Robinson, Joseph H

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF JOSEPH II. ROBINSON AND S. J. ROBINSON, TRADING AS J. ARTHUR WARREN COl\IP ANY COliiPL.UNT, FINDINGS, AND ORDER IN UEGARD TO THE ALLEGED VIOLATION OF SEC. 5 Ol' AN ACT OF CONGRESS Al'PROVED SEI'T. 26, 1014 Docket 30-H. Uomp/a.int, Jan. 29, 193/-Dcci.,ion, Jan. 2'7, 19J8 'Where two partners engaged in sale and distribution of docks, radios, vacuum cleaners, razors, and fountain p€'n sets, and other merchandh;e- Furnished aud distributed to members of the general public in practically all States and in the Dh;trict of Columbia, push curds, order blanks, and advertisements depicting merchandi:>e thus being offered, und instructions, suggestions, and circulars describing tlwir said plan of selling such merchandise, by which chance purchaser paid . for chance varyiug amount, dependent upon number disclosed within various disks of aforesaid curds, and received rotary cloek (or other articles or merchandise us aforesaid), or nothing, depending upon success or failure in seleding feminine names corresponding to those conceall'd under curd's two master seals, and they compensated by one or more items of merchandise operator or representative, aud thereb.v placed in the hands of others means of conducting lotteries, games of chanee, or gift enterprises in distribution of their said merchandise, with knowledge and intent that said cards bud been, were, and would be used in sale and distribution of their said products to public by lot or chance, contrary to public policy, and in competition with many who are opposed to use of such cards in sale and distt·ibutlon of their merchandise and refrain from furnishing same;

With result that sale of similar or like nwrehandise by such competitors was thereby injuriously affected, and trade was diverted from them to said partners by reason of said furnishing of such cards or like devices, and there was a restraint t1110n and detriment to the freedom of fair and legitimate competition; to the prejudice and Injury of the public and competitors :

lleld, That such acts and practices were to the prejudice of the public and competitors and constituted unfair method~ of competition. Before Mr. Miles J. Funw~, trial examiner. Mr. Henry 0. Lank and Mr. P. 0. [{olin._~ki for the Commission. Nash & Donnelly, of Chicago, Ill., for respondent. Complaint Pursuant to the provisions of an Act of Congress, approved Septetnber 26, 1914, entitled "An Act to create a Federal Trade Comlhission, to define its powers and duties, and for other purposes," the Federal Trade Commission having reason to believe that Joseph H. Robinson and S. J. Robinson, copartners, trading as J. Arthur 'Varten Company, hereinafter refer.red to as respondents, have been and Complaint :!6l•'.T.C. are using unfair methods of competition in commerce as "commerce" is defined in said act, 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. RPspondents are imlividuals doing business as copartners under the name and style of J. Arthur 'Vanen Company, with their principal office and place of business located at 318 ·west 'Vashington Street, in the city of Chicago, State of Illinois. They are now, and for more than 1 year last past have been, engaged iu the sale and distribution of rotary clocks and other merchandise in commerce between and among the various States of the United States and in the District of Columbia, and cause and have caused said products when sold to be shipped from their place of business in the State of Illinois to purchasers thereof, some located in the State of Illinois and others located in various other States of the United States and in the District of Columbia.

In the cour·se and conduct of their business~ r·respondents ar·e now, and for more than 1 year last past lun·e been in substantial competition with other individuals and 'with corporations and partnerships engaged in the sale and distribution of clocks and other merchandise in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conj.uct of their Lu<iin~·ss, as dl'scriLeJ above, respondents in soliciting the sale of and l:>selling their products in interstate comuwrce have adopted and pursued aml still maintnin the following methods and practices:

Respondents distribute to the public through the United States mails in interstate commerce, certain lit('rature, instructions, and sales outfits, including paper push cards, order blanks, and advertisements containing illustrations of rotary clocks and circulars expl<tining respondents' plan of selling said merchandise and of alloting it and other articles as premiums or prizes to the operators of the push card.

Respondents' push card bears 32 feminine names with a blank space opposite each for writing in the name of ihe customer. Said push card has 32 small round partially perforated disks marked "PUSH," below each of which is printed one of the feminine names printed alphabetically elsewhere on the card. Concealed within each disk is a number which is disclosed when the disk is pushed or separated from the card. The push card also has two large red partially perforated disks, and concealed within each of these two disks is one of the feminine names appearing elsewhere on the said J. ARTHUR WARRE~ CO. 567 M5 Complaint card. The push card bears printed legends or instructions as follows:

2 WINNERS 2 RECEIVE $5.00 ROTARY CLOCKS FOR 1¢ to 29¢ numbers from 1 to 29 pay what you draw, uumbers over 29 pay only 29¢ write purchaser's name on back opposite name selected INSTRUCTIONS : There are 32 mixed numbers in this card, printed from 1 upwards. Numbers under 21:) pay what numbers call for. All numbers over 21:1 only pay 29¢. When card is completely soltl, open large seals at top and Parties who selected the nam£'s which correspond with names under seals receive the ROTARY CLOCKS.

Sales of rotary clocks by means of said push cards are made in ~accordance with the above described legends or instructions. Each ()f said prizes or premiums is allotted to the customer or purchaser in accordance with the above lt'gends. The fact as to whether a customer pays a sum of money from 1 cent to 29 cents for a rotary clock, and the fact as to whether a customer receives nothing for the amount paid, is thus determined wholly by lot or chance. Respondents furnish one rotary clock and additional merchandise to their representative making sales by means of said push card. !{respondents also furnish their representative with additional printed Instructions or suggestions for using said push cards. PAn. 3. Respondents in selling their said merchandise in counection with the aforesaid push caru, conduct lotteries or place iu the hands of others the means of conducting lotteries in the sale of their lnerchandise in accordance with the sales plan hereinabove set forth. The sale of respondents' said merchandise to the purchasing public, as hereinabove alleged, involves a game of chance or the sale of a <:hanee to procure respondents' merchandise contrary to the established public policy of the United States and contrary to criminal statutes of many of the States of the United States. By reason of Said facts, many competitors of respondents are unwilling to offer for sale or sell their merchandise so as to involve a game of chance, :tnd such competitors refrain therefrom .

. Many purchasers of clocks are attracted by the element of chance lnv-olved in respondents' sales method, as above described, and are thereby induced to purchase respondents' merchandise in preference to the same or similar merchandise of respondents' competitors who do not use the same or equivalent methods. PAR. 4. The use of said method by respondents has the tendency and capacity unfairly to divert to respondents, because of said game of chance, trade, and custom from their competitors who do not use 568 FEDERAL TRADE COl\Il\IIS:::iion DECISIONS Findings 2'6 I<'. '1'. c. the same or equivalent methods; to exclude from said clock trade all competitors who are unwilling to and who do not use the same or equivalent methods; to lessen competition in said clock trade and to tend to create a monopoly of said dock trade in respondents and such other competitors as use the same or equivalent methods; and to deprive the purchasing public of the benefit of free competition in said clock trade. The use of said method by respondents has the tendency and capacity unfairly to eliminate from said clock trade all actual competitors and to exclude therefrom all potential competitors who do not adopt and nse said method or any method involving a game of chance or the sale of a chance to win clocks by chance, because such method is contrary to public policy or to the criminal statutes of certain of the States of the United States, or because they are of the opinion that such method is detrimental to public morals and to the morals of the purchasers of said clocks, or because of any or all of such reasons.

PAR. 5. The aforesaid acts and practices of respondents are all to the injury and prejudice of the public and of respondents' 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."

REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of an Act of Congress approved Sep· tember 26, 1914, entitled "An Act to create a Federal Trade Com· mission, to define its powers and duties, and for other purposes," the Federal Trade Commission on January 29, 1937, issued and served its complaint in this proceeding upon the respondents, Joseph H. Robin· son and S. J. Robinson, copartners, trading as J. Arthur 'Varren Company, charging them with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said compl!lint and the filing of respondents' answer thereto, testimony and other evidence in support of the allegations of said complaint were introduced by Henry C. J.... ank, attorney for the Commission, and in opposition thereto by John A. Nash, attorney for the respondents, before Miles J. Furnas, an examiner of the Commis· sion theretofore duly designated by it. The said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, this proceeding regularly came on for final hearing before the Commission on the said complaint, the answer thereto, testimony J. ARTHUR WARREN CO. 569 Findings nnd 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 matter and now being fully nd.vised. in the premises, finds that this proceeding is in the interest o£ the public and makes this its findings as to the facts and its conclusion drawn therefrom:

l<'INDINGS AS TO THE FACTS PARAGRAI'H 1. The respondents, Joseph H. Robinson and S. J. Robinson, are individual-, doing business as copartners under the name and style of J. Arthur 'Varren Company, with their principal office and place of Lusiness located at 318 'Vashington Street in the city of Chicago, State of Illinois. Respondents are now, and for some time last past have been, engaged in the sale and distribution of clocks and other articles of merchandise in commerce between and among the various State::; of the United States and in the District of Columbia. They cause such merchandise, w·hen sold, to be shipped or transported from their principal place of business in Chicago, Ill., to purchasers thereof in the State of Illinois and in practically all of the other States of the United States, as wPll as in ihe District. of Columbia, at their respective points of location. There is now, and has been for some time last past, a course of trade in commerce by said respondents in such merchandise bet ween and among the various States of the United States and in the District of Columbia. In so carrying on said business, respondents are, and have been, engaged in active competition With other partnerships and with individuals and corporations engaged in the manufacture of Rimilar or like articles of merchandise and in the sale and distribution thereof in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct o£ their business as described in Paragraph 1 above, respondents in soliciting the sale o£ and selling t.their merchandise have adopted and pursued, and still continue, the following methods and practices:

Respondents distribute to members of the general public in practically all States of the United States and in the District o£ Columbia through the United States mail certain literature, instructions, and sales outfits, includi11g paper push cards, order blanks, and advertiselllents containing illustrations of the merchandise which they are oJ~ering for sale and circulars explaining respondents' plan of selling Sllld merchandise and o£ allotting it as premiums or prizes to tho operators of said push cards.

FEDERAL TRADE COl\IMISSION DECISIO~S570 Fin !lings 2G F. T. C- All of the push cards used by respondents involve the same principle or sales plan or method but vary to some extent in detail. One of the said push cards bears 32 feminine names with rule colnmns on the reverse side thereof for writing in the name of the customer opposite the feminine name selected. Said push card has 32 small round par· tially perforated disks marked "PUSH," above each of which is printed one of the feminine names heretofore referred to. Concealed within each disk is a number which is disclosed when the disk is pushed or separated from the card. The push card also has two large red seals, concealed within each of which is one of the feminine names above referred to. The munbers concealetl within each of the partially perforated disks cannot be ascertained until a push or selection has been made and the names concealed within the large red seals can· not be ascertained until the seals have lwen removed. The push card contains printed legends or instructions as follows: 2-WI~.l'iEHS-2 Re<·eive $.i.OO Hotary Clocks For lc to 29c Numbers from 1 to 29 Puy \Vhat You Draw, Nmllllf'r::. Over z:> Pay OJ,Iy 29c \Vrite Purchaser's Name on llu<·k Opposite Name Sl'lected The reverse of the said card b£'ars the following ]pgenu, among others:

INSTRUCTIO~S: There are 32 mixetl numbers in thi~ c·ard, printed front 1 upwards. Numbers under 29 pay what numlwrs call for. All numbers o\•er 29 only pay 29c. When card 1>! completely !SOld, oven large !<Pals at top and Parties who selected the names which corre::;pond with names under seals receive the ROTARY CLOCKS.

Sales of rotary clocks by means of said push eanls are made in accordance with the above described legends and instructions. Said prizes or premiums are allotte<.l to the customers or purchasers in accordance with the above legends. The fact as to whether a customer pays a sum of money from 1 cent to 29 cents for a rotary clock, and the fact as to whether a customer recein•s nothing for the amount paid, is thus determined wholly by lot or chance. In addition to the two clocks distributed to purchasers from the said push card, the respondents furnish one rotary clock and gen· erally an additional item of merchandise to their representative making sales by means of said push carcl. Respondents also furnish their J. ARTHUR WARREN CO. 571 565 Findings reprt>sentatives with additional printed instructions or suggestions for using said push cards. One of the said printed instructions bears the following lt>gends, to wit:

HOW TO OBTAIN YOUR MODERNg ROTARY CLOCK FREE This curd consists of 32 girls' names-beneath each name is a concealed number which f'hows the amount the person selceting that particular name is to pay for pa1·tidpating in this opportunity These concealed numbez·s range from No. 1 to No. 52, but your customers pay only 1c to 29c, according to the number disclosed under the disc punched. For instance, if customer punches 1 he pays 1c. If 10 is punched, he donates 10c, or if 50 is punched, he pays only 29c. NOTHING HIGHER THAN 2!)c-29c is ll!aximum cost. (Total $8.60.) When nil names have bun puncl1ed nml collettions made, you then remove the large fears and db;close the winners-the peri'ons who punched the cortesponding name is awarded One (1) l\Imlerue Hotary Clock, valued at $5.00. And, for your efforts, you also receive one l\Ioderne ROTARY CLOCK. Upon receipt of your order (see other ~ide) with the $8.00 remittance, (or \\·e will ship C. 0. D., F. 0 .. B. Chicago) we immediately ship you Three (3) Modeme Hotury Cloek,;, 'lwo (2) of which may be given the holders of the names untlt:>r the large SP<tls-tbe other may be retained by you. Isn't this nn eaf'y wny to obtuin a c\o(·k vuhwd at $5.00? Nothing hard about this-nothing complicntt:>d-you merely show the clock or illustration to ~·our friends, neighbors, co-world,ers in the offict>, f'hop, etc. They will all want it. 'their; material is sent you ah>:olutely frt>e for your use if you wi,.;h. It can be Ui:!ed with any mf>rchaHdi;.-e. If yon desire to tmrchase from us, you can do so at any time.

NOTE-\Write pnrchaspr's name oppo,.ite the girl's name he selects and then re:rnove disc by pushing with pencil or any pointed object. Don't forget the surprise gift-send your order and remittance within 15 days and the FHEE gift will certainly surprise you. . As stated above, the other push cards which respondents furnish are Identical in principle but vary in detail. Some of said push cards are furnished by respondents and used by the public in purchasing and distributing radios, vacuum cleaners, razors, and fountain pen Sets, and other merchandise sold and distributed by respondents. 1'he members of the public, to whom respondents furnish their push Cards and other literature, use the same in the manner suggested by respondents, thereby distributing respondents' merchandise to others by lot or chance and procuring respondents' merchandise for them- Selves. The sale and distribution of rpspondents' merchandise through the use of or by means of the said push cards constitutes the operation of lotteries, games of chance, or gift enterprises, and the respondents in furnishing said push cards put in the hands of others the means of conducting lotteries, games of chance, or gift ~llterprises in the distribution of their merchandise. 572 FEDERAL TRADE CO:\l:MISSION:N DECISIO:NS Conclusion 26F. T. C. PAR. 3. The respondents, in furnishing said push cards, have knowledge that the same are, have been and will be, used in distributing their merchandise, and furnish said push cards so that their merchandise may be sold or distributed to the public by lot or chance.

PAR. 4. There are in the United States many manufacturers and distributors selling and distributing similar or like merchandise to that distributed by the respondents, who do not furnish push cards similar to those furnished by respondents, and who do not furnish any device by which their merchandise can be distributed to the public by lot or chance. There are also many competitors of respondents who are opposed to use of push cards in the sale and distribu· tion of their merchandise, and such competitors refrain fronl furnishing such devices. Competitors of respondents were caUPd as witnesses and testified in this proceeding, and the Commission findil that the sale of merchandise by means of said push cards injuriously affects the sale of similar or like merchandise by such competitors, and that trade is diverted to respondents from their said competitors by reason of the furnishing of said push cards or like devices. The use of such methods by the respondents in the sale and distribution of their merchandise is prejudicial and injurious to the public and to respondents' competitors, and has resulted in the diversion of trade to respondents from their said competitors, and is a restraint upon, and a detriment to, the freedom of fair and legitimate competition. PAR. 5. As stated previously in these findings, the respondents sell their merchandise in practically all of the States of the United States and in the District of Columbia. While the annual volume of respondents' business was not shown exactly, one of respondents testified, and the Commission finds, that the respondents' annual volume of business is, and has been, substantial One of the respondents testified that from August 1936 to December 31, 1936, they distributed approximately 250,000 push cards and that their sales for the sallle period were approximately $20,000.

PAR. 6. The Commission finds that the sale and distribution in interstate commerce of merchandise as described above, by means of lot or chance, is contrary to public policy. CONCLUSION The aforesaid acts and practices of the respondents, Joseph H. Rob· inson and S. J. Robinson, copartners, trading as J. Arthur ·warren Company, are to the prejudice of the public and of respondents' com· petitors, and are unfair methods of competition in commerce and :J. ARTHUR WARREN CO. 573 565 Order constitutes a violation 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, the answer of the respondents, testimony and other evidence taken before Miles J. Furnas, an examiner 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 Henry C. Lank, counsel for the Commission, and by John A. Nash, counsel for the respondents, and the Commission having made its findings as to the facts and conclusion that said respondents have 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 ord-ered, That the respondents, Joseph H. Robinson and S. J. Robinson, copartners, trading as J. Arthur 'Varren Company, their agents, representatives, and employees, in connection with the offering for sale, sale and distribution of clocks, radios, vacuum cleaners, razors, fountain pen sets, and other merchandise in interstate commerce or in the District of Columbia, do forthwith cease and desist from: 1. Supplying to or placing in the hands of others push cards or other similar devices so as to enable such persons to dispose of or sell by the use thereof such articles of merchandise; 2. Mailing, shipping, or transporting to members of the public push cards or other similar devices so prepared or printed as to enable said persons to sell or distribute such merchandise by the use thereof; 3. Selling or otherwise disposing of merchandise by the use of push cards or other similar devices, or in any manner selling or otherwise disposing of such merchandise free of charge or at varying prices depending upon lot or chance.

It is further ordered, That the respondents shall, within 30 days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and fonn in which they have complied with the order to cease and desist hereinabove set forth. 160451m-39-\'0L.26-39 Complaint 2GF. T. C.