Max Schwartz and Sarah Schwartz trading as Max Schwartz Company

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

IN THE J\IATTER OF MAX SCHWARTZ AND SARAH SCHWARTZ TRADING AS MAX SCHWARTZ Camp ANY ORDER , ETC., 1K Regard TO THE ALLEGED YIOLATION OJ: THE FEDERAL TRADE CO)I1\188IOK ACT AND OF Tile \VOOL PRODUCTS LABELING ACT lJocllet 61U2. Complaint, .liar. l!JJ. Dccisioii, Jloi'. lS, 19j5 Order requiring an individual in ),Tew York City who purchased from mils and jobber.: bolts of cloth which he cut into snit lengths and sold to pedlliers, to cease labeling such domestic "cuts" falsely as imported from the British Isles; failng to disclose that certain wool-like fabrics \\'ere in fact made from rayon and acetate, and tllat others were '; seconds mill ends, and umnel'cbantables; and failing to label certain wool products as required by the .Wool Products Labeling Act, with respect to the constituent fibers country of origin, and otherwise.

Before llfr. Fl'wnk H7:er hearing examiner. . George E. Stein?netz and 3fT. John .1. NcNally for the CommlSSlOJl.

1111'. 11yman Flied of Kew 1. o1'k City, for responde,nts. DECISION OF THE COllDIISSIOX Pursuant to Rule XXII of the Conlmission s H.ulcs of Practice, and as set forth in the Commission s " Dec.ision of the Commission and , 1955, theorder to File Report of CompJianee, dated March IB initial decision in the instant matter of hearing examiner Frank IIier, as set. out as follmys, becnme on that elate the decision of the Counnissioll.

J);ITIAL DECISION BY Fn \XK 1-IIER) HE.\JU:f'W E:LDnSER Complaint herein issued j)farc.h 11, 1954 charge,s respondents as copartners "\with violation of the Federal Trade Commission Act (lG U. S. C. 45) and the IV 001 Products Labeling Act of 1939 (15 r. S. C. OB (a)- (j)) in that it a!Jeges that respondents: l.:.lisreprcsent.ed domestic.ally producecl fabrics as being imports. . Failed to disc-Jose true fiber contents on synthetic fiber fabrics simulating natural fiber fabrics.

:3. Failed to rlisc.ose that inferior fabrics '''ere not nrst quality. 4. Falsely labeled fabrics as to tmc fiber content. 5. Failed to label fabrics as to true fiber content. Findings 51 r. T. C. Respondents' answer denied partnership, admitted jurisdictional facts, and denied the charges. Six hea.rings before the undersigned Hearing Examiner, theretofore duly designated by the Commission resulted in 485 pages of testimony froln 24 .witnesses, and 47 exhibits all received in support of the complaint and all of which \Were filed of record in the Offce of the Commission. Respondents offered no evidence. On final consideration of the above, plus the proposed findings and conclusions submitted by a1l counsel, the I-learing Examiner finds that this proceeding is in the interest of the public and makes the follow iug :

FI2\ DIXGS AS TO THE YACTS 1. Hcspondent Iax Sch"\yartz, an individual trading as I\Iax Schwartz Company, has had his office and place of business locate,d at 143 'Vest 29th Street, New York City, D.'e\Y York, (luring 1050 and part of ID51. Since ID5l his place of business has been located at 27 East 20th Street, Ke\," York City. Respondent Sarah Sclnyul'tz i the ,yifc of respondent lax Schwartz and occasionally visited hie: place of business and while there would occasionally ans\ycl' the telephone 01' otherwise incic1ental1y assist him, but there is no substantial evic1e,nce to indicate eomnwrcial partnership Y\,lth him 01' complicity in or responsibility for the acts and practices charged. 2. Since 1949 to the present, respondent l\fax SclnvarLz . (hereinafter referred to as respondent) under his own name or as ::iax Schwartz Company, has been and is now engaged in the sale and distribution in interstate commerce, of \\001, rayon and acetate fabrics. primarily to peddlers, located throughout the United States, for resale to the consuming public. Sales volume was bet\fcen $75 000 to 885 000 annually.

3. Respondent's oprrabon was the purchase of bolts or partial holts of cloth, mostly from jobbers, a fev of which he occasionally resold intn.ct or In part to other jobbers, but the great majority of 'ivl1ich he cut into 31j2 yard pieces, known in the industry as "cuts" because this val'daO"e is sllffcient to make therefrom a suit. and these he old to p ddler: The latter operate in various localitie around the country '''lth no fixed place of abode or business. They find out about respondent from each other, order by mail, either C. O. D. or with cash. Each bolt when bought is labeled as to fiber contents and usually, but not always. the invoice would state the fabric or the fiber C011tent or both. ,; Respondent kept these "cuts" in 23 piles of :!;) each on tables in his premises assorted as to color or weave or type, ulllnbpIL'd. hmve,ver as to origin. fabric or fiber content. On occasion. respondent does not reduce a huh to " Cllts: l1Jlti1 he geb fin order. MAX SCHWARTZ CO. 835 8.'13 I-indings 4. When an order is received, respondent, usually at the request of the customer, would impress on the inside of the cloth a "transfer which is a decalcomania on tissue paper impressed on the cloth with a hot iron. Only one transfer was put on anyone "cut." At least up nn611952, respondent used transfers reading "Bra.dford, England All 1Vool" and "BradforrJ, England " together with a depiction of a coat of arms or heraldic device. There is no evidence that the former transfer was used on any fabric not in fact all wool. On July 31 1952, he registered "with the U. S. Patent Offce a trade mark of "Lord Leslie " together with a coat of arms depiction. He denied thereafter using t.he "Bradford" transfers, but the record shows that in 1953 he did buy substantial quantities thereof and it cannot be assumed in the absence of other explanation, t.hat they were not used. i). The depictions of these coats of arms on these transfers are not as urged by the respondent, duplicates of the royal British seal, but are close enough to it, and do resemble other British coats of arms so that without minute comparison, or training in heraldry, an ordinary citizen of thjs country would nevertheless think so. J\iere inspection of these transfers convinces the Hearing Examiner that anyone outside the industry would assume t.hat fabrics so marked were imports from the British Isles. There is also substantial and c.rec1ible testimony that the ordinary purchaser would so believe. A tual deception is unnecessary a tendency and capacity to deceive is suffcient. The fact is that practically all of the fabrics so marked were of domestic manufacture. Respondent's testimony on this issue was either so evasive or so vague, and its contradiction in the record 30 patent, that it is rejected lor lack of credibility. 6. Although there are American fabrics, whether wool or otherwise which are just as good, if not better, than British fabrics, nevertheless t.he overwhelming evidence is that a substantial part of the American purchasing public believe the contrary to the extent that they will pay as much as dollar a yard more for a British import over an American product. "Although the false article is as good as the true one, the privilege of deceiving the public even for their own benefit is not a Jegitimate subject of commerce. " 2 7. Counsel for respondent urge that since respondent has, as he sa.ys, discontinued using these labels-the Bradford labels since 1951 and Leslie label since 1953-this charge should be dismissed. However, the evidence of discontinuance is in conflict, and respondent's l:No evidence was offered b . respondent as to any iwports. 'Worden v. California Fig Syrup Co. 187 U. S. 516 , 529; Natiol1ul Si/ver Co. v. F. T. G. SS I'. 2d 425. 427.

836 FEDERAL 'TRADE COML\nSSIO DECISIOXS Findings 51 F.

lack of ca nc10r ml(1 surprisingly poor memory of detnils, \which would ordinarily be fresh in his mind, convinces the IIe.aring Examiner that it is highly doubtful that the practice has ceased aud still more doubtful that it wil not be resumed when "the heat is off. " The plea for dismissal is accord!lngly denied.

8. The conc.usory I-nding on this issue therefore is that respondent's practice of labeling, as found above, has the tendency and capaeity to deceive a snbstaniial portion of the purchasing public into buying domestically made fabrics believing them to be British imports. D. Rayon and 8cetatc are synthetic textile fibers which may be and are manufactured so as to simulate wool or other natural fibers in texture and a,ppel rance. Fabrics manufactured from such fibers have the appearance and feel of wool, particularly where the \yeave and pattern are the same as \YE:ll known and typical woolen fabrics, such as gfl.bardine covert, sharkskin, herringbone, serge, etc. :Many in the textile business can distinguish them from what they simulate, but comparatively Jew other members of the public can do so. Some with years of experience in textiles, are unable to so clistinguisl1; certainly the l-learing Examiner could not from the exhibits in this case. Tllere is no doubt in his mind that these synthetic fabrics simulating natural fiber fabrics have been purchased by a substantial number of the public for what they are not, since the bulk of respondent's sales were of these rayon and acetate fabrics and respondent did not label many of them as to content. Such a practice, under' the circumstances has, at least, the capacity and tendency to deceive and to induce pnrchases in that belief.

10. Eft' active relief, however, can be afforded by that prayed for under the fifth is, and no se,parate prohibition under the Federal Trade Commission Act, as distinguished from the ,V 001 Products Labeling Act, is d8l!lled necessary.

11. The third issue is that of respondent selling "seconds tender or weak goods" and "unmerehantables" without marking them as such. A "second" is a fabric containing too many defects (in the color, Weaye or 1yidth) to be satisfactorily usable for all purposes. AJI fabrics contain some ancl the tolerance pci' 60 yard bolt seems to vary with the individual cloth producer s 0\\"11 standards. One allo\Ts 6 defects per bolt., another 24. Included in "seconds ' are "tender or wea.k goods" which generally connotes a tensile strength less than what is necessary to withstand, without tearing, the strains put on various parts of a suit in ordinary weal' This also yaries \with the manui' actl1rer. One will reject as n "second" any fabric which will not withsta,nd 25 Ibs. pull, others less. Eighteen pounds pull with- :; . p ( IAX SCHWARTZ CO. 837 833 Findings out tearing seems however, to be the minimum. "Unmerchal1ta.bles are "seconds" of the poorest grade-so many defects they are fit only for shrouds, certain linings or boys' caps. An of these substandard goods are made by all mills, sold by them as such, plainly marked, and at as little as 7 of the price of first quality merchandise. 12. Respondent admits buying this substandard merchandise most, of the time. He did dcny buying and reselling "tender goods " but a number of his purchase invoices shows that he. did. If these \fete. exceptional, respondent offered no evidence 1.0 that effect. One of his cuts" in evidence was so "tender" that it store in the hands. Ilis records further 8ho\\- the purchase of "ulllncl'chant.ables-as is" from mills. His o\vn purchase records, plus his experience. in the textile business, refutes any claim of ignorance all respondent' s part that he was buying "seconds." The record amply establishes that upon resale this substandard quality was riot marked, although he well knmy that his customers peddle.d these "cuts ' to individuals inexperienced in textiles, who would buy by appearance and price, without testing, to have suits made therefrom. N Rturally such ultimate purchasers want only first qua.lily merchandise, free from latent as "Tell as patent defects to the extent that the suit ",vould wear comparably with those purchased in responsible retail stores. Direct proof of this of course, would be redundant. A.ctnul deception neeclnot be shmvnthe capacity and tendency is enough:

13. lt is now too \ven settled to ad l:t t of eav.il that one \\"ho pll into the hallets of reta, s--QJ;:-2thel )lni\nsand instrlunel!tality w llere i8Jti! oTJ!. e-- i !.lg l? lJ)j\.J!1.I!YJ !:!!i:s Ls1 is equo;py- resp sible thcref9r, Tf1Ht a p' I:. ()1 gdoeI oso fllrnisl1es anoth81 with.the. . 11041.1S \()XLS lm_I!lflti ng..8,.. f1:' 1 , ()l been a part Qr. thc_Jaw- of. Ilnt 9n, " The record here shows that substantially an of respondent s sales \YCTe to itinerant peddlers, who bought from him by mail for cash Or by C. O. D. to general delivery; that they move constantly from locality to locality peddling from door to door; that they form sort of a gypsy brotherhood tied by blood, marriage, common interest or method; that the National Detter Business Bureau has voluminous files of complaints and a long record of fraud, swindling, misrepresentation deceit, shopliftiug and even thieving against them; and that at least one of them had obtained from respondent his business card with her name printed thereon as his representative. Respondent admitted furnishing these ca-rds to anyone dema.nding them. These people apparently paint Buckellstctte Y. F. T. c. 134 F. 2d ::G8: Brown FOlcr &: Win: CO. Y. 1' '1' 64 F. 2() 03-.1, F. '1'. C. v. Winstrd Hosierlf Co. 258 l: S. 483 , 494; Ch(l8. A. Brewer tf 80118 V. F. T. C, 148 F. 2d 74.

838 FEDERAL TRADE CO;VL\IISSION DECISIONS Findings 51 T. C. barns with alleged aluminum paint ,which, however, promptly washes off after the first heavy rain, or they sell, under their Scotch or English names, fabrics represented to be imports. They engage also in other activities, complained of, as confidence games and sW1uclling schemes. 14. It is true, of course, as urged by respondent, that he cannot be held to be a guarantor or insurer of the honesty or dishonesty of his customers-no seller, absent complicity, can be punished for happening to sell to a thief. This evidence is not competent on that point, but it is competent to show the social importance of accurate and adequate labeling; that frauds could be and were practiced on purchasing consumers by his customers, made possible or at least easier by his failure to label or his mislabeling done at their request; and that respondent knowingly aided and abetted their practice. It is also competent in answer to respondent s contention that his mislabeling, failure to label and failure to label properly did not deceive those to ,,-hom he sold. Of course, these peddlers were not deceived. From their character and record they apparently wanted just what respondent did or failed to do. This is borne out by the fact that the trausfers connoting or suggesting importation were put on by respondent largely at the suggestion of these peddlers. It is obvious from this record as a whole that respondent, kno\ving the character and operations of those with whom he dealt and upon whom he depended for practically all of his business (and the Hearing Examiner is satisfied that he did know) failed to label at all, failed to label accurately, mislabeled and dealt in per se deceptive "seconds" to satisfy these swindlers and thereby increase his sales volume-in other words, aided and abetted theln. 15. The remaining two charges allege violation of the ,Vool Products Labeling Act, namely, failing to label true fiber eon tent and falsely labeling such content. As to the first, there is no doubt on this record. Respondent bought and resold wool fabrics and also rayon and acetate fabrics and mixtures of both. "\V 001 pure-hases alone rep. resented about 10 percent of the total. As to the woolens, the record is uncertain as to labeling. But as to the bulk of his sales, wool and rayon or acetate, by his own admission, respondent sold in interstate commerce without any marking as to fiber content -whaisoever except such deceptive transfer markings described in Par. 4, supra, put on by him at the request of the peddler. Most of this material came to him marked as to fiber content as the law requires. Renee, the finding is that respondent misbranded most of his "cuts" in that he did not, when sold, affx thereto a stamp, tag, label, etc., which showed the percentage of wool and each fiber other than wool in violation of Section 4 (a) (2) of said Act.

IAX SCHWARTZ CO. 839 833 Findings 16. As to false labeling, the record is barren as to how shipments of pure woolens were labeled as to fiber content, and since no tags were affxed to shipments of other fabrics showing their exact fiber content there is nothing to show that respondent falsely tagged non wool as wool. However the Act referred to provides in Section 2 (e) thereof that "wool product" means any product, or portion thereof, which contains or purports to contain 01' in any 1.()ay is represented as containing wool, etc. The charge, therefore, rests on the circumstances which would lead to the impression that fabrics were an 11'01 or contained wool \vhen in fact they were not.

17. Very litte rayon or acetate made in the British Isles is imported into this country-so little that the public here believes an import from there to be woolen. Respondent, as found supra, has misrepresented domestic fabrics to be British imports by the use of the transfers hereinabove descrihed in Par. 4. A very substantial part of respondent' sales were so marked regardless of fiber content. Specific examples are in the record, without fiber content., tag or other IJlal'king\ except the transfers referred to. l\fany an unskilled person would assume that such fabrics were woolen. This false impression is heightened by the fact that these rayon and acetate fabrics resemble "woolens in weave, color, pattern and type (see Par. supra) and by the fact that these fabrics were made up at the mill in 60 incli or more widths, Vdlich the record shows, is the usual width for ,yoolens. 18. :Moreover, there is in the record as an exhibit a "cut" 5 purchased by an investigator from a peddler and which upon scientific analysis for fiber content showed 17. 0 to 17.3 percent wool, the balance rayon. This piece was unlabeled as to fiber content, except indirectly, in that it bore the "Lord Leslie" transfer. The peddler witness testified he became acquainted with the fact that respondent sold "cuts" throughbuying a number of them from a man in a poolroom. He subsequently bought from respondent 150 or more cuts, but was unable to say whether the sample he sold the investigator was so bought or was among the six or seven pieces he bought in the poolroom. Respondent's name and address were on the brmvn wrapping paper which surrounded these "poolroom cuts." There was thus some doubt at that time that the material analyzed for fiber content came from the respondent, but subsequent evidence dispels that doubt: ID. The analyzed piece has the "Lord Leslie" transfer. The die from which this transfer was made, was specially cut for and paid for by respondent by a transfer making concern. The mark v;rs registered in the u. S. Patent Offce by respondent for use in commerce on woolen Commission s ExhibH 14.

Order 51 F. T. C.

and rayon piece goods. The transfer making concern s offcials testified categorically that when a. die is especially made np by them for a particular customer it was available to no one else, although they sell transfers of their own designs. Respondent, hmvever, in one place said six more used the same transfer,6 in another place in the transcript said it "could be" others used it, that everyone uses tra,nsfers. Respondent, as a witness, was so uncert.ain and so uncooperative that the credibility is clearly with the offcials of the wholly disinterested transfer manufacturer and it is so found. The preponderant and substantial evidence therefore is that respondent by using these transfers, together \with other facts noted, has sold in commerce fabrics which he represented to be woolen when in fact they either ,yore not woolen or contained a very small percentage thereof in violation of Section 4 (a) (1) of the vVoDI Products Labeling Act. 20. All conflicts between respondent's testimony and the testimony of others, or between respondent's testimony and documentary evidence or cireumstances in the record have been resolved against the respondent clue to what in the Hearing Examiner s judgment, from his observation of respondent as a witness, was a lack of candor, a most surprising Jack of memory or knmde.c1ge about his business, and t' ,' asi ve ans"'ers.

CONCLTISIOK The acts and practices of respondent as hereinabove found were all to the prejudice and injury of the public and constituted unfair and deceptive acts and practices within the intent and meaning of the Federal Trade Commission Act (15 l,T S. C. '15) and in viola,tion of the Wool Products Labeling Act of 1989 (15 U. S. C. 68 (a)- (j)) and of t11e rules and regulations promulgated thereunder and by reason t.here,of constituted unfair methods of competition, and unfair and de ceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

OlWER It 1:8 ordered That the respondent J\Iax Scln\artz, individually, trading as JIax ScJnfartz Company, or under any other name: find respondent's representatives, agents and employees, directly or through any corporate or other device, in connection ,dth the offering for sale. sale or distribution in commerce, as "commerce.e" is defined in the Fed ral Trade Commission Act, of fabrics, do forthwith cease, and desist from:

e Transcript 47. lines 7-16.

MAX SCHWARTZ CO. 841 833 Order 1. Representing, directly or by implication, that fabrics manufactured in the United States are manubctured in any other country. 2. Selling fabrics known as "seconds " or "unmel'cha.ntablcs: without clearly and conspicuously marking said fabrics with the above words or terms or other words or terms of the same import, in such manner that such markings w111 not be obliterated. It is further ordered That the respondent, :t\ax Schwartz individually, trading as :Max Schwartz Company, or under any other name, and respondent's representatives, agents and employees, dil'ectJy or through any corpora,tc or other device, in connection with the introduction or manufa,ctl1re for introduction into commerce or the offering for sale, side, tra,nsportation or distribution in commer( as "commerce " is defined in th0 \V 001 Products Labeling Act of 1039 of '''001 fabrics or other wool products, as such products are defined in and subject to the Wool Products Labeling Act of 10:J9, which products contain, purport to contain, or in any way are represented as containing " \yool repro( essed wooF or " reused wool :: as thus8 terms are defined in said a.ct, de, forthwith cease and desist from misbranding such products by:

1. Falsely or deceptively stamping, tagging, labeling, or otherwise identifying such products as to the character or amount of the constituent fibers therein.

2. Falsely or deceptively stamping tagging, labeling or otherwise identifying such products, either directly or by implication, as to the country of origin thereof.

3. Failing to affx securely t.o or place on each sllch product a stamp, tag, label or other means of identification showing in a clear and conspicuous manner:

(a) the percentage of the total fiber.r w.eight of such wool product exclusive 01' ol'namcntaJion not. exceeding five percentmn of said total weight, of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber other than wool where s,lid percentage by weight of such fiber is five perccntum or more, and (5) the aggregate of al1 other fibers; (b) the maximum pcrccnLlge of the total weight of such wool product of any non-fibrous londing, filling or adulterating matter; (c) the name or the registered jdentjfication number of the manuacturer of such wool product. or or one or more persons engaged in introducing such wool product into comrnel'c.e or in the offering for sale, sale, transportation, or distribution thereof in commerce, as "commerce" is deJinecl in the Fed2ral Trade Commission Act and in the 'Vool Products Labeling Act of 1939. Provided That the foregoing provisions concerning mjsbranding shall not be construed to prohibit Order 51 F, T. C.

acts permitted by pamgmphs (a) and (b) of Section 3 of the Wool Products Labeling Act of 1939; and, provided 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.

It is further ordered That complaint herein be, and the same hereby , dismissed as to Sarah Schwartz, named as respondent herein. ORDER TO FILE REPORT OF COMPLIANCE It i8 ordered That the respondent Max Schwartz, an individual tmding as Max Schwartz Company, 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 to cease and desist (as required by said declaratory decision and order of March 18, 1955J. &:

GOLDIN-FELD1Ifit, L C., ET AL. 843 Complaint