Astor Industries, Inc.

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

IN THE MATTER OF ASTOR INDUSTRIES, INC. ET AL.

DECISION IN REGARD TO THE ALLEGED VIOLATION o ' THE FEDERAL TRDE COMMISSION ACT Docket 5889. Complaint, June 27, 1951-Decision, Feb. 1954 Where a corporation and its three offcers, engaged in the competitive sale to distributors and retailers of sewing machine heads imported by them from Japan, upon some of which there appeared on the back of the vertical arm a deealcornania displaying- the word "Japan" and upon some of which there appeared on brass or brass colored medallions on the front of the vertical arm, the words "Reg. Applied for Hudson" or "Reg. Applied for Hudson Japan, and of the completed sewing machines of which said heads were a part, and, as thus engaged, in attachinp; to said heads at the only place provided therefor motors marked "Made in U. S. A. " thus concealing the aforesaid marking on said imported heads (a) Offered and sold tile aforesaid machines upon some of which the word Japan" as included on the front of the vertical arm, as above set forth was, by virtue of the lettering, coloring, and general arrangement, indistinct, diffcult to read, unemphasized, and distinguishable only by careful hlspecUon, with no adequate nlarking to show the place of manufacture or origin of said imported beads; and (b) l"falsely represented that their said sewing machines were manufactured by or connected in some way with the Hudson Motor Car Company, through conspicuously branding their said machines with the naroe "I-Iuuson" and use thereon of the w" rds "The Hudson Sewing Machine Co. , and the featuring of said name In instruction booklets, advertising circulars, displays, and letters:

Held that such acts and practices, under the circumstances 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. Frank Bier hearing examiner. Mr. William L. Taggart for the Commission. Mr. Joseph N. Klapper of New York City, for respondents. DECISION OF THE CO::J\IISSION AND ORDER TO FILE HEPOHT OF COMPLIANCE Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission, on ,June 27, 1951, issued and subsequently served its complaint in this proceeding upon Astor Industries Inc. , a corporation, and Max Goldberg, Manny Goldberg, George Zuckerman, Henry Spiegelman, and John D. Bussel, individually and as offcers of said corporation, charging them with the use of unfair methods of competition and unfair and deceptive acts and practices in 700 FEDERAL TRADE- COMXrrSSION DECISIOl\S Findings 50 F. T. C.

commerce in violation of the provisions of said Act. After the issnance of said complaint and the fiing of respondents' answer thereto hearings were held. at which testimony aJ'd other evidence in support of and in opposition to the allegations of the complaint were introduced before a hearing examiner of the Commission theretofore duly designated by it, and said testimony and other evidence were duly recorded and filed in the offce of the Commission. Thereafter, the proceeding regularly came on for final consideration by said hearing examiner upon the complaint, answer thereto, testimony and other evidence, and proposed findings as to the facts and conclusions presented by counsel, and said hearing examiner, on February 25, 1953 fjledhis initial decision herein.

'Within the time permitted by the Commission s Hules of Practice counsel supporting the complaint filed with the Commission an appeal from said initial decision, and thereafter this proceeding regularly came on for final consideration by the Commission upon the record including briefs of counsel in support of and in opposition to said appeal (oral argument not having been requested); and the Commission, having entered its order granting said appeal, and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and conclusion drawn therefrom and order, the same to be in 1 ieu oJ the initial decision of the hearing examiner.

FINDINGS AS TO TI-IE FACTS PARAGRAPH 1. Respondent Astor Industries, Inc., is a corporation organized and existing under and by virtue of the laws of the State of )Jew York with its offce and principal place of business located at 220 Fifth Avenue, New York, Kew York. Respondents Max Goldberg, Manny Goldberg, George Zuckerman, Henry Spiegelman, and John D. Russel are president, vice president, vice president, secretary, and treasurer, respectively, of corporate respondent, and acting as such offcers formulate, direct, and control the policies, acts, and practices of said corporation. The address of the individual respondents is tJ1e same as that of the corporate respondent. They are the only offcials of corporate respondent.

PAR. 2. Respondents are now, and have been for several years last past, engaged in the sale of' sewing-machine heads imported by them from Japan, and completed sewing machines of which said heads are a pmt, to distributors and also to retailers who, in turn, seJJ to the purchasing public. Hespondents do not seJJ to consumers. In the course and conduct of their business, respondents cause their said , . , ASTOR INDUSTRIES , INC. , ET AL 701 699. Findings products, when sold, to be transported from their place of business in the State of New York to the purchasers thereof located in various other States and maintain, and at all times mentioned herein have maintained, a course of trade in said products in commerce among and between the various States of the United States. Their volume of trade in said commerce has been and is substantial. PAR. 3. ,Vhatever markings, showing country of origin, are on the sewing-machine heads imported from .J apan by respondents, whether by plaque, medallion, or decalcomania, are left unchanged by respondents. Some of these machines imported by respondents have a metal plaque or medallion, elliptical in shape, attached to the front of the vertical arm by two small rivets, reading in raised letters about ",4 of an inch Reg. Applied for Hudson" or "Reg. Applied for Hudson Japan. Other sewing-machine heads imported by respondents have, in addition, a decalcomania on the rear of the vertical arm about an inch above the bed, gold letters on black lacquer, reading J apan. Respondents purchase these machines, as above described with and without attachments for the sewing-machine head (such as light, motor, foot pedal), and these purchases are resold in the same condition by respondents after inspection. PAR. 4. These machines are designed for electric operation and when a motor is attached at the only place provided for it, the real' of the vertical arm, the decalcomania marking thereof of "Japan " is effectively conce"led from even careful inspection, short of removing the motor or turmng the machine into an awkward and unusual position, from a user s standpoint, imposed only by a desire to see that particular spot but entirely unlikely to ensue from ordinary or normal use of the machine. There is substantial evidence in the record that purchaser-users never saw this concealed marking or suspected the foreign origin of their purchases. The finding is that such marking , for practical purposes and to the ordinary user or purchaser completely and effectively concealed.

PAR. 5. The brass or brass-colored mecb1Jions riveted to the' front of the vertical arm of respondents' imported machines are in bright gold color, in raised letters only, with no backgrouJ11 coloring to emphasize the raised letters and with other lettering "Reg. Applied for Hudson" of similar size and protrusion, so that the word "J apan is indistinct, diffcult to read, unemphasized, and distinguishable only by careful inspection. There is sub,:tantial evidence in the record that users and purchasers did not see, or seeing, dill not compl'elwnel such marking.

PAn. H. ,Vhen these markings, as lwreinabove described, are taken together with the acJditional facts that the motors attached to these Findings 50 F. T. C.

or "Universal" are all marked "Made inmachines whether "Hudson" U. S. A. " that the instruction booklet prepared and distributed by respondents to dealers and accompanying the machine when sold to the consumer, as weJJ as ajj of the other advertising of respondents -except letters to dealers, fails to mention anywhere the foreign origin of the machine, and that the name "Hudson" is part of the corporate or brand name of a number of American concerns manufacturing and Belling domestieaJJy, some of them nationally known, it is plain that many consumer-purchasers would be, and are, deceived into the belief that respondents' Hudson sewing machines are made in the United States. The finding, accordingly, is that respondents' imported Hudson sewing machines are not adequately marked to show their place of manufacture or origin.

PAn. 7. The fact that 70-80 percent of these machines are supplied by respondents to dealers in the original containers as they arrived Jrom Japan, which containers plainly show on the outside their foreign origination; the fact that respondents ordered the decals and medallions put on the machines in ordering them from the makers in .Japan; and the Jact that purchasing dealers are, regardless of markings, under no misapprehension that the machines were imported or that such dealers are instructed by respondents to teJJ consumers that1 the machines are imported, are equally irrelevant. Hespondents, by placing in the hands of these dealers their sewing machines as hereinabove described, have provided the dealers with the means and instrumentality whereby the purchasing public may be, and is, misled' and deceived as to the place of origin of said machines. This is emphasized by the substantial evidence in the record that these riveted medallions may be rernoved with comparative ease without the marks of removal being discernible except upon the closest inspection. IVhether dealers do so delib2rately or innocently is beside the point. It is suffcient if the public has been, or can be, misled. PAn. 8. 'Yhen sewing machines are exhibited and offered Jor sale to the purchasing public and such articles are not marked at ajj or are inadequately marked to show their foreign origin, or if such articles are marked and the markings arc concealed, removed, or obliterated the purchasing public understands and believes such articles to be wholly of domestic origin.

P AH. 9. Respondents use the brand name "Hudson " in marketing their imported machines. Every machine is branded with the name in decalcomania, gold letters of equal size on the black lacquer 01 the machine s horizontal arm, both sides; and across the top of the same ann, in the same manner, there appear the words "The Hudson Sewing IVfaehine Co." In addition to this, the word "Hudson" appears ,, ASTOR INDUSTIU""

699 Findings in raised letters on the metal medallion affxed to the front of the vertical arm. AJJ of respondents' instruction booklets, advertising circulars, display, and letters prominently feature the name "Hudson. PAR. 10. The name "Hudson" is a part of the corporate name of the Hudson Motor Car Company, a corporation which has been and is favorably known to the purchasing public and which is and has been long established in the automobile industry by seJJing an automobile known as "Hudson.

A number of witnesses who testified in this proceeding said that they associated the name "Hudson" with the Hudson Motor Car Company or with the Hudson automobile. One of the witnesses said that he associated the name "Hudson" with the manufacturer of the Hudson automobile. He did not know whether Hudson Motor Car Company manufactured anything other than automobiles but there was the possibility that the company also manufactured the sewing machine on which the name "Hudson" appeared. Another witness, a housewife, testified that she would assume anything in the machinery line with the name "Hudson" was made by the Hudson Motor Car Company. Other consumer witnesses testified to the same effect. representative of the Hudson Motor Car Company testified that the ord "Hudson" as it appears on the horizontal arm of respondents machines and in some of the respondents' advertising literature simulated in appearance some of his company s advertising. There is also in the record a stipulation by opposing counsel to the effect that t 11lee named consumers who had purchased respondents' machines were earned as witnesses, they would testify that the name "Hudson did not, to their minds, indicate that the machines had any connection whatsoever with the Hudson Motor Car Company. Based upon the whole record, the Commission concludes, and therefore finds, that by using the word "Hudson" as a trade or brand name for their sewing machines in the manner hereinabove found, the respondents have represented, contrary to the fact, that their sewing machines are manufactured by or connected in some way with the Hudson Motor Car Company. Respondents' use of the word " Hudson" has also enhanced the erroneous and mistaken belief on the pari of the purchasing public that respondents' sewing machines are 0 domestic origin.

PAR. 11. There are among members of the purchasing public a sui stantial number who have a decided preference for products man' factured in the United States over products manufactured in whe or in part in foreign countries, and this preference extends to sewi machines. There are also many members of the purchasing pur who prefer to purchase products, including sewing machines, wh _ ..V.H:J.1V.J.lDD.JVl.'\ .J.!I...O-LV.1" 0 Findings 50 F. T. C.

ate manufactured by, or connected in some way with, weJJ and favorably known American firms rather than products manufactured by a firm or firms which are not weJJ known to the purchasing public. PAR. 12. The booklet which respondents furnish with each machine sold to dealers, and which the dealer in turn gives the user-purchaser when the machine is resold, contains on the inside of the front cover page the following:

HUDSON BLBCTHIC SBJWING J\ACIIINg Twenty Year Guarantee Bond This certifies that - ------ is the OWller of In:;DSON' Dlectric Spwing IHachine Serial No. Purclwseu on 1. The HUDSON Electric Sewing 1\Jnchine covered in this guarantee is waJ'ranted to be free from ilefects in workmanship and nwterial for period of twenty years from the date of this certificate. 2. AI! HTJJ)SON Electric Sewinp; Machine parts are wade ot the finest materials. All friction parts are doubly jlrotected tor long life. Ally part foum! defective ,,'il be replaced by your HUDSON' dealer free of charge for a period of twenty years.

3. Parts that normally require replatemcn1: suel! as bobbin easp, bobhin8 needles and attachments are 110t covered hy this guarantee. 4. The HUDSON Sewing 1\lac11ine motor and, 1l1motor aeeessories are guaranteed for one year.

HUDSON Electric Sewing' !lIachil1e Dealer. This is signed by the local retailer who seJJs to the consumer. The complaint charges that the use of the 'word "guarantee" without clisdosing the terms and conditions of the gllara.ntee is contusing and misleading.

PAR. 13. The evidence is in conflict. Several witnesses most of whom !lid never seen the guarantee before, and some of whom were not shown t when testifying, have the impression, notwithstanding that the sigature line is plainly for the dealer to sign, that it was a gUluantee or warranty by the nmnufacturer of the product. One of these, though sti11ed he would go to the store he purchased from, if anything went ong. This, of course, is not the charge in the complaint. Only witness stated he did not understaml from it whether parts or vice, or both, were guaranteed, and how long for each. On the other , two business executives, one in the sewing machine business the ')1' unconnected with it, testiiied, in the first instance, that except the term of years and the fad of dealer backing instead 01' manul1rer backing, it was the same as the guarantee of his company: ;eecmcl instance, that the lwerage person reading it ,youlcl Imo\\' . he was supposed to get. In addition, a labor union official had Dubie understanding it. This, taken with the wordiug and 5u1.- ASTOR INDUSTRIES INC. ET AL. 705 699 Conclusion stance of the document itself and the demeanor of the sole witness testifying that it was confusing to him, makes the preponderance of evidence against the charge, and the finding, accordingly, is that the use of the word "guarantee" is not misleading or confusing, and that the guarantee does disclose its terms and conditions. PAR. 14. Respondents, in the course and conduct of their business are in substantial competition in commerce with makers and sellers of domestieaJJy made sewing machines and also with seller' s of imported sewing machines.

PAR. 15. The failure of respondents adequately to disclose on the sewing machine heads that they are manufactured in ,Japan and the use of the brand or trade name "Hudson" have the tendency and capacity to lead members of the purchasing public into the erroneous and mistaken belief that respondents' said products arc of domestic origin and are manufactured by, or connected in some way with, a weJJ and favorably known domestic manufacturer, and into the purchase of sewing machines of which said heads are a part because of such erroneous and mistaken belief. As a result thereof trade in commerce has been unfairly diverted to respondents from their competitors and injury has been and is being done to competition in commerce.

CONCLUSION The respondents import sewing machine heads from ,J apan. ,'\hen these heads are assembled and processed into completed sewing machines, whatever markings there were on the heads showing the country of origin are, for ajj practical purposes, effectively concealed from the ordinary user or purchaser. Respondents use the name Hudson" as a brand or trade name for their completed sewing machines. The name "Hudson" appears on the front horizontal arm of the sewing machines, and is prominently featured in respondents' advertising literature. As a result of respondents' failure to adequately disclose on the sewing machine heads that they are imported from J apan and the use of the brand or trade name "Hudson " purchasers and prospective purchasers arc led to believe that respondents' sewing machines are of domestic origin and are manufactured by, or connected in some way with, a weJJ and favorably known domestic manufacturer. A substantial number of the purchasing public has a decided preference for sewing machines manufactured jn the United States over sewing machines manufactured jn whoJe or in part in .J apan. There are also many persons who prefer to purchase sewing machines manufactured by, or connected in some way with, well and fayorably known American firms rather than sewing machines manufactured by a firm or firms which are not weJJ known to the purchasing public. 40; 44: 37 - - 4 n Order 50 F. T. C. The fact, if it be so, that the sewing machine heads imported by the respondents were inspected and passed by United States Customs offcers at the port of entry as being properly or adequately marked is immaterial and no defense to this proceeding. L. Heller Son, Inc. v. Federal Trade Commission 191 F. 2d 954. Also, whether or not the Singer Sewing Machine Company manufactures and imports from Great Britain sewing machines which are not marked at ajj, or not adequately marked, as to country of origin is immaterial and no defense to this proceeding. Independent Directory Corp. v. Federal Ford Motor Co. v. Federal TradeTrade Commission 188 F. 2d 468; C o'fn?nission 120 F. 2d 175, 182.

Tho Commission therefore concludes that the acts and practices of the respondents as hereinabove :found are ajj 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 I t is ordered That the respondents, Astor Industries, Inc., a corporation, and its offcers, and Max Goldberg, Manny Goldberg, George Zuckerman, Henry Spiegelman, and .John D. DusseJJ, as offcers of said corporation, and said respondents' representatives, agents, and employees, directly or through any corporate or other device, in connection with the ofiering for sale, sale, or distribution of sewing machine heads or sewing machines in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist fiom: 1. Offering for sale, seJJing, or distributing foreign-made sewing machine heads or sewing machines of which foreign-made heads .11e a part, without clearly and conspicuously disclosing on the heads, in such a manner that it wiJJ not be hidden or obliterated, the country of origin thereof.

2. using the word "Hudson " or any simulation thereof, as a brand or trade name to designate, describe, or refer to their sewing machines or sewing machine heads; or representing through the use of any other word or in any other manner that their sewing machines or sewing machine heads are manufactured by anyone other than the actual manufacturer.

It is That respondents shall, within sixty (60) days further ordered after service upon them of this order, file \with the Commission a report in writing setting forth in detail the 11:\11\('./ and form in which they havo complied with the order to cease and (lesist. Commissioner Carretta not partiei pating.

Syllabus