Verrazzano trading Corporation

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IN THE MATTER OF VERRAZZANO TRADING CORPORATION, ET AL.

ORDER, OPINION, ETC., IN REGARD TO ALLEGED VIOLATION OF _ THE FEDERAL TRADE COMMISSION, WOOL PRODUCTS LABELING AND TEXTILE FIBER PRODUCTS IDENTIFICATION ACTS Docket 9038. Complaint, June 24, 1975 — Final Order, May 15, 1978 This order, among other things, requires a New York City importer and distributor of wool and textile fiber products, and four affiliated companies, to cease misrepresenting or failing to properly disclose the fiber content of wool and textile fiber products, and the residual shrinkage of such products. Additionally, the firms must file bond with the Secretary of the Treasury before participating in the importation of wool and textile fiber fabrics, and provide purchasers of mislabeled merchandise with a copy of the order. Appearances For the Commission: Ellen Zweibel and Judith K. Braun. For the respondents: David A. Botwinik, Pavia & Harcourt, New York City.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, the Wool Products Labeling Act of 1939 and the Textile Fiber Products Identification Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Verrazzano Trading Corporation, a corporation, Francisco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Walter Banci, individually and as an agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s., hereinafter referred to as respondents, have violated the provisions of said Acts and the rules and regulations promulgated [2] under the Wool Products Labeling Act of 1939 and the Textile Fiber Products Identification Act, and it now appearing to the Commission that a proceeding by it in respect thereto would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent Verrazzano Trading Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its main office and princival place of business at. 2. Penn Plaza Nou Vaork Nour Vark VERRAZZANO TRADING CORP., ET AL. 889 888 Complaint existing and doing business under and by virtue of the laws of the State of New York, with its main office and principal place of business at 2 Penn Plaza, New York, New York. Respondent Lanificio Tuscania Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York with its main office and principal place of business at 2 Penn Plaza, New York, New York. Respondent Lima Textiles Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its main office and principal place of business at 2 Penn Plaza, New York, New York.

Individual respondent Walter Banci is an agent of said corporations and an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and a partner trading and doing business as Lanificio Walter Banci s.a.8. Lola Conti Banci is a co-partner but is inactive with respect to the business operations of said company. Walter Banci formulates, directs and [3] controls the acts and practices of said partnership and of said corporate respondents, including the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondents.

The corporate respondents and Walter Banci constitute a unified family business operation designed to import and sell in the United States fabrics produced and exported from Italy by Lanificio Walter Banci, s.a.s. and distribute such fabrics in commerce. Par. 2. Respondents are now and for some time past have been engaged in the introduction, sale, advertising, and offering for sale, in commerce, and in the transportation or causing to be transported in commerce, and in the importation into the United States, of textile fiber products; and have sold, offered for sale, advertised, delivered, transported and caused to be transported, 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 as the terms “commerce” and “textile fiber product” are defined in the Textile Fiber Products Identification Act. _ Par. 3. Certain of said textile fiber products were misbranded by respondents within the intent and meaning of Section 4(a) of the Textile Fiber Products Identification Act and the rules and regulations promulgated thereunder, in that they were falsely and deceptively stamped, tagged, labeled, invoiced, advertised or otherwise identified as to the name or amount of the constituent fibers contained therein.

Among such misbranded textile fiber products, but not limited aN Complaint 91 FTC.

thereto, were certain textile fabrics stamped, tagged, labeled or otherwise identified by respondents as “50% cotton, 35% polyester, 15% nylon” whereas, in truth and in fact, said products contained substantially different fibers and amounts of fibers than represented. [4] , Par. 4. Certain of such textile fiber products were misbranded by respondents in that they were not stamped, tagged, labeled or otherwise identified as required under the provisions of Section 4(b) of the Textile Fiber Products Identification Act, and in the manner and form as prescribed by the rules and regulations promulgated under said Act.

Among such misbranded textile fiber products, but not limited thereto, were textile fiber products with labels which failed: (1) To disclose the true generic names of fibers present; and (2) To disclose the true percentages of such fibers. Par. 5. Respondents’ textile fiber products described in Paragraph Four above were imported by the respondents into the United States and, as particularized in said paragraph, were not stamped, tagged, labeled, or otherwise identified in accordance with the provisions of the Textile Fiber Products Identification Act. The invoices of said imported textile fiber products required by the Tariff Act of 1930 failed to set forth the information with respect to said textile fiber products required under Section 4(b) of the Textile Fiber Products Identification Act. The respondents did falsify the consignee’s declaration provided for in said Tariff Act of 1930 insofar as it related to said information, in violation of Section 9 of the Textile Fiber Products Identification Act and Section 5 of the Federal Trade Commission Act.

Par. 6. The acts and practices of respondents as set forth in Paragraphs Three, Four and Five above were, and are, in violation of the Textile Fiber Products Identification Act and the rules and regulations promulgated thereunder, and constituted, and now constitute, unfair methods of competition [5] and unfair and deceptive acts and practices, in commerce, under the Federal Trade Commission Act.

Par. 7. Respondents now and for some time past have imported for introduction into commerce, introduced into commerce, sold, transported, distributed, delivered for shipment, shipped and offered for sale, in commerce, as “commerce” is defined in the Wool Products Labeling Act of 1939, wool products, as “wool product” is defined therein.

Par. 8. Certain of said wool products were misbranded by VERRAZZANO TRADING CORP., ET AL. 891 888 Complaint Wool Products Labeling Act of 1989 and the rules and regulations promulgated thereunder, in that they were falsely and deceptively stamped, tagged, labeled, or otherwise identified with respect to the character and amount of the constituent fibers contained therein. Among such misbranded wool products, but not limited thereto, were certain wool fabrics stamped, tagged, labeled, or otherwise identified by respondents as “45% acrylic, 30% wool, 25% cotton” whereas, in truth and in fact, said products contained substantially different fibers and amounts of fibers than represented. Par. 9. Certain of said wool products were further misbranded by respondents in that they were not stamped, tagged, labeled, or otherwise identified as required under the provisions of Section 4(a)(2) of the Wool Products Labeling Act of 1939 and in the manner and form as prescribed by the rules and regulations promulgated under said Act.

Among such misbranded wool products, but not limited thereto, were wool products, namely wool fabrics, with labels on or affixed thereto, which failed to disclose the percentage of the total fiber weight of the said wool products, exclusive of ornamentation [6] not exceeding 5 per centum of said total fiber weight, of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber other than wool, when said percentage by weight of such fiber was 5 per centum or more, and (5) the aggregate of all other fibers. Par. 10. Respondents’ wool products described in Paragraph Nine above were imported by the respondents into the United States and, as particularized in said paragraph, were not stamped, tagged, labeled, or otherwise identified in accordance with the provisions of the Wool Products Labeling Act of 1939. The respondents in their invoices of said imported wool products required by the Tariff Act of 1930 failed to set forth the information with respect to said wool products required under the provisions of the Wool Products Labeling Act of 1939, to wit, the percentage of the total fiber weight of the said wool products, exclusive of ornamentation not exceeding 5 per centum of said total fiber weight, of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber other than wool, when said percentage by weight of such fiber was 5 per centum or more, and (5) the aggregate of all other fibers. The respondents did falsify the consignee’s declaration provided for in said Tariff Act of 1930 insofar as it related to the above items of information enumerated in this paragraph, in violation of Section 8 of the Wool Products Labeling Act of 1939 and Section 5 of the Federal Trade Commission Act. Par. 11. The acts and practices of the respondents as herein alleged in Paragraphs Eight, Nine and Ten were, and are, in Complaint 91 F-T.C.

violation of the Wool Products Labeling Act of 1939 and the rules © and regulations promulgated thereunder, and constituted, and now constitute, unfair methods of competition and unfair and deceptive acts and practices, in commerce, within the meaning of the Federal Trade Commission Act. [7] Par. 12. Respondents, now and for some time past, have been engaged in the importation, offering for sale, sale, and distribution of certain products, namely fabrics. In the course and conduct of their business as aforesaid, respondents now cause and for some time past have caused their said products, when sold, to be shipped from the State of New York to purchasers located in various other States of the United States, and maintain and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce, as “commerce” is defined in the Federal Trade Commission Act.

Par. 13. In the course and conduct of their business, respondents have misrepresented to their customers the character and amount of the constituent fibers contained in their products through falsely and deceptively stamping, tagging, labeling and otherwise identifying said products.

Among such products, but not limited thereto, were fabrics labeled as “65% acrylic, 25% cotton, 10% nylon” whereas, in truth and in fact, such products contained substantially different fibers and amounts of fibers than represented including wool. Par. 14. In the course and conduct of their business, respondents have misrepresented to their customers the shrinkage factor of their textile products through falsely and deceptively invoicing said products.

Among such products, but not limited thereto were fabrics represented as having 1-1 1/2% residual shrinkage whereas, in truth and in fact, such products shrink substantially more than represented.

Par. 15. Respondents in the course and conduct of their business have made statements on [8] invoices to their customers, misrepresenting the fiber content of certain of their products. Among such misrepresentations, but not limited thereto, were statements setting forth the fiber content thereof as “55% acrylic, 20% wool, 20% cotton, 5% other fibers” whereas, in truth and in fact, said products contained substantially different fibers and amounts of fibers than. represented.

Par. 16. The aforesaid acts and practices of respondents as herein alleged in Paragraphs Thirteen, Fourteen and Fifteen were and are, VERRAZZANO TRADING CORP., ET AL. 893 888 Initial Decision constitute, unfair methods of competition and unfair and deceptive acts and practices, in commerce, within the intent and meaning of the Federal Trade Commission Act.

INITIAL DECISION BY PAUL R. TEETOR, ADMINISTRATIVE LAW JUDGE 4 , November 25, 1977 SUMMARY OF COMPLAINT Identification of Respondents | Alleging violations of the Wool Products Labeling Act of 1939 (hereafter “the Wool Act”), the Textile Fiber Products Identification Act (hereafter “the Textile Act”) and Section 5 of the Federal Trade Commission Act (hereafter “the FTC Act”) and the rules and regulations promulgated thereunder, on 6/24/75 this Commission issued its complaint against what Paragraph 1 thereof alleges to be “a unified family business operation.” It is said to be made up of Verrazzano Trading Corporation, Francesco Datini Inc., Lanificio Tuscania Inc., Lima Textiles Inc. (all New York corporations with an office in New York City) and one Walter Banci, personally, as an officer and agent for said corporations and as a partner in an Italian company, Lanificio Walter Banci s.a.s. His wife, Lola Conti Banci, is alleged to be an inactive partner. [An amendment to the complaint allowed by the administrative law judge without objection on 2/10/76 added Hudson Textile, Inc. (also a New York corporation) as an additional respondent and alleged participant in the same enterprise.] This “unified family business” is alleged in Paragraph 1 to be designed to import and sell in the United States and distribute in “commerce” their fabrics produced and exported from Italy by Lanificio Walter Banci s.a.s.

“Commerce” Allegations Complaint Paragraph 2 alleges that respondents engage in importing, transporting, advertising, offering and selling textile fiber products and introducing them in “commerce,” both phrases being defined as in the Textile Fiber Products Identification Act (hereafter the “Textile Act”). [2] Paragraph 7 alleges that respondents engage in importing, transporting, distributing, offering, selling, shipping and delivering wool products and introducing them in “commerce” (both phrases Initial Decision 91 F.T.C.

being defined as in the Wool Products Labeling Act (hereafter the “Wool Act”).

Paragraph 12 alleges that respondent engage in importing, distributing, offering and selling fabrics generally, shipping such fabrics, when sold, from the State of New York to purchasers located in various states, the same amounting to a “substantial course of trade” in “commerce,” as defined in the Federal Trade Commission Act (hereafter the “FTC Act”).

Alleged Violations of the Textile Act Complaint Paragraph 3 pleads a violation of Section 4(a) of the Textile Act, which prohibits “misbranding,” i.e, false and deceptive identification of the name or amount of constituents in textile fabrics. An example of such misbranding is said to be the identification of a textile fabric as “50% cotton, 35% polyester, 15% nylon” when the constituent fibers and amounts thereof are, in fact, “substantially different.”

Complaint Paragraph 6 adds that such violation of Section 4(a) of the Textile Act, by virtue of Section 7 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act. Complaint Paragraph 4 pleads a violation of Section 4(b) of the Textile Act, which prohibits “misbranding” ie, non-attachment or non-affixation of specified identifying data of textile fiber products. An example of such misbranding is said to be the non-disclosure on textile fiber product labels of the true generic names of fibers present or the true percentages of such fibers therein contained. Complaint Paragraph 6 adds that such violation of the Textile Act, by virtue of Section 7 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act. [3] Complaint Paragraph 5 pleads a violation of Section 9 of the Textile Act, which prohibits importation into the United States of textile fiber products “misbranded” under Section 4 of the act (above). In elaboration, Paragraph 5 explains that the required identifying information was omitted from so-called Tariff Act invoices and falsified on so-called Tariff Act consignee-declarations. Complaint Paragraph 6 adds that such violation of Section 9 of the Textile Act, by virtue of Section 7 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act. Alleged Violations of the Wool Act Complaint Paragraph 8 pleads a violation of Section 4(a\1) of the VERRAZZANO TRADING CORP., ET AL. 895 888 Initial Decision “ randing”) of wool products. An example of such misbranding is said . to be the identification of certain wool fabrics as “45% acrylic, 30% wool, 25% cotton,” whereas said fabrics in fact contained “substantially different” fibers or amounts of fibers. Complaint Paragraph 11 adds that such violation of the Wool Act, by virtue of Section 6 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act.

Complaint Paragraph 9 pleads a violation of Section 4(a)(2) of the Wool Act, which prohibits non-attachment or non-affixation of specified identifying data (“misbranding”) of wool products. An example of such misbranding is said to be failure to disclose by a label on or affixed to a wool product the percentage of total fiber weight? which is: [4] (1) wool (2) reprocessed wool (8) re-used wool (4) each non-wool fiber representing 5% or more of total weight (5) the aggregate of all other fibers.

Complaint Paragraph 11 adds that such violation of the Wool Act, by virtue of Section 6 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act.

Complaint Paragraph 10 pleads a violation of Section 8 of the Wool Act, which prohibits importation into the United States of wool products “misbranded” under Section 4 of the act (above). In elaboration, Paragraph 10 explains that required identifying information was omitted from so-called Tariff Act invoices and falsified on so-called Tariff Act consignee-declarations. Complaint Paragraph 11 adds that such violation of the Wool Act, by virtue of Section 6 thereof, automatically constitutes, in addition, an unfair practice under the FTC Act.

Alleged Violations of Federal Trade Commission Act? Complaint Paragraph 18 pleads a violation of Section 5 of the FTC Act, which prohibits unfair and deceptive trade practices, alleging misrepresentation of the character and amount of constituent fibers in respondents’ fabrics. An example pleaded is the [5] labeling of fabrics “65% acrylic, 75% cotton, 10% nylon,” whereas, in fact, such TY “Exclusive of or tion not ding 5% of total fiber weight. * Complaint Paragraphs 18, 14 and 15 plead unfair trade prectices under Section 5 of the FTC Act which do not (unlike earlier allegations of unfair practices) derive tically from a Textile Act or Wool Act violation and which, in fact, for one reason or another, could not have been made the basis for a Textile Act or Wool Act charge. The “public interest” finding requisite to all three FTC Act charges is pleaded in complaint Paragraph 1 6. Initial Decision 91 F-TC.

fabrics contained “substantially different” kinds and amounts of fibers, including wool.* Complaint Paragraph 14 pleads a violation of Section 5 of the FTC Act, which prohibits unfair and deceptive trade practices, alleging misrepresentation of the shrinkage factor‘ in respondents’ textile products. An example pleaded is a representation that fabrics have 1-1 1/2% residual shrinkage whereas, in truth, such fabrics shrink “substantially more” than represented.

Complaint Paragraph 15 pleads a violation of Section 5 of the FTC Act, which prohibits unfair and deceptive trade practices, alleging misrepresentation by means of commercial (i.e, non-Tariff Act) invoices’ concerning certain products’ fiber content. An example pleaded is a representation that fiber content is [6] “55% acrylic, 20% wool, 20% cotton, 5% other fibers,” whereas, in fact, such products contain “substantially different” kinds and amounts of fibers than represented.

Complaint Paragraph 16 pleads the public interest in prosecution which must exist to justify bringing charges (as in Paragraphs 13, 14 and 15) under Section 5 of the FTC Act (as distinguished from either the Wool Act or Textile Act).

Proposed Order A proposed order, served with the complaint, contemplates cease and desist orders against all respondents, which orders would prohibit: (1) misbranding textile fiber products by false or deceptive identification of the name or amount of constituent fibers or by failing to affix each element of information required by Section 4(b) of the Textile Fiber Products Identification Act; (2) importing textile fiber products into the United States except upon filing a bond in double import value to comply with the Textile Fiber Products Identification Act; (3) misbranding wool products by false or deceptive identification of the character or amount of constituent fibers or by failing to affix each element of information required by Section 4(a)(2) of the Wool Products Labeling Act; (4) importing wool products into the United States except upon filing a bond in double * The significance of wool traces lies in making such a fabric a “wool product” and thus exempt from application of the Textile Act, at least according to plaint counsel's r ning, as will be di d at page 32 ah misrepresentation concerning a fabric’s shrinkage potential must be pleaded under the FTC Act because both the Textile Act and the Wool Act are concerned only with the kinds and quantities of fibers contained in a fabric.

* Misrepresentation of the fiber content of a wool product must be charged under the FTC Act if the instrumentality of the misrepresentation is an ordinary commercial invoice (as distinguished from a so-called VERRAZZANO TRADING CORP., ET AL. 897 888 Initial Decision import value to comply with the Wool Products Labeling Act; (5) misrepresenting the character or amount of constituent fibers or the shrinkage factor of wool and/or textile products in any manner, including identification in invoices.

Respondents would also be required to give notice of misbranding ' to those customers who have bought misbranded products; to notify this Commission of changes in business affiliation or employment; to give notice to the Commission 30 days before making any structural change in their business which might affect compliance with this order; and to distribute copies of this order throughout their organization. [7] II PROCEDURAL HISTORY From the issuance of the Commission’s complaint on 6/24/75 to the filing of this initial decision on 11/25/77, a period of nearly two and a half years has elapsed. To one uninitiated in the lengthy discovery procedures and complex motion practice that have come to characterize Commission proceedings for the purpose of satisfying the requirements of due process of law for businessmen, it might appear that the administrative law judge and the parties put this relatively small and largely indefensible® case on the back burner for many months at a time.

On the contrary, the two and a half years were crowded with constant motions and discovery procedures. Aside from an inexplicable delay by the contract reporter of more than three months in correcting the pagination and other clerical errors of this relatively small trial transcript, there was almost never a period of time when some pre-trial, trial or post-trial procedure was not in the offing. . Lest there be any question on this score, we have compiled a detailed procedural history of this matter which is attached hereto as Appendix I, to which any reader interested in the facts of this case or any student interested in its implications for the future of administrative jurisprudence is hereby referred. We now turn directly to our findings of fact, which are notably briefer than the procedural history of their evocation. [8] * On 11/16/76, respondents’ counsel stated frankly in open court: “Now my fight will have to be a weak one since I have nothing to show on Banci's side but I still have the right to put the Commission to its proof.” (Tr. 76.) Initial Decision . 91 F-T.C.

Il FINDINGS OF FACT Parties 1. The sole individual respondent and principal figure in this matter is Walter Banci, partner with his wife, Lola Conti Banci, in a business known as Lanificio Walter Banci s.a.s. (Original Complaint; Ans. I, § 1; Ans. I, § 1; Ans. III, § 1), a firm which operates two textile mills near Prato, Italy (Tr. 78). 2. For some years Banci has sold his textiles in the United States through several corporations, all organized and existing under the laws of New York. (Original Complaint; Ans. I, § 1; Ans. II, § 1; Ans. Ill, § 1).

3. Four of these New York corporations were named as respondents in the original complaint here:

Verrazzano Trading Corp. (hereafter “Verrazzano”) Francesco Datini Inc. (hereafter “‘Datini”) Lanificio Tuscania Inc. (hereafter “Tuscania”) Lima Textiles Inc. (hereafter “Lima”) (Original Complaint; Ans. I, § 1; Ans. II, § 1; Ans. IIT, § 1) 4. A fifth corporation, named Hudson Textile Corporation (hereafter “Hudson”), also organized and existing under the laws of New York, was subsequently joined as a respondent without objection (Amended Complaint; Ans. II, § 1; failure of original respondents to deny amended complaint). [9] 5. All respondents together have constituted a unified family business operation designed to import and sell in the United States wool and textile products manufactured by Lanificio Walter Banci s.a.s. (RA I, § 642; Amended Complaint and Ans. III, § 1; see also an earlier Verrazzano case, reported in 1971 in 78 F.T.C. 6387, at 668. 6. Respondent Banci has formulated, directed and controlled the acts and practices of this unified family business operation, both the Italian family partnership (Lanificio Walter Banci s.a.s.) and the American corporate respondents, including the acts and practices challenged in the complaint here. (RA I, § 641; Complaint § 1; Ans. I, § 1; Ans. I, § 1; Amended Complaint § 1; Ans. III, § 1). As his counsel] put it: “. . . Mr. Banci’s operation is such that he really is the man who does everything. . .” (Tr. 77). 7. All respondents were actively doing business from an office at 2 Penn Plaza in New York City (their only office in the United States, on this record) at least from 1/1/69-through 9/1/75 (ALJ’s “Anniieatian AF Ganctiane TIndaw Doula £ 990 TH- Bo. A VERRAZZANO TRADING CORP., ET AL. 899 888 , Initial Decision Respondents To Make Discovery As Ordered,” dated 4/16/76, at pp. 6-7.) 8. During the years in question here, respondents admit, fabric manufactured by Lanificio Walter Banci s.a.s. was shipped to the United States in substantial quantities (Tr. 58). Moreover, we have earlier found that since January 1972 and for the time period covered by the complaint respondents have maintained a substantial course of trade in wool and textile products in the United States. (“ALJ’s Application Of Sanctions Under Rule § 3.38 For Failure Of Respondents To Make Discovery As Ordered,” dated 4/16/76, at pp. 4-6.) We have further found that since January 1972 respondents have sold to United States customers substantial quantities of each of many specific textile products (including qualities Sioux, Manito, Totem, Veruska, Navajo, Ingrid and Myla) and wool products (including qualities Marnie, Gretel, Isabel, Spluga, Eva, and Ellen). [10] (ALJ’s “Application Of Sanctions Under Rule § 3.38 For Failure Of Respondents To Make Discovery As Ordered,” dated 4/16/76, at pp. 4-6.) 9. It is conceded by complaint counsel that after issuance of this complaint and at least by November 1976, respondents were no longer doing business in the United States and that their New York City office was closed by then. (Tr. 78.) 10. This record is barren of evidence, however, as to whether Banci may or may not resume his American sales, either through the present corporate respondents or through other vehicles.” Importation and Sale in Commerce 11. All the original respondents, including Walter Banci, in their Answers admitted the allegations of complaint Paragraphs 2, 7 and 12,* [11] concerning respondent’s engagement in the importation of 7 Subsequent to the closing of the record here both sides made claims on this subject but neither moved to reopen the record to take further evid When submitting his pro) findi | for respondents reported (but without benefit of affidavit) that Lanificio Walter Banci s.a.s.-was adjudicated bankrupt in Prato, Italy on 9/2/77. Complaint ed by attaching to their reply brief unverified copies of Customs records of a Banci sale to a New York customer as late as 9/29/77. We view both submissions as improper and we shall attach no weight to either.

* The aint all ti thus ami d are as foll “Paragraph Two: Respondents are now and for some time past have been engaged in the introduction, sale, advertising, and offering for sale, in commerce, and in the transportation or causing to be transported in commerce, and in the importation into the United States, of textile fiber products; and have sold, offered for sale, advertised, delivered, transported and caused to be transported, 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 as the terms “commerce” and “textile fiber product” are defined in the Textile Fiber Products Identification Act.” “Paragraph Seven: Respondents now and for some time past have imported for introduction into commerce, introduced into sold, transported, distributed, delivered for shipment, shipped and offered for sale, in commerce, as “commerce” is defined in the Wool Products Labeling Act of 1939, wool products, as “wool product” is defined therein.”

(Continued) Initial Decision 91 F.T.C.

textile fiber and wool products into the United States and their sale and shipment, etc. thereof from New York to other states, in [12] commerce, as “commerce” is defined in the Wool, Textile and FTC Acts. (Original Complaint; Ans. I, § 2; Ans. II, § 2). 12. When Hudson Textile Corporation was subsequently joined as a respondent, its Answer to the amended complaint, for no reason that has yet become apparent, denied the commerce allegations found in complaint Paragraphs 2, 7 and 12.° However, respondent Hudson’s Answer to the amended complaint admitted most of the allegations of complaint Paragraph 1, including an allegation that “the corporate respondents” — which by then included Hudson — together with respondent Banci, constituted “a unified family business operation designed to import and sell in the United States _ fabrics produced and exported from Italy by Lanificio Walter Banci 8.a.s. and distribute such fabrics in commerce.” (Complaint, § 1; “Order Granting Amendment Of The Complaint,” dated 2/9/76; Ans. ITI, § 1). As a part of this “unified family business operation,” respondent Hudson, was necessarily engaged in the business’ importation of wool and textile products from Italy into the United States and the sale, shipment, etc. of such products “in commerce” from New York to other states and we now so find. Investigation of Possible Misbranding 13. In 1971 this Commission agreed to dismiss misbranding charges against most of the same respondents on condition that they would voluntarily comply with the misbranding laws. See Verrazzano Trading Corporation t/a Lan Etruria, et al., 78 F.T.C. 687, 675 (1971).

14. Between 1973 and 1975 the Commission conducted a new investigation into possible misbranding by respondents of woolen and other textiles imported from Italy into the United States and thereafter distributed in interstate commerce. [13] Sample Sources 15. Many samples of respondents’ imported fabrics were obtained from the United States Customs Service in New York City and many “Paragraph Twelve: Respondents, now and for some time past, have been engaged in the importation, offering for sale, sale, and distribution of certain products, namely fabrics. In the course and conduct of their business as aforesaid, respondents now cause and for some time past have caused their said products, when sold, to be shipped from the State of New York to purchasers located in various other States of the United States, and maintain and at all times mentioned herein have maintained, a substantial course of VERRAZZANO TRADING CORP., ET AL. 901 888 Initial Decision others were obtained from United States customers of respondents, including the following:

Bobbie Brooks, Inc., 3880 Kelley Ave., Cleveland, Ohio (Tr. 374-75) Ivy International, Ltd., 119 W. 40th St., New York, N.Y. (RA II, f 45, 4 150, | 170; RA III, § 28) Melrose Mfg. Co., 712 Commerce St., Dallas, Texas (RA II, ¥ 1, { 2; RA III, { 17, 18) Jones of Dallas Mfg., Inc., 2316 N. Griffin St., Dallas, Texas (RA II, q 15, 7 16; RA III, { 19, 20) Abbott Fabrics, Inc., 1412 Broadway, New York, N.Y. (RA II, § 47, q 48, J 49; RA III, ¢ 21, { 22, § 23) Artbro Sportswear, Inc., 1407 Broadway, New York, N.Y. (RA II, § 88; RA III, q 25) F. Resnick, Inc., 242 W. 39th St., New York, N.Y. (RA II, { 107; RA IIL, J 26) Fabri-Centers of America, Inc., 23550 Commerce Park, Beachwood, ’ Ohio (RA I, 1 19; RA III, 2) Sample Quantity 16. Although respondents concede that their total imports of wool and other textile products into the United States during the period in question were “substantial”, (Tr. 58), they have declined to [14] provide data on the total quantities** imported. It is therefore impossible, because of respondents’ contumacy, to determine with any precision what percentage of their total imports during that period have been sampled.

17. However, the record shows that 58 undisputed samples were taken (RA I, { 19, 4 38, 7 55; RA II, 7 1, 2, 15-18, 47-49, 87-88, 107-8, 145; RA III, § 1-30; RA V, ¢ 1-40) and that the shipments from which they were taken totaled over 1,185,000 yards of woolen and other textile products. [Of this total, customs samples account for about 550,000 yards (see App. II. Col.) and one customer (Bobbie Brooks, Inc.) for 635,000 yards. (Tr. 374-375).] 18. We find that the woolen and other textile products from which the above samples were taken represent a very substantial We Respondents did reveal that the value of their imports to the United States was 1.424 billion lire in 1974 and .271 billion lire in 1975. At the exchange rate as published (.001543) in the “Bank & Quotation Record Magazine,” of January 1975, these figures would convert to 2.2 million dollars and .4 million dollars, respectively. Initial Decision 91 F.T.C.

amount of trade in and of themselves and, drawing an inference permissible under Rule 3.38" that withheld evidence would have been unfavorable, we find further that the goods sampled were quite probably a substantial portion of respondents’ total imports during the period in question.

Testing Process 19. The 58 samples listed in Appendix II were each subjected to testing for actual fiber content, in some cases by the U.S. Customs laboratory technicians and in others by independent experts employed for that purpose by this Commission. The tests employed and their validity were the subject of testimony by three expert witnesses: [15] 20. Dr. Samuel Golub, a 20-year veteran of textile research, currently in charge of fabric analysis for Fabric Research Laboratories, Dedham, Mass. (Tr. 105-06); Ms. Amelia Eaton, holder of a degree in textile chemistry, veteran of fabric analysis, and currently laboratory director for the U.S. Customs Service (Tr. 205-06). Both she and Dr. Golub have been active in the American Society of Testing Materials (hereafter “ASTM”) and the American Society of Textile Chemists and Colorists (hereafter “AATCC”), associations that have developed standard methods for qualitative and quantitative textile fiber analysis (Tr. 106-7, 118, 208); Mr. Martin Youngberg, holder of a degree in textile technology, has for eight years been a chemist in the fiber branch of the U.S. Customs Service laboratory, performing fiber content analyses throughout that time. (Tr. 330.) 21. All three witnesses described very similar procedures for analysis of fabric samples. Dr. Golub tested CX 5, 9 through 13, 19 through 28, and CX 30. He testified that in his opinion CX 112 a-f accurately represents the results of his testing. (Tr. 107-09.) He explained a typical multi-fiber analysis at the hearing. [The exact process for each test, he noted, may be different because of different fibers present in the sample. (Tr. 150.)]. He began by preparing two specimens so that he could run two separate tests on each sample. (Tr. 130.) He examined microscopic slides of the sample to identify the fibers present and thus determine the particular chemical sequence to be used to decipher the percentage weight of each fiber. (Tr. 136.) 22. Thereafter, Dr. Golub explained, the procedure is to extract the spinning oils from the fabric; dry and weigh the fabric; apply a reagent grade chemical which will dissolve one of the fibers; and VERRAZZANO TRADING CORP., ET AL. 903 888 Initial Decision repeat the process until all fibers have been dissolved except one. (Tr. 136-142.) More specifically, Dr. Golub testified that if he identified fibers of acrylic, nylon, wool, cotton, rayon, and polyester, he would use cold dimethyl [16] formamide to remove acrylics, formic acid to remove the nylon, 5% sodium hydroxide to remove wool, 70% sulphuric acid to remove the cotton and rayon, with the remainder being polyester. The sample would be rinsed, dried and weighed between each application of a reagent. (Tr. 189-142.) 23. Ms. Eaton described similar procedures used at the U.S. Customs Laboratory where, just as with Dr. Golub’s work, all tests are done in duplicate. (Tr. 210.) She explained that the chemists, who all work under her general supervision, use microscopic analysis to determine what fibers are present in the fabric and to devise an appropriate chemical sequence. (Tr. 212.) They then extract spinning oils and other non-fibrous material from the sample. (Tr. 213.) After the initial weighing under controlled temperature conditions, reagents are applied to the sample to remove a fiber. Then the sample is again rinsed, dried and weighed under constant conditions. (Tr. 248-44.) Specifically, Ms. Eaton suggested using sodium hypochlorite to dissolve wool (Tr. 250-51); dimethyl formamide to remove acrylics and acetate (Tr. 256); formic acid to remove nylon (Tr. 257); and 59.5% sulphuric acid to remove rayon (Tr. 257). Samples tested under the supervision of Ms. Eaton are CX 4, 31-38, and 35-71. The corresponding test reports are CX 154, 113, 114, 115, and 117-153. Respondents’ counsel agreed that the above-listed exhibits are genuine U.S. Customs’ laboratory reports of analyses done on the samples. (Tr. 215-16.) 24. Mr. Youngberg was the chemist who personally performed many of the tests cited above. (Tr. 330; CX 123, 129, 180, 135, 136, 140, 141, 142, 151, 152, 154.) The reports accurately represented his findings of his analyses according to Customs procedures. (Tr. 331.) He described the procedures he followed. He removed two specimens from each sample to run duplicate tests. He then began by removing non-fibrous material, then dried the sample, ground it up, mixed it and conditioned it. [17] He microscopically examined the sample to identify the fibers present and determined the “scheme of attack.” (Tr. 335.) He would use either AATCC or established Customs methods (Tr. 335-37), that is, sodium hypochlorite for removing wool (Tr. 341); dimethyl formamide for dissolving acrylic and acetate (Tr. $24); formic acid to remove nylon (Tr. 341); 59.5% sulphuric acid for rayon (Tr. 342); 70% sulphuric acid for cotton. This procedure would leave a residue of polyester. (Tr. 324.) 24.1. There is no single standard chemical sequence to follow for Initial Decision 91 F.T.C.

multifiber analysis. Dr. Golub testified that correct results can be obtained from several different methods, explaining that “[t]he only requirement is that the operator should know that and assure himself that his is not losing weight from one of the subsequent fibers which has not yet been dissolved by any particular step of the process.” (Tr. 159.) Both Dr. Golub and Ms. Eaton have checked their fiber analysis methods for accuracy. (Tr. 150-51, 214.) Dr. Golub used acceptable methods for testing the samples given him by complaint counsel. (Tr. 158.) Mr. Youngberg followed regular Customs procedures, developed by Ms. Eaton, in testing the samples assigned to him. (Tr. 214, 331.) A stipulation was agreed to by the parties that, as to the remaining samples, the chemists performing the analyses would testify that they, too, followed regular Customs procedures. (Tr. 861.) Accordingly, we find that the samples reported in Appendix II were all tested in accordance with reasonable and scientifically acceptable chemical procedures and that the results of the tests are satisfactory evidence of the true fiber content of the samples. [17.1] 24.2. From time to time, respondents’ counsel has alluded to the possibility that fabrics manufactured in Italy were made from used fibers and that this would affect test results. Beyond respondents’ counsels’ innuendo there is no evidence that used fibers were actually used in respondent Banci’s mills, let alone in the particular runs involved here. In any event both experts Golub and Eaton testified that the presence of used fibers in the samples would not — materially affect the fiber analysis. Even assuming that such a possibility existed, the testing chemist would recognize it and make corrections in the test accordingly. (Tr. 128, 286, 287.) We find that the speculative suggestions of respondents’ counsel in this regard are without substance, at least as far as this record is concerned. 25. In assessing the deviations from respondents’ representations concerning fiber content summarized in Appendix II, it should be borne in mind that this Commission, by regulation, will not deem such deviation “misbranding” if it does not exceed 3% (by weight) of a textile product’s total fiber content. 16 C.F.R. 303.43(a). Test Results 26. The results of the fiber content tests of these 58 fabric samples are embodied in Appendix II. Each sample is there denoted by its exhibit number, manufacturer’s “quality”, quantity of the source fabric, source of data (Customs or customer), year of shipment, represented fiber content, tested fiber content and rant VERRAZZANO TRADING CORP., ET AL. 905 © 888 Initial Decision .

(expressed in percentage points above or‘below the representation). We find Appendix II to be an accurate statement of the facts it purports to show.

27. For purposes of analysis the 58 fabric samples whose characteristics are summarized in Appendix II are broken down into three groups. Group I includes 24 fabric samples which were represented by respondents to contain certain percentages of various textile fibers, but none of which samples were claimed to include or in fact turned out to include any wool. Group II includes 25 fabric samples which were represented by respondents to contain certain 5 1 2 2 8 2 571 904 226 38 75.395889 percentages5 1 2 2 8 3 815 903 40 32 95.855286 of5 1 2 2 8 4 868 903 124 33 96.310455 textiles 1 2 2 8 5 1010 904 116 39 96.609375 fibers,5 1 2 2 8 6 1145 905 48 34 96.540710 all5 1 2 2 8 7 1212 906 39 33 96.552109 of5 1 2 2 8 8 1264 907 115 33 96.560410 which5 1 2 2 8 9 1396 909 151 39 96.638535 samples5 1 2 2 8 10 1564 920 92 22 96.773117 were5 1 2 2 8 11 1675 910 148 34 96.704727 claimed5 1 2 2 8 12 1840 915 37 30 96.635468 to4 1 2 2 9 0 570 950 1312 50 -1 5 1 2 2 9 1 570 950 140 34 96.970451 includes 1 2 2 9 2 731 952 79 38 96.328796 and,5 1 2 2 9 3 833 952 38 32 97.006477 in5 1 2 2 9 4 892 953 80 38 97.007454 fact,5 1 2 2 9 5 994 955 129 32 96.257690 turned5 1 2 2 9 6 1143 959 61 29 96.257690 outs 1 2 2 9 7 1225 959 37 30 96.869118 to5 1 2 2 9 8 1281 957 140 33 96.338974 includes 1 2 2 9 9 1441 959 133 32 96.338974 certain5 1 2 2 9 10 1596 962 225 38 96.809212 percentages5 1 2 2 9 11 1842 962 40 32 96.975037 of4 1 2 2 10 0 568 1000 1308 52 -1 5 1 2 2 10 1 568 1000 97 33 96.760887 wool.5 1 2 2 10 2 681 1001 116 41 96.981171 Groups 1 2 2 10 3 808 1002 58 33 86.072144 III5 1 2 2 10 4 875 1002 156 34 96.491623 includes5 1 2 2 10 5 1045 1003 19 32 96.655800 95 1 2 2 10 6 1077 1004 110 34 96.307167 fabrics 1 2 2 10 7 1199 1006 153 41 96.307167 samples5 1 2 2 10 8 1364 1007 114 33 96.230095 which5 1 2 2 10 9 1490 1018 91 23 96.433449 were5 1 2 2 10 10 1594 1010 225 39 96.319626 represented5 1 2 2 10 11 1830 1011 46 41 96.956337 by4 1 2 2 11 0 568 1050 1306 48 -1 5 1 2 2 11 1 568 1050 231 41 96.049614 respondents5 1 2 2 11 2 814 1055 37 30 96.843460 to5 1 2 2 11 3 867 1054 141 32 96.550430 contains 1 2 2 11 4 1024 1055 134 32 96.311279 certain5 1 2 2 11 5 1174 1058 226 38 96.267303 percentages5 1 2 2 11 6 1416 1057 38 32 97.007446 of5 1 2 2 11 7 1465 1058 139 33 96.852943 various5 1 2 2 11 8 1620 1059 122 33 96.350685 textiles 1 2 2 11 9 1758 1060 116 38 96.723656 fibers,4 1 2 2 12 0 568 1100 1306 50 -1 5 1 2 2 12 1 568 1109 92 24 96.863480 none5 1 2 2 12 2 676 1100 40 33 96.760506 of5 1 2 2 12 3 727 1101 115 33 96.454758 which5 1 2 2 12 4 858 1102 161 40 96.686958 samples,5 1 2 2 12 5 1037 1103 168 40 96.686958 however,5 1 2 2 12 6 1223 1115 93 23 96.661774 were5 1 2 2 12 7 1331 1106 147 34 96.256210 claimed5 1 2 2 12 8 1495 1110 37 30 96.475044 to5 1 2 2 12 9 1547 1108 139 34 96.734123 includes 1 2 2 12 10 1702 1120 71 30 96.778252 any5 1 2 2 12 11 1787 1110 87 33 96.780724 wool4 1 2 2 13 0 567 1148 1305 45 -1 5 1 2 2 13 1 567 1148 63 34 96.887428 but5 1 2 2 13 2 643 1150 49 32 96.214241 all5 1 2 2 13 3 705 1150 40 32 96.176025 of5 1 2 2 13 4 752 1150 124 38 96.960846 which,5 1 2 2 13 5 890 1151 38 32 97.001663 in5 1 2 2 13 6 941 1152 81 39 96.691696 fact,5 1 2 2 13 7 1036 1154 127 32 96.533302 turned5 1 2 2 13 8 1176 1157 62 30 96.694054 outs 1 2 2 13 9 1250 1157 36 31 96.415695 to5 1 2 2 13 10 1299 1156 140 33 96.220222 includes 1 2 2 13 11 1450 1159 39 30 96.220222 at5 1 2 2 13 12 1501 1157 89 33 97.001717 least5 1 2 2 13 13 1603 1160 113 31 97.011261 traces5 1 2 2 13 14 1729 1160 40 31 97.015213 of5 1 2 2 13 15 1777 1160 95 33 96.666603 wool.3 1 2 3 0 0 563 1198 1310 341 -1 4 1 2 3 1 0 608 1198 1265 47 -1 5 1 2 3 1 1 608 1198 51 33 95.024956 28.5 1 2 3 1 2 704 1199 116 42 96.385506 Groups 1 2 3 1 3 831 1200 23 33 82.171974 I.5 1 2 3 1 4 872 1200 84 34 96.588341 This5 1 2 3 1 5 967 1211 110 31 96.580170 groups 1 2 3 1 6 1090 1203 40 33 97.002441 of5 1 2 3 1 7 1138 1203 40 32 96.967445 245 1 2 3 1 8 1192 1205 123 32 96.776482 textiles 1 2 3 1 9 1327 1205 161 40 96.763069 samples,5 1 2 3 1 10 1502 1217 39 22 96.995430 as5 1 2 3 1 11 1554 1209 36 30 96.096146 to5 1 2 3 1 12 1603 1208 113 32 96.954674 which5 1 2 3 1 13 1729 1219 46 22 96.854790 no5 1 2 3 1 14 1786 1210 87 32 96.662575 wool4 1 2 3 2 0 566 1250 1307 45 -1 5 1 2 3 2 1 566 1251 144 30 96.174446 contents 1 2 3 2 2 725 1259 72 23 96.846191 was5 1 2 3 2 3 813 1250 114 33 96.486549 either5 1 2 3 2 4 943 1251 147 33 96.341637 claimed5 1 2 3 2 5 1107 1263 39 22 96.751266 or5 1 2 3 2 6 1162 1253 107 33 96.963829 found5 1 2 3 2 7 1285 1254 46 40 96.156090 by5 1 2 3 2 8 1346 1256 140 39 96.479515 testing,5 1 2 3 2 9 1503 1256 134 34 96.178596 reveals5 1 2 3 2 10 1654 1258 133 32 96.178596 serious5 1 2 3 2 11 1802 1259 71 33 96.310196 anda 1 2 3 3 0 565 1299 1308 48 -1 5 1 2 3 3 1 565 1299 182 38 93.295799 pervasive5 1 2 3 3 2 767 1299 249 42 92.887535 misbranding.5 1 2 3 3 3 1039 1302 49 32 96.133018 Of5 1 2 3 3 4 1105 1303 154 41 96.519096 primary5 1 2 3 3 5 1280 1305 149 33 96.519096 interests 1 2 3 3 6 1449 1305 29 33 93.293915 is5 1 2 3 3 7 1498 1305 241 42 93.037247 misbranding5 1 2 3 3 8 1758 1308 115 33 96.561989 which4 1 2 3 4 0 565 1349 1305 44 -1 5 1 2 3 4 1 565 1353 184 28 92.813629 overstates5 1 2 3 4 2 766 1349 90 33 96.854668 fibers 1 2 3 4 3 873 1353 151 30 92.514214 content.5 1 2 3 4 4 1043 1351 248 42 91.686584 Disregarding5 1 2 3 4 5 1309 1354 19 32 96.607460 85 1 2 3 4 6 1345 1354 90 33 93.186798 fibers 1 2 3 4 7 1451 1358 291 31 92.193840 overstatements5 1 2 3 4 8 1759 1358 38 32 95.619957 of5 1 2 3 4 9 1810 1358 60 34 93.651764 3%4 1 2 3 5 0 565 1397 1306 49 -1 5 1 2 3 5 1 565 1407 39 22 97.000206 or5 1 2 3 5 2 615 1397 70 33 96.069702 less5 1 2 3 5 3 697 1408 40 22 96.069702 as5 1 2 3 5 4 748 1398 104 41 97.003754 beings 1 2 3 5 5 863 1399 124 33 96.948708 within5 1 2 3 5 6 1000 1401 61 32 96.942070 thes 1 2 3 5 7 1072 1401 177 33 96.679077 tolerances 1 2 3 5 8 1261 1403 39 32 96.984390 of5 1 2 3 5 9 1310 1404 39 32 91.308716 165 1 2 3 5 10 1361 1404 114 33 91.308716 C.F.R.5 1 2 3 5 11 1489 1404 176 42 61.754875 303.43(a),5 1 2 3 5 12 1678 1416 52 22 96.671417 we5 1 2 3 5 13 1742 1407 75 33 96.822456 finds 1 2 3 5 14 1831 1408 40 32 97.003204 294 1 2 3 6 0 564 1446 1305 51 -1 5 1 2 3 6 1 564 1446 102 33 97.013771 others 1 2 3 6 2 677 1447 90 33 93.306091 fibers 1 2 3 6 3 777 1452 300 36 93.053802 overstatements,5 1 2 3 6 4 1090 1451 87 33 97.003189 each5 1 2 3 6 5 1189 1452 37 31 96.720261 in5 1 2 3 6 6 1237 1463 118 22 93.412544 excess5 1 2 3 6 7 1367 1453 39 32 96.975998 of5 1 2 3 6 8 1414 1454 59 33 96.956757 3%5 1 2 3 6 9 1487 1454 39 32 94.393456 of5 1 2 3 6 10 1532 1455 87 32 94.393456 totals 1 2 3 6 11 1632 1455 89 33 96.714561 fibers 1 2 3 6 12 1732 1457 137 40 96.836678 weight.4 1 2 3 7 0 563 1496 1307 43 -1 5 1 2 3 7 1 563 1496 72 33 96.586029 Thes 1 2 3 7 2 651 1497 149 33 96.437996 numbers 1 2 3 7 3 815 1497 70 33 96.437996 ands 1 2 3 7 4 901 1500 202 39 95.558365 magnitude5 1 2 3 7 5 1118 1501 39 32 96.661591 of5 1 2 3 7 6 1168 1501 98 33 92.325279 these5 1 2 3 7 7 1282 1506 291 30 92.002998 overstatements5 1 2 3 7 8 1588 1515 70 22 96.952927 was5 1 2 3 7 9 1673 1515 39 23 96.562912 as5 1 2 3 7 10 1728 1506 142 33 96.952904 follows:2 1 3 0 0 0 1139 1625 158 41 -1 3 1 3 1 0 0 1139 1625 158 41 -1 4 1 3 1 1 0 1139 1625 158 41 -1 5 1 3 1 1 1 1139 1625 116 41 96.264130 Groups 1 3 1 1 2 1273 1627 24 31 95.237358 I2 1 4 0 0 0 1034 1748 357 36 -1 3 1 4 1 0 0 1034 1748 357 36 -1 4 1 4 1 1 0 1034 1748 357 36 -1 5 1 4 1 1 1 1034 1748 189 34 91.338837 Non-Wool5 1 4 1 1 2 1246 1750 145 34 96.327682 Textiles2 1 5 0 0 0 568 1868 1227 310 -1 3 1 5 1 0 0 568 1868 1227 310 -1 4 1 5 1 1 0 601 1868 1194 49 -1 5 1 5 1 1 1 601 1868 210 41 96.312607 Magnitude5 1 5 1 1 2 832 1870 43 41 93.287361 of5 1 5 1 1 3 888 1876 278 30 91.837852 overstatements5 1 5 1 1 4 1286 1875 156 33 96.056114 Numbers 1 5 1 1 5 1461 1877 42 40 91.122078 of5 1 5 1 1 6 1516 1882 279 29 91.122078 overstatements4 1 5 1 2 0 631 1950 927 45 -1 5 1 5 1 2 1 631 1950 19 33 95.553787 35 1 5 1 2 2 672 1953 37 30 95.665245 to5 1 5 1 2 3 732 1952 40 32 96.353729 105 1 5 1 2 4 793 1956 208 38 96.676430 percentages 1 5 1 2 5 1022 1956 117 39 96.562065 points5 1 5 1 2 6 1539 1960 19 32 96.846489 94 1 5 1 3 0 620 2001 938 43 -1 5 1 5 1 3 1 620 2001 40 32 94.891724 105 1 5 1 3 2 682 2003 37 31 96.750435 to5 1 5 1 3 3 740 2001 42 33 96.693787 205 1 5 1 3 4 803 2006 208 38 96.564346 percentages 1 5 1 3 5 1032 2005 117 39 96.280197 points5 1 5 1 3 6 1519 2010 39 31 96.209412 124 1 5 1 4 0 626 2051 931 43 -1 5 1 5 1 4 1 626 2061 84 22 96.902924 overs 1 5 1 4 2 730 2051 42 32 96.157516 205 1 5 1 4 3 793 2055 209 38 96.426529 percentages 1 5 1 4 4 1023 2055 116 39 96.639969 points5 1 5 1 4 5 1538 2059 19 32 96.536438 84 1 5 1 5 0 568 2132 988 46 -1 5 1 5 1 5 1 568 2132 99 34 93.280586 Totals 1 5 1 5 2 690 2137 292 32 92.974991 overstatements5 1 5 1 5 3 1003 2139 97 38 96.607155 (overs 1 5 1 5 4 1121 2138 74 40 96.726402 3%)5 1 5 1 5 5 1516 2142 40 31 96.735641 292 1 6 0 0 0 550 2215 1313 338 -1 3 1 6 1 0 0 550 2215 1313 338 -1 4 1 6 1 1 0 595 2215 1267 51 -1 5 1 6 1 1 1 595 2215 74 40 94.199486 [19]5 1 6 1 1 2 696 2216 50 33 96.652832 29.5 1 6 1 1 3 774 2217 50 33 96.954926 As5 1 6 1 1 4 851 2217 174 35 96.416924 discussed5 1 6 1 1 5 1052 2220 92 33 93.293678 later5 1 6 1 1 6 1170 2222 45 39 92.263229 (p.5 1 6 1 1 7 1243 2222 40 32 96.844025 315 1 6 1 1 8 1311 2223 133 41 96.899696 below),5 1 6 1 1 9 1471 2224 100 33 96.864052 there5 1 6 1 1 10 1597 2226 31 32 96.856712 is5 1 6 1 1 11 1654 2236 22 22 96.637077 a5 1 6 1 1 12 1702 2227 160 39 96.545555 question4 1 6 1 2 0 553 2265 1309 48 -1 5 1 6 1 2 1 553 2265 159 34 93.131874 whether5 1 6 1 2 2 747 2267 242 42 92.123718 misbranding5 1 6 1 2 3 1023 2270 114 33 96.149513 which5 1 6 1 2 4 1173 2272 133 41 93.008385 merely5 1 6 1 2 5 1342 2274 216 33 92.750671 understates5 1 6 1 2 6 1593 2274 91 34 96.091965 fibers 1 6 1 2 7 1719 2280 143 30 96.562386 content4 1 6 1 3 0 552 2315 1309 44 -1 5 1 6 1 3 1 552 2315 147 33 96.641365 violates5 1 6 1 3 2 715 2316 61 33 96.641365 thes 1 6 1 3 3 793 2317 133 33 96.313599 Textiles 1 6 1 3 4 943 2328 41 22 96.963379 or5 1 6 1 3 5 1000 2319 95 34 96.924927 Wool5 1 6 1 3 6 1111 2320 92 33 96.771477 Acts.5 1 6 1 3 7 1222 2321 73 34 96.373230 Thes 1 6 1 3 8 1312 2322 89 34 96.373230 facts5 1 6 1 3 9 1417 2322 85 34 96.681671 here5 1 6 1 3 10 1518 2325 116 32 95.677269 reveals 1 6 1 3 11 1651 2335 22 22 93.228043 a5 1 6 1 3 12 1689 2326 172 33 92.082809 consider-4 1 6 1 4 0 552 2364 1308 49 -1 5 1 6 1 4 1 552 2364 78 34 95.226898 able5 1 6 1 4 2 651 2365 149 34 96.412697 numbers 1 6 1 4 3 820 2367 40 32 96.657120 of5 1 6 1 4 4 874 2368 88 33 93.301140 such5 1 6 1 4 5 982 2369 329 35 91.747375 understatements.5 1 6 1 4 6 1333 2373 249 40 91.958595 Disregarding5 1 6 1 4 7 1603 2374 16 32 93.275162 15 1 6 1 4 8 1642 2375 218 34 91.867249 understate-4 1 6 1 5 0 551 2415 1309 48 -1 5 1 6 1 5 1 551 2418 99 29 96.840355 ments 1 6 1 5 2 664 2415 40 33 97.004768 of5 1 6 1 5 3 715 2416 68 33 96.983070 less5 1 6 1 5 4 799 2416 88 33 96.185509 than5 1 6 1 5 5 904 2417 70 38 96.185509 3%,5 1 6 1 5 6 991 2429 51 22 96.952805 we5 1 6 1 5 7 1057 2419 76 33 96.242638 finds 1 6 1 5 8 1148 2419 41 33 82.256409 385 1 6 1 5 9 1204 2422 103 32 96.551994 others 1 6 1 5 10 1321 2422 90 33 93.280884 fibers 1 6 1 5 11 1426 2423 330 40 91.739067 understatements,5 1 6 1 5 12 1772 2426 88 32 96.893349 each4 1 6 1 6 0 550 2464 1313 50 -1 5 1 6 1 6 1 550 2464 37 33 97.008255 in5 1 6 1 6 2 602 2474 120 24 96.626839 excess5 1 6 1 6 3 736 2466 39 32 96.971138 of5 1 6 1 6 4 786 2466 59 34 96.784172 3%5 1 6 1 6 5 862 2467 39 33 96.935982 of5 1 6 1 6 6 911 2468 89 32 96.987061 totals 1 6 1 6 7 1014 2468 90 34 96.576782 fibers 1 6 1 6 8 1117 2470 137 40 87.452225 weight.5 1 6 1 6 9 1270 2471 73 33 87.452225 Thes 1 6 1 6 10 1358 2473 149 32 96.744530 numbers 1 6 1 6 11 1521 2474 70 32 96.628822 ands 1 6 1 6 12 1606 2476 204 38 96.775131 magnitude5 1 6 1 6 13 1825 2477 38 32 96.793633 of4 1 6 1 7 0 550 2513 739 40 -1 5 1 6 1 7 1 550 2513 100 34 93.281303 these5 1 6 1 7 2 661 2515 322 35 92.027313 understatements5 1 6 1 7 3 994 2528 92 23 96.702499 were5 1 6 1 7 4 1097 2530 39 22 96.903679 as5 1 6 1 7 5 1147 2520 142 33 96.829926 follows: Initial Decision 91 FTC.

Group I Non-Wool Textiles Magnitude of understatements | Number of understatements 3 to 10 percentage points 16 10 to 20 percentage points 19 over 20 percentage points 3 Total understatements (over 38%) 38 29.1. We also find that in Group I, there were three instances (CX 61, 62, 63) where testing revealed the presence of acrylic in amounts over 5% of the total fiber weight of the sample and yet acrylic was not revealed by respondents to be a constituent fiber. 30. Group IL. This group of 25 fabric samples, each of which was represented to include and did include some wool, also reveals serious and pervasive misbranding. It is desirable to analyze the extent of deviation from represented fiber content in this group of textile samples not only in terms of overstatements vs. understatements (as in Group J) but also in terms of wool fiber vs. all other fibers, for the legal consequences vary, depending on these factors. 31. Wool fiber content. There were no understatements of wool fiber content in any of the 25 samples in Group II but all 25 samples revealed overstatements of wool content, in almost all instances (23) by over 10 percentage points. The number and magnitude of wool fiber overstatements were as follows:

Group II Wool Fiber Magnitude of overstatements Number of overstatements 3 to 10 percentage points _ 2 10 to 20 percentage points 23 over 20 percentage points 0 Total overstatements (over 3%) 25 [20] 32. Other (non-wool) fibers. The 25 textile samples in Group II reveal a substantial number of deviations from represented content, both overstatements and munderstatements of fihar ennetitnanta VERRAZZANO TRADING CORP., ET AL. 907 888 Initial Decision number and magnitude of all other non-wool fiber overstatements were as follows:

Group IT Non-Wool Fibers Magnitude of overstatements Number of overstatements 3 to 10 percentage points 13 10 to 20 percentage points 6 over 20 percentage points 10 Total overstatements (over 3%) 29 33. There were also a number of understatements of the content of the non-wool textile fibers of Group II. Disregarding 7 understatements of less than 3%, their number and magnitude were as follows: Group II Non-Wool Fibers Magnitude of understatements Number of understatements 8 to 10 percentage points 8 10 to 20 percentage points 4 over 20 percentage points 0 Total understatements (over 38%) 12 33.1. We also find in Group II fibers were included in the wool products which were not revealed on respondents’ fiber content tags. CX 19, 20, 21, 28, 24, 25, 26, 27, 28, 31, 32, 35, 36, 39, 41 and 42 all contained nylon and polyester, each in amounts of over 5% of the ‘total fiber weight of the product but were claimed by respondents to contain only wool, cotton and acrylic. CX 22, 37, 38, 40 and 4 contained nylon in amounts over 5% of the total fiber weight. 34. Group III. This relatively small group of 9 textile samples is significant largely because it poses the unusual situation of textiles not claimed to contain any wool but found on testing to contain at least traces of wool (and, for that reason, pleaded here as [21] direct’? violations of the FTC Act rather than as derived from either the ? The Group I and Group II situation, too, are alleged to constitute violations of the FTC Act but only a derivative theory. If a Textile Act and/or Wool Act charge fails in those situations, the derivative FTC Act charge would p bly fail aut tically. Contra as to Group III situations. 908 ; FEDERAL TRADE COMMISSION DECISIONS Initial Decision 91 F.T.C.

Wool Act or the Textile Act.) The wool traces, found in each Group III textile sample, range from 1.1% to 9.6%, averaging 3.5%. 35. Disregarding 2 overstatements of less than 3%, Group III contains a number of substantial overstatements of non-wool fiber content as follows:

Group IIT Textiles Containing Unclaimed Wool Magnitude of overstatements Number of overstatements 3 to 10 percentage points 5 10 to 20 percentage points 6 over 20 percentage points 5 Total overstatements (over 3%) 16 In addition to one understatement of less than 3%, Group III also contains a number of understatements of non-wool fiber content as follows:

Group IIT Textiles Containing Unclaimed Wool Magnitude of understatements Number of understatements 3 to 10 percentage points 2 10 to 20 percentage points 1 over 20 percentage points 5 Total understatements (over 3%) 8 [22] 36. Residual Shrinkage. In 1973 and 1974 respondents sold approximately 790,000 yards of fabric (qualities Sioux, Totem and Manito) to Bobbie Brooks, Inc. Bobbie Brooks actually received 635,000 yards which were used in the manufacture of 25,000 dozen garments. (Tr. 374-75.) Respondents’ sales invoices for qualities Sioux and Totem represented that the fabric had a residual shrinkage of from one to one and a half percent. (RA I, 4 43.) Several samples of this fabric (CX 15, 16, 17, 18) were tested by Dr. Golub for residual shrinkage. (Tr. 109.) Respondents admitted that the samples tested were samples of fabrics manufactured, sold and shipped by them. (RA I, { 38; RA III, 13, 14, 15, 16.) Dr. Golub’s tests indicated VERRAZZANO TRADING CORP., ET AL. 909 888 Initial Decision was approximately 5-6%, substantially more than respondents’ claim of 1 to 1 1/2% (CX 112d; Tr. 110) and also substantially more than the maximum of 3 1/2% permitted for such fabrics by the American National Standards Institute (Tr. 111). 37. Dr. Golub testified that washing has little effect on clothing manufactured from fabrics having a residual shrinkage of from 1 to 1 1/2%, but that shrinkage such as was discovered in these samples “would lead to improper fit, improper length and dimensions of the garment and of course, it would make a garment unsatisfactory.” (Tr. 110.) He further testified that a fabric would have to be treated or stabilized to obtain residual shrinkage of only 1 to 1 1/2%. Stabilization is an additional costly process which can be undertaken by either the manufacturer or purchaser of the fabric. A claim of 1 to 1 1/2% residual shrinkage by the manufacturer would lead the purchaser to believe that the stabilization process had already been performed on the fabric (Tr. 195) and therefore to pay the higher price obtainable for stabilized fabrics. (Tr. 196.) [23] Relief Factors 38. Previous Assurances. Signor Banci and his American corporate instrumentalities are not strangers to charges of fabric misbranding. A prior proceeding before this Commission, begun in 1961 and terminated in 1971, resulted in a dismissal of misbranding charges involving some rather close questions, on the condition that respondents Banci and Verrazzano “endeavor to engage in cooperative compliance procedures with the Commission’s staff.” Verrazzano Trading Corporation t/a Lan Etruria, et al, 78 F.T.C. 687, 674-675 (1971). While complaint counsel made no effort to prove noncooperation in compliance procedures, as such, our findings of substantial misbranding during 1973-74 now leave no doubt that respondents were not cooperating and indeed cast considerable doubt on the good faith of respondents when they pleaded in the prior case that they were “anxious to avoid future difficulties under the Textile Act as well as the Wool Act” and would “cooperate in a voluntary enforcement procedure. . .” Ibid., p. 666. 39. Warnings and Complaints. Beginning in December 1972 (prior to this Commission’s 1973-74 testing program) respondents admittedly received a substantial number of notifications from U.S. Customs that their shipments of wool and/or textile products had not been labeled in accordance with the Wool Act and/or the Textile Act. (RA I, § 599.) Indeed, respondents’ counsel conceded: “He (Banci) was receiving the notices (concerning fiber content) from Customs almost daily. . . . Not daily notices but you (Complaint 910 FEDERAL TRADE ‘COMMISSION DECISIONS \ Initial Decision 91 FTC.

Counsel) know very well that . . . Customs frequently gave him notices and I have to admit that because its true” (and) “you should have copies... .” (Tr. 45-46.) As respects residual shrinkage, complaints were made to respondents by at least two customers, Starward and Bobbie Brooks. (Tr. 44.) [24] 40. Abandonment of Practices. Respondents rely heavily on Customs reports of four 1976 fabric test results turned over to respondents by complaint counsel before the hearing. (RX 7-10.) These reports tend to show no misbranding of primary textile constituents substantially in excess of 3% except for a fairly slight. overstatement of one constituent (-4.5%) in one of the four tests (RX 8). Respondents concede that evidence of little or no misbranding in 1976 would not be a defense to a charge of misbranding in 1973-74 . (Tr. 295-6) but argue that it could be taken into account in determining the terms of the order (Tr. 296). Complaint counsel, for their part, did not seriously question the accuracy of the four reports, arguing principally that four tests were much too few on which to base sweeping conclusions about all of respondents’ 1976 importations (Tr. 294-5, 328). We admitted the test results but with a caveat that little weight might be attached to them. (Tr. 328.) Mature reflection has not changed our initial reaction. We find that the four reports (RX 7-10) accurately report what they purport to show but in the absence of further proof, which respondents did not. even attempt, we decline to draw therefrom any inference as to whether these few tests fairly represent a substantial quantity of respondents’ 1976 importations.

41. Abandonment of Respondents’ Business. There have been occasional unsworn assertions by respondents’ counsel to the effect that the Banci enterprise was in serious trouble. Thus, at a prehearing conference on 11/16/76, respondents’ counsel stated (at Tr. 74-5):

The financial situation in Italy is atrocious. Mr. Banci informs me that he is owed substantial monies by the government of Italy. He is not receiving them. I’ve mentioned before (that) he hasn’t been paying my firm for what we've done. [25] * * * * * * * Mr. Banci is a very depressed man. ... and a man who really was the most optimistic of all my clients in the past sounded terrible to me. It was just not the Walter Banci I knew. He wrote me a letter: “. . . . For us the firms Lima Textiles, Inc., Francesco Datini, Inc. and Verrazzano Trading Corporation are dead. And if they are not yet, then we are ready to close them definitely. . . .” VERRAZZANO TRADING CORP., ET AL. 911 888 Initial Decision Judge Teetor: Counsel, is that list of companies that you read the total list of respondents? Does that cover everybody that is a respondent here? Ms. Braun: No, there was also listed Lanificio Tuscania, Inc. and Hudson Textile Corporation and Walter Banci.

Mr. Botwinik: I’m certain (that) if Mr. Banci had thought of them he would have included them in the letter because they are dead to all practical purposes. Mr. Banci hasn’t been in the United States for, I'd say, three years. I don’t know what he is doing. Ms. Braun and Ms. Zweibel told me before (that) there had been a shipment from (in?) September in (from?) his factory. I know he is not shipping in the same quantities he did in the past and any shipments now would be in very small amounts. 42. To such assertions has now been added another unsworn allegation by respondents’ counsel in his “Proposed Findings, etc.” that Signor Banci’s manufacturing company, Lanificio Walter Banci s.a.8. on 9/2/77 was adjudicated bankrupt, with creditors’ claims exceeding 14 billion lire (about 17 million dollars). Thus, counsel argue, “it is highly [26] doubtful that Lanificio Walter Banci s.a.s. or Walter Banci, who was the unlimited partner, . . . . will ever again be involved in the United States fabric trade in any substantial way.” (RPF, pp. 1-2.) On this theory, respondents seek to have all findings of fact rephrased from the present to the past tense. 43. Complaint counsel concede that the corporate respondents are “currently dormant” (CCR, p. 10) but note that there is no record evidence that they have ever been dissolved. (CCR, p. 11.) Nor is there record evidence that Walter Banci or the corporate respondents have ceased doing business in the United States or, for that matter, that the Italian partnership, Lanificio Walter Banci s.a.s. is really bankrupt and, if so, under what conditions. Ibid. Indeed, it appears that respondents might have some difficulty in attempting to prove cesser of importation, since complaint counsel attach as Exhibit A to their reply to respondents’ proposed findings Customs documents which purport on their face to be an exporter’s invoice and consumption entry for a textile importation by Lanificio Walter Banci s.a.s. as late as 9/29/77. Obviously, we place no reliance whatever on either party’s unverified assertions. 44. The Customs documents, however, may explain why respondents have never attempted to make actual proof of cesser of importation. There being nothing but a little lawyers’ rhetoric on which to base a claim of abandonment or discontinuance of the business here, we find no satisfactory evidence that Lanificio Walter Banci s.a.s. is now out of business and no satisfactory evidence that its trade in the United States, though “dormant,” may not be revived, either through the corporate respondents or other vehicles. [27] Initial Decision 91 F.T.C.

IV CONCLUSIONS OF LAW 1. The Federal Trade Commission has jurisdiction over the subject matter of this proceeding and over all respondents. Comment: Jurisdiction over the subject matter here is found in Section 5 of the Federal Trade Commission Act (hereafter “FTC Act”), 15 U.S.C. 41, et seq. Section 7 of the Textile Fiber Products Identification Act (hereafter “the Textile Act”), 15 U.S.C. 70e; and Section 6 of the Wool Products Labeling Act (hereafter “the Wool Act”), 15 U.S.C. 68d. Jurisdiction over the person of the five original respondents (Verrazzano Trading Corporation, Francesco Datini Inc., Lanificio Tuscania Inc., Lima Textiles Inc., and Walter Banci) was obtained by delivering a copy of this complaint for each at their place of business at 2 Penn Plaza, New York, New York, on 7/23/75, and by the subsequent general appearance of each by his attorneys, Pavia & Harcourt (for details of which see Procedural History, App. I, pp. i-ii). Jurisdiction over the sixth respondent (Hudson Textile Corporation) was obtained by serving an order amending the complaint to include Hudson on its attorney, Pavia & Harcourt, on 2/18/76 and by said attorney’s subsequent general appearance for said respondent (for details of which see Procedural History, App. I, p. v.).

2. The acts and practices charged in the complaint and proved here took place in commerce within the meaning of Section 2(k) of the Textile Act, 15 U.S.C. 70; Section 2(h) of the Wool Act, 15 U.S.C. 68; and Section 4 of the FTC Act, 15 U.S.C. 44. [28] Comment: All respondents except Hudson concede this. See all answers to complaint paragraph except Hudson’s. For our finding of fact that Hudson, as part of a unified family business operation, was necessarily engaged “in commerce” for present purposes, see Finding of Fact # 12.

3. All respondents have constituted a unified family business operation designed to import and sell in the United States wool and textile products manufactured in Italy by Lanificio Walter Banci §.a.s. a partnership between respondent Banci and his wife. Respondent Banci formulates, directs and controls the acts and practices of both the Italian manufacturing vartnershin and the VERRAZZANO TRADING CORP., ET AL. 913 388 Initial Decision American corporate respondents, including the acts and practices that are the subject of this complaint.

Comment: All respondents, including Banci himself, concede the existence of this unified family business operation, Banci’s dominance therein and his responsibility for any particular acts and practices challenged here. Findings of Fact # 5 and #6. Fora holding that such dominance of corporate affairs will be enough to hold an individual, see Tractor Training Service, Inc. v. F.T.C., 227 F.2d 420 (9th Cir., 1955). Other courts require an additional showing of actual participation in the challenged practices, Coro, Inc, et al. v. FTC, 338 F.2d 149, 154 (1st Cir., 1964, cert. den., 380 US. 954, but that, too, is conceded here. Ibid. 4. Respondents have violated Sections 4(a), 4(b) and 9 of the Textile Act, 15 U.S.C. 70b, and 70g, (and thereby also Section 5(a) of the FTC Act, 15 U.S.C. 45) by importing into the United States and selling in interstate commerce substantial amounts of non-wool textile fiber products in which one or more constituents were overstated on the label or other identification device contemplated by the Textile Act. [29] Comment: Finding of Fact # 28 establishes that respondents have made 29 overstatements of fiber content in Group I of the textiles sampled and listed in Appendix II (not including 8 other overstatements of less than 3 percentage points). Two thirds of these overstatements are there shown to exceed 10 percentage points and a quarter of them to exceed 20 percentage points. Unless respondents’ criticism of the Commission’s testing methodology has some merit, it seems plain and we find that Group I of Appendix II evidences some 29 clear violations by respondents of the Textile Act (and, by derivation, the FTC Act) during the period 1973-74.

In addition, respondents failed to list all constituent fibers which amounted to over 5% of the total fiber weight on three of the Group I samples tested. (Finding of Fact # 29.1.) By this omission, respondents violated the clear requirements of Section 4(b)(1) of the Textile Act.

Test Methodology Respondents argue that neither the Textile Act nor the Wool Act nor any regulation under either establishes any particular method for testing the fiber or wool content of specific samples of fabric. They contend (RPF, p. 5) that, absent such statutory standards, Initial Decision 91 F.T.C.

complaint counsel must establish the superiority of their tests over all others in order to sustain reliance on them. Prior Commission cases hold, however, that to support the validity of a test result, it is sufficient that complaint counsel establish only the expertise of the testers and their adherence to general procedures accepted by the scientific community.'* Hunter Mills [30] Corp. v. F.T.C., 284 F.2d 70 (2nd Cir., 1960), cert. den., 366 U.S. 903. Such expertise and acceptable methodology were clearly established here. See Findings of Fact # 19-24.1.

A similar question was raised in Allenton Mills, Inc., 60 F-.T.C. 1630 (1962). In the initial decision, (which was adopted by the Commission) it was found that the testimony of an expert witness as to the approximate percentages of reprocessed wool in the samples of fabric manufactured by the respondents, constituted “substantial and reliable proof” that said samples contained at least the amounts of reprocessed fibers to which the expert testified. It was further stated therein that:

[i]t is not essential that a test be capable of determining quantitatively the precise amount of a particular fiber. It is sufficient that the test under proper conditions when undertaken by a qualified expert, determines the approximate amount within reasonable limits. (p. 1640).

In the present case the expert witnesses clearly testified and we have found that their qualifications and the test methodology they employed were acceptable and proper. See Findings # 19-24.1. Although respondents’ counsel cross-examined all complaint counsel’s experts extensively, he made no serious inroads on their testimony. Moreover, respondents introduced no witnesses of their own to rebut the testimony of complaint counsel’s experts. Nor did respondents offer any evidence of tests made by themselves or others which would support the fiber content claims made on their labels and other fiber identification devices.

The 2nd Circuit Court of Appeals’ per curiam opinion in Hunter Mills Corp., 284 F.2d 70, 71 (2nd Cir., 1960) is dispositive of respondents’ contentions in this area:

The variance in testing techniques between the two experts testifying for the Commission does not impeach the testimony of either. The Commission has the duty of passing on the qualifications of the experts who testify [31] before it, and it may decide that both procedures are proper. . .. Moreover, it is unlikely that the allegedly “proper” procedure would have changed the ultimate fact-finding, since the percentages of wool content were substantially below those permitted by statute. 1 Respondents’ citation of the Flammable Fabrics Act, 15 U.S.C. 1191, and the United States Grain Act, 7 U. S. &. 11, as statutes which Provide specifi ic test procedures to be followed seems to us to cut the other way. They aha dba OA We VERRAZZANO TRADING CORP., ET AL. 915 888 / Initial Decision We conclude that there is nothing to respondents’ attack on the testing process employed here.

Understatements of Fiber Content Finding of Fact # 29 establishes that in addition to the 29 overstatements of fiber content analysed in Finding # 28 there were also 38 substantial understatements of fiber content in Group I. As to whether these should be held violations of the Textile Act in the present confused state of the law we are uncertain. In the predecessor case, Verrazzano Trading Corporation, t/a Lan Etruria, et al, 78 F.T.C. 687, 670-71 (1971), this Commission expressly disagreed with but followed, as stare decisis, the ruling of the Second Circuit Court of Appeals in Marcus v. Federal Trade Commission, 354 F.2d 85 (2nd Cir., 1965) that an understatement of wool fiber content is not misbranding within the meaning of the Wool Act. Since the same logic seems applicable to understatements of non-wool textiles, we are inclined to apply the same rule here. Accordingly, we conclude that respondents did not, by understating certain fibers as shown in Finding # 29 add to the violations of law resulting from their overstating fiber content, as shown in Finding of Fact # 28. 5. Respondents have violated Sections 3, 4 and 8 of the Wool Act, 15 U.S.C. 68a, 68b and 68f (and thereby also Section 5(a) of the FTC Act, 15 U.S.C. 45) by importing into the United States and selling in interstate commerce substantial amounts of wool products in which the wool fiber content was overstated on the label or other identification device contemplated by the Wool Act. [32] Comment: Finding of Fact # 31 establishes 25 instances where respondents overstated the wool content of their textiles, in 23 of which instances the overstatement was between 10 and 20 percentage points. Assuming, as we do, that respondents’ attack on the Commission’s testing methodology is no more convincing with regard to wool than with regard to other textile fibers, we conclude that the textile samples of Group II of Appendix II evidence some 25 clear violations by respondents of the Wool Act (and, by derivation, the FTC Act) during the period 1973-74. In addition, respondents failed to list all constituent fibers which amounted to over 5% of the total fiber weight on twentyone of the Group II samples tested. (Finding of Fact # 33.1.) By this omission, respondents violated the clear requirements of Section 4(2)(A) of the Wool Act.

Effect of Wool on Misbranding of Other Textiles Initial Decision 91 F.T.C.

Finding of Fact # 32 establishes that wool was not the only fiber overstated in Group II textiles. It shows 29 overstatements of nonwool fibers considerably in excess of the Commission’s “tolerance” (8%). A question naturally arises as to why 29 substantial overstatements of other textile fibers should not be actionable without regard : to whether they occur in fabrics which contain wool. The theory of non-actionability turns on Section 2 of the Wool Act, which makes a fabric containing any wool a “wool product” and Section 2 of the Textile Act, which exempts “wool products” from the strictures of the Textile Act. Against all common sense, therefore, all other textile fibers in a fabric that contains wool escape the requirements of either the Wool or Textile Acts. And this Commission in the earlier Verrazzano case, at pp. 670-1, apparently accepted such conclusion as the inevitable result of the Second Circuit’s Marcus opinion (supra, pp. 670-1). [33] ; Accordingly, we feel bound to hold that the overstatements of nonwool fiber content marshaled in Finding of Fact # 32 do not add anything to our finding of 25 misbranding violations arising out of overstatements of the wool content of Group II textile samples. With reference to the understatements marshaled in Finding of Fact # 33, we are governed by the same considerations set out in connection with Group I textile samples (p. 31, above). 6. Respondents have violated Section 5(a) of the FTC Act, 15 U.S.C. 45, by engaging in certain unfair and deceptive acts and practices in the importation of wool and other textile products into the United States and the sale of substantial quantities of such textiles in commerce.

Comment: Insofar as the complaint charges violations of the FTC Act as simple derivatives of violation of the Wool and Textile Acts (see Section 3 of both Acts), we have already noted that failure to prove the Wool or Textile Act charge automatically carries with it failure of the derivative FTC Act charge. When, however, an independent FTC Act charge is pleaded, the situation is different: the question then is simply whether all the essential elements of an unfair/deceptive practice case have been made out.

Here Section 5(a) of the FTC Act has been invoked to reach several situations where it was apparently felt that neither the Wool nor the Textile Act could reach the wrong. One includes the Group III textile samples (see Findings of Fact # 34-35) where, for reasons already explained, the wool contents are VERRAZZANO TRADING CORP., ET AL. 917 Initial Decision presence make it impossible in the existing confused state of the law to reach 16 serious overstatements of other (non-wool) fibers in these “wool products.” [34] A second situation where Section 5(a) of the FTC Act is invoked is found in the wool products exhibits of Group II (CX 4, 19-28, 31-83 and 35-45). The respondents admitted that their sales invoices for these wool products contained the same representations of fiber content as the product’s other labels and tags. (RA I, { 26; RA III, { 33 through § 37.) We have. already found substantial deviations between fiber content as represented by respondents and actual tested fiber content. (Finding # 31.) However, the Wool Act, unlike the Textile Act, does not reach misrepresentations made on sale invoices. (cf. § 4(a) of the Textile Act, § 4(a)(1) of the Wool Act). Therefore, complaint counsel hope to invoke Section 5(a) of the FTC Act, arguing that “the gross misrepresentations to customers made by respondents on the sales invoices relating to these misbranded wool products are false and deceptive acts or practices under the ~ Federal Trade Commission Act.” (CPF, p. 42.) A third such situation is set out in our Findings of Fact # 36-37 on misrepresentations by respondents to their customers regarding residual shrinkage, which are not, of course, governed by misbranding laws.

In all of these situations the threshold question is: what does proof of an unfair method of competition and/or deceptive act or practice entail that is not required to establish a Wool Act or Textile Act violation? More specifically, is the deceptive capacity or tendency which is the bare minimum for a Section 5 violation sufficiently evidenced by the mere fact of misbranding or must something more be shown? [35] It is well established that proof of a Section 5 violation does not require a showing of actual injury or deception but only a capacity or tendency to injure or deceive. Charles of the Ritz v. Federal Trade Commission, 148 F.2d 676, 680 (2nd Cir., 1944). Still, there is supposed to be some record evidence as to how consumers may be injured or misled, as to price, quality, etc. Federal Trade Commission v. Winstead Hosiery Co., 258 U.S. 483 (1922). That seems to be at least a theoretical difference between such cases and those brought under the Wool or Textile Acts, which “may be violated despite the absence of actual deception or a tendency to deceive. . .” Taylor-Friedsan Co., Inc., et al., 69 F.T.C. 483, 494 (1966).

While we would certainly not be shocked by the idea that Initial Decision 91 F.T.C.

deceptive tendency may reasonably be inferred from misbranding alone, we cannot make out that the law has progressed quite that far. Accordingly, we now conclude that neither the misbranding of Group III textile samples nor the misbranding of a textile product on a commercial invoice is sufficient, standing alone, to prove the deceptive tendency requisite to a Section 5 FTC violation. On the other hand, the charge of misrepresenta-. tion regarding residual shrinkage is supported here by sufficient additional evidence of deceptive tendency, as developed in Findings of Fact # 36-37, to justify a conclusion that Section 5(a) of the FTC Act has been violated independently in that respect and we now so conclude.

Vv RELIEF The “Public Interest” Defenses Respondents have made several arguments as to why their violations of the Wool Labeling and Textile Fiber Identification Acts, even if established, should not be made the subject of an order by this _ Commission. [36] All such arguments are based ultimately on the rule laid down by Justice Brandeis in Federal Trade Commission v. Klesner, 280 U.S. 19 (1929). That case held that when the facts established in a proceeding before the Commission show, as a matter of law, that the relief would not be in the public interest, the complaint should be dismissed. Whether this holding in an FTC Act case has any application to special statutes enforced by the Commission seems very doubtful but for present purposes we assume, arguendo, such applicability.

The Klesner rule, although understandably popular among respondents, has not had the wide-ranging application that its statement might suggest. As a practical matter, it has been substantially confined to three kinds of situations which are, in fact, the ones relied upon by respondents here. 1. Private vs. public interest In Klesner the unfair method of competition involved was the appropriation of a competitor’s trade name in the retail window shade business in Washington. The Supreme Court, affirming dismissal of the suit, said:

MN. 20.002 Uw. 7 t-. 4 1d.

VERRAZZANO TRADING CORP., ET AL. 919 188 Initial Decision * * * : * a * s Che undisputed facts, established before the Commission at the hearings on the complaint showed affirmatively the private character of the controversy. This aspect of the Klesner decision is now codified in Commission Rule 2.3:

The Commission acts only in the public interest and does not initiate an investigation or take other action when the alleged violation of law is merely a matter of private controversy and does not tend adversely to affect the public. [37] While a purely private dispute is thus beyond the purview of the Federal Trade Commission it is nevertheless equally clear from these statements of the law that a dispute affecting the public interest is not beyond the Commission’s jurisdiction merely because a private interest, as commonly happens, is also involved. For that reason while Klesner’s language concerning private controversies has sometimes been quoted in other cases, the “rule” itself has rarely been deemed appropriate for application to particular factual situations. See, for example, Curtis Publishing Company, 78 F.T.C. ' 1472 (1971), where the hearing examiner held that a complaint seeking refunds for subscribers after the Saturday Evening Post suspended publication involved only a private controversy and should be dismissed but the Commission reversed, holding that the vindication of private rights was merely incidental to the proceeding’s main purpose to terminate an illegal practice and cure its effects.

Respondents argue here (RPF, p. 8) that the question whether the shrinkage characteristic of fabrics sold by respondents was misrepresented is “solely between Bobbie Brooks and (respondent) Banci and not within the scope of the Act.” Citing Klesner and noting that the Brooks-Banci dispute has already been the subject of court proceedings to determine the merits of the claim, respondents argue: “For the Commission to interpose itself in this matter and use it in the present matter (manner?) smacks of a persecutional (sic) approach.” QPF, p. 8.) Although the samples introduced in support of the shrinkage allegation of the complaint happen to have come from Bobbie Brooks, the record shows that substantial quantities of the affected qualities (Sioux and Totem) were sold to United States customers (Finding of Fact # 8). Bobbie Brooks was not the only customer to complain on this score. (Tr. 44.) Misrepresentations of the shrinkage characteristic of these qualities constituted an unfair and [38] deceptive practice injurious to all buyers and to the public in Initial Decision 91 F.T.C.

general, not merely to the particular buyer whose evidence happened to prove the allegation. The existence of Bobbie Brooks’ private interest in this matter is by no means inconsistent with the existence of a public interest in putting an end to the practice. 2. De minimis argument The Klesner rule has sometimes been invoked when the violation proven is claimed to have affected only a inconsequential volume of business. A classic de minimis case was Matter of William S. La Rue, 47 F.T.C. 1472 (1950). There the Commission affirmed a hearing examiner’s order of dismissal where a Chicago barber, without factory, laboratory or any employees made and sold his patrons | about a thousand dollars worth of hair tonic over a year’s period. Despite undisputed evidence that his claims for this concoction were exaggerated or untrue and therefore misleading and deceptive, it was held that such “inconsequential” volume would not support an allegation of substantial amount of commerce and that further proceedings would not be “in the public interest.” Once we move beyond obvious trivia, however, the Commission has been reluctant to disregard violations just because they are slight and the courts have properly been reluctant to interfere with the Commission’s exercise of discretion in this respect. Thus the 2nd Circuit Court of Appeals pointed out in Exposition Press Inc. v. FTC, 295 F.2d 869 (2d Cir., 1961), a “vanity press” deception proceeding, that even though a particular case may seem trivial it may be “the means whereby in the long run the Commission may use its influence to prevent continuance of many similar deceptions.” (p. 873.) Another appellate court has pointed out that the whole purpose of the Federal Trade Commission’s policing of business practices is to prevent the growth of unfair acts and practices by stopping them, wherever possible, in their incipiency. This [39] purpose, by its very nature, will not infrequently result in the bringing of cases which may seem insignificant but are not. Guziak v. F.T.C, 361 F.2d 700 — (8th Cir., 1966); cert. den., 385 U.S. 1007. (Deceptive practices by seller of aluminum siding held properly forbidden.) Indeed, to put it broadly, not even a mere tendency to deception — as distinguished from actual deception — is too trivial for Commission attention. Spiegel, Inc. v. FTC, 494 F.2d 59, 62 (7th Cir., 1974). In this case respondents’ de minimis claim goes neither to the volume of business involved, as claimed in Surf Sales Co., Inc., 54 F.T.C. 483, 491-2 (1957), nor to the infrequency of violations, as claimed in Hoving Corporation v. F.T.C., 290 F.2d 808 (2d Cir.. 1961) VERRAZZANO TRADING CORP., ET AL. 921 888 Initial Decision ed by the seller on invoices, consignee declarations, labels, etc.: “Even if the Commission’s results (test) were accurate, the margin of error is so slight that we may well question the harshness of the remedies demanded.” (RPF, p. 9.) Similarly, respondents’ tests are said to “show a variation so slight as to render the order sought by complaint counsel overly harsh and punitive.” (RPF, p. 10.) It is plain, however, that we are not here dealing with “slight” (or even borderline) variations from represented wool/fiber content. No reasonable person could so describe the 29 substantial violations of the Textile Act summarized in Finding of Fact # 28 and the 25 additional substantial violations of the Wool Act summarized in Finding of Fact # 31. This is not a de minimis case. 3. Abandonment argument The third area where Klesner has frequently been invoked is the claim of discontinuance or abandonment of either the practice charged or the business itself. Since the purpose of a cease and desist order (and presumably of a [40] compliance bond, too) is therapeutic rather than punitive, the need for an order to protect the public has long been thought to disappear if there is no reasonable expectation that the violation proved will likely be repeated.‘ Stokely-Van Camp, Inc. v. FTC, 246 F.2d 458, 464-5 (7th Cir., 1957). While, however, the abandonment defense is well recognized and frequently pleaded by respondents, it is equally clear that not every disclaimer of intent to continue the practice or the business itself will move the Commission to dismiss a case on public interest grounds. Thus the abandonment should be voluntary and that normally means before the Commission’s hand is on the respondent’s shoulder. Spiegel, Inc., 86 F.T.C. 425, 446 (1975). It also normally means an abandonment of some duration, although not necessarily the decade or so understandably held to justify dismissal of charges in New Standard Publishing Co. v. F.T.C, 194 F.2d 181 (4th Cir., 1952). In sum, what is called for is assurance that an alleged abandonment is in good faith and that there is no real likelihood of resumption of an unfair/deceptive practice after the threat of legal action has disappeared. Beneficial Corp., et al., 86 F.T.C. 119, 165 (1975). “And the Commission has required respondents to meet a heavy burden to prevail on such a claim.” Ibid.

Our Findings of Fact # 40 - # 44 make it clear that while the corporate respondents may recently have been “dormant,” there is i Although this case does not involve a possible redress suit, it should be noted that there is real doubt since passage of the Magnuson-Moss Act, 15 U.S.C. 2301 in 1975 as to whether the public interest will ever permit dismissal of a cease and desist proceeding, if redress is a purpose of the proceeding. Initial Decision 91 F.T.C.

no good proof in this record that Signor Banci, the dominant figure in this “unified family business organization,” is [41] out of business and certainly no proof that he may not resume his American operations through the corporate respondents or other vehicles when this proceeding is over. To forego a proper order on the basis of unsworn and doubtful speculations by counsel as to possible abandonment of the business would be an error of the first. magnitude. We reject any such suggestion. The administrative law judge concludes that the violations of the Wool Act, Textile Act and FTC Act heretofore found to exist are all to the prejudice and injury of the public and that the relief hereafter ordered is in the public interest.

The Penal Bond Respondents lay great stress on the prayer of the complaint that they be prohibited from further importing or participating in the importation of any wool or textile products unless they post a bond under Section 8 of the Wool Products Labeling Act and Section 9 of the Textile Fiber Products Identification Act, in double the value of any imports, conditioned on respondents’ compliance with all applicable provisions of the above Acts and regulations thereunder. Respondents assume that such a bond is essentially a penal bond rather than an indemnity bond and we are inclined to agree with that assumption.’® From this starting point, however, respondents concoct a complex and confused argument with most of which we cannot agree. We now 18 Since the statute of 8 and 9 William III, cap. 11 (1696-97), (the gist of which is now found in 28 U.S. 1874), Anglo-American law courts have been authorized, like equity before the statute, to assess only actual damages for breach of a penal bond, unless the difficulty of determining actual d: justified the parties in recourse of a liquidated damage clause. For a classic dispute between private parties over whether a particular contractual stipulation should be treated as a penalty or as an agreed ascertai t of d see Sun Printing & Publishing Association v. Moore, 183 U.S. 642, 662-3 (1902) (penalty enforced.) However, in the case of penalties or forfeitures to the government imposed by statute upon the doing or omission of a certain act, there courts will not generally interfere to mitigate the penalty or forfeiture, if incurred, for it would be in contravention of the direct expression of the legislative will. Clark v. Barnard, 108 U.S. 436, 457 (1883) (penalty enforced.) [This case contains an excellent discussion of the history of the problem, at pages 454--456.] ‘An illustration of the usual result when a statutory bond is in question (penalty enforced) is found in U.S. v. Dieckerhoff, 202 U.S. 302 (1906). This case involved an importer's re-delivery bond for double the value of certain imported packages released to him during tests of a ple package: “In our opinion, it was the purpose of this statute and the bond executed in the case, to disp with the ity of resort to. . . showing damages and to fix double the value of the package ordered to be returned, as a definite sum to be paid for now fulfillment of the statutory duty. In such cases the recovery is for the stipulated sum and is not limited to the d ctually proven” (p. 311). While there are cases where a penal bond payable to a government has been held mere security for ind ification against proven damages, such cases require a very clear showing of intent to invoke an indemnity bond, not a penal bond. See, for example, U.S. v. Zerby, 271 U.S. 332, 339 (1926), where as here, the bond was conditioned on compliance with all applicable laws and regulations. However, the administrative history there loft nan dniwht that tha wnennn nate ce Fete VERRAZZANO TRADING CORP., ET AL. 928 888 , Initial Decision attempt to analyze what appear to be the high points of this argument. [42] Respondents’ own summary of their thesis is as follows: Imposition of a penal bond on the facts of this case represents a criminal sanction and consequently should not be imposed under the guise of a civil enforcement proceeding. (RPF, p. 10.) This cavalier assimilation of the penal bond contemplated in Sections 8 and 9 of the Wool Labeling Act and Textile Fiber Identification Act with the criminal penalty provisions of Sections 10 and 11 of the same statutes is insupportable. While there is some overlap, the concepts of “penalty” and “fine” do not necessarily have the same meaning: [43] In general a fine is a sum of money exacted of a person guilty of a crime or contempt as a pecuniary punishment, the amount of which may be fixed by law or left to the directions of the court. It is true that a penalty, like a fine, is a pecuniary punishment inflicted by the law for its violations, but a penalty is that which is demanded for the violation of a statute, which violations may or may not be a crime. Indeed, statutes giving a penalty for committing a prohibited act [sometimes] preserve the distinctions by providing that the penalty may be recovered in a civil action, while the crime, if it be so declared, must be punished by the infliction of a fine or imprisonment, after a conviction in a criminal action. 36 Am. Jur. 2d, Forfeiture and Penalties, § 4 (emphasis and bracketed matter added) Thus the U.S. Supreme Court has affirmed a holding that where a state constitution set apart as a permanent literary fund all “fines” collected for offense committed against the state, such provision comprehended only those fines which were affixed as penalties for crime and recoverable on the convictions of the offender but did not embrace those pecuniary penalties provided by statute that a popular or qui tam action (“which is a civil action”) might be brought to recover. Southern Exp. Co. v. Commonwealth (of Virginia), ex rel. Walker, 92 Va. 59, 22 S.E. 809 (1895); aff'd, 168 U.S. 705 (1897). Here the penalty bonds in question are [44] found in sections which make no reference to criminal penalties and are entirely separate from those sections (9 and 10) headed “Criminal Penalty.” Accordingly, there is no basis on which to treat the penal bonds as the “equivalent” of criminal sanctions. Although the logic of respondents’ argument is extremely difficult if not impossible to follow, they apparently argue that if a penal bond may be assumed to be the “equivalent” of a criminal sanction, the principles underlying the section dealing with criminal sanctions must be applied to the provision for posting of bonds by an importer, in order to insure equitable and just enforcement of the laws. (RPF, p. 14.) Initial Decision 91 F.T.C.

While this is an interesting jurisprudential speculation, it flies on the face of several hundred years of Anglo-American law, which has never required that the plaintiff in a qui tam or other civil penalty action must prove his case beyond a reasonable doubt or satisfy other of the more strigent requirements of a criminal trial. (One good reason, of course, is that the defendant in a civil penalty action is not faced with the possibility of imprisonment as a sanction, if he loses.) The ultimate goal of respondents’ tortured logic seems to be the preposition that if a civil penalty could be viewed as the “equivalent” of a criminal sanction, the civil penalty provision concerned here would not be constitutional unless construed to apply only to “willful or intentional misconduct as the term is understood in the criminal law” because “(t)he fundamental distinction between a criminal versus a statutory violation of either Act is the element of willful or intentional misconduct, as the term is understood in the criminal law.” (RPF, p. 15.) It should be sufficient to point out that while a mens rea is still generally required in a case of mala in se, for mala prohibita there is no requirement of a mens rea, especially in the area of public welfare offenses. These are crimes which depend on no mental element but consist only of forbidden acts or omissions. Morisette v. United States, 342 U.S. 246 (1952). Where [45] the legislature creates such an offense, criminal intent in any of its forms — including “wilfulness” — is no element of the crime and need not be proved to justify a conviction, People v. McClennegen, 195 Cal. 445, 234 P. 91, 100-1 (1925) although some courts reconcile this with the older law of crimes by saying that where a statute denounces the doing of an act as criminal, the law imputes criminal intent from the mere doing of the act. Hargrove v. United States, 67 F.2d 820 (5th Cir., 1933). The only question is whether the prohibited act was done or the required act omitted. United States v. Balint, 258 US. 250 (1922).

While, in a certain sense, intent is essential to the commission of a crime and in some classes of cases it is necessary to show moral turpitude in order to make out a crime, there is a class of cases where purposely doing a thing prohibited by statute may amount to an offense, although the act does not invoke turpitude or moral wrong. Armour Packing Co. v. United States, 209 U.S. 56 (1908). Since a statutory crime need involve no mens rea, it follows a fortiori that a statutory civil penalty — even if it were viewed as the “equivalent” of a crime — need involve no “wilfulness” or other specific intent to violate the law. Thus there is no reason for reading the word “wilful” into the penal bond clauses of Section 8 of the Wool Products Labeling Act of Section 9 of the Textile Fiber Products VERRAZZANO TRADING CORP., ET AL. 925 888 Initial Decision nk A further argument by respondents is that while Congress concededly (“expressly”) granted the Commission authority to enforce both the Wool Labeling and Textile Fiber Products Identification Acts, “such jurisdiction is not without limits” (RPF, p. 14). Respondents’ brief, at the same page, purports to “quote” a statement attributed to the U.S. Supreme Court in FTC v. Ruberoid Co., 343 U.S. 470, 473 (1952) but, in fact completely rewritten by respondents’ counsel: [46] Supreme Court Statement Verrazzano Version “Orders of the Federal Trade “Commission proceedings are Commission are not intended to impose criminal punishment or exact compensatory damages for past acts, but to prevent illegal practices in the future.”

-neither compensatory nor punitive _in character, they are strictly corrective and preventive measures taken (in) the interest of the general public.”

The same brief, at p. 17, argues that “in view of the fact that a bond would operate as a punishment for past acts, while the Commission’s authority is directed to the regulation of future activities, it is inappropriate to invoke it here.”

We note that the requirement of a compliance bond in double the value of respondents’ imports serves the very purpose “to prevent illegal practices in the future” stressed by the Supreme Court in Ruberoid. However, we need not decide whether such a bond could be justified as part of an ordinary cease and desist order because it is plain that the Supreme Court was speaking in the context of a Clayton Act rather than a Wool Labeling or Textile Fiber Products Act violation. Neither the Clayton nor Federal Trade Commission Acts contains any such penal bond provisions as are found in the Wool Labeling and Textile Fiber Products Identification Acts. In the latter cases, however, Congress explicitly granted this Commission authority to prohibit a proven violator from making further importations without posting a compliance bond. Whether this Commission would have authority to require such a compliance bond if the Wool Labeling and Textile Fiber Products Acts had never been passed is a purely academic question which has no bearing on this matter.

Finally, respondents argue that “if a mere finding that goods have been misbranded by an importer could give rise to the use of a bond, Initial Decision 91 F.T.C.

it would be clear that importers were being held to a far higher standard than all other groups who fall within the purview of the Acts.” (RPF, p. 11.) The fact that we are dealing here with [47] the importations of foreign goods into this country — and thus dealing frequently with unusual jurisdictional, procedural and executional problems — would seem to justify classification as between those who participate in importation arrangements and have already at least once violated the law, on the one hand, and, on the other, those who may also have violated the law but are engaged only in the more easily policed domestic trade. Consider, for example, the continuing validity of so-called foreign attachment in the face of the present Supreme Court’s virtual demolition of domestic attachment/garnishment before judgment under ordinary circumstances. Cf Ownbey v. Morgan, 256 U.S. 94, 110-112 (1921) and Sniadach v. Family Finance Corp. of Bay View, 395 U.S 387, 339 (1969). We do not, however, propose to involve this tribunal in the constitutional argument which respondents seek to make. We have hitherto already stricken a substantially identical affirmative defense contained in { 5 of the answers of all respondents except Hudson Textile Corporation. See both initial ruling (7/14/76) and denial of applications for review (10/1/76). In the latter we said: Since it is elementary law that the constitutionality of Congressional legislation cannot be litigated before this Commission (or, a fortiori, before this Administrative Law Judge), Davis K., Administrative Law Text, (8rd Ed., 1972)), pp. 388-89, injection of such an issue into the pleading and proof of this proceeding would only confuse the issues and waste time. We do not think there is even a serious doubt about this. Nothing has since been said by respondents to change our mind. Our ruling declining to consider the constitutionality of a compliance bond for violators involved in importation arrangements remains the law of this case. [48] Necessity of Imposing a Bond in This Case To require respondents to post a bond for double the value of their imports is particularly appropriate to their situation. Despite assurances of good intention in 1971, and although since 1972 respondents have received numerous notifications from U.S. Customs advising that their shipments of wool and textile products had not been labeled in accordance with the Wool Act and the Textile Act, (Findings of Fact # 38-9). Respondents, nevertheless, continued to import into the United States misbranded wool and textile products. This evidences a blatant disregard. on respondents’ part. of VERRAZZANO TRADING CORP., ET AL. 927 888 Initial Decision Respondent Banci resides in Italy, the corporate respondents are currently dormant and apparently have no assets in the United States. Under these circumstances, liability for civil penalties alone might present no deterrent to future misconduct by respondents as disregarding a Commission cease and desist order may not result in any financial loss. Requiring respondents to post bonds, conditional upon compliance with our labeling laws, is the only way to insure that the respondents will adhere to the mandates of those laws. The following order will issue:

ORDER It is ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations, and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc., and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or any other device, in [49] connection with the introduction, sale, advertising or offering for sale in commerce, or the transportation or causing to be transported in commerce, or the importation into the United States of any textile fiber product; or in connection with the sale, offering for sale, advertising, delivery, transportation, 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, as the terms “commerce” and “textile fiber product” are defined in the Textile Fiber Products Identification Act, do forthwith cease and desist from misbranding such textile fiber products by:

1. Falsely or deceptively stamping, tagging, labeling, invoicing, advertising or otherwise identifying such products as to the name or amount of constituent fibers contained therein. 2. Failing to affix a stamp, tag, label, or other means of identification to each such textile fiber product showing in a clear, legible and conspicuous manner each element of information required to be disclosed by Section 4(b) of the Textile Fiber Products Identification Act. [50] It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Initial Decision 91 F.T.C.

Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s.,. and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or other device, do forthwith cease and desist from importing, or participating in the importation of, any textile fiber product into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value of said products and any duty thereon, conditioned upon compliance with the provisions of the Textile Fiber Products Identification Act.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles [51] Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or other device, in connection with the introduction into commerce, or the offering for sale, sale, transportation, distribution, delivery for shipment or shipment in commerce of wool products, as “commerce” and “wool product” are defined in the Wool Products Labeling Act of 1939, do forthwith cease and desist from misbranding such products by: 1. Falsely and deceptively stamping, tagging, labeling, or otherwise identifying such products as to the character or amount of the constituent fibers contained therein.

2. Failing to securely affix to or place on each such product a stamp, tag, label or other means of identification showing in a clear and conspicuous manner each element of information required to be disclosed by Section 4(a)(2) of the Wool Products Labeling Act of 1939.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc, a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers. and Walter Ranci VERRAZZANO TRADING CORP., ET AL. 929 888 Initial Decision Lanificio Tuscania Inc. and Lima Textiles [52] Inc. and as a partner trading and doing business as Lanificio Walter Banci s8.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or other device, do forthwith cease and desist from importing or participating in the importation of wool products into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value of said wool products and any duty thereon, conditioned upon compliance with the provisions of the Wool Products Labeling Act of 1939.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc, a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and.as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporate or other device, in connection with the importing, advertising, offering for sale, sale or distribution of wool and/or textile products, in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from misrepresenting the shrinkage factor of such products on [53] contracts, invoices, shipping memoranda or labels applicable thereto, or in any other manner. It is further ordered, That respondents deliver a copy of this order by registered mail to each of their customers that purchased qualities Sioux, Manito, Totem, Marnie, Gretel, Isabel, Veruska, Spluga, Eva, Navajo, Ellen, Ingrid or Myla during the period January 1, 1973 to June 24, 1975.

It is further ordered, That the individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and his affiliation with a new business or employment. Such notice shall include said 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 corporate respondents shall forthwith distribute a copy of this order to each of their operating divisions and/or subsidiaries.

It is further ordered, That the corporate respondents notify the Commission at least thirty (30) days prior to any proposed change in Me Appendix 91 F.TC.

said respondents such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporations which may affect compliance obligations arising out of the order. [54] It is further ordered, That respondents herein shall within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. APPENDIX IJ PROCEDURAL HISTORY?* On 6/24/75, the date of issuance of this complaint, it was assigned for hearing to Administrative Law Judge Paul R. Teetor, who thereafter conducted all pre-trial and trial proceedings. The notice hearing set for 8/13/75, was postponed indefinitely on 8/4/75 at the request of certain respondents.

On 8/1/75 respondent Francesco Datini, Inc. and “all other Respondents (not identified) who have been properly served” appeared generally by their attorneys, Pavia & Harcourt, and moved for a more definite statement of charges. Simultaneously, respondent Banci appeared specially by his attorneys, Pavia & Harcourt, and requested a determination whether service of process on him had been properly made. On 8/25/75 complaint counsel filed answers to: both the request for a more definite statement and the jurisdictional objection.

In response to the request for a more definite statement, on 9/10/75, reciting complaint counsel’s representations that they had been unable to obtain all information required during the precomplaint investigation of this matter, in an “Order For Bill Of Particulars And Discovery In Aid Thereof” the administrative law judge directed complaint counsel to file all their foreseeable discovery requests (whether or not necessary for preparation of a Bill of Particulars) within 21 days and then, as soon as possible after [ii] receipt of a response, to prepare a Bill of Particulars identifying the name, line and style of the goods referred to in complaint Paragraphs 8, 4, 5, 8, 9, 10 and 18 and also the time period involved. Respondents were given until 10 days after service of such Bill of Particulars to file their answers to the complaint. In response to the jurisdictional objection, on 9/19/75 the administrative law judge held that service on respondents Banci and 1 Dater recited hore ara thaca an urhiah manner erase Bled eth ae ‘ aan VERRAZZANO TRADING CORP., ET AL. 981 888 Appendix Verrazzano Trading Corporation by delivering a copy of the complaint to one Hamm at the New York office of respondent Francesco Datini Inc. was sufficient to obtain jurisdiction over the person of Banci by collateral estoppel, in view of the Commission’s litigated finding only four years earlier that respondent Banci and all respondents named here except Lima Textiles, Inc. constitute “a single unified enterprise — an integrated family-owned business — designed to sell in the United States fabrics manufactured by Lanificio Walter Banci” in Italy and that over this business Banci exercises sufficient direction and control to make him accountable individually for the practices of the unified enterprise and each of its parts. Verrazzano Trading Corporation, t/a Lan Etruria, et al., 78 F.T.C. 687, 638 (1971).

On 9/26/75 the administrative law judge gave formal notice to respondents Verrazzano Trading Corporation, Lanificio Tuscania Inc. and Lima Textiles Inc. that they were in default on their obligation to appear and answer these charges and that an initial decision to that effect would be entered under Rule 3.12(c) unless within 10 days after service of this notice a proper appearance be entered and a proper pleading filed. On 10/6/77 respondents Verrazzano Trading Corporation, Lanificio Tuscania Inc., Lima Textiles Inc. and Walter Banci appeared generally in this proceeding and on the same date requested the benefit of our [iii] earlier “Order For Bill Of Particulars And Discovery In Aid Thereof” filed on 9/10/75. (See p. 2 above) This motion was granted by order filed 10/20/75 and the anticipated default simultaneously held cured. Meanwhile, on 10/10/75 complaint counsel had made an informal “Initial Discovery Request” for a large number of admissions by respondents. On 10/28/75 complaint counsel moved for a time limit on respondents’ answers to said informal discovery request. On 10/29 the administrative law judge directed respondents to make return of all responsive documents and/or information requested within 3 weeks from the date of his order or explain in writing, with affidavits, why such return could not be made by that date. On 11/17/75 all respondents sought a so-called “protective order” limiting discovery to such information as complaint counsel might need to draft a Bill of Particulars but on 12/1/75 complaint counsel opposed such a restriction on their discovery and any extension of . time for respondents to produce. On the same date (12/1/75) the administrative law judge reaffirmed that complaint counsel were to get all their foreseeable discovery out of the way at once, holding that there is nothing wrong with post-complaint discovery simply because a complaint has issued. In view, however, of the number of 932 FEDERAL TRADE COMMISSION DECISIONS:

Appendix 91 F.T.C.

disputes by then arising concerning such discovery, the administrative law judge directed complaint counsel to convert their voluntary requests into subpoena demands and to make certain changes in their specifications appropriate to such conversion. Forty-five days were allowed for a search and an additional 15 days for communication back and forth between the United States and Italy regarding such search.

On 12/11/75 respondents sought additional time for compliance with complaint counsel’s subpoenas, so that their search for responsive [iv] documents might be coordinated with a trip to Italy planned by respondents’ counsel. Respondents also sought to begin their own discovery before complying with complaint counsel’s subpoenas. On 12/12/75 the administrative law judge denied respondents’ motion for intervening discovery but granted a delay until 3/15/76 for return of all requested documents available only in Italy or elsewhere outside the United States. Meanwhile respondents and their counsel were warned that they would be held strictly accountable for the integrity and safe-keeping of all records in this country responsive either to complaint counsel’s informal discovery requests or to their new subpoenas, which the adminstrative law judge proceeded to issue on 12/18/75. On 12/19/75 prehearing conferences for the receipt of formal returns were scheduled for 1/22/76 for domestic documents and 3/15/76 for foreign documents. An informal letter from Pavia & Harcourt, counsel for respondents, dated 12/22/75, informed the administrative law judge that respondent Banci’s companies in the United States no longer had any employees here and that counsel could not be held “strictly accountable for the integrity and safe-keeping of these companies’ records,” although it would “do the best it can” to obtain the “voluminous” and “burdensome” information requested by complaint counsel. On 12/29/75 the administrative law judge by informal letter accepted counsel’s assurance that his firm would use its “best efforts” to obtain the requested information but noted the seriousness with which “any substantial loss of relevant records” would be viewed by the administrative law judge. Pursuant to the aforementioned order filed 12/19/75, a prehearing conference was held in the Commission’s Regional Office in New York, N.Y. on 1/22/76 to receive the return of domestic documents called for by complaint counsel’s subpoena. [v] No company official appeared to make a return but Mr. Botwinik of Pavia & Harcourt, on his oath of office as an attorney, handed over a few papers he had picked out of his own (attorney’s) files. He further suggested that the | VERRAZZANO TRADING CORP., ET AL. 933 888 Appendix be drastically reduced if complaint counsel would submit requests for admissions of the facts to be proved by documents subpoenaed and thereby render production of such documents necessary. The administrative law judge encouraged complaint counsel to submit as many such requests as possible before counsel’s forthcoming departure for Europe. Complaint counsel undertook to do so. On 2/9/76 complaint counsel filed their “Initial Request For Admissions” comprised of 642 proposed factual and documentary admissions. Simultaneously, by letter dated 2/6/76, complaint counsel advised respondent which admissions would render which subpoena calls unnecessary and inoperative. On 3/3/76 complaint counsel filed an additional 170 requests for admissions. On 2/9/76 complaint counsel moved to amend the complaint by adding as a respondent Hudson Textile Corporation, a New York corporation, alleged to be part of the same unified family business carried on by the original respondents. There being no objection by respondents, said motion was granted by the administrative law judge on 2/10/76. Thereafter Hudson Textile Corporation appeared generally and participated in all proceedings by Pavia & Harcourt, counsel for all respondents.

On 3/22/76 another prehearing conference was held, again in the regional office of this Commission in New York, N.Y. Counsel reported that, with only a few exceptions, the further return of documents in response to complaint counsel’s subpoena issued 12/18/75 had now been [vi] rendered unnecessary by respondents’ acquiescence in most of counsel’s Requests for Admissions. However, with reference to the exceptions (subpoena specifications 13 thru 18), respondents’ counsel reported that he had not yet received various responsive documents promised by his clients. Accordingly, the administrative law judge ruled that respondents were now in default and that, unless such default be cured no later than 4/12/76, sanctions would be applied under Rule 3.38. At the same prehearing conference respondents advised that sufficient knowledge of the case against: them had been obtained in the course of complaint counsel’s discovery. They accordingly waived their right to the Bill of Particulars granted them by order of 9/10/75. It was then ordered by the administrative law judge that respondents file their answers to the complaint by 4/12/76 and initiate such discovery as they might require no later than 4/26/76, after which complaint counsel would have at least three weeks to respond.

On 4/14/76 three separate answers to the complaint were filed by respondents. Individual respondent Walter Banci admitted the Appendix; 91 F.T.C.

allegations of complaint paragraphs 1, 2, 7 and 12 (except as to his business address); denied all other allegations; and raised five socalled affirmative defenses. A second answer, by respondents Verrazzano Trading Corporation, Francesco Datini Inc., Lanificio Tuscania Inc. and Lima Textiles Inc., made the same admissions and denials of the complaint’s allegations (except as to the group’s main . office and principal place of business) and raised the same five affirmative defenses as respondent Banci’s individual answer. The third answer, by lately-joined respondent Hudson Textile Corporation, admitted only the allegations of complaint Paragraph 1 (except those relative to doing business under the laws of New York and relative to its main office and principal place of business) and denied all [vii] other allegations but, unlike the original respondents, raised no affirmative defenses.

On 3/25/76, complaint counsel had filed a motion, under Rule 3.38, for the administrative law judge to make 21 specified findings of fact to compensate for respondents’ failure to produce the documents requested in specifications 13 thru 18 of complaint counsel’s - subpoena duces tecum issued 12/18/75 and, further to preclude respondents from introducing in evidence or otherwise relying in support of any claim or defense upon testimony or evidence relating to any documents responsive to specifications 13 thru 18 and, further, to preclude respondents from objecting to complaint counsel’s use of secondary evidence to show what the withheld documents would have shown.

Respondents’ answer to this preclusion motion, filed on 4/2/76, asserted (although without benefit of any supporting affidavit) that respondents had submitted “all extant copies” of certain documents sought by the subpoena, attacked the reasonableness of certain of complaint counsel’s proposed constructive findings of fact and urged that complaint counsel might better obtain from Customs certain documents sought by complaint counsel as the basis for other proposed findings. By special order of the administrative law judge (4/5/76) complaint counsel were then permitted to reply to respondents’ answer. Complaint counsel pointed out (4/8/76) that there had been no testimony or even an affidavit that anyone had searched company files in New York or Italy and that the statements of respondents’ counsel were limited to his own legal file. In response to respondents’ suggestion that complaint counsel should get the needed documents from Customs, affidavits from Customs officials explained why such would be an “impractical if not impossible task.” [viii] Ar. ASTO MTA AL. —- AL f- fea ate. Veo fee eee et tat “ok a ae mae VERRAZZANO TRADING CORP., ET AL. 935 888 Appendix Sanction Under Rule 3.88 For Failure ‘Of Respondents To Make Discovery As Ordered.” With respect to proposed findings concerning complaints about shrinkage, it was held that even if statements in court by respondents’ counsel on his oath of office should be construed as denying the existence of responsive documents, such “testimony” showed on its face his lack of sufficient testimonial knowledge to make such statements. Complaint counsel’s proposed findings # 1 and # 2 were accordingly adopted but subject to a tempus penitentiae. Respondents were given five days in which to move for another prehearing conference at which to present the sworn testimony of anyone with actual personal knowledge as to the completeness of whatever search may have been made by respondents and to turn over to complaint counsel all responsive documents found in such search.

No tempus penitentiae was allowed, however, with respect to two other deficiencies for which sanctions were sought. Firstly, failure by respondents to produce records responsive to subpoena specifications # 3 thru # 20 was held to be deliberate and willful. Furthermore, their argument that complaint counsel might get the desired evidence from Customs was held legally immaterial and, in any event, an unsatisfactory substitute under the facts here. Accordingly, complaint counsel’s proposed findings # 3 thru # 20 were adopted and respondents were also precluded from later offering in evidence any documents which would have been responsive to these subpoena specifications. Secondly, in view of respondents’ failure to produce leases, etc. from their files at 2 Penn Plaza in New York, the administrative law judge found that location to be a place of business of respondents in the United States (although declining to infer, as suggested in complaint counsel’s proposed finding # 21, it was respondents’ “principal” place of business here). [ix] Finally, a general request for an order precluding respondents from using any evidence which had been denied complaint counsel and, further, permitting complaint counsel to make use of secondary evidence as to such matters was denied for the time being but held in abeyance pending possible application in specific situations. At another prehearing conference held at the Commission’s regional office in New York, N.Y. on 5/4/76 respondents’ counsel presented a telex message from respondent Banci reciting a search of Italian files yielding certain stated statistics concerning respondents’ volume of business in the United States in 1974 and 1975 but . advising that such files yielded no claims by customers concerning the composition of fabrics. Thereupon the administrative law judge ruled that respondents would be relieved of sanctions #1 and $2 on 936 FEDERAL TRADE COMMISSION DECISIONS | Appendix 91 FTC.

receipt of a sworn statement by respondent Banci to the same effect as his telex. After some delays a time limit of 6/11/76 was set for filing such affidavit and after the filing of such an affidavit on 6/14/76, the administrative law judge on 6/22/76 relieved respondents of sanctions # 1 and # 2, while maintaining all other sanctions under the Ruling of 4/16/76 in full force and affect. At the same prehearing conference (5/4/76) respondents were given five days (later informally extended to seven days) within which to apply for a discovery subpoena and complaint counsel were given five days thereafter to answer the application. On 5/17/76 respondents filed a motion for a broad discovery subpoena and complaint counsel filed their answer on 6/2/76. On 6/23/76 respondents filed a motion for special leave to reply, with proposed reply attached. By this time, however, it had become apparent that the proper scope of respondents’ discovery would be greatly affected by the outcome of a pending attack by complaint counsel. on respondents’ so-called affirmative defenses. [x] Accordingly, no further action on respondents’ motion for a discovery subpoena was taken at that time. We turn now to complaint counsel’s attack on respondents’ affirmative defenses.

On 5/18/76 complaint counsel had moved to strike 4 of 5 affirmative defenses in the answers to the complaint filed by respondent Banci individually and by all corporate respondents except Hudson Textile Corporation. These four affirmative defenses and complaint counsel’s position concerning each may. be summarized as follows.

Answer § 5 _ Respondents attacked the constitutionality of the bonding provisions of Section 8 of the Wool Products Labeling Act of 1939 and Section 9 of the Textile Fiber Products Identifications Act (and auxiliary rules and regulations) as denying due process of law and equal protection of the law, because discriminatory in their application solely to importers. Complaint counsel denied that this is a proper forum in which to raise such a constitutional defense and noted that exhaustion of the administrative process might not leave any constitutional question to be decided. Answer § 6 Respondents asserted that the bringing of this complaint was not really in the public interest because only a private dispute is VERRAZZANO TRADING CORP., ET AL. . 937 888 Appendix once a complaint issues, the Commission’s determination that there is a reason to believe a violation has occurred and that a proceeding would be in the public interest are not reviewable. [xi] ‘Answer §7 Respondents argued that this is an action designed to protect competitors whereas the purpose of Section 5 of the F.T.C. Act is to protect consumers. Complaint counsel explained that while consumers have been protected explicitly only since the Wheeler-Lea Amendments in 1938, the protection of competitors has always been a purpose of Section 5.

Answer § 8 Respondents’ final affirmative defense was that any violations constituted but a small part of respondents’ total volume of business. Complaint counsel denied the relevancy of this defense and pointed out that under such a rule a big enough business could violate the law with impunity.

By order filed 5/27/76 respondents were granted until 6/11/76 to answer complaint counsel’s motion and on 6/14/76 filed such an answer (see above) elaborating on respondents’ position as to each of these four affirmative defenses. On 7/14/76 the administrative law judge filed a lengthy ruling not reaching the merits of the constitutional argument but otherwise granting complaint counsel’s motion to strike the affirmative defenses contained in Paragraphs 5, 6, 7 and 8 of the answers of all respondents except Hudson Textile Corporation (whose answer contained no such affirmative defenses). On 7/20/76 respondents gave oral notice that they intended to apply for interlocutory review of the administrative law judge’s decision to strike four affirmative defenses contained in the answers of all respondents except Hudson Textile Corporation. The judge thereupon gave respondents until 8/2/76 to file such application and complaint counsel until 8/16/76 to file any response thereto. The application was filed on 8/3/76 and complaint counsel’s reply on 8/12/76. On 10/1/76 the administrative law judge filed another lengthy ruling denying [xii] respondents application for interlocuto- — ry review, reaffirming and explaining his earlier opinion as to the impropriety of the four affirmative defenses in question, and finding nothing in his earlier opinion sufficiently doubtful to merit bothering the Commission with a special appeal at this time. Meanwhile complaint counsel had been seeking a supplementary discovery subpoena said to be required by a fifth affirmative defense Appendix 91 F.T.C.

(Par. 4 of all answers to the complaint except that of Hudson Textile Corporation). In a motion filed 8/8/76, complaint counsel recited respondents’ pleading that deviations from the stated fiber contents were the result of “unvoidable manufacturing variations despite the exercise of due care. ” The interjection of this defense, complaint counsel argued, required discovery which would enable complaint counsel to “trace respondents’ manufacturing process: from raw material to finished product” in order to determine “at what stage in production unavoidable manufacturing variations may have occurred and what procedures are generally followed at respondent’s mill to insure due care and quality control.” On 8/23/76, all respondents moved to limit or quash complaint counsel’s requested supplementary subpoena in substantial respects and, in any event, to be given extra time in which to obtain any properly subpoenaed documents from Italy. On 9/1/76 complaint counsel opposed respondents’ motion to limit or quash. In his ruling filed 10/1/76 the administrative law judge limited the proposed specifications as requested in certain respects; denied alleged irrelevancy as to one specification; declined to restrict discovery to the time period covered by the complaint; and took the problem of communicating with Italy into consideration in making the revised subpoena returnable at a prehearing conference scheduled for 11/16/76. [xiii] When said prehearing conference was convened at the Regional Office of this Commission on 11/16/76, respondents’ counsel informed the administrative law judge that respondents would neither appear nor produce any of the documents specified in the subpoena duces tecum because of the expense of producing such evidence and because respondents’ American business is now relatively insignificant. An oral application in open court by complaint counsel to apply sanctions against respondents under Rule 3.38 for failure to make discovery as ordered was then and there granted by the administrative law judge. It was duly ordered that (1) an inference be drawn that documents responsive to subpoena specifications 1 thru 15 would be adverse to respondents’ claim of unavoidable manufacturing variations despite the exercise of due care; (2) it be now established that violations charged in the complaint are not the result of unavoidable manufacturing variations despite the exercise of due care; (3) respondents may not introduce into evidence or otherwise rely, in support of any claim or defense upon any document which would have been responsive to subpoena specifications 1 thru 15; that Paragraph 4 of each of respondents’ answers be stricken.

VERRAZZANO TRADING CORP., ET AL. 939 888 Appendix With the pleadings thus pruned, a considerable amount of the discovery sought earlier by respondents now became unnecessary and on the same principle the administrative law judge determined to further postpone his ruling on said discovery request until respondents had received complaint counsel’s proposed exhibits and summaries of expected witness’ testimony. By order filed 10/1/76 complaint counsel were directed to turn their case over. to respondents in two weeks, after which respondents would have another two weeks to revise the specifications of their long-pending requested subpoena duces tecum to eliminate material already received in the turnover. [xiv] At the aforementioned prehearing conference held on 11/16/76 it was confirmed that respondents would have two weeks (until 11/30/76) to revise the specifications for their discovery subpoena in light of recent developments and complaint counsel would then have four weeks (until 12/31/76) to make responsive production, subject to the usual time limit of 10 days in which to make objections. Thereafter, on 12/10/76 respondents moved for their subpoena duces tecum, specifying eight categories of documents desired from the Commission’s files. These included (1) reports on investigations into respondents’ textile/wool products; (2) complaints received about respondents’ products; (8) communications between the Commission _ and Bobbie Brooks concerning fiber content or the shrinkage factor of textile/wool products which respondents had sold Bobbie Brooks; (4) studies made by the Commission in connection with the Care Labeling Act; (5) explanations of the manner in which the Commission tests, samples and otherwise enforces the Textile and Wool Acts domestically; (6) statistics comparing the volume of investigations and enforcement proceedings brought against foreign manufacturers and importers with the volume of actions taken against domestic manufacturers and sellers; (7) statistics showing the volume of actions taken under those acts against importers or domestic resellers; and (8) statistics showing the number of field employees enforcing the Textile and Wool Acts, either full-time or part-time. Complaint counsel’s opposition was filed on 12/27/76. On 1/26/77 the administrative law judge denied all of respondents’ specifications except (8), as to which complaint counsel were required to produce within two weeks. This ruling was based principally on the view that in most instances respondents were merely “fishing” in the private area of Commission decision-making which is not subject to discovery, absent a showing of probable cause not even attempted here. On the substantive side, it was held, [xv] the Commission’s exercise of administrative discretion, as in Appendix 91 FTC.

choosing the sequence of prosecution of different offenders is not ordinarily open to litigation, and mere relevance to the exercise of such discretion is insufficient to make discovery proper in such a situation as this. In view, too, of the striking of respondents’ so-called affirmative defenses, all but specification (3). were held improper. Throughout the pre-trial discovery period a good deal of real progress in preparing for trial was made by the use of many complex admissions requested and accepted under Rule 3.11 (See filings on 9/20/76, 11/1/76, 11/26/76). With the completion of the admissions procedure and reciprocal discovery, as set out above, on 2/11/77 the administrative law judge ordered evidentiary hearings in the New York Regional Office to begin on 3/21/77. He simultaneously ordered respondents to turnover to complaint counsel by 3/4/77 a list of all their proposed exhibits, with copies thereof, and a list of all their proposed witnesses, with summaries of the thrust of their expected testimony. It was further laid down that “witnesses and exhibits not so pre-viewed will not be received in evidence during said hearing.” On 3/3/77 complaint counsel were directed to advise respondent of the sequence in which they expected to call their witnesses (the identity and testimony of whom had already been provided to respondent as noted above).

By letter to complaint counsel, with copy to the administrative law judge, respondents on 3/7/77 gave notice that they did not expect to call any. witnesses at trial but did submit certain fiber test results and a record of the testimony of one Professor Antonio Rota in an earlier matter (Dkt. 8801) to be offered in this hearing. Evidentiary hearings began on Monday, March 21, 1977 and continued through Wednesday, March 23, 1977. [xvi] Complaint counsel called the following witnesses: Name and Address 1 Date of Testimony 1 Transcript Reference Samuel A. Golub 3/21/17 105 1000 Providence Highway Dedham, Mass.

Amelia Eaton 8/22/77 205 U.S. Customs Service 6 World Trade Centar VERRAZZANO TRADING CORP., ET AL. - 941 888 ; Appendix New York, N.Y.

Martin Youngberg 3/28/77 329 5 Richard Court Lincoln Park, N.J.

Kenneth Schaden _ 3/23/77 371 “9318 Girdle Road Middlefield, Ohio In addition to the foregoing witnesses, counsel for both sides stipulated on 3/23/77 at pages 324-5 of the transcript that Edward Feder, import specialist for the U.S. Customs Service, would testify as therein stated. Respondents, as anticipated, called no witnesses in their behalf.

During the hearing complaint counsel introduced approximately 121 exhibits and respondents approximately 18, all during the casein-chief. When the case-in-chief was closed (Tr. 395), respondents’ counsel stated that because respondent Banci had informed him that he had neither the time nor the finances to properly defend this matter, respondents would have nothing further to offer in evidence except a record of the 1970 testimony of Professor Rota in a similar proceeding before this Commission (Dkt. 8801). (Tr. 895-6). The latter was excluded from evidence but with permission for respondents to re-offer it by written motion with an explanatory brief, for reconsideration (Tr. 396). [xvii] On 4/5/77 respondents filed their motion to admit into evidence Professor Antonio Rota’s testimony on 7/29/70 at pp. 966-1036 of the transcript in D. 8801, arguing that Professor Rota’s testimony would be relevant to the alleged willfulness of respondents’ mislabeling here and that Rota, an Italian citizen, was “unavailable” within the meaning of Rule 804(a)(5) and 804(b)(1) of the new Federal Rules of Evidence. Complaint counsel’s reply, filed 4/12/77 argued that Professor Rota was not “unavailable” merely because he resides in Italy and in any event his testimony would be of little value or positively misleading, chiefly because it was originally addressed to a different issue (unavoidable manufacturing variations despite due care) and, being seven years old, might be quite inaccurate at present. On 4/21/77 the administrative law judge denied respondents’ motion to reconsider the admissibility of Professor Rota’s former testimony, holding that Rota was not “unavailable” within the meaning of F.R.E. Rule 804(a)(5) and that the offer also seemed like a back-door effort to get into the field of unavoidable manufacturing defects, from exploring which respondents had been Appendix; 91 F.T.C.

precluded by the order of 11/23/76 (for failure to make discovery on such subject). Finally the judge agreed that Rota’s testimony, being quite out of date, could be misleading, absent opportunity for crossexamination thereof.

There followed a period of incomprehensible length while the reporting contractor attempted several times to correct a number of errors in the transcript, particularly the numerical pagination thereof. It was not until 8/18/77 that a stipulation of transcript corrections could be entered into and incorporated into the record by the administrative law judge. On 8/24/77 the record was officially closed. [xviii] ’ Pursuant to earlier arrangements (Tr. 398) complaint counsel on 9/20/77 filed their proposed findings of fact, conclusion of law, and order, with arguments in support thereof. An order issued on 10/12/77 noting respondents’ default in serving proposed findings and conclusions but on the same date said proposals were actually filed, curing the default. At the same time respondents advised that on 9/2/77 respondent Banci’s manufacturing vehicle, Lanificio Walter Banci s.a.s., had been adjudicated bankrupt. At the same time respondents filed their corresponding proposals. On 11/1/77 complaint counsel filed their proposed reply findings and brief. VERRAZZANO TRADING CORP., ET AL.

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68 -1 5 1 72 1 2 1 1435 1272 10 21 51.065502 Teas 1 72 1 2 2 1435 1304 12 13 53.946808 tA5 1 72 1 2 3 1435 1326 9 14 53.946808 ve4 1 72 1 3 0 1370 1271 11 69 -1 5 1 72 1 3 1 1370 1271 11 69 30.601181 oA2 1 73 0 0 0 1306 1270 10 69 -1 3 1 73 1 0 0 1306 1270 10 69 -1 4 1 73 1 1 0 1306 1270 10 69 -1 5 1 73 1 1 1 1306 1270 10 22 62.167229 ole5 1 73 1 1 2 1306 1303 10 13 45.148087 ta5 1 73 1 1 3 1306 1325 9 14 27.256325 ve2 1 74 0 0 0 1089 1266 141 70 -1 3 1 74 1 0 0 1089 1266 141 70 -1 4 1 74 1 1 0 1219 1267 11 68 -1 5 1 74 1 1 1 1219 1267 11 68 37.194778 eam4 1 74 1 2 0 1154 1267 12 69 -1 5 1 74 1 2 1 1154 1267 12 69 39.355003 tan4 1 74 1 3 0 1089 1266 11 70 -1 5 1 74 1 3 1 1089 1266 11 22 43.395195 ae5 1 74 1 3 2 1089 1299 11 12 38.691021 tA5 1 74 1 3 3 1090 1322 8 14 62.585888 va2 1 75 0 0 0 1024 1253 13 83 -1 3 1 75 1 0 0 1024 1253 13 83 -1 4 1 75 1 1 0 1024 1253 13 83 -1 5 1 75 1 1 1 1024 1253 12 19 34.945709 te5 1 75 1 1 2 1025 1283 12 28 30.515694 Sun5 1 75 1 1 3 1025 1322 11 14 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1 81 1 1 1 658 1267 16 71 0.000000 wearer2 1 82 0 0 0 0 2640 0 18 -1 3 1 82 1 0 0 0 2640 0 18 -1 4 1 82 1 1 0 0 2640 0 18 -1 5 1 82 1 1 1 0 2640 0 18 95.000000 2 1 83 0 0 0 589 1292 13 55 -1 3 1 83 1 0 0 589 1292 13 55 -1 4 1 83 1 1 0 589 1292 13 55 -1 5 1 83 1 1 1 589 1292 11 6 85.437065 15 1 83 1 1 2 589 1307 13 40 8.450356 droag2 1 84 0 0 0 1775 1401 27 148 -1 3 1 84 1 0 0 1775 1401 27 148 -1 4 1 84 1 1 0 1791 1497 11 52 -1 5 1 84 1 1 1 1791 1497 11 52 0.000000 seiiyse4 1 84 1 2 0 1775 1401 12 141 -1 5 1 84 1 2 1 1777 1401 10 38 0.000000 haas 1 84 1 2 2 1776 1449 11 54 0.000000 raureng5 1 84 1 2 3 1775 1520 10 22 21.642181 “3742 1 85 0 0 0 1709 1402 27 140 -1 3 1 85 1 0 0 1709 1402 27 140 -1 4 1 85 1 1 0 1724 1488 12 53 -1 5 1 85 1 1 1 1724 1488 12 53 0.000000 velesly4 1 85 1 2 0 1709 1402 13 140 -1 5 1 85 1 2 1 1710 1402 12 36 0.000000 4aaug5 1 85 1 2 2 1709 1449 11 54 0.000000 mwoneny5 1 85 1 2 3 1709 1513 10 29 2.601578 “5°n2 1 86 0 0 0 1645 1401 26 140 -1 3 1 86 1 0 0 1645 1401 26 140 -1 4 1 86 1 1 0 1660 1488 11 49 -1 5 1 86 1 1 1 1660 1488 11 49 0.000000 arst6t4 1 86 1 2 0 1645 1401 13 140 -1 5 1 86 1 2 1 1645 1401 13 37 9.891655 haiwg5 1 86 1 2 2 1645 1449 11 53 19.496834 smoreny5 1 86 1 2 3 1645 1512 10 29 0.000000 “§°12 1 87 0 0 0 0 1627 0 10 -1 3 1 87 1 0 0 0 1627 0 10 -1 4 1 87 1 1 0 0 1627 0 10 -1 5 1 87 1 1 1 0 1627 0 10 95.000000 2 1 88 0 0 0 0 1684 0 40 -1 3 1 88 1 0 0 0 1684 0 40 -1 4 1 88 1 1 0 0 1684 0 40 -1 5 1 88 1 1 1 0 1684 0 40 95.000000 2 1 89 0 0 0 1582 1401 10 69 -1 3 1 89 1 0 0 1582 1401 10 69 -1 4 1 89 1 1 0 1582 1401 10 69 -1 5 1 89 1 1 1 1582 1401 10 36 0.000000 Av1ua5 1 89 1 1 2 1583 1449 7 21 30.200584 ono:2 1 90 0 0 0 0 1767 0 52 -1 3 1 90 1 0 0 0 1767 0 52 -1 4 1 90 1 1 0 0 1767 0 52 -1 5 1 90 1 1 1 0 1767 0 52 95.000000 2 1 91 0 0 0 1432 1398 27 140 -1 3 1 91 1 0 0 1432 1398 27 140 -1 4 1 91 1 1 0 1447 1485 12 53 -1 5 1 91 1 1 1 1438 1485 28 28 0.000000 COL5 1 91 1 1 2 1447 1517 11 21 44.395527 ATE4 1 91 1 2 0 1432 1398 13 140 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-1 5 1 121 1 1 1 1495 1691 10 28 70.956917 vel2 1 122 0 0 0 1431 1690 10 28 -1 3 1 122 1 0 0 1431 1690 10 28 -1 4 1 122 1 1 0 1431 1690 10 28 -1 5 1 122 1 1 1 1431 1690 10 28 24.210388 vat2 1 123 0 0 0 1366 1690 11 28 -1 3 1 123 1 0 0 1366 1690 11 28 -1 4 1 123 1 1 0 1366 1690 11 28 -1 5 1 123 1 1 1 1366 1690 11 28 51.788704 wor2 1 124 0 0 0 1219 1685 11 28 -1 3 1 124 1 0 0 1219 1685 11 28 -1 4 1 124 1 1 0 1219 1685 11 28 -1 5 1 124 1 1 1 1219 1685 11 28 27.856606 tier2 1 125 0 0 0 1153 1685 12 28 -1 3 1 125 1 0 0 1153 1685 12 28 -1 4 1 125 1 1 0 1153 1685 12 28 -1 5 1 125 1 1 1 1153 1685 12 28 47.511414 beet2 1 126 0 0 0 1089 1684 11 29 -1 3 1 126 1 0 0 1089 1684 11 29 -1 4 1 126 1 1 0 1089 1684 11 29 -1 5 1 126 1 1 1 1089 1684 11 29 54.761005 cot2 1 127 0 0 0 1024 1684 13 30 -1 3 1 127 1 0 0 1024 1684 13 30 -1 4 1 127 1 1 0 1024 1684 13 30 -1 5 1 127 1 1 1 1024 1684 13 30 0.000000 feet2 1 128 0 0 0 961 1683 12 30 -1 3 1 128 1 0 0 961 1683 12 30 -1 4 1 128 1 1 0 961 1683 12 30 -1 5 1 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135 1 0 0 1494 1746 11 68 -1 4 1 135 1 1 0 1494 1746 11 68 -1 5 1 135 1 1 1 1494 1746 11 21 61.386871 ast5 1 135 1 1 2 1494 1776 11 38 43.650627 (scat2 1 136 0 0 0 1429 1746 12 67 -1 3 1 136 1 0 0 1429 1746 12 67 -1 4 1 136 1 1 0 1429 1746 12 67 -1 5 1 136 1 1 1 1429 1746 12 21 0.000000 B795 1 136 1 1 2 1430 1777 10 36 0.000000 Lcoor2 1 137 0 0 0 1365 1745 12 68 -1 3 1 137 1 0 0 1365 1745 12 68 -1 4 1 137 1 1 0 1365 1745 12 68 -1 5 1 137 1 1 1 1365 1745 11 22 0.000000 ose5 1 137 1 1 2 1366 1776 11 37 0.000000 RH2 1 138 0 0 0 1300 1743 12 69 -1 3 1 138 1 0 0 1300 1743 12 69 -1 4 1 138 1 1 0 1300 1743 12 69 -1 5 1 138 1 1 1 1300 1743 12 21 10.330086 B/t5 1 138 1 1 2 1300 1774 12 38 60.126080 CONT2 1 139 0 0 0 1219 1740 11 69 -1 3 1 139 1 0 0 1219 1740 11 69 -1 4 1 139 1 1 0 1219 1740 11 69 -1 5 1 139 1 1 1 1219 1740 11 22 35.699638 ese5 1 139 1 1 2 1219 1773 11 36 17.498749 lees2 1 140 0 0 0 1153 1749 13 61 -1 3 1 140 1 0 0 1153 1749 13 61 -1 4 1 140 1 1 0 1153 1749 13 61 -1 5 1 140 1 1 1 1153 1749 13 21 0.000000 at5 1 140 1 1 2 1154 1781 11 29 0.000000 c0082 1 141 0 0 0 1088 1752 11 62 -1 3 1 141 1 0 0 1088 1752 11 62 -1 4 1 141 1 1 0 1088 1752 11 62 -1 5 1 141 1 1 1 1088 1752 11 22 67.109665 ay5 1 141 1 1 2 1088 1784 11 30 50.981480 shee2 1 142 0 0 0 1024 1788 12 21 -1 3 1 142 1 0 0 1024 1788 12 21 -1 4 1 142 1 1 0 1024 1788 12 21 -1 5 1 142 1 1 1 1024 1788 12 21 33.531395 ws2 1 143 0 0 0 900 1786 11 23 -1 3 1 143 1 0 0 900 1786 11 23 -1 4 1 143 1 1 0 900 1786 11 23 -1 5 1 143 1 1 1 900 1786 11 23 82.273293 wa2 1 144 0 0 0 834 1785 11 23 -1 3 1 144 1 0 0 834 1785 11 23 -1 4 1 144 1 1 0 834 1785 11 23 -1 5 1 144 1 1 1 834 1785 11 23 84.499550 we2 1 145 0 0 0 765 1785 19 22 -1 3 1 145 1 0 0 765 1785 19 22 -1 4 1 145 1 1 0 765 1785 19 22 -1 5 1 145 1 1 1 765 1785 19 22 33.085930 wae2 1 146 0 0 0 641 1747 75 64 -1 3 1 146 1 0 0 641 1747 75 64 -1 4 1 146 1 1 0 699 1773 17 34 -1 5 1 146 1 1 1 699 1773 17 34 55.597870 a4 1 146 1 2 0 673 1758 13 51 -1 5 1 146 1 2 1 673 1758 13 51 0.000000 (epsed)4 1 146 1 3 0 658 1747 14 64 -1 5 1 146 1 3 1 658 1747 14 64 0.000000 TapreenS4 1 146 1 4 0 641 1764 12 46 -1 5 1 146 1 4 1 641 1764 12 46 36.460243 vcr2 1 147 0 0 0 1771 1875 12 21 -1 3 1 147 1 0 0 1771 1875 12 21 -1 4 1 147 1 1 0 1771 1875 12 21 -1 5 1 147 1 1 1 1771 1875 12 21 54.049835 ty2 1 148 0 0 0 1364 1870 11 23 -1 3 1 148 1 0 0 1364 1870 11 23 -1 4 1 148 1 1 0 1364 1870 11 23 -1 5 1 148 1 1 1 1364 1870 11 23 37.104763 ome2 1 149 0 0 0 1154 1867 12 36 -1 3 1 149 1 0 0 1154 1867 12 36 -1 4 1 149 1 1 0 1154 1867 12 36 -1 5 1 149 1 1 1 1154 1867 12 36 34.531082 at2 1 150 0 0 0 1025 1866 12 22 -1 3 1 150 1 0 0 1025 1866 12 22 -1 4 1 150 1 1 0 1025 1866 12 22 -1 5 1 150 1 1 1 1025 1866 12 22 62.523529 ote2 1 151 0 0 0 961 1865 12 22 -1 3 1 151 1 0 0 961 1865 12 22 -1 4 1 151 1 1 0 961 1865 12 22 -1 5 1 151 1 1 1 961 1865 12 22 17.914009 ty2 1 152 0 0 0 900 1865 11 22 -1 3 1 152 1 0 0 900 1865 11 22 -1 4 1 152 1 1 0 900 1865 11 22 -1 5 1 152 1 1 1 900 1865 11 22 38.916492 dy2 1 153 0 0 0 834 1864 11 22 -1 3 1 153 1 0 0 834 1864 11 22 -1 4 1 153 1 1 0 834 1864 11 22 -1 5 1 153 1 1 1 834 1864 11 22 48.566406 oe2 1 154 0 0 0 772 1863 12 23 -1 3 1 154 1 0 0 772 1863 12 23 -1 4 1 154 1 1 0 772 1863 12 23 -1 5 1 154 1 1 1 772 1863 12 23 37.430634 ety2 1 155 0 0 0 1089 1899 13 37 -1 3 1 155 1 0 0 1089 1899 13 37 -1 4 1 155 1 1 0 1089 1899 13 37 -1 5 1 155 1 1 1 1089 1899 13 37 32.077187 aM2 1 156 0 0 0 1025 1899 13 37 -1 3 1 156 1 0 0 1025 1899 13 37 -1 4 1 156 1 1 0 1025 1899 13 37 -1 5 1 156 1 1 1 1025 1899 13 37 16.970886 ‘12 1 157 0 0 0 0 1465 0 20 -1 3 1 157 1 0 0 0 1465 0 20 -1 4 1 157 1 1 0 0 1465 0 20 -1 5 1 157 1 1 1 0 1465 0 20 95.000000 2 1 158 0 0 0 1639 1991 12 47 -1 3 1 158 1 0 0 1639 1991 12 47 -1 4 1 158 1 1 0 1639 1991 12 47 -1 5 1 158 1 1 1 1639 1991 12 47 35.419861 ean2 1 159 0 0 0 1575 1999 11 38 -1 3 1 159 1 0 0 1575 1999 11 38 -1 4 1 159 1 1 0 1575 1999 11 38 -1 5 1 159 1 1 1 1575 1999 11 38 54.237633 anoyg2 1 160 0 0 0 1428 1998 11 37 -1 3 1 160 1 0 0 1428 1998 11 37 -1 4 1 160 1 1 0 1428 1998 11 37 -1 5 1 160 1 1 1 1428 1998 11 37 0.000000 nots2 1 161 0 0 0 1364 1997 10 38 -1 3 1 161 1 0 0 1364 1997 10 38 -1 4 1 161 1 1 0 1364 1997 10 38 -1 5 1 161 1 1 1 1364 1997 10 38 12.172394 ano}2 1 162 0 0 0 1155 1992 11 39 -1 3 1 162 1 0 0 1155 1992 11 39 -1 4 1 162 1 1 0 1155 1992 11 39 -1 5 1 162 1 1 1 1155 1992 11 39 32.038086 aness,2 1 163 0 0 0 1026 1969 27 61 -1 3 1 163 1 0 0 1026 1969 27 61 -1 4 1 163 1 1 0 1040 1969 13 60 -1 5 1 163 1 1 1 1040 1969 13 60 30.897881 (tga)4 1 163 1 2 0 1026 1992 11 38 -1 5 1 163 1 2 1 1026 1992 11 38 0.000000 Bnons2 1 164 0 0 0 961 1969 28 60 -1 3 1 164 1 0 0 961 1969 28 60 -1 4 1 164 1 1 0 977 1969 12 60 -1 5 1 164 1 1 1 977 1969 12 60 0.000000 dvectta)4 1 164 1 2 0 961 1991 12 38 -1 5 1 164 1 2 1 961 1991 12 38 5.701599 ang2 1 165 0 0 0 901 1968 25 61 -1 3 1 165 1 0 0 901 1968 25 61 -1 4 1 165 1 1 0 914 1968 12 60 -1 5 1 165 1 1 1 914 1968 12 60 0.000000 (cr9tte?4 1 165 1 2 0 901 1991 10 38 -1 5 1 165 1 2 1 901 1991 10 38 0.000000 a8et82 1 166 0 0 0 835 1968 28 61 -1 3 1 166 1 0 0 835 1968 28 61 -1 4 1 166 1 1 0 850 1968 13 60 -1 5 1 166 1 1 1 850 1968 13 60 0.000000 (esere)4 1 166 1 2 0 835 1990 11 39 -1 5 1 166 1 2 1 835 1990 11 39 24.637054 anys2 1 167 0 0 0 0 2493 0 39 -1 3 1 167 1 0 0 0 2493 0 39 -1 4 1 167 1 1 0 0 2493 0 39 -1 5 1 167 1 1 1 0 2493 0 39 95.000000 2 1 168 0 0 0 706 1966 28 62 -1 3 1 168 1 0 0 706 1966 28 62 -1 4 1 168 1 1 0 721 1966 13 60 -1 5 1 168 1 1 1 721 1966 13 60 0.000000 Atvoste)4 1 168 1 2 0 706 1989 11 39 -1 5 1 168 1 2 1 706 1989 11 39 10.424194 aid2 1 169 0 0 0 641 1968 31 55 -1 3 1 169 1 0 0 641 1968 31 55 -1 4 1 169 1 1 0 657 1968 15 55 -1 5 1 169 1 1 1 657 1968 15 55 39.120476 Tis4 1 169 1 2 0 641 1977 12 46 -1 5 1 169 1 2 1 641 1977 12 46 23.909744 ct2 1 170 0 0 0 1813 2055 13 85 -1 3 1 170 1 0 0 1813 2055 13 85 -1 4 1 170 1 1 0 1813 2055 13 85 -1 5 1 170 1 1 1 1817 2055 8 22 43.599609 40m5 1 170 1 1 2 1813 2087 13 53 9.910400 weary2 1 171 0 0 0 1769 2095 12 39 -1 3 1 171 1 0 0 1769 2095 12 39 -1 4 1 171 1 1 0 1769 2095 12 39 -1 5 1 171 1 1 1 1769 2095 12 39 39.300175 19892 1 172 0 0 0 1702 2095 12 39 -1 3 1 172 1 0 0 1702 2095 12 39 -1 4 1 172 1 1 0 1702 2095 12 39 -1 5 1 172 1 1 1 1702 2095 12 39 33.750168 “so2 1 173 0 0 0 1573 2095 12 38 -1 3 1 173 1 0 0 1573 2095 12 38 -1 4 1 173 1 1 0 1573 2095 12 38 -1 5 1 173 1 1 1 1573 2095 12 38 81.190453 nD2 1 174 0 0 0 1491 2093 11 39 -1 3 1 174 1 0 0 1491 2093 11 39 -1 4 1 174 1 1 0 1491 2093 11 39 -1 5 1 174 1 1 1 1491 2093 11 39 22.534027 “61>2 1 175 0 0 0 1426 2094 12 37 -1 3 1 175 1 0 0 1426 2094 12 37 -1 4 1 175 1 1 0 1426 2094 12 37 -1 5 1 175 1 1 1 1426 2094 12 13 15.926064 t65 1 175 1 1 2 1427 2116 11 15 67.233215 x92 1 176 0 0 0 1362 2094 12 37 -1 3 1 176 1 0 0 1362 2094 12 37 -1 4 1 176 1 1 0 1362 2094 12 37 -1 5 1 176 1 1 1 1362 2094 12 37 28.074165 te5 1 176 1 1 2 1353 2122 28 13 57.696877 =)2 1 177 0 0 0 1298 2091 11 39 -1 3 1 177 1 0 0 1298 2091 11 39 -1 4 1 177 1 1 0 1298 2091 11 39 -1 5 1 177 1 1 1 1298 2091 11 39 84.772263 an2 1 178 0 0 0 1154 2088 11 38 -1 3 1 178 1 0 0 1154 2088 11 38 -1 4 1 178 1 1 0 1154 2088 11 38 -1 5 1 178 1 1 1 1154 2088 11 38 16.270996 ee)2 1 179 0 0 0 1089 2088 11 38 -1 3 1 179 1 0 0 1089 2088 11 38 -1 4 1 179 1 1 0 1089 2088 11 38 -1 5 1 179 1 1 1 1089 2088 10 13 0.000000 ty5 1 179 1 1 2 1089 2111 11 15 0.000000 ap2 1 180 0 0 0 1025 2087 12 38 -1 3 1 180 1 0 0 1025 2087 12 38 -1 4 1 180 1 1 0 1025 2087 12 38 -1 5 1 180 1 1 1 1025 2087 12 38 9.838562 TRS)2 1 181 0 0 0 641 2072 12 46 -1 3 1 181 1 0 0 641 2072 12 46 -1 4 1 181 1 1 0 641 2072 12 46 -1 5 1 181 1 1 1 641 2072 12 46 11.200058 Tt?2 1 182 0 0 0 1768 2160 13 27 -1 3 1 182 1 0 0 1768 2160 13 27 -1 4 1 182 1 1 0 1768 2160 13 27 -1 5 1 182 1 1 1 1768 2160 13 27 77.122620 an2 1 183 0 0 0 1702 2158 12 30 -1 3 1 183 1 0 0 1702 2158 12 30 -1 4 1 183 1 1 0 1702 2158 12 30 -1 5 1 183 1 1 1 1702 2158 12 30 52.622475 op2 1 184 0 0 0 1637 2159 12 27 -1 3 1 184 1 0 0 1637 2159 12 27 -1 4 1 184 1 1 0 1637 2159 12 27 -1 5 1 184 1 1 1 1637 2159 12 27 49.374992 “an2 1 185 0 0 0 1573 2158 13 27 -1 3 1 185 1 0 0 1573 2158 13 27 -1 4 1 185 1 1 0 1573 2158 13 27 -1 5 1 185 1 1 1 1573 2158 13 27 31.259315 (na)2 1 186 0 0 0 1490 2166 12 26 -1 3 1 186 1 0 0 1490 2166 12 26 -1 4 1 186 1 1 0 1490 2166 12 26 -1 5 1 186 1 1 1 1490 2166 12 26 23.891449 (37)2 1 187 0 0 0 1426 2165 12 26 -1 3 1 187 1 0 0 1426 2165 12 26 -1 4 1 187 1 1 0 1426 2165 12 26 -1 5 1 187 1 1 1 1426 2165 12 26 51.893677 an2 1 188 0 0 0 1362 2165 12 26 -1 3 1 188 1 0 0 1362 2165 12 26 -1 4 1 188 1 1 0 1362 2165 12 26 -1 5 1 188 1 1 1 1362 2165 12 26 68.559914 aD2 1 189 0 0 0 1297 2164 12 26 -1 3 1 189 1 0 0 1297 2164 12 26 -1 4 1 189 1 1 0 1297 2164 12 26 -1 5 1 189 1 1 1 1297 2164 12 26 72.626175 ten2 1 190 0 0 0 1220 2166 11 20 -1 3 1 190 1 0 0 1220 2166 11 20 -1 4 1 190 1 1 0 1220 2166 11 20 -1 5 1 190 1 1 1 1220 2166 11 20 0.000000 wy2 1 191 0 0 0 1154 2168 11 18 -1 3 1 191 1 0 0 1154 2168 11 18 -1 4 1 191 1 1 0 1154 2168 11 18 -1 5 1 191 1 1 1 1154 2168 11 18 82.487381 w2 1 192 0 0 0 1089 2167 11 19 -1 3 1 192 1 0 0 1089 2167 11 19 -1 4 1 192 1 1 0 1089 2167 11 19 -1 5 1 192 1 1 1 1089 2167 11 19 74.712585 aw2 1 193 0 0 0 961 2166 13 19 -1 3 1 193 1 0 0 961 2166 13 19 -1 4 1 193 1 1 0 961 2166 13 19 -1 5 1 193 1 1 1 961 2166 13 19 17.278976 cy)2 1 194 0 0 0 899 2166 12 19 -1 3 1 194 1 0 0 899 2166 12 19 -1 4 1 194 1 1 0 899 2166 12 19 -1 5 1 194 1 1 1 899 2166 12 19 3.433342 tt2 1 195 0 0 0 835 2166 12 18 -1 3 1 195 1 0 0 835 2166 12 18 -1 4 1 195 1 1 0 835 2166 12 18 -1 5 1 195 1 1 1 835 2166 12 18 56.325111 wo2 1 196 0 0 0 705 2164 13 20 -1 3 1 196 1 0 0 705 2164 13 20 -1 4 1 196 1 1 0 705 2164 13 20 -1 5 1 196 1 1 1 705 2164 13 20 59.971100 wm Appendix 91 F.T.C.

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56.828705 .5 1 21 1 6 6 1122 1883 11 25 8.074829 Ct5 1 21 1 6 7 1108 1948 11 156 0.174980 Iw4 1 21 1 7 0 1100 636 18 1383 -1 5 1 21 1 7 1 1103 636 11 50 42.037369 an5 1 21 1 7 2 1100 919 11 21 46.745369 ae5 1 21 1 7 3 1100 950 12 48 24.774971 iw5 1 21 1 7 4 1102 1129 13 48 0.000000 anidiay5 1 21 1 7 5 1102 1185 12 21 53.235760 365,5 1 21 1 7 6 1105 1361 10 25 3.671425 soul5 1 21 1 7 7 1105 1396 10 56 0.000000 eanaqea5 1 21 1 7 8 1105 1462 10 34 0.000000 2eaey5 1 21 1 7 9 1105 1557 11 105 27.700417 “mowers 1 21 1 7 10 1106 1723 10 26 51.132965 Wer5 1 21 1 7 11 1106 1781 10 20 41.618073 ce5 1 21 1 7 12 1107 1818 10 40 24.476990 te5 1 21 1 7 13 1108 1918 10 42 51.737518 oun5 1 21 1 7 14 1108 2013 9 6 0.000000 ,4 1 21 1 8 0 1057 1091 11 107 -1 5 1 21 1 8 1 1057 1091 10 43 0.000000 saeaya5 1 21 1 8 2 1058 1143 10 36 0.000000 sonau5 1 21 1 8 3 1057 1186 10 12 18.038391 as4 1 21 1 9 0 1045 1150 8 20 -1 5 1 21 1 9 1 1045 1150 8 20 28.294250 320;4 1 21 1 10 0 1018 1135 35 968 -1 5 1 21 1 10 1 1028 1135 24 43 0.000000 “oem5 1 21 1 10 2 1028 1185 25 21 26.106598 ot5 1 21 1 10 3 1030 1541 11 19 35.201828 wt5 1 21 1 10 4 1030 1571 10 26 43.158337 com5 1 21 1 10 5 1032 1883 11 47 0.000000 ecoy5 1 21 1 10 6 1033 1939 12 42 41.076450 oar)5 1 21 1 10 7 1018 2099 11 4 10.478821 ,4 1 21 1 11 0 1007 1361 32 737 -1 5 1 21 1 11 1 1018 1361 7 19 0.000000 vomy5 1 21 1 11 2 1018 1397 7 49 0.000000 saayageg5 1 21 1 11 3 1016 1557 11 40 48.735390 ‘ave5 1 21 1 11 4 1016 1636 11 26 30.215820 wet5 1 21 1 11 5 1007 1717 30 35 73.365364 oon,5 1 21 1 11 6 1009 1919 30 41 0.000000 e898;5 1 21 1 11 7 1018 2019 10 29 0.000000 a25 1 21 1 11 8 1018 2079 10 19 41.159431 ten4 1 21 1 12 0 1007 635 18 932 -1 5 1 21 1 12 1 1010 635 10 51 49.578964 25 1 21 1 12 2 1007 899 3 1 0.000000 .5 1 21 1 12 3 1007 918 12 56 35.419952 an5 1 21 1 12 4 1008 984 8 12 29.617500 te5 1 21 1 12 5 1013 1129 12 49 0.000000 aatdaay5 1 21 1 12 6 1013 1186 11 20 34.088387 ash5 1 21 1 12 7 1015 1382 10 4 3.042152 15 1 21 1 12 8 1015 1419 10 19 0.000000 *824qe5 1 21 1 12 9 1015 1469 10 27 26.750801 TORY5 1 21 1 12 10 1015 1563 10 4 41.965176 44 1 21 1 13 0 969 1092 11 107 -1 5 1 21 1 13 1 969 1092 11 42 19.771255 seats5 1 21 1 13 2 970 1143 10 36 25.047592 208205 1 21 1 13 3 970 1187 10 12 52.981171 164 1 21 1 14 0 947 1135 30 721 -1 5 1 21 1 14 1 947 1135 30 31 47.731468 wena}5 1 21 1 14 2 958 1853 4 3 39.956902 .4 1 21 1 15 0 926 1129 15 975 -1 5 1 21 1 15 1 926 1129 11 49 3.160614 andar5 1 21 1 15 2 926 1186 10 20 25.698608 ash5 1 21 1 15 3 928 1354 11 26 19.915810 “Ape5 1 21 1 15 4 928 1389 9 42 0.000000 ootimy5 1 21 1 15 5 927 1440 10 13 62.168613 ju5 1 21 1 15 6 928 1462 10 35 41.354977 comer5 1 21 1 15 7 928 1637 10 25 36.264946 mel5 1 21 1 15 8 928 1694 10 19 35.814682 wt5 1 21 1 15 9 928 1723 11 26 28.490868 ee5 1 21 1 15 10 929 1780 10 21 10.121933 ote5 1 21 1 15 11 929 1920 11 41 0.000000 terag5 1 21 1 15 12 930 2013 10 36 71.102585 uD5 1 21 1 15 13 930 2080 11 24 42.323296 Wo4 1 21 1 16 0 895 634 15 362 -1 5 1 21 1 16 1 900 634 10 27 28.142059 Denk5 1 21 1 16 2 900 671 9 13 35.698372 aD5 1 21 1 16 3 895 918 13 78 34.374565 aban4 1 21 1 17 0 882 1092 10 231 -1 5 1 21 1 17 1 882 1092 10 42 0.000000 esegta5 1 21 1 17 2 883 1143 9 36 17.854935 sono5 1 21 1 17 3 883 1186 9 12 20.481514 15 1 21 1 17 4 888 1318 3 5 13.604523 :4 1 21 1 18 0 868 1135 10 70 -1 5 1 21 1 18 1 868 1135 10 42 0.000000 wenieg5 1 21 1 18 2 868 1186 10 19 63.546738 WE4 1 21 1 19 0 853 1157 10 49 -1 5 1 21 1 19 1 853 1157 10 21 36.484203 oon5 1 21 1 19 2 853 1187 10 19 58.844421 4024 1 21 1 20 0 841 1130 13 851 -1 5 1 21 1 20 1 841 1130 6 5 51.724373 a5 1 21 1 20 2 841 1637 10 25 43.647972 Vel5 1 21 1 20 3 841 1694 10 20 0.000000 ar95 1 21 1 20 4 841 1723 10 27 51.038036 coe5 1 21 1 20 5 842 1846 9 14 56.229271 ve5 1 21 1 20 6 842 1884 11 47 0.000000 Ctooess5 1 21 1 20 7 843 1941 11 40 31.154510 85008)4 1 21 1 21 0 820 454 30 1650 -1 5 1 21 1 21 1 831 454 3 2 19.916824 ;5 1 21 1 21 2 828 977 3 3 47.754807 .5 1 21 1 21 3 838 1136 11 42 41.875473 nary5 1 21 1 21 4 838 1186 10 20 81.262833 ass5 1 21 1 21 5 840 1644 10 12 0.000000 “5 1 21 1 21 6 820 1933 25 32 0.945892 reds 1 21 1 21 7 828 2013 11 35 60.212166 uo5 1 21 1 21 8 828 2079 11 25 67.982925 uo4 1 21 1 22 0 808 446 15 550 -1 5 1 21 1 22 1 814 446 9 26 19.959442 tn5 1 21 1 22 2 813 481 9 11 0.000000 th5 1 21 1 22 3 813 503 10 19 0.000000 6l5 1 21 1 22 4 811 633 10 50 27.076553 ana5 1 21 1 22 5 808 983 10 13 75.079689 n4 1 21 1 23 0 780 1092 10 106 -1 5 1 21 1 23 1 780 1092 9 42 0.000000 saeqs45 1 21 1 23 2 781 1143 8 35 34.522278 200005 1 21 1 23 3 780 1186 10 12 41.486088 1h4 1 21 1 24 0 765 1136 11 70 -1 5 1 21 1 24 1 766 1136 9 42 0.000000 wars5 1 21 1 24 2 765 1186 11 20 0.000000 10t4 1 21 1 25 0 751 1151 10 55 -1 5 1 21 1 25 1 751 1151 9 27 39.633900 Jeon5 1 21 1 25 2 751 1187 10 19 12.084229 It4 1 21 1 26 0 726 1129 26 975 -1 5 1 21 1 26 1 736 1129 11 49 0.000000 abidsoy5 1 21 1 26 2 735 1186 11 20 45.702705 2665 1 21 1 26 3 737 1383 9 19 26.482430 veg5 1 21 1 26 4 736 1418 13 21 8.797714 Bw5 1 21 1 26 5 737 1447 9 50 0.000000 oscaim5 1 21 1 26 6 737 1519 10 28 23.040428 Cot5 1 21 1 26 7 737 1557 10 18 10.353867 TALS 1 21 1 26 8 737 1636 11 26 48.856155 wel5 1 21 1 26 9 738 1729 10 21 20.502502 STM5 1 21 1 26 10 739 1811 11 25 27.623840 OL5 1 21 1 26 11 738 1883 11 48 24.579002 M25 1 21 1 26 12 739 1940 13 41 23.373528 Beds 1 21 1 26 13 729 1968 27 16 34.185455 bd5 1 21 1 26 14 726 2080 11 24 58.220272 two4 1 21 1 27 0 716 634 28 1458 -1 5 1 21 1 27 1 723 634 10 49 32.705299 aan5 1 21 1 27 2 720 914 10 22 36.347153 fis5 1 21 1 27 3 720 947 10 24 22.893005 tn5 1 21 1 27 4 719 981 10 13 40.241512 wy5 1 21 1 27 5 716 1918 28 42 14.722855 oyna5 1 21 1 27 6 726 2012 10 36 0.000000 orm4 1 21 1 28 0 676 386 14 813 -1 5 1 21 1 28 1 684 386 6 3 43.899426 ‘5 1 21 1 28 2 676 1092 10 42 0.000000 eaeaya5 1 21 1 28 3 676 1143 9 35 0.000000 sen05 1 21 1 28 4 676 1187 10 12 20.410217 164 1 21 1 29 0 635 637 13 1344 -1 5 1 21 1 29 1 636 637 9 4 23.247177 .5 1 21 1 29 2 640 944 4 3 19.184036 ‘5 1 21 1 29 3 639 1383 3 32 33.382507 “25 1 21 1 29 4 640 1557 4 3 36.196827 .5 1 21 1 29 5 635 1779 11 57 17.881310 iit5 1 21 1 29 6 636 1882 10 49 0.000000 Mei5 1 21 1 29 7 637 1940 11 41 12.880745 eT4 1 21 1 30 0 618 629 35 1468 -1 5 1 21 1 30 1 636 629 10 50 27.068069 xu5 1 21 1 30 2 633 912 10 22 48.451683 es5 1 21 1 30 3 633 950 9 41 37.058533 tu5 1 21 1 30 4 633 1389 9 12 17.475044 Pi5 1 21 1 30 5 633 1447 10 50 22.527122 et5 1 21 1 30 6 633 1519 11 29 19.014221 ec5 1 21 1 30 7 634 1564 10 11 13.210266 i5 1 21 1 30 8 634 1636 10 26 20.505035 Oy5 1 21 1 30 9 618 1919 35 44 25.281616 bees 1 21 1 30 10 622 2013 11 35 53.304893 wp5 1 21 1 30 11 623 2073 10 24 50.443527 owe4 1 21 1 31 0 587 927 22 1177 -1 5 1 21 1 31 1 593 927 14 63 0.000000 Someranen5 1 21 1 31 2 580 1403 35 40 0.000000 austos5 1 21 1 31 3 580 1454 35 41 0.000000 aydaiy5 1 21 1 31 4 592 1532 13 64 0.000000 TAT5 1 21 1 31 5 592 1627 13 29 0.000000 AT5 1 21 1 31 6 595 1794 12 27 30.593674 cr5 1 21 1 31 7 594 1910 14 50 30.197037 ec.5 1 21 1 31 8 583 1964 36 54 13.026970 aT5 1 21 1 31 9 596 2076 13 28 12.018898 a!4 1 21 1 32 0 577 941 13 1106 -1 5 1 21 1 32 1 578 941 10 12 39.748116 ub5 1 21 1 32 2 578 965 10 25 29.811577 te5 1 21 1 32 3 577 1453 10 44 39.204903 21995 1 21 1 32 4 577 1556 10 41 25.874603 vie5 1 21 1 32 5 577 1621 10 41 12.943657 $13005 1 21 1 32 6 580 1918 10 43 34.413231 ae.5 1 21 1 32 7 580 2006 10 41 31.814316 vine2 1 22 0 0 0 0 1681 0 1043 -1 3 1 22 1 0 0 0 1681 0 1043 -1 4 1 22 1 1 0 0 2622 0 101 -1 5 1 22 1 1 1 0 2622 0 101 95.000000 4 1 22 1 2 0 0 1681 0 1043 -1 5 1 22 1 2 1 0 1681 0 1043 95.000000 2 1 23 0 0 0 546 1451 11 55 -1 3 1 23 1 0 0 546 1451 11 55 -1 4 1 23 1 1 0 546 1451 11 55 -1 5 1 23 1 1 1 546 1451 9 10 13.352959 Uy5 1 23 1 1 2 546 1471 11 35 5.067001 énoaa 91 FTA Appendix soreasiog 39°C ody AST s19q)d 3240 26 a1tdarw B97 ES woried I$ 902009 29°91 Yoon 162 DLsy0se ap (oon 36°21 artdaay age man Aaaug ewozend “Ss C1SR Eve Lebt Bz B60 “ar maa syd (oy) seveedtog 16° svtda sweden 20-91 sanqra 20420 15 ’ worry 162 139 Lown 352 . . etrenry wl 3 25T4aay 369 {a Ave 2amg emozend $05 1 22 1 9 10 1813 1743 11 30 0.000000 ZI9k5 1 22 1 9 11 1813 1785 13 11 16.588715 I5 1 22 1 9 12 1813 1806 10 15 32.660362 ve5 1 22 1 9 13 1813 1862 11 29 42.939781 Ceol5 1 22 1 9 14 1812 1925 11 23 38.472828 8/95 1 22 1 9 15 1812 1956 11 31 29.119583 Sates 1 22 1 9 16 1811 2036 13 69 23.997749 {he5 1 22 1 9 17 1810 2193 12 23 59.305111 aa5 1 22 1 9 18 1810 2274 11 38 65.131439 wr5 1 22 1 9 19 1809 2346 13 28 56.069874 tay)4 1 22 1 10 0 1767 1271 11 115 -1 5 1 22 1 10 1 1768 1271 10 44 0.000000 saaqya5 1 22 1 10 2 1768 1326 10 39 0.000000 semn05 1 22 1 10 3 1767 1373 11 13 65.087875 354 1 22 1 11 0 1751 1318 11 77 -1 5 1 22 1 11 1 1752 1318 10 46 29.247368 0012095 1 22 1 11 2 1751 1373 11 22 61.045311 3574 1 22 1 12 0 1726 1336 19 374 -1 5 1 22 1 12 1 1735 1336 10 28 55.413227 loans 1 22 1 12 2 1735 1374 10 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12 53 0.000000 eyeeaen2 1 116 0 0 0 669 2012 11 54 -1 3 1 116 1 0 0 669 2012 11 54 -1 4 1 116 1 1 0 669 2012 11 54 -1 5 1 116 1 1 1 669 2012 11 54 0.000000 wyenaes2 1 117 0 0 0 605 2010 31 56 -1 3 1 117 1 0 0 605 2010 31 56 -1 4 1 117 1 1 0 622 2010 14 56 -1 5 1 117 1 1 1 622 2010 14 56 42.598068 TTS4 1 117 1 2 0 605 2020 12 46 -1 5 1 117 1 2 1 605 2020 12 46 14.707932 ai]2 1 118 0 0 0 1410 2118 11 38 -1 3 1 118 1 0 0 1410 2118 11 38 -1 4 1 118 1 1 0 1410 2118 11 38 -1 5 1 118 1 1 1 1410 2118 11 38 21.780312 oO2 1 119 0 0 0 1330 2118 10 38 -1 3 1 119 1 0 0 1330 2118 10 38 -1 4 1 119 1 1 0 1330 2118 10 38 -1 5 1 119 1 1 1 1330 2118 10 38 36.784687 $5.192 1 120 0 0 0 766 2122 11 39 -1 3 1 120 1 0 0 766 2122 11 39 -1 4 1 120 1 1 0 766 2122 11 39 -1 5 1 120 1 1 1 766 2122 11 39 35.391624 122 1 121 0 0 0 670 2123 11 38 -1 3 1 121 1 0 0 670 2123 11 38 -1 4 1 121 1 1 0 670 2123 11 38 -1 5 1 121 1 1 1 670 2123 11 38 16.234222 CP)2 1 122 0 0 0 607 2114 31 47 -1 3 1 122 1 0 0 607 2114 31 47 -1 4 1 122 1 1 0 622 2114 16 47 -1 5 1 122 1 1 1 622 2114 16 47 33.440140 as4 1 122 1 2 0 607 2115 12 46 -1 5 1 122 1 2 1 607 2115 12 46 29.517525 rie2 1 123 0 0 0 1409 2190 12 28 -1 3 1 123 1 0 0 1409 2190 12 28 -1 4 1 123 1 1 0 1409 2190 12 28 -1 5 1 123 1 1 1 1409 2190 12 28 37.326118 (asd2 1 124 0 0 0 0 1953 0 18 -1 3 1 124 1 0 0 0 1953 0 18 -1 4 1 124 1 1 0 0 1953 0 18 -1 5 1 124 1 1 1 0 1953 0 18 95.000000 2 1 125 0 0 0 1131 2193 12 27 -1 3 1 125 1 0 0 1131 2193 12 27 -1 4 1 125 1 1 0 1131 2193 12 27 -1 5 1 125 1 1 1 1131 2193 12 27 40.720894 (66)2 1 126 0 0 0 1048 2193 12 28 -1 3 1 126 1 0 0 1048 2193 12 28 -1 4 1 126 1 1 0 1048 2193 12 28 -1 5 1 126 1 1 1 1048 2193 12 28 59.639355 on2 1 127 0 0 0 953 2193 12 28 -1 3 1 127 1 0 0 953 2193 12 28 -1 4 1 127 1 1 0 953 2193 12 28 -1 5 1 127 1 1 1 953 2193 12 28 62.956028 us2 1 128 0 0 0 860 2193 12 28 -1 3 1 128 1 0 0 860 2193 12 28 -1 4 1 128 1 1 0 860 2193 12 28 -1 5 1 128 1 1 1 860 2193 12 28 80.116608 as2 1 129 0 0 0 766 2194 13 27 -1 3 1 129 1 0 0 766 2194 13 27 -1 4 1 129 1 1 0 766 2194 13 27 -1 5 1 129 1 1 1 766 2194 13 27 67.335022 ao Opinion 91 FTC.

OPINION OF THE COMMISSION By Dixon, Commissioner:

This case principally involves the question of whether the Commission can and should apply provisions of the Wool Products Labeling Act of 1939 (15 U.S.C. 68) and the [2] Textile Fiber Products Identification Act (15 U.S.C. 70) which empower the Commission to require an importer that has violated those acts to post a bond with the Treasury Department in double the amount of future imports as a guarantee against further violations of the law. The complaint in this matter was issued June 24, 1975, and charged respondents with a variety of violations of the Wool and Textile Acts, as well as Section Five of the Federal Trade Commission Act (15 U.S.C. 45) in connection with the importation from Italy into the United States of various wool and other textile fiber products. Protracted pretrial skirmishing followed by a short and peaceful trial before Administrative Law Judge (ALJ) Paul Teetor led to his initial decision sustaining in large measure the allegations of the complaint. Judge Teetor found that respondents had violated the Wool Act, after review of numerous samples of wool products which evidence substantial overstatements of their wool content. He found that respondents had violated the Textile Act upon consideration of numerous fabric samples evidencing substantial overstatements of the content of textile fibers other than wool. Based upon these violations, the ALJ recommended entry of an order requiring that respondents cease and desist from future violations and, in addition, post a bond in double the value of future imports to be forfeited in the event of further violations of the Wool and Textile Acts.

Judge Teetor also found that respondents had violated Section Five by misrepresenting the shrinkage factor of certain of their imports and recommended that an order enter prohibiting that practice.

The ALJ rejected complaint allegations that misstatements of the amount of non-wool fibers in wool products constituted violations of Section 5 of the Federal Trade Commission Act, and that misstatements of wool content on sales invoices of wool products constituted Section 5 offenses. Judge Teetor also rejected the argument that understatements of textile fiber components violated the Textile Act. Complaint counsel have appealed each of these adverse rulings, while respondents have objected to imposition of the bond and the finding of Section 5 liability for misrepresentation of shrinkage fantayr Our Aionncitinn af thaan annnala Fall acren. 191 VERRAZZANO TRADING CORP., ET AL. 949 888 Opinion Bond Requirement The record reveals that 58 samples were taken from shipments totalling over 1,185,000 yards of woolen and other textile products. (I.D. 17)? Of these 58 samples, 25 were represented to and did include some wool. (I.D. 27) In 28 of the wool samples, wool content was overstated by 10 to 20 percentage points.? In the other two the overstatement was 3-10%. (1D. 31)* Another group of 24 textile samples, as to which no wool content was either claimed or found by testing, involved 29 overstatements of fiber content in excess of 3%, including 8 overstatements of fiber content in excess of 20%. (1D. 28)* The ALJ found that [4] these substantial and pervasive overstatements of wool and textile fiber content constituted violations of the Wool and Textile Acts respectively. (I-D. pp. 29, 31-32) Section 8 of the Wool Products Labeling Act, 15 U.S.C. 68f, provides in relevant part that, with respect to fiber content information which the Act requires to be disclosed: any person who falsifies, or fails to set forth, said information in said invoices, or who falsifies or perjures said consignee’s declaration insofar as it relates to said information, may thenceforth be prohibited by the Commission from importing, or participating in the importation of, any wool products into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value of said wool products and any duty thereon, conditioned upon compliance with the provisions of this Act.

Section 9 of the Textile Fiber Products Identification Act, 15 U.S.C. 70g, provides in relevant part that, with respect to information required to be provided by a seller of textile products: any person who falsifies, or perjures the consignee’s declaration insofar as it relates to such information, may thenceforth be prohibited by the Commission from importing, or participating in the importation of, any textile fiber product into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value 1 The following abbreviations are used herein: LD. __- Initial Decision Finding of Fact No. LD. _p. - Initial Decision Page No.

Tr. ~ Transcript of Testimony, Page No.

cx - Complaint Counsel’s Exhibit No.

RX - Respondent’s Exhibit No.

2 - referring to an t or understat t of fiber content by “x” percent, we mean that the number repr ing the indicated per of wool ds or falls short of the actual percentage of wool in the product by the number “x”. Thus, a claim that a product with 20% wool contains 40% wool is considered an overstatement of “20%", although one might also view it as overstating the wool content by 100%. 3 Those ples involving misst its of wool also involved 41 misstatements of non-wool fibers, including 29 overst ts, of which 10 were in excess of 20 percentage points. (1.D. 32-33) Judge Teetor found no violation based on these misst its. We di them in regard to complaint counsel’s appeal, infra at p. 13. * As a corollary, these samples also contained numerous understatements of textile fiber content in excess of 3% (1.D. 29). Judge Teetor concluded that these understatements did not violate the law. Our discussion of this point occurs infra at p. 15.

950 FEDERAL TRADE, COMMISSION DECISIONS Opinion 91 F.T.C.

of said products and any duty thereon, conditioned upon compliance with the provisions of this Act.

The purpose of these provisions is to allow the Wool and Textile Acts to be enforced against previous violators who may be, by virtue of their status as importers with assets outside and unreachable from the United States, immune, in practice, to the threat of civil penalties (the ordinary mode of enforcement of orders to cease and desist. [5] The applicability of the bonding provisions to the facts of the instant case is clear. Respondent Banci is an Italian citizen, while the corporate respondents appear dormant within the United States. It thus seems quite likely that the threat of civil penalties would do | little to deter a resumption of misbranding in the future by the individual or corporations through which he might act. Need for the bond is further enhanced by the fact that respondents have evidenced a pattern of repeated violations of the labeling laws (despite notifications from U.S. Customs) at least since 1972, notwithstanding their promise in 1971 (in conjunction with dismissal of previous misbranding charges) that they would undertake to comply with the labeling laws. Verrazzano Trading Corp., et al., 78 F.T.C. 637, 675 (1971). As Judge Teetor properly observed, imposition of a bond, to be forfeited in the event of further violations, appears to be the only way to ensure respondents’ compliance with the Wool and Textile Acts. (LD. p. 48) Respondents argue that imposition of a bond requires a finding that the law has been willfully breached. This is belied by the plain language of the statutes, which applies to a party who “falsifies or perjures” the consignee’s declaration.’ While perjury, of course, denotes an element of willfullness, falsification may occur by design or otherwise.* To read into the term a necessary element of intent would render its use in the statute redundant.’ The plain meaning of the statute is, moreover, wholly consistent with its plain purpose. It is apparent that misbranding that results from recklessness, [6] carelessness, or incompetence is no less inimical to the public interest than that which is done with specific intent to deceive. The Tih addition, the Wool Act authorizes imposition of a bond where the importer has falsified or failed to set forth the requisite information in its customs invoices. © Webster's New International Dictionary (2d ed.) defines “falsify” as “To make false; specif. (a) to represent falsely. . .” at page 915.

Tit would also lead to different constructions of “falsify” in different Sections o| of the Acts. For example, Section Ale) af the Textile Act. (IR TIS CO TA dofinas 0 tortiln nendiiat ta ba Ueitetee ote VERRAZZANO TRADING CORP., ET AL. 951 $88 Opinion zareless violator is no less dangerous, and no less likely to repeat its unlawful carelessness or heedlessness, than the willful one.® Accordingly, it comports fully with the statutory scheme that the bonding requirement should apply to misbranding whether intentional or not.

Respondents also observe that the bonding provision of the Wool Act may be invoked for falsification only of the consignee’s declaration or the special invoices required by the Tariff Act of 1930, while the Textile Act bonding provision is triggered by falsification only of the consignee’s declaration. Respondents contend that the ALJ did not find that these particular customs documents had been falsified.

While the ALJ did not focus precisely on this technical point, the requisite finding of falsification is implicit in the initial decision, and, in any event, our own review of the record leaves no doubt that the relevant invoices and consignee’s declarations were falsified. The ALJ found, in “Appendix II” of his initial decision and the findings which summarize it, that misbranding of numerous fabrics had occurred. Respondents admitted before trial (RA Ill, { 29-41, 9/20/76) and did not dispute at trial, that the representations found by the ALJ to be false had been made on “all fiber content tags, supplier’s invoices, special customs invoices and consumption entries . .” relating to each fabric in question. From this it is clear that falsification of supplier’s and special customs invoices occurred, as required for imposition of a bond under the Wool Act. It is also clear that falsification of consignee’s declarations occurred. The consignee’s declaration is merely a sworn statement contained in the consumption entry in which the importer vouches for the accuracy of the invoices accompanying the entry (eg., CX 73E). Falsification of the invoices is tantamount to falsification of [7] the consignee’s declaration. Accordingly, we find that falsification of supplier’s invoices, special customs invoices, and consignee’s declaration has occurred with respect to all fabrics found by the ALJ to have been misbranded.

Constitutionality of Bond Requirement Respondents also contend that the bonding provisions of the Wool and Textile Acts are unconstitutional. The ALJ refused to address the merits of this argument, concluding that it would be inappropri- * That Congress clearly recognized the distinction bet the two kinds of behavior is evident from Section 10 of the Wool Act (15 U.S.C, 68h) and Section 11 of the Textile Act (15 U.S.C. 10h) which impose criminal penalties for “Any person who willfully” violates various provisions of the laws, including Section 8 of the Wool Act and Section 9 of the Textile Act.

Opinion 91 F.T.C.

ate for an administrative agency to consider the constitutionality of one of its organic statutes. Wishing to preserve our options pending further consideration of this issue, the Commission instructed both sides to brief the merits of the constitutional argument, subject to the Commission’s determination as to whether it should be considered. .

With all the arguments now in hand, we find it much easier to answer the constitutional question than to decide whether we ought to ask it. While the Commission is frequently called upon to assess the impact of constitutional provisions upon various proposed interpretations of its organic statutes, or orders proposed to remedy violations of those statutes [eg., National Commission on Egg Nutrition, 88 F.T.C. 84 (1976); aff'd and ordered enforced as modified, 570 F.2d 157 (7th Cir. 1977)] the situation presented here is somewhat different, because respondents squarely challenge the constitutionality of an entire provision of law, however applied, and adoption of their position would lead to non-enforcement under any circumstances of a provision which Congress and the President believed to pass constitutional muster.

As complaint counsel and the administrative law judge contend, there is considerable case law support for the view that an administrative agency lacks jurisdiction or authority to consider the constitutional validity of the statutes it enforces, e.g., Johnson v. Robison, 415 U.S. 361, 368 (1974); Public Utilities Commission v. United States, 355 U.S. 584, 539 (1958); Macy Industries, Inc., 51 F.T.C. 981, 151 (1955), affd, 355 U.S. 411 (1958). Policy reasons justifying such an approach are readily imagined. However, viewed, an [8] administrative agency is created to enforce the law and effect the mandate of Congress. Were an agency to conclude that a duly enacted statute was unconstitutional, it might thereby preclude any review of that issue by the courts, thus thwarting a constitutional scheme which contemplates passage of laws by Congress, enforcement of them by the executive, and ultimate determination of their constitutionality by the judiciary.

There are, however, persuasive reasons which argue in favor of constitutional consideration by administrative agencies. For one thing, Commissioners, like other federal officials, take an oath of office to “support and defend the Constitution,” which presumably entails that we not wholly ignore its effect, when relevant, upon contemplated action. It may be argued that in upholding the Constitution, the administrative agency should defer in the first instance to the judgment of Congress as to what. the Coanctitutian VERRAZZANO TRADING CORP., ET AL. 953 888 Opinion of relevant case law. However, one may imagine many situations, short of an adverse Supreme Court ruling directly on point, in which the unconstitutionality of a statute would be strongly indicated to all reasonable minds. For example, one might ask what would happen if, (to take a pure hypothetical) during the pendency of this litigation the Supreme Court were to rule unconstitutional the bonding _ provisions of the Fur Products Labeling Act, 15 U.S.C. 69, 69d, a statute closely analogous in form and purpose to the Wool and Textile Acts. Such a ruling might well compel any reasonable person to conclude that the bond provisions of the Wool and Textile Acts must fall. It is only a matter of degree to move from precedents of this sort to the less pointed precedents which defense counsel may believe warrant condemnation of the statute here or others that might be challenged. It is no secret that certain statutes fall into disuse because prosecutors conclude, from their reading of case law and in the exercise of largely unreviewable discretion, that the constitutionality of those statutes could not survive challenge. It seems an artificial distinction to maintain that an administrative agency cannot consider the same issues when it acts, on the record for all to see, in its adjudicative capacity. [9] Moreover, as pointed out in the article upon which respondents rely for support,® there may be instances in which agency review of constitutional issues will furnish the informed factual and legal basis that is needed for reviewing courts to reach the best decision when they must face the constitutional question. Perhaps the lesson to be drawn from these conflicting observations is that administrative agencies ought not blind themselves to constitutional considerations, but in taking them into account they should give extreme deference to the implicit view of Congress that such statutes are constitutional, so as to avoid thwarting the Congressional intent by precluding judicial review of a statute’s constitutionality. Fortunately for the Commission, this is not a case in which we need risk bringing the pillars of the republic crashing down about our ears. Having considered respondents’ sketchy constitutional arguments, we find them without merit, and we can thus discern no reason to question the determination of Congress that the bond provisions of the Wool and Textile Acts are constitutionally sound. Respondents appear to contend that the bonding provisions constitute a denial of due process because they restrain unreasonably, or without need, respondents’ ability, if not “right” to engage in the importation of fabrics. Implicit in this part of the argument is * Note, “The Authority of Administrative Agencies to Consider the Constitutionality of Statutes,” 90 Harv. L. Rev. 1682 (1977).

Opinion 91 F.TC.

also an equal protection claim, that importers have been impermissibly singled out for imposition of the bond requirement. As complaint counsel observe, however, there is no vested right to carry on foreign commerce with the United. States and the power of Congress over foreign commerce is plenary. United States v. 12 200-Ft. Reels of Film, 413 U.S. 123, 125-6 (1973). Given that Congress might, if it chose, exclude all foreign imports, Buttfield v. Stranahan, 192 U.S. 470, 493 (1904), it can surely place less restrictive conditions upon importers found to have violated federal labeling laws without offending due process.’° [10] Nor do the bond provisions discriminate impermissibly. While the necessity to post a bond imposes some incremental restraint upon an importer’s ability or inclination to import, the requirement | is clearly tailored reasonably to ensure non-repetition of previous violations by a class of violators which may reasonably be thought less likely than others to be amenable to the sanctions ordinarily imposed for violations of an order. Metropolitan Casualty Insurance Co. v. Brownell, 294 U.S. 580, 584 (1935). Although respondents claim that Italian law would permit enforcement of a civil penalty judgment against them rendered by an American court, the ease with which this might be accomplished is by no means clear, and surely the process would be fraught with much greater uncertainty and expense than that by which civil penalties are ordinarily exacted. Under the circumstances, we think that Congress quite reasonably provided an alternative means to ensure deterrence of repeat violations by importers, and its judgment in this matter affecting foreign commerce is one that ought not lightly be disturbed, cf. Mathews v. Diaz, 426 U.S. 67, 78-82 (1976). Finally, we reject respondents’ contention that the relevant provisions of law are impermissibly vague. Counsel’s strained attempts to misunderstand what these provisions mean are perhaps the best indication of their clarity.

For the foregoing reasons we are unpersuaded by respondents’ constitutional challenge, assuming arguendo that we ought to consider it. [11] Misrepresentation of Shrinkage Factor The administrative law judge found that respondents had violated Section 5 by misrepresenting the residual shrinkage of large quantities of cloth sold to Bobbie Brooks and other purchasers. (1.D. 8, 36) The fabric in question was represented as possessing residual %”° This ideration also speaks to respondents’ ar tt that the bond constitutes an unconstitutionally VERRAZZANO TRADING CORP., ET AL. 955 388 Opinion é shrinkage of 1% to 1-1/2%, when, in fact, it was likely to shrink by 5-6%. (I.D. 36) There is no serious dispute as to the existence of the misrepresentation, or its materiality. Fabric with a residual shrinkage of less than 1-1/2% is suitable for immediate incorporation in clothing, and implies to the manufacturer some sort of pre-treatment, for which additional payment may be warranted. Fabric with residual shrinkage approaching 6% is not suitable for incorporation in many kinds of clothing without further treatment, since washing may result in substantial shrinkage that would materially alter the size of the clothing. (1.D. 37) While not challenging these facts, respondents appear to contend that what is involved is merely a “private controversy” which injured no consumers. Respondents contend that Bobbie Brooks tested the cloth itself before making any use of it, so that it was aware of its true shrinkage factor. Any transmission of the fabric untreated to the public was, therefore, the responsibility of the manufacturer.

The principal point to be made about all this, we think, is that Section 5 does not tolerate deceptive practices by businesses merely because they are visited upon other businesses rather than directly upon consumers. In either case the public is harmed. The law prohibits deceptive practices affecting commerce because such practices make it impossible for purchasers to make the informed buying decisions that are needed to maximize the welfare of all citizens in a capitalist economy. These market-distorting effects of deception are no less significant in the middle of the chain of distribution than they are at its end. If a manufacturer pays extra money for fabric because it is represented to be pre-shrunken, that cost must inevitably be [12] passed along to the consuming public, in one form or another. Deceptive practices which alter the buying patterns of manufacturers must inevitably affect, in turn, the way such manufacturers relate to their customers.” It is true, of course, that manufacturers may be in a better position than consumers to pursue private remedies to redress the effects of deception. For this reason, the Commission, in the exercise of its discretion, may be less inclined to pursue deceptions occurring between businesses. However, this can in no way constitute a legal defense to charges of misrepresentation. The deception challenged 5 1 6 1 1 2 577 2401 64 20 94.254066 This5 1 6 1 1 3 635 2408 17 13 96.789665 is5 1 6 1 1 4 660 2404 48 18 96.970390 true5 1 6 1 1 5 715 2408 52 14 96.890297 even5 1 6 1 1 6 776 2404 69 19 96.428162 where5 1 6 1 1 7 853 2404 37 20 96.428162 thes 1 6 1 1 8 897 2404 107 24 96.396309 deceptions 1 6 1 1 9 1012 2405 19 20 96.836006 is5 1 6 1 1 10 1041 2405 92 8 96.836006 detected5 1 6 1 1 11 1141 2405 25 25 96.975883 by5 1 6 1 1 12 1174 2406 37 20 96.799118 thes 1 6 1 1 13 1285 2407 92 20 91.792549 facturers 1 6 1 1 14 1384 2407 41 20 96.866508 ands 1 6 1 1 15 1433 2410 36 18 96.865593 not5 1 6 1 1 16 1476 2409 74 23 96.398476 passed5 1 6 1 1 17 1558 2415 27 14 96.948441 on5 1 6 1 1 18 1593 2412 22 16 96.987190 to5 1 6 1 1 19 1621 2416 126 14 96.506371 consumers.5 1 6 1 1 20 1756 2411 55 20 96.577423 With4 1 6 1 2 0 508 2434 1303 33 -1 5 1 6 1 2 1 508 2437 81 21 96.971550 respects 1 6 1 2 2 600 2437 22 17 97.001320 to5 1 6 1 2 3 632 2434 36 20 96.726990 thes 1 6 1 2 4 679 2435 115 25 97.007881 shrinkage5 1 6 1 2 5 805 2437 100 24 96.853889 problem,5 1 6 1 2 6 916 2443 31 14 96.308640 we5 1 6 1 2 7 958 2437 61 21 96.874390 thinks 1 6 1 2 8 1032 2438 48 20 97.018890 that5 1 6 1 2 9 1090 2439 61 19 96.989174 while5 1 6 1 2 10 1162 2439 76 20 96.416313 Bobbie5 1 6 1 2 11 1249 2440 79 20 96.882950 Brooks5 1 6 1 2 12 1339 2446 49 18 96.116577 may5 1 6 1 2 13 1399 2440 25 21 96.275375 be5 1 6 1 2 14 1435 2442 127 25 96.929192 sufficiently5 1 6 1 2 15 1574 2443 59 24 96.995476 large5 1 6 1 2 16 1643 2445 22 17 96.824066 to5 1 6 1 2 17 1675 2446 43 17 96.359451 tests 1 6 1 2 18 1728 2444 27 20 96.428436 its5 1 6 1 2 19 1765 2451 46 13 96.981270 own4 1 6 1 3 0 507 2465 1304 36 -1 5 1 6 1 3 1 507 2467 76 20 96.379036 fabrics5 1 6 1 3 2 592 2467 33 20 96.951820 for5 1 6 1 3 3 633 2468 66 20 96.317856 shrinks 1 6 1 3 4 760 2465 67 33 96.563293 other,5 1 6 1 3 5 884 2471 14 9 22.204941 HH5 1 6 1 3 6 998 2471 104 20 74.882736 facturers5 1 6 1 3 7 1111 2472 66 25 96.213097 might5 1 6 1 3 8 1185 2473 47 19 96.213097 wells 1 6 1 3 9 1241 2476 39 17 96.223595 not5 1 6 1 3 10 1288 2473 39 20 96.223595 be5 1 6 1 3 11 1321 2480 22 13 96.914131 in5 1 6 1 3 12 1352 2480 14 14 95.356979 a5 1 6 1 3 13 1375 2475 88 23 96.790253 positions 1 6 1 3 14 1472 2476 22 18 96.425278 to5 1 6 1 3 15 1502 2476 70 19 96.411865 detect5 1 6 1 3 16 1580 2476 52 19 93.301971 such5 1 6 1 3 17 1642 2477 169 24 93.117401 misrepresenta-4 1 6 1 4 0 506 2500 1305 40 -1 5 1 6 1 4 1 506 2500 61 23 96.964691 tions,5 1 6 1 4 2 576 2501 42 20 97.002731 ands 1 6 1 4 3 628 2501 73 24 96.194107 might,5 1 6 1 4 4 710 2502 111 23 96.194107 therefore,5 1 6 1 4 5 830 2509 48 18 96.118935 pass5 1 6 1 4 6 886 2504 59 20 96.894745 them5 1 6 1 4 7 953 2510 27 14 96.894745 on5 1 6 1 4 8 988 2505 89 25 96.696625 directly5 1 6 1 4 9 1085 2507 23 17 96.972862 to5 1 6 1 4 10 1115 2512 126 14 96.915459 consumers.5 1 6 1 4 11 1249 2506 57 23 96.669800 This,5 1 6 1 4 12 1315 2507 58 23 94.967949 then,5 1 6 1 4 13 1382 2508 18 18 94.967949 is5 1 6 1 4 14 1408 2514 13 13 96.914597 a5 1 6 1 4 15 1429 2507 83 20 69.917526 farther5 1 6 1 4 16 1520 2509 102 23 95.137123 potential5 1 6 1 4 17 1631 2515 73 14 90.975922 sources 1 6 1 4 18 1708 2496 17 40 96.995720 of5 1 6 1 4 19 1738 2511 10 19 96.357391 i5 1 6 1 4 20 1741 2505 70 35 96.841919 injury4 1 6 1 5 0 506 2533 306 27 -1 5 1 6 1 5 1 506 2533 54 20 95.523941 from5 1 6 1 5 2 567 2535 143 23 92.294479 respondents’5 1 6 1 5 3 717 2536 95 24 96.901581 practice.2 1 7 0 0 0 670 2476 392 17 -1 3 1 7 1 0 0 670 2476 392 17 -1 4 1 7 1 1 0 670 2476 392 17 -1 5 1 7 1 1 1 670 2476 392 17 95.000000 Opinion 91 F.T.C.

here occurred with respect to a substantial volume of commerce (LD. 36), and in addition to Bobbie Brooks involved at least one other customer of respondents, and may well have involved numerous customers to whom respondents made representations of shrinkage. (.D. p. 37) It is obviously in the public interest that such practices be © curbed. [13] Complaint Counsel’s Appeal - Section Five Labeling Violations Nine samples of respondents’ fabrics were tested and found to contain small, undisclosed traces of wool ranging from 1.1% to 9.6% (1.D. 34). These samples also exhibited 16 substantial overstatements of the percentage of non-wool fabrics, including 5 overstatements in excess of 20 percentage points. (I.D. 35). In addition, as noted supra at n. 3, those fabric samples in which wool content was overstated also involved 29 overstatements of fiber content other than wool. The complaint alleged that the overstatements of non-wool fibers constituted violations of Section 5 of the Federal Trade Commission Act.?? The administrative law judge dismissed the Section 5 count on grounds that a deceptive tendency required under Section 5 could not be inferred from “mere misbranding alone.” We reverse. Misstatements of the fiber content of fabrics are, by definition, “misrepresentations,” and that misrepresentations of more than de minimis character may be materially misleading is, we think, equally clear. The fiber composition of a fabric is likely to affect its perceived value in the eyes of both some manufacturers and some consumers. Perhaps the best indication of this comes from the customs invoices present in the record of this case. In these, respondents [14] declared both the fiber percentage composition by weight of their products, and the fiber percentage composition by value. As might be supposed, different fabrics have different relative values. Thus, for example, respondents’ Navajo was represented to consist of 40% cotton, 40% polyester, and 20% nylon. However, 86% of the value of the same fabric was declared to be accounted for by cotton (9% by polyester, and 5% by nylon) because of the greater relative value of cotton. (CX id 102I). In fact, none of the samples of Navajo present in the record contain anything approaching 40% cotton. Some contain less than 25% cotton, one only 22.4% cotton (CX 69), which means that the value of this fabric was implicitly Tr These violations were alleged under Section 5 upon the theory that the decision in Marcus v. Federal Trade Commission, 354 F.2d 85 (2d Cir. 1965) precluded a finding of Wool Act violation for mislabeli: ig of the n yt content of wool products, while the Textile Act does not apply to prod which in wool. R izing the VERRAZZANO TRADING CORP., ET AL. 957 888 Opinion overstated to a very substantial degree. Misrepresentations of fiber content may thus lead manufacturers and consumers to misestimate the value of the fabrics they are purchasing, as well as their characteristics. We believe, accordingly, that such misrepresentations possess the capacity to mislead consumers materially. While the materiality of a misrepresentation is clearly a matter which the Commission, in its expertise, may infer, Federal Trade Commission v. Colgate-Palmolive Co., 380 U.S. 374, 392 (1965); Leonard F. Porter, Inc., et al., 88 F.T.C. 548, 628 (1976), we need not rely in this instance solely upon such inference to support our conclusion. The same conclusion has been reached by Congress when it passed the Wool and Textile Acts. These laws are premised upon a clear determination that accurate fiber content information is an important factor in consumer purchase decisions. See, e.g., Report to Accompany H.R. 944, Committee on Interstate and Foreign Commerce, 76th Cong., Ist Sess., Report 907, 1939; Report of Senate Committee on Interstate and Foreign Commerce, 85th Cong., 2d Sess., Report 1658, June 6, 1958; Report to Accompany H.R. 469, Committee on Interstate and Foreign Commerce, 85th Cong., 1st Sess., August 5, 1957. Accordingly, by holding that misrepresentations of non-wool fiber content constitute violations of Section 5, the Commission does no more than give effect to the Congressional determination that these practices are misleading and may tend to injure consumers." [15] While the foregoing findings are adequate to address complaint counsel’s appeal,'* we must note that having again considered the Second Circuit’s holding in the Marcus case, we respectfully question whether it is an appropriate interpretation of the law. [16] The Second Circuit in Marcus held that the Wool Act was concerned only with protecting buyers against substitution of 18 We also hold that misrepresentations of both wool and non-wool fibers in sales invoices constitute violations of Section 5. While the Wool Act does not extend to sales invoices, the misrepr i ined therein may be no less misleading to consumers than those made on the label or in customs documents covered by the Act. See G. Sherman Corp., et al, 56 F.T.C. 788, 786 (1960); cf. Grand Union Co. v. FTC. 300 F.2d 92, 98 (2d Cir. 1962). * Complaint counsel have also argued on appeal that understatements of textile fibers should also be considered violations of the Textile Act. The ALJ concluded they were not violations, analogizing from Marcus v. Federal Trade Commission, supra which held that understat ts of wool content were not violations of the Wool Act. The Second Circuit's rationale was that the Wool Act was designed only to protect consumers who viewed wool - asa desirable component product and who would presumably not be injured if wool content were understated. This holding is patently not generalizable to the Textile Act, which is designed to ensure accurate disclosure of the constituent fibers in textile products and embodies no assumption as to which fibers consumers will prefer. Obviously und t ts of disfavored fibers may be just as deceptive and injurious as overstatements of preferred fibers. Accordingly, we believe that understatements of fiber content constitute violations of the Textile Fiber Products Identification Act. However, the point may be of little significance for most proceedings. The exi of an under it of one fiber is likely to ensure the exi of an overst t of at least one other, since even a manufacturer which fabricated the contents of a label would doubtless take care to ensure that the stated components of its product added up to 100%. Therefore, proof of an understatement is likely to accompany proof of an overstatement, and will certainly imply the existence of one. Whether this is regarded as involving one or two violations of the law hardly seems to alter the gravity of the offense. Opinion 91 F.T.C.

inferior products for wool. Where the wool content was not overstated, the court held that no violation could result merely because of misstatement of the content of other, “inferior” fibers. In reaching this conclusion, the Court sought to overcome Section 4(a)(2)(A)(4) of the Wool Act which defines a wool product to be misbranded if it lacks a stamp, tag, or label which shows, inter alia, the percentage of the total fiber weight of the wool product, exclusive of ornamentation not exceeding 5 per centum of said total fiber weight, of . . . (4) each fiber other than wool if said percentage by weight of such fiber is 5 per centum or more; . . . (emphasis added). , In our view the underlined words prescribe that each and every non-wool fiber in a wool product should be identified and its percentage given, if such fiber constitutes more than 5% of the product.

Marcus suggests that this requirement could be satisfied merely by designating all non-wool fibers together as “man-made” fibers, with their combined percentage stated. This interpretation, however, appears inconsistent with use of the word “each” in the statute. Moreover, while Congress was apparently silent at the time of passage of the Wool Act as to what it intended to require by way of labeling of non-wool fibers (except for its express statement in the statute) its intent with respect to the earlier Act can be glimpsed by a consideration of the history of the Textile Act which the Marcus decision does not appear to address. In passing the Textile Act, Congress acted on- the assumption that consumers would be interested in knowing the content of all fibers in covered products, without regard to superiority. Therefore, in language virtually identical to that employed in the above-quoted portion of the Wool Act, Congress required a listing in non-wool products of the percentage of each fiber present, by weight, in the total fiber content of the textile fiber product, exclusive of ornamentation not exceeding 5 per centum by weight of the total fiber content. .. . :

[17] Congress undoubtedly excluded products “required to be labeled under the Wool Products Labeling Act of 1939” from its definition of products covered by the Textile Act because it presumed that the Wool Act already required virtually identical labeling requirements for non-wool fibers contained in wool products. That assumption does not appear unreasonable since the Wool Act would seem to have expressly so required.

Accordingly, it is our view that whatever omissions exist in the legislative history of the Wool Act as to how it should be construed © VERRAZZANO TRADING CORP., ET AL. 959 888 Opinion passed the Textile Act. The concern of Congress with wool representations when it passed the Wool Act cannot be allowed to obscure the fact that in plain language it did establish a regulatory scheme to require percentage labeling of non-wool fibers, a scheme which was ultimately perfected in the Textile Act. As complaint counsel point out, the interpretation rendered in Marcus would defeat this statutory design. While a product with no wool must be labeled as to each constituent fiber under the Textile Act, a product with small amounts of wool becomes subject to the Wool Act (and exempt from the Textile Act) and thereby need not be labeled at all, even though the consumer’s principal interest in the product will surely be with respect to non-wool fibers. In the instant case, actual misrepresentations of fiber content have occurred and as noted above we believe these are readily reached under Section 5. However, Section 5 is clearly not an adequate substitute for the careful Congressional design, because it lacks the same criminal and civil remedial provisions that are contained in the labeling laws. . Moreover, it is not clear that a finding of “deception” under Section 5 alone could be properly applied to the unscrupulous manufacturer who simply included tiny quantities of wool in its fabric (thereby rendering it a product covered by the Wool Act) and thereafter proceeded to label it accurately “other non-wool fibers 99%,” a formulation seemingly endorsed by the Second Court in Marcus. For the foregoing reasons, the Commission remains persuaded of the view that the Wool Act applies to misbranding non-wool fibers in wool products, and requires accurate statements of the amount. of each non-wool fiber which constitutes more than 5% by weight of the product. It is the Commission’s respectful hope and desire that the Second Circuit, when faced with the compelling facts of this case or others like it, would reconsider its holding in the Marcus case in the respects indicated above. [18] Synopsis of Determinations for 15 U.S.C. 45(m)(1)(B) In order to facilitate application of the Commission’s holdings in this case to others who may be engaged in the same practices as respondents, pursuant to the provisions of 15 U.S.C. 45(m)(1)(B) ((§205 of the Magnuson-Moss Act)], the Commission has determined to set forth in synopsis form a statement of the acts or practices determined to be unfair and deceptive in this proceeding: ** ** The Commission's decision to prepare a synopsis of its determinations in this case is undertaken in the exercise of its discretion, in order to simplify application of these determinations to other cases. Such a procedure is not required by 15 U.S.C. 45(m)(1\(B).

fa i 960 FEDERAL TRADE‘COMMISSION DECISIONS Opinion 91 F.T.C.

I. Acts or Practices Which Are Unfair or Deceptive Pursuant to the Wool Products Labeling Act or the Textile Fiber Products Labeling Act, and Section 5 of the Federal Trade Commission Act 1. It is an unfair and deceptive act or practice to falsely or deceptively stamp, tag, label, or otherwise identify wool products as to the character or amount of the constituent fibers which they contain.

_ 2. It is an unfair and deceptive act or practice to fail to affix securely to, or to place on, a wool product a stamp, tag, label, or other means of identification showing in a clear and conspicuous manner the correct percentage of the total fiber weight of such wool product . exclusive of ornamentation not exceeding five percent of said total fiber weight of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber other than wool when said percentage by weight of such fiber is five percent or more, and (5) the aggregate of all other fibers. 3. It is an unfair and deceptive act or practice (a) to falsify or fail to set forth upon invoices of imported wool products required by Section 484 of the Tariff Act of 1930, all information required by the Wool Products Labeling Act (15 U.S.C. 68) to be disclosed in connection with those products; and (b) to falsify or perjure the consignee’s declaration provided for by Section 485 of the Tariff Act of June 17, 1980, insofar as it relates to the information required by the Wool Products Labeling Act to be disclosed in connection with wool products. [19] 4, It is an unfair and deceptive act or practice to falsely or deceptively stamp, tag, label, invoice, advertise, or otherwise identify any textile fiber product as to the name or amount of constituent fibers contained therein.

5. It is an unfair and deceptive act or practice to fail to affix to a textile fiber product a stamp, tag, label, or other means of identification showing in words and figures plainly legible the true percentage of each fiber present by its true generic name, if the weight of such fiber is 5 percent or more of the total weight of the product.

6. It is an unfair and deceptive act or practice (a) to falsify or fail to set forth upon invoices of imported textile fiber products required under Section 484 of the Tariff Act of 1980, all information required by the Textile Fiber Products Identification Act (15 U.S.C. 70) to be disclosed in connection with those products; and (b) to falsify or nasties tha nnneieemanian Annlnwnnst ne 2.2 2--t-- ed be Oe nat 40F oR at VERRAZZANO TRADING CORP., ET AL. 961 888 Final Order .

be disclosed by the Textile Fiber Products Identification Act to be disclosed in connection with textile fiber products. II. Acts or Practices Held To Be Unfair and Deceptive Pursuant to Section 5 of the Federal Trade Commission Act: 1. Itis an unfair and deceptive act or practice to misrepresent the amount by which a fabric will shrink when it is washed. 2. Itis an unfair and deceptive act or practice to misrepresent the amount of constituent fibers contained in a wool or textile fiber product.

FINAL ORDER This matter has been heard by the Commission upon the crossappeals of complaint counsel and respondents’ counsel from the initial decision and upon briefs and oral argument in support and in opposition to each appeal. The Commission, for the reasons stated in the accompanying Opinion, has granted the appeal of complaint counsel and denied the appeal of respondents’ counsel. Therefore, [2] It is ordered, That the initial decision of the administrative law judge be adopted as the Findings of Fact and Conclusions of Law of the Commission, except for p. 31 paragraph headed “Understatements of Fiber Content”; p. 35, line 7, sentence beginning “Still. . .” through line 29, sentence ending with “violation”; p. 47, first full paragraph onward.

Other Findings of Fact and Conclusions of Law of the Commission are contained in the accompanying Opinion. It is further ordered, That the following order to cease and desist be entered:

ORDER It is ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations, arid as an officer of Lanificio Tuscania Inc. and Lima Textiles, Inc., and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidlary, division, or any other device, in connection with the introduction, sale, advertising or offering for sale in. commerce, or the transportation or causing to be transported in commerce, or the Final Order 91 F.T.C.

importation into the United States of any textile fiber product; or in connection with the sale, offering for sale, advertising, delivery, transportation, 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, as the terms “commerce” and “textile fiber product” are defined in the Textile Fiber Products Identification Act, do forthwith cease and desist from misbranding such textile fiber products by: [3] 1. Falsely or deceptively stamping, tagging, labeling, invoicing, advertising or otherwise identifying such products as to the name or amount of constituent fibers contained therein. 2. Failing to affix a stamp, tag, label, or other means of identification to each such textile fiber product showing in a clear, legible and conspicuous manner each element of information required to be disclosed by Section 4(b) of the Textile Fiber Products Identification Act.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc, a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or other device, do forthwith cease and desist from importing, or participating in the importation of, any textile fiber product into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value of said products and any duty thereon, conditioned upon compliance with the provisions of the Textile Fiber Products Identification Act.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc., a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc., and as a partner trading and doing business as Lanificio Walter Banci s.a.s.. and VERRAZZANO TRADING CORP., ET AL. 963 888 Final Order through any corporation, subsidiary, division, or other device, in connection with the introduction into commerce, or the offering for sale, transportation, distribution, delivery for shipment or shipment in commerce of wool products, as “commerce” and “wool product” are defined in the Wool Products Labeling Act of 1939, do forthwith cease and desist from misbranding such products by: [4] 1. Falsely and deceptively stamping, tagging, labeling, or otherwise identifying such products as to the character or amount of the constituent fibers contained therein.

2. Failing to securely affix to or place on each such product a stamp, tag, label or other means of identification showing in a clear and conspicuous manner each element of information required to be disclosed by Section 4(a)(2) of the Wool Products Labeling Act of 1939.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc. a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporation, subsidiary, division, or other device, do forthwith cease and desist from importing or participating in the importation of wool products into the United States except upon filing bond with the Secretary of the Treasury in a sum double the value of said wool products and any duty thereon, conditioned upon compliance with the provisions of the Wool Products Labeling Act of 1939.

It is further ordered, That respondents Verrazzano Trading Corporation, a corporation, Francesco Datini Inc., a corporation, Lanificio Tuscania Inc., a corporation, Lima Textiles Inc. a corporation, and Hudson Textile Corporation, a corporation, their successors and assigns and their officers, and Walter Banci, individually and as agent for said corporations and as an officer of Lanificio Tuscania Inc. and Lima Textiles Inc. and as a partner trading and doing business as Lanificio Walter Banci s.a.s., and respondents’ representatives, agents and employees, directly or through any corporate or other device, in connection with the importing, advertising, offering for sale, sale or distribution of wool and/or textile products, in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease Final Order 91 F.T.C.

and desist from misrepresenting the character and amount of constituent fibers contained in such products and the shrinkage factor of such products on contracts, invoices, shipping memoranda or labels applicable thereto, or in any other manner. [5] It is further ordered, That respondents deliver a copy of this order by registered mail to each of their customers that purchased qualities Sioux, Manito, Totem, Marnie, Gretel, Isabel, Veruska, Spluga, Eva, Navajo, Ellen, Ingrid or Myla during the period January 1, 1973 to June 24, 1975.

It is further ordered, That the individual respondent named herein. promptly notify the Commission of the discontinuance of his present business or employment and his affiliation with a new business or employment. Such notice shall include said 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 corporate respondents shall forthwith distribute a copy of this order to each of their operating divisions and/or subsidiaries.

It is further ordered, That the corporate respondents notify the Commission at least thirty (30) days prior to any proposed change in said respondents such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporations which may affect compliance obligations arising out of the order. It is further ordered, That respondents herein shall within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. KOSCOT INTERPLANETARY, INC., ET AL. : 965 965 Interlocutory Order i