Hercules Products and Distilling Corp

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IN THE MATTER OF liEHCULES J>RODUCTS & DISTILLING CORPORATION <:OMPLAnh, FINDINGS, AND ORDER IN REGARD TO Tlie ALLEGED VJOI,ATJON OF SEC. 5 OF AN ACT OF CON(iHESS APPROVED SEP'l'. 26, 1914 Docket 2473. Complaint, June 28, 1935-Decision, Jan. 30, 1931 Where a corporation engaged as wholesaler and rectifier of distilled spirits, in purchasing, rectifying, blending, and bottling whiskies, gins, and other spirltllous beverages, and In the making of gin with a still which it used therefor by redistlllation of pUt'clrased alcohol, not produced by It, over juniper berries' and other aromatics, and in selling its aforesaid various products to wholesalers and retailers in other States and in the District of Columbia, In substantial competition with those engagetl In the manufacture by true distillation of whiskies, gins, and other spirituous beverages and selling same in trade and commerce among the various States and in said District, and with those engaged in purchasing, rectifying, blending, and bottling such various beverages and similarly selling same, and Including among said eompetltors. those who, as manufacturers and distillers by original and continuous distillation from mash, wort, or wash, through continuous closed pipes and vessels until manufacture Is cernplete, of whiskies, gins, and other spirituous beverages sold by them, truthfully use words "distillery," "distilleries," "11lstillers," or "distllling" as a part of their corporate or trade names and on their stationery and catalogs and on the labels of the bottles In which they sell and ship their said products, and those who, engaged in purchasing, reetifying, Llendlng, bottling, and selling such various products, do not use aforesaid words as above set forth- Rept·esented, through use of word "Distilling" In its corporate name, printed on Its stationery and catalogs and on- tl•e labels attached to the bottles In which' It s~ld and rshipped its said prouucts, and in various other ways, to Its customers, and furnished same with a means of representing to their vendees, both retnllers and ultimate conrsuming public, that It was a dis· tiller and that the whlsldes, gins, and other spirituous beverages contained In such bottles were by It made through process of distlllatlton as aforesaid, notwithstanding fact It did not thus distill said various beverages, thus bottled, labt'led, sold, and trnnsported by It, through aforesaid process of original and continuous distillntfon, as long definltely unuerstood from word "distilling," used in connection with liquor industry and products thereof In the trade and by the ultimate purchasing public, and did not own, operate, or control any place or places where such beverages are made by aforesaid process, and was not a distll!er, for the purchase of the bottled liquors ot which there Is a preference on the part of a substantial portion of the purchasing public;

With effect of misleading and deceiving dealers and purchasing public into the beliefs that It was a distiller and that the whiskies, gins, and other spirituous beverages sold by it were by it made and distilled from mash, wort, or wash by one continuous process, and of Inducing dealers, In such beliefs, to buy Its saltl whiskl<>s nnd other beverages bottled and sold by It, and of therehr dh·erting trade- to it from its cornpPtltors who do not, by their cor- 592 FEDERAL TRADE COl\Il\IISSION DECISIONS Complaint 24 F. T. C". porate or trade names or In any other manner, misrepresent that they aredistillers; 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. Defore llfr. John L. Hornor, trial examiner. Mr. PGad B. Morehouse for the Commission.

jJf,·. Albert 0. Drucker, of New York City, for respondent. Complaint Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Hercules Products & Distilling Corp., 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 wo~ld be in the public interest, hereby issues its complaint, stttting its charges in that respect as follows:

PARAGRAPH 1. Respondent is a corporation organized, existing, and doing business umll'r the laws of the State of New York, with its office and principal place of business in the city of Drooldyn, in said State. It is now, and for more than one year last past has been, engaged in the business of a wholesaler and rectifier of distilled spirits, purchasing, rectifying, blending, and bottling whiskies, gins~ and other spirituous beverages and selling the same in constant ronrs~ of trade and commerce between allll among the various States of the Unite(l 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 beverages from mash, wort, or wash, and in the sale thereof in trade and commerce between and among the various State~ 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 HERCULES PRODUCTS & DISTILLING CORP. 593 Complaint engaged in the business of purchasing, rectifying, blending, and bottling whiskies, gins, and other alcoholic beverages and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia. PAn. 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 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 u 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 the wholesalers and retailers in such industry and to the ultimate purchasing public, to wit, the manufacturing of spirituous liquors by an 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 and prepared by distillers.

PAR. 3. In the course and conduct of its business as aforesaid, by the use of the word "Distilling" in its corporate name, printed on its stationery and catalogs, 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 it is a distiller and that the said whiskies, gins, and other spirituous beverages 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 beverages by it so bottled, labeled, sold, and transported. Respondent docs not own, operate or control any place or places where alcoholic Leverages 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 !leverages, as mentioned in paragraph 1 hereof, corporations, firms, partnerships, and individuals who manufacture and distill from mash, wort or wash, us aforesaid, whiskies, gins, and other spirituous Leverages sold by them and who truthfully llse the words "distillery," "distilleries," "distillers," or "distilling" as a part of their corporate or trade names and on their stationery and 594 FEDERAL TRADE COMl\IlSSION DECISIONS Findings 24F.T.G.

catalogs, 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, bottling, and selling 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 or catalogs, nor on the labels attached to the bottles in which they sell and ship their said products. PAR. 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 dealers and the purchasing public into the beliefs that respondent is a distiller and that the whiskies, gins, and other spirituous beverages 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 beverages bottled and sold by the respondent, thereby diverting trade to respondent 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.

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 anu the competitors of respondent and constitute unfair methous of competition in commerce within the in• tent 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, FINDINGS AS TO THE FACTS, AND ORDER J>ursuant 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 28, 1935, issued, and on June 29, 1935, served its complaint in this proceeding upon respondent, Hercules Products & Distilling Corporation, charging its with the use of unfair methods o£ 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, respondent npplied for permission to withdraw its said. answer waiving hearings on the charges set forth in the complaint in this proceeding, stating that it does not contest the HERCULES PRODUUTS & DISTILLING CORP. 595 591 Findings said proceeding, and that it admits all of the material allegations of the complaint to be true, and that the Commission might, without further evidence or other intervening procedure, make, issue and serve upon the respondent findings as to the facts and an order to cease and desist from the violations charged in the said complaint; and the Commission having duly considered the same and being 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 con· elusion drawn therefrom.

FINDI:NGS AS TO THE FACTS PARAGRAPH 1. Uespondent is a corporation organized, existing and doing business under the laws of the State of New York, with its t1ffice and principal place of business in the city of Brooklyn, in said State. It is now, and for more than one year last past has been, engaged in the business of a wholesaler and rectifier of distilled spirits, purchasing, rectifying, blending, and bottling whiskies, gins, and other spirituous beverages and selling the same 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, eonsisting 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 heveruges from mash, wort, or wash, and in the sale thereof in trade awl 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 alcoholic beverages and in the sale thereof in commerce between and among the various States of the United States and in the District of Columbia.

J> .AR. 2. In the course and conduct of its business as aforesaid, respondent has upon its said premises a still which it uses in the produc· tion of gin by a process of rectification whereby alcohol, purchased .596 FEDERAL TRADE COMMISSION DECISIONS Findings 24F.T.C.

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 the wholesalers ami retailers in such industry and to the ultimate purchasing public, to wit, the manufacturing of spirituous liquors by an 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 and prepared by distillers.

PAn. 3. In the course and conduct of its business as aforesaid, by the use of the word "Distilling" in its corporate name, printed on its stationery and catalogs, 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 it is a distiller and that the said whiskies, gins and other spirituous beverages 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 uistiller, does not distill the said whiskies, gins, and other spirituous beverages by it so bottled, labeled, sold, and transported. Respondent does not own, operate or control any place or places where alcoholic beverages are manufactured by a process of original and continuous distillation from mash, wort, or wash.

PAR. 4. There are among the competitors of responuent 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 "uistillery," "uistilleries," "distillers," or "distilling'' as a part of their corporate or trade names and on their stationery and catalogs, 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 indivitluals engaged in the business of purchasing, rectifying, blending, bottling, and selling whiskies, gins, and other spirituous beverages who do not use the words "distillery,'' "distilleries," "distilling," or "distillers" as a part of their corporate HERCULES PRODUCTS & DISTILLING CORP. 597 591 Order or traue names, nor on their stationery o'r catalogs, nor on the labels attached. to the bottles in which they sell and. ship their said products. PAR. 5. The rrpresentations by respondent, as set forth in paragraph 3 hereof, are calculated to and. have a capacity and tendency to and do mislead and deceive dealers and the purchasing public into the beliefs that respondent is a distiller and that the whiskies, gins and. other spirituous beverages 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 purcha~ing public, acting in such beliefs, 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 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. Existing regulations promulgated under the Federal Alcohol Administration Act, approved August 29, 1935 ( 49 Stat. L. 977), Provide that rectifiers who redistill purchased alcohol over juniper berries and other aromatics, in the manner in which this respondent produces its gin, may call such resulting product "distilled gin," and tequire that the labels state thereon who distilled it. This is to l'nable the rectifier to have the benefit of any distinction between gin produced by such method and "cold'' or compound gin prepared by mixing alcohol with essential oils. The Commission has, therefore, exceptl'u gins produced in the aforesaid manner from the application of its order to cea~e and desist as hereinafter set forth. CONCLUSION The aforesaid acts and practices of the respondent, Hercules Prod- Ucts & Distilling Corporation, 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 CRASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the substituted answer of respondent, filed herein, admitting ull the material alleg11.- .598 FEDERAL TRADE CO:\Ii\IISSION DECISIONS Order 24F.T. C. . tions of the Commission's complaint to be true, stating that it does not contest the said proceeding and waiving all intervening procedure; briefs and oral argument of both counsel having been waived, 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, Hercules Products & Distilling ·Corporation, its officers, representatives, agents, and employees, in connection with the sale, offering for sale, and distribution in interstate commerce or in the District of Columbia, of whiskies, gins and all other spirituous beverages, 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 said products, or in any other way by word or words of like import, (a) that it is a distiller of whiskies, gins, or any other spirituous beverages; (b) that th~ said whiskies, gins, or other spirituous beverages were by it manufac· tured 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 manufacture thereof is completed, unless and until respond· ent shall actually own, operate, or control such a place or places. It is further ordered, That the said respondent, within 30 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 ami has complied with the order to cease and desist hereinabove set forth. NORTH Al\IERICAN CLOTHES CO., ETC. 599 Syllabus