"Strand-Sealed Hosiery Co.," Etc

Text (OCR of the scan at left; may contain errors)

IN THE MA TI'ER OF WORLD'S ST.\R-MALLOCH, INC., ALSO HAVING TRADED AS "STRAND-SEALED HOSIERY CO."

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3623. Complaint, Oct. 4, 1938-Decision, Jan. 9,1943 Where a corporation, engaged in competitive interstate sale and distribution to the purchasing public of various articles of wearing apparel, including lingerie, hosiery, shirts, and dresses, principally through sales agents whom it obtained through advertisements in newspapers and periodicals of wide distribution and to whom it forwarded, upon receipt of inquiries, circular letters and other advertising material,. supplying to those who agreed to serve in such capacity a sales kit which included various leaflets, circulars, pamphlets and other advertising material to be used by th~m and exhibited to prospective purcha!lers- (a) Represented through representations in its said advertising, directly and by implication, that its "Strantl-Sealed" hosiery was made by a secret process, use of which greatly increased its wearing qualities and enabled it to give two or three times as much wear as other hosiery; and (b) Represented that its said product was proof against snags and runs, and that the number of turns or twists used therein was greatly in excess ot that used in other hosiery:

The facts being that, as disclosed by examination and report made by the Bureau of Standard!'!, the process employed by It was not secret but was in fairly common use among manufacturers; the number of turns or twists used by it was about the same as that of other hosiery on the market; and process commonly employed among modern manufacturers of "sealing" their hosiery or silk yarn used therein through subjection to certain solutions had not been used to any exten't in its said hosiery, which was not proof against snags or runs, and which did not give any degree of wear substantially greater than other hosiery; and .

(c) Portrnyed in a pamphlet a purported sample of the !'ilk tbi'ead used in the manufacture of its said products which had a fairly high degree of twist, and a sample of the thread used in "ordinary" sllk hosiery which had very little twist, In connection with which it claimed superior advantages for its hosiery with respect to snugs and breaks;

Notwithstanding that the pictured strands or threads claimed to be r<'presentativ~ of those used In its said product had a considerably higher degree of twist than the strands in the product itself: and (d) Represented that ppi·sons acting as sales agents for it might reasonably expect, under normal conditions, to earn amounts ranging up to $1.30 per hour, $15 Jl('r dny, and $47 per week;

The facts being that the highest amount which had ever been earned by its representatives was $20 per week and that not in recent years; and figures given were greatly in excess of the amounts which agents could reasonably expect to earn under normal conditions: and WORLD'S ·STAR-MALLOCH, INC., ETC. 77 76 Con:ipia!nt {e) Repi·esented that its representatives received from it free of charge a sample 4 outfit and various articles of merchandise for- their own use through such statements, among others, as "Outfit Free"; "Your Own Lingerie Free"; "Sample outfit with 2 stockings offered free"; "Free Dresses"; etc.; The facts being it did not supply sample outfits to its representatives free of charge or give them any free articles for their own use; a "gift" referred , to in its advertising was In fact only a coupon which entitled representative to an article of clothing In event" of sale by him of enough products within ten days to earn commissions amcunting to $5 ; and articles referred to as given "free" were in no sense a gift, but were in fact part of the agent's compensation for services rendered In sale of its merchandise; 'With tendency and capacity to mislead and deceive a substantial portion of the purclmsing public· with respect to said hosiery, thereby causing its purchase thereof, and also causing it to undertake sale of said products in preference to those of competitors, whereby trade was diverted unfairly to said corporation from them :

Held, That such acts and practices, under the circumstances set forth, were all to the prejudice of the public and competitors, and constituted unfair methods of competition in commerce and unfair and deceptive acts and practices therein.

Before Mr. Arthur F. Thomas, Mr. John.. W. Addison and Mr. Miles J. FurruuJ, trial examiners. . Mr. J. R. Phillips, Jr. and Mr. Carrel F. Rhodes for the Commission. Butterfield, Keeney & Am:berg, of Grand Rapids, Mich., for respondent.

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 World's Star-l\falloch, Inc., a corporation, also having traded as Strand- Seal£-d Hosiery Co., hereinafter referred to as respondent, has violated the provisions of the said act, and it appearing to the Commission that a preceeding 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, 'Vorld's Star-Malloch, Inc., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of Michigan and having its office and principal place of business at 501 Ottawa Avenue, N. ,V., in the City of Grand Rapids, State of Michigan. The respondent has also traded as Strand-Sealed Hosiery Co.

PAn. 2. Respondent is now and has been for more than six years last past engaged in the business of selling and distributing lingerie, ·hosiery, underwear, shirts, dresses, and other wearing apparel. The respondent sells said products by direct selling methods and FEDERAL TRADE COMMISSION D·ECISIONS 78 Complaint 3aF. T. U.

by means of salespersons and representatives (hereinafter referred to· • as "distributors"). Respondent sells said products to members of the purchasing public situated in various States of the United States and in the District of Columbia and causes said products when sold by it to be transported from ·its aforesaid place of busi- • ness in the State of Michigan to the purchasers thereof at their respe:ctive points of location in various States of the United Statesr other than the State of Michigan, and in the District of Columbia. Respondent maintains and at all times mentioned herein has maintained a course of trade in commerce in said products among and Letween the various States of the United States and in the District of Columbia.

PAR. 3. The respondent is engaged in substantial c.ompctition in commerce among and between the various States of the United States and in the District of Columbia, with other corporations and with partnerships, firms, and individuals selling and distributing lingerie, hosiery, underwear, shirts, dresses, and other weari;ng apparel. Among such competitors in said commerce are many who do not in any manner misrepresent the quality and character of their products, .the earnings of the distributors of their products, the merchandise which they give free of charge to such distributors, nnd who do not make nny other false statements in connection with the sale and distribution of their products. · PAR. 4. In the course and conduct of its said business and for th() purpose of inducing the purchase of its said products and to ~~rocur() the services of distributors to sell its said products, respondent has caused false advertisements containing representations and claims with respect to the quality and character of its hosiery, tho earnings of the distributors of its products and the merchandise purported to he given free of charge by the respondent to such distributors to be disseminated in commerce, as defined in the Federal Trudo Commission Act, through the use of advertisements in newspapers, trade magazines, and other publications, having a general circulation throughout various States of the Unit('d Statps, through letters, catalogs, circulars, and leaflets distributed among prospective pur· c:hasers and prospective distributors of its said products, situated in various States of the United States, and through other means. Among and typical of rcpres<~ntations contain<•d in said false advertisements so used and disseminated ns aforesaid are the following: JJrlp Wanted-Female. Earn $15 Commission Dally. Free dresst'S. Sell tr()('ks, thr<>e for $3.08. Amazing vnlnes, stunning tubrlcs, en(·bnntlng styles. Quick sales. Eiperlence unneces81lry. Outfit tree. WORLD'S STAR-MALLOCH, INC., ETC. 79 76 Complaint Help Wanted-Female. Your own lingerie free. Up to $20 per week with umazing ne.w form-tailored lingerie. World's Star-Malloch, Department 554, Grand Rapids, Mich.

Sales Agents Wanted-Ladles.

Earn $28 Commissions in week. Demonstrate amazing "Strand-Sealed" Silk Hosiery; secret weaving process doubles wear; strongest money-back guarantee; order your hosiery free; sample outfit with two stockings offered free; state size. Strand-Sealed Co., Dept 04, Grand Rapids, Mich. Even spare-time will bring you up to $5 In a day. Lots of folks working with me are making $1.30 an hour right from the start. Spare-time workers are making from $18 to $47 a week. Full-time workers are making much more.

ICvery hour you devote to selling our lines means an average of $1.30 an hour clear profit to you.

You, too, can have FHEE DRESSES and FREE HOSIERY, LINGERIE and UNDERWEAR, too! "Strand-sealing". It makes silk thread stronger and more elastle-"proofs" it 8A:nlnst SNAGS, RUNS and ordinary WEAR.

StranQ,-Sealed Sllk hosiery doubles the wear 1n every pair. DOUDLE-even triple wear you have been getting. Secret weaving process-doubles wear.

A remarkable scientific discovery Insures a much longer wear. Free handbag selling outfit, lnclu(llng two actual stoekiags. 01·dlnary silk hosiery (not "Strand-SPaled") snaps so ea~:~ily because lt Is wo,en of thin, dt-llcate silk th1·ead. Under the microscope yon would see that this thrt-ud Is made of many struntl::~ of raw sill' twisted together. The raw silk tl.hers are fuzzy an(l SPPIII to rPneh out to cateh on any rough object. When one Is caul!;ht nnd hJ't-aks, the th1·end Is snnggPd and a run results. That problem has lwen flolv l by our lli'W nnd exclusive, "Stran~-Se~led" silk process. With this worulf>rful new st>crPt proc£'!'!! all loo!ll', tiny t~trnnds are flt·st twisted together. Then the silk !hrend Is placed In a ISe<:ret solution ~-hlch "solidifies" each und every ~;trbnd. The fibers ore smoothed down, making a thread that Is smootll, strong and sliPilPI'Y. It glides enslly, over rough objects tbnt woul<l snag ordinary silk, hoslPry thread. It Is thi::~ marvelous treatment that ennbles "Strnnd-SrnlPd'' Silk IJoslery to give much longer wear. Wily OHDINARY SILK HOSIERY SNAGS RO EASILY. Silk hosiery thread Is made up of so many hair-like strands, so delicate as to be almost invisible to the nakt•<l eye. In ordinary silk hosiery tllese fnlgile strands ore loosely twisted togPthl'r and the thi'Pud hns 11 ''fuzzy" surtacP. It snags easily, tor there nrc> many st•pnrnte stran<l>! to rnt('h and br{'Uk. This Is rt>sponslble for the dt>strnl'!lon ot than!'nnd~ ot d(·lhli'S wo1·th or hosiery every year. Now, on the Oflfloslte IJilge, 111~e how this problem has hPl'n solvetl hy our exclusive "Strand· SPaling'' Ilroci'RS. See tor yoursl'lt-Why ordinary silk hosll'ry snags so euslly, and how exclusive "Strnnd-Sealetl" silk threntl re!':lsts snags and runs. Thi' pamphlet, 1li5.trilmtetl hy the l'i'!'pond('nt as aforesaid, from which the last above quotation is taken portrays what respondent f{'presents to be a sample of the silk thr<'atla~('d in the manufacture of "ordinary silk hosiery" and a sample of the silk thread used in the Complaint 36F.T.C.

manufacture of respondent's hosiery. The sample of the silk thread which respondent represents to be used in the manufacture of ordinary hosiery has very little twist. The sample of the silk thread which respondent represents is used in the manufacture of its hosiery is a three-thread silk, each thread being composed of nine stmnds. PAR. 5. Through the use of the statements and representations hereinabove set forth and others similar thereto, not herein 'set out, which purport to be descriptive of the quality and nature of respondent's lwsiery and the income earned by the uistributors of respomlPnt's products and the articles of merchandise given free of charge by the respondent to such distributors, respondent has represented directly and by implication, among other things, that respondent's hosiery is manufactured pursuant to a secret weaving process or a remarkable scientific discovery which triples or doubles the wear thereof; that such hosiery is manufnctureu pursuant to a secret process not used in the manufacture of the hosiery sold and distributed by competitors ()f respondent; that such hosiery is "proof" against snags, runs, and ordinary wear; that such hosiery contains a number of turns or twists greatly in excess of those used in the manufacture of a hosiery sold .and distributed by competitors of respondent; that the above described pamphlet contains a true representation of the silk threaus used in the manufacture of ordinary silk hosiery and the silk thread used in the manufacture of respondent's hosiery; that the average income -earned by the distributors of respondent's products is comparable to the income represented to be earned by such persons in the aforesaid advertisements and that a person who contracts or agrees with the respondent to distribute its products may expect, under normal conditions or circumstances, to earn such amounts; that distributors of respondent's products receive free of charge from the respondent dresses, hosiery, lingerie, uuderwear, and a sample outfit. PAR. 6. The aforesaid representations used and disseminated by the respondent in the manner above described are grossly exaggerated, misleading and untrue nnd constitute false advertisements. In truth and in fact the hosiery sold and distribut('d by the respondent as aforesaid is not manufactured pursuant to a secret manufacturing process or a remarkable scientific discovery which triples or doubles the wear thereof. Such hosiery is not manufactured pursuant to a secret process, not used in the manufacture of the hosiery sold and distributed by the said competitors of respondent. Such hosiery is not "proof" against runs, snags, or ordinary wear. Such hosiery docs not contain WORLD'S STAR-MALLOCH,. INC., ETC. 81 76 Complaint a number of twists or turns greatly in excess, or .in excess, of those used in the manufacture of the hosiery sold and distributed by competitors of respondent. The above described pamphlet does not contain a true representation of the silk thread used in the manufacture of respondent's silk hosiery. The average earnings of the distributors of respondent's products, under normal conditions or circumstances, are much less than the amounts represented as being earned by such persons in the aforesaid statements and representations. Such distributors do not consistently earn amounts equal to or comparable to the amounts described in such advertisements. The distributors of respondent's products do not receive from the respondent free dresses, hosiery, lingerie, underwear, or a sample outfit. The true facts are that the respondent's hosiery is manufactured from a four-thread silk, having approximately 18.5 turns left (Z) per inch. It is the opinion of experts in the hosiery business that in the manufacture of hosiery the use of a higher twist makes the hosiery more durable and less likely to snag or run. The aforesaid twist used by' the respondent in the manufacture of its hosiery is not an unusual or extraordinary twist in silk hosiery and does not exceed the twist used in the manufacture of the ordinary silk hosiery sold and distributed by the said competitors of respondent. Respondent does not give to the distributors of its products a free outfit or free hosiery, lingerie, dresses, or underwear, but in truth and in fact supplies bonus coupons to such persons and after sales are made and commissions earned in certain designated amounts, by such persons, the said coupons may be exchanged by such distributors with the respondent for hosiery, lingerie, underwear, shirts, and dresses. PAR. 7. The use by the respondent of the foregoing false, deceptive, and misleading statements, representations, and advertisements disseminated as aforesaid with respect to the quality and character of its hosiery has had, and now has, the capacity and tendency to, and does, mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such false statements, representations, and advertisements are true and that respondent's hosiery possesses the properties claimed and represented and causes a substantial portion of the purchasing public, because of said erroneous and mistaken belief, to purchase substantial quantities of respondent's hosiery. The use by the respondent of the foregoing false, deceptive, and misleading statements, representations, and advertisements, disseminated as aforesaid, with respect to the income earned by distributors of respondent's products and the articles of merchandise- I 82 FE·DERAL TRADE COMMISSION D'E1CISIONS Findings 36F. T.C.

purported to be given free by the respondent to such distributors has had, and now has, the capacity and tendency to, and docl, mislead and deceive a substantial number of prospective distributors of respondent's products into the erroneous and mistaken belief that such false statements, representations, and advertisements are true and into agreeing or contracting with the respondent to become distributors of its products and into distributing such products in preference to distribut-1 ing the products of the competitors of the respondent. · As a result trade has been diverted unfairly to the respondent from its said competitors in said commerce who truthfully advertise the quality and nature of their products, the income earned by the distributors of their products and the articles of merchandise which they give free of charge to such distributors, as described in paragraph 3 hereof. In consequence thereof, injury has been, and is now being done, by respondent to competition in commerce among and between the various States of the United States, and in the District of Columbia. PAn. 8. The aforesaid acts and practices of respondent, as herein alleged, are all to the prejudice and injury of the public and of respondent's competito~s and constitute unfair methods of competition and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. Report, FINDINGS AS TO TIIE FACTs, AND Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on October 4, 1938, issued and subsequently served 'its complaint in this proceeding upon the respondent, ·world's Star-1\falloch, Inc., a corporation, also having traded as ''Strand-Sealed Hosiery Co.," charging it with the use of unfair methods of competition and unfair and deceptive act& and practices in commerce in violation of the provisions of that act. After the filing of respondent's answer, testimony nnd other evidence in support of the allegations of the complaint 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 s~ch 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 answer thereto, testimony and other evidence, report of the trial examiners upon the evidence and the exceptions to such report, and brief in support of the complaint {no brief having been filed by respondent and oral argument not having been requested); WORLD'S STAR-MALLOCH, INC., ETC. 83 76 Findings and the Commission, having duly con~idel-ed 'the matter and being now fully advised in the premises, firtds that this proceeding is in the interest of the public and makes this its findings as to the facts and its tConclusion drawn therefrom.

FINDINGS AS TO THE FACTS P ARAORAPH 1. The respondent, 'Vorld's Star-Malloch, Inc., is a corporation,. organized, existing, and doing business under and by virtue of the laws of tile State of Michigan, with its office and principal place ()f business located at 501 Ottawa Avenue, N. W., Grand Rapids, Mich. Respondent has also operated under the trade name "Strand-Sealed Hosiery Co.,'' but the use of this name was discontinued in 1937. Respondent is now and for a number of years last past has been engaged in the sale and distribution of various articles of wearing apparel, jncluding, among others, lingerie, hosiery, shirts, and dresses. PAn. 2. In the course and conduct of its business respondent causes :and has ~aused its products, when sold, to be transported from its place of business in the State of Michigan to purchasers thereof located in various other States of the United States and in the District of Columbia. Respondent maintains and has maintained a course of trade in its products in commerce among and between the va~ious .States of the United States and in the District of Columbia. PAR. 3. In the sale and distribution of its merchandise respondent is and has been in substantial competition with other corporations, and with partnerships, firms, and individuals, engaged in the sale and distribution of similar merchandise in commerce among and between the various States of the United States and in the District of Columbia. PAn. 4. Respondent's sales are made principally through sales agents ()r representatives who contact and solicit the purchasi11g public in their respective localities and territories. To obtain such agents and representatives, respondent inserts advertisements in numerous newspu pers and periodicals published in various places throughout the United States and having wide distribution among the members of the public. Upon obtaining inquiries from prospective agents, respondent forwards to such prospects circular letters and other advertising material soliciting their services in the sale of its products and containing numerous statements with respect to respondent's products and the earnings which may be obtained by such prospects from the sale thereof. To those who agree to serve as sales representatives respondent supplies a sales kit which includes, among other things, various leaflets, circulars, pamphlets, and other advertising 84 FEDERAL TRADE· COMMISSION DE1CISIONS Findings 36F.T.O•.

material to be used by the representative and exhibited to prospective· purchasers. Among and typical of the statements and representa-· tions which have appeared in respondent's newspaper advertisements,. circular letters, and other advertising material are the following: Earn $15 commission daily. Free dresses. Sell Frocks, 3 for $3.08. Amazing.· values, Stunning Fabrics, Enchanting styles. Quick Sales. Expet·ience unneces- !lary. Outfit free. (Com. Ex. No. 19-D) YOUR own lingerie free and up to $20 in a week with amazing new "Fot·m- '.1\tllored" lingerie. World's Star-Mallocb, Dept. 5404, Grand Rapids, Mich .. (Com. Ex. No.3) EARN to $28 commissions in week; demonstrate amazing "Strand-Sated" silk: hosiery; secret weaving process doubles wear; strongest money-baclc guarantee;. £>arn your hosiery free; sample outfit with 2 stockings oflered free; state size.. Strand-Sealed Co., Dept. 94, Grand Rapids, Mich. (Com. Ex. No. 4) * * * Even spare-time will bl'tng you· up to $5 in a day. (Com. Ex. No. 8)· Lots of folks working with me are making $1.30 an hour right from the start. Spare time workers are making from $18 to $47 a week. Full time workers. are making much more.

* * * Every hour you devote to selling our lines means an average of· $1.30 an hour clear profit to you. * * • You, too, can have FREE DRESSES and FREE HOSIERY, LINGERIE and·. UNDERWEAR, too! * * * (Com. Ex. No. 21-A) • * * Free Handbag Selling Outfit, including 2 actual stockings. "' * •· (Com. Ex. No. 13) • • • "Strand-Sealing." It makes silk thread stronger and more elastlc- "proofs" it against SNAGS, RUNS and ordinary WEAR. • • • (Com. Ex .. No.7) "Strand-Sealed"

SILK HOSIERY "Double the Wear in Every Pair" (Com. Ex. No.6) * • • DOUBLE-even TRIPLE the wear you have been getting * • * (Com. Ex. No.8) * • • secret weaving process doubles wear. • • • (Com. Ex. No. 22) A Remarkable Scientific Discovery Assures Much Longer Wear (Com. Ex. No.9) Ordinary silk hosiery (not "Strand-Sealed") snap so easily because it Iswoven of thin, delicate silk thread. Under tile microscope you would see that this thread Is made of many strands of raw silk, twisted together. The raw silk fibres are fuzzy and seem to reach out to catch on any rough object. When one is caught and breaks, the thread is snagged and a run results. That problem has been solved by our new and exclusive, "Strand-Sealed" silk: process. With this wonderful new secret process all loose, tiny st:t:ands are first twisted together. Then the silk thread is placed In a secret solution which· "solidifies" each and every strand. The fibres are smoothed down, making a thread that Is smooth, strong and slippery, It glides easily over rough objects that would snag ordinary silk hosiery thread. It Is this marvelous new treat- WORLD'S STAR-MALLOCH, INC., ETC. 85 '76 Findings ment that enables "Strand-Sealed" Silk Hosiery to give much longer wear. <Com. Ex. No. 8) SEE FOR YOURSELF.

Why Ordinary Silk lloslery Snags So Easily • • • and how Exclusive "STRAND-SEALED"

Silk Thread Resists Snags and Runs • • • • • • • WHY Ordinary Silk Hosiery SNAGS So Easily Silk hosiery thread Is made up of many hair-like strands, so delicate as to be almost invisible to the naked eye. In ordinary silk hosiery these fragile strands are loosely twisted together and the thread has a "fuzzy" surface. It snags easily, for there are many separate strands ,to catch and break. This is responsible for the destruction of thousands of dollars worth of hosiery every year. Now on the opposite page, see how this problem has been solved by our exclusive "Strand-Sealing" process. (Com. Ex. No. 24) The last excerpt quoted above is from a 'pamphlet which purported to portray a sample of the silk thread used in the manufacture of respondent's hosiery and a sample of the silk thread used in the manufacture of other hosiery.

PAR. 5. Through the use of the foregoing statements and representations, and others of a similar nature, respondent has represented, directly and by implication, that its hosiery designated as "Strand- Sealed" hosiery is manufactured by a secret process not used in the manufacture of other hosiery; that the use of such process greatly increases the wearing qualities of respondent's hosiery and that such hosiery gives two or three times..as much wear as other hosiery; that such hosiery is proof against snags·and- runs; that the number of turns or twists used in the manufacture of such hosiery is greatly in excess of the number used in other hosiery; that the pamphlet referred to above portrays true samples of the silk threads used in the manufacture of respondent's hosiery and the silk threads used in the manufacture of other hosiery; that persons acting as sales agents for respondent may reasonably expect under normal conditions or circumstances to earn amounts ranging up to $1.30 per hour, $15.00 per 86 FE'DERAL TRAD'E COMMISSION DEIC1Sf0NS Findings 36F.T. C.

day, and $47.00 per week; and that such persons receive from respondent free of charge a sample outfit and various articles of merchandise for their own use.

PAR. 6. Examinations and tests of respondent's hosiery were made by the National Bureau of Standards and the written report of the Bureau is in evidence, together with the testimony of the repref:>tmtative of the Bureau who conducted the tests and the testimo.uy of another expert on hosiery who witnessed the tests. The hosie1·y was found to be made of wha~ is known as a four-thread silk yam, each thread having ten filaments., The amount of twist in the yurn was determined from an examililation of ten threads, each ten mches in length. The average twist of ,these ten specimens was 1~.7 turns per inch. The range of the threads was from 1'1.5 turns per inch tu 15.3 tums per inch. The filaments in the threads were twisted together with a very small amount of twist. Upon examination it was found that the filaments separated readily from one another, which disclosed that there was no permanent sealing or solidification among the threads or filaments.

The number of turns or twists used in the manufacture o:f silk hosiery varies considerably, depending upon the. type and grade of hosiery and upon the practice of the various manufacturers. Generally speaking, hosiery having a higher number of twists is regarded as possessing greater durability than hosiery having a smaller number. The average or more frequently used twist is approximately fifteen turns per inch. It thus appears that resp~ndent's hosiery is of about the same twist as other hosiery on the market. It is a common practice among modern manufacturers of hosiery to subject their hosiery or the silk yarn useu therein to certain sohitions, the process being sometimes referred to as "sealing." As a result of this process the threads and filaments are coated with a fairly insoluble material, resinous in nature. The threads and filaments are bound more closely together and are made smoother, thus increasing the resistance of the hosiery to snag:; and runs. The tests made of respondent's hosiery demonstrate, however, that this process had not been used to any substantial extent, there being no sealing or solidification of the threads or filaments in the hosiery.

An examination was also made by the Bureau of Standards of the purported samples appearing in respondent's advertising pamphlet · (Com. Ex. No. 24). It was found that the strands or threads claimed by respondent to be representative of the material used in "ordinary" silk ,.hosiery' • had very little·,.,, I twist,.. I whereas the strands• claimed to be J'epresentative of those. useu ·1u respondent's hosiery had a fairly high degree of twist. The latter sample, however, was found not to be WORLD'S STAR-MALLOCH, INC., ETC. 87 76 Findings representative of the material actually used in respondent's hosiery, the strands in the sample having a considerably higher twist than the strands in the hosiery itself.

Respondent's hosiery is not proof against snags or runs. It is of average quality and durability, but does not give two or three times as much wear as other hosiery, or any degree of wear which is substantially greater than other hosiery. The process used in the manufacture of respondent's hosiery is not a secret process but is in fairly) common use among hosiery manufacturers.

The record further discloses that the average earnings of rer:.pond- . ent's sales representatives are not in excess of approximately $50 per month. It appears that the highest amount which has ever been earned. by such representatives was $20 per week, and none of the sales agents has earned that much during recent years. The figures given by respondent in its advertising of $1.30 per hour, $15 per day, and $47 per week appear to be clearly excessive, being greatly in excess of the amounts which agents could reasonably expect to earn under normal conditions or circumstances: Respondent does not supply sample outfits to its representatives free of charge, nor does respondent give, its representatives any free articles of merchandise for their own use. The "gift" referred to by respondent in its advertising is in fact only a coupon which entitles the representative to an article of clothing if the representative sells enough of respondent's products within ten days to earn commissions amounting to $5. The articles referred to by respondent as being given "free" are in no sense a gift but are in fact a part of the agent's compensation for services rendered in the sale of respondent's merchandise.

PAn. 7. The Commission therefore finds· that the representations made by respondent with respect to its hosiery, the amounts to be earned in the sale of its products, and its offers of free sample outfits and merchandise, as set forth herein, are erroneous and misleading. The Commission further finds that the use by respondent of samples purporting to depict the difference between respondent's hosiery and other hosiery is misleading, in that the purported sample of the material used in respon<lent's hosiery is not a true sample. P .AR. 8. The acts and practices of the respondent as herein described have the tendency and capacity to mislead and deceive a substantial portion of the purchasing public with respect to the nature, characteristics, and quality of respondent's hosiery, and the tendency and capacity to cause such portion of the public to purchase substantial quantities of respondent's h<?siery as a result of such deception. Re- 88 FE·DERAL TRAD·E COMMISSION DE1CISIONS. Order 36F.T.C.

spondent's representations with respect to the earnings and purported gifts which may be obtained from the sale of respondent's t>roducts also have the tendency and capacity to cause a sub:;tantial number of members of the public to undertake the sale of respondent's products in preference to the. products of respondent's competitors. In consequence thereof, sub:;tantial trade has been diverted unfairly to the respondent from its competitors, among whom are those who do not engage in such acts and practices.

CONCLUSION The acts and practices of the respondent as herein found are all to the prejudice of the public and of respondent's competitors, and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER TO CEASE .AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of respondent, 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, report of the trial examiners upon the evidence and the exceptions to such report, and brief in support of the complaint (no brief having been filed by respondent and oral argument not having been requested); 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 is 10rdered, That the respondent, ·world's Star-:Malloch, Inc., a. corporation, trading under its corporate name or under the name "Strand-Sealed Hosiery Co." or any other name, and its officers, agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribu. tion in commerce, as "commerce" is defined in the Federal Trade Commission Act, of respondent's hosiery, lingerie, shirts, dresses, and other wearing apparel, do forthwith cease and desist from: 1. Representing that respondent's hosiery designated as "Strand- Sealed" hosiery, or any other hosiery of substantially similar type or con;;truction, is manufactured by a secret process not used in the manufacture of other hosiery.

.WORLD'S STAR-MALLOCH, INC., ETC. 89 76 Order 2. Representing that said hosiery gives two or three times as much wear as other hosiery, or that the wearing qualities of said hosiery are substantially greater than those of other hosiery. 3. Representing that said hosiery is proof against snags or runs: 4. Representing that the number of turns or twists used in the manufacture of said hosiery is substantially in excess of the number used in other hosiery. · 5. Using in respondent's advertising or supplying to respondent's sales agents or representatives samples purporting to portray the material used in the manufacture of respondent's hosiery when such purported samples are not in fact representative of the material actually used in such hosiery.

6. Representing that respondent's sales agents or representatives . earn $1.30 per hour, $15 per day, or $47 per week, or any amounts in . excess of those which are usually or customarily earned by such agents or representatives under normal conditions and circumstances. 7. Hepresenting that respondent supplies sample outfits to its agents or representatives free of cost when a charge is in fact made for such outfits.

8. Using the word "free" or "gift," or any other word of similar import, to designate, describe, or refer to any merchandise which is not in fact given by respondent free of charge but is furnished as compensation for services rendered.

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 has complied with this order.

ll28713-43-vol. 36-9 • 90 FEDERAL TRADE COMMISSION DE-CISIONS Complaint 36F.T.C.