The Maico Company, Inc.

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IN THE :JIATTER OF THE ::rAICO COMPANY IKC.

CONSEKT ORDER , ETC. , IX REGARD TO THE ALLEGED VIOLATION OF SEC. 3 OF THE CL.:\. YTON ACT Docket 5822. Complaint, Oct. 24, 1950-Decision, May, 1955 Consent 'Order requiring a manufacturer of hearing aid instruments and parts and a cessories in Minneapolis, J\Iinn., to eense violating 1,et. 3 of the Clayton Act by entering into such exclusi,e contracts with distributors as require tl1em to agree to earry its products only, to deal' their stocks of competitive products and not to order any more of such pl'?ducts for resale. Before lYlr. Webster Ballnger and lift. Fmn1c Elier hearing examiners.

Mr. Wiliam C. Kern and lift. And?'e"" O. Goodhol'e for the Commission.

DOTSey, Oolman, Barke,' , Scott Barber of ::linneapolis, Minn. for respondent.

CO:.IPLAIXT Punmant to the provisions of an Act of Congress approved October 1914, entitled "An Act to Supplement Existing Laws Against Unlawful Restraints and :Monopolies, and for other purposes " commonly known as the Clayton Act, the Federal Trade Commission having reason to be.lieve. that the Iaico Company, Inc., a corporation hereinafter designated and referred to as respondent, has violated the provisions of Section 3 of said Act, the Commission hereby issues its complaint stating its charges in such respects as foUO\ys: P ARAGfu\PI- 1. Respondent, The )'Iaico Company, I DC., is a corporation, organized, existing and doing business under and by virtue of the laws of the State of :Minnesota, and having its principal offce and place of business at 21 Korth Third Street, Minneapolis, Minnesota. PAR. 2. Responclent is now, and for many years last past has been engaged in the manufacture, distribution and sale of hearing aid instruments and parts and accessories; the principal line of products manufactured, distributed and sold by respondent is now, and has been, a line of hearing aid instruments which are advertised and sold under the trade name "I\.faico.\' Such products are sold by respondent for resale and use within the l united States and the District of Columbia. Respondent's hearing aid instruments are nationally advertised enjoy wide sales throughout the various States of the United States 1198 FEDERAL TRADE CO \IISSION DECISIONS Complaint 51 F. T. C.

and respondent is one of the larger manufacturers and distributors of hearing aid instruments in the hearing aid industry. Respondent' s annual sales were approximately two milion dollars during the year 1948. Respondent now sells, and for many years last past has been selling, its said products above-described to approximately 155 distributors located throughout the several States of the United States, the Territories thereof, and in the District of Columbia causing said pToductswhen sold La be transported frora the place of manufacture to the purchasers thereof located in States other than the place of manufacture, and there is now and has been for many years last past, a constant current of trade and commerce in said products between and among the various States of the United States the Territories thereof, and in the District of Columbia, PAR. 3. In the course and conduct of its said business, as herein described, respondent has been for many years last past in substantial competition in the sale of hearing aid instruments and parts and accessories therefor, in commerce between and among the various States of the l:united States, the Territories thereof, and in the District or Columbia, with other corporations and with persons, firms and partnerships.

PAR. 4. In the course and conduct or its business in commerce respondent has made sales and contracts for sale or its products and is still making sales and contracts for sale or its products or fixing a price charged therefor or discount from or rebate upon such price on the condition, agreement or understanding that the purchasers thereor shall not use or deal in goods, wares, n1erchnndise, machinery, supplies 01' other commodities or a competitor or competitors or respondent.

Among such contracts for sale, but not limited thereto, have been and are those which respondent entered into with its distributors. This contract is a form contract prepared by respondent and used by it in contracting with all its distributors. Paragraph Two or the contract now being used by respondent in contracting with its distributors provides as follows:

2. Distributor agrees to order and purchase exclusively from Company and Company agrees to sell to Distributor, on terms as hereinafter set forth and snbjeet to Company s ability to make delivery, Distributor s rcquircme,nts of the products described in Paragraph Onc (1) hereof, and Distributor further agrees to devote his entire time and attention and his best efforts to promote the sale of Company products; to maintain a suitable sales offce, or offces, adequately THE ::IAICO CO, ) IXC. 1199 1197 Order Denying Appeals, Etc. staffed for local and territorial sales coverage; to render adequate service to users of Company s products; to con10rm to Company credit, sales, guarantee and service police-ies as set forth in Company's Distributor Policy l\Janual, Franchise Supplmnent, current bulletins and in its advertising to the public, and to refrain frOlTI seDing, marketing, distributing, or othenyise dealing in other brand or secondhand merchandise or indulging in any trade practices or doing anything which may in any way impair or adversely affect the good-will or reputation of the Company.

among such sales and contracts for sale, but not limited thereto have been and are those in which respondent, in selling its products to its distributor has required the distributors: either orally or in writing, or both, to agree to carry j'espondenes products only and to clear their stocks of products other than those sold by respondent and not to order any more of such items for resale by the distributor. PAR. 5. The effect of said sales and contracts for sale on sneh conditions, agree,ments and understandings 111ay be to substantially lessen eompctition in the line of l'OlErnerce in "Thich the respondent is e.11gage(1 and in the line of commerce in which the customers and purc.hasers of respol1c1e.nt are engaged; and tend t-'l create a monopoly in responclent in the manufacture and sale of h al': lg aid instnunents and parts and ftccessories therefor and other gouds, ',ar.es and merchandise in the manufacture and sale of which respondent has been and now is engaged.

\TI. 6. The aforesaid acts of respondent, The ).Jaico Company, Inc. consbtl!le a violation of the provisions of Section of the hereinabovementioned act of Congress pntitled "An A.d to Supplement Existing La\\' \against LTnlawfnl Restraints and :.\Ionopo1ies, and for other pllrposes': approycd October 15 , 1 D14, (the Clayton Act). Inter1ocntory opinion of .January 21 , 1955, sustaining hearing exminel'\; overruling of motion to qnash subpoenas calling for production at hearing of records, etc., shoydng total sales of IlPa.ring a, batteries to each oll'espondenfs eompetitol' , in proceed1ing concerned with mnmtfflctUl'er s exelllsive, c1eating C'ontrn.cts ,with its distributors. OIlDEn DE::YIX(; .'lPT'EM. S FnOJI ElJLIXG DESYISG JI01')O:;' S TO QC"\8J1 S"GBPOENAS- DUCES TECDll This InatteT haYlng come before the Commission upon the appeals r'! :, it of General Dry Batteries, Ine. , and Xational Carbon COlnp division of TJnion Carbide & Carbon Company, from the ruling of the 42378:- 31'- , ,, Opinion 51 F. T. C.

hearing examiner of June 23, 1954, denying their motions to quash subpoenaes duces tecum addressecl to them in this proceeding, and upon the motion of P. R. l\'allory & Co. , Inc., objecting to the hearing examiner s refusal to quash a similar subpoena addressed to it; and The Commission having determined, for the reasons stated in the acc.ompanying opinion, that the moti0115 to quash were properly denied, and that the offer of compliance \Yith the subpocnaes in an alternative manIlcr satisfactory to respondent was improperly rejected by the hearing examiner:

It is ordel'd That said appeaJs and mid motion of P. n. fallory & Co. Inc., are hereby denied.

It isj'lt'ither ol'do' That the heating examiner s ruling, requiring the parties sub:iect to the subpoenaes duc.es tecum to reveal the names of their customers and the dollar value of purchases of each in compliance \\ith these subpoenaes despite respondent s wiJ1ingness to waive this requirement, is hereby reversed.

Commissioner )fEAD dissenting.

OPIXlON OF 'lhe COllDnSSIO By GWYXXE, Commissioner:

Involved here arc appeals of General Dry Batteries, Inc., and Kabonal Carbon Company from rulings of the hearing examiner denying motions to quash subpoenas duces tecum. )J . H. l\Iallory & Co., Inc. did not file notice of appeal but did file a memorandum with the Commission stating its objections to the hearing examiner s rulings. The complaint was issued under Section 3 of the Clayton Act and charged respondent :.Uaieo Cornpan)', Inc. ith entering into exclusive dealing contracts with its distributors which had the efiect of substantially lessening competition and which tend to create a monopoly in respondent in the manufacture and sale of hearing aid instruments and parts and accessories therefor and other goods, wares and merchalk1ise in the manufacture and sale of which respondent has been and is now engaged.

The hearing examiner found that the exclusive dealing contra.cts did have the et1eet of ubstantj t11y lessening competition and tending to create a monopoly. lupin appeal the opinion by Iason, Commissioner, states: 1 T1:e hearing examiner rejected all of respondent's attempts to present evidence for the purpose of showing (1) that there has been , (2.) that the volume of an inc.rease in the number of its competitors business of its c.ompetitors has increased, (3) that its share of the 150 F. T. c. 485.

THE Malco CO. , lKC. 1201 1197 Opinion lllarket has been decreasing, (4) that its dealers constitute a small perc;entage of the totalllllmber of hearing aid dealers in the country, and (5) other matters relating to effect on competition. These factors, in our opinion, an have a very real bearing on ",,,hother there may be, or alre,ady has been, a substantial lessening of competition due to respondent:s exclusive dealing contracts. Accordingly, the case was remanded to the hearing examiner for the deyclopment of a record slliIicient to enable the Commission to determine the actual eifect upon competition. After the hearing had been resumed, the respondent secured and served on the proper offcials of the three battery companies named in paragraph one hereof subpoenas duces tecum. The subpoenas called for the production at the hearing of the following.

"Books and records of said company showing the total sales of said company, of hearing aid batteries, by types, amounts, and dollar volmoe to each hearing aid manufacturer or their respective dealers or distributors to whom it BOJel batteries for each of the years 1949 through 1954, inclusive.

Instead of complying literally with the subpoena, the National Carbon Company, by agreement with the respondent, brought to the hearings a document which for identification purposes was marked Respondent' s Exhibit 68. This was a list sworn to have been made from the books and records of the company, showing the relative position of the 15 largest purchasers of hearing aid batteries during the years 1949 to 1953, inclusive, as determined by dolh,,. purchases. The list did not give the dollar volume of purchases nor the names of the customers with the exception of respondent. All others were identiiied by lett€rs of the alphabet.Counsel for the complaint objected to the introduction as being incompetent to show respondent's position in the hearing aid industry and also because the names of the customers were not included. The objection was overruled with the reservation that counsel might move at the proper time to strike the evidence. On cross-examination the witness declined to reveal the names of customers a,nd the dollar value of purchases and counsel for the complaint then moved that the exhibit be stricken. The hearing examiner indicated that cOllnsel was entitled to have the information sought, on cross-examination and gavc the witness until the next morning to produce it. or to move to quash the subpoe,nas. On that day the National Carben Company moved to quash the subpoena on the ground that. it is unreasona,ble in scope since it has to do ,with confidential business information, that it is irrelevant and immaterial and that compliance therewith vwulcl work an undue hardship. This motion was overruled.

, Opinion 51 Ji'. T, C. The record in regard to General Dry Batteries Company is substantially the same. P. R. Mallory & Co., Inc. , appeared by counsel and stated it ,vas ready and 'willing to put in the required evidence. However, in view of the stand taken by its two competitors, it also moved to quash the Sll bpomIa.

Thus it appears that respondent 1\as not insisting upon literal compliance I"\ith its subpoena. An arnmgement had been worked out which was satisfactory to both parties. This caned ror the introduction of certain evic1ence which the hearing examiner helc1 \yas not at that stage in the proceedings subject to the objection of irrelevancy. Upon cross-examination the witness claimed his privilege of not divulging certain information. This he had a rig' ht to do. J s was said in Finn lVinneshiek District Court 1808 Io a 123 :f. ,V. 1066 question cans for privileged matter the ,witness may decline to answer subj,ect to proceedings for eontempt. " Just. why the hearing examiner considering the state of the record, gave the witness the alternative of complying literally with the subpoe.na or moving to quash it is llot entirely clear.

That there is some privil gc' in the matter or divulging "trarle secrets" is well settle,d. This privilege extends, llot merely to the chemical and physical cornpositioll of substance,s employed and to the mechanical structure of tools JncL rnachines, but also to such other facts of a possibly priv2te nature ns the names of customers, the subjects and amoUl: S of expense and the like. \Vigmore on Evidence, 3rcl edition V oj !Une 8 Section 2212.

The privilege is not an absolute one. Nor can the "public interest" be automatically held up as :m excuse for denying it: although it is always an important consideration. In E. B . illulleT cG Omnpany F. T. 0. 1844142 F. 2d 511, the court ordered Schanzcr (respondent' only competitor and the party claiming to be injured) either to pl' oduce i8 books and 1'e(,;o1'ls or to furnish data therefrom giving petitioners the information to iyhich they Y;ere entitled. Sclullzer furnished certain information but refused to give the names of his customers. The court affrmed the action of the Commission in not. requiring such f1 disclosure, In 111oO'' v. C1'01))II L. R.. 7 Ch. the court said "The court does not: when discover:, is a matter of indifference to the defendant. "eight in golden scales the, question 01 materiality or -immat-eriality: but where the nature of the discovery required is such that the giving of it may be prejudicial to the (lefenc1ant, the court takes into consideration the special circumstances of the case: tmd whilst, on the one, hand, it takes care that the plaintiff obtain all the discovery \vhic1\ can be of u e to hill on the other ha.nd: it is bounc11:o protect the. defencbnt against. undue inquisition il1tO his affairs. THE :MAICO CO. , L,,C. 1203 1197 Opinion It should also be noted that the question arose on the cross-examin. ation of the witness. Respondent elected to waive certain requirements of the subpoena. He offered evidence tending to show only the relative position of 15 customers, including the respondent. In this limited field, opposing counsel had the right of cross-examination, to bring out facts showing how the books and the records were kept, how the list was prepared and any other facts bearing upon the credibility of the \vitness and the value of the evidence submitted. There is nothing in the record to inl1ieate that inquiry as to matters, ordinarily confid8n1:ird, was llece ary for that purpose. In the Robinson v. Phila, R. R. OO7npany, 1886 28 Fed. 34,0, which was an action to compel answers to interrogatories, the court sa, 1Vitnesses before an examiner will be compelled to ans,ver, when it seems probable the testimony will be relevant; but care must be exercised to avoi(11ltl1necessary and improper inquiry ,into private affairs. In ll!omie 1VeT'oe-FoorZ Omnpany v. Deach. 1888, 35 FNl. 465, it was he1c1 that where a witness fol' plaintiff testified on direct, only as to the uses a.nd effects of ioxie. el've- Food, he cannot on cross-e.examination be requi.i' cd to (lisclose pn.rticulal' ingredients of the prepflTation, that being a trade steel'et, the disclosure of which wonhl injure plaintiff' busiIlf'S ,Vi'cnc S'2S 1 like. jl1lors Hl' e often required to pnt aside their pe.rsonaI allairs and desires to aiel in the settlement of disputes heu' 2en litigants. This is the inc1ispen able requirement for the operation of judicial trilmn; rmd courts ill f1 free society. CmlSe(llH'ntlY1 an concerned in the litig"ation. should cooperate in protecting against disclosure of eonndential matters, to the :fullest extent compatible \lith the interests of the litigants and of the public. The record here discloses that various procedures along' this line are under consideration, In fact, all the parties emil cooperative and we have no reason to doubt that the necessary fac.ts can be adduced without undue injury to anyone. Under the facts disclosed in the record, we conclude that the wit.nesses should not be required to disclose the nflmes of their 11hearing aid unttery cnsi:oL"lers or the c101htr alTount of sales to cacho Applicants next raise the question that the evi(lcJ1ce sought is irreI eyant. They point. out the follow' ing: their records do not distil1gnish bet \Tecn sules of batteries for nc"\v instruments and for replacements; thrtt there is it great dlflerence in the useful life of diJrerent batteries de.pending upon their use, etc. : that many batteries are intel'cha.nge aule; th t the use of a J1e\T cleyicc kno\vn fis a transistor in some instruments prolongs the life of the battery; that the necessary information can best be secured from coll1pe6ng hearing aid ll1anufactnrers. If the status of the hearing aid business and the eiIect of the battery Dissenting Opinion 51 F. T. C. sales on it were the sale question, there would be considerable force to this argument. J-Iowever, the complaint covers not only hearing aid instruments but also parts and accessories thereof. Both counsel for the compla.int and counsel for the respondent agree that batteries are.included thereunder.

Respondent points out that sales of batteries constitute about 20% of its total sales; that under the exclusive dealing contracts, its dealers and distributors buy batteries only from Iaico, where-as many dealers of their competitors buy direct from battery manufacturers; consequently, the true picture of the status of respondent in the battCl' field win not be shown by the books of hearing aid manufacturers alone, the facts can only be shmyn by the records of the 2400 dealers or by records of the battery manufacturers, which supply the larger share of the batteries used.

'Ve think the evide.nce sought might have some value in determining respondents status in the battery field and, in ( conjunction with othet proposed testimony, might also bear on the matter of he.aring a.id instrument sales. 'Ve agree. that the motion to quash the subpoenas ,vas properly overruled.

It is therefore directed that the appeals be dismis,ed and that the case be remanded to the hearing examiner for further proceedings in accorcb.ncc with this- opinion.

Commissioner J\:IF.,\D dissents.

DISSEXTD.' O1TXION OF COl\DlISSIQ::-nm l\lead This is a. Section 3 Clayton Act casp. J\Iaico, a manufacturer of hearing aids, distributes its hearing fl1ds and accessories through its dealers. ::faico requires its dealers to contract with \'laico not to handle the products of competjtors of ::Uaico. There is no controversy))) thjs case fls to Ihe jurisdiction of the Commission or the existence and eniorcement 01 the exclusive dea.ling contracts by :)1 aico.

Thjs ease at an earlier date was before the Commission on t.he n1merits. The Commission decided that there were not suffcient facts in the record to determine whet1ler or not t.he requisite statutory injury had resulted from the exclusive dealing contract. The Majority of the Commission rendered an Opinion discussing' in general terms the evide lt1ary facts the Commission should consider in Section 3 cases. I concurred in the order of the C0ll1nission remanding the case to the IIearing Examiner for the taking of additional eviclenee on the question of injury to competition. I did not concur in the Opinion IRE MAICO CO. , INC. 1205 1197 Dh;senting Opinion or the Commission. JUy vic was that the \vording or the Opinion was so broad that it might encourage the introduction into trial records or economic and other data not necessary for the proper a:nd expeditious trial and consideration or Section a cases. Section 3 or the Clayton --\.ct is based on the proposition that, generally speaking, it is contrary to the public interest: 1. ror a seller by contract, agreement or understanding to deprive competitors or the opportunity to sell to customers or the seller; and 2. ror a seller by contract, agreement or understanding to deprive his customers of the opportunity to buy rrom competitors or the seller; when the effect of such arbitrary requirements may be to substantially lessen competition or tend to create a monopoly. The Congress could have prohibited aD of such contracts, etc. solely because they are arbitrary and restrictive, regardless or the dollar volume or the number or units involved or the effect on competition. Congress did not. do so. In its wisdom Congress decided that Sect.ion 3 of the Clayton Act should not be concerned with what might be rermed ror ',ant of a better description as "arbitrary trifles :: which ha,ve no adverse effect on competition.

C011gress did provide in eiJect in Section 3 that if by restrictive exclusive dealing contrads, merchants are foreclosed rrom competing for a, ubstantial share of the .lne 01' commerce affected, then thl" Commission is authorized to conclu( e from such facts that the result may be to substnntiaJ1y lessen competition or tend to create a monopoly. Business transactions are mensurec1 in teIT.1S or unit and donar volumes, Alert merchants desire to increase their volumes and thereby snrvi\-e and prosper in t.he competitive struggle. \Vhen these merchants are deprivecl by a.arbitrary action by one competitor of their opportunity.y to compete for u, substantial share of the market the result (in the absence of 1l1uslwl factors) is probably to substantially lessen competition.

In this case the Healing Examiner, acting 011 the basis of the broad order or reference from the Comlnission, issued subpoenas at the request of .Maico, whidl ordered offcials of three battery manural:;turing corporations to produce books and records " shm,ing the total sales of sa.id Company of batteries by t.types, amounts and dollar vo:' ume to each hearing aid manufa,cturer or their respective dealers or distributors to hom it sold uatteries ror each of t.he years 1949 through 1954 inclusive. " These subpoenas are not directed at hearing aid manufacturers who- arc eompetit.ors of Iaico, but are directed to the suppliers of one item to the competitors of Maico and their dealers. It is 1206 FEDERAL TRADE COM1VIISSIOX DECISI01\S Decision 51 F. T. C indicated in the record that JIaico may request subpocna,s be issued directing other suppliers of Iaico competitors to produce their books and records.

As indicated above, I understand that the basic question in this case is whether or not the use of these arbitrary exclusive dealing contracts by laico has foreclosed other business concerns of their opportunity to compete for a substantial share of the market. in the products involved. In the light of the record now before the Commission and of the requirements of Section;) of the Clayton Act, I am not. convinced of the necessity for directing these supplier corporations who are not parties to this litigation and Iyho are not competitors of :\laico to pro. duce their books and records.

r understand the desire of the Iajol'it.Y of the Commission to have before it an of the relcvant data in these very important cases in order that in:fornlec1 decisions can be made. I am c.concerned, hmyevel', particularly after reading the briefs andlis!:enillg to the oral argurnents of cOllnsel in this case that tile trial records in LheseScctioll g e::lses rna)' be ul1necessarily lengthenecl. I believe that the :3Iajol'ity al wishes to avoid such an undesirable result. The c1iI-erellce here may be only it question of degree, but such questions mfl)' be very importfllt in the enforcement of the antitrust. knife. J do not believe the record now before i he Connni:.isioJl adequately supports the contention (hat t;1e isswmcc of these slJbpOen 1s i3 necessary for the trial or this case. In the absence of tjl1ch n sho\yillg "auld quash the subpoenas.

DECISID); OF THE CO::U::'.ISSIOX Pursuant to Hule XXII of the Commission s Hules of Practice and as set forth ill the Commission s ':Deeisioll of the Commission and Order to FiJe R,c-port of Compliance " dated Ia.y 22 , 1955 , the initial decision in the instant matter of hearing exa,miner Frank I-lier as set out ns follows, became on t.hat date the decision of the Commission, INITIAL DEClSlOX BY .FH.AXK BIETI, H:E,\HlXG I:XA.:IIYEI: Pursuant to the provisions of the Clayton Act, as amended by the Robinson- Patman Act (15 r. S. C. A. 12) the .Federal TClde COlnmission on October 24, 1950, issued its complaint in this proceeding against respondent, upon whom such complaint ,,,as duly served and thereafter ans\vel'ec1.

, THE MAICO CO. , IXC. 1207 1H)7 Decisioll Respondent is a Minnesota corporation located at 21 North Third Street, 1Iinneapolis, J\linnesota and is engaged in the manufacture and sale of hearing aids, parts and accessories under the trade llalne 1faico. :, Subsequent to service of the complaint and answer thereto a number of hearings were held at which evidence in Support of and in opposition to the allegations of the complaint was taken and therea-fer on November 10, 1052, the hearing examiner rendereel his initial decision from which respondent appealed and on December 7, 1953, the Commission granted said appeal, set aside the initial decision and remanded the proceeding for the taking of further evidence and for the reconsideration of various exclusionary rulings of the hearing examiner. The hearing examiner, previously presiding, being then about to retire (mandatorily), the pl' oceeding was transferred to the undersigned hearing examiner who thereafter proceeded to carry out the command of the l':m:uld nnd pursuant thereto further evidence was taken in support of the allegations of the complaint and some evidence offered by respondent in opposition thereto. On March 28, 1955, counsel for the parties hereto entered into a stipulation providing for entry of a consent order disposing of this proceeding under the Rules of Practice of the Commission, which stipulation appears of record. By the terms thereof, respondent admits an of the jurisdictional allegations set forth in ihe complaint and stipulates that the record herein may be taken as if the Commission had made findings of jurisdictional facts in accordance with such aJlegations. Respondent expressly wjthdraws its ads\ver previously filed herein and \"alvcs a hearing before the hearing examiner or the Commission, the making of findings of fact or conclusions of la\y by the hearing examiner or the Commission and waives all other and further procedures before the hearing examiner and the Commission to which respondent may be entitled under the aforesaid Clayton Act or the Ilules of P,'actice of the Commission.

Respondent agrees by said stipulation that the order hereinafter entered shall hace the same force "nd etIeet "s if made after a fnn hearing, presentation of evidcllce, findings and conclusions thereon and respondent specifically ,vaives any and alll'ight, power Rnd privilege to cJutllenge or contest the ya1iclity of the order entered in accordance with the stiPllJation. By the terms of said stipulation, respondent further ngl'ces that the stiplllation, t.together with the COffplaint shall constitute the entire record herein; that the complaint herein may be used in const.ruling the terms of the order hereinafter entered which order, upon motion of respondent or of counsel sup- 1208 FEDERAL TRADE COMMISSIOK DECISIONS Order 51 F.

porting the complaint or upon 1TIotion of the Commlssion, may be altered, modified or set aside in the manner provided by the statute for the orders of the Commission. Respondent further agrees that the stipulation is subject to approval in accordance with Rules V and XXII of the Commission s Rules of Practice and that thc order hereinafter entered shall have no foree and effect unless and until it becomes the order of the Commission.

Counsel for the parties so stipulating and all the basis of the foregoing, the undersigned hearing examiner concludes on the basis of the foregoing a,ud in conformity therewith maIms the following order: ORDER It 1:8 ordered That respondent, The J\Iaico Company, Inc. , a corporation, and its offcers, agents, representatives and employees, directly or through any corporate or other device in connection with the offering for sale, sale or distribution of hearing aids, audiometers other n1eclical acoustic products, batteries, parts and accessories there for, or other similar 01' related products in commerce as "commerce is defined in the Clayton Act, do forthwith cease and desist from: 1. Selling or making any contract or agreement for the sale of any such products on the condition, agreement or understa,nding that the purchaser thereof shah not use, or deal in, or sell any such products supplied by any competitor or competitors of the respondent. 2. Enforcing or continuing in opera60n or effect any condition agreement or understanding in, 01' in connection with, any existing contract of sale, which condition, agreement or understanding is to thc effect that the purchaser of said products from respondent shall not use, or deal in, or sell any such products sllPp1iecl by any competitor or competitors of respondent.

ORDER TO FILE REPORT OF COl\IPLIAKCE It is ordered That the respondent herein shall, within sixty (60) days after service upon it of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with the order to cease and desist (as required by said declaratory decision and order of :\fay 22 , 1955J. C. G. OPTICAL CO, ET AL. 1209 Complaint Ix THE :MATTER OF C. G. OPTICAL Camp ANY ET AL.

COKSEXT Order, ETC. , 11" REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\I:nssIOX .ACT Dockrt U'Z6(). Complaint, Nov. 1954-Decision, May HJ55 Consent order requiring a seller of eyeglasses in Chicago, Ill., to cease represellt iug falsely in "Test Your Own Eyes " advertising that eyeglasses made according to prescriptions furnished by customers using his "Seli-Test Opto meter" for the measurement of the face and nose would coneet defects in visioIl of all persons.

Before Mr. Earl J. J( olb hearing examiner. llh. Jesse D. J(ash and i1h. Frederick J. McManus for the Commission.

Fmnk E. Artl"," Oettleman ,md Mr. Benjamin D. Ritholz for respondents.

CO:.II'LAINT Pursuant to rhe provisions of the Federal Trade ComrnjssioIl Actand by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that C. G. Optical C01npany, a corporation, and Benjamin D. Ritholz, individually, hereinafter referred to as respondents, have violated the provisions or the said Act and it appearing to the Commission that a proceeding by it in respect thereof would be in the public int.erest, hereby issues its complaint stating its charges in that respect as follows: P ARAGRAPII 1. R.respondent, C. G. Optical Company, is a corporation organized, existing a.nd doing business under and by virtue or the laws of the State of Illinois, with its place of business located at 20 E. Delaware Place, Chicago, Illinois. The business or respondent, C. G. Opti eal Company, while ostensibly that of a corporation is actually the business or respondent Benjamin D. Ritholz which he carries on under the name or the corporation. This individual ror1llulates the policy or said corporation and directs, controls and puts into efiect all or its acts and practices including those hereinafter referred to. His address is the same as that of the corporate respondent. PAR. 2. Respondents are now a,nd :for more than one year last past have been engaged in the business or selling eyeglasses and as an inducement or instrumentality in the sale of said glasses make use or a certain device designated a "Self-Test Opto-meter" and other devices 1210 FEDERAL TRADE COMMISSION DECISIOKS Complaint 51 F. T. C.

for the measurement of the face and nose. Eyeglasses are a device as device" is defined in the Federal Trade Commission Act, Respondents c.cause said devices, together with printed instructions for the use thereof, and an order blttnk upon which spaces are provided for the insertions of various measurements obtained by the use of said devices: to be transported from their place of business in the State of Illinois, to prospective purchasers a.ncl e:yeglasses to the purchasers thereof located in various other States of the l nitecl State's. Respondent.s ma.intrdn and at all times mentioned herein have maintained a course of trade in said eyeglasses in connection with said "Self-Test Opto-meter': and other devices, and instructions for the use thereof in c.commerce, bet.ween and among the various Stutes of the lnited States. PAR. 3. In the course and conduct of their business, respondents have disseminated and caused the dissemination of advertisements con erning said eyeglasses and of the devices referred to above, by United States mails and by various means in C0111111crce, as "commerce" is defined in the Federal Trade Commission Act, including but not limited to advertisements inserted in newspapers and periodicals and by means of circulars and form letters, for the purpose of inducing, and which were likely to induce, directly or indirectly, the purchase of their said eyeglasses; respondents have also disseminated and caused the dissemination of advertisements concerning their saiel eycglasses and the devices referred to above, including but not limited to the advertisement media referred to above, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of their said eyeglasses in C01Tll1Crce, as "commerce" is defmed in the Federal Trade Commission Act.

Among and typical oJ the statements and representa,tions contained in the said advertisements are the following: GLASSES BY MAIL! (Pictorial representation of a pair of glasses.

SAVE UP '1' 0 $15.00 30 Day Trial Test your eyes at home for far or near with our HO:.IE EYE TESTER.

Save money.

Send name, address, age, agents wanted PHEE! for 30 Day Trial Offer.

Fl' ee Eye Tester. Latest Style Catalog and full information c. G. OP'rICAL CO., DEPT. C-552 20 E. Delaware Place, Chicago 11, Ill.

C. G. OPTICAL CO. ET AL. 1211 120B Complaint Sensational Device TESTS EYES (Pictorial representation of a man using the Tester and a pail' of eyeglasses.

SAVE up to $15.

ON GLASSES Big news to the :\lilions of Spectacle .Wearers and prospects. Means Freedom from outrageous prices.

Sold on :\Ioney-Back Guarantee.

MAKE BIG MONEY Show it to friends and others. Let them use it Free and watch their amazement over this self testing system. Here is a great new opportunity in f1 tremen(1om;; ne,,, field of unlimited possibilties. Spare or full time. o experience needed. Write fol' complete sample kit.

C. G. OPTICAL CO., Dept. .1-108 20 ID. Delaware Place Chicago 11, Ill.

GET YOUR OW GLASSES AS A BONUS! -and Make Big Monev Besides Vtil you share your good .fortune .with your friends-wil yon give them the benefit or our amazingly low prices? Your friends wil be grateful to you. Surely you are interested in them and want to see them benefited. rake our tester to their homes. Let them use it. Make out an order for them on one of the order blanks in the book and send it in. The first sheet in the book is for your own order-the others for friends' orders. Collect a deposit of 82.00 and we wil ship tbe glasses direct to your friends, who wii pay the postman only the balance due plus postage. In other .words, your friends pay you a deposit of $2.00 and the balance upon delivery. Keep the $2.00 deposit you collect, as your pay. It is your profit. Take only ft few orders and you have collected enough to poy for your own glass es so that they become yours, \"\it11out cost. Take as many orders as you can. You make $2.00 profit on each. This is a splendid \yay to earn extra money. :Many who have dealt with us in the pnst hft\e done it. You ll be snl'wisf'(l nt the JnOIlCY you can make just by rendering your friends a great service which they Deed and vdlJ appreciate. Profits of $35. 00 a week for spare time or $75.00 a week for full time are ,nil within Y0111 reach. Of course yon need not t(Ll e order unless you want to, but may order only one pair of glasses for Y01t1'8sl! at 01W loi price. Rush your order at once, also as many orders as you can get from friends and'. other's. :\lore order books \yil be SUIJplied on request. This offer applies to an orders for glasses selected from Style Sheet. 20 E. Dela,vare 1'1. , Chicago, Illc. G. OPTICAL CO. PAR. 4:. Respondents Test Your Own Eyes" advertising c1i..seminated b: them as aforesa1f1 is being and has been ans\\"cred by persons , .

Complaint 51 F. T. C.

in various States of the United States. Said persons, in answering such advertising, have requested that respondents kit of free samples including the various devices above referred to, for use in testing of the eyes, be sent to them. Said kits have been ordered alike by individuals desiring to purchase eyeglasses for themselves and by other individual.ls desiring to sell glasses by acting as agents of respondents. Individuals receiving respondents' kits have attempted to use t.he devices contained therein to determine the eyeglasses necessary to correct defects in their vision, have written out their own prescriptions for respondents' eyeglasses upon the forms provided by respondents, have mailed the prescriptions to respondents and respondents have shipped to them the eyeglasses ordered pursuant to said presscriptions.

Sales agents of respondents, located in various States of the L united St.ates, receiving respondents' said kits have attempted to use the devices contained therein to determine the eyeglasses necessary t.o correct the defects in the vision of others and have written prescriptions or assisted in the writing of prescriptions for respondents' eyeglasses upon the forms provided by respondents, have ma,ilcd the prescriptions to respondents and respondents have shipped said glasses ordered pursuant to said prescriptions to various customers. PAR. 5. Through the use of the advertisements containing the statements hereinabove set forth and explanatory literature and directions which accompany the eye testing kit sent by respondents t.o those requesting it, respondents represented, directly and by implication, that the eyeglasses sold by them, made pursuant to the results of tests of the eyes using respondents' devices wjll correct the defects in vision of all persons.

PAR. 6. Said advertisements 'were and are misleading in material respects and constitute "false advertisements" as that tenn is defined in the Federal Trade Commission Act. In truth and in fact, the eyeglasses sold by respondents) made pursuant to the results of tests of the eyes using respondents' devices: will not correct defects in vision of all persons. On the contrary, such glasses are capable or correcting defects in vision of only those persons approximately forty years of age and older who do not have astigmatism or diseases of the ete and who require only simple magnifying or reducing lenses. \.R. 7. The use by the respondents of the foregoing H'c!\'Cl'tisemenrs cont.aining the false, mislead,ding and c1ecepti\'c statements, nnd 1'ep1'esentatjons above referred to have had and no,,, have the capac.ity and tendency to mislead and deceive, substantial num1'ers of the pUJ'chasi1Jg public into the erroneous and mistaken belief that such statements C. G. OPTICAL CO. ET AL. 1213 Decision and representations were and are true and into the use of respondents devices and the purchase of substantial quant-itje,s of rcspondcnts: eyeglasses, because of such erroneous and mistaken belief. PAR. 8. The aforesaid acts and practices of respondents, as herein alleged, are all to the prejudice and injury of the public and constitute illfair and deceptive acts and practices, in commerce, within the intent and meaning of the Federal Trade Commission Act. DECISION OF TUE C03IMISSION 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 :May 22, 1955, the initial decision in the instant matter of hearing exa,miner Earl J. I\:oIb, as sct out as follo\ys, became on that elate the decision of the Commission. INITIAL DECISION BY EAHL .r. KOLB, HEARING EXAMIXEH The complaint in this proceeding charges the respondents C. G. Optical Company, a corporation, and Benjamin D. Ritholz, an individual, with the use of unfair and deceptive a(':s and practices in commerce in violation of the provisions of the 1"2dcral Trade Commission!1 Act, in c.onncction with the sale and distribution of eyeglasses through and by means of a self-testing device designated as "Self- Test Opto-nwter.

After the issuance of said complaint and the filing of their answer thereto, the respondents entered into a stipulation for a consent order with counsel for the complaint, disposing of al1 the issues in this proceeding, which stipulation was duly approved by the Director and Assistant Director of the Bureau of Litigation. Respondents, pursuant to the aforesaid stipulatioll admitted an of the jurisdictional allegations of the complaint and agreed that. the record herein may be taken as if the Commission had made fin(lings of jurisdictional facts in accordance with sneh allegations. Said stipulahon j\u,that provides that the ans\fer hereto.fore. filed by respondents is to be \vit.hc1ra.\\n and t.hat the parties expressly wnlye a. hearing before the H( aring Examiner or the Commissjon the fiJing of exceptioIls or oral argument before the Commission, and a11 other 11l'ocec1ure before the IIearing Examiner and the Commission to \which the respondents may be entitled under the Federal Trade Commission Act or the Rules of Practice of the Commission. In said stipulation, respondents further agreccl that the order to cease. and desist issued in Hccorchnce "7ith said stipulation shall han: Order 51 F.

the sanle force and effect as if made after a full hearing, presentation of evidence and findings and conclusions thereon, and specifically waived all right, po,vcr and privilege to chal1e,nge or contest the va lidity of such order.

It was further provided that said stipulation, together with the complaint, shall constitute the entiro record herein; that the complaint herein may be used in construing the terms of the order issued be a1tercd, modi-pursuant to said stipulation; and that .said order may fied or set aside in the manner prescribed by statute for the orders of the Commission.

The hearing Examiner has considered such stipulation and the order therein contained, and it appearing that saiel stipulation and order provides for an appropriate disposition of this proceeding the same is hereby accepted and made a part of the record, and the following jurisdictional findings made, and the follo"ing order issued: 1. Respondent C. G. OptiClI Company is a corporation organized exj sting and doing business under and by virtue of the la ws of the State of Illinois, with its place of business located at 20 East Delaware Place, Chicago, Illinois. The business of respondent C. G. Optical Compa.ny, ,vhile ostensibly that of a corporation, is actually the business of respondent Benjam.in D. Ritholz which he carries on under' the name of the corporation. This individual respol dent formulates tlle policy of said corporation and directs, controls and puts into efiect all of j ts acts and practices.

2. The :Federal Trade Commission has jurisdiction of the subject , a.nd matter of this proceeding und of the respondents named herein this proceeding is in the interest of the public. Ol/DEB It -i8 ordered That responclents C. G. Optical Company, a corporation, and its offcprs, and respondent Benjamin D. Ritholz, individ- , di- ually, and respondents ' agents, representatives flncl emplo)'ecs rectly or through any corporate or other clevice in connection "ith the offerlng for sale, sale or distribution of eyeglasses, do forth-.-.ith cease ami desist fronl:

1. Disse,minabng, or causing to be c1issp.ll1natec1, any advertisement by means of the Unite(l States mails, or by any means in commerce as ;;commerce ': is defined in the Federal Tnlc1e Counnission Act, ,vh-ic.h advertisement represents, directly or by implication, that the eyeglass::es sold by respondents, Inade pnrsnant to the l'e nlts of tests of the eyes using respondents: llevices, ,vin correct, or the capable of ;:, ;::

C. G. OPTICAL CO. ET AL. 1215 1209 Orcler correcting, defects in V1810n of persons unless expressly limited to those persons approximately forty years of age and older who do not have astigmatism or diseases of the eye and who require only simplG lnagnifying or reducing lenses.

2. Disseminating, or causing to be disseminated, any advertisement by any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase of their eyeglasses in commerce, as "commerce" is defined in the Federal Trade Commission Act, which advertisement contains the representation prohibited in paragraph 1 hereof.

ORDER TO FILE REPORT OF COl\PLL\XCE It i8 ordered That the respondents herein shall within sixty (60) days after service upon thenl of this order, flue ''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 a.nd desist fas re quired by said declaratory decision and order of May 22, 1955J. ;jS 1216 FEDERAL TRADE COl\TMISSION DECISIONS Complaint 51 F.