Dow Chemical Co

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IN THE 11ATTER OF DOW CHEMICAL C011PANY COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 6 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 3991. CCYmplaint, Jan. 4, 194D-Decision, Nov. t!2, 1944 Where a corporation engaged, among other things, in the manufacture and interstate sale and distribution of chlorinated hydrocarbon solvents used in dry cleaning clothing, the most important of which were carbon tetrachloride and mixtures thereof with other solvents, making about half of the carbon tetrachloride and ethylene dichloride used in dry cleaning, and selling to nearly half of the 4,000 to 5,000 dry cleaners who use synthetic solvent machines, synthetic solvents, the nonflammable nature of which permits their use in locations where the fire hazard of petroleum solvents would constitute a public hazard and most of which, in contrast to the petroleum solvents, can be recovered after dry cleaning use in synthetic plants designed therefor;

In selling its said synthetic solvents to numerous jobbers or distributors in various cities through or with the aid of men who were skilled in salesmanship and in the chemistry and use of synthetic dry cleaning solvents, called on dry cleaners in the company of salesmen employed by jobbers, carrying with them equipment for testing dry cleaning solvents, and who were given instructions by said corporation's offices on comparative products and the manner in which they were to deal with problems met in the field; in competition, among others, with the corporate manufacturer of "Kolene C" dry cleaning solvent, which solicited business from about half of the dry cleaners using synthetic solvent machines and regularly sold its solvent to about 500 of them- Made false, misleading and disparaging representations concerning said "Kolene C," to numerous distributors, customers, prospective purchasers of dry cleanin.J solvents and manufacturers of dry cleaning machines located in various states, and thus also placed in the hands of others the means of further disseminating such mi9" representations,-which were vigorously used to persuade dry cleaners not to use "Kolene C," even to the extent of cancelling orders therefor-whereby in substance it was represented in many different ways that the fumes produced by "Kolene C" were more dangerous and toxic than the fumes produced by its solvent, contents of "Kolene C" were misrepresented, and it was falsely represented directly and by implication that it contained "naptha," was a "Petroleum bien d' " and was inflammable and explosive and therefore dangerous when used under the usual conditions of operation by dry cleaners; The facts being that "Kolene C" was not more dangerous or toxic than the solvents sold by it; said competitive preparation contained no "naptha" as used and understood in the trade, and was not a carbon tetrachloride-naptha blend as represented, but was a mixture of carbon tetrachloride, benzol and a small proportion of trichlorenthylene; had a small fire hazard rating and was not flammable under standard or usual conditions of dry cleaning clothing; and, during the period concerned, a solvent sold, though not made, by corporation in question, was given the same or higher fire hazard rating than that assigned said competitive "Kolene C "; With tendency and capacity, through said false and disparaging representations made by it as aforesaid, to mislead and deceive a substantial portion of the purchasing DOW CHEMICAL CO. 445 444 Complaint public into the false belief that said statements were true and into the purchase of its products in preference to said "Kolene C," and thereby unfairly to divert trade from the sellers of "Kolene C" to sellers of its preparations: lleld, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public and competitors, and constituted unfair method of competition in commerce and unfair and deceptive acts and practices therein. Before Mr. James A. Purcell, trial examiner.

Mr. D. E. Hoopingarner and Mr. R. P. Bellinger for the Commission. Campbell, Groening, Jr. & Prince, of Midland, Mich., for respondent. Complaint 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 the Dow Chemical Company, a cor- Poration, hereinafter referred to as the respondent, has violated the pro- Visions of said act, 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: PARAGRAPH 1. The Dow Chemical Co., is a corporation, organized under the laws of the State of Michigan with its principal office and place of business located at Midland, Mich.

PAn. 2. Respondent is now, and for more than two years last past, has h.een engaged in the manufacture and sale of numerous chemical preparations including chemical preparations used in dry cleaning clothes. Respondent causes said preparations when sold to be transported from its Place of business in the State of Michigan to its purchasers located in Various other States of the United States and in the District of Columbia. Respondent maintains and at all times mentioned herein has maintained a course of trade in said preparations in commerce between and among the Various States of the United States and in the District of Columbia . . PAn. 3. In the course and conduct of its said business the respondent is In competition with other corporations and with partnerships and individ- ~als engaged in the sale of preparations used in the dry cleaning of clothes In commerce between and among the various States of the United States and in the District of Columbia. Among said competitors of respondent. engaged in commerce as aforesaid, is Kolene, Inc., a corporation organized and existing under the laws of the State of Michigan. PAn. 4. The Dow Chemical Co., in the course and conduct of its business, and for the purpose of inducing individuals, firms and corporations to PUrchase its chemical preparations used in dry cleaning clothes in preference to the chemical preparation sold by Kolene, Inc., has made, directly and by inference, numerous unfairly disparaging statements conherning the preparation Kolene. These statements and representations ave been disseminated by the said respondent between and among the Yarious States of the United States and in the District of Columbia. Typ- Ical of the unfairly disparaging representations thus made by the respondent are the following:

Findings 39 F. T. C.

Kolene is inflammable and explosive and therefore dangerous when used under stand· ard or usual conditions for dry cleaning clothes. Kolene is a compound composed solely of tetrachloride and benzine. Kolene is highly corrosive of the metals of the dry cleaning machinery wherein it is used.

The fumes produced by the preparation Kolene are more dangerous and toxic than are the fumes produced by the cleaning preparations sold by respondent. PAR. 5. The aforesaid representations with respect to the preparation Kolene are untrue, misleading and unfairly disparage the preparation Kolene. In truth and in fact the preparation Kolene is neither explosive nor inflammable and is not dangerous when used under standard or usual working conditions for dry cleaning clothes. Kolene is not a compound of tetrachloride and benzine only. Kolene is not highly corrosive of the metals of the dry cleaning machinery wherein it is used. The fumes produced by the preparation Kolene are not more dangerous or toxic than are the fumes produced by the dry cleaning preparations sold by respondent. PAR. 6. The respondent has disseminated the aforesaid false, misleading and unfairly disparaging representations to its distributors located in the various States of the United States and in the District of Columbia, thus placing in the hands of said distributors a means of further disseminating said false and unfairly disparaging statements. The aforesaid false, misleading and unfairly disparaging representations made by respondent, as hereinabove alleged, have had and now have a tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the false and erroneous belief that said statements are true and into the purchase of respondent's products in preference to the product Kolene because of such erroneous belief brought about as hereinabove set out. Further said false and misleading statements and unfair disparagements have a tendency to and do divert trade unfairly to respondent and the sellers of respondent's preparation from the sellers of the preparation Kolene.

The aforesaid acts and practices of the respondent, as herein alleged, a~e all to the prejudice and injury of the public and of respondent's compet~­ tors 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 January 4, 1940, issued and subsequently served its complaint in this proceeding, upon the respondent named in the caption hereof, charging it with the use of unfair methods of competiti~n in commerce and unfair and deceptive acts and practices in commerce 1n violation of the provisions of said act. After the respondent filed its an· swer, a stipulation was entered into whereby it was stipulated and agreehd that a statement of facts signed and executed by the respondent, throug its counsel, and Richard P. Whiteley, Assistant Chief Counsel for the Fed· eral Trade Commission, subject to the approval of the Commission, Dla.Y DOW CHEMICAL CO. 447 444 Findings be taken as the facts in this proceeding in lieu of testimony in support of the charges stated in the complaint or in opposition thereto, and that the Commission may proceed upon said statement of facts to make its report stating its findings as to the facts, its conclusion based thereon, and its order disposing of the proceeding without intervening procedure save the filing of briefs and presentation of oral argument (the reservation as to oral argument was subsequently waived). Thereafter, this proceeding regularly came on for final hearing before the Commission on said complaint, answer, stipulation, and briefs in support of and in opposition to the complaint, said stipulation having been approved, accepted, and filed; and the ~ommission, having duly considered the same and being now fully advised ln 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, The Dow Chemical Co., (the corporation ~eferred to in the complaint as Dow Chemical Co.), is a corporation, organl~ed and existing under the laws of the State of Michigan, with its prin- Cipal office and place of business located at Midland, Mich. PAR. 2. Respondent is now, and for a number of years last past has been, engaged in the manufacture, sale, and distribution of numerous chemical products, including chlorinated hydrocarbon solvents used in ~ry cleaning clothing, the most important of which are carbon tetrachloride and mixtures of carbon tetrachloride and other solvents. Respondent ~auses said solvents, when sold, to be transported from its place of business ln the State of Michigan to purchasers at their various points of location in other States of the United States and in the District of Columbia, and lllaintains, and at all times mentioned herein has maintained, a course of trade in said solvents in commerce between and among the various States of the United States and in the District of Columbia. PAR. 3. In the course and conduct o.f its business as aforesaid, respond- ~nt is in competition with other corporations and with partnerships and Individuals engaged in the sale in commerce between and among the various States of the United States and in the District of Columbia, of solvents Used in the dry cleaning of clothing. Among said competitors of respondent is Kolene, Inc., a corporation organized and existing under the laws of kthenowuStateas "Koleneof MichiganC" forandtheengageddry cleaningin the ofbusinessclothing.of selling a solvent PAR. 4. Approximately 25 percent of the dry cleaning in the United ~states is done in machines using synthetic solvents, commonly known as . 'synthetic solvent machines," and the remainder is done in machines us- Ing petroleum naptha, commonly known as "naphtha plants" and "naphtha systems." Of the dry cleaning done in synthetic solvent machines. lll?st is done with carbon tetrachloride; a part is done with mixtures containing carbon tetrachloride, including blends of carbon tetrachloride and ethylene dichloride, and about 10 percent with trichlorethylene and per- ~hlorethylene. Respondent makes approximately 50 percent of the carbon etrachloride and ethylene dichloride thus used. In addition to respond- Findings 39 F. T. C.

ent, a few other concerns make carbon tetrachloride. Between four and five thousand dry cleaners in the United States used synthetic solvent machines and approximately 40 to 50 percent of these dry cleaners use synthetic solvents purchased from respondent, the others purchasing their supplies 'of solvents from competitors of respondent. Kolene, Inc., has solicited business from about half the dry cleaners using synthetic solvent machines and regularly sells its solvent to approximately 500 of the dry cleaners using such machines.

PAR. 5. (a) The numerous dry cleaning plants known as "naphtha plants" and "naphtha systems" use as a cleaning agent petroleum naptha only. In the fractional distillation of petroleum, also called "naphtha," consisting of a mixture of hydrocarbons, portions thereof also called petroleum distillates, or fractions boiling between 14° C. and 240° C., are called "petroleum naphthas." Lower-boiling portions consisting of several of the lighter and more volatile constituents of petroleum, including gasoline, and boiling between 40° C. and 70° C., are called "petroleum either" and also "benzine." Gasoline, also called "petroleum either" and "naphtha," consists of low-boiling petroleum distillates boiling between 14° C. and 90° C. The low-boiling petroleum naphthas, including benzine and gasoline. and also the higher-boiling petroleum naphthas, including Stoddard Solvent which boils between 149° C. and 210° C., and various other similar high-boiling petroleum naphthas sold under various trade names, have been used extensively in dry cleaning. The dry cleaning plants using petroleum naphtha are generally recognized as presenting greater fire hazards than dry cleaning plants using synthetic solvents. Though the term "naphtha" is technically descriptive of benzine and other petroleum napthas and benzine (benzol), in the dry cleaning trade the term "naphtha," when used without qualification, is usually understood to refer to "petroleum naphtha."

(b) The term "benzene" is the scientific name for C&H6 and its commercial name is benzol. Benzol is obtained from the destructive distillation of coal. The "cut" boiling between 74° C. and 110° C. consists principally of the hydrocarbons benzene and toluene and is called "90 percent benzol." The" cut" obtained between 110° C. and 140° C. consists essentially of the same two hydrocarbons p(us xylene, and is called "50 percent benzol." The "cut" obtained between 140° C. and 170° C. consists of higher-boiling members of the benzene series of hydrocarbons and is called "solvent naphtha," "burning naphtha," "naphtha," or "160° benzol."

PAR. 6. (a) The solvent "Kolene C" sold by Kolene, Inc., is a mixture of carbon tetrachloride, benzene (benzol), and a relatively small proportion of trichlorethylene. The benzol used in this solvent is that heretofore described as "90 percent benzol," which boils between 74° C. and 110° C. Carbon tetrachloride is a fire extinguisher and is given a "0" rating b_Y Underwriters' Laboratories, Inc. The rating of either is 100; gasoline ld rated 9Q-100; ethyl alcohol, 60-70; kerosene (100 F. Flash), 30-40; an f paraffin oil, lQ-20. The fire hazard of benzol is about the same as that o gasoline and that of ethylene dichloride is about the same as ethyl alcoho~ In a report of January 12, 1939, Underwriters' Laboratories, Inc., state that the fire hazard of "Kolene C" is very small and rated it 1 to z. "Kolene C" is not flammable or explosive and, therefore, is not dangerous DOW CHEMICAL CO. 449 444 Findings ~hen Used under standard or usual conditions of dry cleaning clothing, but 1s slightly flammable at higher temperatures which are encountered only under laboratory conditions.

(b) Respondent's solvent "Dowclene" is a mixture of carbon tetrachloride and ethylene dichloride. All solvents manufactured by respondent for sale to the dry cleaning trade as of January 12, 1939, were, and at all times since have been, rated" 0" by Underwriters' Laboratories. Inc., and thus classed as completely nonflammable. Respondent, however, during the ~ime referred to herein, sold a dry cleaning solvent not manufactured by 1t, trichlorethylene, which was given the same or a higher rating by Underwriters' Laboratories, Inc., than the rating assigned "Kolene C." (c) Synthetic Solvent plants can be designed to recover in usable form most of the synthetic solvents used for dry cleaning, whereas the recovery of petroleum solvents, because of their flammable nature, cannot be done as efficiently. The nonflammable nature of the synthetic solvents permits their use in locations where the fire hazard of the petroleum solvents would constitute a public hazard.

PAR. 7. (a) In 1935 the manufacturers of benzol and carbon tetrachloride, respectively and independently of each other, entered into agreements with the United States Public Health Service with respect to the labeling of benzol and carbon tetrachloride. These agreements were voluntary and did not constitute findings by a public body as to the properties of the products covered by the agreements or a determination by the United States Public Health Service of the comparative toxicity of carbon tetrachloride and benzol. The manufacturers of benzol agreed that mixtures containing 15 percent or more of benzol should be labeled as follows: CAUTION-POISON This Product Contains More Than 15% BENZOL Which Is A VOLATILE SOLVENT USE WITH ADEQUATE VENTILATION AVOID PROLONGED BREATHING OF VAPOR The manufacturers of carbon tetrachloride agreed that mixtures containing 24 percent or more of carbon tetrachloride should be labeled as follows:

' VOLATILE SOLVENT USE WITH ADEQUATE VENTILATION AVOID PROLONGED BREATHING OF VAPOR !J-nd, further that the labels of such carbon tetrachloride mixtures should lnclude the 'statement: "Contains more than 24 percent by weight of carbon tetrachloride."

(b) Kolene Inc. used the "volatile solvent" label but did not use the benzol "pois~n" l~bel or the statement: "Contains more than 24 percent Findings 39 F. T. C.

by weight of carbon tetrachloride." Respondent did not sell benzol or a dry cleaning solvent containing more than 15 percent benzol, and used the "volatile solvent" labels where applicable but not the statement: "Con~ tains more than 24 percent by weight of carbon tetrachloride." (c) The solvent "Kolene C" is not more toxic or dangerous than the cleaning solvents sold by respondent.

PAR. 8. (a) As heretofore stated, respondent manufactures about half of the carbon tetrachloride and ethylene dichloride used in dry cleaning and sells its synthetic solvents to approximately half of the dry cleaners using synthetic solvent machines. Respondent thus occupies the most important, if not a dominant position, in the production and distribution of synthetic solvents for the dry cleaning industry. Respondent maintains a solvent sales office at Midland, Mich., to handle the sale and distribution of its synthetic dry cleaning solvents and also maintains branch offices in New York, Chicago, and St. Louis. It sells such solvents to numerous jobbers or distributors located in various cities of the United States and employs a number of men skilled in salesmanship and in the chemistry and use of synthetic dry cleaning solvents who call upon said distributors and dry cleaners in the interest of the sale and distribution of respondent's syn~ thetic dry cleaning solvents. These men often make calls on dry cleaners in the company of salesmen employed by jobbers. They often carry with them equipment for testing in the field dry cleaning solvents and are given instructions by respondent's main office and branch offices on comparative products and the manner in which they are to deal with problems met in the field.

(b) Respondent and its representatives and agents have made false, misleading, and disparaging representations concerning "Kolene C" to numerous distributors, customers, prospective purchasers of dry cleaning solvents, and manufacturers of dry cleaning machines located in various States, including Michigan, Illinois, Iowa, Wisconsin, Minnesota, Pennsyl~ vania, New York, and in the District of Columbia, and have also thus placed in the hands of others the means of further disseminating such false, misleading, and disparaging representations. The substance of the false, misleading, and disparaging representations is to represent that the fumes produced by "Kolene C" are more dangerous and toxic than the fumes produced by the solvents sold by respondent; to misrepresent the contents of the preparation "Kolene C"; and to represent, directly and by implication, that "Kolene C" contains "naphtha," is a "petroleum blend," is inflammable and explosive, and therefore dangerous when used under the usual conditions of operation by dry cleaners. (c) The aforesaid false, misleading, and disparaging representations, were made in many different ways, typical instances of which appear be~ low. In the course of correspondence with a manufacturer of synthetic solvent machines concerning "Kolene C," respondent suggested the "pos~ sibility of a solvent consisting of Carbon Tetrachloride and naphtha acting differently than Carbon Tetrachloride alone"; approved the machine man~ ufacturer's attitude in recommending that his" machine owners stay away from using any mixture of a naphtha-Carbon Tetrachloride nature"; stated, "We, of course, do not believe that any mixture of Carbon Tetrachloride and naphtha can be safe when used in a synthetic solvent ma~ chine"; suggested that in such a mixture carbon tetrachloride would evap- DOW CHEMICAL CO. 451 444 Findings ?rate first and leave behind the naphtha, and thus produce a solvent havmg a "lower flash point than the solvent as it was originally blended"; and stated, "In the stills as designed for synthetic units, this is likely to result in a rather hazardous operation." In a letter written to its Chicago office concerning "Kolene C" respondent referred to the alleged lower boiling point of carbon tetrachloride and stated, "Because of this, the naphtha or petroleum base which is left behind is gradually increasing in concentration"; and suggested a personal call on a particular purchaser of "Kolene C" "to point out to him some of the reasons why this particular dry cleaning fluid should not be used." In writing to one of its distributors, respondent suggested that "KoleneC" "is a blend of Carbon Tetrachloride and Benzol which, of course, takes it out of the classification of a completely nonflammable dry cleaning solvent"; and in a subsequent letter to this distributor stated in part, "from information we have received, the Kolene solvent does tend to flash after 95% has been distilled." In reporting a call on a dry cleaner using synthetic solvents, one of respondent's salesmen referred to the change by this dry cleaner from the use of respondent's solvents to "Kolene C" and advised that he pointed out to this dry cleaner that "there might be some fire hazard with C. T. (carbon tetrachloride)-Petroleum Blend." In writing to another manufacturer of synthetic solvent machines, respondent referred to "Kolene C" and stated that in its experience such blends are worse with respect to toxic vapors than a straight chlorinated solvent and that "In regard to toxicity, we Would like to call your attention to the statement made by the Manufacturing Chemists' Association; namely, that a blended solvent carrying a Volume percentage of over 15% of Benzol in Carbon Tetrachloride is ':more hazardous than straight Carbon Tetrachloride.'" In writing to one of its distributors concerning "Kolene C," respondent stated, ''however, as you know, Benzol is much more hazardous from the standpoint of toxicity than is Carbon Tetrachloride nnd, consequently, this fact might deter a great many dry cleaners from using any Benzol mixtures." In re- Porting a call upon a dry cleaner using synthetic solvents, one of respondent's salesmen wrote," We had a long talk going over again the comparison of Dowclene and Kolene. I stressed toxicity of Benzol, etc. * * * Of course I brought up the point that he was actually giving his operata; a more dangerous' matena. 1 t o use. "

(d) The record shows that the hazards respondent asserted existed in the use of "Kolene C" were vigorously used by respondent and by others in whose hands such assertions were placed as a means of persuading dry cleaners not to begin or to continue, as the case might be, the use of" Kolene C," even to the extent of inducing cancelation of orders for such product. At the time respondent was referring to 11 Kolene C" as a carbon tetrachloride-naphtha blend and to the evapora~ion and distillation problems ~rising from the naphtha petroleum base said to be l~ft behind in increas- ~ng concentration, respondent had the results of routme analyses made by Its laboratory indicating that "Kolene C" was a. carbon tetrachloride and benzol blend. These analyses were of a type which would not disclose the Presence of a relatively small proportion of trichlorethylene in "Kolene C." There are however, more elaborate, more costly, and more accurate methods of an~lyzing cleaning solvents.

Order 39 F. T. C.

PAR. 9. The false, misleading, and disparaging representations, made by respondent to the effect and in the manner, above found, have had, and have, a tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the false and erroneous belief that said statements are true and into the purchase of respondent's products in preference to the product "Kolene C." Because of such erroneous belief, said false and misleading statements and disparagements also 'have the tendency and capacity unfairly to divert trade from the sellers of the preparation "Kolene C" to respondents and to the sellers of respondent's preparations.

CONCLUSION The aforesaid acts and practices of respondent, as herein found, 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.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, a stipulation as to the facts entered into between the respondent herein and Richard P. Whiteley, Assistant Chief Counsel for the Commission, and briefs in support of and in opposition to said complaint, and said stipulation providing, among other things, that without further evidence or other intervening procedure save the presentation of briefs and oral argument (oral argument having subsequently been waived) the Commission may issue and serve upon respondent findings as to the facts and conclusion based thereon and an order dis- . posing of the proceeding, and the Commission having made its findings as to the facts and conclusion that said respondent has violated the provisions of the Federal Trade Commission Act.

It is ordered, That respondent, The Dow Chemical Co., its officers, representatives, agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution of its dry cleaning solvents in commerce. as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Misrepresenting in any manner the constituents of "Kolene C" or of any other competing dry cleaning solvent.

2. Representing, directly or by implication, that "Kolene C" is inflammable or explosive when used for dry cleaning under standard or mual conditions for such work.

3. Representing, directly or by implication, that the hazard of fire or explosion from the use of" Kolene C," or any other competing dry cleanin.g solvent, either absolutely or in comparison with respondent's solvents, IS greater than any such hazard is in fact.

4. Representing, directly or by implication, that the toxicity of or dangers from the fumes of "Kolene C" are greater than the toxicity of or DOW CHEMICAL CO. 453 444 Order dangers from the fumes of respondent's dry cleaning solvents; or misrepresenting in any manner the absolute or comparative toxicity of or dangers from the fumes of "Kolene C," or of any other competing dry cleaning solvent.

5. Making or publishing any false and disparaging representations concerning the dry cleaning solvents of competitors. It is further ordered, That respondent shall, within 60 days after the 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.

Complaint 39F. T. C.