Ray Mertz trading as Ray Mertz & Company

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IN THE MATTER OF RAYl\fERTZ TRADING AS RAY l\iERTZ & CO~fPANY COMPLAINT, FINDINGS, AND ORDERS IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF' AN ACT OF CONGRESS APPROVED SEPT, 26, 1914 Docket 5911. Compla.int, Aul. 8, 1951-Decis-ion, May, 195'2 Where an individual engaged in the manufacture and interstate s-ale of various kinds of push cards, which, bearing explanatory legends or space therefor were designed for and used only in the sale of merchnnc1ise to the consuming public through means of games of chance, under plans whereby, -as typical, the price paid by purchasers for an article was determined by the push selected by chnnce, or whereby the purchasers who, by chance, selected a certain one of various feminine names displayed, received, without additional cost, an article of merchandise, the normal retail price of which exceeded the chance determined price of the push, others receiving nothing for their money other than the. privilege of it push 01' punch or in some cases, -a small piece of candy of less value- Sold and distributed such devices to dealers in candy, cigarettes and other articles, assortments of which, along with said devices, matte up by tlle dealers, and were exposed and sold by the direct or indirect retailer purchasers to the purchasing public in accord;l11ce with the aforesnid sales plan; and thereby supplied to and placed in the hands of others the means of conducting lotteries, g-ames of chance or gift enterprise in the sale and distribution of their ll1erchnndise, contrary to an established public volicy of the United States Government, find in violation of criminal laws; and means and instrumentalities for engaging in unfair acts and practices; With the result that many members of the purchasill~ public were induced, because of the element of chance involved, to trade 01' deal with retailers who thus sold or distributed their merchandise; Hnd many retailers were induced to deal or trade with manufacturers, wholesalers and jobbers who sold and distributed such assortments:

Held, That such acts anel practices, under the circumstances set forth, were all to the prejudice and injury of the public, and constituted unfair acts and practices in commerce, In said proceeding the only testimony offered by respondent in his defenseto the effect that competition in either the wholesale or retail sale of merchandise was not affected by the sale of punchboards in commerce, that the use thereof in the sale of merchandise did not di\elt tr-ade, and that consequently, their use did not constitute an unfair method of competitionwas rejected as immaterial and irrelevant to the issues in the instant proceeding, since the complaint did not charge respondent with the use of such methods, but only wi th the use of unfair acts and practices in commerce. Before 1111. F"7'ank f-liel' hearing examiner. Llf').. J. lV. Brookfield, J')'. for the Commission. lIII'. F. lV. J G:mes of Evanston, Ill., for respondent. RAY MERTZ & CO. 1289 J288 Complaint 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 Ray Mertz, an individual trading and doing business as Ray :Mertz & Company, hereinafter referred to as respondent, has violated the provisions of the said Act, and it appearing to the Commission that a proceeding by in respect thereor would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent, Ray :Mertz, is an individual trading and doing business as Ray Mertz & Company, with his office and principal place of business located at 525 South Dearborn Street, in the city of 'Chicago, Illinois. Respondent is now, and for more thnn two years last past has been, engaged in the manufacture or devices commonly known as push cards, and in the sale and distribution in commerce between and among the various States of the United States of said devices to manufacturers of and dealers in various articles of merchandise.

Respondent causes and has caused said device when sold, to be transported from his aforesaid place of business in Chicago, Illinois to purchasers thereof at their respective points of location in various States of the United States other than the State of Illinois. There is DOW and for more than b,o years last past has been a course of trade in such push card devices by said respondent in commerce between and among the various States or the United States, PAR. 2. In the course and conduct of his said business, as described in Paragraph One hereof, respondent sells and distributes, and has sold and distributed, to said manufacturers and dealers, push cards so prepared and arranged as to involve gmnes of chance, gift enterprises or lottery games when used in making sales of or distributing merchandise to the consuming public. One of said push cards has 50 small partially perforated discs on the face of which is printed the word Push. Concealed within each disc is a number which is disclosed when a disc is pushed or separated from the card, the card bears a legend as follows:

CANDY BAR SPECIAL!! May Cost Only l~ :;\Tot Over 5,ft Each Sale Receives A High Grade Full Value Candy Bar Pay What You Push 1~-21-3~-4f,-5if Complaint 48 F. T. C.. l\fany other of said push cards have printed on the face thereof other labels or instructions that express the manner in which said devices are to be used or may be used in the sale or distribution of candy or various other specified articles of merchandise. Each purchaser pays an indicated price which may be determined either by the printed legend on the card or by the number appearing under the disc ,which he pushes. In the use of the card referred to above, the purchaser of each push receives a candy bar. \Vhether he pays 1~, 2if" 3~, Ll~ or 5~ for said bar is determined "' holly by chance. Other push cards sold and distributed by respondent bear various other legends and are used for the distribution of various articles merchandise, the winners being determined by a number or name concealed in a master list. Typical of such push cards is one consisting of 12 concealed discs each of which bears a feminine name and a list for writing the name of the person who selects each name. This eard contains a concealed master disc or master seal which is pushed after all the other discs have been sold and the winner is determined the name appearing under said master seal. Prices of the purchase of each push on this type of card are determined by the number which appears under each seal so that the winner as well as the price to be paid by each purchaser of a push from the card is determined wholly by lot or chance, Persons securing by their push lucky 01' "inning numbers or names receive articles of merchandise without additional cost, the prices of said pushes are Jess than the normal retail price of said articles of merchandise, Persons who do not secure winning numbers in some cases receive a small piece of candy of less value than the price paid for the push or in other cases receiye nothing for their monev. The articles of merchandise are thus distributed to the consuming or purchasing public wholly by Jot or chance, Others of said push card devices have no instructions or legends thereon but have blank spaces provided therefor, On those push cards the purchasers thereof place instructions or labels which have the same or similar import or meaning as the instructions or labels placed by respondents on said push card devices hereinabove described. Respondent sells and distributes and has sold and distributed many kinds of push cards but all of said devices involved the same chance or lottery features when used in connection with the sale or distribution of candy or other merchandise and vary only in detail. The . only use to be made of said push cards and devices and the only manner in which they are used by the purchasers thereof is in combination with other merchandise so as to enable said purchasers to sell or distribute said other merchandise by means of lottery or chance, as hereinabove alleged.

RAY MERTZ &; CO. 1291 1288 Complaint PAR. 3. 1\iany persons, firms and corporations who sell and distriblite, and have sold and distributed, candy, cigarettes, and other articles or lllerehanc1ise in commerce between and among the various States of the United States and in the District or Columbia, and within the various States or the United States, purchase and have purchased respondents said push card devices, and pack and assemble, and have paeked and assembled, assortments comprised or various articles or l11erehandise, together with said push card devices. Retail dealers who have purchased said assortments, either directly or indirectly, 11ave exposed the same to the purchasing public and have sold or distributed said articles or merchandise by means or said push cards in accordance with the sales plan as described in Paragraph Two hereof, Because or the element or chance involved in connection with the sale and distribution or said merchandise by means or said push ,cards and punchboards, many members or the purchasing public have been induced to trade or deal with retail dealers selling or distributing said merchandise by means thereor. As a result thereor many retail dealers have been induced to deal with or trade with manufacturers, wholesale dealers and jobbers who sell and distribute said merchandise together "ith said devices.

PAR, 4. The sale or marchanc1ise to the purchasing public through the use ot or by means or, such devices in the manner above alleged involves a game or chance or the sale or a chance to procure articles or merchandise at prices much less than the normal retail price thereor and teaches and encourages gambling among members or the public all to the injury or the public. The use or said sales plan or methods in the sale or merchandise and the sale or merchandise by and through the use thereor, and by the aid or said sales plan or method is a practice which is contrary to an established public policy or the vovernment or the United States and in violation or criminal laws, and constitutes unrair acts and practices in said commerce. The sa;1e or distribution or said push card and punchboard devices by respondent, as hereinabove alleged, supplies to and places in the hands or others the means or conducting lotteries, games or chance or girt enterprise in the sale or distribution or their merchandise. The respondent thus supplies to, and places in the hands or, said persons firms and corporations the means or, and instrumentalities ror, engaging in unrair acts and practices within the intent and meaning or the Federal Trade Commission Act.

PAR, 5, The aroresaid acts and practices or respondent, as hereinabove. aBeged, are aB to the prejudice and injury or the public and constitute unrair acts and practices in commerce within the intent and meaning or the Federal Trade Commission Act. 1292 FED'ERAL TRAD.E CDMMI'S'SION DECISlO!NS Findings 48 F. T. C.

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 :May 5, 1952, the initial decision in the instant matter of hearing examiner Frank leer, as set out as follows, became. on that date the decision of the Commission.. INITIAL DECISIO"N BY FRANK HIER, I-IEARING EXAMINER Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission on August 8, 1951, issued and subsequently served its complaint in this proceeding upon respondent Ray :Mertz charging him with the use of unfair acts and practices in commerce in violation of the provisions of said Act. After the issuance said complaint and the filing of respondent' s answer thereto, hearings were held at which testimony ancl other evidence in support of the allegations of said complaint were introduced before the above-named 11hearing examiner theretofore duly designated by the Commission, and said testimony and other evidence were duly recorded and filed in the office of the Commission. Testimony \vas offered by respondent at a hearing held for that purpose but rejected by the hearing examiner for immateriality and irrelevance. Proffer of such testimony appears in the record. Thereafter, the proceeding regularly came on for final consideration by said hearing examiner on the complaint, the answer thereto, testimony and other evidence, no proposed findings or conclusions having been filed by any counsel; and saiel hearing examiner having duly considered the record herein, finds that this proceeding js in the interest of the public and makes the following findings as tothe facts, conclusions drawn therefrom, and order: FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Ray :Mertz is an individual trading and doing business as Ray 1\:fertz & Company, with his office and principal place of business loe-ated at 525 South Dearborn Street, in the city of Chicago, Illinois. Respondent is now, and for more than two years. last past has been, engaged in the manufacture of devices commonly known as push cards, and in the. sale and distribution in commerce between and among the various States of the United States of said. devices to manufacturers of and dealers in various articles of merchandise.

Respondent causes and has caused said device, when sold, to be transto;ported from his aforesaid place of business in Chicago, Illinois, RAY MERTZ & CO, 1293 288 Findings purchasers thereor at their respective points or location in various States or the United States other than the State or Illinois. There is now and ror more than two years last past has been a course or trade in such push card devices by said respondent in commerce between and among the various States or the United States. PAR. 2. In the course a11d conduct or his said business, as described in Paragraph One hereor, respondent sells and distributes, and has sold and distributed, to said manuracturers and dealers, push cards so prepared and arranged as to involve games or chance, gift enterprises, 01' lottery schemes when used in making sales or or distributing merchandise to the consuming public, One or said push cards hns 50, small partially perforated discs on the face or ,which is printed the ,vorel "Push, Concealed ,,-within each disc is a number which is disclosed when a disc is pushed or separated from the card, the card bears a legend as rollows:

CAKDY BAR SPECIAL! ! May Cost Only l~-Not O\' er 5~ Each Sale Receives A High Grade Full Value Candy Bar Pay 'What You Push 11-21-31-4f- :Many other or said push cards have printed on the race thereof other labels or instructions that express the manner in ,which said devices are to be used or may be used in the sale or distribution or candy or various other specified articles or merchandise. Each purchaser pays an indicated price which may be determined either by the printed legend on the card or by the number appearing under the disc which.h he pushes. In the use or the card refer'l'ed to above, the purchaser or each push receives a c.andy bar. ""Vhether he pays 1~., 2~, 30, 4r, or 5r, ror sflid bar is determined wholly by chance. Other push cards sold and distributed by respondent bear various other legends find are. used ror the distribution or various articles or merchandise, the ,-vinners being determined by a number or name concealed in a master list. Typical of such push cards is one consisting of 12 concealed discs each or which bears a reminine name and a list for writing the name or the person who selects each name. This card contains a concealed master disc or master seal which is pushed after all the other discs have been sold and the winner is determined by the name appearing under said master seal. . Prices or the purchase of each push on this type or card are detennined by the number which appears under each seal so that the winner as well as the price to be paid by each purchaser or a push rrom the card is determined wholly by lot or chance. Persons securing by their push lucky or winning Findings 48 F. T, C.

numbers or names receive articles or merchandise without additional cost, the prices or said pushes are less than the normal retail price said articles or merchandise, Persons ,,-ho do not secure .winning numbers in some cases receive a small piece or candy or less value than the price paid for the push or in other cases receiye nothing ror their money. The articles or merchandise are tlius distributed to thecon~ suming or purchasing public wholly by lot or chance. Others or said push card devices have no instructions or legends thereon but have blank spaces provided thereror~ On those push cards the purchasers thereof place instructions or labels which have the same or similar import .01' meaning as the instructions or labels placed by respondents on said push card devices hereinabove described.

Respondent sells and distributes and has sold and distributed many kinds or push cards but all or said devices involved the same chance or lottery features when used in connection with the sale or distribution or candy or other merchandise and val y only in detail. The only use to be made or said push cards and devices and the only manner in which they are used by the purchasers thereor is in combination with other merchandise so ns to enable said purchasers to sell or distribute said other merchandise by means or lottery or chance, as hereina bove alleged, PAR. 3, :LUany persons, firms and corporations "ho sell and clistribute, and have sold and distributed, candy, cigarettes, and other articles or merchandise in commerce between and among the various States or the United States and in the District or Columbia, and within the various States or the United States, purchase and have purchased respondent's said push card devices, and pack and assemble and have packed and assembled, assortments comprised or various articles or merchandise, together with said push carel devices. Retail dealers who have purchased said assortments, either directly or indirectly, have exposed the same to the purchasing public and have sold or distributed said articles or merchandise by means or said push cards in accordance with the sales plan as desc-ribecl in Paragraph Two hereof. Because or the element or chance involved in COl1l1ection with the sale and distribution or said merchandise by means or said push cards and punchboards, many members or the purchasing public have been induced to trade or deal with retail dealers selling or distributing said merchandise by means thereat. As a result indue-eel to deal ,,-ith or tradethereof many retail dealers have been with manufacturers, wholesale dealers and jobbers ,,-ho sell and distribute said merchandise together with said devices. RAY MERTZ & CO. 1295 1~88 Order PAR. 4. The sale of merchandise to the purchasing public through the use or by means such devices in the manner above alleged involves a game of chance or the sale of a chance to procure articles of merchandise at prices much less than the normal retail price thereof and teaches and encourages gambling among members the public, all to the injury of the public. The use of said sales plan or methods in the sale of merchandise and the sale of merchandise by and through the use thereof, and by the aid of said sales plan or method, is a practice which is contrary to an established public policy of the Government of the United States and in violation of criminal laws, and constitutes unfair acts and practices in said commerce. The sale or distribution of said push card and punchboard devices by respondent, as hereinabove alleged, supplies to and places in the hands of others the means of conducting lotteries, games of chance or gift enterprises in the sale or distribution of their merchandise. The respondent thus supplies to, and places in the hands said persons firms and corporations the means and instrumentalities for, engaging in unfair acts and practices within the intent and meaning of the Federal Trade Commission Act.

CONCLUSIONS 1. The only testimony offered by respondent in his defense was to the effect that competition in either the wholesale or retail sale merchandise was not affected by the sale of punchboards in commerce that the use of punchboards in the sale of merchandise does not divert trade and that, consequently, their use does not constitute an unfair method of competition. I-Iowever, the complaint in this proceeding does not charge respondent with the use of unfair methods of competition but is confined to a charge of the use by him of unfair acts or practices in commerce. Consequently, the evidence proffered by respondent is immaterial and irrelevant to the issues in this proceeding.

2. The aforesaid acts and practices of respondent, as hereinabove described and found, are all to the prejudice and injury of the public and constitute unfair acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. ORDER It is onle?' That the respondent, Ray :Mertz, an individual trading as Hay lVIertz &; Company, or under any other name or trade name directly or through any corporate or other device, do forthwith cease 21B840-54- Order 48 F. T. O. and desist from selling or distributing in commerce, as "commerce is defined in the Federal Trade Commission Act, punchboards, push cards or any other lottery devices which are to be used or may be used in the sale or distribution of merchandise to the public by means of a game of chance, gift enter-rprise or lottery scheme. ORDER TO FILE REPORT OF CO1.IPLIANCE tis O'l'del'ecl That the respondent herein shall, within sixty (60) days after service upon him of this order, file with the Commission a report in writing setting forth in detail the manner and form in which he ha:3 eompljed with the order to cease and desist (as required by said declaratory decision and order of May 5, 1952). Commissioner :Mason concurring in the findings as to the facts and conclusions but not concurring in the form of order to cease and desist for the reasons stated in his opinion concurring in part and dissenting in part in Docket 5203-vVorthmore Sales Company. 1 See 46' F, T. C, 606.

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BOOK-OF-THE-MONTH CLUB, INC., ET AL. 1297 Syllabus