David Kritzik, trading as General Merchandise Company

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IN THE MATTER OF DAVID KRITZIK, TRADING AS GENERAL MERCHANDISE COMPANY COl!PLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPHOVED SEPT. 20, 1914 Docket 3780. Complaint, May 2, 1939-Decision, Apr. 3, 1941 'Vhere an Individual engaged In conducting a premium and novelty business, and In competitive interstate sale and distribution of blankets, radios, cigarettes, candies, and other articles of merchandise ; Furnished to purchasers various devices and plans of merchandising which involved operntion of games of chance, gift enterprl~e, or lottery schemes for sale and distribution of articles concerned to ultimate consumers by lottery and chance, including, as lllustrative and typical, assortments consisting of (1) two blankets and a punchboard for use in selling and distributing said products under a plan by which purchasers securing from the 1CO numbers secreted in the board, the two numbers corresponding to those In holes designated as grand prize became entltlt>d to and received said blankets, others received nothing other than privilege of a punch, and cost of punch was determined by figures contained on slip of paper secured from bole selected; (2) twelve key holders equipped with dry cell and bulb, embedded in the . upper portion of punchboard, secured by those selecting from the 400 covered buies, for the five cents paid, numbers corresponding to those displayed in connection with each of said twelve key holders, others receiving nothing . for their money; and· (3) a miniature radio, with a llo·hole puncbboard, with ten punches free and prices of remaining 100 varying from 1 cent to 22 cents, as determined by slip secured, person punching out a certain number receiving said radio and others receiving nothing; and thereby Placed in the hands of uthers varloas devices for the distribution of his merchandise by means of a game of chance, gift enterprise, or a lottery, contrary to the established public policy of the United States Government and in competition with others who are unwilling to and do not use in the distribution of their product any method involving chance ; With result, as consequence of its said methods, that trade was unfairly diverted to him from such competitors:

Held, That such nets and practice~ were all to the prejudice and Injury of the public, and competitors, and constituted unfair methods of competition in commerce, and unfair and deceptive acts and practices therein. Before Mr. Miles J. Furnas, trial examiner. Air. L. P. Allen, Jr., Mr. D. 0. Daniel and Mr. J. W. Brookfield, Jr., for the Commission.

Weinstein & Kline, of Milwaukee, "\Vis., for respondent. 1110 FEDER.All TRADE COMMISSION DECISIONS Complaint 32F.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 David Kritzik, individually and trading as General :Merchandise Co., 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 interest of the public, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent David Kritzik is an individual trading as General Merchandise Co., with his principal office and place of business located at 843 North Third Street, Milwaukee, Wis. Respondent is now, and for s9me time last past has been, engaged in the sale and distribution of blankets, radios, cigarettes, candy, and other articles of merchandise in commerce between and among 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 his aforesaid place of business in ·wisconsin 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 ;merchandise 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, respondent is, and has been, in competition with other individuals and with partnerships and corporations engaged in the sale and distribution of like or similar articles of merchandise in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the sale and distribution of his said merchandise, as described in paragraph 1 hereof, respondent :furnishes and has furnished various devices and plans of merchandising which involve the opera~ tion of game~ of chance, gift enterprises, or lottery schemes, by which said merchandise is sold and distributed to the ultimate consumers thereof wholly by lot or chance. One of respondent's assortments substantially illustrates the sales plan or method used in the sale or distribution of his merchandise to the purchasing public, and is as follows:

This assortment consists of two blankets, together with a device commonly called a punchboard. The punchboard contains 100 holes into which have been inserted slips of paper and on one side of said slips of paper is printed the amount the purchaser is to pay for the GENERAL MERCHANDISE- CO. llll 1109 Complaint privilege of making the punch. These amounts rang~ from 1 cent to 22 cents. On the other side of said slips of paper is printed a number which entitl~s the holder thereof to one of the blankets if it corresponds with either of the numbers punched from the two holes designated as "Grand Prize." The slips of paper inserted into the holes designated "Grand Prize" are not punched out until all the 100 chances on said board are sold. Purchasers punching numbers from the board that do not correspond with the numbers on the slips of paper in the holes designated "Grand Prize" receive nothing for their money other than the privilego of making a punch. The numbers are effectively concealed from purchasers and prospective purchasers until a punch has been made and the particular punch separated from the board. The said merchandise is thus distributed to the purchasers of said punche~ from said board wholly by lot or chance.

Respondent sells and distributes, and has sold and distributed, vari.ous assortm,~nts of his said merchandise and furnishes, and has furnished, various devices for the distribution of such merchandise by means of a game of chance, gift enterprise, or lottery scheme. Such plans or methods vary in detail but the above-described plan or method is illustrative of the principle involved. . ' PAR. 3. The dealers or purchasers to whom respondent furni"sh~~ said punchboards use the same in selling and distributing respondent's said merchandise in accordance .with the aforesaid sales plan. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of its merchandise in accordance with the sal~s plan hereinabove set forth. The use by respondent of said method in the sale of his merchandise and the sale of such .merchandise by and through the use thereof and by the aid of said method is a practice of the sort which is contrary to an established public policy of the Government of the United States and in violation of the criminal laws.

PAn. 4. The sale of merchandise to the purchasing public in tha manner above alleged involves a game of chance or the sale of a chance to procure an article of merchandise at a price much less than 'the normal retail price thereof. 1\lany persons, firms, and corporations, who sell or distribute merchandise in competition with the respondent as above alleged, are unwilling to adopt and use said mrthod or any method involving a game of chance or the sale of a chance to win something by ch!lnce, or any other method that is contrary to public policy and such competitors refrain therefrom. Many persons are attracted by said sales plan or method employed by respondent in the sale and distribution of his merchandise and the element of chance involved Findings 32F.T.C.

therein, and are thereby induced to buy and sell respondent's merchandise in preference to merchandise 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, has a tendency and capacity to, and does, unfairly divert trade to respondent from his said competitors who do not use the same or an equivalent method, 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.

P .AR. 5. The aforesaid acts and practices of 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 iri 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 the 2d day of May, A. D. 1939, issued and thereafter served its complaint in this proceeding upon the respondent, David Kritzik, charging him with the 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 o£ respondent's answer thereto, testimony and other evidence in support of the allegations of the complaint were introduced by L. P. Allen, Jr., D. C. Daniel, and J. '"'· Brookfield, -Jr., attorneys for the Commission, and in opposition to the allegations of the complaint by Maurice Weinstein, attorney for respondent, before Miles J. Furnas, a duly appointed trial examiner of the Commission. Said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on said complaint, the answer thereto, the testimony and other evidence, and briefs in support of the complaint and in opposition 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 its findings as to the facts and its conclusion drawn therefrom. GENERAL MERCHANDISE CO. 1113 1109 Flndlngs FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, David Kritzick, is an individual trading as General Merchandise Co. and having his principal place of business at 843 North Third Street, Milwaukee, Wis. PAn. 2. Respondent, for more than 1 year prior to the issuance of the complaint herein was, and now is, engaged in conducting a premium and novelty business, and in the sale and distribution of blankets, radios, cigarettes, candies, and other articles of merchandise in commerce between and among various States of the United States and in the District of Columbia. Respondent causes said products, when sold, to be transported from his said place of business to purchasers thereof in various States of the United States at their respective points of location.

PAR. 3. Respondent, in the sale and distribution of his merchandise as described in paragraph 2 hereof, furnishes and has furnished to the purchasers thereof various devices and plans of merchandising which Involve the operation of games of chance, gift enterprises, or lottery schemes, by means of which said articles of merchandise are sold and distributed to the ultimate consumers thereof wholly by lot or chance. Typical of the methods so used by the respondent are the following :

{a) One of respondent's assortments consists of two blankets, together with a device commonly called a "punchboard." This punchboard has two small covered holes, each of which is designated "Grand Prize," and effectively concealed within which is a slip of paper on which a number is printed; below these are ranged one hundred small covered holes for which punches are to be sold, each containing a slip of paper, on one side of which is printed a number and on the other side the amount in cents to be paid for the punch, which ranges from 1 cent to 22 cents; if the number on the slip corresponds to that in one of the holes designated as "Grand Prize;" it entitles the holder to one of the blankets. 'With the exception of the two thus acquiring the award, the purchasers of the right to punch receive nothing for their expenditure but the privilege of punching. The number and cost of the punch appearing on each of the slips are effectively concealed until the punch has been made and the slip removed, and the numbers printed on the slips within the holes marked "Grand Prize" are not disclosed until all of the 100 holes have been punched.

(b) Another of respondent's assortments consists of 12 keyhold~rs termed "keyglos,'' each of which is equipped with a dry cell and a FEDERAL TRADE 'COMMISSION DECISIONSiil4 Order 32F.T.O;

bulb which lights up when coritact is made. These keyholders are imbedded in the upper portion of the punch board, ·and under. each app,ears a number. In the lower portion of the board are 403 covered holes, each containing a number which is revealed when. the hole is punched, a charge of 5 cents each being made for the right to punch. 1fhe persons punching a hole containing a number corresponding to akeyglo number receives the key holder as a prize. The purchasers punching holes which do not contain a number corresponding to a keyglo number, receive nothing for their money. (c) Another of respondent's assortments consists of a miniature radio, together with a punchboard. This punchboard has 110 covered holes, 10 of which are free; the price of the remaining 100 punches varies from 1 cent to 22 cents each, according to the price indicated. There is but one prize-the radio, and only the purchaser who punches out the number which calls for this award receives anything for the money expended.

Various other schemes of like character for merchandising his products are advertised in respondent's catalogue. PAR. 4. Respondent; by his sales methods here·inbefore described, places in the hands of others various devices for the distribution of his merchandise by means of a game of chance, gift .enterprise, or lottery; and respondent's said sales methods are contrary to the established public policy of the Government of the United States. PAn. 5. During all of the time herein mentioned respondent has been in competition with other dealers in merchandise of a like or similar character who are engaged in commerce between and among various States of the United States and who are unwilling to use,. and do not use, in the distribution of their merchandise any method involving a game of chance, gift enterprise, or lottery scheme; and ns a result of respondent's said methods, trade has been unfairly diverted from such competitors to the respondent. CONCLUSION The aforesaid acts and practices of the respondent 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 Commission upon the complaint of the Commission, the answer of re- GENERAL MERCIHNDISE CO. 1115 uog · .Qrder spondent, testimony and other evidence taken before Miles J. Furnas, an examiner of the Commission theretofore duly designated by it, in support of the_ allegations of said complaint and in opposition thereto, briefs filed herein, oral·argument not having been requested, and the Commission having made its findings as to the facts and the conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, David Kritzik, individually and trading as General Merchandise Co., or frading under any other name or names, his representatives, agents, and employees, directly or through any corporate or other device in connection with the offering for sale, sale and distribution of blankets, radios, keyholders or any other merchandise in commerce, as commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from: · 1. Supplying to or placing in the hands of others any merchandisb together with punchboards, push or pull cards or other lottery devices, which said punchboards, push or pull cards or other lottery devices are to be used, or may be used, in selling or distributing such merchandise to the public. ' 2. Supplying to or placing in the hands of others, punchboards, pu:>h or pull cards, or other lottery devices, either with assortments of merchandise or separately, which said punchboards, push or pull cards, or other lottery devices, are to be used, or may be used, in selling or distributing such merchandise to the public. 3. Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme. 1 t 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.

CO~fMISSION DECISIONS 1116 FEDERAL TRADE Syllabus 32F. T...