Ray R. Goldie and David Bachman doing business as Mercury Vacuum Stores and Mercury Vacuum Cleaner Stores

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IN THE .MATTER OF HA Y R. GOLDIE AND DAVID BACHMAN DOING BUSINESS AS MERCURY VACUUM STORES AND MERCURY VAC- UUM CLEANER STORES CONSENT SETTLEJlIENT IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COJHJlHSSlON ACT JJw,/, e! (;064. C(Jm'JJI(li' u. 4, 19, Decisi.on Jan. 14, 1954 Where two parties engaged in the competitive interstate sale and distribution of lie\V alid rebuilt sewing machines and vacuum cleaners through retail stores in California, 'VashingtoIl, and OregoIl, to purchasers in various other states and in Alf1ska, including among the former products several brands made in Japall, upon the back of the vertical arm of which machines the word Japan, when sold to members of the purchasing public, became covered by thf' motor and upon which the word "Japan" as displayed in some instances upon a medallon on the front of the vertical arm was so small and indistind as not to constitute adequate notice that. the heads were imported- (a) Offered and sold such machines without. placing any other mark thereon or otherwise informing the public that the heads thereof were of foreign origin;

(b) Represented falsely, directly or by implication, that one of the sewing machines sold by them was rnanufaciured by or connected in some manner \With the \Yell and favorably known American firm or firms with which the word "Universal" had long been associated through use of said \vard as a trade or brand name for said product and conspicuous display thereof on its front horizontal arm and use thereof in their advertising matter; and throug' h use of such trade or brand names enhanced the belief on the part of the public that their said machines were of domestic origin; (c) l requently advertised rebuilt sewing machines and vacuum cleaners at extremely low prices through their retail stores; '''hen in fact such advertisements were not genuine or bona fide offers to sell the articles advertised but were run to obtain the names of persons who were interested in the purchase of such products; while their salesmen when re.sponses were obtained, demonstrated said products, their sole purpose was to sell new and much higher prieed machines and cleaners; and products in question were not intended to do satisfactory work and very few of them were sold;

(d) Made use in the advertising of their rebuilt vacuum cleaners of such terms as "complete with attachments 3 days only, and " year guarantee When in fact attachmcnts were frequently not furnished; offers were continuous, the only changes being slight variations in the prices' charged; no guarantee was given without payment of a substantial snm therefor in addition to the purchase price of the machine; and use of the word "guarantee" without a statement of the terms and conditions and the manner in which the guarantor would perform was misleading and confusing and constituted a misleading and deceptive practice; Consent Settlement 50 F. T. C. (e) :B'falsely reI'resented through their salesmen that their said machines eolltaining- heads imported from Japan were manufactured by the Singer Sewing i\fnchine Co. ; and (f) Quoted directly and through their salesmen fktitious prices for yarious machines as their usual selling" prices and represented that they were able to offer same at a much lower price since they had been used as demonstrators or fot S'Olnc other reason:

\Vhen in fact such machines were ll ually new machines and the price at whith they were offered constituted their uS11al selling price and not, as the prospective purchaser was thus led to believe, a reduced one: Held That such acts and practices, under the circumstonces set forth, were all to the prejudice and injury of the public and of their competitors, and constituted unfair methods of competition in commerce and unfair and deceptive acts and practices therein.

Before Mr. TVilliam . Pack hearing examiner. Mr. William L. Tag,qart and Mr. J. C. Williams for the Commission. lJlr. lJlyer K oonin of VVashington, D. c., for respondents. CONSENT SE'l'rLKilIENT 1 Pursuant to the provisions 01' the Federal Trflde Commission Act the Federal Trade Commission, on November 24, 1932, issued and subsequently served its complaint on the respondents named in the caption hereof, charging them with the use 01' unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. The respondents desiring that this proceeding be disposed of by the Consent Settlement procedure provided in IluJe V of the Commission Rules of Practice, solely for the purpose of this proceeding, and review thereof, and the enfo)'cement of the order consented to, and conditioned upon the Commission s acceptance of the Consent Settlement hereinafter set forth and in lieu of the answer to said complaint heretofore fied, and which, upon acceptm1ce by the Commission of this settlement, is to be withdm wn from the record, hereby: 1. Admit all of the j urisdietion allcgations set forth in the complaint.

2. Consent that the Commission may enter the matters hereinafter set forth as its findings as to the facts, conclusions and order to cease and desist. It is understood that the respondents, in consenting to 1 The Commission s "Notice" announcing and promulgating the consent settlement as published herewith, follo,vs :

The consent settlement iendcre(l by the parties in this procerding, a copy of which is served herewith, was accq)tnl by the Conli1i,o;sion on Jannary 14 , HJ54 , and ordered entered of record as the Commission s finding:: as to tlw facts, conclusion, and order in disposition of this procecuing.

The time for iiing report of compliance pursuant to the aforesaid order runs from t11e date of service hereof.

, MERCURY VACUUM STORES, ETC. 605 603 indings the Commission s entry of said findings as to the facts, conclusion and order to cease and desist, specifically refrain from admitting or denying that they have engaged in any of the acts or practices stated therein to be in violation oflaw.

3. Agree that this Consent Settlement may be set aside iD whole or in part under the conditions and in the manner provided in paragraph (f) of Rule V of the Commission s Rules of Practice. The admitted jurisdictional facts, the statement of the acts and practices which the Commission had reason to believe were unlawful, the conclusion based thereon and the order to cease and desist, all of which the respondents consent may be entered herein in final disposition of this proceeding are as follows:

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondents, Ray R. Goldie and David Bachman are copartners doing business under the names of Mercury Vacuum Stores and Mercury Vacuum Cleaner Stores with their principal place business at Room 216, Fleming Building, San Bernardino, California. PAH. 2. Respondents are now, and for some time in the past have been, engaged in the sale and distribution of new and rebuilt sewing machines and vacuum cleaners through retail stores located in the States of California Washington, and Oregon. Included in the sewing machines sold by them are several brands, the heads of which are manufactured in Japan.

PAR. 3. In the course and conduct of their business, respondents cause certain of their said products, when sold, to be transported from their places of business in the States of California, Washington, and Oregon to purchasers thereof located in various other States of the United States and in the Territory of Alaska, and at all times mentioned herein have maintained, a course of trade in said products in commerce between various States of the United States and the Territory of Alaska.

PAR. 4. When the sewing machines are sold by respondents to members of the purchasing public, the word "Japan" appears on the back of the vertical arm but such name is covered by the motor so that it is not visible. In some instances, the heads are marked with a medallion placed on the front of the vertical arm upon which the word "Japan appears. This word is, however, so small and indistinct that it does not constitute adequate notice to the public that the heads are imported. Respondents place no other mark on said sewing machines or otherwise inform the public that the heads thereof are of foreign origin. PAR 5. When articles of merchandise, including sewing machines are exhibited and offered for sale by retailers to the purchasing public Findings 50 F. T. C.

and such articles are not marked or are inadequately marked showing they are of foreign origin, or if marked and the markings are covered over or otherwise concealed, such purchasing public understands and believes such articles to be wholly of domestic origin. There is among the members of the purchasing public a large number who have a decided preference for products originating in the United States over products originating in whole or in part in foreign countries, including sewing:machines.

PAR. 6. Hespondents use the word "Universal" as a trade or brand name for one of the sewing machines sold by them, which word is printed or embossed on the front horizontal arm of the head in large conspicuous letters and use said trade or brand name in their advertising matter. The word "Universal" is the name or a part of the name of or used as a trade name, mark or brand by one or more business organizations transacting and doing business in the United States which are and have been well and favorably known to the purchasing public and which are and have been well and long established in various industries.

PAR. 7. By using the trade or brand name "Universal" respondents represent, directly or by implication, that their product is manufactured by or connected in some manner with the well and favorably known American firm or firms with which said name has long been associated, which is contrary to the fact. PAH. 8. There is a preference among members of the purchasing public for products manufactured by well and long established concerns whose identity is connected with the word "Universal." The use of s lid trade or brand name by respondents enhances the belief on the part of the public that the said sewing machines are of domestic ongm.

PAR. 9. In the course and conduct of their business, respondents through their retail stores frequently advertise rebuilt sewing machines and vacuum cleaners at extremely low prices. Such advertisements are not genuine or bona fide offers to sell the articles advertised but are run for the purpose of obtaining the names of persons who are interested in the purchase of sewing machines or vacuum cleaners. When responses are obtained to such advertisements, salesmen for respondents demonstrate the rebuilt sewing machines and vacuum cleaners but their sole purpose is to sell new and much higher prieed sewing machines and vacuum cleaners. As a matter of fact the rebuilt sewing machines and vacuum cleaners are not intended to do satisfactory work. As a result, very few of the rebuilt sewing maehines or vacuum cleaners are sold.

MERCURY VACUUM STORES, ETC. 607 603 Findings PAR. 10. Respondents, in the advertising matter of their rebuilt vacuum cleaners, make use of such terms as "complete with attachments three days only," and "2 year guarantee." Such statements are misleading and deceptive. In truth and in fact, attachments are frequently not furnished. The offers are continuous, the only changes being slight variations in the prices charged. The use of the word guarantee" without a statement of the terms and conditions thereof and the manner in which the guarantor will perform is misleading and confusing and constitutes a misleading and deceptive practice. In truth and in fact, no guarantee is given without the payment of a substantial sum therefor in addition to the purchase price of the machine.

PAR. 11. Respondents' salesmen, in soliciting the sale of sewing machines containing heads imported from .Japan, represent, contrary to the fact, that the machines were manufactured by the Singer Sewing Machine Company. The respondents and their salesmen also quote fictitious prices for various machines as the usual seJJing prices and represent that, because the machines have been used as demonstrators or for some other reason, they are able to ofier the machines at a much lower price thus inducing the prospective purchaser to believe that the price asked is a reduced price. .As a matter of fact the machines so ofiered are usually new machines and the price at which the machines are ofiered for sale are the usual selling prices. PAR. 12. Respondents, in the course and conduct of their business are in substantial competition with other individuals and with firms and corporations engaged in the sale in commerce of sewing machines and vacuum cleaners.

PAR. 13. The failure of respondents to adequately disclose on the sewing machine heads that they are manufactured in .Japan and the use of the trade or brand name "17universal" have the tendency and capacity to lead members of the purchasing public into the erroneous and mistaken belief that their sewing machines are of domestic origin and manufactured by the well and favorably known firm or firms with which said trade or brand name has 10nO' been associated. Furthermore, the other misleading and deceptive statements enumerated above have the capacity and tendency to lead members of the purchasing public into the erroneous and mistaken belief that such statements are true. All of the aforesaid practices have the capacity and tendency to induce members of the public to purchase respondents' sewing machines and vacuum eleaners because of the erroneous belief engendered thereby.

Order 50 F. T. C.

CONCLUSION The aforesaid acts and practices of the respondents, as herein found are all to the prejudice and injury of the public and of respondents competitors and constitute unfair methods of competition and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. ORDER TO CEASE AKD DESIST It is ordered That the respondents Hay R. Goldie and David Bachman, individually and as copartners doing business as Mercury Vacuum Stores and .Mercury Vacuum Cleaner Stores, or doing busi- Iless under any other name, and their representatives, agents and employees, directly or through any corporate or other device in connection with the oflering for sale, sale and distribution of sewing machines vacuum cleaners or other merchandise in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Offering for sale, selling or distributing sewing machines, of which foreign made heads are a part, without clearly and conspicuously disclosing on the heads the country of origin thereof. 2. Using the word "Universal" or any simulation thereof as a brand or trade name or in any other manner to designate, describe, or refer to sewing machines or representing, through the use of any other words or in any other manner that their sewing machines or any part thereof are made by any other than the actual manufacturer. 3. Hepresenting, directly or by implication, that certain merchandise is offered for sale when such offer is not a bona fide offer to sell the merchandise so offered.

4. Representing, directly or by implication, that attachments are included with their rebuilt vacuum cleaners unless such is the fact. 5. Hepresenting, directly or by implication, that offers are limited as to time when they are continuous offers. 6. Hepresenting, directly or by implication, that any merchandise is guaranteed unless the nature and extent of the guarantee and the manner and form in which the guarantor will perform thereunder are clearly and conspicuously disclosed.

7. Hepresenting, directly or by implication, that the usual or customary price of any merchandise is in excess of the price at which said merchandise is regularly and customarily sold in the normal course of business, or that the price at which any merchandise is regularly and customarily sold in the normal course of business is a reduced pnce.

MERCURY VACUUM STORES , ETC. 609 603 Order It is further ordered That the respondents, Ray R. Goldie and David Bachman, individually and as copartners doing business as Mercury Vacuum Stores and Mercury Vacuum Cleaner Stores, 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 this order. ( Sgd. ) Ray R. Goldie RAy R. GOLDIE (Sgd. ) David Bachman DAVID BACHMAN individually and as copartners doing business as Mercury Vacuum Stores and Mercury Vacuum Cleaner Stores.

Date: November 6, 1953.

(Sgd. ) Myel' Koonin MYER KOONIN 721 Shcraton Building, Washington D. C.

Attorney for Respondents.

Date: November 10, 1953.

The foregoing consent settlement is hereby accepted by the Federal Trade Commission and ordered entered of record on this the 14th day of January 1954.

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Syllabus 50 F. T. C.