Earl M. Loban

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IN THE l\hTTER OF EARL M. LOB AN, INDIVIDUALLY AND TRADING AS CEN • TURY BUSINESS SERVICE, ACME DIVIDEND SYSTEM AND CENTURY PUBLISHING COl\IPANY, INC.

I COMPLAINT, FINDINGS, AND OimER IN REGAUD TO THE ALLEGED VIOLATIO!'I' OF SEC. 6 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket S7.U. Complaint, .liar. 6, 1939-Decision, Apr. 20, 1939 Where an Individual engaged In sale and distribution of sales promotlon card~. which were so designed and arranged as to involve use of a lottery scheme or gift enterprise when used by deall.'rs in promoting and increasing sales of their merchandi!>e to public and which included- (1) Group of cards arranged for punching out and recording amounts of merchants' customers' sales with totals ranging, as the case might be, from $5.50 to $20, and which contained concealed legends on cards en· titling holder, upon completion of total sales provided for on card, to amounts ranging from 20 cents to $5 in accordance with particular legend secured by chance by holder of particular card; and (2) Other sales promotion cards for use In various types of business but Involving same general plan;

Sold to dealers such assortments, together with various display circulars and advertisements for use in distributing and using said cards in various wuys involving ~ottery, game of chance, or gift enterprise in ~uggested distribu· tion by dealer customers, by whom said cards were distributed to own customers and prospective customers and awards thereon made as called for by particular concealed legends as contained on particular cards when treated so as to reveal nature of such particular legend and chance award thus called for; contrary to an established public policy of the United States Government and In competition with various sellers and distributm·s of sales promotion cards, pt·emium cards, price competition cards, coupons, l;lnd trade stamps, which, when used by dealers do not involve lottery scheme, game of chance, or gift enterprise, and in competition with many who sell and distribute various sales cards or devices for Increasing sales of dealers and who are unwilling to offer or sell cards or devices designed and ar· ranged as above found, or otherwise designed or arranged so as to involve game of chance, lottery scheme or gift enterprise and refrain therefrom; With result that consuming public was induced to deal with or purchase mer· chandlse from dealers using his cards in preference to purchasing mer· chandise from dealers using devices of his competitors because of lottery scheme, game of chance, or gift enterprise connected with said cards, and with result, through his use of such methods in designing aud arl"8nging hill cards and distributing them as aforesaid, of unfairly divet·ting trade to himself from his said competitors who do not use such or equivalent methods:

Held, That such acts and practices were all to the prejudice and injury of the public and competitors and constituted unfair methods of competition and unfair and deceptive acts and practices in commerce. Mr. L. P. Allen, Jr. for the Commission.

CENTURY. BUSINESS SERVICE, ETC. 1481 l 1480 Complaint f ~ ' Col\IPLAINT -Pursuant to the provisions of the Federal Trade Commission Act, 1: and by virtue of the authority vested in it by said act, the Federal Trade Commission, having reason. to believe that ~arl M. Loban, •II individually and trading as Century Business Service, Acme Dividend j System and Century Publishing Co., Inc., hereinafter referred to as !•: respondent, has violated the provisions of said act, and it appearing· II to the Commission that a proceeding by it in respect that-eof would he in the interest of the public, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. R~spondent, Earl M. Laban, is an individual trading as Century Business Service, Acme Dividend System and ~ntury Publishing Co., Inc., with his principal office and place of business located at 401 and 402 Lafayette Building, Waterloo, Iowa. Respondent is now, and for some time last past has been, engaged in the sale and distribution of sales promotion cards to deal-ers located at points in the various States of the United States and in the District of Columbia. Respondent causes, and has caused, his said sales cards, \Yhen sold, to be transported from his principal place of business in the city of ·waterloo, Iowa, to purchasers thereof located in the various States of the United States, other than the State of Iowa, and in the District of Columbia, at their respective points of location. There is now, and has been for some time last past, a course of trade by said respondent in such sales promotion cards in commerce between nnd among the various States of the United Stutes and in the District of Coh1mbia. In the course and conduct of said business, respondent is in competition with other individuals and with corporations and with partnerships engaged in the sale and distribution of sales promotion curds, trade cards, discount cards, premium cards, coupons, and trading stamps in commerce between and among the various States of tne United States and in the District of Columbia. par. 2. In the course and conduct of his business in commerce, as described in paragraph 1 hereof, respondent sells and has sold cards so designed and arranged as to involve the use of a lottery scheme or gift enterprise, when used by dealers i.n promoting and increasing sales of their merchandise to the consuming public. The respondent sells and distributes several groups of sales promotion cards, but they all invoh·e a lottery scheme or gift enterprise and vary only in detail. The sales promotion cards in one such group are herein described for the purose of showing arrangement, design and principle involved. On the front of such cards is the following: 1482 FEDERAL TRADE 001\Il\IISSION DECISIONS Complaint 28F.T.C.

20 20 20 20 20 15 15 15 15 15 15 15 15 15 1~ 20 20 20 20 20 25 25 25 25 25 25 25 25 25 25 COURTESY GIFT CARD The "CONCEALED --------------------------------------- COURTESY GIFT" --------------------------------------within the square at --------------------------------------right may be of a 25c --------------------------------------- 50c, $1.00, $2.50, --------------------------------------or $5.00 "iR trade" --------------------------------------value! --------------------------------------- NO COURTESY GIFT --------------------------------------- LESS THAN 25c No card honored it mutilated. Do not Mutilate Present this card to us each time your cash purchases amount to 10c or over. When they total the amount punched in the margin we will pay you the' "Courtesy Gift."

No. Cll 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 50 50 50 35 35 3G 35 5 5 5 5 5 5 5 5 5 5 10 In the ruled square referred to on the face of the card is printed in invisible ink amounts ranging from 25 cents to $5. These amounts are revealed upon the application of sufficient heat to scorch the chemicals in the said ink, but until such heat is applied the legend in the said square is effectively concealed from. the holder of said card. The amount which the holder of said card will receive in trade is thus determined wholly by lot or chance. On the reverse side or back of the said sales promotion card is the following language:

SAVE THIS CARD IT IS VALUABLE This. is a new and interesting plan whereby we show our appreciation of your patronage through a "Courtesy Gift." THANK YOU Name-------------------- [Merchant's advertisement] Other cards in this group, sold and distributed by the respondent, provide for recording sales of from $5.50 to $20 worth of merchandise by the numbers ranged around the border of the card and provide for the winning of amounts from 25 cents to $5 by the legends written with invisible ink in the ruled or blank squares or blank circles. Other cards in the same group are prepared primarily for CENTURY BUSINESS SERVICE, ETC. 1483 1480 Complaint automobiles, gasoline, and service stations and provide for the pur- ~hase of 75 gallons of gasoline and 5 quarts of oil by the numbers ranged around the border of the card and provide for the winning of from 25 cents to $5 in trade by the legend written in invisible ink in the blank circle therein.

The respondent sells and distributes other sales promotion cards for use in various types of business, but the ones described above illustrate the general plan of such cards.

Respondent furnishes his dealers with various display posters and circulars and with advertisements to be used and which are used by said dealers in distributing and using said cards. PAR. 3. The dealers to whom respondent sells assortments of said sales promotion cards, distribute the same to their customers and prospective customers and honor the awards as shown when the Isquares and circles on the said cards are scorched so as to reveal the legend written in invisible ink. The respondent in his literature and I(l by his representations suggests various methods for the use of said I cards by their dealers, all of which methods involve a lottery, game Iof chance, or gift enterprise.

PAR. 4. There are in competition with respondent various sellers and distributors of sales promotion cards, premium cards, price concession cards, coupons and trading stamps, which, when used by dealers, do not involve a lottery scheme, game of chance, or gift enterprise. Many persons, firms, and corporations who sell and distribute various cards or devices for promoting or increasing the sales of dealers are unwilling to offer for sale or sell cards or devices so designed and arranged as above alleged, or otherwise designed and arranged, as to involve a game of chance, lottery scheme, or gift enterprise. and such competitors refrain therefrom. PAR. 5. The use by respondent of said methods in designing and arranging his said cards and distributing the same for redistribution to the public, is a practice of the sort which is contrary to an established public policy of the government of the United States and is in violation of criminal laws. The consuming public is induced to deal with or purchase merchandise from dealers using respondent's cards in preference to using the devices of respondent's competitors, because of the lottery scheme, game of chance, or gift enterprise connected with respondent's said cards. The use by respondent of said methods in designing and arranging his said cards and distributing them as aforesaid, because of said game of chance, has R. tendency and capacity to and does, unfairly divert trade to respondent from his said competitors who rlo not use the snme or an equivalent method, 200346m--40--vol.28----96 1484 FEDERAL TRADE C011MISSION:S DECISIO:SS Findings 2SF.T.C.

and as a result that·eof substantial injury is being and has been done by respondent to competition in commerce between and among the various States of the United States and in the District of Columbia. PAR. 6. The aforesaid acts and practices of the respondent, as here· in alleged, are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair methods of competi· tion in commerce and unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Com· mission Act.

RFJPORT, FINDINGS AS TO THE FACTs, AND Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission on l\Iarch 6, 19!39, issued and served its complaint in this proceeding upon Earl l\I. Loban, individually, and trading as Century Business Service, Acme Dividend System and Century Publishing Co., Inc., charging him with the use of unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of the provisions of said act. On l\Iarch 24, 1939, the respondent filed his answer, !n which answer he admitted all the material allegations of fact set forth in said com· plaint, and waived all intervening procedure and further hearing as to said facts. Thereafter the proceed.ing regularly came on for final hearing before the Commission on the said complaint and answer thereto; 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 PARAGRAFH 1. Respondent, Earl M. Loban, is an individual trading as Century Business Service, Acme Dividend System and Century Publishing Co., Inc., with his principal office and place of business located at 401 and 402 Lafayette Building, Waterloo, Iowa. Respondent is now, and for some time last past has been, engaged in the sale and distribution of sales promotion cards to dealers located at points in the various States of the United States and in the District of Colum· bia. Respondent causes, and has caused, his said sales cards, when sold, to be transported from his principal place of business in the city of 'Yaterloo, Iowa, to purchasers thereof located in the various States of the United States, other than the State of Iowa, and in the District of Columbia, at their respective points of location. There is now, and CENTURY BUSINESS SERVICE, ETC. 1485 1480 Findings ~ has been for some time last past, a course of trade by said respondent I iin such sales promotion cards in commerce between and among the i various States of the United States and in the District of Columbia. In the course and conduct of said business, respondent is in competition iwith other individuals and with corporations and with partnerships engaged in the sale and distribution of sales promotion cards, trade eards, discount cards, premium cards, coupons, and trading stamps IIJ Iin commerce between and among the various States of the Uuited States and in the District of Columbia.

PAR. 2. In the course and conduct of his business in commerce, &S described in paragraph 1 hereof, respondent sells and has sold cards so designed and arranged as to involve the use of a lottery scheme or gift enterprise, when used by dealers in promoting and increasing sales of their merchandise to the consuming public. The respondent sells and distributes several groups of sales promotion cards, but they all involve a lottery scheme or gift enterprise and vary only in detail. The sales promotion cards in one such group are herein described for the purpose of showing arrangement, design and principle involved. On the front of such cards is the following: 20 20 20 20 20 15 15 15 15 15 15 15 15 15 15 20 20 20 20 20 25 25 25 25 25 25 25 25 25 25 COURTESY GIFT CARD The "CONCEALED COURTESY GIFYr"

within the square at I' right may be ot a 25¢, i 50¢, $1.00, $2.50, or $5.00 "in trade"

value! NO COURTESY GIFT LESS THAN 25¢ No card honored if mutilated. Do not 1\Iutllate Present this card to us each time your cash purchases amount to 10¢ or over. "'hen they total the amount punched in the margin we will pay you the "Courtesy Gift."

No. Cll 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 M W M ~ ~ ~ M 5 5 5 5 5 5 5 5 5 5 W In the ruled square referred to on the face of the card is printed in invisible ink amounts ranging from 25 cents to $5. These amounts are revealed upon the application of sufficient heat to scorch the 1486 FEDERAL TRADE COl\UviiSSION DECISIONS Findings 28F. T. C.

chemicals in the said ink, but until such heat is applied the legend in the said square is effectively concealed from the holder of said card. The amount which the holder of said card will receive in trade is thus determined wholly by lot or chance.

On the reverse side or back of the said sales promotion card is the following language:

SAVE THIS CARD IT IS VALUABLE This Is a new and Interesting plan whereby we show our appreciation ot your patronage through a "Courte:>y Gift."

THANK YOU Name -------------------- [1\lercbant's advertisement] Other cards in this group, sold and distributed by the respondent, provide for recording sales of from $5.50 to $20 worth of merchandise by the numbers ranged around the border of the card and provide for the winning of amounts from 25 cents to $5 by the legends written with invisible ink in the ruled or blank squares or blank circles. Other cards in the same group are prepared primarily for automobiles, gasoline and service stations and provide for the purchase of 75 gallons of gasoline and 5 quarts of oil by the numbers ranged around the border of the card and provide for the winning of from 25 cents to $5 in trade by the legend written in invisible ink in the blank circle therein.

The respondent sells and distributes other sales promotion cards for use in various types of business, but the ones described above illustrate the general plan of such cards.

Respondent furnishes his dealers with various display posters and circulars and with advertisements to be used and which are used by said dealers in distributing and using said cards. PAR. 3. The dealers to whom respondent sells assortments of said sales promotion cards, distribute the same to their customers and prospective customers and honor the awards as shown when the squares and circles on the said cards are scorched so as to reveal the legend written in invisible ink. The respondent in his literature and by his representations suggests various methods for the use of said cards by their dealers, all of which methods involve a lottery, game of chance or gift enterprise.

PAR. 4. There are in competition with respondent various sellers and distributors of sales promotion cards, premium cards, price con- CENTURY BUSINESS SERVICE, ETC. 1487 1480 Order cession cards, coupons, and trading stamps, which, when used by dealers, do not involve a lottery scheme, game of chance, or gift enterprise. Many persons, firms, and corporations who sell and distribute various cards or devices for promoting or increasing the sales of dealers are unwilling to offer for sale or sell cards or devices so designed and arranged as above found, or otherwise designed and arranged, as to involve a game of chance, lottery scheme, or gift enterprise, and such competitors refrain therefrom.

PAR. 5: The use by respondent of said methods in designing and arranging his said cards and distributing the same for redistribution to the public, is a practice of the sort which is contrary to an established public policy of the Government of the United States and is in violation of criminal laws. The consuming public is induced to deal with or purchase merchandise from dealers using respondent's cards in preference to using the device of respondent's competitors, because of the lottery scheme, game of chance, or gift enterprise connected with respondent's said cards. The use by respondent of said methods in designing and arranging his said cards and distributing them as aforesaid, because of said game of chance, has a tendency and capacity to and does, unfairly divert trade to respondent from his said competitors who do not use the same or an equivalent method. CONCLUSION The aforesaid acts and practices of the respondent, as herein found, are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce within the I intent and meaning of the Federal Trade Commission Act. t ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, and answer of the respondent in which answer respondent admitted all the material allegations of fact set forth in said complaint, and states that he waives all intervening procedure and further hearing as to said facts, and the Commission having made its findings as to the facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That the respondent Earl M. Loban, individually and trading as Century Business Service, Acme Dividend System, and Century Publishing Co., Inc., or trading under any other name or names, his representatives, agents, and employees directly or through 1488 FEDERAL TRADE COl\IMISSION DECISIONS Order 28F.T.C.

any corporate or other device in connection with the offering for saler sale and distribution of sales promotion schemes or any other merchandise in commerce as commerce is defined in the Federal Trade· Commission Act, do forthwith cease and desist from: 1. Selling or distributing sales promotion cards or any other device so designed that their use by the retail dealers constitute or may constitute the operation of a game of chance, gift enterprise, or lottery scheme.

2. Supplying to, or placing in the hands of retail dealers or others,. sales promotion cards or sales booster plans or schemes or any other devices which are used or which may be used without alteration or rearrangement thereof to conduct a lottery, game of chance, or gift enterprise when distributed to the consuming public. 3. Furnishing or supplying to dealers display posters or circulars or other advertising literature bearing legends or statements informing the public as to the manner in which said sales promotion cards or other lottery devices are to be or may be distributed and used. It is further ordered, That the respondent shall, within 60 days after service upon him of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which he hascomplied with this order.

UNITED STATES RUBBER CO. ET AL. 1489 Syllabus