Valley Springs Distillery, Inc.

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IN THE MATTER OF VALLEY SPRINGS DISTILLERY, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THID ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CO~GRESS APPROVED SEPT. 26, 1914 Docket 24"18. Complaint, June f8, 1935-Decision, Dec. 3, 1936 Where a corporation engaged as wholesaler and rectifier of distllled spirits, in purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages, and in producing gin by process of rectification whereby alcohol, purchased but not produced by it, was by it redistilled over juniper berries and other aromatics, and in selling aforesaid various products to Wholesalers and retaih.•rs in other States and in the District of Columbia, in substantial competition with those engaged in the manufacture by true distillation of whiskies, gins, and other spirituous liquors ft·om mash, wort, or wash, and in the sale thereof among the various States and in the District of Columbia, and with those engaged in purchasing, rectifying, blending, and bottling whiskies and other spirituous liquors and in selling the same as aforesaid, and including among its said .competitors those who, as manufacturers and distillers from mash, wort, or wash of whiskies, etc., sold by them, truthfully use words "distillery," "distilleries," "distillers," or "distilling" as part of their corpomte or trade names and on their stationery, catalogues, advertising, and on the labels of the bottles in which they sell and ship such products, and those who, engaged in purchasing, rectifying, blending, bottling and selling such various products, do not use aforesaid words as above set forth- Represented, through use of word "Distillery" in its corporate name, printed on its stationery, catalogues, advertising, and labels attached to bottles in which it sold and shipped its said products, and by express representation on its letterheads and in various other ways, to its customers and furnished the same with the means of representing to their vendees, both retailers and ultimate consuming public, that it was a distiller and that the whiskies, gins, and other spirituous liquors contained in its bottled products, labeled as above set forth, were by it made through process of dis· tillation from mash, wort, or wash, notwithstanding fact it did not distill said whiskies, gins, and other spirituous liquors thus bottled, labeled, sold, and transported by it, nor own, operate, or control any place or placea where such spirituous liquors are made by process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels, until manufacture is complete, as long definitely understood from word "Distilleries" in the trade and by the ultimate purchasing public, as meaning the place where !Opirituous liquors are thus made, and lt Was not a distiller, for the purchase of bottled liquors of which there is a W preference on the part of a substantial portion of the purchasing public; lth effect of misleading and deceiving dealers and purchasing public Into belief that It was a distiller and that the whisldes, gins, and other spirituous liquors sold by It were by lt made or distilled from mash, wort, or wash, as above set forth, and of inducing dealers and purchasing public, acting In such belief, to buy its said whiskies, etc., rectified and bottled Complaint 2!F.T.C.

by it, and of thereby diverting trade to it from its competitors, who <lo not, by their corporate or trade names or in any other manner, misrepresent that they are distillers; to the substantial injury of competition in commerce:

Jield, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Before 11/r. John L. Hornor, trial examiner. J,J r. PGad B. 111ore house for the Commission. Mr. La;wrence A. Jacobson, of Chicago, Ill. and Mr. II. Sternfield, of Peoria, Ill., for respondent.

Col\cPLAINT 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 Valley Springs Distillery, Inc., 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 the said Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows :

P ARAGRArii 1. Respondent is a corporation organized, existing, and doing business under the laws of the State of Illinois, with its office and principal place of business in the city of Chicago, in said State. It is now, and for more than one year last past has been, engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and in the sale thereof in constant course of trade and commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its said business it causes its said products when sold to be transported from its place of business aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers, located in other States of the United States and the District of Columbia. In the course and conduct of its business as aforesaid, respondent is now, and for more than one year last past has been, in substantial competition with other corporations and with individuals, partnerships, and firms engaged in the manufacture by true distillation of whiskies, gins, and other spirituous liquors from mash, wort, or wash, and in the sale thereof in trade and commerce between and among the various States of the United States and in the District of Columbia; and in the course and conduct of its business as aforesaid, VALLEY SPRINGS DISTILLERY, INC. 35 33 Complaint respondent is, and for more than one year last past has been, in substantial competition with other corporations and with individuals, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous liquors and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia. PAR. 2. In the course and conduct of its business as aforesaid, respondent has upon its said premises a still which it uses in the production of gin by the process of rectification whereby alcohol purchased but not produced by respondent is redistilled over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondent a distiller as defined by Section 3247 of the Revised Statutes regulating Internal Revenue, nor as commonly understood by the public or the liquor industry. For a long period of time the word "Distillery" when used in connection with the liquor industry and with the products thereof has had and still has a definite significance and meaning to the minds of wholesalers and retailers in such industry and to the ultimate purchasing public, to wit, a place where spirituous liquors are manufactured by a process of original distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is complete, and a substantial portion of the purchasing public prefers to buy spirituous liquors bottled and prepared by distillers.

PAn. 3. In the course and conduct of its business as aforesaid, by the use of the word "Distillery" in its corporate name, printed on its stationery, catalogs, advertising, and labels attached to the bottles in which it sells and ships· itf) said products and by express representation on its letterheads that it is a distiller, and in various other ways, respondent represents to its customers and furnishes them With the means of representing to their vendees, both retailers and the ultimate consuming public, that it is a distiller and that the said ~hiskies, gins, and other spirituous liquors therein contained were by It manufactured through the process of distillation from mash, wort, or wash, when, as a matter of fact, respondent is not a distiller, does not distill the said whiskies, gins, and other spirituous liquors by it so. bottled, labeled, sold, and transported, and merely by the use of a sti·ll· operated by it as aforesaid in the rectification of alcoholic spll'lts by redistillation over juniper berries and other aromatics ~oes not distill the whiskies, gins, and other spirituous beverages by It so bottled, labeled, sold, and transported in the sense in which the word "distilled" is commonly accepted and understood by those 36 FEDERAL TRADE COl\!MISSION DECISIONS Complaint 24F. T. C.

engaged in the liquor trade and by the public. Respondent does not own, operate, or control any place or places where spirituous liquors are manufactured by a process of original and continuous distillation from mash, wort, or wash.

PAn. 4. There are among the competitors of respondent engaged in the sale of spirituous beverages, as mentioned in paragraph 1 hereof, corporations, firms, partnerships, and individuals who manufacture and distill from mash, wort, or wash, whiskies, gins, and other spirituous liquors sold by them and who truthfully use the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade namrs and on their stationery, catalogs, advertising, and on the labels of the bottles in which they sell anrl ship such products. There are also among such competitors corporations, firms, partnerships, and individuals engaged in the business of purchasing, rectifying, blending, bottling, and selling whiskies, gins, and other spirituous liquors who do not use the words "distillery," "distilling," or "distillers" as a part of their corporate or trade names, nor on their stationery, catalogs, advertising, nor on the labels attached to the bottles in which they sell and ship their said products.

PAn. 5. The representations by respondent, as set forth in paragraph 3 hereof, are calculated to and have a capacity and tendency to and do mislead and deceive dealP.rs and the purchasing public into the beliefs that respondent is a distiller and that the whiskies, gins, and other spirituous liquors sold by respondent are manufactured or distilled by it from mash, wort, or wash by one continuous process and are calculated to and have the capacity and tendency to and do induce dealers and the purchasing public, acting in such beliefs, to purchase the whiskies, gins, and other spirituous liquors rectified and bottled by the respondent, thereby diverting trade to responden~'from its competitors who do not by their corporate or trade names or in any other manner misrepresent that they are distillers, and thereby respondent does substantial injury to substantial competition in interstate commerce.

PAn. 6. The acts and things above alleged to have been clone and the false representations alleged to have been made by respondent are to the prejudice of the public and the competitors of respondent 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," approved September 26, 1914. VALLEY SPRINGS DISTILLERY, INC. 37 33 Findings REPORT, FrNDINGs AS TO THE FACTs, AND ORDER Pursuant to the provisions o£ an Act of Congress approved September 26, 1914, entitled, "An Act to create a Federal Trade Commission, to define its powers and d.duties, and for other purposes," the Federal Trade Commission, on June 28, 1935, issued and served its complaint in this proceed.ing upon respondent, Valley Springs Distillery, Inc., charging it with the use o£ unfair methods of competition in commerce in violation of the provisions of said act. After the issuance o£ said complaint, and the filing of the respondent's answer, the Commission, by order entered herein, granted respondent's motion for permission to withdraw said answer and. to substitute therefor an answer admitting all the material allegations of the complaint to be true, and waiving the taking of further evidence and all other intervening procedure, which substitute answer was duly filed in the office o£ the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint and the substituted answer, briefs and oral arguments o£ counsel having been waived, and. the Commission, having d.uly considered the same and being now fully advised. in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS '1'0 THE FACTS P ARAGRArll 1. Respond.ent is a corporation organized, existing, and doing business under the laws of the State of Illinois, with its office and principal place of business at 3512-26 Carroll Avenue, in the city of Chicago, in said State. It is now, and for more than one year last past has been, engaged in business under a whiskey permit from the United States Government, which permit is designated. "R-151", ~s a wholesaler and rectifier of distilled spirits, purchasing, rectify- Ing, blending, and bottling whiskies, gins, and other spirituous beverages and in the sale thereof in constant course of trade and comlllerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its said business it causes its said products when sold to be transported from its place of business aforesaid into and through various States of the United States to the purchasers thereof, consisting of whole- ~alers and retailers, located in other States of the United States and In the District of Columbia. In the course and conduct of its business as aforesaid, respondent is now, and for more than one year last past has been, in substantial competition with other corporations and with individuals, partnerships, and firms engaged in the manu- 38 FEDERAL TRADE COl\:Il\:IISSION DECISIONS Findings 24F. T. C.

facture by true distillation of whiskies, gins, and other spirituous liquors from mash, wort, or wash, and in the sale thereof in trade and commerce between and among the various States of the United States and in the District of Columbia; and in the course and conduct of its business as aforesaid, respondent is, and for more than one year last past has been, in substantial competition with other corporations and with individuals, firms, and partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous liquors and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of its business as aforesaid, respondent has upon its said premises a still which it uses in the production of gin by the process of rectification, whereby alcohol purchased, but not produced, by respondent is redistilled over juniper berries and other aromatics. Such rectification of alcoholic spirits does not make or constitute respondent a distiller as defined by Section 324 7 of the Revised Statutes regulating Internal Revenue, nor us commonly understood by the public or the liquor industry. For a long period of time the word "Distillery," when used in connection with the liquor industry and with the products thereof, has had, and still has, a definite significance and meaning to the minds of wholesalers and retailers in such industry and to the ultimate purchasing public, to wit: a place where spirituous liquors are manufactured by a process of original distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is complete, and a substantial portion of the purchasing public prefers to buy spirituous liquors bottled and prepared by distillers. PAR. 3. In the course and conduct of its business as aforesaid, by the use of the word "Distillery" in its corporate name, printed on its stationery, catalogs, advertising, and labels attached to the bottles in which it sells and ships its said products, and by express representation on its letterheads that it is a distiller, and in various other ways, respondent represents to its customers, and furnishes them with the means of representing to their vendees, both retailers and the ultimate consuming public, that it is a distiller and that the said whiskies, gins, and other spirituous liquors therein contained w·ere by it manufactured through the process of distillation from mash, wort, or wash, when, as a matter of fact, respondent is not a distiller, does not distill the said whiskies, gins, and other spirituous liquors by it so bottled, labeled, sold, and transported, and merely by the use of a still operated by it as aforesaid in the rectification of alcoholic spirits by redistillation over juniper berries and other VALLEY SPRINGS DISTILLERY, INC. 39 33 Findings aromatics does not distill the whiskies, gins, and other spirituous ?everages by it so bottled, labeled, sold, and transported in the sense m which the word "distilled" is commonly accepted and understood by those engaged in the liquor trade and by the public. Respondent ~oes not own, operate or control any place or places where spirituous hquors are manufactured by a process of original and continuous distillation from mash, wort, or wash.

. PAn. 4. There are among the competitors of respondent engaged In the sale of spirituous beverages as mentioned in paragraph 1 hereof, corporations, firms, partnerships, and il).dividua}s who manufacture and distill from mash, wort, or wash whiskies, gins, and other spirituous liquors sold by them and who truthfully use the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery, catalogs, advertising, and on the labels of the bottles in which they sell and ship Ruch products. There are also among such competitors corporations, firms, partnerships, and individuals engaged in the business of purchasing, rectifying, blending, bottling, and selling whiskies, gins, and other spirituous liquors who do not use the words "distillery," "distilleries," "distilling," or "distillers" as a part of their corporate or trade names, or on their stationery, catalogs, advertising, or on the labels attached to the bottles in which they sell and ship their said products.

' PAn. 5. The representations by respondent, as set forth in paragraph 3 hereof, are calculated to, and have a capacity and tendency ~o, and do, mislead and deceive dealers and the purchasing public mto the beliefs that respondent is a distiller and that the whiskies, gins,,and other spirituous liquors sold by respondent are manufactured or distilled by it from mash, wort, or wash by one continuous process and are calculated to, and have the ca.pacity and tendency to, a.nd do, induce dealers and the purchasing public, acting in such behefs, to purchase the whiskies, gins, and other spirituous liquors rectified and bottled by the respondent, thereby diverting trade to respondent from its competitors who do not by their corporate or t~ade names, or in any other manner, misrepresent that they are distillers, and thereby respondent does substantial injury to substantial competition in interstate commerce.

PAn. 6. Much of the "distilled" gin on the market is produced by ~companies who do distill their own alcohol and produce gin therefrom . Y redistillation in exactly the same mamwr that respondent produces It~ gins-not under any distillery permit, but under a rectifying per- ~lt. These distiller-rectifiers place on their gin labels: "Distilled Y -------------------- Distillers". There are distilleries which Order 24 F.T.C.

produce gin by the same process in the distillery by one continuous process and the tax is paid at the completion of the process, that is, after the alcohol becomes gin, so that although the final redistillation process is the same as that of respondent, yet it is all done in a distillery and the distiller has control over the process from the mash to the gin. Thus, it includes original or primary distillation through closed pi pes and vessels, as well as the final process of redistillation over the juniper berries.

Section 5 of the Federal Alcohol Administration Act, approved August 29, 1935, dealing with unfair competition and unlawful practices in the industry, provides that it shall be unlawful to sell in bottles any distilled spirits in interstate or foreign commerce unless they are bottled, packaged, and labeled in conformity with such regulations, to be prescribed by the Administrator, as will prohibit deception of the consumer with respect to such products. Existing regulations under this act define "distilled gin" as the distillate by original distillation or redistillation of neutral spirits with aromatics.

The regulations further provide that on labels of domestic distilled spirits bottled by or for the actual distiller thereof, there shall be stated the words "distilled by" and immediately thereafter the name of such distiller and the place where distilled.

Because of existing regulations, under the Federal Alcohol Administration Act approved August 29, 1935 ( 49 Stat. 977), which regula-· tions became effective August 15, 1936, providing that rectifiers who redistill purchased alcohol over juniper berries and other aromatics may call such resulting product "distilled gin", and requiring that the labels state who distilled it, the Commission has excepted gins. produced by respondent by redistillation of alcohol over juniper berries and other aromatics from the prohibitions of its order. CONCLUSION The aforesaid acts and practices of the respondent, Valley Springs Distillery, Inc., are to the prejudice of the public and of respondent's competitors, and constitute unfair methods of competition in commerce, within the intent and meaning 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."

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answer filed herein, UNITED DISTILLEHS & WINERS, INC. 41 Memorandum dated October 24, 1936, by respondent, admitting all the material allegations of the complaint to be true and ·waiving the taking of further evidence and all other intervening procedure, and the Commission having made its findings as to the facts and its conclusion that said respondent 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." It is ordered, That the respondent, Valley Springs Distillery, Inc., its officers, representatives, agents, and employees, in connection with the offering for sale, sale, and distribution of whiskies, gins, or other spirituous beverages, in interstate commerce or in the District of Columbia (except gins produced by it through a process of rectification whereby alcohols purchased, but not produced, by respondent are redistilled over juniper berries and other aromatics), do forthwith cease and desist from :

Representing, through the use of the word "Distillery" in its corporate name, on its stationery, advertising, or on the labels attached to the bottles in which it sells and ships said products, or in any other Way by word or 'words of like import, (a) that it is a distiller of Whiskies, gins, or other spirituous beverages; or (b) that the said whiskies, gins, or other spirituous beverages were by it manufactured through the process of distillation; or (c) that it owns, operates, or controls a place or places where any such products are by it manufactured by a process of original and continuous distillation from mash, Wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is completed, unless and until respondent shall actually own, operate, or control such a place or places. It is further ordered, That the said respondent within 60 days from and after the date of the service upon it of this order, shall file with the Commission a report or reports in writing setting forth in detail the manner and form in which it is complying, and has complied, with the order to cease and desist hereinabove set forth. MEMORANDUM UNITED DISTILLERS & 1VINEns, INc. (D. 2486). Complaint July I, 1935. The Commission, as of the same date, made findin~s and ord~r which, excepting the use of the word "Distillery" in the Valley S~rzngs case, supra, and word "Distillers" by instant respondent, With principal place of business in Detroit, were substantially simi- ~ar to those in the Valley Springs case; testimony having been taken . efore J.fr. John L. llo1'1UJr, trial examiner, and Commission havhingouse.been represented in the instant matter by AIr. PGad B. AIore- Syllabus 24F. T. C.