Theodore Stephen Company, Inc

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IN THE MATTER OF THEODORE STEPHEN COMPANY, INC., ET AL.

ORDER, OPINION, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION, TEXTILE FIBER PRODUCTS IDENTIFICATION AND TRUTH IN LENDING ACTS Jcket 8944. Complaint, Dec. 197.' Deci..rion, Jan. , 197. Order requiring a Silver Spring, Md., carpet retailer, among other things to cease using bait and switch tactics; failing to maintain adequate records; misrepresenting savings available to consumers; misrepresenting prices or terms and conditions thereof; misrepresenting guarantees; misrepresepting credit services or terms; failing to notify consumers of their right to cancel contracts v.rithin three business days; misbranding and falsely advertising its textile fiber products; and failing to disclose to consumers, in connection with the extension of consumer credit, such information as required by Regulation Z of the Trth in Lending Act.

Appearances For the Commission: Everette E. Tfwmas, Richard F. Kelly and Michael Dershowilz.

For the respondents: John H. Harrn, Coggins, Fireison & Harmon Silver Spring, Md.

COMPLAINT Pursuant to the provisions of the Federal Trade Commssion Act, the Textile Fiber Products Identification Act, the Trth in Lending Act and the implementing regulation promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Theodore Stephen Company, Inc., a corporation, and Benjamin Eisenman, individually and as an officer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Acts, the implementing regulation, and the rules and regulations promulgated under the Textile Fiber Products Identifcation 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 Theodore Stephen Company, Inc. is a corporation organized, existing and doing business under and by virue of the laws of the State of Maryland, with its principal office and place of business located at 14405 Sturtevant Rd., Silver Spring, Md. Respondent Benjamin Eisenman is an individual and is the principal THEODORE STEPHEN CO., INC., ET AL. Ifh 152 Complaint offcer 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.

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. COUNT I Alleging violation of Section 5 of the Federal Trade Commission Act the allegations of Paragraphs One and Two hereof are incorporated by reference in Count I as if fully set forth verbatim. 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 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 purose of inducing the purchase of their carpting 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 ilustrative of said statements and representations, but not all-inclusive thereof, are the following: CARPET SALE ALL THE CARPET YOU NEED FOR 6 AREAS $125 *LIVING ROOM *BEDROOM *DINING ROOM *STEPS *HALL *FOYER POLYESTER SHAG $5.99 SQ. YD.

Complaint 85 F.

100% ACRILAN $6.99 SQ. YD.

ANNIVERSARY CARPET SALE TOTAL PRICES $125 ANY 3 AREAS COMPLETELY INSTALLED CARPETING, PADDING, LABOR UP TO 320 Sq. Ft.

IMMEDIATE INSTALLATION CARPET AND LABOR GUARANTEED LOWEST PRICES Because we don t give gifts BANK RATE TERMS TO FIT YOUR BUDGET LOW BANK RATE TERMS 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, 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 carpting and floor coverings at the price and on the terms and conditions stated in the advertisements.

2. By and through the use of the word "SALE " and other words of similar impqrt and meaning not set out specifcally herein, that said carting and floor coverings may be purchased at special or reduced prices, and purchasers are thereby afforded savings from respondents reguarly selling prices.

3. By and through the use of the words "COMPLETELY INSTALLED, CARPETING, PADDING, LABOR" and other words of similar import and meaning, not set out specifically herein, that all of 152 Complaint the careting mentioned in such advertisements is installed with separate padding included at the advertised price. 4. Certain of respondents' products are unconditionally guaranteed. 5. By and through the use of the words "BANK RATE TERMS TO FIT YOUR BUDGET," "LOW BANK RATE TERMS" and words of similar import and meaning, not set out specifically herein, that respondents extend credit to their customers at or below rates which are usually charged by banks.

PAR. 6. In truth and in fact:

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

2. Respondents' products are not being offered for sale at special or reduced prices. To the contra, the price respondents regularly advertise and their so-called advertised "sale" price are identical and are used to mislead prospective customers into believing there is a saving from a bona fide reguar sellng price. In fact, seldom, if ever are the advertised items sold, because the offer is designed to act as the inducement for the practices set forth in Pargraph Six, 1., hereof. 3. A substantial portion of the carting advertised by the respondents is not installed with separate padding which is included in the advertised price. To the contra, a substantial portion of the advertised carpting has rubberied backing which is bonded to the careting.

4. Respondents' carting and floor coverings are not unconditionar available areally guaranteed. To the contra, such guarantees as subject to numerous substantial conditions and limitations. 5. Respondents arrange credit for customers through finance companies or other third paries at rates substantially higher than those generally charged by banks.

Complaint 85 F.

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 custorner 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 Paragrph Four above, respondents offer carpt 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 caret 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 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 and is, unfair, false, misleading and deceptive. PAR. 9. In the course and conduct of their business, and for the purpose of inducing the purchase of their products, respondents use the term "up to 320 sq. ft." to indicate the quantity of carpting available at the advertised price.

PAR. 10. The unit of measurement usually and customarly employed in the retail advertising of carpt is square yards. Consumers are accustomed to comparng the price of caret in term of price per square yard ' therefore respondents' use of the square foot unit of mea.-;urement confuses consumers who compare respondents' prices with competitors' prices advertised on a square yard basis. Furhermore, respondents use of square foot measurements exaggerates the size or quantity of careting being offered, and therefore has the capacity and tendency to mislead consumers into the mistaken THEODORE STEPHEN Co., INC., ET AL. 157 152 Complaint belief they are being offered a greater quantity of carpet than is the fact.

Therefore, the acts and practices as set forth in Paragraph Nine hereof were and are unfair, false, misleading and deceptive. PAR. 11. In the course and conduct of their a.foresa.id 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. 12. 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 ha." 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. 13. The aforesaid acts and practices of respondents, as herein alleged, were and are all to the prejudice and injur 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.

COUNT II Alleging violation of the Textile Fiber Products Identifcation Act and the implementing rules and regolations promulgated thereunder and of the Federal Trade Commission Act, the alleg-dtions of Paragraphs One and Two hereof are incorpordted by reference in Count II as if fully set forth verbatim.

PAR. 14. Respondents are now, and for some time last pa..;t have been engaged in the introduction, delivery for introduction, sale, advertising, and offering for sale, in commerce, and in the transportation or causing to be transported in commerce, of textile fiber products including carpeting and floor covering and have sold, offered for sale, advertised delivered, transported and caused to be transported, after shipment in commerce, textile fiber products, which have been advertised or offered for sale' in commerce; and have sold, offered for sale advertised, delivered, transported and caused to be transported, after shipment in commerce, textile fiber products, either in their original state or contained in other textile fiber products, as the terms Complaint 85 F.

commerce" and "textile fiber product" are defined in the Textile Fiber Products Identification Act.

PAR. 15. Certain of said textile fiber products were mishranded by respondents within the intent and meaning of Section 4(a) of the Textile Fiber Products Identification Act and of the rules and regulations promulgated thereunder, in that they were falsely and deceptively advertised, or otherwse identified as to the name and amount of constituent fibers contained therein. PAR. 16. Certain of said textile fiber products were falsely and deceptively advertised in that respondents in making disclosures or implications as to the fiber content of such textile fiber products in written advertisements used to aid, promote, and to assist, directly or indirectly, in the sale or offering for sale of said products, failed to set forth the required information as to fiber content as specified by Section 4(c) of the Textile Fibcr Products Identification Act, and in the manner and form prescribed by the rules and regulations promulgated under said Act.

PAR. 17. Among such textile fiber products, but not limited thereto was carpeting which was falsely and deceptively advertised in The Washington Post newspaper published in the District of Columbia, and having a wide circulation in the District of Columbia and varous other States of the United States, in that said carpeting wa., described by such fiber connoting terms among which, but not limited thereto, was Acrilan " and the true generic name of the fiber contained in such carpting was not set forth.

PAR. 18. By means of the aforesaid advertisements and others of similar import and meaning not specifically referred to herein respondents have falsely and deceptively advertised textile fiber products in violation of the Textile Fiber Products Identifcation Act in that said textile fiber products were not advertised in accordance with the rules and regulations promulgated thereunder in the following respects:

I. In disclosing the fiber content information as to floor coverings containing exempted backings, fillngs, or paddings, such disclosure was not made in such a manner as to indicate that such fiber content information related only to the face, pile or outer surace of the floor covering and not to the backing, filling or padding, in violation of Rule 11 ofthe aforesaid rules and regulations.

2. A fiber trademark was used in advertising textile fiber products without a full disclosure of the fiber content information required by said act, and the regulations promulgated thereunder, in at least one instance in said advertisement, in violation of Rule 41(a) of the aforesaid rules and regulations.

THEODORE STEPHEN CO., lng., ET AL. 159 152 Complaint 3. A fiber trademark was used in advertising textile fiber products containing only one fiber and such fiber trademark did not appear, at least once in the said advertisement, in immediate proximity and conjunction with the generic name of the fiber, in plainly legible and conspicuous type, in violation of Rule 41(c) of the aforesaid rules and regulations.

PAR. 19. The acts and practices of respondents as set forth above were, and are, in violation of the Textie Fiber Products Identification Act and the rules and regulations promulgated thereunder, and constituted, and now constitute, unfai and deceptive acts and practices, in commerce, and unfair methods of competition, in commerce, under the Federal Trade Commission Act. COUNT II Alleging violation of the Trth in Lending Act and the implementing regulation promulgated thereunder, and of the Federal Trade Commission Act, the allegations of Paragraphs One and Two hereof are incorporated by reference in Count III as if fully set forth verbatim PAR. 20. In the ordinar course and conduct of their business, as aforesaid, respondents regularly extend consumer credit, as "consumer credit" is defined in Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System.

PAR. 21. Subsequent to July 1, 1969, respondents, in the ordinar course of business as aforesaid, and in connection with their credit sales, as "credit sale" is defined in Reguation Z, have caused, and are causing customers to execute binding retail installment contracts hereinafter referred to as the "contract.

PAR. 22. By and through the use of the contract respondents, in a number of instances:

(1) Failed to include in the finance charge the amount of the charges or premiums for credit life insurance in instances where customers desiring such insurance coverage did not give specifc dated and separately signed afIllative written indication of such desire, as provided in Section 226.4(a)(5)(ii) of Regulation Z. (2) By reason of failng to include in the finance charge the amount of the charges or premiums for credit life insurance, as stated in (1) above failed to disclose accurately the "amount financed " and "finance charge," as required by Sections 226.8(c)(7), and 226.8(c)(8)(i), respectively, of Regulation Z, and the "annual percentage rate" accurately to the nearest quarer of one percent, computed in accordance with the provisions of Section 226.5 of Regulation Z, as requid by Section 226.8(b)(2) of Regulation Z.

I nitial Decision 5 F. (3) Failed to disclose the "annual percentage rate" accurately to the nearest quarter of one percent, computed in accordance with the provisions of Section 226.5 of Regulatiol) Z, as required by Section 226.8(b)(2) of Regulation Z.

(4) Failed to disclose the sum of the cash price, all charges which are included in the amount financed but which are not par of the finance charge, and the finance charge, and to describe that sum as the deferred payment price " as required by Section 226.8(c)(8)(ii) of Regulation Z.

PAR. 23. Pursuant to Section 103(q) of the Truth in Lending Act respondents' aforesaid failures to comply with the provisions of Regulation Z constitute violations of that Act and, pursuant to Section 108 thereof, respondents thereby violated the Federal T,ade Commission Act.

INITIAL DECISION BY RAYMOND J. LYNCH, ADMINISTRATIVE LAW JUDGE JULY :31, 1974 PRELIMINARY STATEMENT On Dec. 18, 1973, the Federal Trade Commssion issued a complaint in this proceeding alleging that the respondents Theodore Stephen Company, Inc., a corporation, and Benjamin Eisenman, individually and as an officer of said corporation, violated the provisions of the Federal Trade Commission Act, the Textile Fiber Products Identifcation Act the Trth in Lending Act and the implementing regulations promulgated thereunder.

Respondents fied an answer to the complaint on Jan. 16, 1974, and a prehearing conference was held in the matter on Jan. 29, 1974. An amended answer to the complaint was fied on Feb. 26, 1974 admitting all of the allegations of the complaint. A prehearing conference was held on Feb. 27, 1974. Respondents fied a brief in support of their amended answer on Mar. 28, 1974, and complaint counsel rued a memorandum in support of their position on Mar. 29, 1974. Ora argument was held on Apr. 17, 1974. The respondents having admitted all of the allegations of the complaint, the only remaining matter to be determined is the nature of the sanction to be imposed. FINDINGS OF "FACT 1. Respondent Theodore Stephen Company, Inc. is a corporation organized, existing and doing business under and by virtue of the laws THEODORE STEPHEN CO., INC., ET AL. 161 152 Initial Decision of the State of Maryland, with its principal office and place of business located at 14405 Sturtevant Rd., Silver Spring, Md. Respondent Benjamin Eisenman is an individual and is the principal offcer 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.

2. Respondents are now, and for some time last past have been engaged in the advertising, offering for sale, sale, distribution and installation of careting and floor coverings to the public. 3. In the course and conduct of their business as 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 Marland, to purcha.,ers 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.

4. In the course and conduct of their aforesaid business, and for the purose of inducing the purchase of their careting 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 ilustrative of said statements and representations, but not all-inclusive thereof, are the following: CARPET SALE ALL THE CARPET YOl! NEED FOR 6 AREAS $125 'LIVING ROOM 'BEDROOM 'DINING ROOM *STEPS *HALL *FOYER POLYESTER SHAG $5.99 SQ. YD.

look ACRILAN $6. 99 SQ. YD.

ANNIVERSARY CARPET SALE Initial Decision 85 F.

TOTAL PRICES $125 ANY 3 AREAS COMPLETELY INSTALLED CARPETING, PADDING, LABOR UP TO 320 Sq. Ft.

IMMEDIATE INSTALLATION CARPET AND LABOR GUARANTEED LOWEST PRICES Because we don t give gifts BANK RATE TERMS TO FIT YOUR BUDGET LOW BANK RATE TERMS 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, 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: a. Respondents are making a bona fide offer to sell the advertised careting and floor coverings at the price and on the terms and conditions stated in the advertisements.

b. By and through the use of the word "SALE", and other words of that said similar import and meaning not set out specifically herein, carting and floor coverings may be purchased at special or reduced prices, and purchasers are thereby afforded savings from respondents regularly sellng prices.

c. By and through the use of the words "COMPLETELY IN- STALLED, CARPETING, PADDING, LABOR" and other words of that all of similar import and meaning, not set out specifcally herein, the careting mentioned in such advertisements is instaled with separate padding included at the advertised price. d. Certain of respondents' products are unconditionally guaranteed. e. By and through the use ofthe words "BANK RATE TERMS TO FIT YOUR BUDGET LOW BANK RATE TERMS" and words of similar import and meaning, not set out specifcally herein, that respondents extend credit to their customers at or below rates which are usually charged by banks.

6. In truth and in fact:

a. Respondents' offers are not bona fide offers to sell said carpeting . , ..., _.. _on 152 Initial Decision 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 obtaining leads to persons interested in the purcha..e ofpurose of careting. Members of the purchasing public who respond to said advertiscments are called upon in their homes by respondents or their salesmen, who make litle or no effort to sell to the prospective customer the advertised careting. Instead, they exhibit what they represent to be the advertised careting, which, because of its poor appearance and condition, is frequently rejected on sight by the prospective customer. Higher priced careting or floor coverings of superior quality and texture are thereupon exhibited, which by comparison disparages and demeans the advertised carting. By these and other tactics, purchase of the advertised carpting is discouraged and respondents, through their salesmen, attempt to sell and frequently do sell the higher priced careting.

b. Respondents' products are not being offered for sale at special or reduced prices. To the contrary, the price respondents regularly advertise and their so-called advertised "sale" price are identical and are used to mislead prospective customers into believing there is a saving from a bona fide regular sellng price. In fact, seldom, if ever are the advertised items sold, because the offer is designed to act as the inducement for the practices set forth in Finding 6 a, hereof. c. A substantial portion of the carting advertised by the 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 rubberied backing which is bonded to the careting.

d. Respondents' careting and floor coverings are not unconditionally guaranteed. To the contra, such guarantees as are available are subject to numerous substantial conditions and limitations. e. Hespondents arrange credit for customers through finance companies or other third paries at rates substantially higher than those generally charged by bank.

Therefore, the statements and representations as set forth in Findings 4 and 5, hereof, were and are false, misleading and deceptive. 7. In the furher course and conduct of their business, and in furherance of a sales program for inducing the purcha.,e of their careting and floor coverigs, respondents and their salesmen or representatives have engaged in the following additional unfai, 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 Findings 4 through 6, above, respondents or their representa- Initial Decision 85 F. tives 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. 8. In thc further course and conduct of their aforesaid business, and in connection with the representations set forth in Finding 4 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 specifed areas of coverage are not applied at the same rate for additional quantities of caret 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 suhstantial number of such persons into the understanding and belief that the prices charged for quantities of carpet needed in excess of the specified areas of coverage wil not be substantially higher than the rate indicated by the initial offer.

Therefore, respondents' failure to disclose such material facts wa.-; and is, unfair, false, misleading and deceptive. 9. In the course and conduct of their business, and for the purose of inducing the purchase of their products, respondents use the term up to 320 sq. ft." to indicate the quantity of carpting available at the advertised price.

10. The unit of measurement usually and customarly employed in the retail advertising of carpet is square yards. Consumers are accustomed to comparing the price of carpet in terms of price per square yard, therefore respondents' use of the square foot unit of measurement confuses consumers who compare respondents' prices with competitors' prices advertised on a square yard basis. Furthennore, respondents' use of square foot mea.')urements exaggerates the size or quantity of carpeting being offered, and therefore has the capacity and tendency to mislead consumers into the mistaken belief they are being offered a greater quantity of carpet than is the fact.

Therefore, the acts and practices as set forth in Findings 9 and 10 hereof were and are unfair, false, misleading and deceptive. 11. In the course and conduct of their aforesaid business, and at all in times mentioned herein, respondents have been, and now are, substantial competition in commerce, with corporations, firms and individuals in the sale and distribution of rugs, carpting and floor coverings and service of the same general kind and nature as those sold by respondents.

12. The use by respondents of the aforesaid false, misleading and , It1 UIJ\Jl\. ':l r.n l'1 , U'lV., e,l ftl. 152 I nitial Decision deceptive statements, representations, acts and practices, and their failure to disclose material facts, a., aforesaid, ha., 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. 13. The aforesaid acts and practices of respondents, as set forth in Findings 11 and 12, were and are all to the prejudice and injur 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.

14. Respondents are now, and for some time last past have been, engaged in the introduction, delivery for introduction, sale, advertising, and offering for sale, in commerce, and in the transporttion or causing to be transported in commerce, of textile fiber products including carting and floor covering and have sold, offered for sae, advertised delivered, transported and caused to be tranported, after shipment in commerce, textie fiber products, which have ben advertised or offered for sale in commerce; and have sold, offered for sae advertised, delivered, transported and caused to be transportd, after shipment in commerce, textile fiber products, either in their origina state or contained in other textie fiber products, as the terms commerce" and I'textile fiber product" are defined in the Textile Fiber Products Identifcation Act.

15. Certain of said textile fiber products were misbraded by respondents within the intent and meaning of Section 4(a) of the Textile Fiber Products Identification Act and of the rules and reguations promulgated thereunder, in that they were falsely and deceptively advertised, or otherwse identifed as to the name or amount of constituent fibers contained therein. 16. Certn of said textie fiber products were falsely and deceptively advertise in that respondents in making disclosures or implications as to the fiber content of such textile fiber products in wrtten advertisements used to aid, promote, and to assist, directly or indirectly, in the sale or offering for sale of said products, faied to set forth the required information as to fiber content a., specified by Section 4(c) of the Textile Fiber Products Identification Act, and in the manner and form prescribed by the rules and reguations promulgate under said Act.

17. Among such textile fiber products, but not limited thereto, was advertisl-d in Thecarting which wa.' falsely and deceptively Initial Decision 85 F. Washington Post newspaper published in the District of Columbia, and having a wide circulation in the District of Columbia and various other states of the United States, in that said carting was described by such fiber connoting terms among which, but not limited thereto, was .. Acrilan " and the true generic name of the fiber contained in such carting was not set forth.

18. By means of the aforesaid advertisements and others of similar import and meaning not specifically found herein, respondents have falsely and deceptively advertised textile fiber products in violation of the Textile Fiber Products Identifcation Act in that said textile fiber products were not advertised in accordance with the rules and regulations promulgated thereunder in the following respects: a. In disclosing the fiber content information as to floor coverings contaning exempted backings, fillings, or paddings, such disclosure wa., not made in such a manner as to indicate that such fiber content information related only to the face, pile or outer surface of the floor covering ang not to the backing, fillng or padding, in violation of Rule 11 of thc aforesaid rules and regulations. b. A fiber trademark was used in advertising textile fiber products without a full disclosure of the fiber content information required by said Act, and the regulations promulgated thereunder, in at least one instance in said advertisement, in violation of Rule 41(a) of the aforesad rules and regulations.

c. A fiber trademark was used in advertising textile fiber products contaning only one fiber and such fiber trademak did not appear, at least once in the said advertisement, in immediate proximity and conjunction with the generic name of the fiber, in plainly legible and conspicuous typ, in violation of Rule 41(c) of the aforesaid rules and reguations.

19. The acts and practices of respondents as found above were, and are, in violation of the Textie Fiber Pructs Identification Act and the rules and reguations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and pratices, in commerce and unai methods of competition, in commerce, under the Federd! Trade Commssion Act.

20. In the ordnar cour and conduct of their business, respondents regularly extend consumer cret, as "consumer creit" is defined in Reguatioll Z, the implementing regulation of the Trth in Lending Act, duly promulgated by the Board of Governors of the Federd! Reserve System.

21. Subsequent to July 1, 1969, respondents, in the ordinary cour of business, and in connection with their credit saes, as "creit sale" is defined in Reguation Z, have cause, and are causing customers to 102 Initial Decision execute binding retail installment contracts, hereinafter refcITcd to as the "contract.

22. By and through the use of the contract respondents, in a number of instances:

(1) Failed to include in the finance charge the amount of the charges or prenrums for credit life insurance in instances where . customers desiring such insurance coverage did not give specific dated and separately signed affinnative written indication of such desire, as provided in Section 226.4(a)(5)(ii) of Regulation Z. (2) By reason of failing to include in the finance charge the amount of the charges or premiums for credit life insurance, as stated in (1) above failed to disclose accurately the "amount financed " and " finance charge " as required by Sections 226.8(c)(7) and 226.8(c)(8)(i), respectively, of Regulation Z, and the "annual percentage rate" accurately to the nearest quarer of one percent, computed in accordance with the provisions of Section 226.5 of Regulation Z, as required by Section 226.8(b)(2) of Regulation Z.

(3) Failed to disclose the "annual percentage rate" accurately to the nearest quarer of one percent, computed in accordance with the provisions of Section 226.5 of Regulation Z, as required by Section 226.8(b)(2) of Regulation Z.

(4) Failed to disclose the sum of the cash price, all charges which are included in the amount financed but which are not part of the finance charge, and the finance charge, and to describe that sum as the deferred payment price," as required by Section 226.8(c)(8)(ii) of Regulation Z.

23. Pursuant to Section 103(q) of the Trth in Lending Act respondents' aforesaid failures to comply with the provisions of Regulation Z constitute violations of that Act and, pursuant to Section 108 thereof, respondents thereby violated the Federal Trde Commssion Act.

CONCLUSIONS 1. The Federa Trade Commission has jursdiction of and over respondents and the subject matter of this proceeding. 2. The complaint herein states a cause of action, and this proceeding is in the public interest.

3. Respondents have engaged in unfair methods of competition in commerce and have committed unfai and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trde Commission Act.

Respondents have violated the provisions of the Textile Fiber Initial Decision 85 F. Products Identification Act, the Truth in Lending Act and the implementing regulations promulgated thereunder. THE REMEDY As previously stated herein, the parties fied briefs and oral argument was held regarding the nature of the sanction to be imposed. It is the contention of counsel supporting the complaint that in order to protect the public interest corrective advertising such as that set forth in the complaint must be issued:

The Federal Trade Commission ha(sj found that we engage in bait and switch advertising; that is, the salesman makes it diffcult to buy the advertised product and he attempts to switch you to a higher priced item. The respondents, on the other hand, contend that Section 5 of the Federal Trade Commission Act in no way gives the Commission the power to issue an order requiring " the respondents (to) devote a certain portion of their future advertising to a confession and admission that they have been found by the Federal Trade Commission to have engaged in 'Bait and Switch' tactics." The respondents argue that the recommended remedy is penal in nature, unconstitutional and the taking of property without just compensation. Furhermore, that should the order issue, the net effect would be that the respondents would be put out of business.

The Commission is vested with broad discretion in determining the type of order necessary to ensure discontinuance of the unlawful v. Colgate-Palrrlive Co. practices found. Federal Trad Commission 380 U.S. 374, 392 (1965). The Commission s discretion is limited only by the requirement that the remedy be reasonably related to the unlawful practices found. Jacob Siegel Co. v. Federal Trade Commission 327 v. Federal Trad S. 608, 613 (1946); Niresk Industries, Inc. cert. denied 364 U.S. 883. It is Commission 278 F.2d 837 (7th Cir. 1960), well setted that the Commission may require affirmative statements in advertising where failure to make such statements leaves the prospective consumer without all the material facts on which to base his choice as to whether to do business with the advertiser or purchase the product advertised. Federal Trad Commission v. Alyoma Lumber Co. 291 U.S. 67, 78 (1934).

The position of the Commission with respect to corrective advertising has been s t forth very clearly in Firestone Tire and Ru.bber Co., 81 C. 398, 471, where the Commission held that: (A In order requiring corrctive advertising is web within the arsenal of relief provisions which the Commission may draw upon in fashioning effective remedial mea.'mres to bring about a termination of the acl" or prclctices found t.o have been unfair the public, it is or deceptive. If such relief is wan-nted to prevent continuing injur to neither punitive nor retrospective.

THEODORE STEPHEN CO., INC., ET AL. 169 152 Initial Decision (CloITeetive advertising orders where necessary and appropriate wil violate neither the letter nor the spirit of the First Amendment guarantees of free speech and press and are clearly within the remedial authority of the Commission. Subsequently, the Commission had occasion to reiterate the theories in ITT Continental Baking Co. Inc. C. Docket RR60, (R3 F. 865), wherein it stated:

We have further evidencf' that many months after conclusion of the advertising campaign a small percentage of consumers recall the nutritional advertising of respondents though it is not clear from this evidence to what extent those consumers continued to believe that Wonder Bread is an extraordinary food (the misrepresentation found to have been made) * * * we cannot find in the record a sufficient basis upon which to conclude that corrective advertising is needed to eliminate the misrepresentation found.

In addition, the Commission has also set forth its position with respect to the imposition of sanctions in both the Curtis Publishing Company case, Docket No. BROO (78 F. C. 1472), and the Universal Credit Acceptance Company case, Docket No. BR21 (82 F. C. 570), wherein they very emphatically decided that even in a case of what was deemed restitution they had the power to, and indeed did in Universal Credit, supra impose an order which was referred to throughout as restitutio nary relief.

Taking into consideration all of the ca. es that have come before, and the Commission s repeatedly stated position, the undersigned is of the opinion that he is bound by the precedent that has already been established by the Commission.

Therefore, the undersigned concludes that as a result of the respondents' activities, the request of counsel supporting the complaint for corrective advertising is not beyond the scope of the Commission power, and that in order to stop the respondents and deter others from engaging in acts and practices as set forth herein, the corrective advertising provision of the Commission s order should be imposed. ORDER It is ordered That respondents Theodore Stephen Company, Inc., a corporation, its successors and assigns, and its officers, and Benjamin Eisenman, individually and as an officer of said corporation, and respondents' agents, representatives, and employees, 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 OQ-'Oq () - r, - ) 2 Initial Decision 85 F. 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 careting or other merchandise or services.

2. Making representations, orally or in wrting, directly or by implication, purporting to offer merchandise for sale when the purpose of the representation is not to sell the offered merchandise but to obtain leads or prospects for the sale of other merchandise at higher pnces.

3. Disparaging in any manner, or discouraging the chase of any merchandise or services which are advertised or offered for sale. 4. Representing, orally or in wrting, 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 durng which each advertisement was run and for a period of six weeks after the termnation 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 of each advertised product or service at the advertised price. 6. Using the word "Sale " or any other word or words of similar import or meaning not set forth specifically herein unless the price of such merchandise being offered for sale constitutes a reduction, in an amount not so insignficant as to be meaningless, from the actual bona fide price at which such merchandise was sold or offered for sale to the public on a regular basis by respondents for a reasonably substantial period of time in the recent, regular coure of their business. 7. (a) Representing, orally or in wrting, directly or by implication that by purchasing any of said merchandise, customers are afforded savings amounting to the difference between respondents' stated price and respondents' former price unless such merchandise ha.!; been sold or offered for sale in good faith at the former price by respondents for a rea.c;onably substantial period of time in the recent, regular coure of their business.

(b) Representing, orally or in wrting, directly or by implication, that by purchasing any of said merchandise, customers are afforded savings THEODORE STEPHEN CO., INC., ET AL. I7l 152 Initial Decision amounting to the difference between respondents' stated price and a compared price for said merchandise in respondents' trade area unless a substantial number of the principal retail outlets in the trade area regularly sell said merchandise at the compared price or some higher price.

(c) Representing, orally or in wrting, directly or by implication, that by purchasing any of said merchandise, customers are afforded savings amounting to the difference between respondents' stated price and a compared value price for comparable merchandise, unless substantial sales or merchandise of like grade and quality are being made in the trade area at the compared price or a higher price and unless respondents have in good faith conducted a market sureyor obtained a similar representative sample of prices in their trade area which establishes the validity of said compared price and it is clearly and conspicuously disclosed that the comparison is with merchandise of like grade and quality.

8. Failng to maintain and produce for inspection or copying for a period of three (3) years, adequate records (a) which disclose the facts upon which any savings claims, sale claims and other similar representations as set forth in Paragraphs Six and Seven of this order are based, and (b) from which the validity of any savings claims, sale claims and similar representations can be determined. 9. Representing, orally or in wrting, 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.

10. Representing, orally or in wrting, 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 wrtten guarntee clearly setting forth all of the terms, conditions and limitations of the guarntee fully equal to the representations, orally or in wrting, directly or by implication made to each such purchaser, and unless respondents promptly and fully perform all of their obligations and requirements under the terms of each such guarntee.

11. Representing, orally or in wrting, directly or by implication , 172 FEDEIlAL TIlADE COMMISSION DECISIONS Initial Decision 85 F. that respondents extend credit to customers or extend credit at bank credit services or creditrates; or misrepresenting in any manner, terms.

12. Contracting for any sale whether in the form of trade or otherwiseacceptance, conditional sales contract, promissory note, thirdwhich shall become binding on the buyer prior to midnight of the day, excluding; Sundays and legal holidays, after the date of execution. 13. 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 lang;age 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 pag;e of the receipt if a contract is not used and in a statement inbold face type of a minimum size of 10 points, substantially the following; form:

YOU, THE BUYER, MAY CANC,;L THIS TRANSACTION AT ANY TIME PRIOIl 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.

14. Failng to furnish each buyer, at the time he signs the sales contract or otherwse 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 Spanish, as that used in the contract:

NOTICE OF CANCELLATION (enter date of transaction J (date) YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE BUSINESS DAYS FROM THE AllOVE DATE. IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU UNDER THE CONTRACT OR SALE, AND ANY NEGOTIABLE INSTRU- MENT EXECUTED BY YOU WILL lle RETIJRNf D WITHIN 10 BUSINf:SS DAYS FOLLOWING RECEIPT BY THE SELLER OF YOUR CANCELLATION NOTICE, AND ANY Sf:CURITY INTEREST ARISING OUT OF THE TRANSAC- TION WILL BE CANCELLED.

IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE SELLER AT YOUR RESIDENC,:, IN SUBSTANTIALLY AS GOOD CONDITION AS WIlEN 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 'Im: SELU S EXPENSE AND RISK IF YOU DO MAKE THE GOODS AVAILABLE TO THE SELLf:R AND THE THEODORE STEPHEN CO., INC., ET AL. 173 152 Initial Decision SELLER DOES NOT PICK THEM UP WITHIN 20 DA YS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OFTI!E GOODS WITHOUT ANY FURTHER OBLIGATION. IF YOU FAIL TO MAKE THE GOODS A V AILABLE TO THE SELLER, OR IF YOU AGREE TO RETURN THE GOODS TO THE SELLER AND FAIL TO DO SO, THEN YOU REMAIN LIABLE FOR PERFORMANCE OF ALL OBLIGATIONS UNDER THE CONTRACT. 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 fName of seller), AT famb"es,'I ofselleys oflJ'Mine. '!s j, NOT LATER THAN MIDNIGHT OF (date). I HEREBY CANCEL THIS TRANSACTION.

(Date) (Buyer's signature) 15. 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. 16. Including in any sales contract or receipt any confession of judgment or any waiver of any of the rights to which the buyer is entitled under this order including specifcally his right to cancel the sale in accordance with the provisions of this order. 17. Failing to inform each buyer orally, at the time he signs the contract or purcha.-;es the goods or services, of his right to cancel. 18. Misrepresenting, directly or indirectly, orally or in writing, the buyer s right to cancel.

19. 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 gnod 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 necessar or appropriate to terminate promptly any security interest created in the transaction.

20. Negotiating, transferrng, sellng, or assignng any note or other evidence of indebtedness to a finance company or other thid party prior to midnight of the ruth business day following the day the contract wa. signed or the goods or servces were purchased. 21. 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. 22. Advertising the price of cart, either separately or with padding and installation included, for specifed areas of coverage Initial Decision 85 F. without disclosing in immediate conjunction and with equal prominence the square yard price for additional quantities of such carpet witfi padding and installation needed.

23. Advertising any careting or floor covering using a unit of measurement not usually and customarly employed in the retail advertising of caret or which tends to exaggerate the size or quantity of careting or floor covering being offered at the advertised price. Provided, however That nothing contained in Par I of 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 respondents Theodore Stephen Company, Inc., a corporation, its successors and assigns, and its officers, and Benjamin Eisenman, individually and as an officer of said corpration and respondents' agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with the introduction, sale, advertising, or offering for sale in commerce, or the transporttion or causing to be transported in commerce of any textile fiber product; or in connection with the sale offering for sale, advertising, delivery, transporttion or causing to be transported, of any textile fiber product which has been advertised or offered for sale, in commerce; or in connection with the sale, offering for sale, advertising, delivery, transportation, or causing to be transported, after shipment in commerce, of any textile fiber product whether in its original state or contained in other textie fiber products as the terms "commerce" and "textile fiber product" are defined in the Textile Fiber Products Identifcation Act, do forthwith cease and desist from:

A. Misbranding textile fiber products by falsely or deceptively stamping, tagging, labeling, invoicing, advertising or otherwse identifying such products as to the name or amount of the constituent fibers contained therein.

B. Falsely and deceptively advertising textile products by: 1. Making any representations by disclosure or by implication, as to fiber content of any textile fiber product in any wrtten advertisement which is used to aid, promote or assist, directly or indiectly, in the sale or offering for sale, of such textile fiber product unless the same ), THEODORE STEPHEN Cu., INI.. r..L N.!-'. 152 Initial Decision information required to be shown on the stamp, tag, label or other means of identification under Sections 4(b)(I) and (2) of the Textile Fiber Products Identification Act is contained in the said advertisement, except that the percentages of the fibers present in the textile fiber product need not be stated.

2. Failng to set forth in advertising the fiber content of floor covering containing exempted backings, fillngs or paddings, that such disclosure related only to the face, pile or outer surace of such textile fiber products and not to the exempted backings, filings or paddings. 3. Using a fiber trademark in advertising textile fiber products without a full disclosure of the required fiber content information in at least one instance in said advertisement.

4. Using a fiber trademark in advertising textile fiber products containing only one fiber without such fiber trademark appearing at least once in the advertisement, in immediate proximity apd conjunction with the generic name of the fiber, in plainly legible and conspicuous type.

It is further ordered That respondents Theodore Stephen Company, Inc., a corporation, its successors and assigns, and its officers, and Benjamin Eisenman, individually and a. an officer of said corpration and respondents' agents, representatives, and employees, directly or inthrough any corporate, subsidiar, division or other device, connection with any extension of consumer credit or advertisement to aid, promote, or assist directly or indirectly any extension of consumer credit, as "consumer credit" and "advertisement" are defined in Regulation Z (12 C. R. 9226) of the Trth in Lending Act (Pub. L. 90- 321, 15 U . C. 1601 et " eq. do forthwith cease and desist from: (1) Failing to include in the finance charge the amount of the charges or premiums for credit life insurance in instances where customers desirng such insurance coverage did not give specific dated and as separately signed affirmative wrtten indications of such desire, provided in Section 226.4(a)(5)(ii) of Reguation Z. (2) Failing to disclose accurately the "amount financed " and "finance charge," as required by Sections 226.8(b)(7), and 226.8(c)(8)(i), respectively, of Regulation Z.

(3) Failing to disclose the "annual percentage rate" accurtely to the nearest quater of one percent, computed in accordance with the provisions of Section 226.5 of Regulation Z, as required by Section 226.8(b)(2) of Reguation Z.

(4) Failing to disclose the sum of the cash price, all charges which are included in the amount financed but which are not par of the finance 176 EDERAL TRADE COMMISSION m;CISIONS Initial Deci1iion RG F.

charge, and the finance charge, and to describe that sum as the deferred payment price " as required by Section 226.8(c)(8)(ii) of Regulation Z.

(5) Failng in any consumer credit transaction or advertisement, to make all disclosures, determined in accordance with Sections 226.4 and 226.5 of Regulation Z, in the manner, form and amount required by Sections 226. , 226. , 226. , 226.9 and 226.10 of Regulation Z. It is further ordered That each of respondents do forthwith cease and desist from disseminating or causing the 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 engage in bait and s\otch advertising; that is, the salesman makes it diffcult to buy the advertised product and he attempts to switch you to a higher priced item. 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 furth"3r ordered That respondents shah 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 t100r coverings, or utilized in the advertising, promotion or sale of carpeting or floor covering and other merchandise.

It is fu.rther ordered That respondents, for a period of one (1) year from the effective date of this order, shah 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 carpting or floor coverings and other merchandise, with a copy of the Commission news release setting forth the terms of this order. It is further ordered That respondents notify the Commssion at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assigrent or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order. , .. ., .l.lU.:"V.l''.. HH.. '-.L""

152 Opinion 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 f/lrther ordered That the individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment. Such notice shall include respondent' s current business address and a statement as to the nature of the business or employment in which he is engaged as well as a description of his duties and responsibilities.

It is further ordered That the said respondents herein shall within sixty (60) days after service upon them of this order, fie with the Commission a report, in wrting, setting forth in detail the manner and form in which they have complied with this order. OPINION OF THE COMMISSION By HANFORD Commi:ssioner Respondents appeal from that par of the order entered hy the administrative law judge constituting a Uconsumer warning" requirement, which provides that respondents must include the following disclosure in all of their advertisements: The Federal Trde Commission has found that we engage in bait and switch advertising; that is, the salesman makes it diffcult to buy the advertised product and he attempts to switch you to a higher priced item. On two occasions, we have faced the question of whether such a warning is justified in a contested caret bait and switch case: Wilbanks Carpt Speeialists, Inc., et aI. Docket 8933 (Sept. 24, 1974) (84 F. C. 670), and Tri-State Carpets, Inc., et al. Docket 8945 (Oct. 15 1974) (84 F. C. 1078). In each instance, we determined that the record did not support such a requirement. We find nothing in the record of this case to distinguish it from Wilbanks and Tri-State. Therefore we find it necessary to delete Judge Lynch' s "consumer warning" from the order. This detennination is, of course, without prejudice to the Commission s right to reopen this proceeding to consider the imposition .. .. ); Final Order 85 F.

of a "consumer warning" requirement, or to seek imposition of such relief in a civil penalty action against respondents ' should their future conduct wan-ant either course of action.

In all other respects, the order of the administrative law judge is affrmed.

FINAL ORDER This matter has come before the Commission on the motion of respondents, for consideration of the question whether the consumer warnng provision ordered by the administrative law judge should be adopted as part of the Commission s cease and desist order, The Commission has determined that this matter is indistingushable from the matter of Wilbelnks Carpt Specialists, Inc., et al. Docket 8933 (84 C. 670) and Tri-Stelte Carpets, Inc., et al. Docket 8945 (84 F.TC. 1078), inasmuch as the record presents insufficient evidence that a consumer warnng is a necessar or appropriate means for the termnation of the act or practices complained of or for the prevention of their reCllITence. Having declined to order a consumer warning in the Wilbanks and Tri-Stelte matters, the Commission has concluded that the same disposition is waranted herein. Accordingly, the initial decision issued by the judge should be modified in accordance with the foregoing views of the Commission and, as so modifed, adopted as the decision of the Commssion: It is ordered That the initial decision issued by the administrative law judge be modifed by striking therefrom the following: Those portions of the conclusions of law which concern "consumer waring" relief (at pp. 11- 13 (pp. 168- 169 herein) sub rw. "THE REMEDY" and the second "FURTHER ORDERED" paragrph of Par III of the order to cease and desist issued by the judge (at pp. 29-30)rp. 176 herein).

As so modified, the initial decision is hereby adopted.