Ross, S. C

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IN THE MATTER OF S. C. ROSS DOING BUSINESS AS IDEAL GIFT COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF .-\:>! AC'.r OF CO:SGRESS APPROVED SEPT. 26, 1914 Docket 3~05. Complaint, Aug. 16, 19/J'i-Decision, Jan. 2.'j, 1939 Where an Individual engaged in offer, sale, and distribution of various articles or merchandise, Including rotary clocks, fountain pen sets, and fountain pen and pencil combinations, to purchasers in the various States, in sollciting sale of and selling and distributing sflid products- Furnished various types of merchandising plans which involved operation of games of chance, gift enterprises, or lottery schemes for distribution thereof to consumers wholly by lot or chance, and consisted of certain literature and circular lette1·s together with paper push cards, order blanks, and advertisements dt:>plcting his aforesaid merchandise, for n>~e In offer and sale thereof ~' i by operators of said cards under scheme in accordance with which persons paid for chance secured varying amount In accordance with number revealed by particular disk selected and punched, and person purchasing chance received article of merchandise being thus disposed of in accordance with his ( '·I selection of, or failure to select, feminine name corresponding with that con· cealed under card's master seal, and other article in accordance with success \' or failure in securing from cards certain number, and others secured nothing other than pi'lVIIPge of making selection for money paid, and thereby con· ducted lotteries in sale and distribution of his said products, and placed in hands of others means of conducting lotteries in sale thereof, contrary to the common law and criminal statutes and to an established public policy of the United States Government, and In competition with many engaged In sale and distribution in simllar commerce of like and similar articles of merchandise who do not sell the same through use of lotteries or games of chance;

With result that many purchasers of his said products were attracted by games of chance involved In his said sales method and thereby induced to pur- <·hase his merchandise in preference to same or similar goods of competitors who did not and do not use same or equivalent method, and thereby sub· stantial volume thereof was bought by public and trade was unfairly diverted to him from competitors aforesaid :

Held, That such acts and practices were all to the prejudice and Injury of the public and competitors and constituted unfair methods of COilllletltlon. Before Mr. lVilliarn 0. Reeve.~, trial examiner. JJ!r. Ilem'Y 0. Lank and JJ!r. D. 0. Daniel for the Commission. N a8h & Donnelly, of Chicago, Ill., for respondent. Co:uplaint Pursuant to the provisions of an Act of Congress, approved Sep· tember 26, 1914, entitled "An Act to create a Federal Trade Comlnission, to define its powers and duties, and for other purposes," the C01Il\IISSIO~ DECISJO~S202 FEDERAL TRADE Complaint 28F.T.C.

Federal Trade Commission having reason to believe that S. C. Ross, individually and trading as the Ideal Gift Co., hereinafter referred to as respondent, has been and is using unfair methods of competition in commerce, as "commerce" is defined in said act, and it appearing to said Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent is an individual doing business under the trade name and style of the Ideal Gift Co., with his principal office and place of business located in Room 825, Garrick Building, 64: West Uandolph Street, Chicago, Ill. He is now, and for some time last past has been, engaged in the sale and distribution of various articles of merchandise, including among others, rotary clocks, fountain pen sets, and fountain pen and pencil combinations, in commerce between and among the various States of the United States. He causes and has caused said products when sold to be transported from his principal place of business in the State of Illinois to purchasers thereof in Illinois and in other States of the United States at their respective points of location. There is now, and has been for some time last past, a course of trade and commerce by said respondent in such merchandise as he is selling or distributing between awl among the States of the United States. In the course and conduct of said business, respondent is in competition with other individuals and vi·ith ·partnerships and corporations engaged in the sale and distribution of similar or like articles of merchandise in commerce between and among the various States of the United States.

PAR. 2. In the course and conduct of his business, as described in paragraph 1 hereof, the respondent in soliciting the sn le of and in !'le!ling and distributing the said merchandise has furnished various devices and plans of merchandising which involve the operation of gift enterprises or lottery schemes and a distribution of such merclmndise to the ultimate consumers thereof wholly by lot or chance. Said devices or plans of merchandising consist of a variety of push cards, the us~ of which, in connection with the sale and delivery to the purchasing public by the method or plan suggested by respondent, was and is substantially as follows:

The said push cards bear a number of girl's names, concealed under each name is a number. Also, under a master seal there is a name corresponding to one of the names on the card. Prospective purchu.sers select one of the names and remove the su.me disclosing the number thereunuer. Persons selecting numbers from 1 to 29 pay in cents the amount of such number, and persons selecting numbers over 29 pay 29 cents for the privilege of selecting one of the names. The push cards bear various legends informing purchasers and prospective purchasers of the plan or method by which said push card is operated I i ;··. ; :' IDEAL GIFT CO. 203 ,I I!·,, I,lj ' 201 Complaint j: and by which the merchandise described thereon is to be distributed . . 'Vhen all the names have been purchased the master seal is removed, and the person who has selected the name corresponding to the name under the master seal receives the article of merchandise described without further charge, and the person, salesman, agent, or representative soliciting purchases of chances, as above described, also receives r': an article of merchandise without further charge or additional service. The numbers under the names are concealed· from purchasers and prospective purchasers, and they do not know how much they will have to pay for the privilege of selecting one of the names until the selectiOii has been made and the name removed. .The name under the master seal is concealed from purchasers and prospective purchasers until all the names have been selected. Those customers se- '·.: lecting names which do not correspond to the name under the master ,. seal receive nothing but the privilege of making a select.ion for the ' '! n, · money which they pay. The said articles of merchandise vary in value, but each of said articles of merchandise is of a greater value than the cost of a single push from said push card. The various articles of merchanuise are thus distributed to the purchasing public wholly by lot or chance, and the amount which the customers pay for a chance is determined wholly by lot or chance. PAn. 3. The persons to whom respondent furnished said devices use the same in purchasing, selling, and distributing respondent's merchandise in accordance with the aforesaid sales plan. Respondent thus supplies to and places in the hands of others the means of con- ·i <hlcting lotteries in the sale of his merchandise in accordance with ··!I the sales plan hereinabove set forth. The use by respondent of said method in the sale of his merchandise, and the sale of such merchandise by and through the use thereof and by the aid of said method, is a practice of the sort which the common law and criminal statutes have long deemed eontrary to public policy, and is contrary to an Pstablished public policy of the Government of the United States. PAR. 4. The sale of merchandise to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure articles of merchandise at a price much less than the normal retail price thereof. :Many persons, firms, and corporations who make or sell merchandise in competition with the respond- ('nt, as above alleged, 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, and such competitors refrain therefrom. Many persons are attracted by respondent's said methods and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to buy and sell respondent's merchandise in 200346m--40--vol.28----16 FEDERAL TRADE COl\Il\IISSION DECISIONS204 Findings 28 F. T. C. preference to merchandise offered for sale and sold by said competitors of respondent who do not use the same or an equivalent method. The use of said method by respondent, because of said game of chance, has the tendency and capacity to, and does, divert trade and custom to respondent from his said competitors who do not use the same or an equivalent method.

PAR. 5. The aforesaid method, acts, and practices of respondent are all to the injury and prejudice of the public and of respondent's competitors, and constitute unfair methods of competition in commerce within the intent and meaning of Section 5 of an Act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other:r purposes."

REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on August 16, 1937, issued, and on August 18, 1937, served its complaint in this proceeding upon the respondent, S. C. Ross, individually and trading as Ideal Gift Co., charging him with the use of unfair methods of competition in commerce in violation of the provisions of said act. After the issunnce of the said complaint, testimony, and other evidence in support'"of the allegations of the complaint were introduced by Henry C. Lank and D. C. Daniel, attorneys :for the Commission, and in opposition to the allegations of the complaint by J olm A. Nash, attorney for the respondent, before 'Villiam C. Reeves, an examiner of the Commission theretofore duly designated by it, and the said ·testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter, the proceeding regularly came on for final hearing before the Commission on the said complaint, testimony, and other evidence, briefs in support of the complaint, respondent not having filed brief 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 drawn therefrom. FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent S. C. Ross is an individual trading under the name and style of Ideal Gift Co. with his principal office and place of business located at 6! 'Vest Randolph Street, city of Chicago, State of Illinois.

IDEAL GIFT CO. 205 201 Findings Respondent is now, and for some time last past has been, engaged in the business of offering for sale, selling, and distributing various articles of merchandise, including, among others, rotary clocks, fountain pen sets, and fountain pen and pencil combinations to purchasers thereof located in the various States of the United States. Respondent causes said merchandise, when sold, to be transported from his place of business in the State of Illinois to the purchasers thereof located at various points in the States of the United States other than the State from which said shipments are made. Respondent is now, and has been, in substantial competition with '·,. other individuals and with partnerships -and. wit-h' corporatiolis·.like·wise engaged in the sale and distribution of similar articles of merchandise in commerce between and among the various States of the UnHed States. ·,• PAR. 2. In soliciting the sale of and selling and distributing his merchandise, respondent furnishes various devices and plans of mer- 'I .<!handising which involve the operation of games of chance, gift enter- '' prises, or lottery schemes by which said merchandise is distributed to the consumers wholly by lot or chance.

The methods used by respondent to sell his merchandise are as follows:

Respondent distributes to the public certain literature and ~ircular letters together with paper push cards. Along with ·the foregoing, respondent also encloses order blanks and advertisements which con- ' 'tain illustrations or pictures of his merchandise. The circulars en- 'i closed by respondent set forth respondent's plan of selling the merchandise and of allocating it as premiums or prizes to the operators of the push cards.

In said circulars, respondent refers to the enclosed push card as a "sales card."

One of respondent's circulars contains the following: Tile PLAN The Snlescard, you will notice, has an illu~tration or this recently invented <'loek. The p€'rson seleeting the name' corresponding with the name under the large seal will receive one of these new Venus Hotat·y Clocks. The person se· lecting number 33 receives a beautiful Fountain Pen Desk Set, u><eful for home and office.

You Also Will Receive One of These Clocks Absolutely Free for Di;oposing of 'this Salescard.

The numbers on the Salescard are extremely low priced. Pet·sons selecting numbers from 1 to 29 pay what they· dmw and those selecting numbers· ovl'r 29 pay only 29¢-No l\Iore.

Upon completion of this card, fill ln and mall us the t>nclosed order hlnnk and we will send you Two of these new Venus Rotary Clocks in your choice of colors, and also the beautiful Fountain Pen Desk Set. 206 FEDERAL TRADE COMMISSION DECISIOXS Findings 28F. T. C.

Each of the aforesaid push ·cards or "sales cards" bears a number of feminine names and on the reverse side of each care:l is a number of blank spaces opposite an alphabetical list of feminine names for writing in the names of customers who purchase chances on the card. Each card has a corresponding number of partially perforated disks, markec:l "Push." Above each disk is printed one of the feminine names printed alpha.betically on the reverse side of the card. Concealed within each disk is a number which is disclosed when the disk is punched or separated from the card. Each push card has a master disk, concealed within which is one of the feminine names. 'Vhen all the disks have been selected and the master disk removed, fhe person selecting the name corresponding to the name under the master disk receives the article of merchandise speeified without further charge. In this manner, respondent's merchanc:lise is distributed to the public. Among the items which respondent distributes by means of push cards are the following: Venus rotary clocks, fountain pen de.sk sets, and fountain pen and pencil combinations. Customers purchasing chances on the push canls pay in cents the amount of money indicated by the number revealed when the disk is punched or pushed by them, and customers selecting numbers higher than 29 pay only 29 cents. On some of the cards which respondent distributes, additional merchandise is offered by respondent to cus- . tomers selecting certain numbers. On one of such cards, the customer pushing the number 33 receives a fonntain pen desk set. This prize is offered in addition to the principal prize which is the Venus rotary clock. The person winning the Venus rotary clock on said card must select the feminine name which is concealed under the master disk.

Custom£>rs selecting names which do not corresj)OJH.l with the name under the mast£>r disk receive nothing but the privilege of making a selection for the money which they pay, except the customer selecting the number which entitles him to the fountain pen desk set. In this manner, the public is induced and persuaded to purchase · chances from said push card in the hope of selecting a prize-winning name or number and thus obtaining an article of merchandise for the price of 29 cents or less.

Respondent's merchandise is thus distributed to the purchasing public wholly by lot or chance, and the amount which a customer pays for a chance is determined wholly by lot or chance. Sales by respondent of said merchandise have averaged approximntely $3,200 annually.

PAn. 3. The Commission finds that the respondent, in selling and distributing his merchandise in connection with the ahove-described IDEAL GIFT CO. 207 201 Ot·der }lush cards, conducted lotteries and placed in the hands of others the means of conducting lotteries in the sale of his merchandise. The Commission further finds that the sale of respondent's mer- -chandise to the purchasing public, as hereinabove described, involves a game of chance, or the sale of a chance to procure respondent's lherchandise, and that the use of said lottery method in the distribution of his merchandise is a practice of the sort which long has been deemed contrary to the common law and criminal statutes, and is ·contrary to an established policy of the Government of the United States.

PAR. 4. There are, among the competitors of respondent, in- <lividuals, firms, partnerships, and corporations also engaged in the business of selling and distributing in similar commerce, like and similar articles of merchandise, who do not sell their merchandise by use of lotteries or games of chance.

Many purchasers of respondent's merchandise are attracted by the element of chance involved in respondent's sales method and nre thereby induced to purchase respondent's merchandise in prefer- -ence to the same or similar merchandise of respondent's competitot·s who did not and do not use the same or equivalent methods. I.i' Because of the said preference, the public has purchased a substantial volume of respondent's merchandise ·with the result that '' trade has been unfairly diverted to respondent from said competitors. ' CONCLUSION The aforesaid acts and practices of respondent as hereinabove found are all to the injury and prejudice of the public and of respondent's competitors and constitute unfair methods of competition in commerce within the intent and meaning of the Fedeml Trade Commission Act.

ORDER TO CE.\SE AND DESIST This proceeding having been heard by the Federal Trade Comlhission upon the complaint of the Commission, the answer of respondent, testimony and othet· e~idence taken before 'Villiam C. Reeves, an examiner of the Commission theretofore duly designated by it, in support of the allegations of said complaint and in opposition thereto, brief of counsel for the Commission (respondent having filed no brief and oral argument not having been requested) and the Commission having made its findings as to the facts and its conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

COl\Il\IISSIO~ DECISIONS208 FEDERAL TRADE Orller 28F.T.C.

It is ordered, That the respondent, S. C. Ross, individually and trading as Ideal Gift Co., or trading under any other name, his agents, representatives, and employees, in connection with the offer:. ing for sale, sale and distribution of rotary clocks, fountain pen sets and fountain pen and pencil combinations, or any other merchandise, in interstate commerce or in the District of Columbia, do forthwith cease and desist from:

1. Supplying to or placing in the hands of others push or pull cards, punchboards, or other lottery devices for the purpose of enabling such persons to dispose of or sell such or any other merchandise by the use thereof.

2. Mailing, shipping, or transporting to his agents and to distributors or to members of the public push or pull cards, punchboards, or other lottery devices so prepared or printed us to enable said persons to sell or distribute such or any other merchandise by the use thereof. 3. Selling or otherwise disposing of such or any other merchandise by the use of push or pull cards, punchboards, or other lottery devices.

It is further ordered, That within 60 days from the date of the service of this order upon said respondent, he shall file with the Commission a report in writing, setting forth in detail the manner and form in which this order has been complied with. LLOYD'S DISTRIBUTING CO. 209 Complaint ,j