National Fire Safety Counsellors

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Lv THE :YIATTER OF NATIONAL FIRE SAFETY COUNSELLORS ET AL.

CONSENT ORDER, ETC. , IN REG \RD TO THE ALLEGED v"JOLATION OF THE FEDERAL TRADE CO:\DIISSTON ACT Docket 6489. Complaint, Jan. 1956-Decision, June 12, 1956 Consent order requiring sellers in Irvington, N. J., through house-te-house canvassers, of a fire alarm system for homes. to cease representing falsely that their salesmen were connected with the federal government or a civic organization, were only demonstrators, and desired to make fire prevention talks or demonstrations only; that prospects and their homes were specially selected for demonstration purposes; that the total cost of the system would be little more than the credit allowed for sllppl;ring names of other prospects, and that demonstrations in the homes of referred prospects 'were not necessary before such credit was given; that the contract or promissory note for the purchase price ,,,auld not be discounted and that carrying charges would not be added to the total cost; and to cease utilzing such scare tactics as newspaper.r clippings or horror pictures of fire fatalities to induce tlw purchase of their products, among other things. Before illr. Frank Hier hearing exa.miner. Mr. William R. Tincher ror the Commission. Mr. Jerome L. lies81er or Ne\mrk, K. J., ror respondents. COlifPLAIXT Pursuant to the provisions of the Federal Trade Commission Act and by virtue or the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that ational Fire Safety Counsellors, a corporation, and R.robert L. Berko and Howard Berko, individually and as offcers of sa.id corporation, hereinafter referred to a,s 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 cOlnplaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent National Fire Sarety Counsellors is a corporation orga,nized, existing and doing business under and by virtue or the laws or the State or New .Jersey. Respondents Robert L. Berko and lIoward Berko are the president a.ud vice president respectively of said corporate respondent and formulate, control and direct the policies and practices of said corporate respondent and are responsible for the operation and management thereof. Hesponclent Robert L. Berko a.lo does business under the name of t.he National Fire Sarety Council. The oITce and principal place or business or all NATIONAL FIRE SAFETY COUNSELLORS ET AL. 1499 1408 Complaint respondents is located at 1068 Clinton Avenue, Irvington ew Jersey. PAR. 2. Respondents are nmv, and lor more t.han one year last past have been, engaged in the sale and distribution, in commerce between and among the various States of the 1Jnited States and in the District of Columbia, of a fire detection or fire alarm system usually installed in purchasers' homes or dwellings. Respondents cause and have caused said fire detection or fire alarm systems when sold to be shipped from the State of New Jersey to purchasers thereof located in various other states of the United States and iu the District of Columbia, where they are installed in the homes or dwellings of such purchasers. The volume of business of respondents in saiel systems in commerce is now and has been substantial.

PAn. 3. In the course and cond uet of their business as a.foresaid respondents are nol' , and have been in substantial competition with other corporations, firms and individuals engaged in the business selling and distributing fire detection or fire alarm systems in C01nmeree.

PAIL 4. Respondents employ salesmen 01' house- house canvassers to sell their products. Said salesmen are customarily given a course of instruction in selling supplied with sales manuals, demonstration kits newspaper clippings and pictures of fires and fire fatalities and injuries. \Vhen a sale is nlac1e the salesman secures the signatures usually of both husband and wife to a contract and prornjssory note attached thereto supplied by respondents.

PAR. 5. In the course and conduct of their aforesaid business and for the purposes of selling their products, respondents directly or through their representatives employ many unfair and deceptive practices. Among and typical, but not all inclusive, of such practices are the following:

(1) In the telephone solicitation of prospective purchasers, respondents' salesmen falsely represent that they desire to make a fire prevention talk or demonstration only.

(2) Respondents' salesmen falsely represent themselves to be eonnect,ed with some department of t.he Federal Government or with a civic organization when making said fire preve,ntion talk and demonstration.

(3) Respondents' salesmen employ " scare tae(jes" in exhibjting news clippings and horror pictures during their sales talks, calculated to arouse parents emotionally as to the need to protect themselves and their chjldren from fire hazards.

(4) Respondents' salesmen falsely represent that they are demonstrators only and not salesmen.

1500 FEDERAL TRADlJ CO:rUlISSIO?\ DECISIONS Complaint 52 F. T. C.

(5) Respondents' sa1csmen falsely represent tlmt prospects have been especially selected or that their homcs have been se1ccted for demonstration purposes and that the call presents an exceptional opportunity for said prospects.

(6) Respondents' salesmen falsely represent the total cost of the fire detection or fire alarm systmD.

(7) Respondents' salesmen falsely represent that the entire cost of the system to prospective purchasers 'will be a few cents or dollars per month in excess of the credit that purchasers will receive from supplying names of other prospective purchasers to the respondents. (8) Hespondents' salesmen falsely represent to prospects that they ",ill be given credit of $5 or $10 per name and address of other persons who might. be interested in said syst.em without disclosing that a demonstrat.ion in the homes of the referred persons is necessary before the credit will be gjycn. Respondents salesmen usually allow a specified number of names at time of the sale and thereafter represent that two or three names and addresses can be submitted monthly. (9) Respondents' salesmen falsely represent that if any of the referred names culminate in a sale, an additional $20 credit will be given to the person furnishing the lead.

(10) Respondents' salesmen falsely represent that the names of those who supply prospective customers wil not be revealed to the latter. These names are almost universally disclosed to the referred prospect.

(11) Respondents' salesmen in many instances have induced prospects to sign contracts and promissory notes which are attached thereto, in blank upon the representation that the total cost would be only a few cents or few dollars per month over and above the credit for supplying names of additional prospective customers. Such contracts and notes are subsequently returned to the purchasers filled in with the total cost and the carrying charges which are contrary to the representations made.

(12) Respondents' salesmen fail to reveal or do not advise the prospective purchasers that the contract and note will be discounted. Respondents almost universally discount the contract and note with a, finance company or bank which in turn notify buyers that they hold a contract and noie and expect full payment in monihly installments, usually 36 months. In the absence of being so advised, prospective purchasers do not expect t.their contracts and notes to be handled in this manner. Knowledge that their contracts and notes were to be so handled would have the tendency and capacity to cause prospective purchasers to refrain from entering into said contra,cts. SATIOKAL FIRE SAFETY COUNSELLORS ET AL. 1501 1488 Decision (13) Respondents' salesmen do not. advise prospect.ive purchasers t.hat carrying charges win be added to the cost of the system. In the absence of being so advised, prospective purchasers do not expect respondents to add such carrying charges. JCnowledge that carrying charges -were to be added would have the tendency and capacity to cause prospective purcha.sers to refrain from entering into said contracts.

PAR. 6. The use by the respondents of the unbir and deceptive acts and practices, in connection with the conduct of their business has had and now ha.s the capacity and tendency to mislead and deceive a substantia.l portion of the purchasing public, to cause many prospective purchasers to become unduly alarmed in regard to fire and its consequences a.nd to purchase respondents' fire detection or fire alarm system. As a result thereof trade has been unfairly diverted to the respondents from their competitors and substantial injury has thereby been done to competition in commerce.

PAR. 7. The. above and foregoing practices of the respondents arc all to the prejudice and the injury of the public and of respondents competitors and constitute unfair and deceptive acts and practices in commerce, and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. INITIAL DECISION BY FRANK HIER, HEARING EXAMI Pursuant to the provisions of the Federal Trade Commission Act the Federal Trade Commission, on January 11, 1956, issued and subsequently served its complaint in this proceeding against respondents X ational Fire Safety Counsellors, a corporation existing and doing business under and by virtue of the laws of the State of Kew Jersey, Robert L. Berko and Howard Berko, individually and as president a.nd vice president, respectively, or said corporate respondent, who as such formulate, control, and direct the policies and practices of said corporate respondent and are responsible for the operat.ion and management thereof. The of lice ane! principal place of business of respondents is at 1068 Clinton Avenue, Irvington, New Jersey. On April 25, 1956, there was submitted to the undersigned hearing examiner an agreement bet\Vcen respondents and counsel supporting the complaint providing ior the entry or a. consent order. By the dictional fact3terms or said agreement, respondents admit all the juri alleged in the complaint. and agree that the record may be taken as if findings or jurisdictional racts had been duly made in accordance with such allegations; agree that the answer or respondents herein to the complaint shall be considered as having been withdrav\il; waive any further procedural steps before the hearing examiner and the Com- 451524--59-- - 96 1502 FEDERAL TRADE C01-:IlISSIO DECISIONS Order 52 F. T. C.

mission; waive the making of findings of fact or conclusions or law; and waive all of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with this agreement. Such agreement further provides that it disposes or all of this proceeding as to all parties; that the record on which the ini6al decision and the decision of the Commission shall be based shall consist solely of the complaint and this agreement; that the latter shall not become a part of the offcial record unless and lmti! it becomes a part of the decision or the Commission; that the agreeme,nt is for seitlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint; and that the following order to cease and desist may be entered in this proceeding by the Commission without further natiee to respondents and when so entered it shall have the same force and effect as if entered after a full hearing and may be altered modified or set aside in the manner provided for other orders; and that the complaint may be used in construing the terms of the order. The hearing 83:aminer having considered the agreement and proposed order and being of the opinion that they provide a,n appropriate basis for settlement and disposition of this proceeding, the agreement is hereby accepted, the following jurisdictional findings made, and the following order issued:

1. Respondent, K ational Fire Safety Counsellors, is a corporation existing and doing business under the Ia WB of K ew Jersey, with its offce and principal place of business located at 1068 Clinton Avenue Irvington, New .J ersey. H,respondents Robert L. Berko and Howard Berko are the president and vice president, respectively, of said corporation, with their offce and principal place of business located at the same address as the corporate respondent. 2. The Federal Trade Conmlission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It i8 ordend That the respondents National Fire Safety Counsellors, a corporation, its offcers, agents, representatives and employees, and Robert L. Berko and Howard Berko, individually and as offcers of said corporation, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution in commerce, as "commerce:' is defined in the Federal Trade Commission Act, of fire detection or fire alarms systems, do forthwith cease and desist from representing, directly or by implication: NATIONAL Fine SAFETY cor .,TELLORS ET AL. 1503 1498 Decision 1. That respondents or any of their salesmen or e.l1ployees are in any way connected with, or endorsed or approved by, the United States Government, any state Government, or any civic association; 2. That respondents' salesmen only desire to make fire prevention talks or demonstrations;

3. That respondents repre,sentatives are not salesmen but are only demonstrators;

4. That prospective purchasers have been specially selected, or that their homes have been selected for demonstration purposes; 5. That the total cost or the cost per month of their fire detection device or fire alarm system is any less than the actual cost, without reference to credit for referrals;

6. That no demonstrations in the homes of referred prospective customers are necessa.ry before credit is given to the supplier of said referrals;

7. That the identity of those supplying names of prospective purchasers will not be re,' ealed to said prospective purchasers; 8. That the contract or promissory note for the purchase price of the system will not be discounted or failing to reveal that such will be discounted j 9. That carrying charges "ill not be added to the tobl cost of the systerH or failing to reveal that carrying charges will be added; 10. That newspaper clippings or horror pictures of fire fatalities represent what the prospective purchaser may expect in his home ii he does not purchase respondents' products, or otherwise utilize such scare tactics to induce the purchase of respondents' products. DECISION OF THE co n.nSSION AND orilER TO FILE REPORT OF CO::PLlNCE Pursuant to Section 3.21 of the Commission s Rules of Practice, the initial decision of the hearing examiner shall, on the 12th day of J\me 1956, become the decision of the Commission; and, accordingly: It is ordered 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 comp1iecl -with the order to cease and desist. &) &: , . 1504 FEDERAL TRADE COl\:\IlSSIOX DECISIO::T Decisioll 52 F. T. C.