S. Klein Department Stores, Inc.

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

IN THE :.1A TTER OF S. KLEIN DEPARTMENT STORES, INC. ORDER, ETC. , IN REGARD TO THE ALLEGED VIOLATIO OE THE FEDER\L 'lll\.DE fMISSIOX ACT Docket 7891. Compla.int, JIuy 1960-Decisf,on-, Feb. , 1962 Order dismissing cbarges that a Kcw York City depIlltment store made deceptive pricing and savings claims, misrepresented the fiber content of mcl':handise and failed to disclose when IJl'oducts were irregular in newSjJHper advertising.

fPLAIXT 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 S. IOein Department Stores, Inc., a corporation, hereafter referred to as respondent, has violated the provisions of said Act, and it appea.ring 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:

PARAGRAPH 1. Respondent S. Klein Department Stores, Inc. , is a corporation organized, existing and doing business under and virtue of the la"\yS of the State of New York, with its main offce and principal place of business located at Union Square, Sew York PAR. 2. Respondent is no\v, and at all times material hereto has been engaged in the business of operating de,partment stores selling mer cha,ndise to the public in competition \with other corporations, fll. and individuals also engaged in soJJing to the public merchandise of the sa,me nature. Respondent owns and operates department stores located in the cities of New York, \Ve,stchester, and Hempstead, in the State of Xew York, and in Newark, in the State of New Jersey. .. .

S. KLEIX DEPARTMENT STORES, INC. 389 388 Complaint PAR. 3. In the course and conduct of its business respondent has ben and is engaged in disseminating and in ca.using to be dissenlinated in ne1vspa.pers of interstate circulation, and in ra.dio and television broadcasts of interstate transmission, advertisements designed and intended to induce sales of its merchandisf and that of its concessionaires. The amount expended by respondent upon such advertising is approximately one mjllion dollars per year.

PAR. 4. Among a.nd typical, but not all inclusive, of tbe statements appearing in the advertisements described in paragraph 3 are the following:

Save 50% Cuban Revolt Stops Mattress Export-Shipment :\Iade to retail at 39.5019.

" 59.5029.

" 79.50-39.

From one of the Kation s best known Ilakers-sa ve $25.

Thomas Cotton Sport Coats Made to retail at $35.009.

Rota-Broil H.otisseries !\ade to retail at $G9. 29.

Callaway s "Profile Cannon s "Checker" Bath Towels :.lade to retail at $1.29-691 Full /2 to 5 ft. Aluminum and Frosted Glass Tub I'Jnc1oSl1rcs $89.95 Value-il9.

Cultured Pearl Necklaces & Chokers All hand knotted! All \with 14 Kt. white gold clasps.

Gunranteed equal to $15 necklaces and chokers 5.

Guaranteed equal to $20 necklaces and chokers 8.

Guaranteed equal to . 30 necklaces and chokers 12.

Guaranteed equal to $45 necklaces and chokers 19.

Cashmere Sweater Rvent Precious mink on Cashmere Sweaters sold nationally at SSg to $139-$50 Long slee,e cardigans * .. '" na tionally sold at $22. 95 to $2G.95-$10.

2 to 15 cnp Automatic Coffee Percolators l,ist price 824.95 7.

12 Automatic Skilet."

, , , . . , . . 390 FEDERAL TRADE COMMISSIOK DECISIONS Complaint GO F.

List price 19.95 7.

Natural Mink Stores & Capes :.lade to retail at $290 to $329 . . . . $189 Pure Silk Costumes 1IIade to retail at 25 to 35. 11.

PAR. 5. Through the use of the amounts in connection with the words and terms "list" sold nationally at" value" and "equal to the respondent represented that. said amounts were the prices at which the merchandise referred to was usually and customarily sold at retail in its trade area, and through the use of said amounts and the lesser amounts that the differences bet\fcen saiel amounts represented a saving to the purchaser from the price at which said merchandise was usually and customarily sold in saiel trade area. Through the use of the amounts in connection with the words and terms "made to retail ae' and " save" the respondent represented that said amowlts were the prices at which it usually and customarily sold the lIlerchandise referred to in the recent, regular course of business and through the use of the said amounts and the lesser amounts that the differences between said amounts and the lesser aInounts represe,nted savings from the prices at which the merchandise referred to had been sold by respondent in the recent, regular course of its business.

Through and by the use of the \\orcls "Pure Silk" in describing its costumes offered for sale respondent represented that said costumes were composed of 100% silk fibers.

PAIL 6. The aforesaid representations were fnJse, misleading and deceptive.

In truth and in fact, the amounts set out in connection with the words "list" nationally sold at" value:: and "equal to" \were in excess of the prices at which the articles of merchandise referred to were usually and customarily sold at retail in respondent's trade area and the difference between such amounts and the lesser amounts did not represent savings from the prices at which the merchandise had been usually and customarily sold in respondent' s trade area. In truth and in fact, the amounts set out in connection with the \words "made to retail at" and "save" were in excess or the prices at which the articles of merchandise referred to had been sold by respondent in the recent, regular course of its business and the difference between said amounts and the lesser amounts did not represent savings from the prices at which the merchandise had been sold by respondent in the recent, regular course of its business. The costumes described as "Pure Silk" did not contain any silk fibers.

&, S. KLEIN T DEPARTME T STORES , INC. 391 388 Initial Decision PAR. 7. Respondent advertises and sells merchandise which is known as "seconds" or "irregulars" without disclosing such fact in the advertising of such merchandise or in connection with the merchandise itself. Such merchandise is of less value than first class merchandise and, in the absence of a disclosure that it is "seconds ,j or " irregulars\ it is believed to be, and is accepted by the public as, first class merchandise.

PAR. 8. The use by respondent of the foregoing false, misleading and deceptive staten1ents and representations had the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations were true and into the purchase of substantial quantities of respondent s merchandise because of such mistaken and err011eous belief. The failure of respondent to disclose the hets as alleged in paragraph 7 had thc tendency and capacity to lead the public into the erroneous and mistaken belief that the merchandise referred to therein was first class and into the purchase thereof because of such erroneous and mistaken belief. As a result thereof, substantial tra.de in COlllmerce has been lmfairly diverted to respondent from its competitors and substantial injury has thereby been done to competition in commerce. PAR. 9. The a.foresaid acts and practices of respondent, as herein alleged, were, and are, a1l to the prejudice and injury of the public and respondent's competit.ors and constituted, and n01T" constitute, unfair ancl deceptive acts and practices and unfair methods of competition, in com111erce, \within the intent and meaning of the Fcdera,l Trade Commission Act.

ilr. FredcTick J. I1fcl1fanu8 and lift. Garland S. Fe1'gu8on supporting the complaint.

Paul, Weiss, Rifkind, Wharton O(",rison by ilr. Jay H. Topkis and I1fr. Peter il. Fishbein of New York, :I. , for respondent. TITAL DECISION BY J ORN LEWIS, IIEARDW EXA1\UNDER STATEMENT OF PROCEEDINGS The Federal Trade Commission issued its complaint against the above-named respondent on :YIay 16, 1960, charging it with having engaged in unfair and deceptive acts and practices and unfair methods of competition, in commerce, in violation of the Federal Trade Commission Act by (a) misreprcsenting the prices of, and the savings to be realized on, certain merchandise advertised for sale by , (b) misrepresenting the fiber content of certain of said merchandise, and (c) failing to reveal that certain of said merchandise was j \ 392 FEDERAL TRADE COMMJSSION DECISIOXS Initial Decision 60 F.

irregular. After being served with said complaint respondent appeared by counsel and there,Lfter filed its answer denying, in substance, that it had engaged in the ilegal conduct charged. Prior to the holding of any hearings herein respondent moved to dismiss the complaint for failure to allege facts suffcient to sustain the jurisdiction of the Commission. After the hearing of oral argument on said motion on August 30, 1960, the examiner to whom this proceeding was then assigned denied such motion by order dated September 15, 1960. An interlocutory appeal to the Commission from said order of the hearing examiner was denied by order of the Commission issued X ovember 18, 1960.

The undersigned \\fls subst.ituted as heating examiner on October 10 1960, after the hearing examiner theretofore assigned to hear this proceeding disqualified himself from further participation therein. Hearings on the complaint were held in abeyance pending the outcome of a suit 'hy respondent for an injunction against the hearing examiner and the members of the Federal Trade Commission in the United States District Court for the District of Columbia. I-Iearings 'were t.hereafter held on various dates between April 5, 1961 , and June 1 1961 , in \Vashingtoll, D. , and BwYork, X.Y. At such hearing testimony and other evidence ",were offe,red in support of l1d in opposition to the allegations of the complaint, which testimony and other evidence were duly recorded and filed in the offce of the Commission. Both sides were represented by counsel, participated in the hearings, and were afforded fun opportunity to be heard, to exmine and cross-examine witnesses, and to introduce evidence bearing on the issues. motion by respondent at the end of the case-in-chief to dismiss the complaint, for insuffciency of proof and lack of jurisdiction, was denied by the undersigned examiner at the herring held :May 10, 1961. Proposed findings of fact and conclusions of law were fied by counsel supporting the complaint and by counsel for respondent on July 19, 1961, and a support,ing memorandum of law \vas filed by respondent on said date.

After having carefully reviewed the entire record in this proceeding and the proposed findings a.nd conclusions 1 and the snpporting memorandmn filed by respondent, the hearing examiner finds that this proc.eedillg is in t.he intercst of the public and, based on the entire record and his observation of the witnesses, makes the foJImviIlg: 1 Proposed findings not IJerl'in adopter! , either in tlw form proposed or in s\11) talc:(" are rejected as not supported by the evidence or as invoh-ing immaterial matters. S. KLElj\ DEPART ENT STO'RES, Ij\ 393 388 Initial Decision FIXDIXGS OF FACT I. The Business of Respondent 1. Hespondeut S. Klein Depart ment Stores, Inc., is a corporation organized, existing and doing business under a,nd by virtue of the laws of the State of New York, with its main offce and principal place of business located at LTnion Square, New York, N. 2. R.respondent is now, and for a number of years has been, engaged in the business of operating department stores selling merchandise to the public in competition with other corporations, firms and individuals also engaged in selling to the public merchandise of the saine nature. R.respondent owns and operates department stores 10cater! in l\ew York City, IVeslchesler County anel Hempstead in the State of New York, and in Kemlrk, N.,J. During the fiscal year 1958 respondenc ssales 1were in excess of $84 000 000. 3. In the course and conduct of its business respondent has been and is engaged in disseminating and in causing to be disseminated in newspapers ha,ving a substantial interstate circulation, advertisements designc(l ancl intended to induce sA-les of its merchandise and that of the concessionaires who opcrate certain of its departments. The amount expended by respondent upon such newspaper advertising is approximat.ely 83 000 000 a year.

4. Hcspondent has questioned whether the mere solicitation of customers in 118"YSpapers of interstate circulation is a sufficient .showing of interstate cOlnmerce, for purposes of sustaining the Commission s jurisdiction, in the absence of e.vidence of actual sales of merchandise in commm'CB pursuant to .snch solicitation. The Commission has already ruled that it has jurisdiction! under these circumstances in its order denying respondent's interlocutory appe,al in this proceeding. A similar ruling \,as sllbseqllent1y made by it in its decision in Bankers Sec"""ities OOPp. Docket 7039, December 1, 1960. Aside from the fact that the examiner is bound by these rulings, he enterta,ins no (lonbt as to the Commjssion s jurisdiction under the facts alleged.

It is wen settled that the transmission of intelligence for commercial purposes across state Jines is interstate commerce. InteTnakional Textbook 00. v. Pig.'. 217 U.S. 01. This has been held to include trade in news and the circulation of newspaper.rs across state lines. Associated PTeSS v. 326 U. S. 1; J1 abee v. WhitePlains Publishing 00. 327 U. S. 178. It also includes the advertising of products for sale in publication 1which arc circulatDc1 in commerce. LOTain,J OUP- 394 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision GO P.

nal 00. v. U.s. 342 U.S. 143. The case relied upon by respondent Bl1linenstoc1, Bros. v. Ourtis Pub. 00. 252 U.S. 436, is of doubtful application in view of the Supreme Court' s subsequent holding in the LOTCtin JO'lrnal case. It may a.lso be noted that t1nen8tools was based on the line of cases \which helel that insurance policies were not articles of commerce, and that the making of contracts pertaining thereto was Inerely incidental to commerce. HO\vever, these cases have since been overruled in S. v. Southeastern Under'1Jl'iters Ass 322 U. S. 533.

The fact that the 1Vheeler-Lea Amendment to the Federal Trade Commission Act specifically makes the interstate advertising of foods drugs, devices and cosmetics illegal is not as suggested by respondent indicative of a Congressional interpretation that the Commission did not previously have jurisdiction over the interstate advertising of these products. The legislative history of the amendment makes it clear that its sponsors regarded the Commission as already having jurisdiction under these circumstances, but that they wished to give it the ad(litional pmver of injunctive relief in the case of products ' .vhere there was imlllinent danger to life and limb. Aside from the legislative history, the fact that Congress considered it nece sary to spell out advertising, in commerce, as being il1legal may just as readily be ascribed to an oventbuncbnce of caution on its part, considering' the then uncertainty in the state of the la ,v (some of the cases cited above including Southeastern Undenun:tet81ulvlng not yet been decided), as to an intention to enlarge the Commission s jurisdiction. Certainly there is no dfirmatiYe evidence of a,ny Congressional intent to limit tho Commission s jurisdiction over the interstate advertising of other products.

In the opinion of lhe examiner a showing that the goods advertised by respondent moved in commerce is not an essential element of the offense. The gra.vamen of the charge is the use of misrepresentation in the advertising of the product, not in the actual sale which occurs thereafter. The act, practice or method of competition charged to be unfair or deceptive is the use of false advertising claims in inducing sales, rather than the sales themselves. If the act or practice charged to be unfair occurs in commerce the Act has been violated, without a showing that the act or practice has resulted in a sale in commerce. It is concluded and found that, in c1isseUlinating and causing to be disseminated advertisements in newspapers "\which circulate in commerce, respondent is engaged in COlllmeree, within the meaning of the Federal Trade Commission Act.

, S. KLrEIX DEPARTME?\ ':r STORES , INC. 395 888 Initial Decision II. The Alleged Ilegal Practices The Issues 1. The principal issue involved in this proceeding is whether respondent has misrcpresented the comparative prices of certa.in of the products which it advertised for sale, and the savings which \\ould be realized on the basis of such prices. In advert.ising many of its products for sale respondent uses what is generally referred to as comparative price advertising, i. , it COlnpares its price wit.h S011e supposedly more usual selling price. The compariscJl in n10st of the a.advertisements involved in this proceeding is between the price at which the merchandise \fas purportedly "l\lac1e to Retail" and the price at "\which it \vas actually offered for sale by respondent.. In some of the advertisements the comparison is with the price at which the product purportedly was "sold nntionally, or with the product' s "list price" or its "value 2. In connection with respondent's comparative price claims, there is raise.d a basic issue as to what certain of the comparative price statements used by respondent mean, particularly its reference to a "made to retail" and a "Est" price. In addition, there is presented the issue whet.her such prices are, in fflct, bona fide prices for purposes of reflecting the savings to be realized.

3. The complaint also charges respondent \\ith two other forms of deceptive advertising, (a) misrepresenting the fiber content of certain garments and (b) failing' to reveal that certain merchandise \-.fls ir regular. There is no serious issue of fact in connection with these two advertisements, respondent's primary contention in this regard being that there is no public interest involved. de To Heb,i) At."

4. There is no dispule as to the f ct th t in a number of its advert.isements respondent stated that the product in quest-ion was "made to retail at" a specified price, and then indicated the price 1t ,, which it was actually being offered :for sflle. For exalnple, it advertised that certain men s sport coats were "made to retail at $35.00", follmyed by a statement of the actual price at which the coats \were being offered viz $9.95". Counsel support.ing the complaint and respondent are in sharp disagreement as to what is nlcant by the phrase " lde to retail at". The complaint alleges that made to retail at" means the price at which respondent itself "usually and customarily sold the merchandise referred to in the recent, regular course of business Respondent contends, on the other hand, that this language means either (a) that the manufacturer expected that the merchandise 396 FEDERAL TRADE CONDlISSION DECISION& Initial Decision 60 F.

would retail at the 'made to retail price, or (b) that other retailers had actually sold the merchandise at the 'made to retail' price 5. No evidence was offered by counsel supporting the complaint as to how the consuming public would interpret an advertisement by a retail store which stated that a product was "made to retail" at a particular price. To support their position as to the meaning of this phrase Government counsel rely entirely on the decision of the Commission in Ameri':can Broa.dloom Oarpet Co. 53 FTC 239, in which the Commission purported to uphold the finding of its hearing examiner that- '" . '" respondent' s use of such terms as "original" and "woven to sell for could reasonably be interpreted as representing that the prices represented in connection therewith were customary and usual with respondent. It should be noted, in connection with the American Broadloom Oarpet case, that the finding made there "as based on the reeard in that case, which disclosed that respondent used the term "original", ap well as "woven to sell for, in its advertisements. Furthermore, while t.he examiner (whose findings the Commission purport.ed to uphold) di.d, on the one hand, suggest that "woven to sell for" amounted to a re,presentation that the product .vas customarily sold at the indicated prjce by respondent, he also found (at 244) : Cpon examination respondent was unable to produce any suggested retail price made by any manufacturer, mill or supplier with whom he dealt for the reason that none such \.,cre eyer printed or communicated to him, nor did any supplier furnish respondent with any information which would justify the representation of "woven to sell for which very language hnp01.ts that the producer of the merchandise, at the time of production, intended, desfgned and produced it to sell jor" the fioure quoted. C:Bmpbasis sl1applied. \Vhether the Commission intended to hold that "woven to sell for means the price "the producer of the merchandise at tl1C time of produetion, int.ended, designed and produced it to ' sell for, or the price the retail out.let advertising the product cust.omarily and usually sold it for, is not clear from the decision. In any event, the finding in that case, based on t.he record there before the examiner and the Commission, caIlnot serve as the basis for a finding in this case concerning t.he meaning of the phrfLse "made to retail atl 6. The only evidence in the record concerning the meaning of the phrase "made to retail lle' in connection with a c01nparative price claim, is that given by respondent' s ach.ertising llanager Wlll testified that he interpreted it to mean the price suggested by the manl1fnd:.urer of the product "wheTcit is sold jn other stotes or destined to be sold in other stores at the historic markupl: or, sta.ted dinere,ntly, that it is S, KLEIN DEPARTME T STORES INC. 397 388 Initial Decision somewhat of a suggested retail price, with the addition that it is customarily sold 'at that price . It may be' l1oted that ,vhile thecomplaint assert.s, and cow1sel supporting the complajnt contend, that the made to retail" price refers to the price at ,vhieh the product is CllStomarily and regularly sold by the retn.iJer so advertising it., counsel supporting the complaint in it number of instances ha.ve not seen fit to rely entirely on this t.theory to establish a ( ase of price misrepresenta1.ion. Inst.ei1d of showing merely that respondent had not customarily sold the product at the indicated "made 1.0 retail price, COlUlsel sought to est.ablish in a, number of instances that the price was not one v,hieh had been recommended by the manufacturer and that the product customarily did not sell at the indicated price in the trade area.

7. The examine.r recognizes that t,he COlImis.sion is not required to sample public opinion in order to det.ermine how the consuming public would int.erpret certain ,words in the English language. IIowevel' where the me,lning contended for is not that which is implied by the norma.ll1sage of the word or phrase, such mea,Filing must be established by substantial, reliable and probative evidence. In this case the examiner, based on a substantial number of years as a Federal Trade Commission hearing examiner, cannot ascribe to the phrase "made to retail at" any such meaning as that c.ontended for by 'counsel supporting the complaint. Based on his own so-called expertise and ordinary common sense the examiner, in the a.bse,nee of evidence to the contrary, finds that the phrase would imply to members of the pureha:;ing public that it is it price at ,which the manufacturer contemplated the product ',"auld be sold t.o the public, taking into consideration the normal and cl1stonull)" marknp in the industry. This implies a.s respondent's advertising mi1l1ager recognized, not merely a subjective element of wha.t the manufacturer had in mind, but also the objective elen1Pnt that t.he product normally sells for that price in the market. The latter is a very necessary element in the meaning of the phrase since, by giving the public the "made to retail" price flnd the actual.l price of t,he advertiser, the advertiser is conveying to the eonSllme.r the impression hat he win aehieye an actual saving from a bona fide comparative price. The consumer is not int.erested in fictit.iolls sa\Cing from some artificia.l "made t.o retail" price which has no meaningful rela.t.ionship to the realities of the market. 8. Respondent suggests that if the exalniner does not accept the meaning of the phrase "made to retail at" which is alleged in the compla.int, viz, it mea.ns the price at which the advertiser customarily sells t.he product, the complaint mllst be dismissed as to the it.ems so adver- 398 FEDERAL TRADE CO \nSSION DECISIO!m Initial Decision GO F. tised. This by no means follows. As above indicated, counsel supporting the complaint attempted to show, in a number of instm-:ces that the products were not made to sell at the indicated prices and did not sell at such prices in respondent's trade nrca. Respondent attempted in a number of such instances to show t.o t.he contrary. The issue was thus clearly joined and litigated, even though the complaint incorrectly alleged the meaning of the term "made to retail at" ,Vhether respondent's product.s Iycre or were not "made to retn.il at" the indicated prices is reserved for later discussion, in connection with each of the vftrious items of merchmlc1ise involved in the complaint. Sold Kationally At"

D. One of the advertisements challenged by the compbjnt refers to the merchandise in question as being "sold nationally at $22. D5 to $26.05" and offers it for sale at $10. 00. The complaint aJ1eges, and counsel supporting the c0111plaint contend, that to r"c1vertise a product as being "sold nationa.lly at" a cert.ain figure is to represent that this is the price at which the merchandise usually and cust.omarily is sold h1 the trade. area where it. s being offered for sale. In t.he opinion of tho examiner t,he pluase in question me ns exactly ,yhnt it says, viz that this is the price at ,which the product is :enenllly c.olcl in the united States. This docs not imply, 11o'ycye1' j that it necessarily sens at this price in each and every trade area of the United States or that it may Dot be sold at lo\\er prices in a few trade areas. List Price 10. Several of the advertisements used by respondent refer to a list price" of the product in question and then give respondent' actual sale price. The c()l1plnint alleges and counsel supporting the complaint, contend that, by l'efeTTing to a " list price, respondent is implying that, the product in question is usually and cllstomarily sold at that price in the trade area "here it is being offered for sale. Respondent, on the other hand, seeks to give the phrase a more restricted meaning, viz, that it "mea,ns only that the price named is that which appears on the manl1facturer s price list. 11. In the opinion of the examinCl', a reference to a "list price" in compa.rative advert.ising implies more than that the indicated price is a price appearing on a ma.nufacturer s schedule of suggested prices. It also implies that the listed price bears a realistic relationship to the price at which the product normally sells. A list price schedule is not lmlike the use of ft pre- ticketing device by a manufacturer. a price ticket conttLins an artificial price ,which does not, reflect the price at which the article nonmllly sol1s, it has been held that the &: :\. s. KLEIX DEPARTMENT STORES, INC. 399 3SS initial Decision manufacturer is guilty of supplying an instrumentality for deception concerning the normal selling price of the proc1uct. ..\. manufacturer ,vho u es and distributes price lists which he has rea on to believe do 110t reflect bona, fide retail selling pric.es is in no difierent position than it manufacturer ,vho uses and distributes fictitious price tickets. retailer who uses an artificial list price in comparative price .adver tising is in no bett.er position than is the lTHl1ufacturer. Respondent suggests that list prices are used in the N cw York area merely to help the consumer identify the product, in a manner similar to the use of a model llmnber. ,Yhile there is some testimony to this effect, principally by respondent's offcials, the greater weight of the evidence is to the contr.ary. A retailer of appliances, to whose testimony respondent refers, actually testified that customers "very rarely " identified a product by reference to a list price. An omcia1 in respondenes appliance department testified that: "The list price as I understand it, is tile price that the manufacturer lists it and also 1Dhat some people sell it at" (emphasis supplied). It is significant that, in advertising a rotisserie appliaJlcc, respondent used "list price and "made to retail at" interchangeably. In connection with the phrase "made to ret.aip' respondent has recognized, as discnssecl above that there is involved an element or cust.omary selling price, in addition to merely all indication .of the price proposed by the manufacturer. It Secl1B apparent that by using t.he terms "list price and made to retail' intcrclwpgc,luly rcspondcnt has indicated that it interprets bot.h of these tenus fls hiwing a similar mea.ning. It is appfL,lcnt from the w110Je context of the adycTtising in question that the reference to ,l "Jist price" implies that such price hears senne rcasolll,ble relationship to tbe actual going price of the product. The whole purpose of t.he achcl'tisement. 1S to create the iJnpression that the cnstonwl' is going to nlake a substant.ial saving by buying from EJein. Respondent's l';ilSic Hwdus operandi is to try to convince the COl1sumer that he 01' she ;s going to get a ':bargain . As respondent' advertising" num,lger i-psti fied:

Very simply it is Klein s business to sell bargains. We have nothing else to offer outside of offering the fashions at the lou;esf 1F1c88 in town against other stores that sell at rerJular prices We have only bargains to ojler. IEmphasis supplied.

The Orloff Co., Inc. 52 F'l' C 708; Kay Jewelj.y Stones, Inc. 53 :B' TC 548; and The Baltimore Lif1flOfle Company, Docket 7683, :March 15, 1961. Art Nut" llan!lfacturenJ Distrib. 00. Docket 7280 , ;\II1Y 10 , 1961; GrJOrlyear Tire Rubber Co., 33 FTC 298.

J Sears Roeuuclc (G Co., 33 FTC 304.

Initial Decision GO F. The customer obviously does not believe he is getting a bargain because re,spondent' s price is below some theoretical "list price" appearing on a piece of paper issued by a manufacturer. To him the use of a list price, together with an advertised selling price, obviously implies that the difference between the two represents a realistic n1easure of the bargain he is being offered and the savings he can achieve. It is accordingly, concluded and found that by the use of the term "list price" respondent represent.s that the amount indicated is the price at ,,-which the product. usually and customarily sells in the trade area where it is being advert.ised, and that the difference between said fUTlOunt and the amount at which the product is advertised for sale represents, substantially, the saving which will be realized by the customer over the customary selling price.

V value ' and " Equal To 12. The other two terms used by respon(lent in comparative price adve.rtising are "vallle ' and "equal to" both of which, according to the complaint, constitute a representation that the product referred to usually and customarily sells at the iudicated amount in t.he trade area where it is so advertised. Respondent apparently does not question that this is the normal meaning of these terms. It is, accordingly, concluded and found t.hat by the use of amounts in connection with the terms "vallle ' and "equal to" respondent represents that said amounts are t.he amounts at which the merchandise referred to is usually and customarily sold at retail in its trade area, and that through the use of such amounts and the lesser amounts at which the products are advertised for s:11e, it represents that. the difference between such amounts represents, subst.antially, the savings to the customer from the prices at which said merchandise was usually and customarily sold in said trade arch.

The Falsity of the Price and Savings Claims Made To Retail At"

(aJ :\Iattresses 13. On January 1 1959, and January 14 , 1959, respondent. advertised cert.ain mat.t.resses for sale in the New York Daily News and t.he New York Post, respectively. The advertisement in each case contained the statement: "Cuban Revolt. Stops :\Iatt.ress Export Shipment'\ and indicated that the mattresses, of which there were three gmdes, had been made to retail at" prices from 539. 50 to 579. respectively. They were advertised as being for sale by respondent at prices from S19.99 to $39. , respectively. The only evidence offered to esta b1ish the falsity of respondent's "made to retail' price S. KLEIN DEPARTMEXT STORES INC. 401 388 Initial Decision cJ"ims is that respondent itself had never theretofore or did not thereafter, down to the date of the complaint, ever selJ any of the mattresses at t.he so- called "made to reta,il" prices. 14. It is the opinion a,nd finding of the examiner that counsel supporting the complaint have failed to establish the falsity of re pondcnt's comparative price claims concerning the mattresses in question. As heretofore indicated, a representation that 11 product was "made to retail at" a certain price is not a, representation that the retailer offering it actually ever sold it at that price, but rather tha.t the manufact.urer intended it to be sold at that price and that it did in fact generally retail at the indicated price. There is no evidence in the record as to what price the manufacturer intended to sell the mattresses for or that they did not generally selJ at the specified "made to retail" prices.

(b) "Thomas" Cotton 81'01i. Coats 1:"). On Iay 25, ID5D, and 2\lay 26, 1050, respondent advertised certain Thomas' Cotton Sport Coats " for sale in the Xew York Daily News and the New York 1\lirro1' , respectively. The advertisements stated that the coats had been made to 'retail at 835li(P and oiIel'ed them for .sale at $0. , indicating that the purchaser would "Save $25. Counsel supporting the complaint did not limit his proof merely to the fact t.hat KJein s had not previously sold the coots at S3:J. , but sought to establish that $:15.00 was not the then market price of the coats.

16. The record discloses tJuct the coats in question had originally been advertised for sale by the manufacturer in 1956 and 1957 for $35. , and that they had generally been retained at tlult price throughont the country. During this period the nmnufacturer had sold thc coat$ t.o retailers at $19.75. Based on" markup of 35% t.o 40%, which was stated to be normal in the ret.ail trade, and taking into account the dealer s selling costs, the coats usually sold at $35. , although there is evidence that one retailer in 1;ew York sold them at $27. 50. By 1959 the manufa,ct.ure of this particular design coat had been discontinued nd the manufacturer sold his remaining stock of about 390 coats consisting of broken sizes and odd lots to respondent for $7.85 apiece. 17. It seems evident that by lay H)59 the going retail price of Thomas" cotton sport coats was no longer $35. , but considerably less than that amount. They had originally been made to retail at $35. , but that was no longer the current "made to retail" price. There can be no question but that a statement that a product is "made to retail at" $35. , implies that it is the current price, otherwise the claim that the consumer ",.ill save $25.05 is meaningless. Clearly, 402 FEDERAL TRADE COMYIISSION DECISIONS Initial Decision GO F. in the absence of a statement to the contrary, a prospective purchaser would assume that this is the current price and that he is buying a current 111odel.

18. Respondent' s apparent justification for using the $35.00 "made to retail" price in its advertising is that the manufacturer had given it a copy of an advertisement in which the coat was advertised a:i being for sale at "about $35.00", lend had advised it that that was 'hat the coats "originally sold for . Respondent contends that it did not then know that the coats were not currently being sold for $35.00. However, the manufact.urer s representative testified that he t.old respondent's offcial that the advertisement in question had been run in 1956 and 1957. There can be no question from all the circumstances surrounding the transaction that respondent wa.s a,ware it was dealing in a discontinued model, which "'as not then selling for S )5.00. Even if it was not actual11y aware of this fact, it was under an aiIrmative obligation to ascertain the true facts if it wished to make a representation to the pnblie in its ach ertisjng matter, as to the comparative price fllc1 savings on the proclncL This obligfltion to the public could not be fulfilcd merely by obtaining a copy of a m:ll1ufacturer s advertisement, for the record so to speak, anel disregarding the facts as to "whether this "as actually the price at \which the product was then being sold in the market. lD. It is concluded and found that respondent' s represcntf1Jiolls in connection with advertising "Thomas" cotton i:port coats "\ye1'8 false misleading and deceptive in that the price ,rhich said advertisement stated was the price at \which said coats \H re :'made to rett'ciF did not represent the price at )\ which such coais were then usually and customari ly selling at retail in respolHlent's trade area, and in that the difference between said price and the price at which said coats "ere a(lyel'tised for sale by l'espolHlent did not represent an actual saving from the price at which such coats were usually and customarily being sold in responclenfs trade a.rea.

(c) Hoto- Broil Rotisseries 0. In an advertisement appearing in the New Yolk Daily ews of .January 12 195D respondent advertised "Rota-Broil '400' Rotlssel'jes as being "made to retail at 869.95" , and offered said product for ale at S:29.DD. '1' 11e same rotisseri8s "ere offered :Eor sale in a series of advertisements appearing in the J\-:e\vark Evening News, the York :JJirror and The Newark Star-Ledger dated, respectively, March 31, 1950, and April 3, 1050. In all or the latter ads the product was stated to have a "list price" of $69. , rather than a "made to retail price, and it was oiIered for sale at $28.99. S. KLEIK DEPAHTME T STORES , INC. 403 388 Initial Decision 21. '1118 record discloses that the rota-broiler in question) ,vas the manufacturer s "Golden Capri" model and that the manufacturer list price was $G9.D5 at the tillie it was so advertised. According to the credited testimony of the merchandise n1manager of respondent' hard goods division, at the time the product \vas advertised as being made to retail at" a.nd as having a "list price " of $69.95 he had seen the manufactl1re.r s price list and had actually priced the product at severed st.ores in the area at 869.95.

22. The only evidence to show that the rota-broiler was not "made to retail at" or did not have a $69.95 "list price" is the testimony of a K mv York retailer, called by counsel supporting the complaint, to the effect that he had sold the product for about $40.00. However, the same witness also jndicated that he tried to get and did sometime.s get $69.95 for the broiler, and that he usually s01,1 it for between $47. to $48.00.

3. In the opinion of the examiner the testimony of the single retailer cnJled by counsel supporting the complaint does not destroy the effectiveness of the evidence "which discloses that the product did actually list at $69.95 and t.hat it was being sold at that prict'. in yariOllS stores in the X ew York flTca. It is concluded and found that counsel supporting the corn plaint have i'ailed to sl1 tain the burden of proving that the rota-broil rotisseries a.advertised by respondent for $29. ands28.99 were Dot "made to retail at" or did not have a alist price of 869.95.

(d) Mink Stoles and CRpes 24. In an advertisement in the New York ::Iirror of l\farch 4 1959 respondent advertised "Katllral !\Iink Stoles & Capes" as having been nwde to retail at $299 to $329" , and offered them for sale at $189. Respondent's fur department is actually operated by a concessionaire but the advertisement is in the name of respondent. 0 question has been rnised as to respondent' s responsibility for the advertisement of products sold by its concessionaires.

25. The only evidence cited by counsel supporting the complaint as establishing that the furs hRd not been "made to retail at $299 to $328" is the testimony of respondent's fur concessionaire that the particular furs advertised had never previously been sold by him for any price other than for the sak price of $189. I-Imvevcr, the te.stimony of the Bfune witness indicates that the furs in question had 1)2en purchased specially for this particular sale, and that he had sold comparable furs prior thereto at prices ranging from $249 to ;r29g. He further testified that the furs in question had been purchased Rt 719-603--64-- Initial Decision GO F. a price of $167. and that he bad been advised by the manufacturer that similar furs were being sold to others at $195. 00 to $S25.00 aud that at the normal retail markup such furs would sell at from $299 to $329. The concessionaire also shopped a number of his competi. tors, including Maey, Arnold Constable and Abraham & Straus, to ascertain that comparable furs \"8Te selling at the prices indicated by the manufacturer. There is no evidence in the record to contradict the testimony of respondent's concessionaire and it is, accordingly, credited.

26. It is concluded and found that counsel supporting the complaint have failed to sustain the burden of proving that the mink stoles and capes a.dvertisecl by respondent., as above indicated, were not made to retail at $2.90 to $329. ( e) Pure Silk Costumes 27. In aclYertisements appearing in the Ke\\ York Post and the New York IVorld-Telegram ou April 13, 1959, respondent advertised certain "Pure Silk Costumes " as having been made to retail at $95. to $35.00" and offered them for sale at $11. 00. Counsel supporting the complaint assert that respondent never sold the advertised costumes at any price other t.han $11.00. However, the record fails to establish this as a fact. Furthermore, as heretofore discussed, the fact that respondent never sold the product at the indicated price does not establish that the representation as to a "made to retail" price is false, misleading and deceptive.

28. The only evidence in the record as to what the dresses in question actually sold for in the market is the uncontradicted and credited testimony of the head buyer in respondent's dress department that dresses of the type advertised were being sold for $25. 00 to $35.00 the Fifth Avenue stores and all the fine shops around the country It is concluded and found that counsel supporting the complaint have failed to sustain the burden of proving that the representation made by respondent as to the "made to retail" price of the silk garments in question is false, misleading and deceptive. (f) Cannon Towels 29. Respondent advertised Cannon bath towels in the :Ke\y York , as being made to retail at $1.2.9", andDaily Kews of April 27, 1958 offered such to\,els for sale at 69 . The same advertisement is the subject of a separate charge in the complaint, in which it is alleged that respondent failed to reveal that the towels were seconds or irregulars. 30. There is no evidence in the record whatsoever as to what the maxle to retail" price of the advertised towels were, either as first S. KLEIN DEPARTME:\TT STORES INC. 405 388 Initial Decision goods or as seconds. The gravamen of this charge actually is the failure to reveal the irregular nature of the to\vels, rather than any misrepresentation as to the price thereof. This cha.rge will be separately dealt with hereinafter. It is concluded and found that counsel supporting the complaint have failed to sustain the burden of proving that the representation made by respondent as to the "lnade to retail" price of the Cannon towels advertised by it is false, misleading and deceptive.

(g) Tub Enclosures 31. In a series of advertisements in the X e,v York Sunday and Daily :News appeltring on vltrious dates between Xovember 16, 1958 and )'lay 31 , 1959, respondent advertised certain "Aluminum and Frosted Glass Tub Enclosures" as being "made to retail at $89. , and offered such tub enelosures for sa.le at $31).95 (except in t.he advertisement of May 31, 1959, in which sale price the tub enclosure was stated to be $29.95). Respondent also advertised the same tub enclosures in the Kew York 'rimes of ),ovclnDer 9 , 19;)8 , for &;39.95 but instead of using the plJrase "made to retail at $89.95" it used the expression $89.95 value 32. The evidence discloses that the tub enclosures in question were purchased by respondent's concessionaire directly from the InanufactureI' , Anoroe Products, Inc., of Corona, New York. Anoroe price list of FebnlRry 9, 1959 (which antedates a number of the advertisements in evidence), discloses that the two models sold to respondent, the "Cha.mpion ' and the "De Luxe, had a retail "list price" of $59.95 and $69. , respectively. 'While the February 1959 price list may have been somewhat lower than the previous price list, neither of the tub enclosures in question had ever been listed for $89.95. 33. The testimony of a representative of Buildcraft Products, a major distributor of Anoroc tub enclosures in the K ew York metropolitan area, discloses that. he sold the De Luxe tub enclosure in 1959 for $70. , which included an installation fee of approximately $10.00. The price of the door advertised by respondent, it may be noted, did not include installation, the !1dveri.isement indicating th!1t this was available for a separate charge of $10.00. 34. The testimony of a. competing manufacturer of tub enclosures reveal.ls that his enclosures, which are of a heavier and bett.e-r quality than Anoroe s De Luxe enclosure, sen for $85. , including an installation fee of approximately $10. , and had sold for that price for approximately three years, including 195D. The same manufacturer testified that the Anoroc tub enclosures were mid"\yay in price between , 406 FEDERAL TRADE COM11ISSION DECISIONS' Initial Decision 60 P.

his lTlOrB expensive enc.osures and certain lower-priced enclosures sold by a group of Florida 111anufadurers, it being his testing10ny that the highest price for which the De Luxe Anoroc tub enclosme h"d sold was $70.00.

.35. Respondent's justification for using an $89. 95 "made to retail'\ price is based partly on a self-serving letter related June 30 1959 (subsequent to the insertion of all but one of the advertisements in question), written by respondent's own concessionaire to respondent, stating that four nan1ed retailers were sening the Anaroe tub enclosure (models not identified) " at $89.95 and higher . One of the dealers mentioned in the letter is Builc1craft Products, whose representative testified , including" $10.that he sold the De Luxe tub enclosurc for $70. installation charge. Hesponc1cnt's concessionaire also testified yaguely that he had been told by the manufacturer s salesman that the endosure sold ': anywhere from $50.00 to $125. , but it averaged up some where around $80. 00 or $90.00", and that he had also checked with a representative of his competitor, ICorvette, who, whDe he did not sell the door for $80. knew of people selling it for that" a. whole that the 30. The examiner is satisfied from the record as maximum reblil price on the De Luxe cnclosure was S70. , inclnding installation, and at least 810.00 less on the Champion tub enclosure. The examiner is also satisfied tllat respondent made no bona fide effort to ascertain the going price on the tub enclosures 1)rice listwhen it advertised them. It could readily have obtained a enclosure listed for which would lmve disclosed that the De Luxe $69.95 and the Champion for $59.95. It was not 11nhl Koyemher 1959, when a Commission investigator showed respondents concesthat respondent changed its sionaire tlle manufacturer s price list, $69.95. Even this price was advertised "made to retail price" to excessive since it was the list price of the De Luxe tub enclosure s concessionaire, it was and, according to the testimony of respondent' the less expcnsive Champion enclosure which 'vas being advertised and sold. The $69.95 price was even excessive as to the De Luxe enclosure, which was being sold for that price installed. made false, mis- 37. It is concluded ane! found that respondent. leading and deceptive statements concerning the Anoroc tub endosures advertised by it, in that the amount set out in connection \\ ith the wOTC18 "made to retail at" and "value" was in excess of the price at which such tub enclosures . ere intended to sell by the manufachIrer, and did usually and customarily sell, in the ::ew York metro amount and the politan a.rea, and in that the difference bet\yeen such lesser amounts at which they were fldvertised for sale did not repre- ,, : , ,, KLEIK DEPARl':.ENT STORES, INC. 407 388 Initial Decision sent the actual savings frOJTI the prices at which such merchandise had usually and customarily sold in respondent's trade area. List Prices (a) Percolators and Skilet.s 38. Respondent caused to be disseminat.ed in t.he New York Daily News of February 18, 1959 , an advertise,ment in which it ouered for sale at $7. 99 automatic conee percolators having a purported list 7J1' of $24. , and automatic skillets l1a\ring a purported li.st price of $19.93. The evidence discloses that in 1939 ,,,hen these items werel being ad vertised .Ierit Enterprises, Inc., the manufacturer from which respondent purchased thein, had 110 list prices. The bulk of the manufacturer s sales (about 75 %) was to discount-type operations such as respondent, including Davega, Korvette, and 1\:faster, which sold t.these items at. retail at from $8.00 to $11.95. A smaller percenta.ge of the manufacturer s sales ,vas to house-to-honse eanvassers ho sold the percolators at a maximum price of $19.95. Another indeterminate percentage of the manufacturer s sales "Was to catalog llow::es which sold these items to industrial accounts for llse as prizes. 39. As part.ial justiicat.ion for t.he use of t.he list. prices referred to above, respondent relies on a Jetter from the manufacturer s sales representative stating that the automatic coffee percolator "is selling around the country :for $25.05" and, further, that. a named distributor in Brooklyn had been selling it ":for over a year for $:2;'),05". This let.ter, it may be not.ed, is dat.ed July 9 , 1959, approximately five months after the percolators had been adYCltised by re,sponclent, and does not refer to the price of the skillets. The distributor mentioned in the letter is a house-to-house selling organization, not a regular retail outlet, a fact concerning "which respondent 'was inforrne.c by tho manufacturer s sales representative. Respondent relies further on the fact that the prices indicated in its ads as the list prices ,were stmnped on the cartons in which the articles ,were enclosed. 0. As has heretofore been found, when a " list price" is used jn comparative advertising, it means more than a price appearing on some document issued by a manufa,cturer. It is partially that, but jt also represents, as far as the consumer is concerned, fl, pricp, which bears some reasona.ble rela.tionship Lo the going price in the market. It seems clear from the record as a whole that, respondent made no real effort to ascertain what the percolators and skillets were selling for in the market and, at best., "as merely trying to take a,dva.ntage of some technical price appearing on a carton, which price was substantially above the norma.! selling price of the products advertised. 408 FEDERAL TRADE COMMISSION DECI&IONS Initial Decision 60 F. T. The manufacturer itself had already abandoned the use of price lists, and approximately three-fourths of its products was being sold by establishments like respondent's for substantially below the represe,nted list prices.

41. It is concluded and found that respondent made false, misleading and decepti VB statements concerning the percolators and skillets advertised by it in that the amoUllts set out in connection with the words "list price" were not contained in any current price list of the manufacturer and were in excess of the prices at which these articles of merchandise weTB usually and customarily sold at retail in respondent' s trade area, and in that the difference between such amounts and the lesser amounts for which the articles were advertised did not represent the actual savings which would be realized from the prices at which the merchandise had been usually and customarily sold in respondent's trade area.

Equal To" and "Value (a) Pearl N eckJaces and Chokers 42. In the New York Times issues of August 23, 1959 and November 15 1059, respectively, respondent caused to be disseminated advertisements for "Cultured Pearl K eckla,ces & Chokers . In the issue of August 23, 1059, said pearls ancl chokers were offered for sale in four different price brackets, yiz, $5. , $8. , $12. 09 and $19. , and were represented as being "guaranteed equal to:' necklaces of $15. 820. , $30.00 and $45. , respcctiveJy. In the issue of N ovcmber 15 1050 cult.ured pearls and chokers were offered for sale in six different price brackets and were represented as being "guaranteed equal :' necklaces selling at substantially higher specified prices. 4=1. Counsel supporting the complainl offered evidence \with respect to a single strand of pearls which had purportedly been purchased for 812. 9D purslwnt to respondenes advertisement of Angust 23, 1959 and which was anegcdly represented as being " guaranteed equal pearls selling at $30.0"0. Before considering the evidence relating to the issue of whether the pearls in question were or were not equal.l to $30 pearls, there is presenteel a threshold question as to whether the recorel contains snffciellt reliable evidence that the pearls were actually purchased frOJTI respondent pursuant to the advertisement in question. This preliminary issue arises from the fact that the person who had purportedly purchased the poarls ,yas deceased at the time of the hearing, and the circumstances of t.he purchase were testified to by a Commission attorney-investigator, to ,,-l1Dm they had been related by the cleceased.

S. KLEIX DEPART ENT STORES, INC. 409 3&5 Initial Decision 44. According to the Commission s attorney-investigator, the pearls were turne.d over to hiIn 011 August 25, 1959, together with a copy of the a.advertisement by respondent in the e\\ York Times of August 23 19l59 by one Benjmnin R.ichter, a reta.il jeweler. Richter advised the Commission representative that he had purchased the pearls from respondent's esUtblislunent pursuant to the advertisement in question. AfIixecl to the pearls, by a metal clasp, is a tag bearing the uarne " S. 1Clein" and a. price of "812.99 + Tax . Included in the box 1n w.which the pearls ,,,ere enclosed is a gU8.Tantee certificate containing the printed signature "GEMMARIUS" and stating that the certifir,ate is your guarantee that each pea.rl in this neeklaCB is a cultw' ed pearl. Sometime between the chtc when he turned over the exhibit tD the Commission representati\' e and the date of the he,aring, H.ichter dic(I' .Rcsponrlent contends that the testimony of the Commission representative is hearsay, both as to the fact that lEchter purcha,sed the pearls from it and the fact that he did so pursuant to its advertisement of Augnst 23, 1959. Accordingly, it contends that the testimony offered by other witnesses called by cOlUlseJ supporting the complaint to establish that the pearls were not "equal to $30. 00 immaterial since it relates to a string of pearls which is not properly in the record.

Respondent is, undoubtedly, correct that the testimony of the Commission investigator, based on ,yhat R.ichter reported.d to him, is hearsay. It does not follow, however, that such testimony may not properly be made the basis of a finding in this proceeding. 11e,arsay fwidence may he received in evidence under the more liberal rules which apply in administrative proceedings and, where the circum stances vouch for its reliability, may he made the basis for a finding. In this case the surrounding cireumst Lnces are such, in the opinion of the examiner, as to vouchsafe the reliability of the hearsay testimony.

The pearls bear respondent's price tag thereon, and the amount on the tag, $12. , eonforms with the price in respondel1t s advertisement in the 1 ew York Times of August 23, 1959. The pearls, together with the adveli,isement, were turned over to the COl1Jnission investigator only two days after the advertisement had appeared. Although the concessionaire who operates respondent's jewelry department was called as a witness, as well as the buyer a.ssisting him in his operation and both testified ilt the instance of respondent c0l1cerning the value of the pearls in question, neither denied that the pearls were theirs or that they were not the pearls which had been offered in the adver- 410 FEDERAL TRADE COM;,nSSION DECI&IONS Initial Decision 60 F.

tisement in question. No claim was made by either witness that the price tag was not theirs, or that the metal clasp by which it was attached to the pearls had been tampered with, or that the guarantee certificate was different from the one that accompanied their pearls. In view of Richter s death these two witnesses were in the best position to question the authenticity of the pearls and whether they had been offered pursuant to the advertisement in question. It is concluded and found that the pearls in evidence were purchased by R.ichter for $12. , pursuant to an advertisement which represented tllat they were "guaranteed equal to $30.00" 45. Tho next question presented is whether the pearls were equal in value to $30.00 pearls. According to the testimony of two importers of pearls who were called a.s witnesses.s by counsel support.ing the complaint, the pearls wou 1d have sold for between $5.00 and $6. at wholesale in 1959. The saine two witnesses indicated that the usual retail markup in the industry is 100 per cent, so that the pearls ,,-ould have sold at retail for between $10.00 and $12. , wit.h $15.00 being the outside limit of their retail value at that time. This testimony, if accepted, \\ould mean that the $30.00 "guara.nt.eed equal" price advertised by respondent Wlll grossly in excess of the price at which pearls ofthis quality ,mu1d sell in the market.

46. Respondent questions the expert juc.hYlnent of the two witnesses called in support of the complaint beca-use of an alleged discrepancy bet."ween the amounts which they testified certain other pearls shown to them by respondent on cross-examination were worth, in comparison with the actuulretiil prices at ,,-hieh such pearls "ere allegedly pur chased by a witness acting on beIullf of respondent. In the opinion of the examiner the facts relied upon by respondent are not a suffcient justification for concluding that the two importers called by counsel supporting the complaint "ere not qua.lified experts as to the value of tho pearls at issue, and for disregarding their testimony concerning tho reta.il value of such pearls. Both of the "witnesses appeared to have a good grasp as to what it is that contributes to the value of a cultured pea.rl nec.dace and ,,,hat lnakes one necklace more expensive than another. K either one had heard the testimony of the other or discussed his testing10ny with tlle other; yet their e,st1mates as to the wholesale nd retail value of the pe,arls at issue were sllbst.antially in line with on8 a.lather. The mere fa.ct that se,veral other strings of pearls shown to them on cross-examination were purchased by one of respondent' witnesses at retail for prices above those estimated by the two c+--pert witnesses does not destroy the effcacy of their testimony. S. KLEIX DEPARTMENT STORES, I 411 388 Initial Decision It mry be noted in this connection, that they were Rctually shown six strands of pearls on cross-examination. 1\ one of these pearls were actually strung in the same manner as they \yould be when offered for srl1e at retail, with a clasp affxed thereto. Each of the experts gave an estimate as to the 'v wholesale value or price of each strand. Their estimates as to the price of each ,were, with one exception, suhstantia.lly close to one another. Respondent s contention that their estimates are not valid is based on the fact that in three out of the six instances the estimates were substantially below those at which the pearls in question 'were actually purchased by its representative in department stores in the New York midtown area. In the opinion of the examiner, it is just as logical to attribute these variances to all above average markup in the three stores in question, as it is to conclude that the differences point to a lack of familiarity with prices and values by the experts. It is significant, in this connection, that in the case of the fourth strand of pearls purchascc1 in a smaller jewelry establislmlCnt, the estimate of one of the experts was almost exactly the same as the actual retail purchase price. In any event, the primary issue is the going value or price of the strand of pearls which is the subject of the charge in this proceeding. On this score, the testimony of both experts, as above found, is in substm1tial accord. It is also worthy of note that respondent produced no reliable countervailing evidence with respect to the value of these pearls. Even the testimony of tho two witnesses whom respondent called with respect to the value of the pearls establishes tlmt the pearls were somewhat overvalued by respondent in its representation that they were "guaranteed equal to $30.00". The testimony of the buyer for respondent's concessionaire \yas to the effect that the pearls would have sold for $25.00 in 1959. '\Vhile the concessionaire himself testified that the pearls would sell for $30.00 on the present market, the testimony of respondent's other witness and that of the t\yO -witnesses called in support of tho complaint indicates that as a result of a scarcity c Respondent sought to introduce in evidence a written estimate of the "approximate retail replacement cost" of the pearls in question fit tbe present time. .,\ccording to this propoo:ed evidence, $30 00 would represent the aJ)proximate retflil replacement cost of the pearls. Such evidence was obtained by one of reo:pondent' s attorneys, ,vho had exhibited the peflrls to an Ol1praiser of pearls. ' he evidence was excluded by tile undersigned as being he,ll.my. It may be noted, in this connedioll, that the situ'ltion is substantially dissimjJar to that discussed above with respect to tbe hearsay eviuence pertaining to the purchase of the pearls in question hy Hiehter. Ko justificlltion was gi\ en by resnon(leIlt for not p!'orlncing tlle person ,,-110 bfld actually api11'llsed the 11P.fll"ls other than the Illleged expcnsc that evidence involved thc very fact at issue, wouldviz.,be involvcdtlle retailing pricehis testifying.or value offi:-cethe pearls,the hearsayand there ,\"as no legal justification for the non-production of the alleged expert, and there were no circumstances youcbsafing its reliability, the examiner considered it improper to receive sncll evidence, particularly in the light of the fact thfit counsel snJJIJo:-ting tbe complaiJlt had already plo(luceu " live " evidence as to their value. 412 FEDERAL TRADE CO:MISSION DECISIONS' Initial Decision GO F. in the availability of cultured pearls the market price today is anywhere from 20% to 40% above that of 1959.

47. In justiIicat.ion of its use of the " guaranteed equal prices advertised by it, respondent cites the testimony of the operator of its jewelry concession to the effect that before fixing the price."3 in question, he had shopped four midtown Manhattan departinent stores and two jewelry stores. This, in the opinion of the examiner does not justify the use of comparative prices which the record establishes were in excess of the usual and customary prices throughout the area. 1Vhen respondent seeks to make a representation as to compa.rative prices and savings, it cannot take refuge behind a mere sampling of prices in a few other establishments, particularly \".he1'e it represents that the prices ,which it is using for comparative purposes Rre "guaranteed" to be equal to such HsuRI and customary prices. 48. It is concluded and found that respondent made false, misleading and deceptive statements concerning certain of the cultured pearls ,md chokers advertised by it, in that the amount of $30. set out in connection with t.he words "guaranteed equal to" was in excess of the price at which cert.ain of such pearls and chokers usually and customarily sold at retail in the N ew York City trade area, and the difference between such amount and the price at which such pearls and chokers were advertised for sale did not represent the actual savings which would be realized by the consumer. (b) Tub Enclosures 49. As above fOllnd, respondent. advertised certain aluminum and frosted glass tub enclosures as being "made to retail at $89.95' :' and offered such tub enclosures for sale at $39.95. In one advertiseInent that appeared in the New York Times of ovember 9 , 1958, it represent.ed that such tubs were an "$89.95 value, and offered them for sale at $3D.D5. It has already been found that $89.95 was considerably in excess of the price at which such tubs customa.rily and regula.rly sold in the Ne,v York trade area. As previously found by advertising said tub enclosures as having an "$89.95 value" respondent misre.presented t.he usual and custOlnary price of such tub enclosures in the ew York trade area and t.he savings to be realized by the consumer in the purchase thereof.

1' nationally Sold At"

50. In the New York Times of June 28 , 1959, respondent caused to be disseminated an advertisement for cashmere swenters containing 6 III tile case of the department stores, the witness apparently ' examined what he considered to be comparable pearls In tbe establishments. However, iD the eDse of the two jewelry stores he merely " Window-shopped" the pearls. :

S. KLEIN:\T DEPARTME T STORES , Dic. 413 388 Initial Decision the statement that such sweaters were "na60nally sold at $22.95 to $26.95", and offering the sweaters for sale at $10.00. Immediately below the price the advertisement contained the following statement: (marked 'irregular' only because of this famous maker s extremely high standards of perfection)"

51. The evidence offered by counsel supporting the complaint establishes that the sweaters of the manufacturer in ques60n normally do retail for between $22.95 and $27.95. The basis of the claim by counsel supporting tbe complaint that the sweaters do not customarily sell for $22.95 to $26. , as represented, is not based on the falsity of the price claims, as such, but on t.he fact that the price claims were applicable to perfect. s".eaters, ancl that the advertisement does not suffciently reveal t.hat the advertised sweaters ate imperfect. , The gravamen of the charge concerning t.he sweaters is the failure to make a conspicuous disclosure of the imperfect nature thereof, rather than any falsity in the price claims. This failure to disclose is t.he subject of a separate charge, which will hereinafter be separately discussed. In the opinion of the examiner the question of whether the fictitious price charge has been sustained depends on the rmtcome of the charge of failure to disclose. It may also be noted, however t.hat t.here is no pvic1ence as to t.he llnture of the alleged irregll1nrity of the sweaters or as to the fact that such alleged irregularity would materially affect the 110rmaJ selling price of such sweat.ers, The Failure To Reveal J rreg111arity of Ierchandise (a) Cannon Towels 53. As lle retofore found, respondent hl the X ew York Daily News of April 27, 185!J , caused to be c1isserninatecl an advertisement for Cannon bath towels. Said tmvels .were, in fact, seconds or irregubrs. This fact iyas in no way disclosed in the adve-rtisement. The price tags a.fxed by respondent do contain a legend which respondent states is the abbreviat.ion of irreguJa.r, viz IRR: Actually, this abbreviation looks more like the figure one with the additional letters RR slightly above the figure, so that it is by no means clear that it is the abbreviation of irregular. In any event, the failure to reveal in the advertisement itself the fact that t.he tOlyels oflered were irregular, is misleading and deceptive since, in the absence of sllch J'evelation, the public would ordinarily assume that it is first-class merchandise. The lal\' is violated if the first contact * of' of' is secured by deception * , * even though t.he t.rue facts are made known to the buyer before he enters into the contra.ct of purchase (Carter Products, Inc. v. FTC 186 F. 2d 821, 824, CA7, 1951).

, 414 FE.DERAL TRADE CO:YnIISSIO DECISIONS Initial Decision 60 F.'l. (b) Cashmere Sweaters 54. As above found, in the New York Times of June 28 , 1959 respondent ca,used to be disseminated an advertisement for cashmere sweaters, in which there appears a statement that such s,vcaters arc irregular . Counsel snpporting the complaint contend that the fact that such s"\ycatcrs were irregular is not ac1equfLtely disclosed in the advertisement. Such contention is apparently based on the fact that the words (marked 'irregular' only because of this famolls maker extremely high standards of perfection) ", do not appear in letters suffciently large to be noticeable by the consuming public.. 55. The complaint, in paragraph 7 thereof, charges respondent with advertising merchandise "which is known as 'seconds' or ' irregular without disclosing such fact in the advertising or such merchandise In paragraph 3 of the bill of parliculars served and filed by counsel supporting the complaint, pursuant to order or the undersigned, caunsel supporting the compln,int identified the me.rchandise involved in this charge as rollo.ws:

The merchandise referred to in paragraph 7 of the complaint consisted of Cannon " to,vels.

At no. time did counsel supporting the complaint request leave to. broaden the charge, as specified in the bill of particulars, so as to. include the failure to. canspicuously reveal the irregular nature of the cashmere sweaters. This charge as alleged in the compla,int and specified in the bill of particulars is limited to Cannon towels, and invalves a railure to disclase rather than an inadequate disclosure. may also. be noted that while the complaint quotes from the advertisement in question, it rerers only to. that portion dealing with price and makes no mention ar the portion dealing with irregularity. 56. As above indicated, the advertisement does conhtin a refere,nee t.o. the irregular nature or the cashmere s\veaters. This appears im mediately below the statement of the price at which the Slyeaters are offered. ,Vhile it is true that the rererence to the irregular nature of the sweaters aJ Ipears in letters much smaller than other portions of the advertisement, it does appear in a conspicuous place, and the examiner cannot find on this re,cole1 that it is so lU1clear and inconspicuous that it would not generally be observed by the purchasing public. Under a11 the circumstances, it is the conclusion af the examiner that no iinding may appropriately be made that respondent falsely and decept.ively advertised its cashmere s\yenters by failing to. conspicuausly reveal the irregularity thereor, particularly in view af the failure ar the. pleadings, as amplified, to clearly chanenge this advertisement.

, S. KLEL"N DEPAH'rMENT STORES , INC. 415 3SB Initial Decision Misrepresentation as to Pure Silk Costumes 57. Respondent caused to be disserninatec1 in the :sew York Post and in the New York "Vorlel-Telegram of April 13, 1959, advertisements for " Pure Silk Costumes" at $11.00. These advertisements have a.already been discussed above, in c.connection with the mislcading price c1a.ims allegedly made in such advertisements. The c0111plaint also charges such advertisements to have been deceptive by reason of the fact that the costwnes described as "Pure Silk" contained som6 nOllsilk garments.

58. The record establishes that between 20% to 30% of the dresses advertised as being "Pure Silk" were, in fa, , made of other fibers. One of the nonsilk garments ,,-as purchased, in response to the advertisement, by a witness called in support of the c.omplaint. The gar- 11lent in question "Was found, on inspection by the purchaser, to contain a label indicating that it was 80% dacron anel 20% flax. It is the position of respondent that the advertisements ,were not misleading because (a) they revealed the fact that there ,ycre nonsiJk costmnes in the group and (b) the garments themselves ''\e:re all plainly marked as to fiber content and the racks on which they 'yore solel in the store made no claim as to fiber.

59. In the opinion of the examiner the facts referred to by respondent do not constitute a proper defense. ,Vhile the advertisement does contain the statement that the selcc.ion " also includes cotton hop sacking dresses wit.h lined emhroidered jackets, pure silk polka-dot bouft11tS and other born-to-be-praisec1 original designs, this reference appears in small print in an inconspicuous position in the advertisement where it would be a.pt to bo overlooked by rnany prospective purchasers. It may be noted, in this connection, that the advertisement in the New York Post not only includes the "Words "Pure Silk CostUJ11es:: in large bold type, hut under this phrase there also appears in type almost as large a reference to "Pure Silk Linen-Type Textures Pure Silk Shnntungs" and "Pure Silk Prints . In this context, the reference to other fa,bries is clearly inc.onspicuous. Furthermore, t.he only other nonsilk fabric referred to in the ad'Tertisement is "cotton hopsacking . There is no reference to dacron and fla.x fabrics, which is the composition of the garment in evidence. The fact that the garme,nts thcmsel ve.s are properly labeled or that the racks on which they "Were being displayed cont.ined no reference to pure silk': :is immaterial since, as above indicated, it is the initial impression created by the ac1vcrtjsement ,,,which controls (Oarter Prod"cts v. FTC, 8"pm).

416 FEDERA TRADE COMMISSIO DECISIONS Initial Decision 60 F.

60. It is concluded and found that the representation made by respondent, in advertising which it disseminated or caused to be disseminated, that certain garments were "Pure Silk" was false, misleading and deceptive in that a certain number of said garments were not in truth and in fact, silk or made entirely from silk. CONCLUSIONS 1. The use by respondent of the false, misleading and deceptive statements and representations hereinabove round to have been made by it had the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that such state- TIlents and representations were true and into the purchase or substantial quantities of respondent's merchandise because of such mistaken and erroneous belief. The failure of respondent to disclose the fact that certain of the merchandise advertised and sold by it was what is known as "seconds'; or "irregulars" had the tendency and capacity to lead the public into the erroneous and mistaken belief that the merchandise referred to therein was first class and into the purchase thereof because or such erroneous and mistaken belier. As a result thereof, it filay be inferred that substantial trade in commerce has been lmfairly diverted to respondent from its competitors, and substantial injury has thereby been done to competition, in commerce. 2. The acts and practices or respondent, as here-jnabo\ Immel, were and are, all to the prejudice and injury of the public and of respondent' s competitors and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition, in commerce, within the intent and nleaning of the Federal Trade Conlmission Act.

THE P.E?'fEDY 1. Respondent contends that even if the record does establish some instances in which certain products were falsely advertised by it, it is not in the public interest to issue a cease and desist order in this proceeding. It relies, in this connection, on the fact that out of 75 000 to 100 000 items which it advertises per year, the Commission challenged only 40 to 50 items during the course of investigating it and that the complaint itself challenges a lesser number of items, with evidence being offered only as to some of the itcms ehallenged in the complaint. It relies further on the fact that it seeks to check carefully its advertising chlims, particularly those as to comparative prices, and that its basic advertising policy is "to be as near abso)ute truth as we can get", recognizing that philosophicaJly "there js no absolute truth" S. KLEIN DEPARTME T STORES, INC. 417 388 Initial Decision 2. The fact that evidence was offered only as to a relatively small proportion of the items advertised by respondent and that the charges in the complaint have been sustained as to an even smaller number of the items is, in the opinion of the examiner, wholly immaterial. Th" Commission is not required to sample respondent' s advertising claims in emtenso or to challenge any specific number of advertisements. The law does not require respondent to adycrtise its products, nor does it require it to make any claims, cOlllparative or othenvise, with respect thereto. If respondent elects to do so, as indeed it has a right , it is, in effect, a guarantor that the claims it makes are truthful. It has not fulfilled its duty to the public merely because the greater proportion of its advcrtiselnents arc truthful or, indeed, because 99. of its advertisements are truthful. It can comply with the law only when its representations are 100% truthful. 3. Respondent's contention that it seeks through its ad, ertising procedures to "be as near the absolute truth as we can get", is no defense. In the first plnee, the evidence discloses that jis purported efforts to check its advertising claims, particularly as to comparative prices, are sommvhat exaggerated, lacking in thoroughness and not necessarily calculated to insure complete truthfulness in its pricing claims. Secondly, as above indicated, it is not enough as far as the Federal Trade Commission Act is concerned "to be as near the absolute truth" as one can get. 1Vhile it may be that in matters of philosophical disputation one can never be assured of " absolute truth" a commercial estab1islm1cnt which sceks to make comparative pricing and other claims must be sure that its claims are 100% truthful. It must undertake ,,,whatever procedures Dxe necessary to insure that the clailns it makes are fully sustained. Only thus can it fulfill its obligation to the public.

4. "'while it is true that the complaint has been sustained as to only a small portion of the items advertised by respondent, the pattern of misrepresentation is such as to indir.at.e that it is more than sporadic or de ?nini,mi8. Furthermore, there is no assurance from th(:\ evidence in this record that such violations as have been revealed will not reoccur. It is the conclusion and finding of the examiner that the public interest requires the issuance of an order to cease and desist to prevent a reoccurrence of the activities herein found to be illegal. ORDER It ordered That respondent S. Klein Department Stores, Inc. a corporation, and its offcers, representatives, agents a,nd employees directly or t.through any corporate or other device, in eonnectioll with the offering for sale, sale or distribution of merchandise, do forth- , , 418 FEDERAL TRADE CO:\IMISSION DECISIONS Initial Decision 60 F. T. with cease and desist from disseminating, or causing to be disseminated, directly or indirectly, in commerce, as "commerce " is defined in the Fec1ernJ Tra.de Commission Act, any advert.isement ,which 1. Represents, directly or by implication, that: (a) Any amount is the price of lnerchandise in respondent s trade area when it is in excess of the price at which said merchandise has been usually and customarily sold in sajd trade area. (b) Any saving is alforded in the purchase of merchandise from the usual and customary price in a. trade area unless the price at which it is offered constitutes a reduction from the price at which said 1118rchanc1ise has been usually and customarily sold )n said trade area.. (c) ThIerchanclise is composed of 100% silk fibers, when such is not the fact, or misrepresenting, in any manner, the fiber content of merchandise. Provided, however: that nothing in (c), above, shall relieve thc respondent from t.he obligation to comply with the Textile Fiber Proclncts Iclentification Act or fOlbid the respondent from laoeling and offering produc:s subject to that Act in the manner prescribed thereby and the Hules ftncl Regulations promulgated thereunder by the Commission.

2. :Misrepresents, in any manner, the amount of savings available to purchasers of respondents merchandise, or the amount by which tho price of merchandise has been reduced from the price at which it is usually and customarily sold in the trade area where the representation is made.

3. uses the .words or terms "made to retail at" and "save Ese" value equal or any other 'I\'orc1s or terms of the same import, to refer to prices of merchandise unless such amounts arc the prices at which the merchandise has been usually and customarily sold in the trade area I'he1'e the representation is made. 4. Offers for sale merchandise \which is composed of irregulars or seconds unless such fact is clearly disclosed in the advertising and in cOllnection \'\ith said merchandise.

It i8 further" o1'lered That the complaint be, and the same hereby , dismissed insofar as it alleges that the respondent made faJsc misleading flnd deceptive representations through the use of the \Tords nationally sold at" and the setting out of amounts in connection there,with, and insofar as it alleges that respondent made false, misleading and deceptive representations as to the prices at 'I"which had sold certain merchandise in the recent, regular course of busi ness and as to the savings which would be afforded from such pnces.

, OHMLACPAINT & REFINING 'Co. , IX-C. , ET AL. 419 388 Complaint Order DISI'HSSING THE CO:1IPLAINT This matter having been heard by the Commission upon the appeal of the respondent from the hearing examiner s initial decision, and the Comnlission having considered the briefs find oral argument: 1 t is ordered That the complaint be, and it hereby is, dismissed. By the C01nmission, Commissioners I(ern and J\IacIntyre dissenting. THE J\1A TTEH m lLAC PAINT & HE FINING CO., INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE co::unSSION AC' Doeket SOSl. COiujJlaint, AUf). 19GO-Dcci8ioj/ , Fcb, 24, 196'2 Onlel' requiring a seller of paillt products in Long' Island City, N. , to cease misrepresenting its prices in ne\\"SpfllJer a(lv rtising hy such statement.s as 2 for :1 SHlc--Buy one gallon or quart-Get Qne Free (?mdily Paint at Factory Prices, etc., when tbe customary retail prices were substantially lower than the amounts listed, t\yO gaitoDs \were ohvays sold for SG. tbe price specified for one, and tile advcl'isel! prices were two to four times as much as factory prices.

CO:lIPLAIXT 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 Ohmhw Paint & Hefining Co., Inc., a corporation and Clm-rules A. Jacobs, individually and as Ul offcer of Ohmlac Paint & Refining Co., Inc., and Betty Jordan Paint Factories, Inc., a corporation, and Irving Rubin, Sidney Jacobs and Charles A. Jacobs, indivichmlly and as offcers of Betty Jordan Paint Factories, Inc., 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 as follows :

PARAGRAPH 1. Respondent Ohmlac Paint & ReGning Co., Inc. , is a corporation organized, existing and doing business under and by virtue of the laws of the Stale of New York, with its oiiee and principd place of business located at 41-'10 Crescent Street, Long Island City, Y. Individual respondent Charles A. .Jacobs is an offcer of Ohrnlac Paint & Refining Co., Inc., and his address IS the same as that of said corporate respondent. Respondent Betty Jordan Paint Factories, Inc., is a corporation organized, existing and doing 719-603 64-- , OHMLACPAINT & REFINING 'Co. , IX-C. , ET AL. 419 388 Complaint Order DISI'HSSING THE CO:1IPLAINT This matter having been heard by the Commission upon the appeal of the respondent from the hearing examiner s initial decision, and the Comnlission having considered the briefs find oral argument: 1 t is ordered That the complaint be, and it hereby is, dismissed. By the C01nmission, Commissioners I(ern and J\IacIntyre dissenting. THE J\1A TTEH m lLAC PAINT & HE FINING CO., INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE co::unSSION AC' Doeket SOSl. COiujJlaint, AUf). 19GO-Dcci8ioj/ , Fcb, 24, 196'2 Onlel' requiring a seller of paillt products in Long' Island City, N. , to cease misrepresenting its prices in ne\\"SpfllJer a(lv rtising hy such statement.s as 2 for :1 SHlc--Buy one gallon or quart-Get Qne Free (?mdily Paint at Factory Prices, etc., when tbe customary retail prices were substantially lower than the amounts listed, t\yO gaitoDs \were ohvays sold for SG. tbe price specified for one, and tile advcl'isel! prices were two to four times as much as factory prices.

CO:lIPLAIXT 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 Ohmhw Paint & Hefining Co., Inc., a corporation and Clm-rules A. Jacobs, individually and as Ul offcer of Ohmlac Paint & Refining Co., Inc., and Betty Jordan Paint Factories, Inc., a corporation, and Irving Rubin, Sidney Jacobs and Charles A. Jacobs, indivichmlly and as offcers of Betty Jordan Paint Factories, Inc., 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 as follows :

PARAGRAPH 1. Respondent Ohmlac Paint & ReGning Co., Inc. , is a corporation organized, existing and doing business under and by virtue of the laws of the Stale of New York, with its oiiee and principd place of business located at 41-'10 Crescent Street, Long Island City, Y. Individual respondent Charles A. .Jacobs is an offcer of Ohrnlac Paint & Refining Co., Inc., and his address IS the same as that of said corporate respondent. Respondent Betty Jordan Paint Factories, Inc., is a corporation organized, existing and doing 719-603 64-- . . .

Complaint 60 F.

business under and by virtue of the laws of the State of K ew York with its principal offce and place of busines located at 24-13 Bridge Plaza North, Long Island City, N.Y. Individual respondents Irving Rubin, Sidney Jacobs, and Charles A. J aoobsare offcers of Betty Jordan Paint Factories, Inc., and their addresses are the same as that of said corporate respondent.

Respondent Betty .Jordan Paint Factories, Inc., is a wholly owned subsidiary of respondent Olmllac Paint & Refining Co. Inc., and the individual respondents, Charles A. Jacobs, Irving Rubin, and Sidney Jacobs, cooperate in formulating, directing and controlling the policies, acts and practices of the said corporate respondents, including the acts and practices hereinafter set forth. PAR. 2. Respondents are now, and for more than two years last past have, engaged in the business of selling and distributing paint and related products to the public lmder the label or trade name of "Betty Jordan" through retail outlets located in the States of Connecticut and New York.

PAR. 3. In the course and conduct of their business respondent Ohmlac Paint & Hefining Co., Inc., manufactures Bctty Jordan Paint in a factory owned and operated by it in Newark, New Jersey, and upon order by respondent Betty Jordan Paint Factories, Inc. , the parent corporation ships 01' causes such paint products to be shipped from the State of New J crsey to the Betty Jordan paint stores in the States of Connecticut and New York, where said products are sold at retail, and respondents thereby maintain, and at all times mentioned herein have maintained, a substantial course of trade in said paint products in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 4. Respondents advertise their paints in various newspapers. Among and typical, but not all inclusive, of the statements contained in such advertisements are the following: for the Gal with Horne Decorating on Her Mind o"r PAINT TWO ROO::dS FOR THE PRICE OF ONE! (picture of a girl during BETTY JORDAJ\S pointing a pencil at 2 for 1 SALE certain words in the BUY ONE advertisement) GALLO:\ or quart GI"T OKE FREE )j . . . . .

OEMLAC PAI & REFIING CO. , INC. ET AL. 421 419 Complaint There g.no time to lose while the 2-for-l Sale is on. '" . '" Only Betty Jordan can make this offer beca use only Betty Jordan sells direct-to-you through (Picture factory branches. There are no middlemen can of profits . '" . no fancy stores or sellng paint) fixtures '" '" . PLUS TREMENDOUS SAVINGS during the 2-for-l Sale. So make your selections now. . . BUY ONE gallon or quart. GET ONE FREE! SA:rISFACTION GUARANTEED Your Money Back On 'Cnuserl Portion of Your Paint Purchase If You Are Not Completely Satisfied QUALITY PAIKT AT FAOTORY PRICES (And NOW the Second Gal. or Qt. is FREE) ALKYD FLAT ENAM- Exterior House Paint Decor-Tex LATIDX EL Figg TINTING FREE. TINTING FLAT SERVICE! SERVICE I NOW 2-For-The-Price- NOW 2- or-'lhe- Price- NO\V 2-For-The-Pnce-' Of- In colors Slightly Of-l! $5.98 l! $5.981 I Higher. $6.

Cement and Stucco Paint SEMI-GLOSS Floor and Deck Enamel REE TI;: TI1\ EN Al\fel XOW 2-For-The-Price- SERVICE FREE 1'INTLroG $6. NOW 2-For-The-Price SERVICE! Of- :1 . '" '" '" $6. XOW For-The-price- Of-1! '" '" '" . '" Of- 1: $6. SOLD ONLY IN FACTORY BRANCHES BETTY ,JORDAN PAINT FAOTORY (Picture of can of paint) PAR. 5. Through the use of said advertisements, and other similar thereto not specifically set out hcrcin, respondents represented, directly or by implication, that the usual and customary retail price of each can of Betty Jordan paint is the price desi/,'lated in the advertisement; that this advertised price is a factory price; and that if one can of Betty Jordan pJlint is purchased at the advertised price, a second can will be given "free, that is, as a gift or gratuity without cost to the retail purchaser.

PAH. 6. The aforesaid advertisements referred to in paragraph 4 were blsB, misJeJlding and deceptive. In truth Jlnd in fact, the usual and customary retail price of each can of Betty J ordJln paint was not the price designated in the advertisements but was substantially less than such price. The advertised prices were not the prices charged by the factory for said paints, but were substan- , 422 FEDERAL TRADE COMMISSION DECISIONS' Initial Decision 60 F."l. tially in excess thereof. The second can of paint was not "free, that , was not a gift or gratuity, and was not given without cost to theretail purchaser since the purchaser paid the advertised price 'which was the usual and regular retail selling price for two cans of Betty Jordan paint.

PAR 7. In the conduct of their business, at all times mentioned herein, respondents have been, and are now, in substantial competition in commerce, with corporations, individuals and firms engaged in the sale of paint and related products of the same general kind and nature as that sold hy respondents.

PAR. 8. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had ancl now has, the capacity and tendency to mislead members of the purchasing pubEe into the erroneous and mistaken beEef that sllid stlltements and representations were ttnd are true and into the purchase of substantial quantities of respondents' products by reason of said erroneous and mistaken belief. As a consequence thereof, substantial trade in commerce has been, and is being, unfairly diverted to respondents from their competitors and substa.ntial injury has tlwl'eby been and is being, done to competition in commerce.e. PAR. 9. The aforesaid actsancl practices of respondents, as herein alleged were and are all to the prejLHlice and injury of the public and of respondents' competitors and constituted, and now constitute llnfn.il' and deceptive nets and practices and unfair methods of competition, in commerce, within the intent :111(1 meaning of the Federal Trade Conunission Act.

illi'. Arthur B. EdgelOoTth for the Commission. 311' llhl.JTay Glantz of New York, N. , for the respondents. INITIAL DECISION BY HARRY R. I-Ir::'' KES, Healing EXA::IINER By c01nplaint issued August 22 1060 the respondents in this proceeding were charged with violation of Section 5 of the Federal Trade Commission Act in the sale and distribution of p lint and related products lUlcler the Jabel or trade name of "Betty J orclan." By ans\ycr fi10(1 December 27, 1960, respondents admitted certain of the aJlegat.ions of the complaint, but denied that any of t.their actions constituted violations of the Act and asked that the complaint be dismissed. Hearings were held and nJl parties given an opportunity to file proposed findings and briefs. Counsel supporting the complaint has filed such findings and brief, but none of the respondents has done so. OHJ\ILAC PAINT & REFINING CO. , INC. , ET AL. 423 419 Initial Decision FINDINGS OF FACT 1. Respondent Ohmlac Paint & Hefining Co., Inc., hereinafter referred to as Ohmlac, is a corporation organized, existing and doing business under ,md by virtue of the laws of the State of N ew York with its offce and principal place of business located at 41-40 Crescent Street, Long Island City, Y. Individual respondent Charles A. Jacobs is the president of Ohmlac, and his address is the same as that of t.he corpora60n.

2. Respondent Betty Jordan Paint Factories, Inc., hereinafter referred to as Betty J ardan, is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal offec and place of business located at 24-13 Bridge Plaza 1\orth, Long Island City, Y. Individual respondents Irving Rubin, Sidney Jacobs, and Charles A. Jacobs are offcers of Bctty Jordan, and their addresses are the same as that of said corporation.

3. Betty Jordan is a wholly-owned subsidiary of Ohmlac, and the individual respondents, Charles A. Jacobs, Irving Hlibin, ,md Sidney Jacobs i'ormulated, directed and controlled the business activities of Betty Jordan from the date of its incorporation until October 1960; thereafter, respondent Irving Rubin ceased to be an employee of Betty Jordan, while con6nuing as an offcer. 4. l respondent Betty Jordan and the individual re"pondcnts are and since September 1957 have been, engaged in thc business of selling and distributing paint and related products to the public under the label or trade name of "Betty Jordan" through retail distribution outlets located in the States of Connecticut and cw York. 5. Respondent OhmJac manufactures paints and upon order by Betty Jordan ships or causes paints to be shipped from the Ohm1"c factories in N cw Jersey to the Betty J ardan Paint stores in the States of Connecticut ancll\ew York, where such products are sold at retail and respondents thereby lnaintain, ana at all times mentioned herein have maintained, a substantial course of trade in such trade products in commerce as "commerce" is defined in the Fecleral Trade Commission Act.

6. Respondent Irving Rubin, as president and store supervisor of Betty ,Jordan, v.isited rlll the Betty .J orc1an retail stores t,o check on their operations and placed some of the advertising in question for Betty Jordan in various local ne"\vspapers. In his work at Betty Jordan between ID57 and ID60, he ""as supervised by the other inclividual respondents, Sidney .Jacobs and Ch,ules A. .hcobs. Mr. Rubin Initial Decision 60 F.

was also plant manager of Ohmlac at one time, but not while employed by Betty Jordan.

7. Respondent Charles A. Jacobs is the president and principal operator of Ohmlac, as well as an offcer of Betty Jordan who supervised, among other things, the advertising activities of respondent Ruhin as store supervisor of Betty Jordan.

8. Respondent Sidney Jacobs is an offcer of Betty Jordan who at times also supervised the activities of respondent Rubin while employed at Betty Jordan.

9. Respondents Ohmlac and Betty Jordan utilized the same offce space. Betty Jordan, however, has its own bookkeeper and sales force. Ohmlac also has its own clerical staff, although Ohmlac s invoices for paint shipped to Betty .J ordan stores are prepared by Betty Jordan s bookkeeper.

10. Betty Jordan and the individual respondents have advertised Betty J ardan paints in various newspapers and over television and radio. Among and typical of the statements contained in newspaper advertising are the following:

for the Gal with Home Deeorating on Her Mind ),TO'" . . . PAIKT TWO ROOMS :B~OR THE PRICE Ox' O::E! during BETTY JORDAN' (picture of a girl pointing a pencil at certain 2 for 1 SALE words in the advertisement) BUY OKE GALLON or quart GET ONE REE There s no time to lose while the 2-for-l Sale is on. * '" * Onl (Picture of Betty Jordan can make this offer because only Betty Jordan sells can of paint) direct-to-you through factory branches. There are no middlemen profits. . . llo fancy stores or selling fixtures '" .. .. PLUS TRFDJEXDO"CS SA VIXGS during the 2-for-l Sale. So make our selections now. . BUY OKE gallon or quart. GET O:\T FREE! SATISFACTION Gt:ARAXTIJED Your Money Bark on Fnmed Portion of Your Paint Purchase If You Are Kot Completely Satisfied .. .; .. .. cOHMLAC PAINT & REFINIG 'CO. , INC. , F.T AL. 425 419 Initial Decision QUALITY PAIN'!' AT FACTORY PRICES (And NOW the Second Gal. or Qt. is FREE).

ALKYD FLAT Exterior House Paint Decor-Tex LATEX EJ\A 1JL FREE TINTING SERV- FLAT FREE TIN'l'IKG lce XOW 2-For-Tbe SERVlCE Price-of- I NOW 2-for-The, NOW 2-For-The i In-Calms Price-of-l. $G. Price-Of-l! $5. ! Slightly Higher $6. Cement and Stucco SEMI-GLOSS Floor and Deck Enamel Paint EKAMEI,I FREE TI:\TIKG SERVi FREE TINTING ICE! Now 2-For-The SERVICE! NOW 2-For-Tbe ::TOW 2-For-'lhe Price-Of- $6. Price-Of- $6. Price-Of- 86. SOLD ONLY IN FACTORY BRAKCIIES (Picture of lty JORDAK can of paint) PAINT FACTORY 11. Through the use of said advertisements Betty Jordan ,and the individual.l respondents represented, directly or by jmplication, that the usual and customary retail price of one can of Betty J orclan paint is the price designateu. in the advertisement; that this advertised price is a factory price; and that if one can of Betty J oTdan paint is purchased at the advertised price, a second can will be given free to the purchaser.

12. The advertisements referred to were false, misleading and decep- , customary retail price of one t.ive. Tn truth and in fact the usual ean of Betty ordan paint was not the price designated in the adver- KOT ",vas thetisement but was subst.antially less than such price. second can of print "free.:' ,Yhereas t.he advertisements specified a price for one gallon of paint (e.g. $6. 98 for semi-gloss), in fact it t1.()O gallons were always soldwas sold for half that price, inasmuch as for $6.\)8. J\ioreover, the use of such words in the advertisement as sa. buy now now two for the price of one" confirmed the impression that the $6.98 price lor one gallon was the usual and regular price, whereas the $6. D8 price was really the customary price for two gallons.

18. The advertised prices were not f.actory prices. Despite the corpomte name of Betty Jordan (Betty Jordan Paint Factories ;

426 FEDERAL TRADE COMMISSION DECT&IONS Initial Decision no J!~ Inc. ), the only factory involved in this proceeding is the factory of Ohmlac, the manufacturer. Betty Jordan s advertised price for one call of paint was, hO'iyever, not the same as Ohmlac s factory price but about four times as much. Even Betty .J ordan s actual sales price for bTO cans of paint was nhout twice Olmllac s factory price. Betty J Orclfll S claim "there.are no midlllemen profits" is patently false.

14. In the course of their business at aU times mentioned herein respondents have been, and are now, in substantial competition in commerce with corporate.ions, individuals, and firms engaged in the sale of paint. and related products of the same general kind ,and nature as that sold by respondents.

15. The llse by Betty Jordan and the individual respondents of the aJoresaic1 false, misleading and de,ccpt.ive statements, representations and practices has 11ac1, and now has, the capacity and tendency to mislead melnbers of the purchasing public into the r.rroneous and mistaken belief that said statements and representations were and are true and into the purchase of sllbstrmtial quantities 01 Betty Jordan paint by reason of said erroneous and mist.taken belief. DISCl,1SSIOX During the COllrse of the hearings, counsel for the respondents nrged that the comphlint should be dismissecl inasmuch as the company had ahvays sold two cans " for the price of one" and that therefore, the advertisements referred to represented the actual and truthful state of affairs. The test, however, is not the language used or the exact meaning properly attributable to that language, but the net impression which the advertisement is likely to make upon the general populace. OhCl'Zes of the R'itz Dist?'1:tnltors OOTp. Pede",? Tmde Commission 14;) F. 2c1 676 (2c1 Cir. 1944). Here the ac1vert.i ements ce-rtainly conveyed the impression that it special sale was being conducted by Betty .J.ordan (see fmcling 11 above). Some of the advertiscme,nts spoke of "no time to lose while the byo for one sale is on. :' Actually, hmvever, t.his was not a special sflle. The advertised prices "-ere the usual and regular prices for t'iYO cans of paint. The customer was not getting two for the price of one. Company records do not indicate that anyone can of paint was eyer sold f01' the flchel'ti:-ed price of onc can. The sitlllltion hrre is quitl' sirl111a.r to that i'onnc11n the llfatte1' of L01ds Shapiro trading a8 P1lto 001npany, Fcdera.l Trade Commission Docket 5710, where the Commission jssuecl ,a cease nud desist onler (50 F. C. L15rJ November 19 1953). QIIMLAC PAINT & REF'IXIKG CO. , IXC. , ET AL. 427 419 Initial Decision Respondents also argue that the customer.r is actually getting a factory price. They claim that the price paid by the customer was the price charged by a factory to a retailer on cOlllparable products. Counsel for the respondents, hmvever, freely admitted that such evic1cnee "' as not in the record and could not be used and that the only paint prices in the record \were those for the Betty Jordan line. The only factory Tlhose price may be considered from this record is the Ohmlac factory \which manufactures the paint. Its prices, however, are approxi1lfltely half those charged by Betty Jordan for two cans and olle-fourth those advertised by Betty J ordan as the regular price of one call.

I have concluded, how8ye1', that the complaint must be disnlissed as to respondent Ohmlac. Ordinarily the acts of one corporation cannot be charged to fl, parent corporation absent unusual circumstances. In National Lead Com'2HulY v. Federal Trade 001nmission 227 F. 2d 825 (7th Cir. 1055), reversed on other grounds 352 U. S. 410 (1057), thc court held:

. . . there must be evidence of such complete control of tbe subsidiary by the parent as to render the former a mere tool of the latter, and to compel the cunclusion that tbe corporate idcllt:it;y of tlle subsidiary is a mere fiction. Supporting the possibility that Betty Jordan is a mere tool of Ohmlac are the facts that both corporations used the same notice space individual respondent Charles A. Jacobs was an offcer and leading figure in both firms, and that the Betty J ordan bookkeeper prepared tlle Olnnlac invoices for paints bought by Detty Jordan. On the other hand, however, the record is silent as to the identity of the other offcers of Ohmlac and their' functions, the identity of the directors of tho two corporations and their functions, the idenbty of t.he stockholders of Ohmlac, the behavior of the two cornpanie.s vis-a-vis each other, or any direction of Betty ordan by offc.ers or employees of Ohmlac who hold no official position with Bett.y .Jordan. 111 the Jlattei' of American llew8 CO'J'/7H1:ny, et aZ. Federal Trade COll1ni3sion Docket )fa. 7396, the decision of the Commission dated January 10 , 19G1 , fOlmcl that the American K ews Company dominated and controlled its y\!holly- owned subsidiary, Union ews Company. The opinion recited:

Its president, secretary and treasurer hold the same positions in UDion and the directors of American for the most pilrt sen' e as directors of lnion. Thetwo corporations ba,e the- ame tu1dress. American appears to consider LIlian as one of its integral parts for its 103S annual report to stockl1oll1crs refers to Union as a "division" auel to Union s actiYitjes as the acts of "Y(lllr company. But more importallt than these considerations is the substantial evh1ence that , . , , 428 FEDERAL TRADE COMMISSION DECISION:! Initial Decision GO F.

offcers of American, some of whom hold DO offcial position with Union, actually vartieipate in the management and conduct of the affairs of Vnion. None of these criteria. ith the exception of the same address, are to be found here. The advertising was placed by an employee of Betty orelan. There is nothing to indicate that OlunhLc controlled the nature of such !tdvertising or dicL!tted it in any way. Although this employee worked principally under the supervision of Charles A. Ja,cobs who was also president of 01unlac, he was subject to the instructions of Sidney JrLCobs who was not shown to have any connection with 01U11Iac. Under the circumstances, insuffcient clidence has been introduced to justify a conclusion that the Betty Jorc1n,n corporation was a Inere t.ool of the Ohmlac corporation in that its activities were completely domimlted by its parent.

CONCLUSION or LAW The above-said acts and practices of the respondents were and are all to the prejudice and injury of the public and of respondents' competitors, and constituted and now 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. onder It i8 ordered That respondent Betty Jordan Paint Factories, Inc. a corporation, and its offcers and Irving Hubin, Sidney .J acobs, and Charles A. Jacobs, individmllly and as offcers of Betty .J ordan Paint Factories, Inc., and their agents, representatives and employees directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of paint, or any other merchandise, in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, directly or by implication:

(a) That any amount is respondents' customary and usual retail excess of the price price of any merchandise when said amount is in at which such merchandise is custon1arily a.nd usually sold by respondents, at retail, in the recent regular course of business; (b) That !tny mcrch!L1c1ise is sold or offered for saJe at factory prices, when such is not the fact;

(c) That any article of merchandise is being given free or as a gift or without cost or charge, when such is not the fact. It i8lnrtheT ordered That the complaint be dismissed as to respondents OhmJac Paint & Refining Co. Inc., a corporation, and CharJes A. J acabs as an offcer of sa.id corporation.

AMERICAN STRATIGRAPIDC CO. ET AL. 429 419 Complaint DECISION OF TILE COl\fl\HSSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 4. 19 of the Commission s Hules of Practice effective July, 1961, the initial decision of the hearing examiner shall on the 24th day of February 1962, become the decision of the Commission; and, accordingly:

It is orderd That respondents Betty Jordan Paint Factories, Inc. a corporation, and its officers, and Irving I ubln, Sidney Jacobs, and Charles A. Jacobs, individually and as offcers of Betty J orcbn Paint Factories, Inc., shall, within sixty.y (60) days after service upon them of this order, file with the Commission a report in writing sett.ing forth in detail the manner and form in "which they have complied with the order to cease and desist.

By the Commission, Commissioner xIacIntyrc not concurring. Ix THE X(ATTEH OF AMERICA:' STllATIGllAPHIC COxIPANY ET AL.

COKSENT ORDER, ETC. , IN UEGAHD TO Tile ALLEGED VIOLATION OF SEC. 2 (a) OF THE CLAYTON ACT Docket 8- 17. Compla,int, June 1961-Deuision, Feb. 24, 1962 Consent order requiring a Denver corporation engaged in the sale, 011 a subscription basis, of litholo ic logs used in planning oil driling exploration activities. to cease discriminating in price among competing customers in violation of Sec. 2(a) of the Clayton Act hy giving to customers who increased their u1Jscription coverage for the same sized log to additional areas among the foul" they covered, a lower subscription price for each area, while continuing to charge other customers the higher price. COl\fPLA TNT The Federal Trade Commission, ha,ving reason to believe that the parties named in the caption hereof, and hereinafter more particularly designated and described, have violated and are nmv violating the provisions of subsection (a) of Section 2 of the Clayton Act (D. Title li\ Sec. 13), as amended by t.he I-obinson-Patman Act, approved June 19, 1936, hereby issues its complaint, stating its charges with respect thereto as follows:

PARAGRAPH 1. Respondent Amerjcan Stratigraphic Company is a corporation orga.nized, existing and doing business under and by virtue of the laws of the State of Colorado, with its principal offce and place of business located at 1820 Broadway, Denver Colo. 430 FEDERAL TRADE CO",IMISSION DECISIONS Complaint 60 F.

are the PAR. 2. Hespondents James G. :Mitchell and C. E. Brehm principal officers of the corporate respondent. They fOrInlllnte direct and control the acts and practices of the corporate respondent., including the acts and practices hereinafter set forth. The address of respondent James G. Mitchell is the same as that of the corporate respondent. The address of respondent C. E. Brehm is Mount Vernon, Ill.

PAR. 3. Said respondent corporation is now and has been extensively engaged primarily in the sale of lithologic logs which products are used by oil companies and others to eyalllate rock conditions favorable to the accumulation of on as an aiel in their further oil drilling ex plol'ation activities. These logs provide a geologic interpretation of the earth stratum as pelwtrflted by particular well drillings in c1iffel' cnt locations. Respondent sells said products in both a mlrrow (3 iuch) and wide (6 inch) Jog, primarily on a monthly subscription basis, for such product use. The sale of its products is di,cic1ccl by four different said corporate re,spondent generally into, and cover, operational areas, which include: (1) the Iontaua-Dakota area; (2) the '\Vyoming-Ida,ho area; (3) the Southern Rocky l\Jollntain area covering K evada" the nortlrivest part of Colorado, the Panhandle of Nebraska a.nd t1lC northern half of Utah; and (4) the area commonly described as the "Foul' Corners area, consist.ing of Arizona" the southwest Corner of Colorado: the nortln,est part 01 :y mv :Jlexico and the southern half of Utah.

Said COl'pOnlte respondent is the leader in sales of said110gs in the aforementioned areas where it operates, IVith its total sales volume , 1959, and exceeding $250 000 for its fiscal year ending :May 31 $290 000 fol' its fiscal year ending May 31 , 1960. Pall 4. Said corporate respondent is 1101Y, and for many years past has been: sellin;. saicllogs from the states of location of its various places of bl1since s to the purc.hasers thereof located in sUltes other tlutn the states wlwrein said sales originated, awl it causes sllch products t.o be shipped nncl tnlllsportecl from its nlriol1s places of business to purchasers locnJed in other states, and respondent corporation, in the sale of its products, has at all times rC1event herein been and now is engaged in commerce, as "commerce" is defined in t.he Clayton Act, as amended.

\H. 5. In the course and conduct of its aforesaid bl1siness in commerce, respondent corporation has hcen and nm\' is (liscriininat;ng o:E like grade alld in price between clifIercnt purchasers of its logs qua,lity, by selling said products at higher and less favorable prices to some purchasers than the same are sold to other purchasers. AMERICfu"' S1' RATIGRAPHIC co. ET AL. 431 428 Complaint lncluded among said corporate respondents customers are various eil companies and others, operating in one or more of the various aforementioned areas where respondent sells its said products, who purchase the same on a subscription basis for one or more of the said areas for which respondent corporation prepares its said logs. Prior to 1960 respondent sold its narrow and w-jc1e logs for each of the said areas to all customers at the basic subscription price for each size, regardless of whether the customer purchased s Lid logs for one or more of said areas.

Commeneing in IDGO and purslHmt to a siding price seale plan applicable to both sizes, customers who increased their subscription coverage for the same sized log to addi6ona1 areas received a lower subscription price for such size in each area covered, while at the same tilne customers who did not so increase their subscription coverage continued to pay the higher subscription price for the size and area purchased.

For exmnple, respondent:s siding price scale covering its narrow Jog size, includes additional discounts from the basic subscription price for all cllstomers increasing their area coverage, as follows; 1 subseription- 000 ft. of log per mo. $185.00/monthly 2 subscriptions- 000 ft. of Jog pci' mo. 180. 00/ea. monthly 3 subscriptiolls- 000 ft. of log per mo. 170. 00/en. monthly 4 subscriptions- 000 ft. of log per mo. 100.00Iea. monthly The granting of these additional discounts, by respondent, to those customers increasing their area subscription purchases of said products, results in the charging of lower and 110re favorable prices to said cust.omers than the higher and less favorable prices charged other customers who did not increase their area subscription coverage purchase of said products. In the offering for sale and sale of said products as aforestated, respondent was and is in cOlnpetition with other sellers.

PAR. 6. The effect of respondents' aforesaid discriminations in price between the said different purchasers of its said products of like grade and quaEty, sold in manner and method and for purposes as aforestated, has been or may be substantially to Jessen competition, or tend to create a monopoly, or to injure, destroy or prevent competition be. t"\veen respondent and its competitors in the sale and distribution of such products.

PAR. 7. The aforesaid acts and pmctiees of respondents constitute violations of subsection (n) of Section 2 of the Cbyton Act (D. Title 15, Sec. 13), as amended by the Hobimon-Patman Aet, approved June 19, 1936.

432 IFEDERAL TRADE COMMISSION DECISIONS Initial Decision 60 ,' Mr. Herbert I. Rothbart for the Commission. Ely, Duncan &J Bennett by 1111. Elnwr F. Bennett for the respondents.

INITIAL DECISION BY AN TOCKER, HEAHIXG EXAMINER In a complaint issued June 1, 1961, the Federal Trade Commission charged respondents, American Stratigraphic Company, a corporation, and .J ames G. Mitchell and C. E. Brehm, individually and as offcers of said corporation, with having violated Section 2 (a) of the Clayton Act, as amended, by unlawfully discriminating in price between different purchasers of informational material known as lithologic logs sold by them h1 commerce. The corporation is organized under the laws of the State of Colorado and its business is conducted under the direction of James G. ",fitchell at 1820 Broadway, Denver, Colo.

After the issuance of the complaint, responde.nts with the advice and f.agreement of their attorneys, and counsel supporting the complaint entered into an agreement providing (a) for the issuance of a consent order to cease and desist and (b) for the dismissal, without prejudice of the complaint against C. E. Brehm as an individual, on the basis of an affdavit of James G. Mitchell, submitted in connection with and incorporated by reference into the agreement, thus disposing of all the issues in this proceeding.

In the agreement it is expressly provided that the signing thereof is for settlement purposes only and does not constitute an admission by the respondents that they have violated the law as in the complaint alleged.

By the terms of the agreement, the respondents admit all the jurisdictional facts alleged in the complaint and agree that the record herein may be takeu as if the Commission had made findings of jurisdictional facts in accordance with the allegations. By the agreement, the respondents expressly waive any further procedural steps before the Ilearing Examiner and the Commission the making of findings of fact or conclusions of law, and all rights they may have to challenge or contest the validity of the order to cease and desist to be entered in accordance therewith. Respondents further agree that the order to cease and desist, to be issued in accorda.nce with the a.agreement, shall have the same force and effect as if made after a full hearing. It is further provided in said agreement that. the same, together with the complaint, sha.l1 constitute the entire record herein a.nd t.hat the complaint herein may be used in construing the terms of the order AMERICA. STRATIGRAPHIC CO. ET AL. 433 429 Decision and Order to be issued pursuant to said agreement and that such 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 the agreement, the affdavit submitted therewith, and the order therein contained, and, it appearing that said agreement (as supplemented by the affdavit) and order provide for an appropriate.e disposition of this proceeding, the same are hereby accepted and shall be filed upon becoming part of the Commission s decision in accordance with Sections 3.21 and 3. of the l nles of Practice applicable to this case. Now, in consonance with the terms thereof, the I-Iearing Examiner finds that the Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents named herein, and that this proceeding is in the interest of the pubbc, and issues the following order:

ORDER It is ordered That respondent, American' Stratigraphic Company, a corporation, and respondent James G. :Mitchell, individually and as an offcer of respondent American Stratigraphic Company, and any of respondents' offcers, representatives, agents and employees, directly or through any corporate, pa.rtnership, sole proprietorship, or any other device, in, or in connection with, the sale of lithologic logs and related products of like grade and quality, in commerce, as conuerce" is defined in the C1aytoll Act, as amended, do forthwith cease and desist from discriminating directly or indirectly in price between different purchasers of said products: By selling such products to any purchaser who purchases for one or more than one, area at lower net prices than those granted for the same area or areas to any other purchaser, where, in the saJe of said products, respondent is in competition w.jth any other seller in one or more of the areas for which the said purchasers have purchased sa,id products.

It is tnrthe,. ordered That the complaint be, and it hereby is dismissed, as to C. E. Brehm, individually, without prejudice to the right of the Commission to take flny further action in the matter in the future which may be warranted by the then existing circumstances. DECISION OF THE CO)D:ISSIOX AXD Order TO FILE REPORT OF COMPLIANCE Pursuant t,o Section 3.21 of the Commission s Rules of Practice published )'la.y 6, 1955, as amended, the initial decision of the Hearing Examiner shah, on the 24t h day of February 1962, become the decision of the Commission; and, accordingly:

434 FEDERAL TRADE CO:NISSIOX DECISIOXS Complaint 60 F.

It i8 ordered That 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.