Lawrence TV Corporation

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IN THE l\iatter OF LA\VRENCE TV CORPORATION ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\Il\IISSION ACT Docket /54. Co1npla.'int, Jan. 196B-Decision, April 10, 1968 . Order requiring a Washington, D. , retailer of television sets, and television, radio and phonograph combinations to cease using bait advertising, deceptive offers of free merchandise, misrepresenting metal cabinets as wood, and using other deceptive sales practices.

688 FEDERAL TRADE COM:::\IISSIOK DECISIONS IComplaint 73 F.

COl\IPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the a,authority vested in it by sflid Act, the Federal 'Trade Commission, having reason to believe that Lawrence TV Corporation, a corporation, and George Harris, individually and as an employee of said corporation, hereinflfter referred to as respondents have violated the provisions of said Act, and it flppearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its chflrges in that respect as follows:

PARAGRAPH 1. Respondent. Lawrence TV Corporation is a c.orporation organized, existing and doing business under a.nd by virtue the laws of the State of Virginia, with is principal office and place or business located at 5832 Georgia A venue NW. in ,Yashington, D. Respondent corporation is the franehisecl 1\Iuntz TY dealer in the greater ,Yashington, D.C.. metropolitan area. Respondent George Harris is an individual and manages the business of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondent. Respondent, George Harris. has lnanaged the, 1\Iuntz TV franchise dealership for the greater ,Yashington, D. , metropolitan area at former business locations of 1203 N. Highland Street, Arlington~ Virginia, 635 H. Street, ::\E., ,Yashington, D. , and 601 ICing Street, Alexandria, Virginia. PAR. 2. Respondents are now, and for some time last past. have been. engaged in the advertisting. offering for sale, sale and distribution of television sets, and television, radio and phonograph combinations to the public.

PAR. 3. In the course and conduct of their business as aforesaid, respondents now cause, and for some time last past have caused, their said products, wIlen sold, to be shipped from their place of business in the District of Columbia to purchasers thereof loeatecl in various States of the United States and in the District of Columbi8-, and maintain, and at all times mentioned herein htn-e Iilaintainec1, a substantial course of trade in said products in commerce ~ as " commerce:' is defined in the Federal Trade Commission Act.

PAR. 4. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their television sets and television, rfldio and phonograph combine-tions, the respondents have made, and are now making. numerous statements and representations in advertisements inserted in newspapers of "which the follo"ing are typical and illustrative, but not all inclusive thereof: y :::.... . ... LAWRENCE TV CORP. ET AL. 689 687 iCompIaint V0ry 5pl9c1C1l1y prlcedl 282 SQ.IN. ~6 TV, hi-fi RADIO & STEREO Phono COMBINATDON with UHF- VHF with you,1oid "" in trode r~Qrdl...8 PIn!! wllft )' 0'" p":'ChcO4' of og., oi.. or con~il;cn $25 worth of STEREO ALBUMS! Choice of album, from lvi"" M"ok c~, NO MOUIY S&37 GmRG!A .VE., H.

DOW)o! ..,;th old ,.t ((orner of His$Guri Ale.) NO I'MMENTS SHOP PAI~ \" & SAY. 10 t e 11; " ~ '"'WI!tNCli'o'COL" lop ts .45 Day' SUNDAYS 10 10 ~ ..1I.u.n.t"t 267 sq. in.

COLOR TV with UHf. YHF Wi'~ ro.' .I~ .., In 1,.40 ,..

VEHY ..,.10.. .1 i.. LOW oeo,rcndill.n.,I..C...t, PRICE! ..1.." b... ,. .pt!...!.

~ MOM" COwith old .., in trodo 10 PAUl.nm UP HI 45 DAn low,.",e TV Co,-' PAR. 5. By and through the use of the above-quoted statements and representations, and others of similar import and meaning but not expressly set out herein, the respondents have represented, anc1are now representing~ directly or by implication that: (Complaint 73 F. T.

1. The offers set forth in said advertisements are bona fide offers to sell the advertised products at the prices and on the terms and conditions stated.

2. The respondents will give a free home demonstration of the products advertised.

3. The respondents have sufficient quantities of the advertised products available for purchase.

4. Purchasers of the advertised television, radio and stereo combination will receive free record albums.

PAR. 6. In truth and in fact:

1. The offers set forth in said advertisements were not bona fide offers to sell the advertised products at the prices and on the terms and conditions stated. Respondents' salesmen, who called upon persons responding to the advertisements, did not display the advertised product. Instead, respondents' salesmen disparaged the advertised product and attempted to sell a higher priced product. By these and other tactics, purchase of the advertised product was discouraged and respondents frequently sold a higher priced product. 2. In a number of instances, the respondents did not give a free home demonstration of the products advertised. 3. In a number of instances, the respondents advertised a product when they did not have sufficient quantities on hand to make it available for purchase.

4. Purchasers of the advertised television, radio and stereo combination did not receive free record albums.

Therefore, the statements and representations as set forth in Paragraphs Four and Five hereof were a.nd are false, misleading and deceptive.

PAR. 7. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their television sets, the respondents have placed, and are now placing, numerous illustrated advertisements in newspapers in which the cabinets of the television sets advertised are depicted as having a grain like the natural grain appearing in wood.

Typieal, but not all inc.lusive thereof, are the illustrations set out in Paragraph Four hereof.

PAR. 8. By and through the use of the aforementioned illustrations and others of similar nature but not set out herein, the respondents have represented, and are now representing, directly or by implication that the cabinets of the advertised television sets are wood. PAR. 9. In truth and in fact, the cabinets of the advertised television sets were not wood, but were metal.

LAWRENCE TV CORP. ET AL. 691 687 ilnitial Decision Therefore, the illustrations and representations as set forth in Paragraphs Four, Seven and Eight hereof were and are false, misleading and deceptive.

PAR. 10. In the course and conduct of their aforesaid business, and at all times mentioned herein, respondents have been, and now are, in substantial competition, in commerce, with corporations, firms and individuals in the sale of television sets and television, radio and phonograph combinations of the same general kind and nature as those sold by respondents.

PAR. 11. The use by respondents of the aforesaid false, misleading and deceptive statements, representations 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 statements and representations were and are true and into the purchase of substantial quantities of respondents: products by reason of said erroneous and mistaken belief.

PAR. 12. 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 methods of competition in conm1erce and unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade. Commission Act.

JIr. TViUia1n E. Ba1' supporting the complaint. JIr. George 11 ctptis, p1'O Be representing respondents. INITIAL DECISION BY ELDON P. SCHRUP, I-IEARING EXAMINER FEBRUARY 28 , 1968 STATE::\IENT OF PROCEEDINGS The Federal Trade Commission on January 5, 1968, issued its complaint charging the respondents with unfair methods of competition in commerce, and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the Federal Trade Comm.ission Act. Respondents, following an informal prehearing conference on February 2" 1968, filed answer on February 8, 1968, admitting all material allegations of the complaint to be true.

The Federal Trade Commission s Rules of Practice for Adjudicative Proceedings, Section 3.12" subparagraph (2) states: 1 f aUegation~ of complaint are acl'lnitted. If the respondent elects not to contBSt the allegations of fact set forth in the complaint, his answer shall consist of u statement that he admits all of the material allegations to be true. ..

692 FEDERAL TRADE CO),BlISSION DECISIONS ilnitial Decision 73 F.

Such an ans"\yer shall constitute a waiver of hearings as to the facts alleged in the complaint, and together with the complaint will provide a record basis on which the hearing examiner shan file an initial decision containing appropriate fu"'1dings and con elusions and an appropriate order disposing of the proeeecling. In such an answer, the respondent may, however, resell'\'e the right to subnlit proposed findings and conclusions under g 3.46 and the right to appeal the initial decision to the CO1llinission lmder 8 3.52. Respondents' answer in this proceeding waives the right to submit proposed findings and conclusions and the right to appeal the initial decision to the Commission. FIXDIXGS OF FACT 1. Respondent Lawrence TV Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Virginia, with its principal office and place of business located at 5832 Georgia A \'e11ue, X1V., \Vashington, D.C. Respondent corporation is the franchised ~Iuntz TV dealer in the greater \Yashington, D. , metropolitan area.

Respondent George Harris is an individual and manages the business of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondent. Respondent, George Harris, has managed the l\Iuntz TV franchise dealership for the greater 'Yashjngton, D. , metropolitan area at former business locations of 1203 ~. Highland Street, Arlington, Virginia; 635 1--1 Street, ~E., 'Yashton, D. , and 601 King Street, Alexandria, Virginia. 2. Respondents are no", and for some time last past have been, en- ~tarted in the advertisin.Q:. onel'inQ" for sale. sale and distribution of television sets, and television, radio and phonograph combinations to the public.

3. In the course and conduct of their business, respondents now cause, and for some time lust past have caused, their products, when sold, to be shipped from their place of business in the District of Columbia to purchasers located in yarious States of the United States and in the District of COh1~l1bi~L fled maintain, and at all times mentioned herein have maintflinecl~ a substantial course of trade in said products in commerce ~ as "commerce" is defined in the Federal Trade Commission Act.

4. In the course and conduct of their business and for the purpose of inducing the purchase of their television sets and television, radio and phonograph e0111binations, the respondents have made, and are now LA\VRENCE TV CORP. ET AL. 693 ()87 \Initial Decision making, numerous statements and representations in advertisements inserted in newspapers of which the following are typical and illustrative, but not all inclusive thereof. CSee page 689. 5. By and through the use of the above-quoted statements and representations, and others of similar import mid meaning but not expressly set out herein, the respondents have represented, and are now representing, directly or by implication that: (1) The oft'ers set forth in said advertise.ments are bona fide offers to sell the advertised products at the prices and on the terms and conditions stated.

(2) The respondents will give a free home demonstration of the products ach-ertised.

(3) The respondents have sufficient quantities of the advertised products available for purchase.

(4) Purchasers of the advertised television, radio and stereo combination will receive free record albums.

6. In truth and in fact:

(1) The offers set forth in said advertisements were not bona fide offers to sell the advertised products at the prices and on the terms and conditions stated. Respondents' salesmen, who called upon persons responding to the advertisements, did not display the advertised product. Instead, respondents' salesmen disparaged the advertised product and attempted to sell a higher priced product. By these and other tactics, purchase of the advertised product was discouraged and respondents frequently sold a higher priced product. (2) In a number of instances, the respondents did not give a free home demonstration of the products advertised. (3) In anum bel' of instance€s, the respondents advertised a prod uet when they did not have sufficient quantities on hand to make it available for purchase.

(4) Purchasers of the advertised television, radio and stereo combination did not re,ceive free record albums. Therefore, the statements and representations as set forth in Findings 4: and 5 hereof were and ate false, misleading and deceptive. 7. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their television sets, the respondents have placed, and are now placing, numerous illustrated advertisements in newspapers in which the cabinets of the television sets advertised are clepicted as having a grain like the natural grain appearing in wood.

Typical, but not nil inclusive thereof, are the illustrations set out in Finding 4 hereof.

; ) IInitial Decision 73 F.

S. By and through the use of the aforementioned illustrations, and others of similar nature but not set out herein ~ the respondents 11:1ve represented, and are now representing, directly or by implication that the cabinets of the advertised television sets are wood. 0. In truth and in fact the cabinets of the advertised television sets were not "\\ood, but "\\ere metal Therefore, the illustrations and representations as set forth in Findings 4 ~ 7 and S hereof were and are false, misleading and deceptive. 10. In the course and conduct of their aforesaid business, and at all times mentioned herein, respondents have been, and now are, in substantial competition, in commerce, with corporations, firms and indiyiduals in the sale of television sets and television, radio and phonograph combinations of the same general kind and nature as those sold by respondents.

11. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, and now has, the. capacity and tendency to misle,ad members of the purchasing public into the erroneous and mistaken belief that said statements and representations were and are true and into the purchase of substantia.! quantities of respondents' products by reason of said erroneous and mista-ken belief.

GONGL USIONS 1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and over the respondents. 2. The complaint herein states a cause of action and the proceeding is in the public interest.

3. The aforesaid acts and practices of the respondents as found in the foregoing Findings of Fact were and are to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation Section of the Federal Trade Commission Act. ORDER It is orde?" That respondents Lawrence TV Corporation ~ a corporation, and its officers, and George Harris, individually and as an employee of said corporation, and respondents' agents, representatives and employees, directly or through any corporate or other device. in connection with the advertising, offering for sale, sale or distribution of television sets, television, radio and phonograph combinations. or LAWRENCE TV CORP. ET AL. 695 687 !Initial Decision other products, in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Using in any manner, a sales plan, scheme or device wherein false, misleading or deceptive stateme,llts or representations are made in order to obtain leads or prospects for the sale of merchandise.

2. Discouraging the pllrehase of, or disparaging, any products which are advertised or offered for sale.

3. Representing, directly or by implication, that any products re offered for sale when such offer is not a, bona fide offer to sell such products.

4. Representing, directly 01' by implication, that any product will be delivered to prospectiye customers for a free home demonstration, unless such products are demonstrated without charge or obligation to prospective customers in their homes in e"\~ery instance where the prospective customer so requests. 5. Representing, directly or by ill1plication, that any products are offered for sale, unless sufficient quantities of such products are available in stock to satisfy reasonably anticipated demand: P?'ocoided, hO1cei,'e1' That items available only in limited supply may be ac1vertise,d if such advertising clearly and conspicuously discloses the Humber of units in stock and the duration of the offer.

6. R.representing, directly or by implication, that free merchandise will be given to purchasers of products, unless such free merchandise is tendered or deli yered to the purchasers in every instance.

7. Representing, directly or by implication, through illustration that a product has a cabinet with a grain similar in appearance to naturahyood whml the cabinet is not wood. unless (1) the illustration accurately depicts the appearance the cabinet and (2) the composition of the ca..binet is dearly and conspicuously disclosed in immediate eonjunction with such illus- 8. tration.losing any iHustrntion of a product purportedly offered fol' sale by respondents unless the illustration accurately depicts such product.

9. :Misrepresenting, in any manner, the composition of any product.

10. Failing to deliver a copy of this Order to cease and desist to all present and future salesmen or other persons engaged in the 696 FEDERAL TRADE CO2\DIISSION DECISIONS IComplaint 73 F.

sale of the respondents' products, and failing to secure from each such salesman or other person a signed statement acknowledging receipt of said Order. FIX AL ORDER K 0 appeal from the initial decision of the hearing examiner having been filed, and the Commission having determined that the case should not be placed on its own docket for review' w and that pursuant to Section 51 of the Commission s Rules of Practice (effective July 1, 1967), the initial decision should be adopted and issued as the decision of the Commission:

It is fu7'their' onle'i'ed That Lawrence TV Corporation, a corporaon the 10th day of April 1968, become the decision of the Commission. Tit i8 furthe"7' opdm' That Lawrence TV Corporation, a corporation, and George I-Iarris, individually and as an employee of said corporation, shall, within sixty (60) days after service of this order upon them, file with the Conm1ission a. report in writing, signed by such respondents, setting forth in detail the manner and form of their com-