Max J. Haff

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IN THE MATTER OF' MAX J. HAFF ET AL. DOING BUSINESS AS ARISTOCRAT CLOCK COMPANY ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF TIn; FEDERAL TRADE CQJ.D.I!SSlON ACT Docket 6931. Complainl VOL!. lD5i-Drcisi(); , Ai/Y. 1.958 Order requiring distributors in l\' ew York City to cease reprct'enting falsely by means of labels, counter displays, display boxes, and trade ci!'culars distributed to dealers and retailers, that their "ArLeo " watches were jeweled and contained jeweled movements; th2.t watches designated Seventeen " and "Twenty- One" contained S€1;enteen and twenty-one jewels respectivl:Jy; and that the watches were fully guarantee"d for one year; and to cease selling watches having bezels composed of base metal simulating gold without disclosing the true metal composition of the bezels. M1" IIurry E. Middleton, !T. fo!" the Commission. Petersen, Steiner Kolwn of New York, N. by Joseph H. Kohun for !"respondents.

INITIAL DECISION BY WILLIAM L. PACK, HEARING EXAMINER PRELIMINARY STATEMENT The Commission s complaint in this matter, issued on November , 1957, charged the respondents with the use of certain mislead(1ing representations and practices in t.he advertising and sale of w"tches. After the filing of respondents' answe!" to the com plaint, there were extended negotiations between counsel looking toward disposition of the proceeding by means of an agreement for a consent order. Because of one diffculty in connection with the proposcd order (to be discussed late!"), such negotiations were unsuecessful, and on April 16, 1958, a hearing was held for the purpose of concluding the proceeding- insofar as reception of evidence was concerned.

At this hea!"ing, respondents through their "attorney admitted a1l of the allegations of fact in the complaint, and it was therefo!"e unnecessa!"y that any evidence in support of the complaint offered. While certain evidence was introduced on behalf of respondents, such evidence ,vas not in contravention of the factual allegations of the complaint but related solely to the proposed order; specifically, to the question whether there should be a postponement of the effective date of one prohibition in the order. :

ARISTOCRAT CLOCK COMPANY 179 178 Findings The filing of proposed findings and conclusions was waived and the proceeding is now before the hearing examiner for final consideration.

Respondents having admitted all of the allegations of fact the complaint, the facts are found to be as therein set forth, to wit:

FJNDIXGS AS TO THE FACTS 1. Respondents 1ax J. Raff and Isadore A. Raff, are individuals and copartners doing business as Aristocrat Clock Company, with their office and principal place of business located at 245 Fifth Avenue, New York, N.

2. Respondents are now, and have been for several years last past, selling and distributing ladies' and men s one and two jewel wrist watches under the trade names of "Artco Seventeen and " Twenty-One.

Respondents cause their products, when sold, to be transported from their place of business in the State of New York to purchasers thereof located in various other States of the United States and in the District of Columbia. Hespondents maintain and at a1l times mentioned herein have maintained a substantial course of trade in their products in commerce, as "commerce " is defined in the Federal Trade Commission Act. 3. In the course and conduct of their business and for the purpose of inducing the purchase of their watches, respondents have made numerous statements and representations relative to their watches hy the use of labels thereon, counter displays, display boxes, and trade circulars, all of which are distributed throughout the United States to dealers and retailers who handle respondents' products. Among and typical of such statements are the following:

Swiss ,J eweIed Movemf Seventeen Twenty-one Constellation ':"I. Full Year Guarantee Through the use of these representations and others of similar import, respondents have represented that their watches are jeweled watches and contain movements "which are jeweled movements; that the watches designated "Seventeen" and "Twentyone" contain seventeen and twenty-one jewels, respectively; and that such vvatches are guaranteed for one year in every respect. 4. These representations were misleading and deceptive. Ac- Decision 55 F.

tually, the watches so described are not "jeweled" watches nor do they contain jeweled movements. As generally understood in the industry, a jeweled watch or a jeweled-movement watch is one which contains at least seven jewels, each of which serves a mechanical purpose as a frictional bearing. Respondents' watches do not contain as many as seven jewels serving a mechanical purpose as frictional bearings.

Respondents' watches are not guaranteed in every respect. The so-called guarantee provides for the payment of a charge for servicing. The terms, conditions and extent to which such guarantee applies, and the manner in which the guarantor will perform thereunder, are not disclosed in Ihe advertising matter. 5. Certain of respondents' watches have cases which consist of two parts, that is, a back and a bezel. The bezel is composed of' a base metal which has been treated or processed to simulate or have the appearance of precious metal, that is, gold or gold alloy. Said cases are not marked to disclose the true metal composition of the bezels or to disclose that the bezels are composed of' base metal.

The practice of respondents in offering for sale and selling watches having cases composed in part of' base metal which has been treated or processed to simulate or have the appearance of precious metal, without disclosing the true metal composition of such paris, is misleading and deceptive and many members of the purchasing puhlic are therehy led 10 believe that such parts are C0111posed of precious metal.

6. Respondents, by furnishing the advertising matcria1 and selling and ctistributing the watches to dealers and retailers as above set forth, Jurnish such dealers and retailers the means and instl'umentaliti(-;s by which they may mislead and deceive the purchasing public as to the quality and construction of' respondents ' watches and the nature and extent of the guarantee. 7. In the course and conduct of their business, respondents are in substantial competition \with other individuals, and with firms and corporations engaged in the sale of watches in commerce.

8. The use by respondents of' the representations set forth above has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public with respect to respondents' watches and to induce such members of' the public to purchase such ,vatches as a result of such erroneous and mistaken belief', As a consequence thereof' , substantial trade in com- ARISTOCRAT CLOCK COMPANY 181 178 Conclusion merce has been unfairly diverted to respondents from their competitors and substantial injury has been done to competition in commerce. The proceeding is therefore in the public interest. CONCLUSION The acts and practices of respondents as herein found are all to the prejudice of the public and of respondents' competitors and constitute unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. The Question With Respect to the Order The question raised by respondents with respect to the order relates to the matter covered by paragraph 5 of the above findings. The bezels of certain of respondents' watches are made of aluminum or other base metal which has been treated or processed so as to simulate gold. As charged in the complaint and as found above, the sale by respondents of \vatches having such bezels, without disclosing the true metal composition of the bezels is misleading to the public.

Respondents are entirely willing for the order issued herein to contain a prohibition covering this practice. The diffculty has to do with the effective date of this portion of the order. Long before the issuance of the complaint, respondents had placed orders for large quantities of watches containing- such bezels and these \vatches have already been manufactured. The ' watches are now either in the hands of the manufacturer in Switzerland or in the hands of respondents' purchasing agents in Bristol, Conn. Not only are respondents under binding contract to accept and pay for the watches, hut the watches bear respondents' trade-mark Artco" on either the case or the dial. For this reason the watches cannot be sold to anyone other than respondents. Nor is it practicable to stamp the cases or bezels of the watches at this time so as to disclose the metal content of the hezels. This would require that the watches be disassembled, stamped, and then reassembled, and the cost would be prohihitive, particularly in view of the fact that the watches are of an inexpensive grade being intended to retail at from $6.95 to $12.95. The number of such watches which have been manufactured and which are in the hands of respondents' agents, or in the hands of the manufacturer a\waiting respondents' shipping instructions, is approximately 50 000. While the watches are being Order 55 F.

sold by respondents to retailers as fast as possible, it wil probably be the latter part of December 1958 before all of the watches can be moved. The great bulk of watch sales to retailers are made during the last 6 months of the year. This is because it is not until the Christmas holiday season that retailers are able to sell watches to the public in substantial quantities. The challenged practice has already been discontinued by respondents. The only diffculty is in connection with the watches which, as stated above, \were ordered long- prior to the Issuance of the complaint.

For the reasons indicated, respondents urge that the effective date of any order on the point in question he postponed until the last of December 1958. In the examiner s opinion the request has substantial merit and should be granted if this may legally be done, While the precise point has not, so far as the examiner is advised, been passed on by the Commission or the courts, the case (1t. v. Federal Tradeof Ame",:c(1n Chuin Cubic Co. , Inc., et Commission (1944) 142 F. 2d 909, is persuasive as indicating that the Commission does have power to postpone the effective date of an order to cease and desist issued in a proceeding under Section 5 of the Federal Trade Commission Act. Also persuasive is the C. E. Niehofl Co. case, although this case arose under Section 2 of the Clayton Act rather than under tbe Federal Trade Commission Act. C. E. Niehoff Co. v. Federal 2d 37; Federal Trade Commis-Trade Commission (1957) 241 F. sion v. C. E. Niehoff Co. (1958) 355 U. S. 41l. The hearing examiner being of the view that the Commission does have authority to postpone the effective date of a cease and desist order and that such authority should be exercised in the present case, the effective date of the pertinent prohibition in the order which follows is being postponed to December 31 , 1958. ORDER It is (J1de1"ed That respondents Max J. RafI and Isadore A. Raff, individually and as eo-partners doing business as Aristocrat Clock Company, or under any other name, and respondents agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, or distribution of watches in commerce, as "commerce is defined in the Federa) Trade Commission Act, do forthwith cease and desist from:

ARISTOCRAT CLOCK COMPANY 183 178 Decision 1. Hcpresenting, directly or by implication, that a watch is a je\veled" watch, or that it contains a jeweled movement, unless such watch contains at least seven jewels, each of which serves a mechanical purpose as a frictional bearing. 2. LJsing the term "Seventeen" or the term "Twenty-One" as a designation for a watch which contains less than seventeen or twenty-one frictional bearing jewels, respectively; or otherwise representing that a watch contains a greater number of jewels than is the fact.

3. Representing, directly or by implication, that watches are guaranteed, unless the nature and extent of the guarantee and the manner in which the guarantor will perform thereunder are clearly and conspicuously disclosed.

4. Offering for sale or selling watches, the cases of which are composed in whole or in part of hase metal which has been treated to simulate precious metal, without clearly disclosing on such cases the true metal composition of such treated cases or parts.

Pmvided, hmueveT that nothing contained herein shall be deemed to require the respondents to comply with the requirements of paragraph 4 of this order to cease and desist until December 31 , 1958.

DECISION OF THE COMMISSIO AND ORDER TO FILE REPORT OF COMPLIANCE The Commission having considered the initial decision filed hy the hearing examiner and having noted that the last sentence thereof provides that paragraph 4 of the order to cease and desist shall not become effective until Dccemher 31, 1958; and It appearing that such sentence may be incompatihle with certain provisions of Section 5 of the Federal Trade Commission Act and should be rewritten:

It 'is order-d That this case be, and it hereby is, placed on the Commission s own docket for review.

It 'is f"urther O,.dered That the last sentence of the initial decision be, and it hereby is, modified to read as follows: Pmvided, however that nothing contained herein shall be deemed to require the respondents to comply with the requirements of paragraph 4 of this order to cease and desist until December 31 , 1958.

It 'is j1,rther on/cred That the initial decision, as so modified 184 FEDERAL TRADE CO:vMISSIO~ DECISIONS Decisiun 55 F. T.

shall, on the 13th day of August 1958, become the decision of the Commission.

It is lurther onlered That the respondents shall, within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied \:with paragraphs 1 2 and 3 of the order to cease and desist. It is lurlhe1' ordered That the respondents shall, on or before December 31, 1958, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with paragraph 4 of the order to cease and desist. LANOLE PRODUCTS , INC., ET AL. 185 Decision