Food Display Machine Corporation

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IN THE MATI'ER OF FOOD DISPLAY MACHINE CORPORATION, AND A. II. KULIKOWSKI, MRS. A. H. KULIKOWSKI, AND GEORGE H. HARDT COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATIOl'f OF SEC. o' OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket .t,J~~. Complaint, May 1, 1940-Decision, Sept. f9, 1941 Where a corporation and two individuals, who were its general officers ancl stockholders and in active charge of its business, engaged in interstate sale and distribution of machines designed for preparing and cooking potato chips, doughnuts, and, until discontinuance of sale of such Illll" chine In early 1940, corn chips, conducting their business under various trade names and doing much of their advertising under name of one of said Individual officers; by advertisements In periodicals of general circulation, and advertising circulars, leaflets, and pamphlets, and circular letters, directly or by implication- Represented that amazing profits or earnings might be made and fortunes acquired through the operation of their said machines,- that profits of as much as $21.60 and $40 per day might be so obtained, and that the minimum profit on operation of certain machines would amount to $100 a week;

Facts being earnings and profits so represented were far in excess of any amounts which had been earned by persons operating their machines, or which might reasonably be expected from operation thereof; in excep· tional cases In which purchasers had been able to derive a profit fron their operation, !'luch profits were far below the amounts represented; and In no event could amazing profits or earnings be thus derived, or fortunes thus acquired; . With tendency and capacity to mislead· and deceive a substantial portion of the purchasing publlc Into the erroneous belief that much greater earnings and profits might be made from the operation of their said machines than was actually the fact, and to cause it to purchase substantial quantities of their machines, as a result of such belief: Held, That such acts and practices, under the circumstances set forth, wt!re all to the prejudice of the public and constituted unfair and deceptive acts and practices in commerce.

Before J.fr. lVilliam 0. Reeves, trial examiner. Mr. R. P. Bellinger for the Commission.

Russian & DeBolt, of Chicago, Ill., for respondents.- 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 Food Display :Ma· FOOD DISPLAY MACHil-."E CORP., Ell' AL. 1403 1402 Complaint chine Corporation, a corporation, :M. J. Kulikowski, Mrs. 1\t J. Kulikowski, and George H. Hardt, individuals, hereinafter referred ~0 as respondents, have violated the provisions of the 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. The corporate respondent, Food Display Machine Corporation, is a corporation, organized, existing, and doing bui::i- ~ess under and by virtue of the laws of the State of Illinois, with ~ts office and principal place of business located at 620 North Mich- Igan Avenue, Chicago, Ill. The respondents, M. J. Kulikowski, Mrs. 1\f. J. Kulikowski, and George H. Hardt, of the same address, are the officers and principal stockholders of the said corporate respondent above named, and as such manage, control, and direct the Policies and operation thereof, particularly in the acts and practices herein alleged. All of said respondents have acted in concert in COnducting the business hereinafter described and in doing the acts and things hereinafter alleged.

PAn. 2. Respondents are Jiow, and for some time last past have been, engaged in the sale and distribution of machines designed for cooking potato chips, corn chips, and doughnuts. Respondents cause ~aid machines, when sold, to be shipped from their place of business In Chicago, Ill., to the purchasers thereof located in States of the Dnited States other than Illinois and in the District of Columbia, and there is and has been a course of trade in said machines sold by the respondents in commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of their business as aforesaid, respond- ~nts employ or use the trade names, Vita-Seald with respect to and In connection with their potato chip machines King Korn Co. and 1\:ing K Co. with respect to and in connection with their corn chip lllachines, and Brown Bobby Co. with respect to and in connection With their doughnut machines.

PAR. 3. In the course and conduct of their business in said comlllerce as aforesaid, in soliciting the sale of and selling their ma- ~hines, respondent's have made various and sundry representations In form letters, pamphlets and other circulars distributed among Prospective purchasers, and by statements published in magazines and periodicals o'f national circulation concerning the opportunities afforded purchasers of such machines to start a profitable, inde- Pendent business, and concerning the earnings or income which are likely to result from the purchase of any of said machines. Among Complaint 33 F. T. C. and typical of the statements and representations so made and used by the respondents are the following:

Only $2.50 investment in raw materials brings back $10 In cash at wholesale.

Your machine is capable of turning out 10 lbs. of chips every hour-80 lbs, In an 8 hour day. If sold in 5¢ size bags ... * * that should give you a total profit of $21.60 on your 80 lbs. of chips. You can get back $40 in cash receipts from one day's production of tbe machine.

Big dally profits from the start without overhead expense. Sensational New Business That May Sweep You To Riches. This is undoubtedly the most amazing money-making opportunity ever offered to the readers of this-or any other-magazine. It tells how any ambitious level-headed man can quickly establish a remarkable new kind of business that cnn pay a steady net cash profit of $40.00 a day-a business that otrers unlimited opportunity, rapid expansion-a business in which you can employ others to work for you and run your daily profits up as high as you want them to go--a business that may make many men independently wealthy witbiD the next few years.

Your whole Investment will be less than your first week's potential income- This is truth; not fiction-fact; not theory. To the best of our knowledge I!O other business in America offers one-tenth the opportunity for profit and Independence.

Experts estimate and tests show that the first year's requirements should be about 12,000,000 lbs. You make 32¢ net pt•ofit on every pound that passes through your hands.

$100 A WEEK NET TO START, According to accurate figures the Vl'ry minimum of the first operation would produce a net cash profit of at least $100 a week * • •. This we figure to be a minimum. · Anyone-anywhere-can make big profits on this surprising new product. No wonder so many people without one bit of experience are literally cleaning up fortunes with this n~w money-maker.

Said statements, together with other statements similar thereto not herein set out, represent that tremendous incomes and profits may reasonably be expected by the pqrchasers and users of respondents ' machines as aforesaid; that with little effort and small investment or expense, on~ can purchase respondents' machines and therewith start a business that will rapidly accumulate riches for himself; that respondents' said machines present in themselves the most amazing money-making opportunity offered by any business in America; that the demand for the products of respondents' machines is so great that with one or more of said machines a person cnn quickly amass fabulous profits; that anybody anywhere can make large profits by the operation of one of respondents' machines and the minimum net weekly profit to be derived therefrom as a starter is $100; that with the purchase and operation of one of respondents' muchines a man can quickly establish a business in which he will realize a net cash FOOD DISIPLAY MAC'HIN1E CORP., ET AL. 1405 1402 Complaint Profit of $40 a day, and which offers unlimited opportunities for lnounting profits as high as he might wish; that the first week's income from the operation of one of respondents' machines will exceed the entire purchase price thereof and in vestment in the business; that many people without experience are reaping fortunes by the Use of respondents' machines .

. PAR. 4. In truth and in fact, respondents' claims and representations as to the actual or potential markets available for the sale of the products produced by such machines and the claims and repre- ~entations ma~e as to the earni~gs to be made or the income pr~duced . Y the operatwn of such machmes are grossly exaggerated, misleadlug, and deceptive, for the actual and potential markets available for such products are not as great as represented by respondents and the actual market is supplied by strong, well-financed, experienced operators from whom an inexperienced operator with one or more of respondents' said machines would be unable to acquire or divert substa,ntial trade and custom. Only a few, if any, operators of such lllachines are able to find markets which will justify or require the operation of such machines at full capacity for any extended period of time. To accumulate the profits or earnings at the rate and inth . e amounts represented by respondents would require the steady operation of such machines at full capacity. In truth and in fact, one cannot buy respondents' machines and therewith start a business that will rapidly accumulate riches for himself; respondents' machines do not present in themselves the most ~lllazing money-making opportunity offered by any business in Amer- 1?a; the demand for the products of respondents' machines is not suffi- Cient to enable the operator of one or more of said machines quickly to atnass fabulous profits; not everyone can make large profits through the operation of one of respondents' machines and the minimum net Weekly profit to be derived therefrom when the operation thereof is first st.arted is not $100 per week or any approximate sum; a man canb.ot, by the purchase and operation of one of respondents' machines, quickly establish a business in which he will realize a net cash profit of $4:Q a day, or which offers unlimited opportunities for mounting profits as high as he might wish; the first week's income from the operation of one of respondents' ma.chines will not exceed the total investment in the business; many people without experience are not reaping fortunes by the use of respondents' machines; the actual and probable earnings nr profits of operators of respondents' machines are, on the average, llluch less than the amounts set out above, and said amounts set out above are far in excess of the earnings and profits that can reasonably be expected by operators of said machines. 435J26m--42--vol.33----89 Findings 33F. T.C.

PAR. 5. The use by respondents of the representations set out herein have had and now have the capacity and tendency to mislead and deceive, and do mislead and deceive, a substantial portion of the pur· chasing public into the erroneous belief that such representations are true and to purchase a substantial quantity of such machines froill respondents by reason of such erroneous belief. PAR. 6. The aforesaid acts and practices as herein alleged are all to the prejudice and injury of the public, and constitute unfair and de· captive 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 1\fay 1, 1940, issued and subse· quently served its complaint in this proceeding upon the respondent~, Food Display Machine Corporation, a corporation, and A. H. l(uh· kowski (referred to in the complaint as M. J. Kulikowski), Mrs. A. JI. Kulikowski (referred to in the complaint as Mrs. M. J. Kulikowski), and George H. Hardt, individuals, charging them with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of said act. After the issuance of said complaint and the filing of respondents' answer thereto, testimony and other evidence in support of the allegations of the complaint were introduced by R. p. Bellinger, attorney for the Comrp.ission, and in opposition thereto bY l\Iessrs. Bussian & DeBolt, attorneys for respondents, before 'Villi~nl C. Reeves, a trial examiner of the Commission theretofore duly desig· nated by it, and such 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 t~1e complaint, answer, testimony and'other evidence, report of the tnal examiner upon the evidence and exceptions thereto, and briefs in sup· port of and in opposition to the complaint (oral argument not having been requested); and the Commission, having duly considered t~e matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom. FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Food Display Machine Corporation, is a corporation organized, exis.ting, and doing business under the Jaws of the State of Illinois, with its office and principal place of business located at 620 North Michigan Avenue, Chicago, Ill. FOOD DISTLAY MACHINE CORP., ET AL. 1407 1402 Findings Ra<;pondent, A. H. Kulikowski (referred to in the complaint as M. J. Kulikowski), is president and treasurer of the corporate respondent. Respondent, Mrs. A. H. Kulikowski (referred to in the complaint as Mrs. :M. J. Kulikowski), is secretary of the corporate respondent. Respondent George H. Hardt is vice president and assistant secretary of the corporate respondent. The mailing address of the individual respondents is the same as that of the corporate respondent.

The individual respondents, together with L. T. Kulikowski, a son of respondents A. H. Kulikowski and Mrs. A. H. Kulikowski, are the owners of all of the outstanding capital stock of the corporate respondent. Respondents, A. H. Kulikowski and George H. Hardt, a~e in active charge of the business of the corporation and formulate,· ?Direct and control the corporation's policies, practices and methods, Including its advertising policies and practices. Respondent, Mrs. A.. II. Kulikowski, does not participate actively in the operation of the business nor in the formulation, direction or control ·of the corporation's policies or practices.

The corporate respondent and respondents A. H. Kulikowski and George H. Hardt have acted in conjunction and cooperation each with the others in carrying out the acts and practices hereinafter set forth. A.s used hereinafter, the word "respondents" will refer to these three respondents alone and not to Mrs. A. H. Kulikowski. PAR. 2. The respondents are now, and for more than three years last past have been, engaged in the sale and distribution of certain Inachines designed for preparing and cooking potato chips and doughnuts. Respondents were formerly engaged also in the sale and distribution of a machine designed for the preparation and cooking of corn chips, but the sale of this machine was discontinued in the early part of 1940. Respondents cause, and have caused, their machines, when sold, to be transported from their place of business in the State of Illinois to purchasers thereof located in various other States of the United States and in the District of Columbia. Respondents maintain, and have maintained, a course of trade in their tnachines in commerce among and between the various States o£ the United States and in the District of Columbia. ·PAR. 3. In the course and conduct of their business, the respondents employ, in addition to the corporate name Food Display l\Iachine Corporation, various other trade names. In connection with their corn chip machine the names "King Korn Co." and "King K Co." have been used, and in connection with their doughnut machine the name "Brown Bobby Co." is used. Much of the respondents' adver- Findings 33F. T.C.

tising is done also under the name of the individual respondent, George H. Hardt.

PAR. 4. In the courset and conduct of their business and :for the purpose of promoting the sale of their machines, the respondents ha-ve inserted advertisements in periodicals having a general circulation throughout the United States. They have also made use of numerous :advertising circulars, leaflets, and pamphlets as well as various circu· lar letters, all of such advertising material being sent to prospecti-ve pmchasers of their machines. Among and typical of the statements and representations appearing in respondents' advertisements and advertising material are the following:

Only $2.50 investment in raw materials brings back $10 in cash at wholesale. Your machine is capable of turning out 10 lbs. of chips every hour-SO lbs· in an 8 hour day. If sold in 5¢ size bags • • • that should give you a total profit of $21.60 on your 80 lbs. of chips. You can get back $40 in cash receipts from one day's production of tbe machine.

Big daily profits from the start without overhead expense. This Is undoubtedly the most amazing money-making opportunity ever offered to the readers of this-or any other-magazine. It tells how any ambitions Level-headec:l man can quickly establish a remarkable new kind of business that can pay a steady net cash profit of $40.00 a day-a business that offers un· limited opportunity, rapid expansion-a business in which you can eDlploY others to work for you and run your daily profits up as high as you want them to go-a business that may make many men independently wealthy within the next few years.

Your whole investment will be less than your first week's potential incoDle· This is truth; not fiction-fact; not theory. To the best of our knowledge no other business in America offers one-tenth the opportunity for profit and independence.

$100 A WEEK NET TO START Accord:ling to accurate figures the very minimum of the first operation would pi'Oduce a net cash profit of at least $100 a week • • •. This we :figure to be a minimum.

Anyone-anywhere-can make big profits on this surprising new product. AMAZING NEW BUSINESS Work at Home Pays BIG DAILY PROFITS A SL'RPRISI:-~o new profit opportunity is now offered to every ambitious man and woman I A Sf'nsational new kind of food business has been Invented that can be opf'rated with no previous f'XperienC'e In either full or spare time-a busln~s that pays you big daily profits selling proc:J.action of one machine at wholesale (IJlly.

EVERYTHDNO SUPPLUD. We supply equipment 'and plans for Dlaklng and selling a df'IIcious new greaseless doughnut that Is cooked in a remarkable electrical device. Easy to digest and more toothsome than old style doughnuts ever were. This delicious new dainty-Brown Bobby-costs less to make and sells faster. N° FOOD DlSIPLAY MACHINE CO'RP., Err AL. 1409 1402 Findings ,;"00der so many people without one bit of experience are literally cleaning up fortunes" with this new money-maker! PAR. 5. Through the use of these statements and representations and others of similar import, the respondents have represented, directly or by implication, that amazing profits or earnings may be made and :fertunes acquired through the operation of respondents' machines; th~t profits of as much as $21.60 per day and $40 per day may be obtained from the operation of such machines, and that the minimum Profit on the operation of certain of the machines will amount to $100 Per Week.

~AR. 6. In order to ascertain the amount of the earnings or profits Which may reasonably be expected to accrue tQ persons operating respondents' machines, there were introduced as witnesses on behalf of the Commission a number of persons who had actually purchased and operated the machines. These witnesses resided in some six different States and were representative of the members of the public who purchase the machines. The testimony of these witnesses shows, and the Conunission finds, that the earnings and profits represented by respondents are far in excess of any amounts which have been earned ~y Persons operating respondents' machines, or which may reasonably e el:pected to accrue from the operation of the machines. In most of the instances testified to by the witnesses the machines were found t~ be unprofitable, and the business was abandoned and the machines discarded entirely. In those exceptional cases in which purchasers had been able to derive a profit from the operation of the machines such profits were far below the amounts represented by respondents. In no event can "amazing" profits or earnings be derived from the operation of respondents' machines, nor can "fortunes" be acquired from the operation of the machines. Profits of $21.60 per day, $40 Per day and $100 per week, as represented by respondents in their advertising, are wholly impossible from a practical viewpoint. Pan. 7. The Commission therefore finds that respondents' representations with respect to the earnings or profits which may be derived from the operation of their machines are. grossly exaggerated, false, and misleading.

PAR. 8. The Commission further finds that the use by respondents of these false and misleading representations has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that much greater earnings and profits may be made from the operation of respondents' machines than is actually the fact, and the tendency nnd capacity to cause such portion of the public to purchase substantial quantities of respondents' machines as a result of such erroneous nnd mistaken belief.

1410 FEDERAL TRADE CO:MMISSION DECISIONS Order 33F. T.C.

CONCL"GSION The acts and practices of respondents, Food Display Machine Cor· poration, A. H. Kulikowski and George H. Hardt, as herein found are all to the prejudice of the public, and constitute unfair and decep· tive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER TO CE.,\SE AND DESIST This proceeding having been heard by the Federal Trade Commis· sion upon the complaint of the Commission, the answer of respond· ents, testimony and other evidence taken before William C. Reeves, trial examiner of the Commission theretofore duly designated by it, in support of and in opposition to the allegations of the complaint, report of the trial examiner upon the evidence, and exceptions thereto, and briefs in support of and in opposition to the complaint (oral argument not 'having been requested); and the Commission having made its findings as to the facts and its conclusion that certain of the respondents have violated the provisions of the Federal Trade Corn· mi::.sion Act. · It is ordered, That respondents Food Display Machine Corporation, a corporation, its officers, and A. H. Kulikowski and George H. Hardt, trading under the names King Korn Co., King K Co. and Drown Dobby Co., or trading under any other name or names, and respond· ents' representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of respondents' potato chip machines, corn chip rna· chines, and doughnut machines in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Uepresenting that amazing earnings or profits may be made or fortunes acquired through the operation of respondents' machines. 2. Representing as possible or maximum earnings or profits which may be made during any specified period through the use of respond· ents' machines, any amounts in excess of those which have actually been earned during such specified period by users of respondents' machines under normal conditions in due course of business. 3. Representing as usual or customary earnings or profits which may be made during any specified period through the use of respond· ents' machines, any amounts in excess of the average, usual and cus· tomary amqunts which have actually been earned by users of respond· ents' machines under normal conditions in due course of business. FOOD DISIPLAY MACHI.N'E CORP., Ell' AL. 1411 1402 Order It is further ordered, That the respondents shall, within 60 days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in Which they have complied with this order. · !tis further ordered, That this proceeding be, and it hereby is, dis- Inissed as to respondent Mrs. A. H. Kulikowski. Syllabus 33F. T.C.