Sanders Manufacturing Co

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IN THE MATTER OF SANDERS MANUFACTURING COMPANY Cm!l'LAIXT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 351!6. Complaint, Aug. 4, 1938-Decision, June 12, 1941 Where a corporation engaged In the manufacture and the competitive Interstate sale and distribution of advertising novelties, rulers, calendars, fans, ftyswatters, punchboards, and >arious other articles- Furnished purchasers Yarious plans and devices which involved the operation of games of chance, !lift enterprises, or lottery schemes by means of which said merchandise was distributed to the ultimate consumers wholly by lot or chance, and included, as typical, combination of one of the aforesaid articles of merchandise together with a punchboard for use under a sales plan providing that the purchaser of a "punch" who punched certain concealed number, received the article without additional payment, and purchasers of all other punches received nothing for their 5 cents except the "punch"; placing thereby in the hands of others various devices involving games or schemes of chance for distribution of its said merchandise to the ultimate consumer wholly by lot or chance, contrary to established public policy of the United States Government;

With result that many persons were attracted by aforesaid sales method and the element of chance involved therein and were thereby induced to purchase its merchandise in preference to that of its competitors who were unwilling to and did not use any such methods, and trade was unfairly diverted from them td It:

lleld, That such acts and pt·actlces were all to the prejudice and injury of the public, and its competitors, and constituted unfair methods of competition in commerce.

Before .Mr. Arthur F. Tlwmas, .Mr. John lV. Addison, Mr. jjj~les J. Fuma.~ and Mr. W. lV. Sheppard, trial examiners. llfr. D. 0. Daniel for the Commission.

CO::IIPLAIXT Pursuant to the provisions of the Federal Trade Commission Act, and by Virtue of the authority vested in it by said act, the Federal Trade Commission, having reason to believe that Sanders Manufacturing Co., a corporation, hereinafter referred to as respondent, has violated the provisions of said net, and it appearing to the 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:

104 FEDERAL TRADE COl\IMISSION DECISIOXS Complaint 33.1<'. T. C. PARAGRAPH 1. The respondent is a corporation organized and doing business under the laws of the State of Tennessee w·ith its principal office and place of business located at 122-126 Fourth Avenue, South, in the city of Nashville, State of Tennessee. Respondent is now, and for some time last past has been, engaged in the business of selling and distributing various articles of novelty merchandise, including pencils, knife sharpeners, billhooks, pocket mirrors, key tags, and sand glasses. Respondent also sells and distributes knives and watches together with various punchboards and push cards. All of the above-described merchandise is sold and distributed by respondent for resale or distribution to the purchasing public. Respondent's customers are located in various States of the United States and in the District of Columbia, and the respondent ~auses its merchandise, when sold, to be transported from one of its places of business in the State of Tennessee or from the place of manufacture to the purchasers thereof in other States of the United States and in the District of Columbia, at their respective addresses. There is now, and has been for some time last, past, a course of trade by said respondent in such merchandise in commerce between and among the various States of the United States and in the District of Columbia. In the course and conduct of its business, respondent is in competition with other corporations and with partnerships and individuals engaged in the sale and distribution of like or similar articles of merchandise in commerce between and among the various States of the United States and in the District of Columbia.

PAn. 2. In the course and conduct of its business as described in paragraph 1 hereof, respondent in soliciting the sale of, and in selling and distributing certain of its products in commerce, has furnished or sold various punchboards or push cards which involve the operation of games of chance, gift enterprises, or lottery schemes by which said merchandise is or may be or is designed to be distributed to the ultimate purchasers or consumers thereof wholly by lot or chance. The punchboards or push cards, as sold or distributed by the respondent, have attached thereto watches or pocket knives and have printed on the top of said punchboards or push cards various state· ments or legends showing the manner or sales plan by which said articles of merchandise are to be sold or distributed to the purchasing or consuming public. Sales are generally 5 cents each and said punch· boards or push cards have a number of holes or partially perforated disks and each purchaser is entitled to a punch or push from said punch board or push card, and when a punch or push is made a printed slip or disk is sf.'parated and a number disclosed. The numbers are effectively concealed from purchasers and prospecti,·e purchasers until SANDERS 1\IANTJFACTURIN"G CO. 105 103 Complaint a selection has been made an~ the punch or push completed. Certain specified numbers entitle purchasers to an artic.Ie of merchandise. Persons obtaining numbers not so specified receive nothing for their money other than the privilege of making a punch or push from said board or card. The articles of merchandise attached to said board are offered for distribution and distributed to the public in accordance with the above described sales plan and the merchandise attached to said punchboards or push cards is thus distributed to the consuming or purchasing public wholly by lot or chance. PAR. 3. Retail dealers 'vho purchase or procure respondent's said merchandise and punchboards or push cards either directly or indirectly from respondent expose said devices and the merchandise attached thereto to the purchasing public and sell or distribute such articles of merchandise in accordance with the above described sales plan. Respondent thus supplies to and places in the hands of others the means of conducting lotteries, gift enterprises, or games of chance in the sale of said merchandise in accordance with the sales plan hereinabove set forth. Such sales plan has the tendency and capacity to induce the consuming or purchasing public to purchase respondent's merch::mdise in preference to similar merchandise offered for sale and sold by its competitors.

PAR. 4. The sale of said merchandise to the purchasing public in the manner above described involns a game of chance or the sale oi a chance to procure said articles of merchand.ise. The use by respondent of said method in the sale of its merchandise and the sale of its merchandise by and through the use thereof is a practice of the sort which is contrary to an established public policy of the Government of the United S(ates and in violation of criminal laws. The use by respondent of said sales plan or method has the tendency to unfairly hinder competition. Many persons, firms and corporations who sell and distribute merchandise in competition 'with the respondent as above described 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.

PAR. 5. l\fany dealers in and ultimate pmchasers of merchandise similar to that distributed by respondent are attracted by respondent's said sales plan or method and by the element of chance involved in the sale thereof in the manner above describ<>d and are thereby induced to purchase said merchandise from respond<>nt in preference to similar lllerchandise offen•d for sale and sold by said competitors of respondent who do not use the same or a similar method. The use of said lllethod by respondent has the capacity and tendency, because of said 106 FEDERAL TRADE COMMJSSION DECISIONS Findings 33F.T.C.

game of chance, lottery scheme, or gift .enterprise, unfairly to divert to respondent trade and custom from its competitors who do not use the same or an equivalent or similar method, and has the capacity and tendency to deprive the purchasing public of free competition in said merchandise.

PAR. 6. The aforesaid acts and practices of the respondent as herein alleged are all to the prejudice of the public and of respondent's competitors and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commissi~n on the 4th day of August, A. D. 1938, issued and thereafter served its complaint in this proceeding upon . the respondent, Sanders Manufacturing Co., a corporation, charging it with unfair methods of co111petition in commerce in violation of the provisions of said act. After the issuance of said complaint and the filing of respondent's answer thereto, testimony and other evidence in support of the allegations of the complaint were introduced by attorneys for the Commission before duly appointed trial examiners of the Commission designated by it to serve in this proceeding. No testimony or evidence was offered on behalf of the respondent. The testimony and other evidence introduced 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, the testimony and other evidence and the report of the trial examiners thereon, and the Commission having duly considered the matter and being now fully advised in th~ pren1· ises, :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.

FINDI:SGS AS TO THE FACTS PARAGRAPH 1. Respondent Sanders Manufacturing Co. is a corporation organized under the laws of the State of Tennessee with its principal office and place of business located at Nashville, Tenn., and it also operates two branches at Shelbyville, Tenn. PAR. 2. Respondent is engaged in the business of manufacturing, selling, and distributing advertising novelties, rulers, calendars, funds. flyswatters, punchboards and various other articles. PAR. 3. Respondent causes its said merchandise described in para· graph 2, when sold, to be shipped or transported from its said places SANDERS MANUFACTURING CO. 107 103 Findings of business to purchasers thereof located in various States of the United States at their respective points of location. PAR. 4. Respondent in the course and conduct of its business as set forth in paragraphs 2 and 3 hereof now is, and has been, in competition with other corporations, individuals, and partnerships engaged in the sale and distribution of like or similar merchandise in commerce between and among the various States of the United States.

PAR. 5. Respondent in the sale and distribution of its merchandise furnished, and now furnishes, to purchasers thereof various plans and devices which involve the operation of games of chance, gift enterprises, or lottery schemes-by means of which said merchandise is sold and distributed to the ultimate consumers wholly by lot or chance. Typical of the methods used by respondent is the following: One of respondent's combinations consists of one of the articles of merchandise mentioned in paragraph 2 hereof, and a. punch board. This punchboard has 100 covered tubes, for the right to punch which a charge of 5 cents is usually made. Each of these tubes contains a ticket which is effectively concealed until the cover of the tube has been punched. On each of the tickets is printed a number, and one of the numbers entitles the purchaser to receive the article of mer~ chandise as a prize, without any additional payment. The purchasers of all the other punches received nothing for their investment except the right to punch one of the tubes. Other like or similar devices, differing only in detail, are used by respondent in disposing of its merchandise. PAR. 6. The respondent, by its sales methods hereinbefore described, places in the hands of others various devices to be used in the distribution of its merchandise by means of a game of chance, gift enterprise, or lottery scheme, and by the use of such devices said merchandise is distributed to the ultimate consumer wholly by lot or chance. Respondent's said sales methods are contrary to the established public Policy of the Government of the United States. PAR. 7. Many persons have· been and are attracted by the sales lhethods employed by respondent in the sale and distribution of its lherchandise, and by the element of chance involved therein, and liave been thereby induced to purchase respondent's merchandise in preference to merchandise offered for sale by respondent's competitors Who do not use the same or a similar method. PAR. 8. Respondent, for some time last past, has been in competition with other manufacturers and distributors of merchandise similar to that mentioned in paragraph 2 hereof, who are engaged in " 0rnmerce between and among various States of the United States, and who are unwilling to us~, and do not use, in the distribution of Order 33F. T. C.

their merchandise any method involving a game of chance, gift enter· prise, or lottery scheme; and as a result of respondent's said methods, trade has been unfairly diverted from such competitors of the respondent.

CONCLUSION · The aforesaid acts and practices of the respondent are all to the prejudice and injury of the public and of respondent's competitors, and are contrary to the established public policy of the Government of the United States of America, and constitute unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commisfiion upon the complaint of the Commission, the answer of the re- ~pondent, testimony and other evidence taken before duly appointed trial examiners of the Commission designated by it to serve in this proceeding, and the report of the trial examiners thereon, and th(} Commission having made its findings as to the facts and its conclusion that the respondent Sanders l\Ianufacturing Co. has violated the provisions of the Federal Trade Commission Act. It is ordered, That the respondent Sanders Manufacturing Co., a corporation, its officers, directors, representatives, agents, and employees, jointly or severally, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of advertising novelties, rulers, calendars, fans, flyswatters, punchboards or any other merchandise in commerce as "commerce" is defined in the Federal Trade Commisison Act, shall forthwith cease and desist from:

1. Selling or distributing any merchandise so packed or assembled that sales of such merchandise to the public are to be made or may be made by means of a game of chance, gift enterprise, or lottery scheme. 2. Supplying to, or placing in the hands of, others push or pull cards, punchboards or other lottery devices either with assortments of merchandise or separately which said push or pull cards, punchboards or other lottery de,·ices are to be used or may be used in selling or distributing said merchandise to the public.

3. Selling or otherwise disposing of any merchandise by m<>ans of 11 game of chance, gift enterprise, or lottery scheme. It is further ordered, That the respondent shall, within GO days after service upon it of this order, file with the Commission a report in writing, setting forth in detail the manner aml form in which it has complied with this order.

FRED P. "WEISSMAN, INC. 109 Complaint