Ni. Rubin & Sons, Inc.

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

IN THE MATTER OF NI. RUBIN & SONS, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 6318. Oo-mplaint, Mar. 1955-Deaision, Jan. , 1956 Consent order requiring sellers in New York City to cease repre:3enting through use of the color, pattel'l1, and style of garments issued to members of the United States Armed Forces, and through markings, insignia, labels, and tags substantially the same as those used by the Armed Forces all similar garments, that the jackets and outer coats it sold were manufactured for the Armed Forces and in accordance with Armed Forces specifications; and Order requiring the same sellers to cease representing; falsely through use of the word "Manufacturers " on!,-1etterheac1s ancl,jilyoic8S and iT\ advertising that it owned a factory where it made the products it sold, when actually all of its rainwear and 60% of its .iacl~ets were purchased from other firms and the remaining 40% of the latter \n~i'e produced according to its specifications, by indepenllent companies. i1fr. Terral A. J01'dan counsel supporting the complaint. Chambers Chambers by lJ.fr. Gerald H. Oha17~be1' of New York N. Y. ~ counsel ror respondents.

INITIAL DECISION OF HEARING EXAJ.\IINER JOHN LEWIS STATEMENT OF THE CASE The Federal Trade Commission issued its complaint against the above-named respondents on :March 23, 1955, charging them with the use or unrair and deceptive acts and practices and unfair methods of competition in commerce, in violation of Section 5 of the Federal Trade Commission Act. Copies or said complaint and notice of hearing were duly served upon respondents. Said complaint charges respondents with two separate illegal practices in the operation their business: (1) Selling and distributing jackets and outer coats which were made to simulate garments manufactured for the United States Armed Forces, and (2) representing themselves to be the manufacturers of the garments sold by them. Respondents appeared by counsel and filed their joint answer in which they admitted that in that portion of their business in which they acted as distributors and jobbers for merchandise manufactured by others, they had :-:()lcl garments which in some instances contained labels of the kind and character alleged in the complaint, but that such practice had been discontinued in 1954, and otherwise denied any violation of the Act. 45,1524-i)9- 686 FEDERAL TRADE COMMISSION DECIS'lO:XS Decision ;32 F. T. C. Pursuant to notice: a hearing ,vas thereafter held on JIay 17, 1953 in New York, New York, before the undersigned hearing e~aminer theretofore duly designated to hear this proceeding. At said hearing counsel for the parties advised the hearing examiner that they had reached agreement on a consent order disposing of that portion of the complaint charging respondents with the simulation of Armed Forces jackets, and thp.t a formal document embodying such agreement would be submitted to the examiner in due course. The hearing thereafter continued with respect to the remaining portion of the complaint alleging that respondents had misrepresented their status as a manufacturer. Testimony and other evidence were oifered in support of, and in opposition to the allegations of the complaint pertaining to said issue, which testimony and other evidence liere duly recorded and filed in the office of the Commission. Both sides were representeel by counsel, participated in the hearings, and were afforded full opportunity to be heard: to examine and cross-examine witnesses: and to introduc.e evidence bearing on the issues. At the close of the evidence in support of and in opposition to the allegatjons of the complaint, the record was kept open so as to afford counsel supporting the complaint an opportunity to submit rebuttal evidence. Counsel thereafter advised the examiner that he did not. desire to offer any rebuttal evidence, and the proceeding was thereupon closed for the submission of evidence by order of the examiner dated June 15, 1955. Proposed findings of fact and conclusions of law were subsequently filed by counsel for both sides, including a supporting memorandum by counsel for respondents. No request for oral argument was made.

On June 21 , 1955, there was also submitted to the hearing examiner by counsel supporting the complaint an agreement for consent order covering that portion of the complaint which relates to the simulation of United States Armed Forces style jac.kets and outer coats. The said agreement, which is dated June 20 , 1955, and is signed by c.ounsel supporting the complaint, counsel for respondents and all the respondents and approved by the Director of the Bureau of Litigation of the Commission, contains an admission by respondents of the jurisdictional allegations of the c.complaint and an agreement that the record may be taken as if the Commission had made findings of jurisdictional facts in accordance with such allegations. The said agreement further withdrawn insofar as it relates to the issue covered by said agreement, and that the parties expressly waive hearing before the hearing examiner or the Commission with respect to said issue and all further and other procedure to which respondents may be entitled under the Federal Trade Commission Act M. RUBIK & SONS) INC. , ET AL. 687 685 Findings or the Rules of Practice of the Commission. Respondents have agreed that the order to cease and desist issued in accordance with said agreement for eon sent order shall have the same force and effect as if made after a full hearing and that they specifically waive any and all right, power or privilege to challenge or contest the validity of said order. It has been further agreed that said agreement for consent order, together with the complaint, insofar as it relates to the simulation of Armed Forces jackets, shall constitute the entire record herein and 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 alleged in the; complaint.

It appearing that the order provided for in said agreement conforms in all respects to the proposed order in the notice portion of the complaint and thrt said agreement provides for an appropriate disposition of that portion of the complaint which involves the charge of simulation of Armed Forces jackets, and it appearing that with respect to such issue this proceeding is in the public interest the said agreement is hereby accepted and, in accordance therewith paragraph 1 is included in the order hereinafter made. 'With respect to the balance of the proceeding, based on the entire record pertaining thereto and from his observation of the witnesses, the undersigned fil1ds that this proceeding is in the interest of the public and makes the following:

FINDINGS OF FACT I. The Parties and the Interstate Commerce Respondent ~L Rubin & Sons, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the State of New York with its office and principal place of business located at 688 Broadway, New York New York. Respondents Milton Rubin, Donald Ilubin, and Robert Rubin are, respectively, President, Vice President and Treasurer, and Secretary 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 the corporate respondent.

Respondents are now, and have been for more than two years last past, engaged in the sale and distribution of jackets and outer coats to retailers in commerce among and between the various States of the United States and in the District of Columbia. Respondents maintain, and at all times mentioned herein have maintained, a 688 FEDERAL TRADE CO.M~IISSION DECISIONS Findings 52 F. T. C. substantial course of trade in said garments, in commerce among and between the various States of the United States. II. The Alleged Illegal Practices A. The Issue '1.S has been stated above, the only issue which was litigated in this proceeding involves that portion of the complaint in which respondents are charged with having falsely represented themselves to be manufacturers of the garments sold and distributed by them. This charge arises out of the fact that respondents use the word :Manufacturers" on their letterheads and invoices, and also in some ,of their advertising in trade journals. The complaint alleges that by using the word "manufacturers" respondents have represented that they own, operate or control a factory where they manufacture the merchandise sold by them and that such representation is false. Hespondents deny that their use of the term "manufacturer" amounts to a representation that they own, operate or control a plant where their merchandise is manufactured, but nevertheless contend that they are considered to be manufacturers under the generally accepted meaning of the term. The question for decision on this issue, therefore, is whether respondents may properly call themselves manufacturers.

B. Respondents ' Status as a Jl anl.lfactuJ'eJ' There is no basic dispute concerning respondents' method of operation. Respondents are engaged in the sale of outdoor jackets and rain wear, mainly to retail stores. 1 All of the rainwear which they sell is purchased from other firms. Of the outdoor jackets "\which they sell, approximately 60 1wl'Cent is purchased, readymade, from other firms. Their only basis for contending that they are manufacturers is with respect to the balance of their outdoor jnckets which are produced, according to respondents' speciiieations by independent contractors in the following fashion. Respondents originate a style for a particular garment aud have an independent pattern-maker prepare a pattern to Ineet l'l\sponllents specifications. Respondents purchase from the primary sources, such as mills~ the materials which go into the making of the garment. This includes the cloth for the outer shell, material for the inner lining, and trimmings such as zippers, buttons and dnnystrings. 1 While the complaint alleges and the answer admits that I'e"'lJondents abo sell their garments to wholesalers, the testimony of the respondent Donald Rubin indicates that respondents' merchandise is sold primarily to retail establi,"hment,,;, M. RUBIN & SONS, INC. , ET AL. 689 685 Findings The lining cloth for the heavy jackets is sent out to independent contractors for quilting. Then respondents cut both the outer shell and the lining, in accordance with their pattern. This is usually performed in respondents' own loft where they have a long cutting table and cutting machines, except during the busy season when some cutting is done in the place of business of some of respondents contractors. J\lost of the cutting is done by respondent Donald Rubin, except during the busy season when another cutter is sometimes hirecl.

)...Jtel' the materials are cut, they are tied in bundles and sent to the factory of independent contractors for sewing. Respondents pay these c.ontractors on a per piece basis for sewing the garments. The contractors have no exclusive arrangement with respondents but ,york for other firms as well. A representative of respondents regularly visits the plant of the contractor who does the major part of their work in order to see that the garments are properly made. 1Vhen the garments have been sewn they are returned to respondents premises where they are tagged, folded and placed in boxes for shipment to customers. No further fabricating operations are performed on the jackets after they are returned from the contractors~ except that respondents place several snaps or hooks on certain of the heavy winter garments in order to permit the fastening of a hood which comes with the jacket. It is evident that with respect to the rainwear sold by them and the majority of the outer jackets which they purchase ready-made respondents cannot be considered a manufacturer.3 The only question presented is whether they can be considered as manufacturers with respect to that portion of their garments which are designed and cut by them but which are sewn by independent contractors. The case of counsel supporting the complaint rests primarily on four retailer-witnesses, operating.in the New York City area, who testified with respect to their understanding of the term "manufacturer."4 These witnesses testified in substance that it was their understanding that a manufacturer was a person who produced a substantially complete garment in his own plant, with his own employees and machinery, and that they preferred to deal directly with a manufacturer because they believed they would be afforded 2 It was estimated that 90 percent of the cutting was done in respondents' own plant. :I Respondents in their answer admit that with respect to that portion of the business where they buy merchandise from others, " they act as distributors and jobbers, 4 Three of such witnesses actually testified and the testimony of the fourth was stipulated, 690 FEDERAL TRADE COMJ\JISSION DECISIONS Findings G2 F. T. C.

a better price and other advantages, such as better quality and selection of merchandise. ",Vhile some of these witnesses recognized that manufacturers sometimes had eontractors make up some of their garments during the busy season, it was their understanding that a manufacturer ordinarily produced most or at least a substantial portion, of the garments in his own plant. Respondents relied mainly on two industry witnesses who testified as to their understanding of the term "manufacturer" in the industry. One of these was a sales representative for two manufacturers, who was himself formerly associated with a manufacturing firm, and the other was a salesman selling quilting services and woolens to firms in the industry. According to the testimony of these witnesses any firm which designs a garment, buys the raw materials and arranges for its manufacture, is considered to be a manufacturer in the industry, even though it performs no fabricating operations what- - soever and has merely an office and showroom. C. Contentions and Conclusions Counsel for respondents contends that the testimony of the witnesses called in support of the complaint is of no value since as retailers they are not experts in the industry and were merely expressing their individual opinions. Counsel argues that his own industry witnesses were, on the other hand, more experienced in the manufacturing end of the industry and that their opinions are therefore entitled to greater weight. The examiner cannot agree with this argument.

Counsel's argument overlooks the real issue in this case which is not what the people such as respondents call themselves or understand themselves to be, but rather what the people with whom they deal understand by the term or designation. used. 1Vhere a firm makes certain representations about itself or its product, the question of whether such' statements are misleading is not determined what the "experts" understand them to mean but by the understanding of those for whose benefit the representations are made, which may include "the ignorant, the unthinking and the credulous."5 The fact that a form of misdescription has become so common in industry that sophisticated members of the industry are not deceived by it and possibly use it themselves, does not prevent it from being Positive Products Co. v. FTC, 132 F. 2d 165, 167 (C..!.. 7, 1942). See 'also Gulf Oil Corp. v. FTC, 150 F. 2d 106. 109 (C. A. 5, 1945) ; Chas. of the Ritz Dist. Corp, FTC, 143 F. 2d 676. 679 (C.A. 2, 1944).

y.

M. RUBIN & SONS ' INC. , ET AL. 691 685 Findings misleading and deceptive to those with whom the industry deals many of whom may not be familiar with the fact that the term is not being used in its ordinarily accepted sense 6 The question therefore is what the class of persons with whom 'respondents deal understand by the term "manufacturer" in the industry. Since respondents sell their merchandise mainly to retailers, the question is what retailers in the industry understand by the designation manufacturer. "

As has already been stated, the retailers who were called in support of the complaint testified it was their understanding of the term "manufacturer" that it referred to someone who had a factory where he employecllabor and machinery to produce a substantially completed garment. This testimony is clearly relevant, not simply as an expression of opinion, as counsel for respondents argues, but as evidence of a material fact in issue, viz., the understanding of the class of persons for whom respondents' representation was intended. Such fact may be properly established by the testimony of such persons as to their understanding or impression of the statement used by respondents.

Counsel for respondents argues that the number of retailers who testified in support of the complaint was not significant. However the testimony of those who did so testify was sufficient to support finding based on the understanding stated in their testimony, absent substantial countervailing evidence. At the close of the evidence in support of the complaint counsel for respondents stated that he did not propose to call any retailer-witnesses to establish their understanding of the term "manufacturer." However, counsel did subsequently call a retailer who had be,en subpoenaed by counsel supporting the complaint, but who was excused from testifying by the latter. ,Vhile some of this witness' testimony does tend to support the understanding of respondents' industry witnesses, his testimony as a whole was c.haracterizec1 by such uncertainty, and was so obviously influenced by the testimony of one of respondents 6 See, in this connection FTC v. Winstecl Hosiery Co., 258 U. S. 483, 493, where the Supreme Court stated:

The fact that misrepresentation and misdescription have become so common in the knit underwear trade that most dealers 110 longer accept labels at their face value does not preyent their use being an unfair method of competition, A method inherently unfair does not cease to bE'. so because those competed against have become aware of the wrongful practice, Nor does it cease to be unfair because the falsity of the manufacturer s representation has become so well known to the trade that dealers as distinguished from consumers, are no longer deceived, Stanley Laboratories, Iuc. FTC, 138 F. 2d 388 (C,.A. 9 , 1943) ; Koch v. FTC, 206 F. 2d 311, (C. A, 6, 1953), :j !) 692 FEDERAL TRADE COl\.fJ\lission DECISiIONS Findings 52 F. T. C. industry witnesses who had testified in his presence, that it can be given little weight.

In any event, even accepting the testimony of respondents' single retailer-witness, as indicating that some retailers have an understanding similar to that expressed by respondents' industry witness there is nevertheless sufficient evidence in the record to establish the existence of a contrary understanding among a significant portion of the class of persons with whom respondents deal. In order to establish a violation of the Act, it is not necessary to show that all persons may be deceived. It is sufficient if there exists a reapublic.9sonable probabilityIt may alsoof deceptionbe noted, amongin thisa connection,significant thatportionit isof thenot necessary to show actual deception, as counsel for respondents argues~ since the tendency or capacity of a representation to mislead or deceive is sufficient to establish a violation of the Act..Io while counsel supporting the complaint did not call a large number of witnesses, it may be inferred that the understanding of those who did testify fairly reflects the understanding of many other retailers throughout the United States. That such an understanding is widely held may be inferred from the ordinary dictionary meaning of the term used. Under this definition a "manufacturer is: "One who manufactures, an employer of operatives in manufacturing; and "manufacture" means: "To make (wares) by hand, by machinery, or by other agency; to produce by labor, esp., now, by, division of labor, and usually with machinery."l1 The understanding of the witnesses who testified in support of the , complaint comports with the finding of the Commission in a number of cases, involving a variety of industries. Under these decisions one who merely arranges for the manufacture of a product but does not perform the basic manufacturing operations is not considered manufacturer. Thus, the Commission in a number of cases involving the handkerchief industry has held that firms which design the product, purchase the cloth, and package it for shipment but who have the actual mc::.nl1facturing operations performed by independent contractors are not themselves manufacturers since they 8 This witness testified that he had never given much thought to what constituted manufacturer, but that after listening to one of respondent's witnesses he had become convinced that anyone who could compete with a manufacturer was entitled to be called one (R. 113). Under this concept a wholesaler who could meet a manufacturer s price would be entitled to call himself a manufacturer. However, when asked to define the word manufacturer in his own words, the witness gave the generally accepted definition: A man who takes a piece of material and makes a garment out of it" (R. 118). Prima Products, Inc. v. FTC, 209 F. 2d 405, 409 (C...:\.. 2, 1954). 10 Parker Pen Co. v. FTC, 159 F. 2d 509 (C. A. 7, 1946) ; Charles of the Ritz Di.st, Co. FTC, 143 F. 2d, 676 (C.A. 2, 1944).

11 Webster s New Collegiate Dictionary.

M. RUBIN & SONS) INC., ET AL. 693 1(385 Findings do not own or operate or control a. factory for the production of the products sold by them.12 The same ruling has been made in other industries and has been sustained, in a number of instances :by the courts. These include knitted wear, textiles, floor coverings men s clothing and blankets.13 The impropriety of calling oneself a manufacturer has been held to exist though the firm making such representation has performed certain incidental operations in the Inanufacturing process. . Finally, the Commission has round that the precise operations which are being performed by respondents do not constitute one a manufacturer. In Ralph Cohn Underwear :31 F. T. C. 1077, respondents represented themselves as manufacturers of ladies' undergarments. They designed and patterned the garments, bought the piece goods and trimming, cut them up with their own employees on their own premises, and sent them out for sewing by independent contractors, after which the garments were returned to respondents for packing and distribution. The Commission held on these facts that this method did not constitute respondents a manufacturer.

Counsel for respondents argues that the evidence here is deficient in that it fails to show "what constitutes control of a factory." It clear.r from the record that respondents neither own nor operate a of operationfactory. The evidence offered concerning their method &lso indicates an absence of control over the manufacturing operations of such a nature as to entitle them to use the designation of manufacturer. The Commission has indicated in several cases tha a mere incidental relationship to the manufacturing process does not constitute control suflicient to justify use of the designation manufacturer."15 while the cases have not spelled out precisely what degree of control it is which entitles one to be called a manufacturer, certain it is that the right to use some term cannot be bottomed on the casual inspection by respondents over the plant .of their contractors or their right to rej ect unsatisfactory garments. 12 Berkshire Mnnufact1tring Co,) 47 F. C. 1048; Ju,lian S. Cohn 32 F. C. 952; Universal Handkerchief Mfg. Co, ) Inc., 26 F. C. 193; Standard Handkerchief .Manufacturing Co, 20 F.'.r. C. 182.

13 Beacon Knitting Mills, Inc.) 10 F. C. 70; BCa1' Mill Mfg. Co,) 98 F. 2d 67 (C.A. 2, 1938) : Herzfeld v. F'l' C) 149 F. 2d 207 (C. A. 2, 1944) ; Interstate Clothing Co,) 20 F. 412; Lawrence Blanket Mms 24 F. 'l' C. 615; Columbia Pants Manufacturing Co,) C. 6 1; Knit-Finn) Inc., 13 F, C. 302, 14 See FTC Y. Royal Mining Co, 288 D. S, 212j where respondents blended flour but did' not grind it; Bilt-RUe Box Corp.) 33 F. 'l' C. 1487, where respondents bought boxes in knockdown form and assembled them by stitching and stapling them together; Columbia Pencil Company, 33 F. C. 617, where respondents purchased lead pencils, and then painted them and attached a ferrule and eraser.

15 See Pt' ogress 'lTailoring Co. v. FTC) 153 F. 2d 103 (C.A. 7, 1948), where respondents clothing was sewn by a subsidiary corporation; FTC v. Pttre Silk Hosiery Mills) Inc., 3 F. 2d 105 (C.A. 7, 1925), where respondents' hosiery was made by a mill in which it ()wned one-sixth of the stock and had one director; Primfit Textile Co., 31 FTC 1423, where respondents had an exclusive contract with the firm which made their product. Findings 52 F. T. C.

Based on the evidence as a whole and in the light of the precedent above cited, it is concluded and found that respondents are not manufacturers since they do not own, operate or control any factory or manufacturing establishment and since a significant portion of the class of persons with whom they deal understand that a manufacturer is someone who owns, operates or controls a factory where the goods sold by him are manufactured. :Moreover, since a substantial portion of the products sold by respondents are purchased by them from others, ready-made, they have no right to call themselves a manufacturer with respect to such products in any event. D. Pz:efeJ'ence for Dealing With a ilJanufactul'ei' The basis of the elaim of public interest in this case rests on allegation of the complaint that retailers prefer to buy from manufacturers because of their belief that they will obtain better prices and other advantages. This allegation is sustained by the testimony of the witnesses called in support of the complaint previously alluded to. It may be that the expectation of retailers is not ab, ays realized. as is indicated bv the testimonv or the one retailer-witness called by respondents, who testified that he was able to purchase from respondents as cheaply as from a bona fide manufacturer from whom he made most of his purchases. However, this does not gainsay the fact that there exists a general preference among retailers for dealing directly with those 'VhOlll they consider mflnufacturers. The fact that respondents may have, as they contend, largely. eliminated the middleman s profit (despite the fact that they pay a contractor for the sewing of their jackets) does not justify ignoring the preference on the part of retailers for dealing with those whom they regard as bona fide manufacturers and as to whom they would ordinarily entertain no doubt concerning the elimination of the middleman s profit. Counsel for respondents urges that there no likelihood of any damage here since the prices which respondents charge must generally be competitive to that of manufacturers. However, this argument overlooks the fact that retailers have a right to be correctly advised concerning the status of those with whom they deal and to deal with the type of firm for whom they have a preference, even though such preference may sometimes be based on ignorance or caprice.17 It cannot be denied that the failure to 16 Brown Fence cf Wire Co. v, FTC 64 F. 2d 934 (C.A-. 6, 1933). Respondents allege in their answer that the merchandise manufactured by others was sold under a different label from that made up under their supervision. No e,idence was offered to support this allegation. Moreover, there is nothing to show that this label indicates respondents are not the manufacturer of such merchandise, 17 FTC v. Algoma Lumber Co. 291 U. S. 67 , 80; Benton Announcements Inc. v. FTC, 130 F. 2d 254: (C. A. 2, 1942).

:

M. RUBIN & SONS, INC. , ET AL. 695 685 Findings correctly advise retailers concerning the status of a prospective vendor may result in their purchasing .from such firm, thereby causing damage to competitors, some of whom may be wholesalers who make no claim to being a manufacturer and some of whom may be bona fide manufacturers. The position which respondents take in this regard is similar to that which was answered by the Court of Appeals in Bear ilIal 111'f'g. Co. v. FTC 98 F. 2d 67 , 68 , as follows:

lndeerl. the line between manufacturing itself and supervising the finishing of the product as to color, style, and workmanship ,,-here: ft8 here, the orders are given to fin independent contractor is so tenuous that, upon the record we regard the damage, if any, to c.ustomcrs or competitors as highly speculative. Yet accw'acy of n~pte8en,tations hnplicit i'n a tracZe-nanw indicating ~()whether a conce?' ?'/, is a ?nanufactuJ'er, Conl)el'tel' 01' )oooeJ'is in geneNll important and it cannot be denied that a 'lnisleacZinfj' na7lze ?nay lead to inju.riolls 1nisapJJi'elu?Jisions on the pad of custo?ners, actual or prospective ((lid doma,ge to competitoi' CEmphasis supplied. It is accordingly concluded and found that there exists a preference. on the part of retailers for dealing directly with manufacturers of products r::ither than with distributors, jobbers and other intermedia:'les, such preference being due in part to a belief that by dealing \with the manufacturer lower prices and other advantages may be obtained.

III. Effect of the Unfair Practices Found The use by respondents of the word ":Manufacturers" on their letterheads, invoices and advertising, as above found, has had and now has the tendency and capacity to mislead dealers into the erroneous and mistaken belief that respondents are the manufacturers of said merchandise and that they own, operate or control a 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. Respondents in the course and conduct of their business are in direct and substantial competition with other corporations, firms and individuals engaged in the sale in commerce of jackets and outer coats. As a result of the unfair practices found, it may fairly be inferred that substantial trade in commerce has been unfairly diverted to respondents from their competitors and substantial injury has been done to competition in commerce. 696 FEDERAL TRADE CO1\1:MISSION DECISIONS Opinion 52 F. T. C.

CONCLUSION OF LAW , The acts and practices of respondents, as hereinabove found, 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. ORDER t is orde?' That respondents 1\1. Rubin &. Sons, Inc., a corporation, and its officers, and :Milton Rubin, Donald Rubin and Robert Rubin, individually and as officers 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 distribution of wearing apparel, or of any other merchandise in commerce, as "commerce" is defined in the Federal Trade Com- Inission Act, do forthwith cease and desist from: 1. Representing, directly or by implication, by marking, branding, labeling, tagging, or in any other manner, that such merchandise was manufactured for the Armed Forces of the United States or in accordance with specifications of said Armed Forces. 2. Representing through the use of the word "manufacturers" or any other word or words of similar import or meaning on letterheads or invoices or in any other manner, that they or any of them manufacture the merchandise sold by them. OPINION OF THE COMMISSION By I~RN, Commissioner:

The Commission on March 23, 1955, issued its complaint, charging the respondents with having falsely, misleadingly and deceptively represented (1) that jackets and outer coats sold and distributed by them were manufactured for, and according to specifications of, the United States Armed Forces, and (2) that respondents were the manufacturers of the garments sold by them. ,With respect to the first charge, respondents and counsel supporting the complaint entered into an agreement for a consent order which was tendered to, and accepted by, the hearing examiner. The initial decision adequately and appropriately disposes of this charge. After hearings at which evidence in support of and in opposition to the remaining charge was received, the hearing examiner issued his initial decision in which he found that the respondents had misrepresented that they were the manufacturers of the garments they sold, and ordered that the practice be discontinued. Respondents M. RUBIN & SONS) INC., ET AL. 697 685 Opinion have appealed from this portion of the hearing examiner s findings and order.

. There is no dispute as to the facts surrounding the issue as to whether or not respondents have misrepresented that they are manufacturers of the garments they sell. The hearing examiner s findings as to the respondents' method of operation are adopted by respondents as a "fair factual statement " except for his failure to mention the 2500 square feet of area in respondents' cutting room and the fact that respondents' sales of garments designed and cut by them and sewed by individual contractors have increased steadily each year in proportion to the total volume of their sales. "'\Ve do not consider the omitted statements as materially changing the factual situation.

Respondents sell rainwear and outdoor jackets, mainly to the retail trade. All of the rainwear and 60% of the outdoor jackets they sell are purchased, ready-made, from other firms. The remaining 40% of the outdoor jackets sold are produced, according to respondents' specifications, by independent contractors, and respondents' re~ation to the manufacturing proce, ss is incidental. R.espondents do not own, operate, or control any factory or manufacturing establishment where the garments they sell are manufactured. In our opinion, the hearing examiner s conclusion that the respondents are not manufacturers is correct.

There is substantial testimony in the record to support the finding that respondents' use of the word " Manufacturers" on its letterheads, on invoices, and in some of its advertising in trade journals has the tendency and capacity to mislead dealers into the erroneous belief that respondents own, operate or control a plant or plants where the garments they sell are manufactured, and to induce the purchase of substantial quantities of respondents' merchandise in commerce because of such belie.f. The Federal Trade Commission Act is violated if there exists a reasonable probability that a substantial portion of the purchasing public may be deceived. The law is well settled that a finding of tendency and capacity to mislead is sufficient and that actual deception need not be shmvn. Alg017w L'lt1need Co. 291 U. S. 67 81 (1934) ; Vacu-Jlfatic CCl?'Ow'et01' 00. v. 152 F. 2c1 711, 713 (7th Cir. 1946); Charles of the Ritz, Dist. Corp. v. 143 F. 2c1 676, 680, and cases there cited (2nd Giro H)c14). \Ye think the hearing examiner properly held that the testimony of the four retailers fairly reflected the understanding of many other retailers throughout the United States, particularly in view of the dictionary defulition of the word "manufacturer" and the scant evidence offered by respondents to the con- Order 52 F. T. C.

trary. The courts have repeatedly affirmed similar Comnlission orders. Progress Tailorin.g 00. v. 153 F. 2d 103 (7th Cir. 1946) ; Bear jJfill Mfg. 00. v. 98 F. 2d 67 (2nd Cir. 1938) ; O. v. Royal Milling 00. 288 S. 212 (1933) ; Brown Fence and TVire 00. v. 64 F. 2d 934 (6th Cir. 1933); O. v. Pure Silk Hosiery Mills, Inc. 3 F. 2d105 (7th Cir. 1924). The hearing examiner found that the use by the respondents the word ":Nlanufacturers" on their letterheads, on invoices, and in advertising, not only has the tendency and capacity to, but also does mislead dealers. Since the evidence does not show actual. deception, the hearing examiner s findings of fact, first paragraph Section III will be modified by eliminating all reference to the existence of actual deception on the part of those dealing with respondents. The capacity and tendency to mislead is sufficient to warrant an order. The findings as modified, conclusions and order of the hearing examiner are adopted as the findings, conclusions and order of the Commission.

Respondents' appeal is denied, and it is directed that an order issue accordingly.

FIN AL ORDER This matter having been heard by the Commission upon respondents' appeal from the hearing examiner s initial decision, and briefs of counsel in support thereof and in opposition thereto, oral argument not having been requested; and The Commission having determined, for the reasons appearing in the accompanying opinion of the Commission, that the initial decision of the hearing examiner should be modified and thereafter adopted as the COlnmission s decision, and that respondents' appeal should be denied:

I t is ordered That the initial decision of the hearing examiner be and it hereby is, modified by eliminating the words "and does" from the first paragraph, Section III of the findings of fact in the initial decision.

It is further ordered That the findings as modified, conclusions and order in the initial decision be, and they hereby are, adopted as the findings, conclusions, and order of the Commission. It is fu1,thel' 01'de1'ed That respondents' appeal from the hearing examiner s initial decision be, and it hereby is, denied. I t is fu1'ther o1'dered That the respondents herein shall, within sixty (60) days after service upon them of this order, file 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.

DRUGGISTS' SUPPLY CORP. ET AL. 699 Complaint