Marcelle Candies, Inc.

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IN THE MATTER OF MARCE~LE CANDIES, INC.

CO!>U?LAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 2913. Complaint, Aug. 29, 1936-Decision, Apr. 13, 1938 Where a corporation engaged in manufacture and sale of "draw" or "deal" candy, including assortments composed of number of half-pound trays, number of one-pound boxes; and punch board or push card with punches or pushes divided into sections, through use of which boards or cards said candy was sold to ultimate consumer-purchaser under scheme by which, ln accordance with explanatory statement thereon displayed, purchaser of one of 5-cent chances received, or failed to receive, one of said trays, in accordance with chance selection, or failure to select, one of various designated, concealed numbers, as announced on card or board, and received, by PUnching or pushing last number in section, one of pound boxes, and thus secured, by lot or chance and in event of correct selection for tray, S merchandise exceeding 5-cent cost of chance- 'Old said assortments and cards or boards to wholesale dealers and jobbers, so as!lembled and packed that they could be and were used and displayed by numerous retail dealer buyers, for distribution to purchasing public by lot or chance>, without alteration or rearrangement, and with knowledge that majority of said assortments, as thus packaged by it, were to be, and c~ulu be, thus resold to public by lot or chance by said retail dealers, in VIOlation of public policy; in competition with other manufacturet·s and dealers, many of whom rE-gard such sale and distribution as morally bad an(] as encouraging gambling and injurious to candy industry as merchandising chance or lottery instead of candy, and some of whom refuse, for reasons set forth, to sell candy so packed that it can be resold to public w· by lot or chance;

lth result of supplying to and placing in the bands of retail merc!Jants means of violating the laws of the several States in sale and distribution of such "draw" or "deal" assortmE>nts of candy, preferentially purchased by consumers because of gambling feature connected with sale thereof, and :hieh, i~ providing means or opportunity of obtaining a prize or becomc h~tldt·ena Wtnnerc by· · lot or ehance,. teac!J and encourage gambling among • omprunng substantial number of purchasers and consumers of such candy, and sale of which in same market with "straight" goods is followed b . · · f Y marked decrease m sales of latter, due to gumblmg or lottery eature connected with other, and with effect of unfairly diverting from such refu:;;· . . . t mg competitors, thereby put to compettttve disadvantage, trade ~ it and others using similar methods, by reason of retailers' purchase ~ such candy from it and such others as more salable under "draw" or dear• method ·lleld, 'that . Pub . such acts and practices were to the prejudice and injury of the he and competitot·s and constituted unfah· methods of competition. ~efore lllr. Miles J. Fu1'1Ul-8, trial examiner. r. P. 0. l(oUnsl.:i and M1·. Henry 0. Lank for the Commission. 1078 FEDERAL TRADE COl\Il\IJSSIOX DECISIOXS Complaint ::!6F.T.C. Mr. Ernest P. Rogers of Hirsch & Smith, of Atlanta, Ga., for respondent.

Complaint Pursuant to the provisions of an Act of Congress, approyed Sep· tember 26, 1914, entitled "~\n Act to create a Federal Trade Conl• mission, to define its pmvers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Marcelle Candies, Inc., 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 proceeuing 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, Marcelle Candies, Inc., is a corpor:a· tion organized and operating under the la"·s of the State of Georg111' with its principal office and place of business located at 223 Peachtree reStreet, N. W. Atlanta, Ga. The respondent is now and for m~ than 1 year last past has been engaged in the manufacture of candies and in the sale and distribution thereof to wholesale dealers, jobbers, and retail dealers, located at points in the various States of the United States, and causes and has caused its said products, when 50 sold, to be transported from its principal place of business in the city of Atlanta, Ga., to purchasers thereof in other States of th~ United States at their respective places of business; and there is no''J and has been for more than 1 year last past, a course of tmde an commerce by said respondent in such candies between and among tl~e · · d busi·States o:f the Umted States. In the course and conduct of sar . ilness, respondent is in competition with other corporations and w~t partnerships and individuals engaged in the manufacture of candre~ and in the sale and distribution thereof in commerce between an among the various States of the United States. . PAR. 2. In the course and conduct of its business as described 1~ paragraph 1 hereof, respondent sells and has sold to wholesale an retail dealers assortments of candies so packed and assembled as Ito involve the use o:f a lottery scheme when sold and distributed to t 1e ultimate consumers thereof. d (a) Several o:f the said assortments manufactured and distribute f by respondents are composed of a number of half-pound trafs °a candy and a number o:f 1 pound boxes of candy, together wrtl1 'tl 1 t 11edevice commonly called a '~punchboard" or "push card" w1 punches or pushes divided into sections. The said boxes of can~Y are distributed to the consuming public by means of said "pnnc 1 • 1\IARCELLE CANDIES, IXC. 1079 1077 Complaint board" or "push card" in the following manner: Sales are 5 cents each, and when a punch or push is made from said "punchboard" or "push card" a number is disclosed. The numbers begin with one and continue to the number of punches or pushes there are on the board or card but the numbers are not arranged in numerical sequence. The board or card bears a statement or statements informing purchasers and prospective purchasers as to which numbers :eceive the half-pound trays of candy and a statement or statements Informing purchasers and prospective purchasers that the last punch or Pllsh in each section receives one of the one pound boxes of candy. A. purchaser who does not qualify by obtaining one of the numbers calling for one of the half-pound trays of candy or by punching or Pnshing the last number in a section ~·eceives nothing for his money ~ther than the pr·ivilege of punching or pushing a number from the oard or card. The trays and boxes of candy are worth more than ~ cents each and a purchaser\ who obtains one of the numbers calling Tor a tray or box of candy receives the same for the price of 5 cents. he numbers on said' board or card are effectivelv concealed :from PUrchasers and prospective purchasers until a s~lection has been lllade and the particular pmich or push separated from the board or ~~rd.. The trays and boxes of candy in said assortment are thus Ish·Ibuted to purchasers of punches or pushes from said board or card "Wholly by lot or chance.

• par. 3. The wholesale dealers and jobbers, to whom respondent sells Its assortments, resell said assortments to retail dealers, and said retail dealers, and the retail dealers to whom respondent sells direct, ~:ltpose said assortments for sale and sell said candy to the purchas· ~~g public in accordance with the aforesaid sales plan. Respondent d us.supplies to and places in the hands of others the means of con· ~ctlng lotteries in the sale of its product in accordance with the sa es plan hereinabove set forth, and said sales plan has the capacity a~~ tendency of inducing purchasers thereof to purchase respondent's srn product in preference to candy offered for sale and sold by its competitors.

1ll PAn. 4. The sale of said candy to the purchasing public in the anner above alleged involves a game of chance or the sale of a 1c l~nce to procure a tray or box of candy. th he use by respondent of said method in the sale of candy, and s ~d sale of candy by and through the use thereof and by the aid of c~~ .method, is a practice of the sort which the common law and i llllinal statutes have long deemed contrary to public policy; and ~ c?ntrary to an established public policy of the Government of the llited States. The use by respondent ~f said method has the dan- 1080 i'EDERAL TRADE COMl\IISSION DECISIONS Complaint 26F.T.C· gerous 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 involving the same or an equivalent or similar element of chance or lottery scheme. . 111 Many persons, firms, and corporations who make and sell candy competition with the respondent, as above alleged, are unwilling to offer for sale or sell candy so packed and assembled as above allege~, or otherwise arranged and packed for sale to the purchasing publ.1c so as to involve a game of chance, and such competitors refrain therefrom.

PAR. 5. Many dealers in and ultimate purchasers of candy a~·e 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 respondent who do not use the same or equivalent methods. The use of said method b{ respondent has_ the tendency and capacity, because of said game 0 chance, to divert to respondent trade and custom from its said conlpetitors who do not use the same or an equivalent method; to exclude from said candy trade all competitors who are unwilling to and wi:o 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, T~e use of .sa~d method by ~he respondent ha~ the t£>ndency and capacity to elumnate from said candy trade al actual competitors, and to exclude therefrom 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 method that is contrary to public policy.

PAR. 7. The aforementioned method, acts, and practices of the r~­ spondent are all to the prejudice of the public and of responde~t s competitors, as hereinabove alleged. Said method, acts, and practices constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress, entitled ".A~ Act to create a Federal Trade Commission, to define its powers an duties, and for other purposes," approved September 26, 1914. MARCELLE CANDIES, INC. 1081 1077 Findings REPORT, FINDINGs AS TO THE FACTs, AND Onder Pursuant to the provisions of an Act of Congress approved Septe~ber 26, 1914, entitled "An Act to create a Federal Trade Com- :nnssion, to define its powers and duties, and for other purposes," ~he Federal Trade Commission, on August 29, 193<3, issued and served :ts complaint upon the respondent, Marcelle Candies, Inc., charging lt With the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issuance of said com- Plaint and the filing of respondent's answer thereto, testimony and ?ther evidence in support of the allegations of said complaint were Introduced by P. C. Kolinski and Henry C. Lank, attorneys for the Commission, and in opposition thereto by Ernest P. Rogers, attorney fo: t.he respondent, before :Miles J. Furnas, an examiner of the Commission theretofore duly designated by it. The said testimony and ot~Ie:: evidence were duly recorded and filed in the office of the ComlXllssion. Thereafter, this proceeding regularly came on for final hearing before the Conunission on the said complaint, the answe1· thereto, testimony and other evidence, and brief in support of the complaint (brief in opposition thereto having been waived, and oral argument not having been requested), 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 dmwn therefrom: . FINDINGS AS TO THE FACTS ~ARAGRAPI-I 1. The respondent l\Iarcelle Candies, Inc., is a corporation, organized and operating under the laws of the State of ~eorgia, with its principal office and place of business located at 223 eachtree Street, N. ,V., Atlanta, Ga. Respondent is now, and for seve~al years last past has been, engaged in the manufacture of candtes and in the sale and distribution thereof to wholesale dealers ~n~ jobbers located in the States in the southeastern part of the G nite~ States, including, among others, the States of Florida, eorg1a, Alabama, North Carolina, South Carolina, Mississippi, Ten- ~essee, and Louisiana. It causes its said products, when so sold, to t e transported from its principal place of business in Atlanta, Ga., purchasers thereof in the State of Georgia and in such others°T~tes .of the United States at their respective places of business. t, ere IS now, and has been for several years last past, a course of 1 ade and commerce by said respondent in such candy between and among the States of the United States. In so carrying on said business, respondent is, and has been, engaged in active competition with 1082 FEDERAL TRADE COi>UIISSION DECISIONS Findings 26F.T.0· 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 Yarious States of the United States. The gross annual volume of respondent's business is approx· imately $200,000. . PAR. 2. In the course and conduct of its business, as described lU paragraph 1 hereof, respondent has sold in commerce between and among the States of the United States to wholesale dealers and job· hers, various packages or assortments of candy so packed and asse~1 blecl as to involve the use of a lottery scheme when sold and dis· tributed to the consumers thereof. The said assortments were described by an official of the respondent called as a witness at t~le instance of the Commission, and are described in the circular dis· tributed by the respondent which was offered as an exhibit. One of said assortments is hereinafter described for the purpose of showing the method used by the respondent, but this description does not include all of the assortments, nor the details of the several sales plans which respondent has been using in the distribution of candy by lot or chance :

(a) One of said assortments manufactured and distributed by respondent is composed of a number of half pound trays of can~Y~ and a number of 1 pound boxes of candy, together with a devlC" commonly called a "punchboard" or a. "push card," with the punche~ or pushes divided into sections. The said trays and packages ?1 candy are distributed to the consuming public by means of sal "punchboard" or "push card" in the following manner: ·a Sales are 5 cents each and when a. punch or push is mrLde from sn~ punchboard or push card, a number is disclosed. The numbers beglll at 1 and continue to the number of punches or pushes there are. 01i the board or card, but the numbers are not arranged in numerl?a sequence. The board or card bears a statement or statements Informing purchasers and prospective purchasers as to which numbers receive the half pound trays of candy and a statement or statement: informing purchasers and prospective purchasers that the last pnnc 1 or push in each section receives two of the 1-pound boxes of candy· A purchaser who does not qualify by obtaining one of the numbers · orcalling for one of the half pound trays of candy or by punclnng pushing the last number in a section receives nothing for his money other than the privilege of punching or pushing a number from the board or card. The trays and boxes of candy are worth more t~!ln 5 cents each and a purchaser who obtains one of the numbers calling for a tray or box of candy receives the same for the price of 5 cents. The numbers on said board or card are effectively concealed frolll MARCELLE CANDIES, INC. 1083 l0i7 Findings PUrchasers and prospectiye purchasers until a selection has been lllacle, and the particular punch or push separated from the board or card. The trays of candy in said assortment are thus distributed to Purchasers of punches or pushes from said board or card wholly by lot or chance.

PAn. 3. Candy assortments involving the lot or chance feature as described in paragt'aph 2 above are generally referred to in the candy hade or industry as "draw" or "deal" assortments. Assortments of candy without any lot or chance feature in connection with their ~resale to the public are generally referred to in the candy trade or Industry as "straight" merchandise. These terms will be used hereafter in these findings to distinguish the various types of assortments. PAn. 4. The wholesale dealers and jobbers, to whom respondent sells its assortments, resell the same to retail dealers. Numerous ret 'J .ai dealers purchase the said assortments from. wholesale dealers and Jobbers, and the majority of such retail dealers display said assortl1Ient.s for sale to the public as packed by the respondont, and the ca?dy contained in the majority of said assortments is sold and distnbuted to the consuming public by means of said push cards or Punch boards in the mamwr hereinbefore described . . PAll. 5. All sales made by respondent to wholesale dealers and Jobbers are absolute sales and respondent retains no control over said ~ssortments after they are delivered to the wholesale dealer or job- ~'r. The assortments are assembled and packed in such manner that ~l~ey .are, and have been, used, and may be used, by retail dealers for Istnbution to the purchrrsing public by lot or chance without alteration or rearrangement.

tl In the sale and distribution to wholesale dealers and jobbers of k Ie assortments of candy hereinbefore described, respondent had t nowledge that the majority of said assortments were to be resold 0 the purchasing public by retail dealers by lot or chance, and it P~ckaged such candy in the way and manner described so that, "'Without alteration, addition thereto, or rearrangement thereof, it ~vould be, and could be, resold to the public by lot or chance by said Iet ~ll dealers. Such packing and distribution is contrary to publicPo 1 Icy, Consumers prefer to purchase the "draw'~ or "deal" c.andy, because otf.bthe gambling feature connected with its sale. The sale and dis- 1'1 t' . u Ion of "draw" or "deal" assortments of candy, or of candy ;·Inch has connected with its sale to the public the means or opc~rtunity of obtaining a prize or becoming a winner by lot or p ~nee, teaches and encourages gambling among children, who comt llse a substantial number of the purchasers and consumers of this YPe of candy.

1084 FEDERAL TRADE COl\11\:IISSION DECISIONS Order 26F.T.0· PAR. 6. There are, in the United States, many manufacturers of candy who do not manufacture and sell "draw" or "deal" assort· ments of candy and who sell their "straight" merchandise in interd state commerce in competition with the "draw" or "deal" candy, an manufacturers of "straight" merchandise have noted a marked de;, crease in the sales of their products whenever or wherever the "draw or "deal" assortments have appeared in their market. This decrease in the sale of "straight" merchandise is due to the gambling or lottery feature connected with the "draw" or "deal" candy. PAR. 7. The sale and distribution of candy by the methods de· scribed herein is the sale and distribution of candy by lot or chance and constitutes a lottery, gaming device, or gift enterprise. :Man~ competitors regard such sale and distribution as morally bad an as encouraging gambling,. and as injurious to the candy industry~ because it results in the merchandising of a chance or lottery, inste~ of candy. The sale and distribution of candy. by respondent 111 assortments as hereinabove found supplies to and places in the hand~ of retail merchants a means of violating the laws of the sevenl States. Because of these reasons, some competitors of respondent refuse to sell candy so packed that it can be resold to the publi? .b~ lot or chance. These competitors are thereby put to a compeutn' disadvantage. The retailers, finding that they can dispose of 111° 1~ candy by the "draw" or "deal" method, buy from respondent an. others employing the same methods of sale, and thereby trade 15 unfairly diverted from said competitors to respondent and others using similar methods.

CONCLUSION The aforesaid acts and practices of the respondent Marcell: Candies, Inc., are to the injury and prejudice of the public and 0 respondent's competitors, and constitute unfair methods of _coJll~ petition in commerce, within the intent and meaning of Sectwn of an Act of Congress, approved September 26, 1914, entitled ".A.~ Act to create a Federal Trade Commission, to define its powers an duties, and for other purposes."

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Co~: mission upon the complaint of the Commission, answer of respon f ent, testimony and other evidence in support of the allegati~ns Jsaid complaint and in opposition thereto, taken before Miles j Furnas, an examiner of the Commission theretofore duly designate by it, and brief of counsel for the Commission (brief for the re· MARCELLE CANDIES, INC. 1085 10i7 Order spondent having been waived and oral argument not having been il'equested); and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the pro- ,;isions of an Act of Cm1gress, approved September 26, 1914, entitled An Act to create a Federal Trade Commission, to define its powers .and duties, and for other purposes."

It i.'1 01·dered, That the respondent Marcelle Candies, Inc., a cor- Poration, its officers, representatives, agents, and employees, in con- ~ection with the offering for sale, sale, and distribution of candy in Interstate commerce, and in the District of Columbia, do forthwith: ~ease and desist :from :

1. Selling and distributing candy so packed and assembled that sales of such candy to the general public are to be made, or may be ltlade, by means of a lottery, gaming device, or gift enterprise; 2. Supplying to or placing in the hands of dealers packages or .assortments of candy which are used, or which may be used, without -alteration or rearrangement or the contents of such packages or ~ssortments, to conduct a lottery, gaming device, or gift enterprise 11\ the sale and distribution of the candy contained in said assort· lllents to the public;

3· Supplying to or placing in the hands of dealers assortments of ~andy, together with a device commonly called a punchboard or push ~aru for use, or which may be used, in distributing or selling the said ~andy to the public at retail;

1· Furnishing to dealers a device commonly called a punchboard or Push card, together with packages or assortments of candy, or separately, which punchboard or push card is to be used, or may be USed, in distributing or selling said candy to the public. 1 h t i.<J further ordered, That the respondent Marcelle Candies, Inc., ~all, ~i~hin 30 days after service upon it of this order, file with the 0111:tnissron a report in writing, setting forth in detail the manner ~nd form in which it has complied and is complying with the order 0· cease and desist hereinabove set forth. 1111lt51 "'- H!l-~vor •. 20--71 Syllabus 26F. T.C.