Leonard Margolis

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

THE :rfa TIER OF LEOXARD MARGOLIS ET AL. TRADING AS SILVO HARDWARE COMPANY ORDER , ETC. , IX REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 856'1. Complaint, Mar, 14., 1963-Decision, Jan. 1964 Order requiring Philadelphia mail-order distributors of hardware housewares, t;ypewriters, toys, and other general merchandise, to cease representing falsely in catalugs distributed to prospective purchasers that higher prices Quoted in juxtaposition ,,'ith lower stated code prices were the usual retail :,ricos in all the trade areas in which the catalogs were distributed; and by such statements in catalogs as "wholesalers and distributors BUY I' WHOLESALE PRICI' " that they sold all their merchandise at wholesale prices.

COl\IPLAIXT 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 Leonard :Margolis and Norton Berger, individual.11y and as copartners trading as Silvo Hardware Company, hereinafter referred to as the respondents have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it. in respect thereof TIould be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

P ARAGRJ\PH 1. Respondents Leonard :\largolis and X orton Berger are individuals and copartners trading as Silvo I-lard ware Company, with their principal offce and place of business ioeated at 107-100 Walnut Street in the city of Philadelphia, State of Pennsylvania. PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of hard ware, housewares, typewriters, toys and other items of general merchandise to the public.

PAR. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said merchandise, when sold, to be shipped from their place of business the State of Pennsylvania to purchasers thereof located in various other States of the United States and in the District of Columbia and maintain and at all times mentioned herein have maintained a substantial course of trade in said merchandise in commerce, as commerce,j is defined in the Federal Trade Commission Act. 224-0(;0- .0- ____ _ . Complaint u4 F.

PAR. 4. In the course and conduct of their business the respondents have distributed catalogs through the Fnitecl States mail to prospective purchasers located outside the State of Penusylvania. The following statements from the catalogs arc typical but not all inclusive:

o. 18900 Perm-Grit Hand Sander-20001-S37 PS3_- 51. 25 Skil Pernl1-Grit Hand Sander Sheets- lS973-S37 P1J6- -- $. 99 O. 503 Skil ?:j" Dril-503-S37 P1263-51bs --u-- $18. 05 No. 549 Skil Dril-549-S37 P1997-5Ibs_ J. 95 No. H264 St.anley; P. Rout.er-H264-S2fJ P4S97-- $69. 95 D. HS5 Stanley 8" HCflVY Dut.y Builders' Saw- HS,j- S20 1I66J5- Ibs_ S94. 50 ='o. 6m- Stanley Block Plallf'- Slo P42() 86. 25 O. X 226 Stanley " 100 PIns Zig Zag " Ext.en jon Rllle-X226-S19 P1SG-- 82, SO Ko. 6800 11ilcl's Falls 1'O'i' (,1' ROl1ter-6800-1\Ilo P3006_ $42, 05 l\Ioclel K700- 11 Shopm:1te Logger Chain Saw-Power Saw-K700- 11- P4 lofi332_- - $79. 08 1)- 05 Dii'ston I-ghtweight Strajghtbuck Hnncl S:1\\ D9iJ-D6 P730 SID. 95 S Disston ?\IediulI Weight Skew Ba.ck Hane! Saw-DS-DG 1'585-- ss. 75 No. (102 Stanley Magnetie LJpholste1'er s Hamme1'- 602-S19 P2S7 - - - - $4 10 No. 20 Stanley Try Squllres-20- S19 P197- u---- 82. S2 tladel 6T Smith-Corona " laxie" Portable Typewriter-6T-S12 1110498_ $141. 50 Model SA Smith-Corona "Sterling Portable Typewriter- 5A" S12 H7795- - - - - - - --- - 5104. 50 !'\lode! 4Y Smith- Corona i'Skyriter" rortable Typewrit.r-4Y-S12 116099- - - - --- $74. ,')0 Page 2 of the respondents catalog contains the statement that all prices s110wn in the catalog are retail and your cost is shown incode. The code used throughout the catalog is explained on page 2 of the catalog with the foJ1owing example for a Stanley plane adapter kit:

H170-S20 1'3098 5 lbs-- --u__---- $44. 25 H170-S20 ' is described as the catalog number; " P\ or some other letter, is the shipping key; " 3098': is the purchaser s cost, the decimal point to be added by counting off two places from the right: " 5 Ibs. is the approximate weight of the item; and "S44, is the retail price established by manufacturer or recommended by us. PAR 5. Through the use of the aforesaid statements the respondents have represented, directly or indirectly, that the l1higher stated , , , SILva HARDWARE co. 411 409 Cumplaint prices quoted in Paragraph 4 in juxtaposition with the lower stated code prices are the prices at which the merchandise described in Paragraph ,1 is usually ancl customarily sold in al1 trade areas to which the catalogs are distributed and that a saving win be made of the difference bebvecn the two prices.

\R. 6. In truth and in fact the higher amounts set out for the items listed in Paragraph 4 are not the prices at which said merchandise is usually and customarily sold in all tntde areas to 'iyhich the c.atalogs are distributed\ but are in excess of the price or prices at which said merchandise is generally sold in some of said trade areas, and purchasers of respondents' merchandise in such trade areas would not realize a saving of the difference between the said higher and lower price amounts.

Therefore, the statements and representations as set forth in Paragraphs 4 and 5 hereof were and are false, misleading and deceptive. PAR. 7. Through the use of such statements as wholesalers and distributors you ,, il1 be able to BUY AT "WHOLESALE PRICES" you ,write the orders, mail them to us with proper remittance (according to your wholesale cost) * * *,: and "your confidential ,dlOlesale prices are printed in CODE" ' * * appearing in their catalogs the respondents have represe,ntec1 directly or indirectly that they sell all of their merchandise at wholesale prices. PAR. 8. In truth and in fact the respondents do not sell, nor do they ofIel' to sell, all of their merchandise at "holesa.le prices but to the contrary, the prices of some of their merchandise are in excess of vd101resale prices. Therefore, the statements and representations referred to in Paragraph 7 are false, misleading and deceptive. \.H. D. In the conduct of their business, at al1 times mentioned herein, respondents have been in substantia.l competition, in commerce, with corporations, firms and individuals in the sale. of articles of merchandjse of the same general kind and nature as that sold by respondents.

PAR. 10. The use. by respondents of the aforesaid -false, lnisleading: and deceptive statements, representations and practices has had, and now has, the caJxwity and tendency to mislead members of the purchasing public into the elTonC0l1S (111(1 mistaken belief that said statements and representations were a11(l are true and into the purc.hnse of substantial quandties of respondents' merchandise by reason of said erroneous andmistnkell belief.

\R. 11. The aforesfl1d nets nncl practices 01 respondents, as herein alleged, ,were and are all to the prejudice and injury of the public and oT respondents' competitors and c.onstituted, and now constitut.e unfrlir methods of competition in commerce and unfair and deceptive Dccision 84 F.

acts and practices in commerce, in violation of Section 5 of the Federal Trade Commission Act.

3fT. Robert A. ilattina, illi.. iloTton Nesmith, supporting the complaint.

NT. Leonard il argolis, in personam and by acquiescence and partnership authorization for Silva Hardware Oompany and ilr. LVorton Berger as an individual.

IxrfI.\L DECISION BY 1-IER:\LL'\ TOCKER , 1-IE.:Rl:'G EXAl\IIXER AUGDS'r 15 , Ifit3 In a complaint issued IHrch 1.1, 19G3 , the respondents Leonard )yfargolis and Norton Berger, inc1ivic1ually and as copartners trading as Silvo IIarchvare Company, \were charged "ith having engaged in unfair met1lids of competitbn in commerce and unfair and deceptive acts a,ncl practices ill commerce, all in violation of Section 5 of the Federal Trade Commission I\.Ct. The practices with which this compbintis conccrnerl h:lvC to do "ith alleged representations to prospective custOlnel'S that the gc.ods or merchandise offered for sale by respondents ",ycre being sold fit wholesale prices, 10\\e1' than the retail prices usually and cllstomarily paid for sneh goods or merchandise in the trade areas in which the c.customers solicited were located. These allegations resulted in t,yO issues, (1) whether respondents selling prices ac.tually ",were chol(,sale prices find (2) whether tprices called "retail" by respondents factually ",were retail prices in the relevant areas of solicitation.

The respondents (hereafter described as Silvo) operate " h,,t has come to be kno\\-n as a cat.along house. Their place of business is 109 "\Valnut. Street in Philadelphia, Pennsylvania. They di tribl1t.e from 000 to 30 000 catalogs annually throughout the United States. In 196 , they did a gross business of approxirnately 8342 000. During the current year, their business is rnnning about 10% below that (Tr. 32 35-36). Although, as the printed reproduction of portions of the (jataJog will show, respondents purport to sell to dealers, actuany this is not so. There is nothing in this material which suggest.s t.hat there is any condition attached to buying other than a minimum order of $10 and payment with the order. Respondents admit they seJJ to anybody who submits an order and pavs for the goods (Tr. 193) .

The -following are extracts reproduced from Pages 2 and 3 respondents' catalog (CX- 4).

Significant portions of t11e foregoing extracts point up both the manner in wl1ich the respondents conduct their business and the Pictorial extracts are omitted in printing. , SILVO IL-\RDW ARE CO. 413 409 Dccision practices with which.h this proceeding is conc.erned. The recipient of the catnlog is referred to as a "c1dealer ' and is welcomed to Silvo FAMILY OF DEALERS !". But, as mentioned before, one does not have to be a dealer to buy from SiJvo or to buy at the prices at which it seDs. This literature imposes no such condition and 1\1argolis admitted as much in his testimony (1'1'. p. 193). Respondents in the material pictured, emphasize it by making clear that catalogs are free and that. if the recipient or any of his "friends desire an extra copy of t.his catalog, all that is necessary to send a postcard to Silvo "and a copy "ill be sent free of charge . In this material respondents tell their prospective customers that they are "able to BUY AT WHOLESALE PRICES" and that all that they have to do to buy and receiye the merchandise is to " write the orc1e.rs, mail them to (Silvo) with proper rcmittance (according to your 1.l)holesule cost)" and Siho "iJ "in turn * * * ship (the) order promptly These blurbs at the left of the first of the reproduced extracts are implemented by the material at its rjght. This again emphasizes Confidential \Vholesale Prices . Although the "dealer': pretense is repeated by the remark that the catalog can be sho\yn freely to Cust011ers, this whole dealer angle, in view of the manner in which respondents conduct their business, is primarily an appeal to the guile of prospective customers. Everybody likes to get a bargain and, if one can be led to believe that he is getting something cheaper from Silvo than he would have to pay else"here, he is more likely to purchase from it. In this manner, whether or not there is a deception, trade is diverted from competitors. If there is a deception, there is a violation of the Act.

To lend enchantment to this catalog method of doing business, a ric1ieulonsly :;imple code is portrayed in the right-hand side portion of the first reproduced extract. Thus, in addition to thc text material describing the commodity offered for sale, there are the h'\o blac.kface (in the body of the catalog) groups of arabic numbers here 30D8" and "844. . The 84-'1.25 is described by respondents as Hetail Price Estab. by Ifr. or Hecommended By Us, and the 30D8" code figure discloses the price which the solicited c.customer is expected to pay. He is told Your Cost Point Off Tv,o Decimal Plnr es From the Right, . In other ,words, the sum and substance of the \\hole business is that respondents represent to prospectil'e customer:; that they can buy, in this instance, it p1nne adapter kit for 830.D8 from them, \yherens, if the kit 'Were bought at r('tail they ,ymdc1 lWl'e to PflY 844. 2;'. If this \,ere so, customers would be saving Slg.27 by buying from Si1vo. To repeat, it is charged that the represented retail price was fictitious in that this was not the , 414 federal TRADE Come.nSSION DECISIONS Decisioll 64 F. T.

price at which thc particular item involved usually was sold in the areas solicited and that the purported ::wholes Lle" price in fact wa.s not a wholesale price.

It is now established law .:that the use of the term 'manufacturer jist price' represents to the public that that (is) the priec at "hieh t.he product (is) usually and customarily sold by other stores in the area. Giant Food: Inc. v. Federal Trade Comlnission 322 F. 2d 977 CA- , June 13, 1963 Ci S. &D. no), and cases there cited. Subject to the right of the respondents to disproye any fact of which oficial notice 1\"as taken, the hearing examiner issued, filed and there was served on respondents, a notice of intention to take offcial notice as follows:

1. "WHOLESALE" is a word generally used find understood to be used as an adjective to describe the business of a per:;Ol1 or firm who, or 'which, normally sells to other persons or firms who are engag-el1 in the business of buying such goods as are sold for purposes of resale, with the exceptiun, howe,er, that it is sometimes used to describe sales in qUfllltity lots to industrial. commercial. institutional or professional users, although such users do not purchase for resale.

2. "WHOLESALER" is a noun generally used and understood to be used to describe the person or firll which engages in a wholesale business. 3. "RETAIL" is a word generally used and understood to be used as an adjective to describe the business of acquiring goods either by purchase, pro duction or manufacture for the purpose of sellng the same, generally. but not necessarily, in small quantities to the ultimate consumer or user thereof. 4. "RETAILBR" is a noun generally used and understood to be used by a person or firm engaged in retail business.

5. The foregoing words, when used in any other grammatical form, such as verbs, participles, etc.. retain the meaning-s abo,e ascribed to them. 6. When any of the foregoing ,,'ords are used in close context with words like "price cost" , etc., they are understood to mean that the word "price or "cost", or any such similar word, is the amount which governs or determines the money paid or to be paid in order to pllrdwse 01' receive the article involved in tbe transaction or the amount llsually demanded fls a consideration for selling or delivering such article.

7. An offer for sale of a product to the consuming public ,which utilzes, in connection with the terms of the offer, an expression or word like or similar to the ,yard "wholesale" is generally understood to mean that the price at which it is so represented is the same as the price regularly paid by retailers for such article; and. consequently, that if the purchaser buys the article that price, he wil save the difference between that price and the amount at which the article offered usually is suld at retail in the trade area, or areas, where the offer is made.

8. .An offer for sale of a product to thc consuming- public which utilzes, in connection with the terms of the offer, an expression or word like or similar to the word "retail" is generally understood to mean that tbe price at which it is so represented is the same as the price regularly paid by purchasers of such articles at retail; and, consequently, that the difference between that price and any lower price at which the article is offered for sale is the amount that the purchaser ,,-il sa-fe if he makes the purchase from the , , , , SILVa HARDWARE co. 415 109 Decision offerer and not in the usual and customary retail manner in the trade area, or areas, where the offer is made.

10. A "standard Metropolitan statistical area, as used in the UJ58 Census of Business (of which the hearing examiner also takes offcial notice), is a trade area as the term "trade area " is used for the purpose of considering and ruling upon retail trade practices by the Federal Trade Commission. 11. The Washington, D. :Maryland-Virginill trade area consists of Wasbington, D. ; Alexandria and Falls Cburch duties and Arlington and Fairfax counties, Virginia; and .:lontgomery and Prince Georges counties, Maryland. )::. The Bflltimore, ::Uarylanrl trade area consists of Baltmore City and Anne AruJ1tlel, Baltimore, Carroll awl Howard Counties, Maryland. 13. The Richmond, Virginia trade area consists of Richmond city and Chesterfield and HCllrico Counties, Virginia, 14. Amounts designated by the terms ::lfg. List" l\Ifl'. List" l\Ianufacturer s List Price Manufacturer s Suggested List Price Hetail" and Retail Price" and words of similar import, when used in conjunction with amounts of money or prices, are representations that the amounts of money arc the prices at which the products offered or advertised were or are usually and customarily sold at retail in the recent, regular course of business in the trade area, or areas, in \which the goods are being offered for sale. Because of evidence adduced during the hearing, the hearing examiner now qualifies the definitions governing the use of the word "\yllOlcsale ' in its various forms and connotations by limiting its price significance to single- unit or small quantity sales or purchases. This is because it was developed that in many instances manufac turers or distributors set different wholesale or dealer prices for single-unit or small quantity sales than they set for sales in greater quantities (Tr. Pl'. 102 311 502 517, RX- , 2b). Since respondents sales are primarily single-unit sales to their customers, the hearing examiner has concluded that, in those cases where a manufacturer or a distributor sets and abides by H, single-unit or small quantity price for a particular commodity, that is the price to which reference must be made for the purpose of determining if, in fa. respondents' alleged wholesale or dealer price was fictitious. In all other respects the offcial notice taken by the hearing examiner has not been made to appear improvident or inapplicable to the facts of this CelSC.

During the course of the hearing, respondents contended that the prices published by them in their catalog, whether referred to as wholesale or as retail, were determined by them primarily after refcrence to literature distributed by the manufacturers Or cHstributors of the articles offered for sale by them. They said that in such liter"hire, the manufacturers or distributors specified either or both the prices at " hieh the commodities were to be sold to dealers flnd to the retail trade. They said that where they referred either to a dealer price or a. ma.nnfactlll'er s List. price, in most. cases, they obtained such' prices from the Jiterahu'c. There srere some except.ions, however , Decisiun 64 F.

(Tr. pp. 182-185, 252). 1:Vl,ere the dealer price was such that they could not make a profit, they increased this somewhat in order to allow a profit, but say that such increase always was to a figure below the so-called "retail" or "manllfacturer s list price . Also, they say that in cases where a manufacturer did not publish a suggested list price, they undertook to establish as the so-called " retail price" "hat they thought was a fair and proper pric.e to be charged at "retail" (Answer and Pretrial Order, Tr. pp. 54-55). This is the background of the phrase Recommended By 1;s, quoted above from the reproduced extract. Counsel supporting the complaint expressly stated that in those cases where a manufacturer actually published a suggested retail price, it was not claimed on behalf of the Commission that in any instance respondents incorrectly quoted that figure (Tr. pp. 181 , 561-567). 1\0 such issue appears in this proceeding.

It may be observed also that there is nothing in the eyidence from which it can be concluded that respondents made any study of prices routinely or usually paid for particular merchandise in any particular trade area before "recommending " a so-called "retail price . As a practical matter, this probably would be impossible because of the number of areas in which they distributed their cata.log. Consequently, as a matter of lay." , unless by accident this so-called "recom mended" price happened to be the routine, regular retail price in a particular trade area, the very practice of establishing prices in this manner would have to be condemned.

For the purpose of establishing trade areas to prove the contentions set forth in the complaint (Baltimore Luggage Company v. Federal Trade Commission 296 F. 2d 608, 611), Commission counsel offered in evidence a number of inv01ccs showing actual sales made by respondents in .Washington, D. , Baltimore, Maryland, and Richmond, Virginia (CX-6 to 34, inclusive). 'VhUe not necessarily controlling on the ultimate decision in this proceeding, these sales included various power and hand tools and household appliances and utensils, and toys. The proof extended beyond these to typewriters and fishing gear. Gtilization was made of the testimony of manufacturers' representatives or employees, distributors and wholesakI' S and retailers showing prices in the ,Vashington C. and Baltimore trade areas, and, in a more general sense, elsewhere. This evidence will be discussed in somewhat greater detail below. It was substantial and suffcient to establish the conelusory allegations set forth in the complaint.

Before setting forth details of the evidence, arguments on behalf of the respondents and some other factors must be considered. iVhen , SILVa HARDWARE co. 417 409 Decision it "'as made to appear that some prices actually "'ere different from prices published by respondents, they suggested that the changes might have occurred following the publication of a particular cata- Jog. This was discussed not only at the pretrial conference but also during the hearing ('II'. 318- 320). The hearing examiner ruled, Rnd adheres to his ruling, that when an advertiser undertakes to make a rrprese,ntation as to price, he does so at his peril. This is particulrl'ly the case in this catalog mail- order business. Respondents issue only one Jnain caUllog in a whole year, which is supplemented only by a smaller Spring distdbution intended mainly to stimulate business. If the price should change during the year that this catalog i in circulation, such a representation becomes untruthful. The fact. that it may be impractical, diffcult or too e,expensive to change the catalog or to recall it is wbol1y immateri l1 to whether the representation is deceptive or untruthful.

In considering the issues in this case, the hea,ring examiner has based no finding of fact or determination on evidence of special sales or one- day sales (Tr. 32i-82D). On the other hand, the contention on the part of the respondents that the District of Columbia area which "Tas one of the areas involved in this proceeding, is an area in which " outrageous prices" prevail is ill-founded. Assuming that from the viewpoint of a businessman, particularly a mail-order merchant, prices in the District of Columbia area are outrageously low, he is not compelled to solicit business in this area. However, if he does so solicit business, he may not adopt. unrealistic, so-called manufacturers' Est prices ': in a manner resulting in representations that they are the usual retail prices in this area. Similarly, the fact that an article is "foot balled" particularly vulnerable to price cutting for loss-leacler or other purposes, is immaterial. Finally, as already indicated above, in determining what is a usual wholesale or dealer price or cost, since the business involved in this case was concerned primarily with single-unit purchases and sales, the hearing examiner has disregarded prices based on or resulting from special.1 quantity discounts, distributorship discounts, adn rtising allmvances and rebates.

Respondent s argue also that no remedial action CRn be taken against them because there was no proof that substantial quantity.ies of the goods ,,,ith respect to which the cyidence was submitted were sold, ancl, conseql1enny, no proof of (Iiversion of business from compe.titors. The Commission may infer that false representations induce customers 10 buy commodities so represented and thus divert business from competitors. But, more important Section 5 of the Federal Trade Commission Act declares such deceptive practices 418 FEDERAL TRADE COMMISSION" DECISIOXS Decision 64 F.

unlawful without regard to their actual effect on competition." In re Leeds Tracuelwear, Inc. Docket No. 8140 (61 F. C. 152J; Giant Food, Inc. v. Federal Trade Oommission 322 F. 2d 977, CA- June 13, 1063 (7 S.&D. 710J; and eases there cited. NARRATION OF EVIDENCE Typewriter.. at Wholesale: A typewriter represented by respondents to be sold to its customers at a wholesale price of $104.98 or $108.7 was sold at wholesale in the District of Columbia, regularly and routinely, at prices varying from $86. 10 to $92.77. Another typewriter represented by the respondents as being sold at wholesale at $75.21 or $77.95 was sold at wholesale in the District of Columbia regularly and routinely, as low as $63.08 and as high as $67.80. A third typewriter represented by the respondents as being sold at wholesale at $58. 86 or $60.99 was sold similarly in the District of Columbia and elsewhere as low as $48.94 and as high as $52.62. A fourth typewriter represented by the respondents as being sold at wholesale at $49.95 was sold similarly at $43.11 (CX- , p. 85, CXp. So, RX- , HX-2 (c); Tr. Pl'. 7- , 286-302, 198-220). Type' writers at lletail, Wa.shington, D. C. TJ'ade Area and Elsewhe't' Respondents represented as the retail price one typewriter at $141.50 or $149. , which t.ype,writer sold, regularly fmd routinely, as low as $109.95 and no higher than $129.50; a second typewriter at $104. or $124. , which sold, regularly and routinely, as low as $89.50 and as high as $08.88 (CX-4 , p. 85, CX- , p. 80; Tr. Pl'. 8- , 198-200 220, 204, 025-328); a third typewritcr at $79. , which sold, regularly and routinely, at as low as $49.95 and as high as $53.57 (RX- , p. 85; Tr. 286 , 287, 325-328 and CX-30). The manufacturer distributor of all these typewriters testified that the majority of his dealers in the 'Vashington, D.C. and the Baltimore retail trade areas retail their typewriters at less than the manufacturer s list price.. (It is to be recalled that the manufacturer s list price was the price which respondents represented to be the usual or routine retail price. (Tr. Pl'. 198-200 , 220. Respondent Margolis also conceded that throughout the United States these typewriters are sold around factory cost price and always lower than the manufacturer s suggested list price (pretrial statement, Tr. Pl'. 166- 177). Fish,ing Gem' Testimony as to fishing gear "was given by the manufacturer s representative. The following table, together with citations to the record, shows respondents represented retail and wholesale prices and the actual retail and wholesa,le prices in Dehtware Iaryland, ,Vashington, D. , Virginia, ,Vest Virginia, fUld portions of Ohio and Kentucky:

0(;If SO ,)6 J()l(i D676 ..

. hr'). R ). 11. 10. - ;W.11. 11.!)6IH. J .)12-- 21- 7fi- 21-21-7I- (;8-20.21-1.'.21-12t,. . 8. :); 14.11.7. 11.18. "'""''C'O'' $18. 10. I4.11.21- I I ' -; 7:'), 48 48 D8 75 1H 501818 rcsa . ., !t (i. ,). 7.4.7.22. 5.4812. S:J:; !J. 7. :;:34, "" "525,""""

. ',"n' I . \24 ., ' , 1 ,)115 !).( 517 !IS !J.'I,50I;j() 00 fJ,')I!)5 !j5 . I1.D.'24.lR 10. nc' D.14.J;;. b. 4.'. 14. IH. 22. A:gcrtrctail r- fI!) \17f)777 no 10jJ 70,)!)? pric . . . 11.40 8. 8.!1.:176. O'''O' : $11. SilVOCO ;

!J , _ - 7D7- 77L 2mHJ JI J 177, fJ28J)12L J!)():L 15Wn.14:")1 141(3_L.n4-!O1O No. No.o.No.No. No. ).a.No.No.l\' D.No.No. !( (,I Hr'cJ H(,(,\ H.eelHt'f,j Hpf'!HodHodHodH.odHod , , p.

420 FEDERAL 'TRADE CQMM.:rSSIOK DECISIOKS Decision 64 F.

Respondents conceded that this fishing gear regulorly sold below the list prices (Tr. Pl'. 166 178, pretrial statement). The manufacturer s representative stated that his personal observa.tion was that retail selling prices ran from 20 to 25 percent below the published catalog prices (Tr. p. 525).

APPLIANCES IN THE WASHINOTON, D.C. TRADE AREA: A Rotisserie was represented to wholesale at $66. , but it \fas bought generally at wholesale at about $57.68 or less. Two witnesses test.ified that their wholesale prices were $02.87 and 562. (CX- , p. 82; Tr. Pl'. 300-310, 351-352 , 360 :162, 407 408 , 416). Respondents represented this rotisserie to retail at $89. , but it retajled generally at prices running from $62.87 to as high as B6- (CX- , p. 82; Tr. Pl'. :151-352 , :160-362, 407-408). A Clod, was represented to ,,-wholesale at 84. 6:1 , bnt its "holes ale price appeared to be 8:1. 1:1 in the District of Colmnbia. Although it was represented to retail at 86. it was sold in the District of Columbia at 85,45 (CX- , p. 82, CX- , 1'. 82; Tr. p. 352). A Cake Jlixing Appliance was represented to wholesale at $:16. whereas, in the Distr.lct. of Columbia, its regular find routine ,..holcsale cost. "as less than $32. One distributor did, howcyer, test ify that his live or less price was $:15.67. The retail price was representee! at $48. whereas, in t.he District of Columbia, it sold as low as $31.24 ane! as high as $:16. 07 (CX- , p. 86; Tr. Pl'. :111 , :152 , :160 :162, 40S 421-42:1 428-4:1:1) .

A Hnil' Ihyer was represented by respondents to sel! M wholesale at $22. .37 and to retail at $31.D5. Its routine wholesale cost in the District of Columbia was $ID. , although one distributor did testify that his five or less price was 822.:17 and another testilied that his single unit price was $21.57. This hair dryer generally sold at retail in the District of Columbia as low as 8n. 97 and as high as $2:1. (CX , p. 86; Tr. pp. :111 , :15:1-:154, :161-362 408 422-42:1 , cl2S-4:13 and 502-503) .

A Fruit Juicing Appliance: Respondents represented this to wholesale at $13. 27 and to retail at $1S.05. Its wholesale price fluctuated from $7.50 to $8.75. It retailed generally at $O.DD (CX- , CX- , p. 8:1, CX-:17; Tr. Pl'. :10D , :154 , :161 :162 10S, 422-4Q:). As to these, the respondents also conceded that they are generally sold below the manufacturer s suggested1list price (pretrjal statement and Tr. Pl'. 160-173).

The foregoing sets forth specifically as to particular items, the prices brought out by the m-ic1ence. .A similar narration of the other evidence could be made, bnt this would only make this decision SILva HARDWARE co. 421 409 Decision unwieldy anel tedious. Wholesale prices jn the 'Washington, D. trade. area for pressure pans, timers, can openers, another brand of juicing machine, an ice chopper and a thermometer were brought out in detail. As to these, Silva s "wholesale" price generally was substantially higher tha,n the usual or routine wholesale price at which the particular article was sold. This ',fis with few exceptions. For instance, a timer represented by Silvo to "wholesale" at $2. while generally \"holesaling at much less, "\fls wholesaled by one distributor at $2.50. A can opener, juicing machine and ice. crusher also generally sold at substantially less than Silvo s represented wholesale" price, but one wholesaler did testify that his single-unit. price was about the same as that represented by Silvo for these three items (CX- , 1'. , eX- , 1'. 84; Tr. Pl'. 376, 385-388, 422, 503-505 540-541, 547).

R.etail prices of block planes, rulers, levels, clamps, screwdrivers propane torches, saws and drills also were brought out in specific' amounts for the ,Vashington, D.C. trade area. A representative chain and other dealers testified that their retail selling prices usnnl1:y were either 10 percent or 20 percent off m Lnufacturers: suggested list prices, ,,,which Iwc1 been adopted by Silvo as " retair: prices. The chainstore representation testified that his company s prices fan from G to 12 percent off. However, t\"O localized hardware stores mftinulined manufflcturers: list prices 'with few exceptions (CX- Pl'. 11, 1;; and 16 , CX- , Pl'. 11 15 ,md 16 , 26 , 31 , 32 5:J: Tl'. 1'1'. 225-226, 240-244, Sn- , 8:J8-343, 434-440). There was evidence as to retaill:.rices of similar tools in the Baltimore, )Iarylalld tra(18 area.. IIere. again! the chains and larger stores regularly sold the articles at less than the manufacturers' suggested list prices One of them testified that the practice was to cut these by 10 to 15 percent. On the other hand, there "as some testimony to the effect that. the list price is maintained ge.nerally with the exception of certain especially favored customers, such as known artisans in the tl'clde, employees in the trade, and industrial accounts. An example of an -inc1ust,rial account is a real-estat.e operator or fl company engaged in the building business (CX- pp. 10 , 11 , 2. , 26, 28 , 31 , 53, CX- , Pl'. 10 , 11 , 26 , 28, 29 , 31 , 53; Tr. Pl'. 101-107 124-144, 455-469, 487-4D3).

Thus, it appeals in summary that, with few exceptions, with respect to goods upon which evidence was offered, in the tra.de areas selected, respondents' represented "wholesale prices were higher than the usual.l wholesale prices and respondents: represented retail prices "ere higher than the usual1 retail prices. The few exceptions are not 422 FEDERAL TRADE CO:MMISSIO DECISIONS Findings 64 F, suffcient to overcome the preponderance of the evidence to the contrary on the general issues.

The following are ultimate.

:FINDINGS OF FACT 1. Respondents Leonard Margolis and K orton Berger are individuals and copartners trading as Silvo hard ware Company. Their principal offce and place of business is located at 107- 109 .Walnut Street in Philadelphia, Pennsylvania.

2. Respondents are now, and for some time last past have been engaged in the advertising, otrering for sale, sa.le and distribution to the public of general merchandise, including, but not limited to hardware, housewares, typewriters, fishing gear and toys. Their gross sales exceeded $340 000 in 1962 and approximated $390 000 in 1961.

3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said rnercha, elise, when sold, to be shipped from their place of business in the State of Pennsylvania to purchasers thereof located in various other States of the ,;united States and in the District of Columbia. They maintain, and at all times mentioned herein have maintained, a substantial course of trade in said merchandise in commerce, as "eommerce" is defined in the Federal Trade Commission Act. 4. The business of the respondents is a mail-order business developed with the aid of catalogs disseminated through the mails freely to any persons requesting the same. A pproximat.ely :?5 000 to 30 000 such catalogs are distributed annually.

5. :Merchandise is offered by the respondents in mid c,atalogs to prospective cllstomers and recipients thereof. It is set forth in the catalogs, most often pictorially with descriptive material accompanying the pictures. Each article is ident.ified generally by manufacturer or ma.nufacturer s trade name or trade mark, and by manufacturer s identificat.ion number. In addition, each article offered for sale has a Silvo catalog number or stock number, a price in code and a price in dollars and cents, ,,'which last price is represented by the respondents to be the retail price established by the manufacturer at recommended. by them. The eoded price consists of several digits depending on whether the price is in cents, dollars and cents or dollars even. This coded price is uncoded easily merely by marking off two decima.l places from the right. The resulting iigure is the amount, or price: in dollar.rs and cents, cha.rged to t11e customer. 6. By utilizing and describing the price referred to as retail price respondents represent to prospective customers that that is the price , ,, , SILva HARDWARE co. 423 409 Findings at which the product to which it refers usually and customarily is sold by others in the trade area in which the catalog is circulated. 7. Respondents describe their coded price to prospective customers as being a 'i"wholesale price or a wholesale cost. 8. Typical of the method used by respondents for describing an article of merchandise offered for sale is: Xo. H170, Stanley Plane Adapter Kit'" * * H170- S20 P309S- lb8-$44. 215 In this particular instance, the so called "wholesale price ' or wholesale cost" is found in the group "P3098", which becomes $30. by marking off the two decimal points. The $44.25 is described as the retail price established by the manufacturer or recommended by Silvo. This is all as more specifically shown in the photographic reproduction from CX-- which appears at page :2 of t.his decision. D. The purpose as web as the effect of the printing of the coded price in juxtaposition with the invariably higher price represented as a. "retail price" is to represent to users of the catalog that and to lead such users to believe that the higher stated " retail" price. is the price at which the item offered or pictured in the eatalog usually and cllstomarily is sold in the trade areas to which the catalog is distl'ibnte(1. It if; fl1r1'1er the purpose of the respondents to callse users of the catalog and prospective customers to believe that the difference between t.he t,,-o prices will result in a saving of the amount of that difference to such users and customers, if they should make purchases from the respondents of articles pictured in the catalogs. 10. In truth and in fact, the higher amounts set out for many of the items listed in the respond6ilts' catalogs are not the prices at which the merchandise usually and customarily is sold in all trade areas to which the catalogs are distributed, but are in excess uf the price or prices at which it generally is sold in some of, if not all said trade areas.

11. Purchasers of respondents' merchandise in such trade areas do not and would not realize a saving of the difference between the stated retail and code prices.

12. Respondents have utilized in their advertising literature such statements as "wholesalers and dist.ributors ' (describing themselves), you will be able to BUY AT WHOLESALE PRICES" you ,write the orders, mail them to us with proper remittance, according ol * * " andto your wholesale cost) "your confidential wholesale prices are printed in CODE" * * * By such advertising, they ha.ve represented, directly or indirectly, that. they sell all their merchandise at the ge,nera.l1y preva.filing prices paid by retailers for sllch mcrchandisc in each trade area to which their catalogs are distributed and that , Pktorinl exbiblt is omitted in printing.

Conclusion 64 F.

customers buying from them save an amount equal to the retailer profit.

13. In truth and in fact, the respondents do not sell, nor do they oifer to sell, all their me.rchandise at the generally preva.filing prices paill by retailers for sllch mercha,ndise in each trade area. to ,,,which their catnJogs are distributed. On the contrary, the prices of some of their mcrclmndisc in several of the trade areas to which their catalugs are distributed are in excess of the generally prevailing prices paid by retailers in such trade areas and purchasers of sllch men hanclise will not and do not realize a saving equal to the retailer s profit. 1-!. The eviclellce in this proceeding, "\. while touching upon other trade areas, was concerned mainly "With the - ashington, D. )laryland-Virginia trade area ancl the Baltimore, l\laryland trade area. The first consists of ,Vashington, D. , Alexandria and Falls Church cities and Arlington and Fairfax Counties, in Virginia; and )Iontgomel'Y and Prince Georges Counties in 1\Iaryland. The latter consists of Baltimore city and Anne Arundel, Baltimore, Carroll and Hcw;ard Counties, :.Iaryland.

15. Htspondents hate conducted their business in numerous trade areas throughout the United stntes as well as in the \Vllshingion :.Iarylallcl- Virginia trade area and the BaltilllOre, :Jlaryland trade area. In the conduct of such business, they have been in suostantial cOlnpetition in commerce in such trade, areas -with other corporations, firms and individuals engaged in the sale of articles of merchandise of the same general kind and nature as that sold them.

And from the foregoing are made the follmving COXCLUSIOXS A. The statements and representations made by the respondents as more particnhrly set forth in the foregoing Findings: were and are false, misleading flnc1 deceptive.

B. The use by respondents of such false, misleading and deceptive statements, representations and practices has had, and nO\l; has, the capacity and tendency to mislead.d members of the, purchasing public into ihe erroneous and mistaken belief that said statements and representations were flncl are true and into the purchase of substant inl quantities of respondents' merchandise by reason thereof. C. Substantial trade in commerce has been and is being unfa,irly diyeried to respondents from thpir competitors, and substantial injury has been and is being done to competition in commerce.e. D. The Federal Trade Commission has jurisdiction of the subject. lnatter of this proceeding fwd of the respondents. SILVO HARDWARE CO. 425 Conclusion E. The aforesaid acts and practices of respondents, as herein found and as described in the text of this decision preceding the Findings of Fact, were all to the prejudice and injury of the public and constituted unfair and deceptive acts and practices and unfair methods of competition in commerce in violation of Section 5 of the FClleral Trade Commission Act.

Respondents make a.n impassioned plea that they should not be singled out for prosecution since they are only one of many firms engaged in the cautlog business indulging in similar pnlctices. They urge that n.n rnembcrs of the catalog indust.ry ought to be made parties to remedial proceedings of this nature and that all such proceedings should be conducted either simultaneously or in consolida! ion \with each other. They pray either that no cease and desist order be entered against them until similar orders are entered against aU members of the catalog industry or, in the alternative that if any cease and desist order be entered against them, such order be held in abeyance and not made effective and operative unless and until similar orders are entered a.nd made efiective against aJl mem bel's of the industry. Such pleas are inevitable when the Commission attacks pl'aetjces widely in use. The fact that the practices are. prevalent or in wide use does not n1 lke t.hem immune from correc tion if they are unfair r\ within the meaning of the Federal Trade Commission Act. The Commission obviously cannot, nor is it required to, proceed against all violators at one time merely because they are engaged in the same kind of violation. In LV ational Oancly 00. v. Federal TracZe Oornrnission 104 F. 2d 000, 1004 (7th Cir. 1939), cert. denied 308 U. S. 610, the Court said: Petitioner further urges that it would be prejudicially discriminatory against it to permit tbe order to become operative because its competitors use the same methods. In other words, it argues that unless the Government procee(ls against all such offenders at one time, it would be wrong to proceed against it alone. There is no merit in this contention, Federal Trade Cotnmission Wi.nster1 Hosiery, 258 U. S. 483; Federal Trade Commf8sion v. Keppel Bro. 291 1;. S. 304.

In Moog Industries, Inc. v. Federal Trade Oommission 355 17. 411 413 414 (1958), the Supreme Court stated, The question, then, of whether orders sucb as those before us should be held in abeyance until tbe respondent's competitors are proceeded against is for the Commission to (lecide.

If tbe Commission has decided tbe question, its discretionary determination should not be overturned in the absence of a patent abuse of discretion. See also Clinton Watch 00. v. Federal Trade Oornrni s';on 291 F. 2d 838 , 841 (7th Cir. 1961), cept. denied 368 U.S. 952 (1962). 22c1-0G8-TO- 426 FEDERAL TRADE CO :IMISSIOX DECISIONS Order 64 F. T.

It is not for the hearing examiner to deviate from a longstanding practice of the Commission, particularly one having consistent high court approval.

Now, therefore, being of the opinion that it. is necessary to achieve effective enforcement of the law, the hearing examiner enters the follm\"ing:

ORDER It is ordered That respondents Leonard fargo1is and orton Berger, individually and as copartners trading as SilvD Hardware Company, or under any other name or names, and their agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or dig. triblltion of hard-ware, housB'vares, appliances, typewriters, fishing gear, and other articles of merchandise in commerce, as "commerce is defined in the Federal Trade Commission Act, do fortlnvith cease and desist from:

1. Representing, directly or by implication that any amount. is the usual and cllstomary retail or wholesale price of merclumdise in any trade areft to 1\-which the respondents (1istribllte their catalogs \\hen it is in excess of the generally prevailing ret.ail or wholesale price (as the case may be) at \yhieh sllch merchandise is sold in such trade area.

2. R.representing in any manner that savings arc made ava.ilable too purchasers of respondents: merchandise when it is offered by them at prices which are identified with, or placed in juxtaposition \with, or compared to, prices or figure-s which purport. to be the prices at which the same or similar merchandise is customarily sold by competitors or other vendors in the usual course of business in the tI'Rele area or areas where the offerings are made unless such other prices or figures are, in truth and in fact, the actual prices or figures at which such merchandise is customarily sold in the usual course of business in such trade are,as.

3. losing the word "wholesale" or any other word or term of similar import or meaning, in connection with the direct or indirect solicitation of sales to individual members of the public or other consumers, t.o describe a price which is higher than the generally prevailing price at vdlieh the merchandise is sold by wholesa,Jers to retajJers who purchase jn the qwmtjty range at I'i'hjch such merchandise is offered and who a.rc engaged in business in the trade area or a.areas where such use is made. FILDER1IAN CORP. ET AL. 427 408 Syllabu ORDER DEXYIKG I\lotion FOR POSTPONE IENT OF ORAL ARG1Jl\IENT DIS::IISSl G Appeal, ADOPTING INITIAL DECISION \XD PROVIDING FOR REPORT OF COJIPLIANCE Upon consideration of respondents' request, received January 21 1964, for postponement of oral argument on complaint counsers appeal from the initial decision scheduled for .January 27, 1D64, and of complaint counsers opposition thereto filed January 23, 1064, and of the motion filed by complaint counsel on January 24, 1964, seek ing leave to withdraw complaint counsel's appeal, filed October 3 1963, from the initial decision of the hearing examiner; and It appearjng that respondents have not perfected an appeal from the initial decision as provided for in Section :3.22. of the Commission s Procedures and Rules of Practice (August 1 , 1\)63) ; and It further appearing that good and suffcient cause does not exist for the Commission s issuing an order staying the effective date of the initial decision 01' plncing the case on its own docket for rc\'iew and that: therefore, the initial decision should forthw.ith be entered as the fina.J decision of the Commission (see Section 3.21), It is ordered. That: (1) Respondents' motion for postponement of oral argument is c1pnied; (:2. The appeal of complaint counsel from the initial decision is dismissed; (3) The initial decision of the hearing examiner is a(lopt.ed as the final decision and orrlrT of the Commission.

It is JUTther ordered That the respondents shall, within sixty.y (60) days after servlee upon t.hem of t.his order, file ,with the Commission II written report setting forth in detail the manner and form in which they have complied with the order to cease and desist. By the Commission, Commissioner Anderson not participating.