Leona Johnson and Aubrey M. Graff, trading as Radio Distributors

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IN THE MATI'ER OF ' LEONA JOHNSON AND AUBREY M. GRAFF, TRADING .AS RADIO DISTRIBUTORS .CO:!.IPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION' OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 1,151. Oomplaint, June 1, 191,:0-Decision, Sept. 22, 191,1 'Where an individual engaged in the competitive interstate sale and distribution of radios and other articles; in soliciting sale of and in selling and dis· tributlng her said products- Furnished various devices and plans which involved the operation of games of chance, gift enterprises, or lottery schemes in sales of hl)r merchandise to the ultimate consumer, -including among other things, push cards and cir· culars explaining her plan of selling her said merchandise and allotting It as premiums or prizes to operators of said cards and to t11e purchasing public, a typical plan inyolving the use of a push card displaying 58 feDJI· nine names and adjacent disks and under which the customer selecting the name corresponding to that under card's master seal received a radio, those punching disks concealing certain numbers received a combination pen and pencil, and the amount paid for a chance was dependent upon the number punched; and thereby Supplied to and placed in the hands of others means of conducting lotteries In the sale of her merchandise, in which the fact as to whether a purchaser received an article and which, If any, was determined wholly by Jot and there was involved a game of chance to procure an article at much below its. normal'prlce, contrary to an established public policy of the United states Government, and In violation of the criminal laws, and in competition with many who are unwilling to use any method involving chance, or contrary to public policy, and refrain therefrom;

'With the result that many persons were attracted by her said sales plan and the element of chance involved therein, and were thereby induced to buy and sell her merchandise In preference to that of said competitors, and trade In commerce was unfairly diverted to her from them, to the substantial injury of competition In commerce:

Held, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public and eompetitors, and constituted unfair methods of competition In commerce, and unfair and deceptive acts and practices therein.

Before Mr. lV. TV. Sheppard, trial examiner. !lfr. L. P. Allen, Jr. and Mr. D. 0. Daniel for the Commission. Mr. A. H. Schwab of Nash & Donnelly, of Chicago, Ill., for re· spondents.

COl\IPLAINT Pursuant to the provisions of the Federal Trade Commission A.ct and by virtue of the authority vested in it by said act, the Federal RADIO DISTRIBUTORS 1379 1378 Complaint Trade Commission having reason to believe that Leona Johnson and Aubrey l\1. Graff, individually and trading as Radio Distributors, hereinafter refe1-r~d to as respondents, have violated the provisions ?f. said act and it appearing to the Commission that a proceeding by ~tin respect thereof would be in the interest of the public hereby issues Its complaint, stating its charges in that respect as follows: PARAGRAPH 1. Respondents, Leona J olmson and Aubrey M. Graff, are individuals trading as Radio Distributors with their principal office and place of business located at 30 North Dearborn Street, Chi· cago, Ill. Respondents are now and for more than 8 months last past have been engaged in the sale and distribution of radios and other articles of merchandise to purchasers thereof located in the various States of the United States and in the District of Columbia. Respondents cause and have caused said merchandise when sold to be transported from their aforesaid place of business in the State of !IIinois to purchasers thereof, at their respective points of location, ln the various States of the United States other than Illinois and in the District of Columbia. There is now and has been for more than. 8.months last past a course of trade by respondents 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 ~aid business, respondents are and have been in competition with other Individuals and with partnerships and corporations 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 C~lumbia.

PAR. 2. In the course and conduct of their business as described in Paragraph 1 hereof, respondent in soliciting the sale of and in selling and distributing their merchandise, furnish and have furnished various devices and plans of merchandising which involve the operation of games of chance, gift enterprises, or lottery schemes, when said, merchandise is sold and distributed to the ultimate consumer thereof. The lllethod or sales plan adopted and used by respondents was and is substantially as follows:

Respondents distribute and have distributed to the purchasing Public certain literature and instructions, including among other things, push cards, order blanks, illustrations of their said merchandise and circulars explaining respondents' plan of selling merchandise an~ of allotting it as premiums or prizes to the operators of said Ptish cards and to the purchasing and consuming public. One of respondents' push cards bears 58 feminine names with ruled columns on the reverse side thereof for writing in the name of the customer opposite the feminine name selected. Said push card has 58 small Complaint 33 F. T. C. partially perforated discs on the face of which is printed the ~~rd "push." Each of such discs is set under one of the aforesaid fern1Dl118 names. Concealed within each disc is a number which is disclosed only when the disc is pushed or separated from the card. The push card also has a large master seal and concealed within the roaster seal is one of the feminine names appearing on the face of said card. The person selecting the feminine name corresponding to the o~e under the master seal receives a radio. Persons selecting certa:tn designated numbers set out in the legend in the center of said card also receive a premium or prize. The push card bears a legend or instructions as follows :

Name Under Seal Receives A Licensed AC DC R. C. A. RADIO No ground Required R. C. A. Licensed Tubes Do not remove seal until entire card is sold Nos. 1-39 pay what you draw.

All others 3D¢. None higher 4 EXTRA WINNERS 4 Nos. 1-9-19 and 29 Each Receive a Combination Pen and Pencil. Sales of respondents' merchandise by means of said push card are made in accordance with the above-described legend or instructions. Said prizes or premiums are allotted to the customers or purchasers in accordance with the above-described legend or instructions. The fact as to whether a purchaser receives an article of merchandise or noth· ing for the amount of money paid, and which of said articles of merchandise the purchaser is to receive, if any, is thus determined wholly by lot or chance.

Respondents furnish, and have furnished, various other push cards accompanied by order blanks, instructions, and other printed matter for use in the sale and distribution of their merchandise by means of a gan1e of chance, gift enterprise, or lottery scheme. The snl~s plan or method involved in connection with the sale of all of satd merchandise by means of said other push cards is the same as that hereinabove described, varying only in detail. P .AR. 3. The persons to whom respondents furnish and have fur· nished the said push cards use and have used the same in purchasing, Felling, and distributing respondents' merchandise in accordance with the aforesaid sales plan or method. Respondents thus supply to, and place in the hands of others, the means of conducting lotteries RADIO DISTRIBUTORS 1381 1378 Findings in the sale of their merchandise and the sale of said merchandise by and through the use thereof and by the aid of said sales plan or lnethod is a practice of a sort which is contrary to an. established ~ublic policy of the Government of the United States and in violahan of the criminal laws. · PAR. 4. The sale of merchandise to the .purchasing public in tb<a lnanner above alleged involves a game of chance or the sale of a fhance to procure an article of merchandise at a price much less than 1?e normal retail price thereof. Many persons, firms, and corporalions, who sell or distribute merchandise in competition with the respondents, as above alleged, are unwilling to adopt and u~ said lnethod 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 <·ontrary to 1mblic policy, and such competitors refrain therefrom. Many persons are attracted by said sales plan or method employed by respondents in the sale and distribution of their merchandise and the element of chance involved therein, and are thereby induced to ·buy and sell respondents' merchandise in preference to merchandise offered :for sale and sold by said competitors of respondents Who do not use the same or an equivalent method. The use of said lnethod by respondents, because of said game of chance, has a tend- (~ncy and capacity to, and does, unfairly divert trade in commerce between and among the various States of the United States and in the District of Columbia to respondents from their said competitors Who do not use the same or an equivalent method, and as a result thereof substantial injury is being, and has been done by respondents to competition in commerce between and among the various States of the United States and in. the District of Columbia. PAR. 5. The aforesaid acts a:nd practices of respondents, as herein alleged, are ull to the prejudice and injury of the public and of respondents' competitors and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices 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 Commission, on June 7, 19-!0, issued and subsequently served its complaint in this proceeding upon the respondents, Leona Johnson and Aubrey :M. Graff, individually and trading as Radio Distributors, charging them 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. After Findings 33F.'f.C.

the issuance of said complaint, testimony, and other evidence in ~support of the allegations of said complaint were inhoduced ~y L. P. Allen and D. C. Daniel, attorneys for the Commission, and Ill opposition 'to the allegations of the complaint by A. H. Schwa~, attorney for the respondents, before ,V. W. Sheppard, a trial e:x:a~~ ner of the Commission theretofore duly designated by it, and sal testimony anrl other evidence were duly recorded and filed in the office of the Commission. Thereafter the proceeding regularly can:e on for final hearing before the Commission on said complaint, testimony, and other evidence, report of the trial examiner upon. ~he evidence, and briefs in support of the complaint and in opposition thereto (oral argument not .having been requested), and the Com· mission having duly considered the matter and being now fully advised in the premises, finds that this proceeding is in the inter~st 0f the public and makes this its findings as to the facts and 1ts conclusion drawn therefrom.

FINDINGS .AS TO THE F.ACTS PARAGRAPH 1. Respondent Leona Johnson is an individual trading as Radio Distributors, with her principal office and place of business located at 30 North Dearborn Street, Chicago, Ill. Respondent Aubrey M. Graff is an individual who, during the ti:rnes mentioned herein, was employed by the respondent Leona Johnson, trading as Radio Distributors.

P .AR. 2. For more· than 1 year last past the respondent Leona Johnson, trading as Radio Distributors, has been engaged in the sale and distribution of radios and other articles of merchandise to purchasers thereof located in the various States of the United States and in the District of Columbia. The respondent causes her said :rnerf C'handise, when sold, to be transported from her aforesaid place 0 business in the State of Illinois to purchasers thereof located in various other States of the United States. Said respondent maintains, and ~1 all times mentioned herein has maintained, a course of trade in sal merchandise in commerce among and between the various States of the United States.

In the course and conduct of her said business the res~ondent Leona Johnson, trading as Radio Distributors, is and has been in competition with other individuals and with partnerships and corporations en· gaged in the sale and distribution of like or similar articles of :mer· chandise in commerce among and between the various States of th9 United States.

RADIO DISTRIBUTORS 1383 1378 Findings PAn. 3. In the course and condu~t of her aforesaid business, the :respondent Leona Johnson, trading as Radio Distributors, in solicit- I~g the sale of, and in selling and distributing, her merchandise, furnishes and has furnished various devices and plans of merchandising Which involve the operation of games of chance, gift enterprises, or lottery schemes when said merchandise was sold and distributed to the ultimate consumer thereof. The method or sales plan adopted and llsea by said respondent was and is substantially as follows: Respondent distributes and has distributed to the purchasing public <'certain literature and instructions, including, among other things, push ~ards, order blanks, illustrations of her said merchandise, and circu- ~rs explaining respondent's plan of selling merchandise and of allotting it as premiums or prizes to the operators of said push C!lrds and to the purchasjng and consuming public.

One of respondent's push cards bears 58 feminine names with ruled columns on the reverse side thereof for writing in the name of the customers opposite the feminine name selected. Said push card has 58 small partially perforated disks, on the face of which is printed ~he ~ord "push." Each of such disks is set above one of the aforesaid ~llllnine names. Concealed within each disk is a number, which is ~Isclosed only when the disk is pushed or separated from the card. The push card also has a large master seal, and concealed within the lll~ster seal is one of the :feminine names appearing on the :face of said card. The person selecting the feminine name corresponding to the one under the master seal receives a radio. Persons selecting certain designated numbers set out in the legend in the center of said ~ard also receive a premium or prize. The push card bears the followlug legends or instructions, in addition to· a pictorial representation of a portable radio and the seals and disks above described: Nap1e under seal receives a RCA radio.

Numbers 1 to 39 pay what you draw. AU others 39¢. None higher. Numbers 1-9-19 and 29 each receiv~ a combination pen and pencil. Sales of respondent's merchandise by means of said push cards a.re made in accordance with the above-described legend or instructions. Said prizes or premiums are allotted to the customers or purt'1'hasers in accordance with the above-described legends or instructions. he fact as to whether a purchaser receives an article of merchandise or nothing for the amount of money paid and which of said articles ~f :merchandise the purchaser is to receive, if any, is determined wholly Y lot or chance.

l 1384 FEDERAL TRADE CO:MMISSION DECISIONS Findings 33F. T.C.

Respondent furnishes and has furnished various other push cards, accompanied by order blanks, instructions, and other printed matter for use in the sale and distribution of their merchahdise by means o£ a game of chance, gift enterprise, or lottery scheme. The sales plan or method involved in connection with the sale of all of said ;mer· chandise by means of said other push cards is the same as that here· inabove described, varying only in detail. · PAR. 4. During the period of 16 months prior to February 6, 1941, the respondent Leona Johnson, trading as Radio Distributors, mailed out approximately a million and a half sets of literature containing push cards similar to the one above described. This mailing netted ~ return of approximately 10,000 orders for merchandise. The per· sons who placed such orders for merchandise used the said push cards in purchasing, selling, and distributing respondent's merchandise in accordance with the above-described sales plan or method. Said re· spondent thus supplies to and places in the hands of others, the means of conducting lotteries in the sale of her merchandise, and the sale of said merchandise by and through the use thereof and by aid o£ said sales plan or method, is a practice of. a sort which is contrary to an established public policy of the Government of the United States. and in violation of the criminal laws.

PAR. 5. The sale of merchandise to the purchasing public in the manner above described involves a game of chance or the sale of P. chance to procure an article of merchandise at a price much Jess than the normal retail price the.reof. :Many persons, firms, and corpora· tions who sell or distribute merchandise in competition with the respondent Leona Johnson, trading as Radio Distributors., are un· willing to adopt and use said method or any method involving 11 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 coJll· petitors refrain therefrom. Many persons are attracted by said sales plan or method employed by the respondent Leona Johnson in the sale and distribution of her merchandise and the element of chance involved therein, and are therel;>y induced to buy and sell said re· spondent's merchandise in preferenee to merchandise offered for sale nnd sold by said competitors of respondent who do not use the same or an equivalent method. The use of said method by said respondent, because of said game of chance, has the tendency and capacity to, nnd does, unfairly divert trade in commerce between and among the various States of the United States to said respondent from her said competitors who do not use the same or an equivalent method, and, as a result thereof, substantial injury is being and has been done by RADIO DISTRIBUTORS 1385 1378 Order said respondent to competition in commerce between and among the v-arious States of the United States.

CONCLUSION . The aforesaid acts and practices of the respondent Leona Johnson, Individually and trading as Radio Distributors, as herein found are all to the prejudice and injury of the public and of said respondent's. competitors and constitute unfair methods of competition in commerce and unfair and deceptive acts and practices 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 Commis- Sion upon the complaint of the Commission, testimony and other evidence before w·. 1V. Sheppard, a trial examiner of the Commission theretofore duly designated by it, in support of the allegations of saiu complaint and in opposition thereto, report of the trial examiner llpon the evidence and briefs filed herein, and the Commission having lllade its findings as to the facts and its conclusion that said respondent Leona Johnson, individually and trading as Radio Distributor~~ has v-iolated the provisions of the Federal Trade Commission Act. It is ordered, That the respondent Leona Johnson, individually and trading as Radio Distributors, her representatives, agents, and emt~loyees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution of radios and other articles of merchandise in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Supplying or placing in the hands of others, push cards or other dev-ices which are to be used or may be used in the sale or distribution of said merchandise to the public by means of a game of chance, gift enterprise, or lottery scheme.

2. Shipping, mailing, or transporting to members of the purchasing public push cards or other devices which are to be used or may be used Jn the sale or distribution of said merchandise to the public by meansof a game of chance, gift enterprise, or lottery scheme. 3. Selling or otherwise disposing of any merchandise by means of a game of chance, gift enterprise, or lottery scheme. It is further ordered, That the complaint be dismissed as to therespondent Aubrey 1\I, Graff.

It is fwther ordered, That the respondent shall, within 60 days aiter- ~erv-ice upon her oi this order, file with the Commission a report in 'Writing, setting forth in detail the manner and form in which she has complied with this order.

l 1386 FEDERAL TRADE COMMLSSION DECISIONS Complaint 33 F.T.O·