Sells Enterprises, Inc., et al.

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

and form in which they have complied .with this order. THE i\latter OF SELLS EYTEHPRISES, IKC., ET AL.

CONSENT ORDER , ETC. , IX REGARD TO THE ALLEGED VIOLATIOK OF THE FEDERAL TRADE COl-.DfISSION ACT Docket 0-97. Complaint, Mar. 14, 1962-Decision, Ma,r. 14, 1962 Consent order requiring Atlanta, Ga. , distributors of toys, nursery products Including lJOtted plants, coffee bars and supplies, knives, and other merchandise, to cease making a variety of misrepresentations in newspaper ad,ertlS8ments soliciting l1distributors to service merchandise routes, including deceptive employment offers, exaggerated earnings claims, purported assistance in securing routes, and special selection of customers, as in theorder below indicated.

, 554 EDERAL TRADE COMMISSION DECISIONS Complaint 60 P.

CO::\IPLAINT PurslUmt to the provisions of t.he Federal Trade Commission Act and by virtue of the fLuthority vested in it by said Act, the Federal Trade COlnmission, having reason to believe that Sells Enterprises Inc., a corporation, and Ecl\vard S. I\IunTo, individually and as an offcer of said corporation, hereinafter referred to as respondents have \ iolatecl the provisions of said Act, and it appearing to the Comlnission that it proceeding by it in respect thereof ,yould be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

P AIL\GRAPH 1. Hesponclent Sells Enterprises, Inc., is a corporation organized, existing and doing business under and by virtue of the hvss of the State of Georgia, with its offce and principal place of business located at 188 ,Valton Street ,V., in the city of Atlanta Sta te of Georgia.

Edward S. Iunro is nn individual and an offcer of the corporate l'Pspolldcnt. lie formulates, directs and controls the acts and practices of thl. corporate respondent, and his aclclre.ss is the same as that of said corporntiol1.

PAn. 2. Respondents nre no,l' , and for some time last past have been, engaged in the a.advertising, offering for sale, sale and distribution of toys, nursery products including potted plants, coffee bars and supplies, kni\ 8.s, and other articles of merchandise to distributors for resale to the public.

\R. 3. In the course and conduct of their business, respondents now cause, and lor some time last past h:l,ve caused, their said products, when sold, to be shipped from their place of business in the State. of Georgia to purchasers thereof located in various other states of the United States, and maintain, and at a11 times mentioned herein have maintained, a substantial course of trade in said products in commerce, as "commerce" is defined in the Federal Trade Commission Act.

u:. 4. In the. course and conduct of their business as aforesaid respondents hr1,ve been, and are now, in direct and substantial competition, in commerce ivith corporations, firms and individuals in the sale aT t.he sa.me or similar merchandise. \TI. 5. Respondents insert ach-ertisemellts in various newspapers soliciting c11stl'ibutors to service merdumc1ise routes. Persons respondLllg to said ac1vel'tiscJnents are contacted by respondents or their agents or representati \'8S. Saiel respondents or their agents or representatives then display to the prospective cliBtributor a variety of SELLS ENTERPRISES', IKC. , ET AL. 555 553 Complaint promotional literature and make various oral representations concerning said merchandise in an effort to induce the prospective distributor t.o buy the merchandise. Among and typical, but not all inclusive, of the statements and representations rnacle in newspapers and in printed material dist.ributed to prospective distributors are the following:

SPARE TBUJ FULL '.ril\E OPPORTUKITY REAL I COl\E Self Service Toy Route Business Deliver and collect ONLY. 10 to 98 toys. O sellng. Choice territory. Acquire profitable self-service cash. Toy R01lte in grocery, drug stores, super markets, etc., which we 'Wil establish for yon. Our beautiful self-service DIS- PLAYS are America s greatest toy variety, and rapidly replacing cheap, unsightly rflcks.

KOT A GE'r RICH SCHEl\HJ, SOL"KD REPEAT BUSINESS. ote: herewith gross profits of just a few of our successful distributorships: Panama City, Flfl., 11- days \\'ork- 9GO.00; Port Arthur, Tex. , 4a clays ,york- 530.00; Beaumont, Tex., B7 days work-$'1 717.00; Gastonia, :L 100 days work- 871. 00; :LYashvile, Tenn., 35G days work-$10 00; Birmingham, Ala., 444 days work-$12 303.00; Decatur, Ala., 85 days work- 908. 00; Beloit, Wis., 319 (tars \York-S8, R12.00; Roanoke, Ala., 120 clays work- 263.00; St. Petersburg, Fla., 32 clays work- 248.00; Miami, Fla., 65 days wOJ"k- 042.43; Jackson, 1\iss., 14 days work-$47iJ.54. Many more in twenty states. We are a Xational Concern and wil finance expansion to full time for conscientious, qualified person. Must have cur. He between 25 and: 5, and have 500 to 000 working capital to start. This is a proven business and only sincere persons need apply. 'Vrite give age, phone employment record.

SELLS EXTERPRISES, IXC., 188 Walton St., KW. , Atlanta 3 , Ga. NEW BUSINESS Permanent. year around business. Man or woman. Deliver light weight packaged products to smaU and. medium size employers. Xame brand products used. Business established for you by written contract with each employer. Repeat each two \veeks indefinitely. Your profit $3.00 to $4. 00 each package delivered. Easy to deliver 100 or more packages weekly. Expansion possibilties unlimited. Spare or full time. Openings in other Florida cities now. $3 000 minimum working capital required. Phone 56-5502 or write P. O. Box 12303 St. Petersbmg 33.

MANAGEH l\IA. OR WOMAN EW BUSINESS Sl1apply green potted plants to Super l\larkets, Drug Stores, and other established retail outlets, weekly direct from Florida Xurseries. 1(0 selling- as Company Complaint 60 F.

establishes aU retail outlets for you. 1\ o overhead, operate from home. No experience necessary. A new Business with little or no Competition offering a fabulous unlimited future. Full or spare time to start. Must have car, be between 30 and 50, have references, and $2 000 working capital. Sizable income your first week. Write giving full background information and phone. SELLS Ei\TTJ.RPRISES, INC., 188 Walton Street, 1\.\V., Atlanta, Georgia. SERVICE MA:"Li\GER YOUR OWN BUSINESS Responsible person to own and manage .ery profitable local business that fully established for you and producing a profit. 1\ o overhead. Operate from borne, full or spare time. No experience necessary. Woman can handle. Age 30 to 45. lust have car and $2 000 to $4 000 working capital. Substantial in come starts ,vhen you take over. National concern with its own operations in IDany states invites your banker and lawyers investigations alld \viH guarantee under written contract 100% profit in first 12 months. For qualified person with sales experience. Company will finance expansion to full time. Write for appointment, gil'e full background. Inspect our bank, Chamber of Commerce and other references. See what others do in this business. Lifetime OPIJortunity. A three bilion dollar industry. Sells Enterprises, Inc., 188 Walton Street \V., Atlanta, Georgia.

MAXAGEH :\TEW BUSI!\ ESS Permanent year around business. )Ian or woman. Deliver small lig"ht ,veight packaged products to small and medium sized employers. Kame brand products are supported by TV, radio, magazine, and newspaper advertising throughout America. Business established for ;you by written contract with each employer. Repeats each two or three weeks indefinitely. Your profit $4.00 to $6. 00 each package delivered. Easy to deliver 100 or more packages weekly. Expansion possibilities lmliited, spare time or full time. Openings in your state area now. $3 000.00 minimum cash working capital required. Call Mr. Moore today or Monday, ALpine 6-611, Extension 205.

PAR. 6. By and through the use of the statements in the aforesaid a.advertisements and others of similar import, not specifically set out herein, respondents represent and have represented, directly or by implication that:

1. The outer made by respondents' advertising is an offer of employment.

2. Respondents' offer is limited to selected persons or those with certain qualifications.

3. Respondents offer for sale established profitable merchandise route, 4. Respondents will secure profitable loeiltions for the merchandise displays sold by them or wil locate such displays in drugstores supermarkets a.nd other high tra.ffc areas. SELLS E TERPRISES ) INC. ) ET AL. ;)1 553 Complaint 5. Persons purchasing respondents' merchandise displays will earn substantial income from the first week, or ate guaranteed to earn 100% profit on their invest.lnent the first year, and unlilnited and fabulous earnmgs.

6. Purchasers wil make a profit of $3.00 to $6.00 each week on each display.

7. Respondents establish or set up the business or routes for distributors and all that is required of the distributor is the delivery of small packages to these established locations. 8. R.respondents' oller is to manage an established business and that the only effort required of the distributor is to deliver packages to said business.

9. It is easy to deliver 100 packages a week at a profit of $4.00 to $6.00 per package.

10. K a selling is required to successfully operate respondents' distributorships or mercha,nclise routes.

PAR. 7. R,respondents and the salesmen and representatives employed by them, in the c.course of their solicitation for the sale of their products, h tye repeated the st.atements set out in Paragraph Five lwreof and have made additional oral statements to prospective purchasers of their said products, of which the following ate typical: 1. Purchasers of respondents: products are granted exclusive territories within \',hieh to operate their businesses. 2. Purchasers of respondents' products will reaEze a 25% profit or cOlnmission on an products sold by them.

3. Respondents \vill send experts to make traffc survey:ys and place the displays of merchandise in supermarkets, chainstores, drugstores and other large st.ores that win yield the biggest profits. 4. Profits of $5. 00 to 810.00 a week or $50,00 a month per location will be assured, or that profits of $75.00 to $100.00 a week will be made immediately after placing of the merchandise and displays. 5. Hespondcmts' employees il1 relocate displays that are not profitable.

6. Respondents have large numbers of distributors of plants and toys throughout the country who nre making big profits, including those who are making $30.00 to $40.00 per c1ispJay per month. 7. Transportation costs ,,-in he paid by respondents or an allowance suffcient to pay such costs will be made.

8. Respondents will train and assist the purchasers of their products in concluding their businesses.

558 FEDERAL 1'TRADE COMMISSION DECISIONS Complaint 60 F.

PAR. 8. The aforesaid statements and representations made in ad vertising matter or orally by respondents or their agents or representatives are false, misleading and deceptive. In t.ruth and in fact: 1. The offer in respondents' advertisements is not an offe.r of employment., but is made for the purpose of obtaining purchasers for their prod nets.

2. Respondents' oiler is not limited to any selected group of persons or those with certain qualifications other than their financial ability to purchase and pay for respondents' merchandise. 3. Hespondents, in their advertisements, do not offer for sale established and profitable merchandise routes. No chart is made by respondents to locate any of the merchandise displays until alter the sale thereof has been consummated.

4. Respondents do not in most instances secure profitable locations for the merchandise display.ys. Certain locations are no more than a token cOlnpJiance 1\ith the respondents' obligation under the contracts ,vit.h t.their distributors and such locations are almost without exception undesirable, unsuit.able and unprofitable. R.esponc1ents do not genera1Jy locate such displays in chainstores, supermarkets, drugstores, or other high traffc areas.

5. Persons purchasing respondents' merchandise disphys in most. instances do not. earn substantial incomes from the first ,"cek, or at a.11, and respondents do not guarantee 100% profits of distributors invest.ments, 01' any ot.her level of profits, and such profit is not realized either the first year or at any ot.her time in the great majority of cases. 6. Purchasers do not make a profit of $3.00 to $6.00 each "eek on each display.

7. Respondents: sale efl'orts in establishing or setting IIp routes or the businesses of distributors consist of placing the displays in any or all locations 'Where permission can be obtained from the occupants of the premises, and in many cases in order to resen any of respondents' merchandise the distributors have to relocate the dispbys which have been placed by respondents' employees. The delivery of the small packages" is not to established businesses, but is to the locations which respondents' employees have secured as above. 8. Respondents' outer is not to manage and establish businesses with the only enort required of the purchaser being to deliver packages but is an offer to sell merchandise to distributors who must finance and manage their O1\n businesses.

9. Operation of a distributorship for respondents or the purchase of respondents' merchandise docs not consist of delivering packages SELLS EKTERPRISES, INC. , ET AL. 559 .553 Complaint only and the great majority of respondents' distributors do not "make a profit of $4. 00 to $6.00 a package 10. Selling is required on the part of purchasers or distributors of respondents' merchandise displays in that they must relocate displays in most insta.nces, in which case it is necessary to sell the merchants and others to the extent that they wil permit the displays to be placed in their establishments.

11. Purchasers of respondents' products are not granted exclusive territories in which to operate their businesses. 12. Purchasers of respondents' products seldom, if ever, realize a 25% profit or commission on all products sold by them, the percentage of profit in most instances being much less than that represented by respondents.

13. Respondents do not send experts or others to make surveys or to find the most favorable and profitable locations for the displays of merchandise but merely send their representatives into purchasers areas to sign up an easily available space regftnlless of its desirability as a profitable location for such business. 14. Profits of $5. 00 to $10.00 a week or $50.00 a month pci' location are not assured, and profits of 875. 00 to $100.00 a week arc not made immediately after respondents' display.:s of me-rchandise arc placed. 15. Respondents' employees do not relocate displays that are unprofitable and any such relocations are required to be made by the purchasers of respondents' merchandise.

16. Hespondents do not have large numbers of distributors of their merchandise throughout the country who are making big profits. 17. Respondents do not PRY tmnsporUttion costs of their merchandise or make allowances suffcient to pay such costs. 18. Respondents do not train or assist the purchasers of their metchandise in operating their businesses.

PAR. 9. Thc use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, an now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations were and are true and into the purchase of substantial quantities of respondents' products by reason of said erroneous a,nd mistaken belief.

PAn. 10. The aforesaid acts and practices of respondents, as herein aJJegml, were and are all to the prejudice and injury of the public and of respondents' competitors and constituted and nmy constitute unfair methods of competition in commerce and unfair and deceptive acts and 560 FEDERAL TRADE C'OMMISSIO DECISIO Decision and Order GO F.

practices in commerce, in violation of Section 5 of the Federal Trade Commission Act.

DECISION AND ORDER The C01nmission having heretofore determined to issue its C011plaint charging the respondents named in the caption hereof with violation of the Federal Trade Commission Act, and the respondents having been served with notice of said determination and \'with a copy of the complaint the COlrunission intended to issue, together with a proposed form of order; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by respondents of all the jurisdictional facts set forth in the complaint to issue herein, a statement that the signing of said agreement is for settlement purposes only and does not constitute an adlllission by respondents that the law has been violated as set forth in such complaint, and waivers and provisions as required by the Commission rules; and The Commission, having considered the agreement, hereby accepts same, issues its complaint in the fornl contemplated by said agreement, makes the following jurisdictional findings, and enters the fol. lowing order:

1. Respondent Sells Enterprises, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the State of Georgia, with its offce and principal place of business located at 188 Walton Street X:W., in the city of Atlanta, State of Georgia.

Respondent Edward S. Munro is an offcer of said corporation and his address is the same as that of said corporation. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondents, Sells Enterprises, Inc., a corporation, and its offcers, and Edward S. Munro, individually and as an offcer of said corporation, and respondents' representatives, agents and employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution of toys nursery products including potted plants, coffee bars and supplies knives 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 that: SELLS ENTERPRISES, INC. , ET AL. 561 553 Decision and Order 1. Employment is offered by respondents, when in fact the real purpose of respondents' advertisement is to obtain purchasers and distributors of their products.

2. Respondents' products are sold only to a selected group of persons, or that any qualifications are necessary to become a distributor other than ability to pay for the merchandise ordered. 3. Established or profitable merchandise routoB are offered for sale. 4. Only profitable locations will be secured by respondents for merchandise displays or that respondents usually or customarily obtain locations in chainstores, supermarkets, drugstores or other high t.raffie areas for merchandise displays sold by respondents. 5. Purchasers of respondents' 111erchandise displays will earn substantial profits from the first week or $75 or $100 per week immediately, or wil make a profit of $3. 00 to $6. 00 pel' display per week. 6. Purchasers of respondents' products will derive earnings or profits from the operation of a display route or from a single display or location in any, amounts which are in excess of the earnings or profits typically received by others contemporaneously engaged in the operation of similar distributorships or merchandise display routes situated in similar locations in like trade areas. 7. Distributors or purchasers of respondents' products are guaranteed 100% profit on their investment the first year or representing in any manner that profits are guaranteed by respondents to distributors.

8. The only effort required for profitable or successful operation of respondents' display routes is the delivery of packages. 9. R.respondents' oiTer is to manage an established business. 10. selling is required in the operation of respondents' merchandise display routes.

11. Purchasers of respondents' merchandise will be granted exclusive territory for the operation of their display routes. 12. Purchasers of respondents' products wil make 25% profit on their investment for each display or misrepresenting in any other manner the percentage of profit or mark up afforded to operators of display routes.

13. Respondents employ or furnish experts to make surveys or to locate favorable or profitable placement of the merchandise displays or that such displays wil be placed only in desirable and profitable locations.

14. Profits of $5. 00 to $10. 00 a week or $50 a month per location are assured.

562 FEDERAL TRADE CQMMLSSION DECISIONS Order 60 F.

15. Respondents' employees or representatives wil relocate the displays at the request of the purchaser or operators of the display routes.

16. Respondents have large numbers of successful distributors over the country who are making large or substantial profits per week. 17. Respondents wil pay all transportation costs or make allowances to fully meet such costs.

18. Respondents will train or assist the purchasers of their merchandise in operating their display routes or in the resale of the merchandise sold by respondents.

It further ordered That the respondents herein shall, within sixty (60) days after service upon them of this order, file with the Commission a report hi writing setting forth in detail the manner nd ford1 in which.h they have complied with this order. IN THE 1ATTR Sly ANEE PAPER CORPORATIO)f MODIFIED ORDER IX REGARD TO THE ALLEGED VIOLATJOX OF SEC. (d) OF THE CLAYTON AC'f Docket 6927. Modified order, ..ar. 16, 1962 Order modifying in accordance with the decree of the Court of Appeals for the Second Circuit (2911 2d 833) which held that " the order should be limited to the particular practice found to violate the statute desist ordcr of :Mar. 22, 1960 (56 If. C. 1077), requiring cessation of violation of Sec. (d) of the Clayton Act.

J\WDIFIE OUDER TO CE..\SE AXD DESIST Respondent having filed in the United States Court of Appeals for the Second Circuit a petition to review and set aside the order to cease and desist issued herein on J\farch 22, 1960; and the court on June 22, 1961, having rendered its decision, and, on August 3, 1961 having entered its final decree modifying and, as modified, affrming and enforcing said order io cease and desist; and the l:;united States Supreme Court having denied a petition filed by respondent for writ of certiorari to the court of appeals for rmTjew of said decision and final decree;

Now therefore, it is hereby ",'dered That the aforesaid order to cease and desist be modified, in accordance with the said final decree of the court of appeals, to read as follows: WEST-WARD , IXC. , ET AL. 5G3 562 Order It i8 ordered That respondent Swanee Paper Corporation, a corporat.ion, its offcers, employees, agents or representatives, directly or through any corporate or other device, in connection with the sale or offering for sale in commerce (as "commerce" is defined in the Clayton Act) of paper products, do forthwith cease and des est from: Paying or contracting to pay anything of value to any third person as compensation or in consideration for any advert.ising or promotional display services or facilities if such services or facilitjes are furnished by or through any customer of Swanee in connection with the sale or offering for sale of Swanee s products, and such compensation or consideration paid or contracted to be paid to said third person is used in whole or in part to provide benefits for said customer unless the benefits thus derived by said customer are made available on proportionally equal terms to all other customers of Swanee competing in the distribution of its products. Ix THE J\fatter OF WEST-WARD, INC., ET AL.

l\1QDIFIED OlilIi;R IX REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TR-\DE COl\OIISSION ACT Docket 81.41. Modified order, dollar. , 1962 Order modifying, as justified by changed conditions of fact, order of Mar. 1, 1961 (58 P. C. 249), against ew York City drug distributors by eliminating the general requirement that they cease to claim tl1ey had an adequate quality control system.

ORDER :::IODIFTKG TIm FINAL ORDER OF THE COl\IlnSSJOK Respondents \Vest-\Vard, Inc., and Samuel G. Goldstein lutVing moved for the modification of the order of the Comnlission dated J\larch 1, 1961, which motion has been treated by the Commission as a lTlOtion for reopening pursuant to Section 3.27 of the Commission Hules of Practice (1955); and the Commission having determined that the reopening of this matter and the modification of its order are justified by changed conditions of fact and arc in the public interest It is onlered That this matter bc: and it hereby is, reopened and t11e final order of the Commission modified to read as follows: ORDER It is Q?'de1'ed That respondents, ,Yest-\Yarcl, Inc.: a corporation and its offcers, and Samuel G. Goldstein, individually and as an offcer 719-50H--64-- Complaint 60 F.

of said corporation, and respondents: representatives, agents and 8111ployees, directly or through any corporate or other device, in connection with the offering for sale, srlle or distribution of drugs or food do forthwith cease and desist, directly or indirectly: 1. Disseminating or cfll1sing to be cbsse,mine.tecl any advertisement LJy means of the United States mails or by any means in commerce as '; commerce" is defined in the Federal Trade Commission Act, which ad '"ertisemeut;

(a) l\Iisreprcsents the nature or extent of the procedures llsed by them in the manufacture, preparation or distribution of drugs 01' food;

(b) Represents, directly or indirectly:

(1) That. a. quantitative analysis is made of each of respondents preprnntions to determine the amount cf each of the acth-e ingredients contained therein ! unless such is the fact. (2) Tho!: respondents hand establi"hcd thc stability os to potency or disintegration characteristics of their enteric coated ta,blets, unless such is the fact.

(3) That, respondents perform assays in their O"\'n laboratories on dl of the preparations olTered for srtJe and sold by thenl. 2. Disseminating or causing the dissemination of a.ny a.dvertisement by any means for the purpose 01 inducing or which is likely to 1ndllce, directly or inc1ireetly, the purchase in commerce, as " C01l- 111erCC " is clennec1 in the Federal Trade C011mission ..Act, of said preparation, ,\'hi('h ac1ve.rtisement contains any of the terms or representations prohibited in paragraph 1 hereof.