Roy Fellom

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IN THE ~fatter OF ROY FELLOM, DOING BUSINESS UNDER THE NAME AND STYLE OF FELLOl\I PUBLISHING COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THEJ ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3960. ComplaMtt, Dec. 1, 1939-Deci~ion, Juue 29, 1940 Where an individual engaged under trade name In publication o! his Pacific Uoad Builder and Engineering Review periodical, and in sale and distribution thereof to purchasers in l'arious other States, and in deriving main source of income from conduct of his said business of publication and sale of such magazine, devoted to subject matters of interest to contl'llctors, road builders, engineers, and buyers of construction equipment, from sale of advertising space to manufacturers and others having for sale equipment, materials, and commodities which might be of interest to subscribers and recipients of magazine Involved, and in competition with others engaged in sale and distribution in commerce in the various States and the District of Columbia of periodicals devoted to the same general subject matter, and of interest to the same general class of readers, and circulated in the same general territory, and who also similarly deriYell main source of income from their respective businesses- ( a) Tiepresented in advertising mattet· distributed by mails m· otherwise to advertisers aml prospt>ctive advertisers in said magazine, locnt~>d in various States, that it was circulated only to equipment buyers and had no circulation to nonbuyers, and that survey had ben made of such equipm~>nt buyers in 11 States in which said magazine was principally circulated, and that in said States lt was circulated to 93 percent of such buyers, and that it circulated also to 93 percent of heavy construction equipment buyers based on number thereof, and to 98 percent thereof based on volume of purchases in said 11 Stutes:

Facts being, circulation of said periodical was not restricted exclusively to buyers of equipment, but portion of subscribers and other recipients consisted of those who were not such buyers and no accurate and dependable survey had been made by or for him as basis for figures gi>en by him regarding its coverage of equipment buyers, and his magazine was not circulated to 93 percent of such buyers in said 11 states in which principally circulated, or to 03 percent of heavy construction buyers based on number thereof, nor to 08 percent thereof based on volume of purchases aforesaid; and (b) Furnished figures and material in regard to volume of circulation of his said magazine for publication and distribution to prospecti>e advertisers, and authorized publication and distribution thereof for information of such advertisers and to induce them to place adYertiscments in his said magazine, and among such repres~>ntatlons set forth that such magazine had a total average monthly net paid circulation of o.l~ and a total average monthly distribution of 0,289 for the last 6 months of 1937, and a total av~>rage monthly net paid circulation of 4,5S3 and a total average monthly distribution of 5,6:!.':) !or the first 0 months of 1938:

Complaint 31 F. ~1'. C. Facts being, figures furnished and authorized as aforesaid 'were misleading In that they overstated volume of circulation of periodical in question 'and gave an erroneous idea of value thereof as an advertising medium based on possible results, and also correctness of prices charged for advertising space therein based on extent of such circulation, and average monthly paid circulation and average monthly distribution of his magazine during last 6 months of 1937 and first 6 months of 1938 were much less than given in his said authorized statements, which were inaccurate and greatly exaggerated;

With tendency and capacity, through such acts and practices used by said individual in connection with offer and sale of advertising space in his B'llid magazine, to mislead purchasers and prospective purchasers into erroneous and mistaken belief that such representations as above set forth were true, and to induce them to purchase, by reason thereof, advertising space in his said publication, with result that trade was thereby diverted unfairly to him from competitors engaged in S'ale in commerce of advertising space in magazines and other publications circulated In commerce, and including among competitors those who, in sale of advertising space In magazines and other publications, do not similarly or in any manner misrepresent the volume or character of their circulation or matters pertaining thereto:

Held, That such acts and practices set forth were all to the prejudice and Injury of the public and competitors, and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices therein. Mr. B. G. lVilson for the Commission.

r .:nforth, Cannon & Miller, of San Francisco, Calif., for respondent.

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 Roy Fellom, an individual, doing business under the name and style of Fellom Publishing Co., hereinafter referred to as respondent, hns violated the provisions of said act, and it appearing to the 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, Roy Fellom, is an individual doing business under the name and style of Fellom Publishing Co. with his office and principal place of business at 637 New Call Building in the city of San Francisco, State of California. Respondent is now, and has been for more than 4 years last past, engaged, under said name und style of Fellom Publishing Co., in the publication of a magazine, designated as Pacific Road Builder and Engineering Review, and in the sale and distribution of the same in commerce between and among FELLOM PUBLISHING CO. 389 387 Complaint the -various States of the United States. Respondent, in the course and conduct of said business during the time aforesaid, caused and does now cause its said magazine to be transported from his said place of business in California to, into, and through States of the United States other than California to the purchasers thereof in such other States. Said magazine is devoted to subject matters of interest to contractors, road builders, engineers, and buyers of construction equipment.

PAR. 2. During the time above mentioned, other individuals, firms, and corporations in various States of the United States have been and ure engaged in the sale and distribution in commerce between and among the various States of the United States and in the District of Columbia of magazines devoted to the same general subject matter as that of respondent and of interest to the same general class of readers· and circulated in the same general territory as that covered by the circulation of respondent's said magazine. PAR. 3. The main source of income of respondent in the conduct of said business as well as that of his said competitors is derived from the sale of advertising space to manufacturers and others having for sale equipment, materials and commodities which are or may be of interest to the subscribers and recipients of the magazine involved. In connection with the insertion of the advertisements heretofore referred to in respondent's said magazine as well as in those of rebpondent's competitors, the advertisers contracting for space for the same transport in commerce from their respective States of location to respondent and its competitors located in other States of the United States, cuts, electrotypes, stereotypes, mats, and textual copy for use in making up and publishing such advertisements. Such movement of commerce is materially affected by the methods, acts, and practices of respondent as hereinafter set out.

PAR. 4. In the course and conduct of his business as aforesaid, the respondent has made various misleading representations in advertising matter distributed by mail or otherwise to advertisers and prospective advertisers in said magazine located in various States of the United States in which it is represented that respondent's said magazine is circulated only to equipment buyers and has no circulation to nonbuyers; that a survey had been made of the equipment buyers in the eleven States in which said magazine is principally circulated; that said magazine is circulated to 93 percent of equipment buyers in said eleven States; and that said magazine circulated to 93 percent of heavy construction equipment buyers based on the number of such buyers and to !18 percent thereof based on volume of purchases in Complaint 31F. T.C, ~::aid eleven States. Among such representations so made are the following:

A circulation coverage limited to equipment buyers-a circulation with no waste to nonbuyers. This is exactly what you nel'd for REST ADI'E!ITISING RESULTS! A SURVEY SHOWs- Coverage of equipment buyers in the Eleven 'Vestern States comprising contractors (road and public works), State, Federal and county road otncials, rock, gravel and cement plants:

By Pacific Road Builder & Engineering Review-93% • • • • • • You reach in Pacific Road Builder & Engineering Review practlcallr all the equipment buyers In the Eleven Western States. Breakdown by Purchasing Power in Heavy Constn1ction Pacific Road lluilder & Engineering Review Reaches:

By Quantity-93% of Equipment Buyez·s.

By Volume-98% of Equipment Buying.

PAR. 5. In the course and conduct of his business as aforesaid, respondent has furnished the material and figures in regard to the volume of circulation of his said magazine for publication and distribution to prospective advertisers and authorized the publicatim~ and distribution thereof for the information of such prospective advertisers and for the purpose of inducing them to place advertisements in his said magazine. The figures so furnished and authorized to be published as aforesaid have been and are misleading in that they overstate the volume of circulation of said magazine and give an erroneous idea of the value of the same as an advertising medium based on possible results and also of the correctness of the prices charged for advertising space therein based on the extent of such circulation. Among such representations so made by respondent are statements that said magazine had a total average monthly net paid circulation of 5,129 and a total average monthly distribution of 6,289 for the last 6 months of 1937, and a total average monthly net paid circulation of 4,583 and a total a\·ernge monthly distribution of 5,625 for the first 6 months of Hl38.

PAR. 6. In truth and in fact, the circulation of respondent's said magazine i!': not restricted exclusively to buyers of equipment; a portion of the subscribers and other recipients of respondent's Rrrid magazine consists of those who are not buyers of equipment; no accurate and dependable survey had been made by or for respondent as the basis for the figures given in regard to coverage of equipment. buyers as quoted in paragraph 4 herein; respondent's magazine is not circulated to 93 percent of the equipment buyers in the 11 States in which it is principally circulated; said magazine is not circulated to 93 percent of heavy construction buyers based on the number of such buyers or to !)8 percent thereof based on volume of purchases in said 11 States; and the average monthly paid circulation and average FELLOM PUBLISHL"'ITG CO. 391 387 Findings monthly distribution of respondent's magazine during the last 6 months of 1937 and the first 6 months of 1938 was much less than given in respondent's authorized statements as set forth in paragraph 5 hereof. All of the statements and representations made by respondent as hereinaboye alleged are in fact inaccurate and greatly exaggerated.

PAR. 7. The aforesaid acts and practices used by respondent in connection with the offering for sale and sale of advertising space in his said magazine have had, and now have, the tendency and capacity to mislead purchasers and prospective purchasers thereof into the erroneous and mistaken belief that such representations, as herein alleged, are true, and to induce them to purchase the advertising space in respondent's said publication on account thereof. Thereby trade is unfairly diverted to respondent from competitors engaged in the sale in commerce between and among the various States of the United States and in the District of Columbia of advertising space in magazines and other publications circulated in commerce among and between the vat'ious States of the United States and in the District of Columbia. There are among the competitors of respondents those who in the sale of advertising space in magazines and other publications do not similarly or in any manner misrepresent the volume or character of their circulation or math'r pertaining thereto. As a result of respondent's said practices, as herein set forth, substantial injury has been and is now being done by respondent to competition in commerce between and among the various States of the United States.

PAR. 8. The aforesaid acts and practices of the respondent as herein alleged are all to the prejudice 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. REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on the 1st day of December 1939, issueu and on the 5th day of December 1939, served its complaint in this proceeding upon respondent Roy Fellom, doing business linder the name and style of Fellom Publishing Co., charging him 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. After the issuance of said complaint and the filing of respondent's answer, the Commission, by order entered herein, granh'd respondent's motion for permission to withdraw said answer and to substitute therefor an answer aumitting all the material alll'gations 206516m--41--VOL. 31----28 Findings 31F. T.C.

of fact set forth in said complaint and waiving all intervening procedure and further hearing as to said facts, which substitute answer was duly filed in the office of the Commission. Thereafter, this proceding regularly came on for final hearing before the Commission on the said complaint and substitute answer, 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, Roy Fellom, is an individual doing business under the name and style of Fellom Publishing Co. with his office and principal place of business at 637 New Call Building, in the city of San Francisco, State of California. Respondent is now, .and has been for more than 4 years last past, engaged, under said name and style of Fellom Publishing Co., in the publication of a magazine, designated as Pacific Road Builder and Engineering Review, and in the sale and distribution of the same in commerce between and among the various States of the United States. Respondent, in the course and conduct of said business during the time aforesaid, caused, and does now cause, his said magazine to be transported from his said place of business in California to, into and through States of the United States other than California to the purchasers thereof in such other States. Said magazine is devoted to subject matters of interest to contractors, road builders, engineers, and buyers of construction equipment.

PAR. 2. During the time above mentioned, other individuals, firms and corporations in various States of the United States have been, and are now, engaged in the sale and distribution in commerce between and among the various States of the United States and in the District of Columbia of magazines devoted to the same general subject matter as that of respondent and of interest to the same general class of readers and circulated in the same general territory as that covered by the circulation of respondent's said magazine. PAR. 3. The main source of income of respondent in the conduct of said business, as well as that of his said competitors, is derived from the sale of advertising space to manufacturers and others having for sale equipment, materials, and commodities which are or may be of interest to the subscribers and recipients of the magazine involved. In connection with the insertion of the advertisements heretofore referred to in respondent's said magazine, as well as in those of respondent's competitors, the advertisers contracting for space for the same transport in commerce from their respective States of loca- FELLOM PUBLISHING CO. 393 287 Findings tion to respondent and its competitors located in other States of the United States, cuts, electrotypes, stereotypes, mats, and textual copy for use in making up and publishing such advertisements. Such movement of commerce is materially affected by the methods, acts, and practices of respondent as hereinafter set out. PAR. 4. In the course and conduct of his business as aforesaid, the respondent has made various misleading representations in advertising matter distributed by mail or otherwise to advertisers and prospective advertisers in said magazine located in various States of the United States in which said magazine is circulated only to equipment buyers and has no circulation to non buyers; that a survey had been made of the equipment buyers in the 11 States in which said magazine is principally circulated; that said magazine is circulated to 93 percent of equipment buyers in said 11 States; and that said magazine circulated to 93 percent of heavy construction equipment buyers based on the number of such buyers and to ~tl percent thereof based on volume of purchases m said 11 ~states. Among such representations so made are the tollowmg:

A circulation coverage limited to equipment buyers-a circulation with no waste to non-:myers. This is exactly what you need for BEST ADVERTISING RESULTS! A SURVEY SHOWS- Coverage of equipment buyers in the Eleven Western States comprising contractors (road and public works), State, Federal and county road officials, rock, gravel and cement plants:

By Pacific Road Builder & Engineering Review-93% • • • • "' • You reach in Pacific Road Builder & Engineering Review practically all the equipment buyers in the Eleven Western States. Breakdown by Purchasing Power in Heavy Construction Pacific Road Builder & Engineering Review Reaches:

By Quantity-93% of Equipment Buyers.

By Volume-98% of Equipment Buying.

P .AR. 5. In the course and conduct of his business as aforesaid, respondent has furnished the material and figures in regard to the volume of circulation of his said magazine for publication and distribution to prospective advertisers and authorized the publication and distribution thereof for the information of such prospective advertisers and for the purpose o£ inducing them to place advertisements in his said magazine. The figures so furnished and authorized to be published as aforesaid have been and are misleading in that they overstate the volume of circulation of said magazine and give an erroneous idea of the value of the same as an advertising medium based on possible results and also of the correctness of the prices charged for advertising space therein based on the extent of such circulation. Among such representations so made by respondent are statements that said magazine had a total average monthly net paid circulation of 5,12!) and a total average Conclusion 31 F. •.r. C, monthly distribution of 6,289 for the last 6 months of 1937, and a total average monthly net paid circulation of 4,583 and a total average} monthly distribution of 5,625 for the first 6 months of 1938. PAR. 6. In truth and in fact, the circulation of respondent's said magazine is not restricted exclusively to buyers of equipment; a portion of the subscribers and other recipients of respondent's said magazine consists of those who are not buyers of equipment; no accurate and dependable survey had been made by or for respondent as the basis for the figures given in regard to coverage of equipment buyers as quoted in paragraph 4 herein; respondent's magazine is not circulated to 93 percent of the equipment buyers in the 11 States in which it is prin. cipally circulated; said magazine is not circulated to 93 percent of heavy construction buyers based on the number of such buyers or to 98 percent thereof based on volume of purchases in said 11 States; and the average monthly paid circulation and average monthly distribution of respondent's magazine during the last 6 months of 1937 and the first 6 months of 1938 were much less than given in respondent's authorized statements as set forth in paragraph 5 hereof. All of the statements and representations made by respondent as hereinabove alleged are in fact inaccurate and greatly exaggerated.

PAR. 7. The aforesaid acts and practices used by respondent in connection with the offering for sale and sale of advertising space in his said magazine have had, and now have, the tendency and capacity to mislead purchasers and prospective purchasers thereof into the erroneous and mistaken belief that such representations, as herein found, are true, and to induce them to purchase the advertising space in respondent's said publication on account thereof. Thereby trade is unfairly diverted to respondent from competitors engaged in the sale in commerce between and among the various States of the United States and in the District of Columbia of advertising space in magazines and other publications circulated in commerce among and between the various States of the United States and in the District of Columbia. There are among the competitors of respondent those who in the sale of advertising space in magazines and other publications do not similarly or in any manner misrepresent the volume or character of their circulation or matters pertaining thereto. As a result of respondent's said practices, as herein set forth, substantial injury has been and is now being done by respondent to competition in commerce between and among the various States of the United States. CONCLUSION The aforesaid acts and practices of respondent as herein found are all to the prejudice and injury of the public and of respondent's compc:>titors and constitute unfair methods of competition in commerce and FELLOM PUBLISHING CO. 395 as1 Ordet· 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- ~ion upon the complaint of the Commission and the answer of respond~ ent, in which answer re..o;;pondeut admits all of the material alle~ations of fact set forth in said complaint, and states that he waives all intervening procedure and further hearing as to said facts, and the Commission having made its findings as to the said facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent Roy Fellom, individually or doing business under the name and style of the Fellom Publishing Co., or any other name, his representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale and sale of advertising space in the magazine now designated "Pacific Road Builder and Engineering Review," whether published under that name, or any other name, and in connection with the offering for sale, sale and distribution of said magazine in commerce, as commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing directly or by implication: 1. That said magazine is circulated only among equipment buyers and has no substantial circulation among nonbuyers of equipment. 2. That a survey has been made of the equipment buyers in the area in which said magazine is principally circulated unless an accurate and dependable survey of such buyers has in fact been made by some qualified agency.

3. That advertisers in said magazine reach, through the medium of said magazine, substantially all of the road building and other heavy equipment buyers located in the area in which the magazine is principally circulated.

4. That said magazine is circulated among 93 percent of the equipment buyers located in the area in which it is principally circulated or among 98 percent of such buyers based on volume purchases or among any percentage or number of such buyers greater than the percentage or number among which it is actually circulated. 5. That the average monthly net paid circulation or average monthly distribution of said magazine is greater in number than the actual net paid circulation or the average monthly distribution. It is further ordered, That the respondent shall, within 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.

Syllabus 31 F. 'I'. C.