Bond Vacuum Stores, Inc., et al.

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

IN THE J\fATTBR OF BOXD V ACUliM STORES, IKC., ET AL.

COXSE:r T ORDER, ETC. , TN REGARD TO THE ALLEGED VIOLATION OF THE :FEDERAL TRADE COl\flIISSIOX ACT Docket 620.9-Compl(f1nt, Jlalj 2"' 95- Decisioll. Dec. Y, U!,). Consent order requiring a concern in \Vashington, D. C., to cease arlTertising falsely that certain vacuum cleaners and sewing machines were offered for sale when such offers were not: bona fide, that it overated stores in principal cities, g3Y€ big trade-in allowances on customer,,' old mercbancase, and furnished a five-year guarantee on its reconditioned Singer sewing machines; to cease l'€IJresenting fictionsIJrices as the customary IJrices of their merchandise; and to cease charging customers a drecordjng fee when it did not record its sales contracts but retnined the money thus colleded for its own use.

Before 1fr. L01'en II. L(l'ughlin hearing examiner. M)'. Michael J. Vitale for the Commission. Kallier01IJ !iamero1D of 'Vashington, D. for respondents. COMrI..AI:\ Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the aUihority vested in it by said Act, the Federal Trade Commission having reason to believe that Bond Vacuum Stores Inc. , a Delaware corporation, and Albert IIyatt, Philip Jforris Harold Stengel and .J ulius Langsner, individually and as offcers of said corporation, hereinafter referred to as respondents, have violated t.he provisions of said Act, Hnd 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 follows:

-\HAGHAPH 1. Respondent Bond acu1lll Stores, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Dela\"are, with its offce and principal place of business located at G10 inth Street, Northwest, "\Vashington D. C. Respondents Albert Hyatt, Philip Morris, Harold Stengel and Julius Langsuer are indiyilll1a1s and preside, , vice-presic1ent-treasn1'e1' , "ice president and secretary, respectively, of the corporate respondent. These individual respondents formulate, control and direct the policies, acts and practices 01 the corporate respondent. Their address is the same as that of the corporate respondent. BOXD VACUUJ'vI STORES, INC. , ET AL. 505 504 Complaint PAR. 2. The respondents are now, and for several years last past have been, engaged in the sale and distribution, among other things of vacuum cleaners and sewing machines. In the course and conduct of their said business respondents have caused their vacuum cleaners and sewing machines when sold, to be transported from their place of business at the aforesaid address to purchasers thereof located in the District of Columbia and in various States of the "Cnited States. They maintain, and at all times mentioned herein have maintained a course of trade in said products in commerce in the District of Columbia and between the District of Columbia and various States of the 1;united States. Their volume of trade in saiel commerce has been and is substantial.

PAR. 3. At all times mentioned herein respondents have been, and arc now, in direct and substantial competition with other corporations, finns and individuals engaged in the sale and distribution of vacuum cleaners and se\ying machines in commerce. PAR. 4. In the course and conduct of their bllsines, as aforesaid, and for the pmpose of inducing the purchase of their YHCUUm cleaners and sewing machines, the respondent:: have engaged in extensive advertising in newspapers and on television and radio. Among and typical1 of the statenIents and representations made in such advertising relating to their said products are the follo\\-jng: ACT XOW' QI:A"'TJ'l'UJS LIMITED Baid I,ECO'iDITJO'iED ELECTR01X'i CO:\IPLETE WITH 8 A' I'_I.CH:\IEXTS (Picture of yaCllUm cleaner) RECOXDITIOXED BY BOND EXPERTS WITH BO:'D PXHTS Year Gnnrnntee parts ulJ(1 la!Jor $10, FREE HO:.IE DK\IUXSTHATIOX Big trade-in al1mnwe8 for nnr old nlcnum cleaner BOX D Vacunm Stures, IIH' Glo-Uth Sl. X. ,I'.

506 FEDERAL TRADE CO:-IMISSJON DECISIONS Complaint 51 F. T. C.

PHONE 1\ OW! Ex. 3-5380 for Free Home Demonstration RECOKDITJOKED PORTABLE ELECTRIC SINGER Plus At no extra cost linking Shears with every Iachine purchased (Picture of Singer sewing machine) $21.50 5 Years' Guarantee Full cash price FJASY TERMS ARRANGED Free Home Demonstration Big Trade-In Allowance on Your Old Sewing Machine BOND Vacuum Stores, Inc.

STORES DI PRINCIPAL CITIES PAR. 5. By and through the use of the aforesaid statements and representations and others of similar import, but not specifically set out herein, respondents represented, directly or by implication: 1. That they were making bona fide offers to sell reconditioned Electrolllx vacuum cleaners and reconditioned Singer sewing machines at the low prices specified in the advertising and that the said products would do a satisfactory job of cleaning and sewing, respectively; 2. 'That they operate stores in principal cities; 3. That in connection with the sale of yaCUUlll cleaners and sB'Iying Inachines they win give big trade-in a.lowances on customers' old cleaners and sewing machines;

4. That they furnish a 5-year guarantee on their reconditioned Singer sewing machines.

PAR. 6. The aforesaid statements and representations were false deceptive and misleading. In truth and in fact: 1. The said cleaners and sewing machines would not do a. satisfactory job of cleaning and sewing, respectively, and the said offers were not genuine or bonn fide offers to sell the cleaners and sewing machines advertised, but were made for the purpose of obtaining leads and information as to persons interested in the purchase of vacuum cleaners and sewing machines. After obtaining such leads through responses to said advertisements, respondents' salesmen called upon the persons so responding at their homes or waited upon them at respondents' place of business and in many instances demonstrated such cleaners and sewing machines, well knowing that their performance would be uusatisfactory; made no effort to sell the advertised cleaners and se\ving machines, but in many instances belittled and disparaged such cleaners and sewing machines and attempted and fre. BOXD VACUUM STORES, INC., ET AL. 507 504 Complaint quently did, sell different and much more expensive vacuum cleaners and sewing machines to such persons;

2. Respondents do not operate stores in principal cities. The store located at the address hereinabove set forth is the only store operated by respondents.

3. Respondents do not make or give big trade-in allowance, or any trade-in allowances, on customers' old cleaners and sewing machines when they purchase new or reconditioned cleaners and sewing machines, since the price of the merchandise purchased in so-called trade. in transactions is increased to cover and take care of the so-called tradehin allowance made or given.

4. Respondents' 5- year guarantee is not a bona fide guarantee because it does not set forth the terms thereof or the manner in which respondents will perform thereunder. Such a guarantee,e is confusing and misleading to the purchasing public.

PAR. 7. In addition to the foregoing, the respondents, in connection with the offering for sale and sale of vacuum cleaners and sewing machines, have misrepresented the regular and customary prices at which they sell their merchandise. In advertising literature such as instruction booklets which they exhibit to purcl,"sers and prospective purchasers respondents have represented that the regular and customary price of their Kingston vacuum cleaner is $129.95; that the regular and customary price OT their :Monarch sewing machine is $189.50 and that the regular and customary price of their Kingston sewing machine is $199.50. These prices are fictitious and far in excess of the prices at which the respondents regularly and customarily sold the said merchandise.

In connection with the sale of vacuum cleaners and sewing machines respondents have also engaged in the practice of charging purchasers an amount OT $2.50 represented as being a "recording Tee." Respondents have not had any of their sales contracts recorded but have retained the money thus collected for their own use. PAR. 8. The use by the respondents of the aforesaid false, deceptive and misleading statements, represent.ations and practices had the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements and representations were true and because oT such statements, representations and practices to purchase substantial quantities oT respondents' vacuum cleaners and se\ving machines particularly their mote expensive vacuum cleaners and sewing machines. As a result thereof, substantial trade in commerce has been Decision 51 F.

unfairly diverted to respondents from their competitiors and substantial injury has been and is being done to competition in commerce. PAR. 9. The aforesaid acts and practices, as herein alleged, are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

DECISION OF THE COMMISSION Pursuant to Rule XXII of the Commission s Rules of Practice and as set forth in the Commission s "Decision of the Commission and Order to File Report of Compliance, dated December 9, 1954, the init.ial decision in the instant matter of hearing examiner Loren H. Laughlin, as set out as follows, became on that date the decision of the Commission.

ITIAI DECISION BY LOREN II. LA'GGHLIN , HEARING EXAMI The Federal Trade Commission (hereinafter referred to as the Commission) on May 27, 1954, issued its complaint herein under the Federal Trade Commission Act against all of the above-named respondents, charging them with having committed certain alleged unfair or deceptive acts and practices which purport to be violations of Section 5 of said Act. All respondents joined in an answer filed on June 18, 1954, after due service of the complaint upon each of them. On September 24, 1954, the respondent corporation, by its president and its attorney, and all individual respondents except J uEns Langsner, both in person and by their attorney, stipulated in writing with counsel supporting the complaint that a consent order against such respondents be entered herein which stipulation was approved by the Dire,etor and Assistant Director of the Commission s Bureau of Litigation. By said stipulation, among other things, said respondents admit all the jurisdictional allegations set forth in the complaint and stipulate that the record herein may be taken as if the Commission had more fmc1ings of jurisdidional facts in accordance "with such allegations; that such stipulation is made for settlement purposes only, and does not constitute an admission by said respondents that they lmn violated the law as alleged in the complaint, and that respondents withdraw their said answer iiled on June 18 , 1954. It. IHIS further stipulated that the complaint, insofar as it concerns the respondent tTlllius Langsner, be dismissed for the reasons set forth in his affdavit executed August 27, 1954, attached to said stipulation, which afldavit in substance states that theretofore having BOND VAcrUM STORES, IXC., ET AL. 509 504 Decision held stock in and having been a member of the Board of Directors of respondent Bond Vacuum Stores, Inc. in July 1953, the said Julius Langsner sold an of his said stock and thereupon severed all connections with said corporations; and that neither as an employee or director of said respondent corporation did he ever formulate, control or direct its policies, acts and practices; and that. he has no intention of again being connected in any way with said corporation or any similar corporation engaged in a like business, having been since August, 1949, and presently being employed by the United States Government.

Said stipulation further provides that a11 the parties thereto expressly waive a hearing before a hearing Examiner or the Commission, tho making of findings of facts or conclusions of law by the Hearing Examiner or the Commission, and the filing of exceptions and oral argument before the Hearing Examiner and the Commission to which respondents may be entitled under the Federal Trade Com mission Act or the Rules of Practice of the Commission; and that the cease and desist order therein set forth and hereafter made, shall have the same force and effect as if made after a fun hearing, presentation of evidence, and findings and conclusions thereon. Respondents further specifically waive any and an right, power or privilege to challenge or contest the validity of the order entered in accordance with said stipulation, anel agree that the complaint herein may be considered in construing its terms in any further proceedings which may arise involving said order.

The said sfipulation for consent order a.nd the accompanying affdavit of respondent Julius Langsner were submitted on October 4 1954, by the Commission s Bureau of Litigation to the undersigned 1-Iearing Examiner duly designated by the Commission, for appro priat.e action by him under Bule V of the Commission s Rules of Practice. After due consideration, it appearing to the Ilea ring Examiner from the presentation of sllch matter that only sllch acts and practices alleged in the complaint as are unsupportable by evidence or are repetitious l1ave been deleted from the sanctions of the proposed consent oreler anel that the said stipulation and affdavit afford the basis for appropriate disposition of this proceeding, said stipnlatioll and aflida vit are accepted and ordered iiled as a part of the record in tllis proceeding. The withdrawal of respondents ' answer is hereby:y approved.

Upon the vdlOle record as now made, jn accordance with the said stipulation, the IIearing Examiner finds that the Commjssion ha.s 1risdiction of the subject matter of this proceeding and of aD of 510 FEDERAL TRADE cmn,nSSION DECISIONS Order 51 T. C. the parties respondent; that this proceeding is in the interest of the public; and that the following order as proposed in said stipulation is appropriate for the disposition of this proceeding, and the same therefore should be, and hereby is, entered as follows: ORDER It is ordered That respondent Bond Vacuum Stores, Inc. a cor poration, and its offcers, respondents Albert Hyatt, Philip Morris and Harold Stengel, individually and as offcers of said corporation and respondents' representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of vacuum cleaners and sewing machines or other merchandise in COll11crce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith ceause and desist from: 1. Representing, 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;

2. Representing that they operate more stores than they do in fact operate;

3. Representing, directly or by implication, that any merchandise sold or offered for sale by respondents is guaranteed, unless the nature and extent of the guarantee and the manner in which the guarantor wil perform thereunder are clearly and conspicuously disclosed; 4. Representing, directly or by implication, that respondents usual or customary price of any merchandise is in excess of the price at which said merchandise is regularly and customarily sold by respondents in the normal course of respondent' s business. 5. Requiring purchasers to pay sums of money to respondents represented by them as being for recording fees or for other expenses to be paid to others by respondents, when such SUll1S are retained respondents.

It i8 fUTthe'l ordered That the compla.int insofar as it relates to the respondent Julius Langsncr be, and the same is, hereby dismissed. ORDER TO l"LE REPORT OF COMPLIANCE It i8 ordered That the respondent, Bond Vacuum Stores, Inc. , a corporation, and its offcers, and Albert Hyatt, Philip !lorris, and Harold Stengel, individually and as offcers of said corporation, shan within sixty (60) days after service upon them of this order, iie 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 Decem. bel' 9 , 1954J.

BENlVlAR SALES CO. 511 Order IN THE MATTER OF BENJAMIN MALTZ AND MARSHALL MALTZ TRADING AS BENMAR SALES COMPANY ORDER, OPINION ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRDE COMMISSION ACT Doclcet 6128. Complaint, Oct. 1953-Decision, Dec. 17, 1954 Order requiring an individual in Chicago to cease supplying push cards or other lottcry devices designed for use in the sale of watches and other merchandise to the public, and sellng merchandise by means of a game of chance, etc.

Before Mr. James A. Purcell hearing examiner. Mr. J. W. Brookfield, Jr. for the Commission. Mr. A8het Feren of Chicago, Ill., for Marshall Maltz. ORDERS AND DECISION OF THE COMMISSION Order modifying initial decision and adopting such decision as modiiied and order to file report of compliance, Docket 6128, December 17, 1954, follows:

This case having come on for hearing before the Commission upon the appeal filed by respondent Marshall Maltz from the initial decisioll of the hearing examiner; and The Commission h,wing determined that the contentions urged by that respondent in support of the appeal are without merit and that the appeal should be denied; and The Commission, for reasons stated in its opinion which is separately issuing herein, having additionally determined that the fidings as to the facts a.nel conclusion contained in the initial decision are free from substantial error and should be adopted but that the provisions of the order to cease and desist as contained in the initial decision are inappropriate and that the record requires that they be modified:

It i8 ordered That the appeal from the initial decision be, and it hereby is, denied.

It is further ordered That the prohibitory langlllge of the order to cease and desist as contained in the initial decision be, and it hereby , modiiied to read as follows:

It is ordered That respondent Marshall )faJtz, individually and trading under the name of Benmar Sales Company, or under any other name or names, and his representatives, agents and employees, directly 42:1788-:38- 512 FEDERAL TRADE COMIVIISSIOX DECISIONS Findings 51 F. . C. or through any corporate 01' other device, in connection with the offering for sale sale or distribution of watches or other articles of merchandise in commerce, as ':commerce:' is defined in the Federal Trade Commission Act, do forthwith cease and desist fl'OlTl: 1. Supplying' to or placing in the hands of others pllsh cards, punchboards, or other lottery devices, either with other merchandise or separately, which said push card, punehboards, OJ' other lottery devices are designed or intended to be llsed in the sale or distribution of said merchandise to the public.

2. Selling or otherwise disposing of any merchandise by means of it game of chance, gift enterprise, or lottery scheme. It is further ordered That the initial decision, as modified herein , and it hereby is, adopted as the decision of the Commission. It i8 further ordered That the respondent yfarshall ?lIaltz, 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 has complied with the order contained in the initial decision as modified herein.

J)JITL\.L DECJSIOX BY J_-I::IESA. PCRCELL, HE.\RISG EX.DIIXEH Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission on October 26, 1953, issued and subsequently served its complaint upon the respondents na.med in the caption hereof, charging them with the use of unfair and deceptive acts and practices in commerce in violation of the provisions of said Act. Hespondents filed their answer in due course whereupon hearings were held at which testimony and other evidence in support of and in opposition to, the allegations of said complaint were received by the above-named Hearing Examiner theretofore designated by the Commission, said testimony and evidence being duly recorded and filed in the offce of the Commission.

Thereafter the proceeding came on for final consideration by the Hearing Examiner on the complaint, the answer, testimony and other evidence, and proposed findings as to the facts and conclusions presented by counsel, oral argument not having been requested; and the hearing Examiner, having duly considered the record herein, finds that this proceeding is in the public interest and makes the following findings as to the facts, conc11Isions drawn therefrom, and order: FINDING AS TO 'Tile FACTS PARAGRAPH 1. Respondent Iarshall ;\Ialtz, is an individual trading as Denmar Sales Company, having his principal place of business BEK:\lar SALES CO. 513 511 Findings at 633 South Plymouth Court, Chicago, Illinois, and is now, and for more than six months prior to issuance of the complaint has been engaged in the sale of watches and clocks, causing said merchandise when sold to be transported from his place of business aforesaid to purchasers located in the various states of the united States other than the State of Illnois, and in the District of Columbia, in the doing of which respondent has engaged in a substantial course of trade in commerce, as "commerce" is defined in the Federal Trade Commission Act.

Respondent, Benjamin Maltz, (who is the father of Marshall l\Ialtz), is named and charged as a co-partner ,with his said son but the record wholly fails to substantiate this allegation of co-partnership, or his participation as a principal in the business, the testimony concerning which is hereinafter reviewed in Paragraph Fou.' and on the basis of such review and finding thereon the complaint as to Bcnjamin Maltz will be dismissed.

The Business l\activities PAR. 2. In the conduct of his aforesaid business respondent Marshall :Maltz to effect and facilitate sale of his merchandise, furnishes various plans of merchandising ,,-which involve operation of games of chance, gift enterprise or lottery schemes typical of which is the following:

Respondent has distributed to operators and members of the public eCl'tain literature and instructions including so-caned "push cards order blanks and circulars containing illustrations and descriptions of the merchandisc, as also respondent's plan of selling and distributing same and alloting certain premiums or prizes to the operators of the push cards; the literature and plan also describes the prizes members of the purchasing public who pay for chances or "pushes on said cards. As example: One of said push cards bears eightyht proper names, singly imprinted on a partially perforated disc with. ruled columns on the reverse side of the card for recording the name of the purchaser of the "pllsh ' corresponding to the name selected. Concea1e,d within each disc is the number which determines the price of the chance (none higher than 491) and which is disclosed only after the purchaser pushes and separates the disc from the card. The card also has a larger master seal concea.Iecl wherein is one of the names appearing on the disc and the purchaser selecting the name corresponding with the one under' the master disc receives, as a. prize a ,,,atch. Said card bears the following printed matter or instructions: Findings 51 F. T. C.

LVCKY NAME VNDER SEAL RECEIVES CHOIOE OF EITHER THE LADIES' OR GENTS' BENIWS WATCH Offcialwatcb of famous airlines FOR AS LITTLE AS 51 ami Not More 'lhan 17 Jewels. Handsome 10K Natural Gold Rolled Plate Case Haised Unbreakable Crystal. Gold Applied Dial. ::latching Expansion Band Beautiful Gift Box Every \Vatch has the World Famous Benrus Guarantee Kos. FREE. No. 3 Pays 5 ( Master All Other os. Pay I\one Higher Seal) Push Out with Pencil-Do not Open Seal '(nth Entire Card Is Sold.

Sales of respondent's merchandise by means of said push cards are made in accordance with the foregoing scheme, and whether the purchaser receives an article of merchandise, or nothing, for the money he paid, as well also the amount he is required to pay, are thus determined by lot or chance. The articles of merchandise thus awarded by chance have a value substantially greater than the price paid for the chance or push.

PAR. 3. The persons to ,whom respondent furnishes said push cards use the same in selling and distributing respondent's merchandise in accordance with his sales plan and respondent thus supplies and places in the hands of others the means of conducting games of chance, gift enterprises or lottery schemes in the sale of merchandise, a practice contrary to the established policy of the Government of the United States. Many persons are attracted by said sales plans and the element of chance involved therein and are thus induced to buy and 8e11 respondent's merchandise.

Aside from the direct admission of sales by the respondent, there was stipulated into the record by counsel a specific instance of an interstate sale by respondent to an individual resident in Culver Indiana, who disposed of merchandise according to the push card sales plan of respondent; that he, the purchaser, upon collecting the sum prescribed on the card remitted same to the respondent and in BENMAR SALES CO. 515 511 Findings return received from respondent two watches, Olle of which he delivered to the purchaser who drew the "lucky number" on the push card, and the other watch he retained for himself as compensation for selling and disposing of the chances on the card. As to Respondent Benjamin :Maltz PAR. 4. The testimony of Benjamin Ialtz concerning his connection with the enterprise, fully corroborated by Marshall faltz and unqnestioned and uncontradicted by anything of record discloses: Benjamin Maltz is engaged in the printing business at No. 940 IVinona Street, Chicago, Illnois, and in his capacity as a printer prbdnced the push cards which are the subject of this inquiry; that it was originally contemplated, (in the FaJl of 1952), he and his son Thfa-rshalll\laltz would form a co-partnership to engage in this business but it eventuated that he, Benjamin, was unable to make the necessary contribution toward capital requirements whereupon Marshall Maltz raised the necessary capital, had his own bank account and proceeded with operations on his own and separate account; Benjamin Maltz is, however, familiar ,,,ith the operation of the business, he, as well also his wife, assisting their son .Marshall in the daily operation of the business but only in the capacity of hired assistants; he testified concerning the details of operations; the extent of the mailings, (several of 100 000 each and in one instance over half a. million); the method of operation of the push carcls; related how some of the card purchasers disposed of merchandise by use of the cards and that although the businces had been in operation but a comparatively short while it had sold $50 000.00 of merchandisc; that he printed and produced the push cards used by respondent Marshall )1altz but did not ha.ve other customers for push cards, nor did he. sell or ship cards to others, his dealings therein being limiteel to fining the requirements of respondent Marshall Maltz, they both operating their respective businesses in the City of Chicago; he was emphatic in stating that he has no financial interest in the business, never having "put any money into it" ; that he docs not share in the profits but is paid for whatever assistance he renders. Upon conclusion of the foregoing testimony of Benjamin Maltz counsel supporting the complaint called as a witness respondent Marshall Maltz who testified that the answers he would make to all of the questions propoundcd to his father would be substantially the same if such questions were propounded to him. The Hearing Examiner, observing the demeanor, attitude, appearance and frankness of the two witnesses was suffciently impressed with their truthfulness which, coupled with the circumstance of complete Opinion 51 F. T. C.

absence of contradictory evidence, real or inferential, compels him to find, as a fact, that Benj amin :Maltz is not, and never was, a. copartner as alleged; that co-partnership is never inferred nor arises by operation of law but must be a voluntary act of the parties and that all of the legal elements and indicia necessary to constitute such must be present 110ne of "which exists under the facts disclosed by this record, wherefore the complaint as to Benjamin 11altz wil be dismissed.

C01\ CLrSlOXS The aforesaid acts find practices of the respondent, j\Iarshall J\Ialtz as hereinabove 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 Commjssion Act. On the basis of the facts above found, there has been a total failure of proof to sustain the anegations of the complaint as to respondent Benjamin JUaltz, wherefore, as to him, the complaint will be dismissed. ORDEBt:

It is ordered That respondent Marshall Maltz, individually and trading under the name of Benmar Sales Company, or under any other name or names, and his representatives, agents and employees directly or through any corporate or other device, ill connection ,,,itll the oifering for sale, srlle 01' distribution of ,yatches or other articles of merchandise in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Supplying to or placing in the hands of others push cards, punchboards, or other lottery devices, either with other merchandise or separately, which said push cards, punchboards, or other lottery devices are designed or intended to be used in the sale or dist.ribution of said merchandise to the public.

2. Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, 01' lottery scheme. It is further ordenxl That the complaint herein be, find it hereby , dismissed as to respondent Benj amin J\-faltz. OPIXIOJ\ OF THE COl\I1fISSIOK By :\IE.\,D, COl1llnissioller:

The initial decision of the hearing examiner held that respondent Marshall Maltz, hereinafter referred to as the respondent, has en gaged in unfair acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act, and this matter , BEYMAR SALES CO. 517 Opinion comes before the Commission upon the appeal filed by that respondent from the initial decision.

The complaint under which this proceeding was instituted, alleges tha.t the foregoing respondent and a.another individual have engaged as eo-partners in soliciting the sale of and selling watches and other merchandise, and, in such connection, furnished plans of mcrchandi sing which involve the operation of games of chance, gift enterprises or lottery schemes when such merchandise is sold and distributed to the purchasing public. Distributed and furnished by the parties named, the complaint additionally charges, has been advertising literature comprising order blanks, push carels and circulars containing instructions for distributing the merchandise by means of allotting it as premium11s to the operators of the cards and as prizes to members of the public purchasing chances or pushes thereon. After the filing of ans,ver, testimony and other evidence were received into the record during the course of a. hearing before the hearing examiner. The initial decision held that the evidence received in the proceeding fully susblined the allegations of the compb.int as they refer to the respondent Marshall Maltz, the appellant here, and concluded as noted previously that the acts and practices engaged in by him were in violation of law. 'Ve mention in passing, too, that it was found below that the charges insofar as they related to the party additionally joined in the proceeding lacked adequate support particllbrJy in reference to the nature of his participation in the practices. Provision, accordingly, was made for dismissal of the complaint as to hiln and there being no appeal from that ruling, further reference to this aspect of the proceeding is not warranted. It was held additionally in the initial decision that persons to whom the respondent has furnished push cards have used theln in selling his merchandise in accordnnce with the sales plan, and that the respondent thus supplies nnd places in the hands of others the means of conducting games of chance, gift enterprises, and lottery schemes in the. sale of merchandise which is a practice contrary to the established policy of the, Government of the united Sletes. The appeal contenels that the foregoing conclusions lack adequate sllpport in the record for the reason that no evidence 'vas presented showing how many persons have been attracted by this plan and method and that there ,vas no evidence that the sales plan has constituted a lottery or scheme ,,-which \jas contrary to established public policy. Challenged and excepted to as likewise unsupported by the record and assertedly based on conjecture anel guess are related conelusiQns appearing in the initial decision to the effect that, under the program, the articles are awarded by chance and the amounts paid for pushes or chances 518 FEDERAL TRADE COM nSSION DECISIONS Opinion 51 F, likewise so determined, and that the articles awarded have been of gTeaterThevalueexhibitsthan pricesreceivedpaid for a intochanceevidenceor push. attest that the chances or pnshes available on the respondent' s cards have ranged from free ones up to those callng for maximum payment of 49i. On a typical push card and elsewhere in the literature, a value of $39.75 is ascribed to each of thc watches, There accordingly can be no doubt but that the sales program comprises a lottery and game of chance. Supplying the means of conducting lotteries in the sale of merchandise is a practice contrary to the established public policy of the United States. Jaffe v. Federal Tmde OornrnUJ8ion 139 F. 2d 112 (C. A. 7, 1943). Although there is no arithmetical computation in the record as to the number of persons who have been attracted by and accepted the respondent' s invitation to use his sale program, it was stipulated betwecn counsel in the course of the hearing that a Culver, Indiana customer, if called in this proceeding, would testify that he circulated the push card received by him from the respondent and that he awarded merchandise thereafter purchased from the respondent in the manner counseled in the advertising literature. In excess of 500 000 mailings of the advertising literature, including the push cards, have been made and the respondent has some and shipped a substantial amount of merchandise in commerce. The respondent push cards are clearly designed and obviously intended for use in the distribution of his merchandise and consideration of the exhibits compens conclusions that the persons to whom they were furnished by the respondent generally or in a substantial number of instances used them in accordance with his plan and program. Furthermore, it would be absurd to assume that the respondent would continue to engage in the empty and iinancialJy wasteful practice of enclosing push ca.rds with various of his mailings of literature if such cards were not used in the manner intended. In the Matte,- of Seymour Sales Oornpany, et 01" Docket No. 6060 (Decided November 25, 1953). Without merit also is the respondent' s contention that the decision in United States v. Hal8eth 342 U. S. 277 (1952), precludes legal conclusions that the respondent's practices constitute a lottery or contravene public policy. That case involved an appeal from a criminal indictment for alleged violation of the Postal statutes. The question before the Court was "whether the mailing of gambling paraphernalia that may be used to set up a lottery or similar scheme in a violation of the statute" upon which the indictment was based. There was no determination that the sales plan or method involved did not constitute unfair acts and practices in violation of the Federal Trade &, &, BENMAR SALES CO. 519 511 Opinion Commission Act. That decision is nowise dispositive of the issues here. Seymour Sales Co., et al. v Federal Trade Commission 216 F. 2d 633 (C. A. D. C. No. 12064, November 4, 1954) . The respondent additionally urges that, because the standards of the Federal Trade Commission Act are assertedly vague and indefinite and provision lacking for adjudicating the fairness or unfairness particular practices by means of jury trials, any sanctions which may be imposed under the Act should be deemed to impinge upon the due process clause of the Fifth Amendment to the Constitution. vVe think there is no merit in the contention that the Act is unconstitutional. Sears Roebuck Company v. Fedeml Trade Corri88ion 258 Fed. v. A. jl1clean Som307 (C. A. 7 , 1919) ; Federal Trade Comm-ission 84 F. 2d 910 (C. A. 7, 1936).

Although we are denying the appeal, we have noted in the course of our consideration of this matter that the proscriptions of the order contained in the initial decision are not entirely responsive to the complaint. As stated previously, the complaint charges that the respondent in connection with soliciting sales of and selling his merchandise, has engaged in unfair acts and practices in commerce by furnishing various merchandising plans which involve the operation of games of chance, gift enterprises and lottery schemes when such merchandise is distributed to the consuming public. The complaint accordingly does not expressly charge that the respondent has engaged in unfair acts and practices in connection with the sale of push cards; but the order contained in the -initial decision proposes, however, to forbid their sale and distribution. In tbe circumstances, we think that the provisions of the ordcr should have been directed instead to forbidding the respondent from supplying or placing such devices in the hands of others in connection with the offering for sale, sale distribution of the respondent's merchandise and from otherwise disposing of merchandise by means of a game of chance, gift enterprise, or lottery scheme. The order is being modified accordingly. /. (.

Complaint 51 F, T. C.

1::' THE )1A'ITER OF RAi\I i\IA.:UFc CTURING CORP. ET AL.

COXSEXT ORDER, ETC. , 1N REG.\HD TO THE ALLEGED VIOLATION OF THE FEDERAL TIUDE CO-:DIISSIOK .ACT Docket G20" COJ!lIJlaiiit. JIII,I .2" 195- Decisioll, Dec. , 1.9'-4 Con"cut arch,1' requiring n seller ill :Kew York Cit . to cease representing falsely on labels and tags that its ja("kets and outer coats, rcsemhling in color pattern, and style those issued to members of the 11. S. Armed Forces' were manufactured for the Armecl Forces and in accordance \Tith their specifications; and dismissing a chluge that it repl'esentcrl itself falsely to he a manufacturer.

Before Mr. John Lewis hearing examiner. JIr. Terral A. Jo",lan for the Commission. Cll('lbe?' il Ohamben of New York City, for respondents. CO)IPLAI Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Fedeml Trade Commission, having reason to believe that Ram lanufacturing Corp., a corporation, and Harry 1. Spiewak, Albert Spiewak and Fred Roth, individually and as offcers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it respect thereof would be in the public interest, hereby issues its complaint, stating its cbarges in that respect as follows: PARAGRAPH 1. Respondent Ram launfacturing Corp. , is a corporation organized, existing and doing business under and by virtue of the Jaws of the State of New Yark with its office and principal place of business located at 1150 Broadway, Xew York, Xew York. Respondents Harry 1. Spiewak, Albert Spiewak and Fred Roth are respectively President and Treasurer, Secretary, and Vice President of said corporate respondent. These individuals acting in cooperation with each other formulate, direct and control all of the policies, acts and practices of said corporation . Their address is the same as that of corporate respondent.

PAR. 2. Hesponclents are now, and have been for more than two years last past, engaged in the sale and distribution of jackets and outer coats to wholesalers and dealers in commerce, among a,nd bet\veen the various States of the -United States and in the District of Coll1m- RAM ).fanufacturing CORP. ET AL. 521 520 Complaint bia. Respondents maintain, and at aU times mentioned herein have maintained, a substantial course of trade in said garments, in com merce, among and between the various States of the United States, \R. 3. The garments sold and distributed by respondents in the course and conduct of their business as aforesaid closely resemble the jackets and outer cants issued and furnished to members of the United States Armed Forces in color, pattern and style. Respondents also cause to be affixed to said gannel1ts certain markings, insignia, labels and tags which purport. to designat.e the branch of service, model contract number, specification number, stock number and directions as to the manner of use in substantially the same form, kind and manner as the markings, insignia, labels and tags prescribed and used by the Gnited States Armed Forces on similar anc1like garments. Typical of the words and terms appearing all the markings, labels and tags are:

JACKET, TYPE B- Q. M. O. D. 1953 SPEO. 9X-1540 N. Y. O.

STOCK NO. 1150-B-l1l2 THIS JACKET INCREASES GREATLY THE WARMTH OF CLOTHING WORN UNDER)1 IT IN COLD AND TK\Il-ERATE CLIMATES BECAUSE IT IS WINDPROOF. Typical of insignias on said garments is that of the Army Air Forces under which the words "Army Air Forces" appear. PAR. 4. Through the use of said colors, patterns and styles and tbe markings, insignia, labels and tags, as described in Paragraph Three hereof, respondents have represented and implied and do represent and imply that said jackets and outer coats, sold and distributed by them in commerce were manufactured for the "Gnited States Armed Forces and in accordance with specifications of said Arme.d Forces. PAR. 5. Said representations and implications are false, misleading and deceptive. In truth and in fact, respondents' said garments were neither manufactured for the United States Armed Forces nor in accordance with specifications of said Armed Forces. PAR. 6. By selling and distributing to wholesalers and dealers said products manufactured as aforesaid and having affxed to them the markings, insignia, tags and labels hereinabove described, respondents furnish to such ,wholesalers and dealers the means and instrumentalities through and hy which they may mislead and deceive the. purchasing public as to the origin, kind, type, and style of their said jackets and outer coats.

PAR. 7. Through the use of the words "manufacturing, Alfrs. of and "factory and receiyillg depal'tII.ent in their corporate name and Complaint 51 F. T. C.

on their stationery, invoices and price lists, respondents have represented and are now representing that they own, operate or control a factory or factories where their said merchandise is manufactured and that they are tbe manufacturers of such merchandise. In truth and in fact, neither the corporate respondent nor any of the individual respondents own, operate or control a factory wherein is manufactor' ed the merchandise sold and distributed by respondents. PAR. 8. There is a perference on the part of wholesalers and dealers for dealing directly with manufacturers of products rather than with outlets, distributors, jobbers or othet intermediaries such preference being dne in part to a belief that by dealing directly with the manufacturer, lower prices and other advantages may be obtained. PAR. 9. In the course and conduct of their business respondents are in direct and substantial competition with other corporabons and firms and individuals engaged in the sale in commerce of jackets and cuter coats.

Paint. 10. The sale and distribution in commerce of said garments in the color, style, design and with ma.rkings, as hereinabove alleged has had and now has the tendency and capacity to and does mislead a substantial portion of the purchasing public into the belief that said garments were manufactured for the United States Armed Forces and in accordance with specifications of said Armed Forces, and the use of the words "manufacturing, ::\tfrs. of " and "factory and receiving department" in their corporate name and on their stationery, invoices and price list, as herein alleged, further misleads the wholesalers and dealers who purchase the merchandise of the respondents into the erroneous mistaken belief that respondents are the manufacturers of their merchandise and own, operate or control the plant or plants where such merchandise is manufactured and into the purchase of substantial quantities of respondents' merchandise in commerce because of such erroneous and mistaken belief. As a result thereof, substantial trade in commerce has been unfairly diverted to respondents from their competitors and substantial injury has been done to competition in commerce.

PAR. 11. The aforesaid acts and practices of the respondents, as herein alleged, are all to the prejndiee and injury of the public and of respondents' competitors and constitute unfair and deceptive acts and practices and unfair methods of competition, in commerce, within the intent and meaning of the Federal Trade Commission Act. RAy! MANUFACTURING CORP. ET AL. 523 520 Decision DECISION OF THE CO:JnnSSIO 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 December 17 1954, the initial decision in the instant matter of hearing examiner John Lewis as set out as follows, became on that date the decision of the Commission.

INITIAL DECISION BY JOHN LEWIS, HEARING EXA1\IIXER The Federal Trade Commission issued its complaint against the above-named respondents on May 27, 1954, charging them with the use of unfair and deceptive acts and practices and unfair methods of competition in commerce in violation of the provisions of the Fed- ,eral Trade Commission Act. After being duly served with said complaint, the respondents appeared by counsel and filed their joint answer on J Ulle 23, 1954. Thereafter a stipulation, dated August 11, 1954, wa. signed by the parties, providing for the entry of a consent order rlisposing of one of the two principal charges in the complaint. Respondents, pursuant to said stipulation, have admitted all the jurisdictional allegations oT tbe complaint and agreed that the record herein may be taken as if the Commission had made findings oT j uriselictional facts in accordance with such allegations. Said stipulation provides that the answer heretofore filed by respondents is to be withdrawn as to the issues disposed of by such stipulation and that the parties expressly waive a hearing before the I-Iearing Examiner or the C01mnission and all further and other procedure to which the respondents may be entitled under the Federal Trade Commission Act or the Rules of Practice of the Commission. Respondents have agreed that the order to ceflse and desist issued in accordance with saiel stipulation shall have the same force and e:flect as if made after a full hearing and specifically waive (lily and all right, power, or privilege to challenge or contest the validity of said order. It has also been stipulated and agreed that the complaint herein may be used in construing the terms of the order provided for in said stipulation and, further, that the signing of said stipulation is for settlement purposes only and does not constitute an admission by respondents that. they have violated the law as to those issues disposed of by the stipulation. The aforesaid stipulation for consent order, after being approved by the Director and Assistant Director of the Commission s Bureau of Li6gation, was submitted to the above-named I-Iearing Examiner for his consideration, in accordance with Rule V of the Commission 524 FEDERAL TRADE COM1JISSlOX DECISIONS Order 1 F. T. C. Rules of Practice. Following the submission of said stipulation counsel in support of the complaint filed a motion on October 12 1954, requesting that the remaining charge in the complaint be dismissed, ,without prejudice, for the reason that counsel does not have any informatjon presently available to controvert the facts with respect thereto, submitted by respondents in the form of an affdavit This proceeding having now Calle on for final consideration by the above-named I-Iearing Examiner, heretofore duly designated by the Commission, on the cOlnpJaint; the answer of respondents, which is hereby deemed withdlT\Yll as to the charge covered by the stipulation for consent order; the said stipulation for consent order, which is hereby accepted and ordered HIed as part of the record herein; and the motion of counsel supporting the complaint to dismiss the remaining portion of the complaint, as to ivhich no opposition has been filed; and said I-Iearing Examiner having duly considered the record 11erein\ makes the follmving findings, for jurisdictional purposes, and order:

1. Respondent Ram Jlanufacturing Corp., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York with its offce and principal place of business located at 1150 Broachnty, New York, New York. Respondents Harry 1. Spiewak, Albert Spiewak and Fred Roth, are, respectively, President and Treasurer, See-rotary, and Vice President of said corporate respondent. The address of said individual respondents is the same as that of the corporate respondent.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents hereinabove named. The complaint states a cause of action against said respondents under the Federal Trade COl1mission Act, and this proceeding is in the interest of the public.

ORDER It is ordered That respondents Ram :l\anufactllring Corp., a corporation, and Harry I. Spicwak, Albert Spie"'ak and Fred Roth indiyi(lual1y and as offcers of said corporate respondent, and respondents' agents, representatives and employees, directly or through any corporate or other device, in the offering for sale, sale or distr.ibution of wefll'ing apparel, or of any other merchandise, in commerce as "commerce is defined in the Federal Trade Commission "'ct, do fort.hwith cease and desist from representing, directly or by implication, by marking, branding, labeling, tagging, or in any other, llanner, that such merchandise was manufactured for the Armed RAM MANUFACTURING CORP. ET AL. 525 520 Order Forces of the 1Jnitecl States or in accordance with specifications of saiel Armed Forces.

It i8 jw.ther O1'dered That the allegations of the complaint charging that said respondents have violated the Federal Trade Commission Act by representing that they own, operate or control manufacturing facilities be, and the same hereby are, dismissed without prcj udice.

ORDER TO FILE REPORT OF COMPLIA.:CE J t i8 oTdel'ed That the respondents herein shall "within sixty (60) days after service upon them of this order, file ,,,ith 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 Decemher 17, 1954J. 526 FEDERAL TRADE COMMSSION DECISIONS Complaint 51 F. '1'. C.