Robert A. Johnston Co

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF ROBERT A. JOHNSTON COl\IP ANY (COMPLAINT, FINDINGS, AND ORDER l:il REGARD TO THE ALLEGED VIOLATION OF SEC. 15 OF AN ACT OF CO~GRESS APPROVED SEPT. 26, 1914 Docket ..po.t,. Complaint, Apr. 23, 1940-Dccision, Sept. 5, 1!1.~0 Where a corporation engagt>d in mnnufadur<> ll! ('l11Hly, nnd in t.<nle nnd • distribution of certain asf'ortmcnts thel·eof which were so pncked aud a~embled as to Involve use of a game of chance, gift enterprise, or lottery scheme when sold and distributed to consumers thereof, and one of which included number of boxes or packages of candy and additional article of merchandise, together with pun('hboard for u;;e In distribution Qf sneh pac·kages to consumers under-r a plan, and in accord1l11ce with board'f:l explanatory lE-gend, by which 5-cent purchaser of chance received, in accordance with pa1tlrular number>r secure>d by dHHlCP, ns case might be, basket of candy, specific>d box thereof, 2-ponnrl box or 1-pound box, or 25-rent pu('kage, find In accorrlance with whlc·li, furthl'r, last five punches in each 81'Ction into which board was divided Wt'l'e frel', person ~ll'ctlng last number on board received additlonal·article of merchandise, and persons who did not pun(·h numbers designated as above indieatt>d, recein'd nothing for their mont>y~ :Sold ,such as;;:ortments, along with said punchbonrd><, to dealer and retailer pureha~rs, by latter of wl)om, as direc·t or Indirect buyers thereof, assort· ments in "!_question we1·e I'X})()Sf'rl nnd sold to purchasing public in accordance with such sales plan;:; Ol' method;;, and ti1ereby supplied tol nnrl pla<'ed in the bands of others means of conducting lotterie"' in sole rtud distribution of itif ('fllldy in ac<'ordance with pinus or methods aho\·e spt forth, hn·olving game Qf chauee ot· sale of a dl!Jn('f' to pn)(·m·e p:ll'kagP ot· hox of cnndy llt price much less than normal retoil price> thert'Of, contrary to nn e;.tablished public policy of the United States Govemm!'nt and in violation of criminal laws, and in competition with many who are unwilling to adopt and use !'lllid or any soles plans or methods involving game of chance or sale of a chance to win something by chance, or any other pinus or m!'thods contrary to public policy, and refrain that·efrom;

·with result that many deniers in and ultimate purchasers of snld or like or !'dmllo r !'andy wPr!' attract!'d by sales plans or methods employed by It In sale and dls1 ribution of Its said products and Pll'ment of chance involved therein, and were thereby induced to buy its met·chnndlse ln preference to that offered and sold by competitors aforesaid, who did not and do llot use same or equi~alent sales plan~ or mpthods, and with effect, through use of said plans or methods and bpcause of said gnmes of chance, of unfairly di,·erting trade from its said competitors who did not use such or equivalent plans or methodf:l; to the substantial injury of competition in commerce: Jleld, That such acts and practices, under the circumstances set forth, were all to the prejudice and Injury of the public and competitors, and constitut!'d unfair methods of competition In commerce and unfnlr and d!'C('ptive nets and practices therein .

.lfr. D. C. Daniel for the Commissi<>n .

.J.llr.lra .Vilt&n J011es, of Milwaukee, "'is., for respondent. Complaint 31 F. 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 Robert A. Johnston Co., a corporation, hereinafter referred to as respondent, has 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, Robert A. Johnston Co. is a corporation organized and doing business under the laws of the State of \Visconsin, with its principal office and place of business located at 4023 1Vest National Avenue, Milwaukee, \Vis. Respondent maintains a branch office at 437 Eleventh Avenue, New York, N.Y. Respondent is now and for more than 1 year last past has been engaged in the manufacture of candy and in the sale and distribution thereof to dealers. Respondent causes and has caused said candy, when sold, to be shipped or transported from its aforesaid places of businet?s in the States of Wisconsin and New York to purchasers thereof in the .arious otb.er States of the United States and in the District of Columbia at their respective points of location. There is now and for more than 1 year last past has been a course of trade by said respond- Pnt 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 its business, respondent is and has been in competition with other corporations and with individuals and partnerships 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 alleged in paragraph 1 hereof, respondent sells and has sold certain assortments of said candy so packed and assembled as to involve the use of a game of chance, gift enterprise, or lottery scheme when said candy is sold and distributed to the consumers thereof. One of said assortments consists of a number of boxes or packages of candy, and an additional article of merchandise, together with a device commonly called a punchboard. Said packages of candy are distributed to the c.onsumers thereof by means of said punchboard in substantially the following manner: Sales are 5 cents each. Said punchboard is divided into sections and each section contains a number of small sealed tubes in each of which is concealed a slip of paper with anumber printed thereon. The board bears statements or legends inform- ROBERT A. JOHNSTON CO. 853 851 Complaint ing purchasers and prospective purchasers that the person selecting a certain designated number, receives a basket of candy; that persons selecting certain other designated numbers, each receive a specified box of candy; that persons selecting other designated numbers each receive a 2-pound box of candy; that persons selecting certain other designated numbers each receive a 1-pound box of candy; that persons selecting certain other designated numbers each receive a 25-cent package of candy; that the last five punches in every ?ection of said board are free; that the person selecting the last number on the said • board receives said additional article of merchandise. Persons who do not punch said designated numbers receive nothing for their money. The said numbers are effectively concealed from purchasers and prospective purchasers until said slips of paper have been punched or removed from said board. The facts as to which of said packages or boxes of candy a purchaser is to receive, if any, and whether such package is without cost are thus determined wholly by lot or chance.

The respondent sells and distributes and has sold and distributed various assortments of said candy, together with punchboards and push cards, but all of said assortments of candy are sold and distributed to the consuming public by means of sales plans or methods similar to the one hereinabove described, varying only in detail. PAR. 3. Retail dealers who purchase respondent's said assortments of candy, either directly or indirectly, expose and sell the same to the purchasing public in accordance with the aforesaid sales plans or methods. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale and distribution of its candy in accordance with the sales plans or methods hereinabove set forth. 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 criminal laws. PAR. 4. The sales of candy to the purchasing public in the manner above alleged, involves a game of chance or the sale of a chance to procure a package or box of candy at a price much less than the normal retail price thereof. Many persons, firms, and corporations who sell or distribute merchandise in competition with respondent, as above alleged, are unwilling to adopt and use said sales plans or methods or any sales plans or methods involving a game of chance or the sale of a chance to win something by chance or any other sales plans or methods that are contrary to public policy and such com- Findings 31 F.T.C.

petitors refrain therefrom. :Many dealers in and ultimate purchasers .of said candy or like or similar candy, are attracted by said sales plans or methods employed by respondent in the sale and distribution .of its candy, and the elt>ment of chance involved therein and are tht>reby induced to buy respondent's merchandise in preference to merchandise offered for sale and sold by said competitors of respondent who do not use the same or equivalent sales plans or methods. The use of said sales plans or 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 not use the same or equivalent sales plans or methods, and as a result thereof, substantial injury is being and has been done by respondent 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 o£ respondent as herein alleged, 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.

REPORT, FINDINGS AS TO THE FAG'TS, AND 0RDEI! Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on April 23, 1940, issued and subsequently served its complaint in this proceeding upon respondent, Robert A. Johnston 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. Respondent filed no answer in this proceeding. Thereafter, a stipulation was entered into whereby it was stipulated and agreed that a statement of the facts filed and executed by Ira Milton Jones, counsel for respondent, and ,V, T. Kelley, chief counsel for the Federal Trade Commission, may be taken as the facts in this proceeding and in lieu of testimony, and that respondent waived all hearings and other intervening procedure. Thereafter this proceeding regularly came on for final hearing before the Commission on said complaint and stipulation, said stipulation having been approved, accepted and filed, and the Commission having duly considered the same and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes its findings as to the facts and its o('Oilclusion dmwn then•from.

ROBERT A. JOHKS'l'O:X CO. 855 831 Findings FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Robert A. Johnston Co. is a corporation organized and doing business under the laws of the State of \Visconsin, with its principal office and place of business located at 4D-23 \Vest ~ational An•nue, Milwaukee, \Vis. Respondent maintains a branch office at 437 Eleventh Avenue, New York, N. Y. Responde>nt is now and for more than 1 yE>ar last past has been engaged in the mann facture> of candy and in the sale and distribution thereof to dealers. •Respondent causes and has caused said candy, when sold, to be shipped or transported from its aforl'said places of business in the States of ·wisconsin and New York to purchasl'rs thereof in the various other States of the United Statl's and in the District of Columbia at their rl'spective points of location. There is now and for more than 1 year last past has been a course of trade by said 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 its business, respondent is and has been in competition with other corporations and with individuals and partnerships 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 has sold certain assortments of said candy so packed and assembled as to involve the use of a game of chance, gift Pnterprise, or lottery scheme when said candy is sold and distributed to the consumers thereof. One of said assortments consisted of a number of boxes or packages of candy, and an additional article of merchandise, together with a device commonly called a punchboard. Said packag-es of candy were distributed to the consumers thereof by means of said punchboarcl in substantially the following manner: Sales were 5 cents each. Said punchboard was divided into sections and each section contained a number of small sealed tubl's in each of which was concealed a slip of paper with a number printed thereon. The board contained statements or legends informing purchasers and prospective purehasers that the person selecting a certain designated number, receivl'd a basket of candy; that persons selecting certain other designated numbers, each received a specified box of candy; that persons selecting other designated nmnbl'rs each receiwd a 2-pound box of candy; that persons selecting certain other designated numbers each received a 1-pound box of candy; that persons sell'acting certain other designated numbers each received a 25-cl'nt package of candy; that the last five punchl's in evl'ry section of said board wer£>. free; that the plrson selPding the last number on the said board rl'ceiwd said addi- 2!lU:>tG'" 41 \'OI. 31 iii 856 FEDERAL TRADE COMMISSIOK DECISIONS Findings 31 F. T. C. tional article of merchandise. Persons who did not punch said designated numbers received nothing for their money. The said numbers . were effectively concealed from purchasers and prospective purchasers until said slips of paper had been punched or removed from said board. The facts as to which of said packages or boxes of candy a purchaser was to receive, if any, and whether such package was without cost were thus determined wholly by lot or chance. PAR. 3. Retail dealers who purchased respondent's said assortments of candy, either directly or indirectly, exposed and sold the. same to the purchasing public in accordance with the aforesaid sales plans or methods. Respondent thus supplied to and placed in the hands of others the means of conducting lotteries in the sale and distribution of its candy in accordance with tllP sales pluns or methods hereinnlxwe set forth. The nse by respondent of said sales plans or methods in tlle 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 was and is a practice of a sort which was and is contrary to an established public policy of the Government of the United States and in violation of criminal laws.

PAR. 4. The sales of candy to the purchasing public in the manner above found involved a game of chance or the sale of a chance to procure a package or box of canuyi at a price much less than the normal retail price thereof. Many persons, firms, and corporations who have sold or distributed merchandise in competition with respondent, as above found, were and are unwilling to adopt and use said sales plans or methods or any sales plans or methods inyoh·ing a game of chance or the sale of a chance to win something by chance or any other sales plans or methods that are contrary to public policy and such competitors refrain therefrom. Many dealers in aml ultimate purchasers of said candy or like or similar candy, were attracted by said sales plans or methods employed by respondent in the sale and distribution of its candy, and the element of chance involved therein and were thereby induced to buy respondent's merchandise in preference to mercha.nuise offered for sale and sold by said competitors of respondent who did not and do not use the same or equivalent sales plans or methods. The use of said sales plans or methods by respondent berause of said game of chance, had a tendency and capacity to, and did, unfairly divert trade to respondent from its said competitors who di<lnot use the same or equivalent sales plans or methods, and as a result therpof. substantial injury has been done by respondent to competition in commerce between and among the Yarions States of the Fnited States and in the District of Columbia.

ROBERT A. JOHNSTON CO, 857 8Gl Onlet· PAR. 5. Respondent discontinued the sale of lottery assortments of candy as hereinabove found on or about December 1, 1939, upon receipt of inquiry from the Federal Trade Commission as to the nets and practices being engaged in by respondent.

COXCLU:>IOX The aforesaid acts and practices of respondent as herein found, are all to the prejudice and injury of the public and of respondent's com- ..petitors 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 Tra<.le Commission Act. ORDER TO CEASE AND DESIST This procee<.ling having been heard by the Federal Trade Commission upon the complaint of the Commission (respondent having filed no answer) and a stipulation as to the facts entered into between the. respondent herein and ,V, T. Kelley, chief counsel for the Commission, which provides, among other things, that the respondent waives all hearings and other intervening procedure, and the Commission haying made its findings ns to the facts and. conclusion that said respondent has violate.d the provisions of the Fe<.leral Trade Commission Act. It i8 ordered, That the respondent, Robert A. Johnston Company, 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 nwrchandise in commerce as "commerce" is defined in the Fed~.>ral Trade Commission Act, do forthwith cease and desist from : 1. Selling or distributing any merchandise so packed and asSi'n1bl!-'rl that sales of said merchandise to the general public are to be made ot· may be made by means of a lottery, gaming device, or gift enterprise. 2. Supplying to or placing in the hands of others any merchandise, together with push or pull cards, punchboards, or any other.r devices, which said push or pull cards, punchboards or other devices are to be used or may be used in selling or distributing said merchandise to the general public by means of a game of chance, gift enterprise, or lottery scheme.

3. Supplying to or placing in the hands of others push or pull cards, punchboards or other devices either with assortments of merchandise or separately, which said push or pull cards, punchboards or other devices are to be used or may be used in selling or distributing saill merchandise to the general public by means of a game of chance, gift enterprise, or lottery scheme.

858 FEDERAL TRADE COMMISSION DECISIOXS Order 31 1•'. 1'. c. 4. Selling or othet=wise distributing any merchandise by means of a game of chance, gift enterprise, or lottery scheme. It is further ordered, That the respondent shall within 60 days after service upon it of this order file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with this order.

CANADIAN FC'R TRAPPERS CORP. ET AL. 859 S~·llnlms