Associated Distributors, Inc.

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

IN Tile MA'ITER OF ASSOCIATED DISTRIBUTORS, INC., ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 4749. Complaint, June 80, 194~'-Dec-ision, Jfay18,19-~3 Where a corporation and three individuals engaged In interstate sale and distribution of their "Chen Yu Nail Lacquer"- ( a) Featured trade name ''Chen Yu" on the bottles In which said product watJ sold and In advertisements thereof, together with purported' Chinese letter~ or symbols, or depictions of Chinese art or objects; With etiect of misleading purchasers to believe that said lacquer was of Chinese origin, formula or manufacture, and with tendency and capacity, In the absence of a conspicuous statement that said product was made In the United States, to confuse them as to the actual country of origin; and ( ll) Falsely represented, in said advertisements In newspapers and perloditals and other matter, that said lacquer was Incapable of chipping or flaking under .all conditions of use ;

With tendency and capacity to mislead a substantial portion of the purchasing public with respect thereto, and to ensure It to purchase substantlat"quantities thereof as a result of the mistaken belief so engendered : Held, That such acts and practices, under the circumstances set ·forth, were all to the prejudice of the public, and constituted unfair anJ deceptive acts and practlePs in commerce.

Mr. R.P. Bellinger for the Commission.

00'1Jington, Burling, Rtiblee, Acheson & Shm·b, of Washington, D. C., and Petit, Olin & o~,errnyer, of Chicago, Ill., for respondents.: AMENDED Complaint 2 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 Associated Distributors, Inc., a corporation, J. L. Younghusband, Paul Rowatt, and Douglas Walker, individuals, trading as Associated Distributors, hereinafter referred to as respondents, have violated the provisions of said act, and it appearing to the Commission, that a proceeding by it 'Amended.

• The amended complaint '1\'aB further amended by an order of tbe Commission dated May 10, 1943, as follows:

This matter coming on to be beard hy the Commission upon tbe 11t1pulatlon as to the facts entered Into by and between Richard P. Whiteley, assistant cblef <'ounsel for the Federal Trade Commission, and Associated Distributors, Inc,, J. L. Younghusband, Paul Rowatt,' nml Howard .A. Youughusband, and It ap(ll'arlng from anld stipulated facts that J. L. Younghusband, Paul Rowatt, and Douglas Walker, Individuals trading as .Associated Distributors, were doing business as a partnership until .August 81, 1942, upon which date Douglas Walker withdrew from the partner~sblp, and It further appearing that on September ASSOCIATED DISTRIBUTORS, INC., ET AL, 757 756 Complaint in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: P .AR..o\GRAPII 1. Respondent, Associated Distributors, Inc., is a corporation, organized, existing, and doing business by virtue of the laws of the State of Illinois with its office and principal place of business located at 30 West Hubbard Street, in the city of Chicago, Sta~e of Illinois.

Respondents, J. L. Younghusband, Paul Rowatt, and Douglas Walker, are individuals, trading as Associated Distributors, with their principal place of business located at the same address as that of the -corporate respondent shown above.

P.AR. 2. Uespondents are now, and for sometime last past have been, ~ngaged in the sale and distribution of a cosmetic preparation designated as "Chen Yu' Nail Lacquer" in commerce between and among the various States of the United States and in the District of Columbia. Responi:lents cause and have caused said cosmetic preparation, when sold, to be shipped from their place of business in the State of Illinois to purchasers thereof located in various other States of the United States and in the District of Columbia. The respondents maintain, and at all times mentioned herein have maintained, a course of trade in said cosmetic preparation between and among the various States of the United States and in the District of Columbia. P .AR. 3. In the course and conduct of their aforesaid business, the respondents have disseminated and are now disseminating, and have -caused and are now causing the dissemination of, false advertisements concerning their said product, by United States mails, by insertion in newspapers and periodicals having a general circulation and also in circulars and other printed or written matter, all of which are distributed in commerce among and between the various States of the United States; and by continuities broadcast from radio stations which have :sufficient power to, and do, convey the programs emanating therefrom to listeners located in various States of the United States other than the State in which said broadcasts originate, and by other means in -commerce, as "commerce" is defined in the Federal Trade Commission 1, 1042, Howard A. Younghusband became one of the partners trading as aforeRald and taking the place of Douglas Walker, and the Comml•slon having duly cons;dered such ~tlpulnted facts and the record herein nnrl bl'lng now fully advised In the premlsPs: It ls ordel·ed, That the amended complaint herein be, and the same hereby:r Is, further amended by naming Howard A. Younghusbanil, as an lndh·ldual respondent, In lieu ot Dou!:'lns Wallwr, and that this proceetllng shall hereafter be styll'd "In the Matter of AHHoclatf'd Distributors, Inc., a corporation, J. L. Youn~:"hu•baud, Paul Rowatt, and Howard A. YounghuAilllnl!, Individuals, trading as Assorlnted Distributors." It is further ordered, That this prot•el'dlng be, and It hereby Is. closed as to the respondent, Douglns Walker, without prejudice to the right of the CommlsHion, should the facta so warrant, to reopen tile same and resume trial thereof In accordance with lt1 l<'J:nlar procedure.

758 iFEDEIRAL TRADE COMMISSLON DECISION".S Complaint S6F. T,C'~ Act, for: the purpose of inducing, and which are likely to inducer directly or indirectly, the purchase of their said product; and have disseminated and are now disseminating, and have caused and are now causing the dissemination of, false advertisements concerning theirsaid product, by various means, for the purpose of inducing, and whicl~ are likely to induce, directly or indirectly, the purchase of their said product in commerce, as "commerce" is defined in the Federal Trade Commission Act. Among and typical of the false statements and representations of and concerning said product contained in said advertisements disseminated and caused to be disseminated, as aforesaid, are the following:

NEW BEAUTY l<'OR NAILS! The Thrilling Colors and Breath-taking Luster of Priceless Lncquers from China 0 CIIIP-PROOF NAIL LACQUER n E An Idea stolen from Chinn-long-lnstlug LACQUER to bl'nutlfy your finger- N nails. LACQUER-ellen YU Nail LACQUER-so reslf:tant to chipping and peeling you'll wondet--will it NEVER wear away? Y Positively harmless too-will never pt·event your nalls from growing strong U and long l Buy CHEN YU at all smart stores-or send <'Coupon for trial bottles of two shades (enough for at least 10 manicures). 0 Chip-Proof H Lacquer for Nalls E Translated from the Chinese • • • Remember • • • at the N Museum • • • that breath-taking Chinese IAl.cquer-5000 ye11rs old • • •? Now-at smart stores from coast to coast-that lacquery lng • • • borrowed for an amazing new nail make-up! Like Its ancient U predecessor • • • won't crack • •. • amazingly resistant to chipping • • • peeling • • • remains bE-autifully lustrous so long you'll wonder • • • wlllit :NEVER wear away, The Chinese made Incquer that has kE>pt Its amazingly lustrous color for hundreds of t/ears-without chipping or cracking. Chen Yu nail lacquer has that wonderful tendency to not chip or fade-and to remain lustrous, mlt·ror-like and lovely no matter how busy your hands become.

In some instances the fort'going statements and representations appearing in advertisements, disseminated as aforesaid, are accompanied by Chinese letters or symbols or depictions of Chinese art or objects. The bottle container of said product also prominently displays the trade name "Chen Yu" and what purport to be Chinese letters or symbols.

PAR. 4. Through the use of the trade name "Chen Yu'' and accompanying Chinese letters or symbols or depictions of Chinese art or objects, and the statements and representations publi~hed and dissemi· nated as aforesaid, respondents represent and ha ,.e represented that .ASSOCIATED DISTRIBUTORS, INC., ET .AL~ '759 75o Findings "Chen.Yu Nail Lacquer" is of Chinese origin, formula, or manufacture, and that said product is incapable of chipping or flaking, or that it offers effective resistance to cracking or peeling under all conditions of use.

PAR. 5. The aforesaid representations, as well as others of similar import or meaning which have not been specifically set out herein, are exaggerated, false, misleading, and deceptive. · In truth and in fact, respondents' said "Chen Yu Nail Lacquer" is not manufactured in nor imported from China. Said preparation is a domestic product made in the United States and bears no relationship whatsoever to any product of Chinese manufacture. Said preparation is not compounded from a formula of Chinese origin. Said "Chen Yu.Nail Lacquer" is capable of chipping or flaking, and it does not offer effective resistance to cracking or peeling under all conditions of use. . PAR. 6. The use by respondents of said false advertisements containing the trade name "Chen Yu" and accompanying Chinese letters or symbols or depictions of Chinese art or objects, and the aforesaid ' statements and representations, pictorial and otherwi::;e concerning their said product had, and has, the capacity and tendency to, and did and does, deceive and mislead purchasers and prospective purchasers into the erroneous and mistaken belief that said statements·,. representations, implications, and false advertisements are true. PAR. 7. The acts and practices of respondents as herein alleged areall to the p1:ejudice 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.

REPOilT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act,. the Federal Trade Commission on June 30, 1942, issued and subsequently served its amended complaint in this proceeding upon therespondents named therein, Associated Distributors, Inc., n. corporation, and J. L. Younghusbnnd, Paul Rowatt, and Douglas ·walker,. individuals, trading as Associated Distributors, charging them with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of that act. On July 20, 1942, the respondents filed their answer to the complaint. Thereafter, a stipulation was . entered into whereby it was stipulated and agreed that a statement of facts executed by Richard P. Whiteley, assistant chief counsel for the Federal Trade Commis.'iion, and the respondents, Associated Distribu., tors, Inc., J. L. Younghusbnnd, Paul Rowatt, and Howard A. Young- 760 FEDERAL TRADE COMMISSillON DE'ClSIONS Findings 36F.T.C.

husband (the last-named party having been substituted as a respondent in lieu of Douglas Walker), by their attorneys, subject to the approval of the Commission, might be taken as the facts in this proceeding and in lieu of testimony in support of the charges stated in the complaint or in opposition thereto, and that the Commission might proceed upon such statement of facts to make its report, stttting its findings as to the facts (including inferences which it might draw from the stipulated facts) and its conclusion based thereon, and enter its order disposing of the proceeding without the pre!:ientation of argument or the filing of briefs. Thereafter, the proceeding regularly came on for final hearing before the Commission upon the amended complaint, answer, and stipulation (the stipulation having been approved and accepted by the Commission); and the Commission, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes.this its findings as to the facts and its conclusion drawn therefrom.

FINDINGS AS 'l·o Tile FACTS PARAGRAPH 1. Respondent, As!:iociated Distributors, Inc., is a corporation, organizr.d and existing under nnd hy virtue of the laws of the State of Illinois, with its office and principal place of business located at 30 West Hubbard Street, Chicago, Ill. While the corporation has not !>iuce July 30, 1U41, been engaged in the bu!:iiness hereinafter described and hus taken certain !iteps looking toward its dissolution, !>uch dis!:iolution proceedings have not yet been completed and the corporation is still a legally constituted corporate entity. On August 1, lhl, the H!:iscts of the respondent corporation were transfl'frcd to J. L. Younghusband, the sole shareholder, and he continued as sole proprietor of the business under the trade name "Assodated Distributors" until October 1, ltlH. Subsequent to that date, Various parties have held intel'C!:its in the business along with J. J_. Younghusband, but since September 1, 1912, the business has been a copartncr~hip composed of J. L. Younghusband, Paul Howatt, and Howard A. YounghusLand. The oflice n.ud principal place of business of tho copurtm•r!ihip is located at 30 West Hubbard Street, Chicago, Ill.

PAn. 2. The individual respondents nrc now and since September 1, 1942, have Leen, and the corporate respondent for some time prior to July 30, l!H 1, wa~, engngt•d in the sale ancl distribution of n cosmrtic prt•paration designutt•d ''Chen Yu Nail Lacquer." Hespond£>nts cause 41r during tho periods of time herein m£>ntionrd have cnusecl their prep· nration, wJ.en sultl, to be shipped fmm their place of business in tho ASSOCIATED 'D}Si.TEiliUTORS, INC., ET AL. 761 756 Findings State of Illinois to purchasers thereof located in various other States of the United States and in the District of Columbia. Respondents maintain or have maintained a course of trade in their preparation in commerce among and between the various States of the United States and in the District of Columbia.

PAn. 3. In the course and conduct of their business and for the purpose of inducing the purchase of their product, the respondents have disseminated and have caused the dissemination of advertisements con. ('erning their product by the United States mails and by various other means in commerce, as "commerce" is defined in the Federal Trade Commission Act; and respondents have also disseminated and have caused the dissemination of advertisements concerning their product ·by various means for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of their product in commerce, as "commerce" is defined in the Federal Trade Commission .Act: Among and typical of the statements and representations contained in such advertisements, disseminated and caused to be disseminated by the United States mails, by insertion in newspapers and Periodicals, and by circulars and other printed or written matter,' were the following:

NEW BEAUTY FOR NAILS I Tlle Thrllling Colors and Brenth-taklng Luster of Priceless Lncqucrs from China c CIIIP-PROOF NAIL LACQUER n lll An idea stolen from Cblna-long-lnstlng ~ LACQUER to beautify your fingernails.

Tu\CQUER-CIIEN YU NAIL LACQUER-so rl'sistant to chipping and peeling you'll wondl'r-wlll It NEVEU wear nwny? Positively harmless l too-wlll never prevent your nulls from growing strong and long I lJ Buy CHEN YU at all smart statps--or sPnd coupon for trial bottles of two shudPs (enough for at least 10 manicures)." Chip-proof Lacquer for Nalls T1·ansluted from the Chinese • • • llemembl'r • • • at the Museum • • • that breath-taking Chinese Lncquer-i>OOO years old • • • ? Now-at smart stores from coast to const--that lacquer· lng • • • borrowed for an amazing ne\V nail make-up Like Its l ancient predecessor • • • won't crack • • • amazingly resliltant lJ to chipping • • • pt~ellng • • • rPmnins beautifully lustrous so long you'll wondl'r • • • will It NEVER wear away. 'rltP. Chlni.'HP mn<le lacqul.'r that has kept Its amazingly lustrous color for hundreds ~f 1/rar..,-wlthout chipping or cracking, CllPn Yu nail larqul'r hns that wonder- UI t~>ndt•ncy to not rhlp or fiHle--and to remain Justroul'!, mirror-like and lovely 110 lnntter bow busy your hnn<ls bt>come. 1128713--4:!-vol. 36-111 762 FEDERAL TRIADE COMMISSJON DECISIONS Findings 36F.T.O.

In some instances these statements and representations were acconipanied by Chinese letters or symbols or by depictions of Chinese art or objects. The bottles in which the product is sold also display prominently the trade name "Chen Yu," together with markings which purport to be Chinese letters or symbols.

PAR. 4. Through the use of the trade name "Chen Yu" accompanied by Chinese letters or symbols or by depictions of Chinese art or objects, respondents have led purcha.sers and prospective purchasers of their product to believe that "Chen Yu Nail Lacquer" is of Chinese origin, formula, or manufacture. The ure of the trade name "Chen Xu," when not accompanied by a conspicuous statement that the product is made in the United States, has a tendency and capacity to confuse purchasers and prospective purchasers as to the actual country of origin or manu- . facture. Through the use of the statements and representations set forth in paragraph 3 hereof, respondents have led purchasers and prospective purchasers to believe that "Chen Yu Nail Lacquer" is· incapable of chipping or flaking, and that it offers effective resistance to cracking or peeling under all conditions of use. PAR. 5. Respondent's "Chen Yu Nail Lacquer" is not manufactured in or imported from China, nor is the preparation compounded from a formula of Chinese origin. It is a domestic product made in the United States, and bears no relationship whatsoever to any product of Chinese manufacture. The preparation is capable of chipping or flaking, and does not offer effective resistance to cracking or peeling under all conditions of use.

PAR. 6. The Commission therefore finds that the representations made by respondents with respect to their product, including the use of the unqualified name "Chen Yu" to designate such product, are misleading and deceptive.

Prior to the Commission's investigation of respondents' practices, their labels and advertising material did not disclose that the product was made in the United States, but since December, 1940, respondents have caused the statement ''l\fade in U. S. A." to be printed on their labels and cartons and in their advertising material in connection with the name "Chen Yu."

PAR. 7. The use by respondents of these misleading and deceptive representations, including the use of the name "Chen Yu" when not accompanied by other words disclosing the origin of the product, has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public with respect to the origin and properties of respondents' prqdnct, and the tendency and capacity to cause such portion of the public to purchase substantial quantities of respondents' product as a result of the erroneous and mistaken belief so engendered. ASSOCIATED DISTRIBUTORS, INC., ET AL. 763 700 Order CONCLUSION The acts and practices of the respondents 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 OEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the amended complaint of the Commission, the answer thereto, and a stipulation as to the facts entered into between the re- Hpondents and Richard P. Whiteley, assistant chief counsel for the Commission; and the Commission having made its findings as to the facts and its conclusion that the respondents have violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondents, Associated Distributors, Inc., ·a corporation, its officers, and J. L. Y ounghusband, Paul Rowatt, and lioward A. Younghusband, individually, and tradmg as Associated Distributors, or trading under any other name, and respondent's agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution in commerce, as "commerce" is defined in the Federal Trade Commission Act, of respondents' cosmetic preparation designated "Chen Yu Nail Lacquer," or any other preparation of substantially similar composition or possessing substantially similar properties, whether sold under the same name or any other name, do forth- With cease and desist from:

1. Hepresenting, directly or by implication, that respondents' preparation is incapable of chipping or flaking, or that said preparation Clffectively resists cracking or peeling under all conditions of use. 2. Using Chinese letters or symbols, or any simulation thereof, or any picturization of Chinese art or objects, in connection with the designation or description of respondents' preparation. 3. Uepresenting, directly or by implication, that respondents' prep- , ll~tion is manufactured in or imported from China or any other foreign country, or that the formula from which said preparation is com- Pounded is of Chinese or other foreign origin. It is further orde1wl, That the respondents shall, within 60 days after fiervice up.on them of this order, file with the Commission a report in Writing, setting forth in' detail the manner and form in which they have compli('d with this order. . 764 <FEDE:Ras TR'ADE COMMISSIIION DE·CISfONS Complaint 3611'. T.·O.·