Smith, Kersii a

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IN THE MATTER OF RERSH A. SMITH, TRADING AS TEETERDABE COMPANY OF COLORADO COM:PLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. II OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3109. Complaint, Feb. 1~, 1939-Decision, Aug. 31, 194! .Where an individual engaged In competitive interstate sale and distribution of electric Irons, toasters, cameras, fans, and other artlcles- ?i{ade use of certain devices and plans of me1·chandising which involved the opern.tion of games of chance, gift euterprises or lottery schemes, through supplylug a pull card for use in sale and dlstt·ibutlon of articles concerned Under a plan by which the person sdecting the feminine name found to correspond with that concealed under card's master seal reeelved choice of "Six useful, attractive household items," as thereon displayed, the amount paid for a chance was .determined by the number disclosed under the pull tab selected, and operator was compensated, after sale of articles concerned, by having forwarded to him, along with the particular item of merchandise selected by the winning customer, a "Teeterbabe jumper seat"; and thereby Sullplied to and placed the ;means of conducting lotteries In the sale of his merchandise In the hands of operators wbo made use of aforesaid sales plan, Involving chance to obtain article at less than normul retail price thereof; contrary to an established public policy of the United States Government, and in competition with many who, unwilling to use such or other meUlod contrary to public policy, refrain therefrom; · . . . 'With result that many persons were attracted by said sales plan and the element ~f chance Involved therein, and were thereby induced to buy and sell said merchandise In preference to that offered by said competitors; whereby trade . was diverted unfairly from them to him:

lleld, That such acts and practices, under the circumstances set forth, were all to the prejudice of the public and competitors, and constituted unfair methods of competition in commerce and unfair acts and practices therein. Defore Mr. lVilliam 0. Reeves and Mr. Miles J. Fu.rnas, trial esta:rniners.

Jtr. L. P. Allen, Jr. and 11/r. J. V. Mishou for the Commission. Mr. Robert T. Kingsley, of Denver, Colo:, for respondent. Complaint Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said net, the Federal !trade Commission,. having reason to believe that Kersh A. Smith, 111dividually, and trading as Teeterbabe Co. of Colorn.do, hereinafter ' ~eferred to as respondent, has violated the provisions of said act, and}·. lt appearing to the Commission that a proceeding by it in respect Complaint 35F.T· C.

thereof would be in the interest of the public, hereby fssues its com· plaint, stating its charges in that respect as follows: PARAGRAPH 1. Respondent, Kersh A. Smith; is an individual, trading as Teeterbabe Co. of Colorado, with his principal office and place ~£ business located at 4714 cnay Street, Denver, Colo. Respondent .19 now, and for some time lust past has been, engaged in the sale and dis· tribution of electric irons, electric toasters, cameras, electric fans, hot plates, electric mixers, "Teeterbabe Jumper Seats," kiddie chairs, and other articles of merchandise, in commerce between and among t~le various States of the United States and in the District of Columb111• Respondent causes, and has caused, said products when sold to be transported from his aforesaid place of business in Colorado to pu.r· chasers thereof in the various other States of the United States and 1n the District of Columbia, at their respective points of location. There is now, and has been for some time last past, a course of trade bY respondent. in such merchandise in commerce between and among t~le various States of the United States and in the District of Columb111' In the course and'conduct of said business, respondent is, and has been, in competition with other individuals and with partnerships and cor· porations engaged in the sale and distribution of like or similar articles or 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 conduci of his business, as described in paragraph 1 hereof, respondent in soliciting the sale of and in selling and distributing his merchandise in commerce, as hereinabove described, furnishes, and has furnished, various devices and plans of merchandising which involve the operation of games of chance, gift enterprises or lottery schemes by which said merchandise is sold and -distributed to the ultimate consumers thereof wholly by lot or chance. The method or sales plan adopted and used by respondent was and is substantially as follows: . . · . Respondent distributes and has distributed to the purchasing publlc through the United States inail c~rtain literature and instruct~ons . including, among other things, pull cards, order blanks, illustrations of his said merchandise, and circulars explaining respondent's plan of Felling merchandise and of allotting it as premiums or prizes to the operators of said pull cards.· One of respondent's pull cards bears twenty-four (2!) feminine nanies with ruled columns on the reverse side thereof for writing in the name of the customer opposite the feminine name selected. Said pull card has twenty-four (24} small, partially perforated tabs on the face of which is printed the word "pull." Concealed within each tab is a number which is disclosed when the tab is pulled or separated from the card. The pull card TEETERBABE CO. OF COLORADO . 393 391 Complaint · also has a l!large master seal, and concealed within the master seal is ?ne of the feminine names appearing on the reverse side of said card. £he pull card bears legends or instructions as follows : DELUXE Six Star SPECIAL 6 Useful Attractive Household Items Select your favorite girl's name and receive your choire and selection of either an ELECTRIC :MIXER-ELECTRIC IRON ELECTRIC HOT PLATE-ELECTRIC TOASTER 8" ELECTRIC lan-UNIVEX CAMERA Numbers Under 29 Pay What You Draw Numbers Over 29 Pay Only 29¢ }\JO HIGHER Do Not Break Seal Untll All Collections Are Made Write Your Name Opposite Name You Select on Reverse Side Sales of respondent's merchandise by means of said pull cards are l~ade in accordance with the above-described legends and instruchons. · Said prizes or premiums are all~tted to the customer;; or l)tirchasers in accordance with the above legends and instructions. The fact as to whether a purchaser receives an article of merchandise or. 110thing for the amount of money paid or whether a person receives ~n article of merchandise without cost, is thus determined wholly by· ot or chance.

Respondent furnishes and has furnished various pull cards accom- Panied by said order blanks, instructions, and other printed matter for use in the sale and distribution of his merchandise by means. of . a game of chance, gift enterprise, or lottery scheme. The sales plan or method involved in connection with the sale of all of said merchan- <lise by means of said pull cards is the same as that hereinabove described, varying only in detail.

PAR, 3. The persons to whom respondent furnishes the said pull <'ards use the same in purchasing, selling, and distributing respondent's merchandise, in accordance with the llforesaid sales plan. Re- R[)ondent thus supplies to, and places in the hands of, others the means of conducting lotteries in the sale of his merchandise in accordance · "'ith the sales plan hereinabove set forth. The use by respondent of :I. I :. 1 . i 394 FEDERAL TRADE -COMMISSION DECISIONS Findings 35F. T.C.. :

said sales plan or method in the sale of his merchandise and the sale of said merchandise 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 ~stablished public policy of the Government of the United States and in violation of the criminal laws.

r AR. 4. The sale of merchandise to the purchasing public in the manner above alleged involves a game of chance or the sale of a chance to procure an article of merchandise at a price much less than the· normal retail price thereof. :Many persons, firms, and corporations, who sell or distribute merchandise in competition with the respondent, as above alleged, 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. 1\fany persons are attracted by said sales plan or method employed by respondent in the sale and distribution of his merchandise and the element of chance involved therein, and are thereby induced to buy and sell respondent's merchandise in preference to merchandise· offered for sale and sold by said competitors of respondent who do not' use the same or an equivalent method. The use of said method by respondent, because of said game of cluitice, has a tendency and capacity to, and uoes, unfairly ·divert traile to respondent from his said competitions who do not use the same or an equivalent method, 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 and in the District of Columbia. • . 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 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 Onder Pursuant to the provisions of the Federal Trade Commission Act, the Federal Trade Commission, on February ·14, 1939, issued and subsequently served its complaint in this proceeding upon the respondent, Kersh A. Smith, individually, and trading as Teeterbabe Co. of Colorado, charging him 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 that act. After the filing of respondent's answer,' testimony and other evidence in sup- TEETERBABE CO. OF COLORADO 395 Findings Port of the allegations of the complaint were introduced by the . attorney for the Commission, and in opposition thereto by the attorney for the respondent, before trial examiners of the Commission ~heretofore duly designated by it, and such testimony and other evi- ,ence were duly recorded and filed in the office of the Commission. \hereafter, the proceeding regularly came on for final hearing before t 6 Commission on the complaint, the answer thereto, testimony and ~t~ler evidence, report of the trial examiners upon the evidence, and reef in support of the complaint (no brief having been filed by ~spon~e?t and oral argument. not having been reques~ed); and the 0n:misswn, having duly considered the matter and bemg now fully lldvised 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 t PARAGRAPH 1. The respondent, ICersh A. Smith, is an i;1dividual, bra;ling as Teeterl;mbe Co. of Colorado, with his office and place of Usllless located at 4714 Clay Street, Denver, Colo.. Since June 1938, respondent has been engaged in the sale and distribution of various ~r.ticles of merchandise, including, among others, electric irons, elec- ;lc toasters, cameras, electric fans, hot plates, electric mixers, chilc{e~'s jumper seats known as "Teeterbab.e Jumper Seats," and kiddie lairs . , . · .I · PAR·. 2. In the course and conduct ~f }~is business respondent causes anld has cau~ed hi.s products, when s~l~~tfto~e transport?d from his. ll. ace of busmess m the State of Col. 't<J purchasers thereof locat~c} in various other States of th ·~,ited States. Respondent ~~aintains, and sirice J nne 1938, has m0~~1lt&ined, a course of trade in tlls merchandise in commerce among ancl between various States of le United States. · · · :· Pan. 3. In the ~ale'and distribution of his merchandise respondent ls,' and has beert, in substantial competition with. other individuals d With partnerships and corporations engaged in the sale and dis- 1 brlhution of similar articles of merchandise in commerce among and· etween the various States of the United States. PAR. 4. In selling and distributing his merchandise respondent uses ~~rtain devices nnd plans of merchandising which involve the opera- 1011 of games of chance, gift enterprises, or lottery schemes, by which :hch merchandise is sold and dis~ributed to the ultimate consumers l ereof wholly by lot or chance. The method or sales plan used by respondent is substantially as follows: .I I FEDERAL TRADE COMMISSION DE·CISIONS 396 Findings 35F.T.C· Respondent distributes among various members of the purchasi~g public certain sales literature, including letters of instruction, cir· '' culars illustrating certain items of merchandise, and order blan~s. Along with and as a part of this sales equipment, respondent ~upphe~ to such members of the public a device commonly known as a pul card. This pull card has 24 small, partially perforated tabs, . 0~ the face. of each of which appears a feminine name, together wit. ' ' his the word "Pull." Concealed under each tab is a. number, which not disclosed until the tab is pulled or separated from the card. T~e card also bears a large master seal, under which is concealed a feJlll.· nine name corresponding to one of the names appearing on the fa~e of the pull tabs. On the reverse side of the card are blank spaces lD which may be written the names of the persons pulling the various tabs. The card also bears the following instructions: DELUXE Six Star SPECIAL . 6 Useful Attractive Household Items Select your favorite girl's name and receive your choice and selection of either an . ELECTRIC MIXER-ELECTRIC IRON ELECTRIC HOT PLATE-ELECTRIC TOASTER 8" ELECTRIC FAN-UNIVEX CAMERA Numbers Under 29 Pay What you Draw [RF.AL] NUMBERS OVER 29 Pay Only 29¢ NO HIGHER Do Not Break Seal Untll All Collections Are 1\Iade Sales of respondent's merchandise by means of the pull card are made in accordance wit .th<~se ,·instructions. Persons pulling t~~ tabs pay to the operator. ( .be' card the number of cents correspon t ing to the figure concea:ft~. a .. ':er the particular tab pulled, e:xcep that persons pulling tabs LIce :uig numbers in excess of 29 pay only 29 cents. The purchaser·~¢rr_~tling the tab which bears their'e.on the feminine name corresponding to the name concealed beneath the master seal receives one of the six articles of merchandise listed above, each of which has a normal retail value in e.xcess of 29 cents··. The persons pulling the other. tabs on the card receive nothing for their money. 'Vhether the persons pulling the tabs receive an article of merchandise or nothing for the amount of money paid is thus determined wholly by lot or chance, as' is also the specific amount paid for the merchandise by the person pulling the lucky tab. Upon completing the sale of all of the tabs on the card the operator.r of the card remits to respondent the total amount paid by the varl· ous purchasers, and respondent thereupon forwards to the operator a Teeterbabe J urn per Seat, together with the article of merchandi:e selected by the person pulling :the lucky tab.· The jumper seat 1s·· TEE.TERBABE CO. OF COLORADO 397 Order retained by the operator of the card, while the other article of merchandise is delivered by the operator to the purchaser. · PAn. 5. The persons to whom respondent supplies his pull <;ards ~se such cards in selling and distributing respondent's merchandise ln accordance with the sales plan described above. Respondent thus ~Uppl~es ~o and places in the hands of. others the means of conducting 0~teries m the sale of his merchandise. The use by respondent of this sales plan or method in the sale of his merchandise and the sale of such merchandise to the consuming public by and through the use of this plan or method are practices of a sort which is contr8 ary to an established public policy of the Government of the United states.

PAn, 6. The sale of merchandise to the purchasing public in the lnanner herein described involves a game of chance or the sale of a chance to obtain an article of merchandise at a price less than the normal retail price thereof. Among the individuals, firms, and cor- })orations who sell and distribute merchandise in competition with respondent are those who are unwilling to adopt and use such method or any other method which is contrary to public policy, and such competitors refrain therefrom. Many persons are attracted by the · Sales plan or method employed by respondent and by the element of chance involved therein, and are' thereby induced td buy and sell respondent's merchandise in preference to merchandise offered for ~le by those competitors of respondent who do not use such methods. ecause of such game of chance, the use of this method by respondent has the tendency arid capacity to divert and has diverted trade Unfairly to respondent from his competitors who do not use such lnethods. . CONCLUSION t 'I'he ~ct~ and practice~ of respondent as herein fo~nd are all to h.e Prejudice of the public and of respondent's competitors, and constitute unfair methods of competition in commerce and unfair acts ~nd practices· in commerce within the intent and meaning of the ederal Trade Commission Act.

ORDER TO CEASE AND DESIST .'I'~is proceeding having been heard by the Federal Trade Coml'ntssion upon the complaint of the Commission, the answer of resp?ndent, testimony and other evidence in support of and in oppo- Sition to the allegations of the complaint taken before trial examiners of the Commission theretofore· duly designated by it, report of the 509749m--43--vol.35----28 .. II 'I 'I Order 35F. T.C.

trial examiners upon the evidence, and brief in support of the coJll· plaint (no brief having been filed by respondent and oral argume~t not having been requested), and the Commission having made ~ts findings as to the facts and its conclusion that the respondent has V10• lated the provisions of the Federal Trade Commission Act. It is ordered, That the respondent, Kersh A. Smith, individually, and trading as Teeterbabe Co. of Colorado, or trading und~r any other name, and his agents, representatives and employees, directly or through any corporate or other device, in connection with th: offering for sale, sale, and distribution in commerce, as "commerce · is defined in the Federal Trade Commission Act, of electric irons, electric toasters, cameras, electric fans, hot plates, electric mixers, and children's chairs and jumper seats, or any other merchandise, do forthwith cease and desist from:

1. Supplying to or placing in the hands of agents, distributors, or members of. the public, pull cards or other devices which are to be used, or may be used, in the sale or distribution of respondent's merchandise or any merchandise to the public by means of a gaille of chance, gift enterprise, or lottery scheme. 2. Selling or otherwise disposing of any merchandise by means of' a game of chance, gift enterprise, or lottery scheme. · It is further oi'dered, That the respondent shall, within 60 days: after service upon him of this order, file with the Commission a· report in writing setting forth in detail the manner and form in: which he has complied ·with this order.

CAPITOL PAINT· & VARNISH WORKS, INC. 399 ··. Complaint