U-Need Candy Co., Inc.

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IN THE MATTER OF U-NEED CANDY CO., INC., AND LOUIS J. WEGER, MRS. LOUIS J. WEGER, AND CHARLES R. HOSEY, INDIVID- UALS COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATIO~ OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 8855. Complaint, July 20, 1989-Decision, Dec. 29, 1989 Where a corporation and three individuals who were officers and directors thereof and stockholders therein and, as case might be, controlled, formulated, and directed its practices and pollcles, and who acted together and in cooperation with each other in acts and things below set forth, engaged In manufacture of candy and In sale and distribution of certain assortments thereof which were so packed or assembled as to involve the use of games of chance, gift enterprises, or lottery schemes when sold and distributed to the consumers thereof and with which, as case might be, it included (1) push card for use in sale and distribution of certain assortments under plan by which person, for 5 cents paid, received, in accordance with number pushed by chance from one to four candy bars and last sale on card entitled purchaser to eight of such bars, and (2) various other push cards for use In sale and distribution of their said candy under plan similar to that described and varying therefrom in detall only and involving game of chance, gift enterprise, or lottery scheme; Sold such assortments, along with such push cards to wholesalers, jobbers, and retailers by whom, as direct or indirect purchasers thereof, such assortments were exposed and sold to purchasing public In accordance with aforesaid sales plan Involving game of chance or sale ot. chance to procure additional bars ot. candy without additional cost, contrary 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 of 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 said sales plan or method employed by them in sale and distribution of their candy and in element of chance involved therein and were thereby induced to buy and sell their said candy In preference to that of competitors aforesaid who do not use same or equivalent methods and with effect through use of such method and because of said game of chance of unfairly diverting trade to them from their competitors aforesaid:

Held, that such acts and practices under the circumstances set forth were all to the prejudice and injury of the public and competitors und constituted unfair methods ot. competition in commerce and unt.air and deceptive acts and practices therein.

Mr. L. P. Allen, Jr. for the Commission.

356 FEDERIAL TRADE COMMISSION DECISIONS Complaint 30F.T.C.

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 U-Need Candy Co., Inc., a corporation, and Louis J. 'Veger, Mrs. Louis J. 'Veger, and Charles R. Hosey, individuals, hereinafter referred to as respondents, have violated the provisions of said act and it appearing to the Commission that a proceeding by it in respect thereof would be in the interest of the public, hereby issues its complaint stating its charges in that respect as follows :

PARAGRAPH 1. Respondent U-Need Candy Co., Inc., is a corporation organized and doing business under the laws of the State of Indiana, with its principal office and place of business located at 1231 West Washington Avenue, South Bend, Ind. Respondent Charles R. Hosey is an individual and prior to April 3, 1939, was secretary and treasurer, a stockholder, and a director of corporate respondent. Respondent Louis J. Weger, an individual, is and has been president, a stockholder, and director of the corporate respondent. Respondent Mrs. Louis J. Weger, an individual, is and has been a stockholder and director of corporate respondent. Respondents Louis J. vV eger, Mrs. Louis J. Weger, and Charles R. Hosey, within the time mentioned herein, formulate, control, and direct the practices and policies of the corporate respondent. All of said individual respondents and said corporate respondent, within the time mentioned herein, acted together and in cooperation with each other in doing the acts and things hereinafter alleged. Respondents are and have been, within the time mentioned herein, 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. Respondents cause and have caused, within the time mentioned herein, said products when sold to be transported from their principal place of business in the city of South Bend, Ind., to purchasers thereof, at their respective points of location in the various States of the United States other than Indiana and in the District of Columbia. There is and has been, within the time mentioned herein, a course of trade by respondents 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 said business, respondents are and have been, within the time mentioned herein, in competition with other corporations and with partnerships and individuals engaged in the sale and distribution of candy in commerce U-NE'ED OAN'DY 00., IN,C., E!T AL. 357 355 Complaint between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of their business as described in paragraph 1 hereof, respondents, within the time hereinabove set forth, sell and have 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. One of said assortments is herein fully described for the purpose of showing the method used by respondents and is as follows:

This assortment consists of bars of candy together with the device commonly called a push card. The push card has 60 partially perforated disks, on the face of each of which is printed the word "Push." Concealed within the said disks are numbers. If the number punched corresponds with any of the numbers set out in the legend at the top of said card, the purchaser thereof is entitled to additional bars of candy without additional cost. Sales are 5 cents each and those not securing a winning number receive one bar of candy. The said card bears a legend or statement as follows:

Assortment No. 2 5¢ DELICIOUS 5¢ A SALE CANDTBARB A BALE All Winners-No Blanks EVERY SALE RECEIVES A) 5¢ CANDY BAR No. 15 Receives 4 5¢ BARS-No. 25 Receives 3 5¢ BARB Numbers 7-14-21-28-35-42-4!)-56 Each Receive 2 5¢ BARS LAST SALE ON CARD RECEIVES 8 5¢ CANDY BARS Sales of respondents' candy are made in accordance with the above legend. The numbers aforesaid are effectively concealed until a purchase has been made and the disk pushed or separated from said card. The said bars of candy are thus distributed to the purchasing public wholly by lot or chance.

The respondents furnish and have furnished, within the time hereinabove set forth, various push cards for use in the sale and distribu- . tion of their candy by means of a game of chance, gift enterprise, or lottery scheme. Such cards are similar to the one herein described and vary only in detail.

PAR. 3. Retail dealers who purchase respondents' said candy, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondents thus supply to and place in the hands of others the means of conducting lotteries in the sale of their products in accordance with the sales plan hereinabove set forth. The use by respondents of said sales plan or method Findings 30F.T.C.

in the sale of their candy and the sale of said candy by and through the use thereof and by the aid of said sales plan or method 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 method and plan hereinabove set forth involves a game of chance or the sale of a chance to procure additional bars of candy without additional cost. Many persons, firms, and corporations who sell and distribute candy in competition with respondents, 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 any other method contrary to public policy and such competitors refrain therefrom. Many persons are attracted by said sales plan or method employed by respondents in the sale and distribution of their candy and in the element of chance involved therein and are thereby induced to buy and sell respondents' candy in preference to candy of said competitors of respondents who do not use the same or equivalent methods. The use of said methods by respondents because of said game of chance has a tendency and capacity to, and does, unfairly divert trade to respondents from their 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 respondents to competition in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 5. The aforesaid acts and practices of respondents, as herein alleged, are all to the prejudice and injury of the public and of respondents' 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. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on July 20, 1939, issued and subsequently served its complaint in this proceeding upon respondents,· U-Need Candy Co., Inc., a corporation, and Louis J. 'Weger, Mrs. Louis J. 'Weger, and Charles R. Hosey, individuals, charging them 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 August 18, 1939, the respondent Charles R. Hosey filed his answer, and on November 28, 1939, the respondents U-Need Candy Co., Inc., Louis J. 'Veger, and Mrs. Louis J. 'Veger, filed their answer. In such answers respondents U~NEJED CANDY 00., INC., ET IAL. 359 355 Findings admitted all the material allegations of fact set forth in said complaint, and waived all intervening procedure and further hearings as to said facts. Thereafter the proceeding regularly came on for final hearing before the Commission upon the said complaint and the answers thereto, and the Commission, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public, and makes this it~ findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent U-Need Candy Co., Inc., is a corporation organized and doing business under the laws of the State of Indiana, with its principal office and place of business located at 1231 West ·washington Avenue, South Bend, Ind. Respondent Charles R. Hosey is an individual and prior to April 3, 1939, was secretary and treasurer of corporate respondent, and a stockholder and a director therein. Respondent Louis J. 'Veger, an individual, is and has been president, a stockholder, and director of the corporate respondent. Respondent, 1\Irs. Louis J. Weger, an individual, is and has been a stockholder and director of corporate respondent. Respondents, Louis J. 'Veger and Mrs. Louis J. "Weger formulate, control, and direct the practices and policies of the corporate respondent. Prior to April 3, 1939, respondent, Charles R. Hosey, participated in controlling and formulating such policies. All of said individual respondents acted togefher and in cooperation with each other in doing the acts and things hereinafter found. Respondents are and have 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. Respondents cause and have caused, said products when sold to be transported from their principal place of business in the city of South Bend, Ind., to purchasers thereof, at their respective points of location in the various States of the United States other than Indiana and in the District of Columbia. There is and has been, a course of trade by respondents 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 said business, respondents are and have 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. 260005m--4t--vol.30----20 FEDERIAL TRADE COMMISStiON DECISIONS360 Findings 30F.T.C.

PAR. 2. In the course and conduct of their business as described. m paragraph 1 hereof, respondents, sell and have sold to wholesale dealers, jobbers, and retail dealers certain assortments of candy so packed or assembled as to involve the use of games of chance, gift enterprises, or lottery schemes when sold and distributed to the consumers thereof. One of said assortments is herein fully described for the purpose of showing the method used by respondents and is as follows:

This assortment consists of bars of candy together with the device commonly called a push card. The push card has 60 partially perforated disks, on the face of each of which is printed the word "Push." Concealed within the said disks are numbers. If the number punched corresponds with any of the numbers set out in the legend at the top of said card, the purchaser thereof is entitled to additional bars of candy without additional cost. Sales are 5 cents each and those not securing a winning number receive only one bar of candy. The said card bears a legend or statement as follows: Assortment No. 2 DELICIOUS CANDY BARB 5¢ 5¢ A SALE All Winners-No Blanks A SALE EVERY SALE RECEIVES A 5C CANDY BAR No. 15 Receives 4-5¢ BARS-No. 25 Receives 3-5¢ BARS Numbers 7-14- 21-28-35-42-4~56-Each Receive 2-5¢ BARS LAST SALE ON CARD RECEIVES 8-5C CANDY BARS Sales of respondents' candy are made in accordance with the above legend. The numbers aforesaid are effectively concealed until a purchase has been made and the disk pushed or separated from said card. The said bars of candy are thus distributed to the purchasing public wholly by lot or chance.

The respondents furnish and have furnished, various push cards for use in the sale and distribution of their candy by means of a game of chance, gift enterprise, or lottery scheme. Such cards are similar to the one herein described and vary only in detail. PAR. 3. Retail dealers who purchase respondents' said candy, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondents thus supply to and place in the hands of others the means of conducting lotteries in the sale of their products in accordance with the sales plan hereinabove set forth. The use by respondents of said sales plan or U~NEIED CANIJ)Y 100., [lN•C., ET <AL. 361 355 Order method in the sale of their candy and the sale of said candy by and through the use thereof and by the aid of said sales plan or method 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 method and plan hereinabove set forth involves a game of chance or the sale of a chance to procure additional bars of candy without additional cost. Many persons, firms, and corporations who sell and distribute candy in competition with respondents, as above found, 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 any other method contrary to public policy and such competitors refrain therefrom. Many persons are attracted by said sales plan or method employed by respondents in the sale and distribution of their candy and in the element of chance involved therein and are thereby induced to buy and sell respondents' candy in preference to candy of said competitors of respondents who do not use the same or equivalent methods. The use of said method by respondents because of said game of chance has a tendency and capacity to, and does, unfairly divert trade to respondents from their said competitors who do not use the same or equivalent methods. CONCLUSION The aforesaid acts and practices of respondents, as herein found, are all to the prejudice and injury of the public and of respondents' 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 Commission upon the complaint of the Commission and the answer of respondents, in which answer respondents admit all the material allegations of fact set forth in said complaint, and state that they waive 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 respondents have violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondents U-Need Candy Co., Inc., a corporation, its officers, and Louis J. 'Veger, .Mrs. Louis J. Weger, and Charles R. Hosey, individuals, their respective representatives, agents, 362 FEDE&AL TRADE COMMISSION DECISIONS Order 30F.T.C.

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 such candy, or other merchandise, to the general public are to be made, or may be made, by means of a lottery scheme, gaming device, or gift enterprise. 2. Supplying to, or placing in the hands of, others assortments of candy, or other merchandise, together with push or pull cards, punchboards, or other lottery devices, which said push or pull cards, punchboards, or other lottery devices, are to be used, or may be used, in selling or distributing such candy, or other merchandise, to the general public.

3. Supplying to, or placing in the hands of, others push or pull cards, punchboards, or other lottery devices, either with assortments of candy, or other merchandise, 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 such candy, or other merchandise, to the general public.

4. Selling, or otherwise disposing of, any merchandise by means of a game of chance, gift enterprise, or lottery scheme. It is further ordered, That the respondents shall, within 60 days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with this order.

STONE BROS., INC. 363 Syllabus