Alscap, Inc

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

Ix THE MATTBR OF ALSCAP, INC., ET AL.

ORDER, ETC. , IX REGAIm TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COJ\C\fISSION AND THE WOOL PROD"CCTS LABELING ACTS Docket 8292. Oomplaint, Mar. 1961-Decision, Feb. 14, 1962 Order requiring Kew Yorl( City importers to cease misrepresenting the fiber content of wool products, including fabrics and skirts, imported from Italy. 276 FEDERAL TRADE COMMISSION DECIs.ONS Complaint 60 F.

COMPLAINT Pursuant to the provisions of the Federal Trade Conllnissioll Act and the 'Wool Products Labeling Act of 1939, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission having reason to believe that Alscap, Inc., a corporation, and Luba Scapa and Joseph Scapa, individually and as offcers of said corporation; and Lopa of Italy, Ltd., a corporation, and Bernard Kaplan and Joseph Seapa, individually and as offcers of said corporation hereinafter referred to as respondents, have violated the provisions of said Acts and the Rules and Regulations promulgatedllllcler the ,y Dol Products Labeling Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest hereby issues its conlplaint st.ating its charges in that respect as follows: PARAGRAPH 1. Respondents AJscap, Inc., and Lopa of IUdy, Ltd. are corporations organized, existing and doing business under and by virtue of the laws of the State of New York. Respondents Luba Scapf1 and Joseph Seapa. are offcers of corporate respondent Alscap, Inc. ; and re,spondents Bernard Ka.plan and Joseph Scapa ate officers of corporate respondent Lopa of Italy, Ltd. Respondents Luba Scap" and Joseph Seapa, formulate, direct and control the acts, policies, and practices of corporate respondent ..AIscap, Inc., including the acts flnd practices hereinafter rcfe.rrecl to. R.cspondents Bernard I\.fLplan flnd Joseph Sca-pfl fonnnlate, dire.c, and cont.rol the acts, po1icics and practices of corporate respondent Lopa oJ Italy, Ltd., including the acts and practices hereinafter referred to. All respondents have their offce and principal place of business at 97 Fifth Avenue, X ew Yark effective date of the Yool Products 'n. 2. Subeeqnent to the La,baling _Act of 193D and more especially since January 1 , 1959 respondents ha,ve imported from Italy and introduced into commerce, sold, transported, distributed, delivered for shipment and ofIcred for sale in commerce as ;:commerce" is defined in the \V 001 Products Labeling ---\.ct of 19;j9 , '1,"001 products as " wool products" are defined therein.

PAIL 3. Cc.r(ain of " 001 products, namely l'oolen fabrics anc1la-dies skirts, ,were misbranded by respondents within tile intent and meaning of Section "1 (a) (1) of said Y 001 PToduc(s Labeling Act ,wd the Hules and Reg.ubtions promulgated thereunder in that they were falsely and deceptively In.belcd or tagged with respect to the character and amount of constituent fibers contained therein. ;\among such misskirts im- branded ",yool products ",were woolen fabrics and ladies' ported from Italy by respondents, said fabTies being labeled 01' tagged , , ALSCAP, L'\C. J ET AL. 277 275 Initial Decision by Alscap, Inc. 60% Rep. woo!, 5% nylon, 35% wool" 95% Rep. wool, 5% nylon:' and " 30% Rep. wool, 7070 rayon:' and said ladies skirts being labeled or tagged by Lopa of Italy: Ltd., as consisting of 95% reprocessed wool: 5% nylon, whercfts, in truth and in fact said \\001e,n fabrics and ladies' skirts in each instance contained substantially less \Toolen fiber than was represented. m. 4. Certain of said wool products were further misbranded by respondents in that they were not stamped, tagged or labeled as required under the provisions of Section 4(a) (2) of the 1Vool Products Labeling Act and in the manner and form as prescribed by the Rules and R.egulations promulgated thereunder. P Al-L 5. The respondents in the course and conduct of their business as aforesaid were and are in substantial competition in commerce with corporations, firms and individuals likewise engaged in the importation and sale of sa.id ,vool products, including imported woolen fabrics and1adics' skirts.

PAn. 6. The acts and practices of the rcspondcnts as set forth in paragraphs 3 and 4 above were, and are, in violation of the \V 001 Products Labeling Act of 1939 and thc Rules and Regulations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and practices and lUlfair methods of competition in commerce, within the intent and meaning of the Federal Trade COID mission Act.

Mr. Oharles W. O'Oonnell and Afr. Arthur Wolter for the Commission.

3fT. Leo Giltin of New York, N. , for the respondents. INITIAL DECISION BY J-IEJDL-\ Tacker, HEARING EXLDfI In a complaint issued :i\arch 2 , 1961 , the Federal Trade Commission charged a.ll the respondents herein ,with violating the Federal Trade Commission Act and the ,Vaal Products Labeling Act of 1939. The respondents are Alscap, Inc.) a New York corporation, its offcers Luba Scapa and Joseph Scapa, and Lopa of Italy, Ltd., also a New York corporation, its offcers Bernard Kaplan and Joseph Scapa, alj doing business at 07 Fifth Avenue, K ew Y ork .Although it is not at once apparent from the complaint, the two corporations arc not joined toge,ther in all tho transactions with re spect to ,which the violations are alleged. Alsc.ap and its offcers are charged \lith viohtions concerned with the labeling or tagging of cloth imported by them from Italy; Lopa of Italy, Ltd., and its offcers (Joseph Scapf! being common to both corporations) are cha::'g-ed with iolat1ons concerned with the labeling or tagging of skirts imported 719-60.

, ,. ,, Initial Decision 60 F. T. by them from Italy. During the course of the hearing it appeared however, that for accommodation purposes, while the skirt importation was a Lapa transaction, Alscap had initiated the purchase for Lopa s account.

It was alleged that the cloth which Alscap "imported from Italy and introduced into comnlerce, sold, transported, distributed, delivered for shipment and offered for sale in commerce" ,vas "falsely and deceptively labeled or tagged. . 60% Rep. wool, 5% nylon, 35% wool' 95% Rep. wool, 5% nylon' and ' 30% Rep. wool, 70% rayon It was also alleged that Lopa had similarly imported and distributed or sold ladies' skirts deceptively tagged or labeled" ' 95 % reprocessed wool, 5% nylon The deception, it was alleged, arose from the fact that in each instance substantially less woolen fiber was contained than represented and that these misbrandings constituted violations of Sections 4 (a) (1) and 4 (a) (2) of the IV ool Products Labeling Act and the Regulations promulgated thereunder. The respondents, being in competition with others engaged in the importation and sale of wool products such as those involved herein, were charged also with engaging in unfair and deceptive acts and practices and unfair methods of competition in COfflnerce within the intent and meaning of the Federal Trade Commission Act.

The respondents appeared herein by counsel and filed two answersone on behalf of the corporations and the other on behalf of the individuals. The corporations, while admitting that they imported certain wool products from Italy, denied all other material allegations of the complaint insofar as they were concerned. They alleged, in addition, three defenses. The first was that the goods referred to in the complaint were sold only to purchasers in the State of N ew York and consequently had not been introduced into commerce, as that term is defined in the 1V 001 Products Labeling Act. The second defense ,vas, in effect, a good faith reliance on the manufacturers in ItRJy and their agent in Italy who were concerned with the labeling and checking of the labels to make certain that they truthfully stated the wool content. Respondents alleged that the labels had been placed on the goods by the manufacturers, not by them, and that they had done nothing which would rcsu1t in violation of thc Act. They ,tJleged further that they had paid import duties in accordance with the higher wool content representation set forth on the labels. The third defense was that they exercised clue care and that any variation in the amount of wool content of the goods imported from the representations set forth on the labels or tags "resulted from una voidable variation in manufacture" and, therefore as subject to the defense afforded ALS'CAP , INC. , ET AL. 279 275 Initial Decision by the proviso in subparagraph (A) of subdivision (2) of Section 4(a) of the Act. The individual respondents alleged similar defenses and, in addition, contended that the importations were by the corporations, not by them as individuals or offcers, and that they, as individuals and offcers, had nothing to do with the labeling and tagging.

The case has been fully heard, the parties have submitted requests to find and proposed conclusions and orders and the case is now fully submitted.

Insofar as the individual respondents contend that they should not in any event, be held involved in this lnatter because they personally had nothing to do with the labeling and tagging and because their only connection was as offcers or directors of the corporations which engaged in the importations and sales, it is my finding and ruling that the two corporations are closed corporations wholly owned by the individuals or their families (although Alscap is separate from Lopa and Bernard Kaplan has no interest in Alscap). Luba Scapa is Joseph Scapa s wfe. Joseph Scapa owns 40% of Alscap, Luba, 30% and Joseph' s brother, Michael, the remaining 30%. Bernard Kaplan and Joseph Scapa each own 50 % of the stock of Lopa. Joseph is secretary and treasurer and a director of both Alscap and Lopa. Luba is president and a director of Alseap. Kaplan is president and a director of Lopa. They formulate, direct and control the acts, policies and practices of their respective corporations and as such are subject to remccli 11 action if the allegations of the complaint are sustained against the corporations. Consequently, ,,,herever reference is made here- Lfter either to Alscap or to Lopa, such reference in the case of Alscap shall be deemed to include both Luba and Joseph Scapa and, in the Celse of Lopa, both Bernard Kaplan and Joseph Scapa. Because of the groat sincerity and earnestness with which respondents' counsel has pleaded the case on behalf of the respondents, at the risk of being laborious, I shall develop in some detail my reasons for making the conclusions hereinafter set forth. Fundamenta.11y, a misbranding or deceptive labeling case is not very much different from cases such as Gw.nzer v. Shepa:rd 223 N. Y. v. Touche 255 )r, , 174 236 135 N.E. 275; and Ultrarna1's Corp. E. 441, involving negligence of words. The main diiIerence is that in cases such as Glanzer and Ultralnares the injured person is given the remedy, while in the cases under the 'Vool Product.s Labeling Act t.he public in injured aud the rcmedial action is taken on behalf of the Commission. In such cases as Glanze?' public by the Federal Trade and Ultra?n.(u' the obligation Inay be self-assumed or imposed by , . . . .

280 FEDERAL TRADE co:vnnSSIO:\ DECISIONS Initial D cision 60 F.

reason of the relationship of the party charged to the person injured. In our case, the obligation is imposed by law. These respondents are charged "Tith introducing into comnlerce goods which were misbranded 01' deceptively JabeJed. Under the statute they must be deemed to have made the representations set forth in the branding or labeling. ,Ve might say here, paraphrasing Justice Cardozo, then Chief .Judge of the New York State Court of AppeaJs, in Ultra?nares (at p. 180 N. Y. Reports and p. 448 in the N. Reporter), the respondents certified as a fact, true to their own knowledge, that the wool contents of the goods involved were in accordance with the labels. If the labels were false, the respondents are not to be exonerated because they believed them to be true. Here, not like in Lambert v. Oalifornia 355 U. S. 225, but as suggested in that case, the respondents, by engaging in the business with respect to which this legislation was enacted, must at their peril become informed of its requirements and do aJl t.hat is required of them under the legislation. Tllis legislation imposes on persons engaged in the business of introducing into ancl selling or distributing \'1001 products in commerce the obligation not only to label such products as to their wool content, but to make certain that the labeling is truthful and within the requirements of the statute. The purpose of the statute, as stated in its title, is "To protect proc1ueel's, manufacturers, distributors and consumers from the llnrevealed presence of substitutes and mixtures in spun, woven, knitted felted, or othenvise 1Tul1ufnctured 1\001 products \Jscap purpose in importing the cloth was to sell to lTmllufacturers who ultimately would sell to consumers or both to distributors and consumers. These I\ere persons sought to be protected by the Act. 1.0s purpose in importing the skirts was to sell to it distributor ,\ho, in turn, would sen to consumers. These I\"ere persons sought to be protected by the Act. The protection afforded by the Act to manufacturers and distributors, as distinguished :fr01n consumers, is additional in that not only should these manufacturers and distributors be certain that what they think they arc buying actually js what they arc buying, but they should be protected from, in turn, unwittingly making false representations to their purchasers by adopting the representations made to them by their suppliers. Insofar as it is contended on behalf of the respondents that they were not engaged in commerce, both the Federal Trade Commission Act and the ,Vool Products Labeling Act define commerce as being that ","with foreign nations. . . or between. . . any state or foreign 1 Vie are not here concerned with wmful, iutentional deception, fl'aull 01' mlsbl'ancli!Jg-. , ALSCAP , INC. , ET AL. 281 275 Initial Decision nation Both Alsca.p and Lopa caused the goods involved to be exported from Italy and imported into the United St"tcs. In addition, it appears that Alscap made at Jeast three sales of either of the fabrics importee! by it from Italy to purchasers outside the State of New Yark. Consequently, the defense that the respondents wpre not engaged in comllerce within the meaning of the Ads is ovclTuled.

'ts stated above, Alscap imported cloth while Lopa imported skirts. The importations of cloth wil be discussed first. The first of the AJscap importations consisted of two lots of cloth costing $2D1.16-one, 156% yards called "SAHA" ; the other, 312% yards called "l\lIHELLE." Both lots were brought into the United States white in February or early March 1D59 under Customs Entry D1669 and \were tagged as consisting of 30% reproce.ssed wool and 700/0 nylon. Respondents were requested by Customs to submit samples. After testing by the Federal Trade Commission expert, it \yas found that "SAHA" eontaincd 13.8% acetate, 63.0% residue (rayon nylon, son18 cotton) and 23.2% wool, \\"while ":MIRELLE" contained 3% acetate, 68.1% residue (mostly rayon, some nylon) and 23.67c wool. Although the difference between 23 plus percent and 30% is Jess than 7% of the entire fabric content, the difference between the actual wool content and the represented wool content -is 22:j in one instance and 211/3% in the other. Consequently, there wa.s misbranding nnddeceptive labeling as to the importation of these two Jots.

Alscap imported from Italy in about September 1D5D 35 bales of flannel cloth, identified as "PISA:' , consisting of 13 725% yards valued at over $10 000. This was labeled or brand cd as consisting of 95% reprocessed \\"001 and 5% nylon. On analysis, a s"\vatch thereof obtained from one of Alscap customers was found to contain 85. 1 % wool, O.D% acetate, 14.0% residue (mostly nylon, traces of miscellaneous). Although the wool differential amounted to 90/0 the entire fabrie, the differential in the actual wool content from the represented wool content amounted to 10.4%. In about .J ammry 1D60, AJscap imported into the United States from Italy 10 578% yards of flannel fabric valued at about $7 300. This fabric was JabeJed or branded as 60% reprocessed wool, 5% nylon and 35% wool. A swatch of this fabric obtained from one of Alscap customers was found to contain 89.3% wool, 0.5% acetate and 10. residue (nylon, some rayon, orion, cotton). Although the wool differential in the entire fabric amounted to 5.7%, the difI'ercntial in the 282 FEDERAL TRADE COM:MISSION:Y DECIS.IO Inital Decision 60 J actual wool content from the represented 1,"001 content amounted to 6%.

The only objections made by respondents to the tests were, first that too small a piece from the swatches involved had been used ane! second, that, in any event, Alscap had not imported the fabrics identified as "SARA" and "l\fIRELLE" for sale in commercial quantities. They said that these had been importee! only for the purpose of obtaining and providing for prospectiye customers samples of the maw terials.

The objection that the tests of the small pieces from the swatches involved "as not a correct testing procedure has been decided adversely in Milwaukee Allied Mils, Inc. , et al. Docket 7112. There the Commission said:

The respondents claim the testing pl'oecdure was incorrect, not because of the type of test performed nnd not because of the professional competence of the versnn making the test, but only because the test consisted of a small corner from each exhibit. 'lhe respondents ' contention is premised on the basis that they are under no duty to produce a homogenous mixture so that the woolen content of the batting wil be eyenly distributed throughout. \Ve must reject this contention. This is the very situation that the legislation was designed to correct.

The objection based on the contention that the importations involved consisted only of materials intended for samples is not well taken in view of 16 CFR 300. , which provides that samples, swatches or specime,ns subject to the Act and used to promote sales must be "labeled or marked to show their respective fiber contents and other information required by law. " Apart from the fact that one lot of over 156. yards and another lot over 312 yards were imported and thereby became subject to the Act, the Regulation promulgated under the Act extcnds to samples the same lnarking or labeling obligations as nre required for sales in commercial quantities. Pursuing t.his oLjertion respondents' counsel insist.ed on the production by C0l11nission counsel of a piece of material (and the test related thereto) which was sampled from later importations which had been the subject of sales in commercial quanbties. \Vl1Cn COI11Jnission counsel was directed to produce this sample and test, jt developed that, alt.hough tho cliiTerential in wool content based on the ent.ire fiber content amounted only to 1 %, the percentage differential of the actual ,yool content from the represented wool content amounted to 1373 Jt. Thus, f11though not inject.ed as an issue by Conunission counsel, it developed that the gObdssubsequently imported and sold in commercial quantities also had a large differential of wool content.

ALSCAP , INC. , ET AL. 283 275 Initial Decision Sometime during 1959, Lopa considered the possibility of developing a business in skirts. Because Alscap had the connection with the supplier in Italy, on behalf of Lopa, purchased in October 1059 and imported into the United States in November, 200 dozen skirts labeled or marked as being made of fabric containing 95% reprocessed wool and 5% nylon. One of these skirts so labeled was obtained from one of Lopa s customers. A small piece was cut out of it (to which procedure respondents objected as before) and this fabric, after test was found to contain 84.9% '.001 , 0.5% acetate and 14.6% residue (mostly nylon, some orlon, trace miscellaneous). (It should be noted here that this skirt appears to have been made of the same material as "PIS1\" to which refere.nce is made on page 281. ) The percentage differential which the actual wool content. bore to the entire fiber COJltent was 10. 1 %, while the percent.age differential _from the represented wool content ",vas 10.6%.

The differentials in wool content so found are substantial. "While the statute does not expressly set forth what amOJlnt of differential is to be regarded as a violation, and it provides a defense of nJlowable variation, which will be discussed below, it does provide that if the wool product is misbranded within the meaning of the Act or the R.ules and R.egulations thereunder, its introduction or sale, etc. in COlmneTce is unlawful, is an unfair method of compe6tioll and is an unfair or deceptive act or practice in commerce under' the Federal Trade Commission \ct. Section cl (a) defines (1. misbranded product as one which is "falsely or deceptively stamped, tagged, labeled or otherwise ident.ified", 01' one on or to which a stamp tag, label or other meflns of identificat.ion is not affxed and does not show "the percentage of the total fiber 1\'eight of the \\001 product, exclusive of oin:unentation not exceeding;) per centun1 of said total fiber weight., of (1) wool; (2) reprocessed ,mol; (3) reused ,yool; (4) each fiber other than wool if said percentage by weight of such fiber is ;) pel" centum or more; and (.1) t.he aggregate of a11 other fibers: . . . The references to ,3% in Section 4(a) (2) (A) ancl in Section 5 would indicate that the Congress intended that whateyer variation or deviation might be pormitted under.r the proviso, ,,,which ",,,in be c1iscus ecllater, was not to e.exceed 5%. Consequently, it. would seem t11flt, as a matter of 1:w; since an affrmative obligaUon exists to disclose 5% or 1110re of any foreign element, such a. c1ifl'eren6al or variation in '"'001 content, as a matter of Jaw, must be regarded as being in violation. The proviso, to which reference has been made from time to time, is: P1"o t:(led, That. c1eyiation of the filler content:, of the wool proc1u('t from per('entages stated on the stamp, tag, label, or other means of identification \).

284 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision 60 F.

shah not be misbranding under this section if the person charged 'with mis. branding proves such deviation resulted from unavoidable variations in manufacture and despite the exercise of due care to make accurate the statements on I:uch stamp, tag, label, 01 other means of identification. This recognizes that in the manufacturing process there could be a deviation of the actual fiber contents from the percentages stated. The amollnt of the deviation is not specified and I ha vo indicated above the re.ason for my opinion that a deviation, to be considered as subject to this proviso, ought to be less than 5%. Respondents sought to show, by an application to take testimony in Italy, that the deviations appearing in this case were clue to "unavoidable vari ttions in manufacture " and they contended that in any event they exercised due cate to make accurate the st Ltements:' on the tags or labels. They thus sought to read into this proviso not one, but two, possible defenses-the first, an una.voidable varifLtion in the manufacturing process, and the second .an exercise of due care. A correct interpretation or construction of the proviso is that the possibility of deviation in the manufacturing process exists, that this possibility must be anticipated, that tests or analyses of the fabric once manufactured, are to be made, and that the consequent and indic.ted care be exercised to make sure t.hat the labels or brandings state, as accurately as possible, the true \'\'ol content. Hight within the record of this erse is illustrated the sort of manufacturing deviation which could occur. A certain cloth tested out at 85.1 % wool content ,,-hen the labeling CRlled for 0570. The deficiency was 0. of the whole or 10.4% of the represented wool content. The same or similar cloth, also represented as having 95% wool content wa.s ma.de up into skilis. The cloth in one of these skirts tested out at 84. 0% wool content. The deficiency was 10.1 % of the whole or 10. of t.he repre,sented wool content. This is the sort of rnanufacturing deviation contemplated by the statute-84. 9% VS. 85.1% or 10.1 % V8. 9% or 10. 6% U8. 10.4%. In the absence of both a deviation such as is contemplated by the statute and a showing of due care in the labeling, the defense is not available. ,Vhere the facts of a case are such that it is apparent either one or the other does not exist, it is not necessary and would be a waste of the time and money of all concerned to take evidence in Italy of the premanllfacturing, manufacturing, and postmanufacturing procedures in that foreign country. As a matter of fact, in support of their claims of due care, respondents were unable to show that they subjected the materials to tests to determine whether the statements utilized by them were in fact correcl. The statute does not permit blind reliance by persons subject ALSCAP , INC. , ET AL. 285 275 lni tial Decision t.hereto on the conduct of others. Heliance on spotchecks or investigations Inade by others does not serve to .absolve a vendor from erroneous or incorrectly stated representations adopted and consequently made by hinl. The statute recognizes, however, that persons may rely on manufacturers from 'whom they receive goods in which they trade (Section 9(a)). For the protection of such persons, it is provided that they may rely on "a guaranty received in good faith signed by and containing the name and address of the person resid-ing in the United States by 1.vhOJn the 'wool product gua1Ymteed 1.oCts 'li1J),'fLufact1.tred andlor fl'07n 1lJh07n it was received that said wool product is not misbranded under' the provisions of this Act" (emphasis 11line). By the rule exprts8io 1fT/ius est emclusio alterlu8 this is the only method by which a. dealer in the United States CfUl protect himself when relying on his supplier. Obviously, since respondents in this ease did not purchase the goods involved from ,n manufacturer in the United States, they could not and did not obtain such a guarantee. It is also obvious that the requirement that t.he gllanlntee be signe,d by a person "residing in the United States" is imposed beca,use only such a person would be subject to the re(luirements of and remedial action under the Jaw. Hespondents c.ontencled also t.hat they had paid Customs duties based on the represented amount of "\\'001 content, that such duties were greater tha.n those "\which "\oulcl have been payable on the actual wool content :found ill the tests, and that this should be taken into consideration in determining "whether, in fact, there was a violation. (Although not rely\T lnt, the mere fact that a person pays a higher dut.y based on an exaggerated ,yool content js not indicative of his belief that the wool content is correctly desc.ribed. One might "\illing-ly pay suc h higher duty in order to obtain the higher price ,,-which a higher wool content might command. To counter this sort of argument, re.spondent Joseph ScapfL testjfjed that whether the fabric contained 30% wool or 2 :)% "\ool ,vas not a factor in its selling price. For the purpose of permitting the respondents to develop this defense fully, a Deputy .\ppraiser of Cust.oms was asked to lWlke the comput.atiolls to provide a comparison of the duties payable under the actual wool content as distinguished from the represented wool content of the "SARA" and' 'JIIRELLE" importations. For "SARA" the computation ,vas $64.43 as opposed to 865. , "\while for '":MIRELLE" the computation ,,' as $133. 10 as opposed to $135.95. This is practically de 'lninhnis.

rtespondents argue that since the manuf 1Cturers in Italy and not they placed the tags and labels on the products, they should not be held 286 FEDERAL TRADE CO::IMISSION DECISIOKS Inital Decisioll 60 F.

responsible for the representations contained thereon. .While it may be assumed a.nd the evidence suggests that the manufacturers affxed the tags and labels at the request of and on the direction of the respondents and thereby became respondents' agents in that respect, it is not material who affxes the tags or labels. Hesponc1cnts, by utilizing the tags or labels so affxed, adopted the representations therein contained and became bound thereby and responsible therefor. To conclude otherwise would make the statute a nullity. Respondents argue that "the intent of the Act" has not beam violated hut in support of this refer inac.curately to the evidence. They claim that they made no effort to faJsify the, ool content and had no intention to deceive or defraud. These are clements which do not go to the issue. The use in the statute of ,,'ords like "falsely or deceptively" does not thereby require a showing of intent to decei\' in order to make out a violation. The deception or fraud resulting from a mishtbeling or misbranding is no different than that resulting in Ultramares v. Touch,; 255 N. Y. 170, 17+ R.E. 441, ,md other like cases. There is nothing novel about something being fraudulent in law without intent.

Finally, respondents urge that there has been no shmving of any necessity for a cease and desist order in this case in view of their otherwise good record, the tinle which has elapsed without a.dditiona.l viola tion, and the relatively fe"T instances of violation shown in the record. The statute with which we are here concerned is a remedial statute. It is not, as here applied, punitive and its purpose, as stated in the preamble, is protection of members of the public. The very fact that respondents, who appear to be reputable business folk, are here found in viola.tion demonstrates the desirability and need for a public order to cease and desist. Publicizing of such an order, apart from the fact that tho order will have a deterrent effect on respondents, has a real value because of the educational factor involved. The need is increased particularly in it case of this nature where an importer relies on labeling or branding by a foreign manufacturer \dlo is not subject to the jurisdiction of the United States. It is the importer who introduces the goods for consumption in the United States. If imported are not m lde aWilXO of their obligations under the Act, the door will be opened wiele tu great, if unwitting, deception of the. public because of the continuing increases in importations from flbroac1. It is my belief that the order hereinafter set forth is proper in this case and is necessary and appropriate to achieve effective enforcelnent of the la"

ALSC'AP , INC. , ET AL; 287 275 Initial Decision Hespondents have submitted proposed findings of fact and conclusions of llw. 'With minor variations, I would say that proposed findings numbered 1- , inclusive, 17, 18 37--0, inclusive , 44, could be found as supported by the evidence in the record. do not adopt them for the reasons stated in Oapital Tmnsit 00. United States 97 F. Supp, 614, 621. I reject requests to find numbered 15 , 16 , 19, 20, 22-25, inclusive, 27, 29, 30, 33- , inclusive, and 41-42, for reasons stated during the course of the discussion above 0.1' because they do not correctly set forth the facts or are irrelevant. The proposed conclusians consequently must be rejected. The following are my fuldings of fact.

FINDINGS OF FACT 1. Respondents Alscap, Inc., and Lopa of Italy, Ltd., are corporations organized, existing and doing business under and by virtue of the laws of the State of New York. These two corporations are closed corporations wholly o'Hled by the individuals or their families (although Alscap, Inc., is separate from Lopa of Italy, Ltd., and Bernard Kaplan has no interest in Alscap, Inc. ). Luba Sca pa is Joseph Scapa s wife. Joseph Scapa owns 40% of Alscap, Inc., Luba Scapa 30% and Joseph Scapa s brother, :Michael Seapa, the remaining 30%. Bernard Kaplan and Joseph Scapa each own 50% of the stock of Lopa of Ibtly, Ltd. Joseph Scapa is secretary and treasurer and a director of both Alscap, Inc., and Lopa of Italy, Ltd. Luba Scapa is president and a director of Alscap, Inc. Bernard Kaplan is president and a director of Lopa of Italy, Ltd. They formulate, direct and control'l tho acts, policies and practices of their respective corporations whictt include the acts and practices hereinafter set forth. All respollclent have their offce and principal place of business at 97 Fifth Avenue Xew York, X.

2. Subsequent to the effective date of the 'Wool Products Labeling Act of 1939, and more especially sillce January 1 1D:")9 respondents have imported from Italy and introduced into commerce, sold, transported, distributed, delivered for shipment and offered for sale in commerce, as "commerce" is defined jn the 1VoolProducts Labeling Act of 1939, 'Tool products as " wool products" are defined therein. 3. Ccrta,in of said wool products, namely woolen fabrics and ladies skirts, were misbranded by respondents within the intent and meaning of Section 4 (a) (1) of said IV 001 Products Labeling Act and the Hules and R.egulations promulgated thereunder in that they were falsely and deceptinly lobeled or tagged with respect to the character and amount of constitutent fiben; contained therein. Among such , , 288 FEDERAL TRADE COMMISSION DECISIOKB Inital Decision 60 F.

misbranded wool products ,ycre woolen fabrics and ladies' skirts imported from Italy by respondents, the fabrics being labeled or tagged by Alscap, Inc. 60% Rep. wool, 5% nylon, 35% wool" 95% Rep. wool, 5% nylon" and "30% Rep. wool, 70% rayon" and the ladies skirts being labeled or tagged by Lopa of Italy, Ltd., as consisting of 95% reprocessed wool, 5% nylon " whereas, in truth and in fact said woolen fabrics and ladies' skirts in cneh instance contained subst.antially less woolen fiber than was represented. 4. Certain of said wool products were further misbranded by respondents in that they were not stamped, tagged or labeled as required under the provisions of Section 4(a) (2) of the vVool Products Labeling Act and in the manner and form as prescribed by the Rules and Regulations promulgated therelmder.

5. The respondents in the course and conduct of their business as aforesaid were and are in substantial competition in commerce with corporations, firms and inc1ividua's likewise engaged in the importation and sale of such wool products, including imported woolen fabrics and imported ladies' skirts.

And, from the foregoing, the following is my CONCLUSION The Federal Trade Commission has jurisdiction of this proceeding and of the respondents and this proceeding is in the interest of the public. The acts and practices of the respondents as set forth above were\ and arc, in violation of the \Vool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and practices and unfair lnethods of competition in commerce within the intent a,nc1 meaning of the Federal Trade Commission Act. ORDER It ordered That respondents Alscap, Inc., its offcers, and Luba Scapa and Joseph Scapa, individually and ns offcers of said corporation, and Lopa of Italy, Ltd. , its offc.ers, and Bernard Kaplan and Joseph Scapa, individually and as offcers of said corporation, and respondents' representatives, agents and e.nployees, directly or indirectly or through any corporate or other clevice in connection with the introduction into comlnerce, or the offering for sale, sale, transportation or distribution in commerce, as "commerce" is defuled in the Federal Trade Commission Act and the IV 001 Products Labeling Act of 1939, of ";-olen fabrics ancllrdies' skirts, or other " wool products " as such products are defined in and subject to the VV 001 Products Labeling , .

A. C. WEBER & CO. , II\'" ! ET AL. 289 275 Syllabus Act of 1939, do forth,,,ith cease and desist froni misbranding such products by:

1. Falsely or deceptively stamping, tagging, la.beling or otherwise identifying such products as to the character or amount of the constitutent fibers contained therein.

2. Failing to affx labels on such products showing each element of information required to be disclosed by Section 4 (a) (2) of the Wool Products Labeling Act of 1939.

ORDER VACATING I' RIOH OlilER, DECISION O:P THE COMJ\BnSSION AND ORDER TO FILE REPORT OF COMPLIANCE The Commission having granted respondents' petition for review of the hearing examiner s initial decision by its order of December 26 1961, and having set oral argument in this case forYarch 28, 1962; and The respondents having failed to file t.their exceptions to the initial decision and brief in support thereof as provided by Section 4.21 (a) of the Commission s Rules of Practice:

It is ordered That the aforesaid order of the Commission granting the respondents' petition for review be, and it hereby is, vacated and set aside.

It 'i8 further ordered That the oral argument scheduled for March , 1962, be, and it hereby is, cancelled.

It is further ordered That the initial decision of the hearing examiner be, and it hereby is, adopted as the decision of the Commission. It is fur/he,' ordered That respondents 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 maJiler and fond in which they have complied with the order to cease and desist.