Irving M. Balderson

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

IN THE MATTER OF IRVING M. BALDERSON, ET AL.

TRADING AS NATIONAL CARPET SERVICE COMPANY, ET AL. CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2399. Complaint, May 2, 1973—Decision, May 2, 1973. Consent order requiring two individuals trading as two different companies located in Fairmount Heights, Maryland, engaged in the selling, distribution, and installation of carpeting and floor coverings, among other things to cease misrepresenting various sales offers; failing to maintain adequate records; misrepresenting the prices, terms or conditions under which respondents supply separate padding and provide installation of floor coverings; misrepresenting guarantees; misrepresenting the quantity and qualities of stock on hand; misrepresenting the word “free” with respect to merchandise offered; and failing to inform customers of their right-to-cancel any sales contract within three (3) business days. 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 Irving M. Balderson and Steven C. Goldsmith, individually, trading and doing business as National Carpet Service Company, and Lanham Carpets, 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. Respondents Irving M. Balderson and Steven C. Goldsmith are individuals trading and doing business as National Carpet Service Company and Lanham Carpets, with their principal office and place of business located at 1504 62nd Avenue, Fairmount Heights, Maryland. They formulate, direct and control, and have cooperated together in the performance of the acts and practices of their aforesaid business, including the acts and practices hereinafter set forth. PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale, distribution and installation of carpeting and floor coverings to the public.

PAR. 3. In the course and conduct of their business as NATIONAL CARPET SERVICE CO., ET AL. 1355 1354 Complaint aforesaid, respondents now cause, and for some time last past have caused, their said merchandise, when sold, to be shipped from their places of business located in the State of Maryland, to purchasers thereof located in various other States of the United States and the District of Columbia, and maintain and at all times mentioned herein have maintained, a substantial course of trade in said merchandise in commerce, as ‘‘commerce”’ 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 carpeting and floor coverings, respondents have made, and are now making, numerous statements and representations by repeated advertisements inserted in newspapers of interstate circulation, and by oral statements and representations of their salesmen to prospective purchasers with respect to their products and services.

Typical and illustrative of said statements and representations, but not all-inclusive thereof, are the following: 8 ROOMS WALL TO WALL CARPETING $129 INCLUDES:

e Up to 270 sq. ft.

e Padding and installation included e 100% continuous filament nylon pile e Installation guaranteed for the life of the carpeting * * * * * * FREE! ELECTRIC CARPET BROOM BY LEWYT WITH PURCHASE OF $129 OR MORE WALL TO WALL CARPETING! * * * WE GIVE FREE S&H GREEN STAMPS WITH EVERY PURCHASE * * * * * * * SPECIAL DISCOUNT PRICES On all shags, sculptured, tip shears, tweeds, and plush pile carpets.

Hundreds of decorator colors and patterns to choose from.

* * * * * * * TERMS AVAILABLE FREE SHOP AT HOME SERVICE NO OBLIGATION * * * * * * * PAR. 5. By and through the use of the above-quoted statements and representations, and others of similar import - Complaint 82 F.T.C.

and meaning but not expressly set out herein, separately and in connection with the oral statements and representations of respondents’ salesmen to customers and prospective customers, respondents have represented, and are now representing, directly or by implication, that:

1. Respondents are making a bona fide offer to sell the advertised carpeting and floor coverings at the price and on the terms and conditions stated in the advertisements. 2. By and through the use of the words ‘Padding and installation included” and other words of similar import and meaning, not set out specifically herein, that all of the carpeting mentioned in such advertisements is installed with separate padding included at the advertised price. 3. Certain of respondents’ products are unconditionally guaranteed.

4. By and through the use of the words “Hundreds of decorator colors and patterns to choose from,” and other words of similar import and meaning not set out specifically herein, that the advertised carpeting is available in hundreds of different colors and patterns from which the prospective purchaser may choose.

5. Purchasers of the advertised carpeting will receive a “free” electric broom and “free” S&H Green Stamps. Par. 6. In truth and in fact:

1. Respondents’ offers are not bona fide offers to sell said carpeting and floor coverings at the price and on the terms and conditions stated in the advertisements. To the contrary, said offers are made for the purpose of obtaining leads to persons interested in the purchase of carpeting. Members of the purchasing public who respond to said advertisements are called upon in their homes by respondents or their salesmen, who make little or no effort to sell to the prospective customer the advertised carpeting. Instead, they exhibit what they represent to be the advertised carpeting which, because of its poor appearance and condition, is frequently rejected on sight by the prospective customer. Higher priced carpeting or floor coverings of superior quality and texture are thereupon exhibited, which by comparison disparages and demeans the advertised carpeting. By these and other tactics, purchase of the advertised carpeting is discouraged, and respondents, through their salesmen, attempt to sell and frequently do sell the higher priced carpeting.

2. A substantial portion of the carpeting advertised by the NATIONAL CARPET SERVICE CO., ET AL. 1357 1354 Complaint respondents is not installed with separate padding which is included in the advertised price. To the contrary, a substantial portion of the advertised carpeting has rubberized backing which is bonded to the carpeting.

8. Respondents’ carpeting and floor coverings are not unconditionally guaranteed. To the contrary, such guarantee as are available are subject tonumerous substantial conditions and limitations.

4. The advertised carpeting is not available in hundreds of different colors and patterns from which the prospective purchaser may choose. To the contrary, respondents have available only very limited selection of colors and patterns. 5. Purchasers of respondents’ carpeting do not receive a free electric broom and free S&H Green Stamps. To the contrary, the cost of the “free” gifts is added to and regularly included in the selling price of the merchandise sold to the customer. 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 further course and conduct of their business, and in furtherance of a sales program for inducing the purchase of their carpeting and floor coverings, respondents and their salesmen or representatives have engaged in the following additional unfair, false, misleading and deceptive acts and practices:

In a substantial number of instances, through the use of the false, misleading and deceptive statements, representations and practices set forth in Paragraphs Four through Six, above, respondents or their representatives have been able to induce customers into signing a contract upon initial contact without giving the customer sufficient time to carefully consider the purchase and consequences thereof.

PAR. 8. In the further course and conduct of their aforesaid business, and in connection with the representations set forth in Paragraph Four above, respondents offer carpet with padding and installation included at a price based upon specified areas of coverage. In making such offer, respondents have failed to disclose the material fact that the prices stated for such specified areas of coverage are not applied at the same rate for additional quantities of carpet needed, but are priced substantially higher. The aforesaid failure of the respondents to disclose said material facts to purchasers has the tendency and capacity to lead and induce a substantial number of such persons into the Complaint 82 F.T.C.

understanding and belief that the prices charged for quantities of carpet needed in excess of the specified areas of coverage will not be substantially higher than the rate indicated by the initial offer.

Therefore, respondents’ failure to disclose such material facts was, and is, unfair, false, misleading and deceptive. PAR. 9. 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 and distribution of rugs, carpeting and floor coverings and service of the same general kind and nature as those sold by respondents. PAR. 10. The use by respondents of the aforesaid false, misleading and deceptive statements, representations, acts and practices, and their failure to disclose material facts, as aforesaid, 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 complete, and into the purchase of substantial quantities of respondents’ products and services by reason of said erroneous and mistaken belief. PAR. 11. 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 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 Washington, D.C. Regional Office proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge the 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 NATIONAL CARPET SERVICE CO., ET AL. 1359 1854 Decision and Order 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 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 Section 2.34(b) of its rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Respondents Irving M. Balderson and Steven C. Goldsmith are individuals trading and doing business as National Carpet Service Company and Lanham Carpets, with their office and principal place of business located at 1504 62nd Avenue, Fairmount Heights, Maryland.

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 1s ordered, That respondents Irving M. Balderson and Steven C. Goldsmith, individually, trading and doing business as National Carpet Service Company, and Lanham Carpets, or under any other name or names, and respondents’ agents, representatives, and employees, successors and assigns, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of carpeting and floor coverings, or any other article of merchandise, 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 statements or representations are made in order to obtain leads or prospects for the sale of carpeting or other merchandise or services.

2. Making representations, orally or in writing, directly or by implication, purporting to offer merchandise for sale when the purpose of the representation is not to sell the Decision and Order 82 F.T.C.

offered merchandise but to obtain leads or prospects for the sale of other merchandise at higher prices. 3. Disparaging in any manner, or discouraging the purchase of any merchandise or services which are advertised or offered for sale.

4. Representing, orally or in writing, directly or by implication, that any merchandise or services are offered for sale when such offer is not a bona fide offer to sell such merchandise or services.

5. Failing to maintain and produce for inspection and copying for a period of three years adequate records to document for the entire period during which each advertisement was run and for a period of six weeks after the termination of its publication in press or broadcast media; a. the cost of publishing each advertisement including the preparation and dissemination thereof; b. the volume of sales made of the advertised product or service at the advertised price; and c. a computation of the net profit from the sales or each advertised product or service at the advertised price.

6. Representing, orally or in writing, directly or by implication, that a stated price for carpeting or floor coverings includes the cost of a separate padding and the installation of such padding and carpeting thereof, unless in every instance where it is so represented the stated price for floor covering does, in fact, include the cost of such separate padding and installation thereof; or misrepresenting in any manner, the prices, terms, or conditions under which respondents supply separate padding and provide installation in connection with the sale of floor covering products. .

7. Representing, orally or in writing, directly or by implication, that any product or service is guaranteed unless the nature and extent of the guarantee, the identity of the guarantor, and the manner in which the guarantor will perform thereunder are clearly and conspicuously disclosed; and respondents deliver to each purchaser, prior to the signing of the sales contract, a written guarantee clearly setting forth all of the terms, conditions and limitations of the guarantee fully equal to the representations, orally orin writing, directly or by implication, made to each such purchaser, and unless respondents promptly and fully NATIONAL CARPET SERVICE CO., ET AL. 1361 1354 Decision and Order perform all of their obligations and requirements under the terms of each such guarantee.

8. Representing, directly or indirectly, orally or in writing, that respondents have “hundreds” or any other number of patterns and colors of carpeting in stock unless respondents have the stated number of patterns or colors in stock and available for immediate sale and delivery; or misrepresenting, in any manner, the colors, patterns, size, kind or quantity of carpeting in stock and available for sale, delivery or installation.

9. Representing, directly or indirectly, orally or in writing, that a purchaser of respondents’ merchandise or services will receive a “free” vacuum cleaner or kitchen carpeting or any other “free” merchandise, service, prize or award unless all conditions, obligations, or other prerequisites to the receipt and retention of such merchandise, services, gifts, prizes or awards are clearly and conspicuously disclosed at the outset in close conjunction with the word ‘“‘free’”’ wherever it first appears in each advertisement or offer. 10. Representing, directly or indirectly, orally or in writing, that any merchandise or service is furnished “free” or at no cost to the purchaser of advertised merchandise or services, when, in fact, the cost of such merchandise or service is regularly included in the selling price of the advertised merchandise or service.

11. Representing, directly or indirectly, orally or in writing, that a “free” offer is being made in connection with the introduction of new merchandise or services offered for sale at a specified price unless the respondents expect, in good faith, to discontinue the offer after a limited time and commence selling such merchandise or service, separately, at the same price at which it was sold with a “free” offer. 12. Representing, directly or indirectly, orally or in writing, that merchandise or service is being offered “free” with the sale of merchandise or service which is usually sold at a price arrived at through bargaining, rather than at a regular price, or where there may be a regular price, but where other material factors such as quantity, quality, or size are arrived at through bargaining. 13. Representing, directly or indirectly, orally or in writing, that a “free” offer is available in a trade area for more than six (6) months in any twelve (12) month period. At least thirty (80) days shall elapse before another such “free” Decision and Order 82 F.T.C.

offer is made in the same trade area. No more than three such “free” offers shall be made in the same area in any twelve (12) month period. In such period, respondents’ sale in that area of the product or service in the amount, size or quality promoted with the “free” offer shall not exceed 50 percent of the total volume of its sales of the product or service, in the same amount, size or quality, in the area. 14. Representing, directly or indirectly, orally or in writing, that a product or service is being offered as a “gift,” “without charge,” “bonus,” or by other words or terms which tend to convey the impression to the consuming public that the article of merchandise or service is free, when the use of the term “free” in relation thereto is prohibited by the provisions of this order.

15. Contracting for any sale whether in the form of trade acceptance, conditional sales contract, promissory note, or otherwise which shall become binding on the buyer prior to midnight of the third day, excluding Sundays and legal holidays, after the date of execution. 16. Failing to furnish the buyer with a fully completed receipt or copy of any contract pertaining to such sale at the time of its execution, which is in the same language, e.g., Spanish, as that principally used in the oral sales presentation and which shows the date of the transaction and contains the name and address of the seller, and in immediate proximity to the space reserved in the contract for the signature of the buyer or on the front page of the receipt if a contract is not used and in bold face type of a minimum size of 10 points, a statement in substantially the following form:

YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT. 17. Failing to furnish each buyer, at the time he signs the sales contract or otherwise agrees to buy consumer goods or services from the seller, a completed form in duplicate, captioned “NOTICE OF CANCELLATION,” which shall be attached to the contract or receipt and easily detachable, and which shall contain in ten point bold face type the following information and statements in the same language, e.g., Spanish, as that used in the contract: NATIONAL CARPET SERVICE CO., ET AL. 1363 1354 Decision and Order NOTICE OF CANCELLATION {enter date of transaction] (Date) YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE BUSINESS DAYS FROM THE ABOVE DATE.

IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU UNDER THE CONTRACT OR SALE, AND ANY NEGOTIABLE INSTRUMENT EXECUTED BY YOU WILL BE RETURNED WITHIN 10 BUSINESS DAYS FOLLOWING RECEIPT BY THE SELLER OF YOUR CANCELLATION NOTICE, AND ANY SECURITY INTEREST ARISING OUT OF THE TRANSACTION WILL BE CANCELLED. IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE SELLER AT YOUR RESIDENCE, IN SUBSTANTIALLY AS GOOD CONDITION AS WHEN RECEIVED, ANY GOODS DELIVERED TO YOU UNDER THIS CONTRACT OR SALE; OR YOU MAY IF YOU WISH, COMPLY WITH THE INSTRUCTIONS OF THE SELLER REGARDING THE RETURN SHIPMENT OF THE GOODS AT THE SELLER’S EXPENSE AND RISK. IF YOU DO NOT AGREE TO RETURN THE GOODS TO THE SELLER OR IF THE SELLER DOES NOT PICK THEM UP WITHIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OF THE GOODS WITHOUT ANY FURTHER OBLIGATION. TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE, OR SEND A TELEGRAM TO [Name of seller} ; AT [address of seller’s place of business] , NOT LATER THAN MIDNIGHT OF (date) I HEREBY CANCEL THIS TRANSACTION.

(Date) (Buyer’s signature) 18. Failing, before furnishing copies of the “Notice of Cancellation” to the buyer, to complete both copies by entering the name of the seller, the address of the seller’s place of business, the date of the transaction, and the date, not earlier than the third business day following the date of the transaction, by which the buyer may give notice of cancellation.

' 19. Including any sales contract or receipt any confession of judgment or any waiver of any of the rights to which the Decision and Order 82 F.T.C.

buyer is entitled under this order including specifically his right to cancel the sale in accordance with the provisions of this order.

20. Failing to inform each buyer orally, at the time he signs the contract or purchases the goods or services, of his right to cancel.

21. Misrepresenting, directly or indirectly, orally or in writing, the buyer’s right to cancel. 22. Failing or refusing to honor any valid notice of cancellation by a buyer and within 10 business days after the receipt of such notice, to (i) refund all payments made under the contract or sale; (ii) return any goods or property traded in, in substantially as good condition as when received by the seller; (iii) cancel and return any negotiable instrument executed by the buyer in connection with the contract or sale and take any action necessary or appropriate to terminate promptly any security interest created in the transaction. 23. Negotiating, transferring, selling, or assigning any note or other evidence of indebtedness to a finance company or other third party prior to midnight of the fifth business day following the day the contract was signed or the goods or services were purchased.

24, Failing, within 10 business days of receipt of the buyer’s notice of cancellation, to notify him whether the seller intends to repossess or to abandon any shipped or delivered goods.

25. Advertising the price of carpet, either separately or with padding and installation included, for specified areas of coverage without disclosing in immediate conjunction and with equal prominence the square yard price for additional quantities of such carpet with padding and installation needed.

Provided, however, That nothing contained in this order shall relieve respondents of any additional obligations respecting contracts required by federal law or the law of the state in which the contract is made. When such obligations are inconsistent, respondents can apply to the Commission for relief from this provision with respect to contracts executed in the state in which such different obligations are required. The Commission, upon showing, shall make such modifications as may be warranted in the premises.

It is further ordered, That each of respondents do forthwith cease and desist from disseminating, or causing the NATIONAL CARPET SERVICE CO., ET AL. 1365 1354 Decision and Order dissemination of, any advertisement of merchandise by means of newspapers, or other printed media, television or radio, or by any means in commerce, as “commerce” is defined in the Federal Trade Commission Act, unless respondents clearly and conspicuously disclose in each advertisement the following notice set off from the text of the advertisement by a black border:

The Federal Trade Commission has found that we have engaged in bait & switch advertising solely designed to sell products other than those advertised. One year from the date this order becomes final or any time thereafter, respondents upon showing that they have discontinued the practices prohibited by this order and that the notice provision is no longer necessary to prevent the continuance of such practices may petition the Commission to waive compliance with this order provision. It is further ordered, That respondents shall maintain for at least a one (1) year period, following the effective date of this order, copies of all advertisements, including newspaper, radio and television advertisements, direct mail and in-store solicitation literature, and any other such promotional material utilized for the purpose of obtaining leads for the sale of carpeting or floor coverings, or utilized in the advertising, promotion or sale of carpeting or floor coverings and other merchandise.

It is further ordered, That respondents, for a period of one (1) year from the effective date of this order, shall provide each advertising agency utilized by respondents and each newspaper publishing company, television or radio station or other advertising media which is utilized by the respondents to obtain leads for the sale of carpeting or floor coverings and other merchandise, with a copy of the Commission’s News Release setting forth the terms of this order. It is further ordered, That respondents shall forthwith distribute a copy of this order to each of their operating divisions. It is further ordered, That respondents deliver a copy of this order to cease and desist to all present and future personnel of respondents engaged in the offering for sale, sale of any product, consummation of any extension of consumer credit or in any aspect of preparation, creation, or placing of advertising, and that respondents secure a signed statement acknowledging receipt of said order from each such person. It is further ordered, That each of the individual respondents Decision and Order 82 F.T.C.

named herein promptly notify the Commission of the discontinuance of their present business or employment and of their affiliation with a new business or employment. Such notice shall include respondents’ current business address and a statement as to the nature of the business or employment in which they are engaged as well as a description of their duties and responsibilities.

It is 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 of their compliance with this order.