Max H. Goldberg trading as Novel Company

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Ix THe MatTrer or MAX H. GOLDBERG TRADING AS NOVEL COMPANY ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7360. Complaint, Jan. 14, 1959—Decision, Nov. 28, 1959 Order requiring a Chicago distributor of dolls, clocks, electric appliances, ana other merchandise, to cease furnishing to operators and members of the public, push cards and instructions for their use in selling his merchandise. Mr. William A. Somers for the Commission. Frank E. & Arthur Gettleman, of Chicago, Tl., for respondent. Istria, Decision py Waxrer R. Jounsox, Huarrne Examiner Pursuant to the provisions of the Federa] Trade Commission Act, the Federal Trade Commission on January 14, 1959, issued and subsequently served its complaint upon the respondent Max H. Goldberg, trading under the name of Novel Company, charging him with the use of unfair acts and practices in commerce in violation of the provisions of said Act. Respondent filed his answer in due course, whereupon hearings were held before the undersigned hearing examiner upon the issues presenied by said complaint and answer. At the close of all evidence proposed findings of fact, conclusions of law, and order, together with reasons therefor, were filed by counsel for respondent and counsel supporting the complaint. Upon consideration of the entire record herein, the hearing examiner makes the following findings as to the facts, conclusions drawn therefrom, and order:

NOVEL COMPANY 583 582 Findings FINDINGS AS TO THE FACTS Paracrapy 1. Respondent Max H. Goldberg is an individual trading as Novel Company, with his principal place of business located at 216 West Jackson Boulevard, Chicago, Illinois. Par. 2. Respondent is now, and for more than six months last past has been, engaged in the sale and distribution of dolls, clocks, electric appliances and other articles of merchandise and has caused said merchandise, when sold, to be transported from his place of business in Chicago, Illinois to purchasers thereof located in the various states of the United States other than the State of Illinois. There is now, and has been for more than six months last past, a substantial course of trade by respondent in such merchandise in commerce, as “commerce” is defined in the Federal Trade Commission Act.

Par. 3. In the course and conduct of his business as described in paragraph 2 hereof, respondent in soliciting the sale of, and in selling and distributing his merchandise, furnishes and has furnished various plans of merchandising which involve the operation of games of chance, gift enterprises or lottery schemes when said merchandise is offered for sale, sold and distributed to the purchasing public. Among the methods and sales plans adopted and used by respondent, and which is typical of the practices of respondent, is the following: ;

Respondent distributes, and has distributed, to operators and to members of the public certain literature and instructions, including, among other things, push cards, order blanks, circulars including thereon illustrations and descriptions of said merchandise and circulars explaining respondent’s plan of selling and distributing his merchandise and of allotting it as premiums or prizes to the operators of said push cards, and as prizes to members of the purchasing public who purchase chances or pushes on said cards. One of respondent’s said push cards bears 54 names with ruled columns on the back of said card for writing in the name of the purchaser of the push corresponding to the name selected. Said push card has 54 partially perforated discs. Each of said discs bears one of the names corresponding to those on the list. Concealed within each disc is the number which is disclosed only when the disc is pushed or separated from the card. The push card also has a larger master seal and concealed within the master seal is one of the names appearing on the disc. The person selecting the name corresponding with the one under the master seal receives a doll. Findings 56 F.T.C..

The push card bears the following legend or instructions: LUCKY NAME UNDER LARGE SEAL RECEIVES THIS New, Exciting, Glamourous (1Nlustrated Million Dollar Doll by picture Miss T.V. Queen on push card) - SHE 1S THE T.V. TOAST A NEW 20-INCH BEAUTY FROM COAST TO COAST e Rich, rayon satin dress See How beautifully and completely e Newest, blonde hair-do she is dressed with her attractive red e Soft, lifelike body rayon satin dress. Saran hair can be e Smart, high fashion shoes washed and set. (illustrated by picture on push card) (Illustrated by Picture on push card) She has her and her own 8 piece own BRA, Dresser Set (NOT A TOY) PANTY and Every little girl will love this beau- NYLON HOSE tiful dresser set... all her own...

colorful and well made. Comb, brush and mirror in smart shape like big sisters.

No. 1 pays 1¢ (Illustrated by No. 9 pays 9¢ picture on No. 19 pays 19¢ pusb card) No. 21 pays 21¢ Nos. 50, 60, 70 No, 24 pays 24¢ EACH RECEIVE ALL others BALL PEN pay only 29¢ NONE HIGHER WRITE YOUR NAME ON (Illustrated REVERSE SIDE OPPOSITE by picture NAME YOU SELECT on push card) SIMULATED PEARL EARRINGS BRACELET NECKLACE and RING Par. 4. Sales of respondent’s merchandise by means of said push cards are made in accordance with the above described instructions. Said prizes or premiums are allotted to the customers or purchasers in accordance with the above described instructions. Whether a purchaser receives an article of merchandise or nothing for the amount of money paid and the amount to be paid for the merchandise or the chance to receive the merchandise are thus determined wholly by lot or chance.

NOVEL COMPANY 585 582 Order Par. 5. Respondent furnishes and has furnished various other push cards accompanied by order blanks, instructions and other printed matter for use in the sale and distribution of his merchandise by means of a game of chance, gift enterprise or lottery scheme. The sales plan or method involved in. the sale of said merchandise by means of said other push cards is the same as that hereinabove described, varying in detail: only. Par. 6. The persons to whom respondent furnishes and has furnished said push cards use the same in selling and distributing respondent’s merchandise in accordance with the aforesaid sales plans. Respondent thus supplies to and places in the hands of others the means of conducting games of chance, gift enterprises or lottery schemes in the sale of his merchandise in accordance with the sales plan hereinabove set forth. The use by respondent of said sales plans or methods in the sale of his merchandise and the sale of said merchandise by and through the use thereof and by the aid of said sales plans or methods is a practice which is contrary to an established public policy of the government of the United States. Par. 7. The sale of merchandise to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure one of the said articles of merchandise at a price much Jess than the normal retail price thereof.. Many persons are attracted by said sales plans or methods used by respondent and the element. of chance involved therein and thereby are induced to buy and sell respondent’s merchandise.

CONCLUSION The aforesaid acts and practices of respondent, as herein alleged, were, and are, all to the prejudice and injury of the public and constituted, and now constitute, unfair acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER It is ordered, That Max H. Goldberg, individually and trading under the name of Novel Company, or under any other name or names, and his representatives, agents and employees, directly or through any corporate or other device, in connection with the offerine for sale. sale or distribution of any merchandise in commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Supplying to or placing in the hands of others pull cards, push cards or other lottery devices, either with merchandise or sepa- 582 Syllabus rately, which are designed or intended to be used in the sale or distribution of respondent’s merchandise to the public by means of a game of chance, gift enterprise or lottery scheme. 2, Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme. OPINION OF THE COMMISSION By ANpErson, Commissioner :

The complaint in this matter charges respondent with selling and distributing merchandise by means of Jottery schemes in violation of Section 5 of the Federal Trade Commission Act. The hearing examiner in his initial decision held that the allegations of the complaint were sustained by the evidence and ordered respondent to cease and desist from the practices found to be unlawful. Respondent has appealed from that decision.

Two arguments are presented in the appeal. The first is that the Commission does not have jurisdiction to prohibit the mailing of push cards in interstate commerce and the second is that the furnishing of push cards to be used in selling merchandise by means of lottery schemes is not contrary to the established public policy of the United States. Both of these arguments have been previously considered and rejected by the Commission and the courts. Lichtenstein v. Federal Trade Commission, 194 F. 2d 607 (9th Cir. 1952); Gay Games v. Federal Trade Commission, 204 F. 21 197 (10th Cir. 1953); Surf Sales Company v. Federal Trade Commission, 259 F. 2d T44 (7th Cir. 1958); Bernard Rosten v. Federal. Trade Commission, 263 F. 2d 620 (2nd Cir. 1959). As stated by the Court in Surf Sales Company, supra. “The law is now firmly established that the practice of selling goods by means which involve a game of chance, gift enterprise or lottery, including push cards such as we have here, is contrary to the established public policy of the United States and the sale and distribution, in interstate commerce of such devices designed for the purpose. of selling merchandise by games of chance or lottery js violative of the Federal Trade Commission Act.”

The evidence adduced in this matter establishes bevond question that respondent. is engaged in a practice which the Commission and the courts have repeatedly and consistently held to be illegal. In view of the numerous decisions on this point. it is difficult to behave that a respondent can contend seriously that such a practice does not constitute a violation of the Federal Trade Commission Act.

RADIO TELEVISION TRAINING ASSN., INC., ET AL. 587 582 Sylabus It is noted that in the first paragraph of the initial decision the hearing examiner incorrectly refers to the complaint as charging respondent with the use of deceptive acts and practices in commerce. The initial decision will be modified, therefore, to correct this statement.

Respondent’s appeal is denied, and the initial decision will be adopted, as modified, as the decision of the Commission. FIN AL ORDER This matter having been heard by the Commission upon respondent’s appeal from the initial decision of the hearing examiner and upon briefs and ora] argument in support thereof and in opposition thereto; and the Commission having rendered its decision denying the appeal and directing modification of the initial decision: It ts ordered, That the initial decision be modified by striking the words “and deceptive” from the fifth line of the first paragraph thereof.

It is further ordered, That the hearing examiner’s initial decision as modified hereby be, and it hereby is, adopted as the decision of the Commission.

It ts further ordered, That respondent, Max H. Goldberg, 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.