Drushell Co., J.D

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IN THE MATTER OF J. D. DRUSHELL TRADING AS J. D. DRUSHELL COMPANY, . AND LAURENCE A. SMITH COMPLAINT, FINDINGS, .AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF .AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3642. Complaint, Oct. 31, 1938-Dccision, Feb. 25, 1939 Where an Individual engaged in sale and distribution of. (1) coin-vending machines especially designed to market 1- and 5-cent candy bars made by Hershey Chocolate Corporation, and referred to In conduct of said busines:i as "Hershey Automatic Merchandisers," "Hershey Vending Machines," "Hershey Machines," and "Advance Hershey Vending Machines," and of (2) "Automatic Stores" vending machines which usually contained four separate slots and compartments f.or distribution of candy, etc., and of. (3) candy, confectionery, peanuts, and other commodities for use In said machines, and of. (4) assortments of toys and charms designed to be mixed with commodities placed In said "Automatic Stores," so that members of public, on placing coin therein, would occasionally receive one of said toys or charms, presence of which was concealed, in addition to other commodities purchased, and thus secure same wholly by lot or chance, and in selling and distributing his said products through numerous representatives whom he employed and who traveled throughout the various States calling upon retail trade and soliciting orders for said machines, and whose practice it was, on arrival In city In which they expected to canvass, to Insert "1\lau Wanted" ad,·ertislng In local newspaper or periodical setting forth glowing opportunities to make large profits with own business in sale of Hershey bars through new patented machines, etc.; and, as thus engaged, In active and substantial competition with others engaged in sale and distribution of coin-operated vending mnchlnes of various types, and candy, confectionery, peanuts, and other commodities for use therein, In commerce among the various States and In the District of Columbia; and a traveling and salts representative of said Individual; as a part of a fraudulent sales plan and scheme entered Into by said individual and his representatives, and which included use of. contact advertising as above set forth, and acting directly and through said sales representatives, with his knowledge, acquiescence, and active cooperation- ( a) Represented to prospects contacted and secured 11s aforesaid that said Individual was the representative or agent of the Hershey Choeolate Corporation or the Chocolate Sales Corporation of Hershey, Pa., and that he, or the said business, was directly connected with said concerns, and "a division or subsidiary thereof, and that said individual, or the business, was the sole distributor of Hershey penny candy bars, and that such bars were vended exclusively In his vending machines, facts being said individual, trading under company trade name employed by him, was not a part of said Ilers:hey concerns, hnd no direct connection therewith, wns not a division or subsldinry theerof, nor sole distributor of their penny candy bars, which were not vended exclusively In said individual's machines, and he had no author- Ity to arrange for distributors for such concerns; 200340'"-4Q--vol. 28--113 Syllabus 28F. T. C.

(b) Represented, as aforesaid, or in such contact adn•rtising, that said machines would pay the prospect an a\'erage net profit of $1 per week each, and pro· duced false and fraudulent testimonial letters purportedly signed by various individuals and containing ex!lggeratecl, untrue, and mislemling statements as to profits obtained from machines in question in support of such claim, aml repr('sented, in contact advertising aforesaid, that the operator would rccei\·e an income from machines in qtwstion of $125 a month and up, depending on expansion, and that said "Automatic Stores" vending machines would earn six times as much ns other ty11es of maehines sold IJy !<ll id individual, and that when toys and eharms were used, through their appeal to cl1ildren anrl adults, said machines could be set to vend candy and other merchandise at about $1 a pound, anti that its said Yending machines were strictly slug· proof and insured against fire, theft, or mysterions disappearance, facts bt>iug such machines, distributed as aforesaid, would not pt·oduc·e such exaggerated earnings as represented, nor would said "Automatic Stores" equal in earn· ings six times those of a single ruaehine nor average net profit of $5 per week, nor could they be set to vend at about $1 per pound, and still distribute toys and charms;

(c) Represented that said individual or business assigned exclusive territorial rights within a certain city or cities, county or eountles, and that it or its representatives would obtain desirable locations for the purchasers of its said machines, and that, if locations failed to bring net profit of $1 per week som-eone from such concern would relocate the purchaser's machines where such net profit would be obtainable, and that if, after location of machines, purchaser wns dissatistleu therewith, said individual woulu permit mnehiues to be retumed auu would refund investment in full, less 121/rpercent sales cost, or re!:<ell same for purchaser, and, in support of snell representations or in connection therewith, produced alleged contract for operators and distributors for signature of prospective purchaser and to be sent to said indi· vidual or coucern for execution, but which in fact never was executed or returned, facts being such individual never expect£'d, planned, or intended to assign any such exclusive territory or rights, location for purchasers' machines was not obtained nor were they relocated as above set forth, anll said individual did not either resell or permit return of merchandi:<e of purehusers and rPfnnd of investment In event of purchasers' dissatisfaction as above represented and set out; and (d) Supplied, as a bove set forth, and placerl in the hands of. operators of its said Yending machines toys and charms for distribution under plan or arrangement involving game of ehance or sale of chance to procure snell toy or charm, contrary to public policy and to e~<tablished public policy of the Vnited St~tes Go,·ernment, and in competition with many wl10 are uuuer a moral and legal compulsion not to adopt such practices, and re· frain from ~;:o- 1loing; with effect of. securing said individual an unrltW preferenee and o1wrating unjustly against competitors aforesaid who refrain from use of such methods;

With effect of deceiving, through such false and misleading statements aud repre~entations made by said incliv!dual him!'!Plf, or through his aforesnid and other 81lles representatives In de!'cribing sald products lling in pronJO· tlon of his !'aid framlulent !<Illes plan and ~<Ch£'mP, ultimate pnrcha'<<'rll tuto contra<·ting for and buying his snld vending ma('him•s, and with caparitY and tendPucy so to do, and to divert uufairly to ~<altl itali\'ldual aud ri•Jll'e' J. D. 'DRUSHELL CO. ET AL. 797 795 Complaint sentative trade of compe-titors engaged in sale in commerce among the States and in said District of same kind and nature as those dealt lu by said individual and sales representative, and truthfully advertised and described by such competitors; to the injury of competition in commerce: Ileltl, 'that such acts and practices were all to the prejudice aml injury of the public and competitors and constituted unfair methods of competition and unfair and ueceptlve acts and practices in commerce. Before Jfr. Arthur F. Tlwma8, trial examiner. }Jr. Jferle P. Lyon for the Commission.

Jlr. Franklin R. Oi•ermyer and .llr. llenry Junge, of Chicago, Ill., for respondents.

Complaint Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said act, the Federal Trade Commission having reason to believe that J. D. Drushell, an individual trading as J. D. Drushell Co. and Laurence A. Smith, an individual, hereinafter referred to as respondents, have violated the Provisions of the said act, and it appearing to the Commission that a Proceeding by it in respect then'of would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows:

PARAGR.-\PH 1. J. D. Drushell is an individual trading as J. D. brushell Co., with his office and principal place of business located at 4753 Broadway, Chicago, III.

Laurence A. Smith of 4753 Broadway, Chicago, Ill., is an indi\'idual and sales representative of J. D. Drushell, trading as J. D. Drnslwll Co. This respondent, acting individually and in cooperation with the respondent J. D. Drushell, trading as J. D. Drushell Co., has actiwly Participated in the acts and practices hereinafter alleged . • PAR. 2. The respondent J.D. Drushell, trading as J.D. Drushell Co., 18 now, and for more than 2 years last past hlls bren, Pngaged in the business of selling and distributing coin-operated vending machines of,. . arious type and character and candy, confectionery, peanuts, and other commodities for use in said nnding machines. Respondent ~a~ses said products when sold to be transported from the city of lolucago. in the State of Illinois to. oprrators and ~urehaser~ tl~ereof C cated m other States of the Umted States and m the ·D1stnct of 0hnnbia.

'I'these vending machines sold by respondent J.D. Drushell, trading ~J.D. Drushell Co., are placed in public business places where memrs of the public may secure tlwrefrom candy, conft>diouery, [){'Hnuts, ,.and .oth er commod'ItH'S· b y msertmg· · a com· m· t I1e mnc 1une.· T these endmg machines, sold and distributed by respondent, comprise two Complaint 28F.T. C.

general types: A coin-vending machine specially designed to market 1- and 5-cent candy bars manufactured by the Hershey Chocolate Corporation of Hershey, Pa., which said vending machines are referred to by respondents in orders, correspondence, and advertising material as "Hershey Automatic Merchandisers," "Hershey Vending Machines," "Hershey Machines" and "Advance Hershey Vending Machines'~; the second type sold and distributed by respondent is a vending machine known as "Automatic Stores" and usually contains four separate slots and compartments for the distribution of candy, confectionery, peanuts, and other commodities. In addition to the commodities mentioned above for use in said "Automatic Stores," respondent sells and distributes an assortment of toys and charms which are designed to be mixed with the commodities placed in said vending machines known as "Automatic Stores" so that members of the public, when placing a coin in said machine will occasionally receive one of said toys or charms · in addition to or as a part of the commodities purchased, the said toys and charms being so concealed from the purchaser or prospective pur- -chaser that their distribution to the purchasing public is wholly by lot or chance.

PAR. 3. In the course and conduct of his business the respondent, J. D. Drushell, trading as J. D. Drushell Co., is in active and substantial competition with other individuals and with corporations and partnerships engaged in the sale and distribution of coin-operated vending machines of various types and character, and candy, confectionery, peanuts, and other commodities for use in said vendin~ machines in commerce between and among the various States of the United States and in the District of Columbia. PAR. 4. In the course and conduct of said business and for the purpose of inducing the purchase. of said coin-vending machines designed to market candy bars manufactured by the Hershey Chocolate Corporation of Hershey, Pa., respondent J.D. Drushell, trading as J. D. Drushell Co., has made use of a sales plan consisting of false representations, fraudulent schemes, devices, and practices, among which are the following :

The respondent, J. D. Drushell, trading as J. D. Drushell Co., employs numerous traveling sales representatives, including said respondent, Laurence A. Smith, who travel throughout the various States of the United States, calling upon the retail trade and soliciting orders for respondent's machines. These sales representatives, with the knowledge, acquiescence, and active cooperation of the respondent, J. D. Drushell, trading ns J. D. Drushell Co., as a part of a fraudulent sales plan and scheme, entered into by this respondent and this respondent's representatives, for the purpose and with J. D. DRUSHELL CO. ET AL. 799 795 Complaint the result of selling this respondent's machines, make false and misleading representations as follows:

(a) Representatives of respondent J. D. Drushell, trading as J. D. Drushell Co., on arrival in a city which they expect to canvass cause to be inserted in a newspaper or periodical of said city one of the following, or some similar advertisement : 'Vanted man to own and operate route of new patented machines that ·vend NEW HERSHEY BARS. World's largest selling chocolate. Full or part time. Nearly lOOo/o profit. To qualify yon must have good reference and $305 cash for equipment. Give security. Income $125 per month and up depending on expansion. We furnish all locations. Give phone. Box ------· IMMEDIATE opening, there and adjacent territory, fot· trustworthy m&n to manage distribution of nationally advertised products enjoying 100 million profit. No selling required as accounts are established and will be turned over to party who finances self to extent $675, fully secured. Starting income about $-40 weekly. Right man will receive additional financial aid, assuring expansion after indication of worthiness. Address Box ------· Give Phone. Personal interview will be arranged with company executive. National company has opportunity here for reliable party. Supervise own business. A new merchandising system for special Hershey products to industry. Income starts at about $200 per month, wlll assist to build income to $400 monthly. Requires $600 cash. No selling or experience. Give phone for interview. Address Box ------· (b) When said representative of respondent J. D. Drushell, trading as J. D. Drushell Co., receives response to the advertisement inserted, an appointment is arranged with the prospective purchaser and the sai~ representative outlines that he represents a large concern which is the sole distributor of Hershey penny candy, bars, that respondent's company is directly connected with the Hershey Chocolate Corporation of Hershey, Pa., and the Chocolate Sales Corporation of Hershey, Pa., and that Hershey bars are vended exdusi,·ely in respondent's vending machines, and large sales from the coin vending machines which he is attempting to sell are described. An effort is made to corroborate the exaggerated average income referred to in the advertisment to which the prospective purchaser has replied, and prospective purchaser is informed by said representative that these vending machines will pay him an average net profit of $1.00 per week each. To support this the representative produces false and fraudulent testimonial letters purported to be signed by various individuals which contain exaggerated, untrue and misleading statements as to profits obtained from operation of the vending machines distributed by respondent J. D. Drushell, trading as J. D. Drushell Co.

(c) Said representative of respondent J. D. Drushell, trading as J. D. Drushell Co., further represents as a part of this fraudulent 800 FEDERAL TRADE COl\II\IISSION DECISIONS Complaint 28F. T. C.

sales plan and scheme that the purchaser will be assigned exclusive territorial rights within a certain city or cities, county, or counties. The prospective purchaser is further informed that respondent's representative or someone from respondent's concern will obtain desirable locations for the purchaser's vending machines and that, if the locations fail to bring a net profit of $1 per week for each machine, someone from respondent's concern will relocate purchaser's machines in locations where such net profit will be obtainable. Said representative also states that if, after location of the machines, the purchaser is dissatisfied with them, respondent will permit the machines to be returned and will refund this invrstment in full less 121f2-cent sales cost or resell them for the purchaser. In addition to this, respondent's representative further represents that the machines are strictly slug proof and are insured against theft, fire, and mysterious disappearance. In connection with the above representations, the representative produces an alleged contract for operators and distributors for signature by the prospective purchaser and which is to be sent to said respondent J. D. Drushell, trading as J. D. Drushell Co., for execution, but which is never executed or returned to the purchaser. Also in connection with the allegations of the relationship with the Hershey Chocolate Corporation, the representative produces a printed form, alleging it to be a distributor's application, which features in very large letters the following legend: Industrial Dppartment HERSHEY CHOCOLATE l\Iachine Division J. D. Drushell Co.

4641-47 Ravenswood Chicago, Illinois Largest Organization in the World for Distribution of Hershey Products through Ad,·auce Automatic Equipment PAR. 5. All the representations made by respondent as a part of said fraudulent sales plan and scheme are grossly exaggerated, misleading and untrue. In truth and in fact, the respondent J. D. Drushell, trading as J. D. Drushell Co., is not a part of the Hershey Chocolate Corporation or the Chocolate Sales Corporation of Hershey, Pa., and does not have any direct connection with said com· panies, is not a division or subsidiary of said companies, and is not the sole distributor of Hershey penny candy bars. Hershey candy bars are not vended exclusively in vending machines of said respondent J. D. Drushell trading as J. D. Drushell Co., and said respondent has no authority to arrange for distributors for said Com· J. D. DRUSHELL CO. ET AL. 801 795 Complaint panies. The coin-vending machines distributed by the responuent, J. D. Drushell, trading as J. D. Drushell Co., will not produce such exaggerated earnings as represented. The respondent J.D. Drushell, trading as J. D. Drushell Co., never expected, planned, or intended. to assign "exclusive territorial rights" within any city or county to the purchaser. The location for purchaser's machines is not ob· tained by said respondent or anyone acting for him, and purchaser's machines are not relocated by either said respondent or anyone acting for him, should first location prove unsatisfactory. The respondent J. D. Drushell, trading as J. D. Drushell Co., does not resell or permit the return of machines of the purchaser for refund of investment in event purchaser is dissatisfied. The machines Llistributed by said 1·respondent are not strictly slug proof, and are not insured against theft, fire, and mysterious disappearance.

PAR. 6. In the course and conduct of his business and for the pur· po!:'e of inducing retailers. to purchase said coin-operate.>d vE>nding machines known as "Automatic Stores," respondent J. D. Drushell, trading as J. D. Drushell Co., has made use of and now uses various types of advertising matter purporting to be descriptive of said vending machines known as "Automatic Stores." Such advertising llsed by this respondent contains among others, the following state· lnents and representations:

Six times the earnings of a single machine. Tile use of charms and toys creates amazing sales. Grown-up>:, as well as kiddies, are intrigued at the sight of these clever toys and charms mixed with CUJ~d~· and nuts. 'Ve have seen youngsters drop in 10 to 15 pennies seeking to receive the toy they see through the glnss. Head thn•e figures: Pea nuts cost 8¢ and 10¢ per lh. depending on locality. Hard candies can be purchased at approximately 12¢ lb. This merchandise sells from 60¢ to 70e per lb. 'Yhen charms and toys are used operators are setting them to vend at about $1 per lb.

Bs using "Automatic Stores" and this merchandise, operators have found that they can easily and quickly develop their business. In addition to said advertising, representatives of respondent J. D. Drushell, trading as J. D. Drushell Co., including Laurence A. Smith, with the k11owledge, acquiescence, and active cooperation of respond· ent J.D. Drushell, trading as J.D. Drushell Co., for the purpose and with the result of selling respondent's vending machines, make repre· sentations that said "Automatic Stores" will return earnings of "Six times the earnings of a single machine;" that the earnings can be greatly stimulated and increased by the use of toys and charms; that when toys and charms are used, the vending machines can be set to vend at about $1 per pound; that said machines will awrage a net profit of $5 weekly per machine.

802 FEDERAL TRADE COMl\HSSION DECISIONS Complaint 2SF. T.C.

PAR. 7. Said statements and representations contained in said advertising and in representation~ of salesmen of this respondent J. D. Drushell, trading as J.D. Drushell Co., are grossly exaggerated, misleading, and untrue. In truth and in fact, one "Automatic Stores" will not equal the earnings of six times the earnings of a single machine and will not average a net profit of $5 per week for each machine; and also, said machine cannot be set to vend at about $1 per pound and still distribute toys and charms. Furthermore, the use of toys and charms as abow alleged involves a game of chance or the sale of a chance to procure a toy or charm, which is a practice deemed contrary to public policy; and is contrary to an established public policy of the Government of the United States.

Many persons, firms, and corporations located in the several States of the United States and engaged in competition with respondent J. D. Drushell, trading as J. D. Drushell Co., are under a moral and legal compulsion not to adopt such practices and do refrain from adopting them. The use of said method by this respondent gives hirn an undue preference and operates unjustly against those competitors of said respondent who are required to refrain from the use of such methods.

PAR. 8. Each and all of the false and misleading statements and representations made by the respondent J. D. Drushell, trading as J. D. Drushell Co., himself, or through the respondent Laurence A. Smith and other sales representatives in describing his products or in the promotion of said fraudulent sales plan and scheme hereinabove set forth, were and are calculated to, have had, and now have a capacity and tendency to deceive and do deceive the ultimate purchasers into contracting for and buying that which they did not intend to buy. The aforesaid practices have the capacity and tendency to unfairly divert to the respondents the trade of competitors engaged in selling in commerce between and among the States of the United States and the District of Columbia products of the same kind and nature as those of the respondents, which said products are truthfully advertised and described by said competitors. As a consequence thereof, injury has been done and is now being done by respondents to competition in commerce between and among the various States of the United States and in the District of Columbia. PAR. 9. The aforesaid acts and practices of the respondents as herein alleged are all to the prejudice of the public and of the respondents' competitors and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. J". D. DRUSHELL CO. ET AL. 803 795 Findings REPORT, FINDINGS As TO THE FACTs, AND Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on October 31, 1938, issl'led, and subsequently served, its complaint in this proceeding upon the respondents, J. D. Drushell, an individual, trading as J. D. Drushell Co., and Laurence A. Smith, an individual, charging them with the use o:f unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of the provisions of said act.

After the issuance of said complaint, and the filing of separate ans;..-ers by the respondents, the Commission by order herein designated. and appointed Arthur F. Thomas, an examiner o:f the Commission, to take testimony and receive evidence in this proceeding, and ordered the taking of testimony to begin on January 3, 1939, in Chicago, Ill. At the time and place designated by the Commission the respondent J. D. Drushell appeared by Franklin R. Overmyer and Henry Junge, his attorneys, and the respondent Laurence A. Smith appeared pro se, and moved that they be granted leave to file amended answers admitting all of the material allegations of fact set forth in the complaint and waiving all intervening procedure and further hearing as to the facts. The hearing was thereupon closed by the trial examiner. Subsequently, on, to wit, January 21, 1939, the Commission, by order entered herein, granted the separate motions of the ~·respondents for leave to withdraw their original answers and to substitute therefor aml'nded answers admitting all the material allegations of the complaint, and waiving all intervening procedure. and further hearing as to the facts, which amended answers were 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 answers of the respondents, and the Commission having duly considered the same, 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. The respondent J.D. Drushell is an individual trading as J. D. Drnshell Co., with his office and principal place of business at 4753 Broadway, Chicago, Ill. The respondent Laurence A. Smith is an individual and sales representative of J. D. Drushell, trading as J. D. Drushell Co. This respondent, acting individually and in co- Findings 28F.T.C.

operation with the respondent J.D. Drushell, trading as J.D. Drushell Co., has actively participated in the acts and practices alleged in the complaint.

PAR. 2. The respondent J. D. Drushell, tmding as J. D. Drushell Co., is now, and for more than 2 years last past has been, engaged in the business of selling and distributing coin-operated vending machines of various types and character and candy, confectionery, peanuts, and other commodities for use in said vending machines. Respondent causes said products when sold to be transported from the city of Chicago in the State of Illinois to operators and purchasers thereof located in other States of the United States and in the District of Columbia.

These vending machines sold by respondent J. D. Drushell, trncling as J.D. Drushell Co., are placed in public business places where members of the public may secure therefrom candy, confectionery, peanuts, and other commodities by inserting a coin in the machine. These vending machines, sold and distributed. by re.spondent, comprise two general types: A coin_-vending machine specially designed to market 1- and 5-cent candy bars manufactured by the Hershey Chocolate Corporation of Hershey, Pa., which said vending machines are referred to by respondents in orders, correspondence, and advertising material as "Hershey Automatic :Merchandisers," "Hershey Vending Machines," ''Hershey Machines," and "Advance Hershey Vending :Machines"; the second type sold and distributed by respondent is a vending machine known as "Automatic Stores" and usually contains four separate slots and compartments for the distribution of candy, confectionery, peanuts, and other commodities. In addition to the commodities mentioned above for use in said "Automatic Stores," respondent sells and distributes an assortment of toys and charms which are designed to be mixed with the commodities placed in said vending machines known as "Automatic Stores" so that members of the public, when placing a coin in said machine, will occasionally receive one of said toys or charms in addition to or as a part of the commodities purchased, the said toys and charms being so concealed from the purchaser or prospective purchaser that their distribution to the purchasing public is wholly by lot or chance.

P"\R. 3. In the course and conduct of his busi11ess, the respondent, J. D. Drushell, trading as J. D. Drushell Co., is in active and substantial competition with other individuals and with corporations and partnerships engaged in the sale and distribution of coin-operated nnding machines of various types and character, and candy, confectionery, peanuts, and other commodities for use in said vending ma- J. D. DRUSHELL CO. ET AL. 805 795 Findings chines in commerce between and among the varwus States of the United States and in the District of Columbia. PAR. 4. In the course and conduct of said business and for the purpose of inducing the purchase of said coin-vending machines designed to market candy bars manufactured by the Hershey Chocolate Corporation of Hershey, Pa., respondent, J. D. Drushell, trading as J. D. Drushell Co., has made use of a sales plan consisting 9f false representations, fraudulent schemes, devices, and practices, among which are the following:

The respondent, J. D. Dmshell, trading as J. D. Drushell Co., employs numerous traveling sales representatives, including said respondent, Laurence A. Smith, who travel throughout the various States of the United States, calling upon the retail trade and soliciting orders for respondent's machines. These sales representatives, with the knowledge, acquiescence, and active cooperation of the respondent, J. D. Drushell, trading as J. D. Drushell Co., as a part of a fraudulent sales plan and scheme, entered into by this respondent and this respondent's representatives, for the purpose and with the result of selling this respondent's machines, make false and misleading representations as follows:

(a) Representatives of respondent, J.D. Drushell, trading as J.D. Drushell Co., on their arrival in a city which they expect to cam·ass, cause to be inserted in a newspaper or periodical of said city one of the following, or some similar advertisement: Wanted-man to own and ope~ate route of new patented machines that ver:d NEW HERSIIEY BARS. World's largest selling chocolate. Full or part time. Nearly 100.% profit. To qualify you must have good reference and $3!)3 cash for equipment. Give security. Income $125 per month and up depending on expansion. \Ve furnish all locations. Give phone. Box ------· Il\Il\lEDIATE opening, here and adjacent territory, for trustworthy man to manage distribution of nationally advertised products enjoying 100 million profit. No selling required as accounts are established and will be turned over to party who finances self to extent $675, fully secured. Starting income about $40 weekly. night man will receive additional financial aid, assuring expansion after indication of worthiness. Address Box ------· Give Phone. Personal interview will be arranged with company executive. National company has opportunity here for reliable party. Supervise own business. A new merchandising system for special Hershey products to industry. Income starts at about $200 p('r month, will assist to build income to $400 monthly. Requires $660 cash. No selling or exp('rlenee. Give phone for interview. Address Box ------· (b) 'Vhen said representative of respondent, J. D. Drushell, trading as J. D. Drushell Co., receives response to the advertisement inserted, an appointment is arranged with the prospecth·e purchaser Findings 2RF.T. C.

and the said representative outlines that he represents a large concern which is the sole distributor of Hershey penny candy bars, that respondent's company is directly connected with the Hershey Chocolate Corporation of Hershey, Pa., and the Chocolate Sales Corporation of Hershey, Pa., and that Hershey bars are vended exclusively in respondent's vending machines, and large sales from the coin vending machines which he is attempting to sell are described. An effort is made to 'corroborate the exaggerated average income referred to in the advertisement to which the prospective purchaser has replied, and prospective purchaser is informed by said representative that these vending machines will pay him an average net profit of $1 per week each. To support this the representative produces f<tlse and frauLlulent testimonial letters, purported to be signed by various individuals, which contain exaggerated, untrue, and misleading statements as to profits obtained from operation of the vending machines distributed by respondent, J. D. Drnshell, trading as J. D. Drnshell Co.

(c) Said representative of respondent, J. D. Drushell, trading as J. D. Drushell Co., further represents as a part of this fraudulent sales plan and scheme that the purchaser will be assigned exclusive territorial rights within a certain city or cities, county, or counties. The prospective purchaser is further informed that respondent's representative or someone from respondent's concern will obtain desirable locations for the purchaser's vending machines and that, if the locations fail to bring a net profit of $1 per week for each machine, someone from respondent's concern will relocate purchaser's machines in locations where such net profit will be ol;>tainable. Said representative also states that if, after location of the machines, the purchaser is dissatisfied with them, respondent will permit the machines to be returned and will refund this investment in full less 12¥2 percent sales cost or resell them for the purchaser. In addition to this, respondent's representative further represents that the machines are strictly slug proof and are insured against theft, fire, and mysterious disappearance. In connection with the above representations, the representative produces an alleged contract for operators and distributors for signature by the prospective purchaser and which is to be sent to said respondent, J. D. Drushell, traLling as J. D. Drushell Co., for execution, but which is never executed or returned to the purchaser. Also in connection with the allegations of the relationship with the Hershey Chocolate Corporation, the representative produces a printed form, alleging it to be a distributor's application, which features in very large letters the following leg.end: J". D. DRUSHELL CO. J~T AL. 807 795 Findings Industrial Department HERSHEY CHOCOLATE Machine Division J. D. Drushell Co.

4641-47 H:n·enswood Chicago, Illinois Largest Organization in the World for Distribution of Hershey Products through Advance Automatic Equipment PAR. 5. All the representations made by respondent as a part of said fraudulent sales plan and scheme are grossly exaggerated, misleading, and untrue. In truth and in fact, the respondent, J. D. Drushell, trading as J. D. Drushell Co., is not a part of the Hershey Chocolate Corporation or the Chocolate Sales Corporation of Hershey, Pa., and does not have any direct connection with said companies, is not a division or subsidiary of said companies, and is not the sole distributor of Hershey penny candy bars. Hershey candy bars ·are not vended exclusively in vending machines of said respondent, J.D. Drushell, trading as J. D. Drushell Co., and said respondent has no authority to arrange for distributors for said companies. The coinvending machines distributed by the respondent, J. D. Drushell, trading as .J.D. Drushell Co., will not produce such exaggerated earnings us represented. The respondent, J. D. Drushell, trading as J. D. Drushell Co., never expected, planned, or intended to assign "exclusive territorial rights" within any city or county to the purchaser. The location for purchaser's macl1ines is not obtained by said respondent or anyone acting for him, and purchaser's machines are not l'Plocated by either said respondent or ·anyone acting for him, should first location prove unsatisfactory. The respondent, J. D. Drushell, h·uding as J. D. Drushell Co., does not resell or permit the return of machines of the purchaser for refund of investment in event purchaser is dissatisfied. The machines distributed by said respondent are not strictly slug proof, and are not insured against theft, fire, nnd mysterious disappearance.

PAn. 6. In the course and conduct of his business and for t11e pur- !Jose of inducing retailers to purchase said coin-operated vending rnael1incs known as "Automatic Stores,'' respondent, J. D. Drushell, trading as J. D. Drushell Co., has made use of and now uses various types of advertising matter purporting to be descriptive of said \'ending machines known as "Automatic Stores." Such advertising 808 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings !:SF.T.C.

used by this respondent contains among others the following statements and representations:

Six times the earnings of a single machine. T!Je use of charms and toys creates amazing sales. Grown-ups as well as kiddies are intrigued at the sight of these dever toys and charms mixed witll the candy and nuts. \Ve huYe seen youngsters drop in 10 to 15 pennies steel;:lng to rPeeive the toy they see through the glnss. Read tllP~'<e figures: Peanuts cost Sc to 10¢ per lb. depending on locality. Hard candies can be purchased at approximately 12¢ lb. This merchandise sells from 60¢ to 70¢ per lb. \Vhen charms and toys are used operators are setting them to vent! at about $1 per lb.

By using "Automatic Stores" and this merchandise, opet•atot·s have found that they can easily and quickly develop their business. In addition to said advertising, representatives of respondent, J. D. Drnshell, trading as J. D. Drushell Co., including Laurence A. Smith, with the knowledge, acquiescence, and active cooperation of respondent, J. D. Drushell, trading as J. D. Drushell Co., for the purpose and with the result of selling respondent's vending machines, make representations that said "Automatic Stores" will return earnings of "Six times the earnings of a single machine;" that the earnings can be greatly stimulated and increased by the use of toys and charms; that when toys and charms are used, the vending machines can be set to vend at about $1 per pound; that said machines will average a net profit of $5 weekly per machine. P .AR. 7. Said statements and representations contained in said advertising and in representations of salesmen of this respondent, J. D. Drushell, trading as J. D. Drushell Co., are grossly exaggerated, misleading, and untrue. In truth and in fact, one "Automatic Stores" will not equal in earnings six times the earnings of a single machine and will not average a net profit of $5 per week for each machine; and also, said machine cannot be set to vend at about $1 per pound and still distribute toys and charms. Furthermore, the use of toys and charms as above alleged involves a game of chance or the sale of a chance to procure a toy or charm, which is a practice deemed contrary to public policy and is contrary to an established public policy of the Government of the United States. Many persons, firms, and corporations located in the several States of the United States and engaged in competition with respondent, J. D. Drushell, trading as J. D. Drushell Co., are under a moral and legal compulsion not t01 adopt such practices and do refrain from adopting them. The use of said methods by this respondent gives him an undue preference and operates unjustly against those competitors of said respondent who are required to refrain from the use of such methods.

J". D. DRUSHELL CO. ET AL. 809 795 Order PAR. 8. Each and all of the false. and misleading statements and representations made by the respondent, J. D. Drushell, trading as J. D. Drushell Co., himself, or through the respondent, Laurence A. Smith, and other sales representatives in describing his products or in the promotion of said fraudulent sales plan and scheme hereinabove set forth, were and are calculated to, have had, and now have a capacity and tendency to deceive and do deceive the ultimate pur- ~hasers into contracting for and buying the vending machines of the respondent, J. D. Drushell. The aforesaid practices have the capacity and tendency to unfairly divert to the respondents the trade of competitors engaged in selling in commerce between and among the States of the United States and the District of Columbia, products of the same kind and nature as those of the respondents, which said products are truthfully adyertised and described by said competitors. As a consequence thereof, injury has been done and is now being done by respondents to competition in commerce between and among the various States of the United States and in the District of Columbia. CONCLUSION The aforesaid acts and practices of the respondents have been, and .are, all to the prejudice and injury of the public and said respondents' -competitors, and constitute unfair methods of competition in commerce, and unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answers of the respondents, in which answers respondents admit all the material .allegations of fact set forth in the complaint and waive all intervening procedure and further hearing as to the facts, and the Commission having made its findings as to the facts and conclusion that said respondents have violated the provisions of the Federal Trade Comn1ission Act.

It ls ordered, That the respondents, J.D. Drushell, individually and as sole trader under the name and style of J.D. Drushell Co., or trading under any other name, and Laurence A. Smith, indivitlually, or in combination or conspiracy with each other, their agents, representatins, and employees, directly or through any device, corporate or otherwise, in connection with the offering for sale, sale, and dis • .tribution of the coin-operated vending machines specially designed to Order 28 F. T. C. market 1- and 5-cent candy bars manufactured by the Hershey Chocolate Corporation of Hershey, Pa., variously known as "Hershey Automatic Merchandisers," "Hershey Vending Machines," "Hershey l\Iachines," ''Advance Hershey Vending Machines," "Automatic Stores," or the same or similar machines un<ler whatever name sold, in interstate commerce or in the District of Columbia, do forthwith cease and desist, directly or indirectly, from: 1. Representing that the respondent, J. D. Drushell, is the representative or agent of, or in any manner connected with, the Hershey Chocolate Corporation or the Chocolate Sales Corporation, of Hershey, Pa., or that the "company"· operated by said respondent is a division or subsidiary of or affiliated with either of said firms, when such is not the fact.

2. Representing that the respondent, J. D. Drushell, is the sole distributor of Hershey penny candy bars or that such bars are distributed exclusively through the vending machines sold by said respondent, or that said respondent has authority to arrange for distribution of t~andy for the Hershey Chocolate Corporation or the Chocolate Sales Corporation.

3. Representing that respondents' vending machines will pay the operator thereof an average net profit of $1 per week for each machine, or that the operator thereof will receive an income of $125 per month or any other amount, unless such is the fact. 4. Representing that the respondent, J. D. Drushell, assigns exclusive territorial rights within any certain trade area to any purchaser or prospective purchaser of his vending machines, unless and until such exclusive territory is in fact assigned. 5. Representing that the respondent, J. D. Drushell, obtains locations for said vending machines, or that he relocates said vending machines should first location prove unsatisfactory, unless and until such locations are in fact obtained.

6. Representing that the respondent, J. D. Drushell, resells or permits the return of said vending machines for refuml of investment in case the purchaser thereof is dissatisfied, unless and until such machines are so disposed of and the investment in fact returned to dissatisfied purchasers.

7. Repre~enting that said vending machines are strictly slug proof or are insured against fire, theft, or mysterious disappearunce, unless such is the fact.

8. Representing that said "automatic stores" vending machines will earn six times as much as other types of machines sold by the respondent, J. D. Drushell, or that they will average a net profit of $5 J. D. DRUSHELL CO. ET AL. 811 795 Order per week for each such machine, or any other amount, unless such is the fact.

9. Representing that said "automatic stores" vending machines can be set to vend candy and other merchandise at the rate of $1 per pound, or any other amount, unless such is the fact. 10. Supplying to, or placing in the hands of, operators of any of said vending machines, toys, charms, or other articles of merchandise which may be distributed through said vending machines in such a manner as to constitute a lottery device or the distribution of such merchandise by lot or chance.

It i.s further ordered, That the respondents shall, within 60 days after service upon them of this order, file with the Commission sepnrate and individual reports in writing setting forth in detail the manner and form in which they have co!Ylplied with this order. 2003tll"'-40-vol. 2!'-u4 812 FEDERAL TRADE COMl\IISSIO~ DECISIONS Syllabus !:8F.T.C.