Louis Goldenberg

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IN THE 1\IA'ITER OF LOUIS GOLDENBERG, MORRIS ZIPPER AND HARRY F AERMAN, TRADING AS DIAMOND CAP COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO Tile ALLEGED VIOLATION OF SI<:C. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3230. Complaint, Sept. 2-f, 1937-Decisi.on, Mar. 19, 19-P Where three individuals engaged in munufaeture of clips from felts and other materials obtained from old, used, and second-hand hats purchased from various sources and thereaftet· cleaned, steamed, ironed, dyed, and shaped by them into the form of caps, which were fitted with new visors, buttons, trimmings, sweatbands, and size labels so that thp,tv had the appearance of new caps made from fllt materials which had never been worn or usetl, and in interstate sale and distribution of said products in substantial competitlou with others, including manufactm·e1·s of ~<nell articles from new materials- Sold then· ~;;aid caps with no dlsdosure In invoicing and billing, and with no label, marking, or designation of any kind to indicate that they were made from old hat bodies, to retailers, jobbers, and wholesalers by whom said caps were resold to purchasing public without disclosing in any war the fact that they we1·e made from previously worn felts; \Vlth the result that they were enabled to and did undersell manufacturers who produced similar caps from felt and other materials which were entirely new, and with tendency and capacity to induce many wholesale and retail dealers and a substantial portion of purchasing public to purchase their products manufactured from old materials In the en·oneous and mistaken belief that they were made from new and unused materials, and, as direct consequence of such enoneous belief to divert trade unfairly to themselves from eompetitors, of whom many did not misrepresent the quality, kind, or type of material of which their caps were made :

Held, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public and competitors, and constituted unfair methods of competition In commerce. Before Air. John lV. Addison, },fr. John J. Keenan, Mr. Roberts. Hall, and Mr. Randolph Preston, trial examiners. },fr. George Foulkes and Mr. Robert Mates, Jr., for the Commission.

Mr. Oharles P. Bloom,e and Mr. Samuel R. 1Vurtman, of Philadelphia, Pa., for respondents.

COMPLAINT Pursuant to the provisions of an Act of Congress, approved SeptE>mhE>r 2G, HH4, entitled "An Act to create a FE>deral Trade Commis- Complaint 32F.T.C.

sian, to define its powers and duties, and for other purposes," the. Federal Trade Commission, having reason to believe that Louis Goldberg, Morris Zipper, and Harry Faerman, individuals, trading as Diamond Cap Co., hereinafter referred to as respondents, have been and are using unfair methods of competition in commerce, as "commerce" is defined in said act of Congress, and it appearing to said Commission that a proceeding by it in respect thereof would be hi the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondents, Louis Goldberg, Morris Zipper, and Harry Faerman, individuals, do business under the trade name and style of Diamond Cap Co., with their office and principal place of business located at 2000 South Ninth Street, Philadelphia, Pa. Respondents are now, and for more than 1 year last past have been, engaged in the business of manufacturing caps and hats from felts and other materials obtained from old, used, and second-hand hats, and of selling the same to retailers, jobbers, and wholesale dealers thereof located in the various States of the United States. Respondents cause, and for more than 1 year last past have caused, such caps and hats to be transported from their place of business in Philadelphia to the aforesaid purchasers thereof located in various other States of the United States. In the course and conduct of their business, respondents are now, and have been, in substantial competition with other individuals, corporations, firms, and partnerships engaged in the business of manufacturing and selling new caps and hats or caps and hats similar to those sold by respondents in commerce among and between the various States of the United States and in the District of Columbia.

PAR. 2. In the course and conduct of their business described in paragraph 1 hereof, respondents for more than 1 year last past have bought and still buy second-hand, old, and used felt hats. The second-hand, old, and used felt hats are cleaned, steamed, ironed, and shaped by respondents and then fitted with new trimmings, sweat bands, size labels, and in some cases with peaks or visors, and sold by respondents to retailers, who resell the same to the purchasing public, and to jobbers and wholesale dealers who resell them to retail dealers, who in turn resell said products to the purchasing public. PAR. 3. The aforesaid old, w ..ed, and second-hand hats and caps, after having been made over by respondents into cups and hat~ with new trimmings as d£'scribed in paragraph 2 hereof, have the appearance of new caps and hats. manufactured fiom felts which had never DIAMOKD CAP CO. 911 909 Complaint been worn, and said caps and hats are sold by respondents to retailers and to jobbers and wholesale dealers without any label, marking, or designation on or about said caps and hats to indicate that said caps and hats are in fact .manufactured from second-lund materials, which have been i·enovated and made over by respondents. Said caps and hats sold to jobbers and wholesale dealers are resold by said jobbers and wholesale dealers to retail dealers, who resell them to the public without disclosing the fact that said caps and hats are manufactured from felts previously worn and then renovated and made over, and other used materials, and under such circumstances as to indicate that they are new caps and hats.

The cost to respondents of obtaining, renovating, and making over said old, and previously used hats into caps and hats as aforesaid is much less than the cost to manufacturers of manufacturing new caps and hats of similar quality and respondents are thereby able to sell said caps and hats to retailers, jobbers, and wholesalers and through them to the purchasing public at substantially lower prices than manufacturers of new caps and hats can sell caps and hats of the Home or similar quality to retailers, jobbers, and wholesale dealers, and through said dealers to the using pl:blic. PAR. 4. The acts and practices of respondents as hereinabove set forth had, and now have, a tendency and capacity to induce many wholesale and retail dealers and many of the purchasing public to purchase said caps and hats ,manufactured from old, and used hats which have been renovated and made over by respondents, in the mistaken belie£ that they are purchasing new and unused caps and hats manufactured from new and unused materials. Further, as a direct consequence of the mistaken and erroneous belief induced by the practices aforesaid, a number of the consumiug public purchased a sub- ~tantiul volume of respondents' caps and hats with the result that trade has been unfairly diverted to respondents fro.m individuals, firms, and corporations likewise engaged in the business of selling and manufacturing caps and hats who do not misrepr"sent the quality and type of material out of which their hats and caps are made. .As a result thereof, substantial injury has been done, and is now being dime, by respondents to competition in commerce a,among and between the various States of the United States and in the District of Columbia. PAn. 5. The above and foregoing acts, practice....,, and representalions of respondents have been, nnd nre all to the prejudice of the public and respondents' competitors, as aforesaid, ami have been, and are, unfair methods of competition in commerce within the meaning and 912 FEDERAL TRADE CO:l\-IMISSION DECISIONS Findings 32F.T.C.

intent 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 THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on September 24, 1937, issued and subsequently served its complaint in this proceeding upon respondents, Louis Goldenberg (referred to in the complaint as Louis Goldberg), Morris Zipper, and Harry Faerman, trading as Diamond Cap Co., charging them 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 the filing of respondents' answer thereto, testimony and other evidence in support of and in opposition to the allegations of the complaint were introduced before examiners of the Commission theretofore duly designated by it, and 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, the answer thereto, testimony and other evidence, briefs in support of the complaint and in opposition thereto, and oral arguments of Robert ~Iathis, Jr., counsel for the Commission, and Samuel R. 'Vurtman, counsel for respondents; 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 a}1(i makes this its findings as to the facts and its conclusion drawn therefrom. FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondents, Louis Goldenberg, Morris Zipper, and Harry Faerman, are individuals trading as Diamond Cap Co., with their office and principal place of business now located at Fourth and Somerset Streets in the city of Philadelphia, State of Pennsylvania. The Commission finds that the Louis Goldberg referred to in the coniplaint and the Louis Goldenl>E>rg referred to herein are in fact one and the same person, the correct name being Louis Goldenberg. Respondents for more than 7 years last past have been engaged in the business of manufacturing caps from felts and other materials obtained from old, used, and second-hand hats, and of selling the same to retailers, jobbers and wholesale dealers located in the various States of the United States and in the District of Columbia. Re- ~pondents cause, anti for more than sewn years last past hare caused, DIAMOND CAP CO. 913 il09 Findings .such caps, when sold, to be transported from their place of business in Philadelphia, Pa., to the aforesaid purchasers thereof located in various other States of the United States and in the District of Columbia. In the course and conduct of their business respondents are in substantial competition with other individuals, and with firms and corporations engaged in the business of manufacturing caps from new materials and with others manufacturing caps from materials similar to those used by respondents, and in the sale and distribution thereof in commerce among and between the various States of the United States and in the District of Columbia. PAn. 2. In the course and conduct of their business respondents buy and use old, used, and second-hand felt hats from various source~s, including Good-,Vill Industries which source handles only used mer- <:handise. The felt from such hats is cleaned, steamed, ironed, dyed, and shaped by respondents into the form of caps, which caps are thereafter fitted with new visors, buttons, trimmings, sweatbands, and size labels.

PAn. 3. The Commission finds that the caps thus made by respondents have the appearance of new caps manufactured from felt material which has never been worn or used. In invoicing and billing purchasers respondents do not disclose that their products are made from old, worn, and previously used hat bodies. In such invoices and bills respondents' products are usually designated by numbers <mly. The respondents sell such caps made of second-hand material as aforesaid to retailers. jobbers, and wholesale dealers without any label, marking, or designation of any kind to indicate or disclose that such caps are in fact manufactured from second-hand felt material. Such dealers then resell said caps to the purchasing public without disclosing in any way the fact that they are manufactured from felts which have been previously worn.

Dy reason of the use of these methods and practices, the r('spondents are enabled to and do undersell manufacturers who produce similar caps from felt and other materials which are entirely new. PAR. 4. The acts and practices of respondents as hereinabove set out ha.ve the tendency and capacity to induce many wholesale and retail dealers and a substantial portion of the purchasing public to purchase respondents' products manufactured from old, second-hand, and previously used materials in the erroneous and mistaken belief that they are purchasing caps manufactured from new and unu:;;e1l materials. As a direct consequence of this erroneous anu mistaken belief induced by the practices set forth abow, trade has been and is diverted unfairly to respondents from their competitors, many of 914 FEDERAL TRADE Commlssion DECISIONS Order 32 F.T. C.

whom do not misrepresent the quality, kind., or type of material of which their caps are made.

CONCLUSION The afor~said acts niHl practices of respondents as herein found are all to the prejudice and injury of the public and of respondents' competitors, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Aet.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Feueral Trade Commission upon the complaint of the Commission, the answer of respondents, testimony and other evidence taken before examiners of the Commission theretofore duly designated by it in support of the allegations of said complaint and in opposition thereto, briefs filed herein, and oral argument by Robert :Mathis, Jr., counsel for the Commission, and by Samuel R. "\Vurtman, counsel for the respondents; and the Commission having made its finding as to the facts and its conclusion that said respondents have violated the provisions of the Federal Trade Commission Act.

It i8 orrlered, That the respondent, Louis Goldenberg, Morris Zipper, and Harry Faerman, individually and trading as Diamond Cnp Co., or trading under any other name, their representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of caps in commerce, as commerce is defined in the Fedenil Trade Commission Act, do forthwith cease and desist from: 1. Representing that caps composed in whole or in part of used, worn, or second-hand materials are new or are composed of new materi~ls, by failure to stamp on the sweatbands thereof, in conspicuous and legible terms which cannot be removed or obliterated without mutilating the sweatbands, a statement that said caps are composed of second-hand or used materials, provided that if sweatbands are not affixed to such caps then such stamping must appear on the bodies of such caps in conspicuous and legible terms which cannot be removed or obliterated. without mutilating said bodies. 2. Representing in any manner that caps made in whole or in part from old, used, worn, or second-hand materials are new or are composed of new materials.

DIAMOND CAP CO. 915 909 Order It U! further ordered, That the respondents shall, within 60 days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with this order.

Syllabus 32 F. T. C.