Lux-Visel Co., Inc

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IN THE Matrer OF LUX-VISEL COMPANY, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF A~ ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 9683. Complaint, Jan. 5, 1939-Decision, Mar. 14, 1939 Where a corporation engaged in manufacture and sale of electric bot water beaters under name "Lux" or "Superlux"; In advertising for salesmen to sell and distribute Its said products throughout the various States, in newspapers and periodicals, and in follow-up literature, letters, pamphlets, and order blanks sent to prospective salesmen making inquiry- ( a) Represented and implied to purchasing public and to prospective agents and salesmen, that by purchasing one beater at a stipulated amount they would receive an additional one free, or that by purchasing larger quantities they would receive others free of charge, or that they would receive a "free offer" or ''free sample offer," through such statements as "Free Offer," "Free Sample Offer-No Risk," and "I will send you two Super Lux Heaters for the price of only one which Is $3.00," etc., and "Don't forget I give you Free Heaters to cover transportation charges regardless of the quantity you buy" ;

Facts being it did not make such free offer, nor would customer get beater free, but price of so-called "free beat~?r" was Included In price of oth~?r articles, rendering of a sf?rvice or payment of money was required before such free beater was furnished by it, and price charged for the one heater and the "free" beater was the regular customary price charged for two, and said offer was not special, but one of long standing which constituted its permanent method of doing business, with price referred to included In that of other articles which must be purchased to obtain so-called "free'' item;

{b) Represented, as aforesaid, that its agents normally or usually made up to $30 a day or other large amounts of monf?y as profits derived from their efforts In selling its said product, through such statemHlts as "Up to $30 Profit Dally," "Up to $30 and 1\Iore Dally," and "Pays Agents Up to $20, $30, $40 In a Day," and "Try to think of any business offering you the chance to make up to $15 to $35 and over in a single day that you can get into as easily as this one" ;

Facts being its said agents do not normally or usually make profits up to $30 a day, or any comparable or similar amounts, its claims of earnings made by its agents were greatly In excess or average earnings made by active full-time agents under normal conditions in usual course of business, very few of its agents were full-time employees or had even given it "rl?peat" orders, only a small percentage of its customers actually worked as agents for It or made any further purchase of Its said product oth~?r than the original small order, and Its sales methods accomplished, in general, only Initial sale to a customer, rather than continuous and numerous repeat sales to agents and salesmen; and LUX-VISE!, CO., INC. 1075 1074 Complaint (c) Represented that its product bad been approved or tested by the Underwriters Laboratories through placing ln Its advertising pamphlets, leaflets, and circulars, for purpose of misleading and deceiving purchasers and prospective purchasers, sketch of its said heater together with statement, in large prominent letters, "Underwriters Laboratories Seal of Approval," followed by, in small type, "is on the 8-foot cord of every," and below and again in large prominent letters, "Lux Electric \Vater Heater," and thereby led purchasers or prospective purchasers to believe that entire beater bad been thus approved;

Facts being only cord used for attaching same to electric outlet bad been approved as aforesaid, and "seal of approval" of beater bad not been thus gh·en;

With capacity and t!'ndency to mislead and deceive purchasers and prospective purchaser!'! of its said product into erroneous belief that all of such false and misleading representations, and others of similar purport and effect, were true, and that said product had been approved by recognized testing laboratory with respect to quality and effectiveness, and with result that such purchasers were misled into believing that by answering its advertisements or purchasing its products or acting as its agents or salesmen they would receive something free or be able to earn large and exaggerated profits or commissions, and that, as a direct consequence of such erroneous beliefs thus induced, substantial number of purchasing public bought large quantity of its said products :

Held, That such acts and practices were all to the prejudice and injury of the public and constituted unfair and deceptive acts and practices in commerce. Mr. Merle P. Lyon for the Commission.

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 Lux-Visel Co., Inc., a corporation, hereinafter referred to as respondent, has violated the Provisions of the said act, and it appearing to the 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, Lux-Visel Co., Inc., is a corporation organized, existing and doing business under the laws of the State of Indiana, with its office and principal place of business located at 415 1Vest Franklin Street, Elkhart, Ind. PAR. 2. Respondent is now, and has been for several years last Past, engaged in the manufacture and sale of an electric hot water heater, sold under the name of Lux Electric 'Vater Heater or Superlux Electric 1Vater Heater. In the conduct of its business respondent Uses the trade names "The Lux Company" and "Superlux." Respondent's heater consists essentially of a small aluminum disc com· Complaint 28 F. T. C. bined with a wire heating element, designed for use in the home, shop or office, for the purpose of heating water. In the course and conduct of its said business, respondent causes its product when sold to be transported from its aforesaid place of business in the State of Indiana to the purchasers thereof located in various other States of the United States and in the District of Columbia.

Respondent maintains and at all times mentioned herein has maintained a course of trade in said electric water heaters sold and distributed by it in commerce between and among the various States of the United States and in the District of Columbia. PAR. 3. In the course and conduct of its said business, respondent employs agents and salesmen to sell and distribute its product throughout the various States of the United States, and for the purpose of securing the services of such agents and salesmen it publishes advertisements in newspapers, periodicals, and magazines soliciting agents to sell its product. Such advertisements emphasize and stress the claimed m.oney-making possibilities for agents selling respondent's product.

Among the advertisements so published by respondent and typical of its representations in this respect are the following: Mysterious Disc Boils Water instantly without coal gas or oil. Pays to $SO dally. New Principle. Pocket size. Free offer. Write Superlux, Elkhart, Indiana.

This 1\laglc-Disc Heats Water Instantly. Up to $30 Profit Dally. Free fi!Rmple Offer. Write at once for full details. The Lux Company, Dept., 403, F.Ikhart, Ind.

This Magic Disc Pays You Up to $30 and More Dally. Free Offer. Magic Disc Pays You Up to $30 Daily! Free sample Offer-No Risk. Amazing Magic Disc Boils Water Almost Instantly, And Pays Agents Up to $20, $30, $40 in a Day.

FREE SAMPLE OFFER COUPON.

The Lux Co., Dept. 513 Elkhart, Ind.

Rush me your FREE SAMPLE Ofler for a New SUPERLUX Electric Water Heater and full information about your BIG MONEY MAKING Opportunity. Name ------------------------------ Address ---------------------------------------- City -------------------- State -------- PAR. 4. ·when an inquiry is received from a prospective salesman who has read one of respondent's above advertisements and has indi· cated his interest in becoming an agent for the sale of respondent'a product, respondent sends to such person "follow-up" literature, letters, pamphlets, and order blanks, containing, among others, representations as follows:

LUX-VISEL CO., INC. 1077 1074 Complaint Thousands of others have accepted my Free Sample Offer and ale now making profits up to 233% and you can do the very same thing. Unlike other concerns which require you to buy your sales outfit at an exorbitant price, I am going to help you get started with my Free Sample O.tler which you will find explained in detail under Offer #1 In the enclosed application blank. I will send you two Super Lux Heaters for the price ()'f only one which is $3.00. When they arrive you can sell one immediately for $3.00 and get your money back. That will give you your demonstrator without any cost whatsoever.

In addition to this handsome profit you get a liberal supply of FREJ<J heaters that increase the amount of your profits. You don't have to hesitate to accept my Free Sample Offer because If the Lux Heater isn't all I claim, or if you are not satisfied with the Lux, just return the two heaters within ten days from shipment date and I'll refund your $3.00 Immediately, Clouds of STEAM pay Agents up to $30.00 in a day! Two Easy Ways to Start making up to $15 to $35 In a Day. Try to think of any business offering you the chance to make up to $15 to $35 and over In a single day that you can get into as easily as this one. Don't forget I give you FREE HEATERS to cover transportation charges regardless of the quantity you buy.

PAR. 5. Through the use of the statements and representations hereinabove set forth, and other representations similar thereto not specifically set out herein, the respondent represents and implies to the purchasing public and to prospective agents and salesmen: 1. That by purchasing one heater at a stipulated amount they will receive an additional one free, or that by purchasing larger quantities of heaters they will receive others free of charge, or that they will receive a "free offer" or "Free sample offer". 2. That respondent's agents normally or usually make up to $30 a day or other large amounts of money as profits derived from their efforts in selling respondent's product.

PAR. 6. In truth and in fact, respondent does not make a "free offer" or "free sample offer," since the customer does not get a heater "free." The price of the so-called "Freo" heater is included in the price of other articles, and the rendering of a service or a payment of money is required before such "free" heater is furnished by respondent. The price charged for the one heater and the "free" heater is the regular and customary price charged for two heaters, and is not a special offer. Furthermore, this offer of the "Free" heater or heaters is one of long standing and constitutes the respondent's permanent method of doing business and the price thereof is included in the price of the other articles which must be purchased to obtain the so-called free items.

Respondent's agents do not normally or usually make profits "up to $30 a day" or any comparable or similar amounts, and respondent's claims of earnings made by its agents are greatly in excess of the Complaint 28F.T.O.

average earnings made by respondent's active full-time agents under normal conditions in the usual course of business. In truth and in fact, very few, if any, of respondent's agents are full-time employees or have even given the respondent "repeat" orders. Only a small percentage of respondent's customers actually work as agents for respondent or make any further purchase of respondent's heater than the original S]Jlall order, and respondent's sales methods accomplish in general only the initial sale to a customer, rather than continuous and numerous "repeat" sales to agents and salesmen. PAR. 7. For the purpose of misleading and deceiving purchasers and prospective purchasers the respondent places a pictorial representation or a sketch of its heater in its advertising pamphlets, leaflets, and circulars, which pictorial representation is accompanied by the statement "Underwriters Laboratories Seal of Approval" in large prominent letters, below which appears in small type "is on the 8-foot cord of every," and below this again in large prominent letters "Lux Electric 'Vater Heater." By this means the purchaser or prospective purchaser is led to believe that the entire electric water heater has been approved by the Underwriters Laboratories when in truth and in fact only the cord used for attaching respondent's heater to an electric outlet has been approved by the Underwriters Laboratories, and respondent's heater is not so approved or given its "seal of approval."

PAR. 8. The use of the foregoing false and misleading representations by respondent as above set-out and others of similar purport and effect have had, and now have, the capacity and tendency to mislead and deceive purchasers and prospective purchasers of respondent's product into the erroneous belief that all of said representations are true and that said product has been approved by a recognized testing laboratory as to its quality or effectiveness in use. Such purchasers and prospective purchasers are also misled into believing that by answering respondent's advertisements or purchasing its products or acting as its agents or salesmen, they will receive something free or that they will be able to earn large and exaggerated profits or commissions. As a direct result of these erroneous and mistaken beliefs induced by the false representations hereinbefore set-out, a substantial number of the purchasing public have purchased a large qnnntit:v of respondent's products. PAR. 9. The aforesaid acts mHl practices of the respondent are all to the prejudice and injury of the public and constitute unfair and deceptive acts and practices in commerce within the int-Rnt and meaning of the Federal Trade Commission Act. LUX-VISEL CO., INC. 1079 1074 Findings REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on January 5, 1939, issued, and subsequently served, its complaint in this proceeding upon the respondent, Lux-Visel Co., Inc., a corporation, charging it with the use of unfair and deceptive acts and practices in commerce and in violation of the provisions of said act. Subsequently, the respondent filed its answer, in which answer it admitted all the material allegations of fact set forth in said complaint and waived all intervening procedure and further hearing as to said facts. Thereafter, the proceeding regularly came on for final hearing before the Commission on the said complaint and the answer thereto, 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, Lux-Visel Co., Inc., is a corporation organized, existing, and doing business under the laws of the State of Indiana, with its office and principal place of business located at 415 West Franklin Street, Elkhart, Ind.

PAR. 2. Respondent is now, and has been for several years last past, engaged in the manufacture and sale of an electric hot water heater, sold under the name of Lux Electric 'Vater Heater, or Superlux Electric 'Vater Heater. In the conduct of its business respondent uses the trade names, "The Lux Company" and "Superlux." Respondent causes its products when sold to be transported from its aforesaid place of business in the State of Indiana to the purchasers thereof located in various other States of the United States. Respondent maintains and for the past several years has maintained a course of trade in said electric water heaters in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 3. In the course and conduct of its said business, respondent employs agents and salesmen to sell and distribute its product throughout the various States of the United States, anu for the pur- Pose of securing the services of such agents and salesmen it publishes advertisements in newspapers, periodicals, and magazines soliciting agents to sell its product. Such adnziisements emphasize and stress the claimed money-making possibilities for a..,.ents selling responuent 's product. "' Findings 28F. T. C.

Among the advertisements so published by respondent and typical of its representations in this respect are the following: Mysterious Disc Dolls Water instantly without coal, gas or oll. Pays to $30 dally. New principle. Pocket size. Free offer. Write Superlux, Elkhart, Indiana.

This Magic-Disc Heats Water Instantly. Up to $30 Profit Dally. Free Sample Offer. Wrlte at once for full details. The Lux Company, Dept. 403, Elkhart, Ind.

This Magic Disc Pays You Up to $30 and More Daily. Free Offer. Magic Disc Pays You Up to $30 Daily! Free Sample Offer-No Risk . .Amazing Magic Disc Bolls Water Almost Instantly, And Pays Agents Up to $20, $30, $40 in a Day.

FREE SAMPLE OFFER COUPON.

The Lux Co. Dept 513 Elkhart, Ind.

Rush me your FREE SAMPLE Offer for a New SUPER-LUX Electric Water Heater and full information about your BIG MONEY MAKING Opportunity. Name------------------------------ Address---------------------------------------- City-----------~--------State-------- PAR, 4. 'When an inquiry is received from a prospective salesman who has read one of respondent's above advertisements and has indi· cated his interest in becoming an agent for the sale of respondent's product, respondent sends to such person "follow-up'' literature, letters, pamphlets, and order blanks, containing, among others, repre· sentations as follows:

Thousands of others have accepted my FREE SAMPLE OFFER and are now making profits up to 233% and you can do the very same thing. Unlike other concerns wllich require you to buy your sales outfit at an exorbitant price, I am going to help you get started with my FREE SAMPLE OFFER which you will find explained in detail under Offer #1 in the enclosed application blank. I will send you two SUPER LUX HEATERS for the price of only one which is $3.00. When they arrive you can sell one immediately for $3.00 and get your money back. That 'will give you your demonstrator without any cost whatsoever.

In addition to this handsome profit you get a liberal supply of FREE Heaters that increase the amount of your profits. You don't have to hesitate to accept by FREE SAMPLE OFFER because if the Lux Heater isn't all I claim, or if you are not satisfied with the Lux, just return the two heaters within ten days from shipment date and I'll refund your $3.00 immediately. Clouds of STEAM pay Agents up to $30.00 in a day! Two Easy Ways to Start making up to $15 to $35 in a day. Try to think. of any business offering you the chance to make up to $Ui to $35 and over in a single day that you can get into as easily as this one. Don't forget I give you FREE HEATERS to cover transportation charges regardless of the quantity you buy.

PAR. 5. Through the use of the statements and representations hereinabove set forth and other representations similar thereto not LUX-VISEL CO., INC. 1081 1074 Findings specifically set-out herein, the respondent represents and implies to the purchasing public and to prospective agents and salesmen: 1. That by purchasing one heater at a stipulated amount they will receive an additional one free, or that by purchasing larger quantities. of heaters they will receive others free of. charge, or that they will receive a "free offer" or "Free sample offer." 2. That respondent's agents normally or usually make up to $30 a day or other large amounts of money as profits derived from their efforts in selling respondent's product.

PAR. 6. In truth and in fact, respondent does not make a "free offer" or "free sample offer," since the customer does not get a heater "free." The price of the so-called "free" heater is included in the price of other articles, and the rendering of a service or a payment of :money is required before such "free" heater is furnished by respondent. The price charged for the one heater and the. "free'' heater is. the regular customary price charged for two heaters, and is not a special offer. Furthermore, this offer of the "free" heater or heaters is one of long standing and constitutes the respondent's permanent :method of doing business and the price thereof is included in the price of the other articles which must be purchased to obtain the so-called free items. · Respondent's agents do not normally or usually make profits "up to $30 a day" or any comparable or similar amounts, and respondent's claims of earnings made by its agents are greatly in excess of the average earnings made by respondent's active full-time agents under normal conditions in the usual course of business. In truth and in fact, very few, if any, of respondent's agents are full-time employees or have even given the respondent "repeat" orders. Only a small percentage of respondent's customers actually work as agents for respondent or make any further purchase of respondent's heater than the original small order, and respondent's sales methods accomplish in general only the initial sale to a customer, rather than continuous and numerous "repeat" sales to agents and salesmen. PAR. 7. For the purpose of misleading and deceiving purchasers and prospective purchasers the respondent places a pictorial representation or a sketch of its heater in its advertising pamphletst leaflets, and circulars, which pictorial representation is accompanied by the statement "UNDERWRITERS LABORATORIES SEAL. OF APPROVAL" in large prominent letters, below which appears in s:mall type "is on the 8-foot cord of every," and below this again in large Prominent letters ''LUX ELECTRIC 1VATER HEATER." lly this means the purchaser or prospecth:e purchaser is led to believethat the entire electric water heater has been approved by the Under- Order 28F.T.C.

writers Laboratories when in truth and in fact only the cord used for attaching respondent's heater to an electric outlet has been approved by the Underwriters Laboratories, and respondent's heater is not so approved or given its "seal of approval."

PAR. 8. The use of the foregoing false and misleading representations by respondent as above set-out and others of similar purport and effect have had, and now have, the capacity and tendency to mislead and deceive purchasers and prospective purchasers of respondent's product into the erroneous belief that all of said representations are true and that said product has been approved by a recog· nized testing laboratory as to its quality or effectiveness in use. Such purchasers and prospective purchasers are also misled into believing that by answering respondent's advertisements or purchasing its products or acting as its agents or salesmen, they will receive something free or that they will be able to earn large and exaggerated profits or commissions. As a direct result of these erroneous and mistaken beliefs induced by the false representations hereinbefore set-out, a substantial number of the purchasing public have pur· chased a large quantity of respondent's products. CONCLUSION The aforesaid acts and practices of the respondent are all to the prejudice and injury of the public and constitute 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 Com· mission upon the complaint of the Commission and the answer of respondent, in which answer respondent admits all the material aile· gations of fact set forth in said complaint, and states that it waives all intervening procedure and further hearing as to said facts, and the Commission having made its findings as to facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, Lux-Visel Co., Inc., a corpora· tion, its officers, representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of an electric hot water heater sold under the name of Lux Electric 'Vater Heater or Superlux Electric 'Vater Heater, or any other name or names, in commerce, as com· LUX-VISEL CO., INC. 1083 1074 Order merce is defined in the Federal Trade Commission Act, do forthwith cease and desist from :

1. Using the term "free" or any other term of similar import or meaning to describe or refer to goods, wares, or merchandise regularly offered in connection with the purchase of specified quantities of identical, similar, or other merchandise.

2. Representing any specified sum of money as possible earnings or profits of agents, salesmen, representatives, or distributors, for any given period of time, which is not a true representation of the average earnings or profits consistently made by its active, full-time agents, salesmen, representatives, or distributors in the ordinary course of business under normal conditions and circumstances. 3. Representing any specified sum of money as earnings or profits of any s~cified agent, salesman, representative, or distributor, for any given period of time, which has not in fact been cons5.stently earned by such agent, salesman, representative, or distributor in the ordinary course of business and under normal conditions and circumstances. ':' 4. Representing that its product bas been approved or tested by the "Underwriters' Laboratory" or any similar organization unless said Product has been so approved or tested, and when only a portion or Part of said product has been so approved or tested such fact must be clearly and unequivocally stated so that there is no deception as to which part or parts have been so approved or tested. It is further ordered, That the respondent shall, within 60 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 this order.

2003!6"'-4o-vol. 28-71 Syllabus 28F.T.C.