Preferred Toiletries, Inc.

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IN THE :MATTER OF PREFERRED TOILETRIES, INC., AND HENRY SCHLACTUS COMPLAINT (SYNOPSIS), FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2173. Complaint, Apr. 21, 1994-Decision, Jan. 16, 1935 Where a corporation engaged in the sale of perfumes, cosmetics and other toilet articles; and Its president, responsible for the methods employed by it in marketing Its products;

Advertised and otrered at 08 cents, plus postage, two combinations of toilet preparations, including such items as vanishing cream, shampoo, toilet water, etc., to each of which combinations it gave an aggregate value of $11.50, through addition of the pretended "regular" prices assigned to the eleven Items making up the same, together with the assertion that "most any item included in this sensational olrer of 11 pieces alone would cost you what we are asking for the 11 alluring beauty needs pictured and described here " ;

The facts being the price asked constituted the usual price for which articles of the same grade were sold by competitors, the items included in said combination were never sold separately by them at any price, nnd the prices assigned said Items were fictitious, and inflated over the items' true values, and did not represent prices Intended by them for the sale of said items In the usual course of their business, aggregate purchase price for the combination sets did not exceed 39 cents, and the Gardenia perfume included as "regularly priced at $3 ", was a synthetic preparation which sold at 10 cents retall;

With capacity and tendency to mislead nnd deceive the purchasing publlc Into the belief that the regular combined selling price of said articles was $11.50, nnd with effect of so doing, and of Inducing purchase thereof in reliance on such bellef, and unfairly diverting trade to them from competitors, to latter's injury and prejullice: Jleld, That ~>Uch acts and practices, under the conditions and circumstances set forth, were to the prejudice of the public and competitors, and constituted unfair methods of competition.

J.lr. J,/orton Nesmith for the Commi~ion. SYNoPsrs oF Co:r.rPLAINT Reciting its action in the public interest, pursuant to the provisions of the Federal Trade Commission Act, the Commission charged respondent, Preferred Toiletries, Inc., a New York corporation engaged in the sale of perfumes, cosmetics, and other toilet articles, to purchasers in other States, and with principal office and place of business in said State, and respondent Henry Schlactus, PREFERRED TOILETRIES, INC., ET AL. 71 70 Findings president thereof since its organization and responsible since such time for formulating and carrying out its merchandising practice, here involved, with advertising falsely or misleadingly as to price or value of products offered, in violation of the provisions of Section 5 of such Act, prohibiting the use of unfair methods of competition in interstate commerce.

Respondents, as charged, engaged as aforesaid, offer two combination sets, to each of which they assign a purported value of $11.50, through the addition of the asserted regular values or prices assigned to the different items, at a pretended special reduced price of 98 cents for each,1 the facts being the different prices assigned the items involved are grossly exaggerated and fictitious, and do not represent prices contemplated by respondents for the sale of such items, said items are never sold separately by them at any price, and the price asked, or 98 cents plus postage, constitutes their usual price for the sale of the different items, as sold in combination, and one which affords them a substantial profit.

Use by respondents, as alleged, of such false, fictitious and inflated prices in their advertising matter, "has been and is calculated to mislead and deceive, and has had the capacity, tendency and effect of misleading and deceiving the purchasing public into the belief that the regular combined selling price of the articles mentioned in respondents' said advertisements is $11.50 and to induce the purchasing public to purchase said articles in that belief, and has unfairly diverted trade from and otherwise injured and prejudiced respondents' competitors in interstate commerce and thereby substantial injury has been done by the respondents to substantial competition in interstate commerce", and said acts and things done by respondents, as charged, " are all to the injury and prejudice of the public and of the competitors of the respondents in interstate commerce, and constitute unfair methods of competition." Upon the foregoing complaint, the Commission made the following REPORT, FINDINGS As TO THE FACTs, AND Onnrn Pursuant to the provisions of an Act of Congress approved Sep· tember 26, 1914, the Federal Trade Commission issued a complaint on April 27, 1934, upon the respondents, Preferred Toiletries, Inc., a corporation organized and doing business by virtue of the laws 1 The two combination seta as thus advertised, a1 alleged In the complaint, are set forth In the ftndlngs Intra, at page 73.

Findings 20F.T.C.

of the State of New York, and its president, Henry Schlactus, respectively, which complaint was served on April 30, 1934, charging them with the use of unfair methods of competition in commerce as commerce is defined in said act. Respondent Henry Schlactus, acting both on his own behalf and for respondent Preferred Toiletr-ies, Inc., filed a joint answer dated 1\Iay 29, 1934, to said complaint. Thereafter, on June 20, 1934, a hearing in New York City was had before a trial examiner theretofore duly appointed and testimony was heard and evidence received in support of the charges stated in the con1plaint, and in opposition thereto. Thereafter, this proceeding came on regularly for final hearing before the Commission on the complaint, answer, testimony, and evidence received, brief by counsel for the Commission and answer (letters) from the respondent, Henry Schlactus, and, respondents having waived oral argument, said cause was duly submitted, and, the Commission having duly considered the record and being fully advised in the premises, makes this its findings as to the facts and its conclusion drawn therefrom:

FINDINGS AS TO Tile FACTS PARAGRAPH 1. The respondent, Preferred Toiletries, Inc., 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 in New York City in said State. Respondent, Henry Schlactus, is the president of said respondent, Preferred Toiletries, Inc., and has been such president since the incor· poration of said last-named respondent. Said respondent, Henry Schlactus, since the incorporation of said respondent corporation, has formulated and carried out for it the methods hereinafter described, used by said corporation in marketing its products. Respondent corporation is now, and since its organization on or about Septem· her, 1932, has been engaged in the sale of perfumes, cosmetics, and other toilet articles, which products it has caused and still causes to be transported from its place of business in the City of New York to purchasers thereof located in the State of New York and various other Stutes of the United States and the District of Columbia. PAR. 2. In the course and conduct of its said business respondents have caused and still cause certain of the products of said corporation to be advertised and sold in combinations with certain others of its products, and in soliciting the sale of and in selling said products said respondents have caused and still cause the following PREFERRED TOILETRIES, INO., ET AL. 73 70 Findings statements and representations, among others, to appear as advertisements in periodicals and having a wide interstate circulation: (1) 11 ALLURING BEAUTY NEEDS All Full Sized Nationally Advertised Products 98¢ Plus Postage Complete (Pictorial representation of the items, accompanied by the following legends) :

Baree Vanishing Cream.-------------------------· Regularly priced $1 a jar. Baree Shampoo -~------------------------- Regularly priced $1. Baree Lilac Toilet Water-------------------------· Regularly priced at $1. Baree Cleansing Cream--------------------------· Regularly priced at $1. Baree Face Lotion-------------------------------- Regularly priced at 50¢. Baree Face Powder------------------------------- Regularly priced $1. Purse Size Perfume·------------------------------ Regularly priced $1.50. Baree Brllllantine ________________________________ Regularly priced at 50¢. Baree Perfume Dellte----------------------------- Regularly priced $3. Baree Lip Rouge---------------------------------· Regularly priced 50¢. Baree Nail Polish _________________________________ Regularly priced 50¢. $11.50 WORTH OF TOILET REQUISITES 98¢ Plus Postage, •• Most any one item included in this sensational combination of 11 pieces offered alone would cost you what we are asking for tbe eleven alluring beauty needs Pictured and described ltere .•• (2) 11 ALLURING BEAUTY NEEDS All Full Sized Vivian Vance Creations 98¢ Plus Postage Complete (Pictorial representation of the items accompanied by tbe following legends):

Vivian Vance Cleansing Cream-----------------· Regularly priced $1. Vivian Vance Lilac Water--------------------- Regularly priced at $1. Vivian Vance Shampoo.--------------------------- Regularly priced $1. Vivian Vance Vanishing Cream __________________ Regularly priced $1 a jar. Vivian Vance Brllliantioe _________________________ Regularly priced at 50¢. Vivian Vance Face Powder----------------------- Regularly priced at $1. Vivian Vance Face Lotion.---------------------- Regularly priced at 50¢. Vivian Vance Parfum Bouquet------------------- Regularly priced at 50¢. Vivian Vance Nail Polish------------------------ Regularly priced at 50¢. Vivian Vance Gardenia Perfume_________________ Regularly priced $3. Vivian Vance Lip Rouge------------------------· Regularly priced 50¢. $11.50 worth of toilet requisites 98¢ Plus Postage Most any Item Included 1n this sensational combination of 11 pieces alone costs what we ask for tbe eleven alluring beauty needs offered here. Order 20F.T.O.

PAR. 3. The alleged prices and values for the separate articles as set out in the advertising matter described in preceding paragraph are false and fictitious and inflated over the true value of said products and over the prices at which said products are intended by respondents to be sold in the usual course of their business. The combined price of 98 cents plus postage for all of said articles, as set forth in the advertisements described above, is the usual and regular price at which articles of the same grade are sold by competitors of the respondent. Respondents never sold separately any of the articles described in the above advertisements at the prices suggested therein, or at any other price. The purchase price for the combination sets as set out in said advertisements did not exceed 39 cents and that one of the articles enumerated in said advertisements, viz, Gardenial Perfume, is a synthetic perfume and similar to perfumes sold daily for 10 cents retail.

PAR, 4. The " suggested " or " regular price " employed by respondents in the advertisement of its products is false and fictitious and inflated and has been and is calculated to mislead and deceive and has had the capacity, tendency, and effect of misleading and deceiving the purchasing public into the belief that the regular combined selling price of the articles mentioned in respondents' said advertisements was $11.50 and to induce purchasing public to purchase said articles in that belief and has unfairly diverted trade from and otherwise injured and prejudiced respondents' competitors m interstate commerce.

CONCLUSION The acts and practices of 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 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 "· ORDER TO CEASE AND DESIST This proceeding having been duly heard by the Federal Trade Commission upon the complaint of the Commission, the answers of respondents, testimony in support of the charges of said complaint and opposition thereto and briefs filed by counsel for the Commission and the respondents, and, the Commission having made its findings as to the facts and its conclusion that said respondents have violated the provisions of an Act of Congress approved September PREFERRED TOILETRIES, INC., ET AL. 75 70 Order 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes ": It is now ordm·ed, That respondents, Preferred Toiletries, Inc., and Henry Schlactus, a corporation organized and existing under and by virtue of the laws of the State of New York and its president, respectively, their agents, servants, or employees, in connection with the sale of or offering for sale or distribution in interstate commerce perfumes and toilet preparations, cease and desist, directly or indirectly, from- (1) Advertising said products for sale in combination sets or groups in which the articles comprising said groups are set out as having been previously separately sold or regularly priced at an exaggerated or inflated figure, when in truth and in fact said individual orticles had never been sold either separately or at such exaggerated or inflated figures.

(2) Making any false, fictitious, or misleading statements or representations concerning the regular prices at which said products or any of them.have been or are intended to be sold in the usual course of trade and commerce.

It is ordered, That respondents shall within 60 days after service of a copy of this order file with the Commission a report in writing setting forth in detail the manner and form in which they have compiled with and conformed to the order to cease and desist as above set forth by the Commission.

Syllabus 20F.T.C.