Simon Aron

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IN THE l\IA TTER OF SIMON ARON, MORRIS ARON AND LOUIS BROUDO, TRADING AS NOVELTY SALES COMPANY COMPLAINT, FINDINGS, AND ORDER IN REG.\RD TO THE ALLEGED 'VIOLATION OF SEC. fi OF AN ACT O:F CONGRESS .APPROVED SEPT. 26, 1914 Docket 4039. Complaint, Feb. 2.t, 1940-Decision, June 16, 19.~2 Where three partners; engaged in competitive interstate sale a11d distribution of clocks, knives, flashlights, trays, jewelry, and other merchandise to deal-· ers- Sold and distributed assortments thereof which were so packed and assembled as to involve the use of a game of chance, gift enterprise, or lottery scheme when sold and distributed to the consumer, ·a typical assortment consisting· of a number of articles of merchandise, together with a punchboard-in manufacture and sale of wllich two of the partners were also engagedunder a plan by which persons securing certain numl.Jers fot• the 5 cents usually puld for a punch secured the articles, others receiving nothing; and thereby Supplied to and placed in the hands of purchasers, who exposed their assortments to the purchasing public and distributed merchandise in accordauce· with plan described, a means of conducting games of chance, gift enterprises,. or lotteries In the sale of said products in acc.m·dance with such plan; With the result that many persons purchased said merchandise In preference to that offered by compettto'rs who did not· use similar sales methods, whet·eby competition was hindered and trade unfairly diverted from such competitorsto them:

Held, That such acts and practices, under the circumstances set forth, we•·e all to the prejudice and injury of the public and ~ompetltors, were contrary to the public policy of the United States Government, and constituted unfail~ methods of competition in commerce and unfair acts and practices therein. Before Mr. John lV. Addison, M-r. Arthur ~. Thomas, and Mr. Andrew B. Duvall, trial examiners.

Mr. D. 0. Da:niel and Mr. J. lV. Erool.."field, Jr. for the Commission. Mr. A1·thur S. Salus and Jrfr. DavidS. M olod, of Philadelphia, Pa., for respondents.

Col\IPLAINT 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 Simon Aron, Morris Aron, and Louis Droudo, individually and as copartners, trading under the name of Novelty Sales Co., have violated the provisions of said act, and it appearing to the Commission that a proceeding by it in NOVELTY SALES CO. 1397 1300 Complaint respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows: · PARAGRAPH 1. Respondents, Simon Aron, 1\forris Aron, and Louis Broudo, are individuals, trading as copartners, under the name of Novelty Sales Co., with their principal office and place of business located at 806 Walnut Street, Philadelphia, Pa. Respondents are now, and for more than 1 year' last past have been, engaged in the sale and distribution of clocks, knives, flashlights, trays, jewelry, and various other articles of merchandise to dealers located in the various States of the United States and in the District of Columbia. They cause, and have caused; their said merchandise, when sold, to be shipped or transported from their aforesaid place of business in the State of Pennsylvania to purchasers thereof in the various other States of the United States and in the District of Columbia at their respective points of location. There is now, and for more than 1 year last past has been, a course of trade by said respondents in such merchandise in commerce between and among the various States of the United States nnd in the District of Columbia. In the course and conduct of their business, respondents are, and have been, in competition with other Partnerships and individuals, and with corporations, engaged in the ~ale and distribution of like or similar merchandifle in commerce between and among the various States of the United States and in the District of Columbia.

PAR. 2. In the course and cmiduct of their business, as described in Paragraph 1 hereof, respondents sell, and have sold, to dealers certain assortments of said merchandise so packed and assembled as to involve the use of a game of chance, gift enterprise, or lottery scheme when said merchandise is sold and distributed to the consumers thereof. Respondents' said merchandise is so]d and distributed to the con- ~uming public by means of devices commonly .known as punchboards, lU substantially the following manner: Assortments of said merchandise consist of a number of articles of merchandise, together with one of said punchboards. Said punchboards have printed on the tops thereof various. instructions or legends showing the method or ~ales plan by which said merchandise is to be sold or distributed to the purchasing or consuming public. Sales are generally ·5 or 10 cents each, and said punchboard has a number of sealed tubes in Which have been inserted slips of paper with numbers appearing thereon. Each purchaser is entitled to punch one of said slips from };aid board. The numbers are effectively concealed from purchasers :n1d prospective purchasers until a selection has been made and the 1398 FEDERAL TRADE COMMISSION DECFSIONS Complaint 34 F.T. C. slip of paper punched or removed from said board. Persons' punching certain specified numbers are entitled to and receive specified articles of merchandise. Persons obtaining numbers not so specified receive nothing for their money. Said articles of merchandise are thus sold and distributed to the consuming or purchasing public wholly by lot or chance.

Others of said punchboards have no instructions or legends printed thereon but have blank spaces provided therefor. On those punchboards the purchasers thereof place instructions or legends which have the same import or meaning as the instructions or legends placed by respondents on said.punchboard devices first hereinabove described. Respondents sell and distribute various assortments of their said merchandise and furnish various devices for use in the sale &nd distribution of said merchandise, but the sales plan or method employed with each of said devjces is substantially the same as the sales plan or method hereinabove described, varying only in detail. PAR. 3. Retail dealers who purchase or procure respondents' said merchandise and said punchboards and other devices, either directly or indirectly, from respondents, expose said devices and the said merchandise accompanying same to the purchasing public, and sell or distribute such articles of merchandise in accordance with the above described sales plans or. methods~ Respondents thus supply to, and place in the hands of, others the means of ~onducting lotteries, gift enterprises, or games of chance in the sale of said merchandise in accordance with the sales plans or methods' hereinabove set forth. Such sales plans or methods have the tendency and capacity to induce the consuming or purchasing public to purchase respondents' merchandise in preference to similar merchandise offered for sale and sold by their competitors.

PAR. 4. The sale of said merchandise to the purchasing public in the manner above described involves a game of chance or the sale of a chance to procure articles of merchandise at prices less than the normal retail prices thereof. The use by respondents of said methods in the sale 0f their merchandise, and the sale of such merchandise by and through the use thereof and by the aid of said methods is a practice of the sort which is contrary to an established public policy of tl:le Government of the United States and in violation of criminal laws. The use by respondents of said sales plans or methods has the tendency to unfairly hinder competition. Many persons, firms, and corporations who sell and distribute merchandise in competition with the respondents, as above described, are unwilling to adopt and use faid methods or any method involving a game of chance or the sale NOVELTY SALES CO. 1399 13()6 Findings of a chance to win something by chan~e, or any other method that is contrary to public policy, and such competitors refrain therefrom, PAn. 5. 1\fany dealers in, and ultimate purchasers of, merchandise similar to that distributed by respondents are attracted by respondents' said sales plans or methods and by the element of chance involved in the sale of said merchandise in the manner above described and are thereby induced to purchase said merchandise from respondents in preference t~ similar merchandise offered for sale and E>old by said competitors of respondents who do not use the same or similar methods. The use of said methods by respondents has the C;apacity and tendency, because of said game of chance, lottery scheme, or gift enterprise, unfairly to divert trade to respondents from their tompetitors who do not use the same or equivalent or similar methods, and has the capacity to deprive the purchasing public of free competition in said merchandise.

PAn. 6. The aforesaid acts and practices of the respondents, as herein alleged, are all 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 oi the Federal Trade Comlnission Act. · REPORT, FINDINGS AS TO THE FACTS, AND ORDER Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on the 24th day of February A. D. 1940, issued and thereafter served its complaint in this proceeding ~pon the respondents, Simon Aron, Morris Aron, and Louis Broudo, lndividually, and as copartners, trading under the name, "Novelty Sales Company," charging them with unfair methods of competition in comlnerce and unfair and deceptive acts and practices in comlllerce, in violation of the provisions of said act. After the issuance of the complaint and filing of respondents' answer thereto, testimony and other evidence in support of the allegations of the complaint were introduced by attorneys for the Comlnission before duly appointed trial examiners of the Commission designated by it to serve in this proceeding, and said testimony and other evidence were duly recorded and filed in the office of the Commission.

'!'hereafter, said proceeding came on for final hearing before the Commission on the complaint, the answer thereto, testimony and other evidence, report of the trial examiner, briefs in support of the Complaint and in opposition thereto, and oral argument and the 1400 FEDERAL TRADE COMNHSSION DECISIONS Findings 34F.T.C.

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. The respondents, Simon Aron, :Morris Aron, and Louis Broudo, from 1927, A. D., to December 31, 1939, were co· partners trading under the name Novelty Sales Co. On the latter date the partnership was discontinued and respondent Simon Aron became sole owner and operator of the business until June 29, 1940, when he died. Since that time his widow, Jennie A ron has con· duc.ted the business. Respondents"' principal place of business was located at 806 'Valnut Street, Philadelphia, Pa., and Jennie Aron now conducts the business at this place.

PAR. 2. Respondents, during the existence of the partnership, and respondent, Simon Aron, from the time of the dissolution of the partnership until the time of his death, were engaged in the sale and distribution of clocks, knives, flashlights, trays; jewelry, and other articles of merchandise to dealers located in yarious States of the United States. Respondents caused their merchandise, when sold, to be shipped from their place of business in Pennsylvania to purchasers thereof located in various States of the United States. Respondents, during the periods herein stated, were in competition wit hother individuals and partnerships, and with corporations, en· gaged in the sale and distribution of like or similar merchandise in ~commerce between and among various States of the United States. Respondents, Morris Aron and Louis Broudo, are also engaged in the business of manufacturing punchboards which were sold to the respondents.

PAR. 3. Respondents sold and distributed assortments of their merchandise so packed nnd assembled as to involve the use of i!. game of chance, gift enterprise, or lottery scheme, when sold and ·distributed to the consumers thereof. Such assortments consisted of u. number of articles of merchandise together with a punchboard. Such punchboards had printed on the top thereof various instructions explaining the method or sales plan by which the merchandise was to be sold or distributed to the consuming public. The punch· hoards had a number of tubes containing slips of paper bearing num· bers. These numbers were efiectinly concealed within the tube until it had been punched and the paper withdrawn. Five cents was the usual price charged for the privilege of punching one of these tubes. NOVELTY SALES CO.· 1401 1396 Order Persons who punched tubes bearing certain numbers received the article 0f merchandise stated in the legend; nothing was received by the persons punching other numbers. The merchandise was thus sold and distributed to the consuming public wholly by lot or chance.

Respondents sold and distributed various assortments of merchandise and furnished various devices for use in the sale and distribution thereof, but the sales plan or method was the same as that herein described, varying only in detail.

PAR. 4. The purchasers of respondents' assortments exposed the same and said device to the purchasing public, and sold and distrib- Uted the merchandise in accordance with the herein described plan or sales method. Respondents thus supplied to and placed in the hands of others the means of conducting games of chance, gift enterprises, or lotteries in the sale of their said merchandise, in accordance with their said sales plan.

PAR. 5. Respondents' sales plan involved a game of chance or the sale of a chance to procure articles of merchandise at a price less than the normal retail price thereof, and because of this, many persons purchased respondents' merchandise in preference to similar Inerchandise offered for sale by competitors of respondents who were ltnwilling to use and did not use the same or similar methods in dis- Posing of their merchandise. As a result, competition has been hindered and trade unfairly diverted to respondents from . their competitors.

CONCLUSION The aforesaid ~cts and practices of the respondents were all to the Prejudice and injury of the public and of respondents' competitors, are contrary to the public policy of the Government of the United States of America, and constitute unfair methods of competition in commerce and unfair acts and practices in commerce within the intent and :meaning of the Federal Trade Commission Act. ORDER TO CEAS~ AND DESIST .T~is proceeding having been heard by the Federal Trade Comllllsslon upon the complaint of the Commission, the answer of respondents, testimony and other evidence in support of the allegahons of the complaint taken before duly appointed trial examiners of the Commission designated by it to serve in this proceeding, repor~ of the trial examiner, briefs in support of the complaint and in opposition thereto, and oral argument: And the Commission having Order 34F.T.C.

made its findings as to the facts and its conclusion that the respondents have violated the provisions of the Federal Trade Commission Act.

It is ordered, That respondents, Morris Aron and Louis Broudo, individually, and as copartners, trading under the name of Novelty Sales Co., or trading und~r any other name, jointly or severally, clirectly·or through any corporate or other device, in connection with the offering for sale, sale, and distribution of clocks, knives, flash· lights, trays, jewelry, 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 any merchandise so packed or assembled that sales of same 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 punchboards, push or pull cards, or other lottery device, either with assortments of merchandise or separately, which said punchboards, push or pull cards, or other lottery device, 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 means of a game of chance, gift enterprise or lottery scheme. It is further ordered, That the complaint, insofar as it relates to respondent, Simon Aron, be and the same hereby is dismissed. It i$ further ordered, That respondents, Morris Aron and Louis Broudo 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. BLA:ti.TK & STOLLE'R COR·P ., ET AL. 1403 Syllabus