Joseph W. Graham trading as Graystone Portrait Agency

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IN Tile MATTER OF JOSEPH W. GRAHAM TRADI"'G AS GRAYS TONE PORTRAIT AGENCY ORDER, ETC., I!' REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7075. C01i'jlnint, Pe/), lass-Decision, Jan. 959 Order requiring a seller of enlarged colored photographs and particularly frames therefor, with heailquartcrs in Chattanooga, Tenn. , tci cease representing falsely, through his door-ta-door salesmen or otherwise, that the finished enlargement was a hand-painted oil portrait done by an artist and as goon as the samples exhibited; that frames ordered would be 24 carat gold or walnut, would be airtight, dust proof, and waterproof, with unbrcaJ,able glass; and requiring him to disclose that the finished enlargements would be convex and oddly shaped so that they required special11y designcu frames obtainable only from him. Mr. Edward F. Downs and Mr. Garland. S. Ferguson for the Commission.

Mr. En,ce C. Bishopp, of Folts, Bishop Thomas of ChaUanooga Tenn., for respondent.

INITIAL DECISION BY LORE H. LA!JGIlLI " HEARING EXAMINER This proceeding involves charges that respondent has violated the Federal Trade Commission Act by soliciting, selling, and distributing commercially in interstate commen e tinied or colored enlargements of photographs and photographic frames. It alleged in the complaint that respondent, by means of false, misleading, and deceptive datements and representations of his sales agents or representatives to members of the consuming public, has sold substantial quantities of such photographs and frames in the course and conduct of his busine s. Respondent in his answer and testimony admits the location and nature of his business, that such business is in interstate commerce and in direct and substantial competition with others in like business, but denies, in substance, that he has violated the Federal Trade Commission Act in any way. This initial decision finds generally that the allegations of the complaint are sustained upon the whole record by a preponderance of the reliable, probative and substantia! evidence as required by !;7 (c) of the Administrative Procedure Act and the Commission s Rules of Practice for Ad- GRA YSTONE PORTRAIT AGENCY 983 982 Decision judicative Proceedings adopted pursuant thereto and that respondent has violated the Federal Trade Commission Act in each of the several particulars alleged in the complaint. A cease and desist order is issued herein appropriate to the findings and conclusions hereinafter set forth.

This case was instituted by the filing of a complaint on Fehruary 28, 1958, and after regular service thereof had been had upon the respondent, he filed his answer on April 21 , 1958. Thereafter hearings, wherein evidence was presented by Commission counsel, were held in Chattanooga, Tenn., on June 3, J 958, and in New Orleans, La., on June 5 and 6 , J958, after which Commission s counsel rested. Respondent presented his evidence in Chattanooga on June 30, J958, and both parties rested. On September , J958 , both parties submitted their respective proposed findings of fact, conclusions of la\v and orders, all of which have been carefully considered in the lig-ht of the whole record presented herein. Since the evidence supports the proposed findings of facts conclusions and order submitted by counsel supporting the complaint, the hearing examiner has adopted them either in haec verbae or in substance and effect. Respondent' s proposals, insofar as they are in ag-reement with those tendered by counsel supporting the complaint, have been adopted and all others have been rej ected.

The record is fairly brief, consisting of 249 pag-es of transcript and some tcn documentary exhibits, five being offered by each party. The testimony adduced consisted of the respondent and several of his agents and business associates and a number of so-called "consumer witnesses." The latter were residents of the vicinity of "'ow Orleans who had dealt with respondent' s agents with respect to the purchase of enlarged and colored photographs and frames therefor.

There is nothing- novel in the present case. Respondent' s methods of operating his business in commerce in the main follow a type of procedures which have been repeatedly held by the Commis"ion during- the past twenty years to be violative of the Federa! Trade Commission Act. See International Art Co. et al. (1938), 27 F. C. J387; amrmed International Art Co. v. 1'. (C. A. 7 , J940), J09 F. 2d 393, cert. den. (1940), 3JO U. 632; Ge01'ge H. Lewis, etc. (1939), 28 F. C. 987; Midwest Studios Inc., et at.. (1939), 28 F. C. J583; Success PorU'ait Co. , et al. (1942), 35 F. C. 227; Leroy Miller, etc. (1951), 48 F. C. 80; H. Harold Becko, etc. (195J), 48 P. C. 412; Clinton Studios Decision 55 F.

Inc. , et al. (1952), 48 F. C. 1137; and Cheste,. Bu,.,. Renne,. (1952), 49 F. C. 456. These photographic cases and others are collated in 85081.612 in Volume 2 Tmde Regulation RepoTte,. (C. ). Special significance to these decisions is given not only by the refusal of the Supreme Court to review the International A ,. case but also by the fact that in Success POTtmit it appears that that concern which is still doing business and is the supplier of respondent herein for his photographic materials and frames, together with its representatives, salesmen and employees, was ordered by this Commission to cease and desist from some of the funoamental practices involved herein, either directly or through any corporate or other device. The hearing examiner, after hearing and observing all of the witnesses and their conduct and demeanor while testifying, has given full, careful, and impartial consideration to such testimony and to al1 other evidence presented on the record and to the fair and reuRonable inferences arising therefrom, as well as to any and all facts pleaded in the complaint and admitted by the answer. AI1 statements, arguments, and proposals of counsel have been likewise fully considered. Upon the whole record thus evaluated and weighed, it is found that the material allegations of the complaint are each and all fully and fairly established. The hearing examiner therefore specifically fmds as follows: Joseph \V. Graham is an individual trading and doing business under the name of Graystone Portrait Agency. His business m8.il and all related correspondence is handled at P.O. Box 8278 Chattanooga, Tenn. Respondent is nm, , and for some tcn years last past, has been engaged in the sale and distribution of tinted or colored enlargements of photographs and of frames therefor. In the course and conduct of his business, respondent has caused, and now causes, said products, when sold, to be transported from the State of Tennessee to purchasers thereof located in various other States of the United States, namely, Louisiana, Michigan Mississippi, Arkansas, \Vest Virginia, Kentucky, Ohio, and Indiana.

Respondent has been in direct and substantial competition v/ith other individuals and with firms and corporations engaged in the sale and distribut.ion of photographs, tinteel or colored enlargements of photographs. and photograph frames in commerce. Respondent not only admitted this in his answer hut named three competing concern::.

In connection with the sale of respondent' s said products, in , GRA YSTO),E PORTRAIT AGENCY 98i, 982 Decision the first instance of contact, sales agents or representatives employed by respondent, who are called "subdealers " by respondent visit the homes of prospective customers in cities, tmvns and rural communities of the aforesaid several states. Said sales agents and representatives, in soliciting orders, carry and exhibit attractive samples of work that are represented as typical of what is done by respondent. Said samples are attractively displayed and have been skillfully done, and many of them closely resemble paintings done by hand. These sales agents anct representatives prospective customer::attempt to interest, and often do interest, in placing orders for enlargement to be made from photographs or snapshots furnished by the prospective customers. In cases where sales are made, other sales agents or representatives appear some 'Necks later \with uncolored proofs of the enlargements which are, in fact, merely enlarged unfinished prints or proofs made by photography of the photographs 01' snapshots previously furnished by the customers to respondent' s first sales agents or representatives. These second type of sales ag-ents or representatives who are called "proof-passer subdealers" by rcspondent, thereupon obtain instructions for the colors to be used , and in completing the enlargen1ents and then endeavor to sell often succeed in selling, the customers expensive frames for the enlargements.

One of the chief defenses urged by respondent is that these several types of "subc1ealers " are independcnt contractors. This doctrine was elaborately presented and nrguell in Intel"nal'oral Art Cn. , et oZ. v. SH)J'' , at pages 305- , but was hel(l unavailing to responclenls there. For like rulings as to other types of business where similar claims have been made, for example, see G. H01U(/,.d Hunt Pen Go. v. G. (C. A. 3, 1952), 197 F. 2d 273 , 281 , and Im"in v. C. (C. A. 8, 1944), H3 F. 316 , 325. In the case at bat, the order blanks \which customers executed in duplicate refer only to respondent here and to no other person, firm, or corporation. The public in dealing \ovith the picture and fran1e salesmen are dealing \with respondent an(1 no one else. In addition to that, a number of the "consumer witnesses" testified that those who sold them the enlarged pictures and frames claimed to be salesmen or representatives of respondent. llespondent bears an the expense of' the materials the salesmen carry with them, including the rather expensive cases for pictures and frames carried by the respective salesmen. Decision 55 F.

In their initial contacts with the customers, respondent' s said sales agents or representatives pursue the policy of making no mention of frames for the finished enlargements they are attempting to sell, nor do they disclose to the customers that the enlargements will be made in other than ordinary shape. Nothing is said by said sales agents or representatives to indicate that the profits obtained by respondent in connection with his business, herein described, are derived from the sale of frames, nor that the real and ultimate purpose of respondent' s said sales agents and representatives was and is to sell frames to the said customers.

By failing to disclose to customers that the enlargements ordered by them wil be finished in odd and unusual shapes and with a curved or convex surface, thus requiring odd-style frames the respondent's sales agents and representatives imply that enlargements will be finished in the usual or customary shape and surfaced in the usual manner. Customers are therefore induced to place orders and make deposits who would not have done so had they been apprised of the fact that the enlargements would he finished in odd shapes with a curved surface and that said enlargements would therefore require odd shaped frames which are not generally available and which, in all probability would of necessity, have to be purchased from respondent at a price fixed by respondent.

By and through oral statements and representations made by the sales agcnts and representatives, and by the exhibition of samples respondent represented, directly or by implication: (1) that the finished enlargement will be a hand-painted portrait; (2) that the finished enlargements will be band painted in oils by a well qualified artist; (3) that the finishecl enlargement will be as good as the samples displayed; (4) that certain frames ordered will be 24 carat gold and that others will be made of walnut; (5) that the frames are airtight and dustproof; (6) that the frames are waterproof; and (7) that the glass in the frames is unbreakable.

The aforesaid representations "vcre and are false, deceptive and misleading. In truth and in fact: (1) Respondent's enlargements are not portraits paint.ed by hand but are photographic enlargements with the color applied by air brush using water colors; (2) the enlargements are not hand painted in oils or by an artist; (3) respondent's finished enlargements are often inferior to the samples exhibited by respondent's agents; (4) GRA YSTONE PORTRAIT AGENCY 987 982 Decision the frames represented as being 2'1 carat gold were only covered, in whole or in part, by gold lacquer and the frames represented as being made from walnut are made from other, less expensive wood; (5) respondent's frames are not airtight nor are they dustproof; (6) respondent's frames are not waterproof; and (7) the glass in respondent' s frames is breakahle. It would serve no useful purpose to detail the testimony of the several witnesses with respect to the statements made and the false character of thedi. The respondent and his witnesses somewhat freely admitted many of them and none of the original sales representatives' statements, as testified to by the consumer witnesses, were denied by any witness. It is true that respondent called Arthur Penn, who was a "proof-passer " that is, he lllade the second call carrying the frames. He did not pretend to remember the conversations but relied on the fact that he always made the same sales pitch to al1 customers and never made any of the representations they claimed were made to them at the time they purchased the frames or were approac.hed with regard thereto. He admitted that his business was substantially all among the poorer and 10'vly class of people in the Ne\v Orleans neighborhood where )18 lived. The distinctions drawn by respondent's counsel as to the fact that persons would not be deceived into believing many of the statements that were made, which respondent does not admit, are not persuasive. The Federal Trade Commission Act with respect to deceptive practices is intended to prated the public g-enera11y, which includes the humble and poorly informed members of the community as well as those who have greater education and opportunities. Citation of authority along this line would be so extensive as to be burdensome, and the principle is riQlV well grained into the lavv' in this type.: of case. The hearing examiner observed the "consumer 'Ivitnesses " called 1n this case. They were not people of much education nor of high intelligence but a1l bore the imprint of honesty, and in their simple, unaffected v-lays narrated their respective transactions \with respondent's agents and repn:sentatives 'Ivith fairness and candor, and there is no doubt but what the sales methods employed with them were false, misleading, and deceitful in the particulars charged in the complaint. Since these people were held forth as representative of the general type of "consumer witnesses" to whom respondent' s appeals were made, it must be found that these practices were general and must be prohibited. 988 FEDERAL TRADE COM IISSION DECISIONS Order 55 F.

Respondent further urges that this proceeding is not one in the public interest but, in substance, is in the nature of a number of private litigations between dissatisfied customers and the respondent. The ans\ver to this is obvious and requires no demonstration. The Commission is not interested and makes no attempt in this proceeding to collect damages or otherwise to rectify the state of alrairs existing between respondent and any of its customers. Its proceedings and orders look oJ1ly to the future, and the protection of the public, particularly the gul1ible and ignorant from similar deceptive practices on the part of respondent' s agents and representatives.

The use by respondent of the foregoing false, deceptive and misleading statements, representations and implications has had, and now has, the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements, representations and implications are true and to induce the purchasing public to purchase substantial quantities of respondent' s products, as a result of such erroneous and mistaken belief. As a consequence thereof, substantial trade in commerce has been and is being unfairly diverteel to respondent from his competitors and substantial injury has been and is being done to competition in commerce.

There being jurisdiction of the person of the respondent, upon the findings of fClct here-:inbcforc made, the hearing examiner makes the following conclusions of law:

1. The acts and practices of the respondent hereinabove found to be false, misleading, and deceptive are al1 to the prejudice and injury of the public and constitute unfair and deceptive acts or practices and unfair methods of competition in commerce Ivithin the intent and meaning of the Federal Trade Commission Act. 2. The Federal Trade Commission has jurisdiction over al1 of the respondent's acts and practices which have been hereinabove found to be false, mis1eacling, and deceptive. 3. The public interest in the proceeding is clear, specific, and substantial.

Upon the foregoing findings of Jact and conclll ions of law the following order is hereby entered:

ORDER It 'is onlmed That respondent Joseph W. Graham, individually and trading and doing business as Graystone Portrait Agency, , , GRA YSTONE PORTRAIT AGENCY 989 982 Opinion or trading under any other name, his agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of tinted or colored enlargements of photographs, photograph frames, or any other product in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

A. Hepresenting directly or by implication: J. That the finished enlargement is a hand painted portrait or is anything other than an enlarged photograph; 2. That the finished enlargement is handpainted in oils or is painted by an artist;

3. That the finished enlargement will be as good as the samples displayed in soliciting the sale, unless such is the fact; 4. That the frames sold by respondent are 24-carat gold, or that they are made of any material other than that which is actually used;

5. That the frames sold hy respondent are airtight, dustproof or \vaterproof ;

6. That the glass in the fmmes sold by respondent is unbreakable.

B. Failing to (lisclose to customers at the time the enlargements are ordered that the finished enlargements, ,vhen delivered wil be so shaped that they can be used only in specially designed odd-styled frames that cannot ordinarily be obtained in stores accessible to the purchasing public, and that it will be diffcult, if not impossible, to obtain frames to properly fit the enlargements from any source other than respondent.

OPINION"- OF THE COM !ISSION By TAIT, Commissioner:

The respondent J oseph W. Graham, an individual trading and doing business under the name of Graystone Portrait Agency, has been charged with violation of the Federal Trade Commission Act. Specifically, the complaint charged and 1)10 hearing examiner found that:

By and through oral statements and representations made by t.he sales agents and representatives, and by the exhibition of samples respondent represented, directly or by implication: (1) that the finished cnJargement will be a hand-painted portrait; (2) thgt t.he fmished enlarg' ements will be hand painted in oils by a well qualified artist; (3) that the finished enlargement will be as good as the samples displayed; (4) that certain frames ordered Opinion 55 F.

will he 24 carat gold and that others wil be made of walnut; (5) that the frames are air-tight and dust-proof; (6) that the frames are waterproof; and (7) that the glass in the frame is unbreakable. The hearing examiner held that these representations were false deceptive and misleading.

In addition the complaint charged and the hearing examiner found that the respondent, in sellng- enlarg-ements of photog-raphs made no mention of frames, even though-h his ultimate purpose was to seu frames. He also failed to disclose that the enlarg-cd photographs were of unusual dimensions. In fact the record shows that the shape of the enlarged photograph was convex, of unusual i1 dimensions, and that appropriate frames could not be purchased in the open market. Thus customers would of necessity have to purchase odd-style frames from the respondent at respondent' price, a Jact of 'Nhich the customers were unaware when they ordered the enlarg-ements.

On appeal, by briefs only, the respondent contends that the order entered is not supported by reliable, probative and substantial evidence. He questioned the credibility of the witnesses supporting the complaint, and he argued that oral testimony was admitted to alter, vary and contradict the terms of a written contract.

It appears that the respondent questions the credibility of certain witnesses because their testimony was based on conversations between them and respondent' s salesmen about three or four years ago. The weight to be given such testimony is a matter to be considered. However, no sOllnd reason has been given why such testimony should be whol1)' disregarded. The hearing examiner has passed on the crerlibility of these witnesses. Indeed in some respects the testimony of the respondent himself supports the order entered.

Likewise it is apparent that this case is not concerned with the contracts entered into between these witnesses and the respondent. The compiaint is concerned with the nature and veracity of the representations made by respondent' s salesmen which induced members of the public to enter into the contracts for enlargements and, later, the separate contracts for frames. -. Respondent further claims that he was denied "the right to bring in thousands of satisfied consumer witnesses who would deny the allegations of the complaint."

GRAYSTONE PORTRAIT AGENCY 991 982 Order In Independent DinctoTY C01'porat'on v. Federal Trade Commission 188 F. 2d 468, 471 (1951), the Court held: The fact that petitioners had satisfied customers was entirely irrelevant. They (petitioners) cannot be excused for the deceptive practices here shown and found, and be jmuJated from action by the Commission in respect to them, by showing that others, even in large numbers, were satisfied with the treatment petitioners accorded them.

Also it has long been setted by a multitude of cases that the Commission need not prove actual deception of the injured public but need prove only that the statements in question have the tendency or capacity to deceive.

On appeal the respondent further claimed that he was not notified prior to the hearing, nor did the proof show which one or more than one, of his agents or representatives made the alleged statements and representations, and therefore respondent was denied any opportunity to defcnrl himself by having such agent testify and deny the charge or to have hig agent or representative face the consumer witness as such testimony was given.

The record does not indicate that the respondent ever requested additional time from the hearing examiner to prepare his defense or in any way indicate to the hearing examiner that he was being prej udiced.

Nor does it appear that this ease is a series of private controversies and is not in the public interest as contended by the respondent. The nature of the representations made, the scope of the respondent's activities and the amounts involved al1 indicate that this proceeding is in the public interest and that action by the Commission is warranted.

It is apparent that the order issued by the hearing examiner is proper and is fully supported by reliable, probative and substantial evidence, and that it was issued in the public interest. The respondent' s appeal is denied, and an appropriate order will be entered.

FII'AL ORDER This matter having been heard on the respondent's appeal from the hearing examiner s initial decision, and the Commission having rendered ils deeision denying the appeal: It is ordered That the hearing examiner s initial decision fied1 September 17, 1958, be, and it hereby is, adopted as the decision of the Commission.

Order 55 F. T.

It is f"TtheT onlend That respondent, Joseph W. Graham shall, within sixty (60) days after service upon him of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which he has complied with the order to cease and desist contained in the aforesaid initial decision.

WILLIAM FREIHOFER BAKING CO., ET AL. 993 Complaint