Hoffman Beverage Company

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IN THE MaTTEit m· HOFFMAN BEVERAGE COMPANY ~COMPLAINT, l!'INDINGS, .AND ORDErt IN IUW.AUD ~1.'0 'tiie ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 20, 1014 Dorket 2819. Complaint, JJiay 26, 1936-Decision, Nov. g, 1937 Where a corporation engaged in sale of beer, subjected to treatment and pt·ocess making pasteurization unnecessary, and in distribution of said product in trade and commerce among the various States and in the District of Columbia, in substantial competition with those engaged In similar sale and distribution of such product- Falsely and misleadingly disparaged products of competitors through representing, in advertising of its said product, that "Heat treating beer during bottling operations spoils the fresh taste," in conjunction with statement that such treating "is necessary in all other American breweries" except its own, and that its product was only unpasteurized bottled beer in America and through such label statements as that, due to avoidance of pasteurization, as above noted, "its fine vat quality is fully retained"; facts being that heat tt·eating does not spoil fresh taste of properly pasteurized beer, as now treated pasteurization flavor is avoided, and ordinary consuming public would not be able to detect difference In taste due to pastenrization b<!iwecn pasteurized and other beer; With eJiect of misleading and deceiving dealm·s aud purdwsiug public into belief that beer products of its competitot·s wet·e inferior in quality, purity or taste to Its own, and with result that such dealers and pnrehaslng public were induced, in reliance upon truth of its afot·esaid repre~entations, to pnrehase its said beer in preference to otller products which were competitive as to price, quality, taste, and purity, and with effect of thereby divet·tiug trade to it from its competitors who do not, in the aforesaid or auy other manner, falsely disparage competitive products; to the substantial Injury of substantial competition in commerce: llel!l, '11tat such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Before J,fr. John L. llornor and Mr. John 11'. Nor1llood, trial f'Xaminers.

Mr. PGad B. Morehouse for the Commission.

Mr. Walter H. Free of Hoguet, Neary & Campbell, of New York City, and Mr. Edwin L. Gidley, of Newark, N.J., for responrlent. CoMPLAil'IT Pursuant to the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create n Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Hofflllan Beverage Company, a corporation, hereinafter referred to as Complaint 25 I<'. T. C. respondent, has been and is using unfa.ir methods of competition in commerce, us "commerce"· is defined in said act, and it appearing to the 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. Respondent is a corporation organized in 1913, existing and doing business under and by virtue of the laws of the State of New Jersey, with its principal office and place of business at 402 Grove Street, in the city of Newark, in said State. It now is, and since July 1934 has been, engaged in the sale and distribution of beer in constant course of trade and commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its business as aforesaid it causes said beer to be bottled and, when sold, to be shipped and transported from its place of business in Newark, N. J., to the purchasers thereof, consisting of wholesalers and retailers located in other States of the United States and in the District of Columbia. In the course and conduct of its business as aforesaid respondent is now, and for more than one year last past has been, in substantial competition with other corporations and with individuals, partnerships, and firms engaged in the sale and distribution of beer in trade and commerce between and among the various States of the United States and in the District of Columbia.

PAn. 2. In the course and conduct of its business as aforesaid respondent, in soliciting the sale of and selling its beer, has falsely disparaged the products of its aforesaid competitors through publication and dissemination of the following statements, to wit: Heat-treating beer during bottling operations spoils the fresh taste. This i3 necessary In all other American breweries except Hoffman. The vat-fresh taste of Hoffman Dottled Beer ls due to the fact that IloffmllD BePr is not bent-treated after bottling. Protrctlon from impurities at pvPrY fltep preserves the fine ,·at-fresh flavor by making pasteurization unnecessary· You taste the difference at the first Rip! The only unpasteurized botlleu beer in America.

The difference in taste between draught bet>r and the usual bottled beer Is due chiefly to the fact that bottled beer-with a single exception-Is pasteur- Jzeu (heat-treated) tn tbe bottle • • • l'nsteurizatlon affects the taste of beer. Hoffman Beer Is not pasteurized.

On the labels attached to the bottles in which respondent's beer jg sold appears the statement:

Bernuse ot extraordinary hiologil'al ('Control pasteurizing thb beer is avoided. 'J'hus its fine vat quality Is fully retained. HOFFl\IAN BEVERAGE COMPANY 1285 1283 Findings By means of the foregoing statements respondent represents that the beer sold by its competitors is stale and inferior in quality, purity, and taste, and in other ways less desirable for human consumption than is the. beer of respondent, when in truth and in fact such is Jlot the case.

PAn. 3. The representations by respondent, as set forth in the foregoing paragraph hereof, and each of them, have the capacity and tendency to and do mislead and deceive dealers aud the purchasing public into the belief that the beer products of respondent's competitors are inferior in quality, purity and taste to the beer of respondent, and such dealers and purchasing public, relying upon the truth of the aforesaid representations, are thereby induced to purchase I_Ioffman Deer in preference to other beer products which are competitive as to price, quality, taste, and purity, thus diverting trade to respondent from its competitors who do not in the aforesaid or any other manner falsely disparage competitive products, and thereby respondent does substantial injury to substantial competition in interstate commerce.

PAn. 4. The acts and things above alleged to have been done and tlh~ false representations alleged to have been made by respondent are to the prejudice of the public and the competitors of respondent :tnd constitute unfair methods of competition in commerce within the llltent and meaning of Section 5 of an Act of Congress entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914. REPORT, FINDINGS .As TO THE F .Ac-rs, AND Onder 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 May 26, 193<3, issued, Rnd on l\Iay 27, 193<3, served its complaint in this proceeding upon respondent Hoffman Beverage Company, a corporation, charging it with the Use of unfair methods o£ competition in commerce in violation of the provisions of said act. After the issuance of said complaint, nn_d the filing of respondent's answer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by PGad D. Morehouse, attorney for the Commission, before Jol~n L. Hornor, an examiner of the Commission theretofore duly des~gnated by it, and in opposition to the allegations of the com- ~lamt by ·walter II. Free, attorney for the respondent, before John V. ~orwood, an examiner of the Commission duly designated to tako testimony and receive evidence in the place and stead of John L. 1286 FEDERAL TRADE 001\IMISSION DECISIONS Findings 25 F. T. C. Ho1110r; and said testimony aml other evidence were duly recorded and filed in the office of the Commission. Thereafter the proceeding regularly came on for final hearing before the Commission on the said complaint, the answer thereto, testimony and other evidence, briefs in support of the complaint and in opposition thereto, and the oral arguments of counsel aforesaid; 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 'file FACTS PAnAGRAPII 1. The respondent, Hofl'man Beverage Company, is a corporation organized in 1911, existing and doing business under and by virtue of the laws of the State of New Jersey, with its principal oflice an<l place of business at 402 Grove Street, in the city of Newark, in said State.

It is now, and since August 1934, has been, engaged in the sale and distribution of beer in constant course of trade and commerce between and among the various States of the United States and in the District of Columbia.

In the course and conduct of its business as aforesaid, it causes said beer to be bottled and, when sold, to be shipped and transported from its place of business in Newark, N. J., to the purchasers thereof, consisting of wholesalers and retailers located in other States of the United States and in the District of Columbia. In the course and conduct of its business, as aforesaid, respondent is now and for more than one year last past, has been in substantial competition with other corporations an<l with in1lividnals, partnerships, and firms engaged in the sale and distribution of beer in trade and commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of its business as aforesaid, respondent, in soliciting the sale of and selling its beer, has made, through publication of advertisements, the following statements: 1. Heat treating beer during bottling operations spoils the fresh taste. This ifl necessary in all other American breweries except Iloffman; 2. The vat-fresh taste of IIoffmnn Bottled Deer is due to the tact that Hoffman Beer is not heat treated after bottling. Protection from impurities at every step preserves the fine vat-fresh flavor by making pasteurization unnecessary. You taste the difference at the first sip! The only unpasteurized bottled beer 1n America;

3. The difference in taste between fine draught beer and the usual bottled beer is due chietly to the tact that bottled beer-with a single exception-Is pasteurized (heat·treated) In the bottle;

liOFFl\IAN BEVERAGE COMPANY 1287 1283 Findings 4. Pasteurization affects t))e taste of beer; l'i. Hoffman Beer is not pasteurized;

On the labels attached to the bottles in which the respondent's heer-..,.is- sold appears the statement:

6. Because of extraordinary biological control, pasteurizing this beer is m·ofded. Thus its fine vat quality is fully retained. The statement contained in subparagraph (1) was not made by J·respondent subsequent to March, 1935, and was made as a one-time insertion in approximately eight papers, including the New York "'Herald Tribune," the said papers having interstate circulation. Statement (2) appeared about May 29th, 1935, in the New York "Journal," "'Vorld," "Sun," the Newark "News," and other papers. Statements (3), (4), (5), or (6) were contained in advertisements published in the New York "'Vorld Telegram," the Newark, N. J., "Star-Eagle," and other papers, statement (6) being shown on the reproduction of the bottle label appearing in the advertisements. Respondent's representation, ( 1), that "heat treating beer during bottling operations spoils the fresh taste" and that "this is necessary in all other American breweries except Hoffman," was and is contrary to fact so far as it might be construed to convey the meaning that all other bottled beer than Hoffman's was stale or of such inferior quality, purity, or taste as to be less fit for human ~onsumption than respondent's beer. It was shown by experts, and is so found, that heat-treating does not ordinarily spoil the fresh taste of beer but does so only when the pasteurization is improperly done by the application of too much heat. Thermostatic control is employed in modern brewing to keep uniform temperatmes mHl prevent spoiling. Deer is now treated in such a way as not to give :a pasteurization flavor.

'With respect to respondent'::~ repre::oeutation (2) above, which in substance is that the absence of pasteurization or heat-treating produces a vat-fresh taste in respondent's beer that can be distinguished "with the first sip" ancl that respondent's is the only unpasteurized bottled beer in America, it wa:-:; shown (a) that the distinction Let ween pasteurized and unpasteurized Leer could not ordinarily be detected by taste, although experts in the science of beer making, notably those in Germany and France, agree that such a difference is appreciable., When beer is improperly pasteurized by the appli- ~ation of too much heat there is a "bread taste," but when pasteurization is properly clone the taste is not affected adversely. There is a difference in taste between bottled and draught beer which is not <lue to pasteurization or the lack of it. Prior to thirty or thirtyfive years ago pasteurization affected the taste of beer, such effect > Findings 2:3F.T.C.

being known as a "pasteurized taste," but that has not been so in recent years. It was agreed that respondent's product, up to the time of the publication of the above advertisements, was the only unpasteurized bottled beer produced in America. Since that date other unpasteurized beers have appeared. Draught beer is not pasteurized.

PAR. 3. That the implication arising from respondent's concurrent use of the representations hereinbefore. set out are disparaging to competitive beer products is apparent from the advertisements themselves as well as shown by the testimony to be false or misleading insofar as they might be construed to disparage competing products. By the use of a process known as the Nathan Systcmt respondent's beer is subjected to a filtration treatment whereby yeast and other organisms which might result in later spoiling of the heer after bottling, nrc removed, and it is not necessary io pasteurize it. At the time of the appearance of the above advertised claims, all other breweries than Hoffman's subjected their beert after bottling, to pasteurization, i. e., a heat treatment of approximately 145° F., for the purpose of killing the yeast and other organisms so that the beer would keep indefinitely. The Commission finds from the evidence that while some experts might be able to detect a; difference in taste due to pastenrization between; pasteurized beer and other beer, the ordinary consuming public would not be able to do so.

PAR. 4. The representations by respondent, as set forth in the foregoing paragraph hereof, and each of them, have the capacity and tendency to and do mislead and deceive dealers and the purchasing public into the belief that the beer products of respondent's competitors are inferior in quality, purity or taste to the beer of respondent, and such dealers and purchasing public, relying upon the truth of the aforesaid representations, are thereby induced to purchase Hoffman Beer in preference to other beer products which are competitive as to price, quality, taf::te and purity, thus din~rting­ trade to respondent from its competitors who do not in the aforesaid or any other manner falsely disparage competitive products, and thereby respondent does substantial injury to substantial competition in interstate commerce.

PAR. 5. The record in this case shows that since Hl35 respondent has not repeated the disparaging statements set forth, but in this proceeding it hns asserted its legal right to do so, wherefore the Commission can have and has no assurance whatever that in the absence of any inhibition, respondent might not resume such practice. HOFFMAN BEVERAGE COMPANY 1289 1283 Order CONCLUSION The aforesaid acts and practices of respondent Hoffman Beverage Company are to ~he 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 2u, 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 Com~ rnission upon the complaint of the Commission, the answer of respondent, testimony and other evidence, taken before J olm L. Hornor and John vV. Norwood, examiners of the Commission theretofore duly designated by it, in support of the allegations of said complaint and in opposition thereto, briefs filed herein, and oral arguments by PGad D. Morehouse, counsel for the Commission, and by 'Valter H. Free, counsel for the respondent, and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of an Act of Congress approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

It is now ordered, That the respondent, Hoffman Beverage Company, a corporation, its officers, agents, representatives, and employees, in the sale and distribution of beer in interstate commerce and in the District of Columbia, do cease and desist from: Representing that "Heat treating beer during bottling operations spoils the fresh taste" in conjunction with the statement that such heat treating "is necessary in all other American breweries except Hoffman," or in any other manner falsely or misleadingly disparaging competing products.

Provided further, that nothing herein contained shall restrict respondent from making any legitimate claims regarding the desirability or distinctive taste of its beer so long as such claims are not coupled with false or misleading disparaging references to competing products.

It i.<J further ordered, That said respondent shall, within 60 days from the date of service of this order upon it, make a report or reports to the Commission in writing, showing the manner and form of its compliance herewith.

1290 FEDERAL TRADE CO:Ml\IISSION DECISIONS Complaint 25 F', T.O.