Audiographic Potomac Corporation

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IN THE l\L~TTER OF AUDIOGRAPHIC POTOl\IAC CORPORATION ET AL.

CONSE~T ORDER, ETC., IN REGARD TO TI-lE ALLEGED VIOLATION OF THE FEDElL\L TRADE CO:;\OIISSION ACT Docket 81,01. C'OlnlJlaint, May 18, 1.961-Decision, Nov. 1961 Consent order requiring Silver Spring, ::\1d., sellers of fire alarm systems cea!"~ representing their salesmen as " Safety Counselors" and sales talks as '"Fire Education Presentations; informil1g prospects falsely that they were specially sel~ted to participnte in a "Consumer Referral Plan " and could earn a substantial part of the cost by submitting names of other prospects; and failing to fill in contracts with interest or carrying charges and to reveal to purchasers that the contracts would be discounted with a finance company or bank.

COl\IrLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Audiographic Potomac Corporation, a corporation, and Lena Della Fera, Raymond 111. Padgett, Constance D. Padgett., and :Miltol1 Gordon, individually and as of heel's of said c.orporatiolJ, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest., hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Audiographic Potomac Corporation is a corporation organized, existing and doing business under and by virtue of the la,,-s of the State of :Maryland, with its office and principal place of~ business located at 946 Sligo A venue, Silyer Spring, :Mary land.

693-490--64---- Complaint 59 F.

Respondents Lena Della Fera, R.a.ymond :1\1. Padgett, Constance D. Padgett, and :ThIilton Gordan are inc1ividuals and are officers of the corporate respondent.. They formulate, direct and control the policies, acts and practices 'Of the said corporate respondent and their address is the same as that of the corporate respondent. PAn. 2. H.espo:nclents are naw, and for some time last past have been engaged in the sale and distribution 'Of fire alarm systems. In the course and conduct of their business respondents now cause and helve caused, the said fire alarm systems, when sold, to be transported Jrom their place of business in the State of :J\lary land to purc.hf\~,ers thereof located in other States 'Of the United States and in the District of Columbia. Respondents maintain, and at all times mentioned herein have maintained, a course 'Of trade in said fire ah1.rm systems in commerce, as "commerce.e :' is defined ill the Federal Trade Commission Act. Respondents' volume of business in said commerce is and has been substantial. PAn. 3. In the course and conclu~t of their business, as aforesaid respondents are nmy, and have been, in substantial competition with other corporations, firms and individuals likewise engaged in the business of selling and distributing fire alarm systems in commerce betYfeen and among the various States 'Of the United States. m. 4. In the course and conduct 'Of their business as aforesaid respondents have engaged in the follo"\ving acts and practices: 1. Represented their salesmen as being " Safety Counselors. 2. Represented their salesmen s sales talk as being a "Fire Education Presentation.

3. Induced the sale of their fire alarm system by informing prospe.cti ve purchasers that they have been specially selected to participate in respondents C'Onsumer Referral Plan, by which plan purchasers ern reasonably expect to earn a substantial portion of the purchase price 'Of the said fire alarm system by submitting to respondents the names of other prospective purchasers. 4. Entering into contracts 'Or "Purchase Orders" with purchasers 'Of their fire alarm system which are filled in ,,-ith the purchase price 'Of the system but "hieh do not set forth the amount or rate of interest 'Or carrying charges the purchaser must pay. In some in;. stances respondents' salesmen have led purchasers to believe that they will not be required to pay any interest or carrying charges even th'OuQ"h the Dul'Chnse price is to be, paid over a number of months. L~ 5. Failing to reTeal to purchasers that their contract or nate will be discounted with a. finance company 'Or bank. \H. 5. The, aJores~'.ic1 acts and pn~etices 'Of respondents are un-. fail'and dece )tive in the followin9' resnect.s: L) AUDIOGRAPHIC POTOMAC CORP. ET Ah 1203 1201 Decision 1. By referring to their salesmen as " Safety Counselors" and to their sales talks as "Fire Education Presentations:' respondents falsely represent that. sf\..id "Safety Counselors" are not salesmen. 2. Purchasers to whom resnonc1ents "Consumer R,eferral Plan is offered are not specially selecteel. Participation in said "Plan is offered to a vast majority of respondents' customers. 3. Purc.hasers of respondents' fire alarm systems cannot reasonably expect to earn a substantial portion of the purchase price thereof by submitting the names of prospective purchasers to respondents pursuant to the said "Consumer Referral Plan 4. Purchasers of respondents' fire alarm system who elect to pay for it over a period of months are required to pay interest or carrying charges, knowledge of ,,-which \\ould have the tendency and capncity to keep them from entering into the contracts which they sign.

. 5. In the absence of being so advised purc.hasers of respondents fire alarm system do not expect their contracts or notes to be discounted ,with a finance company or bank, they expect to make their payments to respondents, and knowledge thereof would have the tendency and capacity to keep them from enteriilg into such contra ct s.

PAR. 6. The use by respondents of the unfair and deceptive acts and practic.es as above set forth has hftd, and now has, the tendency and c.ftpacity to mislead and dec.cite a substantial portion of the purchasing public, and as a result. thereof to purchase substantial quantities of respondents' fire alarm systems. Trade has thereby been unfairly diverted to respondents from their competitors, in consequence of ,,-high substantial injury hfls been, and is being done, by respondents to their competitors in commerce. Pooh:. 7. The aforesaid ilcts and practices of respondents, as herein alleged, are all to the. prejufIiee and injury of the public and to respondents' . competitors ami constitute unfair and deceptive acts and practices in commerce anfI unfair methods of competition in commerce ,,-within the intent and I;leaning of the Federal Trade Commis:sion Act.

DECISIOX .\X!) onder:

This matter having come on to be heard by the Commission upon record c.onsiE':.ting of the Commission s complaint charging the 1'0sponc1enj' s named in tlle en ption hereof with violation of the Federal Trade Commission ~~\ct. and an agTeementc. bv and between re~molldents and ('011118('1 supporting the complaint. ",-which agreement COlltains an orc10.:' to cea~:e and desist, an admission by the respondents of all the, jllrisd.ietionnl filcts alleged in the eomp1nint1 H. statcmE'm Order 59 F.

that the signing of said agreement is for settlement purposes only and does not constitute an arunission by respondents that they have violated the law as alleged in the complaint, and waivers and provisions as required by the Commission s rules, and further provides for the dismissal of the complaint as to :Mi1tol1 Gordon, individually and as an office-r of the corporate respondent; and The Commission having considered the agreement and order contained therein and being of the opinion that the agreement provides an adequate basis for appropriate disposition of the proceeding, the agreement is hereby accepted, the following jurisdictional fuld- :ings are made, and the following order is entered: 1. R.respondent Audiographic Potomac Corporation is a corporation organized, existing and doing business under and by virtue the laws of the State of :Mary land, with its office and principal place of business located at 946 Sligo A venue, Silver Spring, ~1:ary land. Individual respondents Lena Della Fern. Raymond 1\.1:. Padgett and Constance D. Padgett are officers of the corporate respondent ~md their address is the same as that of the corporate respondent. 2. The Federal Tra.de Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

OIWER It is ordel' That respondents Audiographic Potomac Corporation, a corporation, and its officers, and Lena Della Fera, Raymond ~f. Padgett and Constance D. Padgett, individually and as officers cf said corporation, and respondents' representatives, agents and E'mployees, directly or through any corporate or other device, in connection ,,'ith the offering for sale, sale or distribution of fire detection or fire alarm systems, or any other merchandise, in commerce, as "commerce:' is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing in any manner that salesmen are anything other than salesmen.

2. Representing that purchasers or prospectiye purchasers have been especially selected l~or any purpose. 3. Representing that purchasers can earn any amount of money, by the submission of names of prospective pure-hasers or otherwise unless said amount of money is based upon the average amount paid by respondents to past purchasers under the sa.me arrangement. 4. Representing, by :failure to reveal or otherwise, that interest or carrying charges win not be added to a purchase price; or failing to re~eal the amoupt of such interest or carrying charge. , GRABLER MFG. CO. , INC. 1205 1201 Complaint 5. Failing to reveal that contracts or promissory notes will be discounted or that purchasers will make their payments to others than respondents.

I t is further mode'red That the complaint, insofar as it relates to respondent J\t1ilton Gordon, be, and the same hereby is, dismissed. t is further ordered That the respondents herein 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 this order.