Chenille Corporation of America

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IN THE MATIER OF CHENILLE CORPORATION OF Al\fERICA COliiPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATIO.N- OF SEC. 0 OF AN ACT OF CONGRESS APPROVED SEPT, 2(1, 1914 Doclcet 8'201. Complaint, Aug. 10, 193"1-Deci.~i(>n, July 21, 1939 'Vhere a corporation engaged in manufacture of chenille yarns and of loom rugs and hooked rugs for sale to jobbers and department stores, and, in selling same to purchasers in various States, In substantial competition with those engaged in manufacture and sale of hooked rugs similar thereto- Represented as "hand-hooked" or "hand-made" rugs, machine-made rugs· sold by it to department stores, and, in other instances, left with buyer, without direct representation, Impression that such rugs, cost of which to it was lower than that of its former genuine hand-made rugs, were hand hooked or hand made;

Notwithstanding fact said rugs, thus represented by it and advertised by department store purchasers, thus misled, in newspapers, as "Hand-booked, Requir- Ing Hours and Hours to Produce," and "Hand-Made," etc., were not, as afore-· said, fashioned and produced by craftsmen expert In the art of making rugs by hand, as long understood in the rug Industry from term "hand-booked" as meaning "hand-made," and as similarly associated by purchasing public· with former term and latter meaning, with their valuable good will as thus applied;

With effect of misleading and deceiving substantial number of members of purchasing public into erroneous and mistaken belief that such rugs were genuine hand-made or hand-hooked rugs, purchased and used by many among the public, and especially decorators and antique collectors, in preference to the machine-made product, as much superior in quality and in durability, and Into purchase of such rugs because of such erroneous and mistaken belief, and of thereby diverting tratle unfairly to it from Its competitors aforesaid who truthfully represent the manner of manufacture of" their respective products :

Held, That such acts and practices were all to the prejudice and injury of the public and competitors and constituted unfair methods of competition In commerce.

Before Mr. Arthur F. Thomas and Mr. Miles J. Fttrnas, trial exammers.

Mr. Dewitt T. Puckett, Mr. Joseph 0. Fehr, and Mr. R. A.McOuat for the Commission.

Mr. Samuel R. lVittelle, of Chicago, Ill., for respondent. Complaint Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers und duties, und for other purposes," the- Complaint 29F.T.C.

Federal Trade Commission, having reason to believe that Chenille Corporation of America, a corporation, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce as "commerce" is defined in said act, and it appearing to said Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows:

PARAGRAPH 1. Respondent, Chenille Corporation of America, is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Illinois, having its principal office and place of business located at 3945 North ·western Avenue, in the city of Chicago, in the State of Illinois. Respondent, for more than 2 years last past has been, and still is engaged in the business of manufacturing rugs, and in offering said rugs for sale and selling the same in commerce between the State of Illinois and the several States of the United States, and in the District of Columbia. When said rugs are sold, respondent transports, or causes the same to be transported from its place of business in the State of Illinois to the purchasers thereof located in States of the United States other than the State of Illinois, and in the District of Columbia. There has been :for more than 2 years last past, and still is, a constant current of trade and commerce in said rugs, thus manufactured, sold, and distributed by respondent between and among the various States of the United States and in the pistrict of Columbia. Respondent is now, and for more than 2 years last past has been in substantial competition with other corporations, and with firms, partnerships, and individuals engaged in the manufacture, or in the sale and distribution of rugs in commerce between and among the various States of the United .States and in the District of Columbia.

PAR. 2. In the course and conduct of its business as aforesaid, the respondent in soliciting the sale of and selling its said rugs, caused · .and now causes said rugs to be represented to retail store customers, located in various States of the United States as "hand-hooked" or ~'hand-made." Pursuant to these representations by the respondent: certain of said store customers advertised, and now advertise, re· -spondent's rugs as being "hand-hooked" and "hand-made" through the use of statements such as "Every Rug is a vVork of Art, Hand- Hooked, Requiring Hours and Hours to Produce,n and "Every Rug Hand-Hooked."

PAR. 3. The statements and representations of respondent referred to in paragraph 2 hereof, and others similar thereto, have the capacity and tendency to deceive purchasers and prospective purchasers of CHENILLE CORP. OF AMERICA 341 339 Complaint respondent's said rugs into the false and erroneous belief that said rugs were and are "hand-made," "hand-woven," "hand-hooked" and are hooked rugs within the common understanding of those terms as set out in paragraph 4.

PAn. 4. In the rug industry, the term "hooked rug" has for many years been understood to mean, and does mean, "hand-made rug," and the purchasing public has long associated, and still associates, with the term "hooked rug" the idea and meaning of a "hand-made" or "hand-woven" rug, fashioned and produced by craftsmen expert in the art of weaving rugs by hand. The value of the hand-made output of these craftsmen is substantial, and their rugs, designated as hooked rugs, have acquired a reputation for superior wearing qualities, and there is a valuable good will in the terms "hooked," "hand-hooked," and "hand-made" as applied to said rugs. There are also among the public many purchasers who buy and use handwoven, hand-made, and hand-hooked rugs in preference to machinemade rugs, believing that hand-woven, hand-made, and hand-hooked rugs are superior in quality and more durable than rugs made b~ machine.

PAn. 5. In truth and in fact, respondent's said rugs were not, and are not made by hand, so as to be properly represented, designated, and referred to as "hand hooked," "hand-made," or as "hooked" rugs. Respondent's said rugs are not the product of hand labor nor of handcraft or artistry, but are rugs made with the aid of a machine in the form of an electrically powered needle, and are of lower cost and less beauty than rugs actually "hand-made,'' "handwoven," or "hand-hooked."

PAn. 6. There are among the competitors of respondent referred to in paragraph 1 hereof, many manufacturers, sellers, and distributors of rugs who truthfully advertise and represent their rugs as being hand-woven, hand-made, or hand-hooked. There are also among said competitors many manufacturers, sellers, and distributors of machine-made rugs who do not advertise and represent that their rugs are or have been hand-woven, hand-made, or hand-hooked when such is not the case.

PAn. 7. The above alleged acts and practices of respondent have the capacity and tendency to mislead and deceive purchasers and prospective purchasers into the erroneous beliefs described in paragraph 3 hereof, and into the purchase 'Of respondent's said rugs in and on account of such beliefs. Thereby trade is unfairly diverted to respondent from those competitors referred to in paragraph 6 as herein described. As a consequence thereof substantial Findings 29F.T.C.

injury is done by respondent to competition in commerce among and between the various States of the United States, and in the District Qf Columbia.

PAR. 8. Said acts and practices of respondent are all to the prejudice of the public and of respondent's competitors and con- -stitute unfair methods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress entitled, "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on August 10, 1937, issued and served its complaint in this proceeding upon respondent, Chenille Corporation of America, a corporation, charging it with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said complaint and the filing of respondent's answer thereto, testimony and other evidence in support Qf the allegations of said complaint were introduced by De"\Vitt T. Puckett, Joseph C. Fehr, and R. A. McOuat, attorneys for the Commission, and in opposition to the allegations of the complaint by Samuel·R. 'Vittelle, attorney for the respondent, before A. F. Thomas and Miles J. Furnas, examiners of the Commission theretofore duly designated by it, and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on before the Commission on said complaint, the answer thereto, testimony and other evidence, brief in support of the complaint (respondent not having filed brief and oral -argument not having been requested); 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, Chenille Corporation of America, is a corporation organized and existing under the laws of the State of Illinois, with its office and principal place of business located in the city of Chicago, State of Dlinois. Respondent is now, and has been since the year 1925, engaged in the manufacture of chenille yarns, and in the manufacture of loom rugs and hooked rugs for sale to jobbers and department stores. Respondent has caused, and now CHENILLE CORP. OF AMERICA 343 Findings causes, said rugs, when sold, to be transported from its principal place <>f business in Chicago, State of Illinois, to the purchasers thereof located in the various States of the United States other than the State <>f Illinois. There is now, and has been for many years last past, a course of trade in commerce in said hooked rugs by respondent between and among the several States of the United States, and in the District of Columbia. Respondent is now, and has been since the year 1925, in substantial competition with other corporations and with firms and individuals also engaged in the manufacture and sale of hooked rugs, similar to those of respondent, in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In 1935 respondent employed in Chicago, and in the States of North and South Carolina, 200 or 300 home workers. It supplied or furnished yarns to these workers who made the rugs in their homes, and respondent sold the finished product. In 1935 respondent ceased · this practice and used thereafter a recently invented machine, under a license from the patentee, This machine contains an electric motor which supplies the power to drive the needle. This machine is hand~ guided and its prodtlct is a machine-made rug in contradistinction to a "hand-hooked" or "hand-made" rug which is made without any implement other than a simple punch, and the operator uses his own manual labor or muscular force to fabricate the rug, The cost of manu~ facture of a machine-made rug is about 45¢ per square foot; and the cost of a hand-made rug is from 75¢ to $1.25 a square foot. PAR. 3. In the course and conduct of its business as herein described, respondent sold the machine-made rugs to department stores and in some instances represented them to be "hand-hooked" or ''hand-made" rugs, and in other instances without direct representation left with the buyer the impression that the rugs were "hand-hooked," or "handmade." These department stores acting under said representations or impressions then proceeded to advertise respondent's rugs in news~ papers and pamphlets as "Hand-hooked, Requiring Hours and Hours to Produce," and "Hand-Made," etc.

PAR. 4. In the rug industry the term "hand-hooked" has for many years been understood to mean and does mean "hand-made." The purchasing public has long associated and still associates with the term "hand-hooked" the idea and meaning of a "hand-made" rug, fashioned and produced by craftsmen expert in the art of making rugs by hand. There is a valuable good will in the terms "hand-hooked" and "hand~ made" as applied to said rugs. There are also among the public many purchasers, especially decorators and antique collectors, who buy and '344 FEDERAL TRADE COl\fl\IISSION DECISIONS Order 29F.T.C.

use hand-made and hand-hooked rugs in preference to machine-made rugs believing that hand-made and hand-hooked rugs are very much superior in quality and more durable than rugs made by machine. PAR. 5. There are among the competitors of the respondent many manufacturers, sellers, and distributors of rugs who truthfully advertise and represent their rugs as being hand-made or hand-hooked. There are also among said competitors many manufacturers, sellers,. and distributors of machine-made rugs who do not advertise and represent that their rugs are or have been hand-made or hand-hooked w.hen: such is not the case.

PAR. 6. The aforesaid acts and practices of respondent have the capacity and tendency to, and do, mislead and deceive a substantial number of members of the purchasing public into the erroneous and mistaken belie£ that such rugs, sold and distributed by respondent, are "hand-made" or "hand-hooked," and into the purchase of such rugs . because of such erroneous and mistaken belief. As a result thereof, trade in commerce among and between the various States of the United States and in the District of Columbia has been diverted unfairly to the respondent from its said competitors who truthfully represent the manner of manufacture of their respective products. CONCLUSION The aforesaid acts and practices of the respondent, Chenille Corporation of America, 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 proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of respondentt testimony, and other evidence taken before A. F. Thomas and Miles J. Furnas, examiners of the Commission, theretofore duly designated by it, in support of the allegations of said complaint and in opposition thereto, brief filed by counsel for the Commission (respondent not having filed brief and oral argument not having been requested); and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, Chenille Corporation of America, a corporation, its officers, representatives, agents, and employees directly or through any corporate or other device, in connection with (IT{E~I~LE CORP. OF AMERICA_. 345 :339 Order the offering for sale, sale, and distribution of rugs in commerce, as commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

Using the terms "hand-made" or "hand-hooked" or any .other terms -of similar import or meaning to designate, describe or refer to rugs which have not been made entirely by hand labor and hand craft. 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.

Complaint 29F.T.C.