Central Sewing Center, Inc., et al., doing business as Tri-State Distributing

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IN THE J\1ATTEJ' OF CEXTHAL SEWIKG CENTER, lng., ET AL. , DOING Business AS TRI.STATE DISTRIBUTING ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF Tile FEDERAL TRADE COl\unSSIOX ACT Docket 8556. Complaint, Mar. 1965-Decision, Sept. 20 . 1963 Order requiring Denver, Colo., sellers of sewing macbines and vaCUUIl cleaners to the public, to cease representing falsely in advertising and orally that their "bait" offers made to develope leads to prospects, were bona fide offers to give sewing machines free to specially selected persons; that an excessive amount set forth as "Retail Value" was the usual price and a stated lesser figure represented savings; that a customer preferring one of their regular line would be granted a substantial discount; that drawings tor their products displayed at theaters or business establishments-fic. tnally schemes to obtain leads to prospective customers-were bona fide contests add that participants won .valuable certificates entitling them to reductions from usual prices; and that their products and practices had been tested and approved by " Good Housekeeping" and "Parents ),iagazine: CO:\IPLAINT Pursuant to the provisions of the Federtd Trade Commission Act and by virtue of the tUthority vestBcl in it by said Act, the Federal Trade Commission, having reason to believe that Central Sewing Center, Inc., a c.orporation, and Leonard H. Dorey, individually and as an offcer of said corporate.ion, and said respondents collectively, doing business as Tri-State Distributing, hereinaiter reiened to as respondents: ha Ye violated the provisions of said Act, and it appearing t.o the Commission that a proceeding by it in respect t.hereof would be in the public interest, hereby issues its c.complaint stating its charges in that respect as follows:

-\R\GRAPH 1. Respondent Central Smdng Center, Inc. is a, Corporation organized, existing and doing business ll1der and by virtue of the lalYs of t.he State of Colorado with it.s principal office and place of bu iness locate.c at 141 South Broachm-y, in the city of Denn State of Colorado.

Hcspondent Leonard II. Dorey is an indivichml and an offcer of respondent corporation. He formulates, directs and controls the acts and practic.es of the respondent corpora.ti()n including the acts a,nel practices hercina after set forth l-Ij acldre.'3s is the same as that of the respondent corporation.

Hespondenrs Central Selving Center, Inc., and its offcers, and Leonard H. Dorey, as all incli\-ic1ual and a an offcer of respondent 'IRI- S'DATE DISTRIB-cti::G 789 788 Gomp1aint corporfltioll, tra,de and do business collectively, under the name and style of Tri- State Distributing, at the princ.pal office and place of business hercimlbove set forth.

'\R. 2. Respondents are now, and for some time last past have been engaged in the advertising, offering for sale, sale a,nel distribution of sewing machines and vacuum cleaners to the public. PAR. 3. In the course and conduct of their business, respondents llo\Y cause, and for some time bst past have eR,used, their said prod nets, when sold, to be shipped from their place of business in the State of Colorado to purchasers thereof located in variolls other States of the united Sta.tes a.nd maintain, and at all times mentioned herein have 1l1l1intainec1, a substantial course of trade in said products in commerce, as "commerce" is defined in the Federal Trade Commis. sion Act.

P),n. 4. In the course and conduct of their business and for the purpose of 111c1uc1ng thc purcha.se of their product.s, respondents have made certain statements and representations ITith respect thereto in direct mail advertisements and through other advertising media, of ,which the following are typical:

Your name has been seleded in your Yicinity to ,receiye a 19G1 KE,Y H01VIE SeYYing )Iachine during OUT advertising camvaign. The Sewing machine wil cost yon absolutely nothing. All you llust vurclHlsP is one of our moderately priced Cabinets for it. Cabinets are priced from $20.50. 'lri- late DIS. TRnn":'l' I.;G is going to place a few of these fine XEW llOlIE machines throughout the state RS part of our annual advertising bmlget ':' The retai yalue of the machine we are making available to you is $11n.50 * '" " . Guaranteed and hacked by New Home Sewing Iachine Corp. * * * . (Depiction of a se\ying machine and cabinet.

PAR. 5. By and through the use of the aforementioned statements by ora.1 statements of respondents or their saleslnen, and by other written statements of' similar import and meaning not specifically set out herein, respondents represented, directly or by implication: 1. That their offers were being made only to a Jimited number of specially selected persons.

2. That they were making genuil1, bona fide offers to give the ad. ycrtised sewing machines froo to purchasers of a sewing machine cabinet.

3. Through the use of the aforestated amount in connection whh the words "Retail Value, that said amount was the price at which the merchandise referred to ,vas usually and customarily sold at retail in all of the trade areas in which said n1erchandise was offered for sale, and through the use of said amount and the lesser amount for said machine a,nd eabinet that the difference in said amounts repre- 7S0-()lS--6!J- 790 FEDERAL TRADE, COML.fSSIOX DECISIO:!TS Complaint 63 F.

sented a saving to the purchaser from the price at w hieh said mel'clmndise wa.s usually and cllstomarily sold in aJl of sa.id trade areas. "1: Through the oral stal81uents of respondents: said salesmen, that customers who elected to purchase one of their regLdal' line of selying machines rather tha,n the aforementioned machines would be granted discounts or allowances in the amount. of the aboyc stated price or some other substantial sum from the prices usually and cus(.omaTily cllfrged by respondents for said regular line of sEnving machines.

PAn. G. In truth and in fact:

1. Hesponclents: said oft'el's IV8re not being made only to a limit.ed llmnber of specially selected persons. Sflic1 offers IY61'e made to numerous members of the general public through frequent mailings to blood segments thereof.

2. Respondents were not making genuine: bona, fide offers to give the advertised sewing machines free to purchasers of a s8,Ying machine eabinet. On the contrary, respondents: said ofters 'Were maue f or the purpose of developing leads a,s to prospective purehnsers of respondents: products at greatly increased prices. 3. The amount set out in connection with the \words "R.etail V fllue \yas not the. price at which the merchandise referreel t.o was usually and customarily sold at retail in all of the trade areas in which said merchandise Ivas offered for sa,Ie and purchasers of respondent.s' said merchandise would not realize a saving or the dilTerence b2LI'7eell the sltic1 higher U1c1)myer price amounts.

4. Customers who elected to purchase one of respondents: regular line 0-( sewing machines rfl,ther than t.he aiorernentioned machines would not be granted (Escounts or allmyances in the unount of the above stated price or some other substa,ntial sum from the prices usually and customarily charged by respondents for said regular line of sewing machines. Said discounts or allowances purportedly granted in heu of said advertised ma.chines or le ders are not based 011 the net prices, disregarding purported discounts, bonuses or allowances, at which said regular line se,wing l1mchines are usually Hnd customarily sold by respondents in the normal course of their business. Therefore, the statements and representations as set forth in Para graphs 4 and 5 hereof, TIcre and axe false, 111misleading and deceptive. m. 7. In the course and conduct. of t)loi1' business and for the purpose of inducing the purchase of their products, respondents have GLUsed certain of their products to be displayed at theaters or business establishments for use as subjects of drawings or contests. Par. ticipants in sa,ill drawings received form letters from respondents , TRI-STATE DISTRIBUTTKG 791 788 Complaint iyhich contailled eenain statpments of which the following arc typical:

COXGRATCLA' IOXS You have been given $8;) to\yarrt the purchase of any ne,"', sewing machine '" " 01' S-!5 toward any new vacuum cleancr \' Various insignia, 01' emblems are also depicted on said foll1 letters including the follmving:

(Insigne) Rrpiacement 01' refulld of mOlH:'Y GlTARANTEED BY GOOD I-O"CSEKEEPING if not as advertised therein. (Insigne) CO.:L\lEKDED by the Consl1mer Service Dnrean of PAREXTS' :\Iagazinc as advertised therein.

PAIL 8. By and through the use of the aforementioned statements by oral statements of respondents or their salesmen, and by other written sta :el1Gnts of similar import ancllneaning not specifically set out herejn, respondents represe.nted, directly or by implication: 1. That they conduct bona Lide contests and thftt recipient.s of sa, form letters hayc won a valuable prizc, through their participation therein, consiEtillg of a certificate entitling them to a discount. or bonus in the aHlounts stfttcd, fts reductions irOJn the prices at which such products are usually and customarily sold by respondents. 2. That rc pondellts' products and their advertising and practices Jwve been testerl or ftpproved by "Gooc1llousekeeping" or "Parents ::fo,gazine, and that respondents ,were a.authorized to depict such insig-Ilin, or elnblems in their advertisement.s. m. \). J n truth and in fact:

1. R.cspondent.s do not conduct honft, fide contests. Said contests arb schemes to obtain leads as to persons interested in purchasing respondents' produds and a.almost everyone participftting therein receives a discoullt or bonns certificate as an award or prize. Said recipients of said form letters have not won 1 valuable prize. Said certificates are nducless since the purported reductions in the various amounts stated therein are not from the net. prices disregarding purported discounts, bonuses and allowances at which such products are usually and cnstOlnarily sold by respondents in the normal course of their business.

2. Respondents' products, advertising, or practices have not been tested 01' approved by " Good I-Iollsekeeping" or "Parents :LJagazine nd respondents are not a.ut.horized to depict their emblems or insiglJia in their advertisements.

Therefore, the statements and representations, as set forth in Paragraphs 7 and 8 hereof, \were ftncl are false, misleading, and deceptive. PAR. 10. In the course and conduct of their business respondents ha,ve used such statements as "gl1aranteed" in their advertisements 792 FEDERAL TRADE CQ1tCIISSIQX DECISIO)J'S Initjnl Decision 63 "' thereby implying t.hat their products -\fere guara,nteecl in every resped and without qualification.

PAR. 11. In truth and in fact respondents' guarantee is not unconditional but is 1limited in certain respects wl1ich limitations were not disclosed m their advertisements. Furthermore, the proper identity of the guarantor is not disclosed in many of said advertisements. Therefore, the statements and representations, as set forth in Para. graph 10 hereof, "'ere anu are false, mislead.ding and dec.eptive. PAR. 12. In the conduct of their business at all times mentioned herein, the respondents have been in substantial competition in com meree \vit.h corporations, firms and individuals engaged in the sale of sewing machines and vacuum cleaners of the same general kind and nature as those sold by respondents.

PAH. 13. The use by respondent.s o:f the aforesaid false, misleading and c1except.i "8 statements, representations and practices has had, and noll has, the capaeity and tendency to mislead members of the pur chasing public into the erroneous and mistaken belief that said statements and representations "Were, and are, true and into the purchase of snbsl-ftntial quantities of respondents: products by reason of said erroneous and mist.taken belie f.

PAR. 14. The -afore::aid acts and pra,etices of respondents, as herein alleged, "ere, and are" all t.o t.he prejudice and injury of the public and of the respondents: eOlnpet.itors imd constituted, and now constitute, unfair methods of competition in comInerce and unfair and deceptive acts and practices in COlnmerce in violation of Section 5 of the Federal Trade Commission Act.

Mr. Terml A. Jordan and ilfr. John J. McNally supporting the complaint.

No leppearance filed for respondents.

INITIAL DECISION BY JOSEPH ""Y. H:AUF:\:IAX , HEAHDW EXAMINER MAY J 7 , 1963 The complaint herein, charging respondents with violation of Sec. tion 5 of the Federal Trade Commission Act by the making of false lend misleading representations for the purpose of inducing the sale of merchandise, was issued March 5, 1963, and was duly served upon respondents by registered mail on March 18 , 1963, and March 20 ) 963. The respondents have not filed their answers to this complaint within the time required (nor did they appear at the time and 1'1"" set for hearing) and are now in default. Pursuant to the provisions of Rule 4.5(2c) of the Commission s Rules of Practice for Adjudica. TRI-STATE DISTRIBU'IIXG 793 788 Inital Decision tive Proceedings, and on complaint counsels motion, the he.aring examiner hereby declares the respondents in dehult and now finds the facts to be as alleged in the complaint: and issues his initial decision containing such findings, appropriate conclusions drawn therefrom and order to cease and desist, as follows:

FINDINGS OF FACT 1. Respondent. Central Sewing Center, Inc" is a corporation organized, existing and doing business under and by virtue of the laws of the State of Colorado, with its principal offce and place of business Jocated at 1417 South Broadway, in the city of Denver, State of Colorado.

Respondent Leonard H. Dorey is an individual and an offcer of respondent corporation. He formulates, directs and controls the acts and prachces of the respondent corporation, including the acts and prrtctices hereinafter set forth. 1-lis a.address is the same as that of the respondent corporation.

Respondents Central Se'iYing Center Inc. , and its offcers, and Leonard II. Dorey, as an individual.l and as an offcer of respondent corporation, trade and do business collectively, under the name and style of Tri State Distributing) at the principal offce and place of business hereinabove set forth.

2. Respondents are nOlV, and for some time last past have been engaged in the advertising, oifering for sale, sale and distribution of sc\ying machines and vacuum cleaners to the public. 3. In the course and conduct of their business, respondents now cause" and for some time last past have caused, their said products when sold, to be shipped from their place of business in the State of Colorado to purcha.sers thereof locate.d in various other States of the -cnitecl SUttes, and maintitin, and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce, as "commerce" is defined in t.he Federal Trade Commission Act.

4. In the course and conduct ,of their business and for the purpos of inducing the purchase of t.their products, respondents have made certain statements and representations with respect thereto in direct mail (xd1JertisenlBnts and through other1' (l(lverti8ing media, of which the following arc typical:

Your name bas been selected in your vicinity to receive a 1961 NEW HOME Sewing :..1acbine during our advertising campaign. The sewing machine wil cost you absolutely notbing. All you must purchase is onp of our moderately priced Cabinets for it. Cabinets are nrked from $20. 30. THI- STATE D1S- TRIBVTIXG is going to place a few of these fine NE'V HOl\IE machines :;

794 FEDERAL TRADE C01L\nSSIO DECISIONS Initbl Decision 63 F.

throughout the state ils part of our annual afl,ertising budget'" '" :; The etal value of tbe machine \ve ate making amiJable to you is $119. 50 . Guaranteed ancl bncked by Kew Home Sewing \Jachine COl'1. " "';' (Depic:tion of a sewing machine and cabinet.) 5. By and through the use of the aforementioned stnJcmcnts, by ora.l statements of respondents or their salesmen, and by other written stn.tements of similar import and meaning not specifically set out l1erein, re.sponclents represented, directly or by implication: 1. That their offers were being made only to a limited number of sppeia.ly selected persons.

2. That t.hey were making genuine, bona fide offers to give the achertised sewing machines free to purchasers of a sewing machine cabinet.

3. Through the use of the aforestated amount in connection with the words "Reta/l Va.lnc, that said amount was t.he price at which the mercha,nclise referred to was usually and custOlnarily sold at retail in all of the trade areas in which said merchandise was offered for sf11e, and through the use of said amount and the lesser amount for said machine and cabinet that the clift'erence in said amounts represe,uted a saving to the purchaser from the price at which said merchandise was USUftJly and c.customarily sold in alj of said trade areas. 4. Through the oral statmnents of respondents' said salesmen, that customers who elected to purchase one of their regular line of sewing machines rat.her than the aforementioned machines would be granted discounts or aDowa,nces in the amount of the above stated price or Olle other substantial sum from the prices usually and cust.om rily charged by respondents for said regular line of sewing machines.

6. In truth and in fact:

1. Respondents' said offers 'were not being inade only to a limited numbm' of specially selected persons. Said offers were made to numerous members of the general public t.through frequent mailings to broad segments thereof.

2. Respondents \\-ere not making genuine, bona fide offers to give the advertised sewing machines free to purchasers of a smving machine c.cabinet. On the contrary, respondents' said offers ,vcre made for the purpose of developinp leads as to prospective purcl1asers of respondents ' products at greatly increased prices. 3. The amount set out in col1Jle,ction with tl1C words Retail Value as not the price at ,which the merchandise referred to was usually and customarily sold at retail in all of the trade areas in which said merchandise was offered for sale and purchasers of respondents' said TRI- STATE DISTRIBUTING 795 788 Initial Decisi()n merchandise \'-auld not realize a, saving or the difference between the said higher and lower price amounts.

4. Customers who elected to purchase one or respondents regular line oj sewing 'lTuJ,chines rather than the arorementioned machines would not be granted discounts or allowances in the amount or the above stat.ed price or some other substantial sum rrom the prices usually and customarily charged by respondents ror said regular line of sewing machines. Said discounts or allowances purportedly granted in lieu of sa.id advertised machines or leaders are not based on the net prices, disregarding purported discounts, bonuses or allowances, at. which said regular line sewing machines are usually and customarily sold by respondents in the normal course of their business. Therefore, the statements and representations as set forth in Paragraphs 4 and 5 hereor, were a,nd are raise, misleading and deceptive. 7. In the course and conduct or their business and ror the purpose of inducing the purchase or their products, respondents have caused certain of their products to be displayed at theaters or business establishments ror use as subjects or drawings or contests. Participants in said drawings recc:lved form letters from respondents which contained certain statements, of which the following are typical: CONGRATULATIONS You have been given $85 toward the purchase of any new sewing machine" .. * or $45 toward any new vacuum cleaner. . "' Various insignia or emblems are also depicted on said form letters including the following:

(Insigne) Replacement or refund of money GUARAI\TEED BY GOOD HOUSEKEEPING if not as advertised therein.

(Insigne) CO:\nrENDED by the Consumer Service Bureau of PARENTS' MAGAZINE as advertised therein.

8. By and through the use of the aforementioned statements, by oral statement.s of respondents or their salesmen, and by other written statements of similar import and meaning not specifically set out herein, respondents repre,sented, directly or by implication: 1. That they conduct bona fide contests and that recipients of said form letters have won a valuable prize, through their participation therein, consisting of a certificate entitling them to a discount or bonus in the amounts stated, as reductions rrom the prices at which such products are usually and customarily sold by respondents. 2. That respondents' products and theit advertising and practices have been tested or approved by "Good House.keeping" or "Parents Magazine, and that respondents were authorized to depict such insignia or emblems in their advertisements. 9. In truth and in fact:

796 FEDERAL TRADE, COMMISSIOK DECISIONS Initial Decis fi3 F. 1. Respondents do not conduct bona fide contests. Said contests are schemes to dbtain learlsas to persons interested in purchasing respondents' products and almost everyone participating therein received a discount or bonus certificate as an award or prize. Said recipients of said form letters have not ,,' on a valuable prize. Said certificates are value.less since the purported reductions in the various amounts stateel therein ate not from the net prices disregarding purported discounts, bonuses and allowances at ,,,which such products are usually and customarily sold by Tespondents in the normal course of their business.

2. Respondents' products, advertising, or practices have not boon tested or approved by "Good I-:ousekeeping: or "Parent.s' J\1agazine and respondents are notauthorizccl to depict t.their emblmns or insignia in their advertisements.

Therefore, the statements and representations, as set forth in Paragraphs 7 a.nd 8 hereof, were and ate fa.lse, 1nislcacling, and deceptive. 10. In the course and conduct of their business respondents have used such statements as "guaranteed" in their advertisments, thereby implying that their products \fere guarrmteed in every respect and without qualification.

11. In truth and in fact respondents' guarantee is not uncondi6ona1 but is limHed in certain re.spects \fhich limitations \fere not disclosed in their advertisements. Furthermore, the proper identity of the c1isc1osec1 in many of said a,c1vertisement.s.guarantor is not Therefore, the statements ftuc1 represent.ations, as set forth in Paragraph 10 hereof, were and are false, misleading and deceptive. 12. In the conduct of their business t all times mentioned herein the respondents have been in substantial competition in commerce with corporations, firms and individuals engaged in the sale of sew. ing machines and vacuum cleaners of the same general kind and nature as those sold by respondents.

13. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, and 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 and mistaken belief.

CLUSIOX The aforesaid acts and practices of respondents, as herein alleged were, anel are, aU to the prejudice and injury of the public and of the respondents' competitors and constituted, and now constitute, unfair , TRI-STATE DI,STRIBTjTING 797 788 Initial Decision methods of corn petition in commerce and unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act.

ORDER 1 t is o)'dered That respondent Central Sewing Center, Inc., a corporation, and it.s offcers, and respondent Leonard H. Dorey, individunJly and as an offcer oJ said corporation, and said respondents separately or collectively doing business as Tri State Distributing, or under' 1111)' other trade name or names, and respondents' representatives, agents and ernployees, directly or through any corporate or other.r device, III connection ,with the offering for sale, sale or distribu tion of se,ying machines, vacuum cleaners or other products, in commerce, as " commerce" is defined in the Federal Trade Commission "-ct, do forthwith cease and desist from:

1. RepresEmtillg, unless t.rue, direct.y or by implication, that any offer to sell said products is lJeing mftc1e only to a limited IJlm1Jel' 01 perSOllf 01' to specially selected persons. 2. Representing, directly or by implication, that said products are offered for sale when suell offer is not a bona fide offer to sell t.he merchandise so, and as, offered.

3. Lsing the words Retail Value, or "words of similar import to re-Icy to any a.mount which is in excess of the price or prices at which such merchandise is usual.lly and customarily sold in the trado are-a where the. representation is made; or otherwise misrepresenting the usual and customary retail selling price or prices of such merchandise in the trade area. 4. I-opresenting in any rnanner that, by purchasing any of their merchandise, customers are afforded savings amounting to the diffe.rence between respondents' stated selling price and any othet price used for compari::on with that selling price, unless the comparative price used represents the price at which the Ewrchnndise is usually and customarily sold at retail in the trade arm\, involved, or 1S the price at which such merchandise has been U311al1y fmd regularly sold by respondents at retail -in the recent regu1ln,r COllrse of their business.

5. liepresenting, directly or by implication, that contests to select t.he "\vinllers of prizes or a-wards are being conducted when all of such winners are not se.1eetecl on the basis of a bona fide drawing or other competitive elimination.

6. Hepresenting, directly or by implication, that awards or prizes are of a certain value or worth when the recipients thereof arb not in fact benefited by or do not sn,ve t.he amollnt of J stated value or worth of such prizes or awards. 798 FEDERAL TRADE COYrYrISSIOX DECISIONS Syllabus 63 F.

7. He.presenting, unless true, directly or by implication, that Good I-Iousekeeping" or "Parents' :Jlagazine" ha.ve authorized the use of any insignia or emblem by respondents, or have tested or approved respondents' products, advertising, or practices; or mis representing in any manner or by any means that respondents products, advertising, or practices have been tested or approved by any organization or publication.

8. Representing, directly or by implication, that said products are guaranteed unless the nature" extent and duration of the guarantee, the manner in "which the guarantor will perform thereunder and the name and address of the guarantor are clearly and conspicuously disclosed and respondents do in fact fulfill all of their requireme,nts under the terms or said guarantee. AL vecision This matter hayjng come before the Commission on the exceptions or counsel supporting the complaint to the initial decision or the hearing examiner filed l\J:ay 17, 1963; and The Comnl_ sion having determined that the exceptions of counsel supporting the complaint should be granted since the record does not '\varrnut the inclusion or the phrase " unless true" in Paragraphs 1 and 7 or the order to cease and desist entered by the hearing examiner on May 17, 1963:

It i8 ordered That the initial decision be modified by striking from Paragraphs 1 a,nd 7 or the order to cease and desist the phrase "unless true It is further Ordel" That the initial decision as modified be, and it hereby is, adopted as the decision or the Commission. It is further orde?' That respondents 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