Refrigeration & Air Conditioning Institute, Inc

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IN THE MATTER OF REFRIGERATION & AIR CONDITIONING INSTITUTE, INC. COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3811. Complaint, Oct. 31, 1939 '-Decision, July 11, 191,1 Where a corporation engaged in competitive interstate sale and distribution of a course of study in refrigeration and air conditioning, which consisted primarily of a series of lessons to be pursued at home, followed by a period of shop· training and instruction at its school in Chicago; In advertising, through newspapers of wide circulation and extensively by means of radio programs, for the purpose, primarily, of arousing the interest of prospective purchasers and of causing them to make Inquiries of it for addi· tiona! information, and by oral representations of Its field representatives or agents, through whom it conducted actual solicitation of prospective purchasers- , (a) Represented, directly or by implication, that there was a great and unusual demand for new employees, and that as many as 5,000 or more 11ew employees per year were needed in the refrigeration and air conditioning Industry, that unusual and extraordinary opportunities for employment were open to persons completing its course of study, and that £>mployment in said industry was assured to such persons ;

The facts being that, while th£>re are opportunities for employment In said industry, there is no unusual or extraordinary demand for employees therein, instruction and training in subject being offered also by many other correspondence schools, as well !Is unh·ersities and colleges, and the industry and the trade unions also supplying additional workers; even assuming that the industry could absorb 5,000 new workers a year, it was doubtful, in view of the large number of persons seeking to enter It, that the major portion of its 2,000 annual graduates would be able to obtain employment, and in no event could such graduates be assured thereof; .and (b) Represented that its .said school was under the direction and supervision of the industry and was conducted In cooperation therewith; Facts b(ling that, while it maintained as a part of its organization a group of individuals holding responsible ·positions in the indust:r;y, and known as Its "Board of Governors," which, at bi-monthly meetings, discussed various school matters and offered suggestions and ct·itlclsms, the world of such "Board," generally speaking, was advisory only: it did not undertake to direct or supervise In detail operations of the school, and the companies with which its Individual members were connected fell far short of constituting the entire industry; though occupying prominent places therein; and while certain individuals In the industry had evinced Interest In the school and cooperated with it to a limited extent, there had been no cooperative action by it as such, and no member thereof had contribut£>d in any way to its financial support;

With tendency and capacity to mislead and deceive a substantial portion of the purchasing public, and to cause It, as a result of the erroneous belief thus 1 Amended.

.REFRIGERATION & AIR CO.NDITIONTNG 1Nsri'ITUTE'1 IN'C. 595 594 Complaint engendered,· to purchase its course of study, whereby trade was diverted unfairly to it from its competitors:

Ileld, That such acts and practices, under the circumstances set forth, 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, Mr. Arthrur F. Thomas, and Mr. Johtn W. Addison, trial examiners.

Mr. William L. Pencke for the Commission.

Mr. Richards. Ol-dbm·g, of Chicago, Ill., for respondent. A:MENDFJ> CollfPLAINT 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 Refrigeration & Air Conditioning Institute, 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 public interest, hereby issues its amended complaint, stating its charges in that respect as follows: PARAGRAPH 1. Respondent, Refrigeration & Air Conditioning Institute, Inc., is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of Illinois, with its office and principal place of business at 2150 Lawrence Avenue in the city of Chicago, State of Illinois.

PAR. 2. Respondent is now, and has been for more than 4 years last past, engaged in the sale and distribution in commerce between and among the various States of the United States of courses of study and instruction in the subjects of air conditioning and refrigeration and subjects connected therewith or incident thereto, which said courses of study and instruction are pursued by correspondence through the medium of the United States mail. Respondent, in the course and conduct of said business during the time aforesaid caused and does now cause its said courses of study and instruction together with books and material connected therewith to be transported from its said place of business in Illinois to, into and through States of the United States other than Illinois to the purchasers thereof in such other States.

PAR. 3. During the time above mentioned, other individuals, firms, and corporations in various States of the United States have been and are 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 courses of study and instruction in air conditioning and Complaint 33F.T.O.

refrigeration and in subjects pertaining to various trades, callings, and pursuits and in preparation for work and positions of various kinds, all of which said courses of study and instruction are given and pursued either in whole or in part by means of correspondence through the medium of the United States mail. Respondent has been, during the time aforesaid, in substantial competition in commerce between and among the various States of the United States in the sale of its said courses of study and instruction with such other individuals, firms, and corporations.

PAR. 4. Respondent, in soliciting the sale of and in selling its said courses of study and instruction, has made numerous misleading representations by one or more of the following methods, to wit: through its representatives engaged in soliciting the sale of such courses; in advertising matter caused by respondent to be published in newspapers and magazines circulated among the general public, including prospective students, in various States of the United States; in printed matter circulated by respondent by mail or otherwise to prospective students, enrolled students and others in various States of the United States; in radio broadcasts to members of the public generally. Among such misleading representations made by or through one or more of the said methods are representations that import or imply: 1. That the person solicited has been specially selected to take the ·course offered and that all those solicited and enrolled are specially selected.

2. That jobs are available for students who complete respondent's instruction and that such students are given preference in available jobs by members of the industries involved by actual employment. 3. That laboratory work given at respondent school may be taken by the student upon completion of the home study regardless of whether payments have been made in full.

4. That immediate enrollment is necessary in order to secure the training offered or that opportunity to enroll will not be available later because enrollment will not then be accepted. 5. That starting pay that may be expected by students who finish respondent's course is higher than it is in fact. G. That little previous education is necessary in order to success· fully pursue and finish the course offered or that apparent educational deficiencies will not be a bar thereto.

7. That the manufacturers -\vhose officials have endorsed or commended respondent's course have agreed to give employment to re• spondent's graduates or a large part thereof. 8. That the salesman or other representative of respondent will call back and assist the student solicited in his studies. RE!FRIGERATTON & Alr CONDIT]ONING INSTITUTE, INC. 597 594 Complaint 9. That respondent's so-called Board of Governors, composed o:f 1 officers or employees of certain manufacturers, is in full charge of respondent school; that it is in direct .and actual charge of the work o:f instruction; that it is appointed by and acts on behalf of the industry or the so-called endorsers as a whole; or that its status is other than it is in fact.

10. That the student solicited may elect and arrange to spend extra time at the laboratory of respondent school in addition to that regularly provided.

11. That the manufacturers in the industry whose officers or employees have given letters commending respondent's course actually sponsor the school or contribute financially to the upkeep of the samn or to the cost of instruction.

12. That the size of the institution conducted by respondent is greater than it is in fact; that respondent school occupies the entire space in the buildings depicted in its literature and a:advertisements; and that a certain building so depicted in some of its literature is actually built and in use.

13. That the school operated by respondent was founded by or is operated by the industries involved, or by the concerns whose officials have endorsed the same.

14. That the)ndustries involved absorb and will absorb all of the graduates o£ respondent school or that approximately 5,000 graduates of the school can and will be so absorbed annually. 15. That all the openings for employment arising and existing ann11ally in the industries involved of the kind. for which respondent's training qualifies its students '"ill be filled by graduates of respondent school or that respondent has been authorized by said industries to prepare and furnish men for all of such openings. 16. That all o£ respondent's graduates have found employment in the industries involved.

17. That respondent school does and will obtain jobs for its graduates.

18. That a refund will be made of money paid by students who sign respondent's enrollment blanks if the students are unable to proceed with the training or cannot assimilate the same or that payments will be suspended during unemployment or other events preventing the continuance of payments, or, if"the student uesires to discontinue the rourse after starting, further payments will be canceleu. 19. That the contract caused by respondent to be presented to and signed by prospective students is a mere application for the training offered and not a contract and is merely preliminary and of no further· binding effect on those signing the same.

Compln.int 33 F.T. C. 20. That there is a great demand for men in the industries involved or that the demand is much greater than it is in fact. 21. That respondent school is the only one of the kind having endorsements from manufacturers or their representatives. 22. That by enrolling in respondent school, the student is accepting the chance of a lifetime and that by graduating therefrom his future is assured.

23. That the home study course conducted by respondent is the only one of the kind having shop training in connection therewith. 24. That the training given by respondent qualifies students thereof ns engineers in the fields involved and that by taking respondent's training jobs as engineers can be procured. 25. That the employment opportunities stressed by respondent in its advertising matter and by its salesmen are in the manufacturing plants in the industries involved.

26. That the number of students accepted by respondent is limited to the number of openings for employment in the industries involved and available to those who graduate.

27. That the value or cost of laboratory equipment in respondent school is greater than it is in fact.

28. That transportation cost of the student to and from Chicago for laboratory training is paid by respondent. 29. That a so-called limited quota of enrollments is employed by respondent and applied to restrict the number thereof so that those \tho finally graduate will not exceed the demand for such graduates in the industries involved.

30. That respondent school is the official training agency of the refrigeration and air conditioning industries. 31. That all of certain listed manufacturers had officially endorsed respondent's training.

32. That respondent school solicits and enrolls only a comparatively small number of students.

PAR. 5. Among the statements of respondent in its radio broadcasts, advertising matter or literature, circulated or published at one time or another as aforesaid, which import or imply one or more of the foregoing representations or which encourage such representations by its salesmen or furnish a background therefor, are the following: • • • In fact, in the last three years, Air Conditioning installations have Increased more than FOURTEEN HUNDRED PERCENT! BUT, with this wonderful growth, a serious problem has arisen, for now the Industry finds that there are not enough trained men available to carry on its work. Recent surveys show that from five to seven thousand additional trained men will be needed EVERY Yl!lAR for at least the next 10 years. • • • To meet this deruand a nation· wide training progt·am, officially endorsed and recommended by more than a REFRIGERATION & AIR CON.OITrO!NiNG I'Ns.TITUTE, INC. 599 ..594 Complaint hundred leading manufacturers, is now being carried on, to create the new type rraftsman SO badly needed * * * MEN ARE BEI:NG SELECTED FOR THIS TRAINING NOW! * * * • • • with one or two widely :scattel·ed exceptions every single student who has completed our training, and attended the laboratory in Chicago and received his diploma, has made an immediate and highly satisfactory connection in this industry • • * * • • • • • • 'this program, endorsed by over 50 lending manufacturers and directly superyise<l by Engineers appointed by there manufacturers consists of • • • etc. • • • • • • • • • • while many men are needed, the Board will accept only those whom they think will be successful in this field, • • • • • • • • • • • .. • • Qualified• men are• being selected• for training• NOW •• • • • • • • the most modern and complete laboratory of its kind in the world: in actual operation;.. • • •$100,000.. of equipment • • • • • We.. carefully select.. the men• we train . .. .. • • A few men in this locality will be accepted for training under arrangements with 20 of largest manufacturers by the Refrigeration and Air Conditioning Institute.. • • • •. .. • .. .. • Wanted immediately-Several ·men to train under direct supervision of factory engineers, appointed by arrangement with 50 leading manufacturers. Those qualifying will be prepared by Refrigeration and Air Conditioning Institute, • • •.

The Refrigeration and Air Conditioning Institute was founded at the request uf seveml well-known manufacturers of refrigeration and air-conditioning equipment, purpose of providing the industry with men • • • • and is conducted.. for the • • • • • • 'The Only School Offering "Officially Endorsed" and Industry-Supervised Training... • .. .. .. .. Fifty leading manufacturers in the industry cooperated with us In making possible a complete tmining program that prepares for ACTUAL JOBS and includes ,a national placement service.

• • • • • • • Wanted Immediately-Right now-there exists an urgent need ~or men to sell, install, and service new types of equipment In a new, fast growing industry but only especially trained men are needed-men who have had complete theoretical training and also practical experience on operating equipment. 1\Ien are being selected for training now • • •. If you are interested tn where this opportunity exists and how you can prepare for good paying positions In that field-\\Tite to Industrial Training Corp. * • •. .. • .. .. • • • Complaint 33F.T.C.

Help Wanted-Men Men wanted immediately-Men mechanically inclined to train for good paying positions in a new and fast-growing industry. Training includes practical experiencepn operating equipment. For complete information write to Refrigeration and Air Conditioning Institute • • •. • • • • • • • Supervised by an Industry Appointed Board of Governors-The manufacturers endorsing Refrigeration and Air Conditioning Institute Training assist in the supervision o{ the training through • an industry-appointed Board of Governors • • "'· • • • • • • • • • • Tpe Refrigeration and Air Conditioning Institute also furnishes your transportation • * •.

• • • • • • • • • • Well-paid positions in estimating, installation, service engineering and maintenance on many new types of mechanical equipment are open to the properly trained men • • "'· * • • • • • • 'lhe purpose of 'this program is to provide the air-conditioning industry with men who have been specially trained to handle installation, maintenance, and service engineering • • •.

• • • • • • • • • • we are accepting for training only nien of good character, fair education, • • •.

• • • • • • • as well as others of like tenor or effect or which carry implications of the kind embraced in one or more of the misleading representations enumerated in the preceding paragraph of this amended complaint. PAR. 6. In truth and in fact-no special selection is or has been made of prospective students who are interviewed by respondent's salesmen and solicited to enroll for training by them, but generally speaking, all who make inquiry in response to respondent's adver.tising efforts, as aforesaid, are interviewed and solicited to enroll; generally speaking, jobs in the industries involved are not available for all students who complete respondent's instruction or for the great majority thereof, nor do members of such industries, generally speaking, give preference to respondent's graduates by furnishing them employment; respondent requires payment in full before students are eligible to take laboratory training and does not permit such training to be taken until payment has been made in full; in order to be accepted by respondent, it is not necessary or required that prospective students enroll immediately when first called upon by respondent's representatives; the subjects involved in respondent's training not only require a considerable degree of jntelligence and the ability to concentrate and study systematically and persistently but also require some knowledge of chemistry, physics, and high RE1FRIGERAT10N & AIR CONDITLON'IN'G INsrriTUT'E, INC. 601 594 Complaint school mathematics, which have not ordinarily been acquired by students having little previous education or only a common school education; the so-called endorsing manufacturers have not and do not furnish employment to all of respondent's graduates or to a large part thereof but only in a comparatively few instances; it is not a part of respondent's system of training for the salesmen or other representatives of respondent to call back and assist students in their work; respondent's so-called board of governors is not in direct charge of respondent school or of its instruction and does not govern the school, but acts in a mere advisory capacity; neither does said board represent the industry as a whole or the so-called endorsing manufacturers as a group; but only the individual concerns with which the members thereof are connected; respondent does not provide for or permit the taking of extra laboratory work but only provides that given to all students in regular course; respondent's so-called endorsing manufacturers do not sponsor respondents school or contribute to the upkeep of the same or to the cost of instruction; the buildings occupied by respondent school and depicted in its advertising matter as such are not entirely occupied by respondent but are also occupied by other associated schools; O)le picture of a building, formerly used by respondent in its advertising matter, was from a drawing of a proposed building that was never built; respondent school was not founded· by nor is it operated by the.· industries involved or by the concerns whose officials have endorsed the same; the industries involved have not· and do not absorb all of respondent's graduates or approximately 5,000 of them annually; all openings for employment in the industries involved are not filled by respondent's graduates nor is respondent authorized by said industries to prepare and furnish men for such openings as may exist; all of respondent's graduates have not found employment in the industries involved; respondent does not in practice obtain jobs for its students but merely attempts to assist therein; respondent does not make a ·practice of refunding money paid by students who are unable to proceed with the training or who find that they cannot assimilate the same, nor are pa;pnents generally suspended during students' unemployment or other events preventing the continuance of payments, nor are further payments canceled as a general practice when students desire to discontinue the course, but, in practice, respondent generally attempts to collect the amounts called for on all contracts or to make some compromise settlement thereon; the so-called application signed by students is a contract for the payment of the price of the course in full, including transportation to and from Chicago, and becomes final upon acceptance by respondent Complaint 33F. T. C.

without further action or election by the applicants involved; there is not now, nor has there been for the last year or 2 at least, any great demand for men in the refrigeration and air conditioning industries or for new men not already connected therewith or that is not capable of being principally supplied through regular channels in the industries involved; respondent school is not the only school of the kind that has endorsements from manufacturers; it is incorrect and greatly exaggerated to represent that by enrolling in respondent school one is accepting the chance of a lifetime and that by graduating therefrom one's future is assured; respondent school is not the only one of the kind having shop training in connection therewith; respondent's training is not such as to qualify graduates thereof as "engineers" under the usual acceptance o£ that term nor engineering training in the sense that students thereof receive the same kind and grade of training as given in colleges and universities granting degrees in engineering but is in the nature of· a trade school offering training tending to qualify students for jobs as mechanics or service men; comparatively few of respondent's graduates have found employment in manufacturing plants of the industries involved; the quota of students fixed by respondent as the limit of enrollments is not such that those who graduate are in fact absorbed by employment in the industries involved; the represented value of respondent's laboratory equipment is based on alleged retail price valuation of the equipment involved, rather than on actual present value or cost to respondent since the ·equipment was purchased at prices greatly below the alleged retail prices on which such represented valuation is fixed; transportation cost to and from Chicago for laboratory work is furnished and paid in advance by the student as a part of the charge made by respondent for the training; the so-called limited quota of enrollments is not employed and applied by respondent so as to result in supplying only enough graduates who find or receive employment in the industries concerned but leaves out of account all other sources of supply o£ new employees in such tndustries and is grossly large and unreasonable if a really substantial percentage of respondent's enrollees should graduate; respondent school is not the official training agency of the refrigeration and air conditioning industries nor o£ the so-called endorsing manufacturers as a group; not all of the manufacturing concerns listed by respondent in its advertising matter as having endorsed its training had officially endorsed the same but some so listed were concerns that had not given official endorsement thereof and any endorsements involved were merely the })e~sonal acts o£ individuals connected therewith; respondent's enrollments are not small when considered on a total and yearly REIFRIGERATrON & AIR CONDIT']OIN'IN'G lNsrriTUTE, INC. 603 594 Findings basis but are based on an annual quota of approximately 20,000 enrollments and made to appear small, restrictive, and selective by dividing such total quota into areas extending over the !"'entire United States and then breaking down these divisions into monthly quotas. P.AR. 7. The :foregoing acts and practices used by respondent in connection with the offering for sale and sale of its said courses of study and instruction 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 and pursue such courses of study and instruction 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 correspondence courses in air conditioning and refrigeration as ·well as from those engaged in such sale of correspondence courses in subjects pertaining to various trades, callings and pursuits and in preparation for work and positions of various kinds. There are among the competitors of respondent those who in the sale of their respective courses of study and instruction do not similarly or in any manner misrepresent the same 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.

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 THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on June 7, 1939, issued and thereafter served its complaint in this proceeding upon the respondent, Refrigeration & Air Conditioning Institute, Inc., a corporation, charging it with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of said act. Thereafter, on October 31, 1939, the Commission issued and subsequently served its amended complaint in this proceeding upon said respondent, 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. After the issuance of said complaints and the filing of Findings 33F.T.C.

respondent's 'answers thereto, tec:;timony and other evidence in support of the allegations of the complaints were introduced by William L. Pencke, attol'l).ey. for the Commission, and in opposition to the allegations of the complaints by Richard S. Oldberg, att~rney for the respondent, before trial examiners of the Commission theretofore duly designated by it, and the testimony and other evidence were duly recorded and filed i~ the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on the original and amended complaints, the answers thereto, testimony and other evide>nce, report of the trial examiners upon the evidence and the exceptions thereto, briefs in support of the complaints and in opposition thereto, and oral argument before the Commission; and the Commission having duly considered the matter, and being now fully advised in the premises, finds that this proceeding is irr the interest of the public and makes this its findings as 'to the facts ~nd its conclvsion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Refrigeration & Air Conditioning Institute, Inc., is a corporation organized, existing, and doing business under and 'by virtue of the laws of the State of Illinois, with its office and principal place of business located at 2150 Lawrence Avenue, in the city of Chicago, Ill. Respondent is now, and since 1935 has been, engaged in the sale and distribution of correspondence courses of study and instruction in refrigeration and air conditioning. Respondent causes, and since 1935 has caused, its courses of study and instruction, when sold, to be transmitted from its place of business in the State of Illinois through the United States mails and by other. means to the purchasers thereof located in various other States of the United States and in the District of Columbia. Respon.dent maintains, and siiice 1935 has maintained, a course of trade in its courses of study and instruction in commerce among and between the various States of the United States and in the District of Columbia. PAR. 2. Respondent is now, and since 1935 has been, in substantial competition with other corporations and with firms and individuals engaged in the sale and distribution,-in commerce among and between the various States of the United States and in the District of Columbia, of correspondence courses of study and instruction in the subjects of refrigeration and air conditioning.

PAR. 3. Respondent's course of study consists primarily of a series of lessons to be pursued by the student in his home. Upon the completion of the series of lessons a period of shop training and instruction i~ given the student at respondent's school in Chicago. Originally, RE,FRIGERATION & AIR GONDITWNTKG INS1TrTUTE, INC. 605 594 Findings this shop training was limited to 2 weeks but subsequently it was increased to 4 weeks. Twelve to 18 months are usually required for the completion of the entire course of study.

In the course and conduct of its business and for the purpose of promoting the sale of its course of study; respondent inserts advertisements in newspapers having a wide circulation and also advertises exteneively by means of radio programs. These newspaper and radio advertisements are primarily for the purpose of arousing the interest of prospective purchasers in respondent's course of study, and of causing such prospective purchasers to make .inquiry of respondent for additional information with respect to the course. The actual solicitation of prospective purchasers is conducted by respondent almost entirely through agents or solicitors located in various sections of the United States, these agents being designated by respondent as field representatives. For the purpose of contacting prospects and selling them the course of study, respondent has divided the United States into numerous sales districts, with field representatives located in each of these districts. Respondent customarily has in its employ approximately 150 field representatives, all of whom are compensated on a commission basis.

Among and typical of the statements and representations made by the respondent in its newspaper advertisements and radio programs . are the following:

[Newspaper advertisements] Also--more than 70 of the leading manufacturers in this industry are "officially" endorsing and recommending ll-A-C-1 training because they know that under such supervision, any man taking it is going to be trained exactly as they wnnt him trained.

Again !-Isn't it reasonable to suppose that after "officially" endorsing this 1'training that these same 70 manufacturers-and their thou~nnd~of. distributors and dealers, everywhere-will give our graduates the preference when they have jobs to fill, everything else being equal, of course. And trained men are needed-don't overlook that-hundreds of them, In fact. But first they must be trained-and trained right. That's our job. And that's the reason for this nd-we are looking for men wi.Jo are really interested. llecau"e of our pledge to these manufacturers to be extra careful we are nccepting for training only men of good character, fair education, and with some mechanical ability.

• • • • • • • Wanted Immediately-several men to train under direct supervision of factory engineers, appointed under arrangement with leading manufacturers. Those qualifying will be prepared by Refrigeration and Air Conditioning Institute • • • • • • • • • • 43::i:i2<l'"-42-vol. 33--39 ' 606 FEDERAL TRADE COMMISSION DECISIONS Fiqdings 33F.T.C.

Fifty leading manufacturers in the industry cooperated with us in making possible a complete training program that prepares for ACTUAL JOBS and includes a national placement service.

The type of training is offered that employers in this industry want their men to have. Its success is p~;,oven by the fact that all of the graduates in the Chicago District are already employed in permanent, good pay jobs. All tools and equipment furnished without charge.

• • • • • • • To our knowledge the Training offered by the Refrigeration & Air Conditioning Institute, of Chicago, iS THI!J ONLY ONE IN THE ENTIRE AIR CONDITIONING FIELD THAT IS ACTUALLY D•RECTED AND SUPERVISED BY ENGINEEI!S AND EXECUTIVES WORKING I<light IN THE INDUSTRY.

[Radio continuities] • • • In fact, in the last three years, Air Conditioniug lnstallatirms have increased more than FOURTEEN HUNDRED PimCENT! nut, with this wonderful growth, a serious problem has arisen, for now the Industry finds that thel·e are not enough trained men available to carry on it:s work. Hecent sun·e~·s show that from five to seven thousand ADDITIONAL tmined men will be needed EYUlY YEAR for the next TEN years • * • To meet this demand a nation-wide training program, officially endorsed and recommendt>d by more than a hundred leading manufacturers, is now being carried on, to create the new type craftsman so badly nPPdPd * * * ME:'< ARE BUNG SF..LEC.'TED FOU THIS TRAINING, NOW! * * * • • • • • • • . As I understand it, this training :vrogram is directed and suvervised by engineers and executives working right in the industry. Is that true? Yrs, that's right! And these men were actually appointed by the presidents of some ol the manufacturers who endorse this program ff,T the very purpose of directing and suprrvising the training, to make sure the men taking it .are trained. Preliminary instruction is followed by practiral !':hop work in what are probably the largrst and most m~dern ~-;hops ol their kind in the world! AND MEN AHI!J BJ.:ING SELECTED FOR THIS TR-'\INING, NOW I • • • • • • • As you p1·obnbly know, refrigeration and air conditioning is one of the fastest growing bu::;inrsses tn America • • • but do you know also that so rapid has been its growth that there ·are not enough trained men to carry on the work of estimating, planning, Installing and service engineer·ing? That's the situation right now. Consequently fifty of the leading manufacturers in the field are cooperating with the Refrigeration and Air Conditioning Institute in a training program that will prepare the men needed for this work. • • • • * • • PAR. 4. The Commission finds that through the use of these statements and representations and others of a similar nature, and through oral representations made by respondent's field representatives to prospective purchasers, respondent has represented, directly or by implication, that there is a great and unusual demand in the refrigeration and air conditioning industry for new employees; that as many as 5,000 or more new employees per year are needed in the industry; that unusual and E'Xtraordinary opportunities for·E'mployment in the indus- RE1FRIGERATION & AIR CONniT1JONTN'G INSrriTUTE, INC. 607 594 Findings try are open to persons completing respondent's course of study, and that employment in the industry is assured to such persohs; that respondent's school is under the direction and supervision of the industry, and is condutted in cooperation with the industry. PAR. 5. There is a sharp conflict in the testimony on the question as to the number of new employees which the refrigeration and air conditioning industry 'may reasonably be expected to absorb each year, and on the question as to the opportunities for employment. which :;tre open to graduates of respondent's school. Testifying at the instance of the Commission were a number of witnesses who were well qualified to express an opinion on the subject and some of whom held high positions in the industry. These witnesses were of the opinion that the industry could not absorb 5,000 new employees per year or any number approaching that figure. A number of well qualified witnesses for the respondent were of the contrary view, their opinion being that the industry should be able to use 5,000 new employees annually for some years to come. Several of respondent's witnesses held important positions with concerns engaged in the manufacture of refrigeration and air conditioning equipment. 'Vhile these latter witnesses were optimistic in their views on the possibilities for employment in the industry, their testimony failed to show that anything more than a negligible number of respondent's graduates had been employed in the manufacturing plants represented by the witnesses. In fact, it was only in exceptional and isolated . instances that respondent's graduates had fom1d employment with these companies. Nor was there any testimony indicating that any substantial number of respondent's graduates had obtained pm;itions with the sales agencies and service concerns throughout the country which sell and service the products of these manufacturers. In connection with its school, respondent maintains an employment Rervice to assist its graduates in obtaining positions. From a survey made by respondent in 1938, it appears that only about 26 percent of respondent's graduates had been able to obtain employment in the industry, and a similar survey made in 1939 indicated that not more than 35 percent had been successful in that respect. A third survey presented a more favorable picture. Between October Hl39 and June 1940, 1,090 persons graduated from respondent's school, and this survey indicated that during the same period, 1,099 graduates had found employment in the industry. This latter figure, however, included persons who had graduated during previous years as well as those who had graduated during this particular period. There is no indication in the record as to how many of the positions obtained by the 1,099 persons were of a permanent nature and how many were only temporary.

Findings 33F.T.C.

A factor which tends to limit the opportunities for employment open to respondent's graduates is that the trade or labor unions themselves maintain trade schools for apprentices, and by means of these schools the trade unions in many cases supply aU of the new men needed for work of this character. A further factor is that in the field of home refrigeration there has been a decided tendency among manufacturers during recent years to enclose their machines in hermetically sealed containers, with the result that when in need of service or repair such machines cannot be attended to by local service men but must be returned to the manufacturer. · Approximately 2,000 students are graduated from respondent's school each year. Not only are there many other correspondence schools offering instruction and training similar to that offered by respondent, but many universities und colleges also offer courses of instruction and training in this field. The industry itself and the trade unions supply an additional number of workers. Even if it be assumed that the industry can absorb approximately 5,000 new workers per year, it is doubtful, in view of the large number of persons seeking to enter the industry, that the major portion of respondent's graduates would be able to obtain employment.

The Commission is therefore of the opinion from the evidence that while there are opportunities for employment open in the refrigeration and air conditioning industry, there is no unusual or extraordinary demand for employees in the industry. In no event can respondent's graduates be assured of employment.

PAR. 6. Respondent's claim that its school is directed and supervised by the refrigeration and air conditioning industry is based upon the fact that the school maintains as a part of its org!\,nization a group composed of individuals holding responsible positions in the industry. This group is known as the school's "Board of Governors" and usually consists of five members. At the meetings of the board, which are held every 2 months, various matters in connection with the school are discussed, and suggestions and criticisms are offered by the members of the board. Generally speaking, the work of the board is of an advisory nature only. The board does not undertake to direct or supervise in detail the operations of the school. The companies with which the individual members of the board are connected, while occupying prominent places in the industry, fall far short of con~tituting the entire industry.

The Commission finds that there is no substantial basis for respondent's representation that its school is conducted in cooperation with the industry. Certain individuals in the industry have evinced interest in the school, and have cooperated with it to a limited extellt, but REIFRIGERATTON & AIR CONDITIONING INSTITUTE, INC. 609 594 Order there has been no cvoperative action by the industry as such. No member of the industry has contributed in any way to the financial support of the school.

PAR. 7. The Commission therefore finds that the claims and representations of the respondent with respect to its school and with respect to the opportunities for employment open to the graduates of its school, as set forth in paragraphs 3 and 4 herein, are grossly exaggerated, misleading, and deceptive.

PAR. 8. The Commission further finds that the use by the respondents of these representations has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public, and to cause such portion of the public to purchase respondent's course of study as a result of the erroneous and mistaken belief so engendered. In consequence thereof, trade has been diverted unfairly to the respondent from its compet_itors.

CONCLUSION The 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 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 original and amended complaints of the Commission, the answers of respondent, testimony and other evidence taken before tria] examiners of the Commission theretofore duly designated by it, in support of the allegations of said complaints and in opposition thereto, briefs filed herein, and oral arguments by \Villiam L. Pencke, attorney for the Commission, and by Richard S. Olclberg, attorney for the respondent, and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent, Refrigeration & .Air Conditioning Institute, Inc., a corporation, its officers, representatives, agents, and employees, directly or through any cor·porate or other device, in connection with the o1fering fot· sale, sale and distribution in commerce, as "commerce" is defmed in the Federal Trade Commission Act, of its correspondence courses of study and instruction in refrigeration and air conditioning. do forthwith cease and desist from: 1. Representing that there is a great or unusual demand in the refrigeration and air conditioning industry for new employees. Ordet• 33 F. T.C.

2. Representing that unusual or extraordinary opportunities for employment in said industry are open to persons completing respondent's course of study, or that employment in said industry is assured to such persons.

3. Representing that respondent's school is under the direction or supervision of said industry, or that respondent's school is conducted in cooperation with said industry.

It is further or·dered, That said 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.

HOLLYWOOD RACKET MA:l\UFIAC'TURING CO., IN'C. 611 Complaint