Nichols & Company, Inc., et al.

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IN THE MATTER OF :\ICHOLS & CONIPAc, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TnAm co::nnSSION AND Tile WOOL PRODUCTS LABELING ACTS Docket 7659. Complaint, Nuv. , 1959-Decision, Jan. 2-4, 1961 Order requiring an individual engaged in garnetting wool stocks on commission for other firms, to cease violating the Wool Products Labeling Act by labeling as "80% Camel Hair, 20% Wool", wool stocks which contained in part reprocessed woolen fibers, and by failng in other respects to comply with labeling requirements.

"Settled as to all other respolJuents by consent order dated ::far. 25, 1960 (56 C. 1122).

GSl-237-H3- 114 FEDERAL TRADE COM:vnSSION DECISIONS Findings 138 F. JIr. anrZnnd S. Ferguson for the Connnission. 11f1'. nnITY Only for himself.

IXITB.L DECISION BY I-IARRY R. HINTms, HEARING EXAMINER Pursuant to the provisions of the Federal Trade Commission Act and the 'V 001 Products Laheling Act of 1939 and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, on November 17, 1959 , issued and subsequently served its com plaint in this proceeding upon the respondents, charging them with violation of the provisions of said Acts and the Rules and Regulations promulgated under the .Wool Products Labeling Act. Thereafter on February 1 , 1960, all of the respondents with the exception of Harry Carr agreed with counsel supporting the complaint to a consent order to cease and desist, and on March 25, 1960 the initial decision of the hearing examiner accepting the consent agreement was adopt.ed as the Decision of thc Commission, disposing of this matter as to all of the respondents with the exception of Harry Carr. Pursuant to notice, a hearing was held as to respondent Harry Carr on March 11 , 1960, at which witnesses called by the Commission counsel were heard and a number of Commission exhibits received in evidence. ir. Carr was afforded an opportunity to crossexamine the witne,sees, to testify on his own behalf and to submit evidence. Proposed findings, conc.usions and order were submitted by Commission counsel, and an opportunity was afforded respondent to do same. Several informal communications were received from the respondent which have been considered in the determination of this case as well as the formal record on file. Oral arguments on the proposed findings were held on June 13, 1960 as of which date the proceedings were closed.

Upon the whoJe record herein, including all exhibits received in evidence and the testimony of the witnesses as well as :\11'. Carr whose conduct and demeanor were under observation during the hearing, the examiner makes the following: FINDINGS OF FACTS 1. Respondent Harry Carr is an individual trading and doing business as !Iarry Carr and as 'Vest First Processing Inc., erroneously named in the complaint as 'Vest First Processing Company. Respondent' s offce and principal place of business is located at 319 West First Street, South Boston 27, Massachusetts. 2. Respondent Harry Carr is engaged in the commjssion garnetting business, processing material belonging to others into cottonbatting-like material for further processing into cloth. In this NICHOLS & CO" INC. , ET AL. 115 113 Findings process, respondent's customers ship their material to him and provide labels which he affxes to the product aHer his processing operations are concluded. Thereafter, pursuant to the instructions or his customers, respondent ships the processed material to such mills as his customers designate.

3. Respondent is paid a stipulated price for his servces. He does not purchase the st.ock 'Which he processes nor docs he sen same. 4. Respondent is engaged in the manufacture of wool products within the meaning of the 1V 001 Products Labeling Act of 1939. Subsequent to the effective date of that Act and more particularly since January 11 , 1058, respondent has manufactured for introduction into commerce and has transported, distributed, delivered for shipment and shipped in commerce, as "commerce" is defined in that Act, such wool product.

5. The ,vool products concerning which evidence was adduced at the hearing consists of two lots garnetted by the respondent upon the instructions of his customer, Nichols & Company, Inc. These lots 'were prepared for shipment and shipped by the respondent from his place of business in Boston, Massachusetts, to Lebanon Mils in Lebanon, New I-Iam pshire.

6. The respondent, in the course and conduct of his business, was and is in competition in commerce with other individuals, firms and corpora,tions likewise engaged in the manufacture of wool products. 7. Certain of said \vool products garnetted and introduced into commerce by the respondent were misbranded by respondent within the intent "nd meaning of Section 4 (a) (1) of the Wool Products Labeling Act in that they were falsely and deceptively labeled or tagged with respect to the character and amount of the constituent fibers contained therein.

Labels or tags attached by respondent to the lots of wool products concerning which evidence was adduced in this proceeding, showed the fiber content to be "80% Camel Hair, 20% 'Wool." Tests of these lots m"ele both by a Commission expert and another showed the camel hair content by weight to be bet.ween 10 a.nd 2-1 percent and the wool content to be between 75 and 80 percent. Said products conta.ined, in part, reprocessed wool as de,fined in the ,V 001 Products LfLbelillg Act.

8. Certain of said wool products manufact.ured and shipped by respondent were misbranded in that they did not have affxed to them 11 stamp, ta,g: label or other means of jdentificat10n showing each fiber other than ,yool contained in said wool stock in quantities of 5 percent or more by weight as required under the provisions of Section 4(a) (2) of the Wool Products Labeling Act. A1I thirteen .... ,,,,,, 116 FEDERAL TRADE CO:VIMISSION DECISIONS Opinion 58 F.

samples of one of the lots used by respondent in manufacturing the wool product which he shipped in commerce were tested by a Commission expert and found to contain more than 5 percent of non-wool fibers A - 84% Wool, 16% non-wool fibers B - 75% " , 25% C - 860/0 14% Mohair D - 52% 48% non-wool fibers E - 74% 26% )Iohair F - 80% 20% G - 91% .. , 9% H - 53% 47% Camel hair I - 93% noll-,yool fibers J - 98% CameJ hair K - 20/0 98% L - 42% 58% M - 85% .. , 15% non-wool fibers OPINION Harry Carr, the respondent in this proceeding, is a processor of wool stocks title to which remains in the name of his customer. The end result of his operations is not a finished product but a semifinished product which he sends to a wool mill designated by his customer for further finishing into cloth. There is no denial, however that the respondent performs some work upon the material and that it leaves his hands in a different state or condition from that in which it arrived. The Vool Products Labeling Act of 19:,9 makes unlawful and an unfa.ir method of competition as well as an unfair or deceptive act or prac6ce the "introduction, or manufacture for introduction, or manufacture for introduct.ion, into commerce, or the sale, transport,ahon, or distribution, in commerce, of any wool product which is misbranded. . . " It should be noted that the various acts are st.ated in the disjunctive. Coverage does not depend upon a sale but may be found merely upon transportation in commerce of the misbranded product. Respondent's delivery of the product to a trucker for interstate delivery is suffcient to const.itute introduction" into c.commerce. In fact, the Act, in apparent recognition of that comprehensive coverage, specifically exempts common carriers or contract carriers. The Act, however, contains no exception or exemption for the type of ,york respondent engages in other than the guaranty provisions of Section 9. There is nothing in the record however, indicating any receipt by respondent of a Section guaranty from his supplier.

KICHOLS & co. , IXC. , ET AL. 117 113 Opinion Even ,vithout such introduction into commerce, Mr. Carr s activities would be covered under the Act as a manufacturer. See United Felt Co.. et 01. FTC D. 7132, October 21 , 1959, where the Commission stated:

Respondent United :H'elt Co. is engaged in the manufadure of wool batting by garnettillg it from raw material supplied from sources in Illnois. . respondents han' maJlufaC'tured from introduction into commerce. . . . To the same effect see also EolgeT Brothers FTC D. 5378 August , 1946.

Since the respondent has admitten that he plrced the labels upon the product shipped out of the state, the oniy issue to be decided is whether the product wa.s misbranned ,yit.hin the lneaning of the Act or t.he Hnles and Regulations thereunder. In this respect, the f'.idence is quite clear and, for all pmctical purposes, undisputed. The label specified the fiber content to be 80 percent camel hair and 20 pen' ent. ,1'001 and made no mention of he presence of reprocessed wool. Tests made upon a number of samples taken from the ,'1001 stock in question before processing shmyed the presence of woven material. Under the Wool Products Labeling Act the term "reprocessed ,V oof' means the resulting fiber ,vhen wool has been wO\or felted into a wool product which, without having been eyer utilized in any ,va.y by the ultimate consumer, consequently has been made into a fibrous state. By definition, therefore, it would a.appear that the lots in question \ycre made, at least in part, from reprocessed wool. The same is true of the camel hair cJips found in the raw lnaterial of the lots in quest.ion. Failure to indicate the reprocessed wool origin or the lots in Cluestion, therefore, constitutes a misbranding.

In addition, tests made upon the lots after shipment from respondent' s plant indicate that they did not contain anything near 80 percent campI ha.i1' a.s specified on the labels. Finally, the labels ma(le no mention of t.he presence of non-wool fibers. Tests ma.de on a number of samples or ODe or the lots used by respondent in mannfRct.uring the ,\001 product ,which he shipped in comnw.lce, shmved the presence of substantial amounts or non-wool fibers ranging from 7 t.o 98 pe.recent.

one of these expert findings were disputed by the respondent who asserted simply that he knew nothing about the fiber content. Respondent' s defense that he merely labeled as instructed by his customers has already been considered by the Commission and deemed without merit. See il10dem Rug Company, Inc. FTC D. 7373 November 11 , 1959.

118 FEDERAL TRADE CO:\MISSION DECISIONS Opinion 158 F. Accordingly, upon due consideration of the foregoing, I make the following CONCLUSIONS 1. Respondent has misbranded wool products within the intent of meaning of Section 4(a) (1) and 4(a) (2) of the Wool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder.

2. The acts and practices of the respondent, all to the prejudice and injury of t.he public and of respondent' s competition, constitutes unfair and deceptive acts and practices and unfair methods of compet.it.ion in commerce within the intent and meaning of the Federal Trade Commission Act.

3. The Federal Trade Commission has jurisdiction of all of the respondent.' s acts and practices which have been hereinabove found to be violative of the ''\001 Products Labeling Act of 1939 and the Federal Trade Commission Aet.

ORDER It;8 ordered That respondent. Harry Carr, trading and doing business as Harry Carr and as "\Vest First Processing Inc., erroneously named in the complaint as "rest First Processing Company, or under any ot.her name, and respondent's representatives, agents, and , inemployees, directly or through any corporate or other device connection with the introduction or manufacture for introduction into commerce, or the offering for sale, sale, transportation, or distri. bution in commerce, as ncommcrce" is defined in the Federal Trade Commission Act and the ,V 001 Products Labeling Act of 1939, of woolen stocks or other ': wool produc.t. " as such products are defined in and subject to said 'Wool Products Labeling Act, do forthwith cease and desist from misbranding such products by: 1. Falsely or deceptive)y stamping, tagging, labeling, or otherwise falsely identifying such products as to the character or amount or the constituent. fibers contained therein; 2. Failing to affx labels to such products showing each element of information required to be disclosed by Section 4(a) (2) of the ,Vool Products Labeling Act of 1939.

OPINION OF THE COM nSSION By AXDERSON Com,missioner:

The complaint in this matter charges respondents, Nichols & Company, Inc., a corporation, Arthur O. IITeUman, Arthur O. ,Vellman Jr., and John H. Nichols, Jr. (erroneously named in the complaint NICHOLS & CO. , INC., ET AL. 119 113 Opinion as John N. Nichols, Jr. ), individually and as offcers of said corporation, Sumner E. Burdette, an employee of said corporate respondent and Harry Carr, an individual trading and doing business as I-Iarry Carr and as 1Vest First Processing, Inc. (erroneously named in the complaint as west First Processing Company), with misbranding wool products in violation of the 'V 001 Products Labeling Act and the Rules and Regulations promulgated thereunder. The complaint also charges respondents, except Harry Carr, with falsely invoicing woolen stocks in violation of the Federal Trade Commission Act. The corporate respondent, Nichols & Company, Inc. , its offcers and employee; named above, acting under 25 of the Commission Rules of Practice, executed an agreement containing a consent order to cease and desist., and an initial decision as to these respondents was filed by the hearing examiner on February 5, 1960, and became the decision of the Commission on "farch 25, 1960. Respondent Harry Carr, hereinafter referred to as respondent, contested the charges against him, and the hearing examiner, in a separate init.ial decision, held that the allegations of the complaint with respect to this respondent were sustained by the evidence and included an order to cease and desist. The matter is now before the Commission OIl the appeal of respondent from this decision. The record discloses that respondent is engaged in the commission garnetting business. 'V 001 stocks owned by other firms are sent respondent for garnctting, a process whereby the material is reduced into a fibrous state. After this operation has been performed respondent labels the garnetted material with tags supplied by the owner and thereaft.er ships it pursuant to the owner s instructions. Certain wool stocks owned by Nichols & Company, Inc. , were garnetted by respondent, labeled by him as "80% camel hair, 20% wool", and shipped hy him from his place of business in Boston Massachusetts, to a woolen mil in Lebanon, K ew Hampshire. The complaint alleges and the hearing examiner found that the garnetted material was misbranded in violation of Section 4 (a) (1) of the Wool Products Labeling Act in that it was falsely and deceptively labeled with respect to the character and amount of the constituent fibers contained therein, and that it was further misbranded in that it Was not stamped, tagged or labeled as required under the provisions of Section 4(a) (2) of the Act.

Tests of two lots of the garnetted material conducted independently by two experts disclosed the camel hair content to be between 19% and 24% and the other wool content to be between 75% and 80%. Although respondent concedes that the tags attached to the garnetted material misstated the percentage of camel hair, he contends that , \\ Opinion G8 F.

the evidence does not support t.he hearing examiner s finding that t.his material contained reprocessed wool. "Reprocessed wool" is defined in the Act as "the resin1ting fiber when wool has been woven or felted into a wool product 1,vhieh, without ever having been utilized in any way by the ult.imate consumer, snbscqlle,ntly has been mrLde into a fibrous state." Respondent argues that t.he only evidence support the finding that the materia.l in question contained reprocessed wool arc samples of woven cloth taken by the Commission investigator from hoppers containing stock being processed by respondent. lie attempts to expbin the presence of these woven clips by stating that. a clip sorter may have made fl, misthrow allowing a few pieces of "1'oven llwtcl'ial t.o get into the wool stock; that these pieces "would have been thrown out. by the shredner and, at the end of a lot Quld have been recovered from the floor and placed into the hoppers so that an stock received from the customer could be returned. 1,Ve do not. believe that this is what. occurreel, however. The record shOlYS that the investigator obtained the woven clips from containers that. receive the wool stock from a picking machine and feed it into the garnetting machine. loreover, according to the investigfLtor s testimony, wit.h which respondent agreed, the samples were obtained, not at the end of a lot, but while a lot was "going through t.he machinery. " In view of this evidence, it appears that woven material "vas being processed by respondent. "\Vc agree with respondent, hol)'e1'er, tlult there is no record support for the finding in the initial decision that the material which he gametted contained more than 5% of non-wool fibers. It appears that the test report relied upon by the hearing examiner in making this finding classifies mohair and camel hail' as " non-'\"ool fibers. Such classification is obviolls1y incorrect since bot.h of these fibers are "wool" as that word is defined in Section :2 of the Act. The initial de,cision will be modified to correct this finding. The aforementioned finding was the sole basis for the conclusion in the initial c1eeision that respondent had misbranded wool products within the meaning of Section 4(a) (2). Although this finding was in error, there is other evidence of record to support such a conclusion. As stat-ed above, certain of t.he wool products mRnufactnred by respondent contained reprocessed wool. The percentage by weight of this fiber was not disclosed on labels affxed to such products, nor did such labels show the true percentage by weight of the wool eontent, as dist.inguished from the reprocessed wool content, of such products. Consequently, products manufactured and shipped in commerce by respondent did not have affxed to them labels or other means of ident.ification setting forth information required to be disclosed by Section 4 (a) (2) of the Act.

NICHOLS & CO.. I:\C., ET AL. 121 113 Order It is also contended by respondent that the hearing examiner erred in concluding that he ma.nufactures \vool products. Respondent' s argument seems t.o be that since the garnettcd material is not a completely manufactured article such as a blanket, the operation which he performs is not. a manufacturing process and the product l'csul6ng from this operation is not. a wool product. This argument must be rejected. See United Felt Oompany, et al. Docket 1'0. 7132 (11)59). The garnetting operation performed by respondent is a stage in the process of converting wool stocks into cloth. As pointed out by the Supreme Court in Tide Water Oil Oompany v. United States 171 '(. 8. 210 (181)8), "Haw materials may be and often are subjected to successive processes of nmnufacture, each one of which is complete in itself, but several of \\'which may be required to make the final product." The Court further stated that "The material of which each manufacture is formed . . . is not necessarily the original raw material. . . but the product or a prior manufacture; the finished product of one manufacture thus becoming the material of the next in rank." The gflrnett in this case is t.he finished product of the manufacturing process performed by respondent and is in turn the raw material to be used by the woolen mill in making clot.h. Since it contains wool and repl'oeessecl ",yool, it is a "wool product" within the meaning of that term.

",Ve must also reject respondent's argument that he ",VHS not required to ailx labels to the garnetts which he processed. As found by the hearing examiner, respondent manufactured \vool products for introduction into commerce and shipped such products in commerce. lie , therefore, subject to t.he rcgnirements of the Act. In the :i\atter of Bolger Brothers Docket 1'0. 5378 (11)16). Respondent' s final exception t.o the initial decision is that there is no public interest in a proceeding against it person who merely acts as a bailee of \"001 products owned by another. lie argues in this connection t,hat even though he is technically required to com. ply with the provisions of the IV ooj Products Labeling Act, the Act should be construed by the Commission so as to exe,mpt him from this requirement. This argument, hOiyeVer, goes to the wisdom of the legislation and should be direct.ed to Congress and not t.he Commission. ",Ve are charged ""ith administering the Act as written and are without authority t.o create an exemption t.therefrom which Congress did not see fit to make.

To the extent indicated herein the appeal of respondent is granted; in aU other respects it is denied. The initial decision, modified to conform with this opinion, wi1 be adopted as the decision of the Commission.

122 FEDERAL TRADE CQMMISSIO"f DECISIO"fS Syllabus 58 F.

FINAL ORDER This matter having been heard by the Commission upon the appeal of respondent flarry Carr from the hearing examiner s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and the Commission having rendered its decision granting in part and denying in part the aforementioned appeal and rJirecting modification of the initial decision: It is ordered That the initial decision be modified by substituting for Paragraph 8 the following:

8. Certain of said wool products manufactured and shipped by respondent contained quantities of reprocessed wool. Such products were misbranded in that they did not have affxed to them a stamp, tag, la,bel or other means of identification showing the percentage of the total fiber weight of the wool product of wool and reprocessed wool as required under the provisions of Section 4(a) (2) of the "\V 001 Products Labeling Act.

It is further ordej' That the initial decision be further modified by striking therefrom the paragraph on page 5 beginning with the words "Finally, t.he labels made no mention " and ending with the words "ranging from 7 to 08 percent.:' It i, fllrtheT O1ylered That the initial decision as modified hereby , and it hereby is, adopt.ed as the decision of the Commission. It is further ordered That respondent Harry Carr 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.