Kay Jewelry Stores, Inc.

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

IN THE l\LATTER OF lca Y JE"\VELRY STORES, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\Il\HSSION ACT Docket 6445. Co IIlp la.i.nt, Nov. 1/, 1955-Deci-si.on, Nor. , 1957 ('flh~r requiring a corporation furnishing supervision and management services to a chain of approximately 110 retail jewelry stores throughout the United States, and its wholly owned sales subsidiary, with principal place of business in 'Vashington, D. , to cease falsely representing the usual retail price of their "Lachine" watches, which sold at retail for $19.75, by affixing to them price tags ranging from $33.75 to $125, and by making the same false representations in advertisements in newspapers. Frederick 3/ cM am.los, Esq. for the Commission. Lord, Day Lord by Charles 1V. 3/e?'ri.tt, Esq. of N e'v York City and Simon 11inlwwn, Esq. of "\Yashington, for respondents.

INITIAL DECISION BY ROBERT L. PIPER , J-IE"\ning Ex.\l\IINER STATEMENT OF THE CASE On November 17 , 1955, the Federal Trade Commission issued its complaint against ICay Jewelry Stores, Inc. , Fairfax Distributing l Joel S. Kaufmann/ David R. TrattnerCompany, Cecil D. Kaufmann Benjamin B. Golding a.nd Simon I-lirshman, individually and as officers of said corporations (all hereinafter collectively called respondents), charging them with the use of unfair methods of competition and unfair and deceptive acts and practices in c.commerce in violation of Section 5 of the Federal Trade Commission Act (hereinafter called the Act), 15 n. c. 41 et seq. Copies of said complaint together with a notice of hearing "ere duly served upon respondents. The complaint alleges in substance that respondents, by attncl1ing price tags to certain watches, falsely represented that such prices were the usual and regular retail prices when in fact they were not thereby placing in the hands of retailers a means and instrumentality for deceiving and misleading the purchasing public, and by the dissemination of certain newspaper advertisements containing original" prices and savings to be effectuated, falsely represented prices and the savingssuch prices to be the regular and usual retail filed a to be effectuated. Respondents appeared by counsel and 1 Incorrectly referrerl to as Kaufman in the caption of the complaint and other doellments.

. KAY JEWELRY STORES, INC. , ET AL. 549 548 Findings joint ans\ver admitting the corporate commerce and competition allegations of the complaint, the furnishing of such price tags for said watches, and the dissemination of said advertisements, but denying all alleged violations of the Act.

Pursuant to notice, hearings were thereafter held before the undersigned hearing examiner duly designated by the Commission to hear this proceeding on January 30, :May 22, August 13 and 14, September 18 November 19 and December 3, 1956 in 1Vashington, D. and Philadelphia, Pennsylvania. All parties were represented counsel, participated in the hearings, and afforded full opportunity to be heard, to examine and cross-examine witnesses, to introduce evidence pertinent to the issues, to argue orally upon the record and to file proposed findings of fact, conclusions of law, and orders, together with reasons therefor. At the conclusion of the case-in-chief counsel for respondents made several motions to dismiss portions of the complaint, which motions were denied. All parties waived oral argument and pursuant to leave granted, thereafter file.d proposed findings of fact, conclusions of law, and orders, together with reasons in support thereof. An such findings of fact and conclusions of law proposed by the parties, respectively, not hereinafter specifically found or concluded, are herewith specifically rejected. Upon the entire record in the case and from his observations of the witnesses, the undersigned makes the following: FINDINGS OF FACT 1. The Business of Respondents The complaint alleged, respondents admitted, and it is found that Kay ,Jewelry Stores, Inc. (hereinafter called I(ay), is a Delaware corporation engaged in the furnishing of supervision and management services to a chain of approximately 110 retail stores throughout the United States in each of which it is the owner of varying amounts of capital stock. Fairfax Distributing Company (hereinafter called Fairfax), is a Delaware corporation wholly owned and controlled by Kay. The office and principal place of business of both Kay and Fairfax is 702 H Street, N."\Y. , "\Yashington, D. Respondents Cecil D. Kaufmann, Joel S. E::aufmann, David R. Trattner Benjamin B. Golding and Simon Hirshman are oilicers and directors of I\::ay and direct, formulate and control its policies, acts and practices. Cecil D. Kaufmann and ,Joel S. Kaufmann are president and vice president, respectively, of Fairfax and direct, formulate and control its policies, acts and practices. The address of ~lr. 25 V. C. POO7(b).

Findings 54 F. Hirshman, Secretary of I\::ay and a practicing-attorney and member of the District of Columbia Bar, is 917 vVoodward Building, Washington, D.C. The respective addresses of Benjamin B. Golding and David R. Trattner are 985 1\lain Street; Hartford, Connecticut, and 510 Commercial Exchange Building, Los Angeles California. The address of all other individual respondents is the same as that of the corporate respondents.

II. Interstate Commerce and Competition The complaint alleged, respondents admitted as hereinafter qualified, and it is found, that they are now and have been for some years engaged in the sale and distribution to retail jewelers of jewelry of all kinds, including watches. ICay does not sell jewelry but furnishes supervisory and management services to the chain of ICay retail stores located throughout the United States and wholly owns Fairfax, which purchases and sells jewelery to such stores throughout the United States.3 Among the watches sold and distributed b~r respondents have been watches sold and distributed under the trade name "Lachine." The individual respondents did not prl'sonany participate in the sale and distribution of the Lflchine watches except in their capacity as oflicers and directors of Kay and Fairfax. In the regular and usual course and conduct of their business, respondents sold and caused to be transported from their place of business in the District of Columbia said Lachine watches to retail customers located in other states . ancr In the District of Columbia for resale to the purchasing public. Respondents maintain and have maintained a constant and substantial course of trade in watches in commerce among and between the various states of the United States and the District of Columbia. In the course and conduct of their business, respondents h~tve been at all times mentioned herein in substantial competition in commerce with other corporations, firms and individuals likewise engaged in the sale and distribution of watches. III. The Unlawful Practices A. The 1 ssu.es The principal issues in this case are whether respondents, by affixing various price tags to the Lachine watches before selling them to the public, falsely represented the usual and regular retail prices of 31\11'. Taylor, the general merchandising manager of Ka~' . testified that the managers of the various retail stores took their orders and directions from him. As sole owner of both Fnirfax and Advertising Associates, Inc., the corporation which prepared the advertising referred to hereinafter, it cannot be disputed seriously that Kay, as principal Is responsible for their actions.

KAY JEWELRY STORES, INC., ET AL. 551 548 Findings such watches, and by disseminating certain newspaper advertisements containing claimed original prices of said watches and savings to be effectuated by purchasers, falsely represented the usual and regular prices of said watches and the savings to be effectuated. B. The False Representation.s 1. The Preticketed Prices There is no dispute in the record that respondents caused to affixed to the Lachine watches before. they were sold to the public price tags ranging from $33.75 to $125. , which watches were offered for sale at $19. , and caused to be disseminated in various newspapers throughout the country advertisements containing, among other things, the following statements:

KAY SAVES YOU $14 TO $80 ON FAMOUS WATCHES. ORIG.

$33.75 TO $100 KAY' S PRICE $19.

The Famous Maker of These Fine Watches has retired from business. He offered the 90 Kay Jewelry Stores his entire stock of watches at a fraction of their cost.

\Ve promised not to mention this famous maker s name. Hespondents conceded the use of the aforesaid price tags and advertisements but, contrary to the allegations of the complaint, contended that such prices were the usual and regular retail prices and consequently the represented savings were also truthful and factual. During October 1954 , respondents entered into a contract with Samuel Lashoff of Philadelphia under the terms of which they purchased his entire stock of Lachine watches, some 4 900 watches and 766 watch movements. :Mr. Lashoff for some years had been engaged in the business of importing Swiss watches imprinted with his own trade name "Lachine'~ and selling them wholesale to various retail outlets in the Philadelphia area. :Mr. Lashoff decided to retire from the business and sold his entire stock to respondents through Fairfax for $34 750. Included in the sale were a number of boxes and price tags previously used by Mr. Lashoff, with prices ranging from $27.50 to $125.00.

Among other things, the contract between Lashoff and Fairfax contained a provision permitting Fairfax for a period of one year to purchase additional watches from other sources and use the name Lachine thereon. Pursuant to this provision, respondent purchased approximately 846 watches from the Gre.ygor watch Company of New York City which were included in the subsequent saJe of the Lachine .watches to the public. In ~larch ID55 the above-found ad- Findings 54 F.

vertisement was run in various newspapers throughout the United States and respondents, through approximately 65 of the Kay retail jewelry stores, engaged in the sale to the public of the Lachine watches, including those purchased from Greygor, at the price of $19.75 each. R.respondents preticketed the watches purchased from :Mr. Lashoif with price tags ranging from $33.75 to $125. , and the watches purchased from Greygor with price tags ranging from $39.75 to $59.50.

The record establishes that until about 1052 :Mr. Lashoff advertised his Lachine watches for sale by retailers at suggested retail prices ranging from $27. 50 to $100. , and delivered Lachine watches to his retail customers with price tags aflixed thereto ranging from $27. 50 to $125.00. The lowest suggested retail price of $27.50 applied to all of the 7-jewel watches sold by ~lr. Lashoff. II1cluded among the purchase by respondents were approximately 1 360 7-jewel watches. The. remainder of the watches and movements purchased by respondents from Lashoff contained 17 jewels and were preticketed with prices ranging from $45.00 to $125.00. The record establishes that certain of the prices tagged and advertised were 110t the usual and regular retail prices of the Lachine watches. However' even assuming (l,l'g1.lendo that the. usual and regular retail price of the Lachine 7-jewel watches was $27. , respondents preticketed and advertised these 7-jewel watches at $33.75. This of course even unde.r the assumption was not their usual and regular retail price. Respondents contend that because they added to such watches a metal band costing them $2.00 which had a retail value of $6.00 or more, and :Mr. Lnshotl sold these watches with only straps 01; cords attached thereto, the retail value of the watches was correspondingly increased $6.00 or more.

The issue of value was inserted in the ease by counsel supporting the complaint, who contended that the preticketing not only placed in the hands of retailers a. means and instrumentality for decei ying the public as to price but also as to value. The Commission has i:'iheld recently in aflirming the undersigned that the issue of value irrelevant in a fictitious pricing case.-! As pointed out therein, the issue of whether respondents have falsely representeel the usual and value regular price of their products has nothing to do with the such products. Even assuming the value to be equal to the prcticketed price casts no light upon the issue of whether or not such prices are the usual and regular prices of the products in question. RlIdh/ Rotll Docket No. 6419 (1956) ; Nctl1.'ille, Inc. Docket No. 6405 (1956), and cases cited therein.

RAY JEWELRY STORES, INC. , ET AL. 553 548 Findings Unfortunfttely in this proceeding, because the complaint alleged that the fictitious pricing furnished an instrumentality for deception as to value, as well as price, considerable evidence was received from both parties concerning value, which upon reflection and for the reasons stated is found to be irrelevant. No finding is made that respondents falsely represented the value of their watches or furnished an instrumentality for deception of the public as to such value.

However, the record clearly establishes that respondents' preticketed prices were not the usual a.nd regular retail prices of the Lachine watches. vV11ile the Laehine 7-jewel \yatches may have been sold for less, the record establishes beyond question that they were never sold for more than the tieketed price of $27. , and therefore respondents' representation that the usual and regular price for such watches was $33.75 was false. The fact that respondents added metal band to such watches which may have increased their retail value to $6.00 or more is no justification or defense for misrepresenting that such watches usually and regularly reta.il for $33.75. This contention is typical of the confusion which arises when the issues of price and value are. not distinguished. As previously found, value is irrelevant. By pretieketing these watches with a price of $33. , respondents represented to the public that that was the usual and regular retail price when in truth a.nd in fact such watches had never been sold at retail for more than $27.50. Although not essential, it is interesting to note that :;\11'. Lashofl' , in a radio commercial ~ oflered Lachine watches for sale from $27. to $100.00 including "free" a matching watch band, which would negate respondents' argument even if relevant. Additional evidence was o:tl'ered that other preticketed prices of the Laehine watches were not the usual and regular prices. One of the exhibits received in evidence was a Lachine watch preticketed by respondents at $100.00. As previously found, these price tickets had been used by 1\lr. Lashoff and furnjshed by him to respondents. The record establishes that while this was one of )11'. Lashoif's suggested retail prices, it was not the usual and regular price at which such watches were sold at retail. Several of 1\11'. Lashofl"s retail customers called as witnesses by counsel supporting the complajnt test)fled that they sold this watch at prices ranging from $50.00 to $75. but never sold it for $100.00.

Substantially all of the retail jewelers called in support of the complaint testified that the usual and general practice in this indlls- (; Comrni!'!':ion Exbibit -"1-",- 554 . FEDERAL TRADE COMMISSION DECISIONS Findings 54 F. try in selling watches, including Lachine, was to use a markup re- ferred to in the trade as "Keystone." 6 Ke)Tstone was defined doubling the price paid by the jeweler to the wholesaler. In other words, if the jeweler paid a wholesaler a price of $50. 00 he normally would retail the watch at $100.00. The record establishes that the wholesale price of the watch preticketed $100. 00 by respondents and Mr. Lashoff was $37. which would result in a Keystone retail price of $75. 00. Some of the witnesses could not recall the specific prices at which they had sold various Lachine watches, but testified that their usual and regular price was ICeystone, or double the amount they paid for the watch. Lashoff himself testified that while he normally did not sell his Lachine watches at retail, upon the occasions when he did so he sold them for 20% to 25% off of his tagged or suggested retail price. 1With reference to the watch tagged $100. this would result in a price of $75. 00 to $80. or approximately ICeystone.

At no point in the record did ~ir. Lashoff elaim that his tagged prices were the usual and regular retail prices of Lachine watches or anything more than suggested retail prices.7 The record establishes with respect to substantially all of the various models of Lachine watches purchased by respondents that, based upon LashotI' price to his retailers, the preticketed price was substantially in excess of Keystone. Other witnesses called by counsel supporting the complaint who were qualified as experts on retail prices testified that the retail price of the particular watch ticketed $100. 00 would vary from $50. 00 to $85. 00. 'Vhile their testimony would not establish the usual and regular retail price of Lachine watches, inasmuch as they never handled or sold them, it tends to corroborate the testimony of the retail jewelers who did sell the Lachine watches. The foregoing facts, together with the facts previously found concerning the 7 -jewel Lachine watch, as well as the facts hereinafter found concerning the Greygor watches, establish that the preticketed prices used by respondents were not in fact the usual and regular retail prices of said watches. It is well settled that such fictitious pricing constitutes an unfair and deceptive practice and an unfair method of competition which the Commission and the courts repeatedly have held to be unfair and in violation of the Act. ;; l\lcssn; . L~'nn and Taylor, official1s of Fairfax find Kay. respectively, and called by respondents as experts, admitted that the customary markup in the trade was Keystone. 7 The record also reveals that Mr. Lashoff told Mr. LYllD that the prices on the tags were those lit which Mr. Lashoff asked his retailers to sell. Neuvillc, Inc. Docket No. 6405 (1956): Rudin Roth Docket No. 6419 (1956); 'The 01"lojJ Company, Inc. Docket No. 6184 (1956). and CU8eB cited therein. KAY JEWELRY STORES, INC., ET AL. 555 548 Findings Counsel supporting the complaint also contended that Lashoff' suggested retail prices were based upon retail prices prevailing in 1951 and the years prior thereto~ and that because lower retail prices prevailed in 1955, the use of such price tags by respondents falsely represented the usual and regular retail prices in 1955. 'Vithout passing upon the merits of this contention ~ suffice it to say that the record does not support the factual finding proposed by counsel supporting the complaint. There is little if any substantial evidence in the record concerning this alleged price decline. If p.anything, the record would support a finding that the price of such watches had not declined.

2. The Advertised Prices and Savings As previously noted, respondents advertised the Lflchine watch sale in newspapers throughout the country. This advertisement stated that. these "Famous" watches were originnlly ~;~~;~1.75 to $100. wpre being sold at $19. , and purchasers saved from 81- 00 to $80.00. The complaint alleged both representations to be. false. The Commission recently has held that an advertisement snbstantinJly iden- ': \\TflStical to the words used herein, namely, " Orig. $~j:1.7;~) to 8100. a representation that such prices were the usual and reg-ular retail prices of the product in question.9 For the same reasons set forth above in connection with the preticketed prices, respondents: fldvel'tising representations concerning the usual.l and regular prices of the watches are false.

In addition, as previously found, the watches included in this promotion were not only those purchased from ~fr. La-shoff but included some 846 additional watches purchased from Greygor but labelled with the Lachine name. The price representations are also false ,,-ith respect to these watches purchased from Greygor. R. spondents' defense with respect to this group of watches has even less merit than with respect to those purchased from Lashoff. ","ith respect to Greygor watches, respondents could not even argue that the prices "ere those usually and regularly charged for Lachine watches, because they had never been handled by Lashofl' or sold by his retailers at any price. Respondents could only offer proof that. the Greygo!' watches were comparable in quality and value to some of the "ntches in the Lachine line but, as previously found quality and value are irrelevant to a representation concerning the usual and regular retail price.

DAmcI' ican Broadloom Ca.rpct Colll-pany, DocJect Xo. G271 (1956). ~12S()77-GO- ,, , , , ,,, ,, Findings 54 F. The above-quoted advertisement of respondents which was received in evidence as Commission Exhibit 1 contains a representation which, while not alleged in the complaint, was patently false in view of the undisputed facts in the case. The advertisement refers to all of the ,,-atches on sale as " Famous ",Vatches and also states The Famous :Maker of these fine watches has retired from business. ",Ve promised not to mention this Famous )Iaker s name. Don t. confuse these with ordinary water-hes. They are one of the finest makes in the world today!" The foregoing statements are obviously untrue ,,-ith respect to the Greygor watches which were stamped ,,-ith the Lachine name and mingled with the rest of the ",ntches included in the sale. The statements that they were famous watches secured at a fraction of the.1r cost from a famous maker who had retired from business hose name had been promised not to be mentioned, and that they "'ere not ordinary watches but one of the finest makes in the ,,-odd ete uniformly untrue and false. As previously found, respondents had secured permission from )lr. Lashofl' to purchase and label additional ,,-atehes ,,-ith the Lachine name. This, however, does not make the foregoing representation any less false. These representations, for reasons not esplaine() in the record ete not alleged in the complaint nor litigated at the hearings and accordingly are not in issue herein and are not included in the. order hereinafter. J-Io,,-e.ver, they unquestionably establish the falseness of respondents' representation as to the usual and regular price of these watches and the savings to be efl'ectuated by the purchasers. Inasnl11ch as neither :\11'. Lashofi' nor respondents had ever sold these particular watches before, any representation concerning their usual and regular retail price must of necessity he false.

The reference in the achertisement to the original price of these famous watches, one of the finest makes in the world " obviously could only refer to those ,,-atches acquired from the "famous maker ho hnd retired from business " and eonld not by any stretch of the ilnagination be truthful representations with respect to watches acquirpd from other sources. The recon) establishes that respondents afiixec) price tags ranging from $39.75 to $59.50 to these socnl1ed Lachine watches pureJwsed from Greygor. ,,-itness from the. Greygor Company called by respondents testified that Grey~:Tor had never sold tlh~se pnrticl1lnr st~')es to Fairfax before OT' sjnce. Experts called by counsel supporting the complaint testified that one of these Greygor ,,' atches received in evidence as an exhibit ,yould regularly at retail prjces ranging from 81!).!);') to $28. ;")0. Hegarc1Jess $) : .

KAY JEWELRY STORES, INC., ET AL. 557 548 Findings of at what price Greygor watches would normally retail, respondents representation that the usual and regular retail prices of these "atches were frolll $39.75 to $59.50 was false. The same conclusions apply "ith respect to respondents' representations concerning the savings to be effectuated, namely, $14. to $80.00 per .watch, which merely computes for the customer the arithmetical differences between the claimed original prices and the sale price. Inasmuch as the prices represented as the usual and regula.r price.s have been found to be false, it follows that the repn~sented savings based thereon must also be false. The same facts which establish the falseness of the representation of the usual and regular retail price of the Lachine watches establish the claimed savings to . be false, and the same facts which establish the falseness of the representation of prices with respect to the Greygor. watches equally disprove the claimed savings thereon. N ormany, of course, representations concerning regular and usual prices referto those prices at which a. respondents products are regularly and usually sold at retail. I-Iere, hm,ever, because respondents had never previously sold Lfichine watches, and be-cause they hRd ac- CjllirNl these "niches from the former wholesaler thereof, as made clear by their advertising, the original usual and regular prices refelted to must of necessity have been those of :Mr. LashofL ""with respect to the Greygor watches, the representation ""as doubly false in that it falsely represented the source as well fis the usual and regular retail prices.

C. Respondents' Contentions. and Defenses I n addition to denying the false representations previously found respondents also contend that no order should be issued because the proceeding is moot inasmuch as al1 of the Lachine watches have now been sold. This contention is without merit. It is well estabof the manu-lished that even the discontinuance and abandonment factllre and sale of n. product does not deprive the Commission its discretion to issue a cease and desist order against future violaof a strong shmving thattions oJ the Act, especially in the absence JO Enl1 I1s"l1l11ing, col1tran" to the (le('i:=;ioJJal Inw. the propriety of the prier tngs nttHchec1 h~' 1'esponclent;; to tlie G1'e~'fol' wntclle~, theil' own eyiflE'JJe(' I'e,"pal~. at least ill Ollt' in",rnllee. tilat ~l1eli prins WPI'(' ill('x('('~:=; of 111(' " nsnal anti H'l!nlnl' " plier~S 01' retail ,nl\lf~s contpndel1 1'01' h~' n'spondpnt" 0111' of the Cn' gol' wntchp,.; ('ost n'sponl!ents fI:', J t wa:=; I1ndi":TllltP(l. iih.'J1J(linf!" p,ill,'ncl' 1'1'11111 1'e8pol1(1('111,, ' witll(,~~t.':=;. tho\ t the cnsj.onwry mark-Ilp ,,";IS 50';;' h~' till' wI1(l1..sakr,.; anti loo'7~ h \- the 1'etnile1', pin:=; in some en~I's nn :Hlditiollal 10' ;;, to ('0,1'1' eill1f'1' t:nes (11' tr:Hll'- ill n 110"-01n('.-,.;. "\ppl~' inf! this 10 tlw ~) 8. 0;) 1'1',;1111:=;in a l1et of ~-4:!.OO, ~.et res!wlH1ents pl:H' l'd a $55.00 price tag 011 that Gl'pYI!OI' "- lItl.'ll.

y.

Findings 54 F. the practices are not likely to be resumecl.ll Here, respondents have not discontinued the business of selling watches, and the mere fact that in all probability they will not again sell Lachine watches would not in any way prevent them from engaging in the same type of representations with respect to other watches, now handled or subsequently acquired.

respondents also contend that because counsel supporting the complaint offered no proof of participation by the individual respondents in the conduct complained of other than their status as officers and directors of Kay and Fairfax, any order issued should not be against such individual respondents. The complaint alleged and the answer admitted that the individual respondents are officers and directors of the corporations and direct, formulate and control their policies, acts and practices. It is well settled that under such circmnstances the Commission properly may include such individuals in its cease and desist orders.

D. Concluding Findings preponderance of the reliable, substantial and probative evidence in the entire record convinces the undersigned and accordingly it is found that respondents, by affixing price tags to the Lachine and Greygor watches in the course and conduct of their business in commerce, represented that such prices were the usual and regular retail prices when in truth and in fact such representations "ere false, misleading and deceptive, and by means of such practices, place,d in the hands of retailers a means and instrumentality whereby they might deceive and mislead the purchasing public as to the usual and customary retail prices of respondents' products. It is further concluded and found that respondents, by disseminatina in the course and conduct of their business in commerce newspaper advertisements containing original prices and savings to be effectuated, represented that such prices were the usual and regular retail prices and that such savings were available to purehasers when in truth and in fact such representations "~ere false, misleading and deceptive.

11 F.l', C, Gooc/local' Th' (f NII/illcr Co.. 304 U, S. ~;)7 (1938): C. Wallacc 75 F, ~f1 7:1B (C. A. 8. 1933) crma-JI(/i.d CU. Y. C.. 1~1 F. ~d 282 (C.A. fi, 1!)41) : Ylii.lip R. Park 13() F. ~d 428 (C. A. D. 19.r:) Gd/i F'. 144 P. ~(l 580 IC. A. 2. HI44) Dec/' I'. C., 152 F. 2c1 G5 (C.A. 2, )H45) .llar/clle July. v. :2J() F. 2c1 55G (C. A. 7. 1954).

1~ Standard Erlllcati.on Soci.ct1l v. 1'. 302 U. S. 12 (Jc:n) ; Standard Di.stri/motors F7'. 211 F. 2d 7 (c.A. 2 , )954).

KAY JEWELRY STORES, INC. , ET AL. 559 548 Order E. The Effect of the Unla1.v/,ul Practices The acts and practices of respondents as hereinabove found have had and now have the tendency and capacity to mislead and deceive a substantial portion of the purchasing public with respect to the usual and regular retail prices of respondents' watches and thereby induce the purchase of substantial quantities thereof. As a result substantial trade in commerce has been and is being unfairly diyerted to respondents from their competitors, and substantial injury has been and is being done to competition in commerce. CONCLUSIONS OF LAW 1. Hespondents are engaged in commerce, and engaged in the above-found acts and practices in the course and conduct of their business in commerce, as "commerce" is defined in the Act. 2. The acts and practices of respondents hereinabove found are all to the prejudice and injury of the public and of their competitors and constitute unfair methods of competition and unfair and deceptive acts and practices in commerce, within the intent and meaning of the Act.

3. As a result of the above-found acts and practices of respondents, substantial injury has been done to competition in commerce. 4. This proceeding is in the public interest and an order to cease and desist the above-found unlawful practices should issue against. respondents.

ORDER 1 t is ordered That respondents, Kay Jewelry Stores, Inc. , a corporation, and its officers, and Cecil D. Kaufmann, Joel S. I(aufmann David R.. Trattner, Benjamin B. Golding and Simon Hirsham, as officers of said corporation, and Fairfax Distributing Company, a corporation, and its officers, and Cecil D. I(aufmann and Joel I(anfmann, as officers thereof, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of watches or other merchandise in commerce, as "commerce" is defined in the Act, do forthwith cease and desist from: 1. R,eprese.nting in any manner that certain amounts are the regular and usual retail prices of merchandise when such amounts are in excess of the prices at which such merchandise is usually and regularly sold at retail; and 2. Representing directly or by implication the savings to be effectuated by purchasers by means of prices represented as the usual Appeal 54 F.

and regular retail prices of merchandise which are in excess of the prices at ,rhich such merchandise. is usually and regularly sold at retail, or representing directly or by implication that any savings are afforded to purchasers of respondents' merchandise in excess of those actually afforded.

ON APPEAL FROM INITIAL DECISION Per Curiam:

The issues raised on this appeal are esse.ntially the same as those which were before the Hearing Examiner and considered by him in his initial dec.ision. ,Ye are of the opinion that there is no error in his holding that the practices in question constitute a violation of Section 5 of the Federal Trade Commission Act and that an order to cpnse and desist should issue.

Illustrative of misrepresentation of usual and regular price and savings to purchasers, for instance, is the matter concerning 7 -jewel watches. From the record it seems clear that many of the watches involved, namely, those which bore retail price tags of $33.75 and were advertised by respondents as originally selling at that price had never sold for more than a retail price of $27. 50. As emphasized by the Hearing Examiner in this connection, the basic issue presented relates to the "usual and regular price" of the products rather than to their value. Assuming that the addition of metal bracelets by respondents would increase the retail value of these watches. , it is still apparent that the watch.hes had not been sold by respondents or anyone else for more than a previously preticketed price of $27. and that there had been established.d no original or usual and regular price of $33.75.

The order of the I-Iefll'ing Examiner does require modific.ation hm,ever, insofar as it is directed at named re.spondents in their individual c.apacities as distinguished from their capacities as officers of the corporate. respondents. The I-Iearing Examiner based his eonclnsion of individual liability upon the fact that the complaint alleged and the answer admitted that the individual respondents are ofhc.ers and directors of the corporations, and that said individuals formulate., cured, and control the policies, acts and practices of the corporate respondents. The rec.ord is devoid of any other evidence or showing of circumstances to support a conclusion that individual liability should attach.

,Ye do not consider the foregoing facts alone sufficient justification in this instance for including the officer respondents as re- 1 cr. In the Matter of American Broadloom Carpet Company. et aI.. Docket No. G271 (HJ5li).

KAY JEWELRY STORES , INC. , ET AL. 561 548 Order spondents in their individual capacities~ The Commission has wide discretion in determining the necessity of attaching individual liability to insure the full effectiveness of an order to cease and desist. But where there is no record evidence showing justification and where "no other circumstances appear pointing to the necessity of directing the order against these parties in their individual as clistinguished from their official eapacities " 2. their inclusion as inclividuals should not be approved.

As modifie.d in accordance with this opinion, the initial decision is adopted as the decision of the Commission. An appropriate order will be entered.

FINAL ORDER This matter having been heard by the Commission upon respondents' appeal from the hearing examiner s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and . The Commission having determined, for the reasons appearing in the accompanying opinion, that respondents' appeal should be denied and that the order contained in the initial decision should be modified:

1 t is ordered That, except to the extent indicated in the opinion the appeal of respondents be, and it hereby is, denied. 1 t is fu1'thel' ordered That the order contained in the initial decision be, and it hereby is, modified to read as follows: is. opdeTed That respondents, Kay (J e"\,e1ry Stores, Inc., a corporation, and its officers, and Cecil D. E:aufmann, Joel S. Kaufmann David R. 'l'rnttner, Benjamin B. Golding and Simon J-lirsham, as officers of said corporation, and Fairfax Distributing Company, a corporation, and its officers, and Cec.il D. Kaufmann and Joel S. Kaufmann, as officers thereof, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of "\yatches or other merchandise in commerce, as 'commerce' is defu1ed in the Act, do forthwith c.ease and desist from: 1. Representing in any manner that certain amounts are the regular and usual retail prices of merchandise when such amounts are in excess of the prices at which such merchandise is usually and reglll:nly sold at retail; and 2. Representing directly or by implication the savings to be effectuated by purchasers by means of prices represented as the usual 2 In the !\latter of Wilson Tobacco Board of Trade, Inc., et a1. , Docket No. 6262 (1956) .

:J Cf. In the ~lntter of Kel1Yille, Inc., et a1.. Docket ?\o. fi405 (1956); In the ~latter of 1\Ian'land Baking Company, et a1., Docket ~o. 6327 (1956). Order 54 F.

and regular retail price.s of merchandise which are in excess of the prices at ",which such merchandise is usually and regularly sold at retail, or representing directly or by implication that any savings are afforded to purchasers of respondents' merchandise in excess of those actually afforded.

It is !1.lott he 'J' 0 'J'de'J' , That the findings, conclusion and order, as modified, contained in the initial decision be, and they hereby are adopted as those of the Commission.

I t is !u'J,ther ordered That respondents, I\:ay Jewelry Stores, Inc. a corporation, and Cecil D. I\:aufmann, Joel S. ICaufmann, David R. , as officers ofTrattner, Benjamin B. Golding and Simon Hirsham said corporation, and Fairfax Distributing Company, a corporation , as officers of saidand Cecil D. ICaufmann and Joel S. Kaufmann corporation, shah, 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 initial decisionwith the order to cease and desist contained in the as modified.

THE BORDEN COMPANY. ET AL. 563 Complaint