Ford Motor Co

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IN THE MATTER OF FORD MOTOR COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SElC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 9171,. Complaint, July 16, 1991-Deci~tion, Oct. 20, 191,1 Where a corporation engaged in the manufacture of passenger motor vehicles and in the competitive interstate sale and distribution thereof to its authorized retail dealers throughout the United States, whom it furnished With suggested price lists for their sales to the consuming public; predicating such retail prices on an advertised f. o. b. price plus transportation to retailer, cost of such equipment as bumpers, bumper guards, spare tires, and other necessary accessories, and, in addition, taxes, advertising assessments, and handling and conditioning charges, so that the actual delivered Price of a vehicle to the retail purchaser was far in excess of its advertised f. o. b. price plus actual transportation; In a nation-wide advertising campaign in newspapers, magazines, price lists, radio broadcasts, and other Udvertising media, describing and illustrating its said products- Ailsrepresented the price to be paid by the consumer purchaser tor a particular vehicle through featuring f. o. b. prices which pertained, not to the model displayed, but to a less expensive car, setting forth in fine print almost totally obscured by the larger type featuring the t. o. b. price, the additional charges needed to make· up the full price of the car ready for operation, and in some ·instances accompanying the featured price by the legend, in small letters, "and up f. o. b. Detroit'' or said legend plus some such words as "standard accessories group including bumpers and spare tires extra," Which explanatory matter was either inadequate or so inconspicuous as to be of no value in correcting the inherent deceptive tendencies; 'With result that the false impression was conveyed that the car pictured was obtainable at the price featured and more expensive models were available at higher prices; readers of its advertisements would expect to obtain cars equipped exactly as shown fo~: the prices emphasized at place of manufacture plus actual transportation charges; and persons who might not otherwise consider purchase of the type of car illustrated, visited the show-rooms ot authorized dealers and in some instances purchased such cars at tbe prices above indicated which were much higher than the figures stated in its Advertisements; and with tendency and capaclty to mislead · and deceive a substantial portion of the purchasing public into the belief that its vehicles could be purchased at prices much less than those at Which they were actually obtainable, and to induce it to visit said dealers and purchase such cars, whereby trade was unfairly diverted to it from Its competitors who truthfully represent the prices of their products: lield, That such acts and practices, under the circumstances set forth, were au to the prejudice and injury of the publlc and its competitors, and constituted unfair methods of competition in commerce. Before Mr. lV. lV. Sheppard and Mr. Joltn P. Bramhall, trial examiners.

Complaint 33F. T.C.

Mr. James M. Hammond for the Commission.

Bodman, Longley, Bogle, Middleton & Farley, of Detroit, Mich., for respondent.

Complaint Pursuant to the provisions of an act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission having reason to believe that Ford Motor Co., a corporation, hereinafter referred to as the respondent, has been and is using unfair methods of competition in commerce as "commerce" is defined in said act, and it appearing to said Commission that a proceding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent, Ford Motor Co., is a corporation or~ ganized, existing, and doing business by virtue of the laws of the State of Delaware, .with its office and principal place of business at 3674 Schaefer Road, Dearborn, Mich. It is now, and for a number of years last past has been engaged in the business of manufacturing passenger motor vehicles and in the sale and transportation thereof in commerce among and between the various States in the United States, and in foreign countries. It causes, and has caused, said passenger motor vehicles, when sold, to be shipped from its place of business, in Michigan to purchasers thereof located in the various other States of the United States, in the District of Columbia, and in foreign countries.

In the course and conduct of its business, the respondent, Ford Motor Co., has been at all times herein referred to, in substantial competition with other corporations, firms, partnerships, and in~ dividuals likewise engaged in similar businesses involving the sale and distribution of passenger motor vehicles in CO!Jlmerce among and between the various States of the United States and in the District of Columbia.

PAR. 2. In tbe course and conduct of its business as described in paragraph 1 hereof, respondent, Ford Motor Co., sells and distrib~ utes its passenger motor vehicles to the purchasing and consuming public through designated agents or dealers located at points through~ out the United States and in foreign countries. These agents or dealers are individuals, firms, partnerships, and corporations and are not owned by said Ford Motor Co. or directly controlled by it except insofar as their relationship is sustained by contracts relating to the manufacture and delivery of motor vehicles by the respondent, FORD MOTOR CO. 1543 1541 Complaint Ford Motor Co., and the purchase thereof by said agents and dealers, who in turn resell the same to the purchasing and consuming public at prices suggested by the respondent, Ford Motor Co. The respondent's retail prices are predicated upon an advertised f. o. b. or delivered retail price, usually at its factories or assembly plants, plus additional charges for transportation from said factories or assembly plants to its retail dealers, plus the cost of certain equipment, such as bumpers, bumper guards, spare tires, and similar material necessary for the proper operation of the vehicle, which varies in accordance with the model or type of car delivered. This so-called extra equipment is charged for in addition to respondent's advertised retail sales price. Other additional charges are generally or frequently made by the respondent to its local agents or dealers, such as taxes, advertising assessments, handling charges, and conditioning charges. All of these charges are added to the advertised f. o. b. or delivered price of each vehicle sold by the respondent, and are, in turn, included in the retail price charged the local purchaser by respondent's agents and dealers. The actual delivered price of respondent's cars to a retail purchaser is therefore far in excess of respondent's published f. o. b. price at a designated point plus actual transportation costs to place of sale and delivery and the retail purchaser is not informed of these additional charges over and above respondent's advertised retail delivery or f. o. b. prices.

PAn. 3. In the course and conduct of its business, as described hereinabove, respondent, Ford Motor Co., for the purpose of promoting the sale of its passenger motor vehicles, conducts and has conducted a nationwide advertising campaign in newspapers, magazines, Price lists, by radio broadcasts, and in other ways, whereby it describes and illustrates its products. Accompanying these illustrations or descriptions, it features, usually- in large numerals, a designated f. o. b. price for the cars so illustrated or described, in such a "Way as to convey or create the impression in the minds of members of the purchasing public that fully equipped cars so illustrated or described may be purchased complete and ready for operation at the said f. o. b. or delivery point for the prices so designated and featured, or at other or distant points, for the designated and featured Prices plus actual cost of transportation thereto. In truth and in fact the passenger motor vehicles described and illu~;,trnted in connectio~ with or in immeuinte proximity with the featured f. o. b. prices are not the motor vehicles usually and commonly sold by the respondent for the featured price, and generally the said featured price is the price charged by the respondent for its less expensive cars. The cars so described or illustrated in respond- 1544 FEDERAL TRADE COl\fMISSION DECISIONS Complaint 33F.T. C.

ents' advertisements. and price lists cannot be purchased at retail for the price featured in said advertisements or price lists at the f. o. b. or deliv~ry point named therein or at the ultimate destination, plus actual freight or transportation charges thereon, without the payment o£ additional charges £or added items, such as bumpers, bumper guards, spare tire, tube, or tire lock, and other accessories necessary for the actual or legal operat~on of the car or constituting part of what the public understands to be a complete car ready for operation, as illustrated or described by the respondent for sale at a designated point at a definite price. To these charges, over and above respondents' advertised delivered prices are frequently or generally added further and additional charges to retail' purchasers for items among others, such as taxes, advertising, handling, and conditioning. In instances where statements are made of charges in addition to the specified f. o. b. price, $Uch statements are printed in such fine print as to be almost totally obscured by the large type or figures featuring the said f. o. b. price.

PAR. 4. The practice of the respondent, Ford l\Iotor Co., in falsely advertising and representing a fully equipped and higher priced vehicle for sale at the price of a lower priced car and charging purchasers a price much higher than the featured price for the car so described and illustrated, and in the other ways set out in paragraph 3 hereof, was and is calculated to mislead and deceive, and has misled and does mislead and deceive a substantial portion of the purchasing and consuming public into the belief that upon the payment of the designated £. o. b. price plus transportation charges to a pain't of actual delivery, full title to and possession of said car, fully equipped and ready for operation, may be had. Respondent has also placed in the hands of retailers, agents, and dealers the means of making such false and misleading representations to the purchasing public and has enabled its retailers, agents, and dealers to increase their own sales of respondent's products, so described and represented, thereby lessening the market for similar goods made by other manu- -facturers of motor vehicles, the true delivered price of which is truthfully stated.

PAR. 5. Motor vehicles of ~undry competitors of respondent likewise engaged in commerce as herein set out, are and have been sold anJ distributed to the purchasing and consuming public in the various States of the United States and in the District of Columbia in competition with respondent's motor vehicles but without fictitious and erroneous statements and representations in reference to "f. o. b." or delivered prices or retail sales prices as used or made by the respondent herein.

FORD MOTOR CO. 1545 1541 Fin <lings PAn. 6'. Ei:teh and all of the false and misleading statements and representations made by the respondent as hereinabove set out, in offering for sale and selling its passenger vehicles, was and is calculated to, and had and now has, a tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous belief tllat aU of said representations are true. Further, as a direct consequence of the mistaken and erroneous beliefs, induced by the acts, advertisements and other representations of respondent as hereinabove set out, a substantial number of the consuming public have purchased a substantial volume of respondent's passenger motor vehicles with the 1·esult that trade has been unfairly diverted to the respondent from corporations, firms, partnerships, and individuals likewise engaged in the business of manufacturing, distributing, and selling passenger motor vehicles who truthfully advertise and represent their products and who sell the same at the retail delivered prices published, represented, or designated by them. As a result thereof, substantial injury has been, and is now being done by respondent to substantial competition in commerce among and between the various States of the United States and in the District of Columbia.

PAn. 7. The above and foregoing acts, practices, and representations of the respondent have been and are all to the prejudice of the Public and respondent's competitors as aforesaid, and have been and are, unfair methods of competition within the meaning and intent of section 5 of an act of Congress entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and forother purposes."

REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act,. the Federal Trade Commission, on the 16th day of July, A. D., 1937, issued and thereafter served its complaint in this proceeding on the respondent Ford :Motor Co., a corporation, charging it with the Use of unf~ir methods of competition in commerce within the intent and meaning of said act. After the issuance of said complaint and ~he filing of respondent's answer thereto, testimony and other evidence ln support of the alle(lations of the complaint were introduced by ~ames l\1. Hammond, eattorney for the Commission, and evidence In opposition thereto was introduced by Dodman, Longley, Dogie, Middleton & Farley attorneys for the respondent, before 1Vm. W. Sheppard, and Joh~ P. Bramhall, duly appointed trial examiners of the Commission theretofore designated by it to serve in this pro- Ceeding; and said testimony and other evidence were duly recorded Findings 33F.T.C.

and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on the said complaint, the answer thereto, the testimony and other evidence, the report of the trial examiners and the exceptions to said report, and briefs in support of the complaint and in opposition thereto; oral argument not having been requested, 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.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Ford Motor Co., is a corporation organized unuer the laws of the State of pelaware in 1919, and having its principal place of business in Dearborn, Mich. PAR. 2. Respondent is now, and has been at all times since the date of its incorporation, engaged in the business of manufacturing passenger motor vehicles and in their sale and distribution. Respondent causes the motor vehicles sold by it to be transported from the place of their manufacture to purchasers thereof located in various States of the United States. In the course and conduct of its business respondent has been, at all times referred to herein, in substantial competition with other corporations, firms, partnerships, and individuals likewise engaged in the manufacture, sale, and distribution of passenger motor vehicles in commerce between and among the various States of the United States. PAR. 3. All sales by respondent of the passenger motor vehicles manufactunid by it are made to authorized dealers located throughout the United States who sell the same at retail to the purchasing and consuming public. The contracts entered into between respondent and all of its authorized dealers, set forth generally the manner in which the dealer shall buy and sell the products of respondent. Respondent furnishes the dealers with suggested price lists at which the dealers are to sell its products, and the dealers sell said products to the consuming public at the prices suggested by the respondent. The retail prices fixed by respondent are predicated on an advertised f. o. b. price, usually at its factories, plus additional charges for transportation to its retail dealers, plus the cost of certain equipment such as bumpers, bumper guards, spare tires, and other necessary accessories and similar material necessary for the proper operation of the vehicle, which vary in accordance with the model or type of car delivered. Generally, or frequently, taxes, advertising assessments, handling charges, and conditioning charges are added to the FORD MOTOR CO. 1547 1541 Findings -advertised retail price. All of these charges are added to the advertised f. o. b. or factory delivered price of each vehicle sold by said dealers. The actual delivered price of respondent's automobiles to retail purchasers is, ther.efore, far in excess of respondent's advertised f. o. b. price at a designated point, plus actual transportation cost to place of sale and delivery.

PAR. 4. Respondent, for the purpose of promoting the sales of its passenger motor vehicles, conducts and has conducted a nation-wide advertising campaign in newspapers, magazines, price-lists, radio broadcasts, and other advertising media, whereby, it describes and illustrates its products. Accompanying these illustrations or descriptions, it features, usually in larg.e numerals, the designated f. o. b. price of the car so illustrated or described, in such a way as to convey or create the impression in the minds of the purchasing public that fully equipped cars so illustrated or described may be purchased -complete and ready for operation at the said f. o. b. or delivery point for the prices so designated and featured, or at other and distant points for the designated and featur.ed prices plus actual cost of transportation thereto.

In truth and in fact, the passenger motor vehicles described and illustrated in connection with, or in immediate proximity to, the featured f. o. b. prices are not the motor vehicles usually and commonly :sold by respondent's dealers for the featured prices, and generally the said featured prices are the prices charged by respondent's dealers for respondent's less expensive cars. The cars so described or illustrated in respondent's advertisements and price lists cannot be purchased at retail for the prices featured in said advertisements or at the f. o. b. or delivery point nam~d therein, or at the ultimate destination plus :actual freight or transportation charges thereon, without the payment ·of additional charges for added items, such as bumpers, bumper guards, spare tire, tube or tire lock, and other accessories constituting part of what the general public understands to be a complete car ready for operation, as illustrated or described by the respondent, for sale at a designated point at a definite price. In addition to these ·extra charges, there are generally, or frequently, added, further and additional charges to retail purchasers, such as taxes, advertising, handling, and conditioning. In some instances, where statements concerning these extra charges appear in respondent's advertisements, such statements are printed in such fine print as to be almost totally ·Obscured by the larger type or figures featuring the f. o. b. price. PAR. 5. The record contains numerous specific instances where the Price stated in the advertisement was not the true price of the car illustrated or described, either at the factory or at the point of de- Findings 33F.T.C.

livery. The following instances are typical illustrations of respondent's practices as hereinbefore ,described. An advertisement of respondent illustrates the Ford V-8 cabriolet for the featured price of $505 in large figures, accompanied by the legend in small letters, "and up, F.O.B. Detroit." The car illustrated in this advertisement, as shown by respondent's price list, was sold to the purchasing public at Detroit for $653.60, or $148.60 mors than the price featured. At the time this advertisement was issued none of respondent's cars was sold at retail in Detroit for the featured price of $505; the cheapest of its cars was sold at retail for $566.38, and the actual selling price of the car illustrated in this advertisement was built up as follows:

List price f. o. b. Detroit_ _______________________________ $590.00 Standard group accessories _______ .:. ____________________ ~- 31.50 Delivery charge----------------------------------------- 4.00 Conditioning and handling------------------------------- 9.00 Approximate Federal tax-------------------------------- 19.10 Total selling price at Detroit----------------------- 1 653.60 • Plus State taxes.

In another of respondent's advertisements is featured a Deluxe Fordor Sedan, and in large figures adjacent thereto appears the price of $495 accompanied by a legend in fine print reading "and up f. o. b. Detroit." This car was sold to the public in Detroit for $712.03, or for a price of $217:03 more than the price advertised. The actual selling price of the car so illustrated is shown by respondent's price list to be built up as follows:

List price f. o. b. Detroit----------------------------- $635. 00 Delivery charge at Detroit----------------------------- 4. 00 Standard group accessories______________________________ 31.50 Conditioning and handling______________________________ 9. 00 White side wan tire!!---------------------------------- 12. 24 Approximate Federal taxes------------------------------ 20. 29 Retail selling price of car illustrated, exclusive of State taxes------------------------------------- 712.03 In another of respondent's advertisements a Tudor Touring Sedan is illustrated and a price of $510 is featured in large figures on the :face of the advertisement adjacent to the illustration, :followed by the fine print legend, "and up Detroit standard accessory group including bumpers and spare tire extra." Respondent's price iist shows that this car was sold to the public in Detroit for the sum of $667.67, being $157.67 more than the price featured, without considering the State tax, which was also added to the purchase price. FORD MOTOR CO. 1549 1541 Findings In another of respopdent's advertisements a Deluxe Fordor Touring Sedan is illustrated, and in large figures the price is stated as $480, and immediately following, in fine print, is the legend, "base at Dearborn plant-taxes, delivery and handling,· bumpers, spare tire and accessories additional." Respondent's price list shows that this car was not sold to the public in Detroit for $480, as featured in said advertisement, but was sold for $757.46 built up as follows: List price ot car illustrated f. o. b. Detroit--------------~ $665. 00 Standaru group accessories, incluuing bumpers and spare tlre-------------------------------------------~------ 50.50 Delivery charge ___________ ~----------------------------- 4.00 Conditioning and bundling ______________________________ _ 18.00 Approximate Feueral taxes----------------------------- 19. {)6 Total selling price at Detroit, not including State taxes-------------------------------~----------- 757.46 Respondent's advertisement in the March 30, 1939, issue of the ·washington D. C. "Star'' illustrates a "Mercury 8" Sedan-Coupe and the Detroit delivered price is featured in large figures as $934. Below, in small type, it is stated that State and Federal taxes are extra. The car thus featured was not sold in 'Vashington, D. C., for the listed price, but was sold by respondent's dealers to a retail buyer.for $1,078.60, being $144.60 more than the advertised price. Of this extra amount, $46.25 is. for transportation to 'Vashington, which is a proper charge, assuming that sum was spent for transportation. Included in the ·additional amount is a charge of $24.40 for Federal taxes, $23.95 for District of Columbia business privilege taxes, and $50 to cover over allowance on used cars.

PAn. 6. The advertisements set forth in paragraph 5 hereof, and numerous other advertisements of respondent of a similar nature and import, when compared with th~ price lists issued by respondent at the time said advertisements appeared, and with the prices actually charged by its authorized agents at the time mentioned, show that respondent's pricing practices were misleading and deceptive, for the reason that the prices stated in such advertisements were not, in fact, the prices ~t which the various cars illustrated or described Were sold to the public, and the explanatory matter appearing in said advertisements was either inadequate or so inconspicuous as to be of no value in removing or curing the inherent deceptive tendencies present in respondent's advertisements. In some instances the pictorial illustrations appearing in the advertisement were of a higher-priced car, and shown in conjunction with the price of a cheaper car, and the words, "and up" were coupled with the price 4351126m-42-vol. 33-98 Order 33F.T.C.

quoted, thus conveying the false impression that the car pictured was obtainable at the price featured, and that more expensive models were available at a higher price.

The testimony shows that persons reading respondent's advertisements would expect to obtain the cars illustrated for the prices emphasized in large figures, at the place of manufacture, plus actual transportation charges if purchased at some other place; that they would expect the cars to be equipped exactly as shown in the advertisements, and that the explanatory matter appearing in the advertisements escaped their attention.

Respondent's advertisements created in the minds of the purchasing public the impression that the prices charged for its cars were much less than the prices at which they could in fact be obtained, and as a result, persons who might not -otherwise have considered purchasing the type of car so advertised, visited the show-rooms of respondent's authorized dealers and in some instances purchased the advertised cars at the prices hereinbefore set forth, which were much higher than the prices stated in respondent's advertisements. PAR. 7. The acts, practices, and methods of respondent, as herein set forth, had the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the belief that respondent's passenger motor vehicles could be purchased at prices much less than the priqes at which they were actually obtainable, and as a result of such mistaken and erroneous belief, a substantial portion of the purchasing public were induced to visit respondent's authorized dealers and to purchase respondent's passenger motor vehicles, with the result that trade was unfairly diverted to respondent from its competitors who truthfully advertise and represent the prices of their passenger motor vehicles.

CONCLUSION The aforesaid acts and practices of respondent, as herein found, are all to the prejudice and injury of the public and of the competitors of respondent, and constitute unfair methods of competition 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, testimony, and other evidence introduced before 'Vm. ,V, Sheppard, and John P. Bramhall, duly appointed trial examiners FORD MOTOR CO. 1551 1541 Order of the Commission designated by it to serve in this proceeding, the report of the trial examiners thereon and exceptions thereto, briefs filed on behalf of the Commission by James M. Hammond, counsel for the Commission, and by Bodman, Longley, Bogle, Middleton & Farley, counsel for the respondent; and the Commission having made its findings as to the facts and its conclusion that the respondent has violated the provisions of the Federal Trade Commission Act.

It i8 ordered, That the respondent, Ford Motor Co., a corporation, its officers, directors, representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution of its passenger motor vehicles in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Representing as the price of any passenger motor vehicle, in or through the quotation of prices in connection with illustrations or descriptions of passenger motor vehicles, or otherwise, in any advertisement promoting the sale of such passenger motor vehicles at retail, any price other than the true retail price of said passenger motor vehicles at the place designated for their sale, such retail price to include all charges for any equipment or accessories illustrated or described in such advertisement, or necessary to the oppration of such motor vehicle, or customarily included as standard ~'quipment, and any charge or charges whatsoever for advertising, delivery, handling, or for any similar or like purpose, or for any other purpose except transportation charges where the passenger 1notor vehicle so advertised is transported from the point where advertised for sale to another or different point for delivery to a retail PUrchaser. The provisions of this subparagraph 1 are subject to the provisions of subparagraph 3 hereof with respect to taxes. 2. Using a designated price in any advertisement illustrating a Passenger motor vehicle offered for sale at retail, unless the true retail price as defined in subparagraphs 1 and 3 hereof, of the passen- ~er motor vehicle illustrated is set out in juxtaposition thereto, in Words or figures equal in size and conspicuousness to the words or figures designating the price of any other passenger motor vehicle referred to in said advertisement.

3. Advertising passenger motor vehicles for sale at retail at a designated price, unless the said retail price includes all Federal, State and local taxes, or unless the advertisement clearly and legibly states, immediately adjacent to the price quoted, that the price is subject to additional charges for Federal, State, or local taxes, or any of them as the case may be.

Order 33F. T. C.

4. Advertising or representing a passenger motor vehicle as being far sale at retail at a designated price, unless such passenger motor vehicle is, in fact, made available and sold to the public at the point specified for the price stated, or at a point distant therefrom, for the price stated plus transportation charges thereto. This para· graph is subject to the provisions of subparagraph 3 hereof regarding taxes.

It is further ordered, That the respondent shall, within 60 days after service upon it of this order, file with the Commission a report in writing, setting forth in detail, the manner and form in which it ha$ complied with this order.

SNAP-OK TOOLS CORP. 1553 Complaint