Jack Rosenfeld

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IN THE :MATTER OF JACK ROSENFELD, DOING JJUSINESS AS J. ROSE & a 1_ .Ia ' { ~ • • ~ "- COl\IP ANY ' •COMPLAINT, FINDINGS, AND ORDiiJR 1::-; REGARD TO THID ALLEGED VIOLATION OF SEC. :; OF AN ACT OF CONGRESS APPROVED SEPT. 20, 1014 Docket 3212. Complaint, Aug. 24, 1937-Dccision, Oct. 24, 1939 Where an individual engagerl in S!!,l'·of ra<liOI'I, clocks, watches, novelties of vorious kinds, and candy, to purchasers, chiefly jobbers, in various other States, and in contacting, as thus engaged, customers through use of form letter advising recipient that he specialized in premium merchandise for sales boards and sales cards; in soliciting the sale of and in selling the merchandiseand novelties dealt in by him- Furpished with such merchandise and novelties push cards and punchboards and' plans of merchandising which involved operation of games of chance, gift enterprises, or lottery schemes for distribution of articles in question to members of consuming public wholly by lot or chance, and which involved (1) one· hundred and twenty-hole, 4-section punchboards for use under a plan in· accordance with which members of public who secured 8 of said numbers received, for nickel paid, pound box of candy, and persons making last punch· in each of 4 sections also received such a box, and selectors of the other 100· numbers received nothing, and (2) other types of boards of same genera! nature, involving operation of games of chance, gift enterprises, or lotteries, anrl push cards also, in operation of some of which cost to members of public· ranged from 1 cent to 15 cents, depending upon concealed number selected by chance by customer, and in operation of which amount of cost to selector, as well as article of merchandise or novelty, if any, secured, were both subject to chance; and Supplied thereby to and placed in the hands of others means by which games of chance, gift enterprises, and lotteries were conducted as aforesaid, and unuer which merchandise and novelties thus sold by said indivi~ual, and with whleh such cards and boards anll devices were supplied, were rlistributed to purchasing public wholly by lot or chonce, and under which, in some instances, amount which customer," wa'! required to pay was similarly thus determined, contrary to established public policy of the United States Government and in violation of the laws of several of the States, and in competition with those who are unwilling to employ in sale and distribution of their products any method or sales plan involving game of chance, gift enterprise, or lottery schemes, and who refrain therefrom;

With result that such cornvetitor!) were placed at competitive disadvantage and many purchasers of merchandise nnd novelties dealt in by sairl individual were attracted by element of chance involved in sale nnd distribntiOJI thereof. a~ aforesaid, and thereby induced to purch.ase such products oll'~red 'and soil!. byJ him in preference to similar merchandise and novelties offered by comr pet! tors who did not furnish with their products similar cards, boards, 01' other devices, and with consequence that jobbers purchased substantial amount of merchandise from said individual and trade wns unfairly diverted to him from competitors aforesaid :

1174 FEDERAL TRADE COMl\IISSION DECISIONS Complaint 29F.T.C.

Held, That such acts and practices, under the circumstances set forth, were all to the injury and prejudice of the public and constituted unfair methods of competition.

Before Mr. lVilliam 0. Reeves and Mr. Ohar·les F. Diggs, trial exammers.

Mr. lVilliam L. Pencke, Mr. P. 0. Kolinski, and Mr. D. 0. Dooiel for the Commission.

Kopitsky &: Kessler, of St. Louis, Mo., 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 and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Jack Rosenfeld, individually and doing business under the trade name and style of J. Rose & Co., hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "com· merce" is defined in said act of Congress, 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 is an individual doing business under the trade name and style of J. Rose & Co., with his principal office and place of business located at 2316 Locust Street, St. Louis, Mo. He is now, and for some time last past has been, engaged in the sale and distribution of candy, radios, lamps, clocks, wa,tches, and various items of novelty merchandise, to wholesale dealers, jobbers, retail dealers, and to the purchasing public. Respondent's customers are located at points in the various States of the United States, and respondent causes his said products when sold to be transported from his principal place of business in the city of St. Louis, State of Missouri, to purchasers thereof in the State of Missouri and in other States of the United States at their respective places of business. There is now, and has been for some time last past, a course of trade and commerce by said respondent in such merchandise between and among the various States of the United States. In the course and conduct of said business, respondent is in competition with other individuals and with partnerships and corporations engaged in the sale and distribution of similar or like articles of mer· chandise in commerce between and among the various States of the United States.

J, ROSE & CO. 1175 1173 Complaint P .AR. 2. In the course and conduct of his business, as described in paragraph 1 hereof, respondent, in soliciting the sale of and in selling and distributing the said merchandise, has furnished various devices and plans of merchandising which involve the operation of games of chance, gift enterprises, or lottery schemes by which said merchandise is distributed to the ultimate consumers thereof wholly by lot or chance. Said devices or plans of merchandising consist of a variety of push cards and punchboards. The methods and practices adopted and used by respondent are substantially as follows: Respondent has advertised his merchandise, or certain assortments thereof, in newspapers, magazines, and other periodicals of general circulation throughout the United States, and distributes and has distributed to customers and prospective customers, including wholesale dealers and jobbers, retail dealers, and the purchasing public, through the United States mails in interstate commerce, certain literature, instructions, and sal.es outfits, including various push cards and punchboards, order blanks, advertisements, and catalogues and circulars containing illustrations of his merchandise and circulars explaining respondent's plan of selling said merchandise and of allotting it as premiums or prizes to the consuming public and to the operators of said push cards or punchboards. Said push cards and punchboards vary in detail and involve different merchandise and various plans of distribution. One such plan is described in detail for illustratio11, but other plans used by respondent involve the same principle or method of competition.

One such assortment consists of eight boxes of chocolate candy, together with 150-hole punchboard. The said punchboard is a paper card having 150 partially perforated discs, said discs being divided into three section. Concealed within each disc is a number. The numbers run from 1 to 150 but are not arranged in numerical sequence. Customers punch or separate one of the discs from the card, and when such disc is separated a number is disclosed. Purchasers obtaining numbers from 1 to 15 pay in cents the amount of such number, and purchasers selecting numbers over 15 pay 10 cents for the privilege of selecting one of the discs. Purchasers selecting certain specified numbers receive one of the boxes of candy, and the purchaser of the last disc or punch in each section receives one of the boxes of candy. The numbers under the discs are concealed from purchasers and prospective purchasers, and they do not know how much they will have to pay for the privilege of selecting one of the discs, nor do they know whether they will receive anything for the money which they pay, until a selection has been made and the disc Complaint 29F.T.C;

removed from the board. The amount which customers pay is thus, determined wholly by lot or chance, and the boxes of candy con-tained in said assortment are thus _distributed to the purchasing: public wholly by lot or chance. - The ·punchboard bears legends informing purchasers and pros-· pective purchasers of the plan or method by which said candy is. being S<;lld or distributed. The boxes of candy sold and distributed ;by_ said pun~hbonrd. are each of a greater value than the cost of a single punch from said board. The purchasing public are thus in- ·duced and persuaded into purchasing punches from said board in the hope that they may select a prize-winning number and thus obtain a box of candy of a greater value than the amount paid. As stated above, respondent sells and distributes various assortments of merchandise, and furnishes or sells various devices for use· in the sale and distribution of such merchandise by m~ans of a gameof chance, gift enterprise, or lottery s~heme. Such plans or methods vary in detail, but the above-described plan or method is illustrative of the principle involved.

PAR. 3. Respondent, in selling and distributing said merchandise in connection with the sale and distribution of the aforesaid punchboards or push cards, conducts lotteries or places in the hands of others the means of conducting lotteries in the sale of his merchandise in accordance with the sales plan hereinabove set forth, and respondent's merchandise is sold or distributed to _the consuming public in accordance therewith. The sale of respondent's merchandise to the purchasing public, as hereinabove alleged, involves a game of chance or the sale of a chance to procure respondent's ;merchandise at a price much less than the normal retail price thereof. The use by respondent of said method in the sale of his merchandise, and the sale of his merchandise by and through the use thereof and by the aid thereof, is a practice of the sort which the common law and criminal statutes have long deemed contrary to public policy, and is contrary to an established public policy of the Government of the United States.

PAR. 4. ]\!any persons, firms, and corporations who sell or distribute, merchandise in competition with respondent, as above alleged, are unwilling to adopt and use said method or any method involving a game of chance or the sale of a chance to win something by chance or a.uy other method that is contrary to public policy, and such competitors refrain therefrom. l\Iany. persons are attracted by respondent's said method and by the element of chance involved in the sale thereof in the manner above described, and are thereby :r. ROSE & CO. 1177 :1173 Findings induced to buy ar.d sell respondent's merchandise. in preference to merchand_ise offered for sale and sold by said competitors of respondent who do not use the same or an equivalent method. The use of said method by respondent, because of said game of chance, bas the tendency and capacity to and does divert trade and custom to respondent from his said competitors who do not use the same or an equivalent method.

PAR. 5. The aforesaid acts and practices of respondent are all to the injury and prejudice of the public and respondent's competitors, as hereinabove alleged. Said acts and practices constitute unfair methods of competition in commerce within the intent and meaning of section 5 of an act of Congress, approved September 26, 1914, · entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes." REPORT, FINDINGS AS TO THE FACTS, A~D ~RDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on August 24, 1937, issued its complaint in this proceeding and caused same to be served upon the respondent, Jack Rosenfeld, individually and doing business under the trade name and style of J. Rose & Co., charging him with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said compllJ.int and the filing of respondent's answer thereto, testimony, and evi- · dence in support of the allegations of said complaii).L were introduced by William L. Pencke, P. C. Kolinsli, and D. C. Daniel, at-' J torneys for the Commission, before "William C. Reeves and Charles' Y. Diggs, examiners for the Commission theretofore duly designated by it, and said testimony was reduced by writing and filed in the -office of· the Commission, together with numerous pieces of docu .. mentary evidence and devices received in ev.idence as exhibits. No testimoriy or other evidence was introduced by or :on ·behalf of said r~spondent. Thereafter, the proceeding regularly came on for final hearing before the Commission on ·the said complaint., the answer tl~et·eto, the testuhbn'y · takim and evidence received and brief. in sup~4 port of the comi)hiint. No brief was filed by o1· on~behalf of re-."! ·spo11dent and oral'atgument was witiv:ed by him'nncl·the Commission havirig 1duly ccn1siClei·ed the matter and ·being" now fully ·advis~d) in .1 tire" premise~i, finds' thaf this· proceeding is in lhe.:·interest·rof' thel i public a;i{J niakes this its' findings a.s to rthe facts' and: its .Conclusiml •; .a:awn ~therefrom. . I -l.:1! ·.~d r 1 J • 1 r ~-> ''.l·J r:, r:· 1 oi u<Jt;·.Ji L ~ l) f ot t :.. 'J 1' .- · ;J • "' ,l,.J,r[ .t•fo o.- ,,, u.1 r • 1 'J':~J 1•Jt ~j :•).., ij '(flll ot bnn Findings 29F.T.C.

FINDINGS AS TO THE FACTS PARAGRAPH 1. For about 8 months prior to May 1937, the respondent, Jack Rosenfeld, carried on business at 2316 Locust Street, St. Louis, Mo., under the trade name and style of J. Rose & Co. On May 13, 1937, said respondent, in association with others, caused a corporation to be organized under the laws of the State of Missouri, under the corporate name of J. Rose, Inc., which corporation took over and succeeded to the business theretofore carried on by ~aid respondent under the name and style of Jack Rose & Co. Said respondent, in February 1938, sold all his stock in said corporation, J. Rose, Inc., and since then has had no connection with the business theretofore carried on by said corporation and by him under the trade name and style of J. Rose & Co. While carrying on business under the trade name and style of J. Rose & Co., said respondent was engaged in the business of selling radios, clocks, watches, novelties of various kinds, and candy. Said respondent caused some of the articles of merchandise and novelties, sold by him, to be transported when sold, from his place of business in St. Louis, Mo., through and into other States of the United States to the respective purchasers thereof, and in the course and conduct of his said business said respondent has been and was then in active competition with various partnerships and corporations and other persons also engaged in the sale of similar articles of merchandise and novelties in commerce. among several of the States of the United States. PAR. 2. The greater portion of the merchandise sold by respondent, as set out in paragraph 1 hereof, was sold to jobbers; respondent made no sales direct to the consumer. Respondent made use of a form letter in contacting customers, in which letter the statement was made that respondent specialized in premium merchandise for sales boards and sales cards. Respondent, in soliciting the. sale of, and in selling, the merchandise and novelties dealt in by him, furnished with such merchandise and· novelties various devices sometimes described as push cards and punchboards and plans of merchandising which involved the operation of games of chance, gift enterprises, or lottery schemes, by means of which, articles of such merchandise and novelties were to be distributed to members of the consuming public wholly by lot or chance. One type of the devices so furnished by respondent, contained 120 holes, divid~d . into four sections. In each hole was secreted a rolled slip of paper upon ·which a number was printed;·. Members~ of the public we~~ to be solicited to punch one or more of the numbers from the board' and to pay 5 cents for each number SO. obtained. Selectors of eight J. ROSE & CO. 1179 1173 Findings of the numbers received, for each of such numbers, a 1 pound box of candy and the person making the last punch in each of the four fiections also received a 1 pound box of candy, but selectors of the other numbers secreted in the board, 108 in all, received Iiothing. Other types of boards, but boards of the same general nature, the use of which involved the operation of games of chance, gift enterprises, or lotteries and devices known · as push cards also were furnished by respondent wit;l1 various articles of merohandise and 1wvelties sold by him. In the operation of some of these devices the cost to members of the public ran from 1 cent to 15 centst depending upon the number concealed by the disk selected by the customers and in the operation of said devices of this nature both f the amount of the cost to the selector and whether the customer would obtain any article of merchandise or novelty was always 11 matter of chance. The respondent, while engaged in business as Iset out in paragraph 1 hereof, sold a substantial quantity of mer- I <:handise and novelties with which he furnished such devices, and the Commission finds that the merchandise and novelties so sold by the respondent were distributed to the purchasing public wholly by lot or chance, and that by the use of one type of such device so furnished by respondent the amount which each customer was required to pay also was determined wholly by lot or chance. PAR. 3. The Commission finds that the merchandise and novelties sold by respondents to jobbers, with which he furnished push cards or punchboards, or both, as set out in paragraph 2 hereoft was resold by such jobbers to retail dealers who resold such articles of merchandise or novelties to the purchasing public by the use of one or the other of such devices in the manner and by the sales plan described in said paragraph 2. The Commission further finds that respondent, by furnishing such cards and boards, or either type of said devices, with the merchandise and novelties sold by him, thereby supplied to, and placed in the hands of others, the means by which games of chance, gift enterprises, and lotteries have been conducted. 'fhe Commission further finds that the use of such cards and boards in the resale and distribution of the merchandise and novelties sold by respondent to jobbers involved a game of chance, or the sale of a chance, and that the use of such methods in the sale and distribution of such merchandise and novelties was a practice of the sort which is contrary to the established public policy of the Government of the United States. and is in violation of the l.aws of :;several of the States of the United States.

PAR. 4. There were among the competitors of respondent, persons, partnerships, and corporations engaged in the sale of articles of FEDERAL TRADE COl\Il\IISSION DECISIONS 1180 Order 29F.T.C.

merchandise and novelties of the same general nature as those sold by respondent, and in commerce between and among the various States of the United States, which competitors were unwilling to employ in the sale and distribution of merchandise and novelties .dealt in by them any method or sales plan which involved games of chance, gift enterprises, or lottery schemes, and refrained from l"uch practice, and as a result were placed at a disadvantage in competition. :Many purchasers of merchan<lise and novelties dealt in by respondent were attracted by the· element of chance involved in the sale and distribution of such merchandise and novelties by the use of push cards or punchboards furnished by respondent, and were thereby induced to purchase the merchandise and novelties offered for sale by respondent in preference to similar merchandise and novelties offered for sale by competitors of respondent who did not furnish with merchandise and novelties sold by them similar push cards or punchboards or other devices and as a result jobbers purchased a substantial amount of merchandise from respondent with the result that trade was diverted unfairly to respondent from .fsaid competitors.

CONCLUSION The acts and practices of respondent, as herein found, are all to t.he injury and prejudice of the public and constitute unfair methods of competition in commerce within the intent and meaning of the provisions of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This procee.ding having be~n heard by the Federal Trade Com~ mission upon. the complaint of the Commission, the answer of re-' spondent, testimony, and other evidence taken before 'Villiain C/ Reeves al).d Charles F. Diggs, examiners of the Comn{ission there-· tofore' duly designated by it, in suppo:l·tj of the allegations of said complaint· (respondent having offered no testimo'11y or other. evi-· dence in opposition to the allegations of said complaint)/ brief of counsel for' tiie Coinmission filed herein (respondent having filed ·no l1rief ·a~d ~rril a1iJfuent not 1 h~ving been reqtiested),'a·n·d the·Co)ll-t t\iission, JHiv,iri~~ ~~d? ~ts' fi~~ings: as .to tl~e' f~c~s and. its· conclilsio1i: that saul respondent has vwlated the provisions o£ the Federal · 'l ~ l. J I I . f / l l 1 , I l l f Trf!Oe C<;>mmisswn Act. . . . r . .- • . ,. , ~ '· 1t is. ordA!re~, That' the respbnd_~~t 1 l:a?~. ~ore1frl~1}in~f~d~~ltr~and domg busi~ess under the t~_a<Je. name and style ~f J. ;ROse & Cp~, ,. .. r )-::.1~_1 I .l~i.J.or traumcr under1 1 71anv.~..J other% nameTti'J _tor ~namest f t ~'..J..•dm~. representatiVesl. J,, l . ~~-1 J:> <::H:.~<J fl: ·· ' .; "~ ·-~ 1 H: i-\t.;n'J ;;.,[.'J-l;,;·u· { :.>) ;;a:: "I' 1- rr ~r:.'£ J. ROSE & CO. 1181 I 1173 Orderagents, and employees, directly or through any corporate or other I tdevice, in connection with the offering for sale, sale, and distribution of candy or any other merchandise, in commerce as commerce 1 is defined in the Federal Trade Commission Act do forthwith cease l and desist from :

1. Selling or distributing candy or any other merchandise so packed and assembled that sales of said candy or other merchandise Ito the general public are to be made, or may be made by means of a lottery, gaming device, or gift enterprise. l 2. Supplying to or placing in the hands of others, packages or assortments of candy or other merchandise, together with punchboards, push or pull cars or any other lottery device, which punchboard, push or pull card or other lottery device is to be used or may be used in selling or distributing said candy or other merchandise to the public.

3. Supplying to or placing in the hands of others, any lottery device either with assortments of candy or other merchandise, or separately, which lottery device is to be used or may be used in selling or distributing such candy or other merchandise to the public.

4. Selling or otherwise distributing any merchandise by means of .a game of chance, gift enterprise, or lottery scheme. It iB further ordered, That the respondent shall withing 60 days after service upon him of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which he has complied with this order.

213706"'-4o-vor.. 29-77 Syllabus 29F. T. C.