Hiram E. Barber doing business as Motor Equip-Ment Specialty Company

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IN THE l\IA'ITER OF liiRAM E. DAUBER DOING BUSINESS AS MOTOR EQUIP- MENT SPECIALTY COMPANY CO:IlPLAl:-<T, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLA.TIO:s' OF SEC. 6 OF AN ACT OF CONGRESS APPHOVED SEPT. 26, 1914 !Jocket 3617. Complaint, Sept. 30, 1938-Decisf.<m, Apr. 3, 1939 Where an individual £>ngaged in manufacture, sale and distribution of two devices for Ut:!e in connection with automobile work, namely, the "Mesco Fender Roller" and the "Universal \Vheel Check," to purchasers in various other States, in substantial competition with others engaged in sale and distribution of other devices intended and sold for shnllur mmge; in advertising iu various periodicals and newspapers circulating throughout the various States for salesmen to engage in distribution of said devices, and in letters and circulars sent through the mails to pro:;pectlve agents and salesmen pur· cha!"ing for resale, and to those purchasing for use- (a) Made such statements, with respect to purported earnings or profits of salesmen of said devices, as ''Up to $250 weekly profits made with amazing new 'Mesco' fender tools," "Salesmen wanted-$250 weekly profit made selling special tool set to garages,'~ "Every garage needs one so you see $200 per WPek Isn't unreasonable. Really it is only a good week," and made, among others, such statements as "Hewett made $84.50 in one day," etc., "Feltou ayernged better than $150 weekly all summer long-Barber cleared $1,100 in se,·en weeks-We will show you bow to do us well," and "Dealers can just coin money" ;

l·'acts being successful demonstration is necessary in practically all cases to effect sales of said roller, and it is necessary to acquire considerable skill, which may be had only by actual practice and experience, in order to give such demonstration, those who do not acquire ability to operate roller so as to obtain successful and satisfactory results essential to success of a salesman cannot reaonably be expected to approach aforesaid earnings, many purchasers, without personal demonstration, have been unable to operate roller satiiSfactorily, notwithstanding written instructions, any earnings of $230 a week were made by persons who had acquired sufficient skill to be able to demonstrate roller successfully, and even they had not earned at said rate consistently in ordinary course of business under normal conditions, stated earnings for specific periods of individuals named, who included owner and seller herein and all of whom were sufficiently sR:Illed to give satisfactoryll demonstration, were not representative of their E"earnings over long periods, and none of salesmen obtained as' result of said individual's advertising hlldd earnings even approaching those of individuals mentioned; JUi rt (b) Made such statements, with respect to efficacy of said roller and easeJ ~11!JC. which proficiency in use thereof might be acquired, and with respect t<!, m~r-. I chantablllty of said articles, as "Actually lifts dents out of f£>nde11s land' makes them perfectly smooth without hammering, grinding or fllln~."~'"' 1100J~ 1, not mar paint or varnit-:h," "SIIYCS the long practice required w)tti•.JJithl''td tools," "Badly needed by e-r':r~J ~arnge and shop," and "No COJ1lrll'~tjl.q.~1TV/ COl\Il\IISSIO~ DECISIONS1342 FEDERAL TRADE Complaint 28 F. T. C. Facts being that, while said roller will, if capably operated, remove many dents, it will not remove all, additional work, in some cases, must be done either prior to or following use of roller, in order to obtain desired smoothnt>ss, operation cannot, in all cases, be carried on witlwnt marring paint or varni~h, dependent upon number of factors including skill of operator, etc., proficiency in use cannot be acquired without certain amount of practice, and articles ln question are in fact competitive, affecting salability of roller, and garage or shop owner's need thereof is retlected by present equipment and prospective purchaser's opinion as to relative merits of that and article in question; ant! ( t) 1\Iade such statements, with respect to terms and conditions of sale, as "If you can't sell them we will sell them for you or refund your money"; F'acts being he did not refund to customers purchase price for such devices upon being advised of customer's Inability to sell same, but required customers demanding such refund, and notwithstanding nondisclosure of such a re· qulrement in his aforesaid advertising matter, to furnish lists of those to whoni devices had been offered and reasons given for their refusal to purchase;

With effe:>ct of misleading and dece:>iving substantial portion of purchasing public into erroneous and mistaken belief that said ::;tatements and representations were true, and into purchasing ~ubstautiul quantities of his devices because of such erroneous and mistaken belief, nnd with result that trade in commerce was thereby diverted unfairly to him from competitors engaged in sale and distribution of devices designed and intended for f<imilar use: Held, That such nets and practices were all to the prejudice and injmy of the public and competitors and constituted unfair methods of comtlt'tition ill commerce.

Mr. Randolph 1V. Branch 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 Hiram E. Barber, an individual, trading and doing business under the name and style of Motor Equipment Specialty Co., hereinafter referred to as respondent, has violated the provisions of the said act, and it appearing to the Co111· mission 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:

·~ARAGRAPH 1. Respondent, Hiram E. Barber, is an individual doing bn.s.imess under the naine and style of Motor Equipment Specialty Co., with his office and principal place of business at Beaver City, in the SfJ~~ of Nebraska. The respondent is now, and for more than one year -r~ru ol l b . . Slas_-l_H fl pnst-t::.l Jlj 1as een, engarred~ m the manufacture and sale of varwn at.!Jrles-·.~110wn generally as Automotive Specialties and particularly hl'otUel.1it6S known as the ".Mesco Fender Roller" and the "Uniwrsal Wl'~l(Jllt!~k," the former for use in the removal of dents from auto- MOTOR EQUIPMENT SPECIALTY CO. 1343 1341 Complaint mobile :fenders and the lntter for use in determining the correctness of the alignment of automobile wheels. In the course and conduct of his business, respondent causes said devices, when sold, to be transported from his aforesaid place of business in the State of Nebraska to the prospective purchasers thereof located in the various States of the United States other than the State of Nebraska and respondent maintains, and has at all times herein referred to maintained, a course of trade in said devices in commerce among and between the various States of the United Stat~s and in the District of Columbia. PAR. 2. In the course and conduct of his business, as aforesaid, the respondent is now, and has been for more than one year last past, in substant ial competition with other imlividuals, firms, partnerships, and corporations engaged in the sale and distribution of other devices designed, intended, and sold for similar usage 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 sai.d business, and for the purpose of inducing the purchase of said devices by salesmen purchasing for resale and by others, the respondent has advertised for salesmen to engage in the distribution of his devices in newspapers, magazines and other periodicals having a large interstate circulation particularly among prospective agents and salesmen for devices of this character. Among, and typical of, the advertisements so used by the respondent are the following:

tJp TO $250 WEEKLY PROFITS MADE "•ITH AMAZIXG NEW "MtJS<X>" FENDED TOOLS Actually lifts Dents Out of Fenders and l\Iakes Them Perfectly Smooth without llammering, Grinding or Filing.

DOES NOT l\IAB PAINT OR VARNISH Representatives Badly Needed by Every Garage and Shop-Ten Minute~ Work Often Saves Buying New Fender-Saves the Long Practice Required with Other tools-Often Makes 1\lore Profit Than All the Rest of the Shop Combined. Priced \Vh«:>re Every Shop Can Buy It.

Hewett made $84.00 in one day s«:>lling "l\Ie;;co" Fender Tools-Felton averaged better than $1fJO weekly all summer long-Barber cleared $1100 in seven weeks- We will show yon lww to do as well.

Exclusive territory to producers-Main or side line. Get full particulars, while territory is available.

1\IOTOR EQUIP:\IENT SPEC. CO Box 2t150 Reaver City, Neb. SALE~ME:'< WAXTED- $250 WEEKLY PlWFIT MADE SELLI~G SPECIAL TOOL SET TO GARAGES.

No Competition.

"·rite "l\Iesco" Box 20:3-S Beaver City, Neb. 1344 FEDERAL TRADE COMMISSION DECISIOXS Complaint 28F. T. C.

SALESMEN-$84.50 profit in one day by Hewett. $1100 in sevl.'n weeks b! Barbl.'r. Over $200 per week all summer by Felton. All selling our Sppcial Tool Set to garages. No competition. Exclusive Territory. ·write 1\Jesco, Bo:! 205, Beaver City, Neb.

PAR. 4. For the purposes aforesaid, the respondent has caused letters and circulars relative to the purported profits or earnings of salesmen of said devices, to the terms and conditions upon which said devices might be purchased, and to the character, utility and merit of said devices, to be sent through the United States mails and otherwise to prospective agents and salesml'n purchasing for resale and to others purchasing for use. Among, and typical of, the statements so made as to the purported earnings or profits of salesmen of said devices are the following:

Every garage needs one, so you see $2;:i0 per week isn't unreasonable. Rl.'alia It is only a good week.

Jewett, who had never sold a lick, went out for about two and a half months, took his family-eame back with over $1000 clear. D. F. Felton-said "Even $450 per month straight wouldn't tempt me Jn the least." He made as high as $300 clear profit in a single week. The profits our boys make don't look reasonable and I hesitate to mention them.

D. F. F. made $90 clear in about six hours on his first trip. Dealers can just coin money.

Yo11 have, as soon as these tools reach you, the makings of $250 per week salary.

Among, and typical of, the statements so made by the respondent as to the purported terms and conditions upon which purchases of said devices might be made are the following: If you can't sell them, we will sell them for you or refund your money. Your sample outfit, the roller and check, cost you only $12.50 if remittance accompanies order-Enclose one-third of amount of order if you wish it shipped C. 0. D.

Among, and typical of, the statements so made by the respondent as to the character, utility and merit of said devices are the following: It is new but we have not a single dissatisfied customer to our knowledge. I ha>e seen and used all kinds of fender rollers and I never saw a roller work as nice as that roller does.

We ha>e had our roller for 3 weeks and sure like it fine. This is the only wheel gauge I ever saw that tells us what we want to know. It is quick, accurate and not too expensive. PAR. 5. Through use of the aforesaid statements appearing in his advertising literature, and through other statements of similar import and meaning, the respondent rl'presl'nts (1) that said fender roller device will make dt'nted fenders smooth without hammering, grinding or filing or without marring the paint or varnish; (2) thil,t l\IOTOR EQUJPl\IENT SPECIALTY CO. 1345 1341 Complaint said devices can be successfully operated without long experience; . (3) that large profits amounting to approximately $~50 per week could be earned by ordinary salesmen and distributors of said devices under normal and usual conditions; (4) that respondent would sell the devices for purchasers or refund the purchase price thereof in the event said salesmen and distributors could not sell such devices; (5) that there is in fact no substantial competition between respondent's devices and other devices designed and intended for similar usage; and ( 6) that said devices possess such utility and merit as to render them readily salable to all garages. PAR. 6. The aforesaid representations so made and disseminated by the respondent in the course of his aforesaid business are misleading, deceptive, and false. In truth and in fact, the use of said fender roller device' does not in all cases make dented fenders smooth without hammering, grinding or filing and will not generally perform a smooth operation on fenders without marring the paint or varnish. Respondent's devices cannot be successfully used except by those who i1ave devoted a substantial amount of time to practice therewith. Large profits amounting to approximately $250 per week have not been and cannot be earned by ordinary salesmen and distributors under normal and customary business conditions. In the few inj stances, if any, in which profits approximating said sum were earned, there were special and unusual circumstances in connection therewith which were not revealed to prospective purchasers purchasing for resale. Ordinary salesmen and distributors under normal and usual conditions of business cannot earn profits in any amount closely approximating the sums represented. Respondent does not customarily refund the purchase price of said devices or sell said devices for purchasers in instances wherein the purchasers have been unable to sell such devices themselves. There is in fact substantial competition between respondent's devices and other devices intended for similar uses. Respondent's said devices do not generally possess the degree of utility and merit represented and can be successfully operated only after long practice and experiEmce with said devices. PAR. 7. The use by the respondent of the aforesaid false and misleading statements and representations in connection with the offering for sale and sale of said devices in commerce as aforesaid has had, and now has, the capacity and tendency to, and does, mislead and deceiye prospective purchasers of such devices into the false and erroneous beliefs that said representations are true and into the purchase of respondent's said devices in and on account of said mistaken and erroneous beliefs so induced by respondent's representations. As a result thereof, trade has been unfairly diverted to re- 1346 FEDERAL TRADE 001\Il\IISSION DECISIOXS Findings 28F. T. C.

spondent from competitors engaged in selling similar devices or other devices designed and intended for similar usage who do not misrepresent the amount of profits that can be earned through selling said devices or otherwise misrepresent the nature, utility and merit of their respective devices. In consequence thereof, injury has been done by respondent to competition in commerce among and between the various States of the United States and in the District of Columbia. PAR. 8. The acts and practices hereinabove alleged on the part of the respondent are all to the prejudice of the public n,nd to the competitors of respondent and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

REPGRT, FINDINGS AS TO THE F_\CTS, AND ORDER Pursun,nt to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on September 30, Hl38, issued, and on October 3, 1938, served, its complaint in this proceeding upon said respmrdent, Hiram E. Barber, trading and doing business as Motor Equipment Specialty Co., charging him with the use of unfair methods of competition in commerce in violation of the provisions of said act. On October 7, 1938, the respondent filed his answer in this proceeding. Thereafter a stipulation was entered into whereby it was stipulated and agreed that a statement of facts, signed and execut~d by the respondent and ,V. T. Kelley, chief counsel for the Federal Trade Commission, subject to the approval of the Commission, may be taken as the facts in this proceeding and in lieu of testimony in support of the charges stated in the complaint or in opposition thereto, and that the said Commission may proceed upon said statement of facts to make its report, stating its findings as to the facts and its conclusion based thereon and enter its order disposing of the proceeding without the presentation of argument or the filing of briefs. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, answer, and stipulation, said stipulation having been approved, accepted and filed, and the Commission having considered the same and being now fully advised in the premises finds that this proceeding is in the interest of the public and makes its findings as to the facts and its conclusion dra,~n therefrom.

FINDINGS AS TO THE FACTS r ARAGRAPII 1. The respondent, Hiram E. Barber, is an individual doing business under the name and style of :Motor Equipment Spel\IOTOR EQUIP~IENT SPECIALTY CO. 1347 1341 Findings cialty Co. His office and principal place of business is at Beaver City, Nebr. The respondent is, and has been for more than one year last past, engaged in the manufacture, sale and distribution of two devices known as the "1\Iesco Fender Roller" and the "Universal 'Vheel Check." The former is used in the removal of dents from automobile fenders and the latter in determining the correctness of the alignment of automobile wheels. Respondent causes said devices, when sold, to be transported from the State of Nebraska to the purchasers thereof at their respective points of location in various States of the United States other than in the State of Nebraska. Respondent maintains, and at all times mentioned herein has maintained, a course of trade in commerce in said devices among and between various States of the United States. During this period the respondent has been in subst:mtial competition with other individuals and with firms, partnerships, and -corporations engaged in the sale and distribution of other devices intended and sold for similar usage in commerce between and among the various States of the United States.

PAR. 2. In connection with the sale of its devices, the respondent has advertised in various periodicals and newspapers having a circulation through the various States of the United States for salesmen to engage in the distribution of these devices, and has also caused letters and circulars to be sent through the United States mails between and among various States of the United States to prospective agents and salesmen purchasing for resale and to others purchasing for use.

In the manner and by the means aforesaid the respondent has made statements and representations relating to (1) purported earnings or profits of salesmen of the devices; (2) the efficacy of the fender roller; (3) the ease with which proficiency in the use of the fender roller may be acquired; ( 4) the merchantability of the articles, and ( 5) the terms and conditions of sale by respondent. The statements and representations by respondent, disseminated as aforesaid, are hereinafter set forth.

PAR. 3. 'With respect to the purported earnings or profits of salesmen, the following representations were made by respondent: Up to $250 weekly profits made with amazing new "l\Iesco" fender tools. Hewett made $8-!.lio in one day selling "l\Iesco" fender tools-Felton averaged hetter than $150 weekly all summer long-Darber cleared $1100 in seven Weeks-,Ve will rshow yon how to do us well. Salesmen wanted-$2.'i0 weekly profit made selling ~<pedal tool s<>t to gnragPS. Salesmen-$84.50 pt·ofit in one day by Hewett. $1100 in seven weeks by narber. Over $200 per week all s1muue1· by Felton. 1348 FEDERAL TRADE COMMISSIO:N DECISIOXS Findings 28F. T. C.

Every garage n~ds one so you see $250 per week isn't unreasonable. Really It Is only a good week.

Jewett, who never sold a lick, wl:'nt out for about 2Y2 months, took his family-came back with over $1000 clear.

D. F. Felton said-"Even $4ijo per month straight wouldn't tempt me in the least.'' He n:iade as high as $300 clear profit in a single week. Tbe profits our boys made don't look reasonable and I hesitate to mention them.

D. F. F. made $00 clear in about 6 hours on his first trip. Dealers can just coin money.

A successful demonstration is necessary in practically all cases to ·effect sales of respondent's fender roller and it is necessary to acquire considerable skill in order to give a successful demonstration, which skill can be acquired only by actual practice and experience. Ability to operate the roller so as to obtain successful and.satisfactory results is essential to success as a salesman and those who do not acquire such ability cannot reasonably be expected to approach the aforesaid represented earnings. 'Vithout personal demonstration, many purchasers have been unable to operate the roller satisfactorily although respondent furnishes to such purchaser-salesmen written instructions for the operation of the device. Any earnings of $250 per week which may have been made by those selling the device have been made by persons who have acquired sufficient skill in the operation of the roller to be able to demonstrate it successfully, but even such persons have not earned at that rate consistently in the ordinary course of business under normal conditions or circumstances.

The earnings of the various individuals mentioned above were made prior to 1935. Those attributed to one individual were made in 1929 while selling for $12.50 a single article that cost him $3, whereas the dealers now sell four articles which cost them $10.75 and have a recommended resale price of $36. Two of the individuals mentioned above are not now engaged in the sale of the device. "Barber," who is stated to have earned $1,100 in 7 weeks, is the respondent and is extremely proficient in the use of the fender roller of which he is the designer and manufacturer.

The stated earnings for specific periods of the individuals named are not representative of consistent earnings by these persons over long periods. All of them were sufficiently skilled in the operation of the fender roller to give a satisfactory demonstration. None of the respondent's salesmen obtained as a result of his advertising have had earnings even approaching those of the individuals mentioned in respondent's advertisements and circulars. PAR. 4. With respect to the efficacy of the fender roller, the following representations were made:

MOTOR EQUIPMENT SPECIALTY CO. 1349 1341 Finrlings Actnttlly lifts dents ont of fe)){lers and makes t11em perfectly smooth without hammering, grinding or filing.

Does not mar paint or varnish.

The :fender roller will, if capably operated, remove many dents. It will not, however, since dents may be so located as to be inaccessible to the device, remove all dents from all types of fenders. In some cases Work must be done either prior to or after the use of the roller in order to obtain the desired smoothness. The operation cannot in all cases be carried on without marring the paint or varnish. 'Vhether or not such marring occurs depends upon a number of factors v.·which include the skill of the operator, the severity of the dent, the condition of the paint or varnish, and the extent to which it was damaged. PAR. 5. With respect to the ease with which proficiency in the use of the fender roller may be acquired the following representation was n1ade:

Sans the long practice required wlth other tools. . Proficiency in the use of the roller cannot be acquired without· a certain amount of practice. .

PAR. 6. With respect to the merchantability of the devices the following representations were made:

Rarlly needed by every garage and shop.

No competition.

Every garage needs one.

The articles are competitive. The existence of this competition affects the saleability of the :fender roller, and whether or not it is needed by a garage or shop will depend upon its present equipment and the opinion of the purchaser as to the relative merits of this equipment and the respondent's article.

PAR. 7. ·with respect to the conditions upon which purchases of the devices might be made the following representation was made: It you cttn't sell them we will sell them for you or refund your money. Respondent does not refund to his customers the purchase price for such devices upon being advised of the customer's inability to sell the same. \Vhen demands for such refunds are made, respondent requires the customers, demanding such refund, to furnish lists of those to ''"hom the devices have been offered for sale by such customers and the reasons given for their refusal to purchaf"e. Respondent does not disclose such requirement to prospective purchasers of his dt>Yices in the advertising matter disseminated as aforesaid. PAR. 8. The use by respondent of the aforesaid false and misleading statements and representations has had, and now has, the capacity and tendency to, and does, mislead and deceive, and has misled and de. 1350 FEDERAL TRADE COJ\Il\IISSION DEC:SIONS Order 28F. T. C.

ceived, a substantial portion of the purchasing public into the en·oneous and mistaken belief that the said statements and representations are true, and into purchasing substantial quantities of respondent's devices because of said erroneous and mistaken belief. As a result thereof trade in commerce among and between various States of the United States has been diverted unfairly to the respondent from his competitors engaged in the business of selling and distributing devices designed and intended for similar usage.

CONCLUSION The aforesaid acts and practices of the respondent, as herein found, are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER TO CEASE AND DESIST This proe_eeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of the respondent, and a stipulation as to the facts entered into between the respondent herein and ,V. T. Kelley, chief counsel for the Commission, which provide, among other things, that without further evidence or other intervening procedure, the Commission may issue and serve upon the respondent herein findings as to the facts and concln· sion based thereon and an order disposing of the proceeding, and the Commission having made its findings as to the facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, Hiram E. Barber, individually and trading as l\Iotor Equipment Specialty Co., or under any other name or names, his representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, srde and distribution of certain devices now designated as the "Ueseo Fender Roller" and "Universal '\Vheel Check," or any other devices of substantially similar construction or design, in com· merce, as commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. 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 net earnings or profits consistently made by respondent's active, full time agents, salesmen, representatives, or distributors in the ordinary course of business under normal conditions and circumstances. r-- MOTOR EQUIPMENT SPECIALTY CO. 1351 1341 - Order 2. Representing any specified sum of money as earnings or profits of any specified agent, salesman, representative or distributor for any given period of time which has not in fact been consistently earned net by such agent, salesman or distributor in the ordinary course of business and under normn1 business conditions. 3. Representing that the use of such fender roller will remove all dents from all fenders, or will in all cases remove dents from fenders w-without the necessity of hammering, grinding, filing, or performing other work on the fender, or will in all cases remove dents from tenders without causing damage to the finish of the fender. 4. Representing that such fender roller can be operated adequately or successfully without practice in the operation thereof. 5. Representing that there is no competition in connection with the sale of such devices with other devices designed and intended for similar usage or that such devices are needed by every garage or shop. 6. Representing that respondent will refund the purchase price for such devices to his customers who are unable to resell the same unless and until such is the fact and unless all the terms and conditions of such offer of refund are clearly and unequivocally stated in equal conspicuousness and in immediate connection therewith. It is further ordered, That the respondent shall, within 60 days ~after service upon him of this order, file with the Commission a report ln writing, setting forth in detail the manner and form in which he has complied with this order. . . __ . . _ 1352 FEDERAL TRADE COl\Il\IISSION DECISIONS Syllabus 28F. T. C.