Kodize Process Corp

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IN THE ~ATTER OF KODIZE PROCESS CORPORATION, AND ~AX WRIGHT TRADING AS KODIZE SALES CORPORATION COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 5206. Complaint, Aug. 26, 1944-Decision, Apr. 21, 1945 Where a corporation and the individual who was its vice president and general manager, engaged in the manufacture and interstate sale and distribution of their "Kodize" product, which was designed for use, when mixed with water as a treatment for soft coal, and consisted largely of common salt and a very small amount of coloring matter; through statements in circulars, leaflets and other advertising matter- (a) Represented and implied falsely that the use of their product "Kodize" in treating or processing soft or bituminous coal resulted in a 25% to 45% saving in coal, labor, and electricity, a reduction in soot and smoke, and increased efficiency with improved combustion; and (b) Represented falsely that their product "Kodize" was a secret formula for treating or processing coal, and that said formula had been patented and copyrighted; and, Where said individual, engaged in the sale and distribution of the product "Kodize" made by aforesaid corporation- (c) Represented and implied, through use of word "Corporation" in the trade name used by him, that such business was owned and operated by a corporation, when in fact it was individually owned by him;

With result that many ml!mbers of the public dealt with him as being a legally organized and existing corporation, such as a substantial portion of the purchasing public prefers to do business with, as assuring, in its belief, greater stability and financial responsibility; by reason, among other things, of the provisions of law and the regulations concerning the organization and operation of corporations; With tendency and capacity to mislead a substantial portion of the purchasing public into the mistaken belief that the aforesaid misleading representations were true, and thereby into purchase of substantial quantities of their said product: Held, That said acts and practices were all to the prejudice and injury of the public, and constituted unfair and deceptive acts and practices in commerce. Before Mr. Randolph Preston, trial examiner.

Mr. B. G. Wilson for the Commission.

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 Kodize Process Corporation, a corporation, and Max Wright, an individual, trading as Kodize Sales Corporation, hereinafter referred to as respondents, have 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, Kodize Process Corporation, is a corporation, organized, existing and doing business under and by virtue of the Complaint 40 F. T. C.

laws of the State of Georgia with its office and principal place of business at 1026 Virginia Avenue, N. E., Atlanta, Ga.

Respondent, Max Wright, is vice president and general manager of respondent, Kodize Process Corporation, and as such formulates, controls and directs its acts, practices and policies. Respondent, Max Wright, trading under the name Kodize Sales Corporation, sells and distributes the product hereinafter described, known as ""ICodize," which is manufactured by respondent, Kodize Process Corporation. Said respondents have acted together and in cooperation with each other in doing the acts and things herein alleged.

PAR. 2. The respondents are now, and for more than two years last past have been, engaged in the sale and distribution of a chemical product designated "Kodize," designed to be used when mixed with water as a treatment for soft or bituminous coal, at wholesale to dealers and at retail to the purchasing public in commerce between and among the various States of the United States and in the District of Columbia. Respondents cause their said product, when sold, to be transported from their place of business in the State of Georgia to purchasers thereof located in various other States of the United States and in the District of Columbia.

Respondents maintain, and at all times mentioned herein have maintained, a course of trade in their said product, in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 3. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their said product "Kodize," respondents have distributed or caused to be distributed, to purchasers and prospective purchasers of said product in various States of the United States circulars, leaflets and other advertising matter. In said advertising circulars and leaflets many false and misleading statements and representations are made by respondents in describing their said product and the properties thereof. Among and typical of said statements and representations so made and circulated are the following: KODIZE-A COAL SAVING PROCESS KODIZE is a remarkable secret formula for processing coal. After more than two years of exhaustive tests and demonstrations, KODIZE has been acclaimed as the miracle formula and process which is destined to "revolutionize the burning of coal." SAVES COAL REDUCES SOOT KODIZE has actually effected savings "KODIZED COAL" (ordinary coal in apartments, homes, industrial plants, to which KODIZE has been applied) etc., ranging from 25% to 45%, both positively will burn clean instead. of in stokers and hand firing. forming the usual thick soot from raw coal. KODIZE reduces soot to a negligible minimum.

ELil\IINATES IMPROVES BLACK SMOKE COMBUSTION KODIZE PROCESSED coal burns KODIZE greatly improves combustion, freely and clean without draft, thereby regardless of the method or equipment burning up the carbon ordinarily escap- employed, but greatest economy and ing from raw coal as black smoke. best results are obtained when all drafts are closed.

KODIZE PROCESS CORP. ET AL. 443 441 Complaint REDUCES FIRING PERIODS TO A MINIMUM APARTMENT HOUSE Janitors report that immediately following the application of KODIZE to their coal, they decrease firings of four, five and six times daily to only two firings in 24 hours in hot water heaters, using from one-fourth to nearly one-half LESS COAL. Fire holds overnight.

KODIZE SAVES 25% AND MORE IN Coal . Labor . Electricity Equipment SAVES Grates . Fire Box Linings Smoke Pipe • Flue Linings.

AMERICA'S FOREMOST COAL SAVING PROCESS.

KODIZE is not mythical or experimental. It is a scientific combination of chemicals (a patented and copyrighted formula) and when applied to your coal, aids in more complete coal combustion.

PAR. 4. The foregoing statements and representations, together with similar statements and representations not specifically set out herein, purport to be descriptive of respondents' said product and of its efficiency and of the benefits to be derived from its use. By means thereof, respondents represent and imply and have represented and implied that ~he use of their product "Kodize" in treating or processing soft or bituminous coal results in or accomplished a material saving ranging from 25% to 45% in coal, labor and electricity, a reduction in soot and smoke, and increased efficiency with improved combustion. Respondents also represent that their product "Kodize" is a secret formula for treating or processing coal, and that said formula has been patented and copyrighted. PAR. 5. The foregoing statements and representations are false, misleading and deceptive. In truth and in fact, the use of respondents' said product "Kodize" in treating or processing soft or bituminous coal does not effectuate or result in any appreciable saving in coal, labor and electricity. The use of said product, when applied to soft or bituminous coal, does not reduce soot or smoke nor improve combustion. Respondents' said product, in fact, is a chemical mixture consisting largely of common salt, a very small amount of coloring matter, and has no material or appreciable beneficial effect when used in treating or processing coal. The formula for "Kodize" is not secret, nor has said formula been patented or copyrighted.

PAR. 6. Through the use by the respondent, Max Wright, of the word "corporation" in the trade name Kodize Sales Corporation, he represents and implies that the business conducted under said name is owned and operated by a corporation organized, existing and doing business under and by virtue of the laws of some State of the United States. Said business is not owned and operated by a corporation, but individually by said respondent, Max Wright. A substantial portion of the purchasing public prefer to do business with a lawfully organized and existing corporation for the reason, among others, that it is believed that the provisions of law Findings 40 F. T. C.

and the regulations concerning the organization and operation .of corporations are such as to assure greater stability and financial responsibility. Many members of the public have dealt with respondent, Max Wright, under the mistaken belief that "Kodize Sales Corporation" was a legally organized and existing corporation.

PAR. 7. The aforesaid acts and practices and representations of therespondents have had and now have the tendency and capacity to deceive and mislead a substantial portion of the purchasing public into the erroneous and mistaken belief that the aforesaid false, misleading and deceptive acts and practices and representations are true, and into the purchase of substantial quantities of respondents' product because of such erroneous and mistaken belief so induced.

PAR. 8. The aforesaid acts and practices of the respondents, as herein alleged, 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.

REPORT, FINDINGS AS TO THE-FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on 'August 2G, 19-14, issued and subsequently served its complaint in this proceeding upon respondents, Kodize Process Corporation, a corporation, and Max Wright, an individual, trading as Kodize Sales Corporation, charging them with unfair and deceptive acts and practices in commerce in violation of the provisions of said act. After the filing of answer by respondent Max Wright, certain facts were stipulated into the record in lieu of testimony in support of and in opposition to the charges stated in the complaint at a hearing before an examiner of the Federal Trade Commission theretofore duly designated by it, and it was agreed that the Commission may proceed upon said statement of facts to make its findings as to the facts and its conclusion based thereon and issue its order disposing of this proceeding without intervening procedure. Thereafter, this proceeding came on for final hearing before the Commission on the complaint, answer, and stipulation as to the facts, said stipulation having been approved 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 TO THE FACTS PARAGRAPH 1. Respondent, Kodize Process Corporation, is a corporation, organized, existing, and doing business under and by virtue of the laws of the State of Georgia, with its office and principal place of business at 1026 Virginia Avenue, N. E., Atlanta, Ga. Respondent, Max Wright, is vice president and general manager of respondent, Kodize Process Corporation, and as such helps formulate, control, and direct its acts, practices, and policies. Respondent, Max Wright, formerly trading under the name of Kodize Sales Corporation, but now trading under the name of Kodize Sales Company, sells and distributes the product "Kodize," which is manufactured by respondent, Kodize Process Corporation. Said respondents have acted together and in cooperation with each other in doing the following acts and things.

KODIZE PROCESS CORP. ET AL. 445 441 Findings PAR. 2. For more than two years last past the respondents have been engaged in the sale and distribution, at wholesale to dealers and at retail to the purchasing public, of a chemical product designated "Kodize." This product is designed to be used when mixed with water as a treatment for soft or bituminous coal. Respondents cause their said product, when sold, to be transported from their place of business in the State of Georgia to purchasers thereof located in various other States of the United States and in the District of Columbia, and maintain, and at all times mentioned herein have maintained, a course of trade in said product in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 3. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their said product "Kodize," respondents have distributed, or caused to be distributed, to purchasers and prospective purchasers of said product in various States of the United States circulars, leaflets, and other advertising matter. In said advertising circulars and leaflets many false and misleading statements and representations are made by respondents in describing their said product and its properties. Among and typical of the statements and representations so made and cir~ulated are the following:

KODIZE-A COAL SAVING PROCESS KODIZE is a remarkable secret formula for processing coal. After more than two years of exhaustive tests and demonstrations, KODIZE has been acclaimed as the miracle formula and process which is destined to "revolutionize -the burning of coal." SAVES CO~L REDUCES SOOT KODIZE has actually effected savings "KODIZE COAL" (ordinary coal to in apartments, homes, industrial plants, which KODIZE has been applied) posetc., ranging from 25% to 45%, both itively will burn dean instead of forming in stokers and hand firing. the usual thick soot from raw coal. KODIZE reduces soot to a negligible minimum.

ELIMINATES IMPROVES BLACK SMOKE COMBUSTION KODIZE PROCESSED coal burns KODIZE greatly improves combustion, freely and clean without draft, thereby regardless of the method or equipment burning up the carbon ordinarily escap- employed, but greatest economy and ing from raw coal as black smoke. best results are obtained when aU drafts are closed.

REDUCES FIRING PERIODS TO A MINIMUM AP ARTI\IENT HOUSE Janitors report that immediately following the application of KODIZE to their coal, they decrease firings of four, five and six times daily to only two firings in 24 hours in hot water heaters, using from one-fourth to nearly one-half LESS COAL. Fire holds overnight.

• • • • • • KODIZE SAVES 25% AND l\lore IN Coal • Labor • Electricity Equipment Findings 40 F. T. C.

SAVES Grates . Fire Box Linings Smoke Pipe . Flue Linings • • • • • • AMERICA'S FOREMOST COAL SAVING PROCESS • • • • • • KODIZE is not mythical or experimental. It is a scientific combination of chemicals (a patented and copyrighted formula) and when applied to your coal, aids in more complete coal combustion.

PAR. 4. By means of the foregoing statements and representations, and similar statements and representations not specifically set out herein, respondents represent and imply, and have represented and implied, that the use of their product "Kodize" in treating or processing soft or bituminous coal results in or accomplishes a material saving ranging from 25% to 45% in coal, labor, and electricity, a reduction in soot and smoke, and increased efficiency with improved combustion. Respondents also represent that their product "Kodize" is a secret formula fot treating or processing coal and that said formula has been patented and copyrighted. PAR. 5. The foregoing statements and representations are false, misleading, and deceptive. In truth and in fact, the use of respondents' said product "Kodize" in treating and processing soft or bituminous coal does not effectuate or result in any appreciable saving in coal, labor, or electricity. The use of said product, when applied to soft or bituminous coal, does not reduce soot or smoke or improve combustion to the extent claimed. In fact, said product is a chemical mixture consisting largely of common salt and a very small amount of coloring matter. It has no material or appreciable beneficial effect when used in treating or processing coal. The formula for "Kodize" is not secret, nor has said formula been patented or copyrighted.

PAR. 6. Through the use by the respondent, Max Wright, of the word "Corporation" in the trade name "Kodize Sales Corporation," he has represented and implied that the business conducted under said name is owned and operated by a corporation organized, existing, and doing business under and by virtue of the laws of some State of the United States. Said business is not owned and operated by a corporation, but is individually owned by respondent, Max Wright. A substantial portion of the purchasing public prefers to do business with a lawfully organized and existing corporation for the reason, among others, that it is believed that the provisions of law and the regulations concerning the organization and operation of corporations are such as to assure greater stability and financial responsibility. Many members of the public have dealt with respondent, Max Wright, under the mistaken belief that Kodize Sales Corporation was a legally organized and existing corporation. PAR. 7. The aforesaid acts and practices of respondents have had, and now have, the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that the aforesaid misleading and deceptive representations are true, and into the purchase of substantial quantities of respondents' product because of the erroneous and mistaken belief so induced. KODIZE PROCESS CORP. ET AL. 447 441 Order CONCLUSION The aforesaid acts and practices of the respondents 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 Commissi-on upon the complaint of the Commission, the answer filed by respondent Max Wright, and a stipulation as to the facts entered into upon the record by and between counsel for the Commission and counsel for the respondents, which stipulation provides, among other things, that without further evidence or other intervening procedure, the Commission may issue and serve upon respondents herein findings as to the facts and an order disposing of the proceeding, and the Commission having made its findings as to the facts and its conclusion that said respondents have violated the provisions of the Federal Trade Commission Act. It is ordered, That respondent, Kodize Process Corporation, a corporation, its officers, agents, representatives, and employees, and respondent, Max Wright, an individual, trading as Koclize Sales Company, or trading under any other name, his 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 a chemical product for the treatment of coai designated "Kodize," or any other preparation of substantially similar composition, whether sold under the same name or under any other name, do forthwith cease and desist from representing, directly or by implication:

1. That the use of respondents' product "Kodize" in treating or processing coal results in a saving of from 25% to 45%, or any appreciable saving, in coal, labor, and electricity; or results in any appreciable reduction in soot and smoke; or results in increased efficiency or improved combustion.

2. That said product "Kodize" is a secret formula for treating or processing coal, or that said formula has been patented or copyrighted. It is further ordered, That respondent, Max Wright, do forthwith cease and desist using the word "Corporation" in the trade name used to designate the business operated by him individually, or otherwise representing in any manner that said business is incorporated or operated by a corporation. . It is further ordered, That the respondents shall, within 60 days after service 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.

Complaint 40 F. T. C.