Clean-Rite Vacuum Stores, Inc., Samuel Berenson, and Etta Berenson

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Ix TH:E NIATTEH OF CLEAR RITE VACUUM I STORES, lXC., SA:\1lel BEREKSOK, AND ETTA BEREKSOX ORDER INION ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE !"RDERAL TItADE COJ\DfISSIOK ACT Docket 6181. Compla.int, Feb. 195J,-Decision, Apr. , 1955 OnJer requiring a retail dealer in \Vashington, D. to cease representing falsely in '; hait" achertising that it was maki,ng a bona fide offer to sell reconditioned vacuum cleaners at exceptionall;y low prices and that the machines would do a satisfactory job of cleaning, when such offers .were made for the purpose of obtaining leads as to pJ'ospectjve buyers and in fo1Jow calls on persons responding to tl1ern, respondent's salesmen disparaged the advertised cleaners and attempted to, and often ditl, sell them much more expensive cleaners.

Before Jfr. Earl J. li olb hearil1g exo,miner. ilfr. William J. Tmnpki11 Rne! ilfr. Michael .1. Yitale for the COlnmi,ssion.

Jioonin Ohalfonte of \Vashington \ D. lor respondents. INITIAL DECISIO:: BY EARL J. KOLE, HBARIXG EXAJ\UXER This proceeding is before the undersigned :Hearing Examiner for final consideration on the complaint, answer thereto, testimony and other evidence and proposed findings as to the facts and conclusions presented by counsel, and the Hearing Examiner, having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this his findings as to the facts and conclusion drawn therefrom: FINDIKGS AS TO THE FACTS 1. Respondent Clean-R,ite Vacuum Stores, Inc., is a corporation organized under the laws of the State of Maryland with its principal offce and place of business located at 925 F Street, K. \V., \Vashington, D. C. Respondents Samuel Berenson and Etta Be-reason are individual.ls and are President and Secretary-Treasurer, respectively, of the corporate respondent. These individual respondents formulate control and direct the policies, acts and pra,cticcs of the corporate respondent.

2. The respondents are now, and for several years last past have been,eno-aaeelb b in the sale and distribution of vacuum cleaners jn inter- 888 FEDERAL TRADE COIYIMISSIO DECISIONS Findings 51 F. T. C.

state commerce and in the District of Columbia, and are engaged in direct and substantial competition with other concerns engaged in the sale and distribution of va,cunm cleaners in interstate commerce and in the District of Columbia.

3. In the course and conduct of their business the respondents, lor the purpose of inducing the purchase of their vacuum cleaners, have engaged in extensive advertising in newspapers and in television and radio broadcasts. Among and typical of the statements and representations made in such advertising were the following: How would you li\:e to get a superbly reconditioned Electrolux Vacuum Cleaner, rebuilt by the Cleanrite Vacuum Stores, for only $8.75. Yes, only $8.75 complete with these work-saving attachments that are specially designed to save you hours and hours of work every week on your household cleaning. You should see what a terrific job this rug attachment does, and bow effortless too. It just glides over the carpet, but the powerful suction of this machine picks up every piece of lint, every dog hair, and it gets underneath the deep pile of the carpet and pulls out the dirt that' s buried there. Now this Electrolux doesn t cost you one cent until you re absolutely positive that this is the machine you ve been looking for. IVe want you to try it before you buy it. A. Cleanrite representative wil call at your home and give you a complete free home demonstration with absolutely no olJligation on your part. Yes, this beautiful reconditioned Electrolux, with a full one year guarantee on both parts and labor, plus all the attaehments, plus a sprayer attachment, can be yours for only $8.75 and on the easiest of easy terms. So, go to your phone right now, and call REpublic 7-0606. That' s Repnblic 7-0606. CLEAN-RITE STORES Washington s Vacuum Center ME. 8-5600 9251 St. K. W. Open Daily to 6 RECOKDITIOKED ELECTHOLCX Beautifully Reconditioned By Clean-Rite (Picturization of an Cleaner of 101 Uses Electrolux Vacnum COMPLETE WITH Cleaner) CLEAKIKG TOOLS '''written Guarantee for 1 Year ADVERTISE1) (Parts and Labor) 10. ITEMS ALWAYS FCLL CASH PRICE A V AILABLE 1 Commission Exhibit ::0. 3 , being an advertisement which respondents caused to be broadcast over Radio Station W:MAL in the Jear 1953. CLEAR RITE VACUUM 1 STORES) INC. , ET AL. 889 887 Concll1sion Easy Terms Arranged-Liberal Allowance on Your Old Cleaner FOR FREE HOilE DE110:\STR.\TIO:\ Pl10ne ::lE. 8-5GOO 2 Through the use of thc aforesaid st.a.tement and representations respondents represented, directly or by implication, that they ".cre making a bona fide oii8r to sell reconditioned Electrolux vacuum Iyonlclcleaners at prices of S8.73 and $10. , and that said cleaners do a satisfactory job of c1meaning.

4. The advertisements hereinabove described and others of similar import used by the respondents were not bona fide offers to seJ! the , but IYel'ereconditioned Electrolux vacuum cleaner described therein in fact, a part of a sales plan or procedure adopted by the respondents to sell their higher priced vacuum cleaners. In :fact, the vacuum cleaners so advertised "' ere of little or no value and would not do a satisfactory job of cleaning. 'Vhen a member of the purchasing public answered respondents' advertisement a salesman "as sent out with such vacuum cleaner for the purpose of making a demonstration. so doing, the salesman made no effort to sen such va,cuum cleaner, but instead used every effort to discourage such sale and belittle and disparagc such cleaners and only in those instances "Where the customer Iyas suffciently insistent did the salesman sell the machine advertised and in some insta.nces refused and neglected io sell or deliver the vacuum cleaner demonstrated. The salesmrm customarily brought with him ncw or more expensive machines which he insisted on demonstrating in comparison with the ma.chine advertised, and endeavored to induce and in many instances was successful in inducing the prospect to purchase a. ne\' or more expensive vacuum cleaner. 5. Through the use of the aforesaid fa.1e, deceptive ahd misleading statements and representations in advertising as a part of, and in con- , the, re-junction with, respondents' sales plan hereinabove described spondents have induced a substantial portion of the purchasing public to purchase substantia.l quantities of respondents' more expensive Y8.Clinm cleaners as is indicated by the fact that respondents' gross volume of business for the year 1051 amounted to $36J 000; for 1052, $3JO 000; and for 1053 , $200 000.

CONCLUSION The aforesaid acts and practices as herein found are all to the prejudice and injury of the public and constitute unfair and deceptive acts Fed-and practices in commerce \'within the intent and meaning of the eral Trade Commission Act.

2 Commission Exbibit Xo. 2. Advertisement In the Washington Post August 1. , 1833. 890 FEDERAL TRADE COJ\VIISSION DECISIONS Appeal from Initial Decision 31 F. T. C. ORDER It is ordered That respondents Clean-Rite Vacuum Stores, Inc., a corporation, and its offcers a,nel respondents Samuel Berenson and Etta Berellson individually and as offcers of the corporate respondent, and their respective representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of vacuum cleaners or other similar merchandise in commerce, as :' C011m01'CO " is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Representing, directly or by implication, that said merchandise is oifered for sale when such offer is not a bona fide offer to sell the 111p,rchandise so offered.

2. The use of any sales plan or procedure involving the use of false deceptive 01' misleading statements or representations in advertising \which are desigl1ed to obta.in leads or prospects for the sale of other or c1ilIerent merchandise.

3. Hcpresent.ing, directly or by implication, that vacuum cleaners which.h have lit.tle or no value as cleaning devices will, in fact, do a satisfactory job of cleaning.

ox APl'EAL FRQJI lXITL\L DECISIO B Y IEAD, Commissioner:

Presented hac for final determination upon the merits is the appeal of Tesponc1ents from the hearing examiner s initial decision which ruled that the named Tespondents Clean-Rite Vacuum Stores, Inc. and two individuals, Samuel Berenson and Etta Berenson, have engaged in unfa.ir and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. These individual respondents formulate, control and direct the policies, acts a.nd practices of the corporate respondent. The findings and conclusions of the hearing examiner follow gen- E:rally the allegations of the complaint. In substance they are that l'e, sponclents offered for sale, through extensive a.advertising in newspapers, and on radio and television, reconditioned Electrolux vacuum cleaners at prices of $8. 95 and $10. , which machines, in fact, were of litte or no value and would not do a satisfactory job of cleaning; that suell offers were not bona fide, but were, in fact, part of a sales plan adopted by respondents to sell higher priced vacuum cleaners; that such offers were m tde to obtain leads and information as to potential purchasers of vacuum cleaners responding to advertisements after which respondents' sa.lesmen called upon prospects to demon- CLEAR.c'l- RITE Vacuum STORES , INC., ET AL. 891 887 Appeal from Initial Decision etrate the machines advertised. It was found below also that salesmen made no etl'ort to sell the reconditioned vacuum cleaners advertised but, inetead, belittled and disparaged them; that only where customers were insistent were the advertised vacuum cleaners sold; and that in some instances respondents, through their salesmen, refused or neglected to sell or deliver the reconditioned machines demonstrated. The hearing examiner found, as well, that salesmen customarily offered and insisted on demonstrating machines which were new or mare expensive in comparison with those advertised and in many instances were successful in inducing the purchase of new and more expensive lnachines. Fina-ny, the hearing examine.r found that through the use of false and misleading advertising, and in conjunc- 60n with the sales plan deseribec1, respondents have induced the purchase of substantial quantities of more expensive vacuum cleaners, as is indicated by the respondents' gross annual volume of business in 19:11 of $364 000; in 1952 of $340 000; and for 1953 of $280 000. Respondents' appeal seeks to have the initial decision set aside on the ground that the allegations of the complaint have not been sustained and to llaye the complaint herein dismissed. Respondents submitted specific exceptions to the initial decision adverted to in their brief, and hereinafter discussed; and in addition to specific record references set forth therein, included the entire stenographic record and all exhibits of Ie red by both parties. We have fully considered the entire record, including the transcript of hearings, exhibit51 briefs of both parties find oral argument of counsel. For the reasons hereinafter stated, "Ye have concluded that the hearing examiner's initial decision is correct, th lt respondents' exceptions thereto are without merit and that re pondents' appeal should be denied.

.. ppellant.'3 excepteel to the fin clings of the hearing examiner to the effect that:

1. Advertisements involved did not make bona fide ofl'ers to sen the merchandise advertised;

. Vacuum cleaners advertised were of little or no value and \\ould not do a satisfactory job aT cleaning;

3. Adycrtisements offering reconditioned cleaners ".ere part of a plan to sell higher priced vncumn cleaners; 4. Through use of false and misleading advertising, and in conjunction with their sales plan, respondents inc1uced purchase of subst.antial quantities of higher priced vacuum cleaners as evidenced b:.y gross sales volume for each of the years 1851 , 1852 and 18fj3. At the outset 'Ye ,,ill consider exceptions 1 and toget.her. 892 FEDERAL TRADE COM1lISSIOK DECISIOKS Appeal from Initial Decision 51 P. e. Xine of the witnesses testifying in support of the complaint were shown to have been induced by the questioned advertising in various media, to seek to purchase reconditioned vacuum cleaners from respondent.s. From our examination of their unconiroverted testimony it is clear that the representations which stimulated them to act we e not bona fide offers to sell the itcllsaclvertisec1. It truly WflS "bait" advertising resorted to in order to get the feet of respondents' salesmen in the doors of prospective customers. This accomp1ishcd, the "sales pitch ' utilized, as disclosed by the record, uniformly involved aggressive and deliberate belittlcment and disparagement of the advertised reconditioned units, outright. refusal to (lemon strate or to sell, and resort to high pressure methods, hardly le timat8 in several instances to induce the purchase of more expensive machines. IVe think the tes6mony and exhibits are thoroughly convincing that the adyertising employed by respondents to further the sale of more expensive vacuum cleaners was false, misleading and deceptive in that respondr,nts had no intention of selling the reconditioned machines except as part and parcel of a sales scheme to sen more expensive vacuum cleaners. Such sales schemes, whereby many persons are, or may be, induced to pm' chase merchandise other than that featured in advertisements, are contrary to public policy and, in themselves, are an injury to the public and constitute unfair and deceptive ads and pra,etices in commerce. We expressly find respondents' exceptions 1 and 3 to be totally lacking in merit.

Respondents' second exception goes to the hearing examiner s finding that the reconditioned vacuum cleaners \n l"C of little or no value and would not do a satisfactory job of cleaning. There is direct and uncontrovert.ed testimony that these machines were as found by the hearing examiner. For example, two witnesses testified that reconditioned machines demonstrated "had a motor that was so weak * * * there \yas no suction at all " or that "it would not pick a thread up, and it would not pick a straw up * * * no suction at nJl." 1 Also, \ve find the record shows respondents' salesmen to be in substantial agreement with the hearing examiner on this finding when, as part of their sales p,itch " they belittled and disparaged the reconditioned machines in attempting to induce the purchase of higher priced ones. "'Ve find TE'sponclents ' second exception to be without merit and so reject it. Respondents' fourth exception, in substance, is tha.t there is no basis in the record for the hearing examiner s finding and conclusion that 1051 ($364 000), J 052respondents ' gross volume of sales for the years ($:140 000) and 1053 ($280 000) indicated that the questionedadver- 1 Record, pp. 24, 40, 47.

CLEAN-RITB VACl,UM STORES ll'\C. ET AL. 893 887 Order Usements resulted in the sale of a substantial quantity of respondents more expensi \'e vacuum cleaners. The argument is made that the testimony of the \vitness Samuel Berenson on this aspect of the case dealt entirely with the gross annual volume of sales for the years indicated with no breakdown of such figures as to "reconditioned" or "new and more expensive" vacuum cleaners.

,Ve think t.he inference drawn by the hearing examiner is valid on the record. He did not find that the entire gross annual sales volume resulted from respondents' use of " bait" advertising in conjunctioll with the sales scheme described. or is that the posit.ion we take. The record establishes that sales in fact were made; and, that "bait" advertising accounted for some of those sales. The inference is reasonable, and we so iind that respondents' gross volume of business for the years stated indicates in the circumstal1ces that substantial quantities of more expensive vacuum cleaners Were sold as a result of tho respondents' sales scheme. Respondents elected to introduce no eV c1ence io contravene the allegations of the complajnt in this regard or to offset the testimony of the witnesses supporting the finding. There are present in the record here undisputed facts and circumstances, the weight of which support the ultimate fact found-namely, that the advertisements complained of did result in the saJe of a substantial quantity of respondents' more expensive vacuum cleaners. Consequently, we reject respondents' fourth and last exception. The respondents' appeal is denied and the initial decision of the hearing examiner is affrmed.

Commissioner Howrey did not participate.

FINAL ORDER Respondents Clean-Rite Vacuum Stores, Inc., a corporation, and Samuel Berenson and Etta Berenson, individual11y, having filed, on August 4, 1954, their appeal from the initial decision of the hearing examiner in this proceeding; and the matter having been heard by the Commission on briefs and oral argument; and the Commission having rendered its decision denying the appeal and affrming the initial decision:

It V; ordered That the aforesaid respondents shah, within sixty (60) days after service upon them of this order, fie with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with the order contained in said initial decision.

Commissioner Howrey not participating for the reason that he did not hear the oral argument.

894 FEDERAL TRADE COMMISSIOT\"' DECISIONS Complaint 51 F.