Wolverine Gum, Inc

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IN THE MATTER OF WOLVERINE GUM, INC.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION' OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 311,5. Complaint, June 4, 1931-Decision, June 29, 1937 Where a corporation engaged In manufacture, sale, and dlstrlbutlon of chew· lng gum Including assortments which were I';O packed and as~embled a& to Involve, or which might Involve, use of a lottery scheme when sold and distributed to ultimate consumers thereof, and which consisted of ll number of Individually wrapped penny sticks of gum, of which a rela· tively few of the Individual wrappers differed from that of the rna· jority, together with a number of other articles of merchandise, to begiven as prizes to chance purchasers of Individual sticks, wrappers of which, upon opening, were thus found to df1'rer as aforesaid- Sold, to wholesalers and jobbers for display and resale by retaUer-customers topurchasing public, In accordance with said sales plan, said assortments, and thereby supvlled to and placed In the hands of others means of conducting lotteries In the sale of Its products In accordnnce with such plan, contrary to public policy long recognized by the common law and' criminal statutes, and to an established public policy of the United States Government, and In competition with many who, unwilling to sell guiil or other confections so packed and assembled, or otherwise arranged and packed for sale to J.liUrchaslng public as to Involve a game of dwnce, refrain therefrom;

With result that many dealers In and ultimate purchas('rs of chewing gum or· other confections were attracted by said method and mmmE>r of pacldng ~;nld gum nnd by eie>ment of ehanc•e fnmll'f'd In salt> thereof as aforesahlr and were thereby Induced to purchase such gum, thus packed and sold by It, In preference to gum or other confections ol'l'ered and sold by said competitors who do not use same or equivalent methods, and with tend· eney and capacity, because of said game of chance, to divert to it trade and custom from its ~;aid competitors who do not use same or equivalent practice or method, exclude from trade involved all competitors who areunwilling to and do not use same or equivalent method as unlawful, lt-ssen competition In said trade, and tend to create a monopoly thereof· In It anti in such other distributors of such products as do use same or equivalent practice or method, deprive purchasing public of benefit of· free competition in said chewing gum trade, and eliminate from said trade all actual, and exclude therefrom all potential, competitors who dO not adopt and u~~e such or an equivalent method: Jleld, That such acts and practices w-ere to the prejudice of the public and: competitors and constituted unfair methods of competition. J,/r. Jlenry 0. Lank and Mr. P. 0. [(olinski for the Commission. WOLVERINE GUl\I, INC. 339 Complaint COMPLAINT Pursuant to the provisions of an Act of Con,.ress approved Sep- te b o ' ·rn. ~ .er 26, 1914, entitled "An Act to create a Federal Trade Com- F Isswn, to define its powers and duties, and for other purposes," the ederal Trade Commission, having reason to believe that 'Vol verine ~um, Inc., a corporation, hereinafter referred to as respondent, has ·" een and is using unfair methods of competition in commerce, as c?mmerce" is defined in said act of Congress, and it appearing to '~nld Commission that a proceedin,. by it in respect thereof would be ~n the public interest, hereby issue~ its complaint stating its charges ln that respect as follows:

• PARAGRAPH 1. The respondent, 'Volverine Gum, Inc., is a corpora- ~I~n ?rganized and doing business under the Jaws of the State of fichigan, with its principal office and place of business located at 5 ·:UG25 Lauderdale A venue, in the city of Detroit, State of Michigan . . respondent is now, and for several years last past has been, engaged 1 ~ the manufacture of chewing gum and in the sale and distribution t 1?reof to wholesale dealers, jobbers, and retail dealers located at Points in the various States of the United States. Respondent causes nn~ has caused its said products when sold to be transported from its Principal place of business in the city of Detroit, State of Michigan, ~0 Purchasers ther~of in l\Iichigan a?d in oth~r States ?f the :tJnited tntes and the District of Columbm at their respective pomts of 10 t' ca Ion. There is now, and has been for several years last past, a {!course of trade and commerce by said respondent in such chewing gum between and amoncr the States of the United States. In the course and conduct of said business, respondent is in competition with other corporations and with partnerships and individuals engaged in the" manufacture of chewin•r gum and other con f ectwns· and m· t 11e :sale and distribution there~f in commerce between and among the ''arious States of the United States and the District of Columbia. Pan. 2. In the course and conduct of its business, as described in j)n.ragmph 1 herrof resi)Ondent sells and has sold to wholesale and l'e(. 'l ' . •ll dc•alers assortnwnts of chewmg gwn so packed and assembled as to im·olve, or which are designed to or· may involve, the use of ~lottery scheme when sold and distributed to the ultimate consumers \ ereof. Such assortments are comj)Osed of a number of sticks of c 1.ewing gum and a number of other articles of merchandise, which said tl · b · · t 1er articles of merchaiH.hse nre to e given as prizes o pur· 1 °~~'lS<>r~ of individual sticks of chewillg gum in the following manne:: · e said sticks of chewin,. gum in said assortments are wrapped mind· · '"' 1"ldual wrappers, and the majority of the said wrappers are 340 FEDERAL TRADE COl\Il\IISSION DECISIONS Complalut ::!5F.T.C. hlentical but a small number of said wrappers are different from the majority of the wrappers. The individual sticks of chewing gun1. retail at the price of 1¢ each, and the purchasrr who procures a stick <>f chewing gum containetl within a wrapper different from the majority is entitled to receive free of charge and ill! to he given as a priza one of the other articles of merchandise in said assortments. The fact as to which wrappers are different from the majority is effectively concealed from purchasers and prospective purchasers until a selection has been made and the wrapper remoYefl. The articles of merchandise other than chewing gum contained in said assortments are thus distributed to purchasers of chewing gum from said assortments wholly by lot or chance.

PAR. 3. The wholesale dealers and jobbers to whom respondent sells its assortments resell said assortments to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortments for sale and sell said chewing gum to the purchasing public in accordance with the aforesaid sales plan. Re- E'pondent thus supplies to and places in the hands of others the mean~ of conducting lotteries in the sale of its products in accordance with the ·sales plan hereinabove set forth; and said sales plan has the capacity and tendency of inducing purchasers thereof to purchase rrspondent's said products in preference to chewing gum or other confections offered for sale and sold by its competitors. PAR. 4. The sale of said chewing gum to the purchasing public in the manner nh<>ve alleged involves a game of chance or the sale of n. chance to procure other articles of merchandise. The use by respond· ent of said method in the sale of chewing gum, nnd the sale of chew· in~ gum by and through the use thereof and by the aid of said method, is n. practice of the sort which the common law and criminn.I ~tatutf's 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 method has the tendency unclnly to hinder competition or create monopoly in this, to wit: that the uso therpof has the trndency anti capacity to exclude from the chewin~ gum trade comprtitors who do not adopt and uso the same method or nn £>quivnlrnt or similar method involving the same or an <>qnivalent or similar element of chance or lottery sch£>me. Many person~, firms, and corporations who make and sell chewing gum or other confections in competition with respondent, as above alle~ed, are unwilling to ofler for sale or sell chewing gum or other confections so packed and assembled as above all('~ed, or otherwise arranged nnd packed for sale to the purchasin~ public so as to involve a game of chance, nnd such competitors refrain therefrom. WOLVERINE GUl\I, INC. 341 338 Findings PAR. 5. Many dealers in and ultimate purchasers of chewing gum or other confections are attracted by respondent's said method and manner of packing said 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 chewing gum so packed and sold by responuent in preference to chewing gum or other confections offered :for sale and sold by said competitors of respondent who do not usethe same or an equivalent method. The use of said method by respondent has the tendency and capacity, because of said game of chance, to divert to respondent trade and custom from its said competitors who do not use t11e same or an equivalent method; to exclude from said chewing gum trade all competitors who are unwilling t() and who do not use the same or an equivalent method because the same is unlawful; to lessen competition in said chewing gum trade nnd to tend to create a monopoly of said chewing gum trade in respondent and in such other distributors of chewing gum or other ronfcctions as use the same or an pquivnlent method; and to deprive ilte purchasing public of the benefit of free competition in said chewillg gum trade. The use of said method by respondent has the tendency and capacity to eliminate from said chewing gum trade aU actual competitors, and to exclude therefrom all potential competitors who do not adopt and use said method or an equivalent method. PAR. 6. The aforementioned method, acts and practices of respond- ('nt are all to the prejudice of the public and of respondent's competitors, as hereinabove allerred. Said method, nets, and practices ~onstitute unfair methods of competition in commerce within the Intent nnd m£>aning of Section 5 of an Act of Congrpss, approved S('ptembcr 2o Hl14 entitled "An Act to create a Federal Trade Com- . ' 'llllssion, to define its powers and duties, and for other purposes." REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of an Act of Congress, approved September 26, 1914 entitl£>d "An Act to cr£>ate a F£>cl£>ral Trade Commis- SJon,. to define 'its powers and cluti£>s, and for oth£>r purpos£>s, " t l 1e Federal Trade Commission, on June 4, 1!):~7, is!"m'd and on June 7t 1937, serw<l its complaint in this proc£>t>ding upon rpsponrlent, 'Vo!- Verine Gum, Inc., a corporation, charging it with the use of 1~n.fair methods of compt>tition in comnwrce in violation of the prov1swns of said act. Aft£>r the issuanc<> of said complaint, the respondent fii('u answer thereto ndmittinrr all the material allegations of the com- P1~int to be true and waivi;g hearing on the charg£>s set forth in ~all} complaint. Thert>aftH, this proc£>eding rt>gularly came. on for na} ht>aring before the Commission upon the said complamt and :342 FEDERAL TRADE COMMISSION DECISIONS Findings 25F.T.O.

-answer thereto; and the Commission having duly considered the -same and being now fully advised in the premises, finds that this proceeding is in the interest of the public and makes this its findings as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent, 'Volverine Gum, Inc., is a corporation organized and doing business under the laws of the State of .Michigan, with its principal office and place of business located at 15()25 Lauderdale Avenue, in the city of Detroit, State of Michigan. Respondent is now 1 and for several years last past has been engaged in the manufacture of chewing gum and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers located at points in the various States of the United States. Respondent <'auses and has caused its said products when sold to be transported from its principal place of business in the city of Detroit,•State of Michigan, to purchasers thereof in Michigan and in other States of the United States and the District of Columbia at their respective points of location. There is now, and has been for several years last past, a course of trade and commerce by said respondent in such chewing gum between and among the States of the United States. In the course and conduct of said business, respondent is in competition with other corporations and with partnerships and individuals engaged in the manufacture of chewing gum and other confections an<l in the sale and distribution thereof in commerce between and among the various States of the United States and the District of Columbia.

PAn. 2. In the course and conduct of its business, as described in paragraph 1 hereof, r£>spondent sells and has f;old to wholesale and retail dealers assortments of chewing gum so packed and assembled as to involve, or which are designed to or may involve, the use of a lottery scheme when sold and distributed to the ultimate consumers thereof. Such assortments are composed of a number of sticks of -chewing gum and a number of other articles of merchandise, which said other articles of merchandise are to Le given as prizes to pur- -chasers of individual sticks of chewing gum in the following man· ner: The said sticks of chewing gum in sn.id assortments are wrapped in individual wrappers, and the majority of the said wrappers are identical, but a small number of said wrappers are different from the majority of the wrappers. The individual sticks of chewing gum re· tail at the price of 1¢ each, and the purchaser who procures a stick .of chewing gum contained within a wrapper different from the ma· .WOLVERINE GUM, INC. 343. 838 Findings jority is entitled to receive free of charge and is to be given as a prize one of the other articles of merchandise in said assortments. The fact as to which wrappers are different from the majority is effectively concealed from purchasers and prospective purchasers until a selection has been made and the wrapper removed. The articles of merchandise other than chewing gum contained in said assortments are thus distributed to purchasers of chewing gum from said assortments wholly by lot or chance.

PAn. 3. The wholesale dealers and jobbers to whom respondent sells its assortments resell said assortments to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct. expose said assortments for sale and sell said chewing gum to the purchasing public in accordance with the aforesaid sales plan. 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 plan hereinabove set forth; and said sales plan has the capacity and tendency of inducing purchasers thereof to purchase respondent's said products in preference to chewing gum or other coufections oiferecl for sale and sold by its competitors. PAn. 4. The sale of said chewing gum to the purchasing public in the manner above found involves a game of chance or the sale of a chance to procure other articles of merchandise. The use by respondent of said method in the sale of chewing gum, and the sale of chewillg gum by UJHl through the use thereof aml by the aid of said ntet hod, is u practice of the sort which the common law and criminal statutes have long dePmell contrary to public policy, and is contrary to an e~.>tablishe<l public policy of the Government of the Unite(l ~tatrs. The use by respondrnt of suitl method 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 from the chewi11g gum trade competitors who do not adopt and use the snllle methOll or an equivalent or similar nwthod involving the same or an equivalent or similar element of chance or lottery scheme. Many persons, finns, and corporations who make and sell chewing gum or other confrctions in competition with respondents are un- Willing to offer for sale or sell chewing gum or other confections so· Pncketlnnd assembled us above described, or otherwise arranged and Pacbd for sale to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom. PAn. 5. Many dealers in and ultimate purchasers of chewing gum or other confections are attracted by respondent's said method and l1lanner of packing said chewing gum and by the element of chance- .344 FEDERAL TRADE COMMISSION DECISIONS Order 25F. T. 0.

im·olved in the sale thereof in the manner above described, and are thereby induced to purchase said chewing gum so packed and sold 1 lJ~,... respondent in preference to chewing gum or other confections offered for sale ltnd sold by said competitors of respondent who do llot use the same or an equivalent method. The use of said method by respondent has the tendency and capacity because of said game of chance to divert to respondent trade and custom from its said competitors who do not use the same or an equivalent method; to exclude from said chewing gum trade all competitors who are unwilling to .and who do not use the same or an equivalent method because the .same is unlawful; to lessen competition in said chewing gum trade .and to tend to create a monoply of said chewing gum trade in respondent and in such other distributors of chewing gum or other confections as use the same or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said -chewing gum trade. The use of said method by respondent has the tendency and capacity to eliminate from said chewing gum trade all actual competitors, and. to exclu<.le therefrom all potential competitors who U.o not adopt and. nse said method or an equivalent method. CONCLUSION The aforesaid. acts allll practices of the respondent, 'Volwrine Gum, Inc., a corporation, are to the prejudice of the public and of respondent's competitors and constitute unfair metho<ls of competi· tion in commerce within the intent and meaning of Section 5 of an Act of Congress, approved September 2G, 1914, entitled "An Act to create a Federal Trade Commission, to drfine its powers and duties, and for other purposes."

OllDER TO CEASE AND DESIST This procet'ding having been hPanl by the Federal Trade Commission upoa the complaint of the Comnlission and the answer filed later<>in on June 10, 1!>37, by the respondent admitting all the materi!tl allt•g-ations of the complaint to lJe true aml wniving hearing on the dmrgPs Slt forth in sail complaint, nnd the Commission having made its findings as to the facts anll its conclusion that said. respondent has violated the provisions of nn Act of Congn•ss, approval Sl'pt<>mber 2G, 1!>14, entitlNl "An Act to create a Fedt'ral Trade Commission, to (ll'fine its powers and dntit's, and for other purposes." It i.~ ordered, That the rpspondent, 'Volverine Gum, Inc., a corporation its officers, representatives, agents, and employees, in connection with the offering for sale, sale, and. distribution of chewing gum in interstate comme1w, U.o forthwith cease and desist from: WOLVERI~E GUl\I, INC. 345 Order 1. Selling and distributing to jobbers and wholesale dealers for resale to retail dealers, or to retail dealers direct, chewing gum so packed and assembled that sales of such chewing gum to the general public are to be Inade, or are designed to 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 chewing gum which are used, or which are designed to be useu, without alteration or rearrangenteut of the contents of such assortments, to conduct a lottery, gaming device, or gift enterprise in the sale or distribution of the chewing gum conta ine<l in said assortments to the public. 3. Packing or assembling in the same package or assortment of -chewing gum for sale to the public at retail pieces of chewing gum containeu within individual wrappers of the same general design and appearance but differing in particular respects, together with other articles of merchandise, which other articles of merchandise ~re to be ginn as prizes to the purchaser procuring a piece of chew- Ing gum coutained within a wrapper of a particular design, pattern, or composition.

It i8 furtller ordered, That the respondent, 'Volverine Gum, Inc., a. -corporation, shall within 30 days after service upon it of this order, file \With the Commission a report in writing setting forth in detail the manner anu form in which it has complied with the order to <!ensp and desist hereinabove set forth.

346 FEDERAL TRADE COl\IMISSION DECISIONS Syllabus 25 F. T. c: