Encyclopaedia Britannica, Inc.

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

IN THE l\fA TTER OF ENCYCLOPAEDIA BRITANNIGt\.., INC.

COMPLAINT, FINDINGS, AND ORDERS IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 5384. Complaint, Sept. 191,5-Decision, June 12, 1952 Where a corporation engaged in the intel state sale and- distribution of its Britannica Junior" encyclopedia under its "15 for 1" plan, pursuant to which its sales agents contacted the superintendent or principal of a school to obtain the names of pupils and their parents and called upon the latter to sell them the books, and the school received a set of said encyclopedia for each fifteen sets sold, or proportionate credit or some other book such as an atlas or dictionary if fewer than fifteen were sold- (a) Erroneously and misleadingly represented through the use of the expression School Advancement Program, that the plan was designed primarily for the benefit and improvement of the school; the facts being that while the schools derived incidental benefit through obtaining the books, the program was essentially a sales plan or campaign for the sale of books to the public; (b) Unwarrantedly and misleadingly represented in a substantial number of instances, through statements of its sales agents, that the local school or the superintendent or some other official was sponsoring the sale of the books; when the school's only connection with the matter was that it had supplied. the names and addresses of the pupils and parents; (c) Erroneously and misleadingly represented through its agents that the books were essential or indispensable to the proper preparation by pupils of their homework; and (d) Erroneously and misleadingly represented, as aforesaid, that t11e price which the books "'were offered under said sales plan were special or reduced, applicable for a limited time only; when in fact they were the regular prices;

With tendency and capacity to mislead and deceive a substantial portion of the purchasing public with respect to their books, and thereby induce its purchase thereof:

Held That sucb acts and practices, under the circumstances set forth, were all to the prejudice of the public and constituted unfair and deceptive acts and practices in commerce.

As respects interlocutory orders of the Commission, no requirement exists that bearing examiners subsequently adopt, verbatim, in the preparation of initial decisions, such language relevant to the matters to be stated as may hal"'e appeared in the Commission s own orders. As respects exceptions by counsel supporting the complaint in the aforesaid matter, which ch:111enged, among other things, the hearing examiner s use of various words and terms such as "erroneous inherently el'l'oneous and mi~leading, and "unwarranted and misleading, to characterize certain of the representations which occurred during respondent's house-to-house sales presentations to the public, counsel urging that they should instead be characterized as false, so that any findings which might issue would not be susceptible to an interpretation that there were but a few misrepresen- ENCYCLOPAEDIA BRITANNICA, INC. 1417 1416 Complaint tations, or that tlJey represented inadvertent, unintentional mistakes on the part of respondent and its representatives: TIle Commission was of the opinion that no error was presented through use of the expressions in question in the particular contexts in which they occalled or by reason of the examiner s failure to additionally characterize respondent's misrepresentations as false.

Certain other exceptions also rejected were directed to use of the word "unquestionable" in connection with the value of the pl' ogram to the schools; to use of the word "already" in noting the discontinuance of the designation School Advancement Program; to the omission from the initial decision of a detailed narration of the statements made by respondent' s salesmen; to the grouping of three of the char~'es of the complaint, for lack of propel' emphasis; and to the examiner s failure to find certain specific misrepresentation of alleged t;savings growing out of the price misrepresentation; '1' 11e Commission, among other things, holding the use of said words neither inappropriate, nor unwarranted; and noting, as respects salesmen s statements, that neither the conclusions characterizing such representations were challenged as erroneous nor the prohibitions inadequate; and, as respects said last exception, the absence of any indication of resulting error in the findings, substantively; or deficiency in the order. Before 1111'. A1?thu.1' F. Thomas and llfr. TVillia-m, L. Pack hearing examiners.

JJf1' olvn 1/1. Russell and 11r. William, L. Pencke for the Commission.

Mr. H. J. Joy, of Chicago, Ill. , and Davies, Richberg, Tydings Beebe dJ Landa and 1/1'1'. L. A. Scholl of vVashington, D. C. , for respondent.

. Otto T. Engleha'i,t of )Vashington, D. C. , and Mr. Lorentz B. l(noufl, of Chicago, Ill., for F. E. Compton & Co., intervenor. 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 the Encyclopaedia Britannica, 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, Encyclopaedia Britannica, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of tlle State of New York. Respondent's office and principal place of business is located at 20 North ",Yacker Drive, Chicago Illinois.

, Complaint 48 F. T. C. PAR. 2. Respondent Encyclopaedia Britannica, Inc., now is, and for over two years last past has been, engaged in the business of publishing and of selling and distributing books, including encyclopaellitL sets ealled Britannica ( unior. Respondent causes its Britannica Junior sets when sold, to be transported from its said place of business in the State of Illinois 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 hereir1 has maintained a course of trade in its said encyclopaedia sets 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 its said business in connection with the sale and distribution of its Britannica . unior encyclopaedia sets and as an inducement for the purchase thereof by meli1bers of the purchasing public, respondent adopted in or about the fall of 1941 a so-caned "15 for 1 Plan" for selling its said sets and thereafter used such plan, represe.nting that it is a "Britannica Junior School .l~dvancement Program" plan, especially designed for those neighborhoods where a school or library is unable to buy an initial or additional set or sets of Britannica Junior for the use of the children in the school. The said plan operates as follows:

One of the respondent' s representatives calls on the superintendent or other official of the school and explains that the Encyclopaedia Britannica, Inc., desires to initiate a "School Advancement Program in their community which affords the sehool an opportunity to receive a set of Britannica Junior "free" providing the school official furnishes the representative with a card stating the name, age, and grade of each pupil, the teacher s name and the name and address and occupation of the pupil' s parents thereon: that the requirement of a letter of endorsement or approval of the Britannica set by such school official is optional; and provided further that the sale of fifteen similar sets of said encyclopaedia is eft'ected by said representative of Encyclopaedia Britannica, Inc., among the parents having children attending the school. Assurance is given that the names -of the "loyal parents of 15 of your students" who purchase the sets will appear on a presentation page attached to the inside front cover of Volume I of the set of Britannica ,Junior they "wish to give to the school." Respondent' s representative thereafter contacts the parents or parent of the children of the sc.hool and represents: That he is working through or cooperating with the school on a " School Advancement Program" whereby the school will receive a set of Britannica Junior free if and when be sells 15 similar sets to the parents having children attending said school;

ENCYCLOPAEDIA BRITANNICA, INC. 1419 1416 Complaint That the school superintendent or other official has furnished him with the parents' names and the said information concerning their child or children and their teacher, in order that they could be afforded an opportunity to participate in tile School Advancement Program by buying a set of Britannica Junior encyclopaedia for their child or children;

That the school is sponsoring the program and its superintendent or other person in authority is recommending that the parents buy the books; That the parents by buying the set through the school receive a special price because the company is very desirous of having these books in their community; That the school superintendent or other official highly recommended these sets for use by the children in preparing their work for school; That people in that communHy were .offered an opportunity to buy a set of Britannica Junior at a reduced cost because of the "School Advancement Program" his company is backing;

That a special price was being quoted but that this would be for only a limited time;

That the children of parents who bought the books would have a definite advantage over the other children who did not have a set of these books to be used in connection with their school work;

That the superintendent or other official of the school personally endorsed these books and ,,-as recommending them to the parents as being indispensable for use by their children;

That if the pflrents l1l1l'chased this set of books they would not have to buy any other books because the information contained in Britannica Junior was full and complete;

hat the school endorsed the books and was recommending them to the parents as being indispensable for their children in preparing their school work; That the books were being sold through the school; That the school superintendent or other official was desirous of having the children in the school own a set of Britannica Junior in order that they could do their home work;

That he lacked only one set of having sold the required number for the school to receive a free set;

That he was selling only a limited number of these books in the vicinity; That the parents he is calling on had been selected to participate in the School Advancement Program That he was working through the school which was sponsoring the program and recommending that the parents buy the set of Britannica Junior; That the parents would be saving $120.00 by purchasing the Britannica Junior set through the school;

That the superintendent or other official of the school has fllrnished him with her name, together with the names of her children in order that she could be giv-en an opportunity to purchase a set of these books to be used by her children in preparing their school home work ;

That only the people recommended by the superintenc1ent or other official of the school would have an opportunity to purchase a set; That the parents by buying the books through the "School Advancement Program" sale would receive a yearbook free for ten years. PAR. 4. Through the use of the expression "School Advancement Program" and the aforesaid statements and others similar thereto Complaint 48 F. T. G. not specifically set out herein, in connection with the offering for sale and sale of their Britannica Junior encyclopaedia under said so-called School Advancement Program" or "15 for 1 Plan" respondent directly or by implication represents to the parents of the children in n school that the "School Advancement Program" is designed for the benefit and improvement of the school; that its Britannica Junior encyclopaedia has been adopted by the school authorities for study or reference as part of the school curriculum; that the superintendent or other school authorities are sponsoring the sale of Britannica Junior to the parents; that by purchasing through the school the parents would be securing said books at a special or reduced price; that could only sell the set at that price for a limited time; that all, or practically all of the school work is, or would be, taken therefrom or based on the material contained in said books; that the school and its superintendent or other ofilcial have endorsed Britannica Junior and are recommending that the parents buy a set as being indispensable to their children in doing their school work; that it is essential to their children s home library in order for them to prepare their school home work; that it is so full and complete as to make the parents' further purchase of school books unnecessary; that respondent's representative is only allowed to sell a limited number of sets of these books through the school or in their community; that he could only sell a set to those parents whom the superintendent or other school authorities had recommended be offered the privilege or opportunity purchasing same; that the parents would be saving $120.00 by purchasing the set through the school; that if the parents purchase a set through the school they would receive a yearbook free for ten years. Respondent' s representative further states to the parents in selling its Britannica Junior encyclopedia that he only lacks one set of having sold the required number for the school to receive a free set, when this is not a fact; that the school is sponsoring the "Britannica Junior School Advancement Program" sale and its superintendent or other official has recommended that the parents buy a set, when he has expressly requested respondent's representative- not to mention the school or his name in selling said sets and respondent' s representative has asured him that he would not do so.

PAR. 5. The statements and representations used and disseminated by the respondent in the manner above described are deceptive, false and misleading. Respondent's so-called "School Advancement Program is not designed for the benefit or improvement of the school but only for the sale of its Britannica Junior sets; the Britannica Junior encyclopedia has not been adoptea for study or reference as a part of the school curriculum; none of the school authorities are ENCYCLOPAEDIA BRITL"N"NICA, INC. 1421 1416 Complaint sponsoring said alleged "Britannica Junior School Advancement Program" sale; by purchasing said set of books from respondent' s representative the parents would not be securing it through the school or at a special or reduced price, but only at its usual retail price; the time of respondent' s representative is not limited to sell said sets at that price; the school work is not and will not be based on or taken from the material contained in said set of books; none of the school authorities has endorsed or is recommending that the parents buy Britannica Junior as being indispensable to their children in doing their school work; it is not essential to their children in preparing their school home work; it is not so full or complete as to make the parents' further purchase or school books unnecessary; respondent's representative is allowed to sell as many of said sets as he is able to, to anyone, and anywhere at the price he is offering a set to the parents; by purchasing a Britannica Junior set in this so-called "School Adyancement Program sale, the parents will not receive any yearbook free. PAR. 6. In truth and in fact, respondent's so-called "School Advancement Program" or "15 to 1 Plan" is not a plan ror the advancement or the school, but only a clever scheme through 'which the respondent' s representative obtains entry into the homes orthe parents or the children in a school to sell respondent's books by stating that the parents have been selected by the superintendent or other authorities or the school to be given the opportunity or privilege of buying a Britannica Junior encyclopedia, which the school has adopted, forstudy or rererence as part or the school curriculum and is recommending that the parents buy. Therearter, by making said rurther raise and misleading statements and representations, and others similar thereto respondent' s representative brings great pressure to bear on the parents to buy said set or books, giving them the impression that their children must have same in order to complete their school courses. :l\fany or the parents buy said books who cannot afford to and would not do so except for being deceived and misled by respondent' s representative as aroresaid, especially since, as respondent states, it only uses said plan in selling its Britannica Junior encyclopedia in communities where the school or library is unable to purchase a set or a rurther set or sets thereor.

PAR. 7. The use by the respondent or the roregoing false, deceptive nnd misleading statements and representations, disseminated as aroresflid, has had, and nmv hfls, the capacity and tendency to, and does mislead and deceive a substantial portion or the purchasing public into the erroneous and mistaken belier that all such statements and representations are true, and induces a substantial portion of the purchasing public to purchase respondent's Britannica Junior sets. . .

Decisiop 48 I- . '1' because of such erroneous and mistaken belief, engendered as above set forth, thereby unfairly diverting trade to the respondent from its competitors in said commerce who truthfully represent their products. PAR. 8. The aforesaid acts and practices of the respondent, as herein alleged, are all to the prejudice and injury of the public, and of respondent' s competitors, and constitute unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Tlade Commission Act.

ORDERS AND DECISION OF THE CO~IlVIISSIOX Order denying appeal of counsel supporting complaint from initial decision of the hearing examiner and decision of the Commission and order to file report of compliance, Docket 5384, June 12, 1952 follows:

This matter came on to be heard by the Commission upon the appeal of counsel supporting the complaint from the initial decision of the hearing examiner herein and upon the briefs submitted in support of and in opposition to said appeal.

Counsel supporting the complaint under the first, third, fourth and fifth of his exceptions challenges, among other things, the hearing examiner s use of various words and terms such as "erroneous, "inherently erroneous and misleading, and "unwarranted and misleading" to characterize certain of the representations occurring during respondent' s house-to-house sales presentations to the public and, in urging that they instead should be characterized as false, contends jn effect, that this is necessary and proper in order that any findings as to the facts issuing herein be not susceptible to an interpretation that the instances of misrepresentation disclosed by the record are but few in number or that they represent inadvertent, unintentional mistakes on the part of respondent and its representatives. Counsel asserts also that supporting his contentions of error in this respect is the fact that the order of the Commission, dated April 25, 1951, ruling upon respondent's previously filed motion to dismiss contained recitations in detail of various representations and. statements which the testimony indicated had been used by salesmen in respondent' s sales presentations.

"'ith respect to the circumstance last referred to, namely, the wording of the order of April 25 , 1951 , no requirement exists that hearil;g examiners subsequently adopt, verbatim, in the preparation of jnitial decisions such language relevant to the matters to be stated as may have appeared in the Commission s own interlocutory orders. The. Commission, moreover, does not share the view that the state- ..:\..

ENCYCLOPAEDIA BRITA1\TNICA) INC. 1423 1416 Decision ments to which counsel's objections are interposed may be interpreted reasonably as an expression that the misrepresentation heretofore engaged in has occurred only in isolated instances or is attributable to inadvertent or unintentional error. The Commission is of the opinion that no error is presented by reason of the hearing examiner s use of the expressions excepted to in the particular contexts in which they occur or by reason of his failure, in such connection, to additionally characterize respondent's misrepresentations as false. Under counsel's third exception, additional objection is directed to the words "unquestionably" and "already" appearing in Paragraph Four of the initial decision, counsel alleging in such connection that they have "significantly enthusiastic and complimentary implications. This position is untenable and it is deemed appropriate by the Commission for a hearing examiner to make reference to the cir- C'.llmstance that a party to a proceeding previously or already has discontinued a practice as the hearing examiner has done in the instant case in reference to respondent's former use of the term " School Advancement Program" to designate its salesplan, and it is noted in passing, in this connection also, that he properly concluded, in effect that the public interest now requires a prohibition against any resumption of its use. In reference to the objection interposed to the word unquestionably, counsel has advanced no reason why the value of reference books, as distinguished from their essentiality, in the preparation of student home work, should be regarded as questionable. Counsel interposes objection in his second exception to the omission from the initial decision of a detailed narration of the statements made by respondent's salesmen in the course of those sales presentations which the hearing examiner deems to have been misrepresentative. Counsel does not urge, however, that the conclusions appearing in the initial decision characterizing the representations made by respondent as deceptive in import are erroneous conclusions nor does he contend that the prohibitions contained in the order are inadequate or not respollsiYe to the record, and this exception clearly is without merit.

8 a sixth ground for appeal, counsel supporting the complaint objects to the form of Paragraph Six of the hearing examiner s findings and among other things, contends that, by there grouping together for discussion three of the charges of the complaint, the . greater relative gravity which counsel feels adheres in one of such charges becon1es obscured. It does not appear to the Commission that the recitations of this paragraph are, characterized by a lack of proper emphasis or are erroneous otherwise, and this exception not being granted.

21384U--54---- ,, Dedsion 48 F. T. C. The hearing examiner found that respondent has represented, contrary to fact, that its customary and usual prices were special or reduced prices and applicable only for a limited period of time, and the last of counsel's exl~.eptions expresses objection to the hearing examiner s failure to find that sales agents falsely represented that savings of $120. , in one instance, and of $60. , in another instance ould be afl'orded to purchasers buying these reference books under the sales promotion being conducted locally. It does not appear that. the hearing examiner failed to give consideration to the testimony to ",which this exception .relates nor are any reasons advanced as bases for concluding that the omission of these matters frolll the findings as to the facts renders them erroneous substantively or that the order contained in the initial decision is deficient, and this exception accordingly rej eeted.

The Commission, therefore, being of the opinion that counsel's appeal is without merit and that the initial decision of the hearing examiner constitutes an adequate and appropriate disposition of this proceeding:

It -is ordered That the aforesaid appeal frolll the initial decision . of the hearing examiner be, and it hereby is, denied. decision of the hearing It i8 further ordered That the initial examiner, a copy of which is attached, shall, on the 12th day of June 1959, become the decision of the Commission. I t is IzU'ther orcleped That the respondent shall, within sixty (60) days after service 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 the order to cease and desist. Said initial decision, thus adopted by the Commission as its decision, follows:

1S1TL\L DECISION BY WILLlX:\( L. 1'.\CK. I-IE.\IUXG EX..\l\IlNEH Pursuant to the provisions of the Fetleral Tracie Commission Act the Federal Trade Commission on September 28 , 1945, issued and subsequent ly served its complaint in this proceeding upon the re- ~ponclent, Encyclopaedia Britanniea, Ine., a corporation, charging it with the use of unfair and deceptive acts and practices in commerce in violation of tile, provisions of that Act. After the filing by respondent of its answer to the complaint, hearings ,,'ere held at. which testimOll)' and otlwr evidence in support of the a negations of the complaint were introduced before the nhoH' lI:llnec1 hearing exmniner theretofore duly designated b:v the Commission. and such testimony and other evidence "ere duly recorded and filed in the office of the Commi~sion. At the conclusion of the reception of such evidence in ENCYCLOPAEDIA BRITANNICA, INC. 1425 1416 Findings support of the complaint, counsel for respondent filed with the Commission a m.otion to dismiss the complaint for failure of proof. Such motion was granted by the Commission as to certain charges in the complaint but denied as to certain other charges. Counsel for re- ~polldent elected to introduce no evidence in opposition to the charges remaining in the complaint, and the proceeding was thereupon closed by the hearing examiner insofar as the reception of evidence was concerned. Subsequently. the proceelling regularly came on for final consideration by the hearing examiner on the complaint, answer testimony and other evidence .with respect to those charges remaining in the complaint, and proposed findings and conclusions submitted by counsel supporting the complaint (counsel for respondent having elected not to submit such proposals, and Oral argument not having been requested), and the hearing examiner, having duly considered the m.atter, 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:

FIXDIXGS "\8 TO THE 1".\C1'8 PAJUG1LU' lI 1. The respondent, Encyclopaedia Britannica, Inc., is, a corporation organized, existing and doing business under and by virtue of the Jaws of the State of New York, with its principal office and place of business located at 20 North 1Vncker Drive, Chicago Illinois. Respondent is nol\", and for a number of years last past has been, engaged in the business of publishing and selling books, including an eneyclopaedia designated by respondent as Britannica Junior. PAR. 2. Respondent eauses its Britannica Junior encyelopaedias "hen sold, to be transported from its place of business in the State of Illinois to purchasers located in various other States of the United States and in the District of Columbia. Respondent maintains and has maintained a lom' se of trade ill such encyclopaedias in COll1meree nl110ng' and between the various States of the T"Tnitecl States and in the District of Columbia.

\H. ~3. This proceeding involyes certain representations alleged to have been made by respondent in connection with sales of its Britanllica. Junior eneyc1opaedia under a certain sales plan designated by respondent as its "15 for 1" plan. Under this plan respondent' s sales agents eontHC't tll(' snperintendent or principal of a school and seek to obtain the names of the pupils in the school, together with the names a nd addresses of the parents. Upon obtaining such names and addresses, the agent proceeds to call upon the parents and to undertake to sell them the books. For its assistanee in supplying the names and nddl'esses, the school receives without cost a set of Britannica Junior Findings 48 F. T. C. for each fifteen sets sold to the patrons or the school. "'\Vhile a letter recommending the books is desired from the school official, this is not required. If fewer than fifteen sets are sold, the school receives a proportionate credit on the purchase of a set or the books or it receives some other book, such as an atlas or dictionary. PAR. 4. In addition to the term "15 ror 1 " respondent has also used the expression "School Advancemenf Program" to designate this sales plan, and the first issue raised by the complaint concerns the use or this expression. The expression as used by respondent is inherently erroneous and misleading, in that it constitutes a representation that the sales plan is designed primarily ror the benefit and improvement or the school. "'\Vhile the schools do unquestionably derive benefit from the sales program through the obtaining or the books, such benefit is incidental. The program is essentially a sales plan or eampaign which has as its primary purpose the sale or books to the public. The. llse or the designation in question has already been discontinued by respondent.

PAR. 5. Respondents sales agents have in a substalltialnumber or instances representeel to prospective purchasers that the local sehool or the superintendent or some other official or the school was sponsoring the sale or the books, when in ract the only connection which the school had with the matter was that it had supplied the Dames and hddresses or the pupils and parents. This representation was made in various ways, including statements to the effect that the books were being sold through the school, that the school was working with the agent in the sale of the books, that the agent had been sent by the school or principal to see the parent, and that the agent was running a school program or a program through the school. The mere fact that the school had supplied the names and addresses of prospective purchasers did not constitute sponsorship or the sale or the books, and it is therefore concluded and round that these representations were unwarranted and misleading.

PAR. 6. Other representations made by respondent's sales agents to prospective purchasers were that the books were essential or indispensable to the proper preparation by pupils or their school homework, and that the prices at which the books were offered under this particular sales plan were special or reduced prices, applicable ror a limited time only. These representations were likewise erroneous and misleaclipg. "'\Vhile a set of rererence books may be very helpful to a pupil in the preparation of his school homework, such books cannot be regarded as essential or indispensable. The prices at which the books were offered were not special or reduced prices nor "were they applicable for a limited time only, but were in fact the customar:y ENCYCLOPAEDIA BRITANNICA, INC. 1427 1416 Order and usual prices at which such books were sold by respondent in regular and normal course of business.

PAll. 7. The acts and praetiees of respondent as set forth above have the tendeney and capaeity to mislead and deceive a substantial portion of the purchasing public with respect to respondent's books, and the tendency and capacity to cause such portion of the public to purchase such books as a result of the erroneous and- mistaken belief so engendered.

CONCLUSION The acts and practices of respondent as hereinabove set out are all to the 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.

ORDER It is o1'deped That the respondent, Encyclopaedia Britannica, Inc., 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 in commerce, as "commerce is defined in the Federal Trade Commission Act, of respondent' s books designated Britannica Junior, or any substantially similar books, by whatever name designated, do forthwith cease and desist from: 1. Using the words "School Advancement Program" or any words of similar import to designate, describe or refer to respondent' s sales plan known as the "15 for 1" plan, or any substantially similar plan; or otherwise representing, directly or by implication, that any such sales plan is designed primarily for the benefit or improvement of schools or of any particular sehool.

2. Representing, directly or by implication, that the sale of books under respondent's sales plan known as the " 15 for I" plan, or under any substantially similar plan, is being sponsored by any school or the school or official referred to is in fact sponsor-school official, unless ing such sale. 3. Representing, directly or by implication, that the prices at which said books are offered for sale are special or reduced prices or are applicable for a limited time only, when such prices are in fact the customary and usual prices at which said books are sold by respondent in its regular ~nd normal course of business. 4. Representing, directly or by implication, that said books are essential or indispensable to the proper preparation by pupils of their school homework.

Order 48 F. T. C. ORDER TO FILE REPORT OF COMPLIANCE I t is f'll1'ther O1'de1' That the respondent shall, within sixty (60) days after service upon it of this order, file with the Commissioll a report in writing setting forth in detail the manner and fornl in which it has complied with the order to cease and desist (as required by aforesaid order and decision of the Coj!1missions. BERZEE SPORTSWEAR, INC. ET AL. 1429 Complaint IN THE lVIATTER O~~ BERZEE SPORTS,VEJ\.R, INC. ET .AL.

co:\rPLAIN'l' , FINDINGS, ..\KD ORDERS IN REGARD TO THE ALLEGED VIOLATION OJ:." SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1~14, AND OF AN ACT OF CONGRESS APPROVED OCT. 14, 1940 Docl~et 5856. Complai-nt, Mal' 5, 1951-Declsion, June 12, 195'2 Whpre a corporation and its two ofncer8 , enf1ged in the manufacture and interstate sale and distribution of sportswear made from cloth labeled as 100% wool when purchased, Imt stated by the vendor actually to contain 45% wool and 55% ra~' oll; ill violation of the 'Vool Products Labeling Act and Rules and Regulations promulgated thereunder- (a) Misbranded said sportswear in that they labeled it in accordance with the aforesaid advice, when the cloth composing it did not in fact contain 45% wool and 35% rayon, but was composed of about 0Slj~ wool, in large part reprocessed, and rayon, nylon and other fibers; (b) Further misbranded said products in that the constituent fibers and percentages thereof were not shown on the ta~s and labels, as required by said Act and Rules and Regulations; and (c) Further misbranded l:certain of said products in that the legal name of the manufacturer or other person authorized b~' said Act to affix stamps, etc., was not shown on the attached labels, or, in lieu thereof, a registered identification numlwr, as permitted by sairl Rules and Regulations: Held, That such acts, practices and methods, under the circumstances set forth, were in violation of Sees. 3 and 4 of said Wool Plo(luets Labeling Act, and of Rule 3 of tl.1e Rules and Regulations promulgated thereunder, and constituted unfair ami deceptive ads and practices in commerce. As . respects respolldents' mislabeling of their products as result of their reliance upon oral information from the vendor, as set out above: the assurance received by them from said vendor as to fiber content of the cloth from which they made their misbranded sportswenr, Ilid not comply with the exculpatory provisions of Sec. 9 of the Wool Products Labeling Act, it appearing that they neither demanded nor received from said vendor any written guaranty, specific or continuing, that said cloth was not misbranded under the provisions of the 'Wool Products Labeling Act, or any written guaranty as to its fiber content.

Before Mr. Frank HieT hearing examiner.

1111' . Jesse D. !(u8h for the Commission. COMPLA INT Pursuant to the provisions of the Federal Trade Commission Act and the \Vool Products Labeling .Act of 1939 and by virtue of the authority vested in it by saiel Acts, the Federal Trade Commission having reason to believe that Berzee Sportswear, Inc., a corporation and IIarry Zinllnerman and ,Valter Bernstein, individually and as Complaint 48 F. T.

officers of said corporation, have violated the provisions of said Act and the Rules and Regulations promulgated under the ,Y 001 Products Labeling Act of 1939, and it appearing to the Commission that 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 Berzee Sports\year, Inc., is a corporation organized, existing and doing business under and by virtue of the la \vs of the State of New York with its principal place of business located at 261 ,Vest 35th Street, New York, N. Y.

Respondents Harry Zimmerman and ,Valter Bernstein are President and Secretary-Treasurer respectively of corporate respondent and in such capacities they fol'1llulate and execute its policies and practices. Their business address is the same as that of corporate respondent.

PAR. 2. Subsequent to July 15, 1941 respondents have introduced into commerce, manufactured for introduction and offered for sale sold and distributed in commerce, as "commerce" is defined in the ,V 001 Products Labeling Act of 1939, wool products, as "wool products" are defined therein.

PAR. 3. Certain of said wool products were misbranded within the intent and meaning of said Act and Rules and Regulations promulgated thereunder in that they were falsely and deceptively labeled 45% wool and 55'% rayon, whereas in truth and in fact saiel. products did not contain 45% wool and 55% rayon but contained approximately 38% woolen fibers, the large proportion of which was reprocessed wool, and the balance rayon fiber and other fibers. The said wool products so labeled were further misbranded in that the eonstituent fibers and the percentages thereof were not Shall11 on the tags or labels as required by said Act, in the manner and form as required by the said Rules and Regulations.

Certain of the wool products were misbranded in that the legal name of the manufacturer thereof or of a person required or authorized said Acts to affix stamps, tags, or labels or other- means of identification thereto, was not shown on the labels attached to their products as required by said Act and in the manner and form required by said Rules and Regulations nor was there so shown in lieu thereof a registered identification number as pel111itted by said Rules and Regulations.

PAR. - 4. The aforesaid acts and practices and methods of respondents as alleged were and are in violation of sections 3 and 4 of the vV 001 Products Labeling Aet of 1939 and Rule 3 of the Rules and Regulations promulgated thereunder and constitute unfair and deceptive BERZEE SPORTSWEAR, INC. ET AL. 1431 1429 Findings acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

DECISION OF THE COl\Il\IISSION Pursuant to Hule XXII of the Commission s Rules of Practice, and as set. forth in the Comlnission s "Decision of the Commission and Order to File Heport of Compliance, dated June 12, 1952, the initial decision in the instant matter of trial examiner Frank Hier, as set out as follows, became on that da te the decision of the Commission. INITIAL DECISION BY FRANK :flier, TRIAL EXAMINER Pursuant to the provisions of the Federal Trade Commission Act and the '11001 Products Labeling Act of 1939, and by virtue of the authority vested in it by said Acts, the Federal Trade Comnlission on l\iarch 5, 1951, issued and subsequently served its complaint in this proceeding upon the respondents, Berzee Sportswear, Inc., a corporation, and Harry Zimmerman and 'Valter Bernstein, individually and as officers of such corporation, charging said respondents, with the use of unfair and deceptive acts and practices in comnlerce, in violation of those Acts. No answer to the complaint was filed by respondents and no appearance of counsel for them was made. Thereafter, a hearing was held at which respondents were present and testilnony and other evidence in support of and in opposition to the complaint were introduced before the above-named trial examiner theretofore duly designated by the Commission, and 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 trial examiner on the complaint, testimony and other evidence and said trial examiner, having duly considered 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 AS TO THE FACTS PARAGRAPH 1. Respondent Berzee Sportswear, Inc., is a corporation organized in April 1950, and since then existing and doing business under and by virtue of the laws of the State of New York with its principal place of business located at 261 V\T est 35th Street, New York, N. Y.

Respondent Harry Zimmerman has been and is President of corporate respondent and since February 15, 1951, has been its sole stockholder and in sole charge of its operations. Findings 48 F. T. C. Respondent ",Valter Bernstein from April 1950 until February 15 1951, was Secretary-Treasurer of Berzee Sportswear, Inc., and together with respondent Harry Zimmerman formulated and executed February 15its policies and practices during that period. On 1951, respondent vValter Bernstein sold all his interest in and severed all connections with the corporate respondent, and since that date has had no connection therewith.

PAR. 2. Since April 1950, respondents have introduced into commerce, manufactured for introduction into commerce, and offered for sale, sold and distributed in commerce, as "commerce" is defined in the vV 00'1 Pro duets Labeling Act of 1939 and the Federal Trade Commisdefined in said ",V 001sion Act, wool products, as "wool products~' are Products Labeling Act.

PAR. 3. Some of said wool products were misbranded within the intent and meaning of said vV 001 Products Labeling Act and the Rules and Regulations promulgated thereunder in that they were falsely and deceptively labeled 45% wool and 55% rayon, whereas in truth and in fact said products did not contain 45% wool and 55% rayon but contained instead approximately 38% woolen fibers, the large part of which was reprocessed wool and the remainder rayon, nylon and otherfibers.PAR. 4. Said products so labeled were further misbranded in tha the constituent fibers and the percentages thereof were not shown on the tags and labels, as required by said vV 001 Products Labeling Act, in the manner and form as required by the said Rules and that theRegulations.PAR. 5. Some of respondents' products were misbranded in legal name of the manufacturer thereof, or of a person required or authorized by said ",V 001 Products Labeling Act to affix stamps, tags shown on or labels or other means or identification thereto, was not the labels attached to such products as required by said vV 001 Products required by said Rules Labeling Act, and in the manner and form and Regulations, nor was there so shown in lieu thereof a registered identification number as permitted by said Rules and Regulations. PAR. 6. Respondents purchased the cloth from which they made the sportswear, misbranded as found in Paragraphs Three, Four and Five above, from the Strand vVoolen Company, 251 west 39th Street New York, N. Y., which cloth was labeled when purchased as 100% wool. Because the price paid was too low for an all-wool cloth respondents believed the labeling erroneous and contacted the Strand ",Voolen Company to eheck its accuracy. The latter informed respondent that the cloth was 45% wool, 55% rayon and respondents relying on such advice, labeled their products, made rrom that cloth BERZEE SPORTSWEAR, INC. ET AL. 1433 1429 Order 45 % wool, 55 % rayon. The invoices rrom Strand ,Yoolen Company covering the sale or such cloth to respondents contain no statement of fiber content and respondents neither demanded nor received from Strand ,Yoolen Company any written guaranty, specific or continuing, that said cloth was not misbranded under the provisions of the said ,Y 001 Products Labeling Act, nor any written guaranty as to the fiber content or the cloth purchased, other than the oral assurance that it contained 45% wool, 55% rayon. CONCLUSIONS 1. The assurance as to fiber content or the cloth rrom which respondpnts made their sportswear, herein round to be misbranded, received by them rrom their vendor, does not comply with the exculpatory provisions or section 9 or the ,Y 001 Products Labeling Act or 1939. 2. The acts, practices and methods or respondents, as herein round were in violation or sections 3 and 4 or the ,Y 001 Products Labeling Act or 1939 and or Rule 3 of the Rules and Regulations promulgated thereunder and constitute unrair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

3. The acts, practices and methods or respondents, herein round to be violations or hl\v, took place during the time when respondent ,Val tel' Bernstein was a stockholder, Secretary-Treasurer and active in the management or the corporate respondent and berore he severed all his connections therewith, hence he is legally responsible thereror. ORDER tis o1ylel' That respondents Berzee Sportswear, Inc., a corporation, its officers, andRarry Zimmerman and vVnlter Bernstein, individually and as officers or said corporation, their respective representatives, agents and employees, directly or through any corporate or other device, in connection with the introduction or manuracture ror introduction into commerce, or the offering ror sale, sale, transportation, or distribution in commerce, as "commerce" is defined in the aroresaid Acts, of wool sportswear or other wool products, as such products ,'Tool Products Labeling Act or 1939 are defined in and subject to the which products contain, purport to contain, or in any way are represented as containing, "wool reprocessed wool " or "reused wool as those terms are defined in said ,V 001 Products Labeling Act, do forthwith cease Rnd desist rrom misbranding such sportswear or other wool prod nets:

Order 48F. T. C.

1. By falsely or deceptively stamping, tagging, labeling or otherwise identifying such products;

2. By failing to securely affix to or place on such products a stamp, tag, label, or other means of identification, showing in a clear and conspicuous manner:

(a) The percentage of the total fiber weight of such wool products exclusive of ornamentation not exceeding five percentum of said total fiber weight of (1) wool, (:2) reprocessed wool, (3) reused wool, (4) each fiber other than wool where said percentage by weight of such fiber is five per centum or more, and (5) the aggregate of all other :6. bel's;

(b) The maximum percentage of the total weight of the wool product, of any non-fibrous loading, filling, or adulterating matter; (c) The name or the registered identification number of the manufacturer of such wool product or of one or more persons engaged in introducing such wool product into commerce, or in the offering for sale, sale, transportation, or distribution thereof in commerce, as "commerce" is defined in the Federal Trade Commission Act and in the "'\V 001 Products Labeling Act of 1030;

PJ' ov-ided That the foregoing provisions concerning misbranding shall not be construed to prohibit acts permitted by paragraphs (a) and (b) of section 3 of the "'\V 001 Products Labeling Act of 1939; and PJ' vided further That nothing contained in this order shall be construed as limiting any applicable provisions of said Act or the Rules and Regulations promulgated thereunder.

ORDER TO FILE REPORT OF COl\IPLIANCE 1 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 in detail the manner and form in which they-have complied with the order to cease and desist (as required by said declaratory decision and order of June 12, 1952J. STA1"\TDARD DISTRIBUTORS, INC. ET AL. 1435 Syllabus