The Wm. M. Hardie Company

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IN THE l\IATTER OF THE WM. l\1. HATIDIE CO~IPANY CO;\lplaint, FINDINGS, AND ORDER IN RF.GAltD TO Tim ALLEGED VIOLATION OF SEC. 5 0~' AN .-\CT Ol•' CON'GRESS APPROVED SEI".r. 26, lll4 Docket 3209. Complaint, Aug. 21, 1937-Decision, Nuv. 1, 19J7 Where a corporation engagf>tl in manufacture und sale of candy, inclndiug certain assortments whkh were ~o pa('ked Ull(l assembled as to hl\'oh·e, or whkh were designpd to or might involve, use of a lottery !lcheme when sold and distributed to ultimate consumers tlwreof, nud whkh were could· po~ed of two pnekag-es SPparntPly pnckPd, as a subterfug-e and in llll effort to a\·oid effect of !-~Piling candy to be distributed by lottery schemf', aud smnetinws separately billed, bnt with knowledge and intent that assort· nwnts might !Je, and in many cases would he, resold at retail by lottery scheme, and containing, respPcth·ely, muuber of small peuny pieces of uni· form size and shape, a few of which had centet·s of a color different from that of tho:-;e of ma.lority, and munber of larger piecf's or burs of candy, to he gin•n without charge to tho,;e spcuring, by chuuee, one of said penny pieces, colored <'l'llter of whidt difi'PI'l'!l, ll!> afo1·e~aitl, from that of the ma.lorlty of piecl•s-- ~ol<l, to whole!>nlers, johlwrl'l, null rl'tailprs, for display nnd resal<> to pnr· chasing public in aecor!lance with aforesaid sales vlan, said n~sot·ttneuts, and tlwrPhy supplied to nud plncP!l in the hundll of others the means of (·OtHluctlng, 1111cl by whi<·h they did condud, lotterlps in the sule of its said vrodncts in a<·eordanee with SU('h plan, coutrary to public policy long recognized by the common Ia w and criminal sta tntl's and to un establishNI public policy of the United St11tes Gon'rument, and in competition with many wllo, _unwilling to offer or ~Pll randy so packt'd und assembled as a!Jove described, or otherwise arrangNl and pack<'d for !'ale to purchasing public, ns to lnvolvt> a game of chanee, refrnln thereft·om; 'With cnpncity and tPndPnf'y to Induce purehnsers to lmy its said prouuct in prPferPnec to candy offl'l'Pii nud sold hy it~ competitors, and with result that many dealers in nnd ultimate pureha~ers of eandy were attracted by said method and manner of packing same and by element of chance hn·olved in sale thereof ns above dt>s<·rihPd, and were thereby induced to pur· chase its cundy, so pa('kt'd and sold h~· it, in preference to that offered and ~oll by its competitors who do not use same or equivalent method, anli with tenden('y and capl.1city, became;p of saiu game of chance, to divert trade and custom ft·om its competitors as aforesaid, exclude ft·om randy tt·ade all competitors who are unwilling to and do not use such or an pquivnlent method as unlawful, lessen competition therein, anl tend to create a monopoly thf'rPof In it and such other distributors as do use same or eqnintlent method, deprive pnrehasing public of benefit of frpe compe· titlon in trade in question, and eliminate from said trade all actual, and exclude therefrom all potential eompetltors who do not adopt and use such or an equivalent method:

THE Wl\I. l\I. HAHDIE COl\IPANY 1265 1264 Complaint lleld, 'I'hat such method, ucts, aud prncticrs, under the conditions and circnmstaners set forth, were all to the prejudice of the public and competitors and constitntPd nnfait· ll]('thods of eompC'tit!on in commerce. Before flf r. Miles J. Fu,rnas, trial examiner. Mr.llenry 0. Lanl.; and Mr. P. 0. Kolinski for the Commission Bulkley, llauxlwr!Jt, Inglis & S!Larp, of Cleveland, Ohio, 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 The "\Vm. M. Hardie Company, 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 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: PARAGRAPH 1. The respondent, The 'Vm. M. Hardie Company, is a corporation organized and doing business under the laws of the State of Ohio, with its principal office and place of business located at 1584 East lDth Street, Cleveland, Ohio. Respondent is now, and for several years last past has been, engaged in the manufacture, sale, and distribution of candy 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 !'aid prodnets when sold to be transported from its principal place of business in the city of Cleveland, State of Ohio, to purchasers thereof in Ohio and in other States of the United States at their respective points of location. There is now, and has been for several years last past, a course of trade ancl commerce by said respondent in such candy between and among the States of the United States. In the course an<l conduct of said business, respondent is in competition with other corporations and with partnerships and individuals engaged in the manufacture, sale, and distribution of candy 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 paragmph 1 hereof, the respondent sells and has sold to wholesale, dealers and jobbers and retail dealers various assortments of ('andy so packed and assembled as to involve, or which are tlesignE:d to or may involve, the use of a lottery scheme when sold and dis- Complaint 25F. T.C.

tributed to the ultimate consumers thereof. Said assortments are composed of two separate packages of candy. One package contains a number of small pieces of candy of uniform size and shape, the majority of which have centers of the same color, but a small number of which have centers of a different color. The other package contains a number of larger pieces or bars of candy, the number thereof being approximately the same as the number of small pieces of candy of uniform size and shape with centers colored differently from the majority in the package first above described. The color of the centers of the small pieces of candy in the package first l:'bove dN>cribed is effectively concealed from customers and· prospective customers until a selection has been made and the piece of candy selected broken open. The said pieces of candy of uniform size and shape retail at the price of 1¢ each, but the purchaser who procures one of the said candies having a center colored differently from the majority is entitled to receive and is to be given free of charge one of the larger pieces or bars of candy contained in the second package referred to above. The aforesaid purchasers of said candy of uniform size and shape, who procure a piece of candy having a center colored differently from the majority, thus procure one of the said larger pieces or bars of candy wholly by lot or chance. 1Vhile the two packages above described are sometimes billed separately, the respondent sells, in practically all instances, the same number of each to its customers. The purpose of respondent in so packing this assortment in separate packages is a subterfuge and an effort to avoid the effect of selling candy to be distributed by a lottery scheme, and the respondent is placing in commerce merchandisc3 to be sold by means of a lottery scheme. Respondent packs this assortment so that it may be resold at retail by a lottery scheme, and respondent knows that in many cases it will be and is sold by means of a lottery schem~.

PAn. 3. The wholesale dealers and jobbers to whom respondent sells its assortment resell said assortment to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortment for sale and sell said candy 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. Said sales plan has the capacity and tendency of inducing purchasers thereof to purchase respondent's said products in preference to candy offered for sale and sold by its competitors.

THE WM. M. HARDIE COMPANY 1267 1264 Complaint PAn. 4. The sale of said candy to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure larger pieces or bars of candy. The use by respondent of said method in the sale of candy, and the sale of candy 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 create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the candy trade competitors who do not adopt and use the same 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 candy in competition with respondent, as above alleged, are unwilling to offer for sale or sell candy so packed and assembled 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 in and ultimate purchasers of candy are attracted by respondent's said method and manner of packing said candy and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to purchase said candy so packed and sold by respondent in preference to candy offered for sale and sold by said competitors of responent who do not 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 compt>titors who do not use the same or an equivalent method; to exclude from said candy 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 candy trade and to tend to create a monopoly of said candy trade in respondent and such other distributors of candy as use the same or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said method by respondent has the tendency and capacity to eliminate from said candy trade all 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 respondent are all to the prejudice of the public and of respondent's competitors, as hereinabove alleged. Said method, acts, and practices constitute unfair methods of competition in commerce within the 1268 FEDERAL TRADE COl\Il\IISSION DECISIONS Findings 2Ci F. T. C. intent and meani11g 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, FINDINGs AS TO THE FACTs, AND Onder Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Conunission, to define its powers and duties, and for other purposes," the· Federal Trade Commission, on August 21, 1937, issued and on August 23, 1937, served its complaint in this proceeding upon the respondent,. The '\Vm. 1\f. Hardie Company, a corporation, charging it with the use of unfair methods of competition in commerce in violation of the provisions of said act. On September 29, 1937, respondent filed its. answer dated September 15, 1937, in which answer it admitted all the material allegations of the complaint to be true and stated that it waived hearing on the charges set forth in said complaint and consented that, without further evidence or other intervening procedurer the Commission might issue and serve upon it findings as to the facts. and conclusion and an order to cease and desist from the violations of law charged in the complaint. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint and the answer thereto, 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 THE FACTS PARAGRAPH 1. The respondent, The ·wm. M. Hardie Company, is a corporation organized and doing business under the laws of the State of Ohio, with its principal office and place of business located at 1584 East 19th Street, Cleveland, Ohio. Respondent is now and for several years last past has been, engaged in the manufacture, sale, and distribution of candy 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 transport·ted from its principal place of business in the city of Cleveland, State of Ohio, to purchasers thereof in Ohio and in other States of the United States 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 candy between and among the States of the United States. In the course and conduct of said business, respondent is in competition with other corporations THE Wl\I. l\I. HARDIE COl\IPANY 1269 1264 Findings and with partnerships and individuals engaged in the manufacture, sale, and distributi01i of candy 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 Paj·agraph 1 here>of, the rE>spondent has sold to wholesale dealers and jobbers and to retail dealers various assortments of candy so packed and assembled as to involve, or which were designed to or might involve, the use of a lottery scheme when sold and distributed to the ultimate consumers thereof. Said assortments wpre composed of two separate packages of candy. One package contained a number of small pieces of candy of uniform size and shape, the majority of Which had centers of the same color but a small number of which had centers of a different color. The other package contained a number of larger pieces or bars of candy, the number thereof being approximately the same as the number of small pieces of candy of uniform size and shape with centers colored differently from the lllajority in the package first above described. The color of the centers of the small pieces of candy in the package first above described Was effectively concealed from customers and prospective customers Until a selection had been made and the piece of candy selected broken open. The said p.ieces of candy of uniform size and shape retailed at the price of 1¢ each, but the purchaser who procured one of the said candies having a center colored differently from the majority Was entitled to receive and was to be given free of charge one of the larger pieces or bars of candy contained in the second package referred to above. The aforesaid purchasers of said candy of uniform size and shape, who procured a piece of candy having a center colored differently from the majority, thus procured one of the said larger pieces or bars of candy wholly by lot or chance. "While the two packages above described were sometimes billed separately, the respondent sold in practically all instances the same number of each to its customers. The purpose of respondent in so packing said assortment in separate packages was a subterfuge and an effort to avoid the effect of selling candy to be distributed by a lottery scheme, and the respondent was placing in commerce merchandise to be sold by means of a lottery scheme. Respondent packed this assortment so that it might be resold at retail by a lottery scheme, and the respondent knew that in many cases it would be and Was sold by means of a lottery scheme.

PAR. 3. The wholesale dealers and jobbers to whom respondent sold its assortments resold the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sold direct exposed said assortments for sale and sold said candy to the purchasing public Findings 25 F.T. C. in accordance with the aforesaid sales plan. Respondent thus supplied to and placed 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 had the capacity and tendency of inducing purchasers thereof to purchase respondent's said products in preference to candy offered for sale and sold by ,its competitors.

r AR. 4. The. sale of said candy to the purchasing public in the manner above described involves a game of chance or the sale of a chance to procure larger pieces or bars of candy. The use by respondent of said method in the sale of candy, and the sale of candy 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 create monopoly in this, to wit: that the use thereof has the tendency and capacity to exclude from the candy trade competitors who do not adopt and use the same 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, sell or distribute candy in competition with respondent are unwilling to offer for sale or sell candy so packed and assembled as above described, 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 in and ultimate purchasers of candy were attracted by respondent's said method and manner of packing said candy and by the element of chance involved in the sale thereof in the manner above described, and were thereby induced to purchase said candy so packed and sold by respondent in preference to candy offered for sale and sold by said competitors of respondent who do or did not use the same or an equivalent method. The use of said method by the respondent had the tendency and capacity, because of said game of chance, to divert to respondent trade and custom from its said competitors who do or did not use the same or- an equivalent method; to exclude from said candy trade all competitors who are unwilling to and who do not use the same or an equivalent method because the sam.e is unlawful; to lessen competition in said candy trade and to tend to create a monopoly of said candy trade in respondent and in such other distributors of candy as use the same or an equivalent method; and to deprive the purchasing public of the benefit of free competition in said candy trade. The use of said THE Wl\L 1\I. HARDIE COMPANY 1271 1264 Order method by respondent had the tendency and capacity to eliminate from said candy trade all actual competitors, and to exclude therefrom all potential competitors, who do or did not adopt and use said method or an equivalent method.

The answer of the respondent states, and the Commission finds, that the respondent discontinued the sale and distribution of the assortments described in paragraph 2 hereof prior to the issuance of the said complaint.

OONCLUSION The aforesaid method, acts and practices of the respondent, The 'Vm. M. Hardie Company, a corporation, under the conditions and circumstances set forth in the foregoing findings of fact, were all to the prejudice of the public and 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 powe.rs and duties, and for other purposes." ORDER TO CEASE A:ND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answer of the respondent, admitting all the material allegations of the complaint to be true and waiving tho taking of further evidence and all other intervening procedure, and the Commission having made its findings as to the facts and conclusion that the 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, The Wm. M. Hardie Company, a corporation, its officers, representatives, agents, and employees, in connection with the offering for sale, sale and distribution in interstate commerce of candy, 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, candy so packed and assembled that sales of such candy to the general 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 assortments of candy which are used, or which may be used, without alternation or rearrangement o:f the contents of such assortments, to conduct a lottery, gaming device, Order 25F. T. C.

or gift enterprise in the sale or distribution of the candy contained in said assortments to the public.

3. Packing or assembling, for sale to the public at retail, assortments of candy composed of two separate packages of candy, one package containing small pieces of candy of uniform size and shape having centers of different colors, and the other package containing larger pieces or bars of candy, which said larger pieces or bars of candy are to be given as prizes to the purchaser procuring a piece of candy having a center of a particular color from the first above described package.

It is further ordered, That the respondent, The Wm. M. Hardie Company, 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 and form in which it has complied with the order to cease and desist hereinabove set forth. D. GOLDENBERG, INC., ETC. 1273 Syllabus