Majestic Chinchilla, Inc

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IN THE MATTER OF MAJESTIC CHINCHILLA, INC., ET AL.

CONSENT ORDER, ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-1559. Complaint, July 10, 1969-Decision, July 10, 1969 Consent order requiring a Louisville, Ky., seller of chinchila breeding stock to cease making exaggerated earning claims, misrepresenting the quality of the stock, deceptively guaranteeing the fertility of the stock, and misrepresenting services to purchasers.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Majestic Chinchilla, Inc., a corporation, and Howard M. Withers, individually and as an offcer of said corporation, and John R. Smith and Odie Carman, individually and as former offcers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Majestic Chinchila, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Kentucky, with its principal offce and place of business located at 6910 Southside Drive, Louisvile Kentucky, 40214.

Respondent Howard M. Withers is an individual and the sole stockholder and an offcer of said Majestic Chinchila, Inc. , which he acquired about August 1968 and since that time alone formu- Complaint 76 F.

lates, directs and controls the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

Respondents John R. Smith and Odie Carman are individuals and former offcers of Majestic Chinchila, Inc. Prior to said change of ownership, together they formulated, directed and controlled the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Respondent John R. Smith's address is 10303 National Turnpike Road, Fairdale Kentucky. Respondent Odie Carman s address is 8809 Brown Austin Road, Fairdale, Kentucky.

PAR. 2. Respondents, as above described, are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of chinchila breeding stock to the public.

PAR. 3. In the course and conduct of their aforesaid business respondents caused, and for some time last past have caused, and respondents Howard M. Withers and Majestic Chinchilla, Inc. continue to cause, their said chinchillas, when sold, to be shipped from their place of business in the State of Kentucky t purchasers thereof located in various other States of the United States and maintain, and at all times mentioned herein have maintained a substantial course of trade in said products in commerce, as commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of their aforesaid business and for the purpose of obtaining the names of prospective purchasers and inducing the purchase of said chinchilas, the respondents made, and respondents Howard M. Withers and Majestic Chinchilla, Inc., continue to make, numerous statements and representations by means of television broadcasts, direct mail advertising, and through the oral statements and display of promotional material to prospective purchasers by their salesmen, with respect to the breeding of chinchilas for profit without previous experience, the rate of reproduction of said animals, the expected return from the sale of their pelts and their hardiness and freedom from disease.

Typical and ilustrative, but not all inclusive of the said statements and representations made in respondents' television and promotional literature, are the following; Many people contemplating raising chinchillas think they must have special buildings to house their herds. However, successful chinchilla ranch- MAJESTIC CHINCHILLA, INC. , ET AL.

Complaint ing can be done in basements, spare rooms, closed-in porches and outbuildings. * * '"

'" '" '" The Chinchila is a healthy, hardy disease- free animal. * '" '" :Majestic guarantees each animal to live past maturity. Breeding '" '" '" Gestation period is 111 days and the young are born in litters of from one to five, with the average being about two. Productivity-Ill days gestation period; average one two per litter. National average 1.9 per litter.

Is schooling or experience necessary to qualify as a Majestic rancher? Our experienced herdsmen personally guide each new rancher through the proven methods of chinchila ranching. * * '"

Fur value * '' Empress Chinchilla Dec. 1965 good quality-$30. to $63.00.

This graph shows your potential yearly income for the number of females breeding Number of Females 25 - -------- $1 561.00 I 175 --- -- $10 997. 50 - - 3 145. I 200 - -- 12 582. 75 - -- 4 730. 225 - - 14 143. 100 - -- 6 291.00 250 - ----- 15,727. 125 - -------- 7 858. 00 275 - ---- 17,312. 150 --- --- 9,436. 300 - -- 18,875. * '" * A herd purchased from Majestic wil be the finest grade of animals available for the price.

* * '" Majestic qualifies in all of the categories that make ranching a success.

Quality stock.

Experienced Consultants. '" * * Ranches visitation four times a year by experienced herdsmen. PAR. 5. By and through the use of the aforesaid statements and representations and others of similar import and meaning, but not expressly set out herein, separately and in connection with the oral statements and representations made by their salesmen and representatives to prospective purchasers and purchasers, re- Complaint 76 F.

spondents represented, and respondents Howard M. Withers and Majestic Chinchilla, Inc., continue to represent, directly or by implication, that:

1. It is commercially feasible to breed and raise chinchillas from breeding stock purchased from respondents in homes, basements, closed-in porches, or spare buildings, and large profits can be made in this manner.

2. The breeding of chinchillas from breeding stock purchased from respondents, as a commercially profitable enterprise, requires no previous experience in the breeding, caring for and raising of such animals.

3. Chinchilas are hardy animals and are not susceptible to diseases.

4. Purchasers of respondents' breeding stock receive high or top quality chinchilas.

5. Each female chinchila purchased from respondents and each female offspring wi1 produce at least four live offspring per year.

6. Each female chinchilla purchased from respondents and each female offspring wi1 produce successive litters of from one to five live offspring at 11l-day intervals. 7. The offspring referred to in Paragraph Five subparagraph (6) above will produce pelts selling for an average price of $30 per pelt, and that pelts from offspring of respondents' breeding stock generally sell from $30. 90 to $63.00 each. 8. A purchaser starting with one female and one male of respondents' chinchila breeding stock wi1 have a net profit 865.98 from the sale of pelts in the sixth year. 9. Chinchila breeding stock purchased from respondents is unconditionally guaranteed to live.

10. Purchasers of respondents ' breeding stock receive service calls from respondents' service personnel four times a year for the first year after purchase of the animals. 11. Purchasers of respondents' breeding stock are given guidance in the care and breeding of chinchillas. 12. Purchasers of respondents' breeding stock can expect a great demand for the offspring and for the pelts of the offspring of respondents' chinchilas.

13. Through the assistance and advice furnished to purchasers of respondents' breeding stock by respondents, purchasers are able to successfully breed and raise chinchilas as a commercially profitable enterprise.

MAJESTIC CHINCHILLA, INC. , ET AL.

Complaint PAR. 6. In truth and in fact:

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

2. The breeding of chinchilas from breeding stock purchased from respondents as a commercially profitable enterprise requires specialized knowledge in the breeding, caring for and raising of said animals much of which must be acquired through actual experience.

3. Chinchilas are not hardy animals and are susceptible to pneumonia and other diseases.

4. Chinchilla breeding stock sold by respondents is not of high or top quality.

5. Each female chinchilla purchased from respondents and each female offspring wil not produce at least four live offspring per year, but generally less than that number. 6. Each female chinchila purchased from respondents and each female offspring wil not produce successive litters of from one to five live offspring at 11l-day intervals, but generally less than that number.

7. The offspring referred to in subparagraph (6) of Paragraph Five above wi1 not produce pelts sellng for an average price of $30 per pelt but substantially less than that amount; and pelts from offspring of respondents' breeding stock will generally not sell for $30.90 to $63.00 each since some of the pelts are not marketable at all and others would not sell for $30 but for substantially less than that amount.

8. A purchaser starting with one female and one male of respondents' breeding stock wil not have a net profit of $3, 865. from the sale of pelts in the sixth year but substantially less than that amount.

9. Chinchila breeding stock purchased from respondents is not unconditionally guaranteed to live but such guarantee as is provided is subject to numerous terms, limitations and conditions. 10. Purchasers of respondents ' breeding stock do not receive the represented number of service calls from respondents' service personnel but generally less than that number. FEDERAL '"HADE COMMISSION DECISIONS Complaint 76 F.

11. Purchasers of respondents ' breeding stock are given litte if any, guidance in the care and breeding of chinchillas. 12. Purchasers of respondents' breeding stock cannot expect a great demand for the offspring of and pelts from respondents chinchilas.

13. Purchasers of respondents' breeding stock are not able to successfully breed and raise chinchilas as a commercially profitable enterprise through the assistance and advice furnished them by respondents.

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, and at all times mentioned herein, respondents have been in substantial competition, in commerce, with corporations, firms and individuals in the sale of chinchila breeding stock of the same general kind and nature as those sold by respondents. PAR. 8. The use by respondents of the afcresaid false, misleading and deceptive statements, representat.ions 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' chinchilas 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' competitors 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 Act. 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, would charge respondents with violation of the Federal Trade Commission Act; and MAJESTIC CHINCHILLA, INC. , ET AL.

Decision and Order 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 settement purposes only and does not constitute an admission by respondents that the law has been vi- Dlated as alleged in such complaint, and waivers and other provisions as required by the Commission s 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 its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, now in further conformity with the procedure prescribed in 34 (b) of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings. and enters the following order: 1. Respondent Majestic Chinchila, Inc. , is a corporation organized, existing and doing business under and by virtue of the laws of the State of Kentucky, with its offce and principal place of business located at 691 () Southside Drive, Louisvile, Kentucky. Respondent Howard M. Withers is an offcer of said corporation and his address is the sp.me as that of said corporation. Respondents John R. Smith and Odie Carman are former offcers of said corporation. The address of respondent John R. Smith is 10303 Kational Turnpike Road, Fairdale, Kentucky, and the address of respondent Odie Carman is 8809 Brown Austin Road Fairdale, Kentucky.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered. That respondents Majestic Chinchila, Inc., a corporation, and its offcers, and Howard M. Withers, individually and as an offcer of said corporation, and John R. Smith and Odie Carman, individually and as former offcers 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 chinchila breeding stock or any other products, in commerce, as tlcom- Decision and Order 76 F.

merce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

A. Representing, directly or by implication, that: 1. It is commercially feasible to breed or raise chinchillas in homes, basements, closed-in porches or spare buildings, or other quarters or buildings unless in immediate conjunction therewith it is clearly and conspicuously disclosed that the represented quarters or buildsuitable for the ings can only be adaptable to and breeding and raising of chinchilas on a commercial basis if they have the requisite space, temperature, humidity, ventiation and other environmental conditions. 2. Breeding chinchilas as a commercially profitable enterprise can be achieved without previous knowledge or experience in the breeding, caring for and raising of such animals.

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

4. Purchasers of respondent's chinchila breeding stock wil receive high or top quality chinchilas. 5. Each female chinchilla purchased from respondents and each female offspring wi1 produce at least four live young per year.

6. The number of live offspring produced per female chinchilla is any number or range of numbers; or representing, in any manner, the past numbel' or range of numbers of live offspring produced per female chinchila , in of purchasers of respondents' breeding stock unless fact, the past number or range of numbers represented are those of a substantial number of purchasers and accurately reflect the number or range of numbers of live offspring produced per female chinchila of these purchasers under circumstances similar to those of the purchaser to whom the representation is made. 7. Each female chinchila purchased from respondents and each female offspring will produce successive litters of one to five Jive offspring at 111-day intervals. 8. The number of litters or sizes thereof produced per female chinchila is any number or range thereof; or representing, in any manner, the past number or range of numbers of litters or sizes produced per female chin- MAJESTIC CHINCHILLA, INC. , ET AL.

Decision and Order chilla of purchasers of respondents' breeding stock unless, in fact, the past number or range of numbers represented are those of a substantial number of purchasers and accurately reflect the number or range of numbers of litters or sizes thereof produced per female chinchila of these purchasers under circumstances similar to those of the purchaser to whom the representation is made. 9. Pelts from the offspring of respondents' chinchila breeding stock sell for an average price of $30 per pelt; or that pelts from the offspring of respondents' breeding stock generally seIJ from $30. 90 to $63. 00 each. 10. Chinchila pelts wil seIJ for any price, average price, or range of prices; or representing, in any manner, the past price, average price or range of prices of pelts of purchasers of respondents' breeding stock unless, in fact, the past price, average price or range of prices represented are those of a substantial number of purchasers and accurately reflect the price, average price or range of prices realized by these purchasers under circumstances similar to those of the purchaser to whom the representation is made.

11. A purchaser starting with one female and one male wil have, from the sale of pelts, a net profit, annual income or earnings of $3 865. 98 in the sixth year after purchase.

12. Purchasers of respondents' breeding stock wil realize earnings, profits or income in any amount or range of amounts; or representing, in any manner, the past earnings, profits or income of purchasers of respondents breeding stock unless, in fact, the past earnings, profits or income represented are those of a substantial number of purchasers and accurately reflect the average earnings, profits or income of these purchasers under circumstances similar to those of the purchaser to whom the representation is made.

13. Breeding stock purchased from respondents is guaranteed or warranted without clearly and conspicuously disclosing, in immediate conjunction therewith, the nature and extent of the guarantee, the manner in which the guarantor wil perform thereunder and the identity of the guarantor.

Decision and Order 76 F.

14. Purchasers of respondents' chinchila breeding stock wil receive service calls from respondents' service personnel four times a year for the first year after purchase of the animals or at any other interval or frequency unless purchasers do in fact receive the represented number of service calls at the represented interval or frequency.

15. Purchasers of respondents' chinchila breeding stock are given guidance in the care and breeding of chinchilas or are furnished advice by respondents as to the breeding of chinchilas unless purchasers are actually given the represented guidance in the care and breeding of chinchilas and are furnished the represented advice by respondents as to the breeding of chinchi1as.

16. Chinchillas or chinchilla pelts are in great demand; or that purchasers of respondents' breeding stock can expect to be able to sell the offspring or the pelts of the offspring of respondents' chinchillas because said chinchillas or pelts are in great demand. 17. The assistance or advice furnished to purchasers of respondents' chinchilla breeding stock by respondents wi1 enable purchasers to successfully breed or raise chinchillas as a commercially profitable enterprise. R 1. Misrepresenting, in any manner, the assistance training, services or advice supplied by respondents to purchasers of their chinchilla breeding stock. 2. Misrepresenting, in any manner, the earnings or profits to purchasers; or the quality or reproduction capacity of any chinchila breeding stock.

C. Failing to deliver a copy of this order to cease and desist to all present and future salesmen and other persons engaged in the sale of the respondents' products or services and failing to secure from each such salesman or other person a signed statement acknowledging receipt of said order. It is further ordered That the respondent corporation shall forthwith distribute a copy of this order to each of its operating di visions.

MAJESTIC CHINCHILLA, INC. , ET AL.

Decision and Order It i8 further ordered That the respondents herein ,shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and form in which they have complied with this order.