Unique Novelties, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF UNIQUE NOVELTIES, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO Tile ALLEGED VIOLATION OF SRC. 5 OF AN ACT OF CONGRESS APrROVED Sert. 26, 101-1 Docl.:ct 3108. Complaint, Apr. 20, 193"1-Decision, June 25, 193"1 Where a corporation engaged in sale and distribution of candy, candy products, and chewing gum, including certain assortments so packed and assembled as to involve use of a lottery scheme when sold and distributed to con-sumers thereof, and which incli,ided (1) large number of individually wrapped penny caramels of uniform size and shape, of which a relatively few were red or red-centet·ed, and of which a still smaller number were green or green-centet·ed, together with a number of small pennants to be given free, and in accordance with explanatory display card for retailer's use Included with assortment, to chance purchasers of aforesaid red or red-centered caramels, and with a number of larger pennants to be thus given to such purchasers of the gt·een or green-centered caramels, and to be given, along with said display card, to which one of said larger pen· nants was attached, to purchaser of last caramel in assortment; and (2) a large number of individually wrapped penny sticks of chewing gum, to· gether with number of small felt pennants to be given, without charge, to chance purchasers of said sticks, upon the Inside of the wrapper of which were prlntrd words "Home Hun," and to be given also to purchaser of last stick In assortment, in accordance with explanatory display card supplied for retailer's use-- Sold, to wholesalers and jobbers and to retallers for display and resale, In accordance with aforesaid plan, such assortments, and thereby supplied to and placed in the hands of others the means of conducting lotteries In the sale of said products, in accordance with such plans, contrary to public policy as long recognized in the common law and criminal statutes, nnd contrary to an established public policy of the United States Govern· ment, and in competition with many who, unwllling to offer and sell candy and clJewing gum so packed and assembled, or otherwise arranged and packed for sale to the purchasing public as to involve a game of chance, refrain therefrom, and in competition with many who are unwilling to adopt and use said or any method involving game of chance or sale of a chance to win by chance, as contrary to public policy or criminal statutes as aforesnld, or as detrimental to public morals and to morals of the purchasers of such products;

With results that consuming public was induced to purchase said caramels or gum because ot chance of obtaining free, one of pennants contained in said . assortments, and with capacity and tendency to Induce purchasers to buy Its said products in preference to those offered and sold by Its competitors, and with result that many dealers in and ultimate purchasers of candy were attracted by said methods and manner of packing such products and by elenwnt of chance lnYolved in sale thrreof as above set forth, and thereby induced to purchase same, thu'! packed and sold by It, in prefer· rnce to those offered and sold by said competitors who do not use such or UNIQUE NOVELTIES, INC. 247 246 Complaint equivalent methods, and with tendency and capacity, by reason thereof, to divert to it trade and custom from its said competitors who do not use same or equivalent methods, exclude from such trade all competitors unwilling to, and who do not, use such or equivalent practices or methods as unlawful, lessen competition therein, and tend to ci·eate a monopoly thereof in it and such other competitors as use same or equivalent methods, deprive purchasing public of benefit of free competition in trade involved, and eliminate from said trade all actual, and excluc.le therefrom all potential, competitors who do not adopt such or equivalent methods: Held, That snell acts and practices ·were to the prejudice of the public and competitors and constituted unfair methods of competition. Mr. Henry 0. L(.f;'fl]c and Mr. P. 0. Kolinski for the Commission . .Mr. Charles W. Jablon, of New York City, for respondent. Coil-rPLAINT 11ursuant 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 Lelieve that Unique Novelties, Inc., 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 said Comtnission 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:

PARAGRAPH 1. Respondent is a corporation organized nml doing business under the laws of the State of New Yorlc, with its priiJcipal office and place of business located at 35-37 Claver Place, in the city of Brooklyn, State of New York. Respondent is now, and for several lhonths last past has been, engaged in the sale and distribution of candy, candy products, and chewing gum to wholesale dealers and jobbers and to retail dealers located at points in the various States of the United States. Respondent causes and has caused its said products when sold to be transported from its principal place of business in Brooklyn, N. Y., to purchasers thereof in the State of New York and in other States of the United States at their respective places of business. There is now, and has been for several months last past, a course of trade and commerce by said respondent in such candy, candy products and chewing gum between and among the States of the United States. In the course and conduct of said busilless, respondent is in competition with other corporations and with individuals and partnerships engaged in the sale and distribution of eandy, candy products, and chewing gum in commerce between aiel among the various States of the United States. FEDERAL~ TRADE C0l\Il\IISSION DECISIONS248 Complaint 2::iF.T.O. PAR. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent sells and has sold to wholesale dealers and jobbers and to retail dealers assortments of candy, candy products, and chewing gum so packed and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers thereof.

(a) Onf' of said assortments is composed of ISO vicces of caramel candy of uniform size and shape, together with 20 small pennants and 11 larger pennants nud a display card, hereinafter referred to, which has a still larger pennant fastened thcrf'on. 120 of these caramels are yellow. 20 0f said caramels are reu or I1a ve rf'd centers, and 10 of saiu caramels are green or ha ,.e green centers. The said carnmels are contained within non-transparent wrappers, and the color of said caramcls, or the color of the center of said caramels, is effectively COJH'ealed from purchasers nnd prospective purchasers until a selection has l1ecn made and the wrapper removed. The said caramels retail for 1¢ f'ach, aml the purchaser procuring one of the rcd earamcls, or one of the curamels having a red center, is entitled to reecive and is to !Je given free of charge one of the small pennants contained in said assortment. The purchaser procuring one of the green earamels, or one of the caramels having a green center, Is entitled to receive and is to be given free of charge one of the larger llennnnts contain I'd in said assortment. '.fhe purchaser of the last caramcl in said assortment is entitled to receiye and is to be given free of charge the display card hereinbefore referred to, to which one of the large pennants is attached. The display card included with said asRortmcnt contains statments or lPgemls informing the purchasers !!.IICl pro;;pective purehnsers that the sa irl a;.;sortment is lleiug sold ln accordance with the above described sales plan. The said pennants are thus distributed to the purchasers of said caramel candies wholly by lot or chance, and the consuming public is indncPcl to purchase said caramel candies because o£ the chance of obtaining Olle of the said pennants contained in said assortnwnt. (b) An assortment of chewing gum !Jeing sold und distributed by I'P~pondent is compose1l of 100 sticks of chewing gnm contained within individual wrap11ers, togetbcr with 11 number of small fPit pennants and a display card to which has hcPn nttal'h!'rl one of said pennants. The majority of the wrappers within which sald stkl•s of chewing gum are contuined have nn printing on the Inside, but n small 1mmher of said wrappers have the words "Horne Unn" printed on the inside thereof. The fact us to whether the inside of the wrapper is blank or has the words ''llome nun" thereon Is cffPetively eoncpak!l from purchasers nnd pro!'pi'Ctlve purrhusers until a splection hns hcPn made und the wrupper rf'moved. The said sticks of chewing gum retail at 1¢ each, and the purchaser procurlug a stid• ot chewing gum contained within a wrapper bcaring the words "Home Run" is entitled to recdve and Is to be given frf'e of churgc one of the F;a[d felt pt-Hnants contained In said assortment. The purchaser of the lnsl stick of dwwlng gum in said assortment is entitled to receive and is to !Je gi\·en free ·of charge the display card to whleh 11. pennant Is attnehed. The display curd lncludf'd with Anid assortment contains stutements or legends informing the JIUrchasPrs aud prospective purcbusers that the said assortment is being sold In accordance with the a!Jove dcseribcd sales plan. The said small felt pennants UNIQUE NOVELTIES, INC, 249 246 Complaint <~re thus distributed to purchasers of sticks of chewing gum from said assortm:nt wholly by lot or chance, and the consuming public is induced to purchase sahl chewing gum because of the chance of obtaining one of the said small felt :O('nnants.

PAR. 3. The wholesale dealers and jobbers to whom respondent sells its assortments of candy and chewing gum resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortments for sale and sell the same to the purchasing public in accordance with the aforesaid sales plans. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of its products in ac- <)ordance with the sales plans hereinabove set forth. Such sales plans have the capacity and tendency of inducing· purchasers thereof to ~urchase respondent's said products in preference to candy or chewlllg gum offered for sale and sold by its competitors. PAR. 4. The sale of candy and chewing gum to the purchasing public in the mannf)r above alleged involves a game of chance or the sale of a chance to procure a pennant .

. The use by respondent of said methods in the sale of candy and ~hewing gum, and the sale of candy and chewing gum by and through the use thereof and by the aid of said methods, is a practice of the sort which the common law and criminal statutes have long deemed contrary to public policy, and is contrary to an established public policy of the Government of the United States. The use by respondent of said methods has the tendency unduly to hinder competition or create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude competitors of respondent who do not adopt and use the same methods or equivalent or similar nwthods involving the same or an equivalent or similar element of {:hance or lottery scheme.

Many persons, firms, and corporations who make and sell candy {)r chewing gum in competition with respondent, as above alleged, are llllwilling to offer for sale or sell candy or chewing gum so packed -nnd assembled as above alleged, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of chance, .:tl.ld such competitors refrain therefrom. PAR, 5. l\Iany dealers in and ultimate purchasers of candy or chewing gum are attracted by respondent's said methods and manner of })aeldng said candy and chewing gum and by the element of chance involved in the sale thereof in the manner above described, and are thel'{•by inducrd to purchase said candy and chewing gum so packed nnd sold by respondent in preference to candy or chewing gum offered for sale and sold by said competitors of respondent who do not use the 250 FEDERAL TRADE COl\IMISSION DECISIONS Findings 25 F. T.C. same or equivalent methods. The use of said methods by respondent haso the tendency and capacity, because of said game of chance, to divert to respondent trade ancl custom from its said competitors who do not use the same or equivalent methods; to exclude from said candy and chewing gum trade all competitors who are unwilling to and who do not use the same or equivalent methods because the same are unlawful; to lessen competition in said candy and chewing gum trade and to tend to create a monopoly of said candy and chewing gum trade in r<'spondent and in such other competitors of respondent as use the same or equivalent methods; and to deprive the purchasing public of the benefit of free competition in said candy and che" ing gum trade. The use of said methods by respondent has the tendency and capacity to eliminate from said candy and chewing gum trade all actual competitors and to exclude therefrom all potential competitors who do not adopt and use said methods or equivalent methods. PAn. G. The aforementioned methods, nets and practices of respondent are all to the prejudice of the public and of respondent's competitors, as hereinabove alleged. Said methods, acts, and practices 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.'' REPORT, FrN DINGS As TO THE Facts, AND OnnEn· 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 po"·ers and duties, and for other purposest the Federal Trade Commission on April 20, 1037, issued and on April, 22, 1937, served its complaint in this proceeding upon the respondent, Unique Novelties, Inc., a corporation, charging it with the use of unfair methods of competition in commerce in violatio11 of the provisions of said act. After the issuance of said complaintt the rrspondent filed answer thereto admitting all the material allegations of the complaint to be true and waiYing the taking of further evidence and all other intervening procedure. Thereafter, this proc<'eding regularly came on for final hearing before the Commission on the said complaint and answer thereto, briefs and oral argument of counsel having been waived; and the Commission, having <luly 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 tlwrcfrom:

UNIQUB NOVELTIES, INC. 251 :24G ~'in dings FINDINGS AS TO THE FACTS P ARAGRAPII 1. Respondent is a corporation organized and doing business under the laws of the State of New York, with its princi- Pal office and place of business located at 35---37 Claver Place, in the ·city of Brooklyn, State of New York. Respondent is now, and for several months last past, has been engaged in the sale and distribution of candy, candy products, and chewing gum to wholesale rlealers and jobbers and to retail dealers located at points in the ''arious States of the United States. Respondent causes and has caused its said products when sold to be transported from its prin- -cipal place of business in Brooklyn, N. Y., to purchasers thereof in the State of New York and in other States of the United States at their respectiye places of business. There is uow, and has been for $creral months last past, a course of trade and commerce by said respondent in such candy, candy products and chewing gum between and among the States of the United States. In the course <111d conduct of said business, respondent is in competition with ~)thpr corporations and with individuals and partnerships engaged ln the sale and distribution of candy, candy products, and chewing gum in commerce between and among the various States of the lJnited States.

PAR. 2. In the course and conduct of its business, as described in Paragraph 1 hereof, respondent sells and has sold to wholesale dealers .and jobbers and to retail dealers assortments of candy, candy prodlicts and chewing gum so packed and assembled as to •involve the Use of a lottery sclwme '~hen sold and distributed to the consumers thereof.

(a) One of said assortments is composed of 150 pieces of caramel -candy of uniform size and shape, together with 20 small pennants .and 11 larger pennants and a display card, hereinafter referred to, w·which has a still larger pennant fastened thereon. 120 of these -caramels are yellow, 20 of said caramels are red or have red centers, and 10 of said caramels are green or have green centers. The said caramels are contained within nontransparent wrappers, and the color of said caramels, or the color of the center of said caramels, is effectively concealed from purchasers and prospective purchasers Until a selection has been made and the wrapper removed. The said caramels retail for 1¢ each, and the purchaser procuring one of the red caramels, or one of the caramels having a red center, is entitlt>d to receive and is to be given free of charge one of the small pennants contain€'d in said assortment. The purchaser procuring one of the gr(len caramels, or one of the cnrn.mels having a green center, is 252 FEDERAL TRADE COl\IMISSION DECISIONS Findings 25 F. T. C. entitled to receive and is to be given free of charge one of the larger pennants contained in said assortment. The purchaser of the last caramel in said assortment is entitled to receive and is to be given free of charge the display curd hereinbefore referred to, to which one of the large pennants is attached. The display card included with said assortment contains statements or legends informing the purchasers and prospective purchasers that the said assortment is being sohl in accordance with the above described sales plan.

The said pennants are thus distributed to the purchasers of said caramel candies wholly by lot or chance, and the consuming public is induced to purchase said caramel candies because of the chance of obtaining one of the said pennants contained in said assortment. (b) An assortment of chewing gum being sold and distributed by respondent is composed of 100 sticks of chewing gum contained within individual wrappers, together with a number of small felt pennants and a Jisplay card to which has been attached<l one of said pennants. The majority of the wrappers within which said sticks of chewing gum are contained have no printing on the inside, but tt small number of said wrappers have the wonls "Home Hun" printNl on the inside thereof. The fact as to whether the inside of the wrapper is blank or has the words "Home Run" thereon is eiTecth·ely concealed from purchasers and prospective purchasers until a selection has been made and the wrapper removed. The said sticks of chewing gum retail at 1¢ each, and the purchaser procuring a stick of chewing' gum contained within a wrapper bearing the words "Home Run" is entitled to receive and is to be given free of charge one of the said felt pennants contained in said assortment. The purchaser of the last stick of chewing gum in said assortment is entitled to receive and is to be given free of charge the display card to which a pennant is attached. The display card included will1 said assortment contains statements or legends informing the purchasers and prospective purchasers that the said assortment is being sold in accordance with the above described sales plan. The said small felt pennants are thus distributed to purchasers of sticks of chewing gum from said assortment wholly by lot or chance, and the consuming public is induced to purchase said chewing gu111 because of the chance of obtaining one of the said small felt pennants. PAn. 3. The wholesale dealers and jobbers to whom respondent sells it::: assortments of candy and chewing gum resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortments for sale and sell the same to the purchasing public in accordance with the aforesaid sales UNIQUE NOVELTIES, INC. 253 246 Findings plans. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of its products in accordance with the sales plans hereinabove set forth. Such sales plans have the capacity and tendency of inducing purchasers thereof to purchase respondent's said products in preference to candy or chewlJlg gum offered for sale and sold by its competitors. PAR. 4. The sale of candy and chewing gum to the purchasing Imblic in the manner above found involves a game of chance or the sale of a chance to procure a pennant. The use by respondent of said methods in the sale of candy and chewing gum, and the sale of candy and chewing gum by and through the use thereof and by the a.id of said methods, is a practice of the sort which the common law and criminal statutes have long deemed contrary to public policy, and is contrary to an established public policy of the Government of the UnHed States. The use by respondent of said methods has the tendency unduly to hinder competition or create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude competitors of respondent who do not adopt and use the same Inethods or equivalent or similar methods involving the same or an equivalent or similar element of chance or lottery scheme. Many Persons, firms, and corporations who make and sell candy or chewing gum in competition with respondent, as above described, are un- Willing to offer for sale or sell candy or chewing gum so packed and ~ssembled, or otherwise arranged and packed for sale to the purchas- Ing public so as to involve a game of chance, and such competitors refrain therefrom .

• PAR. 5. Many dealers in and ultimate purchasers of candy or chew- Ing- gum are attracted by respondent's said methods and manner of packing said candy and chewing gum and by the element of chance Involved in the sale thereof in the manner above described, and are thereby induced to purchase said candy and chewing gum so packed ~lld sold by respondent in preference to candy or chewing gum offered for sale and sold by said competitors of respondent who do not use the same or equivalent methods. The use of said methods by respondent has the tendency and capacity because of said game of chance, to divert to respondent trade and custom from its said com- Petitors who do not use the same or equivalent methods; to exclude from said candy and chewing gum trade all competitors who are 11llwilling to and who do not use the same or equivalent methods because the same are unlawful; to lessen competition in said candy and rhewing gum trade, and to tend to create a monopoly of said candy nnd chewing gum trade in respondent and in such other competitors of respondent as use the same or equivalent methods; and to deprive 254 FEDERAL TRADE COl\IMISSION DECISIONS Order 25F. T. C.

the purchasing public of the benefit of free competition in said candy and chewing gum trade. The use of said methods by respondent has the tendency and capacity to eliminate from said candy and chewing gum trade all actual competitors and to exclude therefrom all poten· tial competitors who do not adopt and use said methods or equivalent methods.

CONCLUSION The aforesaid acts and practices of the respondent, Unique Novel· ties, Inc., a corporation, are to the prejudice of the public and of respondent's competitors and constitute unfair methods of competi· tion 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, 11.nd for other purposes."

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commis· sion upon the complaint of the Commission and the answer filed herein on May 22, 1937, by the respondent admitting all the material allegations of the complaint to be true, and the respondent by its counsel having waived filing of briefs and oral argument, and the Commission having made its findings as to the facts and its conclu· sion 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 i.s ordered, That the respondent, Unique Novelties, Inc., a cor· poration, its officers, r~presentatives, agents, and employees, in con· nection with the offering for sale, sale, and distribution of candy, candy products and chewing gum in interstate commerce, do forth· with cease and desist from:

1. Selling and distributing to jobbers and wholesale dealers for resale to retail dealers, or to retail dealers direct, candy, candy prod· ucts or chewing gum so packed and assembled that sales of such randy, candy products, or chewing gum to the general public are to Le made, or mny be made, by means of a lottery, gaming device, or gift enterprise.

2. Supplying to or placing in the hands of wholesale dealers and jobbers or retail dealers assortments of candy, candy products, or dtl.'wing gum which are used, or which may be used, without altera· tion or rearrangement of the contents of such assortments to conduct n lottery, gaming device, or gift enterprise in the snJe or distribution UNIQUE NOVELTIES, INC.· 255 246 Ql'(ler of the candy, candy products, or chewing gum contained in saitl assortments to the public.

3. Packing or assembling in the same package or assortment of candy for sale to the public at retail pieces of candy of uniform size, shape, anJ quality having centers of a different color, together with felt pennants or other articles of merchandise, which said felt pennants or other articles of merchandise are to be given as prizes to the purchaser procuri11g a pit>ce of candy with a center of a particular <'color.

4. Packing or assembling iu the same package or assortment of thewing gum for sale to the public at retail pieces of chewing gum ~·nclose<l in ·wrappers, some of which have no ll'grnds printed on the Jnsidt> thereof and others of which have a legend printed on the inhide tlwreof, together with felt pennants or otller articles of merthanuise, which said felt pennants or other nrtic1es ot merchandise, :n·e to he p;in•n as priz;es to the purchaser proruring a piece of chew- 111g gum having a legend on the inside of the wrapp~>r thereof. 5. Furnishing to wholesale dealers, jouhrrs and l'retail <lealers dis- Play cnrds, either separately or with pnclmgrs or assortments of candy, camly produ(·ts, or d1ewing gum, Leariug a legend or legends or statements informing the purchasers that the candy, candy prod- Ucts, or chewi11g gum are being sold to the public by lot or chance, or in accol'<.lanec with a salrs plan which constitutes a lottery, gnming tlevice, or gift entervrise.

It i.Y furtnu o,·Jered, Tl1n.t the re~pondent, Unique Kon•lties, Inc., a corporation, shall, within 60 days after service upon it of this order, file with the Commission a n•port in writing setting forth in detail the manner and form in "·which it l1ns complied<l with the ordt>r to cease nnd desist hereinaboye set forth.

1;)1!1:!1 1"-39--10 Syllabus !:!:> 1!'. '1'. c.