Illinois Baking Corp

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IN THE MATTER OF ILLINOIS BAKING CORPORATION COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATIO~ OF SEC. 15 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Doclcet 3023. Complaint, Dec. 24, 1936-Decision, Sept. 8, 193"1 Where a corporation engaged in manufacture, sale, and distribution of ice cream cones, including cones packed and assembled with small printed slips bearing various legends, so as to involve use of a lottery scheme when sold and distributed by retall dealers to consumers thereof, and including legend "You're lucky YOU WIN A FREE ice cream cone," chance recipient of which printed slip, so placed in cones that ultimate conslJmer could not ascertain whether or not he was entitled to free ice cream cone until after his purchase had been made and cone partially consumed, be· came entitled thereby, and in accordance with explanatory display circulars furnished by It, free of charge, to another ice cream cone-- Sold, thus packed, said cones, to wholesalers, jobbers, and ice cream manufac· turers, for use, sale, and distribution by their retail dealer purchasers in accordance with aforesaid sales plan, and thereby supplied to and placed in the hands of others the means of conducting lotteries in the sale of i~S product in accordance with such sales 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, nnd in competition with many who, unwllling to offer or sell lee cream cones with printed slips ns above described, or otherwise arranged and packed for sale to purchas· ing public so as to involve game of chance, refrain therefrom, and in competition with many unwilling to adopt and use said or any method involving gnme of chance to win by chance or any other method contrary to public policy;

With capacity and tendency to induce purchasers to buy its said product ill preference to cones offered and sold by its competitors, and with result that many dealers in and ultimate purchasers of ice cream cones were attracted by its said method and manner of inserting in a number thereof printed slips entitling purchasers to free ice crenm cones, and by element of chance involved in sale thereof as above described, and were thereby induced to buy its said products, containing such printed slips and sold by it, in preference to those offered and sold by said competitors who d<> not use same or equivalent method, and with tendency and capacity, bY reason of said game of chance, to divert to it trade and custom from it9 said competitors who do not use such or equivalent method, exclude froiU said trade all competitors who are un~llling to and do not use such method because unlawful, lessen competition therein, and tend to create a monop" oly thereof in it and such other distributors of ice cream cones as do use same or equivalent method, deprive purchnslng public of benefit of free competition In trade involved, and eliminate therefrom all actual, and exclude therefrom all potential, competitors who do not adopt and use said or equivalent method :

Held, That such method, acts and practices, under the conditions and circum· stances set forth, were all to the prejudice of the public and competitors and constituted unfair methods of competition. ILLINOIS BAKING CORP. 949 948 Complaint Before Mr. Miles J. Furnas, trial examiner. Mr. Henry 0. Lank and Mr. P. 0. Kolinski for the Commission. 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 Illinois Baking Corporation, a corporation, hereinafter referred to as respondent, has been and is using unfair methods or competition in commerce, as "commerce" is defined in said act of Congress, and it appearing to said Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPII 1. Respondent, Illinois Baking Corporation, is a corporation organized and operating under the laws of the State of Delaware, with its principal office and place of business located at 2230 South Union Avenue, Chicago, Ill. Respondent is now, and for several years last past has been, engaged in the manufacture of icc cream cones and in the sale and distribution thereof to whole- Eale dealers, jobbers, and ice cream manufacturers located at points in the State of Illinois and in other States of the United States, and causes and has caused its said products, when so sold, to be transported from its principal place of business in Chicago, Ill., to purchasers thereof in the State of Illinois and in other States of the United States at their respective places of business; and there is now, and has been for several years last past, a course of trade and commerce by said respondent in said ice cream cones between and among the States of the United States. In the course and conduct of said business, responcient is in competition with other corporations and with partnerships and individuals engaged in the manufacture of ice cream cones and in the sales and distribution thereof in commerce between and among the various States of the United States.

PAR. 2. In the course and conduct of its business as described in Paragraph 1 hereof, respondent, on or about May 1, 1936, began the sale and distribution, and since said date has continued the sale and distribution to wholesale dealers and jobbers and ice cream lnanufacturers, of ice cream cones packed and assembled with small Printed slips therein so as to involve the use of a lottery scheme when sold and distributed by retail dealers to the consumers thereof. Respondent has had printed small slips of paper bearing various leg- 950 FEDERAL TRADE CO)'IJ\IISSION DECISIONS Complaint 25 F. T. C. ends, and a few of said printed slips bear the following legend, to wit:

You're lucky YOU WIN A FREE ice cream cone The ultimate consumer procuring a cone containing one of the above printed slips is entitled to receive, and is to be given free of charge, another ice cream cone. The printed slips are so placed in the cones that the ultimate consumer cannot ascertain whether or not he is entitled to a free ice cream cone until after his purchase has been made and the cone partially consumed. The fact as to whether the ultimate purchaser receives an additional ice crean1 cone free of charge is thus determined wholly by lot or chance. Respondent furnishes with cartons of ice cream cones containing the above described printed slips a display circular bearing the fol~ lowing legends, to wit:

FREE ICE CREAM CONES! -Look for This Coupon iu You're Lucky bottom of cone - The You win a lucky Ticket means you FREE get another Cone FREE Ice Cream YOU GET MORE ICE CREAl\! Cone IN A CONE PAR. 3. The w:wholesale dealers and jobbers and ice cream manu~ facturers, to whom respondent sells the above described ice creanl cones containing printed slips, resell said cones as packed by respond~ ent to retail dealers, and said retail dealers sell and distribute said cones, after placing ice cream therein, 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 product in accordance with the sales plan herein~ above set forth, and said sales plan has the capacity and tendency of inducing purchasers thereof to purchase respondent's said product in preference to ice cream cones offered for sale and sold by its competitors.

PAR. 4. The sale of said ice cream cones to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure an additional ice cream cone. The use bY respondent of said method in the sale of ice cream cones, and the sale of ice cream cones by aml through the usc thereof and by the aid of said method, is a practice of the sort which the common la'~ and criminal statutes have long deemed contrary to public policy and is contrary to an established public policy of the Government of ILLINOIS BAKING CORP. 951 948 Complaint the United States. The use by respondent of said method has the dangerous tendency unduly to hinder competition or to create a monopoly in this, to wit: that the use thereo~ has the tendency and capacity to exclude from the ice cream cone manufacturing business competitors who do not adopt and use the said method or an equivalent or similar method involving the same or an equivalent or similar element of chance or lottery scheme. Many persons, firms and corporations who make and sell ice cream cones in competition with respondent, as above alleged, are unwilling to offer for sale or sell said ice cream cones with printed slips, as above alleged, or otherwise arranged and packed for sale, to the purchasing public so as to involve a game of chance, and such competitors refrain therefrom. PAR. 5. Many dealers and ultimate purchasers of ice cream cones are attracted by respondent's said method and manner of inserting printed slips entitling ultimate purchasers to free ice cream cones and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to purchase said ice cream cones containing said printed slips and sold by respondent in preference to ice. cream cones offered for sale and sold by said competitors of respondent who do not use the same or equivalent tnethods. 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 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 trade and to tend to create a monopoly of said trade in respondent and such other distributors of ice cream cones as use the same or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said trade. The use of said method by respondent has the tendency and capacity to eliminate from said trade all actual competitors and to exclude therefrom all potential competitors who do not adopt and use said method or an equivalent tnethod.

PAR. 6. Many of said competitors of respondent are unwilling to adopt and use said method or any method involving a game of chance or the sale of a chance to win something by chance or any other tnethod that is contrary to public policy. PAn. 7. The aforementioned method, acts and practices of the respondent are all to the prejudice of the public and of respondent's competitors, as hereinabove alleged. Said method, acts, and practices ~onstitute unfair methods of competition in commerce within the Intent and meaning of Section 5 of an Act of Congress, entitled "An Findings 25F. T. C.

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 Pursuant to the provisions of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission on December 24, 1936, issued and on December 26, 1936, served its complaint in this proceeding upon the respondent, Illinois Baking Corporation, a corporation, charging it with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said complaint and the filing of respondent's answer thereto, the Commission, by order entered herein on August 9, 1937, granted respondent's request for permission to withdraw said answer and to file in lieu thereof its substitute answer (undated) admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, which substitute answer was duly filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint and the substitute answer; and the Commission having duly considered the matter 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 TIIE FACTS I> ARAGRAPII 1. Respondent, Illinois Baking Corporation, is a corporation organized and operating under the laws of the State of Delaware, with its principal office and place of business located at 2230 South Union Avenue, Chicago, Ill. Respondent is now, and for several years last past has been engaged in the manufacture of jce cream cones and in the sale and distribution thereof to wholesale dealers, jobbers, and ice cream manufacturers located at points in the State of Illinois and in other States of the United States, and causes and has caused its said products, when so sold, to be transported from its principal place of business in Chicago, Ill., to purchasers thereof in the State of Illinois and in other States of the United States at their respective places of business. There is now, and has been for several years last past, a course of trade and com· merce by said respondent in said ice cream cones between and among the States of the United States. In the course and conduct of said ILLINOIS BAKING CORP. 953 :048 Findings business, respondent is in competition with other corporations and with partnerships and individuals engaged in the manufacture of ice cream cones and in the sale and distribution thereof in commerce between and among the various States of the United States. P .AR. 2. In the course and conduct of its business as described in paragraph 1 hereof, respondent on or about May 1, 1936, began the ·sale and distribution, and since said date has continued the sale and -distribution to wholesale dealers and jobbers and ice cream manufacturers of ice cream cones packed and assembled with small printed ·slips therein so as to involve the use of a lottery scheme when sold and distributed by retail dealers to the consumers thereof. Re- ·spondent has had printed small slips of paper bearing various leg- ·ends, and a few of said printed slips bear the following legend to wit: You're lucky YOU WIN A FREE ice cream cone The ultimate consumer procuring a cone containing one of the above Printed slips is entitled to receive, and is to be given free of charge, .another ice cream cone. The printed slips are so placed in the cones that the ultimate consumer cannot ascertain whether or not he is ·entitled to a free ice cream cone until after his purchase has been lllade and the cone partially consumed. The fact as to whether the ultimate purchaser receives an additional ice cream cone free of ·charge is thus determined wholly by lot or chance. Respondent furnished with cartons of ice cream cones containing the above-de- ·Scribed printed slips a display circular bearing the following legend, to wit:

FREE ICE CREAl\I CONES I -Look for This Coupon in bottom of cone-The Lucky You're lucky You Ticket means you get an- Win a FREE Ice Cream other Cone FREE Oone YOU GET MORE ICill CREAM IN A CONE PAR, 3. The wholesale dealers and jobbers and ice cream manufacturers, to whom respondent sells the above described ice cream cones containing printed slips, resell said cones as packed by respondent to retail dealers, and said retail dealers sell and distribute ~aid cones, after placing ice cream therein, to the purchasing public In accordance with the aforesaid sales plan. Respondent thus sup- Plies to and places in the hands of others the means of conducting lotteries in the sale of its product in accordance with the sales Plan hereinabove set forth, and said sales plan has the capacity 954 FEDERAL TRADE COMl\IISSION DECISIONS Findings 25 F. T. C. and tendency of inducing purchasers thereof to purchase respondent's said product in preference to ice cream cones offered for sale and sold by its competitors.

PAR. 4. The sale of said ice cream cones to the purchasing publicin the manner above found involves a game of chance or the sale of a chance to procure an additional ice cream cone. The use by respondent of said method in the sale of ice cream cones, and the sale of ice cream cones by and through the use thereof and by the aid of said method, 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 method has the tendency unduly to hinder competition or to create a monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the ice cream cone manufacturing business competi· tors who do not adopt and use the said method or an equivalent or simibr method involving the same ·or an equivalent or similar ele· ment of chance or lottery scheme. :Many persons, firms, and corporations who make and sell ice cream cones in competition with respondent are unwilling to offer for sale or sell said ice cream cones with printed slips, as above described, or otherwise arranged and packed for sale to the purchasing public so as to involve a game of dmnce, and such competitors refrain therefrom. P.~R. 5. Many dealers and ultimate purchasers of ice cream cones are attracted by respondent's said method and manners of inserting printed slips entitling ultimate purchasers to free ice cream cones and by the element of chance invoh·ed in the sale thereof in the manner above described, and arc thereby induced to purchase said ice cream cones containing said printed slips and sold by respondent in preference to ice cream cones offered for sale and sold by said competitors of respondent who do not use the same or an equivalent method. The use of said metho<l 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 trade all com· petitors who are unwilling to and who do not use the same or an equivalent method because the same is unlawful; to lessen competi· tion in said trade and to tend to create a monopoly of said trade in respondent anu such other distributors of ice cream cones as use the same or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said trade. The use of said method by respondent has the tendency and capacity to eliDl· inate from said trade all actual competitors and to exclude there· ILLINOIS BAKING CORP. 955 ~48 Order from all potential competitors who do not adopt and use said method or an equivalent method.

PAR. 6. Many of said competitors of respondent are unwilling to adopt and use said method or any method involving a game of chance or the sale of a chance to win something by chance or any other lhethod that is contrary to public policy. CONCLUSION The aforesaid method, acts and practices of respondent, Illinois Baking Corporation, a corporation under the conditions and circumstances set forth in the foregoing findings of fact, are all to the prejudice of the public and respondent's competitors, and constitute. unfair methods of competition in commerce within the intent and lheaning of Section 5 of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes." ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the substitute answer (undated) filed herein by respondent admitting all the material allegations of the complaint to be true and waiving the taking of further evidence and all other intervening procedure, and the Comlhission 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, Illinois Baking Corporation, a corporation, its officers, agents, representatives, and employees, in connection with the offering for sale, sale and distribution in interstate commerce of ice cream cones, do forthwith cease and desist from:

1. Selling and distributing to jobbers and wholesale dealers for · resale to retail dealers, or to retail dealers direct, ice cream cones so Packed and assembled that sales of such ice cream cones to the gen- {'J·al public are to be made, or may 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 packages or assortments of ice cream cones lvhich are used, or which may be used, without alteration or rearrangement of the contents of such packages or assortments, to con- Order 25 F.T.C.

duct a lottery, gaming device, or gift enterprise in .the sale or distribution of the ice cream cones in said packages or assortments to the public.

3. Packing or assembling in packages or assortments of ice cream cones, for sale to the public at retail, printed slips which are for use or which may be used, in distributing or selling said ice cream cones to the public at retail.

4. Furnishing to retail and wholesale dealers and jobbers printed slips, either with packages or assortments of ice cream cones or separately a small number of which printed slips bear a legend or legends or statements informing the purchasing public that another ice cream cone will be delivered free of charge or as a prize. 5. Furnishing or supplying to wholesale dealers and jobbers for distribution to retail dealers or to retail dealers direct, display circulars or other advertising material bearing a legend or legends or statements informing the purchasing public that ice cream cones are being sold to the public in accordance with a sales plan which con· stitutes a lottery, gaming device, or gift enterprise. It is further ordered, That the respondent, Illinois Baking Corpora· tion, a corporation shall, within 60 days after service upon it of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with the order to cease and desist hereinabove set forth. MILKO CONE & BAKING CO., INC. 957 Syllabus