Fur & Wool Mills, Inc.

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

IN Tile l\IA'IR OF FUR & WOOL MILLS, INC., ET AL.

COXSEXT ORDER, ETC. , IN IilGARD TO THE ALLGED VIOLATION THE FEDERAL 'rrade GOM::USSIQX ACT Docket 6505. Complaint, Feu. 13, 1956~Decision May, 1956 Consent order requiring three corporations occuvying the same premises at Danbury, Conn. , and closely related by stock ownership, common offcers, and business relationships, to cease violating the Federal Trade Commission Act through invoicing fur fibers to mils and other purchasers as Katural Guanaco Guanaco Fur Blend, Mink Fur Blend " and "Beaver Fur Blend " when the predominant fiber in the product so described \-yas not "guanaco luink " or "beaver " respectively. Before 1111,. J. Katz Oom hearing examiner. 111 T. F1'ede1'iclc 11/ cji an-us for the Commission. 1111'. ,Jacob Landatt of New York City, for responcle,nts. COl\IPLAIXT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vesteel in it by said Act, the Federal Trade Commission, having reason to believe that Fur & 'W 001 Mills Inc., a corporation, Platt TV 001 Corporation, a corporation, Richard Becker a.nd 1Vil1iaul :Mond, individually and as offcers of said corporations, S. Rosenfelder & Son, Inc. , a corporation, and vVilliam Iond, individually and as Rn offcer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act and it appearing to the Commission that a proceeding by it in respect thereof 'would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent Fur "r ooll\iills, Ine., is a corporation organized, existing and doing busine,ss under and by virtue of the laws of the State of Delaware, with its office and principal plaec of business on Chestnut Street in the City of Danbury, State of Connecticut. Individual respondents ltichard Becker and vVilliam Mond are now and were, at all times hereinafter mentioned, offcers of this corporate respondent. These individuals formulate, direct and control the policies, Rcis and practices of said corporate respondent and have their offce and principal place of business at the same place as the corporate respondent.

PAR. 2. Respondent Platt vVool Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its offce and principal place of business on Chestnut Street in the City of Danbury, State of Connecticut. 1446 FEDERAL TRADE COMJlISSION DEClSIO Complaint 52 F. T. C.

Individual respondents Richard Becker and ,Villimn :Mond are now and ,were, at all times hereinafter mentioned, offcers of this corporate respondent. These individuals formulate, direct and control the acts and practices of said corporate respondent and have their offce and principal place of business at the same place as the corporate respondent.

PAR. 3. Respondent S. Rosenfelder & Son, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of K ew York, with its oflice and principal place of business on Chestnut Street in the City of Danbury, State of Connecticut. Individual respondent 'Vill am Mond is now and was, at all times hereinafter mentioned, an offcer of this corporate respondent. This individual formulates, directs and controls the policies, acts and practices of this corporate respondent and has his offce and principal place of business at the same place as the corporate respondent. PAR. 4. The corporate respondents, separately and together, purchase fur scrap and pelts which are sent to the plant of Federal Fur Company, Inc., a corporation, also at Danbury, Connecticut, where the fur fibers are removed. Individual respondent 'Villiam lI0nd is prcsident of Federal Fur Company, Inc. Blends of fur fibers are made up by said company, after which they may be and are sold by one or all of the corporate respondents, regardless of which may have supplied the fur scrap and pelts. The separate respondents occupy the same premises in Danbury and are so closely related by stock ownership, common offcers and business relationship that the acts and practices of onc are the acts and practices of all. The purchasers of said fur fibers consist largely of mils which use the same, together with other fibers, in the manufacture of yarns or fabrics.

PAR. 5. Respondents now cause, and for several years last past have caused, their fur fibers, wheu sold, to be transported from their place of business in the St,ate of Connecticut to purchasers thereof located in various other States. Hespondents maintain, and at all times mentioned herein have maintained, a const,ant and substantial trade in their fur fibers in commerce bebveen and among various States the L:united States.

PAR. 6. In the course and conchwt of their business as aforesaid respondents have made various statements concerning their products in invoices to purchasers. Among and typical, but not all inclusive of such statements, are the following: "Natural Gllanacot "Guanaco Fur Blend Mink Fur Blend" and "Beaver Fur Blend. PAR. 7. Through the use of the description or designation "Natural Guanaco " respondents represented that the fur fiber so identified FUR & WOOL MILLS , IKC. , ET AL. 1447 101\ Decision consisted of 100% gl1anaco; and t.through the use of the descriptions or designations "Guanaco Fur Blend )'Iink Fur Blend" and Beaver Fur Blend " that the predominate fur fiber in the products so identified was guanaco, mink and beaver, respectively. PAR. 8. The aforesaid statements or designations were false, misleading and deceptive. In truth and in fact, the fur fiber described and designated as i\ natural Guanaco" consisted of a blend of fur fibers composed, in large part, of fur fibers other than guanaco and the predominate fiber in the fur fibers described and designated as Guanaco Fur Blend Mink Fur Blend" and "Beaver Fur Blend" was not guanaco, mink and beaver, respectively. PAR. 9. The use by respondents of tbe statements set forth in Paragraph Six had and now has the capacity and tendency to mislead and deceive substantial numbers of the aforementioned purchasers into the erroneous and mistaken belief that such statements were and are true and to induce such purchasers to misbrand the yarns and fabrics made by them in which said fur fibers were and may be used. PAR. 10. The aforesaid acts and practices were and are all to the prejudice and injury of the public and constituted and now constitute lUfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act. INITIAL DECISION BY J'. EARL COX, HEARING EXA1IINER The complaint charges respondents with violation of tbe provisions of the Federal Trade Commission Act in the sale in commerce of fur fibers largely for use, together with other fibers, in the manufacture of yarns or fabrics, by misrepresenting such fur fibers in invoices to purchasers thereof, thereby deceiving and inducing such purchasers to misbrand their yarns and fabrics, in the manufacture of which respondents' fur fibers are used.

After the issuance of the complaint, to which no answer was filed respondents, their counsel, and counsel supporting tbe complaint entered into an Agreement Containing Consent Order To Cease And Desist, which was approved by the Director and the Assistant Director, Bureau of Litigation of the Commission and thereafter transmitted to the I-Iearing Examinf'T for consideration. The agreement states that respondent Fur & VV 001 Mils, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, and that respondents Platt VV 001 Corporation and S. Rosenfelder & Son, Inc. are corporations organized, existing and doing business under and by virtue of the laws of the State of New York; that individual respondents Richard Beeker and wiliam J\ond are oflcers of corporate respond- 1448 FEDERAL TRADE COM:.nSSION DECISIONS Order 52 F.

entsFur & \VooJ :'Iils, Inc. and Plat.t \Vool Corporation, and cooperate in formulating, directing and controlling the acts, practices and policies thereof; that individual respondent ,Villia.11 l\fond is also an offcer of corporate respondent S. Rosenfelder & Son, Inc., and formulates, directs and controls the policies, acts and practices thereof; and that all respondents herein have their offce and principal place of business on Chestnut Street, Danbury, Connecticut. The agreement provides, among other things, that respondents admit all the jurisdictional facts alleged in the complaint and agree. that the record may be taken as if fmdings of jurisdictional facts had bee'- duly made in aeeordance with such allegations; that the record on which the initial decision and the decision of the Commission shall be based shall consist solely of the complaint and this agreement; that the agreement shall not become a part of the offcial record unless and until it becomes a part of the decision of the Commission; that the complaint may be used in construing the terms of the order agreed upon, which may be altered, modified or set aside in the manner provided for other orders; that the agreement is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint; and that the order set forth in the, agreement and hereinafter included in this decision shall have the same force and effect as if entered after a full hearing.

Respondents waive any further procedural steps before the Hearing Examiner ancl the Commission, the making of findings of fact or conclusions of law, and all of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement.

The order agreed upon fully disposes of all the issues raised in the complaint, and adequately prohibits the acts and practices charged therein as being in violation of the Federal Trade Commission Act. Accordingly, the Hearing Examiner finds this proceeding to be in the public interest and accept.s the Agreement Containing Consent Order To Cease And Desist as part of the record upon which this decision is based. Therefore J t is olde1'd That respondent Fur & "Wool Mills, Inc" a corporation, and its offce-rs; respondent Platt 1V 001 Corporation, a corporation, and its offcers; respondent S. Rosenfelder & Son, Inc. , a corporation, and its offcers; and respondent.s R.icha-rd Becker and 'Villiam Mond, individually and as offcers of Fur & "Wool Mils, Inc. and Platt Wool Corporation; and "Wiliam Mond, individually and as an offcer of S. Rosenfeldel' & Son, Inc., and respondents' representatives, agents and employees, directly or through any corporate FUR & WOOL MILLS INC. ET AL, 1449 1445 Decision or other device in connection with the offering for sale, sale or distribution of fur fiber products, or any other products, in commerce as "c.commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

Misrepresenting the constituent fibers of which their products are composed, or the percentages or amounts thereof, in sales invoices or in any other manner.

DECISION OF THE DIISSIO AND Order TO FILE REPORT OP COl\IPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice, the initial decision of the hearing examiner shall, on the 31st day of :\:Iay, 1956, become the decision of the Commission; and, accordingly: It -is o1"dered That respondents Fur & .W 001 Mils, Inc., a corporation, Platt IV 001 Corporation, a corporation, Richard Becker and William Mond, individually and as offcers of said corporations S. Rosenfelder & Son, Inc., a corporation, and .William Mond, individually and as an offcer of said corporation, 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. &, Decision 2 F.

Ix THE J\fatter OF IKTERNATIO ASSOCIATIO PHOTOGRAPHERS ET AL.

ORDER, ETC. , IX REGARD TO 'rue ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Doclcet 6165. Complaint, Feb. 1954-Decision, J1ln€ , 1956 Order requiring sellers in Hollywood, Calif. , of photograph albums, together with certificates for photographs to be taken at independent affliated studios, to cease representing falsely in advertising, on certificates sold to customers and by statements of their salesmen that the person solicited had been specially selected, was to receive an album free, and was charged only forphotographs; that their regular prices were promotional and reduced; that the photographs provided by the certificates were of natural gold-tone finish; and that they had arrangements with photographers all over the country who would honor the certificates; to cease obtaining signatures on order blanks on the pretense that they were receipts for free albums, and attempting to collect from the signers; and to cease representing falsely, through use of their corporate name, that their business was an international association of photographers.

Jir. W. J. Tompkins and llfr. Edward F. Downs for the Commission.

Arkin Weissman of Culver City, Calif., for respondents. INITIAL DECISION BY ABNER E. LIPSCOMB, HEARING EXl\. nner HISTORY OF THE PROCEEDING On February 5 , 1954, the Federal Trade Commission issued its complaint in this proceeding, charging the above-named respondents with violation of the Federal Trade Commission Act by the use of false, deceptive and misleading statements and representations in connection with the sale and distribution of photographic albums and certificates for photographs to be taken in independent studios in various States of the l:united States. On )larch 5, 1954, the respondents submitted their answer denying the principal charges of the complaint. In clue course evidence both for and against those charges was duly received into the record, and proposed findings as to the facts and proposed conclusions \were submitted. IDEXTITY AND BUSIN:gSS OF RESPONDENTS Respondents admit that respondent International Association of Photographers is a corporation organized and existing under and by virtue of the laws of the State of California, with its offce and prin- DJTERNATIONAL ASS1\. OF PHOTOGRAPHERS ET AL. 1451 1450 Decision cipal place of Business located at 1610 Korth Vilcox Avenue, Hollywood, California; that respondents Ray M. Mitchell, Frank Grzesiek Raymond C. Ries, John Mason and Betty C. Mitchell, whose address is the same as the one just given, are individuals and offcers of the corporate respondent; and that they direct and control the policies acts and practices of the corporate respondent. Hespondents also admit that they are now, and for more than two years last past have been, engaged in the sale and distribution of photograph albnms, together with certificates for photographs to be taken at independent affliated studios; that in the course and conduct of their said business, respondents have caused their photograph albums, when sold, together with the certificates, to be transported from their place of business in the State of California to purchasers thereof located in various other States; that they maintain, and at all times mentioned herein have maintained, a course of trade in said products in commerce among and between the various States of the Cnited States; that their volume of trade in said commerce has been substantial; and that they further engaged in commerce in that they transmit various instruments of a commercial.1 nature to their cus tomers located in States other than the State of California and receive from said customers instruments of the same nature. The record shows that the respondents, in connection with and as a part of their business, have entered into agreements or understand ings with a large number of photographic studios located in an or most of the States of the United States, whereby said studios have agreed to honor certificates for photographs to be taken by them and thereafter delivered to the purchasers of respondents' combination album and certificate. These certificates provide that the holders thereof are entitled to receive either ten or fourteen different 8 x 10 photographs of any member of their families, to be taken by the designated studio at the rate of two a year, at intervals of not less than ninety days.

In furtherance of the sale of respondents' album- certificate com binations, salesmen employed by respondents have called upon mothers of newly-born infants, whose names they have usually obtained from lists of births published in newspapers, and have solicited such mothers to purchase respondents' album- eerHficate combination. The albums so offered ,, ere made either of plastic or leather. The plastic a.lbums have been sold, together with a certificate for ten pictures, for $39. , and the leather albums have been sold, together with a certificate for fourteen pictures, for $49.95. 1452 FEDERAL TRADE COj\L\IISSJOX DECISIONS Decision 52 F. T. C.

THE ISSUES The complaint divides the alleged misrepresentations disseminated by the respondents into three kinds:

1. The alleged misrepresentations made by respondents or their sfl1es agents to prospective purchasers;

2. The alleged misrepresentation of an order blank as a receipt for an album; and 3. The alleged misrepresentation inherent in respondents' use of the phrase "International Association of Photographers" as a corporate name.

In their answer respondents denied that they made some of the alleged representations, and the falsity of all representations they admit making. The issues are, therefore, whether respondents have made the alleged representations, and, if so, whether such representa tions are in fact false, misleading and deceptive. The determination of these issues re,quires detailed enumeration of the various representations in question, and a thorough analysis thereof in the light of the entire record. These representations are alleged in the complaint as follows:

REPRESEXTATIOXS ::IADE BY RESPONDENTS OR THEIn SALES AGEXTS '10 l'TIOST'ECTlVE PURCHASERS 1. That the person solicited bas been especially selected, was to receive an album free, and that the charge made was for tbe photographs. This representation is alleged to be false in that prospective purchasers were not especially selected, and that the album \vas not free the price thereof being included in the amount charged the customer for the combination deal of album and certificate. Respondents admit that they have represented that the persons solicited had been especially selected, but maintain that they were so in fact, in that they are selected in a manner determined by respondents' salesmen, VdlO, respondents contend, are independent dealers rather than agents of the Tespondents. They also admit that their album has at times been described to prospective purchasers as "free but contend that 0.11 of the requirements concerning the purchaser thereof have been explained tothe prospective purehasers before they signed an order blank, and, accordingly, no deception resulted. All of the above contentions are without merit. The evidence shows that respondents' prospective purchasers were chosen because they belonged to the class of families who have young children and are therefore naturally interested in purchasing pictures of their children and an album to contain them. T\he names of such prospects were, in INTERNATIONAL ASSN. OF PHOTOGRAPHERS ET AL. 1453 1450 Decision most instances, secured from birth announcements published in newspapers. This basis of selection embraces such a large proportion of the purchasing public that the element of special selection, as that term would ordinarily be Ullderstood by a prospective purchaser, is not present, and its use in the instant connotation, therefore is deceptive.

The evidence sho\vs, further, that respondents) sa,les1len presented both written and oral representations to pro pective purchasers in the name of the corporate respondent. The literature" order blanks and certificates used in offering for sale and selling respondents album-certificate combination were all furnished by and in the name of the corporate respondent. Payments were made by purchasers to the corporate respondent either indirectly! t.through the salesmen, or directly, by mail Much of the profit made by respondents through the sale of their album-certificate combinations resulted directly from the efforts of these salesmen. Regardless, therefore, of the fact that respondents consider such salesmen to be independent contract dealers over whose representations respondents assert they have no control respondents are responsible for all representations made by such salesmen in the process of offering for sale and sening respondents' albumcertificate combinations.

~o seller of a product can in justice furnish to others literature and order blanks bearing his name, creating thereby in the minds of prospective purchasers the impression that the person selling his product is his authorized sales representative, and thereafter hn,ving enjoyed through the efforts of such representative, a subshtntial volume of business, disclaim responsibility for any representation, either oral or written, by which such business was obtained. This principle has been repeateclly affrmed both by the Commission ancl by the courts. The album, which is represented by respondents salesmen as being free, is shown by the evidence not to be free in fact, because its cost is included as part of the price charged for the album-certificate combinations. Furtherinore, the salesmen have, at the beginning of their conversation with the prospective purchaser, represented that the album is free, and have by that means gained dmitta.ncc to the prospect' s home. Later explanation of this misrepresentation to the prospective purchaser does not alter the irwt that deception was earlier used to gain such admittance. Accordingly, it must be. concluded that respondents' prospective purcha.sers are not especlal1y selected; that the album is not given free; and that the two represe.nt-ntions described above, for ,yhieh respondents are responsible under the Fc(lcral Trade Commission Act, are false and misleading.

451524-59.-- 1454 FEDERAL TRADE co::vrMISSION DECISIONS Decision 52 F. T. C.

2. That the prices of $39. 95 and $49.95 for the albums and certificates were promotional and reduced prices.

It is alleged that these prices \were not promotional or reduced prices, but were the prices usually and cllstomarily charged by respondents for their albums.

The evidence shows that these prices were termed " promotional" on respondents' order blanks, and that they 'were inferentially presented as reduced prices in respondents correspondence, particularly in respondents' letters to purchasers acknowledging receipt of orders for the albuDl-certificate eombhwtioJl, "'herein respondents informed the pllrehaser that he was receiving, for $39.95 or S4 , merchandise worth $117.00 or $159. , as follows:

lhe e ten separate portrait settings would regularly cost $79.:')0, but with this you receive ten portraits and a Genuine Custom ::lade Album which has an established price of $37.50. 'rota I cost of this combination offer to you as stated in your contract is $39. , plus tax and $1.00 delivery charges. This equals far less than the price of the portraits alone. Re-sponclent.s contend that their prices are promotional, and respomlent fitchel1 in his te.stimony, states that they are reduced prices, because aJl the items comprising respondents' album-certificate combinations, including the photographs to be furnished by the various studios, would, if purchased separately, on the open market cost mOlC than $39.95 or 849.95. This contention is obviously falJacious. Respondents prices cannot truthfully be said to be " reduced since no one can reasonably claim that his price is a reduced price because it is less than someone else s price for a simihr item. To be in fact a " reduced': price, the price must have been marked down from the seHer s OIVll former higher price. or can respondents prices be truthfully sal(l to be "promotional1. : They were not made as Rll introductory or proHlot.iona.l offer; in fad they were no more promotional than any price quoted with the expectation of making a sale. The evidence shmvs that the t",-o prices at which respondents offer their t\vo album-certificate combinations are, the only prices at which these t",-o combinations have been offered for sale; they are, therefore respondents' usual.l and custom Lry prices lor such comblm1tiolls and are not in a,ny sense "reduced" or "promotional1.:: Accordingly, it must be concluded that this representation is false deceptive and misleading.

3. Tllat the combinat.ion album-certificate deal was of the value of from $117. 00 to $15B.50.

This represented value is alleged to be fictitious because the amounts included for the photographs were in excess of the price charged therefor by photographers affliated with respondents. INTERNATIO AL ASSN, OF PHOTOGRAPHEHS ET AL, 1455 1450 Decision Respondents "admit making the above representations as to the value of their album-certificate combination. but contend that such representation is true, Their contention is 'based on the theory, which is supported by uncontradicted evidence, that the average price of 8 x 10 photographs of comparable quality to those furnished under their certificate would, when added to the self-appraised value Of their albums, equal the values of 8117. 00 to $159. , as represented. Counsel supporting the complaint does not question the self" appraised value of respondents' albums, 01' the arithmetical conclusionof the represented values. He contends, however, that since the' values of the photographs, as represented by respondents, are based upon an average value of photographs throughout the country, they must. include larger as well as smaller prices, so that. in some instance \vhere lesser prices prevail, the represented values must be a misrepresentation. The question to be determined, however, is not "whether the values represented by respondents arb in some instances higher than the prices prevailing in a particular area, but whether they are as alleged, ilctitiolls.

,Vebster e\v lnternationa1 Dictionary, 2nd Edition, Unabridged defines "fictitious as "feigned, imaginary, pretended-arbitrarily devised. " In the light of all the evidence, it is clear that the represented values are not feigned, imaginary, or pretended, because they are baseclupon averages which approximate true values. There is no E',vidence in the record to show to what extent the price used as a criterion by respondents varies from the average, and therefore no basis for a conclusion that such variation was in fact substantial In areas where the average price of phot.ographs prevails, respondents represented values are in accord with the facts; in areas \vhere the price is highm' than the average llsed by respondents, the variation is in favor of the prospective purchaser; and in areas where the price is lower, the degree of variation has not been shown. Respondents' represented vahws c.cannot be said to be arbitra.rily devised, since, according to testimony in the record, they result from a determination of average va.lues of photographs over a considerable area, and \Were obviously arrived nt by m8,Rn5 of reasonable calculation based thereon, a.s distinguished from a random determination of values based on \vhim or caprice.

-\accordingly, it must be concluded that t.his allegation, that respondents' represented values of $117. 00 to $159.50 are fictitious, has nqt been sustained.

4. That HesfJonc1cnts have ftl'angernents with photographers all over tbe country who will1oral their certificates and that no matter wbere the holders 1456 FEDERAL TRADI': cO:\i:nS8'ION DECISIO Decision 52 F.

uf certificates may reside during the time the certificates are in force a photographer who wil honor the certificates wil be readily available. The above representation is alleged to be false because, although respondents have a large number of photographic studios who have contracted to honor their certificates, certificate-holders, as a matter of fact, have found, upon moving to another area, that there were no photographers readily available there who would honor the certificates they held.

Respondents admit that in some rare and exceptional instances 'certificate- holders have failed to fu1d a convenient studio that would honor their certificates. The evidence shows. that certain purchasers upon moving to another area of the country, have failed to find a studio that would honor their certificates. Accordingly, it must be concluded that the above representation has the capaeity and tendency to mislead and deceive some prospective purchasers. 5. That the photographs, to which a purchaser was entited under the eer. tificate, were of natural gold tone finish. It js alleged that respondents represented that the photographs to which a purchaser would be entitled under the certificate were of natural gold tone iinish, and that this repre,sentation is false, in that the photographs were not of natural gold tone finish, but were 01 ordinary sepia tone.

Respondents admit that in SOlle instances the photogJ'a.phs furnished to the certificate-holders by the studios were not of natural representation ,yas gold tone finish. The evidence shows that the made, as alleged, by the respondents within the period or time contemphnec1 in the complaint. It must be concluded, therefore, tlutt the above representation is false, misleading and deceptive. THE PRACTICE 01! OBTAINl-=G SIGXATums ox ORDER BLAXKS BY REPRESEXTING TO PROSPECTIVE PURCll\SERS 'trat 'II-I! OlmF.R BLANK IS .A RECEIPT FOR AN ALDU1.1 It is alleged that respondents sales agents, in some il1st lnee, , hayc represented to prospective purchasers ,vho appeared to be unwilling to purchase an a.lbum-certificate combination, but ,,:ho had expressed a de,sire to accept an album free, that the album ,';Quld given t.hem free, but to obtain it they llust sign a receipt, which " receipt was in fact a contract obligating the signer to purcha.se rcsponde,nts: nlbull certificate combination. Having oht.ainecl the signature' 1 the sales a,crent would thereafter make a notation on the signed order blank llts ,yonld t.hat rt down-payment of 85.00 had been made, alldl'cspOllcle, atternpt. to collect the balance of $34. D3 or 844.06 on the "pnrclmsQ " of the album- certificate cOlnbination.

1'ERNATIONAL ASSX, OF PHOTOGRAPHERS ET AL. 1457 1450 Decision It is alleged that such a pracHce by respondents constitutes an unfair and deceptive act and pracHce.

Respondents contend that their "independent dcalcrs" did not engage in the above-described practice, and, conversely, that "* * * the corporate respondent penahzes the dealer who is guilty of such praetice and * * * does all in its power to prevent this situation from reoccurring. " Respondents further contend that "* * * where the customer informs respondent corporation that this had taken place t.hat corporate respondent upon receiving a satisfactory proof that thi J is t.he true situation, cancels the said contract and does nothing fmthcr * " ." to attempt to collect the amount therein set forth. The evidence in the record, as wen as respondents' admission quoted above, clearly supports that part of the allegation relating to the obtaining of orders by the fraudulent use of an order blank as a recei pt" for a free album. Furthermore, the evidence shows that respondents have, on some oeca,sions, attempted to collect the purchase price of the album-certificate combination on the basis of "orders procurcd in thc manner above described. Accordingly, it must be conclnderl that the above allegation has been sustained, aud that such practice constitutes an unfair and deceptive act and practice. T1IHOUGH THE "L SE OF THE CORPORATE NAME, INTERNATIONAL ASSOCIATION OF l' lIOTOGH.APHERS, REsrONDEXTS Ila VD REPRESEXTED THAT THE CORPORATE RESPONDENT IS AN ASSOCIATION OF PHOTOGRAPHERS ORGA);IZ1:D urON AN I::TERNAT10N \L BASIS It is alleged in the complaint that through the use of the corporate name "International Association of Photographers " respondents represent that the corporate respondent is an association of photographers organized on an international basis. This representation is alleged to be false in that said corporation is not an association, nor is it engaged in the photographic business upon an international scale or otherwise, but is engaged primarily in the sale of photograph albums for profit.

The evidence shows that respondent corporation is a corporation organized primarily for the purpose of engaging in the sale and distribution of photograph albums, in combination with certificates which entitle the purchaser to receive a number of photographs within a designated period of time, from various photographic studios who are under contract to respondent eorpoI'fttion to honor said certificates whenever and wherever presented. Hespondents have been actively engaged in this business. By means of this sales plan, re spondents promote the saJe of photographs by the studios under contract with thel1 nel at the same time promote their own sale of 1458 FEDERAL TRADE COJlr:vnSS' ION DECISIO Order 52 F. T. C.

albums. Respondent corporation was created to be a profit-making organization, and any "improvements" that it may bring to the photographic industry arb incidental to its primary purpose of making a profit. The evidence shows, further, that the direction and control of the corporate respondent is vested in its offcers, and not in the so-caned "member" studios, which have no voice in the selection of such offcers nor in the determination of the poEcy and practices of the corporate respondent. The photographic studios under contract with t.he corporate respondent are not brought together at meetings 01' ot.herwise for the mutual exchange of ideas relative to photography. The legal obligation which they have undertaken, that of honoring respondents: certificates, whe,ll presented, by furnishing photographs to respondents' customers, and there,by gaining an opport.unity to sell additional photographs on their o\\n ac.count to those customers, does not in fact constitute any "association" whatever betv, pen or among the photographic studios under contract to respondents; and the only "association:' of any kind whatever between respondents and the photographic studios is the narrow, contractual one of promoting sales of photographs for mutual profit. It must be concluded, therefore, that respondents use of tho, corpol' ate name "International Association of Photographers is false misleading and dec.eptive.

CONCL 1JSIOX In the light of the above analysis, this proceeding is found to be in the interest of tho, public. It is further found that the acts and practices of the respondents here.inabove coneluc1ed to be false, misleading and deceptive, have the tendency and eapacit,y to mislead and deceive a substantial port.ion of the, purchilsing public into the errone011S and mistaken belief that sllch acts, statements, repre,sentations and practice.s are true and to induce the purchasing public to purchase substantial quantities of respondents' alhmn-certiilcat.e combinations as a result of such erroneous a,nd mistaken belief; that such acts and practices are all to the prejudice and injury of the public and constitute unfa,ir and deceptive acts and practices in commerce "within the intent anc1meaning of t.he Federal Trade Commission Act. OHDEH \Vhereforc, the premises considered, all order to cpa-se and desist. is issued, as follows:

It is ordered That respondent.s International Association or Photographers, a corporation, and its oflcers, and Ray 1\1. fitehel1, Frank Grzesiek, Haymond C. Ries Tohn l\Iason and Betty C. l\Ijt.hell, indi- INTERr--ATIONAL ASSN. OF PHOTOGRAPHERS ET AL. 14. 1450 Opinion vi dually, and respondents' representatives, agents and employees directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of photogntph albw11s or certificates for photographs, in commerce, as "commerce " is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing, dire-ct)y or by implication-- (a) that they sell only to selected persons; (b) that. their albums arc given free or without cost; (c) that the prices at which they regularly 01' customarily sell their products are reduced or promotional prices; (d) tJult the photographs provided by respondents' certificates are of natura) gold tone finish;

2. :Misrepresenting the number and availability of photographers who will honor certificates issued by respondents; 3. Obtaining signatures on order blanks upon the pretense that they are receipts for free albums, or attempting to collect from the persons who may have signed such blanks;

4-. Using the corporate name "International Association of Photographers,' or any other name of similar import to designate, describe or refer to respondents' business, or otherwise representing tllft their business is an association, international or othenvise, of photographers. OPINION OF THE COJUnSSIQN By GWYNXE, Chairman:

Hespondents (a corporation and individual offce.rs thereof, who dmittedly direct and control its policies, , acts and practices) are charged with unfair and deceptive acts and practices in commerce in violation of the Federa.l Tnt-de Commission Act. It is admitted that respondent.s are. engaged in c.ommerc.e; that they sell and distribute photograph albums, together with certificates for photographs to be taken at independent studios -with whom respondents have previously made arrangements. Selling is done through "dealers" who are in effect salesmen se.lling by personal solicitation. The hearing examiner found against the respondents as to an alleged misrepresentations, except "that the combination albullrert.ificate deal was of the nll11e of from 5117 to $159. 50." Respondents appeal.

The alleged misrepresentations invoh-ed in this appeal are: (1) That ti,e pcrson solicited has been especially selected, was to receive an alblln free" and that the charge was made for the photogrn phs.

1460 FEDERAL TRADE COMMISSIQN DECISIONS Opinion 52 F. T. C.

(2) That the prices of $39. 95 and $49.95 for the albwn and certificates 'were promotional and reduced prices. (3) Tlmt respondents have arrangements with photographers all "vel' the country who wiJ! honor their certificates and that no matter where holders of certificates may reside during the time the certificates are in force, a photographer who will honor the certificates will be readily available.

(4) That the photographs to which a purchaser was entitled lmder the certificate were of natural gold tone finish. (5) That signatures are obtained on order blanks by representing to prospective purchasers that the order blank is a receipt for an album.

International (6) That through the use of the corporate name, Association of Photographers, respondents have represented that the corporate respondent is an association of photographers organized upon an intel'natiomtl basis.

1. Selection of Prospects and Gift Part of respondents' answer is " that they state that the persons have been especially selected and in truth and in fact the persons solicited are especiaJ!y selected but the selection is made by the franchised dealers who seJ! the album-portrait plan. It is not disputed that names of prospects Rre secmed from birth records kept by hospitals, clinics and similar sources. The sales force sometimes with the assistance of the studio operator, further narrows the list by giving consideration t.o such facts as the number of children, location of the home, parents' economic status, etc. The method followed is for the purpose of securing good prospects and for the benefit of the seller rather than the purchaser. The Commission recently considered a similar situation in the matter of General Products, Docket 6211, and what we said there is applicable here. 'Ve agree with the finding of the hearing examiner that the representation of special selection) as made in this case, has the capacity and tendency to deceive.

Admitting that the album has at times been described as "fre, respondents nevertheless insist that all the requirements have been explained prior to the purchase and that the free goods rule, as laid down in the Blaok case, Docket 5571, has not been violated. Such contention is not supported by the evidence. Several witnesses testified they were told they 'There to receive a gift and were not aclvised that there was any obligation on them, such as agreeing to pay for photographs.

INTERNATIONAL ASSN. OF PHOTOGRAPHERS ET AL. 1461 1450 Opinion K or can it be said that the album was, in fact, free. Respondents sell for a stated amount an albmn and certificates entitling the purchasers to have photographs taken by a local studio. All the money collected goes to respondents. The studio pays no dues nor eommissian to respondent, and is interested in the plan largely beeauseof its promotional and advertising value. The real interest respondent has in the scheme is the sale of its property, the album. As to the various claimed misrepresentations made by salesmen respondents point out that they do not control the details of their dealers' or salesmen s daily operations. They do, however, furnish the supplies, order blanks, etc. Contracts are made by the purchaser with the respondents and most of t.he payments are made to them. According to the cont-ract, salesmen are paid a profit which is really a commlSSlOn.

The facts here are similar to those in Perma-i1 aid Oompany FTO (1041) 121 F. 2d 282, where the acts of selling agents were held to be within the scope of their employment and the respondent must assume full responsibility therefor.

2. Reduced and Promotional Prices Respondents' literature asserts that the quoted prices of $39. 05 and $49.95 are promotional and reduced prices. In their ans\ver, respondents admit the representation as to reduced and promotional prices and "further state that in truth and in fact, the prices for which the said albums and certificates are sold arc reduced rates in that by comparison with the retail selling price of the said album plus the average retail price of the nlil1ber of portraits to which the purchasers are entitled, far exceed the prices for which the albums and certificates are sold.

That is, the value, if the purchaser avails himself of the certificate is greater than the purchase price. evertheless, the $39.95 and $49. are the charges regularly made by respondents; it appears they never sold at different prict'B. Nor are these prices special prices made for a special occasion or for a particular purpose. The terms "reduced prices" and "promotional prices" are frequently used and have acquired an established meaning to the ordinary prospective buyer. They mean that the seller formerly sold the article at a certain price and that now he is selling it at a lesser price. It is not the statement of rm opinion, such as often exists when reference is made to value, it is a statement of fact that invites comparison between a former price and H, present lesser price. The complaint did make a charge having to do with value, to wit t.hat the combination albnm-certiilcate deal was of the value from 1462 FEDERAL TRADE COM::nSSION DECISIO:\S Opinion 52 F. T. C $117 to $159.50. As to that, the hearing examiner found the evidence insuffcient to support an order.

The use of the terms "reduced:' and "promotionar: do not clearly describe the respondents' pricing policy and have the capacity and tendency to deceive.

3. That the respondents have arrangements with photographers all over the country who \\"i11 honor the certificates and that no matter where the holders of certificates may reside during the time the certificates are in force, a photographer who will honor these certificates will be readily a vailablc R.espondcnts object to the following finding of the hearing examiner as not being support.eel by the evidence: "The evidence shmvs that certain purchasers, upon moving t.o another area. of the country, have failed to find a studio that would honor their certificates. ,Veda not find any evidence to support that finding. There is however, evidence to the e,lIect that one, salesman said: "You can go into any studio around and get the' photographs; that one purchaser after having three photographs taken, discovered that the designn,ted studio had cancelled its contract with respondents and the nearest studio representative was in another city some 12 miles distant; that another customer was told that respondents had studio representatives in different cities and "most principal cities, I believe she said, and if I ever moved, that I could have them take it, you knU\v, just about anywhere. I don t believe she told me that they had them in every city, but pretty near. " Respondent Ray 1\1. l\litcheJl testified there were about 700 member studios located in pradieally all the states and in some foreign countries. It also appears that the contracts for pictures are transferrable and that a purchaser moving to a new location may have the contract completed by another studio member and that in case none can be found, the purchase,r may send in a negative for enlargeInent by respondents. It appears, however, that this information wa.s ordinarily given to the purcha.ser a.after the. signing of the order.

'Ve find that there were misrepresentations as to the number a.nd availability of photographers who will honor certificates issued by respondents and that the order of the hearing examiner in that respect IS propel'.

4. That the photographs ,were of natural gold tone finish At least three certificates inil'odllced into evidence refer to the, portraits to be furnished as "in natural golden tone finish:' . Th testimony of the respondent Mitchell was to the effect that respond- TERNATIOKAL ASSN. OF PHOTOGRAPHERS ET AL. 1463 1450 Opinion ents once used the term "gold tone ' in their certificates. " Then la.ter because we found out that there had been some kind of controversy on gold tone. through the Better Business Bureau, we changed it to golden tone. " Still later "-\Ye changed it to ' tone: portrait, to have the photographer determine whatever t.ype of developer he used. 1D48 andthe refer'cnee "nat.ural golden tone :' was used in 1947 and customers were not getting that in some cases. Although the record on this phase of the case is not too satisfactory \Ye see 110 reason for interfering with the finding and order of the hearing examiner.

b. Obtaining signatures on order blanks by deceptive meaIlS Several "\vitnesses testified that they signed a document presented by the salesmen a,nd represented by him to be simply a receipt, the signing of "\\"hi.ch "\vns necessary to secure the albmD as a gift. These doeume,nts, which weTC in fact order blanks, were sent to the respondellts "\with a notation that the purchaser had paid $5.00 011 account, "\\"hen 111 S(Hne cases, nothing or a lesser amount was actually pa.id. There is evidence that respondents tried to collect the amounts cla,ilnc(l to be due and on occasion utilized the services of a collection agency. ,Yhe.n collections were disputed and the al1cged purchaser would sign n notarized statement setting out the facts, the matter would be chopped.

Hesponclents cbirn they disapproved of this practice and imposed penalties 011 their.r sa.lesmen who engage.d in it,. They also claim that the instances complained of were unauthorized acts of their salesmen which they tried to prevent, a,nd t.hnt, in any event, the facts do not indicate that it was " a practice: of respondents. Nevertheless, the acts disclosed in the evidence are suffcient to warrant the fmding and order entered by the hearing examiner. Fox Filrr/; Oorporation , Inc. v. FTO 116 F. 2d 678.FTO (1924) 296 F. 363. Gimbel Emthel'8 6. JHisrepresentation based on the use of the corporate name Internat.ional L\.association of Photographers The above-named is a corporation organized for profit. The articles of incorporation are not in evidence. The business was formerly owned Rnd operated by Ray 1\1. Mitchell, president of the corporatioll as sole propriet.or. 'Vhen the corporation 'vas created he sold t.he business to the c.orporation in e,:sehrmge for stock. It does not appear tha.t the tllc1io owners own stod;: or have any rights in or control over the corporation, except as conta.ined in their individual.1 contracts with the corpora.tion1j a ropy of which is in evidence.

1464 FEDERAL TRADE CO=SSWN DECISIONS Order 52 F. T. C.

Under their agreements, the studio owners agree to honor the certificates sold by respondents and to furnish photographs and proofs, in accordance therewith. The corporation agrees to act as good-will ambassador for the studio owners, to deliver albums as provided, to furnish the studio certain merchandise, and to sell other merchandise at prices which are claimed to eilect considerable savings. No meetings of the cooperating studios have ever been held. There aro no dues and no reports. Either party may cancel the contract with cause" on 90 days' written notice.

Several studio OIV1101'8 having contracts with the corporation testified that they selected the dealers and at least helped select the prospects. One described the organization as a very good membership of studios who have a working merchandising plan. Respondent Ray M. Mitchell testified that the main business was sellng portrait plans or programs.

1Ye have no doubt that the working arrangement between the corporation and studio owners had elements of potential advantage for both. Nevertheless, it cannot be described as an association of photographers as that term would be normally understood. The corporation was obviously owned and controlled by a few people and its principal source of profit was the sale of albums to the public. The arrangement ,with the studios was for the purpose of furthering the sale of albums. That the name would have a tendency and capacity to deceive is indicated by the fact that some customers testified they understood they were doing business with an organization of photographers.

Except as modified herein, the findings, conclusions and order of the hearing examiner are adopteel as the fulClings, conclusions and order of the Commission. The appeal of respondents is denied and it is directed that an -order issue accordingly. FINAL ORDER The respondents in this proceeding having filed their appeal from the initial decision of the hearing examiner; and the Inatter having been heard on briefs and oral arguments of counsel; and the Commission having rendered its decision l110difying the fuldings conta,ined in the initial decision and adopting as its own decision the initial decision as so modified:

It is o1Ylered That to the extent noted in the tCcompanying opinion the respondents' appeal be, and it hereby is, granted. In all other respects, said appeal is hereby denied.

It is further ordered That the respondents, International Association of Photographers, a corporation, and Ray :\1. Mitchell, Frank INTERNATIONAL ASSN. OF PHOTOGRAPHERS ET AL. 1465 1450 Order Grzesiek, Raymond C. Ries, John Mason, and Betty C. Mitchell individuals, shan, 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 contained in the aforesaid initial decision. 1466 FEDERAL TRADE CQ:\I1IISSIO!\T DECISIONS Decision 52 F.