Army and Navy trading Company

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IN THE MATTER OF ARMY AND NAVY TRADING COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2285. Complaint, Jan. 26, 1985-Decision, Nov. 26, 1935 Where a corporation, engaged in the conduct of a mercantile establishment in the city of Washington and which was organized chiefly to engage in the purchase and resale of surplus, reject and refuse goods procured from the Army and Navy Departments, and did so engage from its organization in 1922 until the year 1927, approximately- Caused its corporate name, including the words "Army & Navy", to be displayed in large signs about its mercantile establishment and in trade journals, circulars, and advertisements in papers and other periodicals, and in said use featured such words as prominently as other portions of its name;

Facts being that while during period 1922 to 1927, 85 to 90 percent of respondent's merchandise had been procured either directly or indirectly from such Army and Navy sales, its inventory currently reflected, as did competitors', the curtailment of such offers by said departments in said latter year, and virtual cessation thereof in 1932, and ultimate absorption of such products for conduct of retail trade by said corporation and its competitors, so that by 1932, such products had decreased to approximately 15 to 18 percent of their inventory, as contrasted with aforesaid higher proportions in said earlier period; With the result that various members of the purchasing public came to the conclusion or received the impression that goods there purchased wpre substantially all, if not all, procured from the Army and Navy and were of the quality and nature used by said departments and that a substantial bargain with reference to price and quality would be therein obtained, and were induced by reason thereof to make purchases from it, and with capacity and tendency thus to mislead the purchasing public, and with effect of diverting trade to it from competitors who offer to sell merchandise identical with the bulk of its inventory, similarly purchased from the ordinary marts of trade, without the use of such misleading and deceptive practice, and of causing substantial injury to substantial competition in the District of Columbia:

Held, That such practices, under the conditions and circumstances set forth, were to the prejudice and injury of competitors and the public and constituted unfair methods of competition.

Before·Mr. John W. Addison, trial examiner. Mr. S. Brogdyne Teu, II, and Mr. Alden S. Bradley for the Commission.

Mr. Joseph B. Stein, of 'Vashington, D. C., for respondent. .542 FEDERAL TRADE COMMISSION DECISIONS Complaint 21F.T.C.

Complaint Pursuant to 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", the Federal Trade Commission having reason to believe that Army and Navy Trading Company, hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "commerce" is defined in said act, and it appearing to said 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. Said respondent, Army and Navy Trading Company, is a corporation organized and existing by virtue of the laws of the State of Maryland, having its principal office and place of business located in the city of Washington, in the District of Columbia, and has been, for more than one year past, engaged in the sale and distribution of general merchandise within the said District of Columbia. Said respondent sold, and has caused and still causes the said articles of merchandise in which he deals to be sold and transported from his place of business to various purchasers located at various points in the said District of Columbia. In the course and conduct of his said business, respondent is in competition with other individuals, partnerships, and corporations engaged in the sale and transportation of like merchandise in the District of Columbia.

PAR. 2. For more than one year past, said respondent has operated under the corporate name of Army and Navy Trading Company. By the representations of said corporate name purchasers are led to believe that the stock of merchandise held out to the purchasing public by said respondent was made for or purchased from the United States Army and Navy. In truth and in fact none of the stock of merchandise of said respondent is purchased from the Army and Navy. None of the merchandise is purchased at any Army and Navy surplus or refuse goods sales. The small amount of such Army and Navy goods carried by said respondent, if any, is bought from jobbers, wholesalers, and others who buy at such Army and Navy refuse goods sales. The remainder of the said respondent's stock of merchandise consists of the usual stock found generally in general merchandise establishments. It is purchased in the marts of commerce in which the general merchant buys his stock of goods, and is not purchased from the Army and Navy or from those who purchase merchandise at any Army and Navy ARMY AND NAVY TRADING CO. 543 541 Findings surplus or refuse goods sales. The said respondent is in no way connected with the Army and Navy, does no£ have affiliation, association, or working agreement with the Army and Navy. · PAR. 3. Said respondent, in the conduct of his business has for some time past offered to the purchasing public a man's garment, commonly known as a "windbreaker" or jacket, as "nationally advertised-genuine buckskin jacket." Such description is false and misleading in that the reader thereof believes the jack~t is made of genuine buckskin. In connection with the above advertisement appears the head of a deer. In truth and in fact, the said garment has no buckskin whatsoever in it, but is made entirely of textile fabrics.

PAR. 4. There are among the competitors of said respondent referred to in paragraph 1, supra, individuals, partnerships, and corporations engaged in the sale and distribution of like and similar merchandise within the District of Columbia, l\Iaryland, and Virginia, which said individuals, partnerships and corporations do not misrepresent their merchandise by the use of a false and misleading corporate, or trade name, or the material of which said merchandise is made.

PAR. 5. The above alleged acts and things done by respondent are all to the injury and prejudice of the public and of the competitors of respondent in interstate commerce, and constitute unfair methods of competition in interstate 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 (!ther 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, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes" (38 Stat. 717), the Federal Trade Commission issued and served its complaint upon the respondent herein, charging it with the use of unfair methods of competition in commerce as "commerce" is defined in said act; and the respondent filed its answer to the complaint. Testimony and evidence in support of the allegations of the complaint and of the issues joined by the respondent were taken before trial examiner John ,V, Addison, theretofore duly assigned. by the Commission for that purpose, which said testimony and evidence were reduced to writing and filed in the office of the Commission subsequent thereto. A brief. on behalf of the Commission was filed 113653m--38--vo1.21----37 544 FEDERAL TRADE COl\11\IISSION DECISIONS Findings 21F.T.C.

in support of the allegations of the complaint, and the respondent filed its brief ju support' of the material allegations of its answer. Thereupon the cause came on for final hearing before the Commission upon the testimony and evidence as adduced bv counsel for the Commission and for the respondent, and brief o.n behalf of the Commission and oral argument of Alden S. Bradley, trial attorney for the Commission, and the brief on behalf of the respondent and oral argument of Joseph B. Stein, attorney for the respondent. The Commission, having duly considered the testimony and evidence, the aforesaid briefs and the aforesaid arguments, and being fully advised in the premises, finds that this proceeding is iu t.he interest of the public and makes this its findings as to the facts and its conclusions drawn therefrom:

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Army and Navy Trading Company, is a corporation organized and existing under the laws of the State of Maryland, by charter issue under such authority in the year 1922, and has, since the beginning of its corporate existence maintained and now does maintain, its principal place of business in the city of Washington, in the District of Columbia) and, since the beginning of its corporate existence, has done and now does business in the District of Columbia, in the city of Washington. PAR. 2. Respondent was organized chiefly for the purpose of engaging in, and has engaged in, the purchase and resale of surplus7 reject, and refuse goods to be procured from the Army and Navy Departments of the United States Government, and from the date of the organization of respondent until the, year 1927, or thereabout, between 85 and 90 percent of the merchandise offered for sale by the respondent had been procured from the Army or Navy Department of the United States, either directly or indirectly, by the respondent. PAR. 3. Respondent engaged in the business related in the paragraph last above at a time when the condition of the market afforded opportunity to secure large lots of various kinds of merchandise actually sold by the Army and Navy Departments of the Government of the United States and the respondent did make substantial purchases of such lots and maintained, as long as the market permitted, a large majority of his total inventory in such goods. The later proportionate decrease in his inventory was in consonance with the decrease in the availability of such goods. Respondent continuously advertised its corporate name in connection with advertisements of sales of its merchandise and established a substantial trade value in connection with such corporate name. . ARMY AND NAVY TRADING CO. 545 Findings PAR. 4. During the year 1927, or thereabout, the Army and Navy Departments of the United States Government began sharply to curtail the quantity of goods theretofore offered by them annual11y in the open market, until, since the year 1932, virtually no goods of any description have been so offered. · The goods formerly offered by the Army and Navy Departments of the United States Goverilll,lent were ultimately absorbed for the purpose of the conduct of a retail trade by the respondent and various other persons, copartnerships, and corporations engaged in the conduct of mercantile establishments approximately identical with the one herein described as having been conducted by the respondent. The inventory of the respondent as well as the inventories of its competitors last above referred to, reflect the condition of the withdrawal from the market of surplus, refuse and reject goods of the Army and Navy Departments of the United States Government by decrease of the quantity of such goods in their inventories from approximately 85 to 90 percent in the year 1927 to approximately 15 to 18 percent in the year 1932.

There are no goods now being offered, nor, since the year 1932, has there been any substantial amount of goods offered by the Army or Navy Department of the United States Government. }l AR. 5. The respondent causes its corporate name to be displayed in large signs about its mercantile establishment, in trade journals, in circulars, and in advertisements appearing in the daily newsp9-pers and other periodicals, with the words "Army & Navy", or "Army and Navy" featured therein as prominently as other portions of its corporate name.

PAR. 6. Various members of the purchasing public, upon observing the use of the words "Army & Navy", or "Army and Navy", in connection with the corporate name of the respondent and in its circulars and advertisements as hereinabove stated, have formed the conclusion or received the impression or belief, from the use o£ such words, that the goods to be purchased in said store were substantially all, i£ not all, procured from the Army and Navy Departments of the United States Government; that the goods were o£ the quality and nature used by said Departments; that a substantial bargain with reference to price and quality would be obtained in such store; and a substantial number o£ such members o£ the purchasing public have been ind·uced, by virtue of such belie£ or impression, to make purchases o£ and from the respondent.

PAR. 7. The use by respondent o£ the words "Army & Navy", or "Army and Navy", in connection with its corporate name and in its advertisements and circulars, as above uescribed, had and has the Order 21 F.T.C. tendency and capacity to, and did and does, in fact, mislead and deceive members of the purchasing public into the false impressions and beliefs as set forth in paragraph 6 hereof. PAR. 8. The use of the words "Army & Navy", or "Army and Navy", in connection with the corporate name, circulars and advertisements of the respondent, has caused and causes a diversion of trade from competitors of the respondent who offer to sell merchandise identical with the bulk of the inventory of the respondent and procured from the same source, i. e., the ordinary marts of trade, but who do not make use of such misleading and deceptive practice, and has caused and now causes substantial injury to substantial competition within the District of Columbia. CONCLUSION The practice of the respondent, doing business under the abovementioned corporate name and using such corporate name in circulars, trade journals, and other advertising matter, under the conditions and circumstances described in the foregoing findings, were and are to the prejudice and injury of competitors of the respondent and were and are to the prejudice and injury of the public, and were and are unfair methods of competition in commerce and constitute a violation of the provisions 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.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission on the complaint of the Commission, the answer of the respondent, the testimony taken, and the brief filed in behalf of the Federal Trade Commission herein, and oral argument of counsel for the Federal Trade Commission, and the Commission having made its findings as to the facts and conclusion that the respondent Army and Navy Trading Company has 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"- /t is now ordered, That the respondent Army and Navy Trading Company in connection with the conduct o~ its mercantile establishment within the District of Columbia, cease and desist from: (1) Using in connection with its corporate name the wonis "Army and Navy'' or either of them.

ARl\IY AND NAVY TRADING CO. 547 541 Order (2) Advertising or causing to be advertised in any circulars, trade journals, daily newspapers, or other periodicals the words "Army and Navy" or either of them, descriptive of or in connection with any merchandise to be sold or offered for sale to the public, unless in fact the words "Army and Navy" be used specifically in connection and conjunction with particular merchandise actually procured from the Army or Navy Department of the United States Government. Provided, however, That :for a period o:f two years :from the date of the service o:f this order upon respondent, the respondent shall be permitted to use in connection with such corporate or trade name as it might assume the words:

Formerly Army and NaYy Trading Company It is further ordered, That respondent shall, within 90 days after the service upon him 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 conformed to. And it is fwther ordered, That respondent shall, within 24 months after the service upon him of a copy of this order, file with the Commisison a report in writing setting forth in detail the manner and :form in which this order has been complied with and conformed to. Syllabus 21 F. T.C.