Swimmer, Jacob

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IN THE M:ATI'ER OF I JACOB SWIMMER, DOING BUSINESS AS NATIONAL LACQUER MANUFACTURING CO. AND NATIONAL TITANIUM CO.

COMPLAINT, FINDINGS, AND MODIFIED ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC, 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1014 Docket 4088. Complaint, Apr. 12, 1940-Dccision, July 20, 19 ~2 1 Where an individual, engaged in the interstate !"ale and distribution of re· conditioned paint which he obtained as waste or salvage material resultilll;" from use of a spray gun by manufacturers of automobiles, electric re· frigerators, and other metal products, and reclaimed through the adding of solycnts and removal of impnrities- (a) P.:presented, by means of sales letters and advertising circulars which were given wide distribution,' that the regular and customary price of his paint was $3.03 per gallon, and that the quoted price thereof of $1.55 constituted a special, reduced, and sacrifice price;

The facts 'being said last figure was his usual and customary selling price, and while the manufacturing concerns from whom he obtaineu his waste material might have paid approximately the higher price for the original paint, 11e never sold his reconditioned product at any price approaching such figure; (b) Represented that he maintained wm·ehouses at numerous points throughout the Uniteu States, one of which was located near the prospective pm·chase!', and that the quantity of paint available from such warehouse at tbe quoted price wa-; limited to the specific amotint mentioned in his letter; TP,e facts being he had no warehouses other than that maintained by him Ill Vernon, Calif., in connection with his processing plant, from which be customarily tilled the order, and it was only in exceptional cases that be was able to fill an erder with a quantity of paint already in the purchaser's vicinity; and contrary to the implications in his said letter referring to "100 galions" or some other specific amount, he was prepared to and did fill all orders received, at said purported "sacrifice price"; (c) l<'uisely represented that his said product was· "fresh sto~k" made entirely from new and unused materials, and. obtained Jllrect from the origin Ill manufacturer; and (d) Failed to reveal, either in his letters or other advertising material or on the labels affixed to the containers, that said product was reclaimed and reconditioned;

With tendency and capacity to mislead and receive a substantial portion of the purchasing public with respect to the nature and value of said product, thereby causing it to purchase substantial ·quantities thereof as a result ot such mlst~ken belief; · • Modified order, published herewith, was made as of September 18, 1942. 1., NATIONAL LACQUER MANUFACTURING CO.; E.TC. 179 lis Complaint llr:ld, That such acts and practices, under the circumstances set forth, were all to the prejudice of the public, ·and constituted unfair and deceptive acts and practices in commerce.

Before Mr. John P. Bramhall nnd Mr. Edward E. Reardon, trial examiners.

iltr. Ol-arlc Niclwls and Mr. Raf,ldolph. lV. Branch for the Commissioa. ilr. Samuel P. Nul-·ick and Mr. G. V. 1Veilcert, o£ Los Angeles, Calif., and llfr.llenry E. Mangh1tm, of 'Yashington, D. C., for respondent. Complaint Pursuant to the provisions ~f th~ Federal Trade Commission Act, ~nd by virtue o£ the authority vested in it by said act, the Federal trade Commission having reason to believe that Jacob Swimmer,un .individual, trading under the name, National Lacquer Manufacturing Co., and under the name National Titanium Co., hereinafter ~eferred to as respondent, has· violated the provisions o£ said act, and lt appearing to the Commission that a proceeding by it in respect I thereof would be in the public interest, hereby issues its complaint, rstating its charges in that respect as follows: I I , PARAGRAPH 1. Respondent, Jacob Swimmer, is an individual trad- I' Ing and doing business under the name and style of "National Lacq~er Manufacturing Co." and under the name and style of "National l'ltanium Co." with his principal office and place o£ business located ~ 123-131-Eleventh Street, in the city of Brooklyn, State o£ New ork, Respondent now is, and £or more than 2 vears last past ha~ been, engaged in the sale and distribution of paint and paint v·o.ducts in col.nmHce among and between the various States o£ the n1~ed States, and in the District o£ Columbia. Respondent has lllaintained, and maintains, a course of trade in said products in said {;01llmerce, and has caused and now causes said products, when sold ?r ordered, to be shipped and transported from his place of busin~ss !11. the State of New York to p1uchasers and users thereof located in ~rious States of the United States other than in the State of New ork, and in the District of Columbia. . . PAn. 2. In the course of conduct of E=aid business- and for the purpose of inducing the purchase ·of said products, it has been and Is the practice of respondent to mail letters and advertising literature to purchasers and prospective purchasers located in various States of the United States and in the District of Columbia, and therein to 1n11.ke representations with respect to the price, quality, and manu- 180 FEDERAL .TRADE COMMISSION DE.CISJON'S Complaint 35 F. T. C. facture of said products and with respect to the life and status of respondent's business. · Typical of said representations s~ made, among others, a're the following :

In a warehouse near you, we have 100 gallons of Genuine. Synthetic outside lVhi.te Paint, In five gallon steel buckets, guaranteed to be !n perfect condition which we will sacrifice for $1.55 per gallon, delivered. This material was originally manufactured by the world's largest synthetic paint maker and is positively fresh stock, regularly priced at $3.G5 per gallon- We procured this lot when we bought out a large manufacturing plant. Jts unusual high quality makes It Ideal for indoor and outdoor structural maintenance on wood, metal, concrete or over old paint. It covers solid In one coat, brushes or sprays on easily and dries hard over night to a beautiful finish. Endures severest exposure without cracking, chipping or flaking and lasts practically a lifetime. May be tinted with all oil colors and thinned with turpentine or benzine. So sincere are we with this offer that we are willing to extend four months credit on this material with the distinct understanding that unless it exceeds your expectations in every way, you may return the entire quantity at any wue and we will pay freight both' ways and not. charge you for what you've used· Through and by means of the foregoing statements, and others of similar import and meaning, it has been and is the practice of re· ~pondent to represent and iinply, among other things, that the regular and customary price of the said paint product is $3.65 per gallon and that it is being offered for sale and will be sold at a sacrifice price of $1.55 per gallon; that respondent maintains warehouses at points other than his place of business and at places near or in tbe vicinity of the solicited prospective purchasers, in which a certain specified number of gallons of said product will be available, and that respondent has been in business for QVer hal£ a century, that· the product is fresh stock, implying that the ingredients used in its manufacture are fresh, unused materials; that the product is direct from the original paint manufacturer and that this paint roan~· facturer is the world's largest synthetic paint maker; that hl~ product is purchased from the said world's largest synthetic paint manufacturer.

PAR. 3. The aforesaid statements and representations are fa.l~e, misleading, and deceptive in that the usual, regular, and customary price of the saiu paint product is not $3.65 per gallon, but is $1.55 per gallon, the price at which it has been and is offered for saJe and regularly sold by respondent. The respondent maintains no ware~ houses other than the warehouse· located at his place of business in Brooklyn, N. Y., and at no time has h~d any quantity of paint avu.i!· able to prospective purchasers in any warehouse other than hls NATIONAL LACQUER MANUFACTURING CO., E.TC. 181 Complaint ,.

Warehouse as aforesaid and not at points near or in the vicinity of i' the recipients of the said letters and advertising literature. Ref:pondent has· not been in business for half a century or :for· any comparable length of time. Respondent's product is not fresh stock btlt is made fr?m waste paint which has been lost in the process of the application of the original fre~h stock on refrigeration boxes and other surfaces, which is recovered and sold to respondent who reconditions and redissolves it into the product herein described; respondent's product is not direct from the original manufacturer of synthetic paint as ·it has been used before it was received by respondent. The aforesaid statements of the respondent and all other advertising material used by him are false and misleading in that they fail to disclose that his said product is a reconditioned, redis- !!olved paint product. · PAn. 4. The use by the respondent of the foregoing false and misleading representations and implications respecting his said product as to its price, quality, manufacture, and location, and the failure to. disclose in said advertising that his said product is a reconditioned Paint, has had and now has, the capacity and tendency to and does hlislead and deceive a substantial portion of the purchasing public into the mistaken and erroneous belief that said representations and impli- <'ations are true, and causes a substantial portion of the purcha!:>ing Pllblic, because of such mistaken and erroneous beliefs, to purchase said product. • · PAn. 5. The aforesaid acts and practices of the respondent, as herein alleged, are all to the prejudice and injury of the public and con- ~titute unfair and deceptive acts and practices in commerce within the lntent and meaning of the Federal Trade Commission Act. Since the date of the issuance of the original complaint herein1 respondent has transferred his place of business from123-131 Eleventh Stre-et, Brooklyn, N. Y., to 2330 East ·Thirty-seventh Street, Venwn, Calif. From this address respondent, in the course and conduct of his business, has mailed letters to the various States of the United Stutes. Said letters, in addition to containing all the false and misleading ~tatements and representations hereinbefore recited, bear the followlng letterhead or inscription: "National Titanium Company. Pacific Coast Division." Respondent thus represents that his office at Vernon, Calif., is but one branch or division of his business, and that he has other branches or divisions in various sections of the United States. The representations thus made by the respondent are faise and Untrue. Respondent's only place of business is located at Vernon, 182 FEDE,RAL TRADE COMMISSION DE.CISION'S Findings 35F. T.C.

Calif., and respondent has no branch or division in other sections of the country.1 REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade dommission Act, the Federal Trade Commission on April 12, 1940, issued and sub· 'sequently served its complaint in this proceeding upon the respondent, Jacob Swimmer, an individual trading as National Lacquer Manu· facturing Co. and as National Titanium Co., charging him with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of that act. After the filing of respondent's · answer, a hearing w·as held on August 13, 194:0, before a trial examiner of the Commission theretofore duly designated by it, at which hearing the attorney for the Commission served notice upon the respondent, who was present; that an amendment to the complaint woul~ be . sought, which amendment would raise certain issues not included in the original complaint. The proposed amendment was dictated into the. record at the hearing. No objection being offered by the respond· ent to the amending of the complaint, the attorney for the Commission proceedeu to introduce testimony and other evidence in support o£ the allegations of the complaint and of the proposed amendment, and the respondent offered testimony and other evidence in opposition thereto. Subsequently, the Commission on April 23,_19-H, entered its order amending the complaint in conformity with the announcement made by the Commission's attorney at the hearing, and directing thttt the evidence introduceu at the hearing on August 13, 1940, be consid· 1 Complaint was amended by the addition ot the above two paragraphs by order amcndll1g complnlnt dated April 23, 1941, as follows: . This matter coming on to be beard by the Commission upon the motion of Rlcbp.rd p .. .Whiteley, Assistant Chief Counsel for the Commission, for an amendment to the cotn· plaint herein, and the Commission having duly considered said motion and the record herein.

And It appearing to the Commission that at a hearing In this case In Los Angeles, Calif., on August 13, 1940, the Commission's trial attorney announced his Intention to seek an amendment to said complaint and dictated the proposed amendment Into the record, tb8 language of such proposed amendment being Identical with that set forth in the motion of the Assistant Chief Counsel.

And It further appearing to the Commission that the respondent was present In person at said bearing when said announcement was made. by the Commission's trial attorney and When said proposed amendment was dictated into the record and that the ·respondent otTered no objection to the amending ot the complaint as proposed by the Commissions trial attorney. · And I~ further appearing that Issue was joined nt said hearing upon the cbnrA"cs set forth In said proposed amendment, and that testimony In support of said charges w11s introduced by the Commission's trial attorney and In opposition to such charges by tb9 respondent.

It ls therefore orclered, That the motion of the Assistant Chief Counsel be ~ranted 11nd that the complaint herein be, and It is hereby, amended by adding thereto the following: [Here follow the two paragraphs hereinbefore set out at the end ot tile complaint]. l\ATIONAL LACQCER. MANUFACTURING CO., E.TC. 183 178 Findings lred a part of the record to the same effect as though such amendment lad been made by the Commission prior to such hearing. · . Thereafter, on June 2, 1941, uml June 3, 1D41, additional hearings Were held before a trial examiner of the Commission theretofore duly designated by it, at which hearings further testimony and other evi- (~ence were introduced in support of and in opposition to the allegations of the complaint as amended, the responderit being present at these hearings and being represented also by counsel. Subsequently, th~ proceeding regularly came on for final hearing before the Corn- . nussion on the complaint as ume.nded, the answer of the respondent, te~timony, and other evidence, repm:t of the trial examiners upon the tlVJc.lence, and brief in support of the complaint (no brief having been filed on behalf of the respondent and oral argument not h:wing been requested); and the Commi~sion, having duly considered the matter ~·nd being now fully advised in the premises, finds that this proceeding 18 in the interest of the public and makes this its findings as to the facts ttnd its conclusion drawn therefrom.

FINDINGS AS TO Tile FACTS PAnAaR.\PH 1. The respondent, Jacob Swimmer, is an individual trading and doing business under th3 name of National Lacquer Manufacturing Co., and also under the name of National Titanium Co. For 8several years immediately preceding January 19-!0, respondent's of~ fice and place of busint'ss was located at 123-131 Eleventh Street, llrooldyn, N. Y. In January 1940, respondent moved to Vernon; Calif., where he opened an olfice and place of business at 2330 East 1'hirty-sewnth Street. While it appears that a short period of time t>lapsed before.all of respondent's business operations could be transferred from Brooklyn to his new place of business in Vernoi1, Calif., all of such operatior1s in Drooldyn had been discontinued by May 19"10. Since that time respondent has maintained no office or place of business other than that located in Vernon, Calif. PAR. 2. Respondent is engaged in the reclaiming and reconditioning of paint, and in the sale and distribution thereof. In the course and conduct of his business respondent sells ancl has sold his product to :Purchasers located in ·various States of the United States and in the· District of Columbia, and causes and has caused his product, when Sold, to be transported from his place of business in the State of N mv York or the State of California to. the purchasers thereof located in snc·h other States and in the District of Columbia.. Respondent main~ tains and has maintained a course of trade in. his product in commerce lllnong and between the several States of the United States and in the District of Columbia. · 184 FEDERAL TRADE CO~:MISSION DECISIONS Findings 35F. T.C.

PAR. 3. In the course and conduct of his business and for the pur· pose of inducing the purchase of his product, respondent follows the practice of addressing sales let~ers to numerous prospective purchasers. Typical of such letters is one addressed to a business concern in Dallas, Texas, in April1939, which read as follows: In n warehouse near you, we now have 100 gallons of high grade Genui116 Outside lVhite Paint In five gallon steel buckets, guaranteed to be in perfect condition which we will sacrifice for $1.55 per gallon, delivered. · This material was originally manufactured by the world's largest paint maker and is positively fresh stock, regularly priced at $3.G:i per gallon. Its unusual high quality makes it ideal far Inside and outside painting oil · walls, woodwork, ceilings, floors, fences, exterior structures, window frames, brlc:lc, concrete, over old paint and metal surfaces. It con~rs solid In one coat, brushes or spmys easily and dries over night to a smooth finish. Endures severest exposure without craekiug, chipping or flaking and lasts practically n lifetime.

It may be tinted with ordinary oil colors and thinned with turpentine. So sincere are we with this offer that we are willing to extend six month!> ·credit on this material with the distinct understanding that unless it exceeds your expectations in every way, you may return the entire quantity at any time and we will pny freight both ways and not charge you for what you've used. · 1\lay we have your order for all or any part of this material by .retum mall? In addition to the use of individual letters addressed to specific prospective purcha~ers, respondent also makes use of advertising circulars, which are given wide distribution among prospective pur· chasers throughout the country. These circulars contain in substance much of the same material used in the letters. Both the letters and circulars used by respondent have imprinted thereon, in connection with respondent's trade name, the legend, "'Varehouses-Principal Cities."

PAR. 4. Through the use of these representations and others of similar import, respondent represents, directly or by implication, that the regular and customary price of his paint is $3.65 per gallon and that the quoted price of $1.55 per gallon constitutes a special, reduced, and sacrifice price; that respondent maintains warehouses at numerous points throughout the United States, one of which is ·located near the prospective purchaser, and that the quantity of ·paint available to the prospective purchaser from such adjacent ware· house at the quoted price is limited to the specific amount mentioned in respondent's letter; that respondent's paint is fresh stock, being made entirely of new and unused materials; and that the paint is obtained by respondent direct from the original paint manufacturer. . PAR. 5. Respondent o~tains his paint from manufacturers of automobiles, electric refdgerators, and other metal products on which NATIONAL LACQUER MANUFACTURING CO., E.TC. 185 178 Findings !Jaint is used. Such manufacturers usually paint their products by spraying the paint on with the aid of a spray gun. During the process of spraying the paint, a substantial proportion of it rebounds ·and collects on plates and in trays and troughs in the booth or room Where the painting process takes place. This waste or salvage ~aterial is subsequently gathered up by the manufacturer and placed 111 barrels or other containers. Upon obtaining the material, re- ~Pondent subjects it to certain processes which include, among other ~things,. the adding of necessary solvents and the removal of certain lrnpurities. It is this reclaimed and reconditioned products which respondent sells. He does not obtain any of his paint from paint lrlanufacturer~.

Neither in his letters or other advertising material, nor· on the labels affixed to the t:ontainers in which his product is sold, does · respondent disclose that his paint is a reclaimed and reconditioned Product. Persons purchasing the paint do so under the impression that they are obtaining new paint made entirely of new :mel unusecl :tna terials.

1. Par. 6. The price of $1.55 per gallon at .which respondent offers lls product for sale is in no sense a special, reduced, or sacrifice D~ice, but is the usual and customary price at which respondent sells hls product in the normal and regular course of business. ·while the tnanufacturing concerns from whom respondent obtains the waste lrlaterial may have paid approximately $3.05 per gallon for t11e original paint, respondent has never sold his reconditioned product at that price nor at. any price approaching that figure. Par. 7. Respondent has no warehouses other thnn the warehouse Which he maintains in Vernon, Calif., in connectioh with his processing Plant. It occasionally happens that persons ordering respondent's Paint decline to accept it upon arrival, and in such cases it may become llecessary for respondent to store the paint with some transportation company or in a public warehouse until a new purchaser for the shiplllent can be found. At times, also, purchasers who accept the paint later find fault with it, and in such instances respondent may arrange With such persons to hold the pai.nt and forward it to·a new purcllaser 1\s soon as a resale can be effected. The only points to which respondent e1>er ships his paint in advance of the sale thereof are Norfolk, Va., and New Orleans, La. Because of certain advantages in freight mtes, carload shipments of the paint are sometimes made to these points and stored in public warehouses pending the sale thereof. · Respondent's letters and circulars, however, are sent to prospective . purchasers indiscriminately and without regard to their location, and Irrespective of whether respondent has any paint on hand in the vicin- COJ1.IMISSION~ DE.CISIONS186' FEDERAL TRADE Order · 3.'5F.T.C· ity of the prospective purchaser: In fact, it is only in exception;! cases that respondent is able.3 to fill an order with a quantity of paint already in the vicinity of the purchaser. The customary and usual practice is to fill the order by shipment from respondent's plant in · Vernon, Calif.

PAR. 8. Although respondent's letters refer to "100 gallons" or son1e other specific amount of paint, thus implying that the quantity avail· able is limited, respondent is prepared to and does fill all orders re· ceived, such orders being filled at the purported sacrifice price quoted in the letters. - P.\R, 9. The Commission therefore finds that the representations made by the respondent with respect to his product, as set forth in paragraphs three and four hereof, are misleading and deceptive. r AR. 10. The Commission finds also that respondent's advertising materia·l, including his letters and labels, is misleading and deceptive, in that it fails to disclose that respondent's·product is not made of new· and unused materials but is a reclaimed and reconditioned product, the essential ingretlient of which is waste or salvage material .which has previously been used.

PAn. 11. The Commission further finds that the acts and practices of the respondent as herein described, including the. failure of re· spondent to disclose the true nature of his product, have the tendency and capacity to mislead and deceive a substantial portion of the pur· chasing public with respect to the nature and value of respondent's product, and the tendency and capacity to cause such portion of the public to purchase substantial quantities of respondent's product as IJ. result of the erroneous and mistaken belief. so engendered. CONCLUSION The acts und practices of the respondent as herein found are ~~;ll to the prejudice of the public, and constitute unfair and deceptive acts and practices in commerce within the intent and meaning of the Fed·· eral Trade Commission Act.

ORDER MODIFYING ORDER TO CEASE AND DESIST The Federal Trade Commission having on July 20, ·1942, made its findings as to the facts and issued its order to cease and desist in this' proceeding (copies of such findings and o~der being served on the respondent on July 24, 1942), and the Commission now being of the opinion that said order to cease and desist should be modified as here· inafter set forth.

NATIONAL LACQUER MANUFACTURING CO., E.TC. 187 178 Order It is ordered, That said order to cease and desist be, and it hereby is, lllodified to read as follows:

. This proceeding having been heard by the Federal Trade Commis- 81011 Upon the ·amended complaint of the Commission, the answer of t~e respondent, testimony and oth.er evidence in support of the allegations of the complaint and in opposition thereto, taken before trial elaminers of the Commission theretofore duly designated by it, report of the trial examiners upon the evidence; and brief in support of the eolllplaint (no brief having been filed by respondent and oral argu- ~ent. not having been requested), and the Qommission having made lt.s findings as to the facts and its conclusion tlu~t the respondent has \'lolated the provisions of the Federal Trade Commission Act. It is ordered, That the respondent, Jacob Swimmer, individually ~~d trading as National Lacquer l\fanufacturing Co., and as National t'ltanium Co., or trading under any other name, and his representalV~s, agents, and employe~s, directly or through any corporate or ~th~r device, in connection with the offering for sale, sale, and distri- ~tlon of respondent's paint. in commerce, as "commerce" is defined in ~ e Federal Trade Commission Act, do forthwith cease and desist ~rolll: . . ~· Representing as the customary or regular price of respondent's Pnmt any price which is in excess of the price at which such paint is regularly and customarily sold by respondent in the normal and usual co Urse.of business. · . • I' 2. Representing, directly or by implication, that the price at which I respondent offers his paint for sale constitutes a special, reduced; or sa?rifice price,· when in fact such price is the usual and customary Price at which respondent sells his paint in the normal and usual course of business.

t ~· Representing, directly or by implication, that respondent mainalns any warehouse other than that maintained at his manufacturing l>plant in Vernon, Cali:£. · 4, Representing, directly or by implication, that respondent has any specified quantity of paint warehoused or on hand in the vicinity o£ l>rospectiv~ purchasers, ·when respondent does not in fact have such 'lllantity warehoused or on hand in the designated locality. 5. Representing, directly or by implication, that the quantity- of respondent's paint available to prospective purchasers is limited, when respondent is in fact prepared to fill all orders receiv~d. 6. Using the words "fresh stock" to designate or describe any reclaimed or reconditioned paint, or otherwise representing, directly I I' I. 188 FEDE.RAL TRADE COMMISSION DE.CJSIO:N'S ! Order 35F.T"C.

or by implication, that such paint is new paint or is made from new and unused materials.

7. Uepresenting, directly, or by implicati~n, that respondent's paint is obtained by him direct from paint manufacturers, when such is not the fact.

8. Advertising, offering for sale, or selling reclaimed or recondi· tioned paint without clearly disclosing in all sales letters and other advertising media, :md on labels affixed to the containers in which such paint is sold, that such paint is a reclai111ed or reconditioned prod· uct made principally from salvage material. It is further orde11ed, That the respondent shall, within 60 dny5 · after service upon him of this order, file with the Commission a :report in writing setting forth in detail the 1nanner and form in which hO has complied with this order.

UNITED DIATHERMY, INC. 189 Complaint