Phoebe Phelps Caramel Co

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IN Tile MATTER OF PHOEBE PHELPS CARAMEL COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGAUD TO THE ALLEGED VIOL.\TIO~ OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 20, 1!J14 Docket 3019. Complaint, Jiar. 111, 19Ji-Dccisiou, Nov. 16, 1!Mi Where a corporation engaged in manufacture and sale of candy, including certain assortments which were so packed and asst•mbled as to involve use of a lottery scheme when sold and distrilmted to consumers thereof, and one of which consisted of number of individually wrapped !Jenny caramels of uniform size and shniJe, with small number thereof l1aviug different colored stripe, and of number of small packages of candy, to be given as prizes to chance purchasers of such stripeu penny cnramels-- Rold, to wholesalers and to retailers for display and resale to purchasing public, in accordance with aforesaid sales plan, said assortments, and thereby supplied to and placed in the hands of others the means 0~ conducting, and under which they did conduct, lotteries in the sale 0 its sald product in accordance with ;;uch plun, contrary to public policy long recognized by the common law und criminal statutes and to an established public policy of the Unlteu States Government, and In competi· tlon with many who, unwilling to offer or sell candy so packed and as· sembled, or otherwise arranged and packed for sale to purchnsing public, as to involve n game of chance, refrain therefrom, and with many who are unwilling to adopt and use said method or uny method involving game of chance for sale of a chance to win by chance, or any other method contrary to public policy; . With capacity and tendency to Induce purchasers to buy its said products 1~ preference to candy offered and sold by Its competitors, and with resuld that many dealers in nnd ultimate purchasers of candy were attrncte. by said method and manner of pucking tmme and by element of dtance Involved In sale thereof as above U.c~;crihcd, and were thereby induced ~~ purchase Its said candy, so packed and sold by It, In preference to tbll t offered and sold by Its competitors who do not use same or equivalell method, and with ten d ency and capacity, hPcause of snld game of c·hance•de to divert tmde and custom from its competitors as aforesaid, esdll from candy trade all competitot·s who are unwilling to aud do not ~se such or an equivalent methou as unlawful, Jessen compt•tition t)leretn; and tend to create a monopoly thereof In it and such other distributo~t us do u~e same or equlvalC'nt nwthod, dt•prh e purchasing public of iJelll'd of free romprtltlon ln trade in que~tlon, and eliminate from said tra et no all actual, and exclude therefrom all potential, eompetitors who c10 adopt and usc such or an equivalent method: lind Jlcld, That sneh ucts and practices were to the prejudi<"e of the pul•Iic compt>tltors and constituted unfair nwthods of compPtltlon. Mr. ll elll y C. Lanl.: nn<l 11/ r. P. C. /( olin.~l.:i for the Commissiol· PHOEBE PHELPS CARAMEL CO. 1421 ComplaiJlt Complaint t Pursuant to the provisions of an Act of Congress, approved Sep- ~mber 2G, 1914, entitled "An Act to create a Federal Trade Collllnis- ;on, to define its powers and duties, and for other purposes," the p~deral Trade Commission, having reason to believe that Phoebe elps Caramel 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 ~rearing to said Commission that a proceeding by it in respect e:reof would be in the public interest, hereby issues its complaint stat' · ping Its charges in that respect as follows: . ARAGRAPH 1. The respondent, Phoebe Phelps Caramel Company, 1 ~ a corporation organized and operating under the laws of the State ~ Massachusetts, with its principal office and place of business ~cated at 74 Fulton Street, in the city of Boston, State of Massa- ~ Usetts. Respondent is now, and for several years last past has t e.~n, ~ngaged in the manufacture of candy and in the sale and disprJ· Utlon thereof to retail and wholesale dealers and jobbers located at ornts in the various States of the United States, and causes and has c~used its said products when sold to be transported from its principal Pace of business in the State of Massachusetts to purchasers thereof ~n ?ther States of the United States at their respective places of llsrness; and there is now, and has been for several years last past, : course of trade in commerce by said respondent in such candy be- Ween and among the States of the United States. In the course and conduct of sard· busmess· respondent IS· m· compe t'rtwn· WI'th ot ller cor·porations anu with p;rtnerships and individuals engaged in the manufacture of candy an<l in the sale and distribution thereof in Scotlnlllerceates. between and among the various States of the United PAn. 2. In the course anti conduct of its business, as described in Palragraph 1 hereof respondent sells and has sold to retail and wholesa e l I ' ( ea ers and jobbers certain assortments of candy so packed and assembl d d.' . e as to involve the use of a lottery scheme when sold and f Istributed to the consumers thereof. One such assortment offered 0~r ~ale, sold, and distributed by respondent is composed of a number ,., Pieces of caramel candy of uniform size and shape, together with ·•o nurnL er of small packages of candy, which small packages of candy ... re to b · f 'd · fc e given as prizes to purchasers o sal pieces o caramel andy of 'f · · 1 f II · 'fl um orm size an<l shape m t 1e o owmg manner: i 1~ majority of the said caramel candies of uniform size and shape 11 stud assortment are plain or have the same color, but a small num- Complaint 25F. T.C.

ber of said caramel candies bear a stripe of a different color. The said caramels of uniform size and shape retail at the price of 1¢ each, but the purchaser who procures one of the said caramels bearing a colored stripe is entitled to receive, and is to be given free of charge, one of the small packages of candy heretofore referred to. The pieces of caramel candy of uniform size and shape are individually wrapped in non-transparent wrappers, and the fact as to whether the caramel is plain or has a stripe thereon is thus effectively con· cealed from purchasers and prospective purchasers until a selection has been made and the wrapper is removed. The aforesaid purchasers of said caramels, who procure one bearing a stripe, thus procure one of the small packages of candy wholly by lot or chance. PAn. 3. The wholesale dealers to whom respondent sells its assort· ments 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 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 contlucting 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 product in prefer· ence to candy offered for sale and sold by its competitors. 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 prorure a small package of candy. The use by respondent of said method in the sale of candy, and t~e sale of candy by aml through the use thereof and by the aid of said method, is a practice of the sort which the common law and criminal statutt-s have long deenwu contrary to public policy, and is contt:ary to an established public policy of the Government of the United Statps. The use by respondent of said method has a tendency unduly to hin1ler competition or create monopoly in this, to wit: that the use thereof has the tendency and cap:icity to exclude from the branch of the candy trade involve(l in this proeecdin(l' coml)etitors who do ~ 'I 11 rnot a!lopt and use the same nwthod or an equivalent or sinu f method involving the same or an equivalent or similar element 0 chance or ]ottery scheme>.

Many persons, firms and corporations who make and sell candy in competition with the respondc•nt, ns above al1Pge1l, are unwilling t~ offer for sale or sell camly so pttckPd and assembled ns above alkge~' or othrrwise arrangNl mHl packed for sale to the purchasing publ.1c Jllso as to m\·o. I ve a game of cI lance, !I.!Hl such compd1tors· rc fr·l' therefrom.

PHOEBE PHELPS CARAMEL CO. 1423 1420 Findings PAn. 5. Many dealers in and ultimate purchasers of candy are attracted by respondent's said method and manner of packing said ~~ndy and by the element of chance involved in the sale thereof in ~ manner above described, and are thereby induced to purchase S~d candy so packed and sold by respondent in preference to candy ered .for sale and sold by said competitors of respondent who do not use the same or equivalent methods. The use of said method by r~spondent has the tendency and capacity, because of said game of c a_nce, to divert to respondent trade and custom from its said com- ~editors who do not use the same or equivalent method; to exclude d rom said candy trade all competitors who are unwilling to and who ° not use the same or an equivalent method because the same is un- 1 awfnl; to lessen competition in said candy trade, and to tend to tt: a monopoly of said candy trade in respondent and such other t nbutors of candy as use the same or an equivalent method; and i 0 deprive the purchasing public of the benefit of free competition Stud candy trade. The use of said method by the respondent has tf te tendency and capacity to eliminate from said candy trade all ;ctua} competitors and to exclude therefrom all potential competi- 0~~ who do not adopt and woe said method or an equivalent method. d An. G. l\Iany of said competitors of respondent are unwilling to al opt and use saitl nwthod or any method involving a game of \;ance or the sale of a chance to win something by chance or any 0 1t;r method that is contrary to public policy. An, 7. The aforementioned method, acts and practices of respondent are all to the prejudice of the public and respondent's comi)ctt1 ors, as heremabove. alleged. Said. method, acts, and prac- t. Jces co t' · · · · 1 · tl . ns itute unfair methods of competition Ill commerce w1t nn S le Ill tent and meani1w of Section 5 of an Act of Congress, approved ~PtcmLer 2G, 1V14 ('I~itled "An Act to create a Federal Trade Comn1Ission l, t o c1efine 1ts·' powers and duties,· and f or ot I1er purposes. " REPORT, FINDINGS AS TO THE FACTS, AND Onder t<•:ursuant to the provisions of an Act of Congress approved Sep- 8. Ler 2G, 19H, entitled •'An Act to create. a Federal Trade Commis- F0111' to define its powers and duties, and for other purposes," the l;c eral Trade Commission, on 1\larch lG, 1937 issued, and on March PI' 1937 served, its complaint in this proceeding upon respondent n1 10 1ebe Phelps Caramel Company, charging it with the u~e of unfairofE>t 10<ls. · of compctitwn· · m· commerce m· vw· I a. twn of tl 1e provisions· · d Srl!d act. After the issuance of said complaint, the respondent 11 1 Y filrd in the office of the Commission its answer admitting all the 158121 "'-:Jl)-!)2 Findings 2i3 F. T. C. material allegations o:f the complaint to be true and waiving the taking of further evidence and all other intervening procedure. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint and answer, 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 conclusiOil drawn therefrom:

FINDINGS AS TO THE FACTS PARAGRAPH 1. The respondent, Phoebe Phelps Caramel Comptt11Y' is a corporation organized and operating under the laws of the SLate of Massachusetts, with its principal office and place of business located at 74 Fulton Street, in the city of Boston, State of Massachusetts. Respondent is now, and for Bevera.l years last past Itas been, engaged in the manufacture of candy and in the sale and distribution thereof to retail and w·wholesale dealers and jobbers located at points in the various States of the United States. It causes aud has caused its said products, when sold, to be transported from its principal place of business in the State of Massachusetts to purchasers thereof in other States of the United States at thf>ir respective places of business. 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 various States of the United States. In the course and conduct of said business, respondEmt is in competition with other corporations and with partnerships and individuals engaged in the manufacture of candy and in the sale and distribution thereof in commerce between and among the various States of the United States.

PAR. 2. In the course ancl. conduct of its business, as clescribcd in paragraph 1 hereof, respondent sells and has sold to retail and ,wholesale dealers ancl jobbers certain assortments of candy so packNl and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers the.reof. One such assortment offered for sale, sold ancl distributed. by respondent, is composed. of a number of pieces of caramel candy of uniform size :mel shape, together with a number of small packages of candy, which small packages of candy are to be given as prizes to purchasers of said pieces of caramel candy of uniform size and shape in the following manner: The majority of the said c:iramel candies of uniform size and shape in said assortment are plain or have the same color, but a small number of said caramel candies bear a stripe of a different color· The said caramels of uniform size and shape retail at the price of 1¢ PHOEBE PHELPS CARAMEL CO. 1425 Findings each, but the purchaser who procures one of the said caramels bearing a colored stripe is entitled to receive, and is to be given free of charge, one of the small packages of candy heretofore referred to. The pieces of caramel candy of uniform size and shape are individually wrapped in non-transparent \\;rappers, and the fact as to whether the caramel is plain or has a stripe thereon is thus effectively concealed :from purchasers and prospective purchasers until a selection has been made and the wrapper is removed. The aforesaid purchasers of said caramels who procure one bearing a stripe, thus procure one of · the small packages of candy wholly by lot or chance. PAn. 3. The wholesale dealers to whom respondent sells its assortments resell the same to retail dealers, and said retail dealers and the retail dealers to whom respondent sells direct expose said assortlllents :for sale and sell said candy to the purchasing public in accordance with the aforesaid sales plan. Respondent thus supplies ~0 and places in the hands of others the means of conducting lotteries 111 the sale of its products in accordance with the sales plan hereinabove set forth, and said sales plan has the capacity and tendency ?f inducing purchasers thereof to purchase respondent's said product In preference to candy offered fol" sale and sold by its competitors. PAn. 4. The sale of said candy to the purchasing public, in the manner above found, involves a game of chance or the sale of a chance to procure a small package of candy. · The use by respondent of said method in the sale of candy, and th~ sale of candy by and through the use thereof and by the aid of sa~d .method, is a practice of the sort which the common law and cnnunal statutes have lm1g deemed contrary to public policy, and is con~rary to an established public policy of the Government of the Dmted States. The use by rf'spondent of said method has a 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 branch of the candy trade involved in this proceeding competitors Who do not adopt and use the same method or an equivalent or similar method hwolving the same or an equivalent or similar element of ~hance or lottery schenw.

. Many persons, firms and corporations who make and sell candy In competition with the respondent are unwilling to offer for sale or ;ell candy so packed and nssf'mbled, or otherwise arranged and packed or sale to the purchasing public so as to involve a game of chance, and such com1wtitors refrain therefrom.

t pan. 5. Many dealers in nml ultimate purchasers of candy are 11 tracted by respondent's said method and manner of packing said ('andy and by the element of chance involved in the sale thereof in the Order 25F. T.C.

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 respondent who do not use the same or equivalent methods. 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 com· petitors who do not use the same or 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 the 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. l\fany 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 method that is contrary to public policy.

CONCLUSION The aforesaid acts and practices of the respondent Phoebe Phelps Caramel Company are to the prejudice of the public and of respon· dent'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 powers and duties, and 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 October 1, 1937 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 Corn· mission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of an Act of Con· gress approved September 2G, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other pnrposrs."

PHOEBE PHELPS CARAMEL CO. 1427 1420 Order It is ordered, That the respondent Phoebe Phelps Caramel Company, a corporation, its officers, representatives, agents, and emrlo.yees, 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 b~ Inade, 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 Job~ers or retail dealers assortments of candy which are used, or Which may be used, without alteration or rearrangement of the c?ntents of such assortments, to conduct a lottery, gaming device, or gi~t enterprise in the sale or distribution of the candy contained in said assortments to the public.

3. Packing or assembling in the same package or assortment of c~ndy for sale to the public at retail pieces of candy of uniform Size and shape, the majority of which are plain or the same color but a .81llall number of which bear a stripe of a different color, together With a number of small packages of candy which said small packages of ~andy are or may be given as prizes to the purchaser procuring a Piece of candy bearing a stripe.

CIt is further ordered, That the respondent Phoebe Phelps Caramel . 01llpany, a corporation, shall, within 30 days after service upon ~t of this order, file with the Commission a report in writing setting t~rth in detail the manner and form in which it has complied with e order to cease and desist hereinabove set forth. Complaint 25 F. T. C.