Nate Gellman

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

In roe Marver or NATE GELLMAN ET AL. DOING BUSINESS AS GELLMAN BROTHERS ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7298. Complaint, Nov. 6, 1958—Decision, May 28, 1960 Order requiring a Minneapolis, Minn., partnership to cease selling and distributing lottery devices for the sale of merchandise to the public through games of chance.

Mr. William A. Somers for the Commission. Mr. Maurice Weinstein, of Milwaukee, Wisc., for respondents. Iniriau Decision py J. Earn Cox, Hearne Examiner Respondents, who are engaged in the sale and distribution of punchboards, are charged with violating the Federal Trade Commission Act by thus placing in the hands of others the means of conducting lotteries, games of chance or gift enterprises in the sale and distribution of merchandise. ) Upon the basis of the entire record, and after considering the proposed findings of facts, conclusions and legal memoranda submitted by counsel, the following findings of facts are made, conclusions reached, and order issued:

1. Respondents Nate Gellman, Burt Horwitz and Peter Podany are individuals and co-partners trading and doing business as Gellman Brothers. The office and principal place of business of all respondents is located at 119 North Fourth Street in the City of Minneapolis, State of Minnesota.

2, Respondents are now, and for more than a year last past have been, engaged in the sale and distribution of merchandise, including devices commonly known as punchboards, to retail dealers, organizations and individuals located in the several states of the United States. Their gross sales, including punchboard sales, for 1957 were in excess of $1,400,000, and approximately the same for 1958. Of this, approximately 50% represented sales outside the State of Minnesotu. The volume of respondents’ punchboard business was not ascertainable for two reasons: (1) respondents kept no separate Decision 56 F.T.C.

record of punchboard sales, and (2) although a subpoena duces tecum was issued for their production, no records of punchboard purchases could be found by respondents even after diligent search. Since punchboard items are carried and prominently displayed in respondents’ catalogue, it is presumed that they constitute a substantial part of respondents’ sales.

3. Respondents cause and have caused said devices, when sold, to be transported from their place of business in the State of Minnesota to purchasers located in various states of the United States, other than the State of Minnesota, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce, as “commerce” is defined in the Federal Trade Commission Act.

4. In the course and conduct of their said business, respondents sell and distribute, and have sold and distributed, to said retail dealers, organizations and individuals, punchboards so prepared and arranged as to involve games of chance, gift enterprises or lottery schemes when used in making sales of merchandise to the public. 5. One of respondents’ punchboards presented in evidence is a “GETZUM SMOKES” board (Commission's Exhibit 4) which is, as referred to in respondents’ 1957-58 Annual Buyer's Guide No. 72, page 324, a “600-holes, 5¢ play, red, white and blue tickets, semithick style board,” which takes in $30.00 and pays out, as shown by the legend thereon, 80 packages of cigarettes. The punches are 5¢ each. Red tickets 15, 85, 55, 75, 115 and 185, when punched, each entitle the player to five packs of cigarettes; white tickets 20, 40, 60, 80, 100 and 120 likewise entitle the lucky player to five packs each, as do blue tickets 22, 44 and 66; the last punch on the board also is good for five packs. Thus, out of 600 punches, only sixteen entitle the player to a share of the merchandise, and the merchandiser takes in $30.00 for eighty packs of cigarettes. Each lucky winner gets five packs of cigarettes for one 5¢ punch. Those who punch other than the designated lucky names receive nothing. Another of respondents’ boards which is in evidence (Commission’s Exhibit 1; Respondents’ No. 6455) is described in the catalogue as follows:

GRAND PRIZE MERCHANDISE BOARD POCKET SIZE BOOK STYLE No. 6455—Grand Prize Board. 200-hole, 1¢ to 35¢ prize board. Regular Midget style, desirable pocket size. Takes in $63.50 and pays out one Grand Prize as offered by the oper- GELLMAN BROTHERS 1445 J443 Decision ator. Suitable for use by Legions, Churches, Lodges, and simi- Jar organizations.

The only Jegend on this board is— Numbers Ending in 0 and 5 Register For GRAND PRIZE Numbers 1 to 15 ARE FREE Numbers 16 to 35 Pay What You Draw Over 35 Pay Only 35¢.

A third board (Commission’s Exhibit 2; respondents’ No. 6454) is in evidence, which is identical with the board just described except that it “(t)akes in $86.55” and provides that punched numbers 16 to 49 must. be paid for in the amount of cents represented by the numbers on the punched slips, and those with numbers larger than 49 sell for 50¢ each.

6. On the lids of the latter two boards are lines in which those who punch the lucky qualifying numbers may register their names. From this list the “grand prize” winner is determined by punching the number in the starred circle at the upper right corner of the board. The purchasers and users of boards of this type can select. whatever grand prize they choose, and customarily each board is used for the disposition of a single item of merchandise. Thus there would be but one prize or item of merchandise disposed of by the 200 punches.

7. Respondents’ catalogue, pages 324 and 325, describes several money-type boards, and other boards of various sizes and types, some of which obviously are intended for, and conveniently can be used for disposition and sale of merchandise. Typical of these are boards which provide for one “grand prize” and eight to twelve “consolation winners.” On many of these boards the price per punch is not designated, the catalogue stating: Operator sets his own payout and price per sale; Operator sets his own price per sale and amount of all awards; Designed to enable the dealer to decide his own price per sale and amounts of awards for consolation and grand prize winners. Across the tops of the two catalogue pages on which respondents’ punchboards are described are the words, in 24-point type, Cigarette, Put and Take and Tip Sales Boards and Cards The Ever Popular Selling Charley and Color Sales Boards.

Decision 56 F.T.C.

The prices of the boards vary from $2.50 per dozen to $2.95 each. Of the punchboards in evidence, Commission’s Exhibits 1 and 2 are catalogue-priced at $1.60 each; Commission’s Exhibit 4 at $1.95. 8. The operation of these punchboards is similar to that of other merchandise boards, which have been described in several Commission decisions. The numbers on the slips which are to be punched are effectively concealed from the purchaser or prospective purchaser until the selection has been made and the punch completed. Persons securing lucky or winning numbers receive articles of merchandise without additional cost at prices which are much less than the normal retail prices of said articles of merchandise. Persons who do not secure such lucky or winning numbers receive nothing for their money other than the privilege of having made a futile punch. The articles of merchandise which are used as prizes are thus distributed to the purchasing and consuming public wholly by lot or chance.

9. Purchasers of respondents’ boards have used them as a means of selling and distributing various types and articles of merchandise, which is the purpose for which the boards hereinabove described were designed, made and distributed. Because of the element of chance involved in connection with the sale and distribution of merchandise by means of punchboards, many members of the purchasing public have been induced to trade or deal with retail dealers, organizations and individuals selling or distributing said merchandise by means thereof.

10. The sale of merchandise to the purchasing public through the use of, or by the means of, such devices in the manner above described involves a lottery, game of chance or gift enterprise through the sale of a chance to procure articles of merchandise at a price much less than the normal retail prices thereof; it teaches and encourages gambling among members of the public, is contrary to established public policy, and constitutes unfair acts and practices in commerce in violation of the Federal Trade Commission Act. 11. The sale or distribution of said punchboard devices by respondents supplies to and places in the hands of others the means of conducting lotteries, games of chance or gift enterprises in connection with the sale or distribution of merchandise, and thus of engaging in unfair methods of competition and unfair acts and practices within the inteni and meaning of the Federal Trade Commission Act.

12. The aforesaid acts and practices of the respondents are all to the prejudice and injury of the public and constitute unfair acts and practices in commerce within the intent and meaning of the Federal Trace Commission Act.

GELLMAN BROTHERS 1447 1443 Decision 13. The Federal Trade Commission has jurisdiction over the acts and practices of the respondents as herein found, and this proceeding is in the public interest. The order which follows effectively disposes of respondents’ motion to dismiss. Accordingly, :

It ts ordered, That respondents Nate Gellman, Burt Horwitz and Peter Podany, individually or as co-partners trading under the name of Gellman Brothers or any other name, and their agents, representatives and employees, directly or through any corporate or other device, do forthwith cease and desist from selling or distributing in commerce, as “commerce” is defined in the Federal Trade Commission Act, punchboards or other devices which are designed or intended to be used in the sale or distribution of merchandise to the public by means of a game of chance, gift enterprise or lottery scheme.

DECISION OF THE COMMISSION AND ORDER TO FILE REPORT OF COMPLIANCE This matter having been heard on the respondents’ appeal from the hearing examiner’s initial decision wherein the respondents were ordered to forthwith cease and desist from selling or distributing in commerce punchboards or other devices which are designed or intended to be used in the sale or distribution of merchandise to the public. by means of a game of chance, gift enterprise or lottery scheme; and The Commission, on the authority of R. B. James and Patrick Zurla, trading as Chicago Board Company v. Federal Trade Comméssion, 253 F. 2d 78 (7th Cir. 1958), cert. denied, 358 U.S. 821; Bernice Feitler, et al., trading as Gardner & Company v. Federal Trade Commission, 201 F, 2d 790 (9th Cir. 1953); and Gay Games, inc. et al. v. Federal Trade Commission, 204 F. 2d 197 (10th Cir. 1953), having determined that the initial decision is adequate and appropriate in all respects to dispose of this proceeding: It is ordered, That the respondents’ appeal be, and it hereby is, denied.

Lt is further ordered, That the hearing examiner's initia] decision, filed December 23, 1959, be, and it hereby is, adopted as the decision of the Commission.

It is further ordered, That the respondents, Nate Gellman, Burt Horwitz and Peter Podany, 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 the order to cease and desist contained in said initial decision.

Decision 56 FVT.C.