Gordon Foods, Inc.

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IN THE Matrer OF •I GORDON FOODS, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 1i OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 4-f38. Complai-nt, Dec. 31, 1940--Decision, June 13, 1941 Where a corporation engaged in the competitive interstate sale and distribution of food products including assortments of nuts, which were so packed and assembled as to involve the use of games of chance, gift enterprises, or lottery schemes when sold to the consuming public, and included, as typical, a display card with twenty-sev.::'n 5-cent packages of nuts each, three of which, however, concealed within them a printed slip of paper bearing . the word "free" and were without cost to purchasers procuring same; Sold such assortments to jobbers a~d, directly or indirectly, to retailers, by whom they were exposed and sold In accordance with said plan, involving game of chance to procure without cost, package of nuts, and thus supplied to and placed in the hands of others means of conducting lotteries in the .sale of its products, contrary to established public policy of the United States Government, and In competition with many who, unwilling to sell their products by such ·or any method contrary to public policy, refrain therefrom;

With result that many persons were attracted by its said sales plan and the element of chance involved therein and were thereby induced to buy and sell its products in preference to those of ~ts said competitors, and with tendency and capacity to divert trade unfairly to it from them: Held, That such acts and practices were all to the prejudice and injury of the public and its competitors, and constituted unfair methods of competition in commerce and unfair acts and practices therein. Air. J. W. Brookfield, Jr. for the Commission . . Mr. Clarence H. Oalhown, of Atlanta, Ga., for respondent. Complaint Pursuant to the provisions of the Federal Trade Conunission Act and by virtue of the authority vested in it by said act, the Federal Trade Commission, having reason to believe that Gordon Foods, Inc., 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 interest of the public, hereby issues its complaint, stating its charges in that respect as follows:

PARAORA.Pn 1. Respondent Gordon Foods, Inc., is a corporation organized and doing business under and by virtue of the laws of the State of Georgia ...with its principal office and place of business located at 1075 Sylvan Road SW., Atlanta, Ga. Respondent is now Complaint and has been for more than 1 year last past engaged in the sale and distribution of food products to jobbers and retail dealers located in the various States of the United States a.nd in the District of Columbia. Respondent causes, and has caused, its products when sold to be shipped and transported from its aforesaid place of busi· ness in the State of Georgia to purchasers thereof at their respective points of location in the various other States of the United States and in the District of Columbia. There is now and has been for more than 1 year last past a course of trade by said respondent in such food products 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 a.nd with individuals and partnerships engaged in the sale and distribution of like or similar products 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 sells and distributes, and has sold and distributed, assortments of nuts so packed and assembled as to involve the use of games of chance, gift enterprises, or lottery .schwnes when sold and distributed to the purchasing and consuming public. One of said assortments consists of 27 packages of nuts mmu1ted on a display card bearing the legend TRY YOUR LUCK.

You May Get a Free Package.

and distributed in the following manner:

The said packages of nuts retail at the price of 5 cents each, but three of said packages have within the wrapper or package a printed slip of paper bearing the word "Free" and thereby advising the purchaser thereof that the said package of nuts is given to him without cost. The said printed slips of paper are effectively concealed from purchasers and prospective purchasers until said packages have been opened and the said slips removed therefrom. The purchasers who procure said packages containing said printed slips thus procure the same without cost rather than at the regular retail price of 5 cents each. The fact as to whdher the purchasers of said packages of nuts in said assortment procure the same without cost or pay the rrgular price of 5 cents each therefor, is thus determined wholly by lot or chance.

The respondent sells and distributes and has sold and distributed various assortments of food products involving a lot or chance fea- GORDON FOODS, INC. 249 247 Findings ture, but such assortments are similar to the one hereinabove described and vary only in detail.

PAR. 3. Retail dealers who purchase respondenes said packages of nuts, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent thus supplies to, and places in the hands of, others the means of conducting lotteries in the sale of its products in accordance with the sales plan hereinabove set forth. The use by respondent of said sales plan or method in the sale of its products and the sale of said products 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 packages of nuts to the purchasing public by the method or plan hereinabove set forth involves a game of chance or the sale of a chance to procure packages of said nuts without cost. Many persons, firms, and corporations who sell and distribute products 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 any other method which is contrary to public policy and such competitors refrain therefrom. Many persons are attructed by said sales plans or method employed by respondent in the sale and distribution of its products and by the element of chance involved therein and are thereby induced to buy and sell respondent's products in preference to products of said competitors of respondent who do not use the same or equivalent methods. The use of said methods by respondent because of said game of chance has a tendency and capacity to, and does, unfairly divert trade in co_rnmerce between and among the various States of the United States and in the District of Columbia to respondent from its 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 respondent to competition in commerce between and among the various States of the United States and in the District of Columbia. PAn. 5. Thf3 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 in commerce within the intent and meaning of the Federal Trade Commission Act. REPORT, FINDINGS As TO THE FACTs, AND Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on the 31st day of December 1940 250 FEDERAL TRADE C0~IMISSION DECISIONS Findings issued, and on January 2, 1941, served, its complaint in this prdceed~ ing upon respondent, Gordon Foods, Inc., 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. On January 21, 1941, the respondent filed its answer in this proceeding. Thereafter, a stipulation was entered· into whereby it was stipulated and agreed that a statement of facts signed and executed by the respondent through its counsel, Clarence H. Calhoun, and by W. T. Kelley, Chief Counsel for the ·Federal Trade Commission, subject to the approval of the Commission, maj.· be taken as the facts in this proceeding and in lieu of testimony in support of the charges stated in the complaint, or in opposition thereto, and that the said Commission may proceed upon said statement of facts to make its report, stating its findings as to the facts and its conclusion based thereon and enter its order disposing of the proceeding without the presentation of argument or the filing of briefs. The respondent also ·waived the filing of a report upon the evidence by a. trial examiner. Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, answer 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 conclusion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Gordon Foods, Inc., is a corporation organized and doing business under and by virtue of the laws of the State of Georgia with its principal office and place of business located at 1075 Sylvan Road SW., Atlanta, Ga. Respondent is now and has been for more than 1 year last past engaged in the sale and distribution of food products to jobbers and retail dealers located in the various States of the United States and in the District of Columbia. Respondent causes, and has caused, its products, when sold, to be shipped and transported from its aforesaid place of business in the State of Georgia to purchasers thereof at their respective points of location in the various other States of the United States and in the· District of Columbia. There is now and has been for more than 1 year last past a course of trade by said respondent in such food products 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" GORDON :FOODS, L~C. 251 247 Findings and partnerships engaged in the sale and distribution of like orsimilar products 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 sells and distributes, and has sold and distributed, assortments of nuts so packed and assembled as to involve the use of games of chance, gift enterprises, or lottery schemes when sold and distributed to the purchasing and consuming public. One of said assortments consists of 27 packages of nuts mounted. on a display card bearing the legend TRY YOUR LUCK.

You l\Iay Get a Free Package.

and distributed in the following manner:

The said packages of nuts retail at the price of 5 cents each, but three of said packages have within the wrapper or package a pri.I~.ted. slip of paper bearing the word "Free" and thereby advising the purchaser thereof that the said package of nuts is given to him without cost. The said printed slips of pap€r are effectively concealed from purchasers and prospective purchasers until said packages have been opened and the said slips removed therefrom. The purchasers who procure said pack~ges· containing said printed slips thus procure the same without cost rather than at the regular retail price of 5 cents each. The fact as to whether the purchasers of said packages of nuts in said assortment procure the same without cost or pay the regular price of 5 cents each therefor, is thus determined wholly by lot or chance.

PAR. 3. Retail dealers who purchase respondent's said packages of nuts, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent thus supplies to, and places in the hands of, others the means of conducting lotteries in the sale of its products in accordance with the sales plan hereinabove set forth. The use by respondent of said sales plan or method in the sale of its products and the sale of said products 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. PAR. 4. The sale of packages of nuts to the purchasing public by the method or plan hereinabove set forth involves a game of chance or the sale of a chance to procure packages of said nuts without cost. Many persons, firms, and corporations who sell and distribute prod- Order 33F.T.C.

ucts in competition with respondent, 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 which is contrary to public policy and such. competitors refrain therefrom. Many persons are attracted by said sales plans or method employed by respondent in the sale and distribution of its products and by the element of chance involved therein and are thereby induced to buy and sell respondent's products in preference to products of said competitors of respondent who do not use the same or equivalent methods. The use of said methods by respondent because of said game of chance has a tendency and capacity to unfairly divert trade in commerce between and among the various States of the United States and in the District of Columbia to respondent from its said competitors who do not use the same or equivalent methods.

CONCLUSION The aforesaid acts and practices of the respondent as herein found 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 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 the respondent, and the stipulation as to the facts entered into between the respondent herein and w·. T. Kelly, Chief Counsel for the Com-mission, which provides, among other things, that without further evidence or other intervening procedure, the Commission may issue and serve upon the respondent herein findings as to the facts and conclusion based thereon and an order disposing of the proceeding, and the Commission having made its findings as to the facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, Gordon Foods, Inc., a corporation, its officers, represantatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of nuts, nut products, or other merchandise, in commerce, as commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Selling or distributing nuts, nut products, or any other merchandise so packed and assembled that sales of such nuts, nut products, GORDON FOODS, INC. 253 247 Order or other merchandise, to th~ general public are to be made, or may be made, by means of a game of chance, gift enterprise, or lottery scheme.

2. Supplying to or placing in the hands of dealers, or others, assortments of packages of nuts, nut products, or other merchandise which are to be used, or may be used, to conduct a lottery, gaming device, or gift enterprise in the sale or distribution, of such nuts, nut products, or other merchandise to the public.

3. Packing or assembling in the same assortment packages of nuts, nut products or other merchandise for ultimate sale to the public, which individual packages of nuts, nut products or other merchandise are of uniform appearance, but some of which contain coupons or slips entitling the purchaser to receive such packages without cost. 4. Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme. It is fwrther 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.

435526m--42--vol.33----17 254 FEDERAL TRADE CO:MMISSION DECISIONS Syllabus 33F.T.C.