William J. Ellison, Inc., and Albert A. Chapman

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In THe Marrer or WILLIAM J. ELLISON, INC., AND ALBERT A. CHAPMAN COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914, AND OF AN ACT OF CON- GRESS APPROVED OCT. 14, 1940 Docket 5327. Complaint, May 29, 1945—Decision, July 23, 1946 Where a corporation and an individual, its president, treasurer, and principal stockholder who controlled and directed its policies and practices, engaged in the competitive interstate sale and distribution of men’s suits and overcoats— Sold and distributed said products to members of the purchasing public through ' sales plans which involved the operation of a game of chance, gift enterprise or lottery scheme, including, as typical, a so-called club plan under which they supplied each participant who had undertaken to pay a specified sum in weekly installments of $1 or $2 for the garment selected, an advertising or gift coupon, bearing a serial number and date, and stating that they would give the garment free to the holder in the event that during the period of his contract the last three figures of the treasury balance as published in the New York Times should correspond with the number stamped on the coupon; and in partial compliance with such plan gave the garment without further charge to contracting participants who held winning numbers as above described ;and made use thereby of a game of chance whereby purchasers might secure garments at a price substantially less than their retail value, contrary to an established policy of the United States Government and in competition with many who do not use methods contrary to public policy ;

With the result that many persons were attracted by said sales plans and the element of chance connected therewith, and were thereby induced to purchase said garments in preference to those of aforesaid competitors, and with tendency and capacity to unfairly divert trade in commerce to them from their said competitors, 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 of their competitors, and constituted unfair methods of competition in commerce and unfair acts and practices therein.

In a proceeding in which complaint charged respondents, among other things, with violating the Wool Products Labeling Act, and in which it appeared that, prior to the issuance of said complaint, it was the practice of the respondents to place upon the bolts of woolens from which their customers selected the materials for their garments, substitute tags or labels which did not contain all the information required by the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder, but that the respondents had since changed such labels and tags so that they thereafter did contain the information thus required, it was the conclusion of Complaint 43 F.T.C. the Commission that said count of the complaint charging violations of said Wool Products Labeling Act should be dismissed without prejudice. Before Mr. Andrew B. Duwall, trial examiner. : Mr. J. W. Brookfield, Jr., and Mr. George M. Martin for the Commission.

Mr. Warren H. Mayell, of New York City, for respondents. Complaint _ Pursuant to the provisions of the Federal Trade Commission Act and the Wool Products Labeling Act of 1939, and by virtue of the authority vested in it by said acts, the Federal Trade Commission, having reason to believe that William J. Ellison, Inc., a corporation, and Albert A. Chapman, an individual and president of said corporation, hereinafter referred to as respondents, have violated the provisions of said act and the rules and regulations promulgated under the Wool Products Labeling Act of 1939, 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:

Count I Paracrapy 1, Respondent William J. Ellison, Inc., is a corporation organized and doing business under and by virtue of the laws of the State of New York with its office and principal place of business located at 545 Fifth Avenue, in the city of New York. Respondent Albert A. Chapman is president, treasurer, and principal stockholder of respondent corporation, William J. Ellison, Inc., and formulates, controls and directs its policies and practices. Respondent Albert A. Chapman has his office and principal place of business at the same address as that of the corporate respondent. Said respondents act together and in cooperation with each other in doing the acts and things hereinafter alleged.

Par. 2. Respondents are now and for more than 1 year last past have been engaged in the sale and distribution of men’s garments, including suits and overcoats, to purchasers thereof located at various points in the United States and in the District of Columbia. Respondents cause and have caused said garments, when sold, to be transported from their aforesaid place of business in the city of New York, New York, to purchasers thereof at their respective points of location in various States of the United States and in the District of Columbia. There is now and has been for more than 1 year last past a course of trade in said garments in commerce between and among the WILLIAM J. ELLISON, INC,, BT AL. ot 29 Complaint various States of the United States and in the District of Columbia. In the course and conduct of their businesss respondents are in competition with other corporations and with individuals and partnerships engaged in the sale and distribution of like or similar merchandise 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 of their business, as above described herein, respondents are now and have been selling and distributing said garments to members of the purchasing public by means of sales plans and methods which involve the operation of a game of chance, gift enterprise or lottery scheme. One of said sales plans or methods is substantially as follows:

Members of the purchasing public are solicited by respondents y agents or representatives to purchase a suit or overcoat under a socalled club plan. Respondents supply each purchaser participating in the plan with a purchase agreement or contract of purchase. Said agreement or contract provides for the sale by respondents of a garment to such purchaser for the sum of $48 which contract provides that the sum of $2 is to be paid weekly until the said full amount is paid. Respondents also furnish each customer who agrees or contracts to purchase one of said garments, as aforesaid, a so-called advertising or gift coupon bearing a serial number or date. The following legend is printed on each of said coupons:

NoNS1GH Datel eileotk pl Sy We want the public to know that we are in the Men’s Tailoring Business. And to have same known we have decided to distribute some of our Advertising money among the public thereby directly benefitting those to whom we cater. HERE IS OUR PROPOSITION If the last three figures of the U. S. Treasury Balance as published in the New York Times on Tuesday, Wednesday, Thursday, Friday and Saturday corresponds at any time during 24 consecutive weeks from the date of this advertising circular with the numbers stamped hereon, which is given away absolutely free to the public, we will give to any holder of record upon presenting same at our office within a week of publication, one $48 TAILOR MADE Suit, Topcoat or Overcoat Advertising Coupon Wm. J. Ellison, Inc.

DESIGNERS AND TAILORS Backed by 20 Years Experience 545 Fifth Avenue, New York, N. Y.

This circular is given away absolutely free to the public. 32 FEDERAL. TRADE COMMISSION DECISIONS Complaint 43 BF. T. C. Purchasers of respondents’ garments are thus entitled to a chance to receive their suits for the amount of $2 or any amount up to full purchase price of $48 while their purchase agreement is in effect. Respondents have used other purchase agreementts and other coupons embodying the distribution of their suits by chance but all of said agreementts and coupons embody the same principle of distributing their garments by lot or chance.

Par. 4. Respondents have sold and distributed their garments to members of the purchasing public in accordance with the aforesaid sales plans or methods. In so selling or distributing their garments respondents have conducted lotteries in accordance with sales plans or methods hereinabove set forth. The use by respondents of said sales plans or methods in the sale of their garments and the sale of such garments by and through the use thereof and by the aid of said methods is a practice contrary to an established public policy of the Government of the United States.

Par. 5. The sale of the garments to the purchasing public in the manner and by the plan or method hereinabove set forth involves a game of chance or lottery in the sale of said garments wherein purchasers of respondents’ garments may secure their said garments at a price substantially less than the retail value thereof. Many persons, firms, and corporations who sell and distribute men’s suits and other goods in competition with respondents; as above alleged, do not use said methods or sales plans, or any methods or plans involving a game of chance or lottery, or any other method contrary to public policy. Many persons are attracted by said sales plans or methods employed by — respondents in the sale and distribution of their garments and in the element of chance connected ‘therewith, and are thereby induced to purchase said garments in preference to garments of said competitors of respondents who do not use the same or similar methods. The use of said methods by respondents because of said game of chance has a tendency and capacity to 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 same or similar methods, 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. 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 competi- WILLIAM J. ELLISON, INC., ET AL. 33 29 Complaint tion in commerce and unfair acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. Count IT Paracrary 1. Respondent William J. Ellison, Inc., is a corporation organized and doing business under and by virtue of the laws of the State of New York with its office and principal place of business located at 545 Fifth Avenue, in the city of New York. Respondent Albert A. Chapman is president, treasurer, and principal stockholder of respondent corporation, William J. Ellison, Inc., and formulates, controls, and directs its policies and practices. Respondent Albert A. Chapman has his office and principal place of business at the same address as that of the corporate respondent. Said respondents act together and in cooperation with each other in doing the acts and things hereinafter alleged. Par. 2. The respondents are engaged in the introduction and manufacture for introduction into commerce, and in the sale, transportation, and distribution of wool products, as such products are defined in the Wool Products Labeling Act of 1939, in commerce as “commerce” is defined in said act, and in the Federal Trade Commission Act. Many of respondents’ said products are composed in whole or in part of wool, reprocessed wool, or reused wool, as those terms are defined in the Wool Products Labeling Act of 1939, and such products are subject to the provisions of said act and the rules and regulations promulgated thereunder. Since July 15, 1941, respondents have violated the provisions of said act and said rules and regulations in the introduction and manufacture for introduction into commerce, and in the sale, transportation, and distribution of said wool products in said commerce, by causing said wool products to be misbranded within the intent and meaning of said act and rules and regulations. Par. 3. Among the wool products introduced and manufactured for introduction into commerce and sold, transported and distributed in said commerce as aforesaid were articles of wearing apparel, such as coats and suits. Exemplifying respondents’ practice of violating said act, and the rules and regulations promulgated thereunder, is their misbranding of the aforesaid products in violation of the provisions of said act, and said rules and regulations, by failing to affix to said products a stamp, tag, label, or other means of identification, or || a substitute in lieu thereof, as provided by said act, showing (a) the || percentage of the total fiber weight of the wool product, exclusive of || ornamentation not exceeding 5 per centum of said total fiber weight, of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber Complaint . 43 F. T.C: other than wool where said percentage by weight of such fiber was 5 per centum or more, and (5) the aggregate of all other fibers; (b) the maximum percentage of the total weight of the wool product of nonfibrous loading, filling or adulterating matter; (c) the percentages in words and figures plainly legible by weight of the wool contents of such wool product where said product contains a fiber other than wool; (d) the name of the manufacturer of the wool product, or the manufacturer’s registered identification number and the name of a seller or reseller of the product as provided for in the rules and regulations promulgated under such act, or the name-of one or more persons subject to section 3 of said act with respect to such wool product.

Par. 4. Respondents are custom tailors and purchase bolts of cloth which are made into coats and suits. Some of the aforesaid suits and coats upon completion are delivered to the purchaser-consumer at respondents’ said place of business in the city of New York, N. Y.; other of the aforesaid suits and coats upon completion are delivered to the purchaser-consumer thereof at their respective points of location in States of the United States other than the State of New York. Respondents in the course and conduct of their business purchase said bolts of cloth from various manufacturers located in States other than the State of New York and cause said bolts of cloth to be transported from the places of business of said manufacturers in commerce between and among the several States of the United States to respondents at their aforesaid place of business in the State of New York. Par. 5. The bolts of cloth purchased, transported, offered for sale, sold, and manufactured into suits and coats as aforesaid are wool products within the intent and meaning of the Wool Products Labeling Act of 1939 in that such bolts of cloth are composed in whole or in part of wool, reprocessed wool or reused wool as those terms are defined in said act.

All of said wool products purchased and transported in said commerce as aforesaid and all of said wool products manufactured for introduction in said commerce are subject to the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder and all of said wool products had affixed thereto by the manufacturers thereof or by some person authorized under the provisions of said act and rules and regulations a stamp, tag, label, or other means of identification purporting to show (a) the percentage of the total fiber weight of the wool product, exclusive of ornamentation not exceeding 5 per centum of said total fiber weight, of (1) wool, (2) reprocessed wool, (3) reused wool, (4) each fiber other than WILLIAM J. ELLISON, INC., ET AL. 35 29 Complaint wool where said percentage by weight of such fiber was 5 percentum |) or more, and (5) the aggregate of all other fibers; (6) the maximum | percentage of the total weight of the wool product of nonfibrous || loading, filling or adulterating matter; (c) the percentages in words and figures plainly legible by weight of the wool contents of such wool product where said wool product contains a fiber other than wool; (d) the name of the manufacturer of the wool product, or the manu- | facturer’s registered identification number and the name of a seller or || reseller of the product as provided for the rules and regulations pro- | inulgated under such act, or the name of one or more persons subject to | section 3 of said act with respect to such wool products. Par. 6. After said wool products were delivered to the respondents _ at their said place of business as aforesaid and before said wool products were offered for sale or sold by respondents to the general public, said respondents with intent to violate the provisions of said Wool Products Labeling Act of 1939 and said rules and regulations promulgated thereunder did remove and participate in the removal of the stamps, tags, labels, or other means of identification which purported to contain the information required by the provisions of said act and said rules and regulations and which were affixed to said wool products by the manufacturer thereof, or by some person authorized or required by said act to affix such stamps, tags, labels, or other means of identification to such wool products.

Par. 7. Said respondents did not replace said stamps, tags, labels or other means of identification with substitute stamps, tags, labels \} or other means of identification containing the information required under the provisions of the Wool Products Labeling Act of 1939 and the Rules and Regulations thereunder. As a result of respondents’ said acts and practices in removing said stamps, tags, labels or other means of identification affixed to said wool products, said wool prod- | ucts when offered for sale and sold by respondents to the general public I| at their place of business did not have affixed thereto stamps, tags, labels, or other means of identification containing the information required by said act and by said rules and regulations. Par, 8. The aforesaid acts, practices and methods of the respondent as herein alleged were and are in violation of the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder and are all to the prejudice and injury of the public and coni\ stitute unfair and deceptive acts and practices in commerce within || the intent and meaning of the Federal Trade Commission Act. 734584 49—vol. 4836 Findings 43 F. T. C. Revort, Frnprnes as To THE Facts, AND ORDER - Pursuant to the provisions of the Federal Trade Commission Act and the Wool Products Labeling Act of 1939, the Federal Trade Commission on May 29, 1945, issued and subsequently served its complaint in this proceeding upon the respondents, William J. Ellison, Inc., a corporation, and Albert A. Chapman, an individual and president of William J. Ellison, Inc., 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 acts. After the issuance of said complaint and the filing of the answer of the respondent Albert A. Chapman, individually and as president of William J. Ellison, Inc., to said complaint, testimony and other evidence in support of and in opposition to the allegations of said complaint were taken before a trial examiner of the Commission theretofore duly designated by it, and said testimony and other evidence were duly recorded and filed in the office of the Commission. Thereafter this proceeding regularly came on for final hearing before the Commission upon said complaint, answer thereto, testimony and other evidence, report of the trial examiner upon the evidence and exceptions filed thereto, and brief filed in support of the complaint (respondents not having filed brief and oral argument not having been requested) and the Commission 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 ParacrapH 1. Respondent William J. Ellison, Inc., is a corporation organized and doing business under and by virtue of the laws of the State of New York with its principal place of business located at 545 Fifth Avenue in the city of New York.

| Respondent Albert A. Chapman is president, treasurer, and principal stockholder of respondent corporation William J. Ellison, Inc., and formulates, controls and directs its policies and practices. Albert A. Chapman has his office and principal place of business at the same address as that of the corporate respondent. Said respondents act together and in cooperation with each other in doing the acts and practices hereinafter described.

Par. 2. Respondents are now and for more than 1 year last past have been engaged in the sale and distribution of men’s garments, including suits and overcoats, in commerce among and between the various States WILLIAM J. ELLISON, INC., ET AL. 37 29 Findings of the United States, and cause said garments when sold to be transported from their place of business in the State of New York to purchasers thereof located in other States of the United States. Respondents maintain and at all times mentioned herein have maintained a course of trade in said garments in commerce, as “commerce” is defined in said acts, among and between the various States of the United States. In the course and conduct of their business respondents are in competition with other corporations and with individuals and partnerships engaged in the sale and distribution of like or similar merchandise in commerce among and between the various States of the United States. Par. 3. In the course and conduct of their said business respondents have been engaged in the sale and distribution of their garments to members of the purchasing public by means of sales plans and methods which involve the operation of a game of chance, gift enterprise, or lottery scheme. One of said sales plans or methods is substantially as follows:

Members of the purchasing public are solicited by respondents’ agent or representative to purchase a suit or overcoat under a so-called club plan. Respondents supply each purchaser participating in the plan with a purchase agreement or contract of purchase. Said agreement or contract provides for the sale by respondents of a garment to such purchaser for the sum of $45, $48 or $58, as the case may be, payable in installments of $1 or $2 to be paid weekly until the full amount is paid. Respondents also furnish to each customer who agrees. or contracts to purchase one of said garments a so-called advertising or gift coupon bearing a serial number or date. The following legend is printed on said coupons:

We want the public to know that we are in the Men’s Tailoring Business. And to have same known we have decided to distribute some of our Advertising money among the public thereby directly benefitting those to whom we cater. HERE IS OUR PROPOSITION If the last three figures of the U. 8S. Treasury balance as published in the New York Times on Tuesday, Wednesday, Thursday, Friday and: Saturday corresponds at any time during 45 consecutive weeks from the date on this advertising circular with the numbers stamped hereon, which is given away absolutely free to the public, we will give to any holder of record upon presenting same at our office within a week of publication, one $45.00. Tailor Made Suit, Topcoat or Overcoat 38 FEDERAL. TRADE COMMISSION ‘DECISIONS Findings 43 F.T.€: On the reverse of said advertising or gift coupon appears the following: . Advertising Coupon Wm. J. Ellison, Inc.

DESIGNERS AND TAILORS Backed by 20 Years Experience 545 Fifth Avenue New York, N. Y.

This'circular is given away absolutely free to the public In addition to the advertising or gift coupon above described, respondents deliver to the customer a booklet entitled “Purchaser’s Record of Payments,” which provides space therein for notations of payments to be made by the collector on the basis of $1 or $2 per week, as the case may be. The advertising or gift coupon in most instances is of the same shape and design as the pages of the booklet containing record or payments so that it can be readily inserted therein. The term within which a customer may obtain a suit free corresponds to the time within which the installment payments are to be made under the contract.

According to the terms of the offer contained on said advertising coupons, a purchaser of respondents’ garments, as a holder -of such coupon, would be entitled to a chance to win a suit or overcoat free if the numbers stamped on said coupon should correspond with the figures of the United States Treasury balance as published in the New York Times during the time that the purchaser’s contract of purchase is in effect. However, in practice, when a purchaser has won a suit or overcoat the respondents retain the amount paid on said contract and deliver the garment without further payments unless a more expensive garment was selected, in which case the purchaser is required to pay the difference between the contract price and the price of the garment selected, in addition to the amount already paid upon said contract. In certain instances, respondents have delivered a suit free to the holder of a winning number even though a contract of purchase was not in effect. Respondents have used other purchase agreements and other coupons embodying the distribution of their suits by chance but all of said agreements and coupons embody the same principle of distribution of their garments by lot or chance.

Par. 4. Respondents have sold and distributed their garments to members of the purchasing public in accordance with the aforesaid sales plans and methods. In so selling and distributing their garments respondents have conducted lotteries in accordance with the sales plans or methods hereinabove described. The use by respondents WILLIAM J. ELLISON; INC., ET AL. 39 29 Conclusion of said sales plans or methods in the sale of their garments, and the sale of such garments by and through the use thereof and by the |) aid of said methods, is a practice contrary to an established policy of || the Government of the United States.

Par. 5. The sale of garments to the purchasing public in the manner }, and by the plan or method hereinabove set forth involves a game of chance or lottery in the sale of said garments wherein purchasers || of respondents’ garments may secure the said garments at a price substantially less than the retail value thereof. Many persons, firms, / and corporations who sell and distribute men’s suits and other goods in competition with respondents, as above alleged, do not use said methods or sales plans or any method or plan involving a game of chance or lottery or any method contrary to public policy. Many persons are attracted by said sales plans or methods employed by respondents in the sale and distribution of their garments and in the element of chance connected therewith and are thereby induced to purchase said garments in preference to garments of said competitors of respondents who do not use the same or similar methods. The use of said methods by respondents because of said game of chance has a tendency and capacity to unfairly divert trade in commerce between and among the various States of the United States to respondents from their said competitors who do not use the same or similar methods, 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. Par. 6. The Commission further finds that prior to the issuance of the complaint herein it was the practice of the respondents to place substitute tags or labels upon the bolts of woolens received by them and from which their customers selected the materials for their garments, which substitute tags or labels did not contain all the information required by the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder, but that the respondents have since changed such labels and tags so that they now contain the information required by said act and regulations. CONCLUSION The aforesaid acts and practices of the respondents as herein found are all to the prejudice and injury of the public and of respondents’ i| competitors 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 438 F.T.C. It is the further conclusion of the Commission that count IT of the ~ complaint charging violations of the Wool Products Labeling Act of 1939 should be dismissed without prejudice. ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, answer of the respondent Albert A. Chapman, individually and as president of William J. Ellison, Inc., testimony and other evidence in support of the complaint and in opposition thereto taken before a trial examiner of the Commission theretofore duly designated by it, report of the trial examiner upon the evidence and exceptions filed threes and brief filed in support of the complaint, and the Commission having 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 the respondents William J. Ellison, Inc., a corporation, and its officers, and Albert A. Chapman, an individual and president of William J. Ellison, Inc., and their respective representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of suits, overcoats, 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 by means of any sales plan or method involving the use of a game of chance, gift enterprise or lottery scheme.

2. Supplying or placing in the hands of others merchandise, together with a sales plan or method involving the use of a game of chance, gift enterprise or lottery scheme, by which said merchandise is to be or may be sold to the public.

It is further ordered, that count II of the complaint charging violations of the Wool Products Labeling Act of 1989 be, and the same hereby is, dismissed without prejudice. | It is further ordered, that the respondents shall, within 60 days after the 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.

MIAHATI, INC., ET AL. Al Syllabus