Pyroteciinic Industries, Inc

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IN THE MAITER OF PYROTECHNIC INDUSTRIES, INC., ET AL.

COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3309. Complaint, Jan. 25, 1938-Decision, Apr. 14, 1938 Where an association of fireworks manufacturers; and the members thereof, producers, together, of approximately 85 percent of the total production of commercial fireworks in the United States, theretofore in active and sub· stantial competition with one another and with other manufacturers in making and seeking to make sales of fireworks in comwerce between and among the several States, as were jobbers and retailers in sale of said products;

Entered into and carried out understamlings and combinations with intent and effect of unlawfully restricting, suppressing, and eliminating competition in manufacture, jobbing, and retail of fireworks in commerce among and in the several States; and, in pursuance of said understandings, etc., and in fur· therance thereof, and acting through and by means of said association, its officers and agents- (a) Agreed to fix and maintain, and fixed and maintained uniform prices and discounts in sale of fireworks to jobbers, and uniform prices and discoun~s at which jobbers should sell such products to retailer,, and minimum n•tall prices thereof;

(b) Agreed to designate, and designated concerns which should, and should not, be sold by such manufacturers as jobbers, and to compile and maintain, and compiled and maintained lists of concerns which should be, and were, recog· nized as chain stores allowed certain special discounts in addition to tlwse granted other purchasers similarly situated, and to fix and maintain, and fixed and maintained special discounts to those concerns which purcbnsed certain specified amounts of fireworks from combined member estttb· lishments;

(c) Organized and held meetings of groups of fireworks jobbers in various parts of United States to devise means of asserting influence, and coercion and other means of inducing, requiring and coercing them to abide bY said agreements and combinations, and effected and procured promises and agreements by various means from various jobbers throughout the United States, and from fireworks distributors' associations, to support and enforce aforesaid agreements, etc.; and (d) Agreed and attempted to maintain aforesaid understandings and comuinn· tions to unlawfully restrict, suppress, and eliminate competition in manu· facture, jobbing, and retail sale of fireworks in United States, and agreed to refuse, and refused, to sell said products to certain concerns and thereby boycotted same and cut off or seriously impaired their ·supply of fireworJiS, and used and engaged in other acts and cooperative and concerted action and coercive methods and policies in promoting, establishing ami carrying out aforesaid understandings, etc., through and by means of said associa· tion, its members, officers, and agents, for purpose of suppressing and pr_e· venting competition and restricting and restraining sale of fireworks l!l trade or commerce, as hereinabove set forth; PYROTECHNIO INDUSTRIES, INC., ET AL. 1105 1104 Complaint Wlth effect of unduly and unlawfully restricting and restraining such sale in trade and commerce among and in the several States, substantially enhancing and maintaining prices at artificial levels, and otherwise depriving Public of benefits that would flow from free and normal competition among and between said members, and among and between jobbers and retailers of such products in commerce, and with effect of eliminating competition, and tendency and capacity to create monopoly in sale of said products: Held, 'rhat such acts and practices were to the prejudice of the public and competitors and constituted unfair methods of competition. Mr. Fletcher 0. Cokn for the Commission.

Mr. Clwdes Henry Fleming, of Washington, D. C., for Pyrotechnic Industries, Inc.

lYir. H emy f{. H eyrna-n, of New York City, for Unexcelled Manufacturing Co., Inc .

.She'rbU'Nie, PmDers & Needhmn, of Boston, 1\lass., for National F~reworks, Inc., National Fireworks Distributing Co., Los Angeles Fireworks Co., Ltd. and Victory Fireworks & Specialty Co. Nyburg, Goldrnan & lValter, of Baltimore, ~Mel., for Triumph Fusee & Fireworks Co.

Mr. George E. llall, of Nev Haxen, Conn., form. Backes' Sons, Inc.

Mr. Morri.s 111. Sclwitze1', of Newark, N. J., for Essex Specialty Co., Inc.

Complaint Pursuant to the provisions of an Act of Congress, approved Sept~mber 26, 1914, entitled "An Act to create a Federal Trade Commis- Sion, to define its powers and duties, and for other purposes," the Federal Trade Commission having reason to believe that Pyrotechnic ~~dustries, Inc., Unexcelled :Manufacturing Company, Inc., National rreworks, Inc., National Fireworks Distributing Company, Los Angeles Fireworks Company, Ltd., Victory Fireworks & Specialty Com- Pany, Triumph Fusee & Fireworks Company, ~I. Backes' Sons, Inc., and Essex Specialty Company, Inc., hereinafter referred to as respondents, have been and are using unfair methods of competition in co~merce, as "commerce" is defined in said act, and it appearing to ~ard Commission that a proceeding by it in respect thereof would be ~n the public interest, hereby issues its complaint stating its charges rn that respect as :follows:

~ AIUGRAPir 1. Respondent Pyrotechnic Industries, Inc., is a corpol'~hon organized, existing, and doing business by virtue of the laws ~ the State of Delaware, with its principal office located in the nves.t~ent Building, ·washington, D. C. Said respondent is an associatwn of fireworks manufacturers, with a membership com- Posed of respondents Unexcelled Manufacturing Company, Inc., Complaint 26F.T.O ..

Triumph Fusee & Fireworks Company, M. Backes' Sons, Inc., Essex. Specialty Company, Inc., National Fireworks, Inc., National Fire· works Distributing Company, Los Angeles Fireworks Company,. Ltd., and Victory Fireworks & Specialty Company. Respondent Unexcelled Manufacturing Company, Inc. is a corpo· ration organized, existing, and doing business by virtue of the la":s of the State of New York, with its principal office and place of busi· ness located at 22 Park Place, New York, N.Y.; it is engaged in the manufacture and sale of commercial and display fireworks. Respondent National Fireworks, Inc. is a corporation organized,. existing, and doing business by virtue of the laws of the State of Massachusetts, with its principal place of business located at ()() North 'Vashington Street, Boston, Mass.; it is engaged, among other activities, in the manufacture and sale of fireworks. Respondent National Fireworks Distributing Company is a cor· poration organized, existing, and doing business by virtue of the_ laws of the State of Arizona, with its principal office and place of business located at 60 North '\Vashington Street, Boston, Mass., and is a subsidiary of respondent National Fireworks, Inc.; it is engaged in the sale of fireworks manufactured by National Fireworks, Inc. Respondent Los Angeles Fireworks Company, Ltd. is a corpora· tion, organized, existing, and doing business by virtue of the la":s of the State of California, with its principal office and place of busi· ness located at 60 North '\Vashington Street, Boston, Mass., and is a subsidiary of National Fireworks, Inc.; it is engaged in the sale of fireworks manufactured by National Fireworks, Inc. Respondent Vi_ctory Fireworks & Specialty Company is a corpora· tion organized, existing, and doing business by virtue of the la":s of the State of Maryland, with its principal office and place of busi· ness located at 60 North '\Vashington Street, Boston, Mass., and is ~ subsidiary of National Fireworks, Inc. ; it is engaged in the sale 0 fireworks manufactured by National Fireworks, Inc. Respondent Triumph Fusee & Fireworks Company is a corporation organized, existing, and doing business by virtue of the laws of the State of Maryland, and with its principal office and place of busines;· located at Elkton, Md.; it is engaged in the manufacture and sale 0 fireworks.

Respondent M. Backes' Sons, Inc. is a corporation organized, es:ist· ing, and doing business by virtue of the laws of the State of Con· necticut, with its principal office and place of business located at Wallingford, Conn.; it is engaged primarily in, the manufacture and sale of fireworks.

PYROTECHNIC INDUSTRIES, INC., ET AL. llot 1104 Complaint . Respondent Essex Specialty Company, Inc. is a corporation organ- Ized, existing, and doing business by virtue of the laws of the State ?f New Jersey, with its principal office and place of business located ~n Berkley Heights, N. J.; it is engaged, among other activities, in. he manufacture and sale of commercial fireworks. ~AR. 2. Respondents Unexcelled Manufacturing Company, Inc., Tnu~ph Fusee & Fireworks Company, 1\i. Backes' Sons, Inc., Essex Spe~Ia.lty Company, Inc., and National Fireworks, Inc., with its three ~~hsidiaries, National Fireworks Distributing Company, Los Angeles. 'Ireworks Company, Ltd., and Victory Fireworks & Specialty Com- ~any,, compose the entire membership of respondent Pyrotechnic Inustnes, Inc., and produce approximately 85 percent of the total Production of commercial fireworks in the United States . • PAR, 3. The aforementioned respondents, Unexcelled :Manufactur- ~~ ~company, Inc., National Fireworks, Inc., National Fireworksto~stri~uting Company,, Los Angeles Fire~orks Company, L~d., Vice Y Fireworks & Specialty Company, Trwmph Fusee & Fireworks: h 0111_Pany, M. Backes' Sons, Inc., Essex Specialty Company, Inc.t 1 erei~after referred to as "members" of respondent Pyrotechnic In-{ ustrles, Inc., hereinafter referred to as the "association," in the course and conduct of their businesses, have made, and are making, ~~merous shipments of fireworks to jobbers and other customers in ates of the United States other than the states in which their respective manufacturing and distributing plants are located. In the ~~urse and conduct of the businesses of said respondent members, i ley have been, and are now, engaged in commerce between, among, \;nd with the several States of the United States. t' efore the adoption of the understandings, agreements, combina- Ions con . . . h . fb ' Spiracles, and practices erema ter alleged, respondent mem- "' were in active and substantial competition with each other and 1 ll1 k other manufacturers of fireworks in making, and seeking to tha e, sales of fireworks in commerce between, among, in and with a£~ several States of the United States, and, but for the facts hereinlllued ~o the present time. Also, prior to the adoption of saidUt:\co~~ alleged, such active and substantial competition would have on \~rstandmgs, agreements, combinations, conspiracies and practices les e part of respondent members, acting through and by means of of ~ondent association, its officers, representatives, and agents, jobbers Pet';ewor~s in the United States were in active and substantial comof ~lon With each other in the sale of same, as likewise were retailers a1n rew.orks, with one another, in trade and commerce between, ong, In and with the several States of the United States, and but COlHl\USSIO~ DECISIONS1108 FEDERAL TRADE Complaint 26 ~'. T. c. for the facts hereinafter alleged, such active and substantial com· petition would have continued to the present time. Respondent association was organized on the 29th day of January 1935, and beginning with the second meeting of said respondent association on April 12, 1935, respondent members, acting through and by means of respondent association, entered into and thereaf~et· carried out understandings, agreements, combinations and conspn·- • • rr acies for the purpose and with the effect of unlawfully restric~I~ 1"' restraining, monopolizing, suppressing, and eliminating competition in the manufacture, jobbing and retail sales o£ fireworks in trade and commerce between, among, in, and with the several States of the United States.

PAR. 4. Pursuant to said understandings, agreements, combinations and conspiracies and in furtherance thereof, said respondent me~n: bers, acting through and by means of respondent association, 1t::. officers and agents, have done and performed, and still do and per· form, among other acts and things, the following: . 1. Agreed to fix and maintain and have fixed and maintained uni· form prices in the sale of fireworks to jobbers of fireworks in the United States;

2. Agreed to fix qnd maintain, and have fixed and maintained, uniform discounts in the sale of fireworks by manufacturers to jobbers of fireworks. in the United States;

3. Agreed to fix and maintain, and have fixed and maintainedd uniform prices and discounts at which jobbers of fireworks should sell same to retailers in the United States; d 4. Agreed to designate and have so designated what concems shonl and should not be sold by manufacturers of fireworks as jobbers; . 5. Organized and held meetings of groups of fireworks jobbers Ill various parts of the United States, according to the particular s~b­ divisions of the United States in which they were situated, to deviS~ means of asserting influence, pressure, coercion, and other means 0 inducing, requiring, and coercing said fireworks jobbers to abide b~ and adhere to the agreements, combinations, and conspiracies 0 respondent members;

6. Effected an<l procured promises and agreements from vunot• 1" d jobbers of fireworks throughout the United States by diverse an various means, including fireworks distributors associations, to sup· port, adhere to, and enforce said agreements, combinations and con· spiracies of respondent members;

7. Agreed to maintain and have attempted to maintain the under· standings, agreements, combinations, and conspiracies of said ~e­ spon<lent members by means of varied and diverse methods o£ pohc· PYROTECHNIC INDUSTRIES, INC., ET AL. 1109 1104 Complaint ing manufacturers, jobbers, and retailers of fireworks in the United States;

8. Agreed to compile and maintain and have compiled and maintained lists of the concerns which should be, and are, recognized as chain stores which are allowed certain special discounts in addition to those granted other purchaser~;

9. Agreed to fix and maintain and have fixed and maintained minimum retail prices of fireworks throughout the United States; 10. Agreed to refuse to sell and have refused to sell fireworks to cer~ain c~ncer?s. thus boycotting said concerns and cutting off or seriously 1mpanmg their supply of fireworks; 11. Agreed to fix and maintain and have fixed and maintained special discounts to those concerns which purchase certain specified amounts of fireworks from the combined establishments of respondent members;

12· Used and engao-ed and continue to use and engage in other ~cts, coope_rati,·e and ~oncerted action, coercive methods and policies, 111 promotmg, establishing, and carrying out said understandings, ~greeme~ts, combinations, and conspiracies of said respondent memers,bacting throuo-h and by means of respondent association, its mem ers ofli "' · d . ' leers, and aO'ents, for the purpose of suppressmg an preYentmO' co . . ., d t . . d . . tl 1 f b ll1petlhon an res riCtm.!! an restrammg 1e sa e o fi rewor k·s · ~ 111 trade and commerce between, among, in and with theseYera l St t . p a es of the Umted States. AR. 5· Each of said respondent members acted in concert and in cooperation ''>ith one or more of the other respondent members, by means of and h d . . . ffi t ti t rough respon ent associatwn, 1ts o cers, represen al.nvebs, and agents in doing and performing the acts and things here- a ove ll ' co b' ~ eged in furtherance of said understandings, agreements, m lnati · · p ons, and conspiracies. spir:n: 6. Said understandings, agreements, combinations, and conin f Cies and the things done thereunder and pursuant thereto and tl Urtherance thereof as hereinabove alleged have had and do have 1 · sa 1ee effect0 f of unduly· and unlawfully restricting and restraining the '\\"'' fireworks in trade and commerce between, among, in, and f I:lh the several States of the United States; of unduly and unlawu Y restricting' and restraining trade in said fireworks in said commerce; of sub~antially enhancing prices to the consuming public ~::n ll1ai~taining prices at artificial levels and otherwise depriving e Pubhc of the benefits that would flow from free and normalcomp t' .b e .!bon among and between the member respondents, among and etween jobbers and among and between retailers in the sale of fire- Works in said commerce; of eliminating competition, with the tend- Findings 26 F. 'f. c. ency and capacity of creating monopoly, in the sale of fireworks, in said commerce.

Said understandings, agreements, combinations, and conspiracies, and the things done thereunder and pursuant thereto and in furthe ance thereof as above alleged constitute unfair methods of cornpetl· tion in commerce within the intene and meaning of Section 5 of all Act of Congress, entitled "An Act to create a Federal Trade CoJJl;, mission, to define its powers and duties, and for other purposes, approved September 26, 1914.

REPORT, FINDINGS As ro THE Facts, AND ORDER Pursuant to the provisions of an Act of Congress approved Sef' JS'tember 26, 1914, entitled "An Act to create a Federal Trade Cornil'\ sion, to define its powers and duties, and for other purposes," t ~ Federal Trade Commission, on the 25th day of January, A. D. 193' issued, and subsequently served, its complaint in this proceeding l1~ 0 ~ respondents, Pyrotechnic Industries, Inc., Unexcelled Manufactu1' 1 ~1 ~ Company, Inc., National Fireworks, Inc., National Fireworks J)JS; tributing Company, Los Angeles Fireworks Company, Ltd., Victor Fireworks & Specialty Company, Triumph Fusee & Fireworks CoJil' pany, M. Backes' Sons, Inc., and Essex Specialty Company, In~·; charging them with the use of unfair methods of competition ll commerce in violation of the provisions of said act. After the jsstJ· ance of said complaint, the respondents filed in the office of the Colr~ mission their answers admitting all the material allegations of t 1d complaint to be true and waiving the taking of further evidence a11 • all other intervening procedure. Thereafter, this proceeding re~d larly came on for final hearing before the Commission on the sui! complaint and the answers, briefs, and oral arguments of conns:l having been waived, and the Commission having duly consider~\ the same and being now fully advised in the premises, finds that .t ~s proceeding is in the interest of the public and makes this its findll1" as to the facts and its conclusion drawn therefrom: FINDINGS AS TO THE FACTS . ~ PARAGRAPII 1. The respondent Pyrotechnic Industries, Inc., IS ll fS poration organized, existing, and doing business by virtue of the hl~~' of the State of Delaware, with its principal office located in the· ,0, v.est!nent Building, ·washington, D. ~· Said respon~ent is an, ~~of c1atwn of fireworks manufacturers, with a memberslup compose 11j1 · 1Jllrrespondents Unexcelled Manufacturing Company, Inc., T rn. lty Fusee & Fireworks Company, l\I. Backes' Sons, Inc., Essex Specl~js· Company, Inc., National Fireworks, Inc., National Fireworks I'YllOTECHNIC INDUSTRIES, INC., ET AL. 1111 Findings tr~buting Company, Los Angeles Fireworks Company, Ltd., and VIctory Fireworks & Specialty Company.

Respondent Unexcelled Manufacturing Company, Inc., is a cor- Poration organized existin(J' and doing(J' business by virtue of the laws of l ' "'' ""' . he State of New York, with its principal office and place of business located at 22 Park Place, New York, N. Y.; it is engaged in the Jnanufacture and sale of commercial and display fireworks. Respondent National Fireworks Inc., is a corporation organized,e . . ' li!Istmg, and doing business by virtue of the laws of the State of ,~assa.chusetts, with its principal place of business located at 60 No.rt~ . ashmgton Street, Boston l\Iass. ·it is engaged, among other actlvl-be · ' ' s, In the manufacture and sale of fireworks. Respondent National Fireworks Distributing Company is a corforation organized, existing, and doing business by virtue of the t"~ of the State of Arizona; with its principal office and place of . usmess located at 60 North 'Vashinrrton Street, Boston, Mass., and ~s a su.bsidiary of respondent National Fireworks, Inc.; it is engaged 111~e sale of fireworks manufactured by National Fireworks, Inc. t' ,spondent Los AnO'eles Fireworks Company, Ltd., is a corporat~on, organized, existin~, and doing business by virtue of the laws of estate of California, with its principal office and place of business1 ?~~ted at GO North 'Vashington Street, Boston, Mass., and is a sub- ~~ Iary of National Fireworks, Inc.; it is engaged in the sale of r~vorks manufactured by National Fireworks, Inc. t' "respondent Victory Fireworks & Specialty Company is a corporat~onSorganized, existing, and doing business by virtue of the la,~·s of 1 e tate of Maryland, with its principal office and place of busmess sr~~ted at 60 North Washington Street, Boston, 1\Iass., and is a sub- .,, Iakry of National Fireworks Inc · it is enO'aO'ed in the sale of fire- ••or s ' ·' ""' ""' R manufactured by National Fireworks, Inc. t' respondent Triumph Fusee & Fireworks Company is a corporao7~hor~anized, existing, and doing business by virtue of the laws bus· e tate of Maryland, and with its principal office and place of :andlnesls located at Elkton, Md.; it is engaged in the manufacture sa e of fireworks.

in~esp~nde~t M. Backes' Sons, Inc., is a corporation organized, existlle~~tnt d~mg .business by virtue of the laws of the State of Con- Wan?u 'f With Its principal office and place of business located at sale ~~gfiord, Conn.; it is engaged primarily in the manufacture and R reworks.

ized e:,~~ent Essex Specialty Company, Inc., is a corporation organof New I~ Ing, an~ doing business by virtue of the laws of the State ersey, With its principal office and place of business located 1112 FEDERAL TRADE COl\L!IIISSION DECISIONS 26 F. T.C. Findings · 't' inin Berkley Heights, N. J.; it is engaged, among other aetiVl Jes, the manufacture and sale of commercial fireworks. PAR. 2. Respondents Unexcelled Manufacturing Company, Inc., Triumph Fusee & Fireworks Company, M. Backes' Sons, Inc., Esse:S: Specialty Company. Inc., and National Fireworks, Inc., with its th~ee subsidiaries, National Fireworks Distributing Company, Los Ange es Fireworks Company, Ltd., and Victory Fireworks & Specialty Con:· pany compose the entire membership of respondent Pyrotechnl~ Industries, Inc., and produce approximately 85 percent of the tota Production of commercial fireworks in the United States. f wr· PAR. 3. The aforementioned respondents, Unexcelled Manu ac ·k. ing Company, Inc., National Fire,vorks, Inc., National Firew~. ~ Distributing Company, Los Angeles Fireworks Company, L~d., ~s tory Fireworks & Specialty Company, Triumph Fusee & F1rewor Company, M. Backes' Sons, Inc., and Essex Specialty Company!r Inc., hereinafter referred to as "members" of respondent Pyroteclnt Industries, Inc., hereinafter referred to as the "association," in ~· 1! course and conduct of their businesses, have made, and are makll~~ numerous shipments of fireworks to jobbers and other customers ~r . S . l. h thelStates of the Umted states other than the States m w uc In respective manufacturing and distributing plants are located. ~ the course and conduct of the businesses of said respondent mernberg, they have been, and are now, engaged in commerce between, aroon ' in, and with the several States of the United States. . Before the adoption of the understandings, agreements, comblll~~ tions, and practices hereinafter alleged, respondent members wer~ 1r active and, substantial competition with each other and with ot ;e 5 manufacturers of fireworks in making, and seeking to make, sa el of fireworks in commerce between, among, in, and with the ~ev~~:r States of the United States, and, but for the facts herein1a nalleged, such active and substantial competition would ha~e c~ r tinned to the date of discontinuance of such practices, as herelDa! ~­ found in paragraph 5. Also, prior to the adoption of said un e { standings, agreements, combinations, and practices on the par~ ~t respondent members, acting through and by means of respon e1 6, association, its officers, representatives, and agents, jobbers of fi~i­ works in the United States were in active and substantial coll1Pe f tion with each other in the sale of same, as likew.i::;e were retailer"~~ fireworks, with one another, in trade and commerce between, an10~11~~in and with the several States of the United States, and but fo~ . 10 11 facts hereinafter alleged, such active and substantial c01npetJ~ 5would have continued to the date of discontinuance of such practice ' as hereinafter found in paragraph 5.

PYROTECHSIC INDUSTRIES, INC., ET AL. 1113 110! Fiudiugs lu~respondent association was organized on the 29th day of January ao-. '\ a~d Legiuning with the second meeting of said respondent Ociab . . and b on on Apnl 12, 1935, respondent members, actmg through ca.,. Y llleans of respondent association, entered into and thereafter Pullled. out understandings, agreements, and combinations for the llJorpose and with the effect of unlawfully restricting, restraining, Uf· llopolizing, suppressing, and eliminating competition in the manbe~cture, jobbing and retail sales of fireworks in trade and commerce p"'een, among, in, and with the several States of the United States. bin 4· Pursuant to said understandings, agreements, and cominrr11t{0118 and in furtherance thereof, said respondent members, actag~1 t lroug-h and by means of respondent association, its officers and 1 fol! s~ have done and performed, among other acts and things, the OWing· 1 . llllif Agreed to fix and maintain, and have fixed and maintained, lJ~tit:~~ P.rices in the sale of fi:ewor~{S to jobbers o! fireworks in the !Jleti Stttes; but same was d1scontmued voluntarily after the comof ton of the investigation by the Commission but prior to the filing :!. ~complaint herein. .

lJ.ltifor!re~d to fix and maintain, and have fixed and maintained, brrs f th:>counts in the sale of fireworks by manufacturers to job- \'olnn~ ~t'eworks in the United States; but sttme was discontinued lll.issio ar~ly af~er the completion of the investigation by the Com- 3 ~ 1 ut Prior to the filing of the complaint herein. Unifor gree~ to fix and maintain, and have fixed and maintained, sell sa lll Prices and discounts at which jobbers of fireworks should Volunttn~. 1to retailers in the United States; but same was discontinuedlll.issio:~ Y af~er the completion of the investigation by the Com- 4: ~ 1 ut Pl'lor to the filing of the complaint herein. · "'1.greedshould to designate and have so designated what concerns hers. b a~d should not be sold by manufacturers of fireworks as jobthe Invu t~am~ was discontinued voluntarily after the completion of con1plaie\ 1h"'atl~n by the Commission but prior to the filing of the 11 11ere1n. 5. 0 rO' . Various batnzed and held meetings of groups of fireworks jobbers in divisionspa;ts of the United States, according to the particular subllleans of 0 the United States in which they were situated, to devise i assert· · . lldncin"' , . 1.11g mfluence, pressure, coercwn, and other means of !litd adi7~ requiring, and coercing said fireworks jobbers to abide by hers; Lut re to the agreements and combinations of respondent memthe invest~am~ Was discontinued voluntarily after the completion of complai~lt 1 ~"'atl~n1 1erelll. by the Commission but prior to the filing of the 1114 FEDERAL TRADE COl\IMISSION DECISIOXS 26 }'.'f. c. Findings 6. Effected and procured promises and agreetnents from variot~ jobbers of fireworks throughout the United States by diverse an various means, including fireworks distributors' associations, to supf port, adhere to, and enforce said agreements and combinations 0 . . ·1 after respondent members; but same was discontinued voluntarl Y the completion of the investigation by the Commission but prior to the filing of the complaint herein.

7. Agreed to maintain and have attempted to maintain the under~ standings, agreements, and combinations of said respondent n~et~be t to unlawfully restrict, restrain, monopolize, suppress, and ehnun~k: competition in the manufacture, jobbing and retail sale of firewor r in the United States; but same was discontinued voluntarily . 11 ~t~o the completion of the investigation by the Commission but prior the filing of the complaint herein. . 8. Agreed to compile and maintain, and have compiled and m~lld tained, lists of the concerns which should be, and are, recognlz;.. as chain stores which are allowed certain special discounts in ad 1e tion to those granted other purchasers similarly situated; but s~n 1 _ was discontinued voluntarily after the c<;>mpletion of the investi~ilt tion by the Commission but prior to the filing of the complalll herein. . d 9. Agreed to fix and maintain, and have fixed and maintallles: minimum retail prices of fireworks throughout the United St;t~1;but same was discontinued voluntarily after the completion ° tbe investigation by the Commission but prior to the filing of complaint herein. ·orkl 10. Agreed to refuse to sell, and have refused to sell, .fire" or to certain concerns, thus boycotting said concerns and cutting offdis· seriously impairing their supply of fireworks; but same w~s bY continued voluntarily after the completion of the investiga.tron the Commission but prior to the filing of the complaint herelll·. d 11. Agreed to fix and maintain, and have fixed and maintar~:J special discounts to those concerns which purchase certain spe~r re· amounts of fireworks from the combined establishments 0 tho spondent members; but same was discontinued voluntarily. after the completion of the investigation by the Commission but prror to filing of the complaint herein. -ted 12. Used and engaged in other acts, cooperative and c~ncei nd 11 action, coercive methods and policies, in promoting, establislu~g 0£ carrying out said understandings, agreements, and combinatron~ectt said respondent members, acting through and by means of respo; 1passociation, its members, officers, and agents, for the purpose 0 . s~11g pressing and preventing competition and restricting nnd restntJD PYROTECHNIC INDUSTRIES, INC., ET AL. 1115 110{ Conclusion t~e sale of fireworks in trade and commerce between, among, in, and ~;lth the several States of the United :States; but same was discon- ~nued. voluntarily after the completion of the investigation by the ~nussion but prior to the filing of the complaint herein. Co an .. 5: Subsequent to the completion. of the investigation by the 1111111SSion, the respondent members d1d, on or about December 6, 193 6' through a resolution adopted at a regular meeting of the .t\ h association, go on record as discontinuing the acts and claims alleged eretof . ore In paragraph 4.

c Pan. G. Each of said respondent members acted in concert and in ~operation with one or more of the other respondent members, by se e~ns. of and through respondent association, its officers, repreh 11 ~hves, and agents, in doing and performing the acts and things lllerelnabove alleged in furtherance of said understandings, agree- ~ts, and combinations.

the~~: 7. The said understandings, agreements and combinations and th Ings done thereunder and pursuant thereto and in furtherance lln~reof as hereinabove alleged have had the effect of unduly and alldawfully restricting and restraining the sale of fireworks in trade lJn·tconunerce between, among, in, and with the several States of the tra~ e~ Sta.tes; of unduly and unlawfully restricting and restraining Pri e In said fireworks in said commerce; of substantially enhancing lev c~s to the consuming public and maintaining prices at artificial flo~ stnd otherwise depriving the public of the benefits that would 1nelllb rorn free and normal competition among and between the betw er respondents, among and between jobbers and among and eli111.een . retailers in the sale of fireworks in said commerce; of lllon Inatmg. competition, with the tendency and capacity of creating_ opoly, In the sale of fireworks, in said commerce. CONCLUSION In~:et ~foresaid acts and practices of the respondents Pyrotechnic- Fire~ ries, Inc., Unexcelled Manufacturing Company, Inc., National .Angelorks,. Inc., National Fireworks Distributing Company, Los Cornpes Fireworks Company, Ltd., Victory Fireworks & Specialty any T ·Inc ' rmmph Fusee & Fireworks Company, M. Backes' Sons, Pubhand Essex Specialty Company, Inc., are to the prejudice of the 111eth~d and of respondents' competitors, and constitute unfair of Se t~ of competition in commerce, within the intent and meaning 5entiti Cdl~n of an Act of Congress, approved September 26, 1914, Powe: An Act to create a Federal Trade Commission, to defme its. s and duties, and for other purposes."

1116 FEDERAL TRADE COl\-DIISSION DECISIONS 2GF.T.C· Order " ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Conuni~ sion upon the complaint of the Commission and the answers fil.e 1herein on March 8, 1938, by respondents admitting all the xnatenaf allegations of the complaint to be true and waiving the taking 0 further evidence and all other intervening procedure, and the c~nl­ mission having made its findings as to the facts and its conclusion that said respondents have violated the provisions of an Act of ~o~: gress approved September 26, 1914, entitled "An Act to create a Fe . eral Trade Commission, to define its powers .and duties, and for other purposes."

It is ordered, That all the respondents, Pyrotechnic Industries, Inc·• Unexcelled Manufacturing Company, Inc., National Fireworks, !J~~., National Fireworks Distributing Company, Los Angeles Fir~wol'~ Company, Ltd., Victory Fireworks & Specialty Company, TnnOl;e- Fusee & Fireworks Company, M. Backes' Sons, Inc., and Essex 51. cia· 1ty Company, I nc., t h eir· respective· o ffi1cers, representatives,· a.,(l'enhf and employees, directly or indirectly or through and by means 0 resp?nden.t associatio~, its officers, representat~ves~ an~ agent~, in·c~;;~ nechon With the offermg for sale, sale, and di~tnbutwn of fire~o. 11in interstate commerce or in the District of Columbia, uo fortlnv-tt cease and uesist from: t 1. Agreeing to fix and maintain or, pursuant to such an agreeJn~l~~ fixing and maintaining uniform prices in the sale of fireworks to JO bers of fireworks; t 2. Agreeing to fix and maintain or, pursuant to such an agreeJne~ ' fixing and maintaining uniform discounts in the sale of fireworl's y manufacturers to jobbers of fireworks; t 3. Agreeing to fix and maintain or, pursuant to such an ag1:eern~ 1 ~: fixing and maintaining uniform prices and discounts at which JO bers of fireworks should sell same to retailers; . · d · t desig- 4 . A greemg to es1gnate or, pursuant to such an agreemen ' 5 nating what concerns should and should not be sold by manufacturer ()£ fireworks as jobbers; to 5. Organizing or holding meetings of groups of fireworks jobbers! r -1 • f . . fl . d otleuevise means o assertmg m uence, pressure, coercwn, an . to means of inducing, requiring, and coercing said firework jobbei~ aa b'dI e b y and a dl 1ere to any understand d'mgs, agreements, or co.rnb 111'the tions by and among said respondents for the purpose and With. 5_ €ffect of unlawfully restricting, restraining, monopolizing, snpp 1es c1 jng, and eliminating competition in the manufacture, jobbing, an retail sales of fireworks;

PYROTECHNIC INDUSTRIES, INC., ET AL. 1117 1104 Order 6: Effecting' or procurinl! promises or agreements, by diverse and "ar ~ . Ious means, from various jobbers throughout the United States, In~uding fireworks distributors' associations, to support, adhere to ~n enforce understandings, agreements and combinations entered l~to by and among the respondents for the purpose and with the ~ ect of unlawfully restricting, r·estraining, monopolizing, suppress- 1.:f'. and eliminating competition in the manufacture, jobbing, and 1111sales of fireworks· t .7. . Agr eemg· to mamtam· ' · or, pursuant to sue l1 an agreemen t, mam-· lllninO' . . . h d d' 11 d ""' or attemptmg to mamtam t e un erstan mgs, agreements, · lhn combinations of respondents to unlawfully restrict, restrain, jo~~?Polize, suppress, and eliminate competition in the manufacture, · Jng, and retail sales of fireworks in the United States; 8 lh · Agreeing to compile and maintain or, pursuant to such an agreeorent, compiling and maintaining lists of concerns which should be, ·di are, recognized as chain stores which are allowed certain special ~counts not granted to other purchasers who are similarly situated; lh:· · Agreeing to fix and maintain or, pursuant to such an agreement, and .mamtammg· · · mmzmum· · retai'l prices· of fi rewor k s t h rough - ·outInrrth · e Umted States· l'e;o. Agreeing, thro~gh any combination of two or more of said futondents, to refuse to sell, or, pursuant to such an agreement, rel~ng to sel!, fireworks to any prospective purchaser; lllent Ag~eemg to fix and maintain or, pursuant to such an agree- '\'hi hfixzng and maintaining special discounts to those concerns bine~ purcl~ase certain specified amounts of fireworks from the com- 12 est~bhshments of respondent members of said association; tion · Usln~ or engaging in other acts, cooperative and concerted accarr' :oercwe methods and policies, in promoting, establishing and tion YI~g out any and all understandings, agreements, and combinal.lnlas ~ respondent members for the purpose and with the effect of elirn :\' u~Iy restricting, restraining, monopolizing, suppressing, and of fi;natmg competition in the manufacture, jobbing, and retail sale of r e.works by said respondent members acting through and by means agen~::ondent association, its members, representatives, officers, and It iB f hafter u;t er ordered, That the respondents shall, within 60 days Port. serv upon them of this order, file with the Commission a ret.hey ~n Writmg setting forth in detail the manner and form in which lave complied with this order.

16045lm --39--vol.26----73 Syllabus 26F. T.C.

IN THE ])UT.rer OF LOOSE-,VILES BISCUIT COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Doclcet 3306. Complaint, Mar. 12, 1938 '-Decision, .Apr. 18, 1938 Where a corporation engaged In manufacture and sale of candy and bnkerr products, including- ! (a) Assortments composed of number of small bars of candy and numb_er a~e large bars, together with push cards for use in sale of candy to ultllii ·d purchaser under plan by which purchaser of chance secured, for 5 cents P111 ' one of smaller bars, or one of larger bars, value of which exceede d sa1"d sull•"til depending upon chance selection of certain numbers, in accordance "'1 ll board's explanatory statement, and by which purchaser making last pus was entitled to one of smaller pieces, 1 (b) .Assortments composed of number of boxes of assorted candy and additiOII~d article of merchandise, together with punchboard for use in sale of 88 ~9 candy, etc., under plan by which purchaser of chance received, for 5 cell c· paid, one of boxes of candy or nothing other than privilege of making seled· tion, depending upon chance punching of one of certain numbers, in accor, · eac" ance with board's explanatory statement, or punching of last number lll II of 12 sections Into which board was divided, or punching of last number :rentire board, through which such purchaser received both candy and III chandise; and d (c) .Assortments composed of number of packages of assorte~ chocolate e vanilla wafers and other bakery products, together with punchbourd for ~til in sale of aforesaid products, under plan by which, and in accordance "'Ill' board's explanatory statements, purchasers punching by chance certain nu d· bers paid nothing for punch or amounts ranging from 1 to 5 cents, In 11cco~tll ance with' particular number disclosed, and secured, in accordance "'~r­ chance selection of certain preannounced numbers, as above set forth, or P ue chase of last punch in each of 12 sections into which board was divided, .0 us . "d vano of aforesaid packages of wafers, value of which exceeded afores111 tlJall amounts, or, failing such selection or purchase, secured nothing other privilege of such chance selection or punch- or Sold said aforesaid and other assortments, Involving use of similar planstail schemes, to wholesalers, jobbers, and retailers for display and sale bY re nd dealers to purchasing public in accordance with aforesaid sales plans, t~ 1,. ndUC Jl" thereby supplied to and placed in the hands of others means of co of lotteries in sale of its products, in accordance therewith and in violation nd long-standing public policy of the common law and criminal statutes 11 J<e that of the United States Government; in competition with many who III:ed and sell such products and are unwilling to offer and sell same, thus pac ub· and assembled or otherwise arranged and packed for sale to purchasing p to lie so as to Involve game of chance or any other method of sale contrary public policy, and refrain therefrom;

t Amended and supplemental.

LOOSE-WILES BISCUIT CO. 1119 111s Complaint With t tendency unduly to hinder competition or create monopoly through tendency and capacity to exclude from candy and bakery products trade competitors Who do not adopt and use same or equivalent or similar methods, involving same or equivalent or similar element of chance or lottery scheme, and with result that many dealers in and ultimate Jlurchasers of such products, at- ~racted by said methods and manner of packing same and element ot chance nv-olved in sale thereof as above set forth, were thereby induced to buy Said Products, thus packed and sold by it, in preference to those offered and sold by competitors who do not use same or equivalent methods, and With tendency and capacity to induce such preferential purchasing, and, by ;enson of said game of chance, to divert unfairly to it trade and custom rorn its aforesaid competitors, to exclude from trade involved all com- ~etitors who are unwilling to and do not use same or equivalent methods t~cause unlawful, to lessen competition in said trade and create a monopoly ereot in it and such other distributors of said products as use same or ~~Uivalent methods, and deprive purchasing public of benefits of tree compet~on therein, and eliminate therefrom all actual competitors and exclude lerefrom all potential competitors who do not adopt and use said or equiva- 1 ., ent method~· "ed1 1' .,, 'f hat such methods, acts, and practices were all to the Injury and prejudice 0 the Public and competitors and constituted unfair methods ot competition. P. 0. Kolinski for the Commission. Z"· r. lV. A. Ferguson, of Long Island, N.Y., for respondent. AMENDED AND SUPPLEMENTAL Co:uplaint The Federal Trade Commission did heretofore, to wit, 011 1ihere~, ent ~nu~ry 19, 1938, issue its complaint herein charging that respondlllte erelD was and had been using unfair methods of competition in an ~state commerce within the intent and meaning of Section 5 of to c~ ct of Congress, approved September 26, 1914, entitled "An Act and ~ate a Federal Trade Commission, to define its powers and duties, lV or other purposes"; and spon3area8, T~is Commission having reason to believe that the resaid ent herem is engaged in business other than as described in Petit'co~plaint and has been and is using unfair methods of comand :on Ill ~~mmerce, as "commerce" is defined in said act, other than its sa·~ addlt!OI~ to those in relation to which the Commission issued 1 Proce d ~omplamt, and it appearing to said Commi;;sion that a further N0 e Ing by it in respect thereof would be in the public interest; \'isio~v, t;erefore, Acting in the public interest, pursuant to the pro- C'o:rnrns· 0 . the Act of September 26, 1914, aforesaid, the Federal Trade tion ~SSion charges that Loose-1Viles Biscuit Company, a corpora- <'o:rn~ as been and now is using unfair methods of competition in in tha~rce, as "commerce" is defined in said act, and states its charges respect as follows :

26F.T.C· Complaint PARAGRAPH 1. Respondent Loose-·wiles Biscuit Company is a cor· poration organized and doing business under the laws of the State of Missouri, with its principal place of business at 811 Conm1erc~ Building, Kansas City, Mo. Respondent also maintains places 0 business in various other cities and States one of which said places of business is located at Denver, Colo. Respondent is now and fo~ more than 1 year last past has been engaged in the manufacture 0£ candy and bakery products and in the sale and distribution thereo to wholesale dealers, jobbers, and retail dealers. Respondent cau:es and has caused its said products when sold to be transported from 1ts principal place of business in Kansas City, Mo., and from its pine~ of business in Denver, Colo., to purchasers thereof in the State: 0d Missouri and Colorado and in various other States of the Unlte States, at their respective places of business. There is now, and has been ~or more than ! year last past, a course of trade and commerce~ by said respondent m such candy and bakery products between and among the various States of the United States. In the course an conduct of said business respondent is in competition with otht corporations and with partnerships and individuals engaged in t 1e sale and distribution of candy and bakery products in commerce between and among the various States of the United States. . 111 PAR. 2. In the course and conduct of its business, as descrilbed paragraph 1 hereof, respondent sells and has sold to wholesale dealer.s, jobbers, and retail dealers certain assortments of candy and bnkeJY products so packed and assembled as to involve the use of a lotte~'Y scheme when sold and distributed to the consumers thereof. Certal» of said assortments are hereinafter described for the purpose of ~ho"'£ ing the methods used by respondent, but this list is not aU-inclusive~ the various assortments, nor does it include all of the details of ~ 1e several plans which respondent has been or is using in the distribntJOll of candy and bakery products by lot or chance: 5 (a) One of said assortments is composed of a number of small b~r . h leVJCOof candy and a numbl'r of large bars of candy, together ':1t. a c to commonly called a push card, and the assortment is distnbuted the purchasing public in the following manner: h Sales are 5 cents each and each purchaser is entitled to one pu\ 1 from said card. 'Vhen a push is made from said card n number f disclosed. The numbers begin with 1 and continue to the ntm~f'~' fn pushes there are on the card, but the numbers are not arrnn,.,e numerical sequence. The card bears statements informing prosp~~­ tive purchasers that all numbers, with the exception of 5, 10, 15, ; 25, and the last number pushed, entitle the purchasers thereof to t 5-cent bar of candy, being one of the smaller bars of the assortrnen ' LOOSE-WILES BISCUIT CO. 1121 Complaint nnd that the aforementioned numbers entitle the purchasers thereof to a large bar of candy. The large bars of candy are worth more than ; cents each and the person who obtains one of the numbers calling ;r a large bltr of candy receives the same without additional charge. he numbers on said cards are effectively concealed from purchasers and prospective purchasers until a selection has been made and the Particular push separated from the card. The aforesaid purchasers of ·1 th sat: candy who procure one of the specified numbers, thus procure e Said large bars of candy wholly by lot or chance. (b) Another assortment consists of a number of boxes of assorted c~ndy and an additional article of merchandise, together with a de- ;l:e commonly called a punchboard. Said boxes of candy are disf~;bute.d to the consuming public by means of said punchboard in the lowlllg manner:

b 'fhe sales are 5 cents each and when a pm1ch is made from the /atd a number is disclosed. The numbers begin with 1 and conblnue to the number of punches there are on the board, but the numsters are not arranged in numerical sequence. The board bears a t ~tement or statements informing prospective purchasers that cero~lll specified number-s entitle the purchasers thereof to receive a box a dcandy. The punches on the board are arranged in 12 sections bnox 0thef purchaser of the last punch in each section receives a pound c: candy and the purchaser of th~ last punch on the board rec~lves. both a pound box of candy and an additional article of mer- 11 andise. A purchaser who does not qualify by obtaining one of the lllllnbers calling for one of the boxes of candy or by punching the last Untb · re . er Ill one of the sections, or the last number on the board, a celves nothing for his money other than the privilege of punching number from the board. The boxes of candy are worth more than5 focents each and a purchaser who obtains one of the numbers calling h 1r a box of canuy, or a box of candy and an additional article of"ercha dbc n 1se, receives the same for the price of 5 cents. The numchrs are effectively concealed from purchasers and prospective pur- Puas~s until a punch or selection has been made and the particular tri~c separated from the board. The boxes of candy are thus disch Uted to purchasers of punches from the board wholly by lot or ance. ass( c) Another assortment consists of a number of packages of orted 1 I .geth ~loco ate and vamlla. wafers and other bakery products, toare ;~ ":1th a device commonly called a punchboard. Said wafers in th lstnbuted to the consuming public by means of said punchboard e following manner:

Complaint 26 F. 'f. c. Purchasers punching numbers ending in "0" receive the same with· out charge. For certain other numbers the purchasers thereof rt 1 cent, 2 cents, 3 cents, 4 cents, or 5 cents. When a punch is ~a ~ from the board a number is disclosed. The numbers begin with t and continue to the number of punches there are on the board, bud the numbers are not arranged in numerical sequence. The board t bears statements or legends informing prospective purchasers. tha certain specified numbers entitle the purchasers thereof to receive a 7Yz-ounce package of said wafers. The punches on the board art arranged in 12 sections and the purchaser of the last punch in ea~ l section receives a 7Yz-ounce package of wafers. A purchaser w k~ does not qualify by obtaining one of the numbers calling for a p~c age of wafers or by punching the last number in a section receives nothing for his money other than the privilege of punching a nUlllber from the board. The numbers are effectively concealed from purcha~· ers and prospective purchasers until a punch has been made and \e particular punch separated from the board. The retail value of .t : said packages of wafers is greater than any of the designated prlC: of said punches. The packages of wafers are thus distributed 0 the purchasers of said punches from the board wholly by lot or d PAR. 3. Retail dealers who purchase respondent's said candy al~o bakery products, directly or 'indirectly, expose and sell the same the purchasing public in accordance with the aforesaid sales plan~ Respondent thus supplies to and places in the hands of others a me~~l of conducting lotteries in the sale of its products in accordance '~\e the sales plans hereinabove set forth, and said sales plans have t e tendency and capacity to induce purchasers thereof to purcha~­ respondent's said products in preference to candy and bakery pro ucts offered for sale and sold by its competitors. has· P .AR. 4. The sale of said candy and bakery products to the pure r ing public in the manner above alleged involves a game of chancedo the sale of a chance to secure a larger piece of candy, or box of can ~ or a package of bakery products. The use by respondent of sal f methods in the sale of candy and bakery products and the sal: ~s same by and through the use thereof and by the aid of said rnet ~es is a practice of the sort which the common law and criminal statu 1111 have long deemed contrary to public policy and is contrary sto tes. established public policy of the Government of the United ~a to The use by respondent of said methods has the tendency undu Y se hinder competition or create monopoly in this, to wit: that the und. thereof has the tendency and capacity to exclude from the candy 11n1e bakery products trade competitors who do not adopt and use the sa LOOSE-WILES BISCUIT CO. 1123 1118 Findings ltlet~ods or equivalent or similar methods involving the same or an equnralent or similar element of chance or lottery scheme. Many Persons, firms, and corporations who make and sell candy and bakery Products in competition with the respondent as above alleged are lJnw·Il"1 1ng to offer for sale or sell candy and bakery products so Packed and assembled as above described or otherwise arranged and P~cked for sale to the purchasing public so as to involve a game of c ance, or any other method of sale that is contrary to public policy, a~ such competitors refrain therefrom.

h AR. 5. Many dealers in, and ultimate purchasers of, candy and nakery products are attracted by respondent's said methods and mane~~ of ~acking said candy and bak~ry products and by the el~ment of , nee involved in the sale thereof m the manner above described and ;re ~hereby induced to purchase said candy and bakery products so pac ed anu sold by respondent in preference to candy and bakery -W~ducts offered for sale and sold by said competitors of respondent 0 lU do not use the same or equivalent methods. The use of said g ethods by respondent has a tendency and capacity, because of said s:~e of chance, to divert to respondent trade and custom from its 1 e-g competitors who do not use the same or equivalent methods, to 1 Wh Ude from said candy and bakery products trade all competitors ln ~ are unwilling to and who do not use the same or equivalent ca~~ods because the same are unlawful, to lessen competition in said said Y and bakery products trade, to tend to create a monopoly of <li t :andy and bakery products trade in respondent and such other Je~tbutors of candy and bakery products as use the same or equivafre methods, and to deprive the purchasing public of the benefit of of e ~ompetition in said candy and bakery products trade. The use natsa~d methods by respondent has a tendency and capacity to elimiaU e rom. said trade all actual competitors and to exclude therefrom ~qu po\ential competitors who do not adopt and use said methods or ~va ent methods.

spa~· 6. The aforementioned methods, acts, and practices of reresp ent are all to the injury and prejudice of the public and of llleth~ent's competitors as hereinabove alleged, and constitute unfair of S 0 ~of competition in commerce .within the intent and meaning entit~c~I~n 5 of an Act of Congress, approved September 26, 1914, Pow e An Act to create a Federal Trade Commission, to define its ers and duties, and for other purposes."

REPORT, FINDINGS AS TO THE FACTS, AND ORDER th;~~uant to the provisions of the Federal Trade Commission Act, e eral Trade Commission, on January 19, 1938, issued and there- 26F.'1'.0· Findings after served its complaint in this proceeding upon the respondent, Loose-,Viles Biscuit Company, a corporation, charging it with the use of unfair methods of competition in commerce in violation of the p~o­ visions of said act. On March 12, 1938, the Commission issued It~ amended and supplemental complaint, to which the respondent fil.e 1 in the office of the Commission an answer admitting all the materia£ allegations of the complaint to be true, and waiving the taking 0 further evidence, and all other ii;tervening procedure. Thereafter this proceeding regularly came on for final hearing before the Corn· mission on the said amended and supplemental complaint and ans~er, and the Commission, having duly considered the matter and bei~g now fully advised in the premises finds that this proceeding is in t ; interest of the public, and makes this its findings as to the facts an its conclusion drawn therefrom:

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent Loose-"Wiles Biscuit Company, is a corf poration organized and doing business under the laws of the Sta~ ~­ l\Iissouri, with its principal place of business at 811 Commerce 13~U ing, Kansas City, l\Io. Respondent also maintains places of busine:s in various other cities and states, one of which said places of busi· ness is located at Denver, Colo. Respondent is now, and for mor~ than one year last past has been, engaged in the manufacture 0 f candy and bakery products and in the sale and distribution thereo to wholesale dealers, jobbers, and retail dealers. Respondent causes, and has caused, its said products when sold to be transported froll its principal place of business in Kansas City, l\Io., and from its plac~ of business in Denver, Colo., to purchasers thereof in the State~ 0d Missouri and Colorado and in various other States of the Unite States, at their respective places of business. There is now, and }las rnerceb een f or more t h an 1 year last past, a course of trade and com d by said respondent in such candy and bakery products between 11nd among the various States of the United States. In the course an conduct of said business, respondent is in competition with other co~­ porations and with partnerships and individuals engaged in the 511 e and distribution of candy and bakery products in commerce between and among the various States of the United States. . d ·n 1 PAR. 2. In the course and conduct of its business, as descr:tbe 1 dell1•paragraph 1 hereof, respondent sells and has sold to wholesa e d ers, jobbers and retail dealers certain assortments of candy a.fn . 0 lt.b a k ery products so packed and assembled as to mvolve the use f lottery scheme when sold and distributed to the consumers thereo · Certain of said assortments are hereinafter described for the pur· LOOSE-WILES niSCUIT CO. 1125 1118 Findings P~s~ of showing the methods used by respondent, but this list is not ~h~Inclu~ive of the various assortments, nor does it includ~ all. of . details of the several plans which respondent has been or Is usmg In ~he distribution of candy and bakery products by lot or chance: f a) One of said assortments is composed of a number of small bars 0 candy and a number of large bars of candy, together with a device ~onunonly called a push card, and the assortment is distributed to the \~chasing public in the following manner:

f ales are 5 cents each and each purchaser is entitled to one push d:o~ said card. 'Vhen a push is made from said card a number is 0~sc osed. The numbers begin with one and continue to the number n :Pus~es there are on the card, but the numbers are not arranged in tjurnerical sequence. The card bears statements informing prospec- 2;e :Purchasers that all numbers, with the exception of 5, 10, 15, 20, fiveand the last number pushed, entitle the purchasers thereof to a rn cent bar of candy, being one of the smaller bars of the assortthent, and that the aforementioned numbers entitle the pur~hasers rn:reof to a large bar of candy. The large bars of candy are worth berre th~n 5 cents each and the person who obtains one of the numtio s ~alhng for a large bar of candy receives the same without addiftona charge. The numbers on said cards are effectively concealed rna~ PUrchasers and prospective purchasers until a selection has been ~aide and the particular push separated from the card. The aforebet PUrchasers of said candy who procure one of the specified num- <'has, thus procure the said large bars of candy wholly by lot or nee. <'a~~) Another assortment consists of a number of boxes of assorted vice Y and an additional article of merchandise, together with a dettibu~oinmonly called a punchboard. Said boxes of candy are disthe fo~~ t? the consuming public by means of said punch board in 1'h owmg manner :

hoar; sales are 5 cents each and when a punch is made from the tinn number is disclosed. The numbers begin with one and con- t0hers e the number of punches there are on the board, but the numstate are not arranged in numerical sequence. The board bears a tain lnen~ or statements informing prospective purchasers that cer- ()f ca~;cified numbers entitled the purchasers thereof to receive a box the p y. The punches on the board are arranged in 12 sections and ()f c u~chaser of the last punch in each section receives a pound box bothan Y and the purchaser of the last punch on the board receives A Pu a hound box of candy and an additional article of merchandise. caUinrc f aser who does not qualify by obtaining one of the numbers g or one of the boxes of candy or by punching the last number 26F. T.C. Findings in one of the sections, or the last number on the board, receives nothing for his money other than the privilege of punching a number from the board. The boxes of candy are worth more than 5 cents each and a purchaser who obtains one of the numbers calling for a. box of candy, or a box of candy and an additional article of mer· chandise, receives the same for the price of 5 cents. .The nurobers are effectively concealed from purchasers and prospective purchaser: until a punch or selection has been made and the particular punc d separated from the board. The boxes of candy are thus distribute to purchasers of punches from the board wholly by lot or chance. (c) Another assortment consists of a number of packages of as· t to·sorted chocolate and vanilla wafers and other bakery produc s, gether with a device commonly called a punchboard. Said wafer~ are distributed to the consuming public by means of said punchbonr in the following manner: . h· Purchasers punching numbers ending in "O" receive the same Wlt out charge. For certain other numbers the purchasers thereof P1 1 cent, 2 cents, 3 cents, 4 cents or 5 cents. When a punch is ma : from the board a number is disclosed. The numbers begin with on t and continue to the number of punches there are on the board, bud the numbers are not arranged in numerical sequence. The bo~ t bears statements or legends informing prospective purchasers. t all certain specified numbers entitle the purchasers thereof to recelve e 71;2-ounce package of said wafers. The punches on the board a~n arranged in twelve sections and the purchaser of the last punch 1 r each section receives a 71;2-ounce package of wafers. A purchasea who does not qualify by obtaining one of the numbers callin~ fo~e­ package of wafers or by punching the last number in a sectl~D a ceives nothing for his money other than the privilege of punchlllf d number from the board. The numbers are effectively conce~ en from purchasers and prospective purchasers until a punch has eee· made and the particular punch separated from the board. Th; [he tail value of the said packages of wafers is greater than any 0 thtlS designated prices of said punches. The packages of wafers areh llj distributed to the purchasers of said punches from the board w 0 by lot or chance. 11d PAR. 3. Retail dealers who purchase respondent's said candy a to bakery products, directly or indirectly, expose and sell the sam~ ll· the purchasing public in accordance with the aforesaid sales a P: Respondent thus supplies to and places in the hands of oth~r nee means of conducting lotteries in the sale of its products in accor; ve with the sales plans hereinabove described, and said sales plans :Use the tendency and capacity to induce purchasers thereof to pure LOOSE-WILES BISCUIT CO. 1127 Findings ~e~pondent's said products in preference to candy and bakery prodc; offered for sale and sold by its competitors. inn- All. 4: ~e sale of said candy and bakery products to the purchasthb Public In the manner above found involves a game of chance or ca~dsale of a chance to secure a larger piece of candy, or box of sa·d Y, or a package of bakery products. The use by respondent of tnethods in the sale of candy and bakery products and the sale 0/ ll! t~atne .by and through the use thereof and by the aid of said st:tlods Is a practice of the sort which the common law and criminal to Utes have long deemed contrary to public policy and is contrary Than established public policy of the Government of the United States. hin~ llse by respondent of said methods has the tendency unduly to th er competition or create monopoly in this, to wit: that the use ereof h th .bak as e tendency and capacity to exclude from the candy and llet~ry Products trade competitors who do not adopt and use the same equ· ods or equivalent or similar methods involving the same or an Per~valent or similar element of chance or lottery scheme. Many Ptodons, fi~ms, and corporations who make and sell candy and bakery llnwi~J~ts Ill competition with the respondent, as above found, are Pack 111g to offer for sale or sell candy and bakery products so Pack e~ and assembled as above described, or otherwise arranged and cha e for sale to the purchasing public so as to involve a game of andnce, or any other method of sale that is contrary to public policy p such competitors refrain therefrom.

bak An. 5· Many dealers in, and ultimate purchasers of, candy and ner :: Prou.ucts are attracted by respondent's said methods and manof ch pa~kmg said candy and bakery products and by the element and ance Involved in the sale thereof in the manner above described, 80 p a~ thereby induced to purchase said candy and bakery products Ptodac ed and sold by respondent in preference to candy and bakery "'ho ~ts offered for sale and sold by said competitors of respondent lb.eth ~ not use the same or equivalent methods. The use of said 8 by respondent has a tendency and capacity, because of saidgatn ° fro~ ?f ch~nce, to unfairly divert to respondent trade and custom lb.eth ~ts said competitors who do not use the same or equivalent cornpo /' to exclude from said candy and bakery products trade all equiv e /tors who are unwilling to and who do not use the same o·r tion .a ent methods because the same are unlawful, to lessen competi- In sa'd1of said candy and bakery products trade, to create a monopoly other d' candy and bakery products trade in respondent and such equiv 1Distributors of candy and bakery products as use the same orbenefi~ e~t methods, and to deprive the purchasing public of the 0 free competition in said candy and bakery products trade. 26F. T.O. Order 'tyThe use of said methods by respondent has a tendency and capaci to eliminate from said trade all actual competitors and to exclu~~ therefrom all potential competitors who do not adopt and use sal methods or equivalent methods.

CONCLUSION The aforesaid methods, acts and practices of respondent, Loosed 'Viles Biscuit Company, a corporation, are all to the injury a~ prejudice of the public and of respondent's competitors, as hereHl· above found, and constitute unfair methods of competition in co~l· merce within the intent and meaning of the Federal Trade CotntnlS· sion Act.

ORDER TO CEASE AND DESIST This P!Oceeding having been heard by the Federal Trade CoJll: mission upon the amended and supplemental compl:!!.int of t~e Corn. mission and the answer of the respondent, Loose-Wiles Biscuit Cofe pany, a corporation, admitting all the material allegations of t 1d complaint to be true and waiving the taking of further evidence fl.~e all other intervening procedure, and the Commission having Ill~ 11 9its findings as to the facts and its conclusion that said respondent violated the provisions of the Federal Trade Commission Act· y It is ordered, That the respondent, Loose-"\Viles Biscuit ComPft\~ a corporation, its officers, agents, representatives, and employeesd·~s 1 connection with the offering for sale, sale and distribution o.£ c:n 0£ and bakery products in interstate commerce or in the District Columbia, do forthwith cease and desist from: k d 1. Selling and distributing candies or bakery products so pac ~0 and assembled that sales of such candies or bakery products f !1. the general public are to be made, or may be made, by means 0 lottery, gaming device, or gift enterprise; ts 2. Supplying to or placing in the hands of dealers, assortrnend of candies or bakery products which are used, or which may be us~t~ without alteration or rearrangement of the contents of su~h ~sso:he ments, to conduct a lottery, gaming device or gift enterprise 1~ cts sale or distribution to the public of such candies or bakery pro u contained in said assortments; nts 3. Supplying to or placing in the hands of dealers, assortn~e or of candies or bakery products, together with a punchboard, pusd1 in pull card, or other lottery device, for use, or which may be use blic, distributing or selling such candies or bakery products to the pu at retail;

LOOSE-WILES BISCUIT CO. 1129 .1118 Order P 4· Supplying to or placing in the hands of dealers, a punchboard, c:h. or pull card, or other lottery device, either with assortments of P l~les or bakery products, or separately, which punchboard, push or dint .car~, or other lottery device, is to be used, or may be used, in ors: 1~Utlllg or selling such candies or bakery products to the public, leo- which punchboard, push or pull card, or other lottery device, bears d..,ends or statements informing the purchasing public that the cant~e:hor bakery products contained in said assortments are being sold co ~public by lot or chance in accordance with a sales plan which ~str~ute a lottery, gaming device, or gift enterprise. C t M further ordered, That the respondent, Loose-Wiles Biscuit ofo:,any, a corporation, shall, within 60 days after service upon it fo th 1 ~ order, file with the Commission a report in writing setting th: In detail the manner and form in which it has complied with Is order.

26F.T.0· Complaint