Peanut Specialty C0.7

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IN THE MA'ITER OF PEANUT SPECIALTY COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF Tile ACT OF CONGRESS APPROVED SEPT. 26, 1914 . Docket 2:a1s. Complaint, June 22, 1939 '-Decision, Sept. 23, 193.9 Where a corporation engaged in manufacture and sale of candy, including certain assortments which were so packed and assembled as to involve use of games of chance, gift enterprises, or lottery schemes when sold and distributed to consumers thereof, and which included (1) box of large number of malted milk balls, together with four-section push ca1·d, for sale and distribution of said milk balls under a plan and in accordance with said card's explanatory legend by which customer received for penny paid from said "Basketball" assortment 1, 2, 3, 5, 10, or 20 pieces in accordance with legend secured by ehance through disk of card selected for push, and last sale in first three sections entitled pur- . chasers to 5 pieces, and last sale on card entitled purchaser to 15 pieces, and (2) number of penny pieces of chocolate covered candy of uniform size, shape, and quality, together with a number of larger pieces to be given as prizes to those purchasers of such uniform pieces who secured by chance one of a relatively few pieces thereof, the enclosed colored centers of which differed from majority, and togpther with explanatory display card for retailers' use, and (3) various other assortments of which the two above described were illustrative- Sold to wholesalers, jo!Jbers, aud retailers for display and resale by retai!Prpurchasers thereof in accordance with the aforesaid sales plans such assortments, and thereby supplied to aud placed iu the hands of others means of conducting lotteries in the sale of its products in accordance with sales plans above described, involviug game of chance o1· sale of a chance to procm·e additional pieces of candy without additional cost, orlarger pieces of candy or packages of candy, contrll.ry to an established public policy of the United States Government and in violation of the· criminal laws, and in competition with many who are unwilling to adopt and use said or any method involving game of chance or sale or a chance to win something by chance or any other method contrary to public policy and refrain therefrom ;

}With result that many persons were attracted by sales plans or methods employed by it in sale and distribution of its candy and element of chance involved therein and were thereby induced to buy and sell its said product in preference to that of competitors who do not use such or equivalent methods, and with effect, through use of such method by it and by reason of said game of chance, of unfairly diverting trade to it from its competitors aforesaid who do not use such or equivalent method, to the substantial injury of competition in commet·ce: 1 Amended and supplemental.

PEANUT SPECIALTY CO. 999 9!l8 Complaint Held, That such acts and practices, under the circumstances set forth, were aU to the prejudice and injury of the public and competitors, and constituted unfair methods of competition and unfair and deceptive acts and practices in commerce.

Mr. lle11ry 0. Lank and Mr. D. 0. Daniel for the Commission. AMENDED AND SurPLEl\IENTAL Complaint Pur~uant .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 Peanut Specialty Co., a corporation, hereinafter referred to as respondent1 has violated the provisions of said act, and it appearing to the Commis::;ion that a proceeding by it in respect thereof would be in the interest of the public, hereby issues its amended and supplemental complaint stating its charges in that respect as follows:

PARAGRAI'H 1. Respondent, Peanut Specialty Co., is a corporation organized and doing business under the laws of the State of Illinois with its principal office and place of business located in the city of Chicago, State of Illinois. Respondent is nmv, and for some time last past has been, engaged in the manufacture of candy and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers located at points in the various States of the United States and in the District of Columbia. Respondent causes, and has caused, said products when sold to be transported from its principal place of business in the city of Chicago, Ill., to purchasers thereof in the various other States of the United States and in the District of Columbia, at their respective points of location. There is now, and has been for some time last past, a course of trade by respondent in such candy in commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of the said business respondent is and has been in competition with other corporations, and with partnerships and individuals engaged in the sale and distribution of candy 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 described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers, jobbers, and retail dealers certain assortments of candy so packed and assembled as to involve the use of games of chance, gift enterprises or lottery schemes when sold and distributed to the consumers thereof. Certain of said assortments are hereinafter described for the purpose of showing the methods used by respondent, but this list is not allinclusive of the various assortments, nor does it include all of the Complaint 29F.T.C.

details of the several plans which respondent has been or is using in the sale and distribution of candy by lot or chance: (a) One assortment consists of a box of 216 count malted milk balls together with a device commonly called a push card. The push card is divided into 4 sections and each of said sections contains 25 partially perforated discs, on the face of which is printed the word "push." Concealed within the said disc is one of the following words or phrases: Basket, double free throw, free throw, tip off, time out, out of bounds, double dribble, traveling, and foul. These words or phrases are effectively concealed from purchasers and prospective purchasers until a push or selection has been made and the selected disc remond or separated from said push card. Punches on the said card are 1 cent each and the number of malted milk balls received by the purchaser is determined by the following legend which appears on the face of the card:

BASKETBALL (1¢) BASKET receives------------------------------------ 20 Pieces DOUBLE FREE THROW reee!ves-------------------- 10 Pieces FREE THROW reecives------------------------------ 10 Piec!'s TIP OFF receivPS------------------------------------ 5 Pieces TIME OUT reeeives__________________________________ 5 Pieces OUT OF BOUNDS receives--------------------------- 3 Pieves DOUBLE DRIBBLE t·eceives------------------------- 3 Pieces TRAVELING. receives-------------------------------- 2 Pieces FOUL receives--------------------------------------- 1 Piece Last Sale in First 3 Sections receives__________________ 5 Pieces Last Sale on Card receives____________________________ 15 Pieces The sales of respondent's candy by means of said push· card are made in accordance with the above-described legend. Said pieces of candy :are allotted to the customers or purchasers in accordance with the above legend. The fact as to whether a purchaser receives one or more pieces of candy for the amount of money paid is thus determined wholly by lot or chance.

Uespondent sells and distributes and has sold and distributed various assortments of candy along with push cards involving a lot or chance feature but such assortments are similiar to the one hereinbefore described and vary only in detail.

(b) Another of said assortments of candy consists of a number of pieces of chocolate covered candy of uniform size, shape, and quality, together with a number of larger pieces of candy or packages of candy which larger pieees of candy or p~ckages of candy are to given as prizes to purchasers of said candy of uniform size, shape, and quality in the following manner:

PEANUT SPECIALTY CO. 1001 008 Complaint The majority of said chocolate covered candy in said assortment has centers of the same color, but a small number of pieces of said chocolate covered candy ha,·e centers of a different color. The color of the center of said chocolate covered candy is effectively concealed from the prospective purchaser until a selection or purchase has been made and the piece of candy broken open. The said candy of uniform size, shape, and quality in said assortment retails at the. price of 1 cent each, but the purchasers who procure a piece of the said candy having a center of a different color than the majority of pieces of said candy are entitled to recein\ and are to be giwn free of charge, one of the said larger pieces of candy or packages of candy heretofore referred to. The aforesaid purchasers of said candy who procure a piece of candy having a center colored differently from the majority of said pieces of candy are thus to procure one of the larger pieces of candy or packages of candy wholly by lot or chance.

Respondent furnishes to said wholesale dealers, jobbers, and retail dealers \with said assortments of candy, display cards to be used by retail dealers in offering said candy for sale, which display cards bear a legend or statement informing the prospective purchaser that the said assortments of candy are being sold in accordance \with the sales plan above described. The wholesale dealers and jobbers to whom respondent sells its assortml:'nts resell said assortments of candy to retail <lealers and said retail uealers expobe said assortment for sale in connection with the aforesaid display cards and sell said candy to the purchasing public in accordance with the aforesaid sales plan. Respondent sells and distributes, and has sold and distributed, various assortments of candy as above described im·olving a lot or chance feature, but such assortments are similar to the one hereinabove described and vary only in detail.

PAR. 3. Retail dealers ''ho purchase respondent's said canclies directly or indirectly expose and sell the same to the purchasing public in accordance "·ith the sales plans aforesaid. Respondent thus supplies to and places in the hands of otlwrs the means of conducting lotteries in the sale of its products in accordance with the sales plans hereinabove set forth. The use by rl:'spondent of said sales plans or methods in the sale of its candies and the sale of said candies by and through the use thereof and by the aid of said sales plans or methods is a practice of a sort which is contrary to an established public policy of the Gowrnment of the United States and in violation of the criminal laws.

PAR. 4. The sale of candies to the purchasing public by the methods nnd plans hereinabove set forth involves a game of chance or the sale of a chance to procure additional piecl:'s of candy without addi- COl\fl\USSIO~ DECISIONS1002 FEDERAL TRADE Findings 29F.T. C.

tiona! cost or such larger pieces of candy or packages of candy in the. manner alleged. Many persons, firms, and corporations who sell and distribute candy- in competition with respondent, as above alleged, are unwilling to adopt and use said methods or any method involving a game of chance or the sale of a chance to win something by chance or any other method contrary to public policy and such competitors refrain therefrom. Many persons are attracted by said sales plans or methods employed by respondent in the sale and distribution of hs candies and in the element of chance involved therein and are thereby induced to buy and sell respondent's candies in preference to candies of said competitors of respondent who do not use the same or equivalent methods. The use of said methods by respondent because of said game of chance has a tendency and capacity to, and does, unfairly divert trade to respondent from its said competitors who do llot use the same or equivalent methods, and as a result thereof sub- :stantial injury is being and has been done by respondent to competition in commerce between and among the various States of the United State.s and in the District of Columbia.

PAR. 5. The aforesaid acts and practices of respondent as herein alleged are all to the prejudice and injury of the public and of re- !;:pondent's competitors nnd 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. REPORT FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on June 22, 1939, issued and thereafter -served its amended and supplemental complaint in this proceeding \lpon respondent Peanut Specialty Co., a corporation, charging it with the use of unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of the provisions of said act. On September 11, 1939, the respondent filed itu answer in which answer it admitted all the material allegations of fact '!"et forth in said amended and supplemental 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 amended and supplemental complaint and the answer thereto; and the Commission, having duly considered the matter, and being now fully ndvised 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. PEANUT SPECIALTY CO. 1003 nos Fin<lings FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Peanut Specialty Co., is a corporation organized and doing business under the laws of the State of Illinois with its principal office and place of business located in the city of Chicago, State of Illinois. Respondent is now, and for some time last past has been, engaged in the manufacture of candy and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers located at points in the various States of the United States and in the District of Columbia. Respondent clluses, and has caused, said products when sold to be transported from its principal place of business in the city of Chicago, Ill., to purchasers thereof in the various other States of the United States and in the District of Columbia, at their respe('tive points of location. There is now, and has been for some time last past, a course of trade by respondent in such candy in commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of the said businpss respondent is and has been in competition with other corporations, and with partnerships and individuals engaged in the sale and distribution of candy 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 described in paragraph 1 hereof, respondent sells and has sold to whdlesale dealers, jobbers, and retail dealers certain assortments of candy so packed and assembled as to involve the use of games of chance, gift enterprises, or lottery schemes when sold and distributed to the consumers thereof. Certain of said assortments are hereinafter described for the pmpose of showing the methods used by respondent, but this list is not all-inclusive of the ,·arious assortments, nor does it include all of the details of the several plans which respondent has been or is using in the sale and distribution of candy by lot or chance: (a) One assortment consists of a box of 216 count malted milk balls together with a device commonly called a push card. The push card is divided into 4 sections and Pach of said sections contains 25 partially perforated discs, on the face of "·which is printed the word "push.'' Concealed within the said disc is one of the following words or phra!"es: Basket, double free throw, free throw, tip off, time out, out. of bounds, double dribble, traveling, and foul. These words or phrases are effectively concealed. from purchasers and prospective purchasers until a push or selection has been made and the selected disc removed or separated from said push card. Punches on the said cards are 1¢ each and the number of malted milk balls received by FEDERAL TRADE COl\11\IISSIO~ DECISIONS1004 Findings 20 F. T. C. the purchaser is determined by the following legend which appears on the face of the card:

BASKETBALL (1¢) BASKET receives-------------------------------------- 20 Pi~>ces DOUBLE FHEE THHOW receh·es---------------------- 10 Pieces FHEE THROW receives------------------------------- 10 Pieces TIP OFI•' receives ________________________________ ;._____ 5 Pieces Tll\IE OUT receives----------------------------------- 5 Pieces OUT OF BOUNDS receives_____________________________ 3 Pieces DOUBLE DRIBBLE receives___________________________ 3 Pieces TRAVELING receives---------------------------------- 2 Pieces FOUL receives----------------------------------------- .1 Piece Lust Sule in First 3 Sections receives____________________ 5 Pieces Last Sule on Card receives ______________________________ 15 Pieces The sales of respondent's candy by means of said push card are made in accordance with the above-described legend. Said pieces of candy are allotted to the customers or purchasers in accordance ·with the above legend. The fact as to whether a purchaser receives one or more pieces of candy for the amount of money paid is thus determined wholly by lot or chance. . Respondent sells and distributes and has sold and distributed various assortments of candy along with push cards involving a lot or chance feature but such assortments are similar to the one hereinbefore described and vary only in detail.

(b) Another of_ said assortments of candy consists of a number of pieces of chocolate-covered candy of uniform size, shape, and quality, together with a number of larger pieces of candy or packages of candy which larger pieces of candy or packages of candy are to be given as prizes to purchasers of said candy of uniform size, shu pe, and quality in the following manner:

The majority of said chocolate-covered candy in said assortment has centers of the same color, but a small number of pieces of said chocolate covered candy have centers of a different color. The color of the center of said chocolate covered candy is effectively concealed from the prospective purchaser until a selection or purchase has been made and the piece of candy broken open. The said candy of uniform size, shape, and quality in said assortment retails at the price of 1 cent each, but the purchasers who procure a piece of the said candy having a center of a different color than the majority of pieces of said candy are entitled to receive, and are to be given free of charge, one of the said larger pieces of candy or packages of candy heretofore referred to. The aforesaid purchasers of said candy who procure a piece of candy having a center colored differently from the majority of said PEAXUT SPECIALTY CO. 1005 9!JS Findings pieces of candy are thus to procure one of the larger pieces of canuy or packages of candy wholly by lot or chance. Respondent furnishes to said wholesale dealers, jobbers, and retail dealers with said assortments of canuy, display cards to be used. by retail dealers in offering said candy for sale, which display cards bear a legend or statement informing the prospective purchaser that the said assortments of candy are being sold in accordance with the bales plan above described. The wholesale dealers and jobbers to whom respondent sells its assortments resell said assortments of candy to retail dealers and said retail dealers expose said assortments for sale in connection "·ith the aforesaid display cards and sell said ·candy to the purchasing public in accordance with the aforesaid sales plan. Uespondent sells and distributes, and has sold and distributed, various assortments of candy as above described involving a lot or chance feature, but such assortments are similar to the one hereinabove described and vary only in detail.

PAR. 3. Retail dealers who purchase respondent's said candies directly or indirectly expose and sell the same to the purchasing public in accordance with the sales plans aforesaid. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of its products in accordance with the sales plans hereinabove described. The use by respondent of said sales plans or methods in the sale of its candy and the sale of said candy by and through the use thereof and by the aid of said sales plans or methods is a practice of a sort which is contrary to an established public policy of the Government of the United States and in violation of the criminal laws.

PAR. 4. The sale of candy to the purchasing public by the methods and plans hereinabove described involves a game of chance or tlle sale of a chance to procure additional pieces of candy without additional cost or such larger pieces of candy or packages of candy in the manner above found. l\Iany persons, firms, and corporations who sell and distribute candy in competition with respomlent, ns above found, are unwilling to adopt and use such methods or any method involving a game of chance or the sale of a chance to "·in something by chance or any other method contrary to public policy and such competitors refrain therefrom. l\Iany persons are attracted by said sales plans or methods employed by respondent in the sale and distribution of its candy and in the element of chnnce involved therein and are thereby induced to buy and sell respondent's candy in preference to candy of said competitors of respondent who do not use the same or equivalent methods. The use of said methods by 213706m-40-VOL.2!J--66 1006 FEDF.UAL TRADE COl\Il\IISSION DECISIONS Order 291!'. T. C. I'respondent because of said game of chance has a tendency and capacity to, and does, unfairly divert trade to respondent from its said competitors who do not use the same or equivalent methods, and as a result thereof substantial injury is being and has been done by respondent to competition in commerce between and among the Yarious States of the United States and in the District of Columbia. CONCLUSION The aforesaid acts and practices of respondent as hereinabove found. are all to the prejudice and injury of the public and of respondent's 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 Commis- .sion upon the complaint of the Commission and the answer of respondent, in which answer respondent admits all the material allegations of fact set forth in said complaint and states that iti waives all intervening procedure and further hearing as to said facts, 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, Peanut Specialty Oo., a corporation, 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 candy or any other merchandise in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Selling or distributing candy or any other merchandise so packed and assembled that sales of said candy or other merchandise to the general public are to be made or may be made by means of a lottery, gaming device, or gift enterprise.

2. Supplying to or placing in the hands of dealers assortments of candy or any other merchandise together with push or pull cards, punchboards, or other lottery devices, or separately, which said push or pull cards, punchboards, or other lottery devices are to be used or may be used in selling or distributing said candy or other merchandise to the general public.

3. Packing or assembling in the same. package or assortment of .candy for sale to the general public at retail pieces of candy of uniform size and shape having centers of a different color together with larger "'-·,,. PEANUT SPECIALTY CO. 1007 908 Order pieces of candy, which said larger pieces of candy are to be given as prizes to purchasers procuring a piece of candy having a center of a particular color.

4. Selling or otherwise disposing of candy or any other merchandise by use of push or pull cards, punchboards or other lottery devices. It is fm·tlter 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.

1008 FEDERAL TRADE COl\Il\IISSION DECISIONS 29F. T. C.