Sullivan, Margaret

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

IN THE MATIER OF DOMINO HOUSE, INCORPORATED, AND MARGARET SULLIVAN L'COMPLAINT (SYNOPSIS), FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1718. Complaint, Oct. 81, 1929-Decision, Feb. 11, 1981 Where u corporation engaged under the trade name "Beauty Arts Society" to the sale of a course In permanent and marcel waving and hair cutting, together with a curling Iron, as a part thel·eof, and an Individual, its pres!· dent, In direct charge and control thereof; In soliciting sale of said course and Iron through circular letters, advertising circulars, pamphlets, and application blanks, and In other advertising literature, (a) Represented said supposed society as a ·national organization composed of beauty specialists, experts, and a faculty, and with openings for new members and purported to otrer the prospective purchaser or pupil membership In such supposed organization, through aforesaid application blanks, with ad· vantage of becoming one of Its resident marcel waving specinllsts, privilege of permanent consultation with society's experts, a membership certificate, right to use of name •• Beauty Arts Society " as a member In full standing, and active backlog of said society, and placed on the title page of the course In marcel waving the words, "Prepared by the faculty of the Beauty Arts Society" and represented the lessons as so prepared that they proceeded logically through the art and technique of said trade or occupation, and that lists of answers sent to by puplls were examined carefully by the teachers and returned with corrections, facts being that the supposed society was fictitious nod nothing more than a trade name employed as above set forth, and aforesaid others, promises, statements and representa· tlons were false and misleading; and (b) Represented In circular letters, etc., that the regular price of the member· ship fee including said course in marcel waving was $10, but that for a limited time and as part of a special otrer said membership was being sold for the reduced price of $9.85 and each person would be given :free the complete $10 course In hair cutting and a professional waving Iron, making such statements as "You actually save halt the regular tee by becoming a member now"," Professional waving iron absolutely free", "Free course In hair cutting for ten days only-regular price $10 ","This letter can be worth $19.15 to you", facts being that $9.85 was the regular price for everything and the so-called special otrer was not limited nor In fact a special otrer, but open for acceptance at any time by sending In the application blanks and $9.85, and said statements and representations were false, deceptive and misleading;

With tendency and capacity to mislead the public and prospective purchasers and Induce the purchase of said course and uncle in r.ellance upon the truth of aforesaid others, promises, statements and representations and tlu>rehy divert trade to said corporation and Individual from competitors, and with etrect of ·so misleading and deceiving such public and purchasers: DOMINO HOUSE, INC., ET AL, 433 432 Oomplalnt Held, That such acts and practices, under the circumstances set forth, were to the prejudice of the public and competitors and constituted unfair methods of competition.

Mr. (}.Ed. Rowland for the Commission.

Feli~ & Felhc of Philadelphia, Pa., for respondents. SYNOPSIS oF Complaint Reciting its action in the public interest, pursuant to the provisions of the Federal Trade Commission Act, the Commission charged respondent Domino House, Inc., a Pennsylvania corporation, engaged under the trade name Standard Specialty Co., in the sale of perfumes, face powders, facial preparations, toilet preparations. patent medicines and other merchandise, and under the trade name "Beauty Arts Society" in the sale of curling irons for marcel waving, together with certain beauty culture courses relating to permanent waving, marcel waving, and hair cutting, and with principal place of business in Philadelphia, and respondent Mlti'garet Sullivan, its president, principal stockholder and manager, with advertising falsely or misleadingly as to business status, nature of product or service offered, prices and pretended free goods or services, in violation of the provisions of section 5 of such act, prohibiting the use of unfair methods of competition in interstate commerce. Respondent corporation, as charged, engaged as above set forth, in the leaflets, price lists, circular letters and other trade literature used by it in connection with the offer and sale of its waving or curling iron, and course, as above set forth, " offers to the public and its prospective customers a membership in the 'Beauty Arts Society', which respondent represents to be a national organization with a membership composed of beauty specialists and experts and with a faculty, which faculty it represents prepared the courses of instruction. Such membership, including a pamphlet comprising all of the courses of instruction, is offered for a so-called membership fee of $9.85, which amount is represented to be a reduced price from the regular price of $19. Such offer includes a 'Professional waving iron', or curling iron, which is represented to be 'absolutely free' to the customer, and a' complete hair cutting course' which is represented to be, in case the offer be promptly accepted, absolutely free to the customer, and to be of the regular price of $10." Said offer, as alleged, " is sham and fraudulent, and the representations therein made are false and misleading in that there is no such society as the Beauty Arts Society, as represented by respondent, and that the amount of $9.85 repreiented to be a. fee is actually 6W42"-81-vot.l4-28 434 FEDERAL T.HADE COMMISSION DECISIONS Findings 14F.T.C.

the price of all the. courses of instruction sold by respondent, and the so-called professional waving iron. Said price of $9.85 is and has been since the incorporation of respondent, Domino House, Inc., the regular and standard and inclusive price charged and received by said respondent for all of said. articles," and said false and misleading offers and representations "have the capacity and tendency, and have caused many persons residing in various States of the United States, to purchase respondents' said courses and waving iron in and on account of a belief in the truth of such representations."

Said alleged acts and practices of respondents, as charged, " are all to the prejudice of the public and respondents' competitors and constitute unfair methods of competition in commerce within the in· tent and meaning of section 5."

Upon the foregoing complaints the Commission made the following REPORT, FINDINGS AS TO Tile FACTs, AND Onder • Pursuant to the provisions of an act of Congress approved September 26, 1014 (38 Stat. 717), the Federal Trade Commission issued and served a complaint upon the respondents above named, charging them with the use of unfair methods of competition in commerce in violation of the provisions of said act. The respondents having entered their appearance, and having filed their answers herein, hearings were had and evidence was thereupon introduced before an examiner of the Federal Trade Commission theretofore duly appointed.

Thereupon this proceeding came on for final hearing, and counsel for the Commission having submitted a brief and having argued the case before the Commission, counsel for respondents failing to file brief or appear for argument, 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 drawn therefrom:

l'INDINGS AS TO THE Facts P ARAGRAPII 1. Respondent, Domino House, Inc., is a corporation organized and existing under .and by virtue of the laws of the State of Pennsylvania, with its principal office and place of business at 317 North Seventh Street, in the city of Philadelphia, in said State. Respondent, :Margaret Sullivan, is president of respondent, Domino House, Inc., and is in direct charge and control of the business DOMINO HOUSE, INC., ET AL. 435 432 Fin clings of said corporation. The only other officer of said respondent corporation is Jacob Slavin, secretary-treasurer. PAR. 2. Respondent, Domino House, Inc., was incorporated in September, 1927, and is engaged and has been engaged since that time in the sale of poultry remedies, cosmetics, books, and household supplies, by means of agents located in various parts of the United States, and also through the United States mails. Said respondent, Domino House, Inc., has been at all times since its incorporation in 1927, also engaged in the sale in interstate commerce, under the trade name and style of "Beauty Arts Society," of .a course of instruction in beauty culture, relating to permanent waving and Marcel waving, and a course of instruction in hair cutting, and a curling iron for use in connection with said course in Marcel waving.

Said correspondence courses sold by respondents under the trade name and style of "Beauty Arts Society," together with the curling iron supplied with said courses, are transported by respondent, Domino House, Inc., when sold, by mail, express or otherwise, from its principal place of business in the city of Philadelphia, State of Pennsylvania, into and through States other than Pennsylvania, in interstate commerce to the purchasers thereof at their respective points of location in the various States of the United States. In the course and conduct of its said business respondent corporation is and has been in competition with other individuals, firms, and corporations, some of whom are engaged in the business of selling courses in beauty culture, including Marcel waving and hair cutting, and others engaged in the business of selling the same kind of merchandise as those sold by respondents, all of such competitors being also engaged in the transportation of the merchandise sold by them in interstate commerce between and among the various States of the United States. PAR. 3. Respondent, Margaret Sullivan, was connected with E. J. Reefer for several years prior to 1926, in connection with the operation of certain mail order businesses by said E. J. Reefer. At that time the said Reefer's business was located at 269 South Ninth Street, in the city of Philadelphia. In 1926 respondent, Margaret Sullivan, left the employ of said Reefer, and in the summer of 1927, the said Reefer went into bankruptcy and his business was bought by Hussell Hughes. Respondent, Margaret Sullivan, purchased the ~aid business from the said Russell Hughes in 1927, and incorporated respondent, Domino House, Inc., for the purpose of conducting the e;aid business, and remained at 269 South Ninth Street, in the city of Philadelphia, until September 1928, when respondent's business was removed to its present location, 317 North Seventh Street, in the city Findings 141!'. T. C. of Philadelphia, State of Pennsylvania. Among the assets acquired by respondent, Margaret Sullivan, when the aforesaid purchase of the business was made was the correspondence courses of study in Marcel waving and hair cutting.

PAR. 4. Respondents solicit the sale of the said correspondence courses in Marcel waving and hair cutting, together with the curling iron accessory thereto, by means of circular letters, advertising circulars, pamphlets, and application for membership blanks, and other advertising literature, under the name "Beauty Arts Society." Said circular letters and advertising literature is sent by respondents through the United States mail to prospective purchasers located in various States of the United States. In all of such circular letters, advertising circulars, pamphlets, application for membership blanks, and other advertising literature, respondents make many offers, promises, statements and representations regarding the said correspondence courses in Marcel waving and hair cutting. Among said offers, promises, statements and representations are the following: (1) That the said Beauty Arts Society is a national organization with a membership composed of beauty specialists and experts, and with a faculty, which faculty prepared the courses of instruction sold by said respondents under said trade name. In said circular letters sent to prospective purchasers of said correspondence course in Marcel waving respondents, under the trade name "Beauty Arts Society," state:

All over the country, the Beauty Arts Society now lias openings for new members-to fill places in its national organization of home specialists in 1\Iarcel Waving.

The regular membership fee In the Beauty Arts Society (a fee that Is necessary solely to cover the cost of your instruction in the work) Is $19. '.rhls fee covers the entire cost of your training by mail "' "' •. It entitles you to a Certificate of 1\Iembershixr-the privilege of using the name of the Beauty Arts Society (this alone should be worth many dollars to you). But, in order to become an accredited member, with the prestige and bucklug of this great organization as a guarantee of your success, you must be prompt.

In the application for membership blank appears the following: I hereby apply for 1\lembersh!p in the Beauty Arts Society and Appoint· ment to a place in your organization as one of your resident Ma.rcel Wave specialists. I understand that you will provide me with everything necessary for Marcel Waving, Including the following: • • • • • • • (3) Full Services and Prlvlleges ot Membership, including (..4.) Permanent Consultation Privilege with the experts of the Society on any question in connection with the work ; (B) Membership Certificate of the Society; DOMINO ROUSE, INC., ET AL. 437 432 Findings ( 0) Right to the use of the name Beauty Arts Society, 81!1 a member in :Cull standing.

In an advertising pamphlet distributed by said respond~nts under the name" Beauty Arts Society," it is said: 'lhe Beauty Arts Society does much more for its Members than simply give them a course of instruction and An Outfit and then leave them to their own resources to earn money as best they can. Once you join the Society, you become part of its organization. You are a 1\Iember of its starr, carrying on its work in your own particular community.

On the title page of the course of instruction in Marcel waving sold by said respondents under the name "Beauty Arts Society," appears the following statement:

J Prepared by the faculty of THE BEAUTY ARTS SOCIETY In the first lesson of said course of instruction appears the following:

Our teachers here at the Beauty Arts Society have so prepared the lessons that they proceed logically step by step through the art and technique of Marcel \Vaving, • • •.

In said lesson 1 also is tf1e following :

We want you to know that all students of the Beauty Arts Society are requested and urged to get in touch with their teachers at any time they like for advice, suggestions, help, information. We have here nt the Society a competent starr of teachers and advisers who are ready and eager to help you. If at any time you feel that you would like personal help and suggestions, do not hesitate to write. Every list of answers sent in by you (examination papers nre sent to you throughout the course for instance) is examined carefully by the teachers and returned to you with corrections. All of the above offers, promises, statements and representations are false and misleading, because in truth and in fact there is no such "society" as said "Beauty Arts Society," said name being a trade name used by respondents, nnd a purchaser of the course of instruction in Marcel waving does not become a member of any national organization; respondents do not maintain a staff of teachers and advisers to answer questions sent in by purchasers of the said course of instruction, and the lessons included in said course of instruction were not prepared by the faculty of the said Beauty Arts Society, bP.cause there is no such society in existence. {2) Respondents in aforesaid circular letters, advertising circulars, pamphlets, application for membership blanks, and other advertising literature, represent that the regular price of the membership fee which includes the said course in Marcel waving, is $19, but Findings 14F.T. C.

that for a limited time, and as part of a special offer, said membership is being sold for the reduced price of $9.85, and that as part of the said special limited offer respondents, under the name "Beauty· Arts Society," will give each person who enrolls as a member in the so-called "Beauty Arts Society" absolutely free a complete course in hair cutting, the regular price of which is $10, and a professional waving iron.

In a circular letter sent out by respondents, under the trade name "Beauty Arts Society," they state as follows: The regular membership fee in the Beauty Arts Society (the fee that Is necessary solely to cover the cost of your Instruction in the work) is $19. But now, tar a verv short time, we 011'~ going to enroll new members for onll/ $9.85-no further pa.yments to be made at any time I • • • And then you wll receive, absolutely free, a professional Marcel Waving Iron-just the kind 1n use 1n the best beauty parlors everywhe.re. • • • But, • • • you must be prompt. Because o! this special low price, in effect for a short time only, we expect to be flooded with appllcatlons • • • • • • • • Simply fill In your name and address and get It In the mall at once. When 1t arrives, your Instructions and free Marcel Waving Iron and your Certificate ot Membership w111 go forward to you immediately. You <.'an pay the postman the special reduced price of only $9.85 • • "'. As a postscript to this circular letter appears the following: . . SPECIAL FOil TEN DAYS ONLY-Complete Course in Hair Cutting FREE. To supplement your course in Marcel Waving, to add to your profits, we make you this amazing FREE offer o! a professional Course in Hair Cutting. This complete, simplified course of lessons has always sold for $10 • • •. In the application for membership blank sent out by respondents to prospective purchasers, it is stated:

Specla.l Offor It you are prompt: $10 Course in Hair Cutting FREEl. • • • • • • • I hereby apply for Membership in the Beauty Arts Society and for Appoint· ment to a place in your organization as one of your resident 1\Iarrel Wave specialists. I understand that you wlll provide me with everything necessary tor :Marcel Waving, Including the following: (1) Complete $19 course of Instruction In marcel waving • • •. (2) One Professional Waving Iron absolutely FREE. • • • • • • • (4) Your;- complete Hair Cutting Course-regular Price $10.-Absolutely FREE.

• • • • • * It is also agreed that you are to send as an appreciation of my prompt acceptance of this otrer, your complete course in Hair Cutting (Regular Price $10) without nddltlonal cost. I enclose no money, but wm pay to postman the special low fee of only $9.85 plus postage on delivery for both courses (Instead of the regular fee of $19). • • • DOMINO HOUSE, INC., ET AL. 439 432 Findings Then appears, printed in red ink:

(N<>TE.-This extra special reduction from the regular price Is for a short time only. To take advantage of it you must mall this Application at once.) In an advertising circular sent out and distributed by respondents, it is stated:

f .

Was $19.00 Now Only $9.85.

The regular price of the course In Marcel Waving is $19.00. This is the first time it has ever been offered at the sensationally low price of $9.85 . • • • • • • • Save one-half.

You actually SAVE HALF the regular fee by becoming a member NOW. And on the back of the said advertising circular appears: FREEt Course in Hair Cutting For 10 days only.-Regular Price $10.00. In another circular letter sent out by said respondents, under the trade name "Beauty Arts Society," they stat~: This letter can be worth $19.15 to you I For the appllcation blank attached entitles you to a FREE course in Hair Cutting (regular price $10.00) as well as a reduction of $9.15 on the complete Marcel Waving course of the Beauty Arts Society. The statements and rej?resentations quoted above are false, deceptive and misleading, because in truth and in fact the said course of instruction in Marcel wavjng never was sold by respondents for $19, and the price of $9.85 is not a special, reduced price, but is the regular price at which said course of instruction has been at all times sold by said respondents; said course in hair cutting which respondents, under the trade name "Beauty Arts Society," offer to give free to purchasers of the course in Marcel waving, was never sold by said respondents separately from the said course of instruction in Marcel waving and was never sold at a price of $10, or any other price, but has always been included as part of the course of instruction in Marcel waving at the regular price of said course of $9.85; the professional waving iron which respondents, under the trade name "Beauty Arts Society," offer free to purchasers of the said course of instruction in Marcel waving is not in fact given free, but the price of the said waving iron is included in the said price of $9.85, which is and has been at all times, since the incorporation of respondent, Domioo House, Inc., the regular standard and inclusive price charged by respondents, under the trade name "Beauty Arts Society," for all of the items referred to heretofore; and the so-called special offer, limited in time, is not in fact a special offer, but is open for acceptance by purchasers at any time that they send in the appli· cation for membership blanks, and pay the said regular price of Order 14 F. T. C.

$9.85, for the several courses of instruction, and the professional waving iron.

The records of the United States Post Office of the City of Philadelphia, State of Pennsylvania, show that respondents, under the trade name" Beauty Arts Society," during the period from September, 1927, to October, 1928, sold and distributed by United States parcel post the aforesaid courses of instruction, and waving iron, to purchasers in the States of Kentucky, South Dakota, Texas, Ohio, Arkansas, California, and other States of the United States, and that on or about March 1, 1929, said respondents advised the U. S. Post Office, in the City of Philadelphia, that the name " Beauty Arts Society " was in use by them at that time. PAR. 5. The offers, promises, statements and representations set forth in paragraph· 4 herein are false, deceptive, and misleading, and the use of said offers, promises, statements and representations by respondents, Domino House, Inc., and Margaret Sullivan, in the manner and form above alleged has a. tendency and capacity to and does mislead and deceive the public and prospective purchasers into the erroneous belief that said offers, promises, statements, and representations, are true, and to induce persons to purchase the course of instruction in Marcel waving and hair cutting, and the professional waving iron, in reliance upon and by reason of their belief in the truth and accuracy of said respondents' offers, promises, statements, and representations, and thereby to divert trade to respondents, Domino House, Inc., and Margaret Sullivan, from competitors of said respondents engaged in the sale of courses of instruction in Marcel waving and hair cutting.

CONCLUSION The acts and practices of said respondents, under the conditions and circumstances described in the foregoing findings, are to the prejudice of the public and respondents' competitors, and constitute unfair methods of competition 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."

ORDER TO CEASE AND DESIS'l' This proceeding having been heard by the Federal Trade Commission on the complaint of the Commission, the answers of respondents, the testimony taken, and brief filed and oral argument by counsel for the Commission, and the Commission having made its DOl\UNO !louse, INC., ET AL. 441 432 Order findings as to the facts and conclusion that respondents have violated the provisions 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," It is now ordered, That respondent, Dominio House, Inc., its officers, agents, representatives and employees, and respondent, Margaret Sullivan, an individual, her agents, representatives and employees, cease and desist from making statements and representations in circular letters, advertising circulars, pamphlets, booklets, and other advertising literature, circulated and distributed in connection with the offering for sale and sale in interestate commerce of a course or courses of instruction in Marcel waving and hair cutting, under the trade name "Beauty Arts Society," or any other name, as follows: (1) That the regular and usual price of said course of instruction in Marcel waving is $19, or any other price, when such is not the fact;

{2) That the regular and usual price of saiu course of instruction in hair cutting is $10, or any other price, when such is not the fact; (3) That prospective purchasers are being offered the said course of instruction in Marcel waving at a specially reduced price for a limited period of time, unless said offer is actually limited in point of time for acceptance at such reduced price, and unless said alleged ~pecially reduced price is in fact a lower price than the regular and usual selling price of said course of instruction; ( 4) That the said course of instruction in hair cutting, and the professional waving iron, or any other article of merchandise or course of instruction, is furnished free to purchasers, when the price· or value of such article of merchandise or course of instruction is included in the price specified as the price of the course of instruction being sold ;

( 5) That a purchaser of the said course of instruction in Marcel waving becomes a member of a national society or organization of hair waving experts, or any other society or organization, when such is not the fact.

And it is further ordered, That respondents shall, within ·30 (30) days after the service upon them of a copy of this order, file with the Commission a report in writing setting forth in detail the manner and form in which this order has been complied with and ,confo.rmed to.

Findings 14F.T.O.