federal Trade Commission, on November 4, 1937, issued, and thereafter served, its complaint in this proceeding upon Donald Reichgott, individually and trading as American Novelty Company, charging him with the use of unfair methods of competition in com· merce in violation of the provisions of said act. .After the issuance of said complaint and the filing of respondent's answer, the Com· mission, by order entered herein, granted respondent's reque,st for permission to withdraw said answer and substitute therefor a sub· stitute answer admitting all the material allegations of the complaint to be true and waiving the taking of further evidence und all other intervening procedure, which substitute answer was duly filed in the office of the Commission. Thereafter this proceeding regularly can1e on for final hearing before the Commission, on the said complaint and the substitute answer, and the Commission, having duly consider~d the matter and now being fully advised in the premises, finds that tins proceeding is in the interest of the public and makes this its findings as to the fac.ts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent is an individual doing business under ~he trade name and style of American Novelty Company, with his pnn· cipal office and place of business located at 18-H llroadwuy, Ne~ York, N. Y. He is now, and for some time last past has been, engu~e in the sale and distribution of various articles of merchandise, 111cluding, among others, electric razors and pen and pencil sets, to wholesale dealers and jobbers and to members of the public located at points in the various States of the United States. Respondent AMERICAN NOVELTY CO. 1049 1045 Findings causes and has caused such merchandise when sold to be transported from his principal place of business in New York City to purchasers thereof in the State of New York and in various other States of the United States at their respective places of location. There is now, and has been for some time last past, a course of trade and commerce by said respondent in such merchandise between and among the various States of the United States. In the course and conduct of said business, respondent is in competition with other individuals and with ~a~nerships and corporations engaged in the sale and distribution of SIIn1lar or like articles of merchandise in commerce between and among the various States of the United States. PAR. 2. In the course and conduct of his business, as described in Paragraph 1 hereof, the respondent, in soliciting the sale of and in selling and distributing the said merchandise, has furnished various devices and plans of merchandising which involve the operation of gatnes of chance, gift enterprises or lottery schemes by which said merchandise is distributed to the ultimate consumers wholly by lot or chance. Said devices and plans of merchandising consist of push cards, the use of which, in connection with- the sale and d~livery to the purchasing public, was and is substantially as follows: The push ~ards have a number of partially perforated discs, and when a push ls made and the disc is separated from the card a number is disclosed. There are as many separate numbers as there are discs on ~he card, but the numbers are varied or assorted and are not arranged In numerical sequence. The numbers on said discs are effectively concealed from purchasers and prospective purchasers until a selection has been made and the disc separated from the card. The price or ~terms of sale vary, depending upon the number obtained. Numbers rom 1 to 10, inclusive, are free, and numbers from 11 to 35 pay in ~_nts the amount of the number, and numbers over 35 pay 35 cents. l ltectly above each disc there is printed a girl's name, and the card ~~s a space prepared for recording the name of each purchaser of a Isc opposite the corresponding girl's name. The card also has a ~aster seal, which, when removed, exposes a girl's name correspond- Ing to one of those appearing above said discs. The purchaser who Pus.hes the disc corresponding to the name under the master seal is e~trtl~d to a specified article of merchandise, and the purchasers se ectmg certain indicated numbers also receive a specified article of ~lerchandise. The name under the master seal is effectively concealed rom purchasers and prospective purchasers until all sales have been In~de and the master seal removed. Purchasers who select names er than the name appearing under the m,aster seal, or numbers0:h ~ er t~an those indicated as winning a prize, do not receive anything or thmr money other than the privilege of pushing a disc from said 1050 FEDERAL TRADE COMMISSION DECISIOSS Conclusion 26F. T.C.

card. The said articles of merchandise are of a greater value than the cost of a single push from said card. The fact as to whether a customer receives his chance free or pays for the same, and the fact as to whether a purchaser receives a specified article of mer· chandise, are thus determined wholly by lot or chance. Other push cards furnished and distributed by respondent for use in the sale and distribution of his merchandise involve the same principle, but vary in detail.

PAR. 3. Respondent forwards his push cards, together with various descriptive literature and with instructions as to how to operate said push cards or explaining what to do in order to obtain said articles of merchandise, to various members of the public, and a substantial amount of such merchandise is sold or distributed by such persons by means of said push cards and in accordance with the instructions fut·· nished by respondent. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of his merchandise in accordance with the sales plan hereinabove set forth. PAR. 4. The sale of merchandise to the purchasing public in the manner above found involves a game of chance or the sale of a chance to procure articles of merchandise at prices much less than the normal retail prices the.reof. Many persons, firms, and corporations who make or sell merchandise in competition with the respondent, as above found, 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, and such competitors refrain therefrom. Many persons are attracted bY respondent's said method and by the element of chance involved in the sale or distribution thereof in the manner above described, and are thereby induced to buy and sell or distribute respondent's Uler· chandise in preference to merchandise offered for sale and sold by said competitors of respondent who do not use the same or an equiva· lent method. The use of said method by respondent, because of said game of chance, has the tendency and capacity to, and does, unfairly divert trade and custom to respondent from his said competitors who do not use the same or an equivalent method. CONCLUSION The aforesaid acts and practices of respondent, Donald Reichgott, individually and trading as American Novelty Company, are all t.o the injury and prejudice of the public ·and of respondent's compeU· tors, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. AMERICAN NOVELTY CO. 1051 1(45 Order ORDER TO CEASE AND DESIST .This proceeding having been heard by the Federal Trade Comllllssion upon the complaint of the Commission and the substitute answer of respondent admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervenincr procedure, and the Commission having made its fi~dings as to the facts and its conclusion that said respondent has V"lolated the provisions of the Federal Trade Commission Act. It i.~ ordered, That the respondent Donald Reichgott, individually and trading as American Novelty Company, or trading under any ot.her name, his agents, representatives and employees, in connection 'Wlth the offering for sale, sale and distribution of electric razors, pen and pencil sets, and other articles of merchandise, in interstate comn:erce or in the District of Columbia, do forthwith cease and de- Sist from:

1. Supplying to or placing in the hands of others push or pull cards, puneh. boards or other lottery devices for the purpose of ~nabling such persons to dispose of or sell such or similar products Y the use thereof· · , t 2· Mailing, shipping, or transporting to his agents or to distribuors or to the members of the public, push or pull cards, punch boards or other lottery devices so prepared or printed as to enable said per- Sons to sell or distribute such or similar products by the use thereof; th 3· Selling or otherwise disposing of such or similar products by ; U~e of push or pull cards, punchboards or other lottery devices. t. ~s further ordered, That, within 60 days from the date of the 8 ~r:v-~ce of this order upon said respondent, he shall file with the Comf 18810~ a report in writing setting forth in detail the manner and hor~ 111 which he has complied with the order to cease and desist erelnabove set forth.

1052 FEDERAL TRADE COl\Il\IISSIOX DECISIOXS Complaint 26F.T.G·