Division West Chinchilla Corporation et al.

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IN THE nIATTER OF DIVISION ,VEST CIIINCHILLA CORPORATION ET AL. CONSENT ORDER , ETC. , IX REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TIL,\.DE COl\DIISSION ACT Docket 0-1334. Complaint, May 9, 19G5-Decision, May 9, 1968 Consent order requiring an Omaha, Xebr., seller of chinchilla breeding stock to cease misrepresenting the profits to be made ill chinchilla breeding, the fertility of its stock. and making' other false claims. C03IPLAIXT Pursuant to the provisions of the. Federal Trade Commission Act and by virtue or the authority vesteel in it by said Act, the Federal Trade Commission, having reason to be.lieve that Division ,Vest Chinchilla Corporation, a corporation, and Richard G. ,Yood and Craig j\100dy, individually and as officers of said corporation, and James R, Holyfield, individually and as a former officer of said corporation hereinafter refened to as respondents, have violuted the provisions of said A. , and it appearing to the Commission that a proceeding by it in respect thereof "\youlc1 be in the public interest, hereby issues its com Dlaint stating' its char.!1:es in that refmect as follo\ys : PARA.GRAPH 1. Respondent Di,.ision ,Yest Chinchilla Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of N ebraska with its principal office and place of business located at 7230 :x orth Pershing Drive, Omaha X ebraska.

Respondents Richard G. ,Yood and Craig ::\Ioody are individuals and offcers of Division '\lest Chinchilla Corporation. Respondent James R. Holyfield is an individuul and 10rmer officer of Division ,Vest Chinchilla Corporation. Together they formulated, directed and can. traded the acts and practices or the corporate respondent, including the acts and practices hereinafter set forth. Respondents Richard G. "'iT cod and Craig :Mooc1y continue to formulate, direct, and control the ads al"ld practices of the coI'po:i:a te respondent, including the acts and practices hereinafter set forth. The address of respondents BiehnI'd G. ,Yood and Craig :I\Iood:y is the. same as that of the corporate respondent. The address of respondent lTames R. I-Iolyfielc1 is 90S :Milford Lane Lonisvil1e, Kentucky.

886 FEDERAL TRADE COMMISSION DECISIONS, ,Complaint 73 F.

\.R. 2.. Respondents are now, and for some time last past, have been , sale and distribution engaged in the. advertising, offering for sale chinchilla breeding stock to the public. Respondent.J ames R. I-Iolyfield is not engaged in the advertising, offering for sale, sale and distribution of chinchilla breeding stock to the public at the present time.. He was engaged in the aforementioned activities at the time the acts and practices hereinafter set forth occurred.

PAR. 3. In the course and conduct of their aforesaid business~ respondents caused, and for some time last past ha VB c.aused, and re, spondents Richard G. ,Vood, Craig :Moody, and Division "'Vest Chintheir said chinchillas when ehilla Corporation continue to cause, place of business in the State of Ne- sold, to be shipped from their braska to purchasers thereof located in various other States of the United States, and maintain, and 'at all times mentioned hereinafter course of trade in said chinchillas in have maintained, a substantial conllnerce, as "commerce" is defined in the; Federal Trade Commission Act.

PAR. 4. In the course and conduct of their business and for the purpose of inducing the sale of their chinchillas, the respondents made. and respondents Richard G. ,Yood, Craig ~loody, and Division 'Vest numerous statements andChinchilla Corporation continue to make, representations by mea.ns of television broa.deasts, ctireet mail adverof promotionaltising a.nd through the oral statements and display material to prospective purchasers by salesmen, with respect to the ra.te of reproduetion of chinc.hilla.s, the expected rate of return from their pelts, their quality, their hardiness and freedom from disease. of the said statements Typical and illustra.tive, but not a.ll inclusive a.nd representations made in respondents' advertising and promotional material are the following:

First of all, they deal only in high-quality ehiJlchillas. '\Ye have a complete program of seryiee and herd-iml1l'OVement. Service? An information bulletin delivered to your ranch every month for two years. * * * the Chinchilla is a healthy, hardy, disease-free animal that needs only Xt'TRITION to build its immunity against disease. * * * a herd purchased from Diyision ,Vest "ill be the finest grade of animals a,nilnble for the price.

ard to an income 'Yell, after five years, successful ranchers can look for~' six thousand dollars a year or more, increasing each year. offspring per female pcl' year. And it' -\.11 a,f'rage rate of growth is three the growth of the herd that's the key to making sub~tantial profits in this of herd program, it can l,e accomvlished on abusiness. No" under a good growth one male.six-year plan, A chjnchilb rancher starts out ~.ith six fpmales plus for a total of Shell. Each femflle should ftyerage t~.o litters per yeln with :1n DIVISION WEST CHINCHILLA CORP. ET AL. 887 885 Complaint average of almost two offspring. So, at the end of one year the chinchilla rancher should have a herd of about 2tl animals, including the newborn, of course, and the original herei. Now this number should include about ::;ixteen females. During the second ypar, the::::e females should produce approximately 33 new offspring. A-\nd this multiplying process continues into the third and fourth years until a real profit-making herd is flcquired. Now you need only a relatively few males to increase the size of the herd, so excess males are sold for pelting profit. Now, in recent years, this average pelt price was well over $21.00. So, for every one hundred males sold off ea~h year it will bring OYer two thousand dollars to the rancher. So, after foul' or five years, the rancher who has followed this growth-of-herd program will be earning substantial annual income which will grow each year thereafter to just as much as he cares to make it, * * * a successful rancher, just by building his herd for five years, will probably have an income of six thousand dollar:',; a year * * * maybe more, And space? 'Veil, you probably have it already, Successful chinchilla ranches ha,;e been housed in 'basements * * * garage::: * * * closed-in porches * * * spare buildings and barns, and even your own horne, PAR. 5. By and through the use of said statements and representations made by respondents in their advertising and promotional material, and in oral representations made by their salesmen, and others of similar import and meaning, but not expressly set out herein, respondents represented, and respondents Richard G. vVood, Craig :Moody, and Division ,Vest Chinchilla Corporation continue to represent, directly or by implication that:

1. It is commercially fe,asible to breed and raise ehinchillas in homes basements, garages, closed-in porches, spare buildings or barns and large profits can he made, in this manner.

2. The breeding of chinchillas for profit requires no previous xpel'lence.

3. Chinchillas are hardy animals, and are not susceptible to diseases. 4. Purchasers of respondents' breeding stock receive select or choice quality chinchilla.

respondents and each 5. Each female chinchilla purelutsed from female offspring will produce at least three live offspring per year. 6. The breeding stock of six females and one male chinchilla purfollows: 18 thechased from respondents will re,sult in live offspring as first year, 33 th~ se,cond year, 69 the third year, 144 the fourth year and 303 the fifth breeding stock sell for 7. Pelts from the offspring of respondents' veal'. an average price of $21.60 per pelt.

and one male of respond- 8. A purchaser starting with six fe,males an income of $5 076 froments' ehinchil1a breeding stock will have the sale of pelts in the sixth year.

888 FEDERAL TRADE CO:M~IISSION DECISIONS, ;Complaint 73 F.

9. Purchasers of respondents' breeding stock would receive service calls from respondents' service personnel four times a year for two successi ve years after purchase of the animals. 10. Purchasers of respondents' breeding stock would be given guidance in the care and breeding of chinchillas. PAR. 6. In truth and in fact:

1. It is not commercially feasible to breed or raise chinchillas in homes, basements, garages, closed-in porches, spare buildings or barns and large profits cannot be made in this manner. Such quarters or buildings, unless they have adequate space and the requisite temperature, humidity, ventilation, and other necessary enyironmental conditions are not adaptable to or suitable for the breeding or raising of chinchillas on a commercial basis.

2. The breeding of chinchillas for profit requires specialized knowledge in the feeding, erne and breeding of said animals, much of \which must be acquired through actual experience. 3. Chinchillas are not hardy animals and are susceptible to pneumonia and other diseases.

4. Chinchilla breeding stock sold by respondent is not aT select or choice quality.

5. Each female chinchilla purchased from respondents and each female offspring will not produce at lefist three liye offspring per year but generally less than that number.

6. The initial ehinehilla breeding stock of six females and one male purchased from respondents \rill not result in the number specsince theseified in subparagraph (6) of Paragraph Fiye abo\~e figures do not allow for factors which reduce chinchilla production such as those born dead or \\which die after.r birth, the culls 'which are. unfit for reproduction, fur che\\ers and sterile animals. 7. A purchaser of respondents' chinchillas could not expect to resubstantiall~' les3ceiye an average price of $21.60 for each pelt but than that amount.

8. A purchaser starting \with six females and one male of respondents' breeding stock will not have an income of 85 076 from the sale of pelts in the sixth year but substantially less than that amount. 9. Purchasers of respondents' breeding stock do not re.eeiye the n~presented number of service calls from respondents' seryiee personnel but generallv less than that number. give.n little if any 10. Purchasers of respondents' breeding stock are guidance in the eare and breedin~r of chinchillas. DIVISION WEST CHINCHILLA CORP. ET AL. 889 885 Decision and Order Therefore, the statements and representations as set forth in Paragraphs Four and Five hereof were and are false, misleading and deceptive.

PAR. 7. In the course and conduct of their business, at all times mentioned herein, respondents have been in substantial competition in commerce with corporations, firms and individuals in the sale of chinchilla, breeding stock.

PAR. 8. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had and now has, the tendency and ..:apacity 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' chinchillas by reason of said erroneous and mistaken belief.

PAR. 9. The aforesaid acts and practices of the respondents, as herein alleged, were and are all to the prejudice and injury of the public. and of respondents' competitiors and constituted, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the Federal Trade Commission Aet.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau of Deceptive Practices proposed to present to the Commission for its consideration and which if issued by the Commission, \yould charge respondents with violation -of the. Federal Trade Commission Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by theCommissions Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating 418-345-- 72-- Decision and Order 73 F.

its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record ror a period or thirty (30) days, now in further conformity with the procedure prescribed in 9 2.34 (b) or its Rules, the Commission hereby issues its complaint, makes the rollowing jurisdictional findings, and enters the rollowing order:

1. Respondent Division ,Yest Chinchilla Corporation is a corporation organized, existing and doing business under and by virtue of the laws or the State of Nebraska, with its office and principal place or business located at 7230 North Pershing Drive, Omaha, N ebrnska. Respondents Richard G. ,Yood and Craig l\1:oody are officers of said corporation and their address is the same as that of said corporation. Respondent James R. Holyfield is a rormer officer or said corporation and his residence address is 90Sl\1ilford Lane, Louisville, I\.::entucky. 2. The Federal Trade Commission has jurisdiction of the subj eet matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER t is ordel'ecZ That respondents Division 1Vest Chinchilla Corporation, a corporation, and its officers, and Richard G. vYood and Craig ~loody, individually and as officers or said corporation, and James R. Holyfield, individually and as a rormer officer or said corporation and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with the advertising, offering ror sale, sale or distribution of chinchilla breeding stock or any other products, in commerce, as "commerce" is defined in the Federal Trade Commission Act, do rorthwith cease and desist rrom :

A. Representing, directly or by implication, that: 1. It is commercially reasible to breed or raise chinchillas in homes, basements, garages, closed-in porches, spare buildings, barns or other quarters or buildings or that large profits can be made in this manner: P1' ovided, however That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to establish that the represented quarters or buildings have the requisite space, temperature humidity, ventilation and other environmental conditions which would make them adaptable to and suitable for the breeding and raising or chinchillas on a commercial basis and that large profits can be made in this manner. DIVISION WEST CHINCHILLA COHP. ET AL. 891 885 Decision and Order 2. Breeding chinchillas for profit can be achieved without previous lulOwledge or experience in the feeding, care and breeding of such animals.

3. Chinchillas are hardy animals or are not susceptible to disease.

4. Purchasers. of respondents' chinchilla breeding stock will receive select or choice quality ehinchillas or any other grade or quality of chinchillas: pM:-ided, however That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to establish that purchasers do actually receive chinchillas of the represented grade or quality. 5. Each female ehinchilla purchased from respondents and each female offspring produce at least three live young per year.

6. The number of live offspring produced per female ehinchilla is any number: Prol)ided, however That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to establish that the represented number of offspring are usually and customarily produced by female chinchillas purchased from respondents or the offspring of said chinchillas.

7. The breeding stock of six females and one male chinchilla purchased from respondents will produce live offspring of 18 the first year, 33 the second year, 69 the third year, 144 the fourth year and 303 the fifth year. 8. The number of live offspring produced by respondents chinchilla breeding stock is any number: Provided, hO1vever That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to establish that the represented number of o~spring are usually and customarily produced by ehinchillas purchased frolll respondents or the offspring of said chinchillas.

9. Offspring of chinehilla breeding stock purchased from respondents will produce pelts selling for the average price of $21.60 each.

10. Purchasers of respondents' breeding stock will receive for chinchilla pelts any price or prices: Prorvided, hO1_vever That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to establish that the represented price or prices per pelt are usually received for pelts 892 FEDERAL TRADE COMMISSION DECISIONS- Decision and Order ,73 F.

produced by chinchillas purchased fromrespondents, or by the offspring or said chinchillas.

11. A purchaser starting with six females and one male will have, from the sale of pelts, an annual income, earnings or profits of $5 076 in the sixth year after purchase. 12. Purchasers of respondents' breeding stock will realize earnings, profits or irlcome in any amount or range of amounts: Provided, horwevep That it shall be a defense in any enforcement proceeding instituted hereunder for respondents to estn blish that the represe,ntecl amOlUlt or range of amounts of earnings, profits or income are usually realized by purchasers of respondents breeding stock. 13. Purchasers of respondents' chinchilla breeding stock will receive service calls from respondents' service personnel four times a year for t\\"o successive years after purchase of the animals or at any other interval or frequency: 7'ovided lwwever That it shall be a defense in any enforcement proeeeding instituted hereunder for respondents to establish that the represented number of service calls are actually furnished. 14. Purchasers of respondents' chinchilla breeding stock are given guidance in the care and breeding of chinchillas or are furnished advice by respondents as to the breeding of chinchillas: P'I' ovidecl, hO'?oeve'i\ That it sha,ll be a defense in any enforcement proceeding instituted hereunder for respondents to establish that purchasers are. actually given the represented guidance in the. care and breeding of chinchillas or are furnished the represente,d advice. by respondents as to the breeding of chinchillas.

B. 1. ~1:isrepresenting, in any manner, the assistance, training, services or advice supplied by respondents to purchasers of their chinchilla breeding stock.

2. :J\lisrepresenting, in any manner, the earnings on profits of purchasers of respondents' chinchilla breeding stock. C. Failing to deliver a copy of this order to cease and desist to all present and future. salesmen or other persons engaged in the sale of the respondents' products or services and failing to secure from each such salesmen or other person a signed statement acknowledging receipt of said order.

It is furthe?' ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, file with the Comlnis- 51011 a report in writing setting forth in detail the manner and form in which they have complied with this order.

HOLLYWOOD FILM STUDIOS 893 Certification of Record