Electra Spark Company et Al.*

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

have complied with this Order.

THE MATTER OF ELECTRA SPARK CO lPANY ET AL.

-ORDER, ETC. : IN REGARD TO THE ).ALLEGED VIOk'lTION OF THE FEERAL TR'lE CO::HnSSION ACT Docket 8274. Complaint, Jan. 1961-Decision, Ju.ne, 1964 '0roer requiring" three corprations and their offcers, engaged in the sale and distribution of automobile spark plugs lllder th-e trade name "Lectra Fuel Igniter, to cease representing falsely in advertising that their said "Fuel Igniter" was not a spark plug, would give better gas mileage and better engine performance than conventional spark plugs, enable the user to switch from premium to regular gasoline, and was unconditionally guaranteed that salesmen and distributors could earn excessive amounts, and that the United States Government had field-tested the product and was a substantial lJUl'cbaser.

COMPLUNT Pursuant to the provisions of the Federal Trade Commssion Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission having reason to believe that The Lectra Spark COJnpany,** a corporation, and Fred P. Dollenberg and Harry Petrick individunJly and as offcers of said corporation; Lectra Sales Corpora tion, a corporation, and Jack I-Ioward, Bernard L. Silver and Harr Petrick, individually and as offcers of said corporation; Barilen Corp., " corporation doing business as Leetra Fuel Igniter Co. and Hyman Schlosberg and Laurence Serlin, individually and as offcers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commssion that a procecding by it in respect thereof would be in the public "Proceeding reopened and remanded to the hearing examiner on Jan. 8. 1965. l ""'The correct name of this respondent is Elf'ctro. Spark Company. ,, 878 FEDER.AL TRADE COMMISSION DECISIONS Complaint G;) F. interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent The Lectra Spark Company is a corporation organized, existing and doing business under and by virt.ue of the laws of the State of New Jersey, with its principal offce and place of business lomted in the Benson Building, J enkintown, Pa. Respondents Fred P. Dollenberg and Harry Petrick are offcers of The Lectra Spark Company. They formulate, direct and control the acts and practices of said corporation. The address of respondent Fred P. Dollenbcrg is 3921 Eden Street, Philadelphia, Pa. The address of respondent Harry Pet.rick is Amoskeag-Lawrence filIs, Inc., 1407 Broadway, New York, N.

Respondent Lectra Sales Corporation is a, corporation organized existing and doing business under and by virtue of the laws of the, State or ew Yark, with its principal office and place of business 10eated at 222 Fourth A venue, N my York, N. Y. Respondents Jack Howard, Bernard L. Silver and Harry Petrick ate offcers of Lectra Sa.1es Corporation. They for1llulate, direct and control the a,cts and practices of aicl corporation. The address of respondent Jack Howard is 33 "'Vest Ninth Street, New York, N.Y. The address of respondent Bernard L. Silver is .J Romohl, Drive, Kir:gs Point, X ew York. The address of re.spondent Harry Petriek is Amoskeag- Lawrence liJjs, Inc., 1107 Broadway, New York, N. Respondent Barilen Corp. is a corporation organized, existing llnd doi.ng business under and by virtue of the 'Jws of the State of Xcv, York, with its principal offce and place of business located at 7aO Third Avenue, New YOlk The business address of respondents Hyman Schlosberg and LtJu rence Se.rlin is locflted at 730 Third Avenue, New York Y. They foi1llulate, direct and control the 'Rcts and practices of the Barilen Corp.

The business address of respondent Barilcn Corp. doing busiIl"'S as Ledra Fuel Igniter Co. is located at 730 Third AYBnue, New York PdR. 2. Respondents are now, and for several years inst past h been, among other things, engaged in offering for sale, saJe and distribl1tion of automobile spa.rk plugs under the trade name "Lcctra Fuel Igniter, in commerce, bet ,,,een and among the various States of the 17united States.

PAR. 3. In the course and conduct of their business, respondents E'.)\Y cause, and for some. t.ime lflst past have eflusec1, said spark pings when sold, to be shipped from their places of business in tho, States of Pennsy)yania, and New York to purchasers thereof located jn various Othi?T ELECTRA SPARK CO. ET AL. 879 877 Complaint States of the United States and in the District of Columbia, and maintain, a,nel at al1 times mentioned herein have maintained, a subst.antial course of trade in said products in commerce, as "commerce:' is defied in the Federal Trade Commission Act. The volume of business of respondents in said automobile spa,rk plugs in commerce is now and has been, substantial.

PAR. 4. The advertising and sellng of respondents' automobile spark plugs designated Lectra Fuel Igniter is conducted through several mediums. The respondent Lectra Sales Corporation has solicited mail orders from the general public through the medium of advertising in newspapers, magazines and other periodicals having an interstate circulation.

The respondent Barilcn Corp. for the purpose of soliciting mail orders was given permission to use the name Lec.ra Fuel Igniter Co. by thc respondent Lectra Sales Corporation. The trade name Lectra Fuel Igniter Co. was formerly owned by respondent Jack Howard. Said respondent Barilen Corp. operating under the trade name Lectra Fuel Igniter Co. also employed direct mail order advertising in maga. zines, newspapers and periodicals having an interest.ate circulation for said automobile spark plugs. The material for said advertising copy was furnished by re.spondent Lectra Sales COrpOl'flt.on. Upon rece, ipt of orders froln consumers sa.id respondent transmitted the orders direct to respondent Lee-ra Sales Corporation which then shipped the spark plugs to the purchasers.

Another method employed by the respondent Lectra Sales Corporation in the sale of said spark plugs is the solicita.tion of agents and salesmen. These advertisements were run by said respondent in magazines having an interstate, circulation commonly knol"11 as Opportunit.y 11:magazines.

Respondent Lectra Sales Corporation also sold direct to catalog houses, mail order houses and automobile spccia1ty outlets. In the ense of retail outlets, respondent Lectra, Sales Corporation pays a portion of advertising expense and materinJ for newspaper.r copy which is subml tted by said respondent Lectra Sales Corporation. In dealing with catalog h011ses, respondent Lectra Sales Corporation provides advertising copy and pays the printing costs of inserts. Thus, in the course and conduct of their aforesaid business, and for the purpose of inducing the sale of their products, t,he respondents have can sed advertiserrwnts to be placed in various publications having distribution in various States of the Unite,d States. Respondents have also cau ed advert.isements of their, products to be mailed to prospective plll'chRSers in States other than the States of Kew York and Pennsyl vania.

:+ .. .

880 FEDERAL TRADE COMMISSIOK DECISIONS Complaint 65 F.

PAR. 5. In the course and conduct of their business, respondents have made, and are making false, deceptive and misleading statements with respect to said automobile spark plugs. These statements are, and have been, made in advertisements in magazines, newspapers, sales bro. chures, counter display cards and other promotional material supplied to distributors, retailers, dealers and to the purchasing public. Among and typical, but not all inclusive of such statements, are the following:

DRIVE YOL'R CAR WITHOI:T SPARK- PLUGS . . . :\EVER USE SPARK-PLUGS AGAIN:\T! That's right! Spark-Plugs Haven Changed In 30 Years They Are As Obsolete As A Model T. DRIVEl faster, further, cheaper without Spark-Plugs and get peak performance using non-premium gas! Save 6 per gallon or more! Drive without Spark-Plugs Lectra Fuel Igniters are not air-gapped in any sense of the word.

. . . We are also guaranteeing that the Fuel Igniter wil squeeze up to maybe 8-more miles out of cwry gallon of gas purchased in the first year and every year--r we \vil replace them free unti they do. That's a sa ving of $40 per year. And it wil do this using regular gas--conomy gas-not the super gas bought at such walloping prices. That means a saving of $50 each year. And the igniters wil do this every year of the car s life-they improve with age. They ne,er wear out! . . . by just replacing gas-wasting old-fashioned ineffcient spark-plugs that you ll soon have to throwaway and replace anyhow-you wil now get new pep, power and performance from your car, and you ll save $100 a year or more as well! Way GL'ARANTY LECTRA FUEIJ IGNITERS are:

1. Guaranteed, unconditionally, against any manufacturing or mechanical defect.

2. Guaranteed, unconditionally, to function properly tor the life of your car. 3. Guaranteed to:

OREASE miles per gallon of gas INOREASE horsepower INCREASE engine RPlVl IMPROVE ease of starting IMPROVE acceleration (pick-up) (This Guaranty applies to Ai\TY car tuned to factory specifications. 4. Guaranteed not to damage your car at any time in any way. This Guaranty endorsed by American Excess Company of London, England. ELECTRA SPARK CO. ET AL. 881 877 Complaint EXCL('SIVE 4-WAY GUARA.'lTEE Every set of Lectra Fuel Igniters comes with this amazing 4- Way Guarantee printed directly on each carton:

1. GUARANTEED against any manufacturing or mechanical defects 2. GUARANTEED to function properly for the lie of the car 3. GUAR."\TTEED to increase mileage, horsepower, engine RPM, improve ease of starting and acceleration 4. GUARA1TEED for performance and endorsed by an internationally known insurance company 'there s big money to be made here! Right now, Joe Jenkins of Point Marion, Pennsylvania bas a big, growing business supplying dealers, service-stations garages. He seHs per month about $20,000 of Lectra Fuel Igniters, most of it re.order. His gross business this year wil be in six figures! We find sellng 5 000 a week nothing unusual for us. . . . These men, who answered the original ad, are making amazingly high income as LECTRA distributors! . . . Kenneth Frost, Ithaca, New York, says: I sold $2300 worth in three weeks With this sensational offer you can create your own substantial business worth $50,000 or more! . . A U. S. Government Agency field-tested 5,000 in 727 vehicles, six months later ordered 25,000 more to use in 3,000 key vehicles. Uncle is a LECTRA customer! ::lany milta.ry installations have field-tested the Fuel Igniter. As a result of these field tests, many thousand Fuel Igniters have been purchased by these Government units. PAR. 6. Through thc use of the foregoing statements and representations, respondents have represented directly or by implication that: (a) The Lectra Fuel Igniter is not an automobile spark plug, is superior to the conventional automobile spark plug, and, the nse thereof will give better gas mileage.

(b) The use of the Lectra Fuel Igniter wil enable the user to switch from premium or high-octane gasoline to regular gasoline irrespective of the automobile engine s l'equil'ements.

(c) The use of the Lectra Fuel Igniters wil result in better engine perfonnance, power, or acce)eration than conventional automobilespark plugs.

( d) The 4- W ay Guaranty is unconditional. (e) The earnings of distributors or salesmen of Lectra Fuel Igniters are in excess of the actual potential earnings. (f) The United States Government is a substantial purchaser of Lectra Fuel Igniters or that its agencies have field-tested said products. 882 FEDERAL TRADE COMMISSION DECISIOXS Complaint 65 F.

PAR. 7. The foregoing statements and representations are false, misleading and deceptive. In truth and in fact: (aJ The Lectra Fuel Igniter is a type or kind of automobile spark plug and is not superior to conventional automobile spark plugs in fuel economy.

(b) The use of the Lectra Fuel Igniter wi1 not enable the user to switch from premium high-oct lle gasoline to re.gular gasoline. with equal or better performance, when the automobile engine spec.ifications require such high octane fuel.

(c) The nse of the Lectra Fuel Igniter wi1not result in better performance, acceleration of power than conventional al1tomohile spark plugs.

(d) The 4-"\Vay Guaranty is not unconditional but has definite conditions attached thereto which are not set out in some of respondents advertising.

(e) Thc offer' that potential distributors or salesmen can create their own busine.ss in the sale of Loctra Fuel Igniters worth 850 000 or more. is exaggerated and misleading.

(f) The statement that one of respondents' distributors sells $20 000 worth of Lectra Fuel Igniters per month and that his gross. business from the sale of such products U1nu(dly runs into six figures is untrue. (g) The statement that one of respondents' distributors seDs $2 300 worth of Lect.ra Fuel Igniters in three weeks is like' wise untrue. (h) The l:united States Government is not a substantial purchaser of Lectra Fuel Igniters and said products have not been field-tested by any of its agencies.

.'I.R. 8. In the course and conduct of their business, at all times mentioned,d herein, respondents have been in substantial competition, in commerce, with corporations, firms and inclividnals in the sale and distribution of 'flutomobile spark plugs of the same general kind and nature as those sold by the respondents.

PAR. D. The use by the respondents of the aforesaid false, misleading and deceptive statements and re.presentations, and practices, has had and now has the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said staten1ents and representations were and are true and into the purchase of substantial quantities of Loctra Fl1e.1 Igniters by reason of said erroneous and mistaken belief. Furthermore, respondents, by snpplying said advertising literature and the material for said sales talks llave furnished their distributors and the agents and representatives of their distributors, Ineans and instrumenta.1ities by anel through which the purchasing public may be misled and deceived with respect to the representations set out. in Paragraph Five hereor. As a con- :

ELECTRA SPARK CO. ET AL. 883 Sii" Initial Decision sequence thereof, substantial trade in commerce has been, and is being, unfairly diverted to respondents from their competitors and substantial injury has thereby been, and is being, done to competition in correrce.

PAR. 10. The aforesaid acts and practices of respondents, as herein alleged, were and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute, unfair llnd deceptive acts and practices and unfair methods of competition, in commerce, within the intent and meaning of the Federal Trade Commission Act.

Jfr. Terral A. J ol'dan supporting the complaint. Jfr. R. OeUin!!er and Mr. +1. OeUin!!er of Kew York, N. Y. by Mr. IJ'dng J. I(au.f1ncrn for respondents. INITIAL DECISION BY DO \LD R. :JIoom: , I-IEARIXG EXA:lUIXER MARCH :11 , 1964 PRELnnN ARY STA TE:\IEXT The complaint in this proceeding was issued January 13, 1961, and duly served on all respondents. It charges respondents with misrepresentation in the sale 'of automobile spark plugs designated "Lectra Fuel Igniter, in violation of the Federal Trade Commission Act. After being served with the complaint, respondents appeared by counsel and filed answer making certain admissions but denying gen era.ly any violation of law.

After previous assignment to two other hearing examiners, the matter was duly assigned to the present. hearing examiner November 30 1961. There followed 'I series of negotiations between counsel designed to obviate the necessity.y of hearings in this matter. After various unavoidable delays, the negot.ia.tions have now culminated in the submission of a "Stipulation as to Facts and Proposed Order. In that document (admitted in evidence as Commission Exhibit 3), counsel supporting the c.complaint and c.ounsel for respondents have a.gre,ed that the stipulation, together -with c.certain other exhibits admitted in evidence by agreement, shall constitute the evidentiary re.cord. On the record thus made, counsel also ha.ve agreed, the hearing examiner may "make his findings of fact and conclusions" without further intervening procet1ure. The parties have, in effect, waived the filing of proposed findings and conclusions, the submission of briefs and t.he presentation of argument.

.Respondent ElectnL Spark Company y is Incorrf'ctly deslgnnted in the complaint as The Lectm SparJ, Company. See Par. 1 , Findings of Fact. ""'The effective (late staypd until further orrler of the COnImi8Sion by Ol'd8l" dated :May 4, 19134.

884 FEDERAL TRADE COM:IISSIO DECISIOKS Initial Decision 65 P.

Counsel further stipulated and agreed that a form of order attached to and made a part of the stipulation "constitutes an adequate and appropriate disposition of the allegations of the complaint and may be entered by the hearing examiner in disposition of this proceeding.

The examiner has taken the agreed order into account in re."hin his decision in this matter. However, he is of the opinion that the order proposed by counsel is not, in an respects, an appropriate order in the light of the findings made and the conclusions reached, and he has accordigly modified it.

As the examiner interprets the stipulation, the parties have not conditioned the entry of the stipulation of facts on the acceptance of t.he order recommended by both counsel. In the caption of Commission Exhibit 3, the text of the order is denomiated as a "Proposed Order and the examiner has considered it merely as a j oint recommendation of counsel supporting the complaint and counsel for respondents. The stipulation provides only that such order "may be entered", but does not purport to require its entry.

The considerations leading the examiner to enter a different form of order are set forth in the findings and conclusions that follow. After carefully review,ving the entire record, the hearing examiner finds that this proceeding is in the interest of the public, and makes the following findings of fact and conclusions drawn therefrom, and issues the following order:

FINDINGS OF FACT On the basis of the stipulation (CX 3), the following facts have been established:

1. Respondent Electra Spark Company is incorrectly designated in the complaint as The Lectra Spark Company and is one and the same corporation. Respondent Electra Spark Company is a corporation which was organized, existed and did business Ul1der and virtue of the laws of the State of New Jersey. Prior to November 1959, the stock of Electra Spark Company was owned as fonows: 60% by respondent Fred P. Dollenberg, 40% by respondent Lectra Sales Corporation and 20% by other individuals who are not parties to this proceeding.

During November 1959, the stock of Electra Spark Company was transferred to Amoskeag-Lawrence Mills, Inc. , 1407 Broadway, York, 1' ew York. This transfer of stock was made to facilitate various financing arrangements entered into at that time. Respondents Fred P. Donenberg and Harry Petrick were offcers of Electra Spark Company and formulated, directed and controned its acts and practices.

ELECTRA SPAHK CO. ET AL. 885 877 Initial Decision Beginning about November 1961, the business operations of Electra Spark Company had diminished to a point where it ceased doing business. Although the corporate chartcr has not been revoked, respondent Electra Spark Company is not now, and for a number of months has not been, engaged in any kind of business operations. At the time during which the Electra Spark Company was actively engaged in business, its offce and principal place of business was in the Benson Building, Jenkintown, Pennsylvania.

The address of respondent Fred P. Dollenberg is 3921 Eden Street Philadelphia, Pennsylvania. The address of respondent Harry Petrick is Junoskeag-Lawrence Mills, Inc., 1407 Broadway, New York, New York.

Respondent Lecka Sales Corporation is a corporation which was organized, existed and did business under and by virtue of the laws of the State of New York. At the time when it was actively engaged in business, its offce and principal place of business was at 222 Fourth Avenue, New York, New York.

Prior to Jlme 1959, the stock of Lectra Sales Corporation was owned by the following named respondents in the shares indicated: Jack Howard-40%, Bernard L. Silver-40% and Electra Spark Company- During June 1959, Lectra Sales Corporation was sold in its entirety to A.moskeag-Lawrence Mils, Inc., as part of a financing arrangement. In November 1961, Lectra Sales Corporation was declared bankpt and soon thereafter was formally adjudged bankrupt. 'Dhe corporate eharter has not been formally revoked, but respondent Lectra Sales Corporation is not now, and for many months has not been, engaged in any kind of business operations.

Both respondent Electra Spark Company and respondent Lectra Sales Corporation presently exist as corporate entities only in the sense Vhat their respective charters of incorporation have not been formany revoked.

During the time of the actual business operations of Lectra Sales Corporation, its offcers were respondents Jack Howard, Bernard L. Silver and Harry Petrick, and they formulated, directed and controlled its acts and practices. The address of respondent Jack Howard is 33 'West 9th Street, New York 11, New York. The address of respondent Bernard L. Silver is 4 Romola Drive, Kings Point, New York. 'Dhe address of respondent Harry Petrick is as above stated. Respondent Barilen Corp. is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal offce and place of business at 730 3rd A venue New York, New York.

: ( , , . 886 FEDERAL TRADE C011lJISSION DECISIOXS Illitial Dscisioll G5 F.

Hyman Schlosberg and Laurence Serlin are in(h v.iduals a-nd offcers of Barilen Corp. They formulate, direct and control the acts and practices of the Barilrn Corp. Their business fllc1ress is T;JCJ ?nl \.ve.nue, Kew York e\'i York.

The business address of respondent Bari10n Corp. , doing lmsine::. as Lectra Fuel Igniter Co. , is 730 i)rd _,"venne, XCI\' York: Xe'" Yurko In or about Xovember 1060, and subsC(lUent to the bankrupt(; . of respondent Lectra Sales Corporation, respondents Fred P. Donenberg and Bernard L. Silver organized and incorporated Electra Industries under the laws of the State of Delaware. The purpose and present activities of Electra Industries are to promote the sale nnd distribution in commerce, as "co1111ne.rce:' is defined in the Federal Trade Commission Act, or "Lectra Fuel Igniters. one of the, ot.her respondents are concerned or connected with the operation of Electra Industries. The offce and principal place of business of Electra Industries is 381 Pa rk Avenue South, New York, New York.

2. For several years before the is ua.nce of the instant cOlnplaint and subsequent thereto in the manner previously desc.ribed, respondents were engaged in offering for sale, selling and distributing automobile spark plugs under the trade name "Lectra Fuel Igniters, in commerce, between and among t.he various state,s of the VDiteel States. 3. In the course and conduct of their business, in the maIller and to the ext-e,nt and for the periods of tune described, respondents now cause, and for some time prior to the issuance of the complaint, hilt8 caused, such spark plugs, when sold, to be shipped from their places of business in the States of Pennsylvania and New York to purchasers located in various other states of the linited States and in the District of Colmnbia, and maintain, n,nd have maintained, a substantial cour.;;e of trade in such products, in commerce, as "cornmeree " is defined in the Federal Trade Commission Act. The volume of business of respondents in such automobile spark plugs in comnlerce, in the manner described, is now, a.nd has been, substa,ntial. 4. In the course and conduct of their business, respondents have been in substantial com'petition, in conlmerce, with corporations firms and individuals in the sale and distribution of automobile spark plugs of the S Line general kind and nature as tho e sold by the re 3pondents. 5. A spark plug bearing the words "Lcctra HD Fuel Igniter" and a spark plug carrying the woros "Champion 1-1-12" were l'e, eived ,in evidence ns Commission Exhibits 1 lnd 2 , ex 1 is typicrJ of respondents: products sold under the trade name "Le.crn. Fuel Igniter.)' ex 2 is typieal of the conventional automobil.e spark plug commonly re ferred to as ft, " J ping. " ex 1 is typical of the kinrl of pnrl:; ping ".hid!. 1s the subject of this complaint nuc1 is designed find intended b T 1'e- ELEC'l' RA SPARK CO. ET AL. 885 877 Initial Decision Beginning about November 1961, the business operations of Electra Spark Company had diminished to a point where it ceased doing business. Although Vhe corporate charter has not been revoked, respondent Electra Spark Company is not now, and for a number of months has not been, engaged in any kind of business operations. At the timeduring which the Electra Spark Company was actively engaged in business, its offce and principal place of business was in the Benson Building, Jenkintown, Pennsylvania.

The address of respondent Fred P. Dollenberg is 3921 Eden Street Philadelphia, Pellsy Ivarria. The address of respondent Harry Petrick is Amoskeag-Lawrence Mils, Inc., 1407 Broadway, New York, New York.

Respondent Lectra Sales Corporation is a corporation which was organized, existed and did business under and by virtue of the laws of the State of New York. At the time when it was actively engaged in business, its offce and principal place of business was at 222 Fourth Avenue, New York, New York.

Prior to Jllle 1959, the stock of Lectra Sales Corporation was owned by the fonowing named respondents in the shares indicated: Jack Howard-40%, Bernard L. Silver-40% and Electra Spark Company- During June 1959, Lectra Sales Corporation was sold in its entirety to Amoskeag-Lawrence Mils, Inc., as part of a financing arrangement. In November 1961, Lectra Sales Corporation was declared bankpt and soon thereafter was formally adjudged bankrupt. The corporate charter has not been form any revoked, but respondent Lectra Sales Corporation is not now, and for many months has not been, engaged in any kind of business operations.

Both respondent Electra Spark Company and respondent Lectra Sales Corporation presently exist as corporate entities only in the sense that their respective charters of incorporation have not been formally revoked.

During the time of the actual business operations of Lectra Sales Corporation, its offcers were respondents Jack Howard, Bernard L. directed and con-Silver and Harry Petrick, and they formulated, trolled its acts and practices. The address of respondent Jack Howard is 33 'West 9th Street, New York 11, New York. The address of respondent Bernard L. Silver is 4 Romola Drive, Kings Point, New York. 'Dhe address of respondent Harry Petrick is as above stated. Respondent Barilen Corp. is a corporation organized, existing and doing business under and by virtue or the laws of the State of New York, with its principal offce and place of business at 730 3rd Avenue New York, New York.

886 FEDERAL TRADE COMl\HSSION DECTSIOXS Tuitial Dc:cision 63 F, Hyman Schlosberg and LrLurence Serlin are indi ddllaJs a.nd offlcel' of Barilen Corp. They formulate, direct and control the acts ane! practices of the Bari1en Corp. Theil' buslne,ss fldc1rcss is 73U :3J'd Avenue, 1\e\" York, New York.

The business address of respondent B,u'ilen Corp. , doing Lmsilh', as Lectra Fuel Igniter Co. is 730 i3rd_\.Tenne, Xe,,- York: Xe"\y Y()r In or about Xovember 1960, and subscqllpnt to the hankl'upte:- ()( respondent Lectra Sales Corporation, responclents Fred P. Dollenberg and Bernard L. Silver organized and incorporated Electnt Inc1ustrir.s under the laws of the State of Delaware. The purpose and present activities of Electra Industries are to promote the sale and distribution in commerce, as "eoll,l1erCC" is defined in the Fec1eralTradc COlll11ission Act, of "Lectra Fuel Igniters. " K one of the ot.her respondents are concerned or connected with the ope.rflt.ion of Electra Industries. The offce and principal.l place of business of Electra Industries is 381 Park Avenue South ew York, J'ew York.

2. For several years before the issuance, of t.he instant complainr and subsequent thereto in the manner previously desc'J:ibed, respondents were enga.ged in oiIering for sale, selling and distribut.ing automobile spark plugs under the tn.de name "Lectra Fuel Igniters " in commerce, between and allong the various states of the United States. 3. In the course and conduct of their business, in t11e mnnne-r and to the extent and for the periods of tin18 described, respondents now cause, and for some time prior to t118 issuance of the complaint, hate caused, such spark plugs, "\yhen sold, to be shipped from t11eir places of business in the Stat.es of Pennsylvania and Kmv York to purchasers located in various other states of the United States and in the District of Colwnbja, and maintaill, and have maintained, a substantial cour of trade in such p.roducts, in commerce, as :;commerce," is defined in the Federal Trade Commiss-ion Act. The volume of business of responde,nts in such automobilc spark plugs in commcree, in the manner described, is now, and has been, substantial. 4. In the course and conduct of theirbnsiness, respondents have been in substantial competltion, in commerce, with corporations, firms and indi'"7iduals in the sale and distribution of automobile spark plugs of the same general kind and nature as t.hose sold by the respondents. 5. A spark plug bearing t.he words " Lectrfl HD Fuel Igniter" and :J spark plug c.a.rrying the wonls "Chflmpion 1T--12, :: 'sere lec.e-ived in evidence as Commission Exl1ibits 1 and 2, ex li:3 typ1Cft- of respondcnts' products sold under the trade name. " Ledrn. FUEl Igniter." ex is typical of the convent.ional automobile spark IJlng' commonly referred to fls a " J plug' ') ex 1. is typical of the. kind of spark plng \"\hi('h is the slibject of this compbint flnd is designed :Jnc1 int.ended by 1'c- ELECTRA SPAHK CO. ET AL. 887 877 Initial Dec:iOiol1 spondents to be used in )ieu of conventional spark plugs of the socaned "J" tJ'pe of which CX 2 is illustrative. 6. Respondent Electra Spark Company participated primarily in the production and distribution of spark plugs. Respondent Lectra Sales Corporation WH's concerned primaril;y with the advertising and sale. of spark plugs. Through and by virtue of the joint and mutual ow:nership of the stock of responde.nt Electra Spark Company and responde,nt Lectra Sale.s Corporation, and because of the a.activities of the individual respondents, particularly Fred P. Dollenberg, Jack I-Ioward and Bernard L. Silver, the operation of the t\yO corporate respondents was basically and essentially but a single business enterprise.

7. The advertising and selling of respondents' automobile spark plugs designated "Lectra Fuel Igniter" were conducted through several Jneclia:

(a) Respondent Lectra Sales Corporation has solicited mail orders from the general public through advertising in 11ewspa.pers magazines and other periodicals having an interstate circulation. (b) Respondent Barilen Corp. , for the purpose of soliciting mail orders, was given permission to use. t.he name Lec.ra Fuel Igniter Co. by the respondent Lectra Sa.les Corporation. The trade name Lectra Fuel Igniter Co. \Vas formerly mvned by responoent Jack Howa.rd. Respondent Barilen Corp., operating under the tra.ce name Lectra Fuel Igniter Co., also enlployed direct mail order advertising in no\"spapers, magazines and perioclicals having an interstate circulation. The material for such advertising copy was furnished by respondent Lectra Sales Corporation. LJpon receipt of orders from consumers respondent Barilen Corp. transmitted the orders direct to respondent Lectra Sales Corporation which then shipped the spark plugs to the purehasers.

(c) Another method employed by respondent Lectra Sales Corporation in the sale of spark plugs was the solicitation of agents and salesmen. These advertisements were run by respondent Lectra Sale Corporation in magazines having a.1l interstate circulation which are commonly known as "opportunity magazines.

(d) Rcspondcnt Lectra Sales Corporation also sold direct to catalog houses, majl order houses and to automobile specialty outlets. In the ease of retail outlets, respondent Lcctra Sales Corporation paid a pol'. tion of the advertising expense and materia.l for newspaper copy which wns submitted by Tespondent Leetra, Sales Corporation. In clenJing dthcatalog houses, T( sponclent Le,ctra. Sales Corporation provided ac1'T ert-ising copyanc1 paid tilC printing cost of inserts. . . . . . :. 888 FEDERAL TRADE COM:IISSION DECISIONS Initial Decision 65 F, 8. '.hus, in the course and conduct of their business, and for the purpose of inducing the sale of their products, the respondents have caused advertisements to be placed in various publications having distribution in various states of the united States. Respondents have also caused advertisements of their products to be mailed to prospective purchasers in states other than the States of N ew York and Pennsylvania.

9. In the courso and conduct of their business, and for the purpose of inducing the purchase of Lectra Fuel Igniter spark plugs, respondents have made numerous statements and representations concerning them, :in advertisements in magazines, newspapers, sales brochures counter display cards and other promotional materials supplied to distributors, retailers, dealers and to the purchasing public. A.among and typical, but not all inclusive, of such statements are the following:

Drive YOUR OAR WITHOUT SPARK,PLUGS EVER nse SPARK PLUGS AGAIN! That' s Right! Spark-Plugs Haven t Changed In 30 Years-They Are As Obsolete As A Model T. Drive faster, further, cheaper without Spark.Plugs and get peak performance using non-premium gas ! Save 61 per gallon or more! Drive without Spark-Plugs. . . Lectra Fuel Igniters are Dot air-gapped in any sense of the word.

. . . We fire also guaranteeing that the Fuel Igniter wil squeeze up to 6maybe 8-more miles out of every gallon of gas purchased in the first year and every year-or we wil replace them free until they do. That's a saving of $40 per year. And it wil do this using regular gas-economy gas-not the super gas bought at such walloping prices. That means a saving of $50 each year. And the igniters wil do this every year of the car s life-they improve with age. They never wear out! . . . by just replacing gas-wasting old-fashioned ineffcient spark-plugs that you U soon have to throwaway and replace anyhow-you \vil now get new pep, power and performance from your car, and you ll save $100 a year or more as well! 4-way GUARAKTY LECTRA FUEL IG).ITERS are:

1. Guaranteed, unconditionally, against any manufacturing or mechanical defect.

2. Guaranteed, unconditionally, to function properly for the life of your car. 3. Guaranteed to:

INCREASE miles per gallon of gas INCREASE horsepower INCRF:A SE engine RP:\! , , , ,. ELECTRA SPARK CO. ET AL. 889 877 Initial Decision DIPROVE ease of starting D11'PROVE acceleration (pick-up) (This Guaranty applies to ANY car tuned to factory specifications. 4. Guaranteed not to damage your car at any time in any way. This Guaranty endorsed by American Excess (.iich Company of London, England.EXCLUSIVE 4-WAY'i GUARAJ\TEE ol Every set of Lectrll Fuel Igniters comes with tllis amazing 4-way Guarantee, printed directly on each carton:

1. GUARANTEED against ally mar.ufacturing or mechanical defects. 2, GlJARANTE D to function properly for the Hie of the car. 3. GUARANTEED to increase mileage, horsepower, engine RPM, improve ease of starting and acceleration.

4. GUARANTEED for performance and endorst,d 11y an internationally kno\vn insurance company.

There s big money to be made here Right now Toe Jenkins of Point Marion, Pennsylvania has a big, growing business supplying dealers, service-stations, garages, He sells per month about $20 000 of Lectra uel Igniters, most of it re-order. His gross business this year wil be in six figures! 1Ve find sellng 5 000 a \veek nothing unusual for us. . These men, who fans ered the original ad, are making amazingly high income as LECTRA distributors! . . . Kel' neth Frost, Ithaca, Xew Yorl, says: I sold $2300 worth in three weeks ith this sensational offer you ('all crt'ate your own substantial business worth $50 000 01' more! . . . A U. S. Government Agency field-tested 5 000 in 727 "ehides, six months later ordered 25 000 more to use in 3 000 l ey Yehides. Uncle is a LECTRA customer! .Many miltary installations have field-tested the Fuel Igniter. As a result of these field tests, many thousand Fuel Igniters have been pl1J'chased b ' these Government nnits. 10. By and through the use of the quoted statements, and others of similar import, the respondents have represented, directly or by implication, that-:

(a) The Lect-ra Fuel Igniter is not an automobile spark plug. (b) The nse of Lectra Fuel Igniters in place of conventional antomobile spark plugs will result in and give better starting, performance power, acceleration and gas mileage in automobiles. (c) The use of Lcctra Fuel Igniters win enable the user to switch from premium or high-octane gasoline to reguar gasoline irrespective of the automobile engine s requirements.

(d) The four-way guarantee is unconditional. 313-121--7O- Initial Decision 65 F.

( e) One of respondents' distributors sold $20 000 worth of Lectra Igniters per month and his gross business from the sale of such products annually ran into six figures; that one of respondents' distributors usually sold 5 000 Lectra Fuel Igniters each week; that one of respondents' distributors sold $2 300 worth of Lcctra Fuel Igniters in three weeks; and that potential distributors or salesmen could create their own business worth $50 000 or more from the sale of Lectra Fuel Igniters.

(f) The United States Government is a substantial purchaser of Lectra Fuel Igniters and that its agencies have field tested the product.

11. In truth and in fact:

(a) The Lectra Fuel Igniter is a sparking device designed to ignite gasoline in an internal combustion engine. The spark emitted by the Lectra Fuel Igniter which ignites the gasoline is created by the surface discharge method. Lectra Fuel Igniters may be used as replacements for and in lieu of conventional spark plugs which create the spark required to ignite the gasoline in an internal combustion engine by sparking through the air space between two attracting electrodes. The function of both the Lectra Fuel Igniters and con ventional spark plugs in internal combustion engines is to emit an electrical spark which ignites the fuel in the combustion chamber.

(b) The use of the Lectra Fuel Igniter will not enable the user to switch from .premium, high-octane gasoline to regular gasoline with equal or better performance when the automobile specifications require such high-octane fuel.

(c) New Lectra Fuel Igniters and new conventional spark plugs operate in the same internal combustion engine with substa.ntially the same level of operating effciency with respect to starting, performance power, acceleration and gas mileage. This approximately equivalent level of operating effciency continues for fL substantial number of miles or period of use but varies widely between different engines depending upon the age and condition of the engine, operating conditions, kind of fuel and other fa-dors to which engines are subjected. If respondents e.lled Fred Labansky, Frenat Service Corp. , 543 "\Vest 57th Street, New York 19, ="ew York, as a witness, he would testify that his company used Lectra Fuel Igniters in its fleet of 84 N ow York City taxicabs. The company used both Stndebaker Econ- Milers and Lark models with six-cylinder engines from May 1958 until farch 1960. Company records would show that Igniters were installed in the Studebaker cabs and used over a period of Sl months with a ELECTRA SPARK CO. ET AL. 891 877 Initial Decision total accumulation of 125 000 miles on the Lectra Fuel Igniters. The only service necessary was an occasional inspection. Conventional spark plugs when used in taxicabs must be cleaned and adjusted each two to three weeks, which means approximately 3 to 4 thousand miles to Frenat Corporation, and replaced completely every four to six weeks. Lectra Fuel Igniters continued to perform without deterioration in the quality of performance for over 80 weeks. If Leonard Schaffran, Secretary, .Jofran ;\Iaintenance Corp., 509- W cst 55th Street, New York 19, New York, was called by respondents to testify, he would state that this company operated a fleet of taxicabs in New York City, that it has used the Lectra Fuel Igniters in its taxicabs and had put over 50 000 miles on the Igniters and that they stil were giving peak performance at that mileage. He would further state that as of October 15, 1960, the company has equipped 30 of its fleet of 100 Ford six-cylinder 1960 cabs with Lectra Fuel Igniters and was installng Lectra Fuel Igniters in thc other 70 cabs as fast as they came in for service.

If Frankie Sotto, Clyde Cab Corp. 409 East 94th Street, New York , New York, was called by respondents to testify, he would state that his company is engaged in the opcration of taxicabs in New York City, that as of October 15, 1D60, it had Lectra Fuel Igniter test sets ,which had gone over 35 000 miles and were stil giving peak performance, which mcant that the company did not have to clean, gap or replace spark plugs. Mr. Sotto would further state that his company has ordered 100 Lectra Fuel Igniters and was installing them in its taxicabs.

(d) Respondents ' 4- Vay Guarantee is not unconditional hut has definite conditions and limitations ,which are not set out in certain of respondents' advertisements of the guarantees. ( e) One of respondents' distributors did not sell 820 000 worth of Lectra Fuel Igniters each month and his gross business from ;the sale of such Igniters did not run into six figures each year. Respondents salesmen and distributors do not usually sen 5,000 Lectra Fuel Igniters each week. One of respondents' distributors did not sen $2 000 worth of Leetra Fuel Igniters in three weeks. All prospective or potential distributors or salesmen of respondents' Lectra Fuel Igniters cannot expect to create their own business, worth $50 000 or more, from the sale of Lectra Fuel Ignitcrs.

(f) The United States Government is not a substantial purchaser of Lectra Fuel Igniters, and such Igniters have not been field tested by any of its agencies.

. .

892 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 65 F.

CL"CSIONS OF LAW 1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents. 2. The complaint herein states a cause of action, and this proceeding is in the public interest.

3. The statements and representations of respondents regarding their "Lectra Fuel Igniter, a.s found herein, were and are false misleading and deceptive in material respects. 4. The acts and practices of respondents, as found herein, have had and may have the capacity and tendency to mislead members of the purchasing ,public with respect to their "Lectra Fuel Igniter" and into the purchase of substantial quantities of such products as a result. 5. By supplying dealers, distributors and others with advertising, literature and material for sales talks, respondents have placed in their hands means and instrumentalities by and through which the purchasing public may be misled and deceived with respect to respondents products.

6. As a consequence, substantial trade in commerce has been and may be unfairly diverted to respondents from their competitors, and substantial injury thereby has been or may be done ,to competition in commerce.

7. The acts and practices of respondents, as found herein, were and are all to the 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, in violation of Section 5 of the Federal Trade Commission Act. 8. The order being entered is designed to halt the misrepresentations found and at the same time permit appropriate truthful representations.

As indicated in the Preliminary Statement supra the examiner has made some changes in the form of order proposed by the parties. First, thc product coverage of Paragraphs A-I and A-3 has been broadcned, consistent with Paragraph A- , so as to make the prohibitions of those paragraphs applicable not only to the Lectra Fuel Igniter, but also to any other product "of substantially similar design or construction.

Second, Paragraph has been revised to specify the nature of the claims permissible under the order. That section of the order, as jointly recommended by counsel, would have forbidden respondents to represent That internal combu-stion engines equipped with Lectra Fuel Igniters or any other product of substantially similar design or construction wil start faster, give better performance, have more power, accelerate faster or give better gas ELECTRA SPARK CO. ET AL. 893 877 Initial Decision mileage than such engines equipped with conventional spark plugs without clearlu and conspirJo1lsly revealing in immediate connection with such Tepre8cntaHons the circumstances and conditiol1S at use necessary to achieve such performance. (Italic added.

For the qualification indicated by the underlined words, the examiner has substituted a proviso that "nothing herein contained shall prevent truthful and non-deceptive repre,sentatiol1s that such Igniters under specified c.onditions, give longer service than conventional spark plugs.

Under the order proposed by the parties, respondents would have been Rllowed to represent that engines equipped with Leetra Fuel Igniters "will start fa,stet, give better performance, have 'more power accelerate faster (anda give better.r gas mileage" than engines equipped with conventional spark plugs, provided only that they appropriately disclose "the circumstances and conditions of use necessary to achieve such performance.

In the opinion of the examiner, such a qualification is not appropriate on the basis of the agreed facts. The facts contained in the stipulation do not warrant a qualification of such breadth, nor do they provide an appropriate basis for a determination of the validity of the claims so qualified.

The agreed facts, as set forth in Paragraph Eight (C) of the stipu- Jation CFindings of Fact, Paragmph 11 (c) J, are that: New Lectra Fuel Igniters and nc,"" conventional spark plugs operate in the same internal combustion engine with substantially the same level of operating effciency with respect to starting, performance, power, acceleration and gas mileage. This approximately equivalent level of operating effciency continues for a sub. stantialnum(b)er of miles or period of use but varies widely between different engines depending upon the age and condition of the engine, operating conditions, kind of fuel and other factors to which engines are subjected. Since initially Lectra. Fue.l Ignite.rs give "substantially the same level of operating effciency" as c.onventional spark plugs ",with respect to starting, performance, powe.r, acceleration and gas mileage, respondents cannot properly be permitted to represent that the Ig11iters are superior in those respects. As far as new Ig11iters and new c.onventional spark plugs are concerned, such superiority docs not exist. The att.empted qualification apparently has reference to the claimed ability of the Lectra Fuel Igniter to cont?nue such performance beyond the ordinary life of conventional spark plugs. The purpose of the qualifying language recommended by the parties in Paragraph of the proposed order was designed to give recognition to such claimed longer utility of the LectraFuel Igniter.

Although rejecting the rec.ommended qualification as il1Lppropriate the examiner has inserted a substitute proviso to carry out the clear initial Decision 65 )i' intent of the parties and to reflect the factual situation established by the record.

Despite the advertising quoted in Paragraph Five of the complaint (to the effect, for example, that the Igniters "function properly for the life of the car ), the question of the validity of respondents' claim that the Lectra Fuel Igniter has a longer useful life than conventional spark plugs is not squarely raised by the pleadings, nor is it definitively resolved by the stipulated evidence. Accordingly, a defiitive finding on this matter cannot be made other than that counsel supporting the complaint has not met his burden of proving that claim to be false and misleading.

As a matter of fact, the stipulated evidence points the other way. There is a generalized statement in Paragraph Eight (C) of the stipnlation (Paragraph 11 (c) of the Findings J to the effect that the operating effciency of the Igniters continues at a level approximately equivalent to the operating effciency of new spark plugs "for a substantial number of miles or period of use." That statement is qualified by langnage to the effect that such performance "varies widely between different engines, depending upon a variety of factors. Against that background, the stipulated testimony of several taxicab fleet operators (Findings, Paragraph 11 (c) J seems to establish some basis for a claim that the Lectra Fuel Igniters may have a longer usefu life than conventional spark plugs. In any event, the stipulated evidence does not provide a basis for prohibiting such a claim; in fact it requires, in the examiner s opinion, a proviso specifcial1y permitting truthful and non-deceptive representations as to the useful life of respondents' product.

Thc order proposed by the parties has been modified as indicated. Otherwise, except for minor editorial changes, the proposed order is adopted as providing an appropriate remedy in the public interest. ORDER It;" ordered That respondents Electra Spark Company, a corporation (incorrectly designated in the complaint herein as The Lectra Spark Company), and its offcers, and Fred P. Donenbcrg and Harry Petrick, individually and as offcers of such corporation; Lectra Sales Corporation, a corporation, and its offcers, and Jack Howard, Bernard L. Silver and Harry Petrick, individually and as offccrs of such corporation; Barren Corp., a corporation, dojng busine,ss as Lectra Fuel Igniter Co., or under any other name, and its offcers, and Hyman Schlosberg and Laurence Serlin, individually and as offcers of such corporation, and respondents' representatives, agents and employees , ELECTRA SPARK CO. ET AL. 895 877 Initial Decision directly or through any corporate or other device, in connection with the offering for sale, sale or distribution in commerce, as "commerce is defined in the Federal Trade Commission Act, of their Lectra Fuel Igniter or any other product of similar design or construction or any other articles of merchandise, do forthwith cease and desist from: A. Representing, directly or indirectly:

1. That Lectra Fuel Igniters or any other products of substantially similar design or construction are not internal combustion engine spark plugs: Provided, however That nothing herein contained shail prevent the non-deceptive use of the brand name Lectra Fuel Igniter.

2. That internal combustion cngines equipped ,,-ith Lectril Fuel Igniters or any other product of substantially similar design or construction will start faster, give better performance, have more power, acc.elernte faster or give better gas mileage than such engines equipped with conventional spark plugs: Provided, however That nothing herein c.contained shail prevent truthful and non-deceptive representations that such Igniters, under specified conditions, give longer service than conventional spark plugs.

3. That the use of Lectra Fuel Igniters or any other product of substantially similar design or construction will enable the user to switch from premiW11 or high-octane gasoline to regular gasoline with equal or better performance irrespective of the automobile engine s requirements.

4. That any product is guaranteed unless the nature and extent of the guarantee and the manner in which the gnarantor wil perform thereunder are clearly and conspicuously disclosed and respondents do in fact fulfill all of their obligations under the terms of the guarantee.

5. That respondents' distributors or salesmen have received earnings or profits in excess of those actually received or earned by such persons; or that the earnings or profits derived by distributors or salesmen of respondents' products will be any amount greater than that usually and customarily earned by distributors or salesmen of such products. 6. That the United States Government has purchased substantialnumbers of respondents' products or has field tested such products.

B. Furnishing to, or otherwise placing in the hands of, retailers or dealers the means or instrumentalities by or through which they may mislead or deceive the public in the manner or as to the things prohibited by this order.

896 FEDERAL TRADE CO lmission DECISIONS Syllabus 65 F.'l' FINAL Oumm The hearing examiner having filed his initial decision herein on March 31, 1964, and no appeal having been taken therefrom; and The Commission, on lay 4, 1964, having issued an order staying the effective date of the decision herein, and now having determined that the case should not be placed on its own docket for review; and The Commission having considered the request of respondent IIa-rry Petrick, set forth in a letter dated May 1, 1064, that his name be excluded from any QI',ler which might be filed by the Commission, and having determined that the grounds advanced by respondent are not suffcient to support the relief requested:

It is ordel' That the request of respondent Harry Petrick be, and it hereby is, denied.

It i8 JUTther o"dered That the initial decision of the hearing examiner, filed March 31 , 1064, be, and it hereby is, adopted as the decision of the Commissioll.

It i8 jul,ther ordend That respondents Electra Spark Company, a corporation (incorrectly designated in the complaint as The Lootra Spark Company), Lectra Sales Corporation, a corporation, Barilen Corp., a corporation, and Fred P. Dollcnberg, lIarr)' Petrick, Jack Howard, Berna..d L. Silver, Hyman Schlosberg, and Laurence Serlin 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 nlanDer and form in ,which they have complied ,with the order to CCJse and desist set fo th in the initial decision.