Ernst Bischoff Co., Inc.

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

COMPLAINT IN THE MATTER OF THE ALLEGED VIOLATION OF SECTION IS OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1914. Docket 743-February "25, 1922.

SYLLABUS.

Where a corporation engaged in the manufacture and sale of substitutes for textile soaps, paid and off€'red to pay to employees of customers and prospective customers charged with the duty of recommending to their employers which products to use, without the knowledge and consent of said employ. ers, sums of money aggregating several thousand dollars annually as au inducement for them to influence their employers to purchase or contract to purchuso its products, and to refrain from dealing with Its competitors; with a tendency to cause competitors to adopt the same methods in order to retain their business, and with the result that all competitors wero affected and the corporation's cost of doing business was increased: Held, Tl.mt such payments and offers to pay, under the circumstances set forth, constituted an unfair method of competition. COMPLAINT.

The Federal Trade Commission, having reason to believe from a preliminary investigation· made by it that Ernst Bischoff Co., Inc., hereinafter referred to as respondent, has been and is using unfair methods of competition in interstate commerce in violation of the provisions of Section 5 of an Act of Congress approved September 26, 1914, entitled, "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect, on information and belief as follows: PARAGRAPH 1. That the respondent is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located at the City of New York in said State. PAR. 2. That the respondent is now and has been at all times hereinafter mentioned engaged in the business of manufacturing and selling dye stuffs, textile soaps, finishing materials and specialties for textile mills, causing such products to be transported to the pur· chasers thereof from the State of New York through and into other States of the United States and carries on such business in direct, active competition with other persons, partnerships and corporations similarly engaged.

ERNST BISCHOFF CO., INC. 231 230. Findings. P .AR. 3. That respondent in the course of its business as described in Paragraph 2 hereof, gives and has given to dyers, finishers and other employees of proprietors of textile mills to whom it sold or offered to sell dye stuffs, soap, oil and other materials and specialties used in such mills, without the knowledge and consent of their employers and without other considerations therefor, cash gratuities amounting in some instances to as much as $200 and $500 per year, to induce such employees to favor and recommend, und influence their employers to purchase, the products of the respondent, and to refrain from purchasing the products of its competitors. That such cash gratuities so given by respondent aggregate approximately $3,000 annually, or 5 per cent of the entire volume of business o£ the respondent, which volume of business amounts to approximately $60,000 per year. That as a result o£ the payment of such cash gratuities, respondent adds to its annual cost of -doing business $3,000, and is compelled to and does add to the selling price of the products sold by it an amount approximating 5 per cent of the fair market value of such commodities, which is an addition to the fair market value of such commodities, and which additional amount the customers of the respondent, and eventually the purchasing public, must pay. That as a further result of respondent's said practices, all of its competitors are affected, and the giving of cash gratuities by respondent as aforesaid, has tende<;l to cause competitors of respondent to give employees of customers and prospective customers, cash gratuities of substantially like amounts to those paid by respondent as aforesaid, for the same purposes and with the same effect, as a means of protecting their trade and preventing respondent from obtaining the business enjoyed liy them.

PAR. 4. That by reason of the facts recited, the respondent is using an unfair method of competition in commerce, within the intent and meaning of Section 5 of an Act of Congress entitled, " An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an Act of Congress approved Septemb~r 26, 1914, the Federal Trade Commission issued and served a ~om plaint upon the respondent, Ernst Bischoff Co., Inc., charging it With. t?e use of unfair methods of competition in violation of the provisions of said Act.

The respondent having entered its appearance and filed its answer herem, hearings were had and evidence was thereupon intra- 232 FEDERAL TRADE COMMISSION DECISIONS. Findings. 4F.T.O.

duced in support of the allegations of the said complaint before Frank B. Lent, an examiner of the Federal Trade Commission theretofore duly appointed.

And thereupon this proceeding came on for final hearing and counsel for the Commission and the respondent having waived the filing of briefs and the hearing of oral argument herein, and the Commission having duly considered the record and being now fully advised in the premises, makes this its findings as to the facts and conclusion:

FINDINGS AS TO THE FACTS, PARAGRAPH 1: That the respondent, Ernst Bischoff Co., Inc., is now and has been at all times since November, 1912, a corporation, organized and existing under and by virtue of the laws of the State of New York, having its main office and principal place of business in the City of New York, in said State. · PAR. 2. The respondent is and since its incorporation has been engaged in the business of manufacturing and selling paroxan, a chemical product which is used as a substitute for soap in washing and scouring textile goods during the process of manufacture thereof, and emarol, a chemical product which is used also as a substitute for soap in the fulling process in the manufacture of textile goods, and shipping such products in commerce from the State of New York through and into the States of Connecticut, Rhode Island, Massachusetts, and Pennsylvania; that other persons, firms, partnerships, and corporations sell and ship soap products, which are used for similar purposes in the textile mills, in commerce in competition with respondent.

PAR. 3. The respondent in the course of its business of selling chemical products used for washing, scouring, and fulling, as above set forth, during the years 1918 and 1919, has given and offered to give to employees of its customers and prospective customers, without the knowledge and consent of their employers, sums of money, amounting in some instances to as high as Two hundred ($200) Dollars, and Five Hundred {$500) Dollars, per year, and aggregating approximately Three Thousand ($3,000} Dollars, annually, as an inducement to influence their said employers to purchase or contract to purchase respondent's products, and to refrain from dealing or contracting to deal with competitors of respondent. PAR. 4. The employees to whom sums of money were offered or given by the respondent as aforesaid were dyers and finishers in textile mills whose duties required them to make tests and apply prepara- ERNST BISCHOFF CO., INC. 233 230 Order. tions in different processes, and to recommend to their employers which products to use in their mills.

PAR. 5. The practice of giving sums of money to employees of customers by the respondent affects all of its competitors and tends to cause them to give employees of their customers and prospective customers sums of money of substantially like amounts to those paid by the respondent for the same purpose and with the same effect, as a means of protecting their trade and preventing the respondent from obtaining the business enjoyed by them.

PAR. 6. That as a result of the payment of such sums of money to employees as aforesaid, the respondent adds to its cost of doing business the amount of money given by it as shown by these findings, and the price of its products to its customers is its cost of doing business plus its profit.

CONCLUSION.

, That the methods described in the foregoing findings as to the facts, under the circumstances set forth therein, are unfair methods of competition in violation of the provisions of Section 5 of the Act of Congress approved September 26, 1914, entitled, "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

ORDER TO CEASE AND DESIST.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of the respondent, the testimony and evidence submitted, and the Commission having made its findings as to the facts with its conclusion that the respondent has violated the provisions of the Act of Congress approved September 26, 1914, entitled, "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,"

. It is now ordered, That the respondent, Ernst Bischoff Co., Inc., Its agents, representatives, servants and employees, cease and desist from directly or indirectly giving or offering to give to employees of customers or prospective customers or employees of any competitor's customers or prospective customers, without the knowledge or consent of their employers, money, cash bonuses, commissions, or other things of value, as an inducement to influence their employers to purchase or contract to purchase the products of respondent, or caus~ any customer of competitor to refrain from dealing or contractmg to deal with any competitor of the said respondent. 284 FEDERAL TRADE COMMISSION DECISIONS. Order. 4F.T.C.

It i8 further ordered, That respondent, Ernst Bischoff Co., Inc., shall within sixty (60) days after the service upon it of a copy of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with the order to cease and desist hereinbefore set forth . • DIAMOND HOLFAST RUBBER CO. 285 Complaint.

FEDERAL TRADE COM.MISSION v.

DIAMOND ROLF AST RUBBER COMPANY.

COMPLAINT :J:N THE 1riATTER OF THE ALLEGED VIOLATION OF SECTION II OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1914. Docket 788-February 25, 1922.

SYLLABUS, Where a corporation engaged in the manufacture and sale of automobile tires, inner tubes and accessories as The Diamond Rubber Co., advertised its business ttt large expense and extended the same largely, so that the word "Diamond" and the name "The Diamond Rubber Co.," had become identified extensively in the public mind with goods made in its factories; and thereaftet' a competitor, the name of whose president purported to be " Dimond " or " Diamond,"

(a) Adopted the name "Diamond Holfast Rubber Co."; and (b) Intentionally and extensively Imitated the Diamond packages, brands, and label~;

Thereby causing confusion respecting the Identity of the two concerns and of their respective products, and resulting in the sale of the products of the latter concern as and for those of the former: Held, That stlch simulation of trade or corporate names, brands and labels, under the circumstances set forth. constituted an unfair method of competition.

COMPLAINT.

The Fede:ral Trade Commission, having reason to believe from a preliminary investigation made by it that Diamond Holfast Rubber Co., hereinafter referred to as the respondent, has been and is using unfair methods of competition in violation of the provisions of Section 5 of an Act of Congress, approved September 26, 1914, entitled " An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges in that respect on information and belief as follows:

P ARAGRAP:H 1. That the respondent is o. corporation organized under the laws of the State of Georgia, with principal place of business at Atlanta in said State.

~ AR. 2. That respondent is engaged in the business of manufactun~g and selling automobile accessories and repair materials, includmg fan belts, friction tape, inner tubes, patches and cement, and causes commodities sold by it to be transported to the purchasers 236 FEDERAL TRADE COMMISSION DECISIONS. Complaint. 4F.T.C.

thereof, from the State of Georgia, through and into other States of the United States, and carries on such business in direct, active competition with other persons, partnerships and corporations similarly engaged.

PAR. 3. That on June 6, 1912, the B. F. Goodrich Co., a corporation organized under the laws of the State of New York, acquired the physical assets, trade marks, trade names, and good will of the Diamond Rubber Co., a corporation organized in May, 1907, under the laws of the State of Ohio, and in order to obtain the benefits accruing from the use of said name and trade marks, which had become well known to the trade and the general public and were of great value, immediately thereafter caused to be organized under the laws of the State of New York a subsidiary corporation under the name of Diamond Rubber Co., and said B. F. Goodrich Co. has continuously, since 1912, manufactured and sold through said subsidiary, under the trade marks acquired from said Ohio corporation, various kinds of rubber goods, including inner tubes, patching material, and cement for automobile tires, and has caused commodities sold by it as aforesaid to be transported to the purchasers thereof from the State of New York through and into other States of the United States, and has carried on such business in direct, active competition with other persons, partnerships, and corporations similarly engaged.

PAR. 4. That the respondent was originally organized on October 27, 1916, with the corporate name of Diamond Holfast Patch Co., and on January 20, 1919, its charter was amended and its name changed to Diamond Holfast Rubber Co.; that the present corporate name of the respondent so closely resembles that of the Diamond Rubber Co., described in Paragraph 3 hereof, that confusion in the trade as to the products of the respondent and the products of said Diamond Rubber Co., has resulted; that the adoption of the corporate name, Diamond Holfast Rubber Co. by respondent, was calculated to and does mislead and deceive the public, and purchasers have been misled thereby into buying respondent's products, under the mistaken belief that they were the products of said Diamond Rubber Co. PAR. 5. That since its organization, the Diamond Rubber Co., described in Paragraph 3 hereof, has marketed its products in containers upon which were placed labels in which the word" Diamond" was featured, and respondent, since its organization, as a means of enabling or assisting it to pass off its products as and for the products of said Diamond Rubber Co., has marketed its products in containers upon which were placed labels which also featured the word "Dia- DIAMOND HOLFAST RUBBER CO. 237 235 Findings. mond," and so closely resembling the labels of the Diamond Rubber CQ. in typographical arrangement, color scheme, general appearance and design as to cause confusion in the trade; that the use by respondent of the labels as aforesaid, was calculated to and does mislead and deceive the purchasing public and purchasers are thereby deceived and induced to purchase respondent's products under the mistaken belief that they are the products of said Diamond Rubber Company.

PAR. 6. That by reason of the facts recited, the respondent is using an unfair method of competition in commerce, within the intent and meaning of Section 5 of an Act of Congress entitled, "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS AS TO THE FACTS, AND ORDER. Pursuant to the provisions of an Act of Congress approved September 26, 1914, the Federal Trade Commission issued and served a complaint upon the respondent, Diamond Holfast Rubber Co., charging it with the use of unfair methods of competition in .commerce in violation of the provisions of said Act.

The respondent having entered its appearance by its attorneys and filed its answer herein, hearings were had and evidence was thereupon introduced in support of the allegations of said complaint and on behalf of the respondent before ·warren R. Choate, an examiner of the Federal Trade Commission theretofore duly appointed. And thereupon this proceeding came on for final hearing and counsel having submitted briefs and the Commission having duly considered the record nnd being now fully advised in the premises, makes this its findings as to the facts and conclusion: FINDINGS AS TO THE FACTS.

P ARAGRAPII 1. The respondent is a corporation organized under the laws of the State of Georgia, with its principal place of business at 33 Auburn Avenue, Atlanta, Ga. It was originally incorporated under the name of Diamond Holfast Patch Company, October 27, 1916. On January 20, 1919, the charter was amended and the name changed to Diamond Holfast Rubber Co.

PAn. 2. Respondent is engaged in the business of manufacturing and selling automobile accessories and repair material, including fan belts, friction tape, patches, cement and inner tubes, and causes such commodities sold by it to be transported to the purchasers thereof, from the State of Georgia, through and into other states in 288 FEDERAL TRADE COMMISSION DECISIONS. Findings. 4F.T.C.

the United States, and carries on such business in direct and active competition with other persons, partnerships and corporations similarly engaged.

PAR. 3. On June 6, 1912, The B. F. Goodrich Co., a corporation organized under the laws of the State of New York May 1, 1912, acquired the physical assets, patents, copyrights, trademarks, trade names and good will of The Diamond Rubber Co., a corporation organized under the laws of the State of Ohio, November 6, 1905, said physical assets including a. rubber factory and equipment therefor located at Akron, Ohio, and :from the time of such acsuisition continued the business of said The Diamond Rubber Co., as its successor, using the same factory, equipment, names, marks and labels. To facilitate the sale of Diamond products and keep them separate and distinct from the Goodrich products The Diamond Rubber Co. was incorporated under the laws of the State of New York, April 25, 1917, as a subsidiary corporation of The B. F. Goodrich Co. Since the incorporation of said subsidiary the Diamond line of goods has been sold through it.

PAR. 4. Long prior to the organization of respondent corporation, or its predecessor, Diamond Holfast Patch Co., the general rubber business of The Diamond Rubber Co., including automobile tires, inner tubes and accessories, had been advertised at large expense and had been extended in large volume into all parts of the United States, and the word "Diamond" and the name "The Diamond Rubber Co." had become identified in the public mind with such goods made in The Diamond Rubber Company factories at Akron, Ohio, having been used as the business name and on the goods of that company and its predecessors since 1898. In the years from 1915 to 1920 inclusive, a sum exceeding $1,714,000 was spent in advertising The Diamond Rubber Co.'s tires and automobile accessories, and the business in these goods for that period exceeded $72,000,000. The Diamond Rubber Co. maintains a branch at Atlanta, Ga., through which branch the Diamond products are distributed throughout a district comprising eight states, from Virginia to Texas. The business in The Diamond Rubber Co.'s tires, tubes and accessories in the Atlanta district for the period from 1917 to 1921 were approximately $6,000,000. Respondent's sales are principally in this territory.

The word "Diamond" and also a mark which prominently includes two diamond-shaped figures inclosing letters D were registered in the United States Patent Office in 1907, by The Diamond Rubber Co., of Ohio, as trademarks for rubber vehicle tires. Respondent has no registered trademarks or labels. DIAMOND HOLFAST RUBBER CO. 239 235 Findings. PAR. 5. The use of the word " Diamond " as a part of the corporate name of respondent has caused confusion with the name of The Diamond Rubber Co., in that letters intended for Diamond Holfast Rubber Co. frequently have been sent in the mails addressed to The Diamond Rubber Co. and delivered to that company; in that goods have been shipped to The Diamond Rubber Co., and so addressed, that were intended for the respondent company; in that state officials have mailed matter to The Diamond Rubber Co. intending the mail matter to be sent to Diamond Holfast Rubber Co.; and in that a garage owner at Tuscumbia, Ala., being visited by a. salesman of respondent, purchased a bill of goods from him under the impression that they were goods of The Diamond Rubber Co. On a number of occasions and in different retail stores in Atlanta where respondent's goods are sold, requests have been made for the purchase of " Diamond " products, such as inner tubes, patching rubber and cement, and such requests have been complied with by delivering the products of the respondent company, Diamond Hoifast Rubber Co.

PAR. 6. Since 1916 the respondent and its predecessor have intentionally and extensively imitated the ·'Diamond" packages, brands and labels. This imitation includes the use by respondent on its goods and packages of the figure of a diamond with the word "Diamond" placed therein, a device of this character having been used from an earlier time on The Diamond Rubber Co. goods; of labels having parallel stripes of contrasting colors, in combination with the word "Diamond," such a combination having been used from an earlier time on the Diamond goods; and of labels including such word and having borders consisting of chains of diamondshaped figures with the word "Diamond" spelled out by letters placed one in each diamond, a feature of the Diamond accessory labels being a field, and in some instances a single chain, of diamondshaped figures with the word " Diamond" so spelled out therein. PAR. 7. The use of the word " Diamond " as a part of the corporate name of respondent and upon the goods sold by it and upon the containers thereof, and the similarity of respondent's labels to those used from an earlier time upon the " Diamond " goods has made possible and has resulted in the sale to ultimate purchasers of respondent's goods as goods of The Diamond Rubber Co. par. 8. The Diamond Rubber Co. notified respondent on May 29, 1.920, that " the use of the word ' Diamond' in any form or combinaho~ 0~ rubber goods and particularly as used by you on tire accessories 1s a clear infringement of our trademark rights and must be 240 FEDERAL TRADE COMMISSION DECISIONS. Findings. 4F.T.C.

stopped." Respondent thereafter ·continued to use the word " Diamond " as a part of its corporate name and upon goods sold by it and to use labels so similar to those of The Diamond Rubber Co. as to be likely to be confused therewith.

PAR. 9. Respondent's president has at various times given his name as " Dimond" and "Diamond," having in 1906 signed his application for naturalization as "Dimond," having so signed it on January 19, 1915, to a petition to be declared a bankrupt, and on February 28, 1916, to an application for registration of a motor vehicle, and having obtained life insurance policies applied for on May 23, 1917, under that name, which policies later he had changed to the name of" Diamond." It has not been proven to the satisfaction of the Commission that either the name "Dimond" or "Diamond " is the legal surname of respondent's president. PAR. 10. In an advertising circular sponsored by respondent company promoting its sale of stock it is stated, " Mr. Diamond is a genius. He was educated in the best technical schools in Europe, specializing in the rubber industry. Later he engaged in research work with several big companies in Ohio, the center of this industry. There he absorbed all the practical methods of manufacture and marketing rubber goods." These are not facts and are false and misleading. He never " attended any technical schools in Europe, specializing in the rubber industry." He was born at sea on a vessel plying between Ru~sian Poland and France in the year 1886. The first three years of his life he spent in France and then he went to Poland and left ·there at nine years of age. Then he went to England, then back to France, then to Germany, then to Austria, living in each country for periods and times indefinite and unascertainable. He ran away from home at about the age of 14 or 15 years, and came to the United States in 1903, at the age of 17 years. He never engaged in research work with any big rubber company in Ohio. He was employed as a common laborer a short and indefinite time in a factory in Akron, the name of which he could not remember.

Since coming to the United States in 1903, respondent's president was "off and on in New York City for about seven years." It is not possible to find from the record what his occupations were for these seven years. Thereafter he engaged in various lines of activity beginning in Atlanta in 1910. In 1911 he bought a soda fountain business, operated it for two or three months and sold it and entered the optical business, which lasted a few months. He then entered DIAMOND HOLFAST RUBBER CO. 241 235 Conclusion. the tailoring business, which went into bankruptcy. Then he established a grocery business for a period of 18 or 19 months, when he went into bankruptcy again in 1915. Then after a short period unaccounted for, he operated a few jitney cars for five or six months. Then about the close of 1915 he went into business with his brotherin-law selling an automobile accessory called Everloc Patches. This lasted but a short while, a few months, and he sold out to his brotherin-law, and in the bill of sale agreed not to sell Everloc Patches in the States of Georgia and Tennessee or "Any other patch in these two states." The sale took place in June, 1916. After the signing of said agreement, respondent's present president adopted the name Diamond Holfast Patch Company, secured the same location of business from which his brother-in-law had re- ~oved the former partnership business, adopted labels and circulars m which were copied illustrations and the major part of the text, as ~ell as the general design, of labels and circulars previously used m the partnership business in which he had sold his interest under the terms of the contract above mentioned, and shortly thereafter incorporated Diamond Holfast Patch Co., respondent's predecessor, as stated in Paragraph 1 hereof.

The facts showing the steps from this point on to the time of filing the complaint in this cause appear in other paragraphs of these findings of fact heretofore set forth. A bill of equity was filed against ·Diamond in the Superior Court, County of Fulton, State of Georgia, by C. Chomsky, to whom the rights under previous agreements had been transferred, praying for an injunction to prevent the sale of patches in imitation of Everloc Patches. Apparently, this bill was not pushed and arbitration was entered into in lieu thereof and under it an award was made permitting Diamond to manufacture patches but not to personally travel in the two States of Georgia and Tennessee to sell them. This was the result of the difficulties existing between Chomsky and Diamond and in no way was The Diamond Rubber Company a party to this dispute. CONCLUSION.

The practices of the said respondent under the conditions and circumstances described in the foregoing findings are unfair methods of competition in interstate commerce and constitute a violation of the Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties and for other purposes."

242 FEDERAL TRADE COMMISSION DECISIONS. Order. 4F.T.C.

ORDER TO CEASE AND DESIST.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the answer of the respondent, the testimony and evidence and the briefs of counsel and the Commission having made its findings as to the facts, with its conclusion that the respondent has violated the provisions of the Act of Congress approved September 26, 1914, entitled: "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,"

It is nmo ordered, That the respondent Diamond Holfast Rubber Co., its officers and agents, cease and desist from using, as a part of the corporate name of respondent, the word D-I-A-M-0-N-D or any word or combination of worus likely to be confused with the name of The Diamond Rubber Co.; from using the word D-I-A-M-0-N-D or the figure of a diamond, or any symbol or mark likely to be confused therewith, upon or in connection with the sale of rubber goods; and from directly or indirectly suggesting, by the use of a word, mark or label or otherwise, that goods of respondent are goods of The Diamond Rubber Co.

And it i.s further ordered, That said respondent shall file within sixty (60) days from the date of service of this order, a report with the Commission setting forth in detail the manner and form in which it has complied with the order of the Commission herein set forth. J. V. FALCK·SUPPLY CO. 243 Complaint.

FEDERAL TRADE COMMISSION v.

J. V. FALCK SUPPLY CO:MPANY.