Recoton Corporation

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IN THE J\L-\ TTER OF RECOTON COR.PORATION ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TR..-\.DE COMMISSION ACT Docket 6322. Oompla,int, Al)1' 1, J955-Decision, A~tU. , 1955 Consent order requiring manufacturers in New York City of phonograph needles with points made of synthetic materials to cease representing falsely in catalogues, on packages and containers, and in sales promotional material furnished to dealers, that the needles had points of sapphire or ruby or jewel; and to cease representing that they were the world's largest manufacturer of phonograph needles.

Before i1fr. EaJ'l J. l(olb hearing examiner. Jl.fr. Terral A. J o'rdan for the Commission. Oahn, Schrwa1,tz-reich ill athias of New York City, for respondents.

CO1IPLAIXT 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 R.ecoton Corporation and Herbert H. Borchardt, Jack n::arns and Alfred Wish, individually and as officers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the COlnmission 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 ARAGR..-\.PH 1. R.respondent R.ecoton Corporation, is a corporation organized, existing 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 147 'Vest 22nd Street, New York, N. Y. Respondents Herbert H. Borchardt, Jack learns and Alfred Wish are respectively President, Vice-President and Secretary of said corporate respondent. These individuals acting in cooperation with each other formulate direct and control all of the policies, acts and practices of said corporation. Their address is the same as that of corporate respondent. PAR. 2. Respondents are now, and have been for more than two years last past, engaged in the sale and distribution of phonograph needles to wholesalers and dealers in comnlerce among and between the various States of the United States and in the District of Columbia. Respondents maintain, and at all times mentioned herein have main- 120 FEDERAL TRADE COl\IMISSION DECISIOXS Complaint 52 F. T. C.

tained, a substantial course of trade in said phonograph needles, in COl1111lerCe, among and between the various States of the United States. PAR. 3. In the course and conduct of their business as aforesaid respondents have made many representations as to the Inaterials used in making their phonograph needles. These representations were made in catalogs, and Ollcounter display cards, packages, containers and other sales prOlllotional material supplied to dealers to be exhibited to the purchasing public. Typical and illustrative of such representations are the following:

Polished Sapphire Tip * * '" tipped with a precious sapphire point. Recoton Ultra Sapphire Tipped Phoneedle.

Ruby Point.

Rubypoint * :Ie * with a sparkling dark red ruby point. Jewel and Osmium Tipped.

Point Material: Jewel.

PAR. 4. Through the use of the foregoing representations and others of similar import and meaning, respondents have represented directly and by implication that said phonograph needles have points or tips made of sapphire, or ruby or jewel. PAR. 5. The said representations are false, misleading and deceptive. In truth and in fact the said needles do not have points or tips made of sapphire or ruby or jewel; but said needles have points . or tips made of synthetic Inaterials.

PAR. 6. By selling and distributing to wholesalers and dealers said phonograph needles packaged as aforesaid and furnishing to such wholesalers and dealers counter display cards and other sales promotional material as aforesaid, respondents furnish to such wholesalers and dealers the means and instrumentalities through and by which they may mislead and deceive the purchasing public as to the composition of the points or tips of said phonograph needles. PAR. 7. Through the use of the statement "world' s largest manufacturers of phoneedles" on certain of its phonograph needle packages respondents have represented that they are the world's largest manufacturers of phonograph needles and produce more phonograph needles than any other manufacturer in the world. In truth and in fact, there are other Inanufacturers in the world whose businesses are larger than respondents' and who produce substantially more phonograph needles than the respondents.

PAR. 8. In the course and conduct of their business respondents are in direct and substantial competition with other corporations and firms and individuals engaged in the sale in comnlerce of phonograph needles.

RECOTON CORP. ET AL. 121 119 Decision PAR. 9. The use by the respondents of the false, misleading and deceptive represmitations herein set forth has had and now has the capacity and tendency to mislead and deceive a sub~tantial number of wholesalers and dealers and nlembers of the purchasing public' with respect to the material of which the tips or points of respondents' said needles are made and with respect to the size and capacity of respondents' manufacturing facilities. As a result thereof, substantial trade in commerce has been unfairly diverted to respondents from their competitors and substantial injury has been done to competition in commerce.

PAR. 10. 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 and deceptive acts and practices and unfair methods of competition, in commerce, within the intent and meaning of the Federal Trade Commission Act. INITIAL DECISION BY EARL J". KOLB, HEARING EXAMINER The complaint in this proceeding charges the respondents Recoton Corporation, anew York corporation located at 52-35 Barnett A venue, Long Island City, New York, and Herbert H. Borchardt, Jack Karns and Alfred ""\Vish, individually and as officers of said corpora""' tion, with the use of unfair and deceptive acts and practices and unfair methods of competition in commerce in violation of the provisions of the Federal Trade Commission Act, in connection with the sale and distribution of phonograph needles.

After the issuance of said complaint and the filing of their answer thereto, the respondents entered into an agreement for consent order with counsel for complaint disposing of all the issues in this proceed.., ing, which agreement was duly approved by the Director and Assistant Director of the Bureau of Litigation. It was expressly provided in said agreement that the signing thereof is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint. By the terms of said agreement, the said respondents admitted all the jurisdictional allegations of the complaint and agreed that the record herein may be taken as if the Commission had made findings of jurisdictional facts in accordance with such allegations. By said agreement, the answer heretofore filed by respondents was withdrawn ancl the parties expressly waived a hearing before the hearing examiner or the Commission, the making, of findings of fact or conclusions of law by the hearing examiner or the Commission the filing of exceptions and oral argument before the Commission 122 FEDERAL T'TRADE COMMISSION DECISIONS Order 52 F. T. C.

and all :further and other procedure before the hearing examiner and the Commission to which the respondents may be entitled under the Federal Trade Commission Act or the R.ules of Practice of the Commission.

By said agreement, respondents further agreed that the order to cease and desist, issued in accordance with said agreement, shall have the same force and effect as if made after a full hearing, presentation of evidence, and findings and conclusions thereon, and specifically waived any and all right, power or privilege to challenge or contest the validity of such order.

It was further provided that said agreement, together with the complaint, shall constitute the entire record herein, that the complaint herein Inay be used in construing the terms of the order issued pursuant to said agreement, and that said order may be altered, modified or set aside in the manner prescribed by the statute for orders of the Commission.

The hearing examiner has considered such agreement and the order therein contained, and it appearing that said agreement and order provides for appropriate dispositions of this proceeding, the same is hereby accepted and made a part of the record and in consonance with the terms of said agreement, the hearing examiner finds that the Federal Trade Commission has jurisdiction of the subject matter or this proceeding and of the respondents named herein, and that this proceeding is in the interest of the public, and issues the following order:

ORDER t is onle?' ecl That respondents Recoton Corporation, a corporation and its officers, and Herbert H. Borchardt, Jack I\::arns and Alfred 'Vish, individually and as officers of said corporate respondent, and respondents' agents, representatives and employees directly or through any corporate or other device, in the offering for sale, sale or distribution of phonograph needles in commerce, as "commerce is defined in the Federal Trade COlmnission Act, do forthwith cease and desist from representing, directly or by implication: 1. That the points or tips of phonograph needles made or synthetic sapphires, rubies, jewels or other precious stones are sapphires rubies, jewels or other precious stones without clearly stating that they are synthetic.

2. Through the use of the statement "world' s largest manufacturers of phoneedles" or representations of similar import or meaning that REGO'T'ON CORP. E'T AL. 123 119 Order said corporate respondent is the world's largest lnanufacturer of phonograph neecUes.

DECISION OF THE COl\HnSSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practices the initial decision of the hearing examiner shall, on the 2nd day of August, 1955 become the decision of the Commission; and, accordingly :

It is orde1o 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. Complaint 52 F. T. C.