Banner Distilling Company

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IN THE MA'ITER OF BANNER DISTILLING COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO Tile ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGUESS APPROVED SEPT. 26, 1914, AND Oll' SEC. 3 OF TITLE I OF AN AC'l' OF CONGRESS APPROVED JUNEJ 16, 1933 1 Docket 2397. Complaint, May 18, 1935-Dccision, Jan. l.J, 1937 Where a corporation engaged as rectifier and wholesaler of spirituous liquors, in purchasing and bottling whiskies and gins and other spirituous beverages, Including different gradl.'s of cordials made by !t through combining fruit and fruit flavors with neutral spirits or whiskey, and purchasing, Incident to its aforesaid business, Its entire distilled spirits requirements of both Whiskey and alcohol from distillers who produced same from the raw materials, and In selling its aforesaid various products at wholesale in constant course of tra<ie and commerce among the various States and in the District of Columbia, !n substantial competition with those engaged in the manufacture by distillation of whiskies, gins, and other spirituous beverages and !n selling snme as aforesaid, and with those engaged in purchasing, rectifying, blending, and bottling such various beverages and in similarly selling same, and including among said competitors those Who as manufacturers and distillers of whiskies, gins, and other spirituous beverages sold by them from mash, wort or wash as above set forth, truthfully use words "distillery," "distilleries," "distillers," or "distllling" as a part of their corporate names and on their stationery, advertising, and on the labels of the bottles In which they sell and ship their said products, and those who, engaged in rectifying, blending, and bottling such various Products, do not use aforesaid words as above set forthnepresented, through use of word "Distilling" in its corporate name, printed on Its stationery and advertising and on the labels attached to the bottles in which It sold and shipped its said products, together with the words "Bottled by" on some of its labels, "Produced in California and Bottled by" on others, "Prepared and Bottled by" on others, and "Made and Bottled by" on still others, and words "Rectifiers and Blenders" on its stationery, lnvolcPs and advertising mnttPr, and through other ways to its customers, and furnished some with the means of representing to their vendees, both retaliers and ultimate consuming public, that the whiskies, gins, and other spirituous beverages contained in such bottles were by it made through Process ot distillation from mash, wort, or wash, notwithstanding fact it did not thus distill said whiskies, gins and other spirituous beverages, thus bottled, labeled, sold, and tran!'ported by It, by process of original and continuous distillation from mash, wort, or wash through continuous closed Pipes an<l vessf'ls until manufacture Is complete, as long definitely understood from word "Distilling" In llquor in<lustry In the trade and by the Ultimate purehaslng public, and did not rectify, purify, or refine distilled ~plrlts or wines by such process, and was not a distlller, for the purchase-r~ Count 2 of the l'omplulnt, under the Nat1oral Industrial Recovery Act, dismissed by 800 ot dl!<'lslon In A., L. A. Schechter Poultrv Corp. v. U. 8., 205 U. S. 495. Complaint 24F.T. C.

of the bottled or packaged liquors of which, including gins, there is a preference on the part of a substantial portion of both liquor purchasing public and trade;

With effect of misleading and deceiving dealers and purchasing public into the belief that the whiskies, gins, and other spirituous beverages sold by it were by it mtHle and uistilled from mash, wort, or wash, as aforesaid, and with capacity and tenuency to Induce such dealers and public, acting in such belief, to buy its said whiskies, etc., rectified, blended, and bottled by it, and thereby divert trade to it from its competitors who do not, by their corporate name or in any other manner, misrepresent that they are distilleries or that they manufacture, by uistlllation from mash, etc., as above set forth, whiskies, gins, and other spirituous beverages; to the substantial injury of substantial competition In commerce: '!Icld, That such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Defore Air. John 1V. Addison, trial examiner. Mr. John J. /{eenan and Air. PGad B. Jforeh(YUse for the Commission.

Mr. Lawrence A. Jacobso·n, of Chicago, Ill., 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 }Jelieve that Banner Distilling Company, a corporation, hereinaftl'r refeneu to as respondent, has been anu is using unfair methods of competition in commerce, as ''commerce" is defined in said act, and in violation of the Act of Congt·css approved June 16, 1933, known as the "National Inuustrial Uecovery Act," anu it appearing to the said Commission that a proceeuing by it in respect tlter£>of 'vould be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: Count 1 PAnAGRWII 1. Respondent is a corporation or~anized, existing and <loiug business under the laws of the State of Illinois, with its office anu principal place of business in the city of Chicago, in said State. It is now, and has been since its organization in February 1934, engageu in the businpss of a rectifier and wholesaler of liquors, purchasing nud bottling whiskies, gins, and other spirituous LcYernges and ~selling the same at wholesale in constant course of trade anu rommerce L£'tween anu among the various States of the Uniteu States and in the District of Columbia. In the course and conduct of its said bur,iuess, it causes its said prouucts wh£>n solu to be transported from BANNER DISTILLING CO. 437 435 Complaint its place of business aforesaid into aiel through various other States of the United States to the purchasers thereof, consisting of wholesalers and retailers, some located within the State of Illinois and some located in other States of the United States and the District of Colum- ~lia. In the course and conduct of its business as aforesaid respondent 18 now, and at all times since its organization has been, in substantial co~npetition with other corporations and with individuals, partiJersl:Ips, and firms engaged in the manufacture by distillation of whiskies, gins, and other spirituous beverages and in the sale thereof in trade and conmH.'rce between nnd among the various States of the Ullited States anll in the District of Columbia; and in the course a.nd conduct of its business as aforesaid, respondent is, and has been s~nce its organization, in substantial competition with other corporahoj~s and with indivilluals, firms, and partnerships engaged in the b~lSiness of purchasing, rectifying, blending, and bottling whiskies, gl!ls, and other spirituous beverages and in tlle sale thereof in commerce between and among the various States of the United States and in the District of Columbia .

. PAn. 2. For a long period of time the word "distilling" when used ~ 1 con1wction with the liquor industry and the products thereof has nd and still has a definite significance and meaning in the minds of the wholesalers and retaikrs in such industry and to the ultimate Purchasing public, to wit, the manufacture of such liquors by the process of original und continuous distillation from mash, w·ort, ot· Wash, through continuous do~rll pipes aJHl vessrls until the manufacture ~hereof is complt•h•ll; and n. substantial pot-tion of the purchasing Pubhc prefers to buy spirituous liquors bottled by the actual distillers nnd manufacturers therrof.

I PAn. 3. In the court> nn«l to!llluct of its business as aforesaid, Ly t le ~1se of the word ''Di'itilling" in its corporate name, printed on its stationery and on the labels nttachetl to the bottlrs in which it sells nnd ships its said prOlluets, and in various other ways, respondent t·eprl'sents to its cuf->tonwrs and fumishes them with the means of ~·l'preS(>nting to their nnl]eps, Loth retailers and the ultimate consum- ~~! .}~uLiie, tl.1at the whi!'>ki~s, gins, awl other spirituous beverages d' 1.etn contauwd Wl're l1y It manufactured through the process of IShllation from mash, wort, or· wash, when, as a matter of fact, respondent is not a distiller, dors not distill the said whiskies, gins or othrr · · .1 11 J 8Pil'ltnous he\·er1wes Ly it so bottletl, laLeleu, so l, an· trans- Ported, and does not operate, or control any place or places ;m, '"here suet} Levera(}'es arc manufactured by the process of uistl-1 ' 'll a t'IOnf l'OJ o n mash, wort, or wash. Complaint 24F.T.C.

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 word "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 "distillers" 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 said product.

PAn. 5. Representation by respondent, as set forth in paragraph 3 hereof, 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 name or in any other manner misr£>present that they are manufacturers hy 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 allegeu to have been made by respondent nre 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 powet·s and duties, and for other purposes," approved September 26, 1!)14, Count~ :PARAGRAPII 1. Respondent is a corporation or~anizeu, existing, and doing business unuer the laws of the State of Illinois, with its office and principal place of business in the city of Chica~o, in said State. It is now, and has been since its organization in February 1934:, en· BANNER DISTILLING CO, 439 435 Complaint gaged in the business of a rectifier and wholesaler of liquors, purchasing 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 o£ 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 other States of the United States to the purchasers thereof, consisting of wholesalers and retailers, some located within the State of Illinois 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 at all times since its organization has been, 1~ substantial competition with other corporations and with indi- V~d~als, partnerships, and firms engaged in 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, respondet~t is, and has been since its organization, in substantial competition Wt.th other corporations and with individuals, firms, and partner- ~lnps engaged in the business of purchasing, rectifying, blend- ~ng, and. bottling whiskies, gins, and other spirituous beverages and tn the sale thereof in commerce between and among the various States of the United States and in the District of Columbia. ~ARs, 2, 3, 4 and 5. As grounds for these paragraphs of this comf~~lllt, the Federal Trade Commission relies upon the matters and 1~gs set out in paragraphs 2, 3, 4, and 5 of count 1 of this com- 1 }> Uint to the same extent as though the several allegations thereof Wl're set out at l<'ngth and in s<'p:trate paragraphs herein, and the said h:ra.graphs 2, 3, 4, and 5 of count 1 of this complaint are incorporated rem by reference and adopted as the allegations of paragraphs 2, 3 ' 4, and 5 of this count, and are hereby charged as fully and as completely as though the several averments of the said paragraphs of co~nt 1 were sepamtely set out and repeated verbatim. U An, 6. Under and pursuant to Title I of the National Industrial p ~ro.very Act, appmved June 16, 1933, ( 48 Stat. 195 C. 90) 1 the 2 ~esident of the United States, by Executive Order No. 6182, of June as supplemented by Executive Order No. 6207, of July 21,1031933,li a, and Executive Order No. ()345 of October 20, 1933, delegated to v · A. 'Vallace, as Secretary of Agriculture, certain of the powers e~ed in the President of the United States by the aforesaid Act. l'~>t nder and pursuant to the delegation of such powers, the said Sec- . ary of Agriculture pursuant to Section 3 (d) of the act and Execu- CO~Il\IISSION DECISIONS440 FEDERAL TRADE Oomplaiut 24 F. T. G ti\·e orders under the act, upon his own motion presented a Code of Fair Competition for the Distilled Spirits Rectifying Industry aftet~ due notice and opportunity for hearing in connection therewith had LPen afforded interested parties, including respondent, in accordance· with Title I of the National Industrial Recovery Act and applicable l't'gulations issued thereunder, to the President of the United States who approved the same on the 9th day of December 1933, thereby constituting the said code a Code of Fair Competition within the meaning of the said National Industrial Recovery Act, for the regulation of the aforesaid industry.

In his written report to the President, the said Secretary of Agri- (•ulture made, among others, the following findings with respect to the said Code in the following words, to wit:

That said Code will tE-nd to effectuate the declared policy of Title I of the- National Industrial Recovery Act as set forth in Section 1 of said Act in that the terms and provisions of such Code tend: (a) to remove obstructions to the free flow of foreign commerce, which tend to diminish the amount thereof; ( lJ) to•provide for the general welfare by promoting the organization of induBlry f(lr the purposes of cooprratlve action among trade groups; (c) to eliminate nn~ iar compe-titive practices; (d) to promote the fullest possible utilization of the preAent produrtlve ca11aclty of in<luRtrles; (e) to avoid undue reRtrlction of production (exce-pt as mny be tempornrlly required) ; (f) to increase the con~ sumptlon of industrlnl and ngt'icultural products hy htct'Pasing pm·cha~Jing 11ower; and (U) otherwise to rehabilitate industry. By his approval of the said code on Dcct:>mLcr U, Hl3:3, the President of the United Statps, pursuant to the authority Yested in him by Title I of the National Industrial Hecowry Act afort>~aid, made and issued his certain written Exrcutire order, wherrin he udoptrtl and approve<l the report, reeollllliPJHlations and finlling-s of the said Secretary of Agricultm·p, awl onlerrd that the said Code of Fair Competition he, and the same tlwn•Ly was approved, awl Ly virtue of the National Industrial Recovery Act aforesaid, the following provision of Article V of said Code Lccame and still is one of the stanllards of fair competition for the Distilled Spirits Rrctifying Industry and is binding upon every mcmLer of said Imlnstry anll this respondent:

The following practices cou~titute unfair nwthods of <·ompl'tillon awl t<llltli not be t>ngnged in hy any member of the industry; Seetlon 1. Falxc Adl'('f'fiHiny.-To IHthli:;h or dls:wmlnllte In any munlll:'l' any false adve-rtisement of any rPctifled product. Any ad\'et·tlsemrnt shall be dE-emed to be fal:;e If It is untrue In any particular, or If directly or by am· blgulty, omission or lnfprence it tend:'! to create a misleading impression. PAR. 7. The use Ly respondent of the word "Distilling" in its corporate name, printed upon its stationery and on tho labels attached BANNER DISTILLING CO. 441 Findings to the bottles in which it sells and ships such products and in various -other ways, constitutes false advertising within the meaning of the aforesaid provision of said Article V and tends to and does create the misleading impression that respondent is engaged in the business -of distilling spirits from mash, 'vort, or wash and that the spirituous beverages by it so sold and transported have been bottled by the ·original distillers thereof, all contrary to the provisions of Section 1, Article V, of the Code aforesaid.

PAn. 8. The above alleged methods, acts and practices of the re- ~pondent are and have been in violation of the standard of fair competition for the Distilled Spirits Rectifying Industry of the United States. Such violation of such standard in the aforesaid transactions in interstate commerce and other transactions which affect interstate commerce in the manner set forth in paragraph 5 of count 1 hereof, are in violation of Section 3 of Title I of the National Industrial Recovery Act and they are unfair methods of competition in commerce within the meaning of the Federal Trade Commission Act as mnended.

REPoJrr, FINDINGS AS TO THE Facts, AND Onder Pursuant to the provisions of an Act of Congress approved September 2G, 1914, entitled "An Act to create 11 Federal Trade Commission, to define its powers and duties, and for other purposes," the Fed- ~ral Trade Commission, on May 18, 1935, issued and served its complaint on Danner Distilling Company, charging it with the use of u.nfair methods of competition in commerce in violation of the provi- Sions of said net. After the issuance of said complaint, and the filing of respondents answer thereto, testimony and otht:>r evidence in snp- P_?rt of the allegations of said complaint were introduced by John J. heenan and PGad ll. Morehouse, attorneys for the Commission, hefore John ,V. Addison, an examiner of the Commission, theretofore duly llesignatPd by it, and in defense of the allegations of the compl:tint by Lawrence A. Jacobson, attorney for the rpspondent; and sa](} testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the }H'OcPetling regularly came (•ll for final hearing before the Commission on the srticl complaint, the answer thereto, testimony and. other evidence, brief of counsel for the ~o.mmission in support oft he complaint, ( respondt:>nt's brief in oppo- Sition thereto having been waiwd.) and the oral :u·guments of counsel nf?resaid; and the Commission having duly considered the same, and ~Jt>I.ng now fully n(hi~ed in the premises, finds that this proceeding 18 Ill the interest of the public, and makes this its findings as to the facts and its conclusion drawn therefrom:

Findings 24F. T. C.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent is a corporation organized February 5, 1934, existing under the laws of the State of Illinois with its principal office and place of business at 2100 South Morgan Street in the city of Chicago in said State. It is now and has been since its commencement of business shortly after its organization, operating as a rectifier and wholesaler of spirituous liquors, purchasing and bottling whiskies and 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. It engages in that business under basic permit No. R-422 issued by the Fedeml Alcohol Administration.

Respondent's premises consist of two floors and a basement of a four-story building at the above address. It has the usual filter percolators and whiskey tanks constituting the ordinary equipment of a rectifier of spirituous liquors, but has no stills. It combines fruit and fruit flavors with neutral spirits or whiskey for the purpose of making different grades of cordials and also handles whiskey made by different distilleries. Its aggregate business is approximately fifty-five thousand dollars a month in sales. It employs no salesmen but circularizes its customers with direct advertising matter. From the time when respondent comm('need its business up to the prcs<'nt time it has purchased its entire distilled. spirits requirements of both whiskey and alcohol from distillers who produced it from the raw materials.

PAR. 2. In the course anu conduct of its busin<'ss, it causes its said products when sold to be transported. from its place of business aforesaid. into anu through various other States of the United States to the purchasers thereof, consisting of wholesalers and retailers, some located. within the State of Illinois il.nd some located in other States of the United States and the District of Columbia. In the course and conuuct of its business as aforesaid respondent is now, and at all times since its organization 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 in trade and commerce between and among the various States of the United States and in the District of Columbin.; and in the course and conduct of its business as aforesaid, J'('spondent is, antl has been since its organization, in substantial competition with other corporations and with individuals, firms, ami partnerships engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous BANNER DISTILLING CO. 443 435 Findings 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. 3. For a long period of time the word "distilling," when used In connection with the liquor industry and with the products thereof, h~s had, and still has, a definite significance and meaning to the mmds of wholesalers and retailers in such industry and to the ultimate purchasing public, to wit: the manufacture of spirituous 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. Respondent's plant premises and operations do not make or constitute it a distilling company in the sense commonly understood by the public or by the liquor industry. Section 3244 (Second) of the Revised Statutes of the United States (U.S. C. A., Title 26, Sec. 1398-f) defines a rectifier in the following language:

Every person who rectifies, purifies, or refines distilled spirits or wiues by any process other than by original and continuous distillation from masli, wort, or wash, through continuous <:los<'d vessels and pirws, until the manufactur~ thereof is comvlete, and PVery wholesale or retail liquor dealer who bas In hi~ Possession any still or leach tub, or wlio keetls any other apparatus for the PUrpose of refining in any manner distilled E<spirits, and every person who, without rectifying, purifying, or refining distilled Rpirits, shall, by mixing such Spirits, wine, or other liquor with any material, manufacture any spurious, imitation, or compound liquors for sale, under the name of whisky, brandy, gin, rum, Wine, spirits, cordials, or wine bittE-rs, or any other name, shall be regarded as a rectifier, and as being engaged in the business of rectifying~. Respondent docs not now ami never has rectified, purified, or refined d.istilled spirits or wines by a process of original and continuous distillation from mash, wort, or wash through continuous dosed vessels and pipes until the manufacture thereof is complete, and is a rectifier and wholesaler only.

PAn. 4. Rectifying, in the distilled spirits rectifying industry, m~ans the mixing of whiskies of different ages or types, or the mixing of other ingredients with whiskies, but reducing proof of whiskey by adding water is not rectifying. Rectifiers also blend whiskies with neutral spirits (grain alcohol), . A distiller, in the sense ordinarily understood by the liquor industry, 1~ 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 establish1ment GOO feet or more away ~rom their distillery, known as a rrctifying 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 444 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings 24F.T.C.

spirits purchased from other distillers, or both. Some distilleries have a tax-paid bottling room on the distillery bonded premis!.'s wherein their distilled spirits are bottled straight as they come from the :,till, or in a bonded warehouse after aging, or after reduction of proof. Any rectifying by a distiller, howev!.'r, must be done in his rectifying plant under his r!.'ctifier's permit. On some bottled liquors, whether bottled at a distillery rectifying plant, or at any rectifying plant, app!.'nr the words "Bottled" 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 bottlt•d in his rectifying plant, the distiller may, and <loes, put "Distilled and Dottled by Company." If, in the <listillery's r!.'ctifying plant, other spirits have been blended or rectified, he puts "HlendPd 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 a rectifier, the number following said letter corresponding with the distiller's or rectifier's permit. Thus "H-422" designates this respond!.'nt. A distiller who also operat!.'s a rectifying plant, having both kinds of permits, may use either symbol Jepending upon whether the liquor contained in the bottle was pro- <luced and bottled 1md!.'r his distiller's or his rectifier's permit. A distilla· has a maximum bond of $100,000, and is p!.'rmitted to have nntaxe1lli(IllOl' wlwreas the average bond of the rectifier is about $5,000. A distiller is r!.'quired eithet· to own the frpe title of the premi~es upon which hi:, business is condudt•ll, ot· have a wuirN' of thp OWIIPr's intPJ'Pst so that the Gon•nmwnt ran have a first li!.'n upon that property fot· tuxt•s. A distillery is IIIHler constant gerwral super·isiun l1y storek!.'e]wr gaugers, who are always t lwre and absolute supervision is maintained owr the hond!.'d war!.'house of a distilh·ry. Another differt•Jice i!> that one storekPe)Wl' gauger may take care of several rectifying plants, hut at a distilh.. ry one is in constant SllJWrvision, primarily to iiUpervise the tax payments. A rectifier is not permitt('d to stOI'e spirits in Lond. A di~tiller pro<luees spirits from grains, alcohol, molass!.'s, and fruits, but a rt>difier, producing no tlistiliNl !'pit·its whatewr, must obtain them flom the producer or from sonwone holding warehouse rt•eeipts. In short, all r!.'quirements are coni-itlf'rably more d!.'taile1l in the case of a distiller than in the case of a rretifi!.'r, vi~:

.A distiller must haven distillt-'ry, which must be a eomph•te building and a warehouse, a sf'parate building. He has to have necessary weighi11g Pquipment, a grain hoppt•r, cook!.'r, cooking !.'quipnwnt, mash tul,s, fpr·menters, and sufficient distilling !.'quipment to take BANNER DISTILLING CO. 445 435 Findings care of his continuous distillation until the spirits are run through the pipe lines into the receiving tanks. At the warehouse he has to have the weighing and testing instruments for checking and many other things. A rectifier is not required to have a separate building but his plant may consist of a room within a building. If one room, it would have to be divided into three separate rooms by partitions. The regulations for the equipment of a rectifier are not so specific as those for a distiller.

Knowledge of these details is not widespread among the retail trade, and is very limited to the general public. All whiskies, whether emanating from distilleries or rectifiers, are generally in the trade conceded to be "distilled products."

It is not possible to determine from the presence of the phrase "Blended and Bottled by" alone or the phrase "Bottled by" alone, on the label whether the package was bottled by a rectifier who is a distiller or by a rectifier who is not a distiller. . PAn. 5. Respondent in the course and conduct of its business uses Its llame on labels attached to bottles in "··which it sells and ships its beverages and on stationery, invoices, aud advertising matter. The name is preceded by the words "Bottled By" on some of its labels; "Produced in California and Bottled by" on others; "Prepared And nottlcd lly" oq others; and "l\fude and Bottled By" on still others. On its stationery, invoices and advertising matter the name is precee<le<l or followed by the words "Rectifiers And Blenders". The Commission finds that in the course and conduct of its business as aforesaid, by the use of the word "Distilling" in its corporatt' llame, pz·intt'd on its stationery, advertising, and on the. labels uttaelwd to the bottles in which it sells and ships its said products, and in various other ways, respondent represents to its customers. and fur11ishes them with the means of representing, to their vendees, b?th l'Ptailers and the ultimate consuming public, that the said whis- !nes, gills, and other spirituous beverages therein contained were by lt manufactlll'ed through the process of distillation from mash, wort, or Wash, when, as a matter of fact, respondent is not a distiller, not a distillery, does not distill the said whiskies, gins, or other spiritu- ?us Leveragrs by it so bottled, labrled, sold, and transported in Interstate commerce.

P .AR. 6. Seventeen lay witnesses, representative of many different pro~essions, trades, and occupations, such as surgeon, contractor, civil engmeer, insurance agent, etc., were called to the stand and examined to test the reaction of a representative cross-section of the ge1wral public to such terms as "distilling," "distilleries," and "distillers" when used} in C'OIHlPction with whiskey or the distilled ·spirits industry, and l4Gi:i0"'-:W-, ol. 24- :n 446 FEDERAL TRADE CO.l\IMISSION DECISIONS Findings 24F.T. C.

all of them testified in substance that by "distilling" they understood the manufacture of spirits, whiskey, or liquors from raw materials; and by "Danner Distilling Company" they would naturally assume respondent to be engaged in such manufacturing process. All but two of them indicated that they would be influenced to purchase respondent's product by reason of the word "distilling" being included in its corporate name. The testimony of many liquor tradesmen, retailers, and wholesalers was substantially to the same effect, namely, that they had observed, from their contacts in selling the public, a definite preference for distillery packaged products. It is unquestionably true that there are many drinkers who, in buying liquors, are governed principally by a brand name established by advertising or by long usage, or who are governed by taste and quality which iR known to them, without regard to the source of bottling. The Commission finds, however, that there is a substantial portion of the liCJUOr purchasing public which prefers to buy spirituous liquors, including gins, which have Leen bottled or packaged Ly distilleries. The Commission also finds that a substantial portion of the trade as well as the public has a preference for handling liquors bottled by distillers or distilling companies notwithstanding tllfl fact that ~uffi­ cient time has now elapsed since repeal for a more widespread knowledge on the part of both retailers and wholesalers as to the exact. status of the concerns from whom they buy their bottled goods for resale and such customer.'rs and prospective customers of respondent are not like.'ly to be misled by respondent's corporate name alone. PAn. 7. There are among the competitors of rE.'spondent engaged in tlle sale of spirituous l1evernges as mentioned in paragraph 2 hereof corporations, firms, partnerships, and individuals who manufacture aud distill from mash, wort, or wash, as aforesaid, whiskies, gins, and other spirituous beverages sold by them, and who truthfully use th<> words "distillery," "tlisti1leries," "distillers," or "distillin~," as a part of their corporate uames and on their stationery, advertising, and on the lalH.~ls of the bottles in which they sell and ship such products. There are also among such competitors corporations, firms, partnerships, allll individuals engaged in the business of rectifying, blending, and bottling whiskies, gins, and other spirituous hcwrngE.'s who do not use the words "distillery," "distilleries," "distilling," or "distillers" as a part of their corporate names, nor on their stationery, nor on the label~ attached to the bottles in which they sell and ship their said products.

PAn. 8. The representations by respondent as set forth in paragraph 5 hPrcof have the capacity nnd tendency to, and by necessary inference> do mi~lend and deceive d£>alers and the purchasing public into th~> BANNER DISTILLING CO. 447 435 Order belief that the whiskies, gins, and other spirituous beverages sold by th~ respondent are distilled by it from mash, wort, and wash as afore- Said and have the capacity and tendency to induce such dealers and the purchasi11g public acting in such belief to purchase the whiskies, gins, and other spirituous beverages rectified, blended and bottled by the respondent, thereby diverting trade to respondent from its competitors who do not, by their corporate name, or in any other manner, misrepresent that they are distilleries, or that they manufacture by distillation from mash, wort, or wash as aforesaid, whiskies, gins, and other spirituous beverages, and thereby respondent does substantial in,iury to substantial competition in interstate commerce. PAR. 9. The Commission's complaint in this case was issued prior to the decision of the United States Supreme Court in the case of 4... L. A. Schechter Poultry Corporation et al. v. United States (295 ~· S. 495), and contained two counts. Count 1 specifically charged a ''iolation of the Federal Trade Commission Act, and count 2 charged that the practices of respondent, as hereinbefore set out, were unfair methods within the meaning of the Federal Trade Commission Act because they were in violation of Section 3" of Title I of the National I.ndustrial Recovery Act, which was invalidated by the aforesaid deci- Sion. For that reason the Commission is dismissing the complaint as to COunt 2 thereof.

CONCLUSION The aforesaid acts and practices of the respondent Banner Distilling Co~pany, are to the prejudice of the public and of respondent's com- P~htors, and constitute unfair methods of comp<'tition in commerce, Within the intent and meaning of Section 5 of an Act of Congress,. approveu September 26, l!H4, entitled "An Act to create a Federal 1trade Commission, to define its powers and duties, and for otheil· Purposes."

ORDER TO CEASE AND DESIST . This proceeding having been heard by the Federal Trade Commis- Sion upon the complaint of the Commission, the answer of respondent, testimony and other evidence taken before John ,V. Addison, an e!aminer of the Commission theretofore duly designated by it, in support of the allegations of said complaint and in opposition thereto, brief of counsel for the Commission filed herein, (brief on behalf of respondent having been waived), and oral arguments by .P. D. Morehouse, counsel for the Commission, and by Lawrence A. Jacobson, counsel for the respondent and the Commission having matle its findings as to the facts and it~ conclusion that said respondent has violated the provisions of an Act of Congress approved 448 FEDERAL TRADE CO~DliSSIOX DECISlONS Ordet· 2! F. T. C. 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 Banner Distilling Company, a corporation, 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 do forthwith cease and desist from: Repres€'nting, through the use of the word "Distilling" in its corpo- I'ate 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 manu·· factured by a process of original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until the manufacturer thereof is completed, unless and until respondent shall actually own, operate, or control such a place or places. It is furtAc'l' ordered, That the said complaint be and the same is hereby dismissed as to count 2 thereof, It is furtherr ordel•ed, That the said respondent within 60 days from ~nd after the <late of the service upon it of this order, shall file with 1he Commission a report or reports in writing setting forth in detail 1he manner and form in which it is complying, and has complied, with the order to C('ase and desist hereinabove set forth. A. 0. LE0:8ARD, INC. 449 Complaint