Zenith Radio Corp

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IN THE MATTER OF ZENITH RADIO CORPORATION COMPLAINT, FINDINGS,· AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. :5 0~' AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 . Docket 4114. Complaint, July 6, 1940-Decision, Oct. 1'2,, 1942 Where a corporation, engaged In manufacturing and assembling radio receiving sets, radio tubes and similar products, and In Interstate sale and distribution · · thereof; by means of advertisements In newspapers and magazines, folders and circulars, and als(} through radio broadcasts_: · (a) Represented, directly or by implication, that its radio !!ets were capable ot bringing in programs broadcast from Europe,· South America, and the Orient every day, and that such programs would be reasonably audible an~dlstlnct at all times and under all .cotidltlons, through .such typical statt>ments. as "EUROPE IS' TALKING TO YOU Every Night IN ENGLISH-ARE YO-q LISTENING? With Zenith, the short-wave radio that gives 'you 'Europe, Direct' you can hear all the leaders • · "' 1 • all the dally news broadcasts . • • • Europe, South America, or the Orient every day guaranteed o.r your · money back on· aq short-wave Zeniths":· ' . , · · 'lhe facts being that there are times when, due to atmospheric conditions, elec; trlcal disturbances, and other obstacles which the industry has so far been unable to overcome, sati!?factory receptic;m of foreign broadcasts is lmpos-. Sible and neither its or any other sets are capable of providing such reception . at all times or under all conditions; · .. · (b) Repref!ented, directly or by implicatio~, through such typical statements a~ "6-Tube · Supet·heterodyne Table ·Model," "8-Tube Superheterodyne With Wavemagnet Aerial," etc., that sets advertised by It us containing 6 or 8 tubes contained said number of necessaty and fully functioning tubes for , the detection, amplification, and reception of rndlo signals·: fhe facts being that one of such devices In certain sets was not 11 tube but. merely a tuning Indicator; and one or more of the others were rectifier tubes which, While serving the auxiliary function of changing alternating· Into direct cur• rent, do not perform the primary function of detecting, amplifying, or receiving radio signals, and a substantial portion of the purchasln.g public does not distinguish between 'tubes which perform such primary functions and recti· fiber tubes and tuning indic11tor devices which perform only auxiliary func- . tlons, but believes that the g1·eater the number of tubes, the greater will be the set's power; . · · ~\'ith tendency and capacity to mislead .and deceive a: substantial portion of the PUrchasing public into the mistaken belief that said radio receiving sets possessed capacities which they did not In fact possess, that·eby causing Its Purchase of such sets: . · - · lield, That such acts' and practices, under the circumstances set forth, were. alr to the prejudice of the public, und constituted unfair and deceptive acts and practices in commerce .

.t\.s respects the ext~nt of the publlc understanding of the Jimitations on foreign· · short-wave radio reception-In connection with advertiser-seller's direct or' implied representations that _Its sets were capable of bringing in programs Complaint 35 F. T. 0. broadcast from Europe, South America, and the Orient every day, and ~bat such programs would be reasonably audible and distinct at all times and under all conditions, and the advertiser-seller's Insistence that tbe pur· chasing public is fully acquainted with the fact that there are times when atmospheric conditions, electrical disturbances, and other obstacles prevent. satisfactory reception of foreign broadcasts-the public, while it may be to a limited extent aware of some of the difficulties encountered in radio recep· tion, does not possess sufficient information to enable !t properly to evaluate representations in question, which were couched in such language as to lead it to ·believe that advertiser-seller bad succeeded in overcoming the condl· tlons which would interfere with satisfactory reception. Before Mr. Arthur F. Thomas and Mr. Randolph Preston, trialexaminers. . Mr. Carrel F. Rhodes and Mr. Edward L. Smith for the- Comm~sion, Montgomery, Hart, Pritchard & Hemot, of C~icago, Ill., fot' respondent.

Co:r.rPLAINT Pursuant to the provisions of the Federal Trade Commission Actr and by virtue of the authority vested in it by said act, the Federal ' Trade Commission, having reason to believe that Zenith Radio Corporation, a corporation, hereinafter referred to as respondent, has violated the provisions of said act, and it appearing to the Commissio.n 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. Respondent, Zenith Radio Corporation, is a corporation, organized, existing and doing business under and by virtue of the laws of the State of Illinois, with its principal office and place of business at 6001 West Dickens Street, Chicago, Ill. · Respondent is now and has· been for more than 10 years last past engaged in the business of manufacturing and .assembling radio ~e­ ceiving sets, radio tubes, and like products, and in selling and dls' tributing said products to dealers for resale direct to the purchasing public. Said respondent corporation sells and distributes said pro~­ ucts to dealers for resale and to buyers among the purchasing pubh0 throughout the United States and in the District of Columbia. Said respondent now causes and for more than 10 years last past has caused its said products when sold eith.er to dealers for resale or direct to the purchasing public to be transported from its principal place ofbusiness in Chicago, Ill., to the purchasers thereof at their several points of location in the State of Illinois and in the various States of the United States other than the State of Illinois and in the District of Columbia· ZENITH RADIO CORP. 581 ~79 Complaint · There is now, and has been at all times mentioned herein, a course of trade in said products so sold and distributed by said respondent between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of the business set out and described in paragraph 1 hereof, :for the purpose o:f inducing the purchase . of the radio receiving sets, radio tubes, and like products offered :for sale and sold by it, the respondent has circulated, and has caused dealers in its products to circulate, among prospective purchasers throughout the United States, by mail, advertisement~ in newspapers and magazines, by means of advertising folders, pamphlets, circulars, letters, and other literature, and by broadcasts :from radio stations with sufficient power to convey the programs emanating therefrom into the various States of the United States, many statements and representations concerning its said radio receiving sets. Io. many of said ?programs so broadcast and in the advertising literature so dissem:. Inated, said respondent has made, and has caused dealers to make, false and misleading statements and representations in describing said radio receiving sets and their power and capacity :for reception, and the number o:f active :functioning tubes in said radio sets. Among said statements and representations so made and circulated by respondent and its dealers, under its direction, are the following: London, Paris, Berlin, Moscow, Rome now broadcast in English I Zenith Short-Wave Radios are guaranteed to bring in Europe, South America, or the Orient every day or your money back I • • • . Long distance radios with short-wave are guaranteed to bring In Europe or Your money back. Way back In 1923 Zenith was pioneering In short-wave radio to make possible today's superlative performance • • •. Positively the greatest 1940 Zenlth values ever offered: • • • ten-tube superheterodyne • • • eleven-tube strperheterodyne • • • radio con- Bole with eight tubes • • • the amazing new 1940 eight-tube, three band Uadiorgan Zenith long distance radio • • • six tubes ! Push buttons I Long and short-wave · • • • six-tube heterodyne with wave magnet aerial, two-button Radiogram .

. The aforesaid statements and representations, together with 8llnilar statements and representations not herein set out, purport ~0 be descriptive of said respondent's Zenith Short-,Vave radio receiv;, lng sets; the number of necessary functioning tubes with which they are equipped and the power and capacity for foreign reception of said :radio receiving sets, and serve as representations on the part of the respondents to members of the purchasing public and to dealers that said radio receiving sets are equipped, some with 6, some with 8, 80tne with 10, and .some with 11, active, fully :functioning tubes; and t~at. said radio receiving sets have the power and capacity to and Will bring in programs broadcast from stations located in Europe, 582 FEDERAL TRADE COMMISSION DECISIONf:l Findings 35F. T. c.

·. South America, and the Orient every day and that they are guaran· teed to and will bring in broadcasts from London, Paris, Berli~, Moscow, Rome, and points in South America and the Orient 1n sufficient volume, free from static, so as to be distinctly heard at all ·times and under all conditions.

~ A substantial number of the purchasing public believe that the · greater the number of actually functioning tubes in a radio receiving set, the better it performs and the greater and clearer its power of detecting, amplifying, and receiving radio waves, and a substantial · number of the purchasing public buy radio sets under that belie!· · PAR. 3. In ·truth and in fact respondent Zenith Radio Corpo· · ration's aforesaid Zenith radio receiving sets are not equipped with· 6, 8, 10 or ll,·active, necessary, fully functioning tubes, respectively, -but have installed therein 1 or 2, or more ballast nonfunctioning, or 'tuning beacon tubes, · or rectifier tubes. Such ballast or tuning :beacon tubes, or rectifier tubes, devices and accessories do not serv-e . as amplifying, detecting, or oscillating tubes and do not perform any . recognized and customary function of a radio receiving tube in t~e :detection, ampl-ification, and reception of radio signals and said ·Zenith radio sets equipped with such radio tubes will not bring in -broadcasts froin London, Paris, Berlin, Moscow, Rome, and other points in Europe and from South America and the Orient in suffi· cient volume; free from static, to be distinctly heard at all tirnes . ·and tinder all conditions.

PAR. 4. Each a~d all of the foregoing false and misleading state· : ini:mts and representations made by the respondent' as aforesaid, in describing said Zenith radio receiving sets and their power and . capacity for .foreign reception and the number of tubes contained -therein, as hereinabove set out;were and are calculated to, and hav-e :had,· and now have, a tendency and capacity to, and do, mislead. and .deceive a substantial portion of the purchasii1g public into the ·erroneous and mistaken belief that such representations are true· As a result of this erroneous and mistaken belief a substantiul number of the purchasing public have purchased a substantial volume of respondent's said products.

~ PAR. 5. The aforesaid acts and practices of the respondent, as herein alleged, are all to· the prejudice and injury of the public a~d constitute 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 _Fed~ral Trade Commission, on July 6, 1940, issued and subse· ZENITH RADIO CORP. 583 579 Findings quently served its complaint in this proceeding upon the respondent, Zenith Radio Corporation, a corporation, charging it 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, testi~ lnony and other evidence in support of the allegations of the com~ Plaint were introduced by the attorneys for the Commission, .and. in opposition thereto by the attorneys for the respondent, before trial examiners of the Commission theretofore duly designated 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 the complaint, the a~swer thereto, and testimony and other evidence (the report of the trial examiners and briefs and oral argument having been waived); and the Commission, having duly considered the matter and being.now fully advised in the premises, finds that this proceeding is in the inter~ est of the public and makes this its findings as to the facts and its con~ · elusion drawn therefrom. . .FJNDJNGS AS TO THE FACTS ~ ARAGRAPH 1. ,The respondent, Zenith Radio Corporation, is a corporation, organized, existing, and doing business under and by virtue of ~he _laws of the. State of Illinois, with its principal office and place of Ustness at 6001 "\Vest Dickens Street, Chicago, Ill. · Respondent is now Rnd for a number of years last past has been engaged in the business of ~manufacturing and assembling radio receiving sets, radio tubes and ~IInilar products, and in the sale and distribution of such :rroducts to ealers for resale to the purchasing public. _ b P..,n, 2. Respondent causes and has caused its products, when sold, to e transported from its place of business in the State of Illinois. to Purchasers thereof located in various other States of the United States ~~d in the District of Columbia. Respondeilt maintains and has main~ t ll.lned a course of trade in its products in commerce among and between ·he various States of the United States and in the District of Columbia. ~ AR. 3. In the course and conduct of its business and for the purpose 0 ~ Inducing the purchase of its products by the public, respondent has , Circulated and has caused its dealers to circulate numerous advertise~ lnents among prospective purchasers, such advertisements beinl!~ dis-s . t:~nnated by means of newspapers and magazines, and also in adverbising folders and circulars distributed to the public. Use has also e:n made by respondent of radio broadcasts in its advertising cam~ Palgns. Among and typical of certain of the statements appearing in respondent's advertisements are the following; · 584: FEDERAL . TRADE COMMISS'ION DECISIONS Findings 35F.T.C· EURDPE IS TALKING TO YOU Every Night in ENGLISH ARE you LISTENING? With Zenith, the short wave radio that gives you "Europe, direct" you can bea~ all the leaders • • • all the dally news broadcasts. You need not depen on rebroadcasts which bring you only a small part. Europe, South America or the Orient every day guaranteed or your money back on all short wave Zeniths.

1940 'ZENITH, ·The Guaranteed Short Wave RADIO (Com. Exs. 8, 33). PAR. 4. Through the use of these statements and others of a simH.llr nature, respondent has represented, directly or by implication, that 1ts rad.io receiving sets are capable of bringing in programs broadcast ·from stations located in Europe, South America, and the Orient, every day, and that such programs will be reasonably audible and distinct at all times and under all conditions.

In fact, neither respondent's receiving sets nor any other radio receiving sets are capable of providing satisfactory reception of pro· grams broadcast from foreign radio stations every day, or at all tii1169 or under all conditions. From time to time there exist various atmos· pheric conditions, el~ctrical disturbances, and other obstacles to satis· factory radio reception which the radio industry has so far been unable to overcome. There are times when, due to these or other conditions, satisfactory reception of foreign broadcasts is impossible. · It is insisted by respondent that the purchasing public is full1 acquainted will} these facts and that the advertisements therefore ar~ not misleading. The Commission is of the opinion, however, t~a while the public is to a limited extent aware of some of the difficu1~1es encountered in radio reception, it does not possess sufficient informa.uon to enable it properly to evaluate respondent's representations· Respondent's advertisements are couched in such language as to lead the public to believe that respondent has succeeded in overcoming the various conditions which otherwise would interfere with satisfactot1 reception. , PAR. 5. Respondent has also made frequent reference in its ad'\'er· tising to the number of tubes contained in its various receiving sets· Typical of these statements are the following: 6-Tube Superheterodyne Table Model (Com. Ex. 3). 8-Tube Superheterodyne With Wavemagnet Aerial (Com. Ex. 3). Ten-tube superheterodyne with Rotor Wavemagnet Aerial (Com. Ex. 2, 3, 4>· Eleven-tube superheterodyne with Rotor Wavemagnet Aerial (Com. Ex. 4)· PAR. 6. These statements imply that the tubes contained in the re· spective receiving sets referred to are active, necessary, and fully' functioning tubes, and are for the purpose of performing the recog· nized and customary functions of radio receiving set tubes iil th6 detection, amplification, and reception of radio signals. ZENITH RADIO CORP. 585 579 Order One 'of the devices in certain of respondent's receiving sets thu~ ~eferred to as a tube is not in fact a tube but is merely a tuning lndicator device or ":Magic Eye." ,Also, one or more of the other devices thus referred to as tubes are "rectifier" tubes which, while serving the auxiliary function of changing alternating electric curlent into direct current, do not perform the primary function of detecting, amplifying, or receiving radio signals. A. substantial portion of the purchasing public does not distinguish ~etween radio tubes which perform the primary functions of detect- Jug, amplifying, and receiving radio signals, and rectifier tubes and tuning indicator devices which perform only auxiliary functions and do not increase the .power of the receiving set to detect or receive radio signals. Such portion of the public believes that the greater the number of tubes in a receiving set, the greater will be its power of detecting, amplifying, and receiving signals. PAR. 7. The Commission therefore finds that the representation$ lllade by· respondent with respect to its receiving sets; as set foi:tl~ herein, are erroneous and misleading.

PAR. 8. The Commission further finds that the use by respondent of these erroneous and misleading representations has the tendency and capacity to mislead and deceive a substantial portion of the pur~ chasing public into the erroneous and mistaken belief that r(lspond- ~nt's radio receiving sets possess capacities, "qualities, and character; lstics whi~h they do not in fact possess, an4 the tendency and capacity to cu.use such portion of the public to purchase substantial quantities of respondent's receiving sets a~ a result of such erroneous and mistaken belief.

CONCLUSION 'rhe acts and practices of the respondent as herein found are all to the Prejudice of the public and constitute unfair and deceptive acts and ~ractices in commerce within the intent and meaning of the Federal trade Commission Act.

ORDER TO CEASE AND DESIST . 'rhis proceeding having been heard by the Federal Trade Commis- Sion upon the complaint of the Commission, the answer of respondent, and testimony and other evidence in support of ·and in opposition to the allegations of the complaint taken before trial examiners of the ColTIInission theretofore duly designated by it (the report of the trial I.!Xaininers and briefs and oral argument having been waived), and the Commission having made its findings as to the facts and its con- 584 FEDERAL . TRADE COMMISS'ION DECISIONS Findings 35 F. T. C. EURDPE IS TALKING TO YOU Every Night in ENGLISH ARE YOU LISTENING? With Zenith, the short wave radio that gives you "Europe, direct" you can bear all the leaders • • • all the daily news broadcasts. You need not depend on rebroadcasts which bring you only a small part. Europe, South America or the Orient every day guaranteed or your money baCIC on all short wave Zeniths.

1940 'ZENITH, ·The Guaranteed Short Wave RADIO (Com. Exs. 8, 33). PAR. 4. Through the use of these statements and others of a simil.ar nature, respondent has represented, directly or by implication, that 1ts radio receiving sets are capable of bringing in programs broadcast ':from stations located in Europe, South America, and the Orient, every day, and that such programs will be reasonably audible and distinct at all times and under all conditions. . In :fact, neither respondent's receiving sets nor any other radio receiving sets are capable of providing satisfactory reception of pro· grams broadcast from foreign radio sta~ions every day, or at all times or under all conditions. From time to time there exist various atmos· pheric conditions, el~ctrical disturbances, and other obstacles to satis· factory radio reception which the radio industry has so :far been unable to overcome. There are times when, due to these or other conditions, satisfactory reception of :foreign broadcasts is impossible. · It is insisted by respondent that the purchasing public is· :fully acquainted with these facts and that the advertisements therefore are not misleading'. The Commission is of the opinion, however, t~at while the public is to a limited extent aware of some of the difficulties encountered in radio reception, it does not possess sufficient informat1011 to enable it properly to evaluate respondent's representationd Respondent's advertisements are couched in such language as to lea the public to believe that respondent has succeeded in overcoming the various conditions which otherwise would interfere with satisfactory reception. .· PAR. 5. Respondent has also made frequent reference in its adver· tising to the number of tubes contained in its various receivl.ng sets. Typical of these statements are the following: ' 6-Tube Superheterodyne Table 1\Iodel (Com. Ex. 3). 8-Tube Superheterodyne With Wavemagnet Aerial (Com. Ex. 3). Ten-tube superheterodyne with Rotor Wavemagnet Aerial (Com. Ex. 2, S, 4>· Eleven-tube superheterodyne with Rotor Wavemagnet Aerial (Com. Ex. 4). PAR. 6. These statements imply that the tubes contained in the re· spective receiving sets referred to are active, necessary, and :fully functioning tubes, and are for 'the purpose of performing the recog· nized and customary functions of radio receiving set tubes in. tbe detection, amplification, and reception of radio signals. ZEl\TITH RADIO CORP. 585 579 Order One of the devices in certain of respondent's receiving sets thu~ referred to as a tube is not in fact a tube but is merely a tuning indicator device or "Magic Eye." Also, one or more of the other devices thus referred to as tubes are "rectifier" tubes which, while serving the auxiliary function o£ changing alternating electric curlent into direct current, do not perform the primary function of detecting, amplifying, or receiving radio signals. A substantial portion of the purchasing public does not distinguish ~etween radio tubes which perform the primary functions of detectlng, amplifying, and receiving radio signals, and rectifier tubes and tuning indicator devices which perform only auxiliary functions and do· not increase the .power of the receiving set to detect or receive radio signals. Such portion of the public believes that the greater the number of tubes in a receiving set, the greater will be its power of detecting, amplifying, and receiving signals. PAn. 7. The Commission therefore finds that the representation!? lllade by respondent with respect to its receiving sets; as set forth herein, are erroneous and misleading.

PAR. 8. The Commission further finds that the use by respondent of these erroneous and misleading representations has the tendency and capacity to mislead and deceive a substantial purtion of the pur~ chasing public into the erroneous and mistaken belief that respond- ~nt's radio receiving sets possess capacities, "qualities, and character, lstics whi~h they do not in fact possess, an~ the tendency and capacity to cause such portion of the public to purchase substantial quantities of respondent's receiving sets ag a result of such erroneous and mis- · I taken belief.

CONCLUSION The acts and practices of the respondent as herein found are all to the Prejudice of the public and constitute 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 Commis- Slon upon the complaint of the Commission, the answer of respondent, and testimony and other evidence in support of and in opposition to the allegations of the complaint taken before trial examiners of the Commission theretofore duly designated by it (the report of the trial examiners and briefs and oral argument having been waived), and the Commission having made its findings as to the facts and its con- 586 FEDERAL TRADE COMMISS'ION DECISIONS Order 35F. T.C.

clusion that the respondent has violated the provisions ~f the Federal Trade Commission Act.

· It is ordered, That the respondent, Zenith Radio Corporation, a. corpo~ation, and its officers,' agents, representatives, and employees, directly. or through any corporate or other device, in' connection with the offering for sale, sale, and distribution of respondent's radio re· ceiving sets in commerce, as "commerce" is defined jn the Federal Trade Commission Act, do forthwith cease and desist from: . 1. Representing that any of respondent's radio receiving sets Wlll bring in broadcasts from .any foreign radio station "every day," or otherwise representing, directly or by implication, that such receiving sets are capable of providing reasonably audible and distinct reception 'of foreign broadcasts at all times or under all conditions. 2. Representing, directly or by implication, that any radio receiving set contains a designated number of tubes or is of a designated tube capacity, when one or more of the tubes referred to are tubes or other devices which do not perform the recognized and customary functions of radio receiving set tubes in the detection, amplification, ·and reception of radio signals.

It is further ordered, Thatthe respondent shall, within 60 days aft?r service upon it of· this order, file with the Commission a report 1n writing setting forth in _detail the manner and form in which ~t bas complied with this order.

MALONE & MOLES 587 Syllabus