John J. McKune & Sons Co., Inc.

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IN THE l\.fatter OF JOI-IN J. :McKUNE & SONS CO. INC., ET AL. CONSENT ORDER , ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE: FEDERAL TRADE COl\IMISSION ACT Docket C-3-1. Complaint, Nov. 30, 1961-Decision, Nov. 30 1961 Consent order requiring Chicago sellers of vending machines and supplies therefor to cease representing falsely in circulars, form letters etc., that they would obtain profitable locations for machines bought from them, give purchasers exclusive territories, and repurchase the machines on terms favorable to buyers; exaggerating profits earned by the machines; substituting a different type and quality of machine from that. displayed; and, through the use of the words "Factory" and "Manufacturers " representing falsely that they manufactured and designed theirmachines.

COMPLAINT 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 John J. lVlcI(une Sons Co., Inc., a corporation, and John J. l\.fcKune, individually and as an officer of said corporation, a.nd Philip A. Small and John t l\1cKune, individually and as former partners doing business as U.S.. Commercial Products Company, hereinafter referred to as respondents, have violated the provisions of said Act, a.nd 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:

PAR. 1. Respondent John J. :McKune & Sons Co., Inc. is a corporation organized, existing and doing business under and by virtueof the laws of the State of Illinois, with its office and principal place. of business located at 7435 North ,Vestern Avenue. Chicago, Illinois. Individual respondent tJohn J. l\lci\:une is an officer of said corporate respondent. He formulates, directs and controls the acts and' practices of the corporate respondent, including the acts and practices hereinafter set forth. Ills address is the same as that of the' corporate respondent.

JOHN J. McKUNE & SONS CO. , INC. , ET AL. 1221 1220 Complaint Respondent Philip A. Small and the aforesaid John r. It'lcK une were formerly copartners, trading and doing business as U. S. Commercial Products Company, with their office and principal place of business the same as that of the corporate respondent. Theil' partnership was dissolved and the asse.ts were transferred to the corporate respondent. The present address of respondent Philip A Small is 505 North \Vaukegan Road, Lake Forest, Illinois. The corporate respondent and the aforesaid individuals cooperated and acted together in formulating, directing and controlling the acts and practices hereinafter set forth.

PAR. 2. The corporate respondent and individual respondent J olm r. l\lcKune are now, and for some time last past have been, engaged in the advertising, sale and distribution of vending machines and vending machine supplies.

Respondents Philip A. Small and the said John r. l\lcKune trading as U. S. Commercial Products Company, for a long time prior to dissolution and transfer of the assets to the corporate respondent were engaged in the same type of business. PAR. 3. In the course and conduct of their business, respondents T~OW cause, and for some time last past have caused, said prodnet.s when sold, to be transpoli.ec1 from their place of business in the State of Illinois to purchasers thereof located in various other St:Ltes of the United St.Mes. Respondents maintain, and at aU 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..

PAR. 4. Respondents solicit persons to whom they sell their products by sending ac1veli.isements in the form of flyers, circulars, brochures and form letters. Enclosed "\with said advertisements is a self-addressed post card to be filled out and returned to respondents by the prospective purchasers if they are interested in respondents products. The names of persons responding to said advertisements were then given by respondents to the,ir sales representatives or agents who ealled upon such persons and solicited the. purchase of respondents' prod ucts.

PAn. 5. Through the use of the statements and representations n,appearing in their advertisements, sales material and purchase contracts, and by oral statements made their sales representatives or agents, respondents have represented, and are nO"\" representing, directly or indirectly, that:

1. R,respondents, or their sales repesenta.tives or agents, will obtain satisfactory and profitable locations for vending machines purchased :from them.

; , 1222 FEDERAL TRADE COM~nSSION DECISIONS Complain 50 F.

2. A person can reasonably expect to earn a net profit of $196 to $300 per machine a year on certain of their "ending machines and a specified net profit on other types of vending machines. 3. Purchasers of machines will be given exelusiye. territory within which to lecate their machines.

4. Respondents ,,-ill repurchase the vending machine f1' o111 tho purchase;:s, in the event they desire to sell the snme, at nen~: cost" or at a profit to the purchasers if oy, ned and operateel for it year or more.

5. The purchase and use of respondents' yenc1ing nlachines requires no selling upon the part of the purchaser. 6. Prospective purchasers "\will receive a ccrtnill type and quality vending machine.

7. They manufacture and design their yeneling' machines, through the use of the words "Factory " and "~lanufacturers and Designers of Postage Stamp l\Iachines P :\R. 6. The aforesaid statements and represenUitions are false misleading and deceptive. In trut h and in fact: 1. Respondents, or their representatives or agents, ~eldom, if e"'\'er obtain satisfactory and profitable locations for the vending machines purchased from them.

2. The net profit of $196 to $300 per machine a year on certain ve,nding machines is greatly in excess of the profit that ,rill accrue in a great majority of the cases: and the net profits specified on other types of their vending maehines are greatly exaggerated in most instances.

3. Purchasers of respondents' machines are not given exclusive territory in ,,-which their machines may be located but, on the eontrary, respondents sell their machines to anyone willing and able to purchase, for placement whereve.r the purchaser may desire. 4. Respondents do not repurchase for any amount the maehines sold by them, regardless of the length of time the machines are owned or operated.

5. Persons purc.hasing said products were required to engage in extensive selling and soliciting in order to establish, operate and maintain locations for said products.

6. The vending machines received by purchflsers are of a different type and quality than those actually displayed to prospective pur- . chasers.

7. Respondents do not manufacture or design the vending machines sold by them.

PAIL 7. In the course and conduct of their business, and at all times mentioned here - respondents have been in substantial com- JOHN J. McKUNE & SONS CO. INC. ET AL. J 223 1220 Decision petition, in commerce, with corporations, firms and individuals engaged in the sale of the same 01' similar products. PAR. 8. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations were, and are, true and into the purchase of substantial quantities or respondents' products by reason of such erroneous and mistaken belief.

PAR. 9. The aforesaid acts and practices of respondents, as herein alleged, v:ere, and are, all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute unfair methods of competition in commerce and deceptive acts and practices in commerce in violation of Section 5 (a) (1) of the Federal Trade Commission Act.

DECISIO~ AND ORDER The Commission having heretofore determined to issue its complaint charging the respondents named in the caption hereof with violation of the Federal Trade Commission Act, and the respondents having been served with notice of said determination and with a copy of the complaint the Commission intended to issue, together with a proposed form of order; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the com- Jlaint, a statement that th~ signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as set forth in the complaint, and waivers and provisions as required by the Commission s rules; and The Commission, having considered the agreement, hereby accepts same, issues its complaint in the form contemplated by said agreement, makes the follmying jurisdictional findings, and enters the follmying order:

1. Respondent I ohn .J. :McKune & Sons Co., Ine., is a corporation organized, E.~existing and doing business under and by virtue of the bws of the State of Illinois, v:ith its ofliee and principal place of business located at 7435 North ,Vestern A venne, in the City of Chicago, State of Illinois. Respondent John J. :McKnne is an officer of said corporation and his address is the same as that of such corporate respondent. Respondent Philip A. Small Ilnd respondent John J. l\fcKune were formerly partners trading and doing business as U.S. Commercial Products Company, which partnership "as dissolved. During such Order 59 F.

partnership respondent John J. :.\1cICune was known as John E. l\fc- Kune. The address of respondent Philip ..A... Small is 595 North \V aukegan Road Lake Forest, Illinois.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondents John J. l\Ic.Kune & Sons Co., Inc. a corporation, and its officers, John J. l\fcI~une, individually and as an office.er of said corporation, and Philip A. Small and John J. l\fc- Kune, individually and as former partners trading and doing business under the name of U.S. Commercial Products Company, or under any other name or names, and their agents, representatives and employees, directly or through any corporate or other device in connection with the offering for sale, sale or distribution of vending machine.s and vending machines supplies, or any Dther products, in commerce, as "c.ommeree:' is defined in the Federal Trade Commission Aet, do forthwith cease and desist from:

1. Representing, directly or by implication, that: (a) Respondents or their sales representatives will obtain or assist iI1 obtaining satisfactory or profitable locations for products purchased from them.

(b) The earnings or profits derived from the purchase of respondents' products and engaging in business will be in any amount in excess of the earnings or profits usually and customarily earned in the operation of their products.

(c) Respondents grant exclusive territory in which the products purchased from them may be operated or located. (d) Respondents will repurchase the products sold by them. ( e) Selling or soliciting is not required to establish, operate or maintain a route of said products.

(f) Respondents are the manufacturers or designers of any products sold by them, unless and until they own, operate or directly and absolutely control the manufacturing plant or factory where the products are manufactured or designed.

2. Substituting an inferior type, grade or quality product for the product disphyed and represented as the product being sold. to the purchaser.

I 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. PACIFIC COAST FUR CO. ET AL. 1225 Complaint