Dorfman, Meyer

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IN THE MA 'ITER OF MEYER DORFMAN AND ARTHUR COHLER, TRADING UNDER THE NAME OF STETSON FELT MILLS COJIIPLAINT, FINDINGS, AND ORDER I:S REGARD TO Tile ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 4231,. Complaint, Aug.14, 1940-Dccision, May 5,191,3 Where two individuals, engaged in the manufacture and interstate sale of felt rugs; In carrying on said business under a sales plan consisting of false representations and fraudulent schemes- (a) Represented, directly and through their salesmen, that they were connected with John n. Stetson Co. of Philadelphia, and that the felt used in their rugs was obtained from trimmings of felt hats made by said company; 1'he facts being they had no connection with said company, had never purchased any material directly from it, and made no use of any such material except Incidentally where some of it might possibly have come into the hands of dealers who bought hat remnants and resold to them, possibility of which did not warrant any such rept·esentatlon as aforesaid; and (b) Mode use directly and through their salesmen of practice of padding orders, by placing upon order blanks quantities of goods greatly in excess of those actually contracted for by the particular purchaser, and shipping to such purchaser merchandise gt·eatly in excess of that actually ordered by him; and In carrying out such prnctlce- (1) Made use directly and through their salesmen of confusing order blanks and, In addition, neglected to extend the totals of the various purchases thereon ~;o that purchaser co1,1ld Immediately determine the amount which he was buying;

(2) l'lacf'd notations, In some instances, upon orders Indicating additional purchas(•s or the purchase of more ex}wnslve merchandise, which were confusing and not readily recognizable ns such upon preliminary examination of the order by the customer upon signing ;

(3) Through such means indured customers on numet·ous occasions to sign orders Without realizing that the items thus enumerated were greatly in excess of those desired by the purchaser and greatly In excess of tile amount which he hud Instructed the snlcsman to place that·eon; ( 4) Inmrlably r£>fUfOPd, H ymrchasrr upon later Pxnm!natlon of the order blank or ntter receipt of sblpmrnt attempted to cancel order, to acc£>pt such cancelation or r£>turn of mPrchnndlse unless purc·ha~";er would pay their designated cost of handling, usually specified by them as 19 percent of the total amount of the order; and Hi) Attempted to and did collect from such purchasers larger sums than they originally agreed or expected to pay, and In many Instances collected damages for cnncPlatlon of such orders by threats to su~ and other forms of lntlruldation · 'With etrect, tbrm;gh such deceptive and misleading acts and practices, of causing a substantial portion of the purchasing public erroneously to believe that said representations were true, and to purchase !laid rugs because of such belief, and to pay larger sums of money to sold Individuals than they originally agr('(>d or pxpected to pay:

652 FE.DE:RAL TRADE COMMISS'IION DECISIIONS Complaint 36F.T.C.

Held, That such acts and practices, under the circumstances set forth, were all to the prdudlee and Injury of the public, and constituted unfair and deceptive acts and pmctices In commerce.

Defore Mr. Miles J. Fwrnas, tria.l examiner. Mr. Clark Nichols, Nr. J. V. Mishou and Mr. B. G. lVUson for the Commission.

O'Connell & Gingold and. Ulvin w Christensen, of St. Paul, Minn., for respond.ents.

Col\IPLAINT 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 l\Ieyer Dorfman and. Arthur Collier, trailing UIH.lrr the name Stetson Felt l\Iills, hereinafter referred to as respondents, have violated the provisions of said. act, and it ap}X'aring to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: PARAGRAPH 1. Hespondents, Mryer Dorfman and. Arthur Cobler, are individuals, tr·ading under the name Stetson Felt Mills, with their principal place of business located at 223 East Fourth Street, St. Paul, Minn. Uespondents are now, nnd for more than 2 years last past have been, engaged in manufacturing and selling felt rugs and felt pillows. The ft>lt rugs and pillows are manufactured by respondents from waste material purchased from differl.'nt manufac· turns of ft•lt products aml from the felt contained in rejected felt hats. The respomlt•nts athertise their pr(Hlucts partly through circulars and placards, but mostly through repn•st•ntations made by the respondents anti salt>smen <'lllployt•tl by thm1 to pro!'pective purchasers. Said felt mat<>rial is eut into appropriate lengths nntl assembled in appropriate colors and run through looms which manufacture the rugs and pillows. Rt•spo!Hlcnts cause thpir said products, when soltl, to be transported from their place of business in the State of Minnesota to the pur· ('hnsers thereof nt their rcl'pt•ctivc points of location in \'nrious oth<•r States of the Unih·<l States nn<l in the Distr·ict of Columbia. Re· Epondents maintain, awl at nll tinws mentioned herein have main· tained, a course of trade in said products in commerce among and Lt-twn•n tile various Stut<•s of the United States anti in the District of Columbia.

PAn. 2. In the course a1Hl rontluct of their busiu<·ss in said commerce ns ufon•saitl, Hllll for t]l(' purpose of in<lueing the purchase of th<'ir said products, the rt'spotHients have circulutPll among~ pro!'}Wcth·e pu:· chuset·s circulars containing l'l•pre~·ntations ns to the quality of their STETSON FELT MLLLS 653 .651 Complaint said products. Typical of the statements made to prospective purchasers by the respondents, as aforesaid, are the following: The method of utilizing the waste from felt mills and lwt factories Into beautiful hand-woven fire-resisting floor mats has been developed by the Stetson Felt 1\Iills with the result that Stetson floor mats are Instantly nclmowledged as a practical long·looked-for addition to the hardware and floor covering lines. · Stetson mats are washable and easy to clean, primarily made for use around stoves, gas heaters and flre places.

Fire-resisting Stetson Floor Mats.

A remarkable product made by hand from fur and wool felt. Respondents nnd salesmen employed by them have represented to Purchasers and prospective purchasers that the Stetson Felt Mills is connected with, or nn affiliate of, .Tohn n. Stetson Co. of Philadelphia, Pa., and that the felt used in making respondents' rugs and pillows is obtained from trimmings from felt hats manufactured by John B. Stetson Co. The John D. Stetson Co. is one of the outstanding and best-known felt hat manufacturing concerns in the United States, and it has the g-ootl will and esteem of a substantial portion of the purchasing public. Its products are well and favorably known to the Public as being ma1le from high quality felt. In connection with the sale of their said products, the respondents and their salesmen exhibit to prospective purchasers and purchasers samples of felt rugs und felt pillows made of felt of a quality superior to the felt used in the manufacture of the rugs and pillows delivered to purchasers.

Through the use of the foregoing statements made and used as aforesaid nn1l others of similar import ami meaning not herein set out, and the use of the nets and practices aforesaid, respondents reprej:;ent and imply that th(} rugs and pillows offered for sale and sohl by them are fh·e-resistant or fire-proof; that they are hand-made; that the rugs and pillows shippPu to purchasers will be of the graue and fi~ality of the samples displayed; that respondents are connected 'With, or an affiliate of, the John D. Stetson Co. of Philadelphia, Pa.; n~u that the re~pondents' rugs nntl pillows nro made from fel~ trimnungs obtained from the John B. Sh'tson Co. of Philauelphm, Pa. b In h·uth a Jill in fact, ~he ru~s and pillows offered for sale and sold Y respondents are not tu·e-resistant or fire-proof; they are not handll1nde; tho rugs and pillows shipped to pur<"hasers are not of the ~rncle 1\n~l quality of thp samplt>s uisplayed, but l~l'e inft>rior j~ grade t nd quahty; the respondents are uot connected mth, or an affihate of, he John B. St<>tson Co. of Philatl<'lphiu, Pu. PAn, 3. Hespondents and their sal!'smen have auopted and used the rlractice of "pudding" orders given them orally by purchasers by 654 FE.D'E:RAL TRADE COML.:USS110N DEClSIIONS Findings 3GF.T.C.

stating in the written order blank a quantity of goods greatly in excess of that actually contracted for by a particular purchaser. Respondents have attempted to. and do, collect from such purchasers larger sums of money than such purchasers originally agreed to pay, by threats to sue and other forms of intimidation. PAR. 4. The use by the respondents of the foregoing fa lfe and misleading statements and representations and the foregoing nets and practices, as aforesaid, has had, and now has, the tendency and capacity to, and does, mislead ami decei,·e a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements and 1·epresentations are tme and that said products arc of the quality and grade indicated by the samples displayed and that purchasers are bound by the terms and conditions of said "padded" orders; and causes a substantial portion of the purchasing public, because of such erroneous and mistaken belief, to purchase respondents' said products an<l to pay for products not ordered in many instances. PAR. 5. The aforesaid acts aml practices of respondents, as herein alleged, are all to the prrjudice UIHl injury of the public and constitute unfair and deeepti,·e acts and practices in commerce within the intent and meaning of the Feueral Trade Commission Act. REPOUT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Traue Commission Act, the Federal Trade Commission on August 14, 1940, issued and subsequently served its complaint in this proceeding upon the respondents, Meyer Dorfman and Arthur Cohler, individuals, trading as Stetson Felt .Mills, charging them with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of said act. After the issuance of said complaint and the. filing of respondents' answer thereto, testimony and other eviuence in support of and in opposition to the allegations of said complaint were introduced before a trial examiner of the Commission theretofore duly designated by it, and said testimony and other eviuence were duly recorded and filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission upon said complaint, answer thereto, testimony, nnJ other eviuence, report of the trial e:t· aminer upon the evide!ll'(', briefs filed in support of the complaint and in opposition thereto, and oral argument of counsel; and the Commission, having duly considered the matter and being now fully ad· vised in the premises, finds that this proceeding is in the interest of the public anJ makes this its findings as to the facts and its conclusion dmwn therefrom.

STETSON FELT MI>LI.S 655 651 Findings FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondents, l\Ieyer Dorfman and Arthur Cohler, are individuals, trading under the name of Stetson Felt Mills, with their principal place of business located at 223 East Fourth Street, St. Paul, Minn. Respondents are now, and for several years last past have been, engaged in the manufacture and sale, among other things, of felt rugs. Respondents cause said rugs, when sold, to be transported from their Place of business in the State of New York to purchasers thereof located in various other states of the United States. Respondents maintain, and at all times mentioned herein have maintained, a course of trade in said rugs in commerce among and between the various states of the United States.

PAn. 2. In the course and conduct of their business and for the purpose of inducing the pu"rchase of their ~aid rugs, the respondents have Inade use of a sales plan consisting of false representations and fraudulent schemes. In carrying out such false and fraudulent sales plan, it Was the custom of respondents and their salesmen to variously represent to prospective purchasers that they were connected with John n. Stetson Co. of Philadelphia. or that the felt used in the making of respondents' rugs was obtained from trimmings from felt hats manufactured by John n. Stetson Co.

When the respondents originally started the manufacture of felt rugs, they used felt obtained from old or used hats. While some of the hats so used may have been Stetson hats, no particular effort was made by the respondents to get Stetson hats for their rugs but, instead, respondents purchased their old or used hats from various dealers engaged in collecting and selling such merchandise. In later years the respondents have discontinued the purchase and use of used hats 11?d, instead, purchase felt remnants for the manufacture of their rugs dlrcct from the mills· which manufacture felt or through dealers in felt scrap who purchase from the various mills; and, in addition, the respondents also use hat remnants, which consist of circles of felt left over when the hat is coJnpletE'U which are known to the trade as"f ' elt circles." Such hat remnants are purchased from various dealers Who accumulate such material. Said felt material is cut into approjtiate lengths, assembled in appropriate colors, and run through hand 00Ins, which make respondents' rugs.

'fhe respondents have no connection with J.D. Stetson Co. of Phila- Uelphia and have never purchnsed any material direct from the J. D. ~tetson Co. The respondents do not use any material purchased fr~m he J. n. Stetson Co. except incidentally where some of such matenal tnay possibly have come into the hands of dealers who buy hat remnants and who resell to the respondents. The possibility that some of 656 FEDIDRAL TRADE COMMISS'DON DECISI'ONS Findings 36F.T.C.

the hat remnants pur·chased by the respondents from various dealers might contain some hat remnants from the J. B. Stetson Co. does not warrant any representation that respondents' rugs are made from remnants from hats manufactured by the J. D. Stetson Co. PAn. 3. As a further part of respondents' false and fraudulent sales plan, it was the custom of the respondents and their salesmen to use the practice of padding orders by placing upon order blanks quantities of goods greatly in excess of that actually contracted for by the particular purchaser and shipping to such purchaser merchandise gt·eatly in excess of that actually ordered by him.

In carrying out this practice the rcspontlents and their salesmen used order blanks which were to some extent confusing and, in addition thereto, failed and n<'glrcted to extend the totals of the various purchases on said order blanks so that the purchaser could immediately determine the amount of the merchandise which he was purchasing. In some instances notations wpre placed upon orders indicating additional purchases or the purcha:-.c of more expt'nsive merchandise, which notations were con.fusing and not l'Padily recognizable as such upon preliminary examination of th~ cmler by the customer upon signing. Dy these means, the respondents and their salesmen, on numerous occasions, induced purchas<.'rs to sign orders without realizing that the items so enumerate(] on said onlrr were greatly in rxcess of those desired by such purchasers and greatly in excess of the amount which the purchaser had instructed the sa]Psmen to place upon such orders. If the purchaser, upon later examination of the ord<.'r blank or after rcc<.'ipt of shipment, attempted to canc<.'l the onl£>r with the respond- £>nts, the respondents invariably refused to accept such cancellation or to ncc<.'pt return of the m<.'rchandise unless the purchaser would pay respondents' designated cost of handling, which was usually specified by the respon(lents ns 19 percent of the total amount of the onlt-r. R('spontlents att<'mpt<'ll to, and did, colh·t from such purchasers larger sums of money than such purchasers originally agreed or expected to pay and in many instance<'s coll<.'ctPu damngt•s for canct·llation of such or1lers by thr£'ats to sue and ot]u>i' fo,·ms of intimitlation. PAn. 4:. The use by the n•spomknts of the for<'going acts and practices is d<.'c<'ptive and misleauing allll causes a substantial portion of the purchasing public <.'rronPously to L<'lieve that said statenwnts and l'('pres<.'ntations are true arH] that rt>spondents are comwet(•d with the ,J. B. Stetson Co. or that the rug~ sofd and distribuil'tl by the respond· ents are manufacturNl from trimmings from f£'1t hats manufactured by J. ll. Stetson Co., und causps a substantial portion of the purchas· ing public to purchase re~pollll<.'nts' rugs because of such erroneous S'I'ETS.ON FELT MILLS 657 6::il Order beliefs. Said acts and practices have the furt~1er tendency and effect of causing purchasers in many instances to pay for rugs in excess of those ordered by them and to pay larger sums of money to the respondents than such purchasers originally agreed or expected to pay. CONCLUSION The aforesaid acts and practices of the respondents as herein found are all to the prejudice and injury 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 Commission upon the complaint of the Commission, answer of the respondents, testimony and other evidence in support of and in opposition to the allegations of the complaint taken before a trial examiner of the Commission theretofore duly designated by it, report of the trial examiner upon the evidence, briefs filed in support of the complaint and in opposition thereto, and oral arhYOment of counsel; and the Commission having made its fintlings as to the facts and its conclusion that said respondents have violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondents, l\Ieyer Dorfman and Arthur Cohler, individuals, trading as Stetson Felt l\Iills, and their representatives, agents, and employees, directly or through any corporate (Jr other device in connection with the offeri11g for sale, sale, and distribution of felt rugs and other merchandise in commerce as "comn1erce" i~ defined in the Federal Trade Commission Act, do forthwith (:case und desist from:

1. Ueprescnting directly or by implication that the rcsponLlents are a part of, or that they are in any way connected with, the John n. Stetson Co. of Philadelphia.

2. Hepresenting directly or by implication that respondents' rugs are manufactured from trimmings from felt hats manufactured by the John ll. Stetson Co. • 3. The use of any sales plan or method which misleads or deceives Purchasers or enables respondents' salesmen to mislead or deceive purrhasers, as a means of obtaining orders from such purchasers for rugs or other merchandise in quantities greater than that which such pur· chas<'rs ordt.'r or expect to receire, or which enables the obtaining of (Jl'ders in amounts greuter than such purchasers intend or expect to Pay.

658 IFEDEIRAL TRA,DE COM.MTSS.llon DECISII'ONS Order 3GF.T.C.

4. The use of any sa~es plan or method. which involves the preparation of orders in such a manner that the purchasers cannot readily determine the quantity of rugs or other merchandise ordered or the amount to be paid, as a means of inducing the purchase of greater quantities of such merchandise than that desired or the payment of &mounts greater than such purchaser expects or intends to pay. 5. The use of any sales plan or method which involves the placing of notations on orders indicating additional purchases or the purchase of additional rugs or other mercha':ldise which are not readily recognizable as such upon reading of the order at the time signature is attached.

·6. Preparing orders for quantities of rugs or other merchandise in excess of the quantities requested. by purchasers and obtaining the signature of such purchasers to such orders without disclosing that the order has been prepared for quantities in excess of those desired Ly such purchasers.

7. Refusing to accept the return of rugs or other merchandise !ihipped in excess of the amount ordered or requiring a purchaser to !lay any sum as damages in order to induce respondents to accept return of such excess rugs or other merchandise.

8. Coercing or attempting to coerce purchasers, by threats to sue or Ly other forms of intimidation, into accepting rugs or other merchandise in excess of the quantity ordered by such purchasers, or into paying sums of money in excess of that which such purchasers agree or expect to pay.

9. Coercing or attempting to coerce purchasers, by threats to sue or by otlwr forms of intimidation, into paying damages to the respondents for cancelation of orders for quantities of rugs or other merchandise in excess of that ordered by such purchasers, or for amounts in exact'£s of that which such purchasers agree or expect to pay. 10. Coercing or attempting to C()('rce purchasers, by threats to sue or by other forms of intimidation, into paying damages to the re· spondents to induce the acceptance of the return of rugs or other mrr· <"hnn<.lise delivered by respondents in exc<'ss of the amount ordered. It is further ordered, That the respond('nts shall, within 60 Jays after !icrvice upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with this order.

FRANKUIN SALES CO. 659 Complaint