James Van Dissen Distilling Co

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IN THE l\fA'ITER OF JAMES VAN DISSEN DISTILLING COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT, 26, 1914 Docket V126. Complaint, June 5, 193.5-Decision, Dec. 7, 1936 Where a corporation engaged as rectifier and wholesaler of spirituous liquors, In purchasing and bottling whiskies, gins, and other spirituous beverages, and in making gin with a still which 1t used therefor by redistillation of purchased alcohol, not produced by it, over juniper berries and other aromatics, and in selling its aforesaid various products to wholesalers and retailers, ln substantial competition with those engaged in the manufacture by distillation of whiskies, gins, and other spiritous beverages, and in selling the same in trade and commerce among the various States and in the District of Columbia, and with those engaged in purchasing, rectifying, blending, and bottllng such various beverages and in slmllarly selling the same, and including among said competitors those who, as manufactut·ers and distillers from mash, wort, or wash of whiskies, gins, and other spirituous beverages sold by them, truthfully use words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate names and on their stationery and on the labels of the bottles In which they sell and ship such products, and those who, engaged in purchasing, rectifying, blending, and bottling such various products, do not use, with competitive advantage attaching thereto, aforesaid words as above set forth- Represented, through use of word "Distilling" in its rorporate name, printed on Its stationery and labels, together with words "Distilled by" ln case of its aforesaid gin, "Manufactured by" in case of its sloe gin and cordials, and "Bottled by" in case of its brandy, and ln various other ways to its customers, and furnished the some with the means of representing to their yendees, both retailers and ultimate consuming public, that the whiskies, gins, and other spirituous beverages contained in such bottles were by 1t made through process of difitlllation from mash, wot·t, or wash, notwithstanding fad It did not thus distill said various beverages thus bottled, labeled, sold and trauspot·ted by It, as definitely un<l('rstood and lmplif'd to the trade and ultimate purcha!'ilng vnulic from word "Distllllng" as meaning such original distillation from grain, fruit or vegetable mash, and did not own, operate, or control any place or places where such beverages are thus made, and was not a distiller, investment and e'l:penses of which ore greater, In general, than those of the rectifier, and for the purchase of the bottled liquors of which there Is a preference on the part of a suu~tantlal portion of the purchasing public, and to which an advontngeom~ prestige In overcoming sales resistance attaches in the mind of the wholesale trade, and associated with the products of which there Is an advantage to the r<eller by virtue of the distiller's control, as believed, of the making of Its product and the Ingredients entering therein !rom start to finish In Its own estobl!sbmPnt; With effect of misleading and deceiving dealers 11nrl pnrrhasing public Into the belief that the whlsklt>s, gins, and other l<ftlr:tuons heat>riii-:PS snld hy it were by it made and distilled from mash, wort, or wn~<h, and of induelng JAMES VAN DISSEN DISTILLING CO. 79 78 Complaint dealers and purchasing public, acting in such belief, to buy its said whiskies, etc., bottled and sold by it, and of thereby diverting trade to it from Its competitors who do not, by their corporate names or in any other manner, misrepresent that they are manufacturers by distillation from mash, wort, or wash of whiskies, gins, and other spirituous beverages; to the substantial injury of substantial competition in commerce: Held, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition, Before Mr. lV. W. Sheppard and Mr. John lV. Addison, trial examiners.

Mr. PGad. B. Morehouse and Mr. Edw. lV. Thomerson for the Commission.

Mr. Donald II. Jlj cDonald, of Los Angeles, Calif., for respondent. CoMrLAINT 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 James Van Dissen Distilling Co., a corporation, 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 ARAGRAPII 1. Respondent is a corporation organized, existing and doing business under the laws of the State of California, with its office and principal place of business in the city of Los Angeles, in said State. It is now, and for more than one year last past has been, engaged in the business of a rectifier and wholesaler of liquors, purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and selling the same at wholesale 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, some locaterl within the State of California and some 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 Complaint 24 F. T.C. the manufacture by distillation of whiskies, gins, and other spirituous beverages 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 benrages 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 premises, a still which it uses in the production of gin by a 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 and the liquor industry. For a long period of time the word "distilling" 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, the manufacturing of such liquors by the process of original and continuous 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 by the actual distillers and manufacturers thereof.

PAR. 3. In the course and conduct of its business as aforesaid, by the use of tha' word "Distilling" in its corporate name, printed on its stationery and on the labels attached to the bottles in which it sells and ships its said products, 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 the whiskies, gins and other spirituous beverages therein contained were by it manufactured through the process of distillation from mash, wort, or wash, as aforesaid, when, as a matter of fact respondent is not a distiller, does not distill the said whiskies, gins, or other spirituous beverages by it so bottled, labeled, sold and transported, and does not own, operate, or control any place or places where such beverages are manufactured by the process of distillation from mash, wort, or wash.

JAMES VAN DISSEN DISTILLING CO. 81 78 Findings PAR. 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, as aforesaid, whiskies, gins, and other spirituous beverages 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, and on the labels of the bottles in which they sell and ship such products. There are also among such competitors corporations, firms, partnerships and individuals engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages who do not use the words "distillery," "distilleries," "distilling," or "distillers" as a part of their corporate or trade names, nor on their stationery, nor on the labels attached to the bottles in which they sell and ship their said products. PAR. 5. Representation by respondent, as set forth in paragraph 3 hereof, is calculated to and has the capacity and tendancy to and does mislead and deceive dealers and the purchasing public into the belief that the whiskies, gins, and other spirituous beverages sold by the respondent are manufactured and distilled by it from mash, wort, or wash, as aforesaid, and is calculated to and has the capacity and tendency to and does induce dealers and the purchasing public, acting in such belief, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondent, thereby diverting trade to respondent from its competitors who do not by their corporate or trade name or in any other manner misrepresent that they are manufacturers by distillation from mash, wort, or wash of whiskies, gins, and other spirituous beverages, and thereby respondent does substantial injury to substantial competition in interstate commerce. PAR. 6. The acts and things above alleged to have been done 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 oi 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, FINDINCS AS TO Tile 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," the Federal Trade Commission, on June 5, 1935, issued and served its 82 FEDERAL TRADE COMl\IISSION DECISIONS Findings 24F. T. C.

complaint in this proreeding upon respondent, James Van Dissen Distilling Company, charging it with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance. of said complaint, and the filing of respondent's answer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by Edward W. Thomerson, attorney for th~ Commission, before W. W. Sheppard, an examiner of the Commission theretofore duly designated by it; and by P. B. Morehouse, attorney for the Commission, before John ,V, Addison, an examiner of the Commission theretofore by the Commission duly substituted to take testimony and other evidence in the place and stead of said ,V, ,V, Sheppard;· and .in opposition to the allegations of the complaint of D. H. McDonald, attorney for the respondent; and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter the proceeding regularly came on for final hearing before the Commission on the said complaint, the answer thereto, testimony and other evidenre, briefs in support of the complaint and in opposition thereto, oral arguments of counsel aforesaid having been waived; and the Commission, having duly considered the same and being now fully advised in the premises, finds that this proreeding is in the interest of the public, and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. James Van Dissen Distilling Company is a corporation organized, existing, and doing business under and by virtue of the laws of the State of California, as a rectifier and wholesaler of spirituous liquors, with its principal office and place of business at 1401 Boyd St., Los Angeles, Calif. It purchases and bottles whiskies: gins, and other spirituous beverages, and sells the same at wholesale in constant course of trade and commerce between and among the various States of the United States. It estimates its average sales at $6,00Q or $7,000 per month. In the course and conduct of its said business, it causes its said products, when sold, to be transported from its place of busines aforesaid into and through various States of the United States to the purchasers thereof, consisting of wholesalers and retailers located in States of the United States other than the State of California. 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 distillation of whiskies, gins, and other spirituous beverages and in the sale thereof J Al\IES VAN DISSEN DISTILLING CO. 83 78 Findings 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 beverages 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. Rectifying, in the distilled spirits rectifying industry, means the mixing of whiskies of different ages or types, or the mixing of other ingredients with whiskies, but reducing proof of whiskey by ndding water is not rectifying. Rectifiers also blend whiskies with neutral spirits (grain alcohol).

A distiller, in the sense ordinarily understood by the liquor industry, is one who prepares distilled spirits by a process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacture thereof is complete. Many distillers operate a separate establishment 600 feet or more away from their distillery, known as a rectifying plant, wherein they operate in the same manner as described above, for a rectifier-sometimes exclusively with spirits of their own distillation, and sometimes with spirits purchased from other distillers, or both. Some distilleries have a tax-paid bottling room on the distillery bonded premises wherein their distilled spirits are bottled straight as they come from the still, or in a bonded warehouse after aging, or after reduction of proof. Any rectifying by a distiller, however, must be done in his rectifying plant under his rectifier's permit. On all bottled liquors, whether bottled at a distillery rectifying plant, or at any other rectifying plant, appear the words "Dottled" or "Blended" (as the case may be} "by the -------------------- Company." If the distilled spirits therein contained are bottled by a distiller either in his distillery or are spirits of his own. distillation bottled in his rectifying plant, the distiller may, and does, put "Distilled and Bottled by -------------------- Company." If, in the distillery's rectifying plant, other spirits have been blended or rectified, he puts "Blended and Bottled by -------------------- Company." Finally, blown (usually in the bottom) in each bottle is a symbol, consisting of a. letter followed by a number, identifying the bottler, viz, a "D" for a. distillery and "R'' for rectifier, the number following said letter corresponding with the distiller's or rectifier's permit. Thus ''R-443'' designates this respondent. A distiller who also operates a rectifying 84 FEDERAL TRADE COl\Il\HSSION DECISIONS Findings 24F.T.C.

plant, having both kinds of permits, may use either symbol, depending upon whether the liquor contained in the bottle was produced and bottled under his distiller's permit.

It is not always possible to determine from the presence of the phrase "lllended and Bottled by" or the phrase· "Bottled by" on the ]abel whether the package was bottled by a rectifier who is a distiller or by a rectifier who is not a distiller.

PAR. 3. In the course and conduct of its business as aforesaid, respondent uses its name printed on its stationery, invoices, and labels. The name on the labels is preceded by the words "Distilled . . . by" in the case of redistilled gins; by the words "Manufactured ... by" in the case of its sloe gins and cordials; and by the words "Bottled by" in the case of its brandies. The name on its invoices is followed by the word "rectifiers." The Commission finds that by the use which respondent makes of the word "Distilling" in its corporate name printed on its stationery and on the labels attached to the bottles in which it sells and ships its said products, 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 the whiskies, gins, and other spirituous beverages therein contained were by it manufactured through the process of distillation from mash, wort, or wash, as aforesaid, when, as a matter of fact, respondent is not a distiller, does not distill the said whiskies, gins, or other spirituous beverages by it so bottled, labeled, sold, and transported, and does not own, operate, or control any place or places where such beverages are manufactured by the process of distillation from mash, wort, or wash.

Respondent has a still which it uses in making gin by redistillation of purchased alcohol, not produced by it, over juniper berries and other aromatics, but this redistillation does not make respondent a distiller as defined by United States Code, Title 26, Section 241, regulating internal revenue, nor as commonly understoou by the public and the liquor industry. As shown by the testimony of many witnesses who for long periods of time had been, and still were, actively engaged in the liquor industry, including uistillers, wholesalers, and retailers, and by the testimony of representative members of the consuming public, for a long period the word "distilling," when used in connection with the liquor industry anJ with products thereof, has haJ, and still has, the definite significance and meaning to the minds of wholesalers and retailers in such inuustry and to the ultimate purchasing public of the making of beverages by original distillation from grain, fruit, or vegetable mash. J Al\IES VAN DISSEN DISTILLING CO. 85 78 Findings In general, the investment and expenses of the distiller are greater than those of the rectifier.

Much of the "distilled" gin on the market is produced by companies who do distill their own alcohol and produce gin therefrom by redistillation in exactly the same manner that respondent produces its gins-not under any distillery permit, but under a rectifying permit. These distiller-rectifiers place on their gin labels: "Distilled by -------------------- Distillers". There are distilleries which 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 pipes 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 jndustry, 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. PAR. 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 beverages sold by them and who truthfully use the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate names and on their stationery, and on the labels of the bottles in which they sell and ship such products. There are also among such competitors corporations, firms, partnerships, and individuals engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages who do not use the words "distillery," "distilleries," "distilling," or "distill- FEDERAL TRADE COl\11\fiSSION DECISIONS86 Findings 24 F. T. C. ers" as a part of their corporate names, nor on their stationery, nor on the labels attached to the bottles in which they sell and ship their products.

PAR. 5. A substantial portion of the purchasing public does prefer to buy spirituous liquors bottled by the actual distillers and manufacturers therof, and such representation is a misrepresentation in fact, and has a tendency to mislead and deceive dealers and the purchasing public, with the resultant tendency to induce them to buy respondent's products in preference to the products of truthful competitors.

The testimony clearly showed, and the Commission finds, that a prestige attaches in the minds of the wholesale trade to the distiller, and that this prestige is an advantage in overcoming sales resistance; that in the minds of the wholesale trade and the public, the belief that a distiller's controlling the making of such products from start to finish, with all the ingredients going into them within its own establishment, is an advantage to the seller; and that the use . of the word "distilling" or "distiller" in a trade or corporate name of a concern gives it a competitive advantage over concerns which do not pursue or practice such characterizations, and which do not purport to be manufacturers when they are not. The Commission, therefore, finds that the representation of re- Bpondent, through use of the word "Distilling" in its corporate name as aforesaid, is calculated to, and has the capacity and tendency to, and does, mislead and deceive dealers and the purchasing public into the belief that the whiskies, gins, and other spirituous beverages sold by the respondent are manufactured and distilled by it from mash, wort, or wash, and is calculated to, and has the capacity and tendency to, and does, induce dealers and the purchasing public, acting in such belief, to purchase the whiskies, gins, and other spirituous beverages bottled and sold by the respondent, thereby diverting trade to respondent from its competitors who do not by their corporate names or in any other manner misrepresent that they are manufacturers by distillation from mash, wort, or wash of whiskies, gins, ami other spirituous Leverages, and thereby respondent docs substantial injury to substantial competition in interstate commerce. P .AR. 6. Because of existing regulations, under the Federal Alcohol Administration Act approved August 29, 1935 ( 49 Stat. 977), which regulations became effective August 15, 1936, providing that rectifiers who redistill purchased alcohol over juniper berries anJ other aromatics may sell such resulting product as "distilled gin," and requiring that the labels state who distilled it, the Commission has JAMES VAN DISSEN DISTILLING CO. 87 78 Order 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, James Van Dissen Distilling Company, 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, the answer of respondent, testimony and other evidence taken before W. W. Sheppard, an examiner of the Commission theretofore duly designated by it, and before John ,V, Addison, a substituted examiner of the Commission theretofore duly designated by it to take testimony aml other evidence in the place and stead of the said W. vV. Sheppard, in support of the allegations of said complaint and in opposition thereto, briefs filed herein, oral arguments of counsel for the Commission and for respondent having been waived; and the Commission having made its findings as to the facts and its conclusions 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 l.s ordered, That James Van Dissen Distilling Company, a corporation, its officers, representatives, agents, and employees, in connection with the offering for sale, sale, and distribution by it 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 alcohol purchased, but not produced, by respondent is redistilled over juniper berries and other aromatics), do cease and desist from:

Representing, through the use of the word "Distilling" in its corporate name, on its stationery, advertising, or on the labels attached to the bottles in which it sells and ships its 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 Order 24F.T.C.

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 wherein 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 complete, unless and until respondent shall actually own, operate, or control such a place or places.

It is fur·ther ordered, That the said respondent, within 60 days from and after the date of fhe 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. PREMIER PEAT MOSS CORP. 89 Syllabus