Savoy Watch Co., Incorporated

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IN THE MATl SA \TOY W ATCH CO., INCORPORATED, ET AI,. ORDER , ETC., IN REGAIil TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CQ:;DfISSION ACT Docket 8080. Complaint, Aug. II, 1960-Decision, Aug. 1.4, 1963 Order requiring New York City importers of watch movements from Switz erland which they assembled with watchcases either domestically manufactured or imported from Bong Kong, to cease furnishing display cards to dealer purchasers which stated falsely that the watches were fully guaranteed by the manufacturers and were water resistant, and represented falsely by the arrangement of the printing that they had been nationally advertised in Life-REaders Digest" ; and to cease sellng the watches with the words "Swiss" or " Swiss Made" on the faces without di8 closing that the cases came from Bong Kong. COMPLAINT Pursuant to the, provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Aet, the Federal Trade Commission, having reason to believe that Savoy watch Co. Incorporated, a corporation, and Arthur Miller and Isadore S. Miller individual.Ily and as ofIeers of said corporation, 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 complaints stating its charges in that respect as follows: PARAGRAPH 1. Respondent Savoy Watch Co., Incorporated, is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New Yark with its principal place of business located at 62-67 'Vest 47th Street, New York, New York Individual respondents Arthur Miller and Isadore S. Miller are offcers of the corporate respondent. They formulate, direct, and control the acts and practices of said corporate respondent, including the acts, policies and practices herein complained of. The place of . .

474 FEDERAL TRADE' COMMISSION DECISI01\-S Complaint 63 F.

business of said individual respondents is the same as that of respondent Savoy .Wateh Co., Incorporat.ed.

PAR. 2. Respondents are now, and for some time last. past have been, engaged ill importing watch movements from Sw.itzerland, and assembling said watch movements with watchcases either domestically manufactured or imported from Hong Kong. Respondents then distribute t.he assembled watches through retail and wholesale jewelers located throughout the United States.

.\R. 3. In the course and conduct of their business, respondents now cause, and for more than two years last past have caused, their watches, when sold, t.o be transported from their place of business in the State of New York to the purchasers thereof located in various other States of the United States. Respondents maintain, and at all times mentioned herein have maintained, a course of trade in said watches in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 4. Respondents at an times mentioned herein have been, and now are, in substantiflJ competition, in commerce, with individuals firms and corporations engaged in the sale of wawhes. -\R. 5. Respondents in the course and conduct or their business and for the purpose of inducing the sale of their watches, furnish display cards to dealers purchasing their watches, for use in displaying said watches for sale to the public, upon which, among other things: the following words, terms and expressions are printed. Sold with a Factory Guarantee Water Resistant. (These words are also stamped 011 the watches themselves. PAR. 6. By means of t11e aforesaid statements respondents represented, directly and by implication, that: 1. Their said watches are fully gwtranteed by the manufacturers thereof.

2. Their ,,,atches arc water resistant.

PAR. 7. Said statements R,ncl representations were false, misleading and deceptive. In truth and in fact:

J. Respondents' watches were not fully guaranteed as the gnarantee, furnished in connection there\with \ya.s a limited one. 2. Said wa.tches \were not water resistant. PAR. 8. The following statement is also printed on the aforesaid display cards With the feature t.hat is nationally advert.ised in Life - Readers Digest". The asterisk is carried to the center of the card, far remove,d from the aforesaid st.atement in the following fashion Teweled ".Watch" While the jeweled lever llsed in Lever respondents' watches may have been advertised in Life and Readers Digest, the arrangement of the pl'jnting on said card is SUd1 that the , ,, SAVOY WATCH CO. , L\T , ET AL. 475 473 Initial Decision public may be led to believe, contrary to the fact, that respondents' \vatches, in their entirety, had been advertised in said publications. PAR. D. Respondents import \vatchcases fr01n IIong Kong, and after nssembling said cases together with watch movements imported from Switzerland, sell and distribute the assembled watch without disclosing the country of origin of said watchcase except on the inside of the bezel which cannot be seen by prospective purchasers. orthe faces of said assembled watches bear the words Swiss" Swiss made In the absence of a disclosure of the country of origin of said watchcases, the public understands and is led to believe that the said cases are eit.her of domestic or S\viss origin. There is. a preference on the part of 111any persons in this country for watchcases of domestic and Swiss origin over watchcases manufactured in Hong Kong.

PAR. 10. The use by the respondents of the aforesaid false, misleading and deceptive statements, representations and practices and their failure to adequately disclose the country of origin of their watchcases have had, and now have, the capacity and tendency to mislead and deceive a substantial portion of the purchasing public as to the country of origin of said \vatchcases and into the erroneous and mistaken belief that the statements and representations are true, and into the purchase of substantial quantities of said watches by reason of said erroneous and mistaken belief.

\8 a consequence thereof, substantia.l trade, in commerce, has been and is beingullfairly diverted to respondents frOlTI their competitors and substantial injury has thercby been and is being done to competi tion in commerce.

PAR. 11. The a.foresaid acts and practices of respondents, as herein alleged ere and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute unfa.ir and deceptive acts and practices and unfair methods of competition, in commerce, \\within the int.ent and meaning of the Federal Trade Commission Act.

ilh. David J. ,11clean for the Commission. Noble & il oyle W ashington, D. , for respondents. Ij\ ITIAL DEGISIOX BY EDGAR A. BUTTLE, HEARING EXAMINER FEBRUARY 26 , 1962 respondents are charged in the Commission s complaint, issued on August 11 , 1960, with practices alleged to be misleading and deceptive , 476 FEDER'AL TRADE- COM:\lission DECISIONS Initial Dedsion 63 F.

in violation of the Federal Trade Commission Act. Succinctly stated, the alleged deceptive practices are as follows: 1. The use of display and promotiana1 material claiming that respondents' watches are guaranteed, without setting rorth the terms and extent of the guarantee in full.

2. The use of display cards arranged and printed in such a manner as to mislead consumers into believing that respondents' watches had been advertised in certain well-known magazines of national circulation, when it was only a component which had been so advertised, and respondents' watches had not been so advertised. 3. The use of the representatian water resistant" 'On display and promotional material, and 'On the backs and dials 'Or respondents' watches, when in fact respondents' watches are nat water resistant. 4. The sale of watches assembled from watchcases manufacture in Hong Kong, without disclasure of the fact of the foreign 'Origi 'Of the watchcases.

Three prehearing conferences were held in this matter 'On December , 1960, January 10, 1961 , and January 24, 1961. Thereafter the Commission s case-in-chief was presented in three days 'Of hearings during May and June 'Of 1961 , and at the clase of the Commission case-in-chief, respondents moved to dismiss the complaint in its entirety. The motion was denied by the hearing examiner and respondents' defense was presented in three days of hearings during September and December of 1961.

During the course of the hearings General Time Corporation made application to appear as an intervenor in this case. The application was opposed by respondents and by counsel supporting the complaint and was denied; however, Cummings and Sellers, by David N. Barus counsel for General Time Corporation were allowed to appear in a status comparable to that 'Of an amieus curiae for the purpose 'Of filig advisory briefs and memaranda. Hearings were concluded and the record on this case closed on December 12, 1961. Proposed findings of fact and conclusions of law were filed by counsel for the parties. The hearing examiner has carefully reviewed and considered same. Proposed findings and conclusions which are nat herein adopted, either in the form proposed or in substance, are rejected as not supported by the record or as involving immaterial matters.

Upon the entire record in the case, the hearing examiner makes the following:

FINDINGS OF FACT 1. Respondent Savoy 'Vatch Co. , Incorporated, sometimes hereinafter referred to as Savoy, is a corporation organized, existing and SAVOY WATCH CO. , INC. , ET AL. 477 Initial Dedsioll doing473business under and by virtue of the laws of the State of New York with principal offces and place of business located at 62-67 West 47th Street, New York, New York.

2. Respondent Arthur Miller is the president of, and is a stockholder in, respondent Savoy.

3. Respondent Isadore S. Miler is an offcer of, and is a stockholder in, respondent Savoy.

4. Respondents Arthur :Miler and Isadore S. Miler are the sole stockholders of respondent Savoy, and they exercise sole control and direction over the policies of respondent Savoy. 5. Respondents are engaged in importing watch movements from Switzerland and assembling said watch movements with watchcases either domestically manufactured or imported from Hong Kong. Respondents then distribute such asscmbled watches to retail and wholesale jewelers located throughout the United State. 6. Respondents maintain, and at all times mentioned herein have maintained, 'a substantial course of trade in watches in commerce, as commerce" is defined in the Federal Trade Commission Act. Respondents at all times mentioned herein have been, and are, in substantial competition in commerce with corporations, firms and individuals engaged in the sale of watches. 7. Respondent Savoy furnishes display cards to dealers for use in displaying respondents' watches for sale to the public. These display cards bear the representation "sold with a factory guarantee S. Guarantee certificates used by respondents in connection with the sale of their watches contain the following guarantee provisions: This certifies that your MILOS watch is therefore fully guaranteed against any original mechanical defects 9. Respondents conect service charges on watches returned for repairs, and sometimes impose a charge covering postage for such wat.ches returned for repair. Thus, respondents' preformance under their guarantee is at times limited and made conditional upon the payment of a fee.

10. The imposition of these service charges is nowhere set forth in the guarantee representations, and hence the nature and extent of the guarantee and the manner in which the guarantor would perform thereunder is not clearly disclosed. The guarantee representations made hy respondents are misleading and deceptive. 11. Respondents use display cards which are arranged and printed in such a manner as to mislead consumers into believing that respondents' watches have been advertised in certain well-known magazines in national circulation, when only a component has been so advertised.

478 FEDERAL TRADg COMMIS'SION DECISI01\TS Initial Decision 63 F.

12. Savoy s watches were never advertised in "Life" magazine, Reader Digest", "Saturday Evening Post", or in any of the other nationally circulated magazines mentioned on the face of the display cards.

13. Respondents represent to the public that their watches are water resistant". This representation is made through the medium of display cards, and is also made in the case of individual watches, by having the Jcgend "water resistant" stamped on the back of the watchcase.

14. A total of eight watches manufactured by respondent Savoy were purchased by the Conmlission s staff from various jewelry retailers in New Y ork ow Jersey, and Massachusetts. All eight of these watches were subjected, by an independent testing agency to the test for "water resistance" as prescribed in the Trade Practice Rules for the .Watch Industry. Only one of these eight watches successfully passed the test for water resistance. The remaining SBV8TI were not water.r resistant" according to the meaning of that term as specified in the Trade Practice Rules of the .Watch Industry. 15. .Watches sold by respondents, bearing the representation "water resistant", are not tested \With a reasonable degree of accuracy before the offering of the watches for saJe to the general public. Mr. Irving Bloch, foreman and factory manager of the Savoy factory, testified that one-half of the watches which Savoy sells were not eased or assembled in their own factory, but were cased or assembled by a number of other outside watch assemblcrs doing work for Savoy. one frolll Savoy supervises the actual assembly of Savoy s watches in these outside assembly shops, and, according to 1Ir. Bloch, the only quality control exercised is a visual inspe,ction of the cased wawhe. when they are returned to Savoy. However, defects which destroy a watch' s "water resistance ate not apparent on visua.l inspection. 16. Vatches sold by respondents and claimed by respondents to be water resistant" were not in fact "water resistant" 17. During 1958, 1959 and the first half of 1960, respondents imported watch movements from Switzerland. About two-thirds of the watchcases used by Savoy in casing these movements were purchased from the V. 1\. R. Vatch Case Company, and from Conde Watch Case Company, and these watchcases, purchased by Savoy from W. M. R. and from Conde, were imported by those companies from Hong Kong.

18. K one of the watchcases originating in Hong Kong and used by respondents in cflsing their watches bear' markings on the outside showing the fact of their Hong Kong origin in such a way that it is disclosed to purchasers of the watches. The origin however is SAVOY WATCH CO. , INC. , ET AL. 479 Initial Decision indicated473on the inside of the casing and may be ascertained by removing the back of the case. This can be accomplished with facility 19. In the absence of a reasonable disclosure that a product, mcluding watchcases, is of foreign origin, the public believes and understands that it is of domestic origin.

20. There are among members of the purchasing public, a substantial number who have a preference for products origiating in the United States over products originating in foreign countries or in foreign places, including watchcases originating in Hong Kong. There are also, among the members of the purchasing public, substantial numbers of potential purchasers who are not concerned with the country of origin of watchcases if such watchcases are used by well-known brand watch manufacturers.

CONCLUSION 1. Respondents' use of display and promotional material claiming that respondents' watches arc guaranteed, without setting forth the terms and extimt of the guarantee in fun, is a deceptive practice within the purview of the Federal Trade Commission Act. The testimony of respondent Arthur ::iler, president of respondent Savoy, is that Savoy makes service charges on watches returned for repair, and that Savoy sometimes makes charges for postage on such watches returned for repair. The guarantee representation on respondents' display cards makes no mention of the fact, and the guarantee representation on the guarantee certificate supplied by respondents for sa.1e in connection with their watches likewise makes no mention of this fact. The guarantees given by respondents appear on their face to be full and unqualified guarantees, although respondents' performance under these guarantees is limited and made conditional on the payment of a fee.

In Olinton Watch Oompany case, Docket No. 7434 (57 F. 222 231). involving similar facts, the Commission states: Respondents contend that this ruling is in error since the repairing and replacing of parts is done without charge, the $1.00 charge being made only reimburse respondents, in part, for postage, insurance and other expenses tn. curred in returning the watch to the buyer. This argument is rejected on the authority of Parker Pen Co. v. Federal Trade Commission 159 F. 2d 509 (7th Gir., 1946). In that case, the court in considering this same point with ret erence to the respondents' advertised "lifetime guarantee" on its pens. concluded that a guarantee per se negatives the idea of a further consideration on the part of a purchaser in bis effort to obtain satisfactory performance with the article guaranteed. 1 1 Ste also Hathaway Watch Co, Docket No. 6357, 52 F. C. 246; Cimter Watcll Gorp. Docket No. 6703 , 54 F. C. 542; R08(' lIHln EJlterpri8cs Co. Docl;:e-t Xo. 6::58 , ;-2 F. 487; Maryla11(l Distri01!t01'S Docket No. 60G;:. 49 F. C. 1229. , 480 FEDERA TRADE COM.\USSIO DECISIONB Initial Decision 63 F.

2. Respondents' use of display cards arranged and printed in suci a manner as may reasonably tend to mislead consumers into believing that respondents' watches had been advertised in certain well- known magazines of national circulation, when it was only a component which had been so advertised, and respondents' watches had not been so advertised, is a deceptive practice within the purview of the Federal Trade Commission Act.

Paragraph 8 of the complaint charges that the display cards which respondents have used are arranged and printed in a misleading and deceptive manner. In the absence of scrutiny beyond that which might norma1Jy and reasonably be expected, a viewer of the cards would be led to believe that it 'iyas the "Sl1rfside:' or ":YIilos " watches 3 which had been advertised in the national magazines, when in fact only certain components or construction features of the movements had been so advertised.

Two examples of these display cards are in evidence. The testimony of Mr. Miller indicates these cards were distributed by Savoy to their cust.omers to help sell ' atches. Savoy s 'ivatc.hes ,were never advert.ised in "Life Reader s Dige.sf" "Sat.urday Evening Post" or in any of the nationally circulated magazines me,ntioncd on the face of the display mrds.

3. R.esponclent.s' use of the represent.ation " ,vater resistant" on display and promotional material, and on the backs and dials of respondents' watches, when in fact respondents' watches are not water resistant, is a deceptive practice within the purview of the Federal Trade Commission Act.

The charge made by Paragraphs 5, 6 and 7 of the complaint, relating to water resistance, states that respondents held out their watches to the public a.s being "water resistant" and that this was false and deceptive because respondents' watches are not always water resistant. The evidence supporting this a,llegation is persuasive. discloses that a number of respondents' watches bearing the water resistant legend on their dials, or on their backs: were purchased by the Commission s investigational staff from retail outlets located in various States, and the watches so purchased were t.ested for water resistance. All but one watchcase failed the test. Two of the foregoing watch1les were purchased by fr. T. ",Vhite. head, fl. member of the Commission s inve..tigational staff, from the regular stock of a retail jewelry store in New Bedford lassachusetts, during August 1959. The third watch was purchased in the See the Commission s order in y King Corporation Docket No. 7029. Surfside " and ":'iilos " Jlre trJldem rked trr.de names used', by respondent Savoy Watch Co.

SAVOY WATCH CO. , INC. , ET AL. 481 473 Initial Decision same way by 1r. 'Whitehead from the regular stock of a retail jeweler in ewark Kew Jersey, in July 1959. All three watches are ormarked with respondents' trademarked trade names, "Surfside" ::1i10s, on their dials. All three bear the legend "water resistant" on their backs, and two bear it on their dials. Subsequent to their purchase these watches were in Mr. Whitehead s custody until they were turned over to a testing laboratory, Lucius Pitkin, Inc., for the water resistance test. The watches were then tested for water resistance according to the rules for test number 2 (the water resistance test), as set forth in the Trade Practice Rules for the watch industry (16 CFR , pa.rt 170.2(c)). These tests were performed by 1\1' Frederick H. ' Wright, an offcial of Lucius Pitkin, Inc., on September 21, 1961. As Mr. 'Wright' s testimony reflocts, all three watches,s failed the test for water resistance. After the issuance of the complaint, five more watches were purchased by Mr. ' Whitehead, during April 1961, from the regular st.ock of retail je'lvelers located in R.oselle Park, New Jersey, ewaTk, Xew Jersey, and Hempstead, New York. All five of the watches bear respondents' trademarked trade names on their faces, and an bear the representation " ,Yf1ter resista,nC on their backs. After their purchase the five watches were. kept in 1)11'. 1Vhit.eheac1's custody and were de. livered to him by Mr. 'Wright, of Lucius Pitkin, Inc., for testing. Mr. 'Wright' s testimony and his written report. of the tests reflect that four of these five watches failed to pass the test, and that only one watch passed the test. There is no reliable evidence that these tests do not typically reflect the water resist.ant qualities of respondents' watches.

Furthermore, the evidence of respondents' testing procedures for water resistance are not demonstrative of their effciency. A substantial number of respondents' watches are cased at the plants of two or three other wat-ch manufacturers. R,e.spondents therefore have no control over the quality of the work done at these other plants. It would seem from the testimony of :\1r. Bloch, respondents' plant manager, that respondents perform only a cursory visual inspection of cased watches returned from these "outside" assembly plants. The adequacy of the testing, however, is not a primary issue. Of ultimate importance is the fact that a preponde.rant number purchased are not water resistant, although claimed to be.

Re.spondent s' contention that the five wa tches purchased and tested after issmtnce of the complaint "are not material or relevant to the issues raised by the pleading: because they came into the Commission s possession after the complaint 'was issued is without merit since presumptively, in the absence of evidence to the contrary, they , 482 FEDERAL TRADEI C01\1'MIS.SIO DECISIOJo"' Initial Decision 63 F.

or other Ivatches proved to have like defects, were on the market during the period contemplated by the complaint and their quality, which is in issue, involves a continuing deceptive practice before and after the fiJing of the complaint, concerning which relief is properly sought.

There also appears to be in issue the question as to whether or not the wat.ches comprjsing the first group purchased are the products of Savoy 1Vatch Co. , Incorporated. The evidence, however, is abundantly clear in the affrmative. All three of these watches bear respondents' trademark. Commission s Exhibit 9 is marked "Surfside" on the dial. Commission s Exhibit 10 is also marked "Surfside" on the dial, ,md Conunission Exhibjt 11 is marked "Milos" on the dial. As evidenced Surfside" and "J\Iilos" are trademarked trade names the property of, and used only by, respondent Savoy 1Vatch Co. Incorporated.

Corroborative of the foregoing, the symbols are also a mode of ide.ntification. cvcrtheless, J\Ir. J\liner in examining Commission Exhibit 9, found the symbol QZX not EXM, and expressed inability to identify the ,,,ateh as a Savoy product for that reason. He also failed to identify Commission s Exhibit 10. Although his attention as invited to the fact that these "\nltches had Savoy s trade name Surfside" on their dials, and that the phrase " Surfside Watch Compan as stamped on the movement in both of these watches, 1\11'. T\liller opinioned that perhaps certain pa.rts of the watch movement (the "balance bridges ) had been switched by some person or persons unknown. IIowcver, he was certain that the QZX symbol was not Savoy s. The oiIcial records of the lJ.S. Bureau oT Customs, howftp. resolves this conjecture. 4 These reeorc1s reilect that watch import symhol QZX ,yas assigned to the "Surfsicle 'Vatch Co. , of 62 est Hth Street, New York ew York, on the 22nd day of June 1957. "Surfside" was a trademarked trade name of Savoy 1Vatch Co. Incorporated. Respondents began using the trade name I:Surfside" in " 1956 or 1957", which corresponds wjth the time that QZX ,ya,s assigned to t11C "Snrfside ,Vatch Co. Significantly also, the address given for the "Snrfsicle ,Yatch Co." is the same as Savoy address, 62 IV est 47th Street ew York New York. The aforesaid ads fmd practices of respondents: hereinabove identi lied as 1, 2 and 3, are all to tbe prejudice and jnjury of the public awl of respondents' competitors and constitute unfair and deceptive acts and practices a.nd unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

See Commission s Exhibit 11, 'lr. 328- 329. &, SAVOY WATCH CO" INC. ET AL. 483 473 Initial Decision 4. The sale of watches assembled from watchcases manufactured in Hong Kong without disclosure of the foreign origin of the watcheases is not deceptive per se or in the instant case violative of the Federal Trade Commission Act.

It is a well established principle of law, that in the case of most products imported in their cntirety and sold in commerce, failure to disclose the country of origin constitutes an unfair or deceptive act or practice which the Commission is fully empowered to enjoin by cease and desist order. See, for example Renew. Lyon 00., Inc., et 01. 48 C. 313 (Docket No. 5850, 1051) (imported metal watchbands), and Duo- Tint B,db Battery 00., Inc., et al. 36 F. C. 749 (Docket No. 4814, 1043) (imported electric light bulbs). There are exceptions, however, hereinafter discussed. This principle has been authoritatively extended to apply similarly in many cases -where, although the product in que,stion was not imported ill its entirety, the major component thereof was imported and its country of origin vms not disclosed. The leading cases of this type are L. Helle,' cD Son, Inc. , et 01. 47 F. C. 34 (Docket No. 5358 1850), afd &nb nom. lie lie,' v. Federal Trade Oommission 191 F. 2d 954 (C.A. 7 , 1951) and Lucian V. Segal, trading as Segal Optical Company. 34 F. C. 218 (Docket No. '1J81 , 1041), af!' d sub nom. Segal v. Federal Tmde Oommi'sion 142 F. 2d 255 (C.A. 2, 1944). In the Helle?' case, the Commission ordered disclosure of the foreign origin of imported imitation pearls, which respondents mounted on domestically produced ear clips and necklace strings. The reviewing court upheld this order, and quoted ITith approval the iollmving language from the opinion of the Commission (47 F. C. 34 45; 191 F. 2d 054, 956) :

\Vhen such imitation pearls are used in necklaces they represent the principal component and the part which makes the necklaces valuable to the consumer. The consumer purchases an imitation peflrl necklace not because of the string which holds the pearls together or the clasp whicb joins its ends, but because of the imitation pearls which are thus assembled and made useful as ornaments "' Failure to (1i close foreign origin, under preyions clecisiol1s of the Commission, constitute.s misrepresentation and an unfair and deceptive practice.

In the foregoing case, the Commission treats and compares different types of imported products and product components. The country of origin of imported genuine pearls, it was held, need not be disclosed. This is an exception to the general rule stated a:,o\' ::101'e, ove1' , in considering certain imported alabaster 'Or glass beads Hsed as the cores for imitation pearls manufacture,d in the United States, the Commission found that failure to disclose the foreign origin of these beads in the sale of the imitation pearls was not mis- 484 FEDERAL 'trade' COMMISSION DECISIONS Initial Decision 63 leading to the public. Thus, in contrast with the finished imported imitation pearls domestically mounted, the imported cores ,were regarded, in effect, as product components having insuffcient signficance to justify a required disclosure of their origin to prevent public deception in any material respect.

The concept enunciated in the Heller case appears to be that the particular circumstances" of each merchandising situation involving a product containing an imported component, must be considered to determine whether the public has a suffcient interest incident to purchase in t.he characteristics of the imported component, in its relationship to other components, or the product as a whole. It is quite apparent therefore that disclosure of the foreign origin of an imported component, is not: it per se requirement. The Commission only ree-entry adhered to this theory in lJi8S lVatch Oase Gorp, et al. (Docket Xo. 7040, 1959) (56 F. C. 87J, the only previous Commission decision involving" impOliecl \vatcl1cases. The hearing examiner had held that the public is entitled to disclosure of the foreign origin of an imported product as a matter of law, and accordingly proposed an order requiring the respondents to disclose the foreign origin of their \vatchcases. In reversing the initial decision of the hearing examiner and dismissing the compla,int, the Commission held (p. 4) (56 F. C. 87, 90J :

'" '" '" (The) concept that failure to disclose foreign origin is unlawful in all merchandiaing situations similarly lacks sound legal basis. However the COHllnission has ordered disclosure of the country of origin of major components of a product.

The hearing eX lmjJler has t.taken offcial notice of a preference for American products over foreign products including watchcases. IIoweve.r, this is insuffcient to establish a deception as to unmarked foreign component parts unless the component may be reasonably considered a material fa.ctor incident tothe purchase of the assembled 'In Swift AnclCI.son, Ino. , et al. (FTC Docket No. 6818) the Commission ordered disclosure of the foreign origill of tbe imported movements (not the cases) of weatl!er Instr:\1111ents, and tlle imported lenses (not the framelO, holders Dr cases) of rending glasses, mag-niters and binocu)llis.

Otllp.r proceedings resulting- in similar or(\ers are many. but the following- arc t;rplcal of tho c ill which a. prod, lct com.ponent was imported and its foreign origin was not disclos(;d, PI"Oppel' JIanlltacturinr; COlnprtl1y, Inc' et al. 53 :B' C. 832 (Docket Ko. G665, 1957) . imported glass lJnl"els und plungers for domestic h ,poder)lic needles (consent order), Jlcn:lo' U Mllc/line Importing Gorp. , et al 51 F. C. 534 (Docket No. '6011 , 1\)50) (consent order) anel Sewing Machine alel! G01.POI'ation, et 01. (FTC Docket 1\0. 6149) ; im- IJortecJ ..cwing lJJRrhiJJP he,id (works) for domestic cablneti: WiWum .Adams l11C" et al. 53 F. C. 1164 (Docket No. 6570, 1957) alld ifetirne Cli.te;lj Corp., et (1/. (F'TC Docket No. 7292 , 1959): imported(l cutlery handles for domestic tol' EngIisl') b1.1Uls and tines.

Tfilld,"or 1-('11 COl"jJo/"tion, et al. 45 F. C. 811 (Docket No. ,5829 , 1-952) : J.imported I1ntomatic pcucil mechanisms for domestic bu,rreis. ..

SAVOY WATCH CO. , INC. , ET AL. 485 4i3 Initial Decision product or is of a. quality inferior to an American component a pur. chaser presumes he is getting the absence of disclosure. Regardless of the quality of product components it is common knowledge that the public has fixed ideas about the overall better quality of American products generally as compared to foreign products. In this connection, with regard to many products, the public relies upon the American manufacturer in assembling a product (e. , watches), to provide component parts, if foreign, that are not of quality inferior to thosewhich can be obtained in the American domestic market.' It inconceivable that a reasonably minded purchaser would be interested in knowing the origin of every component part of every type of machinery he might purchase unless the particular parts, concerning which he is knowledgeable, have a material relationship to nie quality of t.he product as a whole after assembly (e.g., the operating unit of a 'Ivatch as a part of the entire watch, a motor as a, part of an automobile, a transistor as a part of a radio, etc. ) or unless a foreign com pOllent is inferior to the American component, the pur c1lRscr presumes he is buying in the absence of foreign origin identification.

As ernphasized by the Federal Trade Commission in the SlOis8 IVatch case supra each merchandising situation must be considered on its own merits. It would appear to be a logical deduction from this concept that a disclosure of the national origin of a. component part is mandatory only in those cases where a failure to disclose would be of suffcient ma,teriality to induce a, sale which otherwise might not ha,ve been consummated. It is diffcult to believe tha,t a, reasonably minded purchaser would refuse to purchase a watch with which he \vas otherwise satisfied, because the watchcase "as manufactured in a foreign country including IIong Kong\ unless such component was of quality inferior to that usually manufactured in the domestic market in the United States for a comparable type watch, In the within case, there is no evidence of such inferiority. Furthermore, the evidence herein does not adequately establish in other respects the materiality of the disclosure of the national origin of respondents' watchcases or that such "\vatchcases represent the principal component a,nd the pa,rt \which makes respondents' watches valmtble to the consumer.

Even if the national origin of a watchcase should be of some materiality to a purchaser under' unusual circumstances, it would seem reasonable to expect that the purchaser s special interest ,vould induce him to seek identification of its origin by remov,d of the hack of the case in the absence of disclosure on the outside. 6 This is partieulariy applicable to name brand manufacturers. 1 Sce Heller v" Pederal 'l' ade Oommission 47 F. C. 34 , 45 ;1.,1 F. 2d, 956. 780-018--69-- 486 FEDERcAL TRADE, CmL'ImSION DECISIOXS Initial D ision 63 F.

Accordingly, since the Federal Trade Commission has jurisdiction and this proce",ding is in the public interest, the following order shall Issue:

ORDER It is ordered That respondent Savoy Watch Co., Incorporated, a corporation, through its offcers, directors, agents, representatives and employees, and respondents Arthur j\iner and Isadore S. Miler individually and as offcers of said corporation, directly or through any corporate device in connection with the offering for sale, sale and distribution of Ivatches or ot.her similar products, in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing that watches are guaranteed m1Jess the nature and extent of the guarantee and the manner in which the gnarant.or will perform thereunder are clearly a11l conspicuously disclosed.

. Hepresenting clirectly, indirectly, or by implicat.ion. t.hat their merchandise has been a(l\ ett.jsed in Life :.Iagazine, Reads Digest., Saturday Evening Post. :Magazine, or in any other magazine or publication, unless such is the fact. 3. llepresenting through the use of deceptiveJ)' arranged and printed advertising or promotional material, that their merchandise has been advertised in Life l\Iagazine Reader s Digest, Saturday Evening Post J\:Llgazine., or in any other magazine or publication, unless such is the fact.

4. Offering for sale or selling watches represented to be "water resistant" unless such 'watches are in fact water resistant. 5. Offering for sale or sening watches represent.ed to be "water. resistane! unless such watches are so constructed! and are of such a composition, as to provide protection against water or moisture to the ext€nt of meeting the test designated test number 2 of the Trade. Practice Conference Rules for the watch industry, a.s set forth in the Code of Federal RegulatioJls, Title 16, Chapter 1 part 170.2 (c) ; (16 CFR 170.2(c)).

6. Offering for sale or selling watches represent-ed to be "wat€r resistant': unle-ss such watches are so constructed, and arc of such composition as to be capable of immersion for at least three minutes in water at a pressure equivalent to a depth of 26 feet of \Yater under normal atmospheric. pressure of 15 pounds per square inch! without admitting or sho\Ylng any evidence of capacity to admit any moisture or water, and it is :SAVOY WATCH CO., INC. ) ET AL. 487 473 Order Further ordered That the charge relating to the offering for sale or selling watches containing watchcases manufactured in IIong Kong combined with other parts made in the United States and Switzerland, without clearly disclosing the Hong Kong origin of the ,yatchcases, is herein and hereby dismissed. ORDER :MODIFYING AND ADOPTING INITIA DECISro:s AND PROVIING FOR THE FILING OF OBJECTIONS TO PROPOSED FIN_-\L ORDER AND REPLY J"GNE 19 , 1963 This matter having been heard by the Commission upon the exceptions to the hearing examiner s initial decision filed by counsel supporting the complaint, and upon briefs and oral argument in support thereof and in opposition thereto; and It appearing that the only question raised concerns the examiner dismissal of the charge of the failure to disclose the foreign country of origin of watchcases in violation of the Federal Trade Commission Act; and The Commission having determined that the findings and conclusions in the initial decision are appropriate in all respects except as to certain findings and conclusions on the foreign origin issue; that the initial decision should be modified (a) in connection with the foreign origin issue and (b) in connection with various paragraphs of the order for clarification; and that the initial decision as so modified should be adopted as the decision of the Commission: it is ordered That the portion of the initial decision under the heading "Conclusions" llumbered4, beginning with the last paragraph on page 484 and ending with the second fun paragraph on page -1- I)e and it hereby is, stricken.

It is further ord,,' That the following new findings be, and they hereby are, included in the initial decision following finding numbered 20:

21. The record shows that many people care where a watchcase is from and prefer a watch with an American-made case. A !lumber of witnesses testified to this effect. The following are excerpts from pertinent testimony:

Witness Robert Dolan Q. Now, in purchasing a wristwatch, would you prefer one with an American made watchcase, or perhaps a Swiss made watchcase over one of the watchcases made in I-Iong Kong? A. I would prefer either one that' s either made-a Swiss-made watch or an American-made watch.

&) 488 FEDERAL TR'ADE' COMMISSION DECISIONS Order 63 F.

Q. One with a watchcase made in America! A. Yes. (R. 60.

W itness Irving Gerber Q. Does knowledge of the national origins of the component parts of a watch affect your opinion of the watch's quality! A. Yes.

Q. Do you prefer American made goods over those made in Hong Kong! A. Yes. (R. 206.

Witness8 Ann Mari Girven Q. Would knowledge of the national origin of the components of the watch affect your opinion of its quality! A. Yes. (R. lot.) Mr. Arthur Nathanson, part owner of Conde Watch Case Company, a large importer and seller of Hong Kong watchcases when asked why he did not stamp "Made in Hong Kong" on the outside of his cases, testified in part:

In short, an importer of Swiss watches who ha.s a Swiss move. ment which costs him seven or eight dollars and puts it into a Hong Kong case which costs him 25, 50 cents or even a dollar doesn t want the inference there that the entire product is manufactured in Hong Kong.

, were we to stamp it on the outside 'Made in Hong Kong there would defmiteJy be no sale of the item. " (R. 189-190. In this there is the clear implication that many consumers are interested in the place of origin of watchcases and that they prefer American-made cases over watchcases made in Hong lCong. It i8 further ordered That the following be, and it hereby is, included in the initial decision in part 4 of the conclusions following the last full paragraph on page 484, as follows: The watchcase is a component of the completed watch. It is however, a substantial and important component. It protects the watch movement from moisture, dirt and other foreign substances. The watchcase is also identifiable. It serves not only a specific and important function of protecting the movement but, as it is the part the customer mainly see, adds to the appeal of the product by its style and appearance. In the circumstances, the watchcase does not Jose its identity in the manufacture of the watch, but retains its essential characteristics as a foreign-made product. See L. Heller Son, Inc. , et al. v. Federal Trade Oommission 191 F. 2d 954, 956 (7th Cir. 1951). Moreover many members of the purchasing public prefer United States- SAVOY WATCH CO. , IXC. , ET A.. 489 473 Ordei made watchcases over watchcases made in Hong Kong and, in the absence of a reasonable disclosure 'Of foreign origin, would believe the watchcases to be of domestic origin.

It is concluded, therefore, that respondents' failure to mark the foreign place of origin on their watchcases has the capacity and tendency to mislead and deceive purchasers and prospective purchasers into the false and erroneous belief that such watchcases are of domestic origin. The aforesaid practice constitutes an unfair and deceptive act or practice in violation of the Federal Trade Commission Act.

1 t is further ordered That respondents may, within twenty (20) days after service upon them of this order, file with the Commission their objections to the changes in the order to cease and desist oontained in the initial decision, as shown by the following proposed order of the Commission, together with a statement of the reasons in support of their objections and a proposed alternative form of order a appropriate to the Commission s decision: PROPOSED ORDER It is ordered That respondent Savoy ' Watch Co., Incorporated, a c.orporation, and its agents, representatives and employees, and respondents Arthur Miller and Isadore S. .Miler, individually and as offcers of said corporation, directly or through any corporate or other de\Tice' , in connection with the offering for sale, sale and distribution of watches or any other products in commerce, as "commerce" is delined in the Federal Trade Commission Aet, d'O forthwith cease and desist from:

1. Representing, directly or by implication: (a) That their products are guaranteed, unless the nature and extent of the guarantee and the manner in which the guarantor will perform thereunder are clearly and conspicuously disclosed.

(b) That their watches or other products are advertised in Life, Reader s Digest, Saturday Evening Post or in any other national publication, when they are not in fact so advertised.

(c) That their watches are "water resistant " it being understood that respondents may successfully defend the use of such representation with respect to any watch, the case of which respondents can show wil provide protection against water or moisture to the extent of meeting the test designated test ?I o. 2 'Of the Trade Practice Conference Rules for the 490 FEDERAL TIMDE :rMIS'8IOX DECISIO:\S Final Order 63 F.

Federal Regulations, Title 16, Chapter 1 , Part 110.2 (C) (16 CFR 170.2(c)).

2. Offering for sale or selling watches, the cases of which are in whole or in part of foreign origin, without affrmatively disclose'1g the country or place of foreign origin thereof on the exterior of the cases of such watches on an exposed surface or on a label or tag affxed thereto of such degree of pennanency as to remain thereon until consummation of consumer sale of the ,vatches and of such conspicuousness as to be likely observed and read by purchasers and prospective purchasers.

It is further ordered That counsel supporting the complaint may, within ten (10) days after service upon him of respondents' objections, file a statement in reply thereto.

It is further ordered That the initial decision, as modified herein , and it hereby is, adopted as the decision of the Commission. By the Commission, Commissioner Higginbotham not participating by reason of the fact that this matter was argued before the Commission prior to the time he was sworn into offce. FINAL ORDER Pursuant to g4.22 (c) of the Commission s Rules of Practice, respondents were served with the Commission s decision and afforded the opportunity to file exceptions to the form of order which the Commission contemplates ent.ering; and Respondents lj,living not availed themselves of the opportunity exc.ept to the form of the proposed order to cease and desist, saiel order is hereby entered as the fial order of the Commission: 1 t is ordered that respondent Savoy Watch Co., Incorporated, a corporation, and its agents representatives and employees, and respondents Arthur J\i1er and Isadore S. Miler, individually and as offcers of said corporation, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of watches or any other products in commerce, as "commerce " is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing, directly or by implication: (a) That their products are guaranteed, unless the nature and extent of the guarantee and the manner in which the guarantor will perform thereunder are clearly and conspicuously disclosed.

(b) That their watches or other products are advertised in Life, Reader s Digest, Saturday Evening P08t or in any , ET AL. 491 DELAWARE WATCH OO IPA,.. , I 4i3 Syllabus other national publication, when they are not in fact so advertised.

(c) That their watches arc "water rcsista. " it being understood that respondents may successfully defend the use of such representation with respect to any watch, the case of which respondents can show wil provide protection against water or moisture to the extent of meeting the test designated test X o. 2 of the Trade Practice Conference Rules for the Watch Industry, as set forth in the Code of Federal Regulations, Title 16, Chapter 1 , Part 170.2(c) (16 CFR 170.2(c)).

2. Offering for sale or selling watches, the cases of which are in whole or in part of foreign origin, without a.ffrmatively disclosing the country or place of foreign origin thereof on the exterior of the cases of such watches on an exposed surface or on a label or tag affxed thereto of such degree of permanency as to remain thereon until consummation of consumer sale of the watches and of such conspicuousness as to be likely observed and read purchasers and prospective purchasers.

It is further ordered That the initial decision as modified by the Commission s order of June 19, 1963, be, aud it hereby is, adopted as the decision of the Commission.

It i8 further 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 manner and form in which they have complied with the order set forth herein. By the Commission, Commissioner Higginbotham not participating by reason of the fact that this matter was argued before the Commission prior to the time 118 was sworn into offce. Ix THE j):fA TTER OF DELAWARE 'WATCH COMPANY, lng, ET AL.

ORDER , Ol'lXroX ETC. , IN REGARD TO TUE ALLEGED VIOLATION OF THE FEDERAL TRADE co::nnSSION ACT Docl.:et 8411. Complaint, J1me 1D6. Decision, Aug. , 1963 Order requiring ew York City distributors ot watches to wholesalers, retailers and premium users, to cease attaching price tickets to their products find disseminating price lists, catalogs, newspaper and magazine advertisements, etc., which showed excessive amounts as usual retail prices i falsely representing their watches as "fully guaranteed" and "water re- 492 FEDERAL TRADE COMMr&SION DECISIONS Complaint 63 F.

slstant" ; failng to disclose that watch bezels finished in a color simulating silver, gold or stainless steel were actually composed of bae metal; nnd tailng to disclose that watches having the word "Swiss" on the dial were imported from Hong Kong.

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 the Delaware 'Watch Company, Inc., a corporation, A. Schwarcz & Sons, Inc" a corporation, and Steven Vogel and Leslie Shaw, individually and as offcers of said corporations, hereinafter referred to as respondent.s, have violated the provisions of the 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 Tespect as follows:

P ARAORAPH 1. The corporate€ respondents Delaware 'Watch Company and A. Schwarcz & Sons, Inc., ate corporations organized, existing and doing business under and by virtue of the laws of the State of New York, with their principal offce and place of business located at i\80 5th Avenue, in the city of New York, State of New York. Steven Vogel and Leslie Shaw are offcers of the corporate respondents. They formulate direct and control the acts and practices of the corporate respondents, including the acts and practices hereinafter set forth. Their address is the same as that of the corporate respondents.

Respondents are now aud for some time last past h. ve been engaged in the advertising, offering for sale, and selling of watches to wholesalm' , retaUers and premium users, for distribution to the public. PAR. 2. In the course and conduct or their business, respondents are now 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 New York to purchasers thereof located iu various States of the United States and the District of Columbia and maintain, and at all 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, 3. Respondents for the purpose of inducing the purchase of their products have engaged ill the practice of attaching or causing to be attached price tickets to their said products upon which certain amounts are printed. R.respondents have also disseminated or caused to be disseminated price lists, catalogs, brochures, lea.fets, newspaper and maga,zine advertisements and other rorms or advertising in which certain amounts ate show as retail prices or respondents' products. DE,LAWAR'E WATCH COMPAL'f IXC. , ET' AL. 493 491 Complaint Respondents thereby represent, directly or by implication, that said amounts are the usual and regubr retail prices of said products. truth and in fact, said amounts are fictitious and in excess of the usual and rcgu1ar retail prices of said products. P AU. 4. Respondents use such words and expressions as "guaranteed" and "fully guaranteed" in the advertising of their said products, thereby representing that said products are guaranteed by them in every respect.

PAR. 5. Said statements and representations were and are false misleading and deceptive. In truth and in fact, the guarantee provided was limited as to time and extent, moreover a service charge is made for repairs or adjustments which fact is not disclosed in respondents' advertisements.

PAR. 6. Certain of the watches offered for sale and sold by respondcnts are in cases which consist of two parts, that is, a back and bezel. The back part has the appearance of stainless steel and is marked stainless steel back". The bezel is composed of base metal other than stainless steel which has been treated or processed to simulate or have the appearance of precious metal or stainless steel. Some of the bezels are finished in a color which simulate silver or silver alloy or sta.in1css steel. Some of the bezels arc finished in a color simulating gold or gold alloy. Said watchcases are not marked to disclose that the bezels are composed of base metal or metal other than stainless steel.

The practice of respondents in offering for sale and sellng watches the cases of which incorporate bezels composed of base metal which have been treated or processed to simulate or have the appearance of precious metal or stainless steel as aforesaid, without disclosing the true metal composition of said bezels, is misleading and deceptive and has a substantial tendency and capacity to mislead members of the purchasing public to believe that said bezels are composed of precious metal or stainless stel.

PAR. 7. Respondents in the course and conduct of their businesb for the purpose of inducing the sale of their said watches have caused watchcases the wordsand now cause to have marked upon their water resistant" and have advertised certain of their watches as water resistant". In truth and in fact said watchcases are not water resistant.

PAR. 8. Certain of the watches offered for sale and sam by respond. ents are in cases imported from Hong Kong. W'hen delivered to respondents' customers for resale sa.id watches have the word " Swiss on the dial. There is no disclosure of the fact that the watchcases are imported from Hong Kong.

494 FEDERAL TRADE' COMMISSION DECISIONS Initial Decision 63 F.

The practice of respondents in offering for sale and selling watches the cases of which are imported from Hong Kong, as aforesaid without disclosing the country or place of origin of said watchcases is misleading and deceptive. In the absence of a disclosure of the country of origin of said watchcases, the public understands and is led to believe that the said cases are either of domestic or Swiss origin. There is a preference on the part of many persons in this country for watchcases of domestic and Swiss origin over watchcases manufactured in Hong Kong.

PAR. 9. Through the use of the practices hereinabove set forth respondents place in the hands of watch dealers and retailers a means and instrumentality whereby such dealers and retailers may mislead and deceive the purchasing public as to the regular and usual retail prices of their watches; the source or origin of their watches, the metal composition and the capacity to resist moisture of watches sold by them.

PAl. 10. The use by respondents of the false, misleading and deceptive practices hereinabove set forth and the failure to disclose the true origin and metal composition of their watchcases had and now have the capacity and tendency to mislead and deceive members of the purchasing public in the manner aforesaid and thereby to induce them to purchase respondents' watches. As a consequence thereof trade in commerce has been unfairly diverted to respondents from their competitors and injury has thereby been done to competition In commerce.

PAR. 11. The aforesaid acts and practices of respondents as herein alleged were and are aU to tbe prejudice and injury of the public and of respondents' competitors and constituted and now constitute unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

ilfr. Harry E. Middleton, Jr. supporting the complaint. Mr. Harvey M. Lewin of Ne"D York, N. for respondents, INITIAL DECISION BY MAURICE S. BUSH, HEARING EXAMINER APRIL 27 1902 The compbint herein, issued on (June 1 , 1961 , charges the abovenamed respondents, \vholesalel's of \vatehes, with certa.in acts and practices in violation of Section 5 of Federal Trade Commission Act. More specifically, the complaint charges the respondents with the following illegal acts and practices: (1) Showing prices on both the price t.ags which respondents attach to their watches prior to sale DELAWARE WATCH COllfPA. , IXC. , ET AL. 495 481 Initial Decision Rnd on advertising material on such watches in excess of the usual and regular retail prices of said watches; (2) Representing in their advertisements through the use of such expressions as "guaranteed" and "fully guaranteed" that their watches are guaranteed in every respect, whereas the guarantee provided was limited as to time and extnt and also made subject to a charge for repairs or adjustments not disclosed in respondents' advertisements; (3) Misleading the purchasing public into beEeving that the bezel (i. frontsJ of certain watchcases in which respondents' watches are incased arc composed of precious metal or stainless steel whereas they arc made of base metals which have been treated or processed to simulate precious metal stainless steel; (4) Representing that certain of their watches are water resistant", whereas they are not in fact water resistant; (5) Misleading and deceiving the purchasing public into beEeving that certain of the watchcases in ,which they enclose their ,,' atches are m"de in either Switzerland or the United States because the dial of the watch movement put in such cases carries the word "Swiss" and because the ,vat.chca-se carries no disclosure of the country of origin of the, watchcases.

Respondents in their joint answer take issue with the abovedescribed charges.

Heating was held in New Y ork, 1\ ew York, ove-r a period of six days between October 31, 1961, and February 1, 1962. Thereaftr proposed findings of fact and conclusions of law, together with rea- EOns or brief in support of the proposed findings of fact and conclusions of law, were filed by the p"rtics. These have been carefully reviewed and considered and such proposed findings and conclusions which are not herein adopted, either in the form proposed or in substance, are rejected as not supported by the record or as involving imt 1aterial matters. The facts hereinafter set forth are based on the entire. record.

General Bac1'Or01tnd Facts and Special Facts Be Delaware Watch Oompany, Inc.

Hespondents, Delaware .Watch Company, Inc., and A. Schwarcz & Sons. Inc., hereinafter sometimes caned DVVC and Schwarcz, respeotively, are corporations, organized and doing business by virtue of the laws of the State of New York with their offce and principal place of business located at 580 Fifth Avenue in the city of New York, State of New York. Respondents, Steven Vogel and Leslie Shaw, hereinaft"r sometimes called V agel and Shaw, respectively, are offcers of the corporate respondents. They formulate, direct, and conrrol the acts and practices hereinafter set forth and their address 496 FEDERAL TRADE COMMISSION DECISIO?-,S Initial Decision 63 F.

. the same as that of the corporate repondents. Vogel and Shaw re responsible, individual.Ily and as offcers, for the acts and practices of the corporate respondents.

Respondents are now and for some time last past have been offering for sale and selling watches to wholesalers and retailers for distribu. tion to the public. In the course and conduct of their business respondents are now, 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 New York to purchasers thereof located in various StateB of the United States and maintain, and at all 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.

Respondent A. Schwarcz & Sons, Inc., which as noted is sometimes herein referred to as Schwarcz, was organized as a New York corporation in or about the year 1948 as a Successor to a partnership which had operated under the name Of A. Schwarcz & Sons. Respondent Delaware ", atch Company, Inc., which as noted is somet,times herein referred to as D1VC, was organized a a New Yark corporation on ovember 30, J 960. It is not a Successor to any prior firm. Not to be confused with respondent DIYC, the Delaware 'Watch Company is a New York partnership organized in about the year 1848: it. is not a respondent in this proceeding. 11 at to he confused with either the said partnership or DIYC, the De.lware 'Watch Company of the Virgin Islands, Inc., hereinafter caned Virgin Islands Company, is a corporation organized under the laws of the Virgin Islands in the early part of 1960. The Virgiu Islands Company is also not a respondent in this proceeding. The Virgin Islands Company, like Schwarcz, DIVC, and Delaware 'Watch Company (the partnership), is under the direction and control of Vogel Rnd Shaw. Schwarcz owns all of the outstanding shares of stock of DIVe and the Virgin Islands Company. The partners in Dej:ware 1Yatch Company are the aforementioned Steven Vogel and Leslie Sha w who as seen direct and control Sch"\varcz. The business address fmd place of business of DvYC and the Delfnvare watch Company (partnership) is the same as that of Schwarcz.

The Virgin Islands Company is engaged )11 the business of assembling and selling watch movements. No trade na.me is st.amped or printed on the dials of the watch movements it assembles and the movements are sold without watches-ases. It sells about one- half of its production to Schwarcz and the other half directly to other customers in the United State.

DIVC, in the joint answer of the respondents herein, prepared by respondents' counsel of record who has had long familiarity with the DE' LAWAREl WATCH COi\IP&\ INC. , ET AL. 497 Initial Decision491business affairs of respondents Steven Vogel and Leslie Shaw, admits that it is "now and for some time last past have (hasJ been engaged in the advertising, ofiering for sale, and selling of watches to wholesalers, retailers and prelniul1 users, for distribution to the public. Notwithstanding this admission, the uncontradicted testimony of Leslie Shaw, offcer and principal stockholder of D"\VC, shows that the sale business function or operation of DvVC since the date of its incorporation has been and is to clear such merchandise through customs as has been and is being shipped by the Virgin Islands Company to the United States and to forward such merchandise to their consignees in the United States as designated by the Virgin Islands Company and that DWC has not at any time engaged in the sale or offering for sale of watches. By virtue of the findings made in the paragraph next below, it is not necessary to resolve this conflict of evidentiary fact in the record.

No evidence has been presented by counsel supporting the complaint and no evidence otherwise appears of record to support the charges made in the complaint against D\VC. It is accordingly found that there is a complete failure of proof with respect to the charges made against respondent D'\VC ill the complaint in this proceeding. A motion by respondents' counsel to dismiss the complaint with respect to DWC will be disposed of below. Schwarcz sells watches with various trade names imprinted on the dial of the watch, one of these being "Delaware . The only connection of the partnership Delaware 'Watch Company (as seen not a respondent herein) with the issues in this matter is that the written guarantees given by Schwarcz on its watches bearing the imprint Delaware" are issued under the naHle of the said partnership. The reason for this is the desire on the part of respondents Vogel and Shaw, the individual respondents who control corporate Schwarcz to have it appear for "aesthetic" reasons that watches marked "Delaware" are guaranteed by a company bearing the same name. Schwarcz comn1enced the use of the name "Delaware" on watch dials in about the year 1948.

Dismissal As To DWO At the conclusion of the hearing herein, DWC moved for a dismissal of the complaint with respect to it on the ground that no evidence was presented to show that it was engaged in any of the ilegal practices and acts charged in the complaint. A finding having been made above that there is a complete failure of proof with respect to the charges made against respondent D"\VC in the complaint, the motion 498 FEDERAL TRADE C01n.nSSIOX DECISroXS Initial Decision- 03 F.

is hereby granted and the dismissal of the complaint against DWC will be further reflected in the order below. Hereinafter all collective references to "respondents" wil mean all respondents except DWC.

Pre ticketing Issue It is established by the stipulation of the parties that the respondents have for many years attached tags to watches sold by them to their dealer-customers, showing a printed retail price intended to be exhibited to the ultimate consumer-customer and to remain attached to the watch at the time of sale to said customers. More partioularly, the evidence shows that the price tags are inserted by respondents in a conspicuous position in the decorative boxes in which the watches are sold by respondents. This practice of inserting price tags with respondents' merchandise win hereinafter be referenced to as " preticketing One of respondents' numerous customers of its preticketeeJ watches is Alben Jewelers of Newark, New Jersey, a retail jewelry store located in the downtown or loop area of Newark. Newark with. population of about 400 000, together with adjacent or nearly adjacent suburban towns, c.constitutes an independent trade area. Alben .Jewelers under an invoice dated 1farch 30, ID58, purchased 19 watches from Schwarcz. The invoice shows that the pureha. included a watch box for each of the watches invoiced on the invoice. The invoice also shows that the merchandise was delivered "Via P "I" (Tr. 737) which is found to mean that the merchandise was picked up in person at Schwarez' place of business in N ew York City by representative of Alben Jewelers and that it was not sent by mail or by public or private conveyance by respondents to Alben s place of business in Newark. The fact of delivery in person of these watches by Schwarcz at its place of business in New York City to a representat.ive of Alben Jewelers is also shown by oral evidence. Included in the aforcmentionecl19 watches were a "Delaware" 17jewel ladies' wristwatch and a "Delaware" 7-jewel wristwatch, biled to Alben Jewelry at a cost of $10.50 and $6. , respectively. The two watches in the order named were received in evidence as CXs Iand 2-A. Alben sold both of these watches at its place of business in Newark to a representative of the Commission on September 5, 1958. At the time of the sale of the 17-jewel watch to the Commission representative, it bore Schwarcz s preticketed price tag of $39. including Federal tax; this watch was sold by Alben to the representative for a price of $17, exclusive of Federal tax. At the time of DELAWARE WATCH COMPA , IXC. , ET AL. 499 491 Initial Decision the sale of the 7-jewel watch to the Commission s re-presentative, it bore Schwarcz s preticketed price tag of $19. , with no indication as to whether Federal tax was included; this watch was sold by Alben to the representative for a price of $12. , exclusive of Federal tax. Federal tax was charged by Alben on the two wristwatches as the sale was to an agency of the Federal government. The oral evidence establishes that Alben s normal markup on watches above their cost is substantially less than the markup reflected on the two Schw&rcz preticketed price tags described above.

:\0 evidence was presented by counsel supporting the complaint as to the "usual'! and regular retail prices" of the two watches under can. sideration, or watches of similar grade and quality, in :Newark or elsewhere. The record is also otherwise barren of any evidence of the l1.sua.1 and regular retail prices on the watches in question or watches of similar grade and quality in the city of Newark. As part of its defe,llse, respondents sought to show through dealers of its watches in ;:18 cities of Passaic, Pnterson, and New Brunswick, New Jersey, the usual and regular prices of the described watches in those communities. This evidence, although showing in part that respondents' preticketed price tag of $39.95 on the described 17 -jewel watch reflects a price in excess of the usual and regular retail price on said watch in one of the above. specified cities, is not deemed relevant on the issue under consideration because each of these cities are fairly large towns located considerable distances from Newark and each constitutes a trade area in itself. It is accordingly found that the cities of Passaic Paterson, and Nmv Brunswick a,l'e not part of the trade area of Xewal'k.

Discussion and Oonclusions The jssue here under c.consideration is the first count of the complaint cllRrging respondents ,,,ith preticketing its merchandise with fictitious retail prices. Counsel supporting the complaint has based his case on this issue on the sale of the two described preticketed Schwarcz watches to a :Newark retail jewelry store at retail prices substantially Ie-55 t.han the. prcticketed prices. Under Section 5 of the Act one of the required elements of proof is the establishment of the jurisdictional fact that the two watches in question were initially in "commerce:' within the meaning of the Acl 1 Section'" of the Act reads: "'Commerce' mean!' commerce among tile several States or with foreign nations, or In any Territory of the united States or in the District Columbia, or between any such Territory and another, or between any such Territory IIDU any States or foreign Dation. or between the District of Columbia and any State or Territory or foreign nation.

500 FEDERAL THcADE CO::IS:SION DECISIO?\'lS Intial Decision 63 F.

Respondents in their joint answer have admitted the following commerce" allegation of the complaint:

In the course and conduct of their business, respondents are now and for some time last past, have caused their said products when sold to be shipped lrom their place of business in the State of New York to purchasers thereof located in various states of the United States and the District of Columbia and maintain. and at all times mentioned herein, have maintained a substan Uni course of trade in said products, in commerce, as "commerce" is defined in the Federal Trade Commission Act.

Respondents are wholesalers, &nd wholesalers more often th&n not are eng&ged in both intrastate and interstate commerce. Respondents' general admission that they are engaged in interstate commerce (ac. tually, as seen, the pleadings properly use the statutory term "commerce ) does not relieve counsel supporting the complaint from the necessity of proving that the specific instances of the acts 'and practices he is relying on to establish his case are acts &nd practices in interstate commerce.

In the inst&nt case the "commerce" evidence relating to the two wristwatches fails to show that "respondents have caused their said products (the two watches in questions when sold to be shipped from their place 'Of business in the State of New York to purchasers (here Alben JewelersJ thereof located in various States of the United States " (in this instance the State 'Of New JerseyJ. On the contrary it has been found &nd the evidence shows that the two w&tches were picked up in person by a representative of the Newark dealer at respondents' place of business. This in our opinion constitutes intrastate commerce as distinguished from "commerce" as defined in the Act. Accordingly it is our conclusion that the two watches here under consideration were never in "commerce': within the meaning of the Act. It, therefore, follows that the complaint on the count here under consideration must be dismissed due to the fatal lack of proof of the jurisdiction&l requirement of "commerce Although the aforementioned jurisdictional defect disposes of the charge here under consider-ration, it is our opinion that the case. in. chief presented in support of the complaint suffers a second defect which in itself would &lso require a dismissal 'Of the charge here involved. One of the essential elements of proof required under the complaint and applicable law is proof that respondents' preticketed prices on the two involved watches were not "the usual and regu&r retail prices of said products" but were, on the contrary, in the language of tbe complaint, "In truth &nd in fact * * * fictitious and in excess of the usual and regular retail prices 'Of said products." The phrase "usual and regular retail price" of a commodity has been in- DELAWARE WATCH CO:MA."'"' , INC., ET AL. 501 Initial Decision401terpreted to mean the usual and regular retail price of the commodity i8 made. Thewithin the trade area or areas where the representation Ba1tirnore Lng,gage G01npany v. Fede1Yll T1'tde G01nrni88ion 296 F. &D. 251J ce,'t. denied April 23, 1962.2d 608 (4th Cir. 1961) (7 S. The Court in this opinion cites and indicates approval of Commission orders in other cases requiring certain named defendants therein to cease and desist from preticketing their merchandise with a retail price " '-in excess of the price at which such product is usually and customarily sold at retail in the trade area or areas where the representation is ?nade. (The emphasis here shown was supplied by the Court. ) In the insta,nt case the record is completely barren of any evidence as t.o the "usual and regular retail prices:' of the two watches in question or of watches of similar grade and quality in the trade area of Newark, New Jersey where the preticketed merchandise was being offered for sale. The only evidence of record with respect to the prices at which the watches were being sold in Newark were the prices at which they were sold by a single Kewark dealer, Alben Jewelers. Since the city of )f ewark with a population of over 400 000 must have llitny retail jewelry stores selling watches similar, if not identieal, to those -involved here, it follows that the selling prices of only one retail store on the two involved watches is incompetent for the purpose of establishing the "usual and rcgula-r retail prices" of the said watches in the Newark trade area. Thus, if for no other reason tho charge of the complaint here under consideration must be dismissed for failure of proof of the ' usual and regular retail prices" of the two involved preticketed watches or their equivalents in the ?\ ewark, New .J ersey trading area.

Although the record suggests that respondents have been engaged in the prevalent practice of a substantial portion of the industry, of preticketing watches with fictitious retail prices (see statement as to the prevalence of this practice by petitioner-watch company in The Clinton Watch Company v. Federal TrlJle Commission 291 F. 2d 838 (5th Cir. 1961) (7 S. & D. 184J ce"t. denied July 18 , 1961 , due process requires that this be proved by competent evidence. GnaTCtntee 1 SSlte Since on this issue respondents in their proposed fmdings and brief in effect admit the cbarges of the complaint and since no defense on the issue was presented at the hearing the findings of fact thereon ,yin follo\y the JallbTuage of the complaint. Respondents use such words and expressions as "guarantep,d" and "iuDy guaranteed" in the advertising 'Of their products, thereby rep T80-018-6\)-- 3::

502 FEDERAL TRADE, CO lmission DECISIONS Inital Decision 63 F.

resenting that said products are guaranteed by them in every respect. Said statements and representations were and are false, misleading and deceptive. In truth and in fact, the guarantee provided was limited as to time and extent., moreover a service charge is made for repa,irs or adjustments which fact is not disclosed in respondents' advertisements.

The oral evidence also establishes, as heretofore noted, that the written guarantees issued by Schwarcz on the watches sold by it bearing the trade name "Delaware" are issued under the name of the partnership, Delaware 'Watch Company, a related company. Similarly watches sold by Schwarcz under the trade names of "Delgard" and Genoveva" are also guaranteed under the name of Delaware \Vateh Company. The guarantees referred to in this paragraph are the guarantees" described in the complaint and described in the paragraph next above. As mentioned earlier the Delaware Watch Company, the partnership, is not a respondent in this proceeding, but the partners thereof, Steven Vogel and Leslie Shaw, are respondents herein individually as well as in their capacities as offcers of the two corporate respondents herein.

Respondents in their brief concede that an order may be entered on the guarantee issue as follows: ''It is ordered that A. Schwarcz & Son Inc., and Leslie Shaw and Stephen Vogel, as offcers and directors do forthwith cease and desist from representing, directly or indirectly, that the watches it offers for sale or sells are guaranteed unless and until the nature and extent of the guarantee and the manner in which the guarantor will perform thereunder are clearly and conspicuously disclosed'" * * The only substantial difference between the foregoing proposed cease and desist order and the proposed order of counsel supporting the complaint on the issue here under discussion is that the former excludes DvVC from its operation, whereas the latter is made to run against D,VC as well as all other respondents named in the complaint. Tho order to be entered herein on the gua-rantee issue win be issued against all respondents named in the complaint except DvVC. DWC will be excluded from the order because, as heretofore noted. the complaint wil be dismissed against DvVC because of lack of proof that it was engaged in any of the illegal pra,ctices and acts charged in the complaint.

BczeUI etnl Content issue lJncler this issue the complaint charges respondents with misleading and deceiving the purchasing public into believing that the bezels (i.e.. the rim holding a, watch crystal in its setting) of cert,ain of their DELAWARE \VATCH lpa.\TY IKC. , ET AL. 503 491 Initial Decision watchcases arc composed of precious metal or stainless steel, whereas they are in fact made of base metals which have been treated or processed to sinlulate precious metal 'Or stainless steel. The facts as admitted by respondents in their joint answer are as follows. Certain of the watches offered for sale and sold by respondents are in cases which consist of two parts, that is, a back and bezel. The back part has the appearance of stainless steel and is marked stainless steel back". The bezel is composed of base metal other than stainless steel which has been treated or processed to simulate or have the appearance of precious metal or stainless steel. Some of the bezels a.re finished in a color which simulates silver or silver alloy or stainless steel. Some of the bezels are finished in a color simulating gold or gold alloy. Said watchcases are not marked to disclose that the bezels are composed of base metal or metal other than stainless steel. Commerce" with respect to the practice by respondents shown in the above paragraph is admitted by respondents in their joint answer. Sample watches in evidence on the issue herb under discussion are exs 2-A, 8- , and 9-A. CX 2-A has a base metal bezel which is finished in a color simulating gold or gold alloy. CXs 8-A and 9have base metal bezels which simulate silver or silver alloy or stainless steel. Although the issue of " commerce" with respect to each of these sample watches is not deemed particularly pertinent for the reasons set forth in the "Discussion and Conclusions" below, the facts with reference to the "commerce" of each of the said sample watches may have some value on review and as an aid in following the discussion and accordingly a finding with respect to the "commerce" of each of said watches are noted below. As seen, CX 2-A has heretofore been found to be not in "commerce . CX 8- , being part of the same group of 19 watches purchased under a single invoice which were picked up in person by a Kewark jewelcr at respondents' place of business in Kew York City, is also found not to be in "commerce ex 9- , on the other hand, is found to be in "commerce . (Tr. 21- , 736-737; CXs 11 and 13.

Offcial notice waB taken at the hearing herein of certain facts pertinent to the issue here under consideration. Pursuant to this offcial notice, it is found that an examination by an unskiled COIlumer of the watchcases described in the paragraph next above as having the appearance of gold or gold alloy, as typified by CX 2-A, would not disclose whether the watch case bezels are composed of rolled gold plate, gold filled, gold electroplate, 20 or 10 microns of gold, anodized aluminum, or polished brass. Similarly pursuant to the said offcial notice, it is found that an examination by an unskilled consumer of the watchcases described in the paragraph next above as having the 504 FEDERAL TRADE COMlvIlSSIOX DECISIOj\TS Initial Decision 63 F.

appearance of silver, silver alloy or stainless steel, as typified by CXs A and 9- , would not disclose whether they are composed of white gold, silver, stainless steel, chromium plated metal, polished aluminum, or any other metal. In accordance with the same mentioned offcial notice, it is also found with respect to the watches described in the sentence next above that a substantial portion of the purchasing public would be led to believe that such watchcases are white gold silver or stainless steel.

In addition the evidence shows that an ordinary consumer, a journeyman painter in the employment of the State of New York, was misled and deceived from an examination of respondents' watches at the hearing herein into believing that the bezel of one of the watches with the appearance of gold but actually without any gold content (CX 2-A), was made of rolled gold or gold plating, and that the bezels of two other watches, with the appearance of stainless steel but actually without any stainless steel content (CXs 8-A and 9-A), were made of stainless steel.

The only rebuttal offered by respondents with respect to the aforementioned offcial notice and consumer testimony was the testimony of a number of respondents' retail jeweler- dealers to the effect that in their experience consumers \were not misled by the appearance of the described base metal bezels into believing that the said bezels were made of something other than their actual metal contents. This testimony, being largely self-serving, is rejected as not having substantial probative value.

Independently of the aforementioned consumer testimony in support of the complaint and the above-described offcial notice which under the Commission s Rules of Practice for Adjudicative Proceedings requires that opportunity be given the party adversely affected by the offcial notice to present rebuttal evidence, the examiner finds from his own examination of the bezels here under consideration that the bezels per 8e suffcient)y demonstrate their capacity to deceive. Discussion and Conclusions On the basis of all the evidence of record, it is found that the practice of respondents in offering for sale and sellng watches, the cases of which incorporate bezels composed of base metal which have been treated or processed to simulate or have the appearance of precious metal or stainless steel as aforesaid, without disclosing the true metal composition of said bezels, is misleading and deceptive and has a substantial tendency and capacity to mislead members of the purchasing public to believe that said bezels are composed of precious metal or stainless steel.

DELAWARE 'WATCH COMPA , INC., ET AL. 505 Initi l Decision491The above ultimate finding of fact and law is in accord with the decision and opinion of the Commission in the Theodore Kagen Oorp., No. 6893, F. , Nov. 19, 1959 aff' d per curiam 283 F. 2d 371 (6 S. & D. 837J (D.C. Cir. 1960), in a matter involving the same issue here under consideration and under a set of facts substantially similar to that involved in the instant case. The practice here involved was so compreheusively discussed by the Commission in the Kagen case as to require but little more than a reference to it here. The following quotation from the opinion 'Of the Commission in the Kagen case is significant here:

'" '" '" Where the exhibits themselves suffciently demonstrate their capacity to deceive, neither customers who ba,e actually been misled nor experts need be called to testify. Zenith Rad.io Corporation v. Federal Trade Commis sion, 143 F. 2d 29 (7 Oir., 1944) ; Royal Oil Corporation v. Federal Trade Commission, 262 F. 2d 741 (4 Oil'" 1959). Representative samples of resp.ondents' watch cases were received into the record. The bezel is a prominent component of the case and of the finished watch. Our own examination of those exhibits confirms that the bezels many of respondents' watch cases are to all appearances composed of precious metal. We have no doubt that a substantial segment of the watch buying public would find it impossible to distinguish such bezels from those made of precious metals. In these circumstances, the fact that the backs are disclosed as being base metal 01' that no karat markings appear on the cases is immaterial.

AltllOugh QUL' cone1nsion in t.he instant matter that the practice under consideration is misleading and deceptive- is based on all the evidence of :!'f:corcl on the issue, the same conclusion could be rea.ched solely on the. basis of the facts as e.stab1ished by the pleadings \\"which leave for decision only the conclusion to oe drawn therefrom. N otwithstanc1ing the fact that the evidence under the metal content 1issue and the fictit.ious price preticketing issue. (dealt wit.h in an earlier section) i1n"01\'es two \yatch exhibits which have been found riot to be in " c.omn1erce \ the finding of "commerce, : wit-,ll respect. to the metal content. issue and the finding of no commerce:: \with respect to the fjctitiou price issue: although seemingly inconsistent. ald not in fact inconsistent. The two ,vntches referred to are CXs 2and 8-A. Commission s ex 2-A is in evidence under both issues; ex is in Byidence only under the metal content issue; but both of these \vatch-exhibits hate been found to be not in " commerce . However, on the metal content iESlH: , the evidence, in addition to ex 2includes a. ,yatch re,ceived in evidence as ex 9-A. Since the latter was specifically found to be in "commerce \ it sllffciently supplies the jurisdictional "eommercc" element required under the metal content issue t.o sustain the cea.se and desist order rendered thereunder as set forth in the final portion of the instrmt initial decision. 506 FEDERAL TRADE' COML\IISSTON DECISIOXS Initial Decisioll 63 F. But it will be noted that our findings also contain another basis for the finding of "commerce with respect to the practice invo1\ ed in the met.al c.content issue. This other b,leis consists of certain admissions hy respondents in their pleadings heretofore stateel but again indicated below for the convenience of the reader. \Vhile neither or 'Ofthe two bases are necessarily entitled to priority, our treatment the findings of fact above gives priority or mention, and greater emphasis, to responclcnts said admissions because they are in our opinion capable of disposing of the issue of (:commerce." without any necessity rar reliance on physical 'iyatch e:shibits and transportation documents thcrcon for the est.ablishment. of ;:commerce . For this rea on the one watch exhibit (CX 9-A) received in evidence under the l1etr.J content. issue has been mentioned llimost p renthetically on the issue of "commerce" in the findings of Tact flbove. The, aforenw,ntionec1 admissions by respollclfmts are two in number. The first is the general ac1mis:3ion of :; commercp," made in respondents joint. rmswer. The second is the a,clmission of the practice involved under t.he metal content. issue. The most significant sentences in the lat.ter are, the following: "The bezel is composed of base metal other than st.flinJess steel which has beell tre.ated or processed to simulate or steel. Some of thehare the a,')lH:aia;lci~ of j')'(;City3 metal 01' stai.nless be, ls are finished in a color \\hic.h simulates silver or saver alloy stainless steel. Some of the bezels are finished in a color simulating gold OJ' gohZ alloy. Said watchcases are not marked to disclose that the bezels arc composed of base metal or meta) other than stainless steel" (Emphasis supplied. ) It is obvious that the general admiss10n of ncommeTce" in the joint answer must necessarily relate to the "pract.ices)) admitted and set forth in the above sentences as there is nothing in the ans\ver to indic,ate a contrary intention. Accordingly no physical exhibits (watches) are really required to prove "commerce," under the metal content. issnc. :JIoreover, the pleadings as revealed abm-e set forth the facts so completely that the issue thereunder could have been submitted solely on the basis of the pleadings. l:nc1cr fhe circumst.ances, the true function of the watches (physical Jnerely to serve exhibits) in evidence under the metal content issue is as supplementary cyic1ence of a visual character from which conclusions can be and we.re drawn by the examiner and the one consumer wit.ness testifying in support of the complaint on the question of whethpr the involved practice is ': misleading and deceptive and has a sl1bstflntial tendency and capacity to mislead members of the purchasing public to believe that said bezels are composed of preciolls metal or tainle,ss steel."

..

DELAWARE' E \VATCH COMPA..1\fY , I:\C. , ET AL. 507 491 Initial Decision On the other hand the situation in the fictitious price preticketing issue with respect to the "commerce" element is quite different. The distinction between the situation in the metal content issue and that in the fictitious price prcticketing issue is that in the lotter we do not have admissions of the challenged practice as we do in the former. A11 we have under the fictitious price pretickoting issue is a gene.ral admission of "commerce" plus aJl admission by stipulation that respondents have been engaged in the practice of pl'eticketillg their merchandise. It should be noted that there is a "ast difference bet.ween mere pretieketing and fictitious price preticketing. Preticketing in and of itself is not yiolatinj of the Act. To be so the preticketing must be of a particubI' kind, namely, preticketing with fictitious retail prices. The burden of the complaint is that respondents are charged with fictit-io' us retail price pretickcting, not mere preticketing. Respondents have nowhere in the record admitted the charge of fict.itious price pret.icketing and "commerce') in connection with such practice. The most they have rtc1mittecl is that they have preticketecl their ,vatches and p1,lced t.hem in commerce; t.these trio element.s, each Loing lawful, in combination are not violative of the A.. ct. Consequently the double burden of p!' oof on counsel supporting 1118 complaint is to 8hmv (a) fictitious price preticket.ing and (b) commerce" with respect to such practice. But on the metal content i.s as seen both t.he challenged practice and the "commerce: \"\ele COJlcec1cd by respondents in their pleadings. 1Vater Resistant Issue On this is:me, the complaint charges that respondents in the course and conduct of their business for the purpose of inducing t.h2 sale of their wat.ches have crtused and nO\ cal1SQ to have marked upon the.ir \YftJcl1cases the \':ords " water resistant" and have advertized certain of their watches a,s " ,yater resistant, whereas in truth and in fad the ,yatehes so marlmcl are not "\Yftter resistant, Hesponclents hy the.ir P.lls\'icr admit that they have sold and the reccrd shows that thpy sell \vatc.hes inscribed with the phrase "wf1ter lTsistanC. The record al o d.ows t.hnt. l'c3pondents supply adverti3ing mats in which m:ln - of their "'- (1,tehes are de eribecl D.S ;'-\,after r('5ishl.r,l . The phrn;:e " ,tter 1'8::ist mt ill be shown in qnota.tioll.': hcl. cinartP!' ' h?1"c,,-(:l' llC'C'C'2SfU'Y to ilHlica.t.e t.hat Ollr ilHj1l1ry is as to the truth of the l'epl'est'ntat, ion indietlted by the phrnse. The evidence. sho\',s t1Ult. on Octoh ' 1(\ IfJGO , a. l'('lJl'C'S( arive of dw. Fe.cleral Trade Commission pnl'Ch:1Sf'ct ;1- ladies whiteC'- metal ' 'i'list- \yarch j rom the nforementiClJC'd Albp1l3 !Jewele.rs, of ::2work 508 FEDERAL TRADE COMMIS' SIO DECISIOSIS Initial Dedsion 63 P.

Jersey, for a price of $20, exclusive of Federal tax. This watch was received in evidence as ex The back of the watchcase of the w::tch carries the inscription "1Vater-Resist.ant'\ among other inscriptions not here material. Albens had acquired this watch by purchftse in commerce as heretofore indicated from Schwarcz. after purchase from Albens, the same Commission representative prcparatory to taking the watch to a testing company for testing its .Vater-Resistant" quality.y, took the watch to Jean Felber, a watch expert whose specific experience in watchmaking wil hereinafter be set forth, for the purpose of having him inspect the watch, by opening and closing it, to make certain that the watch was properly put together "in the way and manner it would be closed and done in a factory, so that the watch could then be submitted for test of its water-resistant quality. Having made this inspection (in the presence of Commission s representative) to his satisfaction that the watch was in the condition it should ordinarily have been when it left the factory, Felber returned the watch to the Commission representative who immediately the-reafter took the ",yatch to an independent testing laboratory with instructions for testing pursuant to " Test No. 2-For 'Yator Resistance or 'Water Repellancy" as set forth in the Commission Trade Practice Rules" as promulgated on April 21, 1917. The test was made by the testing company and the watch, CX 9failed to meet the test.

It is est.ablished from the testimony of watch expert Felber that it is very diffcult to make a watchcase of the type of construction used U'i in ex water-resistant. Felber testified in part as follows: the crown tube (of CX 9-AJ is made so (the construction of the crown tube of ex 9-A is described below J that it can hardly be * * * water resistant. The lodging of the 'water resistant gasket is made so that it is very diffcult for the case back to fit properly on it and make it water resistant." Felber s experience .as a watch expert includes four years as a student at a watchmaking school in Switzerland, four years experience as assistant to the head technician at a large watch movement factory in Switzerland, four years as head watchmaker in York City for the Vulcan Cricket Alarm .Vristwatches of Switzerland after six months of preliminary training in the Vulcan factory in Switzerland, three years as a head watchmaker in New York City for the agency offcc of the Mido 'Watch Company of Switzerland and its successor, the Mido Watch Corporation of America, and approximatdy the past five years in the operation of his own watch se.rviee primarily for various Swiss watchcompanies in connection with guara.ntees issued by them on their watches. His work for the Vulcan firm involved the casing of Vulcan movements in this country and repairs DELA\VAHE WA'rCH OOMP.0TY , INC. , ET AL. 509 491 Initial Decision of Vulcan watches under guarantees issued by Vulcan. In connection with his job for Mido, Felber spent two months in training at the Mido factory in Switzerland in which the emphasis was primarily on the waterproofing of cases. Mido features a waterproof watch. The general principles for the construction of a wat.erproof watchcase is the same as that for a ,vater resistant watchcase, except that the former has a much higher standard of detail, accuracy and quality. (Tr. 541) Schwarcz purchases about 40 000 "water resistant" watchcases annually for use in assembling atches which it sells at wholesale. From the record as a whole, it is found that the said 40 000 "water resistant" atchcases are manufactured in Hong JCong and purcha,sed from importer-suppliers. (Tr. 678-679) Three of Schwarcz s importersuppliers are Swiss -Watch Case Company, Simon Spira, and WMR which stands for ",Vater and JIo1sture Resistant". Schwarcz regards IR as its principal supplier of Hong Kong "water resistant" watchcases. Its actual purchases from vV:OIR are between 8 000 and 12 000 sllch watchcases annually. The only Hong JCong watch importer called by respondents to testify in their behalf on the "water resistant" issue was Sheldon Parker, a partner of ,VMR. No other importer 01' manufacturer of " water resistant" watchcases was called upon to testify by either party.

The annual imports of I--ong JCong 1yatchcases into the United States totals about one milion cases. The largest single importer of such watcbcases is vVMR which alone is responsible for more than one-half of the total imports. About 80 percent of WJIR' s Hong ICong imports consist of watchcases inscribed "\V after- Resistant". The watchcases imported by ,V1IR are manufactured in Hong Kong Danemann watch Case Factory, Limited. Although there are a number or such watchcase manufacturers in I-Iong lCong, Danemann is the largest. ,N fR has an exclusive contract with Danemann for the importation of its watchcases into the United States. The watchcase of the aforementioned CX9-A (which as above i1l1ieated failed to meet Test :No. 2 of the Commission s Trade Practice Hules) was manufactured in Hong Kong by Rays Metal Manufactory, a competitor of Dancmann and sold to Schwarcz by one of the aforementioned suppliers, Swiss watch Case Company or Simon Spira, competitors of VY:ME. Although the testimony of respondent Leslie Shaw cstablishes that the watchcase in CX 9-A was purchased from one or the other of the two ll1entioned watchcase importersuppliers, Shaw was unable to pinpoint the supplier as between the two.

510 FEDETI\L Tll1DE cO=-,I\nS DECISIOSS Initi:1 Derision 03 F.

There are two methods of construction of "water resistant" watch. eases, hereinafter described and designated as Type A and Type B respectively. Type A is it watchcase in which a separate friction fit. ting tubc is pressed by machinery into a previously driled hole in the bezel part of the ca,se" veTY much like a cork is pressed into a wine bottle. This is referred to in the trade as a "friction fif' water resistant case. Type B is tt watchcase in which the tube is an integral part the bezel and not a separate tube manufactured independently of the bezel and then inserted in a hole in the bezel as in Type B. Type B is knmvn in the t.trade as a "one piece bezel" The described tube::; in both Type': \ and B ,He designecl to recein the 'iyatch stem (which is part. of the watch mm ement) and the watch crown when the case is assembled with a movement. These tubes will he.reinarter be generally described as ""crown tubes The ,mter resistant quality of the Type B ease is substantially superior to that of the Type A ease. The Type A watchcase, due to the ,o-piece construction of its bezel, is vulnerable to water seepage at the site of its friction fitting crown tube because of the possibility that the crown tube ivas not inserted in the bezel hole with suffcient tightness at the factory to make for ' water resistance . This source of vulnerability t'O ,vater seepage is avoided in the Type B watchcase beca.use the crown tube in that construction is an integral part of the bezel. \V I1-s representative, Sheldon Parker, concedes that the onepiece construction of the bezel in the Type B watchcase "helps quite a bit" tn giY8 it water-resistant superiority over the Type A case. The HonJ Kon \yatch manufac.Ul'eTS disfavor thc manufacture 'Of the Type B watchcase because such production involves a large proportion of factory rejects due to service imperfections in the completed onepiece bezel. The predominant production in Hong Kong is of the Type A construction.

CX 18 ' and CX 25 are Hong Kong empty watchcases sold by WMR to Schwarcz. CX 18 bears the inscription "WATER RESIST- A:"T" and CX 25 is inscribed "DliSTPROTECTED". The evidence establishes that CX 25 , although marked "dust protected" 1 Although the index of the offcial transcript of the proceedings in this matter does not show the identlfica.tion of ex 18 as a physical exhibit or its receipt in evidence, the said ex 18 is deemed to be a part of the record herein by virtue of the following col. loquy between the Hearing Examiner and witness Sheldon Parker, partner In W:;fR: Hearing Examiner BUSH, Let the record show here again that this watchcase, as I understand It, as represented by Exbiblt 18 was ODe sold by your firm, hn t that so, Mr. Parker7 The WITNESS, That Is correct.

Hearing Examiner BUSH: To the respondent Schwarcz & Son ': The WITNESS. It was picked up at ScbwarcZ', yes. Hearing Examiner BUSH: Very well. In any event, it is your case, The WITNESS. Yes, yes. (Tr. 598-599) $) DELA\VARE -WATCH CO:\IPA::'Y ) IKC. ) ET AL. 511 491 Initial Decision and not "\Vater rBsistanf' , has the same "water resistant" construction as ex 18 and that for husille s reasons, in order to meet the various demands of the trade, watchcases which ha.ve the construction of 25 are sometimes inscribed ",vater resistant" and sometimes "dust protected". CXs 18 and 25 have the same kind of "friction fit" construction c1e 'Cribed above as Type A.

CX D-A (the "' Rtch which hired to pass the Commission s Test No. 2 for \yater resi2tance) is also eased in a Type A "water resistant" watchcase. (Tr. 42,1 at lines 10 through 12, and Tr. 678-679 and compare \,, lth T:::. 598 aJ Jines 12 through 10 and Tr. 60B at lines 4 through 10). Thus the watchcase of CX D- , of which the supplier was either the Swiss 'Watch Case Company or Simon Spira, and CXs 18 and 25, of which the supplier was ,VJVR, are all Type A "water resistant" friction fit watchcases.

IH sells its I-long Kong Type A watchcases at prices ranging from 20 to 2. each. It also sells Hong Kong Type B watchcases; theso arb sold at 10 more than the Type A case. The Type A case i:i also manufactured in the lnited States but Type B is not. Comparable Type A watchcases manufactured domestically from the same Elctals as the Hong Kong case sell at to 75i each. Except for purchase of some 200 Type B cases annually, the evidence shows that Schwarcz buys its Type A cases at 201 each. From this and the record gcne.rally it is concluded that substantially all of S c:hwarcz s overall annual purchases of 40,000 "water resistant" \\ atchcase-s a.re of Type A.

The relationship of thc cost of the Type A metal watchcase in Scll'Yal'cz s assembled wnt('h ex to Schwar('z s totd cost of the sembled watch.h, is as follo\Ts; \yatchens!? , ;?O( : total -watch cost, $8. :38. Inc.ndecl in the latter is a east or 31 ior a decorative hinged d; play box jJl \yhjch the watch i sold to tile retailer. The Type A \Yatcllcases lwncllec1 by responcle,nts are subjected to a eel'tniu Hmount of testing for compliance with tile aforementioned COllmissioll S Test Ko. :2 for \YfLtch resistance. ..:S to the te,sting procedures of the many Hong Kong watch11case factories which manufacture Type A cases, the record contains evidence only as to the procedures of Danernann and this was supplied, not by a representative of Danemann, but by \\T)1R its sale customer in the United States, through the testimony of WJIH' s aforementioned part owner Sheldon Parker. Danemann spot checks about 10 percent of its total production for W'\IH of Type A watchcases for compliance with the said Test No. 2 before releasing the production for shipment. 'Cpon receipt of the watchcases in this country, ,, IR also random test checks about 10 percent of the empty watchcases for compliance 512 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 63 F.

with Test Ko. 2 before releasing shipments thereof to customers. For purposes of these tests, both Danemanll and lVMR plug the crown tubes in the bezels with plastic stoppers; in the completely assembled watch the crown tube is filled with the stem of the movement and covereel with thc watch crown. Schwarcz upon receipt of shipments of the watchcases spot checks about 10 percent of the cases both before and after they are assembled into watches for compliance with Test No. before releasing or sellng the watches to its customers. One of the respondents' defenses to the charge here under consideration is that al1 of the watches they sell as "water resistant" should be deemed to have passed Test No. because of the aforementioned spot lesting procedure for compliance \"ith Test :Xo. 2. The validity this c1defense will be discussed below.

Discus/;;on and Conrl/18i on.

From the foregoing evidentiary findings of fa,ct it is concl ded that the watches sold by respondent Schwarcz which are marked water resist.ant)' are not always in fact water resistant. This con clusion is based on a number of factors. It is based in part on the fact that a random selected Schwarcz wristwatch, CX 9- , marked lVATERRESISTANT", with a construction identical with that of thousands so marked and handled by SchwaTcz faile-d to pass the Commission s Test No. 2 for water resistance. lore fundamentally the conclusion is based on the inherent imprecision, for purposes of water resist.ance, of the constrllcbon of t.he type of the lyatchcase jn question as typified by ex 9-A. This imprecision is at points particularly vuJne,rable to water leakage, namely, the crown tube and the lodging of the water resistant gasket in the case bac.1\. Thirdly, the conclusion is based on the expert opinion of an expert watchmaker that the watchca.se under consideration, due to its construction as described in the findings, is very diffcult to make water resistant. FourthJy, the conclusion is based on the disbelief that any of the persons involved in the manufacturing, importing, or assembling of the involved Hong ICong "water resistant" watchcases would or could afford to exert the required effort to make such watchcases truly water resistant where the completed unit as here has so little economic value that it. can be sold to assemblers in the United States after transoceanic carriage at the delivered price of 201 each. The i1nal basis for our conclusion is related to respondents' defense that their "water resistant" watches are spot checked for compliance wit.h the Commission s "Test No. 2" for water resistance before they are released for sale. This test, it will be recalled, is set forth in the Commission s Trade Practice Rules as promulgated April 24, 1947, DE'LAWARE WATCH COMPANY, INC" ET AL. 513 Initial Dccision respecting491the term "waterproof" and related designations, as applied to watches, watchcases and watch movements. Test No. 2" is a part of Rule" of said Trade Practice Rules. Rule 2 is made up of parts (a), (b), and (c), the full text of which is set forth in the appcudix hereto LP. 319 hereina. Part (a) is a general proscription against the improper use of the term "Water Resistant". This portion of thc Rule states in effect that it shall be improper to apply the term "water resistant" to a watch or watchcase where the watch or watchcase is not in fact water resistant. Part (b) sets forth certain conditions under which watches and watchcases may be sold as "water resistant" without danger of being construed as coming within the prohibited use of the term "water resistant" The. provisions of part (b) of this Rule are elective, not mandatory, but those who seek its protective coverage must meet its qualifying conditions. Among these conditions is the requirement that each watch and watchcase must pass "Test No. 2" pursuant to the following requirement of part (b) of Rule 2: ". . . when (the watch and case J, before being placed upon the market by manufacturers, assemblers importers, or other marketers the 'Watch and the case have undergone such test; . * "". (Emphasis supplied.) The provisions of Test No. 2 are set forth under part (c) of Rule 2 and are designed to give the watch trade an easy, practical, inexpensive, and acceptable method 'Of testing for "water resistance . But our inuediate con cern here is not the detail of Test No. 2 but the requirement under part (b) of Rule 2 that each and every watch and case must undergo and pass Test No. 2 before it may be sold as "water resistant" In the instant case, the evidence shows that respondents subjected only 10 percent of their watches inscribed "water resistant" to Test No. 2 for water resistance prior to marketing and not each and every such watch to the test as required by part (b) of Rule 2. Failng in this latter requirement, the protective coverage provisions of Rule 2(b) are not available to respondents.

The conclusion stated above that Schwarcz water resistanf' watches are not in fact water resistant is based upon the entire record of this proceeding.

ConntTY of O?'igin on Issue Watch Cases The final charge of the complaint is that respondents are misleading and deceiving the purchasing public into believing that certain of the watchcases housing the watches they sell are made in either Switzerland or the United States due to the fact that the watch movement in such watches is inscribed with the word "Swiss" and to the further fact that the watch does not otherwise carry a disclosure 514 FEDERAL TRADE COl\ll\IIS .IOX DECTSIOXS Initial Dcch;iod 03 F.

of the country of origin of the watchcase. The complaint further alleges that there is a preference on the part of many persons in this country for watchcases of domestic and Swiss origin oyer watchcases ma.nufactured in I-Iong I\:ong.

The complaint does not specify whether the charge of failure of disclosure of country of origin relates to the interior or exterior of the involved watch cases or both.

The answer admits that respondents have sold and the record shows that they are selling watches encased in watchcases imported from I-Iong ICong and that the dials of the watch movements of such watches bear the inscription " wiss . The word "Swiss" on the dial indicates that the watch movement was imported from Switzerland. By stipulation of the parties, it is established that under appropriate law or regulation an watch movements imported from Switzerland must be inscribed with the word "Swiss" on their dials. The watches in c\'idence in this proceeding exhibit the word " S,dss" on the outer circumference of the dial in quite small print beneath the hour figure ' on 1ll0St 6" which is the usual position and size of the word "Swiss Swiss watches. The size and the position of the word "Swiss occupied on the dial of the watches in evidence are inconspicuous in comparison with the size of the trademark name and other printed matter shown on more central and visible locations on the dials of respondents' watches.

As heretofore noted, respondents buy at least 40 000 Hong ICong watchcases annually through importers. These are purchased as indicated at a price of 20 each, ,,,which bears a nominal relationship to respondents' average selling price of $10 for the fully assembled watch to their dealer-customers. The Hong Kong watchcases here under consideration if manufactured domestically would sell at a price between 60t and 75t each. Will, it will be recalled, is the principal importer in the United States of Hong Kong watchcases, imports the backs and bezels of such watches separately, although both are made by the same Hong Ii:ong manufacturer and the two parts are designed in various size.s to be assembled together in one unit. The reason for this practice is that the chaTges -imposed by law in connection with the importation of such commodities is Jess when the backs and bezels are brought into this country separately than when they are imported as assembled units.

CX:s 18 and 25, as heretofore sho'\n, arc empty wrisbvRich cases purchased by respondent Sch ",arcz from -VYMR. The bezels of these \vntchcases bear the engraving ""\VJ\IR Hong JCong" which reflects the made of the importer and the place- of origin. The engraving DELA"T ARE WATCH COMP.\.:r-ry, IXC., ET . 515 4f\1 Initial.lkci,--lOJl is 011 the inside rim surface of the bezel which will be completely obscured when a \'latch movement is inserted in the case. The bezel of a ffan s 'i.'istwatch could be inscribed with the country of origin on the outside portion of the bezel between the lugs (i. the projecdesigned to take the watch-tions of the bezel which hold the pins band) without defacing the outward appearance of the bezel that , as in exmeets the eye, but on some small ladies' wristwatches the bezel could not be marked anywhere on its outer surface without defacement of the outwarcl appearance of the bezel. Neither the interiors or exteriors of the back covers of the two wristwatches here under consideration shmy the country of origin. It is found pursuant to stipulation of the parties that some consumers would have a prejudice against watches housed in watchcases manufactured in Hong Kong and that some would not. Under the Tariff Act of 1930, Title 1, Par. 367 (f) and (g), all watchcases imported as fully assembled units from a foreign country into the United States are required to "have cut, engraved, or die sunk, conspicuously and indelibly on the inside of the back cover, the name in full of the manufacturer or purchaser and the name of the country of manufacture.

Until recently the Bureau of Customs, by a process of exemption or waiver, did not require bezels or back covers when imported separately by importers of origin.to be individually inscribed with the name of the country Euective as of January 18, 1962, the Bureau of Customs abolished the exemptions from country of origin markings formerly applicable to bezels and covers when imported separatcl;y and from and after the said date required all bezels and covers when imported separately to be marked ,with the name of country of origin. The marking on the cover must now show on its inside not only the country of origin but also the phrase "Case made in, followed by the country of origin. (Tr. 627-630.

Testimony was received from IVJ\R's Sheldon Parker on the economic consequences he believes would result from the order sought in this matter requiring in effect that all watchcases manufactured in Hong I(ong be marked "I-Iong JCong" on the exterior of their backs. From this testimony, it is found that such an order would place the respondents as users of Flong JCong watchcases and their suppliers at a, competitive disadvantage with competitors mcl their suppliers ktildling watchcases manufactured in France, Germany, and SlvitZDl'la1Hl because the latter are not currently under similar obligations to impress their watchcases with their respective countries of origin. It is also found from 1\11'. Parker :: testimony that an order requiring 516 FEDERAL TI-L-\DE, cO:'nnSSIOX DECISIO:\lS Initial Decision 63 F.

c1isclosnre or tile country of origin en the exterior of back covers ,vauld have a tendency to adversely affect sales on the Consu111er level. This is been,use people g( nen111y prefer to buy 'i,atches with Swiss movements but t.here 1\-ill be some persons TIho will be lnislecl into believing that a \I-atch containing a genuine Swiss movement but enclosed in a case conspicuously ma.rked I-Iong l\:ong on its exterior was made entirely in Hong I\::ong and therefore reject the watch. Disc1!86io' n and Oonclwrions Based on the foregoing facts, it is our conclusion that a suusta,ntial number or consumers ,youlc1 be misled and deceived into believing that the watchcases of certa.in of respondents' watches assembled with S'iviss watch movements and lIong K.ong cases were either or domestic or Swiss origin because of the absence of any disclosure on the watchcase as to its cOllntry of Ol.jgin. From this, it is our further conclusion that an appropriate cease and desist order should be issued on the count of the complaint here under consideration. As to what would constitute an appropriate order, the first diffculty encountered on the "country of origin" issue is that although the compla.int alleges that the practice of selling Swiss movements in Hong I\:ong cases "is misleading and deceptive, the complaint does not state whether t.he relief sought is an 'Order requiring the disclosure of the conn try or origin on the inside or outside of the watchcase. Under these circumstances, the complaint is construed to mean that it \yonJd be satisfied with having the inscription of the country 'Of origin placed on any part of the case which could be deemed to give the public reasonably adequate notice of the place of origin under all the facts and circumstances of record in this proceeding. It is our conclusion that a marking on the inside of watchcase back which shows the country of origin preceded by the words "Case made " would be reasonably adequate notice and disclosure to the public of the origin of the two involved parts of a watchcase, the bezel and back. IVe refrain from requiring that the bezels be individually marked with their country of origin, not only because the aforementioned marking on the back of the case would put the consumer on notice as to the country of origin of the bezel as well as the back bu t also beca,use a marking of the country of origin on some small ladies' wristwatch cases could not be accomplished without defacing the outward appearance of the case.

There are a number of reasons for the above cunclusion. One is that it is in line with long established custom, as the Tariff Act of 1930 has for many years required the back of imported cases, when they are imported as a unit, to be marked on their inside surface with the DE'LA1VARE WATCH COMPAI\"' , INC. ) ET AL. 517 401 Initial Decision country of origin. Our conclusion is also in line with the Bureau of Custom s rcccnt extension of the requirements of the Tariff Act of 1930 as to the marking of watchcases imported as a unit to bezels and backs when imported separately. In view of this history 'Of country of origins markings as required by the Bureau of Customs, it is a fair assumption that prospective watch consumer-purchasers who arb interested in the country of origin of the watchcase would look for such markings on the inside of the case back. Another consideration for our conclusion is that a contrary order requiring that the exterior of the case be made to show the country of origin might well lead Inany prospectlY8 consumers to believe that watches displayed to the,m having Swiss movements and Hong JCong cases were made in their entirety in Hong Kong and lead to the rejection of the watch because Switzerland is associated in the public mind with the manufacturing of watches and Hong Kong is not. Consequently, such xterior markings of the country of origin could have a more mis chievious and misleading effect on the consumer than a total nondisclosure of the country 'Of origin on the I-Iong Jeong made watchcases.

There are also other reasons for our conclusion that the public would be given adequatc notice of the country of origin of respondents' imported watchcases if they carried the marking of the country of origin on the inside of the watchcase back. One of these factors is that the watchcases here involved sell at only 201 each and accordingly represent an insignificant component part of the assembled watch from a cost point of view. This notation of the low cost of the watchcase unit is not intended to be a denigration of the watchcases under consideration. They perform the function they are designed for and watchcases of similar construction and metal content, if made domestically, even though they sell at about 60\! each would have no greater functional utility than the 20\! Hong Kong watchcase.

The President of the united States in his message on January 25 1962, to the Congress on the subject of the "Reciprocal Trade Agreements Program" stated: "American imports, in short, have generally strengthened rather than weakened our economy." The public interest under Section 5 of the Act does not, in our opinion, require TIl0re than a marking of the country of origin on the inside of the watchcase back. A requirement for the marking of the country of 'Origin on the exteriors of the watchcase back for the purpose of pandering to the stipulated prejudice of some consumers against watchcases made in Hong Kong would be inconsistent with the larger interests of the consuming public in having our economy strengthened by American 1m ports.780-018-69- 518 FEDER.AL TRADE CO DIIS.SION DECTSIOXS Initi;11 Decision ;:3 :F' Although it is realized that the ordcr to be entered in this proceeding will in effect be a duplication of the current requirements on respondents' importer-suppliers by the Bureau of Customs that they mark or cause to be marked ,mtchcase backs (even when imported separately) with the name of the country of origin, the order wil nevertheless be issued since the Federal Trade Commission operates under its own statutes and also because there is a possibility that the said new requirements of the Bure tu of Customs may be challenged in the courts. A further reason for issuing a cease and desist order in this matter is that respondents in all probability stil have on hand substantial quantities of unmarked (as to country of origin) l-Iong JCong watchcases which were imported prior to January 18 1962, when the new requirements of the Bureau of Customs with respect to mflrking :, 0:( COlllHl'Y of origin became effective. OvedlU Findings oj Ultimate Fact Through the use of the practices hereinabove set forth, the respondents, except DvYC, place in the hands of watch dealers and retailers a means and instrument.ality whereby such dealers and retailers may nislead and deceive the purchasing public (1) as to the guaranties they issue on their watches, (2) as t.o the metal composition of their watchcase bezels, (3) as to the ability of their watches marked "water resistant" to actually resist moisture, and (4) as to the country of origin of their imported watchcases.

The use by the respondents, except D,YC, 'Of the false, misleading and deceptive practices hereinaboye set forth and the failure to disclose the true origin and metal composition of their watchcases had, and now have, the capacity and tendency to lnislead and deceive members of the purchasing public in the manner aforesaid and thereby to induce t.hem to purchase said respondents watches. As a consequence thereof, trade in commerce has been unfairly diverted to said respondents from their competitors and injury has thereby been done to competition in commerce.

The aforesaid acts and practices of the respondents, except DvYC, as set forth above, were and are all to the prejudice and injury of the public and of said responc1e,nts' competitors and constitute and now constitute unfair and deceptive ads and practices and unfair methods of competition in commerce within thc intent and meaning of the Fe,c1eral Trade Commission Act.

OR-DER It is oTCZeTed That respondents A. Sc.nrarcz & Sons, Inc., a corporation, and its offcers and Ste-yen V ogeJ and Leslie Sha'\v, individually DELA\VARE WATCH CO::1PA.."'Y , IKC. , ET AL. 519 401 Initial Decision ftnd as offcers of said corporation, and respondents' agents, representatives and employees, directly or through any corporate or other device in connection with the sale and distribut.ion of watches or any ot.her merchandise ill commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Hepresenting, directly or by implication, that their watches are guaranteed, unless the nature, and extent of the guarantee and the Inauncr ill which the guarantor will perform thereunder are clearly and conspicuously disclosed.

2. Offering for sale or selling watches, the cases of which are in whole or in part composed of base metal which has been treated to simulate precious metal, without clearly and conspicuously disclosing the true 111etal composition of such treated cases parts.

3. Representing that their watches are water resistant or water protected.

4. Offering for sale, or selling watches, the cases of which are of foreign origin without clearly and conspicuously disclosing on the interior of the watchcase back the name of the foreign country of origin, preceded by the words "Case made in. 5. Placiug in the hands of dealers and retailers a means or instrumentality whereby they may mislead and deceive the purchasing public as to the character and quality of their products. I t is f"rther' ordered That the charge of the complaint relating to fictitious price preticketing as contained in Paragraph 3 of the complaint be, and the same hereby is, dismissed. I t is further ordered That the complaint be, and the same hereby , dismissed as to the Delaware "\Vatch Company, Inc., a corporation. APPENDIX Trade Practice Rules of Federal Trade Commission Re: Terms ",Vaterproof and Related Designations, as Applied to ,Vatchcs, ,Vatchcases, and ,Vatch-movements R1::LE 2.

(a) Improper Use of the Terms " Water Resistant Water,- Repel- Zent " Etc. It is an unfair trade practice io use the term "water istant' 01' " 'later repellent " or any word, e;qJTession, depiction, or representation of like import., fls c1esch pt.iye of a snitch or watchcase nllder flny false, rnisleac1ing, 01' decc ptive cll'c,nmstrmces or cOllclitioll: ' many lDanncr "which has the capaeit:y and tendency, or cfJect of ll'adillg or dece;Yillg j- he purchasing 01' consl1millg pnh!ic, or of 520 FEDERAL, TRADE CO:\.J:\HS'SIO:N DECISIQXiS Initial Dpch:jon 63 F, aiding, abetting, or causing salesmen, dealers, or other Inarketers to mislead, deceive, or confuse the purchasing or consuming public. (b) Use of Tet1n " Water?' Resistant" 01' " Water?' Repellent" in Relation to Test. Etc. Nothing in this rule shall be construed as prohibiting use or the terms "water resistant" or "water repellent" as descriptive or lL 'watchcase or watch under the rollowing conditions and limitations, namely, when the watchcase or watch has been so constructed and is or such composition as to provide protection against water or moisture to the extent or meeting the rollmving test designated as " Test o. 2 " or a more severe test, a,nd when, before being placed upon the market by manufacturers, assemblers importers, or other marketers, the watch and the ca,se have undergone such test: Provided, hmu,"'e,,, That subsequent to undergoing such test and before sale of the product to the purchasing public as and ror a water resistant or water repellent watchcase, the water resistant condition thereof has not been impaired or destroyed by opening the case, or otherwise: And provided f"rther That no representation is made which is deceptive in implication, or otherwise, by reason of concealment of material fact or by way of guarantee, warranty, advcrtisement, Jabel, or other means indicating or tending to indicate that the water resistant condition 'Of the watch or watchcase win remain unaffect.ed throughout the life thereof, or that it wil not be affected by opening of the case for repairs or adjustment, or wil not be affected by wear or other condition when such is not the fact. NOTE. In the interest of avoiding pDssibilties of misunderstanding and deception of purchasers, members .of the industry or marketers of watches or watchcases offered for sale or sold as and for "water repellent" or "water resistant" products should disclose to and inform the purchasing public, when such is the fact, that the water repellent and water resistant condibon of the watch or case wil be or may be destroyed or impaired by, or wil not or may not continue after, having been opened for repairs, adjustment, or for other purpose, or because of other contingency encountered in the customary use or wear of the watch, unless the case is again servkecl or treated b v competent experts or by ot11Cr methods adequate to renew or re,store its condition of ",-after resistance or water repellency.

(c) Test No. f)-For Water Resistance or Water Repellency. For purposes of this Rule 2, the following is deemed an acceptable test for water resistance or water repellency of a watch 'Or watchcase, namely, complete immersion of the case or watch for at least 3 minutes in water at a pressure equivalent to a depth of 26 feet of water under normal atmospheric pressure of 15 pounds per square inch, without admitting, or showing any evidence of capacity to admit, any moisture or water. The so-caned vacuum test of complete imn1crsion in water under a vacuum suffcient to be productive of conditions of equivalent or great DELAWARE'E WATCH COMPA.-v, L, , ET AL. 521 491 Opinion er severity may be used as an alternate or additional test for purposes of this Rule 2. (Keither test is to be accepted, however, as showing or indicating the durability of such water resistant or water repellent condition or any time or period during which such condition may continue.

QpINIOX OF THE COM:\IISSION T"CXE 1 u IlJI)J By DIXON Oommissioner:

The complaint in this matter charges respondents with violation of Section 5 of the Federal Trade Commission Act through alleged misrepresentations concerning regular retail prices, guarantees, metal composition, place of origin and water resistant qualities of certain of their watches and watchca,ses. The case is before the Commission upon the cross-appeals of the parties from the hearing examiner initial decision.

Complaint counsel takes exception to the hearing examiner s dis missal of the charge of preticketing and also to the form of the order as to disclosing foreign origin. He also appears to take exception to the examiner s dismissal of the charges as to respondent Delaware \Vatch Company, Inc. Respondents except to the examiner s holdings with respect to thc charges on thc metal content of ITatchcases and thc use of the term "water resistant.

Dism,issal As To Delaware lFatch C01npany, Inc. Respondents, Delaware .Watch Company, Inc., and A. Schwarcz & Sons, Inc. (sometimes referred to hereafter as Delaware and Schwarcz, respectively), are N cw York corporations with their offce and principal place of business at 580 Fifth Avenue, :New York City. Respondents Steven Vogel and Leslie Shaw are offcers of the corporations and the.y formulate, direct and control the acts and practices involved in this proceeding. The sole management of the corporate respondents rests in the individual respondents Shaw and Vogel. The individual respondents have vJso formed a partnership which is known as the Delaware 'Vatch Company.

The president and majority stockholder of Schwarcz is respondent Le,Jie Shaw. The stock of Delaware .Watch Company, Inc., is wholly owned by A. Sclnva.rcz &, Sons, Inc. Sc1nva,rcz also whom1y owns t.he stock of a third corporation, Delaware 'Vatch Company of the Virgin Islands, Inc., a corporation orgr.nized under the laws of the Virgin Islands.

The hearing examiner dismissed the complaint as to respondent Delaware 'Vatch Company, Inc. , on the ground that no evidence 522 FEDERAL TRADE COMMIS.,ION DECISIONS Opinion G3 P.

was presented to show that it was engaged in any of the illegal practices and acts charged. According to the testimony, the Delaware 1Vatch Company of the Virgin Islands, Inc., ships merchandise to respondent Delaware "''latch Comp"ny, Inc. , and the latter corporaicn then clears this mcrchanclise throu,CTh Customs a.nd sees that it gets to the destination to which it was origilla11y shipped. This s'ssert.edly is its sole i'function. Respondent 8ha w testified that the Jel\' York corporation (Delaware) does not buy or sen any merchan dise. It is noted, however, that respondent.s in their joint answer herein, including respondent Delaware, admitted that they now and for some time have engaged ill the advertising, offering for sale and wl1jng 0 2 ,yatches to wholesalers, retailers a,nc1 premium users, for distribution to the public. \.s the examiner noted, this HnSTi'el' ,yas pre.pared by respondents' counsel of record who has had long familyiarity with the business affairs of respondents Steven Vogel and Le,sli8 Shaw. In view of such admission, it is not readily apparent why the hearing exa.miner dismissed the complaint as to respondent Delaware ",Yateh Company, Inc. He was clearly in error in so doing. Furthermore, even without the admission, there is a suffcient sho,ving to hold Delaware along with the other respondents responsible or the acts and practices charged. The individual respondents, Vogel and Sha IV, were the sole managers of both corporations. The businesses of the two corporations were operated out of the same premises and each corporation apparently was assigned different complementary functions in connection ,with the overa.ll business. The business was essentially an individually owned and operated affair. This is emphasized by the fact that some of the business was conducted through a partnership composed of the individual respondents. In all the circumstances, we believe that the business affairs of the tlYO corporations Iyere so conducted and so intenvoven as to make both responsible for the acts and practices herein charged and proved. See Lifetime, Inc., et al. Docket No. 7616 (Decision of the Commission, December 1, 1961) (59 F. C. 1231).

Preticketing Tho complaint charges that respondents for the purpose of inducing the purchase of their products have engaged in the practice of attaching or causing to be attached price tickets to their products upon which certain amounts ate printed an.l th:lt the T have also t1isseminated a,c1vertising lite,:L'atlllT upon ,yhic11 ceruLin amounts ate 811mill as retail prices of their products. Respondents thereby represent according to the complaint, that said amounts are the usual and regular retail prices of the products, whereas, in truth, the amounts DELA'VARE . WATCH CO)'.iP.-\XY , IXC. , ET AL. 523 ci0=- inion shown are not the usual and regular prices of the products but are in excess t.hereof. It is also charged that through the use of such practices, as ,yell as others, respondents have supplied to dealers and retailers a means and instrumentality whereby they may mislead and deceive the purchasing public.

Tho hearing examiner dismissed this preticketing charge and we concur in his action. T118 record lac.ks substantial evidence as to the usual and regular retail prices of respondents' watches in any market area..

Counsel supporting the complaint adduced evidence of preticketing for only one marh:et, namely, c'\arl:: , New Jersey. It appears that theTe is but one dealer (in this market) who distributes respondents watches of the type involved. The dealer referred to is the Alben Jewelry Company, also 101mm as Alben Jewelers, 206 .Washington Street, K ewark ew.J ersey. The theory of complaint counsel appears to be t.hat the prices charged by this single dealer are the usual and reguhtr prices at which respondents' watches are sold at retail in that market. The further contention is that these prices are substantially less than the alleged preticketed prices.

The mrjdence as to the regular prices at which Alben Jewelers sold watches obtained from respondents included some testimony as to this dealer s usual markup ove.r its costs. This evidence, however, is very inconclusive. Iarvin Silverstein, associated with Alben Jewelers, testified that the markup on respondents' watches varied and would be "Any place, I imagine, from 25 percent over cost to two and a half times cost or two times cost." However, even if it were certain that Alben .J ewelers' markup was a fixed percentage over its costs, such a fact would prove very little. On this record it could be related at most only to two watch exhibits allegedly fa1seJy preticketed.

These two watches were purchased from Alben Jewelers by a Government investigator. One of thc watches was a 17-jewelladies' wrist watch sold by A. Schwarcz & Sons, Inc., to Alben Jewelers for $9.95. When purchased by the investigator, it had attached to it a ticket which read: " 39.95 fed. tax me., Delaware. " The other was a 7-jewel ladies' wristwatch sold to Alben . Jewelers by A. Schwarcz & Sons, Inc. for $6.50. The latter watch had the word "De1gard" printed all its face. In the box jn which it was enclosed was a price tag or ticket with the printed figures "$19.95. These watches were purchased by the Government investigator for the amounts of $1'7. 00 and $12. re.spectively. The contention is that such prices were the usual and regular prices of these watches in the Newark market. This is not necessarily ::0. E,,-jdence of one or two isolat.ed sales at less than the 524 FEDERAL TRADE COllDIlSSIQX DECISIO Opinicn 63 F.'l.

preticketed price is as equally probative of a valid "gale on the part of the dca1er involved as it is of a deceptive practice. Raye", Corp. Federal Tmde Commission 317 F. 2d 290 (2d Cir. 1963) (7 S.&D. 696J. In the circumstances, the evidence is insuffcient to prove the usual and regular retail prices of respondents: watches in this market. For this reason, the charge. in the complaint that respondents have preticketed their watches at fictitious retail prices \vas properly dismissed, and the exceptions to this part of the initla.l decision will be denied.

Count1'Y of Origin ..'.another charge in the complaint is that respondents have misled the public as to the origin of certain of the \vatchcases housing their watches by failing to mark such cases to show that they liere made in I--Iong l\:ong. In connection with this charge, the examiner found and concluded that in the absence of any disclosure on the watchcases as to the country of their origin a substantial number of consumers would be misled and deceived into believing that the watchcases of ce.rtain of respondents' watches assembled with Swiss watch movements, with the word "Swiss" inscribed on the dials, and Hong JCong c.Lt3eS we,re made either in the United States or in Switzerland. On this finding, he entered an order which would prohibit the offering for sale or the selling of watches, the cases of which are of foreign origin, without clearly and conspicuously disclosing on the interior of the watchcase back the nan1C of the foreign country of origin preceded by ,the words "Case made in.

The record shows that respondents re-ceive substantial quantities of Hong Kong watchcases through importers. The backs and bezels (or fronts) are imported separately, but they are made by the same manufacturer and arc designed to be assembled together into one unit in the United States. Separate shipments of these parts are made only hecause of a savings in import duty. Thus, the backs and bezels are, in reality, a watchcase unit. The significance of these ca,se parts and the unit into which they are assembled in the composition of a w"tch is clearly apparent. As a unit they wil play the entire role in providing protection to the watch movement. If the watch is a water resistant" type, for instance, the watchcase parts win provide this form of protection. "\Vhile the case becomes a component of the assembled wateh, it is a principal and observable component. Its appearance and quality are factors of prime importance in the saJability of the watch. The watch case does not lose its identity in the manufacture or the watch, but retains its essential characteristics a.sa foreign made product. J\loreover, the record supports the &; &; DE' LAWARE .WATCH COMPA."", IKC. , ET AL. 525 491 Opinion conclusion that many consumers are interested in the place of origin of watchcases and that they prefcr American-made cases over watchcases made ill I-Iong I(Ollg. In these circumstances, a requirement in the order for appropriate disclosure of the country of origin is clearly justified. The only question before us is the form the order should take. See L. Heber Son, Inc. v. Federal Trade Oorrission, 191 2d 954 , 956 (7th Cir. 1951) ; Segal v. Federal Trade Oommission 142 F.2d 255 (2d Cir. 1944) il anco Watch Strap 00., Inc. Docket o. 7785 pIarch 13, 1962) C60 F. C. 495J; Baldwin Bracelet Oorp. Docket No. 8316 C61 F. C. 1345J; Hilton Watch Olock 00., Inc. Docket K o. 8402 C61 F. C. 742J; TVillam Adams, Inc. 53 F. 1164.

It scems obvious to us that the order entered by the examiner would be singularly ineffe,ctive ill preventing the deception which he found. Prospective purchasers rarely have an opportunity to see inside the back of a vmtch before purchase; hence, a marking on the interior of the case would be little better than no marking at all. The a,argument has been made that the il1urking of the country of origin on some small wntches cannot be accomplished without deface ment. The solution is to provide that the information may be placed on a tag securely att lcheu to the watch. Another argument advanced is that the use of I-Iong J\:ong on the part may mislead consumers to believe that the whole watch is made in Hong Kong. There should be no great difficulty, hO"yever, in marking so as to make clear that only the part is of Hong Kong origin. This might be accomplished use of the phrase "Case made in.

We thereforo conclude that the order in the initial decision should be modified to require proper disclosure of the country of origin on the exterior of watchcases or parts with the provision that the disclosure may be made by means of a label or a tag affixed to the watch with a degree of permanency suffcient to assure that it will remain there until the watch is sold to a consumer.

Oomposition of Bezels (watchcase fronts) The complaint charges respondents with misleading and deceiving the purchasing public into believing that the bezels of certain of their watchcases are composed of preciolls metals or stainless steel whereas they are in fact made of base metals which have been treated or processed to simulate precious metal or stainless steel. The hearing exa.miner found this allega.tion to have been sustained and entered an order requiring disclosure of the true metal composition of base metal parts which have been so treated or processed. Respondents havo taken exception to his fuldings and order on this issue. Their 526 FEDERAL TRADE C011:'dISSIOl' DE,CI,SIOXS Opinion 63 main contention appears to be that the finding as tc metal content of the bezels was unsupported by reliable, substantial and competent evidence.

Respondents are not now in a position to make this contention. their answer to the complaint, they expressly admitted the first paragraph of Paragraph 6 thereof, which reads as follows: Certain of the watches offered for sale and sold by respondents are in cases which consist of two parts, that is, a back and bezel. ' he back part bas the appearance of stainless steel and is marked ';stainless steel back". The bezel is composed of base metal other than stainless steel which has been treated or processed to simulate or have the appearance of precious metal or stainless steel. Some of the bezels are finisbed in a color which simulates silver or silver alloy or stainless steel. Some of the bezels are finished in a color simulating gold or gold alloy. Said watchcases are not marked to disclose that the bezels are composed of base metal or metal other t.han stainless steel. Thus, the practice of simulating precious metal or stainless steel and the bilure to mark so ns to disclose that the parts are composed of metal ot.her than tha.t mentioned is admitted. ioreover, there is evidence in the record, and the examiner found, that purchasers would be deceived by the appearance of the bezels. This evidence includes tho test.imony of a consumer Iyitness and the exhibits themselves. thl circumst.ances, the record clearly support.s the finding that respondents' bilure to properly mark the bezels has the tendency and capacity t,Q mislead and deceive the purchasing public as to the metal content of such bezels. See Theodore Kagen Oorp. v. Federal Tra.e Oommission 283 F. 2d :i71 (D.C. Cir. 1960) 1 6 S. &D. 8371, cert. denied 365 U. S. 843.

Water Resistance Respondents concede that they have marked and advertised their wat.ches as "water resistant " but contend that the record fails to prove the falsity of this claim.

First, one of respondents' lVatchcs failed to pass the "water resistane-u " test described in Rule 2 of this Commission s Trade Practice 1\nies for the watch industry, April 24, 1947, 16 CFR 170.2 (text at C:X 20, and appendix, initln.J (lecision Lp. 519 hereina). The 3ubstanca of that Rule is that a, cla,im of water resistance shall not be deemed false and deceptive.: and hence not viola.tive of Section 5 c;l -(-:9 Federal Trade. COInmission Act I-lelbros Watch 00. Docket No. 6807 (December 2G , 1961), aff' 310 F. 2d 868 (D.C. Cir. 1962) p S. &D. 596J, if after "complet.c immersion of the case or watch for at least 3 minutes in ,yater at a pressure equivalent to a depth of 2,6 feet of Ivftter under normftl atmospheric pressure of 15 puunds pel' square inch," the witteh is not then " admitting, or showing any DELAVlARE WATCH CO lpa_ , IKC. , ET' AL. 527 4tH Opinion evidence of capacity to admit, any moisture or water." Rule 2(c), Test No. 2. (A wa;tch represented as "waterproof " as contrasted with merely "water resist.ant,: is tested by severer standards. See Rule l(d), Test No.

Respondents' watch, which bore on the back of its case the engraved term "WATERRESISTANT" (CX 9-A), was tested by an independent testing company, Lucius Pitkin, Inc., of Kew York City. The technician who administered the test lr. F. II. \Vright., an offcial of the company, testified that he conducted the test as follows: "The ""atch was immersed in one inch of distilled water in a strong glass flask, and pressure applied for three minutes, then released. The pressure was measured as 22.95 inches on a l\'fercury Manometer, and was equivalent t.o- a depth of 26 feet of water under normal atmospheric pressure. ': I-Ie stated that "",vater entered the watch, and when the required pressure was released at the end of the test, bubbles of air were seen to escape from the watch into the water above. His written report (CX 21-A) corroborated his oral testimony: "Moisture condensed on inside of crystal. Air bubbles came from stem when pressure was released. 'Watch had been rU1ming, but stopped during pressure test.

TIespondents have not challenged the reasonablenes of the testing standards described in the Rules. Helbros Watch 00., supra opinion of the Commission. )I or do we understand that they challenge the technical skin and competence with which the test was administered. Theil' objections are (1) that the watch had been damaged, and its water-resisting properties thus impaired, prior to its delivery to the testing laboratory, (2) that more than one watch (respondents suggest at least four) should have been tested, and (3) that there is no proof the watch tested had been sold in interstate commerce. 1,Ve see no merit in any of these contentions. In support 'of the first, respondents point to the fact that they found the back of the tested watch "loose" at the hearing, and found microscopic scratch marks on it. As to the latter, there was no showing that this so-ca.lied damage': to t, he "atch was the proximate cause of the leakage dis. clo,ed by the test. Expert testimony indicated that the watch leaked because of its particular type of construction that it would have been ':very diffcult to make this case "ateI' resjstant. " And as the "looseness" of the case at the time of the hearing, a highly qualified. watch expert., rt man with special training and experience with ,'cater resistant watches, testified that he had examined and tightened" the watch immediately before it was tested. The custody of the exhibit (CX 9-A) was fully accounted for from the time of its purchase by a Commission attorney until the test was completed. :: , :;

528 FEDERAL TRADE COMJ\II81 IIUN DECISIO),TS Opinion 63 F.

Immediately after purchase it was hand carried to the watch expert, Mr. Jean Felber, who made a routine opening and closing 'Of the case to be sure it was in a proper condition for taking a water resistance test. He testified that he opened and closed the case "the way any watch-maker would do this in servicing" it, that he had used the proper tool, that he had performed the opening and closing carefully, and that he had returned it to the Commission s attorney "in the same condition" as he had received it. The Commission s attorney then hand carried the watch to the testing laboratory, where the test was performed in the attorney s presence. The technician that administereel the test stated that he had "handled the watch very gently throughout the lesting. without doing anything mechanical to ity Since the condition of the watch at the time it was tested C ovember 1960) has thus been thoroughly established, the unexplained "looseness" of the case found at the hearing more than a year later does not affect the validity of the test. If respondents arc arguing that the water resistant" properties possessed by their watches arc so delicate that they cannot survive a routine opening and closing of the case by a specially tra,inecl expert using an ordinary jeweler s tool, then respondents should qualify their "water resistant" claim so as to inform purchasing customers that the. claim is va,1id only until the watch' s first trip to the jeweler for a routine cleaning or repairing. See "Kate " Rule 2(b) (CX 20).

As to respondents' contention t.hat. seve.ral " atches should l1Rve been tested in order to pre::ent S011e kind of st.atistical sample, it should be noted first thal ince the "atch tested had been purchased at random from the shelf of a retail store. it can hardl ' he considered a, hanel. picked specimen. )'fore importa,ntly, IUrWByer, responclent.s ' 0\1'11 ie.st.imony confirmed the fact that a substant.if l pe,rcentage of their watches cannot pass the ', after resist.ant test. According to this testimony. the watchcases the ' buy are merely ;;spot-checked. :: First 10% of ihrm selected at ralldo111, are gin n the test deseribec1 in Rule 2(c) in Hong lCong, by the ma,nnfacturel'. Then: upon their arrival in this COU11t.ry, the importer seh cts another:! random 10% for testing. Finally, respondents t,hemseln s. nfte.r pl1rchfLse from the iInporter :;pot ehed:::: 20 out of each 100 ,yat-ches rcccivec1. Delawarc s president described the results of t.these tests: "Usually: ,yhat happens is that out of 20, two or three are, dissatisfactory ,which then ,,"ill be ndjusted by either changing the rlllJher gnskPt or changing the rrystd or making any necessary repair''s 01' a, djusLme.its that mny be required. :' It is a fair inference that of the 80?lnt,f8te(l w:1t.ehes. the same percentage "auld be found ': clissatisfac.t.ory, e.. 8 to 12 of those 80 watches (or about 10%) are leakers. - s to each of these DELAWARE 'VATCH COMPAJ.'-Y , INC. , ET AL. 529 491 Opinion respondents ,vater resist.ant': claim was false and misleading, and in violation of Section 5 of the Federal Trade Commission Act. (Respondents cannot clainl for t.his " spot checking" procedure the protection of Rule 2(c); its benefits can only be claimed where there has been a " complete immersion of the case or watch a testing of each a.nd every ,vatch represented as "water resisttmt. It need not be shown that all of respondents' ,mtches ,,auld fail to meet a reasonable t.est of "water resjstance." As we said in I-JelbTos lVatch Co., sUjJra the showing that several vmtches selected at random were not water resist.ant was snffcient to sustain the charge even though anot.her group of watches Jnight be found to be water resistant. 1Ve (agree J that since respondents have undertaken to make an affrmative representation concerning their watches, they must bear the responsibility if this representation is not true ,with respect to a portion of the watches.:' Here, respondents' own testimony establishes that some 10% of the approximately 40 000 "water resistant" watches they sell annually (or some 4 000 watches sold per year) would not pass the water resistance test. Therefore, we do not see how respondents would have benefited in this case by our testing 3 more watches. Even if the other 3 had successfully passed the testindeed, if we had tested another 9 and all 9 of them had passed the test-we would stil be constrained to find, on the basis of the fact that lout of a total of 10 had failed, aud on the basis of respondents own testimony that lout of 10 fails to pass thc test they administer themselves, that respondents had misrepresent.cd the ':water resistant" properties of a substantial poli,ion of their watches. As to respondent.s' further contention on the matter of interstate commerce, the hearing examiner expressly found that Commission Exhibit D- , the watch tested for water resistance, was sold in interstate commerce. This exhibit is a watch identified by the respondents with the number 1Y -865. A watch of this type was sold to Alben Jewelers on an inyoicc dated January 5, 1960, identified on Commission Exhibit 11. The watches specified on this invoice were mailed to Alben .Jewelers in Kewark a.nd, t.therefore, were transportd in interstate commerce. It appears likely that the watch identified on Commission Exhibit 11 and the physical exhibit (CX 9-A) are one and the same and the examiner in effect so found. Thus at least one of respondents' watches marked wit.h the term "' water resistant a representation found to be false, was sold ill interstate commerce. Hmvever, apart from this specific exhibit, the charge of misrepresentation in connection with the llse of the term "water resistant" is proyecl. Eespondents have admitted a substa.ntial course of trade in t.their products in interstate commerce and the examiner found, as 530 FEDERAL 'TRADE CO:\JMISSIQX DECISIONS Order 63 F.

the evidence shows, that substantially all of respondents' purchases of water resistant watchcases were of a type so constructed as to make them vulnerable to ,yat.er leakage. Also, as pointed out. above, a large number of respondents' watches failed to be water resistant under-r the minimum ct andard set out in Rule 2 (c) of the Trade Practice Rules promulgllted April 24, 1947.

'Ve hold that charges on use of the term ",vater resistant" arb sustained. The hearing examiner s order win be modified so as to permit the use of the term "water resistant" where respondents watches in fact meet the standards for a water resistant watch. The exceptions of complaint counsel and the exceptions of the respondents are, respectively, sustained to the extent above indicated and other"'i\1se reje.cted. It is ordered that the initial decision be modified in accordance with the views expressed in this opinion and that as modified adopted as the decision of the Commission. An appropriate order win be entered.

ORDER ::IODIF'l'TNG AND ADOYITNG INITIAL DECISION AND PROVIDING FOR THE FILING OF On,TECTIONS TO PROPOSED Fn., AL ORDER AND REPLY J1)XE HJ , HJC:1 This matter hftvillg bef'll heflrc1 by the Commission upon the. except.ions of c.ounsel supporting the complaint and the. respondents to the hearing examiner s initial decision and upon briefs and oral argument in support of and in opposition to t.he exceptions respectively taken; and The Commission, for the reasons stated in ihe accompanying opinion, having sustained in part and rejected in part the exceptions of c.complaint counsel and of respondents, and having further ordered that the initia.l decision be modified in ac.corclance ,,'ith the views therein expressed and as so modified adopt.ed a.s the decision of the Commission:

It is ordered That all of t.he \words beginning with the last sente,nce in the continued paragraph, line 6 , on page, 409 and cl1tling \",itll the sec.ond fun paragraph on page 501 of the initial decision be, and they he.reby are, stric.ken, and that. the following be substitute(l therefor: The record contains no substantial probative evidence as to the usual and regular retail prices for respondents' watches in the Ne\Tark, New ,Jersey, market or in any other market. The record is further deficient on this issue in that it is not clear that the respondents were responsible for pla,cing the price tickets on the watches which were put in evidence t.o show the practice of DELAV\tare \VATCH CO rpa-,TY , INC. , ET AL. 531 491 Order preticketing. It is therefore concluded that complaint counsel has not sustained the burden of proof on the preticketing issue and that the complaint on such issue should be dismissed" It i.s further ordered 'flint the paragraphs beginning with the third full paragraph on page 512 anel ending Wjtll the second full paragraph on page 513 of the, initial decision be, and they hereby are stricken and that the foll()\ying be substituted therefor: Finally, the conclusion is based upon the showing that 11 substantial number of respondents' watches fail the tests provided for in Rule 2(c) of the Commission s Trade Practice H111es for the wateh industry promulgated April 24, 1947. Respondent Shaw testified that out of every test group (20 watches selected from each 100 assembled watches), there would be 2 or 3 watchcases \\"which would not meet the tests. ,Vhile these ,vould be repa,ired uefore sale, it is apparcnt that statistically, at le lst" a substantial number of \"atches in the untested group would fail the tests 10% or more. The ,yateh tested (Commission Exhibit 9-A) was a random selection in that it was purchased off a dealer s shelf, am) the failure of this watch to pass a test provided in R.uJe 2(c) confirms the showing that a large l1umbpr of respondents' watches.s would :fail such tests. The tests set forth in the aforementioned Eules for the watch indust.ry were worked out in close cooperation with the watch industry and, in the circumstances, ma.y be accepted as establishing a rcasonfible minimum standard. It is significant thftt respondents thernselves b ' using a test prescribed in the Rules in their O'yn testing procedures seem to a, accept such test as a reftSOllable standarcl for dcte.rmining "' ,yater resistant." qualities. The tests in Rule 2(c), it should be pointed out, iue not the only test which would be acceptable t.o 811m, ;;\yater l'esistal1f capability. A more severe test might be used. These tesrs, hmyever, establish a minimum performance standard. Since large numhers of respondents' watches failed or Il"oulcl fail such tests, it is founel that such watches are not " ateI' resist.ant" It is tllTthcl' ordered That on page 488 of the initial decision in the last paragraph thereof the price of $D.8;j be ful(l it 11ereby is, snbsUtuted for the price of SI0. 50.

ft is .hwthci' onlered, That on page ;)0:3 01' the initial decision in the third fl111 para,grnph the portion beginning with the Iyorcls "Although the issue" to the end of the paragraph be strickeil allc1 the following 5nbst.tutec1 therefor: " cx D-.A is found to be in ;COl1merce 532 FEDERAL TRADE COM1vIISSIO), DECISIONS Final Order 63 F.

I t is f!l7'that ordered That the following paragraphs or portions thereof contained in the initial decision be, and they hereby are stricken:

1. Page 497, the words in the continued paragraph, line 5, beginthe l11COll- ning with the Jine "Notwit.hstanding this admission, tradieted" to the end of that paragraph and all of the first full parfl.gla.ph.

2. Page 497, the heading "Dismissal as to D\YC:' and the two paragraphs under this heading.

3. Page 502, the third and fourth full paragraphs. 4. Page 505, the last pflTagraph.

5. Page 507, the first paragraph.

6. Pages 515 through 518, all paragraphs bcginuing with the last paragraph at the bottom of page 515 and ending \with the first paragraph on page 518, inclusive, except for the first fun paragraph on page 510.

I t is fw,thel ordered That the phrase "except D,VC" be, and it hereby is, stricken in each of the t.three paragraphs in which it appears under the heading "Overall Findings of Ultimate Fact" in the initial decision.

It is f!lrthe1' oTClerecZ That respondents may, within twenty (20) days after service upon them of this order, file with the Commission their obje,actions to the changes in the order to cease and desist contained in the initial decision, as shown by the following proposed order* of the Commission, together with a statement of the reasons in support of their objections and a proposed alternative form of order appropriate to the COD1rnission s decision. FrXAL OHDEH Alia"CST 15 , J 963 re- Pursuant to S 4.22 (c) of the Commission s Hules of Practice, spondents were served with the Conuission s decision on appeal and aflorded thc opportunity to file exceptions to the form of order which the Commission contemplates entering; and Respondents having made timely filing of their exceptions to the order proposed which were opposed by counsel snppoding the complaint, and the Commission, upon review of these pleadings, having determined that. respondents' exceptions constitute reftrgument of 'The proposed order to cease and desist is omitted, entered as the fmal order of the Commission.

DELAWARE 'WATCH CO:\IPA)' ) INC. , ET AL. 533 401 Fin;11 01"1('1" nla.tters thoroughly consic1erec1 by the Commission upon its review of the initbl decision and do not constitni.e a showing that. the proposed order to cease and c1esi t 1S inappropriate in any wa.y: a.nd The Commission having concludec1, therefore, that: respolH1ents exceptions shOllld be ,lisallowed and that the order as proposed should be entered as the final order of the COlnmission: It is ordered That respondtmts Delaware ,Yatch Company, Inc. , ancl their off-corporation, A. Schwflrcz & Sons, Inc., a corporation cers Steven Vogel and Leslie, Shaw, individlla.1y and as olle-ers of said corporfltioll " and rpspondents' agents, representatives and emin con-ployees, directly or through any corporate or other device, nection with the offering for sale, sale and distribution of watches or any other products in comme,rce, as "CommN' " 1S defined in the Federal Trade Commission Act., do forthwith cea.se a.nc1 desist from: 1. Represent-ing, directly or by implication: (a) That their products are g-UElT(l,nteed, unless the nature and extent of the guarantee and the manner in which t.he guarnntor ,,,ill perform there,under are clearly and conspicuously disclosed.

(b) That the,ir watches arb "water resistant " it being 1 :understood rhat respondents may successfully defend the use of such representation with respect to any watch, the ca.se of which respondent.s can show win provide protection :tgainst wales' or moisture to the extent of meeting the t.est designntec1 test ?- o. 2 of the Trade Practice Conference Rules for the ,Yotell Industry, as set forth in the Code of Feclemlllegulations, Title Hi, Chapter 1, Part 170.2 (c) (16 CFR 170.2(c)).

2. Oflering for ale or sell ing '''(1t hes, the cases of which are in whole or in part C011r1posed of base metal which has been treated to simulate precious metal or st.ainless steel, without cle.arly and conspicuously elisclosing on such cases the true metal composition of such treated cases 01' parts.

1. OflcrllJg' for nJe 01' selJi11,?; watches the cases of which are in ",whole or in part of f01'eign origin, without nffl'nntively c1i closing the country or place of foreign origin thereof on the exterior of the cases of such watches on an exposed surface or on a, label or tag affxed thereto of such degree of perman8Iicy as to remain thereon until consummation of consumer sale of the ,yatches and of such conspicuousness as to be likely obsen-ed and Lead by purchasers and prospective purehasers. 7 SO- Ols- G8-- 534 FEDERAL 'fHADE COMMISSION DECISIONS Complaint 63 F.

4. Supplying to, or placing in the hands any dealer 01' other purchaser, means or instrllmentaJities by and through \y111('h they may deceive and mislead the purchasing public. as to the national origill of their \yatchc.ases, the metal composition of their \vntchcases and the moisture resistant capacity of theil' ,,,ate-hes. It is fUTtheT ordered That the initial decision as modified by the COl1mission s order of .JmH' lD , H)()3 , be, and it hereby ' adopted as the decision of the C011l1ission.

It i8 further o",le' ed. That respondents shall, within sixty (6(1) da,ys after selTice upon them of this order, file -with the COJnJni.ssion n report! ill \writing, setting- Jorth jn detail the manner and form in ,yhieh they have complied \with the order to cease and desist. set forth herein.

Ix TfIE :UATTEH OF xIAX xl. BARTH THADIXG AS CHARLES IURTII & SOX COXSEX'r ORDER , ETC., l REG.\HD TO Tile .\ALLEGED \'lol\TIO:: OF TI-n' FEDERAL TRADE CO)BIISS!OX .\XD TUE F"cn I'IWOrCTS L\EEUXG .-('T Docket 0-568. CO'nplaint, Au,g. lD68-Decisioll, Au.r. , 1963 Consent order requiring a Chicago manufacturing furrier to cea."e violating the Fur Products Labeling Act by labeliJJg potted tM flll a LenpRrd Cat and labeling and invoicing other fur products improp(' rly as "Broadtail" :failng on labels and invoices, to show the true animal name of furs, to disclose vben fur was artificially colored, ami to use the term "Dyed Broadtail-processed Lamb" as required; failing to use the 'yard " natural" on labels where applicable, ancl to show the country of origin of imported furs on invokes; snb:'titlltil1g nol1eonforming labels for those originally Dffxed to fur produl'ts: a1Hl failing in other respects to cOllply 1yjth labeling and illyoicing requirements.

CO::IPLAIXT Pursuant to the provisions of the, Federal Trade COl1mission -\('1 and the Fur Products LalJeling --\.ct and by virt1l8 of the authority vested in it by sa id A.cts, t.he Federal Trade Commission having re,l"son to bcJicI' e that Iax J\L Barth, an indivjdual trading as Charle BartlJ & Son hereinafter referred to fls respondent, has vio1nted the IJrm"isions of said Acts and the Hules and Regulations promnJgatecl under the Fur Products Labeling ..-\.ct, and it a.appearing to the COIlmission that l pro('eec1ing by it in respect thereof ,yould be in tb: , .

CHARLES BARTH & SON 535 G34 C011plaint public. intel'PsL hereby issues its complaint stating its charges in that respect as follo\ys:

IU(;1L\PH 1. l1respondent ::Inx:.1. Bnrth is an individual trading as Charles Barth & .soh.

Respondent is a manufacturer )101e::aler and retailer of fnr prodacts ,,-ith his offce und principal place of business locateel at, 100 Korth State Street, Chicago, Ilinois.

PAR. 2. Subsequent to the effective dale of the Fur Products Labeling Act on .August 9 , 19;')2, respondent has been anel is nO\y engaged in the introducUol1 into commerce, and in the rnnnnfactllre for introduction int',o comme.rce, and ill the sale, aclvel'tisillg and of1'ering for saJe in commerce, anti in the transportation and distribution in c.ommerc.e, of fnr products; and JUtS mallllfaetnred for sale. sold. ;1(1vertised, offered for sale, transported and distributed fur products which have been made in -whole or in part of furs which 11f \-e ueen shipped and recpi,-ecl in commerce, as the terms "commerce flll' and "fur proc1ncf: arc defined in the I llr Prmlucts Labeling- \.C't. PAR. 0. Certain of sl'ticl fnr products \yen.' falsely and deeeptiye1y la.bclec1 01' otherwise falsely or c1eceptiyely identified "with re-sped to the name, or designation of tJJB animal 01' animals that. prodncell the fur from \which the said fur products han bepn manufactured, in viulation of Section 4(1) of the Fur Products Labeling Act. Among such misbranded fur products, bnt not 1imitcd thereto were fur products 1yhic11 1were labpJecl HsLeopard Cat when 1 he. fnr eontainec1 in such products \yas, in fact, Spotted C,l/. Also among such misbranded fur proc1ncs: but not 1imitcll tllPreto, were :fur products labeled as "Broadtajr: thereby implying that the furs contained therein ,were entitled to the designat.ion "Broa.dtail Lamb" 1yhen in truth and ill fact the-y were not. entit1ecl to ::ndl designntion.

m. 4. Certain of said fnJ' products were misbranded in that they \were not, laheJed a,s required under the prm- isions of ectioll 4(2) of t,he Fur Products Labeling _:tct, and in the mHnJleI' and form prescribed by the Rules and HegllJntion promulgat-etl thereunder. Among s11cll misbranded fur products, but not limited thereto were fur products with labels which fti1e 1. To show the trnc, animal name of the fni' llsed in the fur prOlInC'!. 2. To disC'Jose thm the fnr contained(l in the fur proc1llct 1Y,15 bleached. clye.d, or othenyise. artificia))y colored, 1yhen su('h \\";15 the fact.

Pall ;). Certain of said inr products ele rnisbranc1ed in \- inlation of the I-i'm' J) roclllcts La.beling- _A..ct in that they were not lrbe1('d in 536 FEDERAL TRADE CO \BIISSIOX DECISIONS Complaint 63 F.

accordance with the Rules ::mc1 Regulations promulgated t.hereunder in the follmying respects:

(,,) The term "Dyed Broadtail-processed Lamb" vms not set forth on labels in the manner required by lrny, in violation of Rule 10 or sa,id Rules and Regulationi-.

(b) The teJ.m "mltul'aF' was not used on labels to describe fur products Iyhich ,were Hot pointed, bleached, dyed, tip-dyed, or otherwise artificia1Jy colored, in violation of Rule 1D (g) of said Rules and R.egulations.

(c) Information rerJuired under Section 4(2) of the Fur Products LabcJjng Act and the R.ules and Regulations promulgated thereunder was set forth in handwriting on labels, in violation of Rule 29 (b) of said Rules and Regulations.

(c1) Information required nnc1er Section 4(2) of the Fnr Prod, net.s Labeling ct and the Rules and Hegnlations promulgated thereunder '''a,s not set forth in the required sequence, in \7io1ation of Rule :10 of said Rules and Regulations.

PAR. G. Cell,ain of said fur products \were falsely and deceptively il1\oice,cl by the respondent in that they \Verb not iin-oicccl as required by Section 5 (b) (1) of the Fur Products Labeling Act and the I ules nncl REgulations promulgated under such Act. :illong sneh falsely and deceptively in\Toiced fur produc.ts, but. not limited thereto, \were fur products covered by invoices which failed: 1. To show the true nimnl1l:1me of the fur used in the fur product. 2. To disclose that the fur contained in the fur product was bleached, dyed or ot1wrwise artificially colored, when such \)as the fact.

3. To shov; the country of origin of imported furs used In fur products.

PAn. 7. Certain of said fur products were falsely and c1ccepti,,-e1y invoiced with respect to the name or designation of t.he animal) or animals that produced the fur from \',-which the, said fur products had been manufactured, in violation of Section 5 (b) (2) of the Fnr Products Labeling Act.

Among such falsely and dece.ptively invoiced fur products, but not limited thereto, were fur products which were invoiced as "Broadtair' thereby implying that the furs contained t.herein were entitled to the designation "Broadtail Lamb" when in truth ann jn fact they were not entitled to such designfttion.

PAR 8. Certain of said fur products were fa1sc1y and deceptively im' oiced in violation of the Fur Products Labeling Act in that they CHARLES BARTH & SOX 537 S3-! Decision and Order were not invoiced in acc.ordance with the Rules and Regulations promulgated thereunder in the following respects: (0) The term "Dyed Broadtail-processed Lamb" was not set forth on invoices :in the manner required by law, ill violat.ion of Rule 10 of said Hulcs and Regulations.

(b) Required item llumbers "\YCI'C not set forth on invoices, ill violation of Rnlp 40 of said Rnles and Regnlations. PAR. 9. Respondent in introducing, selling, advertising, and offering for sale, in commerce, and in processing for commerce, fur proc1llct. ; and ill selling, advertising, offering for sale and processing fur products which have been shipped and received in commerce, has misbranded such fur products by substituting thereon, labels which did not conform t.o the requirements of Section 4 of the I;'ur Products Labeling Act, for the labels affxed to mid fur products by the mn,nufacturer 01' clist.ributor pursuant to Section 4: of sn.id Act, in violation 01' Section 3(e) of said Act.

PAn. 10. The aforesaid acts and practices of respondent, as herein Jleged, arc in yiolat.ion of the Fur Products Labeling Act and the Rules and Regulations promulgated thereunder and constitute unfair and clerept.ivp 11('18 and practices and unfair methods of competition in COJ1Jl1el'' e ulllel' the Federal Tracie Commission \ct. DECISIQX AND OnDEH The Commission having heretofore c1ete1'mined to issue its complaint charging the respondent named in the caption hereof with violation of the Federal Trade Commission Act and the Fur Products Labeling Act, and the respondent having been served ,,,ith notice of said detennination and ydth it copy of the complaint the Commission intended to issue, together with a proposed form of order; and The respondent and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by respondent of an the jurisdictional facts set forth in the complaint 10 issue herein, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the la,," has been violated as set forth in such compla.int, and ,vaivers and provisions as required by the Commissioll rules; and The Commission, having c.considered the agreement, hereby accepts same, issues its complaint ill the form contemplated by said agreement: makes j-he following jurisdictjonal findings, and enters the following order:

1. Respondent Max J\. Barth is an individual trading as Charles Barth & Son wit.h his offce and principal place of business located at 190 North State Street, Chicago, Illinois. 538 :FEDERAL TRADE COMMISSION DECISlOKS Decision and Ord1r 63 2. The .Federal Trade Commission has jurisdiction of the subject matter of t.his proceeding and of the respondent, and the pr,oceecling is in the public interest.

ORDER It 18 odlei'ed That l'cspollclcnt )Ia.x ::U. Ba,rth, an indi,"iclual trading as Charles Bnrth & Son, or under any other trade name and I'espond ellt, s l'cpl'csentatiYes, agents and employees, directly or through any cOl'pol'nte 01' other dedee, in connection with the introduction, or manufacture for introduction, into commerce, or the sale. adrcrt.ising 01' oflcl'ing for sa)e, or the transport.ation or distrilmtion in commerce of any fur product: or in connection with the manufacture for ale snic-, ncln' rtising, ot1cling' for sale, t.transportation or clistl'ilmtion, of any fur product "n-which ls made in VdlOle. or ill part of fur which has been shipped or received in commerce, as ': commel'(,e. \ H fnl' '' and fur prmlllct. : are defJnec1 in the Fur Proclnc.s Labeling" A('t do forthwith cease and desist from:

\.. ::Iisbranc1ing fur products by:

1. Falsely or dec.epti\-ely Jnbe1ing or other\-ise identifying any such fur prodllct as to the. name or deslgnation of t.he animal or animals that produced t.he fur c.ont.ained in the fur product.

2. Failing to affx labels to fur products showing in words and in figures plainly legible aji of the information require(l o be disclosed by each of the subsections of Section i1-2) tbe Fur Product Labeling Act.

3. Failing t.o set forth the term "Dyed Broadta.il-proce"sed Lamb" on labels in tllp manner required yhere an pled ion jf) made to llse t.hat te.rm ili lien of the term "Dyed Lamb:: 4. Failiug to set forth the term :: atura1' as part. 0-( the information r quired to be disclosed on labe)s under the Fur Products Labeling Act and the Ullles and Heglllntions promulgated t.he.leunc1er to describe flll' products which are not pointeel, blenchec1 dyed, tip-dyed, or otherwlsc artificially colored.

5. Setting forth lnfornwJion required under Section 4(2) oi the Fui' . Products Labeling A.ct flnd the Rilles and Regulations promulgated rhereullder in handwriting 011 labels affxed to flll' products.

6. Fa.iling to set forth informacion required under Section 4(2) of the Fll Products Labeling Act and the TIn1es and Regulations promulgated therel1l)(ler on 1nheJs in the 88, quence required by Rule H) of the aforesaid Hules and H.egulations.

STAX NE\VCO)'IB FIF'rH VEN1JE' 539 ;',34 Syllabus B. Falsely or (kcepti,-ely invoicing fur products uy: 1. Failing t.o furnish ill\oiees to purchasers of fur products showing in words and figures plainly leg:ible an t.he information required to be disclosed in each of the subsections of Section 5(b) (1) oj' the Fur Products Lobeling Act. :2. Setting forth on 1nY01Ces pertaining to fur products any false or deceptive, information ,with respe,ct to the name or designation of the nn1ma,1 or animals that produced the fur cont.ained in such fur product.

3. Failing to set forth the term "Dyed Broadtail-processed Lamb ' in the manner require, d where an election is made to llse that term instead of the ,words "Dyed Lamb 4. Failing to set forth on invoices the itClrl number or Hl:l'k assigned to fur products.

It is further ordered That respondent Iax 1\1. Barth, an individual t.trading as Clm.rules Barth & Son, or under any other trade name and respondent s represent.atlyes, agents and employees, directly or through any corporate or other device, in connection wjth the introduction, sale, advertising or offering for sH,le, in c.commerce, or the processing for commerce, of fur products; or in connection ,with the seIJing, advertising, offering for sale, or processing of fur products which have been shipped a.nd received in commerce, do fort1nvith cease and desist from misbranding fur products by substituting for the labels affxed to such fur products pursuant to Section 4 of the Fur Products Labeling Act labels which do not conj'orm to the requirements of the aj'oresaid Act and the Rules and Regulations promulgated thereunder.

It is further ordered That the respondent herein slm11, 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 jn ,\"hieh he has complied ,with this order. By the Commission: Commissioner Ehnan not prtrt.icipating.