Sewing Machine Exchange, Inc.

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IN THE :MATTER OF SE1VING MACHINE EXCHANGE, I~C. ET ~\..L.

AI....COl\IPLAINT, DECISION. FIXDIKGS, AXD ORDERS IX REGARD TO' THE LEGED VIOLATION OF SEC. 5 OF AX ACT' OF COXGRESS AI'PJtOYED SEPT. :!6, 1914 Docket 5887. Co/llji7aij/t J'/Ille 2,' 1951-Deci8iulI 1pr. H/, When articles of merclwndise, illtluding sewing- J)lih:hine'~ , an' exhibitpd and offered for sale h~' retailers to the purclH1siIJg public llot marked or not or if marked adequately marked showing- that they are of foreign origin and the markings are covered or otherwise concealed, SUCll flllb1ic understands and believes such nrticle:o; to he wholly '- of (loltlestic origin. There is among the members of the purcha~ing public a substantial numbee \"ho have a decided preference for prollucts originating in the rnited States over products originating in \whole or in Dart in foreign countries, indu(lillg sewing machine heads.

Where a corporation and its three officers, engaged in the competiti"C' interstate sale to distributors and retailers of sewing machine heads imported by them from Japan, and of complete sewing machines assembled through att:lelllllpnt of a motor to said imported heads, in which proeeRs tile wortls- " :\fade in Occupied Japan" and "Japan" became covered- Failed adequatel~T to disclose that said heads were made in Japall. notwithstanding the presence upon the front of some Qf them of a medallion \which bore in small and indistinct words the iegend "Made in Occupied Japan or "Japan; and thereby placed in the hanels or c1ealel"~ a JUeam; and instrumentality whereby the~v might mislead awl deceh'e the pUl'Cllfl:-\illg public as to place of origin of said heads; With tendency and capacity to lead members of the purchasing public into the erroneQUS belief that their said produds were of domestic origin and thereby induce purchase of sewing machines of which said heh(ls \were a IJtut; whereby trade was unfairly diverted to them from competitors: H elcZ, That such acts and practices, under the circumstances set forth, were a to the prejudice and injury of the public and their competitors, and constituted unfair methods of competition in COllllUel'Ce and unfair and deceptive acts and practices therein.

Before Mr. James A. P1l.'l'cell hearing examiner. 111'1'. lVillia1n L. Taggart and llfr. J. O. "fTTillia1JI' for the Commission. :111'. Leona'J'(l L. C1' es7wt!', of Philadelphia, Pa., for respondents. CO:MPL\lnt Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Fede.ral Trade Commission, having reason to believe that Sewing nlachine Exchange, Inc., a corporation, and ,Villis Harris, J erry Fineman and :Manual Harris, individually and as officers of said corporation SEWING MACHINE EXCHANGE, INC. ET AL. 1193 1192 Complaint hereinafter referred to as respondents, have violated the provisions 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: \RAGHAPII 1. Respondent Sewing 1\1machine Exchange, Inc. , is a corporation organized and existing under and by virtue of the laws of' the State of Pennsylvania "with its office and principal place of business located at 4233-35 Parrish Street, Philadelphia, Pennsylvania. Respondents \Yillis Harris, Jerry Fineman and :Manual Harris are President, Treasurer and Seeretary, respectively of corporate respondent and acting as such officers formulate, direct and control the policies, acts and practices of said corporation. The post office address of the incli"ddllal respondents is the same as that of the corporate respondent.

PAR. 2. Respondents are now, and have been for Fie"Feral years last past, engaged in the sale of se,ying machine heads imported by the, from ,Japan, and cOlnpleted sewing machines of which said heads are a part, to distributors and also to retailers who in turn sell to the purchasing public. In the course and conduct of their business respondents cause their said products) when sold, to be transported from their place of business in the State of Pennsylvania to the purchasers thereof located in various other States and maintain, and at all times lnentioned herein have maintained, a course of trade in said products in commerce among and between the various States of the United States. Their volume of trade in said commerce has been and is now su bstan tial.

PAR. 3. When the sewing machine heads are imported by respondents the words "lVrade in Oeeupied Japan " or "Japan" appear on the back of the vertical arm. Before the heads are sold to the purchasing public as ft, part of a complete sewing machine it is necessary to attach a motor to the head in the process of which the aforesaid words are covered by the motor so that they are not visible. In some instances said heads, when received by respondents, are marked with a medallion placed on the front of the vertical arm upon which the words "l\lade in Occupied J apan ~' or apan" appear. These words are, hmyever so small and indistinct that they do not constitute adequate noticl3 to the public that the heads are imported.

PAR. 4. \Yhen articles of merchandise, inc1nding sewing machines are exhibited and offered for sale by retailers to the purchasing public and such articles are not marked or are not adequately marked showing that they are of foreign origin or if marked and the markings are covered or otherwise cOllcealed, such purchasing public understands and believes such articles to be wholly of domestic origin. , Orders 48 F. T. C. There is among the members of the purchasing public a substantial number who have a decided preference for products originating in the United States over products originating in whole or in part foreign countries, including sewing machine heads. PAR. 5. Respondents by placing in the hands of dealers their said sewing machine heads and completed sewing machines provide said dealers a means and instrumentality whereby they may mislead and deceive the purchasing public as to the place of origin of said heads. PAR. O. Respondents in the course and conduct of their business file in substantial competition in commerce \,ith the makers and seller':S of domestic sewing machines and also sellers of imported se\ying machines some of whom adequately inform the public as to the source of origin of their said products.

PAR. 7. The failure of respondents to adequately disc.lose on the sewing machine heads that they are manufactured in Japan has the tendency and capaeity to lead me,mbers of the purchasing public injthe erroneous and mistaken belief that their said product is of domestic origin, and to induce members of the purchasing public to purchase sewing machines of which these heads are a part because of such erroneous and mistakenbeliei. As fL result thereof, trade has been unfairly diverted to respondents from their competitors and substantial injll~ry has been and is being done to competition in commerce. PAR. 8. The aforesaid acts and practices of respondents, as herein alleged, are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair methods of competition and unfair anel deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. ORDERS AND DECISION OF THE COJ\UfISSION Order denying motion to stay decision of the Commission and decision of the Con1l11ission and order to file report of compliance Docket 5887, April 15, 1952, follows:

The initial deeision of the hearing examiner in this proceeding having been filed, and service thereof having been completed on March , 1952, and no notice of an appeal having been filed, and the respondents having filed a motion on ~larch 31, 1952, that the Commission stay its decision in this matter until decisions are, rendered by the Commission in certain other proceedings; and It appearing that the grounds relied upon by the respondents in support of said motion are that the initial decision of the hearing examiner was filed prior to the issuance by, the Conllnission of its order permitting the withdrawaLof a certification of question to the SKWING MACHINE EXCHANGE, INC, ET AL. 1195 1192 Decision Commission by the hearing examiner, and that the respondents are in close competition with the respondents in certain other proceedings pending before the Commission and that a decision adverse to the respondents at this time will prejudice the business interest of the respondents and create an inequitable situation; and The Conllnission having duly considered said motion and the record herein and it appearing that the respondents were in no way prejudiced as a result of the hearing examiner having filed his initial decision prior to the issuance by the Commissioner of its order permitting withdrawal of the certification of question and further that there is , no sufficient reason to warrant the staying of the decision in this proceeding until decisions in certain other matters have been rendered; and The Commission being of the opinion that the initial decision of the hearing examiner is appropriate in all respects to dispose of this proceeding:

It z:s ordered That the motion of the respondents that the Commission stay its decision in this proceeding be, and it hereby is, denied. It is frurther ordel' That the initial decision of the hearing examiner, a copy of which is attached, shall on the 15th day of April, 1D52 become the decision of the Commission.

I t is fllrther onle1'ed That the respondents herein 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 the order to cease and desist. Said initial decision, thus adopted by the Commission as its decision, follows:

INITIAL DECISION BY JAMES A. PURCELL. HEARING EXAl\IINETI Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission on June 27, 1951, issued and subsequently served its complaint in the above-entitled proceeding upon respondents Sewing l\fachine Exchange, Inc.. , a corporation, 'Villis Harris, I err)' Fineman and ~faJllial Harris, individually and officers of said corporation, charging them with unfair niethods of competition and unfair fll1d deceptive acts and practices in commerce in violation of saiel Act. On August 20, 1951, respondents filed their answer to the complaint. Thereafter, at a hearing held in Philadelphia, Pennsylvania, on October 24, 19;)1, respondents moved the Hearing Examiner for leave towithc1raw the afoi'esaid answer and to file in substitution th2Teof an ailswer adll1itting all of the material allegations of fact set forth in the eoll1plaint, which motion was 1196 FEDERAl 'rrade COMMISSION DECISIONS Findings -!:~ P. T. C, granted on the record and c.onfirmed by formal order filed herein on October 26, 1951. Such substituted answer reserved to respondents the right to submit proposed findings and conc.lusions, as provided by Rule XXI of the Commission s Rules of Practice, and also certain other reservations to respondents not necessary to be here set forth. Testimony and exhibits were received, which have been retained of record, no motion to strike having been made by any party, which testill1onv and exhibits are not herein C'onsidere,cl because of the filing of the admission answer' as above set out. Thereafter the proceeding regularly came on for final consideration by the above-named IIearing Examiner, theretofore duly designated by the Commission upon said complaint and substituted an8\\er thereto, proposed findings awl conclusions not having been submitted on bel1alf of any party to the proceeding; and said Ileal'ing Examiner, having duly considered the record herein, finds that this proceeding is in the interest of the public and makes the following llndings as to the facts, conclusion drawn therefrom, and order;

FINDINGS AS '1'0 THE FACTS PARAGRAPH 1. Respondent Sewing ~lachine Exchange, Inc. , is n l:orporation organized and existing under' and by virtue of the laws of the State of Pennsylvania with its office and principal place of business located at 4233-35. Parrish Street, Philadelphia, Pennsylvania. Respondents William (alias diet'us 'Villis) Harris, Jerome (alias clictus Jerry) Fineman and Emanual (alias dict1.l,s l\fanual) Harris are President, Treasurer and Secretary, respectively of corporate respondent and acting as such officers formulate, direct and control the policies, acts and practices of said corporation. The post office address of the individual respondents is the same as that or the corporate respondent.

PAR. 2. Respondents are now, and have been for several years last past, engaged in the sale or sewing machine heads imported by them rrom Japan, and completed sewing machines of which said heads are a part, to distributors and also to retailers who in turn sell to the purchasing public. In the course mid conduct of their business respondents cause their said products, when sold, to be transported from their place or business in the State or Pennsylvania to the purchasers thereof located in various other States and maintain, and at all times mentioned herein have maintained, a course of trade in said products in commerce among and between the various States or the United States. Their volume of trade in said commerce has been and is now substantial.

SEl\TIXG MACHINE EXCHANGE, INC. ET AL. 1197 1192 Conclusion PAR. 3. 1Vhen the sewing machine heads are imported by respondents the words "l\iade in Occupied Japan" or "Japan" appear on the back of the vertical arm. Before the heads are sold to the purchasing public as a part of a complete sewing machine it is necessary to attach a motor to the head in the process of which the aforesaid words are covered by the motor so that they are not visible. In some instances said heads, when received by respondents, are marked with a medallion placed on the front of the vertical arm upon which the words "lllade in Occupied tT apan " or " T apa.n" appear. These woi'ds ~re, however, so small and indistinct that they do not constitute ade- Cjllate notice to the public that the heads are imported. PAR. 4. 'Vhen articles of merchandise, including sewing machines ~re exhibited and oirered for sale by retailers to the purchasing public and such articles are not marked 01' are not adequately marked showing that t)wy fire of foreign origin or if marked and the markings are covered or otherwise concealed, such puchasing public understands and believes such articles to be wholly of domestic origin. There is among the members of the purchasing public a substantia) number who have a decided preferenee for products originating in the United States over products originating in whole or in part in foreign countries, including sewing machine heads. PAR. 5. Respondents by placing in the hands of dealers their said sewing machine heads and completed sewing maehines provide said dealers a means and instrumentality whereby they may mislead and deceive the purchasing public as to the place of origin of said heads. PAR. 6. Respondents in the course and conduct of their business are in substantial competition in commerce with the makers and sellers of domestic sewing machines and also sellers of imported sewing machines some of whom adequately inform the public as to the source of origin of their said products.

PAR. 7. The failure of respondents to adequately disc)ose on the sewing machine heads that they are manufactured in Japan has the tendency and capacity to lead members of the purchasing public into the erroneous and mistaken belief that their said product is of domestic origin, and to induce members of the purchasing public to purchase ~ewing machines of which these heads are a part because of such erroneous and mistaken belief. As a result thereof, trade has been unfairly diverted to respondents from their competitors and substantial injury has been and is being done to competition in commerec. CONCLUSION The aforesaid acts and practices of respondents, as herein found are a1) to the prejudice and injury of the public and of respondents 1198 FEDERAL TRADE CO1LMISSION DECISIONS Order 48 F. T. C.

competitors and constitute unfair methods of competition and unfair and deceptive acts and pnictices in commerce within the intent and meaning of the Federal Trade Commission Act. ORDER It is o'lYleJ' That the respondents, Sewing :Machine Exchange Inc., a corporation, and its officers, and ",Villiam (alias (lict~18 'Villis) Harris, Jerome (alias (Uctus J city) Fineman and Emanual (alias clictu8 ~1anual) Harris, individually and as officers of said corporation and said respondents' representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of sewing machine heads for sewing machines in commerce, as "commerce:' is defined in the Federal Trade Commission Act, do forthwith cease and desist from: Offering for sale, selling or distributing foreign made sewing machine heads, or se,ying machines of which foreign made heads are a part, without clearly and conspicuously disclosing on the heads, in such a manner that it will not be hidden or obliterated, the country of origin thereof.

ORDER TO FILE REI' ORT OF COl\IPLL-\.NCE I t is f1('lther' ordered That the respondents herein sJlall, within sixty (60) clays 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 the order to cease and desist (as required by aforesaid order and decision of the Commission THE KNOX CO. 1199 Coll1pln int