Pati-Port, Inc.

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IN THE MATTER OP PATI-PORT, INC., ET AL.

ORDER: ETC. , IX REGARD TO 'rIIE ALLEGED VIOLATION 01" THE FEDERAL TRADE C01lD:HSSIOS ACT Docket 76G5. Camplai,n!. , Nov. 24, 1959-Decision, Jan. 4, 1962 Order requiring Baltimore installers of patios and carports to cease using bait advertisements to get leads to prospects whom they then urged and frequently persuaded to buy much higher priced items; and representing falsely that the 11usual price of their carport or patio was $249 but they were offering it at a special low price of $77, that the merchandise was guaranteed, and that it was "all aluminum 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 Puti-Port, Inc" , a corporation, and Al B. vI' olf, individually and as an offcer of said corporation, hereinafter referred to as respondents, have violated the FEDE-RAL TRADE COM.vlISSION DECISIONS Complaint 60 F.

provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public inte.rest, hereby issues its complaint, stating its charges in that re,speet as follows: PARAGK\PH 1. Respondent Pati-Port, Inc., is a corporation organized, existing and doing business under and by virtue of the 1a \vs of the State of 1\hryland, with its offce and principal place of business located at 3110 Fleet Street, in the city of Baltimore, State of Maryland. Respondent Al B. IV olf is an offcer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His address is 4 Carlton Street, Floral Park, N. Y. PAR. 2. Hespondents are now, and for some time last past have been engaged in the advertising, offering for sale., sale and distribution of a.among other things, carports or patios to the public. PAR. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said products, when sold, to be shipped from their place of business in the State of :l1maryland to purchasers thereof located in various other states of the United States and in the District of Columbia, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said product in commerce, as "commerce" is deiined in the Federal Trade Commission Act.

PAR. 4. In the course and conduct of their business, and for the purpose of inducing the sale of their products, respondents have made certain statements and representations "with respect thereto in newspapers of general circulation and through other advertising medias. By and through the use of such statements and representations, and through oral statements made' by their :mlesmcn, respondents have represented, directly or by implication:

(1) That they arc making a bona fide offer to sell carports or patios for the full price of $77.00;

(2) That respondents' usual and regular retail selling price of the carport or patio advertised is $249.00 but is offered for sale at a special low price of $7700;

(3) That persons who allowed tho carport or patio installed by respondents to be used for model home demonstration purposes in selling to others, "\voulel receive a reduction in price; (4) That said carport or patio is unconditionally guaranteed; (5) That the carport or patio referred to in subparagraph (1) above was "all aluminum PATI-PORT , INC. , ET AL.

Complaint (6) Through the use of pictures in advertisements, the carport or patio referred to in subparagraph (1) includes a supporting fotmdation wall and a completed PAR. 5. The aforesaid representations are false, misleading and de- floor. ceptive. In truth and in fact:

(1) The offer to sell carports or patios for the full price of 877. was not a genuine or bona fide offer but was made for the purpose of obtaining leads and information as to persons interested in the pur chase of said merchandise. After obtaining such leads through response of such advertisements and calling upon such persons, respondents and their salesmen made no enort to sell the ca.rport or patio at the advertised price, but instead, disparaged such merchandise in such a manner as to discourage its purchase and attempted to, and frequently did, sell much higher priced carports or patios. (2) The carport or patio advertised for sale at $77.00 is not a special sale price reduced from the usual and regular retail price of $249.00. In fact, said merchandise offered is advertised regularly at the price of $77.00. This practice is used in conjunction ,with the charge set forth in subparag:ra ph (1) above.

(3) Respondents did not intend to use, nor did they use, the home of any of their purchasers for demonstration purposes, this statement being used only as a means to induce resistant purchasers into the buying of said merchandise under the mistaken impression that they 'Were receiving some sort of a special price beca,use of their 'Willingness to allow their homes to be used for this purpose. (4) R,espandents' guarantee is not unconditional. It is limited in certain respects and this limitation is not disclosed to the purchaser. ( 5) The carport and patio referred to in subparagraph (5) of paragraph 4 above is not all-aluminum but instead has ,,' ooden supporting rafters and ,yooden supporting posts.

(6) The carport or patio depicted in the advertisement and offered for sale at 877.00 does not include a supporting foundation wall or a floor.

PAR. 6. In the course and conduct of their business at all times mentioned herein, the respondents have been in substantial competition in commerce with corporations, firms and individuals engaged in the sale of merchandise of the same general kind and nature as that sold by respondents.

PAR. 7. The use by respondents of the aforesaid false, misleading and deceptive st.atements, representations and practices has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mista,ken belief that. such state- 719-603 (j4-- FEDERAL TRADE COMMISSIOK DECISIONS Initial Decision 60 F.

ment.s and representations were, and are, true and into the purchase of substantial quantities of respondents' products by reason of said erroneous and mistaken belief. As 11 consequence thereof, substantial trade in commerce has been, and is being, unfairly diverted to respondents from their competitors and substantial injury has thereby been, and is being, clone to competiton in commerce. PAR. 8. The aforesaid acts and practices of respondents, as herein ,dlcged, were and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and nmv constitute, unfair and deceptive a,ds and pra,cticcs and unfair methods of competition, in commerce, "Within the intent a.nd meaning of the Federal Trade Commission Act.

lJh. Jiichael J. Vitale supporting the complaint. Mr. 1V alter G. H oTawitz for respondent. INITIALDECISTON BY ORN B. POIND1 XTJ:H, HEARING EXAl\IINER On November 24, 1959, the Federal Trade Commission issued a complaint charging thc respondents named in thc caption hereof with false and deceptive advertising in violation of the Federal Trade Commission Act. Hearings have been completed and proposed findings of fact, concbsions and order filed by counsel supporting the complaint. Proposed findings of fact, conclusions and order have not been fied by or on behalf of respondents. All findings of fact proposed by counsel supporting the complaint have been adopted with the exception of those proposed in subparagraph (6) of Proposed Findings Four and Fi VB. These proposed findings are not established by a preponderance of the evidence.

Upon the basis of the entire record, the undersigned I-Iearing Examiner makes the following findings of fact a.nd conclusions of law and issues the following order:

1. The respondent Pati-Port, Inc., is a corporation organized and doing business under the laws of the State of Maryland with its offce and princ.ipal place of business located at 3110 Fleet Street, Baltimore :.ld. The individual respondent Abraham B. VV olf, also known as Al B. 'W olf, is president of the respondent corporation and formulates directs and controls the acts and practices of said corporation, including those hereinafter found. His business address is 4 Carlton Street Floral Park, N.Y. His residence is 80 Carol Lane, New Rochelle 2. The respondents are now and for sometime last past have been engaged in the advertising, offering for sale, sale and distribution of among other things, carports and patios to the public. ,, PATI-PORT, INC., ET AL.

Initial Decision 3. In the course and conduct of their business, respondents cause and have caused their said products when sold to be shipped from their place of business in the State of Maryland to purchasers thereof located in various states of the United States and in the District of Columbia;. and maintain and at all times mentioned herein have maintained a substantial course of trade in carports and patios in commerce as "commerce" is defined in the Federal Trade Commission Act. 4. In the course and conduct of their business, and for the purpose of inducing the sale of their products, respondents have made certain statements and representations with respect thereto in newspa.pers of general circulation and through other advertising media, including oral statements by their salesmen. By and through their usc of such statements and representations, respondents have presented directly or by implication:

(1) That they are making a bona fide airel' to sell carports or patios for the price of $77 for any size up to eight feet by 20 feet, and with no additional charge for installation;

(2) That respondents' usual and regular retail sale price of the carports or patios advertised is $249 but are offered for sale at a special price of $77 ;

(3) That persons who would aJJow the carports or patios installed by respondents to be used for demonstration purposes in seJJing to others, would receive a reduction in price; (4) That said carports or patios were uneonditionaJJy guaranteed. (5) That tho carports or patios referred to in subparagraph (1) above ,were "all alwninum.

5. 'Vhereas, in truth and in fact:

(1) The offer to sell carports or patios for the fuJJ price of S77 as not a genuine a.nd bona fide offer but was made for the purpose of obtaining leads and information with respect to persons interesteel in the purchase of carports or patios. After obt.aining such Jeads through response to such advertisements and calling upon such persons, respondents and their salesmen made no e.fl'ort to sen the carport or pat.io at the advertised price of $77, but instead, disparaged such merchandise in such a manner as to discourage its purchase and attempted to, and frequently did, sell carports or pat.ios at. substantially higher prices t.han the advertised price of S77. Although the evidence discloses numerous sales of carports or patios at prices substantially in excess of the advertised price of $77, only one saJe at the advertised price of $77 is disclosed by the record and t.his sale was canceJcd before its consummation. Furthermore, the evidence does not show a sale at t.he advertised so-caJJed "regular" price of S249 but does show FEDERAL TRADE COMMIS'SIOK DECISIOKS Initial Decision 60 F.

sales at prices above and below said so-called "regular" price of $249. The evidence of record of actual sa,les of carports and patios by respondents do not establish a regular or standard price but sales were made. at various prices in excess of $130.

(2) The price of $77 advertised for said carports or patios is not a special sale price reduced from the usual and regular retail price of $240 but was frequently advertiscd for sale at the price of $77. (3) Respondents did not use nor did they intend to use the home of any of their customer purchasers for demonstration purposes, but used this statement and representa60n as a means to induce prospective customers to purchase respondents' merchandise under the mistaken belief that they were receiving some sort of special price by reason of their agreement to permit their homes to be used for demonstration of respondents' merchandise.

(4) Respondents' guarantee is not unconditional but is limited iu certain respects. Such limitation is not disclosed to thc purchaser. (5) The carports and patios referred to in subparagraph 5 of paragraph 4 above were not "all aluminum " but have wooden supporting rafters and wooden supporting posts at the corners and sides. 6. In the course and conduct of their business and at all tjmes mentioned herein, the respondents have been in substantial competition in commerce with corporations, firms and individuals engaged in the sale of merchandise of the same general kind a,nd nature as that sold by respondents.

7. The use by respondents of the false, misleading and deceptive statements, representations and practices herein found has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous a.nd mistaken belief that such statements and representations were, and are, true a,nd int.o the buying of substantial quantities of respondents' products by rea. son of said erroneous and mistaken belief. As a consequence thereof substan6al trade in commerce has been, and is being, unfairly diverted to respondents from their competitors and substantial injury has been and is being done to competition in commerce.

8. The individual respondent Abraham B. 'W olf, sometimes known as Al B. Wolf, denies that he controlled the activities of the respondent corporation or participated in the unlawful acts and practices found here-in and alleged in the complaint, and says that said acts and practices were committed under the direction of one Bernard 'Weissluan, an offcer of respondent Pati-Port, Inc., and one Charles Berman who succeedecll\fr. "\Veissman a,s director of sales for respondent cor poration. The individual respondent 'W olf was the first secretary PATI-PORT INC. ET AL.

Inital Decision of the respondent corporation and remained as secretary until he became president in November, 1958. The violations alleged in the conlplaint cover the period of time subsequent to the time when Bernard 'Weissman left the employ of the respondent corporation and after the respondent Abraham B. 'Wolf became president in 1958. Approximately one or two weeks before fr. 'Weissman severed his connection \with the respondent corporation in 1958, the individual respondent vVolf employed Mr. Charles Berman to replace Ml' ' Weissman, and J\ir. 1Veissman trained 2\11'. Berman in the nlCthod of operations of the respondent corporation, including advertising and sales promotion. Ir. Berman was made vice-president of the respondent corporation. when lr. vVeissman left the respondent corporation Mr. TV olf succeeded him as president and Ir, VV olf authorized :111'. Berman to handle advertising and sales of respondent corporation. :lit. Vi olf is an accountant by profession. Some of the other original stockholders of the respondent corporation were: Louis "\V olf, cousin of the individual respondent Abraham B. VV olf; Corinne VV olf, it cousin; Milton VV olf, brother; Sarah VV olf, wife of the individual respondent Abraham B. 'Wolf; Bernard vVeissman, formerly presi- (lent, and :i\yron C. GeJrod, who is under a Commission cease and desist order in Universal Educational Guild, Inc., et aI Docket 1\':0. 5938 (lD54), 51 FTC 452. 1\1'. vVolf countersigned most of the checks issued by the corporate respondent and periodically visited the corporate office.e in Baltimore for the purpose of examining its books and records. ::ir. 1Volf testiiied that the respondent corporation "as dissolved in JIay or June, 1959, but advertisements for the sale of carports rmd patios appeared in newspapers, including the IVashington Post as Jato as July 19, 1959 and checks were written and issued against corporate funds as Jato as December 1959. The complaint herein was issued under' elate of November 24 , 1959. These facts and eircumstances demonstrate that the individual l' esponclent Abraham B. VV olf was responsible for the activities and operations of the corporation and its employees after he became' president on or about the month of November, 1958. The cease a.nd desist order to be issued herein should include the respondent Al B. VV olf as an ollcer of said corporation as \yell as in his individual capacity.

CLUSIO:XS The acts and practices of respondents as herein found, were, and are to the prejudice and injury of the public and of respondents: competitors and eOllstitllterl and nmy constitute, ll1fair and c1eceptin acts FEDERAL TRADE CQ:OlISSIO:\ DECISIONS Decision and Order 60 F.

and practices and unfair methods or competition, in commerce, within the intent and meaning of the Federal Trade Commission Act. ORDER It is- ordered That respondent, Pati-Port, Inc., a corporation, and its offcers, and respondent Abraham B. 'W olf, also known as Al B. \V olf individually and as an offcer of said corporation, and respondents representatives, agents and employees, directly or through any cor. porate or other device, in connection with the offering for sale salo or distribution of carports, patios or any other merchandise, in commerce, as "commerce" is defined in the Federal Trade COIDJnission Act, do forthwith cease and desist from representing, directly or by implication:

1. That any lnerchandise is offered for sale when such of1:er is not a bona fide offer to sell the merchandise so offered; 2. That any amount is respondents' usual and regular retail price or merchandise, when such amounts are in excess of the price at which said merchandise is usual1ly and regularly sold at retail by respondents in the trade area or areas where the representations are made; 3. That merchandise is sold at a special or reduced price unless such price constitutes a reduction from the price at which the merchandise has been usuany and regularly sold by respondents in the recent regular course of business;

4. That any merchandise sold or offered for sale is guaranteed, unless the nature and extent of the guarantee and the 111anne1' in which the guarantor will perform thereunder are clearly and conspicuously disclosed;

5. That said merchandise is of all-aluminum construction, or other- ,vise misrepresenting the materials of which any product is made. Order DENYING PETITION FOR REVIEW\V, DECISION Ol THE COJ.DnSSIQX AXD OlWEn TO FILE REPORT OF C02\fPLIANC:E:

The initial decision of the hearing examiner having been filed in this matter on November 27 1961, and respondent Abraham B. \Vo1f also known as Al B. '\Volf, on December 18, 1961, having filed a petition for review of said initial decision pursuant to Section 4.20 of the Commission s n,ules of Practice; and The Commission having examhrcd said petition and the entire record and being of the opinion that no substantial questions of law or fact are presented, and that granting of the petition for revimv is not necessary or appropriate under the law to insure a just and proper elis. , SIMPSON TIMBE'R CO. ET AL.

Complaint position of the proceeding and to protect the rights of the petitioner; and The Commission having also determined that said initial decision i5 appropriate in all respects to dispose of this proceeding as to reo spondent Pati-Port, Inc.

It i8 or-dered That said petition for review, med December 18, 1961 , and it hereby is, denied.

It i8 furthe?' ordered That the initial decision of the hearing exami. ner be, and it hereby is, adopted as the decision of the Commission. It i8 further ordel'ed That respondents Pati-Port, Inc., and Abraham B. ,Volf, also known as Al B. "\Volf, shall, within sixty (60) days after service upon them of this order, file with the Comn1i sion a report in writing, setting forth in detail the. manner and form in which they have cOlnplied 1\'ith the order to cease and desist coni:ail1ecl in the initial decision.