Mendels, Hyman

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IN THE MATTER OF HYMAN MENDELS, TRADING AS J. J. HENDERSON COJ\IPLAINT, FINDINGS AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3179. Complaint, J-uly 21, 1937-Decision, J-une 22, 1939 Where an individual engaged in· sale and distribution of clocks to customers throughout the United States- Furnished various devices an<l plans for selling his said merchandise which involved operation of game of chance through which same was distributed to ultimate consumer wholly by lot or chance, and the furnh;bing of his customers with push cards, order blanks, and circulars explaining his plan for selling his said products and allotting premiums or prizes to patrons of said cards under such plan, in accordance with which number pushed by chance determined amount paid by customer for his chance, and person securing certain number received fountain pen desk set, and person select- Ing feminine name corresponding to that concealed within card's master seal received "Venus Rotary Clock," and patrons pushing other disks received nothing, and operator of card was compensated through receipt for himself of one of such clocks; and Placed thereby in the bands of others means of conducting lotteries in sale of his said products, contrary to the established public policy of the United States Government and in violation of the criminal laws, and in competition with many who do not use same or similar method of distribution as contrary to public policy;

With result that many persons were attracted by his said sales plan or method of distribution for his merchandise and by element of chance Involved therein, and were thereby induced to buy and sell said merchandise in preference to that offered by competitors, many of whom, as aforesaid, do not use such or similar methods, and trade was thereby unfairly diverted to said Individual from such competitors: ' Held, That such practices, as set forth above, were to the prejudice of the public and competitors and constituted unfair methods of competition. Before Mr. William 0. Reeves, Mr. W. W. Sheppard, and Mr. Charles F. Diggs, trial examiners.

Mr. Henry 0. Lank, Mr. D. 0. Daniel, Mr. Alden S. Bradley, and Mr. P. 0. [{olinski for the Commission.

Nash&: Donnelly, of Chicago, Ill., for respondent. Complaint Pursuant to the provisions of an act of Congress, approved September 26, 1914, entitled "An Act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," the Federal Trade Commission, having reason to believe that Hyman 188 FEDERAL TRADE COMl\IISSION DECISIONS Complaint 29F. T. C.

Mendels, individually and trading as J. J. Henderson, 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 n. 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. The respondent is an individual doing business under the name J. J. Henderson, with his principal office and place of business located at 113 Hudson Street, Jersey City, N. J. He is now, and for some time last past has been, engaged in the sale and distribution of clocks in commerce between and among the various States of the United States. He causes and has caused said products when sold to be shipped or delivered from his place of business in the State of New Jersey to purchasers thereof in New Jersey 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 between and among the States of the United States. In the course and conduct of said business, respondent is in competition with other individuals and with partnersqips 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 sale of and in selling 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 merchandise to the ultimate consumers thereof wholly by lot or chance. Said devices or plans of merchandising consist of a variety of push cards, the use 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 girls' names. Concealed under each name is a number. Also, under a master seal there is a name corresponding to 1 of the names on the card. Prospective purchasers select 1 of the names and remove the same disclosing the number thereunder. 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 1 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 and by which the merchandise described thereon is to be 1 1.·1:•1:

J. J. HENDERSON 189 111,I ! ·!.

187 (]om plaint '',, ' distributed. Illustrative of a few, but not descriptive of all of such legends, is the following:

i Select your favorite girl's name and receive a ::\ew l\Iodern Rotary Clockthe latest clock sensation-$5.00 value--Numbers under 29 pay what you draw- !\umbers over 29 pay only 29¢-No higher-Write your name opposite name You select on reverse side.

1Vhen 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 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 selection 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 selecting names which do not correspond to the name under the master seal receive nothing but the privilege of making a selection for the money which they pay. The purchasing public is thus induced and persuaded into purchasing pushes from said cards in the hope that they may select a prize-winning name and thus obtain an article of merchandise for a sum not in excess of 29 cents. The various articles of merchandise 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. PAR. 3. The persons to whom respondent furnishes said devices use the same in purchasing, selling, and distributing respondent's ;-I merchandise in accordance with the aforesaid sales plan. Respondent thus supplies to and places in the hands of others the means of conducting lotteries in the sale of his merchandise in accordance with 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 contrary to public policy, and is contrary I' ·i.to an established public policy of ·the Government of the United 'I States.

PAR. 4. The said clocks have a retail value greater than the cost of ,· Ia single push, and the sale of said clocks to the purchasing public in the manner above alleged involves a game of chance or the sale 213706'"-40-VOL,29-1:5 CO~Il\IISSION DECISIONS190 FEDERAL TRADE Findings 29F. T.C.

of a chance to procure a clock at a price much less than the normal retail price thereof. l\Iany persons, firms, and corporations who sell or distribute such merchandise in competition with the respondent, 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 method and by the element of chance involved in the sale thereof in the manner above described, and are thereby induced to buy and se.ll respondent's merchandise in 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 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 purposes."

REPORT, FINDINGS AS TO Tile FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on July 21 A,. D. 1937, issued and served its complaint in this proceeding upon the respondent, Hyman 1\Iendels, individually and trading as "J. J. Henderson," charging him with the use of unfair methods of competition in commerce, in violation of the provisions of said act. After the issuance of said complaint, and no answer being filed by the respondent, testimony and other evidence in support of the allegations of the complaint were introduced by. Henry C. Lank, D. C. Daniel, A. S. Bradley, and P. C. Kolin:oki, attorneys for the Commission, before ,V, C. Reeves, W. ,V, Sheppard, and Charles F. Diggs, respectively, examiners of the Commission theretofore duly appointed by it. John A. Nash appeared as attorney for the respondent, but introduced no t~sti­ mony or other evidence in opposition to the complaint. The testi" mony and other evidence introduced on behalf of the Commission were duly recorded and filed in the office of the Commission. There~ after, the proceeding regularly came on for final hearing on the said ·''I .T. J. HE~DER~O:N 191 187 Findings complaint, the testimony and other evidence, and brief in support of the complaint; no brief being filed in opposition thereto. And the Commission having duly considered the matter and being now :fully advised in the premises, finds that this proceeding is in the. public interest and makes this its findings as to the facts and its conclusion drawn therefrom.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, Hyman Mendels, trading under the name "J. J. Henderson," was engaged in selling and distributing clocks from July A. D. 19351 to March A. D. 1937. Respondent sold and distributed said clocks in commerce bl:'tween and among the· various Statio's of the Unitl:'d States. Respondent received orders for his merchandise at his place of business located at 113 Hudson Street, Jersey City, N. J., and shipped the same from his place of business located at 221 "\Vest Forty-second Street, New York, N. Y., to customers located throughout the United States. Respondent, during the time he was so engaged, was in competition with other individuals, partnerships, and corporations engaged in the sale and distribution in· interstate commerce of like or similar articles of merchandise. PAR. 2. Respondent, in the course and conduct of his said business~ furnished to his customers various devices and plans for selling his· merchandise; which involved the operation of games of chance, by which said merchandise was distributed to the ultimate consumers thereof '"holly by lot or chance. The method or sales plan adopted and used by respondent is as follows:

Respondent furnishes his customers with push cards, order blanks, and circulars explaining his plan for selling his said merchandise and allotting premiums or prizes to patrons of said push cards. One of said push cards has 24 partially perforated disks marked "Push,'~ above each of which is printed one of the 24 feminine names which appear in alphabetical order on the reverse of the card. Concealed within each disk is a number which is not di'lclosed until the disk is pushed or separated from the card; the card also benrs a large· 1 i.master seal, concealed within w·which is one of the said feminine names. 't. The method of operating this push card is as follows: t' The consumer customer pushes one of the said disks and the num- '' f ber disclosed determines the amount in cents to be paid therefor Ii by him, but the maximum amount to be paid for 1 push is not to L exceed 29 cents. In the event the number disclosed is "33," the patron of the push card receives a fountain pen desk set, and the one who I' pushes the disk over which appears the feminine name t:oncenle(l t II, I I! .

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Order 29F.T.C.

within the master seal receives a "Venus Rotary Clock." Nothing is received by the patrons pushing the other disks. After all the disks have been pushed, the person who sold the pushes· pays the respondent $6.50 and receives from him two clocks and a fountain pen desk set; one of which clocks he retains as com· pensation for his services, and the other clock and the fountain pen desk set are delivered to the persons who pushed the winning disks. PAR. 3. The respondent, by the sales method hereinbefore described, placed in the hands of others the means of conducting lotteries inthe sale of said merchandise, and said method of sale and distribution I of his merchandise is contrary to the established public policy of the Government of the United States and i.s in violation of the criminal law.

PAR. 4. Many persons were attracted by respondent's sales plan or method of distribution for his merchandise by the element of chance involved therein, and were thereby induced to buy and sell respondent's merchandise in preference to merchandise offered for sale by his competitors, many of whom do not use the same or a similar method of distribution because such method is contrary .to public policy; and as a result, trade has been unfairly diverted from such competitors to the respondent. • ' ' 4 ; ,;. I .... , CONCLUSION The practices of the respondent, as set forth in the foregoing find· ings as to the facts, were to the prejudice of the public and of re· spondent's competitors, and constitute unfair methods of competition in commerce in violation of the Federal Trade Commission Act. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Com· mission upon the complaint of the Commission (respondent having filed no answer), testimony and other evidence taken before 'Villiam C. Reeves, ,V, ,V, Sheppard, and Charles F. Diggs, examiners of the Commission theretofore duly designated by it, in support of the allegations of said complaint, brief filed herein by counsel for the Commission (respondent having offered no proof, filed no brief, and oral argument not having been requested) and the Commission hav· ing made its findings as to the facts and its conclusion that said respondent has violated the provisions of the Federal Trade Com· mission Act.

It is ordered, That" the respondent, Hyman 1\fendels, individually and trading as J. J. Henderson, or under any other name or names, J. J. HENDERSON 193 187 Order I. his representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, !:,, sale and distribution of clocks or any other merchandise, in commerce, as commerce is defined in the Federal Trade Commission Act, 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 any merchandise by the Use thereof.

2. 1\failing, shipping, or transporting to agents, or to distributors, or to members of the public, push or pull cards, punchboards, or other lottery devices so prepared or printed as to enable said persons to sell or distribute any merchandise by the use thereof. 3. Selling or otherwise disposing of any merchandise by the use of push or pull cards, punchboards, or other lottery devices. It is fwther 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 has complied with this order.

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. I ,( 'I''i I r 194 FEDERAL TRADE COilll\IISSION DECISIONS Syllabus 29F.T.C.