Imperial Candy Co

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IN THE ~ATTER OF I~PERIAL CANDY CO~PANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 5046. Complaint, Sept. 11, 191/1-Decision, Nov. £9, 1944 Where a corporation engaged in the competitive interstate sale and distribution of certain assortments of peanuts so packed and assembled as to involve the use of games of chance, gift enterprises or lottery schemes when sold and distributed to the consumer-typical assortments including (1) 36 one-half pound tins, together with a 400-hole punchboard for use under a plan, as thereon announced, under which a customer paid from 1~ to 5~ or nothing, and received one of said tins or nothing depending on the number he punched, and the person making the last punch also received a tin; and (2) 36 one-half pound packages of peanuts together with a device known as a "Whirling Derby" containing a number of slips with concealed numbers, for use under a scheme, as announced by a placard attached thereto, under which customers receiving certain numbers received a package free, the others paying 10¢ and the last sale receiving two packages- Sold such assortments so packed and assembled to wholesalers, jobbers and retailers by whom, as direct or indirect purchasers, they were exposed and sold to the purchasing public in accordance with the aforesaid sales plan involving a game of chance or sale of chance to procure nuts at much less than their normal retail price; and thereby Supplied to and placed in the hands of others the means of conducting lotteries in the sale of its products in accordance with the aforesaid sales plan, contrary to an established public policy of. the United States Government and in competition with many who do not use any sales method involving chance or otherwise contrary to public policy;

With the result that many persons were attracted by said sales plan and the element of chance involved therein, and were thereby induced to buy and sell its nuts in preference to those of said competitors, and with tendency and capacity to unfairly divert interstate trade to it from its said competitors, whereby substantial injury was done by it to competition in commerce: · II eld, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public, and of its competitors, and constituted unfair methods of competition in commerce and unfair acts and practices therein. Mr. J. W. Brookfield, Jr. for the Commission. Skeel, McKelvy, Henke, Evenson & Uhlmann, of Seattle, Wash., 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 Imperial Candy Co., a corporation hereinafter referred to as respondent, has violated the provisions of th~ said act, and it appearin_g to the C?~mission that a proceeding by it in respect thereof would be m the pubhc mterest, hereby Issues its complaint stating its charges in that respect as follows: Complaint 39 F. T. C.

PARAGRAPH 1. Respondent, Imperial Candy Co., is a corporation, organized and doing business under and by virtue of the laws of the State of Washington with its office and principal place of business located at 800 Western Avenue, Seattle, Wash. Respondent is now, and for more than six months last past, has been, engaged in the sale and distribution of peanuts and other products to wholesale dealers, jobbers and retail dealers located at points in the various States of the United States and in the District of Columbia. Respondent causes and has caused said peanuts and other products, when sold, to be transported from its place of business in the city of Seattle, Wash., to purchasers thereof at their respective points of location in various States of the United States other than Washington and in the District of Columbia. There is now and has been for more than six months last past a course of trade by respondent in such merchandise in commerce between and among the various States of the United States and in the District of Columbia. · In the course and conduct of said business, respondent is and has been, in competition with other corporations and with partnerships and individuals engaged in the sale and distribution of peanuts and nut products in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers, jobbers and retail dealers certain assortments of peanuts so packed and assembled as to involve the use of games of chance, gift enterprises or lottery schemes when sold and distributed to the consumers thereof. Typical of said assortments, are the ones hereinafter described, for the purpose of showing methods used by respondent, and are as follows: One of said assortments includes 36 one-half pound tins of peanuts and a punchboard. Appearing on the face of the punchboard is the following legend: SALTED SOCIETE PEANUTS Pay What You Punch 1~ to l# 1~ to 5~ All numbers ending in 1 pay 1~ [Picture All numbers ending in 2 pay 2¢ [Picture of tin of All numbers ending in 3 pay 3¢ of tin of Peanuts] All numbers ending in 4 pay 4¢ Peanuts] All numbers ending in 5, 6, 7, 8, 9 pay 5¢ All numbers ending in "0" ARE FREE Numbers 11-22-33-44-55-66-77 Each Receive i lb. Tin "Societe" Blanched Salted Peanuts Numbers 111-122-133-144-155-166-177 Each Receive i-lb. Tin "Societe" Blanched Salted Peanuts Numbers 211-222-233-244-255-266-277 Each Receive i-lb. Tin "Societe" Blanched Salted Peanuts Numbers 311-322-333-344-355 Each Receive i-lb. Tin "Societe" Blanched Salted Peanuts LAST SALE IN EACH SECTION RECEIVES !-lb. TIN OF "SOCIETE" BLANCHED SALTED PEANUTS.

IMPERIAL CANDY CO. 461 459 Complaint Said peanuts are distributed to the purchasing public in accordance with the foregoing legend and in the following manner.' The punchboard contains 400 punches, each concealing a number. Said numbers are not arranged in numerical sequence. \\'bether the purchaser pays 1, 2, 3, 4, or 5 cents or receives his chance free is determined by the last digit of the . number of the slip punched by him from the punchboard, and whether he receives a can of peanuts or nothing for his money is determined by the number appearing on the slip punched by him from said board. Persons who qualify by receiving one of the designated numbers receive a tin of peanuts. Persons not obtaining one of the designated numbers receive nothing. The numbers are effectively concealed from purchasers and prospective purchasers tmtil a punch selection has been made and a particular punch separated from the board. The peanuts are thus distributed to purchasers of punches from the board wholly by chance and the amount to be paid for each punch or purchase is determined wholly by chance. Another assortment sold and distributed by respondent consists of 36 one-half pound packages of peanuts and a device known as a 'Whirling Derby. This device consists of a number of slips of paper, each containing a concealed number, the numbers running from 1 to 1000, but not consecutively. The slips are attached to a stand so that they may be easily removed by a purchaser or prospective purchaser, and the num:bers concealed from such purchaser until one of the slips has been pulled from the stand. Attached to the stand is a placard containing the following legend: S.U. TED SOCIETE PEANUTS !-lb. Packages Blanched Nuts 800 FREE NUMBERS Numbers ENDING 3 and 9 Pay 10 CENTS-All Others FREE Numbers 10, 20, 30, 40, 50, 60, 70, 80, 90, 100, 110, 120, 130, 140, 150, 160, 170, 180, 190, 200, 210, 220, 230, 240, 250, 260, 270, 280, 290, 300, 310, 320, 330, 340, Etteh Receives !-lb. Package Societe Salted Peanuts Last Sale Receives 2 J~ackages Societe Peanuts The peanuts are distributed to the purchasing public by means of the device containing the sealed numbers in accordance with the above legend. The peanuts are thus distributed to purchasers of slips from the device wholly by chance, and tbe amount to be paid for each slip or purchase is also determined wholly by chance.

PAR. 3. Retail dealers who purchase respondent's nuts, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent .thus supplies to and places in the hands of others the means of conductmg lotteries in the sale of its products in accordance with the sales plan, hereinabove set forth. The use by respondent of said sales plan or method in the sale of its nuts and the sales of said nuts by and through the use thereof and by the aid of said sales plan or method is a practice of a sort which is contrary to an established public policy of the Government of the United States. PAR. 4. The sale of nuts ~o the purchasing public by the method or plan, hereinabove set forth, mvolves a game of chance or the sale of a Findings 39 F. T. C.

chance to procure nuts at prices much less than the normal retail price thereof. Many persons, firms, and corporations who sell and distribute nuts in competition with respondent, as above alleged, do not use said method or any method involving a game of chance or the sale of a chance to win something by chance, or any other method contrary to public policy. Many persons are attracted by said sales plan or method employed by respondent in the sale and distribution of its nuts and in the element of chance involved therein, and are thereby induced to buy and sell respondent's nuts in preference to nuts of said competitors of respondent who do not use the same or equivalent methods. The use of said method by respondent because of said game of chance has a tendency and capacity to unfairly divert trade in commerce between and among the various States of the United States and in the District of Columbia to respondent from its said competitors who do not use the same or equivalent methods, and as a result thereof substantial injury is being and has been done by respondent to competition in commerce between and among the various States of the United States and in the District of Columbia. PAR. 5. The aforesaid acts and practices of respondent, as herein found, are all to the prejudice and injury of the public and of respondent's competitors, and constitute unfair methods of competition in commerce and unfair acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on September 11, 1943, issued and thereafter served its complaint in this proceeding upon respondent, Imperial Candy Co., a corporation, charging it with the use of unfair methods of competition and unfair acts and practices in commerce in violation of the provisions of said act. 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 procedure 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 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 TO THE FACTS PARAGRAPH 1. Respondent, Imperial Candy Co., is a corporation, organized and doing business under and by virtue of the laws of the State of Washington with its office and principal place of business located at 800 Western Avenue, Seattle, Wash. Respondent is now, and for more than six months last past, has been, engaged in the sale and distribution of peanuts and other products to wholesale dealers, jobbers and retail dealers IMPERIAL CANDY CO. 463 459 Findings located at points in the various States of the United States and in the District of Columbia. Respondent causes and has caused said peanuts and other products, when sold, to be transported from its place of business in the city of Seattle, Wash., to purchasers thereof at their respective points of location in various States of the United States other than Washington and in the District of Columbia. There is now and has been for more than six months last past a course of trade by respondent in such merchandise in commerce between and among the various States of the United States and in the District of Columbia.

In the course and conduct of said business respondent is and has been in competition with other corporations and with partnerships and individuals engaged in the sale and distribution of peanuts and nut products in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers, jobbers and retail dealers certain assortments of peanuts so packed and assembled as to involve the use of games of chance, gift enterprises or lottery schemes when sold and distributed to the consumers thereof. Typical of said assortments are the ones hereinafter described for the purpose of showing methods used by respondent, and are as follows: One of said assortments includes 36 one-half pound tins of peanuts and a punchboard. Appearing on the face of the punchboard is the following legend: SALTED SOCIETE PEANUTS Pay What You Punch 1~ to 5¢ 1~ to 5¢ All numbers ending in 1 pay 1~ [Picture All numbers ending in 2 pay 2~ [Picture of tin of All numbers ending in 3 pay 3~ of tin of Peanuts] All numbers ending in 4 pay 4¢ Peanuts] All numbers ending in 5, 6, 7, 8, 9 pay 5¢ All numbers ending in "0" ARE FREE Numbers 11-22-33-44-55-66-77 Each Receive !-lb. Tin "Societe" Blanched Salted Peanuts Numbers 111-122-133-144-155-166-177 Each Receive !-lb. Tin "Societe" Blanched Salted Peanuts Numbers 211-222-233-244-255-266-277 Each Receive !-lb. Tin "Societe" Blanched Salted Peanuts Numbers 311-322-333-344-355 Each Receive !-lb. Tin "Societe" Blanched Salted Peanuts LAST SALE IN EACH SECTION RECEIVES !-lb. TIN OF "SOCIETE" BLANCHED SALTED PEANUTS. . Said peanuts are distributed to the purchasing public in accordance with the foregoing legend and in th~ following manne~. The punchboard contains 400 punches, each concealing a number. Said numbers are not arranged in numerica~ sequence. W~either th~ purchaser pays 1, 2, 3, 4, or 5 cents or receives his chance free IS determmed by the last digit of the Findings 39 F. T. C.

number of the slip punched by him from the punchboard, and whether he receives a can of peanuts or nothing for his money is determined by the number appearing on the slip punched by him from said board. Persons who qualify by receiving one of the designated numbers receive a tin of peanuts. Persons not obtaining one of the designated numbers receive nothing. The numbers are effectively concealed from purchasers and prospective purchasers until a punch selection has been made and a particular punch separated from the board. The peanuts are thus distributed to purchasers of punches from the board wholly by chance and the amount to be paid for each punch or purchase is determined wholly by chance. Another assortment sold and distributed by respondent consists of 36 one-half pound packages of peanuts and a device known as a Whirling Derby. This device consists of a number of slips of paper, each containing a concealed number, the numbers running from 1 to 1000, but not consecutively. The slips are attached to a stand so that they may be easily removed by a purchaser or prospective purchaser, and the numbers concealed from such purchaser until one of the slips has been pulled from the stand. Attached to the stand is a placard containing the following legend.

SALTED SOCIETE PEANUTS i-lb. Packages Dlanched Nuts 800 FREE NUMBERS Numbers ENDING 3 and 9 Pay 10 CENTS- All Others FREE Numbers 10, 20, 30, 40, 50, 60, 70, 80, 00, 100, 110, 120, 130, 140, 150, 160,170,180,190,200,210,220,230,240,250,260,270,280,290,300, 310, 320, 330, 340, Each Receives f-Ib. Package Societe Salted Peanuts. Last Sale Receives 2 Packages Societe Peanuts. The peanuts are distributed to the purchasing public by means of the device containing the scaled numbers in accordance with the above legend. The peanuts are thus distributed to purchasers of slips from the device wholly by chance, and the amount to be paid for each slip or purchase is also determined wholly by chance.

PAR. 3. Retail dealers who purchase respondent's nuts, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent thus supplies to, and places in the hands of others, the means of conducting lotteries in the sale of its products, in accordance with the sales plan, hereinabove set forth. The use by respondent of said sales plan or method in the sale of its nuts and the sales of said nuts by and through the use thereof and by the aid of said sales plan or method i~ a practice of a sort which is contrary to an established public policy of the Government of the United States. PAR. 4. The sale of nuts to the purchasing public by the method or plan, hereinabove set forth, involves a game of chance or the sale of a chance to procure nuts at prices much less than the normal retail price thereof. Many persons, firms, and corporations \\·ho sell and distribute nuts in competltion with respondent, as above found, do not usc said method or any method involving a game of chance or the sale of a chance to win something by chance, or any other method contrary to public policy. Many persons are attracted by said sales plan or method employed by respondent in the sale and distribution of its nuts and in the element of chance IMPERIAL CANDY CO, 465 459 Order involved therein, and are thereby induced to buy and sell respondent's nuts in preference to nuts of said competitors of respondent who do not use the same or equivalent methods. The use of said method by respondent because of said game of chance has a tendency and capacity to unfairly divert trade in commerce between and among the various States of the United States and in the District of Columbia to respondent from its said competitors who do not use the same or equivalent methods, and as aresult thereof substantial injury is being and has been done by respondent to competition in commerce between and among the various States of the United States and in the District of Columbia. CONCLUSION The aforesaid acts a-nd practices of respondent, as herein found, are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair methods of competition in commerce and unfair act~ and practices in commerce within the intent and meaning of the Federal 'Trade Commission Act.

ORDE:R TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission .~pon the complaint of the Commission and the answer of the 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 its conclusion that the respondent has violated the provisions of the Federal Trade Commission Act. It is ordered, That the respondent, Imperial Candy Co., a corporation, and 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 peanuts or any other merchandise in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forth- With cease and desist from:

1. Selling or distributing peanuts or any merchandise so packed and assembled that sales of such peanuts or other merchandise to the general Public are to be made or may be made by means of a game of chance, gift enterprise, or lottery scheme.

2. Supplying to or placing in the hands of others punchboards, push or Pull cards, Whirling Derbies, or other lottery devices, either with assortments of peanuts or other merchandise or separately, which said punchhoards, push or pull cards, Whirling Derbies, or other lottery devices are to be used or may be used in selling or distributing such peanuts or other merchandise to the public.

3. Selling or otherwise disposing of any merchandise by means of a game or rhanre gift enterprise, or lottery scheme. It is further ~rdcred, That the respondent shall, within 60 days after SPrvice 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.

Syllabus 39 F. T. C.