Mercury Machine Importing Coporation et al.

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IN THE )-IA TIER OF 11ERGURY MACHINE IMPORTING COPORATION ET AL. CONSENT ORDER, ETC. T REG \HD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE co::nussro ACT Docket 6011. Complaint, July 1.C52-Decision, Jan. .J, 19.55 Consent order requiring an importer of sewing machine heads from ,Tapan and its corporate' sales agent, with lwadqn rters in Kew York City, to cease offering .'nd sellng such heads and completed sewing machines of which they were a part, ,,,itbout conspicuous disclosure on the beads of the conntry of origin, and to cease representing falsely that they were the manufacturers of the merchandise they solee Before l1Ir. J. Earrl Cox' hearing examiner. Mr. William L. Tag,ga:!'t and Mr. J. O. Williams for the Commission. Jfr. Isaac Anolic of New York City, for respondents. C01lIPLAI 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 J\iercury J\fachine Importing Corporation, a corporation: a,nel Emil Deligtisch and Philip S. 1\101'80, individually and as officers of said corporation, and 1\101'8e Sewing l\fachine and Supply Corporation, a corporation, and Philip S. lVforse and l\farian 1\J01'SO, individually and as offcers of said corporation, 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: P..\RAGHAPH 1. Respondent :Mercury J\fachine Import.ing Corporation is a corporation organized and existing under and by virtue of the laws of the State of New York, \with its offce and principal place of business located at 50 ,Yest 27th Street, New York, Kew York. Hespolldents Emil Deligtisch and Philip S. j\Iorse are President and Treasurer, respectively, of this corporate respondent, and, acting as such offcers, formulate, direct and control the policies, acts and praetices of said corporation. The address of these individual respondents is the same as that of the corporate respondent, :Mercury :Machine Importing Corporate1on.

'The issue as to the nse of the word "Mercury, " charged in the complaint, was adjudicated in Pickow Distributing Corp. et al. D. 58!.0 , )rarch 10 , 1954 , 50 F. T. C. 783, in which the Commission found that it was not sustained by the evidence. MERCURY MACHINE IMPORTP-G CORP. ET AL. 535 534 Complaint Respondent Morse Sewing Machine and Supply Corporation is a corporation organized and existing under and by virtue of the laws of the State of N ew York, with its offce and principal place of business located at 40-42 west 27th Street, New York, New York, and acts as the sales agent for respondent )Iercury :M machine Importing Corporation. Respondent Philip S. Morse and :lVarian :\iorse are President and Secretary-Treasurer, respectively, of this corporate respondent and acting as such offcers, formulate, direct and control the policies, acts and practices of said corporation. The address of these individual respondents is the same as that of the corporate respondent Morse Sewing Machine and Supply Corporation. An of the aforesaid respondents cooperate and act t.together in performing the acts and engaging in Lhe practices hereinafter set forth. PAH. 2. Respondent lercury Iachine Importing Corporation, a corporation, is now and has been for several years last past, engaged in the dist.ribution of sewing machine heads imported from Japan to respondent Morse Sewing Machine and Supply Corporation. Respondent :Morse Sewing :Machine and Supply Corporation is now and has been for several ;yea.rs last past, engaged in the sale and distribution of sewing machine heads imported from Japan and complete sewing machines, of which said heads are a part, to distributors and also to retailers who, in t.urn: sell t.he aforesaid complete sewing machines to the purchasing public.

\R. 8. III the course and conduct of theil' business \ respondents cause their said products, when sold, to be transport.ed from their places of business in thc State of New York to the purchasers thereof located in various other St.ates of the United States and maintain, and at all times mentioned herein I1tive 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 substantial.

PAR. 4. 'Vhen the sewing machine heads are received by respondents the 'YOI'd " Japan" appears 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 nec.essary to attach a motor to the head, in the process of which the aforesaid word is covered by the motor so that it. is not visible. In some instances, said heads, \vhen received by respondents, are marked with a medallion p1aeed on the front of the, vertical arm upon which the word " Tapan': appears. This ,yord is however, so small and indistinet that it does not constitute adequate notice to the public that the hea.ds are imported. Furthermore: said 536 FEDERAL TRADE COMMISSIO:- DECISIONS Complaint 51 F. T. C.

Inedallion can be readily removed and when the medallion is so re llloved, no visible mark of origin appears on the machine. Respondents piace no other mark on their imported sewing machine heads or complete sewing machines, of which said heads ate a part showing foreign origin, or otherwise inform the public that the heads are of foreign origin, before they are offered for sale to the public. PAR. 5. When articles of merchandise, including sewing machines are exhibited and oilered 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 conccaled such purchasing public understands and believes such articles to be wholly of domestic origin. There is among the members of the purchasing public a substantial number who have a decided preference for products manufactured in the Vnited States over products manufactured in whole or in part in foreign countries, including se\ving machines. PAR. 6. Respondents used the word "J\1ercury " and other well known domestic names as trade or bntnd names for their sewing machine heads and complete sewing machines, \which words are printed or embossed on the front horizontal arm of the hea.d in large, conspicuous letters and use said trade names in their advertising matter. The word "l\1:ercury," and the other prominent domestic names, are the names or parts of the names of, or used as tra.ce names, marks or brands by one or more business organizations transacting and doing business in the United States which arc and have been well and favorably known to the purchasing public and which are and have been well and long established in various industries. PAR. 7. By using a trade or brand name such as ':)'Iercury" and other prominent domestic names, respondents represent, directly or by implication, that their product is manufactured by, or connected in some way with, the well and favorably known American firm or firms with which said names have long been associated, which is contrary to the fact.

PAR. 8. There is a preference among members of the purchasing public for products manufactured by well and favorably known and long established concerns whose identity is connect.ed with the word l\1ercury " and other prominent domest.ic names. The use of said trade names by respondents on their sewing machines and heads enhances the belief on the part of the public that the said sewing machines are of domestic origin.

MERCURY lVCHIXE IMPORTDlG CORP. ET AL. 537 534 Complaint PAR. 9. Respondents, in their advertising, make the following statements:

WHOLESALERS MANCF ACTURERS EXPORT1' ERS " respondentsBy and through the nse or the word "manufacturers represent, directly or by implication, that they manufacture the products sold hy them. In truth and in fact, respondents do not own or control a factory or facilities in which their products ate manufactured. Substantial numbers of distributors and dealers prefer to deal with concerns which manufacture the products sold by them. PAR. 10. Respondent Mercury iVIachine Importing Corporation, hy supplying the afore-described imported sewing machine heads to respondent Morse Sewing Machine and Supply Corporation, who, in turn, sells the said heads and complete sewing machines, or which the said heads are a part, to dealers, jointly 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 and the manufacturer thereof.

P Alt. 11. Respondents, in the course and conduct. of their business ate in substantial competition in commerce with the makers and sellers or domestic sewing machines as well as the sellers of imported sewing machines, some of whom adequately inform the public as to the source of origin of their product.

P AU. 12. The failure of respondents to adequately disclose on the sewing machine heads, in a manner which cannot be reacljly removed hidden or oblitemted, that they are manufactured in Japan and also the use of trade or brand names, such a,s "J1ercury" and other prominent domestic names, have 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 is manufactured by the well and favorably known firm or iirms with which said trade 01' brand name has long been associated and to induce members of the purchasing public to purchase sewing machines, of which said heads are a part, because of such erroneous and mistaken belief. As a result thereof, substantial trade in C011merce has been and is unfairly diverted to respondents from their competitors and substantial injury has been and is being done to competition in commerce. as herein PAR. 13. The aforesaid acts and practices of respondents, alleged, are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair and deceptive acts and pra,ctices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commissjon Act. 538 FEDERAL TRADE COMMISSIO DECISIONS Decision 51 F.

DECISION 01 THE CO)BnSSION Pursuant to Rule XXII of the Commission s Rules of Praetiee and as set forth in the Commission s "Decision of the Commission , 1955and Order to File Report of Compliance, dated January 4 the initial decision in the instant matter of hearing examiner J. Earl Cox, as set out as follows, became on that date the decision of the Commission.

IXITUL DECISION BY .J. EARL cox, UL-\RIXG EXX:\fINETI The complaint. in this proceeding charges that l\fercury :\lachille Importing Corporation, a Ke,,' York corporation; Emil De)igtisch and Philip S. :Jlorse, individually and as offcers of said corporation; :1101'88 Sewing :Machine and Supply Corporation, anew York corporation, and l' philip S. Morse and Marian Morse, individually and as offcers of said corporation, all named as respondents, have violated the provisions of the Federal Trade Commission Act in Lonnection with the selling and distribution in interstate.e commerce of sewing lnachines and sC\yjng machine heads\ in three respects: 1. Said sewing machines and sewing machine heads, although of foreign make and foreign origin, arc not marked so as to disclose clearly that fact;

2. In using the word "'l\Iercuri' or other similar name as part of the trade or brand llame for said se\ying machines or sewing machine heads, respondents have represented directly or by implication that their products have been manufactured by well-known American firms with which such name or names have long been associated; and 3. By the use of the term "manufacturers" in their advertising mat tel' , respondents ha VB represented, contrary to fact, that they own or control the factory in which their products are produced. Hearings upon these issues were held, but, after the close of the taking of testimony and before the closing of the record and issmulce of an initial decision, a stipuhItion for a consent order was entereel into by respondents with counsel in support of the complaint. This stipulation provides, among other things, that respondents admit all the jurisdictional allegations of the complaint; that the .stipulation together wit.h the complaint, shall constitute the enhre record in this proceeding; that the order hereinafter set forth may be entered in the disposition of this proceeding, and shall have the same force and effect ash ma.de a.after a full hearing, presentation of evidence, and findings and conclusions thereon; that the complaint may be used in construing the terms of the order, which may be altered, modified, or MERCURY MACHINE IMPORTI:- G CORP. ET AL. 539 534 Order set aside in the manner provided by the statute; and that the answer heretofore filed be withdrawn.

The stipulation provides that further hearings before the hearing examiner or the Commission, the making of findings of fact orcon clusions of la w by the hearing examiner or the Commission, the filing of exceptions and oral argument before the Commission, as "wen as all further and other procedure before the hearing examiner and the Commission to which respondents may be entitled under the Federal Trade COllnni.ssion Act or the Rules of Practice of the Commission arc waived, including specifieaJIy any and all right, power or privilege to ehal1enge or eon test the validity of the order entered in accordance ,with the stipulation. It is also agreed that the signing of the stipulation is for settlement purposes only, and does not constitute an admission that respondents have violated the law as alleged in the complaint.

The issues raised by the complaint in this proceed1ing are similar or identical with the issues raised in numerous other proceedings, and the stipulated consent order conforms to the orders heretofore issued in such other proceedings. This is particularly true as regards the i.issue as tothe use of the v, ord "1\fercury" in conjll11ction with the sale and distribution of foreign-made s€'ving machines and sewing machine heads, which was adjudicated in the Pickow Distributing Corporation proceeding, Docket o. 5890. H,ence, the fact that evidence has been presented in this case does not militate against the acceptance of the stipulation.

Accordingly, this proceeding is found to be in the public interest; the stipulation is accepted; the an.s'ver of the respondents is withdra wn; the evidence heretofore taken is disregarded; and the order as contajned in the stipulation is issued, as follmvs: It is ordered That respondents :Mcrcnry l\fachine Importing Corporation, a corporation, and Emil De1igtisch and Philip S. :Morse individually and as offcers of said corporation, and :Morse Sewing; Machine and Supply Corporation, a corporation, and Pbilip S. Moree and l\larian :Morse, indivichwJly and as offcers of saiel corporation, and respondents' represcntatjves, agents, Hnd ernployees, directly or through any corporate or other device in connection with the ofiering for sale, sale or distribution of sewing machines, 01' se\ving machine heads, in commerce, as "commerce" is defined in the. Federal Trade Commission Act, do forthwith cease and desist from: 1. Offering for sale, selling or distributing forejgn-made sewing machine heads, 01' sewing machines of which foreign-made heads afe a part vithol1t dearly and conspicuously disclosing on the heads the 540 FEDERAL TRADE COlV\ISSION DECISIONS Order 51 F. T. C. country of origin thereof, in such a manner that it cannot readily be hidden or obliterated;

2. Representing, through t.he use of the word "manufacture" or manufacturer'1 or any other word of similar import or meaning, or in any other manner, that said respondents are the manufacturers of the sewing machine heads or sewing machines sold by them, unless and until such respondents actually own and operate or directly and absolutely control a manufacturing plant wherein said products are manufactured by them.

Order TO FILE REPORT OF CQjUPLIANCE It i8 onlei' That respondents :Mercury Machinc Importing Corporation, a corporation, and Emil Deljgtisch and Philip S. :Morse, individually and as offcers of said corporation, and ':Morse Sewing 1Ia. chine and Supply Corporation, a corporation, and Philip S. Morse and :Marian :Morse, individually and as offcers of said corporation, shall within sixty (60) days after service upon them of this ordcr, fie with the Commission a report in writing setting forth in detail the llanner and form in which they have complied with the order to cease and desist Cas required by said declaratory decision and order of January 1955J.

&; , EASTMAN KODAK CO. 541 Decision