Covideo, Inc.

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

IN THE MATTER OF COYIDEO, INC. ET AL.

COMPLAINT, FINDINGS, AND ORDERS IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5' OF AN ACT OF CONGRESs. APPROVED SEPT. 26, 1914 Docket 5923. Oo-mpla-int, Sept. 14, 1951-Decision, Feb. , 1952 Where a corporation and its two officers and owners, engaged in the interstate sale and distribution of "Covideo" coin-operated television sets for use in hotels, motor courts, hospitals, and similar places; in advertising their said product in magazines and newspapers and by circulars, directly and by implication- (a) Falsely represented that they owned, operated or controlled a plant or factory where they manufactured coin-operated radios and television sets and component parts thereof;

(b) Represented that said corporation was not a new company but had been in the field for several years; the facts being that, organized in July 1949, commenced doing business in the following October; (c) Falsely represented that they maintained a staff of competent engineers and technicians and adequate facilities for research and experimentation in the field of television; and (d) Falsely represented that said staff engaged in over two years of research and exllerimentation in said field, the results of which were embodied in their said "Covideo" product, before its offer for sale; With tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such advertisements were true and thereby induce its purchase of substantial quantities of their coin-operated television sets: Held, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public and constituted unfair and deceptive acts and practices in commerce.

Before 1111'. J. Ea1'l Cow hearing examiner. Mr. John F. TValsh 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 Covideo, Inc., a corporation, Sidney I. Horwatt and Louis Brown, individually and as officers of Covic1eo, Inc., hereinafter referred to as respondents have violated the provisions of 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:

. . .

COVIDEO, INC. ET AL. 841 840 Complaint PARAGRAPH 1. Respondent Covideo, Inc., is a corporation, duly organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located at 212 Broadway, New York, New York. Individual respondents Sidney I. Horwatt and Louis Brown are respectively, president and vice-president of said corporate respondent Covideo, Inc. and, acting in such respective capacities, said respondents formulate, direct and control the practices and policies of corporate respondent, including the advertising and other representations used and business practices employed by corporate respondent, as hereinafter related. Individual respondents own the entire capital stock of corporate respondent and their principal office and place of business is that of said corporate respondent. PAR. 2. Respondents are now and for more than one year last past have been engaged inthe sale and distribution of coin-operated television sets designated by them as "Covideo " for use in hotels, motor courts, hospitals and similar places.

Respondents cause their .said coin-operated television sets, when sold by them, to be transported from their aforesaid 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 their said coin-operated television sets in commerce between and among the various States of the United States.

PAR. 3. In the course and conduct of their said business and for the purpose of inducing the purchase of their said coin-operated television sets, respondents have circulated among their prospective purchasers, throughout the United States, by advertisements inserted in magazines and newspapers and by circulars sent through the mails many statements and representations concerning their said coinoperated television sets. Among and typical of such statements and representations, disseminated as aforesaid, but not all-inclusive, are the following:

Just a word about Covideo, Inc.

We were pioneers in the manufacture of Coradio coin-operated radios; and, thousands upon thousands of our Coradio sets are in operation throughout the nation piling up profits every day for hundreds of operators. . . We mention "the above so that you ll know we re not a new company; but, one that has been in the field for years and enjoys an enviable reputation for successful operation. Covideo, Inc.

national manufacturer has openings available in this city and surrounding communities for responsible party to independently own and operate PROFIT- .. . .. .

Complaint 48 F. T. C.

ABLE new metal streamlined TAMPER-PROOF coin-operated television sets, fully guaranteed.

Coin-operated equipment. It must be built to give constant service at a minimum cost.

Our engineering staff spent better than two years in research and experimentation on these Covideo sets to insure perfect, troublefree operation. PAR. 4. Through the use of the statements and representations hereinabove set forth and others similar thereto, not specifically set out herein, respondents represent and have represented, directly and by implication:

That respondents own, operate or control a plant or factory where they manufacture radios, television sets and component parts thereof; that respondent corporation is not a new company but has been in the field for several years; that respondents maintained a staff of competent engineers and technicians and adequate facilities for research and experimentation in the field of television, and that this staff engaged in over two years of research rmd experimentation in this field the results of which were embodied in "Covideo" before it was offered for sale.

PAR. 5. The foregoing claims, statements and representations are grossly exaggerated, false and misleading. In truth and in fact respondents do not operate a plant or factory where they manufacture radios, television sets and component parts thereof. On the contrary, e said television sets sold by respondents are bought, fully assembled by respondents from other corporations, firms and individuals. The corporate respondent is a new company, having been in business for only two years.

Respondents have not maintained a staff of competent engineers and technicians and adequate facilities for research and experimentation in the field of television, nor did such a staff engage in research and experimentation in this field, the results of which were embodied in Covideo" before it was offered for sale.

PAR. 6. There is a preference on the part of dealers and of a substantial portion of the purchasing public for dealing directly with and buying directly from manufacturers, by virtue of the belief that through such purchases they obtain advantages in price and in other respects.

PAR. 7. The use by respondents of the foregoing false and misleading advertisements and representations, employed and disseminated as aforesaid, had the tendency and capa,city to mislead and deceive a substantial portion of the purchasing public into the erroneous and COVIDEO, INC. ET AL. 843 840 Decisions mistaken belief that such advertisements were true and to induce by reason of such erroneous and mistaken belief, a substantial number of the public to purchase substantial quantities of respondents' said coinoperated television sets.

PAR. 8. The aforesaid acts and practices of respondents, as herein alleged, are all to the injury and 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. DECISION OF THE' COMMISSION Pursuant to Rule XXII of the Commission s Rules of Practice, and as set forth in the Commission s "Decision of the Commission and Order to File Report of Compliance, dated February 29, 1952 the initial decision in the instant matter of Hearing Examiner J. . Earl Cox, as set ,out as follows, became on that date the decision of the Commission.

INITIAL DECISION BY J. K\RL cox, HEARING EXAMINER Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission on September 14, 1951, issued and subsequently served its complaint ill this proceeding upon respondents Covideo, Inc., a corporation, and Sidney I. Horwitt (referred to in the complaint as Sidney 1. Horwatt) and Louis Brown, individually and as officers of said corporation, charging them with the use of unfair and d~ceptive acts and practices in commerce in violation the provisions of said Act. After the issuance of said complaint, the corporate respondent answered. No answer was filed by either of the individual respondents, but they both appeared and testified at the hearing which was held pursuant to notice and at which testimony and other evidence in support of and in opposition to the allegations of the said complaint were introduced before the above-named hearing examiner theretofore duly designated by the Commission. Said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final consideration by said hearing examiner on the complaint the answer thereto, testimony and other evidence, proposed findings as to the facts and conclusions presented by counsel, oral argument not having been requested. Said hearing examiner, having duly considerocl the record herein, finds that this proceeding is in the interest of the public and makes the following findings as to the facts conclusion drawn therefrom, and order:

Findings 48 F. T. C..

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Covideo, Inc., is a corporation, duly organized, existing and doing business under and by virtue of the laws 0f the State of New York, with its principal office and place of busilless located at 212 Broadway, New York, New York. Individual respondents Sidney I. EOl'witt and Louis Brown are respectively, president and vice-president of said corporate respondent Covideo, Inc., and, acting in such respective capacities, said respondents formulate, direct and control the practices and policies of corporate respondent, including the advertising and other representations used and business practices employed by corporate respondent as hereinafter related. The individual respondents own the entire capital stock of corporate respondent and their principal office and place of business is that of said corporate respondent. PAR. 2. Respondents are now and for more than one year last past have been engaged in the sale and distribution of coin-operated television sets, designated by thelll as "Covideo " for use in hotels, motor courts, hospitals and similar places.

respondents cause their said coin-operated television sets, when sold by them, to be transported from their aforesaid 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 their said coin-operated television sets in commerce between and among the various States of the United States.

PAR. 3. In the course and conduct of their said business and for the purpose of inducing the purchase of their said coin-operated television sets, respondents have circulated among their prospective purchasers, throughout the United States, by advertisements inserted in magazines and newspapers and by circulars sent through the mails many statements and representations concerning their said coinoperated television sets. Among and typical of such statements and representations, disseminated as aforesaid, but not all-inclusive, are the following:

Just a word about Covideo, Inc.

'Ve were pioneers in the manufacture of Col'adio coin-operated radios; and, thousands upon thousands of our Col'adio sets are in operation throughout the nation piling up profits every day :Cor hundreds of operators. .. mention the above so that you ll know we re not a new company; but, one that has been in the field for J'ears and enjoys an enviable reputation for successful opera tion.

. . . ..

COVIDEO, INC. ET AL. 845- 840 Findings Covideo, Inc.

national manufacturer lJ.as openings available in this city and surroundingcommunities for responsible party to independently own and operate PROFIT- ABLE new metal streamlined TAMPER-PROOF coin-operated television sets, fully guaranteed.

Coin-operated equipment. It must be built to give constant service at a minimum cost.

Our engineering' staff spent better tlJ.an t".o years in research and experimentation on these Covic1eo sets to insure perfect, troublefree operation. PAR. 4. Through the use of the statements and representations hereinabove set forth and others similar thereto, not specifically set out herein, respondents have represented and represent, directly and by implication That respondents own, operate or control a plant or factory where they manufacture coin-operated radios, coin-operated television setsand component parts thereof; that respondent corporation is not a new company but has been in the field for several years; that respondents have maintained and now maintain a staff of competent engineers and technicians and adequate facilities for research and experimentation in the field of television, and that this staff engaged in over t"o years of research and experimentation in this field, the results of which were embodied in "Covideo" before it was offered for sale. PAR. 5. The foregoing claims, statements and representations are grossly exaggerated, false and misleading. In truth and in fact, respondents do not manufacture, nor do they own, operate or control plant or factory ",here they manufacture coin-operated radios, coinoperated television sets or any of the component parts thereof. The corporate respondent ,vas organized in July 1949 and comnlencec1 doing business in October 1949.

Respondents have not maintained and do not now maintain a staffof competent engineers and technicians and adequate facilities for research and experimentation in connection with the development and manufacture of coin-operated television sets, nor did such a staff engage in research and experimentation in this field, the results of which were embodied in "Uovideo" before it was offered for sale. PAR. 6. There is a preference on the part of dealers and of a substantial portion of the purchasing public for dealing directly with and buying directly from manufacturers, by virtue of the belief that through such purchases they obtain advantages in price and in other respects.

PAR. 7. The nse by respondents of the foregoing false and misleading advertisements and representations, employed and disseminated as 846 FEDERAL TRADE COM1IISSION DECISIONS Order 48 F. T. C.

aforesaid, had and has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such advertisements were and are true and to induce, by reason of such erroneous and mistaken belief, a substantial number of the public to purchase substantial quantities of respondents' said coin-operated television sets. CONCLUSIONS The aforesaid acts and practices of 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 It is ordel' That the respondents, Covideo, Inc., a corporation and Sidney 1. Horwitt and Louis Brown, individually and as officers of said corporation, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of coin-operated television sets or any other similar electronic product or any component part thereof in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, directly or by implication:

(1) That they manufacture coin-operated radios or coin-operated television sets or any component parts of either; (2) That respondent Covideo, Inc., is not a new company, or that it has been in business for any greater period of time than is actually the fact;

(3) That they maintain a staff of competent engineers and technicians, or adequate facilities for research and experimentation either in the field of television or in connection with the development and manufacture of coin-operated television sets; (4) That the coin-operated television sets they sell embody the results of research and experimentation by their own staff of engineers or technicians.

ORDER TO FILE REPORT OF COMPLIANCE I t is ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth ill detail the manner and form in which they have com plied with the order to cease and desist (as required by said declaratory decision and order of February 29, 1952J. PERMANENT STAINLESS STEEL, INC. ET AL. 847 Syllabus