Autonator Laboratories Co. and Harry Abelson

Text (OCR of the scan at left; may contain errors)

IN THE ~latter OF AUTONATOR LABORATORIES CO. AND HARRY ABELSON COMPLAINT, FINDINGS, AND ORDER IN REGARD TO THE ALLEGED VIOLATION OF SEC. 5 OF AN ACT OF CONGRESS APPROVED SEPT. 26, 1914 Docket 5638. Corn,plaint, Feb. 11, 1949-Decision, Dec. 6, 1949. Where a corporation and its president, who controlled its policies, engaged in the manufacture and interstate sale and distribution of their immersion electrode type "Hot Donut Water Heater,"

(a) Represented, through statements in advertisements in newspapers and circulars, that their said water heater would produce hot boiling water in a "jiffy," and that steaming hot water, heated to any temperature, would be afforded in a very short period of time, or before the user in normal course anticipated using it; , Notwithstanding the fact that it required considerable time in its heating action, depending in part upon the amount of water heated; (b) Represented falsely, through use of the word "Laboratories" as a part of the corporate name, in advertising literature, circulars, on letterheads and otherwise, that they owned, operated or controlled an establishment containing substantial equipment and apparatus for use in studying and experimentation by scientists or technicians employed for such purposes, and for the conduct of research in connection with the application of electricity to water heating facilities; and (c) Impliedly represented that their heater was harmless under all conditions of ordinary use, through failing to reveal in their advertising, or in the directions set forth upon the tag attached to said device, the dangerous consequences which might result therefrom, in that, used otherwise than as specified, and under some conditions, intolerably large amounts of electricity might flow through portions of the body, and electrocution was possible; With tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous belief that such statements were true, and that their said product was harmless in use, and thereby induce its purchase of said potential eleetrical hazard:

Held, That such acts and practices, under the circumstances set forth, were all to the prejudice and injury of the public and constituted unfair and deceptive acts and practices in comq1erce.

Before Mr. Frank Hier', trial examiner.

Mr. 11f orton N es1nith for the Commission. Bell & Ehtrlick, of Washington, D. C., and Mr. Adolf Loeb, of Chicago, Ill., for respondents.

COMPLAI;NT Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of authority vested in it by said act, the Federal Trade AUTONATOR LABORATORI}}S CO. ET AL. 245 244 Complaint Commission having reason to believe that Autonator Laboratories Co.,. a corporation, and Harry Abelson, hereinafter referred to as respond-· ents, have violated the provisions of said act, and it appearing to the· Commission that a proceeding by it would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent, Autonator Laboratories Co., is a corporation organized and existing and doing business under and by virtue of the laws of the State of Illinois with its office and principal place of business located at 460 South State Street, in the city of Chicago, State of Illinois. Respondent Harry Abelson is the president of said corporation and its principal director and as such controls the policies of said corporation. His address is 460 South State Street, in the city of Chicago, State of Illinois.

PAR. 2. Said respondents are now and for several years last past have been engaged in the manufacture and sale of an electric water heater designated as "Hot Donut vVater Heater." Said Hot Donut Water Heater is an immersion electrode-type appliance in which the heating element is exposed and in direct contact with the water or liquid. It consists of a chrome-nickel coil-wire heating element mounted on an asbestos core and encased in two al umin urn shells.

P4<\R. 3. Respondents cause and have caused said "Hot Donut Water Heater" when sold to be shipped from their place of business in the State of Illinois to wholesalers, distributors and retailers located in various other States of the United States and in the District of Columbia. Said wholesalers, distributors, and retailers in turn sell said hot water heater to the general public or to retailers for sale to the general public. Respondents maintain and at all times mentioned herein have maintained a course of trade in said hot water heater in commerce, between and among the various States of the United States and in the District of Columbia. Their volume of business in said hot water heater in such commerce is substantial.

PAR. 4. In the course and conduct of their business and :for the purpose of inducing the sale of their said product in commerce, respondents, subsequent to the summer of 1946, made certain statements and: representations concerning said product by means of advertisements inserted in newspapers and in circulars, both of which were circulated among the purchasing public. Among and typical of such statements. and representations are the following:

Complaint 46 F. T. C, BOILING HOT WATER IN A JIFFY! How many times have you needed hot water in a hurry for emergency Ol,"' regular use-and found yourself baffled for lack of it? Now your HOT WATER problems banished forever.

Just plug into any electrical outlet-immerse the Hot Donut in water and in a jiffy before you are ready to use it, steaming hot water heated to any tempera~ ture is ready for use.

PAR. 5. Through the use of the advertisements and circulars hereinabove set forth and others of the same import,· but not specifically set out herein, the respondents have represented that their Hot Donut vVater Heater will produce hot boiling water in a jiffy and that steam- . ing hot water, heated to any temperature, will be ready for use before one is ready to use the same.

PAR. 6. The aforesaid statements and representations are false, misleading, and deceptive. In truth and in fact, said water heater will not produce "hot boiling water in a jiffy" nor will it produce "hot \Yater in a hurry for an emergency or regular use," nor will it produce ·"steaming hot water heated to any temperature in a jiffy and before you are ready to use it," but to the contrary, requires considerable time in its heating action, depending upon the amount of water heated. PAR. 7. Respondents, by and through the use of the word "Laboratories" as a part of the corporate name, "Autonator Laboratories Co." in advertising literature, cireulars, on letterheads and otherwise, represent that they own, operate or control an establishment containing substantial equipment and apparatus for use in study and experimentation by scientists or technicians employed for such purposes. In truth and in fact, respondents do not own, operate, or control such an establishment and do not employ scientists or technicians for the purposes of study or experimentation.

PAR. 8. Attached to the c..ord .of each heater is a cardboard tag upon which is printed, among other things, the following: DIRECTIONS Read Before Using Heater 1. For use only on 110 volts, A. C. and D. C. use a twenty (20) ampere fuse. 2. To operate water heater, first place under1· water, then plug into electrical outlet and last turn on current.

3. Always pull plug before removing heater from water. Never have current "on" unless heateris completely under water. 4. Never touch water while current is "on." 5. N evm· use in any liquid other than clean water (never in salt water). 6. For bath, place 5 or 6 inches of water in tub. When heater has brought it to boiling point, pull E~lectric plug and remove heater. You can then temper with cold water, to suit.

AUTONATOR LABORATORIES CO. ET AL. 247 244 Findings PAR. 9. Respondents' product, under some conditions of ordinary use, constitutes a serious electrical hazard in that intolerably large currents of electricity ma.y flow through portions of the human body; in fact, under some conditions of ordinary use, electrocution is possible. By.failing to reveal these facts, respondents impliedly represent, contrary to the facts, that said product is harmless under all conditions of ordinary use. Said advertisements and the tag or label attached to the porduct are further misleading and deceptive in that they fail to reveal the dangerous consequences which may result from the use of said product in some conditions of ordinary use. PAR. 10. The use by the respondents of the aforesaid statements and representations has had and now has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the. ~rroneous and mistaken belief that such statements are true, and that said product is harmless when used as directed under all ordinary conditions, and to induce a substantial portion of the purchasing public, because of such erroneous ai1d mistaken belief, to purchase said "Hot Donut Hot 'iV after Heater."

PAR. 11. The aforesaid acts and practices of respondents as herein alleged are all to the prejudice and injury of the public and constitute 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 February 11, 1949, issued and subsequently served its complaint in this proceeding upon the respondents, Autonator Laboratories Co., a corporation, and Harry Abelson, an individual, charging them with the use of unfairand deceptive acts and practices in commerce in violation of th~ provisions of said act. After the filing of respondents' answer, at a hearing before a trial examiner of the Commission theretofore duly designated by it, certain facts in lieu of other evidence were stipulated on the record, together with a form of order to cease and desist which counsel supporting the complaint and counsel for respondents joined· in recommending to the Commission for adoption, it being further stipulated that the Commission may proceed to make its report stating its findings as to the facts and its conclusion based thereon and enter its order disposing of the proceeding without further intervenirig procedure. Thereafter this proceeding came on for consideration before the Commission upon the complaint, answer, the stipulated facts, and the recommended order of counsel; and the Commission in declining, for Findings 46 F. T. C. the reasons therein expressed, to dispose of this proceeding by the e.ntry or order to cease and desist in the form proposed by counsel, on September 30, 1949, issued tentative order to cease and desist with leave to show cause and afforded opportunity to respondents to show cause why such tentative order should not be entered as an order to cease and desist. Respondents not having appeared in response to such leave to show cause, this proceeding regularly came on for final hearing before the Commission on the record; 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 PARAGRAPH 1. Respondent Autonator Laboratories Co. is a corporation organized, existing, and doing business under the laws of the State of Illinois, with its office and principal place of business located at 460 South State Street, Chicago, Ill. Respondent Harry Abelson is the president of said corporation and its principal director and ·as such controls its policies. His address is 460 South State Street, Chicago, Ill.

PAR. 2. Respondents are now and for several years last past have been engaged in the manufacture and sale of an electric water heater designated as "Hot Donut "\Vater Heater." Respondents' product is an immersion electrode-type appliance in which the heating element is in direct contact with the water or liquid. It consists of a chromenickel coil-wire heating element mounted on an asbestos core and encased in two perforated·-ahuninmn shells~ PAR. 3. Respondents cause and have caused their Hot Donut,Water Heater when sold to be shipped from their place of business in the State of Illinois to wholesalers, distributors, and retailers located in various other States of the United States and in the District of Columbia. Such wholesalers, distributors, and retailers in turn sell respondents' products to the general public or to retailers for sale to the general public. Respondents maintain and at all times mentioned herein have maintained a course of trade in said water heater in commerce between and among the various States of the United States and in the District of Columbia. The volume of business in said product in such commerce is substantial.

PAR. 4. In the course and conduct of their business and for the purpose of inducing the sale of their said product in commerce, respondents, subsequent to the summer of 1946, made certain statements and AUTONATOR LABORATORIES CO. ET AL. 249 244 Findings representations concerning said product by rneans o:f advertisements inserted in newspapers and in circulars, both o:f which were circulated among the purchasing public. Among and typical o:f such statements and representations are the :following:

,I BOILING HOT 'VATER IN A JIFFY! How many times have you needed hot water in a burry for emergency or regular use-and found yourself baffled for lack of it? Now your HOT \VATER problems banished forever.

Just plug into any electrical outlet-immerse the Hot Donut in water and in a jiffy before you are ready to use it, steaming hot water heated to any temperature is ready for use.

PAR. 5. Through the use o:f the advertisements and circulars hereinabove set forth, and others of similar import not specifically set out herein, the respondents have represented that their Hot Donut Water Heater will produce hot bailing water in a jiffy, and that steaming hot water, heated to any temperature, will be afforded in a very short period o:f time, or before the user in normal course anticipates using·.it.

PAR. 6. The aforesaid statements and representations are false, misleading, and deceptive. Respondents' water heater will not produce hot ·or boiling water "in a jiffy," nor will it produce steaming hot water in a very short period of time. Respondents' water heater requires considerable time in its heating action, depending in part upon the amount o:f water heated. In such connection controllled tests or experiments with respondents' product show that the :following periods of time are required for heating water under the conditions specified: Temperature or water in degrees Temperature of water in degrees Elapsed Fahrenheit Elapsed Fahrenheit time, ------------ time, minutes I minutes 3 pints 6 pints, 9_ pints 3 pints 6 pints 9 pints ~-----------~---- --------------o_____________ 70 .'i9 57 15. ___________ ------------ 184 149 !_ ____________ 86 fi9 64 18 ____________ ------------ 200 163 3----------·--- 121 81:! 76 2L ___________ ------------ 207 1786 _____________ Hi7 116 24 ____________ ------------ ------------ 190 9 _____________ 200 1-12 27 ____________ --.---------- ------------ 21012 ____________ 204 Itl4 132I~~ I 30 ____________ ------------ ------------ 206 I PAR. 7. The use o:f the word "Laboratories" as a part o:f the corporate 11ame "Autonator Laboratories Co.," in advertising literature, circulars, on letterheads, and otherwise, has the capacity and tendency to lead purchasers to believe that respondents own, operate, or control an establishment containing substantial equipment and apparatus for use Conclusion 46F. T. C.

in studying and experimentation by scientists or technicians employed for such purposes. In ti·uth and in fact, respondents do not own or control such an establishment and do not employ scientists or technicians for the purpose of experimentation or for the conduct of research in connection with the application of electricity to water heating facilities.

P .AR. 8. Attached to the cord o£ each heater is a cardboard tag upon which is printed, among other things, the following: DIRECTIONS Read Before Using Heater 1. For use only on 110 volts, A. C. and D. C. use a twenty (20) ampere fuse. 2. To operate water heater, first place mtder water, then plug into electrical outlet and last turn on current.

3. Always pull plug bet01·e removing heater from water. Never have current "on'' unless heater is completely under water. 4. Never touch water while current is "on." 5. Never1· use in any liquid other than clean water (.never in salt water). 6. For bath, place 5 or 6 inches of water in tub. 'Vhen heater has brought it to boiling point, pull electric plug and remove heater. You can then temper with cold water, to suit.

PAR. 9. Respondents' product, m1der some conditions o£ use in heating water but not when used as set forth in the paragraph above, constitutes an electrical hazard in that intolerably large amounts of electricity may flow through portions of the human body. Under some conditions of use, electrocution is possible. By failing to reveal these facts, respondents impliedly represent that their water heater is harmless under all conditions of ordinary use. Respondents' advertising, particularly the tag or label attached to the product, is misleading and deceptive by reason of the failure to reveal the dangerous consequences which may result under some conditions from use of said product.

PAR. 10. The use by respondents of the aforesaid statements and representations has had and now has the tendency and capacity to mislead and deceive a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements are true and that respondents' product is harmless in use, and to induce a substantial portion of the purchasing public because of such erroneous and mstaken belie£ to purchase respondents' Hot Donut 'Vater Heater. CONCLUSION The acts and practices of respondents as herein found are all to the prejudice and injury of the public and constitute unfair and deceptive AUTONATOR LABORATORIES. CO. ET AL. 251 244 Order ·acts and practices in commerce within the intent and meaning of the · Federal Trade Conimission Act.

ORDER TO CEASE AND DESIST This proceeding having been heard by the Federal Trade Commisbion, upon the complaint of the Commission, the answer of respondents, certain stipulations of fact submitted for the record in lieu of other evidence by counsel for the respondents and counsel supporting the complaint together with a form of order to cease and desist which counsel jointly recommended to the Commission for adoption, and the tentative order to cease and desist issued subsequently by the Commission l.n connection with which respondents were afforded opportunity to show cause why such ordet should not be entered as the order to cease and desist in this proceeding; and respondents having not appeared in response to such leave to show cause and the Commission having thereafter made its finding as to the facts and its eonelusion that respondents have violated the Federal Trade Commission Aet: It is ordered, That respondents, Autonator Laboratories Co., a eorporation, its officers, representatives, agents, and employees, and Harry Abelson, his agents, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, and distribution in eommeree, as "commerce" is defined in the Federal Trade Commission Aet, of respondents' eleetrie water heating device, ''Hot Donut "'Vater Heater," or any substantially similar device, whether sold under the same name or any other name, do forthwith cease and desist from :

( 1) Representing that said device will produce boiling hot water or steaming hot. water "in a jiffy," or afford hot water in any other period of time less than is actually required; provided, however, that nothing herein shall prohibit use of the word "jiffy" to designate the period required to heat 'vater if in immediate and conspieuous eonjunction therewith respondents truthfully state the time required to raise one or more designated volumes of water of stated temperature to a specified temperature level.

(2) Using the word "Laboratories," or any other word of similar import or meaning, to designate, describe, or refer to respondents' business, or representing through any other means that either of said respondents owns, operates, or controls a laboratory or establishment containing substantial equipment and apparatus for use in study and experimentation by seientists or teehnicians employed for such purposes or for the conduct of research in connection with the application of electricity to water heating facilities. Order 46F. T. C.

· (3) Distributing or selling said device unless the word "caution" or "warning," together with adequate directions for safe use of the device, is indelibly impressed, imprinted, or affixed thereon, informing the user that unless the directions for use are strictly followed dangerous electric shock may result; provided, however, that the word "caution" or ''warning," whichever is used, may be accompanied by reference to adequate directions for safe use separately but securely attached to the device and which inform the user that unless such directions are stl·ictly followed dangerous electric shock ~ay re.sult. It is further ordered, That the respondents shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writing setting forth in detail the manner and ·form in which they have complied with this order.

.AMERICANA CORPORATION ET AL. 253 Order