Holland Furnace Company

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IN THE MATTER OF HOLLAND FUR:\ACE COMPANY ORDBR ETC. , 1;\ REGARD TO THE ALLEGED VIOLATION OF Tile FEDERAL Tll'\DE COMYIISSION ACT Docket 620.7. Complaint, Muy 4, 1i54- Decision, .!ily, 1958 Orner requiring a manufacturer of furnaces, \with plant in Holland, Mich. with some 475 branch offices in various States and a number of subbranches, scoring its products through house-to-hol1sC salesmen WllOm it supplied with sal(:e; manuals, c8talogs, and other literature, and assigned a cert in territory-to cease using deceptive sales schemes under which its said salesmen posed as Government or utility inspectors or heating engineers to gain access to homes and then dismantled furnaces without the o\vr::cr s permission, ostensibly to determine the extent. of repairs necessary, and refused to reassemble them on false representations that this would involve grave dangers of fire, gas, and explosion, 01' that the competitor-11cHlufacturer of th( furnace was out of business 01" that parts wen u:1obbinable; requiring owr.crs of such di"mantlcd furnaces to sign releases alJso!ving the company of liability for its emr-;loyees' negligence or other ji:lbility before l' c2ssembling the furnaces; 01' cthenvise using scare tactics, misrepresentation, and coercion to sell its furnaces, heating equipment, and parts.

John TV. Brookfield, Jr. and Tll:11ia1n R. Tin,chel' Esqs' J supporting the complaint.

Trenkamp Coakley, by Robert H. Trenkamp and Edwanl A. 1cLeod Esqs. , for respondent.

INITIAL DECISION BY JAMES A. PURCELL, HEARING EXAMINER PRELIMINARY STATEMENT Under date of May 4 , 1954 , the Federal Trade Commission pursuant to the provisions of the Federal Trade Commission Act stating that it had reason to believe that the respondent, Holland Furnace Company, a corporation, has violated the provisions of the said Act and that a proceeding by it in respect thereof would be in the public interest, issued its complaint, copy whereof \V;lS served upon the respondent in clue form of law. The specifk charges covering the acts complained of are hereinafter embodied in this decision under the heading of "Issues. " The respondent did, on June 23, 1954, tile its answer, which answer denied the jurisdictiOll of the Commission to hear and determine the issues raised herein on the ground that respondent is not engaged in , Dccision 55 F.

interstate commerce, and further specifically denied many of the acts charged in the complaint.

On .Tune 23 , 1954, respondent moved for a more definite statement of facts or a bill of particulars which motion \vas denied by the hearing examiner, from vvhose ruling the respondent did on ,July 20 , 1954, appeal 1.0 the Commission. On July 27, 1954 the Commission denied the respondent' s appeal. On ,July 22 , 1954, respondent filed a motion for "Suspension and Referral " thereby seeking to suspend these proceedings and have the entire matter referred to the Commission s Bureau of Industry Cooperation for "appropriate action. " Contemporaneously \with foregoing motion the respondent filed a further motion for a preliminary hearing secking (1) the suspension of the then scheduled hearing; (2) fixing a time and place for a preliminary hearing for the purpose of receiving- evidence and testimony as to the facts est2_ blishing the jurisdiction of the Commission over the e.ubjcct matter of the complaint; and (3) providing that the suspension of hearings aforesaid shall continue for such time as is necessary to obtain a review of the hearing examiner s ruling on appcaJ to the Commission, respondent contending that the jurisdiction of the Commission should first be estab1ishecl before proceeding \with trial of the facts in issue. In support of both of the aforesaid moiions respondent filed extensive briefs. Thereafter, on August 20 , 1954 , and pursuant to formal motion of the respondent, the hearing examiner passed an order granting respondent' s motion to abandon its prior motions for a preliminary hearing to determine jurisdiction and change place of hearing, and, by a separate order of even date with the foregoing, denied respondent' s motion for suspension and referral of the proceedings to the Bureau of Industry Cooperation. From the last mentioned,1 order the respondent took an interlocutory appeaJ to the Commission in support of which it filed a rather lengthy brief. By its order of September 14 , 1954 , the Commission denied respondent' s appeal.

On September 3 , 1954 , the hearing examiner issued his supplemental order fixing the times and places of a series of hearings for the taking- of testimony in the cities of Grand Rapids, Mich. Rock Island and Chicago-o, Ill. On September 10 , 1954 , the respondent filed its interlocutory appeaJ to the Commission from the last-mentioned order of the hearing examiner, and contem poraneously with the aforesaid notice of appeal, respondent filed c1direct1y with the Commission an application for a " stay of pro- HOLLAND FURNACE COMPANY Decision ceedings " pending the outcome of such appeal. On September , the Commission denied the appeal of the respondent and refused to grant an order staying the proceeding, stating in effect, as to the latter, that such should have been filed with the hearing examiner and not with the Commission. Pursuant to the hearing examiner s order of September 3 , 195 , fixing dates and places of hearings for the taking of testimony, the hearing examiner presented himself at the appropriate hearing room in the United States Court House in Grand Rapids, Mich. , at 2 o clock , on September J 5, 1954 , prepared to proceed. Fifteen minutes before the hearing time, the hearing examiner was served \with a temporary restraining order, and an order to show cause, issued out of the District Court of the United States for the Westem District of Michigan, Southern Division, in Civil Action No. 2495 entitled Holland Furnace Company, Plaintiff, v. James A. Purcei1, Hearing Examiner, Federal Trade Commission, \Vashington, , \which said restraining order was signed by .1udge Haymond W. Starr. In obedience to the restraining order the hearing examiner merely opened the proceedings in Grand Hapids and immediately closed the same without the taking of any testimony, thus to show, as a matter of rec:orcl, that he had complied with the Commission s direction to him to proceed. This same procedure was followed on September 20 and 21 , in Rock Island, 11. and, on September 2:" 1954 , in Chicago, 111. , the hearing was again opened and immediately closed because the hearing examiner was desirous of proceeding without delay in the taking of testimony immediately upon the lifting ot the aforesaid temporary restraining order, the matter at that time being then presented to, and argued before, the aforesaid District Court in Grand Hapicls, )'Iich. On the morning of September 24 , 1954 shortly before the reopening of the proceedings in Chicago, Ill. the hearing examiner was advised that, on the afternoon of September 23 , the District Court aforesaid hacl dissolved the yestraining order, thus making it possible for the hearing examiner to discharg-e his duties in the matter. 1t will be observed from the foreg-doing that, while the complaint herein is dated May 4, J 954, it was not until September , 1954 , and after considerable preliminary skirmishing, that the commencement of the taking of testimony took place. Thereafter, and in order to rereive appropriate testimony on behalf both of the Commission and of the respondent from witnesses located in various places who \were qualified to testjfy Decision 5;) F. concerning- the subject matter of the complaint, hearings \were h(-:1d in the cities of Chicago, Grand Rapids, Rock Island, St. Louis, Indianapolis, Cincinnati, ;Vlo1inc, Buffalo, Rochester, Boston, New York, Baltimore, Cleveland, and Washington, D. C. during the course of which in excess of 8 500 pages of testimony were l'cceiv( d from 260 witnesses, 182 thereof appearing- at th instance of the Commission, and 128 appearing for the respondent. On behalf of the Commission, 164 exhibits, and on behalf of the respondent, 281 exhibits \were tendered or received in evidence. The record shows that the acts complained of were not confined to the 14 cities above enumerated but that certain thereof took place in cities other than those named, the witnesses being transported to sllch cities for the convenience of the parties at whose instance they \were called. All of the testimony aforesaid was duly reported, reduced to \\Titing, and the transcripts thereof, as well also al1 exhibits received in evidence, were duJy filed in the Offce of the Commission in the city of \Vashington, D. C. , as required by la\\!. Proposed findings of fad, con(:Jn ion:- of law and orders \were submitted by all parties, oral argument thereon not having been requested.

Specifically referring to a document filed by respondent' s counsel entitled "Respondent' s Proposed Findings 01' Fact and Conclusions of Law: This document, consisting of 261 pages, has (lcvotcd 227 pages thereof to a mere detailed col1clensation or resume of testimony, C:1. lHlTte in nature, dealing almost exclusively \with the testimony of witnesses and evidence favorable to respondent and which are not presentations of proposed findings of fact, susceptible of definite rulings either granting or rejecting them as facts borne out by the tolal evidence of record, hence must be rejected in toto aHhoug"h the ex:=miner has given considerable consideration thereio in appraising the position of respondent' s counsel in regard to the testimony of the witn sses therein de1ineatecl. To attempt to rule separately on each IYould entail an aHogether unnecessary expenditure of time and effurt. The Rule of Practice under \which these proposals \were filed (Sec. 3. 19), provides that rulings thereon shall he made by the hearing examiner- " j' * except when his order disposing of the proceeding otherwise unmistakenly informs the parties of the action taken by him. HOLLAND FUHNACB CG:IPANY Decision As said by the Court: ' ),10 details of evidence should be submitted to the court as fmdings under the Rulee; of Civil Procec1urc.

The proposed conclusion.1i of law and 1JTOposed order submitted by the respondent are rejected QS not being supported by the facts, hereinafter specifically found, and as not being in accordance with the reliable, probative and substantial evidence of record.

Since the evidence of record largely suppol"s the proposed findings, conclusions and oJ:d( r submitted hy counsel in support of the compiaint, they are hereby granted to the extent they are incorpoJ'atc:d herein, othervvise they are rejected. This matter being nOlv before the Hearing Examiner for final determination based upon the record as an entirety, he having presided at all hearings, observed all witnesses, considered and ruled upon all testimony and exhibits 01 record, finds that this proceeding is in the interest of the public and hereinafter makes his findings as to the factt), conelu::ions clra\vn therefrom, and order.

The issues tried are based upon the specific charges of the complaint, many of which are denied by the respondent in its ans-wer. Such issues, beluw stated, arc so interrel2.tecl, and the large number of witnesses and length of the transcript is such, that evidence on scvtral issu s has been received from one or more witnesses, or involyec! in one or more transactions, so that, in the interest of brevity and to avoid unnccessary repetition, segmentation of specific testimony or evidence in support of each finding cannot be undertaken. Therefore the findings and eonelusions based thereon, as same may overlap in their relation and applicability to the several issues, will be relied upon. THE ISSUES STATED 1. L8 the respondent engaged in interstate commerce within the purview of the Federal Trade Commission Act ' 2. Do respondent's salesmen and servkemen falsely represent themselve::J to be inspectors or representatives oJ: goven1mental agencies, or utilities companies? 3. Do respondent's salesmen and servicemen falsely represent themselves to be heating engineers '! 4. Do respondent's salesmen and servicemen falsely represent IinallBt B,.os. v. Goldschlao. 119 F. 2d 1022. Cent. R. R. of N. .I. Centn'/ fJa110vet Da1IJ(; & TTHst Co" 29 1". Supp, 826, FEDERAL TRADE COMMISSION DECISIOXS Findings 55 F.

to ()\vners of furnaces manufactured by competitors of respondent that their furnaces are not repairab1e; are dangerous in that continued use thereof will result in asphyxiation, carbon monoxide poisoning, fires or other damage; that the 111anufacturers of their furnaces arc "out of business" and that repair parts therefor are unobtainable? G. lias respondent distributed form letters, post cards and circulars to members of the public offering free inspections, adjustments or minor servicing of furnaces and, by means of such have respondent's agenis, upon gaining admission to homes of furnace owners for purposes of inspection, or to adjust or service said furnaces, dismantle same \vithaut permission of the owner thereof? G. I-lave respondent' s employees, in many instances, refused to reassemble furnaces thus c1ismantkc1 and, as reason for such refusal, falsely stated to owners that such furnaces are dangerous and to reassemble and continue their use will result in asph:j'xiation, gas poisoning or fire; and have they required such o\vners in writing, to absolve respondent of any liability, including liability for the negligence of its employees, before reassembling such furnaces? I. Have respon(lent s employees dismantled furnaces, leaving them un8.ssembled for lengthy periods, after request by mvners that such furnaces be reassembled, thus causing the owners great and unnecessary inconvenience 8. Have respondent' s employees misrepresented the condition of furnaces and a serted, contrary to fact, that the continued use thereof would be dangerous, thereby causing the owners of furnaces to purchase from respondent nc'\v furnaces, or parts therefor, which they '\vould not have purchased except for such false representations? 9. Have respondent's methods of selling caused owners of furnaces and heating equipment produced by competitors ' of respondent to become dissatisfied '\with, or afraid to continue to use such equipment. and to discard same before the completion of the llseful life thereof, thus effecting sales of furnaces, heating equipment and parts manufactured by respondent? FI:-DlNGS AS TO THE FACTS 1. Respondent, Holland Furnace Company, is a corporation organized under the laws of the State of Delaware with its HOLLAND FURXACE COMPANY Findings principal place of business located at No. 489 Columbia Avenue Holland, Mich.

2. Respondent is now, and has been for the past s veral years engaged in the manufacture, sale and distribution of furnaces heating equipment and parts therefor. Respondent owns and operates approximately 475 branch offees, as '',1211 also a number of subbranchcs, located in various States of the United States. All sales of furnaces, heating equipment and parts therefor, effected by thc Holland Furnace Company or its representatives are io the ultimate purchasers and users of such equipment. 3. In conducting its business respondent does not ship furnaces as units but, typically, sends a carload of the essential parts which are assembled either in its warehouses or branches or " on the job" where ihe furnaces are to be installed. The warehouses mentiuned are, in some instances, branch '\varehouses that is to say, ones which are conneded with the respondent' branches, or centra! warehollses located at strategic points and \which supply the branches in adjoining or surrounding territory. Generally speaking:, a central warehouse is located in a larg(- city and acts as a source of supply for respondent' s branches located in that city and in surrounding territory. \Vhen need arises in the branch offces for material or equipment which is not there on hand or in stock, such is ordered direct from the factory and, in the cases of small branches, the order generally goes direct to the factory rather than to a central warehouse. Respondent also sells repair and replacement parts for its equipment to independent furnace servicing concerns or individuals which are obtainable from the branch offces. Also the branches on occasion, exchange material betv, een thernseJves when necessary, although this is not general, the branches being under instruction to order their needs direct from the factory. The branch offces of the respondent extend throughout the United States with the exception of three or four states in the far south. Deliveries are made by respondent preferably by means of automobile trucks, such trucks not only delivering supplies to the appropriate consignees but, on return trips, haul back to the factory at Holland Mich., scrap metal and old equipment for recovery purposes. where exceedingly long hauls are involved, as for instance from Holland to the States of Washington, Oregon, or California, deliveries may be made by railroad freight.

This system of operation has been substantially the same since the year 1934.

Findings 55 F.

Interstate Commerce (1. Respondent maintains, and has maintained, a course of trade in its products aforesaid, in commerce among and between the various stat.es cf the United States and in the District of Columbia to such extent as to make it amenable to the jurisdiction of the Federal Trade Commission under the provisions of the Federal Trade Commission Ad as "interstate commerce" is defined in said Act.

For a long period of time respondent operated a branch offce in the City of Washington, D. C. Respondent furnished certain papers herein ' showing that from the year 1906 through 1912 respondent operated a branch oftce in the Cily of Washington D. C. ; from 1910, to and including 1948, this offce was designated a subbranch; during the years 1949 , 1900 and 1951 , this outlet reassumed its status as a branch, and from 1952 to June 30 , 195,1 was designated as R subbranch. The complaint in this case is dated Ylay 4 , 1954, so the foregoing constitutes an admission that respondent ,vas open1ting in the Vvashington territory subsequent to the date of the complaint herein. Testimony shows that alihough respond1ent claims to have abandoned operations in the Washington, D. C. area it continued to do business therein through the instrumentality of its Baltimore, 1\1c1., branch, flnd that if a homemvner in this area had a Holland furnace which needed parts and wrote to the respondent at its home offce, the latter ,VQuld refer the inquiry to the nearest branch, which in this instance WOllJrl be Baltimore, Md., which branch Ivmllct first dispatch a salesman to ascertain exactly what was needed, and upon determination thereof an agreement ,vould be c:-:ecuted and the material would be delivered through the Baltimore branch. The respondent's manager of the Baltimore branch testified that sales are made in the vVashington area throl1g-h the Baltimore branch and that equipment is delivered in \Vashington from Baltimore by means of the respondent's own truck, or by the trucks of their mechanics; that the Holland Furnace Company has a Washington telephone number with the calls thereon being taken by a so-called answering service and relayed to t.he Baltimore offce, End that this telephonic arrangement was in effect in the Baltimore branch when this particular manager took over; that the Baltmore branch does not at present have a subbranch in Washington, D. ; that he had handled complaints from the 2 Comm. Ex. Nos. 125 through 128.

, HOLLAND FURNACE COMPANY Findings Washington area and had been instrumental in resolving such complaints.

There are also of record twelve exhibits which show actual sales of respondent' s equipment and repair services through the instrumentality of the Washington, D. , offce, in the States of Virginia and Maryland, as well also in the District of Columbia; there is also an exhibit of record showing a sale from an Indiana branch of respondent to an Ilinois customer. The exhibits mentioned in footnote Ko. 2 show the locations of respondent' s eleven central warehouses and its numerous branch and subbranch warehouses strategically located throughout the Vnited States, while a glance at a map of the Vnited States, prepared hy respondent, wi1 disclose its widespread, nationwide, activities which have enabled it to effect gross annual sales which, according to one witness, has reached $30 000 000.00. While it is true that the respondent, in its formal answer to the complaint, denied that it was enga.ged in interstate commerce (and on that ground challenged the jurisdiction of the Commission), and has steadfastly maintained that position throughout this proceeding, a quotation from the 1952 annual report of the corporation, over the signature of its President by order of the Board of Directors" is revealing;

As you may possibly know, your company is the only manufacturer in the heating industry which retaiJs. The public cannot buy heating equipment direct from any other factory-(;nly from dealers .who sell under their own names. Our branch system throws the complete responsibility for aJl the actions of its JJcrsonncl, as well as the functioning of its equipment, directly upon the company. * * .

The said report then goes on to point out: Clearly, our 15 000,000 customers have found this policy gratifying. Co ,"PETITION 5. Respondent is now, and has been at all times herein mentioned, in substantial competition with other persons, firms and corporations engaged in the manufacture, sale and distribution of furnaces, heating equipment, and parts therefor. While respondent admits the charge of competition, it denies that such competition took place in interstate commerce. The fact that thc respondent has been engaged in interstate commerce having been specifically found to be true in the preceding finding, it is not 3R"sp. Ex. No. 228 'P. 22.

Finding" 55 F.

felt necessary to analyze further the testimony of record in support of this finding.

Method of Proeming and Promoting Sales G. Ilespondent sells its merchandise largely through the instrumentality of salesmen or house to house canVfLsscrs, who are customarily given a preliminary course of instruction in selling, supplied with sah:s manuals, catalogues, or other literature of the respondent, and assigned to a certain territory. Vi/hen a sale is made, the salesman fills in the blank forms supplied him according to the terms of the contract agreed upon, thus evidencing a sale from tllP respondent to the purchaser, and thereupon accepts partial or full payment of the purchase price. In instances in which the equipment is sold by the extension oJ credit for the full purchase price, there is, of course, no down payment and the salesman merely procures the execution of the contract by the customer and p,ubmits the same in ordinary course for approval by respondent of extension of credit. The installation of the equipment so sold is made by the respondent' s "furnace in st.allers" or "furnace mechanics" in the employ of the respondent. For the purpose of procuring leads to prospective customers respondent has distributed form letters, post cards and circulars to members of the public, offering free inspections, adjustments and minor servicing of Jllrnaccs. Responses to these offers sllpp1y to respondent prospects for cleaning and servicing jobs which in turn, often lead to large sales of major equipment through misrepresentation as herein otherwise found. Use of "Scare Tactics" in Selling 7. Respondeni's salesmen and servicemen have falsely represented to owners of furnaces made by competitors that the furnace owned is defective, is not repairable and is dangerous io the extent that continued use \vill result in asphyxiation, carbon monoxide poisoning, explosions, fires or other damage. It is found that respondent' s own actions have contributed in large measure to the misrepresentations of their agents, as above in that it publishes a magazine or house organ named "The Hol- Janel Firepot " 4 which has a wide circulation among lts employees in all of its divisions, branches anct subbranches, and a reading- thereof indicates that its prime purpose is to stir up enthusiasm among its employees and thus increase sales volume. J Cor"'"L Ex. No", 50 to 61 incl HOLLAND FUR:-ACE COMPANY Findings In various issues respondent has undertaken to caution its employees against use of "scare tactics" and other questionable methods in selling which, according to the articles in said maga- "ines, have been brought to the attention of the respondent in the form of complaints from Better Business Bureaus and individuals who have been subjected to this form of selling. Despite the disavowal of respondent of the use of these procedures, and as far back as March of 1951 , the respondent was cognizant of many such complaints. One issue of said "Firepot" of March 1951 , on page 1, cites some of these quec,tionable practices and undertakes to lecture and admonish its employees that it will countenance no such procedures. Among the specific acts complained of was that employees get into various homes claiming themselves to be inspectors from the gas C0111pany, city inspectors, or misrepresent that they are making a "survey " on furnaces. Among other things inveighed against were that Holland salesmen sometimes posed as the " chief engineer" from Holland, and contending they are on a "one-night stand" and that the deal must be closed immediately in order to take advantage of their superior knowledge, or that they can make some special discount which the local branch cannot ofter. Other salesmen speak about a model home and say they ",in give a discount for each prospect going into the house, but after the job is installed the model home story is completely forgotten. Throughout the hearings respondent has consistently denied that its representatives have used "scare tactics " thus inducing or frightening- prospective customers to purchase new equipment. It is singular to note in this connection that despite respondent's expressed disapproval of such practice it has undertaken, throughout these publications, to bring the fire, gas and explosion hazards to the attention of its salesmen and servicemen by quotations from ne,vspaper and magazine articles dealing with the subject. Despite the self-righteous protestations of the respondent that the duty of its representatives is to point out these dangers to the purchasing public as a public duty motivated by altruistic feelings, nevertheless, quotations and accompanying reading matter are but self-serving statements ".;which serve to sow the seeds in the minds of its employees and solicitors, that the fire, gas and explosion hazards are, and of necessity should be, pointed out. The fact is that such methods are productive of increased sales, all of which is weil known to the respondent. The proven fact that many of the door to door solicitors, em- FEDERA L TRADE COMMISSIOK DECISIONS Findings 55 F.

played by respondent to establish fn' st contacts with prospective purchasers, are young and inexperienced, and further that their recompense depcnds entirely upon their sales achievements, gives further weight to the finding that respondent' s suggestions, even though-h intent he denied, have contributed to the making of the representations under consideration.

Tn support of the fareg-doing- finding- the following quob,tions and excerpts are cited:

In the " Firepot" of March 1951 , in larg-e bold face print is the following:

Point 11 Use it.- bl1t don t IJlild your enlirr. sales talk around it. The article points out that " Point 11" is a selling argument emphasizing the necessity for cleaning furnaces every year, and the fire hazard, smoke, gas and explosions 'ivhieh 111ight ensuc if this is not done.

In the issue of September 1951 , appears tho following hoadiug: Ko Credit to the Heating Industry Coal fumes kill sleeping girl, eight The article goes on to state that coal gas fumes carried from the basement killed an 8-year-old girl in her sleep. In the issue of November 1951 , page 1 , appears R lengthy article quoting a news item on the dang-ers of carbon monoxide leaks and the necessity for guarding against them. In the issue of December 1951 , page 1 , there appeared an article telling how a minister of the gospel "saved" his entire congregation from death by asphyxiation by monoxide gas clue to a defective heating plant.

In the issue of .J anuary 1952, under the heading: More action and less sanctinlOnious t.alk "\vonl(l drastically cut the number of these nightmares.

appears an article citing some in2.tances of death and destruction reported by a local newspaper reading:

Believe 124 dead in mine blast" and also stating' that, on the same front page of that nc,yspapcr were three other headline stories "equally tragic. One was entitled: " Three Childrcn Burned to Death" ; a second hea(11ine: Boy Burned to Death" ; and a third headline: "Fireman KiJed, Four Injured in Fl1eJ Tank Blast.

The article, on j ts own, then goes on to state that inst.ances such as the above " wil be duplic.ated 011 practically every front (;( ! HOLLA:-D FURNACE COMPA:-Y Findings page of every paper in the United States. Comment on the above-reported articles goes on to say:

It i", perfectly amazing to U how this country can continue to have at least 000 people burned to death annually, with bilions of dollars worth of dam g:c as well, without an all-out effort upon the part of anyone to stop these fires. The ('a use of all these fues is not always given. The fact TCHl,ains that ?nost of them V whe'J heating p:mc.s ((1'; 1:n 1I8e, so it is sole to say that must of them eun be blamed 'Irpo;'1 that one item. (Italics supplied) The article further goes on to paint in words the harrowing scene of a fire at night, in zero "veather, with a "lot of snow on the ground, " saying "it' s a first-class mess" and that "everyone should see a few of those, and it might be just as well if a few people actually experienced one.

In the "Firepot" of Janu2.ry 1952, under the heading: Someone is to blame for this sort of thing-- couple, children burned to death.

After quoting the newspaper article, a catastrophe in Saginaw Michigan, the article goes on to say:

The papers are full of this ort of thing. Apparently, this fire \vas due to a stove which exploc1ed-- but that too, is a fault of the heating industry. It isn just a question of replacing furnaces, you know. These old stoves should be replaced too- A good modern heating plant, properly installed, would have avoided this. Don t pass up these cut-in jobs. A reading- of the newspaper article quoted will disclose that nothing- was said about the physical condition of the stove which exploded, and there is nothing- therein which justified the comment that "A good modern heating plant, properly installed would have avoided this." The fire may have been caused by reason other than faulty or defective equipment. Another artie1e appeared in the January 1953 issue under the headi ng :

Three Escape Death from Leaky Furnace.

The body of the article states:

Does that headline scare you? .!' " . Think of the many thousands of others who in tnc next year will be less fortunate. * * * Get into those lJasem,ents and when defective c(l1dpmcnt is found, make sw-c yon tell the customer1" of the potential da,nge1' (Italics supplied). In the "Firepot" of January 1953, under the heading: Find family of five asphyxiated.

The body of the article goes on to state: Things like this are happening every day. Carbon monoxide gas, that no , FEDBRAL TRADE C01!y!ISSION DBCISIONS Findings 55 F.

one can detect by sense of smeJJ , taste, or vision, accounts for an untold number pf fatalitj(' s fevery week. The irony of this is that Holland men have on occasion lwen cl"jtieiZf'd for re'lcaling hazardous conditions of a furnace ihat ('ould result in either loss o.f life or property damage. Fire ('hiefs and insurance underwriters know the potential danger of a efectivc heating pJrmt. 'They realize that many home owners are Jiving over a volce:ao thet ('(JuJd cause death 01" destn1ction ,vithoLit any \varniJ!g. In the " Firepot" of February 1953, appears the following: In HJ50 , the last year for which figures arc available, close to 200 persons are known to j,ave died i 1 .rew York City alone from ac' cidental carbon monoxide p(Jisoning due to incomplde combustion of gas, coal, or of her fuels in defective!:v operating furnaces and gas appliances The tral death ,md sickness toll from carbon l1onozide poisoning in the :omes and fnctorif' , find on the highways of the !\atio11 as a '\whole, is in all probability Hluch greater than e\'C11 this larg.e tigure suggests, for the presence of carbon mon().' ide is often not obvious to the doctor or health offcial, and the effects m'e attributed to other sources. " .. . TJ).:" i:, the time of 7jCO)' 1o!l('n this nlCn(H' C .is of its height. ,Vo/vis t.he t111(' when Hollrlnd 1IC1I dWilld r)(' O1lt ?uo!.ki'lf) (/lid dol-lfJ something nhO'd it. (Emphasis sllpplicd.

The foregoing clearly indicatt-;s the attitude and purpose of the respondent concerning the importance of gettinr; 7:nto that cellClx and (n)( n ever!) cC/8inu as a business :feeder ancl the featuring of the above-quoted news items, and their skil1fu1 clispendon and repetition through many issues of the "Firepot printed and distributed under the aegis and imprimatur of the respondent under attention-arresting headings in large, bold face type, indicates no other finding than that same were intended to serve to implant in the minds of respondent' s employees and \which solicitors the use of "scare tactics " as a sales stimulant, finding is emphasized by the uniform methods pursued in many and widely diverse geographical areas, It may be contended that emphasis was laid by responclent, in sai(1 articles. on these dangers simply as a discharge of a public or altruistic duty but witting1y or unwittingly, the pradica1 effect has been to increase sales of equipment as there is not a word of testimony to the actually avoided effect that any installation by respondent has fires, explosions, gases or other dangers. C/eanei ,,Yules " Supply Lewls fo)' Eq1lip1Jei1f Sulf's 8. It is found as a fact that so-called " cleaner sales" is an important producer of leads for the sale of furnace units and acct- ssories as will be seen by t\yo 4-page broadsides published HOLLAND FURNACE COMPANY Findings in respondent' magazine the "Fire pot" " in which the following appears:

Branch 1anag( rs:

Ar.ually, this is your contest.

Vou may not win the trip to Holland, the Elgin wristwatch, or the pen and pencil set, but in nality YOU will be the big winner. It is a proven fact that cleaner sales will produce unit sales. Open eveTY ca8inr;, inspect carefully every furnace cleaned, ami YOUR re,vall will be in unit sales and extra profit. (ItaJjes supplied. Salesmen Falsely Representing- Themselves as Ag-ents of Government or Utility Companies 9. Respondent' s salesmen and servicemen, or other employees under whatever designations, have in certain instances falsely represented themselves to be inspectors or representatives of governmental agencies or of local gas or utility companies. An instance of this took place in the St. Louis area where a householder testified that two young men came to her house and said: " are from the Government inspecting- furnaces " and then asked for admission to the house, which was refused. The householder thereupon telephoned to the police and two offcers were sent to apprehend the men. Upon being' taken into custody the men said that they were salesmen from the Holland Furnace Company and, in an interview at the station house, they denied that they were Government offcers but admitted they had represented themselves as working in conj function "with the "Government fuel conservation program. " The same admission was again made by the men in the presence of an offcer of the Federa! Bureau of Investigation, who had been called in to ascertain if any Federal Jaw had been violated. It \vas decided in the negative and the men were released. Pending their detention in the station honse the St. Louis manager of the respondent was contacted, who presented himself at the station house and relieved the two men of all Holland literature in their possession consisting of order blanks and advertising matter.

That respondent, through its responsible executive offcers, had, for a long period of time, been well aware of the prevalent and widespread misrepresentations of its representatives in falsely misrepresenting themselves as governmental and utilities companies is amply borne out by the record. In fact, there were suffcient complaints of this and other characters that respondent ;; Camm. Nos. lO(J anrll01.

FEDERAL TRADE COMMISSION DECISIOXS Findings 55 F.

saw fit to essay a verbal agreement with the K ational Better Business Bureau, denominated the "Horizontal Program " which was designed for the handling and clearing of complaints against Holland, (which had been received by Better Business Bureaus in the several states), through the central offce of the National Bureau in ew York, thus al1 complaints to be referred direct to Holland and a check kept on the adjustment and satisfaction al1 complaints; that the clearing offcer for Holland under such program was its advertising director and public relations c1i1'eetor; this witness occupied this position from June of 1951 until June of 1954 at \which time he resigned from respondent's employment because, as he testified, the National Bureau threatened to sever connections wit.h Holland for the reason that the latter had failed to "conform" to the prog-ram and he, the witness could not get this policy into effect." This finding, being COllcerned primarily with bringing home to respondent actual knmvledge of the subject matter of this and other charges of the complaint, it matters not that said "Horizont.al Program " was not actually effected, or was abandoned. Certain it is that the existence of said charges and lOlOwleclge thereof by respondent motivated it in its attempt to effect the progranl and that it failed is of no moment.

This witness further testiied that in his ofIieia! capacity he reported directly t.o the President of Holland; that his work carried hin1 to various cities where he contacted representatives of Better Business Burea ls and others with a vievv to composing complaints against Holland; that among other complaints was the "gas resetting progr2- " used by Holland' s agent.s, which was designated by the Bureaus as the "Tear Down Program; that witness investigated, and found justified, complaints that respondent' s salesmen or servicemen had represented themselves to be inspectors or representatives of Government agencies and represented themselves to be agents or inspectors for gas or utility companies, \which facts \were reported by the witness direct to the president of Holland.

This witness further testified that in his offcial capacity investigated complaints about Holland representatives' activities covering- generally all of the charges of the complaint in such cities as St. Louis; Des 1\1oincs; Seattle; Los Angeles; 1\:101ine; parts of Ilinois under the Chicago Better Business Bureau; Cincinnati; Columbus; Dayton; Cleveland; Buffalo; Rochester, Baltimore and perhaps other places; that his investigations showed JIOLLA:'D FURNACIo CO'VIPA",Y Findings many of the complaints to be justified as a result of which authorized adjustments \\'ere effected.

There are of record a number of additional witnesses who testiied directly that there had been direct representations by Holland' s agents that they were governmental and/or public utilities' representatives. This \vas especially true in the Baltimore area and, while respondent's manager there was cognizant of this chm"w,: ) he n2verthele :; did not intervie\v the complaining parties but conter:tcd him "elf with taking the word of his employees that they had not done so.

Res)JOnclent' s Ph a of Want of Knmvledge of \Vl'ongc1doing by its Agents 10. 1n its pd1Swer to the complaint filed June 2: , 1951 , respondent denied, because of " want of knowledge " any information that its agents were guilty of misrepres( ntations or of "scare selling, The n:(:ord is replete with a spate of complaints along the above lines which were brought to the attention of the respondent, such having been made by private individuals who had been misled by such representations in many areas of the country; by Better Business Bureaus in many different cities, by school oficials and others. There appears of record G a certified copy of a transcript of proceeding's against the respondent instituted by the l\Jichigan Corporation & Securities Commission dated July , 1951. The geographical area involved in the particular charges in this matler was the city of Detroit and the adjoining counties of ,.yayne and Oaklancl in the respondent' s O\V11 State of Michig-an. This respondent there, as in the case at bar, attempted to enjoin same by a court proceecling, t.he result \\,11e1'eo1' docs not appeal' in the certification, but it is safe to assume that respondent' s efforts in that behalf were fruitless for the reason that the Michigan Corporation Commission proceeded with the matter to its final conclusion and suspcndcd for GO days the license of the respondent to continue to do business from the date of the order, to ,vit, JLl)Y 23 , 1951. The aforesaid eo:hibit disdoses that the testimony of 21 witnesses '\vas re(,f ivec1 , crcating a record of 650 pages, supplemented by 56 exhibits in evidence. In summarizing that testimony the Commission found intc1' alia that a responsible offcer of the respondent was apprised of the fact that a Detroit hranch 6 Corum. Ex. 130 A- , FEDERAL TRADE COMMISSIOK DECISIO"IS Findings 55 F.

manager was known to have sold used furnaces as new but the offender was elevated to anoihf:r position elsewhere and as division superintendent of the respondent, embracing one or more States; that the testimony received was strikingly uniform in telling of respondent's canvassers who came to the door to seJI comparatively,inexpensive and needed services, and "who in fad Vi;ere but the harbingers of salesmen in the guise of engineers or inspectors " and \vho made dire prophecies of harm from heating plants 'vvhich yvcre in fact either undamaged or easily repairable. " Respondent's agents laid particular stress and emphasis on the dangers of asphyxiation, explosion and fire. The certification t.hen goes on to say that it is immaterial that respondent sold furnaces \which gave satisfactory service in vie\'i of the essentially dishonest and unfair method of the attempt to sell based on calculated misrepresentations as above set forth. The above proceeding is adverted to here for the sole purpose of bringing home to respondent, as far back as July 1951 , actual knowledge of many of thc complaints of the type embodied in this proceeding.

False Representations That Respondent' s Agents Are "Heating Engineers 11. It is found that respondent' s salesmen and servicemen in soliciting and effecting sales of equipment have falsely represented themselves to be " heating engineers" \which representation was, because of lack of training, (actual, educational or empiric), unjustified and was made use of solely for the purpose of impressing upon prospective purchasers the superiority of "heating engineers" over the average run of "furnace men " or "furnace mechanics" employed by competitors. As a fact, respondent has in its employ but -six men who are possessors of collegiate degrees which would justify the use by them of the term engineer " and the majority of these are attached to the main production plant or offce of the respondent. This finding is not intended to convey that a co1Jegiate degree is essential, or to imply that one may not become highly qualified in the trade by reason of individual study and experience. However, when it. is borne in mind that respondent has 475 branches and subbranches, employing many hundreds of men t.throughout the United Stales, coupled with consideralion of the sources from which respondent recruits its help, the toial Jack of prior experience of the vast majority of recruits, and the paucity of HOLLAND F1;RNACE COMPANY Findings training given them in the matter of technical details and "knowhow" on furnace installations and heating requirements to be determined in individual installations, negatives the though-ht that there are, among respondent' s employees in its multiple branches, any suffcient number of men qualified to assume this appel1ation of "engineer.

In its hiring of men respondent announces its policy to be: 7 High school and college graduates are preferable, but there is no bar on applicants of lesser enucation. Men with mechanical inclinations are desirable although those "\vithout it can be successfully taught Holland engineering, f:t As a fact, and according to the testimony of a number of respondent' s employees, the instruction and training of men is left to the responsibility of branch and subbranch managers, or their designees, who mayor may not be competent in the field of teaching "engineering. " Such training has been testified io consist of morning meetings of the staff of employees where talks are given, discussions held and demonstrations made with the aid of miniature or model furnaces/ supplemented by rtain publications of the respondent. There is no definite evidence as to \vhat portions of such meetings were elevated to mechanical subjects, (in contrast to selling techniques), nor is there evidence of segregation of the two subjects to be taught to separate groups, but it is a fact that, when the sessions were over, all the men took otf to their respective territories with the principal object of "selling" because their pay depended on their productive ability reflected in sales, and also the productive reputatiou and remuneration of their mentors and teachers, the Branch Managers, rested solely and primarily upon sales - volume. Actual instances of the misappropriation of this designation ':'.121'12 indulged by respondent' s agents, as testified by diverse witnesses in ,vic1ely separated areas, such as 1Vrolinc, Ill.; Chicago 111.; Grand Rapids, Mich. ; Buffalo, N. Y. , Boston, Mass. ; Baltimore, l\1d. , and elsewhere. In fact respondent, in its answer to the complaint:

Denies, for want of Imowleuge, that its serviccmen or salesmen n present themselves to be heating engineers, and denies further that such representation if made, would be false.

In vie\\ of the findings herein elsewhere made, and of the 7 Resp. Ex. 22R . p. S.

8 Rf'Sp. EX. 201J.

9 Resp. Ex. 15:J, 229 , 2:10 Ilnd 231 , and othej. , , FEDERAL TRADE CCHIMISSJON DECISIOKS Findings 55 F.

total lack of suffcient knowledge and training on the part of respondent' s employees, it is found that respondent was in possession of kn()\vledg"e that its employees did, in fad, designate and refer to themselves as " heating engineers" and, despite the assertion by reEiponc1ent that if made " such assertion \vOllld not be false, it is found that sllch assertions ,,,ere false, unjusti ned, misleading and made for the sale Hnd e:-:press purpose of giving stature to such agents for the purpose of effecting sales.

In 011e of the many 8.dvcrtising folders issued by respondent distributed by its solid tors of cleaning and gas proofing jobs it is stated that respondent. upon completion of such a job, causes final checking" thereof to be made by "a heating engineer. Another such piece of advertising literature 11 refers to "engineer s inspection" as an integra! part of service pertaining to Holland Furnace Cleaning.

The respondent introduced a witness who served as chief engineer at respondent's home offce ancl plant from 1936 until February of 1954. By this witness respondent attempted to show the various methods and means it pursued in the technical training of its ilelrl personnel; \witness testiflell he participated in company policy and activity of acquainUn; the branches and their personnel in the proper installation of heating equipment as well also recognizing and identifying defects or shortcomings in heating plants; that this educational policy took the form of printed letters, books p.nd p8D1phlets, as also dissemination by means of the Company pllb1ic ltion The Firepot" ; that various meetings were helel in the home offct at which branch personnel were present and at least once each :year n national meeting y\' as helel, \\'ith all branches present or representell; at these meetings the Engineer Department of respondent \vas allotted certain time for discussion and presentation of engineer. ing subjects; that those in attendance were l::rgely home offce personnel, clivisian managers, branch managers and salesmen and installers; that such meeting-s lasted a period of one clEY and the time was about equally divided bei-lve n presentation of engineering and sales; that in addition to the annual1 meetings there VI/ere the daily morning meetings under upervision of the branch managers; that witness unclertook, by means of uncolored photographs, to instruct the personnel on various furnace defects lUComm. Ex. 45.

11 ResIJ. Ex. 236.

HOLLAND FURNACE COMPANY Findings such as crystalJization, carbonization, scabs, porosity, pin holes cracks, blow holes and other defects.

This witness was on the stand, on direct and cross-examination for three days during which time respondent had every opportunity to develop to the utmost all facets of its technical training of employees in this specialized field and by the offcer of respondent in direct charge of the program, yet it is found, as a fact, that his testimony, (supplemented by that of others on the same subject), was unconvincing- to this examiner, that all of the technical and practical knowledge imparted by him to the branch managers and presumably, (although witness had no direct firsthand knowledp;e on the subject), passed on by the managers their salesmen, solicitors and installers which \vOldr1, in any wise, justify any of the last three categories, or even the branch managers, to arrogate to themselves the title or designation of heating engineer.

Failure to Heassemble Fl1rnac( 12. It is found that respondent's employees have dismantled furnaces and have left the same unassemblecl for lengthy periods of time after having been requested by lhe owners to reassemble them, thus causing such o\\'ne1's unnecessary and great inconvenience. As a reason for failure to promptly reassemble furnaces respondent' s agents have falsely represented that iu do so would entail grave dangers of fire, gas and explosion, or that some of the furnaces, being those of competitive manufacturers, have passed their useful life and are not worth the expense involved, or that the manufacturer has Hgone out of business " and necessary replacement parts are unobtainab1e. Certain instances of record disclose that, prior to actual condemnation of furrwces by respondent, such furnaces 'were operating satisfactorily, !'with no apparent malfunctioning or defects. By reason of such representations many furnace o\V11e1'8 have been improperly forced, or improperly persuaded, to purchase new equipment long before the expiration of the useful life of their furnaces, all of which would not have been necessary had the truth been told and such furnaces been restored to workable and safe condition by respondent which could have been accomplished at an expenditure of money greatly under that outlaid for the purchase of new equipment.

There are a number of instances of record, in several areas where furnaces thus condemned by Holland representatives were FEDERAL TRADE COlVBIISSJON DECISIONS Findings 55 F, proved to be either in safe and usable condition, or repairable without the attendant rlang-crs falsely:v delineated by respondent' agents. 1\any sllch repair;.' s \V(;rE; in fad made subsequently to condemnation by respondent, which fact \vas tcsitficc\ to in a number of instances by home weers who had c l1secl repairs to be made b:r others, and who hac! continued the use of such furnaces, \vithout untoward effect. , and sllch \Y L'; ful"ihcr csbtb1ishec1 by the testimony of witnesses who had examined sllch furnaces after condemnation b:y respondent and who \were technically competent to pass upon the saf'2ty of the continuecluse thereof. The c1isasst:mbling of fl1rn lces, \vl1ich gave rise to this class of complaints of failure to reassemble upon demand, was brought about by respondent's agents when, in their visitations to prospective customers in the solicitation of cleaning and gasp roofing jobs, they falsely claimed it was necessary to completely partially dismantle furnaces, during \which period they ' ve1'e obviousl ' inoperable, in ord(:r to determine the extent of repairs necessary. Before proceeding with dismantling- it is found that in practically aJl instances respondent s agents procured from prospective customers the execution of its so-called "Form H.- Cash Repair and Service Agreement, During the course of the proceedings there were admitted in evidence no less than eighty oJ these e:-:ecl1tecl forms, 'Vhen it is remembered that the:;;e contl' acts were for repairs or Jesser services for inc!ivic!u::d customers, anrl did not include major contracts for equipment installaUon, of which there were many, some ir1ea may be had of the large number of transactions on ,which testimony was receiver1 anrl the im;JracticahiJity of here analyzing each instance, as vi.'ell also why it was necessary to receive the testimony' of the large number of witne:.,ses and the length of the record.

Respondent's " Form R- l0" aforesaid, provided, in the matter of gasproofing service, that respondent was to: Disassemble and ('Jean castings and 1lokl' pipe. Inslwct di"mantlecl heating system with owner. . , Th(, furr;ace must. be l"eas:,emblccl within fort.y-eig-ht hours Clfte!' disassembling: J135 been started C'Xl'Cpt 'where delayed by Act of God 01' prOCUH' I1fnt of foreign parts in ,vJ-Jich case furnace wiJj be reassembled wit.hin forts- eight hours after such parts are obtained. flncl further along, in small type, provides: Al! work will hf' done at OUj' l'onvcnience, Throughout the proceeding respondent has laid great stress HOLLAND n;RNACE COMPANY Findings upon the security of its position in its right to disassemble furnaces because of its legal position, the contract aforesaid expressly according such right to it. This position is demonstrated by the fact that, in almost every instance of wrongdoing proved by the Commission, respondent has sought to counter by introduction of its " Form R-l0" in explanation of, and as authority for, its action.

Adverting specificaliy to the forty-eight hour reassembling clause, above cited, and as evidence that respondent knew of, and realized that, many complaints of failure to reassemble had been received by it, respondent issued its "1943 Service-Sales Poliries " Bulletin 1 in which it said: l\Jost of the trouble sC:erns to surround our cleaning and G. P. (i. e. gas proofingJ services-1dlc)' JJOI!,' COJliJ(IJI'l '/flkc8 1101 OJiC cenl. Those services are al's()lutuly essential to the home 0WI")1 , but from a company viewpoint they (/I' done ?JI'!IIWi'ily as flood- will hllildel' and to allow you men to keep \With this in mind, and to avoidyour individmll organi;:;itions ,Raing:. trouble) in the futUl' , we are issuing this document, ". * " (Italics supplied) 18 HOUR CLAUSE.

FURNACE REASSEMBLING REQUIREMENTS.

(Am€ndment to R-IO Contract.

The change in the H-10 RCjJHir and Service Order as follo'Ns will require prompt J-u:wdlillg of the "downs, " li.c. disasscmbled iurnacesJ. (::TOTE BY EXA?lUXEH.: Then follo\vs PJ'OTlluigation of the new 4S-hour rule and some examples of l'l:a;;01\5 why furl1,wcs ' were not l'easst'mlJled promptly and in ample time to avoid complaints). In this connection, and aside from any question or inquiry into the legality of the contract represented by the "Form R- " or of the impregnability of respondent' s position and supposed legal rights under said contract, it is found that respondent did not receive carte blanche authority to proceed irrespective of the rights and convenience of furna(;e owners, as it did and is so found, nor could respondent at its caprice "perform all work at its eonvenienee," It is further found that respondent has been guilty of breach of the express terms of the contract on which.h , failed it relies for protection in that it has, in n1any instances to reassemble within the contractual time. As a fact this failure or refusal to reassemble \Vas but a t.hinly-veiled cover for effecting improperly forced sales of equipment, as further herein elsewhere found under the heaclings of "scare selling" and t.he use of the solicitation of cleaning and gasproof1ng jobs as equip- Ht' p, Ex. ::0. 223.

Findings 55 F.

ment sales stimulators. That these solicitations were recognized by respondent as a "new sales tool " and the adoption thereof by "All Holland Men " is borne out by reference to respondent' Bulletin No. 1850"" wherein it was said: All Holland Men:

A great many lw,\llchcs have been ''lorking the Cleaner- Casing-Opening ScrviCf with very good results, as per ihe management's recommendations as (1ltlinell in Bulletins Nos. 1 , 1:-J39 am113M) of June 20, 1949. Judging from tJw records of the past ten weeks, we are certain it is a successful Clearle?' SCIvice program and should be adopted by all branches. Please hold a Branch meeting on this new sal('s tool- the Cleaner-Casing- Opening Foldcl' and start September off with this tried and proven service , ofthat gives your homeowners greater service benefit" and value- and this course, will also reward Holland men.

It is foune!, as a fact, that this sales method was imwgurated and prosecuted for the primary and sale purpose of developing sales of heating equipment; that there is not and never was intended to be, any profit from sllch jobs accruing to respondent the entire proceeds from such being devoted to the payment of commissions to the solicitors obtaining the jobs, the payment of mech lnics' sa1r:ries or "vages, the unexpended balance remainingwith the Branch Offce and respondent "geUing not one cent" that when sales of equipment were effected through a lead developed by a denning Job, the solicitor who produced the job received a commission of from three to five per centum on such sale in addition to his original compensation; that the mattt r of commissions and bonuses w !s of prime importance to all on the , issales produdion Ene, from division managers to solicitors evident from the tC2,Umony of a former sales manager of the , in the largerrespondent who testified that in some instances branches, the comlnissions and bonuses of the branch managers exceeded $50,000 per annum, and by another offcer who testified ihat al1 remuneration to thc sales force was based upon commissions.

H.respondent Improperly Required Execution of Releases from Liability 13. From the record it is found that in a number of instances \vhere disputes have arisen between respondent and its customers, respondent's representatives have improperly required such 1: Rf' p. Ex. 23G A- , , , . HOLLAND FURNACE COMPANY Findings customers to absolve the respondent and its employees of any liability, including liability for the negligence of its employees in writing, as a condition precedent to the reassembling of furnaces hy it theretofore dismantled. In many instances these releases were procured to be signed by false representations as to the intent and charader thereof and in other instances such were signed by furnace 0\;vne1'5 under duress-in some cases in order to get respondent to reassemble furnaces and thus to restore heat to their homes while, in other cases, such were signed as a last resort and in order to induce refunds or settlements on the part of respondent where monies had been theretofore paid it, or to procure releases from contracts whose execution had been procured through misrepresentation or falsity. That respondent was fully cognizant of complaints along this line is amply demonstrated by the publication of a two-column "H read-box notice in respondent's offcial paper The F'irepot ing as follows:

THIS IS VITAL' As you men well know, we send out a Jetter following our receipt of a Satisfaction Report which you have gotten from the customers who have complained in any way.

Knowing, as you do, that we are going to send out this ktter we are dumhfounded to find that some of you arc getting these Satisfaction Reports in a manner which is only going to cost you an ach1itiona1 trip, or the expense of Guy Smith before you re through with it. Several customers have written in indicating th2.t if they signed any Satisfaction slip, they were una.ware of it. They ac1mit they siglled a paper, hlt they \were of the opinion it was only one indicating sorneO':e had been there.

What on earth is the mlitter with you men? Is it just impossible for some of you to do things the way they are suppesed to be done? Settle down a bit and get things clicking the \vay they should be, will you please? In one instance, in the city of Dorchester, 1\iass. , a customer was demanding the refund of a deposit, (which refund was ultimately made by respondent), but, according- to the claimant (as reflected by onc of respondent's mvn exhibits 15 ), respondent' s representative said no refund \:llOllld be made unless she thc customer would sign a paper saying that in case any of the neighbors died from coal gas I would be solely responsible. There were ot.her complaints in several areas, which are hereby found as facts in support of this specific charge, to the effect that 14 Camm. Ex. Na. 50.

10 Resp. Ex. No. 28 A- Findings 55 F.

releases were secured under pressure methods and, in a number of instances releases 'were executed only upon final settlement of claims and as a result of elaimants employment of attorneys to prosecute the claims.

THE DEFENSE 11. In support of its defense respondent availed itself of the testimony of 128 \vitnesses, dividecl substR.ntially as follows: 86 \\'ere, at the time of testifying, in the employ of respondent such ranging- from its president ancl higher offcers through division and branch mnnagers, salesmen, instalJel' , solicitors and mechanics; 22 were fonner employees of respondent; four were experts; nine \were engaged in the banking" 'business; and seven miscellaneous.

The Employees, Past and Present l\Iany of ihe present and former employee witnesses of respondent, especiall:y in the lower echelons, Ivcre, in one connection or another, directly associated with many of the individual transactions testified to by the witnesses introduced by the Commission. These witnesses were introduced by respondent primarily, and almost exclusively, for the sale purpose of either attempting to explain the cireumstances surrounding the individual transactions, or to attack the truth and veracity of the Ivitness \vho testified to such at t.he instance of the Commission. This examiner, who heard all of the tee.timony and had full and ample opportunity throughout the proceeding to observe the demeanor and appraise the testimony of these witnesses, and to compare such testimony with that theretofore received from Commission witnesses, thus being able to arrive at a conclusion as to where the truth and weight of (he evidence really resided came to the conclusion, a.nd so finds, that these Ivitnesses, either from a sense of loyalty to the respondent or from motives of s lfinterest, (many of them being central figures in the transactions here involved, their actions being the bases of many of the charges of the complaint), did not measure lip (0 that degree of frankness and truthfulness which would serve to impress or convince this examiner that their testimony was of a type and weight which would induce him to accept same to the extent that such would outweigh the testimony of Commission witnesses. It is realized that the foregoing finding, involving the testimony of so large a number of witnesses, is indeed broad, but it HOLLAND Furnace COMPANY Findings , nevertheless, a fact (hat, except in the testimony of a few ex-employees, not one of all of the respondent.' s witnesses faced up to the fact.s of the situation and admitted to any \"rang-doing or untoward conduct on his part in the discharge of his duties but. on the contrary insist.eel most strenuously on his purity of motive and impcccant rectitude in the matter of business ethics. In thus disposing of the weight (0 be accorded the testimony of so great a number of witnesses, such is not clone lightly or cavalier1y. The converse of this particular finding- is that the Commission, to maint.ain the issues on its part joined, as hereinabove pointed out, produced some 132 ,vitJJ€sses, the majority of whom testified at great length and with apparent frankness and truthfulness, all having been subjected t.o searching, and in some instances grueling, cross-examination, the 1auer having little or no effect in weakening or vitiating their testimony on direct. addition, the examiner has been guided, in his appraisal of the testimony on both sicles, by the ICg"(;tl maxim te:3tes )Jondent.1tU1' non num,r;ranluF as \vell also the rule of f:estibu8 deponentiln s in pari nwnc'lO , dignion bus est; credencl1un. By the testimony of the defense '\vitnesses in this category, respondent would have us to believe that each and every of the acts proved up by the Commission '\verc innocent, propc r and without culpability on the part of recpondent. This cannot accepted, as to do so would be to do violence to the necessity of finding to the contrary under the greater weight of the evidence. Another facet in this connection here taken into consideration iS the uniform and undeviating testimony of these '\vitnesses that they had done no wrong. Jt is not readily conceivable that in an organization of the size of respondent' , (natiol1\vide in its scope of o?crations, 100scly knit as to control, employing large numbers of men of various types, e: perience and capabilities), there are not some agents or employees who do not measure up to the high standards which respondent would have us believe applies to all of its employees, yet, so it is, that not one such vvas produced who '\,"ould frankly admit to any divarication in his methods of obtaining business but, on the contrary, by devious and at times irrational, explanations sought to justify or explain a'\vay the charges.

Yet another consideration enters this finding: and it is that, if a11 of these witnesses are to be believed then it must be decided not only that a11 of the many witnesses who (testified for the Commission were untruthful or mistaken as to the ultimate ::

FEDERAL TRADE COMyrrSSION DECISIOKS Findings 55 F.

justice and correctness of theil' charges J::against the respondent but that they were unjustified in lodging their complaints in the first instance. Under the facts of record this view cannot be accepted, for to do so it would follow, as a necessary \:orolJary, that the great spate of complaints were without foundation in fad 8.nc1 all figments of the complainants. The complaints here dealt with did not Brise as a spontaneous homogeneous outbreak in one locality, which might bc attributable to a local condition but, (Jl the contrary, extended over a long period of time and in many widely diverse communities, all of the ads complained of evidencing- a rem arkable parallelism in the various geographical arCHS visited. In this connection are pointed out the conditions met yvith ill the dues of Ioline. Baltimore, Boston, Chicago Indianapolis, Rochester, Buffalo and else\vherc, in all of which areas existed large numbers 01' complaints calling upon the g-ood omce, of various local Better Business Bureaus in seeking redress from respondent :for the viTongs committed. In fact the volume of the complaints originating among the local Better Busines, Bl1really was such that, in order to hand1Je them \\'ith expedition and satisfaction to the Bureaus, the respondent sought a liaison ::\?reerm:nt vdtll the national headquarters of the Bureaus in New York City ::1.S a ccnLj"al cJearil1g hOllse for all comp1paints, as hereinbefore related.

Eespondent' s EXl)ert \iVitnesses An e p2;- \vitness :fo ' the Tc pc)lclent testified he is a chemical ::i 1(1 cJmjJ i:1l I:l:,?in€u' ; c1 scribe:c1 the func1amenLal processes (rf c()- 1bl1 ti')1l us they OCCUI' in \V i1'm a:1' furnaces; the cliffer,:nce; incoml1'" i.:1rj (If varicils :fuels; the chemical constituents p:!:ocesses of oxi-thereof ;1rht Vie d re.:ults after combustion; dation nncl rc wil \)t fcrE'wLinn of carbon monoxide and carbon dioxide plSCS: the formation of clinkers and soot as by-products of cnmbustiul): the (lift€TC:JlCe beh:vren the by-products of coal and g-DsecJUS nd JiquiJ fuels; the operation of a coal-fired furnace :111(1 the composition c.f flli ,ses under varying conditions of ,il' suppl:y: the (1iffel'ent characteristics of gravity- fed and forcec1air horn2 furnaces; aim()sphEl'ic pressures and turbulences and a great quantity of scientific testim.ony of lil\:e tenor and effect cxtenc1ilg: Clver some two hul1clred pages of the transcript. This \vitness" ,:vas not cognizant of any of the facts surrounding any particular instance of the many testified to at the instance of the Commission; had no personal knowledge concerning the HOLLAND FURNACE COMPANY Findings issues here involved which would aid in a determination thereof and answered no hypothetical ql, estion predicated of any of the circumstances or facts proved in conjunction yvith any of the instances proved by the Commission. Hence it is found that his testimony had no bearing on the issues 7therefore same is disregarded.

Another expert fur respondent testified he is Dean Emeritus of the School of Enginecring of Michigan State College and now engHgcd as a con,s(dta lt to manufacturers of heating equipment; it1elltifiec1 certain diagTamm( .tic photographs and sketches showing constnlction and circulatory systems of hot air furnaces of both gravity and forced ail' fecc:s; the various conditions which ma.y be found in, or are c.h?, l"3cteristic of, warm air heating systems in home installations; the differences between primary and secondary heating surfaces; the life expectancies of cast iron md steel furnaces; the effects of overheating and that, in normal usage "without mistreatment or overheating, furnaces last over long periods. The witness testified further along the above lines, under'tal,ing in some insbmces to give opinions on hypothetical questions propm!lrlecl him but it is found that such opinion testimony, not being based upon suffcient facts proved of record in connection \with any specific instances in issue, is of no value to a determination of the issues herein. Witness had no direct knowledge of any of the fads surrounding any particular instance of the many testiiiec1 to t the instance of the Commission on which grounds it i.s :C(1 nd that his testimor,y, as an cntin:ty, is of nD assistant e in determining th issues here involved, hence is clisrcg-arclec1.

Another exp.2rt \':itnc?s inlToclucccl by respondent testified he is a pl"ofe: sor of OClupTtion::d Medicine in the School of Public Health, Columbia University; among his many professional stucEes Rncl researches he acc.orded pa.rticulm' attention to the study and solLltioJ1 of problsIT-s invulving a number of different types of toxic matcric,Js, indllding: carbon monoxide gas in household equipment alld dom(, 3tic 8Ul'loundings. A bibliography of the publications of the \yitn8 s appear.) of record. This \vitness \\'as fully qualifjed in his field and proceeded to testify to the effects of c trbon monoxide on human beings; the various concentrations thereof which would produce headaches, nausea, dimness of vision, convulsions, unconsciousness 16 Resp. Ex. No. 255 A- Findings 55 F.

and death, and gave his expert opinion on hypothetical questions involving five or six instances \vhere respondent's counsel contended the facts proven of record were suffciently defmi te to justify the acceptance of the opinions expressed. However, this examiner is of opinion that the ans\vers, even though accepted have no weight as a defense in anyone or all of the particular instances cited and are, therefore, disregarded. The testimony of this \vitness was general in character; he had no personal knowledge of any facts or circumstances surrounding any specific furnace, before or after being condemned by respondent' s employees; was not in position or capable of passing any valid opinion all, nor to attempt to justify the procedures of respondent in, arriving at any judgment on the physica.l condition of any furnace or equipment specifically involved in these proceedings and generally his testimony \vas of 110 value or aid in determining any of the issues here involved wherefore as an entirety, it is disregarded.

The final expert introduced by respondent was an associate professor of metallurgy and research supervisor, Ohio State University Research Foundation. This witness was produced to express, among other things, opinions on the causes of defects occurring in cast iron and steel \varm air heating equipment; that one year prior to testifying he had been employed by respondent' s counsel, to pursue a study, by visual examination, of furnace parts \which had been in service, the physical manifestations arising th refrom, and conclusions to be drawn as to the suitability of such furnaces, or parts thereof, to continue in service. lPrim' to the introduction of this witness respondent produced an employee witness \\'ho testiflec1 , in effect. that he had visited the scrap heap or junk pile of respondent in Holland, Mich. , from which he made certain selections of pieces of discarded metal from furnaces \which had been turned into respondent from its branch offces, as hereinabove related, when new equipment had been installed; that he did not know how long this scrap had been on the heap; did not know the source thereof; did not know \vhy the furnaces, of which the scrap had been a part, had been rep1accd; could not testify that any of such scrap had ever constituted a part or porlion of any of the furnaces specifically dealt \with in any testimony in this case, and that he caused certain photographs thereof to be taken by a commercial photographer in Holland, :\ich. These pieces of metals and photographs HOLLAND FURNACE COMPANY Findings were marked for identification for the respondent 17 but were refused in evidence by the examiner on the ground, among others of failure to sho\v materiality to the issues or connection with any furnace in question in this proceeding. Notwithstanding the prior rejection of the exhibits referred to in the next preceding parenthetical paragraph, respondent' counsel attempted, through the expert here under discussion, to again qualify the pieces of metal and photographs as exhibits entitled to admission in evidence, but without success. Such were never accepted.

The witness testified that, prior to his employment by respondent with a view to testifying in this proceeding, he had never pursued any study of gray iron furnace castings, (which is the type of metal principally here dealt with), and that his studies of the metal subsequent to his employment by respondent was cunfined to material which in al1 instances was supplied him by respondent and was, to use his expression, " a return to the Holland Furnace Company for one reason or another as presumable .scrap.

Specifically referring to the testimony of this witness and what respondent hoped and intended to prove by his testimony, respondent' s counsel stated on the record that such testimony would show that, on the basis of the appraisal of furnace conditions as (Usdoscd by respondent.' s crnplo!Jces the representations of respondent' s agents were not fcdse but on the contrary there was , that a1lample basis in fact, and by creditable scientific opinion of such representations were true in fact, fully warranted by the facts in each instance, and \were not fal e or misleading. The witness testified at length and, after full consideration thereof, it is found that such testimony, as an entirety, is of no value or assistance in resolving the issues here involved, hence is disregarded.

There \vas no expert or scientific evidence adduced in support of the Commission s ease in chief. There was, however, some expert testimony offered in rebuital of respondent's witnesses above considered and, it having been found that no consideration would be accorded the latter it fo1Jows that none wi1 be accorded the rebuttal thereof. In view of the foregoing there can be possible conflict in scientific opinions which would, in any wise aJIect the iseues herein.

1" Respom!ent's exhibits for identification, but not in evide_nce, 182.-2.04. FEDERAL TRADI'; CO L\USSION DECISIONS Findings 55 F.

The Respondent's Banker Witnesses Respondent introc1ueec1 nine 'witnesses in this category and it is felt that the?, and their banking- institutions should be referred to in order that respondent may have the benefit of the prominence of the witnesses and of their institutions: 1. Vice-president of Federal Savings & Loan Assn. of Baltimore, Md. ; 2. l\l inager of Lending Department, Rock Island Bank & Trust Co. ; 3. Vice president, Amedcan N ( tion(11 Bank & Trust Co. of Chicago; 4. .Vice president First National Bank of Cincinnati, Ohio; 5. Vice president orth\vest National Bank of Chicago; 6. Loan Manager of Equitable Trust Co. of Baltimore, Me!. 7. Vice president Gramatan National Bank & Trust Co. of Bronxville, N. ; 8. Manager of Indianapolis Branch of First Bancrrclit Corporation and; 9. Manager of Buffalo, N.Y. Branch!) of First Bancredit Corporation.

These witnesses testified to the gener3l effect that they 'ivere purchasers, in great volume of respondent' s cllstomers' promissory notes from Holland which it had acquired as c\'idence of deferred purchases on sales of equipment; that such notes, many of which had been guarRnleed "S to payment by the Federa) Housing Administration, 'ivere cndorsed over by Holland to such purchasers without recol1rs; that Holland received therefor the face value of such notes without disc.aunt; that th( volume of such transactions, since the year 19, , ran into the multiple millions of dollars; that the ratio of customer complaints coming to the attention of these institutions \vas insignificant and th::lt the character and value of the pape!", as to ultjJ1 te pCtyment ,the:'eof, compared favorably with the general run of disr.ounted commercial paper ann in addition thereto several of the \vilncsses were in position to, and did, compare t.he l1tlmbrr of cOIYj'Jlaints on Holland paper with that received concerning Uie c1isc0unt d paper of other suppliers of heating equipment, (competitors of respondent), stating that the latter comparison equated the Holland paper favorable.

Each of the witncsse:.; hac! read to them a Jist uf the charge:;; contained in the complaint. herein and they testified genernJJy to the effect that they had no knowledge th t an v of th ,cts or representations of respon( ent or its age1- , as ch,large 1 in the complaint, formed the basis for any refusal of respondent' s customers to honor their paper by payment thereof. There is no charge in the complaint that respondent over- HOLLAND FURNACF; CO)!PANY Conclusions charged its customers; no question of the prices of equipment is involved; no charge of fraud or overreaching on the part of respondent in procuring- the execution of promissory notes representing- deferred purchase money and no question raised concerning Holland making good on any default in payment by its cllstomers.

All of the c0111mercial paper acquired by these witnesses ' institutions was had after the several deals had been closed and the furnace installations effeded, thus becoming a fait acc01npli; none of the witnesses knew, or at least did not assert any knowledge, of any preliminary negotiations or representations of respondents agents leading up to the sale of the equipment and the execution of the promist,ory notes acquired by them, nul' ,lid they testify to knowledge of instances of charged misrepresentations affecting sales ,which were not completed and did not come within their kno\vleclge, of which there VI. ere many. In fine, this testimony is not only irrelevant to the issue but is also negative in quality and ex )Jost fltcto. That the witnesses had no knowledge of the charges contained in the complaint can patently have no weight in view of the preponderant weight of the evidence, as heretofore found, that there were in truth and fact many such instances.

Under happier circumstances, i. , were the weight of the total evidence more in balance instead of preponderantly in favor of the charges of the complaint, evidence of this character might have some beneficent power to influence a decision, but in the state of this record such is not possible. The testimony of all of these witnesses will, therefore, be disreg-ardecl. The foregoing revic\v and comment on respondent' s defense evidence is occasioned by the opinion in Un1:versal Carr era Corp. v. N.L. 340 U. , 474 , et seq. , directing that the "suhstantial evidence" rule to support an order must be based upon the "entire record" which, of course, includes evidence con(1" that introduced in support of the charges of the complaint. With the rule there enunciated this examiner is in complete accord, hence wishes it to be known that all defenses have received their due consideration at his hands.

CONCLUSIOl\S 1. The contentions of the respondent to the contrary notwithstanding, it is found that respondent was, at alj times touched upon herein, engaged in interstate commerce as such is defined Conclusions 55 F.

in the Federal Trade Commission Act and under the many court decisions inlerpretalive of said Act.

S. v. Rock Royal CO- O)). 307 U. S. 533, 569. S. v. J)arIJij, :n2 U.S. 100, 113-114. Kirschbamn v. Walling, 316 U. S. 517. C",.,in v. Wallace 306 U. S. J 1I. DeGorler v. C. No. 15, 184 U. A. 9th Cir. P. 5. S. v. Walsh 331 U. S. 432.

S. v. Food and G?'occ/'?J Bureau 43 F'. Bupp. 975. S. v. Sian doni Oil of Calif. 78 F. Supp. 850. McComb v. Dessau 89 F. Supp. 295-296. 2. The use by respondent of the unfair and deceptive acts and practices as hereinabove found has had, and now has, the capacity ancl tendency to mis!eacl rmd deceive a substantial portion of the purchasing- public, io cause man:y owners of furnaces and heating equipment made by respondent' s competitors to become dissatisfied with and afraid of continuing to use such equipment to discard such furnaces and equipment before the completion of the useful life of such products and to purchase furnaces, heating equipment and parts manufacturen and sold by the respondent. 3. In order to find respondent guilly of false, deceptive and misleading acts and practices in pursuance of the sale and distribution of its merchandise it is suffcient, under trle law, if ihe first contact or interview leading to a sale be secured by misrepresentation or deception which, it is concluded, has been amply proved in the instant case.

C. v. Standard Educallon Society, et al. 302 U. S. 112, JJ5. CaJ' lel' P''QZucls, Inc. , el al. v. C. 186 F. 2d 821. Fail';fool Products Co. v. C. 80 F. 2d 684, 689. 4. It is concluded that man)' of the acts found to have been committed 'were made possible, in large measure, by the ,vide discretion and freedom of action accorded branch managers, and the lack of supervision exercised by respondent, coupled with the profit motive actuating managers and subordinat.es whose compensation depends \wholly upon sales "turned up " by individual solicitation and initiative and the commissions on such sales. When it is borne in mind that there arc in excess of four hundred branches, by means whereof respondent operates its business throughout the United States, employing several hundreds of agents, and that the branch manager is supreme in his clay to clay operations, subject only to occasional checks by division man- , HOLLAND FUR"ACE COMPANY Conclusions agers or home offce personnel, it can be understood that there is present the occasion and opportunity to improve sales volume by illegal or unethical methods proscribed by law. This situation is the result of respondent's elected methods of transacting busi- 11ess and no amount of instructions to employees, solicitors agents or representatives can save the respondent harmless from failure to properly police its employees to insure that such acts are, in no event, committed.

5. It is concluded that the "purity of respondent's motives " as set forth in its manuals, magazine The Firepot " circular letters, etc., as hereinabove found to be facts, are all immaterial , in fad, their employees violated these instructions to the injury of the public. Instructions to agents and representatives not to misrepresent or otherwise violate the law in this connection do not relieve the respondent of liability in the premises. Steeleo Stainless Steel, Inc. v. C. 187 F. 2d 693. A seller who uses oral solicitation through canvassers is an absolute guarantor of the truth of their utterances and sporadic or intermittent \varnings, or threats of punishment of such employees, is not suffcient to avoid the consequences of their acts. IVlisrcpl'€sentation must be prevented at respondent's peril to the end that it. may not reap the benefits and profits of soch unlawful acts and deny liability therefor. 6. It is concluded that the acts found to be true under the specific charges of the complaint ' sere not localized or peculiar to any particular or restricted area but, on the contrary covered an area which might be roughly dcseribed as a triangle, the cities of Boston, New York, B8,lLimore, and vVashingtol1 , D. , forming the base thereof on the Atlantic seaboard, the apex resting on the Mississippi River at Davenport Iowa, and ioline, Ill., including the Chicago area, thus affecting many of respondent' s branch and subbranch offces and emplo,\'ecs, as well also its Division supervisors, in the areas affeded, 7. On some occasions respondent' s cllstomers have been forced intimidated, or cajoled into signing so-called "satisfadion releases." In many instances the cllstomers have signed such releases as the easiest way out to obtain a refund of Inonies previously paid lo respondent' s employees, either by way of deposit or otherwise, or, having been assured that respondent would not reassemble furnaces theretofore dismantled, have signed such Order 55 F.

releases as a last measure in order to procure the reassembling of their furnaces and thus to have heat restored to their premises. 8. As a result of the false and misleading representations and of the unfair and deceptive acts and practices indulged by the respondent, trade has been unfairly diverted to respondent from its competitors with consequent substantial injury to competition in commerce.

9. The acts and practices of the respondent, as hej'einabove found, are a1l to the prejudice and injury of the public and of respondent' s competitors and constitute unfair and deceptive acts and practices in comm(C rcc, a.nd unfair methods of competition in commerce \within the intent and meaning of the Federal Trade Commission Act.

Standard on Co, v. F. T. C. 173 F. 2d 210 and cases thel",in recited and reviewed.

lnlernal'ional Texl Book Co, v. PirHi 217 U. S. 91. Fw' sl v. n-rewster 282 U. S. 49; Consumers Horlle Equip. Co. v, C. 164 F. 2d )72. Progless Tailoring v. C. 153 F. 2d 1103, S. v. General Molm' 121 F . 2d 276 ct seq. (wherein see p. 399.

Hoboken While Lead, elc. v. F.T, C. 67 F. 2d 551. 10. On the basis of the above f;ndings and conclusions, it is found and concluded that the Federal Trade Commission has jurisdiction of the subject matter hereof and of the respondent herein and that this proceeding is in the public interest Ivherefore the follo\ving order is issued:

ORDER It ?:8 ordered That respondent Holland Furnace Company, corporation, and its offcers, agents, representatives, and em- , inployees, directly or through any corporate or other device connection vvith the offering for sale, sale or distribution in commerce, as "commerce " is defined in the F' deral Trade Commission Act, of furnaces, heating equipment, or PHl'ts therefor, do forth. vvit.h cease and desist from:

(1) Representing, diredly or inrlireetly that any of its employees are inspectors or are employees 01' representatives of Government agencies or or gas or utility companies. (2) Hcpresenting, conirary to fact, th Lt its salesmen or servicemen are heating engineers.

(3) Representing that any furnace manufactured by a com- HOLLAND FUR"ACr; COMPANY Opinion petitor is defective or not repairable, or that the continued use of such furnace will result in asphyxiation, carbon monoxide poisoning, fires, or other damag-e, or that the manufacturer of such furnace is out of business, or that parts of such furnace are unobtainable, unless such are the facts. (4) Tearing down or dismantling any furnace without the permission of the owner.

(5) Representing that a furnace which has been dismantled cannot be reassembled and used without danger of asphyxiation gas poisoning, fires, or other damage, or for any other reason when such is not a fact.

(6) Requiring the owner of any furnace \vhieh has been dismantled by respondent' s employees to sign a release absolving the respondent of liability for its employees' negligence, or of any other liability, before reassembling said furnace. (7) Refusing- to immediately reassemble, at the request of the owner, any furnace which hC'. s been dismantled by respondent' employees.

(8) Misrepresenting in any manner the condition of any furnace Ivhich has been dismantled by respondent's employees. OPINION OF THE COMMISSIOJ\' By SECREST, Commissioner.

This matter is before the Commission for final decision on the merits on respondent's appeal from the hearing examiner s initial decision \vhieh cone1urled that respondent h lS violated the Federal Trade Commission Act through the use of unfair methods of competition and unfair or deceptive acts and practices. The order contained in the initial dl;cision prohibits respondent from engaging in a sales scheme in connection with distribution of furnaces and heating equipment Ivhereby its salesmen gain access to homes by misrepresenting themselves as official "inspectors and Hheating engineers" and thereafter di mantling furnaces on the pretext that this is necessary to determine the extent of necessar? repairs. The order also inhibits respondent from utilizing coercive and "scare tactics" in inducing the purchase of furnaces from it. Also proscribed are other related practices a1l of which are established by the record to be part of a systematic sales plan effectuated by means of false representations. The findings of fact which are the basis for the inhibitions of the order are set forth in meticulous detail in the initial decision and there appears no reason to restate them here. We have care- FEDERAL TRADE COMMISSION DECISIOKS Opinion 55 F.

fully examined the whole record and f1lfl respondent' s contentions both as to procedural and substantive matters to be without merit. It is our view that the record not only substantially but copiously supports the f1lclings in the initial decisioll and that the findings furnish a suffcient basis for the prohibitions of the order to cease and rlesist contained therein. Respondent throughout this proceeding, and particularly on appeal, vigoroLlsly has urged that the Commission lacks jurisdiction. The recort1 c1iseloses Holland owns and operates some 475 branch offces, or retail outlets, 8S well as a number of subbranches. Salesmen or house-to-house canvassers sell respondnt's products with gross annual sales amounting to about $30 miJioll. All sales effected by the Holland Furnace Company or its representatives are to the ultimate purchasers and users of such equipment. Respondent does not ship furnaces as units but sends quantities of essential parts to central or branch warehouses. Respondent argues that once the materials and parts have arrived at its \varehouses, the interstate stream of commerce ceases and that the practices pl'posed to be prohibited take pia"e t.hel' eafter in a given state, at the local lcve1, and arc not i! commerce, " In essence, respondent claims its branches are construction contl'adors who::e operations are removed from the flo\v of interstate commerce.

The Commission is of the opinion that respondent' s contention in this respect must be rejected. The heating- equipment involved is manufactured in Holland, IVIich., and shipped from there and ::old by respondent' s authorized representatives on a naiiol1\\,ide basis in S01l1e 45 States through respondent' s o\vn retail outlets. A realistic. view of respondent' s activities in moving its products from Michigan across State lines to accomplish its stated pure of direct sales to ultimate consumers through "500 Direct Factory Branches Serving Over 15,000 000 Customers" admits of no other conclusion than that respondent is engaged " commerce.

Contracts between respondent and branch managers and salesmen; correspondence between the home offce in Michigan and field personnel; those contracts between respondent' s salesmen and the purchasing public on respondent's behalf \which must be accepteel by the home offce; and representations made by salesmen in selling respondent' s products-all are part and indicate HOLLA:-D FURNACE COMPANY Opinion a pattern of conduct in commerce \within the meaning of the Federal Trade Commission Act.

Furthermore, there is record evidence.e that sales vvere made from respondent' s Baltimore, Md. , branch in the District of Columbia and in Virginia; that the lViles, Mich., branch sold in Indiana; that the South Bend, Ind. , branch sold in Michigan; ;'lissouri branches sold in Ilinois; and Kentucky branches , )10.sold in Ohio. Respondent's branch manager in St. Louis testified as to sales in Ilinois locations from the St. Louis, Mo. warehouse and deliveries to purchasers from the lVIissouri warehouse. Respondent's operations, as \ve have seen, are nation\vide in scope, its sales contracts arc with purchasers in different States, and the technicalities of the "original package doctrine do not shield it from the consequences of unfair acts and practices engaged in by its authorized sales representatives. The fact that respondent' s products are shipped to respondent' s employees at it.s branch warehouses for subsequenl delivery to purchasers does not put an end to the interstate character of the transaction. Bindenrp v. Pathe Film Euhange 263 U. S. 291 (1923); Pedeml Tmde Commission v. Pacific States PCL))C), Tmde Association, 273 S. 52 (1927); ZVlandc1,ile is/!Lnd /oa11ns, Inc. v. Amc,.ico.1 tal S",gar Co. 334 U. S. 219 (1948). And see cases cited n. 1 below.

Respondent also advances on appeal a separate three-pronged argument.

Respondent urp;es in its brief that "the initial decision of the hearing examiner incorporates and is based upon: (1) erroneous findings of fact, contrary to the manifest weight of substantial evidence of record and, in some instances, unsupported by any evidence of probative value and (2) erroneous conclusions of fact and law injudiciously reached and arbitrarily and prejudicially applied in a manner constituting abuse of judicial discretion." Respondent contends therefore that the conclusions reached and the order predicated thereon are invalid and accordingly should be set aside in toto.

As previously indicated in this opinion, it is our view that thb record substantially supports the findings in the initial decision and that these findings furnish a suffcient basis for the order 1 Pr(Jflress Tailorl:nv Co. Ferleral Trud" Commission 153 F. 2r! 103 (e. A. 7 , 19.16); Ca.rt, Carburetor Corp. v. Federal TTflde Commi, "io'!, 112 F. 2d 722 (C. A. 8, 1940); United Stutes Ge1tenLl MotoTl Corp., 121 F. 2d 376 (C.A. 7 , 1!141). And iee COHsnmer6 Hume E(Jui)Jment Co. v. Federal Trade Com.mission?1 164 F. 2d 972 (C. A. 6, 1947), FEDJoRAL TRADE COMMISSION DECISIONS Opinion 55 F.

contained therein. We are accordingly rejecting the respondent' s contentions, as set forth above, since there is adequate legal warrant and sound record basis for all of the examiner s findings which, in our view, were judiciously and fairly applied to the law and facts.

The second point sought to be established is that there were numerous over-technical, arbitrary', erroneous, inconsistent, contradictory and prejudicial rulings made by the examiner on questions of substance as \veil as procedure throughout the course of these proceedings. In this same connection, respondent contends that the examiner evidenced an erroneous conception of the purvose, scope and fundamental rules of law governing the conduct of the hearings and that this resulted in imposition upon respondent of the burden of proof and the burden of proving a negative. Respondent also argues t.hat the examiner by his prior eva1nation of the import, purpose and scope of t.he testimony and evidence committed prejudicial and reversible error and demonstrated a degree of preconception and prejudgment of the issues and evidence, the cumulative e!feet of which was to deny respondent a fah' hearing and clue process of law.

Respondent, subsequent to submittal of its appeal brief, was granted leave to, and did, 11e n supplement thereto consisting of thirleen extensive tabulations of record page references, all of which are cited in support of the second point oJ respondent' separate argument.

The tabulations purport to list instances of rulings adverse to respondent on objections and motions to strike; instances wherein the rule was not enforced requiring that grounds for objections must be stated; occasions when testimony of respondent's witnesses w('.s restricted or limitations placed upon the scope of examination of \vitnesses, where exhibits were refused in evidence, leading questions \were permitted, proffers of testimony were denied and interruption of the examination of witnesses permitted, etc. AIJ of the foregoing are matters peculiarly within t.he scope of the exercise by the hearing examiner of his sound discretion in regulating the course of proceedings before him. Detailed references to the numerous instances of alleged prejudicial conduct on the part. of t.he hearing examiner would unduly extend this opinion . Suffce it to say that after due consideration we conclude that no one instance, nor the combination of them al1, constitutes abuse of discretion or reversible error. The Commission has carefully considered the implications of HOLLAND FURNACE COMPANY Opinion respondent' s omnibus attack upon the conduct of these proceedings by the hearing examiner and this on the basis of the whole record before it, including the particular citations to the transcript of testimony tabulated in the supplement to respondent' appeal brief. We are satisfied, under the circumstances disclosed upon this record, that rcspondcnt clearly was granted a fun, fair and impartial hearing in complete accordance wi th the requirements of due process and the provisions of the Administrative Procedure Act, 5 D. C. 1001, et seq. The second point of respondent' s separate argument is rejected. The third point of respondent's separate argument is that these proceedings, the initial decision and the order therein contained fail to establish an objective standard against which respondent' activity can be measured and by which the future conduct of its business may be governed and that they are therefore of no legal fol"Ce and effect and of no practical value and should be set aside. We are not favored with any elaboration as to exactly wherein respondent will be confronted with any insurmountable diffculties in abiding by the terms of the order or of its specific deficiencie-s. \Ve believe, however, that the order is clear and unambiguous and reasonably related to the practices found to exist. While prospective in operation it deals rith particular activities of the past and is designed to fit the situation and remove the unlawful practices disclosed by the facts. The order is not couched in general svveeping language but enjoins those particular practices engaged in by this respondent which, if permitted to continue, vvou1d perpetuate respondent' s past illegal activities. Respondent has merely to insure that its salesmen do not engage in the practices prohibited by the order. Compliance should not be diffcult if undertaken in good faith. Dorfman v. Fecl(Tal Trade Commission 144 F.2d 737 (C. A. 8, 1944). We have carefully considered all points raised by the respondent on this appeal and find them to be without merit. The appeal of respondent is accordingly denied and the findings, conclusions and order contained in the initial decision are adopted as the decision of the Commission. An appropriate order will be entered.

Commissioner Kern did not participate in the decision of this matter.

Ordcr 55 F.

FINAL ORDER Respondent having filed an appeal from the initial decision of the hearing examiner in this proceeding; and the matter having been heard by the Commission on the whole record, includingbriefs and oral argument; and the Commission having rendered its decision denying respondent' s appeal and adopting the initial decision as the decision of the Commission: It is ordered That respondent Holland Furnace Company shall within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with the order to cease and desist contained in the initial decision. Commissioner Kern not participating.

WORLD WIDE BROKERAGE CORPORATION ET AL.

Decision