American Rug & Carpet Co., Inc

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IN THE MATTER OF AMERICAN RUG & CARPET CO., INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 6 OF AN ACT OF CONGRESS APPROVED SEPT. 26, lll4 Docket -9499. CompllVint, May 10, 1941-Dccision, July 13, 1943 Where a corporation, engaged in competitive interstate sale and distribution of rugs closely resembling Orientals, having their origin in Persia or Iran, including those known as "Sarouk," '·Kushan," "Ardabil," and "Ardavan"- Made use of names "Imperial Saroukan," "Iran Kushan," and "Imperial Ardavan" to designate certain of its said products in invoices to dealers and in otherwise referring thereto, and in labels attached thereto conspicuously displayed the name, together with a depiction of Oriental scenes; The facts being that said rugs, while so closely simulating the true handmade Oriental with its distinctive knotting and other characteristics, as to be Indistinguishable therefrom by a large portion of the purchasing public, were woven on power looms in the United States;

With tendency and capacity to mislead prospective purchasers into the mistaken belief that sucb representations were true and that aforesaid rugs were genuine Orientals, and thereby induce their pure hose; and with result of ·placing in the hands of retailer purchasers thereof means of deceiving the public in the particulars aforesaid; whereby trade was unfairly diverted to it from competitor dealers in truthfully represented Orientals and domestics: Rell, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the. public and competitors, and constituted unfair methods of competition in commer<:e and unfair and deceptive acts and practices therein.

Mr. Randolph lV. Branch for the Commission. Hartman & Craven, of New York City, 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 American Rug & Carpet Co., Inc., a corporation, hereinafter referred to as respondent, has violated the provisions of the said act, and it appearing 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. Respondent, American Rug & Carpet Co., Inc., is a corporation, organized and existing under the laws of the State of New York and having an office and principal place of business nt 105 Mauison Avenue, city anu State of New York. Complahit 37F.T. C.

PAR. 2. Respondent, is now, and has been for more than three years last past, engaged in the business of distributing and selling rugs. In the course and conduct of its business, respondent sells said rugs to various wholesale and retail dealers, and causes such rugs, when sold, to be transported from its aforesaid place of business in the State of New York to purchasers thereof located in various other States of the United States and in the District of Columbia. Respondent maintains, and at all times mentioned herein has maintained, a course of trade in said rugs in commerce among and between the various States of the United States and in the District of Columbia. PAR. 3. In the course and conduct of its said business, respondent is now, and has been at all times mentioned herein, in substantial competition with other corporations, and with firms, partnerships, and individuals also engaged in the sale and distribution of rugs in commerce among and between the various States of the United States and in the District of Columbia. Among such competitors are many who do not misrepresent either the place or method of manufacture of 'their products and who do not furnish their dealer-customer with means or instrumentalities for deceiving the public. ' PAR. 4. A substantial portion of the purchasing and consuming public understands, and for many years has understood, Oriental rugs to be rugs made in the Orient, or more particularly in certain parts of southwestern Asia, by hand, of pleasing texture and original and beautiful design and having a pile of wool or silkand wool, and threads of which are individually knotted in a special manner. Such rugs are usually designated by names which are indicative o:f the Orient and Oriental origin and manufacture. Oriental rugs have been for many years, and still are, held in great public esteem because of their texture, beauty, durability, and other qualities, and by reason thereof there is a substantial demand on the part of many of the purchasing public for such rugs. · PAR. 5. In the course and conduct o:f its business and :for the purpose of inducing the purchase of said rugs, respondent has engaged in ' the practice of describing and designating certain o:f its rugs, which closely resemble true Oriental rugs in appearance, by the names "Imperial Saroukan," "Iran Kashan," and "Imperial Ardavan." There are true Oriental rugs known as "Sarouk," "Kashan," "Ardabil," and "Ardavan/' and "Iran" is the modern name for Persia, which is a place of origin of genuine Oriental rugs. The use by the respondent o:f the designations "Imperial Saroukan," "Iran Kashan," and "Imperial Ardavan" has the capacity and tendency to create the mistaken and erroneous belief that the rugs so designated are in fact genuine Oriental rugs. Respondent uses said names to designate the AMERICAN RUG & CARPET CO.,' INC. 55. 53 Findings said rugs in invoices to dealers and in otherwise referring to the samein the sale thereof to dealers.

To the various rugs designated by respondent -as above set forth, it firmly attaches labels upon which the particular name conspicuouslyappears, together with depictions of Oriental scenes. All of said. labels are plainly discernible to members of the purchasing public- Wh(m said rugs are displayed for sale by retail dealers. In truth and in fact respondent's rugs hereinabove referred to are- Woven on power looms in the United States. They are not made by-. hand and the individual threads are not knotted in the distinctive, manner of the true Oriental rug. They do not possess all the characteristics of true Oriental rugs but do in fact so closely simulate true Oriental rugs in appearance as to be indistinguishable from them bya large portion of the 'purchasing public and, in consequence, are readily accepted as being true Oriental rugs. PAR. 6., The use by respondent of the designations, depictions, and representations as set forth herein in connection with the offering forsale and sale of its said _rugs has had, and now has, the tendency and ?apacity to mislead purchasers and prospective purchasers thereof lllto the erroneous and mistaken belief that such representations and designations are true and correct, and to induce them to punhase said ~·ugs on account thereof. Respondent's said acts and practices place- 111 the hands of retail dealers who purchase said rugs and resell thesame to the purchasing public, means and instrumentalities for misleading and deceiving the public in the particulars aforesaid. As a result of respondent's said acts and practices~ trade has been Unfairly diverted to respondent from its competitors engaged in the sale in commerce between and among the various States of the United!. States and in the Distr-ict of Columbia of rugs of various kinds, in-cluding both genuine Oriental and domestic rugs, who truthfully represent their products as set forth 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. PAR. 7. The aforesaid acts and practices of respondent, as herein. ~alleged, are all to the prejudice and injury of respondent'"s competltors, and constitute unfair methods of competition in commerce and llnfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. REronT, FINDINGS AS TO THE FACTs, AND ORDER :Pursuant to the provisions of the Federal Trade Commission Act,.. the Federal Trade Commission on May 10, 194:1, issued, and on May Findings 37F.T.C.

12, 1941, served its complaint in this proceeding upon respondent, American Rug and Carpet Co., Inc., a corporation, charging it with the use of unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of the provisions o£ said actr After the issuance of said complaint and the filing of respondent's answer, the Commission, by order entered herein, granted respondent's request for permission to withdraw said answer and to substitute therefor an answer admitting all the material allegations . of fact set forth in said complaint and waiving all intervening pro- , cedure and further hearing as to said facts, which substitute answer was duly filed in the office of the Commission. Thereafter this proceeding regularly came on for final hearing before the Commission on the said complaint and substitute answer, and the Commission, having duly considered the matter and bei:t1g now fully advised in ihe 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 TO THE FACTS PARAGRAPH 1. Respondent, American Rug & Carpet Co., Inc., is a corporation, organized and existing under the laws of the State of . New York and having its office and principal place of business at 105 Madison Avenue, city and State of New York. .PAR. 2.- Respondent is now, and has been for more than three years last past, engaged in the business of distributing and selling rugs. In the course and conduct of its business, respondent sells said rugs to various wholesale and retail dealers, and causes such rugs, when sold, to be transported from its aforesaid place of business in the State of New York to purchasers thereof located in various other States of the United States and in the District of Columbia. Respondent maintains, and at all times mentioned herein has maintained, a course of trade in said rugs in commerce among and between the various States of the United States and in the District of Columbia. PAR. 3. In the course and conduct of its said business, respondent is now, and has been at all times mentioned herein, in substantial competition with other corporations, and with firms, partnerships, and individuals also engaged in the sale and distribution of rngs in commerce among and between the various States of the United States and in the District of Columbia. Among such competitors are many who do not misrepresent eithl.'r the place or method of manufacture of their products and who Jo not furnish their dealer-customers with means or instrumentalities for deceiving the public. AMERICAN RUG &: CARPET CO., INC. 57 53 Findings PAR. 4. A substantial portion of the purchasing and consuming public understands, and for many years has understood, Oriental rugs to be rugs made in the Orient, or more particularly in certain Parts of southwestern Asia, by hand, of pleasing texture and original and beautiful design and having a pile of wool or silk and wool, the threads of which are individually knotted in a special manner. Such rugs are usually designated by names which are indicative of the Orient and Oriental origin and manufacture. ·Oriental rugs have been for many years, a~d still are, held in great public esteem because of their texture, beauty, durability, and other qualities, and by reason thereof there is a substantial demand on the part of many of the purchasing public for such rugs.

PAn. 5. In the course and conduct of its business and for the pur- ~ose of inducing the purchase of said rugs, respondent has engaged ln the practice of describing and designating certain of its rugs, which closely resemble true Oriental rugs in appearance, by the names "Imperial Saroukan," ''Iran Kushan," and "Imperial Ardavan." . There are true Oriental rugs known as "Sarouk," "Kushan,'' "Arda- ~il,'' and "Ardavan," and "Iran" is the modern name for Persia, which ls a place of origin of genuine Oriental rugs. The use by the respondent of the designations "Imperial Saroukan," "Iran Kushan," and ''Imperial Ardavan" has the capacity and tendency to create the mistaken and erroneous belief that the rugs so designated are in fact genuine Oriental rugs. Respondent uses said names to designate the ?aid rugs in invoices to dealers and in otherwise referring to tlie same 1n the· sale thereof to deal~rs.

To the various rugs designated by respondent as above set forth, it firmly· attaches labels upon which the particular name conspicuously appears, together with depictions of Oriental scenes. All of said labels are plainly discernible to members of the purchasing public \vhen said rugs are displayed for sale by retail dealers. In truth and in fact respondent's rugs hereinabove referred to are \Voven on power looms in the United States. They are not made by hand and the individual threads are not knotted in the distinctive man- ~er of the true Oriental rug. They do not possess all the cha.racterlstics of true Oriental Rugs but do in fact so closely simulate true Oriental rugs in appearance as to be indistinguishable from them by 1\ large portion of the purchasing public and, in consequence, are readily accrpted as being true Oriental rugs. PAn. 6. The use by respondent of the designations, depictions, and representations as set forth herein in connection with the offering for sale and sale of its said rugs has had, and now has, the tendency and raparitJ: to mislead purchasers and prospective purchasers thereof 5ulll37-44--- 7 Order 37F.T.O..

into the erroneous and mistaken belief. that such representations and designations are true and correct, and to induce them to purchase said rugs on account thereof. Respondent's said acts and practices place in the hands of retail dealers who purchase said rugs and resell the same to the purchasing public, means and instrumentalities for mis~ leading and deceiving the public in the particulars aforesaid. As a result of respondent's said acts and practices, trade has been unfairly diverted to· respondent from its competitors engaged in the sale in commerce between and among the various States of the United States and in the District of Columbia, of rugs of various kinds, in~ eluding both genuine Oriental and domestic rugs, who truthfully represent their products.

CONCLUSION The aforesaid acts and practices of respondent, as herein found, are all to the prejt1dice and injury 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 Com'!lission Act. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answer of respondent, in· which answer respondent admits all the material allegations of fact set forth in said complaint and states that it waives all intervening procedure and further hearing as to said facts and the Commission having made its findings as to the facts and conclusion that said respondent has violated the provisions of the Federal Trade Com· mission Act.

It is ordered, That the respondent, American Rug and Carpet Co., Inc., a corporation, its officers, representatives, agents and employees, directly or through any corporate or other device in connection with the offering for sale, sale and distribution of rugs in commerce as ''commerce" is defined in the Federal Trade Commission Act, do forth~ with cease and desist from:

1. Using the words "Saroukan," or "Iran" or any other combination of words or syllables, coined or otherwise, which are indicative of the Orient to designate or de~ribe rugs which are not in fact made in the Orient and which do not possess all the essential characteristics and structure of Oriental rugs.

2. Using the worJs "Kashan,''"Ardavan," or ~'Sarouk" or any ot.her name of any genuine Oriental rug, alone or in combination with other AMERICAN RUG & CARPET CO., INC. 59 '·sa . Order Wot~ds or syllables, coined or otherwise, to designate or describe rugs ·Which are not in fact made in the Orient and which do not possess all t~e essential characteristics and structure of the particular Oriental rugs indicated by the use o£ such name.

It i<J fttrther ordered, That the respondent shall, within 60 days after service upon it o£ 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.

' I Complaint 37F.T.C. '!