David Chalmers Tobacco Co

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IN THE MA'ITER OF f ' . . . 'DAVID CHALMERS TOBACCO COMPANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1~14 I Docket 474G. Complaint, Apr. 19, 1.'142-Decision, July 2, 1942 Where a corporation, engoged In the competitive Interstate sale and distribution, among other things, of assortments ot pipes so packed and assembled as to Involve the use ot games of chance, gift enterprises, or lottery schemes when sold and distributed to consumers, a typical assot·tment consisting of twelve of Its "Yello-Bole" pipes and a punch-board for use In sale thereof under a plan by which· purchosers securing, by chance, certain numbers received said pipes, as did those making last punch In each of sections Into which board was divided, those securing certain other numbers each received 20 cents, and others received nothing, and under whch the amount paid tor a chance was determined by the number. punched- Sold such assortments to wholesalers, jobbers, and retailers by whom they were exposed and sold to the purchasing public in accordance with aforesaid plan involving sale of chance to procure pipes at much less than retail price thereof, and thereby supplied to.and placed In the hands of others the means of conducting lotteries In the sale of its products; controry to established Government policy, and In competition with many who do not use such or other methods contrary to public policy;

With the result that many persons were attracted by said chance sales plan, and were thereby Induced to buy and sell products of said corporation In preference to pipes of said competitors, whereby trade was unfairly diverted to It from them, and substantial Injury was done to competition: Held, That such acts and practices, under the circumstances set forth, constituted unfair methods of competition In commerce and unfair acts and practices therein.

Mr. J._ W. Brookfield, Jr., for the Commission. Complaint Pursuant to the provisions of the Federal Tr.ade Commission Act and by virtue of the authority vested in it my said act, the Federal Trade Commission, having reason to believe that David Chalmers Tobacco Co., a corporation, hereinafter referred to as respondent, has violated the provisions of said act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the interest of the public, hereby issues it complaint stating its charges in that re. spect ns follows:

DAVID ·CHALMERS TO·BACCO CO. 5 4 Complaint PARAGRAPH 1. Respondent, David Chalmers Tobacco Co., is a corporation, organized and doing business under the laws of the State of Missouri with its office and principal place of business located at 724. Main Street, Kansas City, Mo. Respondent is now, and for more than 6 months last past, has been, engaged in the sale and distribution ·of smoking pipes, cigars, leather goods, and other articles of merchandise to jobbers and retail dealers located at points in the various States of the United States and in the District of Columbia. Respondent causes and has caused said products, w:hen sold, to be transported from its principal place of business in the city of Kansas City, Mo., to purchasers thereof at their respective points of location in the various States of the United States other than Missouri and in the District of Columbia. There is now and has be~n for more than 6 months last past, a course of trade by respondent in such smoking pipes and other 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 said business respondent is and has 'been in competition with other corporations and with partnerships and individuals engaged in the sale nnd distribution of smoking pipes nnd other merchandise in commerce between and among the various States of the United States and in the District of Columbia. PAR. 2. In the course and conduct of its business, as described in ~aragraph 1 hereof, respondent sells and has sold to wholesale dealers, Jobbers, and retail dealers certain assortments of smoking pipes so Packed and assembled as to involve the use of games of chance, gift enterprises, or lottery schemes, ·when sold and distributed to the consumers thereof.

One of said assortments is hereinafter described for the purpose of showing the method used by respondent, and is a sfollows: This assortment includes 12 "Yello-Bole" smoking pipes and a ~unchboard. Appearing on the face of the punchboard is the followlng inscription:

6 FEDERAL TRADE COMMISSIOK DECISIO:NS Complaint 35F. T. C.

70 FREE NUMBERS 70 All NUMBERS ENDING IN "o" ARE FREE Nos. 177-200-277-J77-400-477-500-577 EACH ~ECEIVES A $1.50 IMPERIAL YELLO-BOLE PIPE-Nationally Advertised Sweet as Honey . All Nu~bers Ending in The Pipe YELLO-BOLE 1 PAY --------------1¢ That Is $1.50 2 PAY -------------2¢ Cured With 3 PAY ______________ 3¢ (Depiction Honey of Pipe) EQUAL TO 4 PAY --------------4¢ Cured with 5-<l-7-8-9 THE BEST Honey EACH PAY ONLY 5¢ AT ONLY Free Draft Numbers Ending in 0 $1.50 Double Condenser Are FREE IMPERIAL Nos. 22-44-60-122-144-166-222-244 206-322-J44-3G0-422-444-460-522 544-500-022-644 Each Rec's 20 Cigarettes Last Punch, in Each, Section Rec's A $1.50 Impef"iaZ Yello-Bole Pipe Said pipes are distributed to the purchasing public in accordance with the foregoing legend. The sales price of a punch on the board is determined by the number punched. Persons punching numbers ending in 1 pay 1 cent, 2 pay 2 cents, 3 pay 3 cents, 4 pay 4 cents, and persons punching the numbers 5, 6, 7, 8, and 9 pay 5 cents. Persons punching the number ending in "O" pay nothing for their chance to receive one of the pipes which are distributed to the persons punching the numbers designated on the punchboard legend. Persons punching the numbers which are not designated on the legend as receiving a pipe or cigarettes receive nothing for their money. The pipes are worth more than 5 cents each and the purchaser who purchases a number calling for a pipe or a package ·of cigarettes receives the same for from 1 cent to 5 cents or in some cases free. The numbers under the punches are effecti>ely concealed from the J2Urchasers or prospective purchasers until the punch has been made and the particular punch has been separated from the board. The pipes are thus distributed to the purchasers of the punches from the board wholly by chance and the amount such purchasers pay for the . punch is also wholly determined by chance. The respondent furnishes and has furnished other punchboards and pipe assortments for use in the sale and distribution of its DAVID CHALME,RS TOBACCO CO. 7 4 Findings smoking pipes by means of a game of chance, gift enterprise, or lottery scheme; such punch boards and assortments are similar to the one herein described and vary only in detail. PAR. 3. Retail dealers who purchase respondent's smoking pipes, <lirectly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent thus supplies to, and places in the hands of others, the means of conducting lotteries in the sale of its products in accordance with the sales plan hereinabove set forth. The use by respondent of said sales plan or method in the sale of its smoking pipes and the sale of said smoking pipes by and through the use thereof and by the aid of said sales plan or method is a pmctice of a sort which is contrary to an established public policy of the Government of the United States. PAn. 4. The sale of smoking pipes to th~ purchasing public by the method or plan hereinabove set forth involves a game of chance or the sale of a ch:mce to procure smoking pipes at prices much less than the normal retail price thereof. l\fany persons, firms, and corpo:rations who sell and distribute smoking pipes in competition With respondent, as above alleged, do not use said method or any method involving a game of chance or the sale of a chance to win sometlling by chance or any other method contrary to public policy. Many persons are attracted by said sales plan or method employed by respondent in the sale and distribution of its smoking pipes by the el('ment of chance involved therein and are thereby induced to buy nnd sell respondent's smoking pipes in preference to smoking pipes of said competitors of respondent who do not use the same or equivalent methods. The use of said method by respondent because of said ~ame of chance has a tendency and,capacity to unfairly divert trade 1ll. commerce between and among the various States of the United Stutes and in the District of Columbia to respondent from its said competitors who do not use the same or equivalent methods. PAR. 5. The aforesaid acts and practices of respondent, as herein alleged, are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair methods of competittion in commerce and unfair 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 April 13, 1942, issued and thereafter served its complaint in this proceeding upon respondent, David Chalmers Tobacco Co., a corporation, charging it with the use o£ unfair methods of competition in commerce' and unfair acts and practices Findings 35 F. T. C. in commerce, in violation of the provisions of said act. On June 9, 1942, the respondent filed its answer, in which it admitted all the material allegations of fact set forth in the complaint and waived all intervening procedure and further hearing as to the facts. Thereafter, the proceeding regularly came on for final hearing before the Commission on the complaint and answer thereto, and the Commis- -sion, having duly considered the matter and being now fully advised in the premises, 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.

FINDINGS AS TO THE FACTS PARAGRAPH 1. Respondent, David Chalmers Tobacco Co., is a corporation organized and doing business under the laws of the State of Missouri with its office 'and principal place of business located at 724 Main Street, Kansas City, Mo. Respondent is now, and for more than 6 months last past has been, engaged in the sale and distribution of smoking pipes, cigars, leather goods, and other articles of merchandise to jobbers and retail dealers located at points in the various States of the United States and in the District of Columbia. Respondent causes and has caused said products, when sold, to be transported from its principal place of business in the city of Kansas City, Mo., to purchasers thereof at their respective points of location in the various States of the United States other than Missouri and in the District of Columbia. There is now and has been for more than 6 months last past, a .course of trade by respondent in such smoking pipes and other merchandise in commerce between ~nd among the various States of the United States·and in the District of Columbia. In the course and conduct of said business respondent is and has been in competition with other corporations and with partnerships and individuals engaged in the sale and distribution of smoking pipes and other merchandise in commerce between and among the. various States of the United States and in the District of Columbia. PAR. 2. In the course and conduct of its business, as described in paragraph 1 hereof, respondent sells and has sold to whole>sale dealers, jobbers, and retail dealers certain assortments of smoking pipes so packed and assembled as to involve the use of games of chance, gift enterprises, or lottery schemes, when sold and distributed to the consumers thereof.

One of said assortments is hereinafter described fur the purpose of ~.·showing the method used by respondent, and is as follows: 'DAVID CHALMERS TOBACCO CO. 9 4 Findings This assortment' includes 12 "Yello-Bole" smoking" pipes and a punchboard. Appearing on the face of the punchboard is the following inscription:

70 FREE NUMBERS 70 ALL NUMBERS ENDING IN "o" ARE FREE Nos. 177-200-277-377-400-477-500--577 EACH RECEIVES A $1.50 IMPERIAL YELLO-BOLE PIPE-Nationally advertised Sweet AU Numbers Ending ln as 1 PAY --------------1¢ Honey The Pipe YELLO-BOLE That Is 2 PAY --------------2¢ $l.GO Cured With (Depletion 3 PAY --------------3¢ Honey of Pipe) 4 PAY _____________ _4¢ EQUAL TO Cured with THE BEST Honey 5-6-7-8-9 AT ONLY Ft·ee Draft $1.GO EACH PAY ONLY ___ 5¢ Double Condenser Numbers Ending In Il\IPERIAL 0 are FREE Nos. 22-44-66-122-144-lGG-222-244 266-322-344-3GG-422-44~4G6-522 544-5G6-622-644 Each Rec's 20 Cigarettes Last Punch In Each Section Rec's A $1.50 Imperial Yello-Bole Pipe • .Said pipes are distributed to the purchasing public in accordance ·~nth the foregoing legend. The sales price of a punch on the board ls determined by the number punched. Persons punching numbers ~nding in 1 pay 1 cent, 2 pay 2 cents, 3 pay 3 cents, 4 pay 4 cents, llnd persons punching the numbers 5, 6, 7, 8, and 9 pay 5 cents. Persons punching' the number ending in "O" pay nothing for their chance to receive one of the pipes which are distributed to the Persons punching the numbers designated on the punchboard legend. Persons punching the numbers which are not designated on the legend as receiving a pipe' or cigarettes receive nothing for their money. The pipes are worth more than 5 cents each and the purc~aser who purchases a number calling for a pipe or a package of Cigarettes receives the same for from 1 to 5 cents or in some cases free. The numbers under the punches ar~ effectively concealed from' the purchasers or prospective purchasers until the punch has been tnade and the particular punch has been separated from the board. 10 FEDERAL TRADE COMMISSION DE•CISIONS Findings 35F.T.C.

The pipes are thus ·distributed to the purchasers of the punches from the board wholly by chance and the -amount such purchasers pay for the punch is also wholly determined by chance. The respondent furnishes and has furnished other punchboards and pipe assortments for use in the sale and distribution of its smoking pipes by means of a game of chance, gift enterprise, or lottery scheme; such punchboards and assortments are similar to the one herein described and vary only in detail. · PAR. 3. Retail dealers who purchase respondent's smoking pipes, directly or indirectly, expose and sell the same to the purchasing public in accordance with the sales plan aforesaid. Respondent thus suppli<.'s to and places in the hands of others the means of conducting lotteries in the sale of its products in accordance with the sales plan htreinabove set forth. The use by respondent of said sales plan or method in the sale of its smoking pipes and the sale of said smoking pipes by and through the use thereof and by the aid of said sales plan or method is a practice of a sort which is contrary to an established public poliry of the Government of the United States. PAR. 4. The sale of smoking pipes to the purchasing public by the method or plan hereinabove found involves a game of chance or the sale of a chance to procure smoking pipes at prices much less than the normal retail prire thereof. l\fany persons, firms, and corporations who sell and distribute smoking pipes in competition with respondent, as above found, do not use said method or any method in~ volving a game of chance or the sale of a chance to win something by chance or any other method contrary to public policy. l\fany persons are attracted by said sales plan or method employed by respondent' in the sale and distribution of its smoking pipes by the element of chance involved therein and are thereby induced to buy and sell respondent's smoking pipes in preference to smoking pipes .of said competitors of respondent who do not use the same or equivalent methods. The use of said method by respondent because of said game of chance has a tendency and capacity to, and does, unfairlv divert. trade in commerce between and among the various State; of the United States and in the District of Columbia to respondent from its said competitors who do not use the same or equivalent methods, and as a result thereof substantial injury is being, and has been, done by respondent to competition in commerce between and among the various States of the United States imd in the District of Columbia. DAVID CHALMERS TOBACCO CO. 11 4 Order CONCLUSION The aforesaid acts and practices of respondent as herein set forth 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 CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission and the answer of respondent, in which answer respondent admits all the material allegations of fact set forth in said complaint, and states that it waives all intervening procedure and further hearing as to said facts, and the Commission having made its findings as to the facts and conclusion that the said respondent has violated the provisions of the Federal . Trade Commission Act.

It ·is ordered, That the respondent, David Chalmers Tobacco Co., a corporation, its officers, directors, representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution of smoking pipes, cigars, leather goods, and other articles of 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 such merchandise to the public nre 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 devic.es, either with assortments of merchandise or separately, which said push or pull cards, punchboards, or other lottQI'y devices are to be used, or may be used, in Selling or distributing said merchandise to the public. 3. Selling or otherwise distributing any merchandise by means of a game of chance, gift enterprise, or lottery scheme. It irJ further ordered, That the respondent shall, within 60 days after service upon it of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this order.

FEDERAL TRADE COMMISSION DE·CISIONS 12 Complaint 35 )!. T. C.