Continental Products, Inc.

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

IN THE 1\iA'IER OF CONTINENTAL PRODUCTS, INC., ET AL.

onion, OPINION, ETC., IN Regard TO THE ALU:GED VIOLATION OF THE Federal TRADE cO:.I1nSSION ACT Docket 8517. Complaint, June 19GB-Decision, Apr. , 1964 Order requiring Chicago sellers of various articles of merchandise, including jewelry, cameras, typewriters, hardware, SI)Orting goods and appliances to retailers and to the public direct, to cease representing falsely tllat their merchandise was offered for sale at wholesale prices by such statements in catalogs and circulars as "* .. It a wbolesale catalog '" '" '" at the lowest wholesale prices" " * general wholesale merchandise * * "' " The evidence is insuffcient to support the allegation in the complaint challenging respondent' s use of the term "retail price COMPLANT 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 Continental Products Inc., a corporation, and Gaxrison G-rawoig, Allen Grawoig, Earl ,Y. Gmwoig, Richard N. Gra' oig ,md Paul I. Mayer, individually and as offcers of said corporation, 11creinafter referred to as respondents, have violated the provisions of said Act., and it appearing to the 818-121--70-- Complaint 65 F.

Commission that a proceeding by it in respect thereof ,,' ould be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Continental Products, Inc., is a, corporation organized, existing, and doing business under and by "Virtue the laws of the State of illinois, with its offce and principal place of business located at 2030 South :Jfichigan Avenue, Chicago, Illinois. Respondents Garrison Grawoig, Allen Grawoig, Earl 1V. Grawoig, Richard N. Grawoig and Paul M. :Jlayer are individuals and offcers of the said corporate respondent. They formulate, direct and control the policies, acts and practices of said corporate respondent, including thoso l1el'cinafter set out. The address of each individual respondent is the same as that of the corporate respondent. PAR. 2,. I\espollclents arc now, and for some time last past have been engaged in the advertising, offering for sale, sale and distribution of various articles of merchandise, including jewelry, eameras, type writers, hardware, sporting goods and appliances, to retailers for resale and to individual members of the public. PAR. 3. Respondents now cause, and for some time last past have caused, their said nlerchallclise, when sold, to be shipped from their place of business in the State of Illinois to purchasers thereof located in various other States of the United States, and maintain and at all times men60ned herein have maintained, a substantial course of trade in said mercha.nc1ise, in commerce, as "conunerce" is defined in the Federal Trade Commission Act.

PAn. 4. Respondents, in the course and conduct of their business and for the purpose of inducing the purc.hase of their merchandise, have advertised the same by means of catalogs and circulars, disseminated by and through the United States mails to prospective purchasers located in various States other than the State of Illinois. Among and typical, but not all inclusive, of the statements appearing in respondents' catalogs and circulars are the following: * * '" a wholesale catalog * '" * at the lowest wholesale prices '" * * a great department store in a catalog '" * '" general ",bolesale merchandise * , Prices shown are retail prices established by the manufacturer or recommended by ns. Your cost is hidden in the stock numbers. Confidential-Your Net Lm\" Cost is Hidden in the Stock l\umhel'-Itetail prices'" '" '" have been suggested by the manufacturer as list prices for dealers who are buying for -resale. Yon pay only the coded price. 26-88537-1356 '" '" '" Retail 22.

PAR. 5. Respondents, for each article of merchandise described in their catalogs ,tld circulars, set forth two prices; one, a so-called coded price and the other, a higher price, designated as "Reta.il". By means of such pricing methods and the aforesaid quoted statements, and others !,y, CONTINENTAL PRODUCTS , IXC. , ET AL. 363 J61 Complaint of like import not specifically set out herein, respondents represent directly or by implication, that they are wholesalers who sell a1l of their merchandise at wholesale prices; that the so-called coded prices at which the merchandise is offered for sale, are wholesale prices; that the prices designated as "Retail" are the prices at which the merchandise is usually and customarily sold at retail; and that the difference between the coded price and the "Retail" price represents savings from the usual and customary retail price in the trade areas "Where the representations are made.

PAR. 6. In truth and in fact, respondents do not sell, or offer to sell all of their merchandise at wholesale prices. To the contrary, the prices of many of their articles of merchandise are in excess of wholesale prices and the said coded prices of such articles are not wholesale prices but are in excess thereof. The prices designated as " Retail" prices, for many of their articles of merchandise, arc not actually'etail prices but in fact are in excess of the price or prices at which said merchandise is generally sold at retail in the trade areas where such representations arc made. The differences het\veen respondents' said coded and "Hetail" prices do not represent savings from the generally prevailing retail price or prices. The statements and representations set out in Paragraph Four, and the implications arising therefrom, are therefore false, misleading and deceptive PAR. 7. At all times mentioned herein respondents have been, and are, in substantial competition, in commerce, with corporations, firms and individuals in the sale of merchandise 'Of the same ge, neral kind and nature as that sold hy respondents.

PAn. 8. The use by respondents of the aforementioned false, misleading and deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead and deceive a substantia.l portion of the purchasing public into the erroneous and mistaken belief that such statements ",were, and are, true, and into the purchase of substantial quant.ities of respondents' products because of said mista.lmn and erroneous belief.

PAR. 9. The aforesaid acts and practices of respondents, as herein alleged, were, and are, all to the prejudice and injury of the public a.nd of re,spondents' competitors and constituted, and now constitute unfair methods of competition in COlTlmm'Ce a.nd unfair and deceptive acts and practices in C01Tl1erce. in violation of Section 5 of the Federal Trade Commission Ad.

JIr. lVillia.1n A. Somers ancllJJT. Ed'/o(lrrl A. 111aTku8 , J1'. supporting the corn plaint.

Rothschild, llg1,t, Stevens Bmv by 11iT. Rclward I. Rothschild of Chicago for respondents Initial Decision 65 F.

INITIAL DEClBION BY JOSEPH W. KAUFMAN, HEAI"G EXAMINER JUNE 18 , 1963 The complaint herein alleges violation of Section 5 of the Federal Trade Comnlission Act, mainly by t.he misrepresentation, in effect that list prices in a mail order catalog circulating throughout most of the states of the Union are prevailing prices, and also by the misrepresentation that the catalog s actual retail sellng prices arc wholesale prices.

The complaint issued on Jlme 29, 1962. On fiing of the answer the examiner had counsel confer with each other in ant.c.ipation of a prehearing conference, which was thereafte.r held, pursuant to order resulting in an order containing prehearing directions. On the examiner s certificate, the COlIllllissioll issued an order authorizing hearings to be held in Ft. .Wayne and Milwaukee, as well as Chicago. Respondents filed an extensive motion complaining that the prcheariug order directions had not been complied with by complaint cOlulsel but this motion was, with some reservations! denied. The hearing was duly commenced by taking testimony in the three cities, but complaint counsel's proof of but one retailer for an itenl in each city as to the retailer s own price, without reference to other prices raised a serious question as to adequacy of proof on the case-in-chief. Thereafter, however, complaint counsel fied a petition to reopen which \vas at Jirst denied, on conditions, and then granted on his written stipulation that the proof was defective. Complaint counsel also requested the examiner to certify the necessity of reopened hearings in more than one city, but this was denied. Hespondents' counsel, lUlopposed by complaint counsel, contended that he required time a,after the closing of complaint counsel's case to prepare the defense. The examiner disposed of this on reopening by noticing the reopened hearing for February 13 Rnd14, 1963, and giving respondents an extended weekend 't. to February 18 and 19, for defense, with rebuttal cOlnmencing Februa.ry 20. The reopened hearing was held accordingly in Chicago, with no testimony offered on rebuttal. Tbe entire transcript is 1519 pages. On reopening, complaint counsel adduced test.imony as to only two of the three cities and reduced the number of itmlls testified to from to 49. I-Imvever, there also was some general testimony on the unreality of the catalog s list prices, which areic1entical with the manufacturers' list prices. A motion to dismiss was denied and it was held that the burden of going forward passed to the respondents. Re- 1 A!' per stipulation of counsel dated June 13, HJ63, substituting this for different and differing figures appearing, instead of 89, in their submissions and briefs. COKTINENTAL PRODUCTS , INC. , ET AL. 365 :361 Initial Decision spondents produced a trade expert who actually corroborated the unreality of the list prices, testifying that they were the highest prices obtainable throughout the country hy "some" retailers and were fixed so ag to accommodate all types of retail outlets. On the closing of the hearing, leave was given to respondents to submit certain exhibits by a fixed date. Subscquently there was a motion by them to file further exhibits, which was granted but merely to clarify the record. The case was closed on .Ylarch 20, 1963 conforming to the extended fiing date. Time was also fixed for submissions, which was subsequently extended on complaint counsel' motion. Proposed findings, conclusions, order and brief were submitted by ea,ell side. There were also extensive answering submissions from each side.

In a general way, the decision herein may be slll1marized as follows: 1. The testimony that respondents' reta.il1ist prices are unrealistic, particularly the testimony of respondents' expert that the prices represent only the highest prices some retailers charge, and the fulding that the list prices are a representation of national rather than merely local prevailing prices, all establish the inherent deceptiveness of respondents' list prices, without the neccssity of flllllocal area proof, absent adequate proof by the respondents to the contrary. II. Complaint counsel's eliort to prove his case as to retail prices by local area evidence fails, particularly with the reduction on reopening to 49 items and to two cities, together with other deficiencies, and because at the very most the proof relates only to the two city areas proper and does not comprehend the exte,nsive suburbs, which were included in the trade areas by the testimony of his own witnesses. III, As to wholesale prices, more particularly respondents' use or the word "wholesale" 1n the ea.talog to describe their actual selling prices to consumers, complaint cOlllseI has proved his case. Respondent Continental Products, Inc., hereinafter referred to as Continental, puhJishes an ilustrated mail ordcr catalog, and supple. ments thereof, circulating admittedly ' in 39 States of the United States, and advertising various types of merchandise, including wellknown national brands (CX 1 , p. 355 '), sold by them in the states. Each item of merchandise is listed in the catalog by a price designated as "Retail", which is the manufacturer s suggested retail price (Tr. 503 4). Continental purchases the merchandise from the manufa cturers, or through them.

Respondents' Proposed Finding 12(c). T'bere also seem to be more than 3D such states. 3 This, the 1901 catalog, li!:ts almost 50 such brands and states: "These are only some of the major nationally advertised brand Dailes reprcf;ented in the Continental Catalog, &;

Initial Decision G5 F.

Accompanying each "Retail' price in the catalog is a coded price easily decipherable once explained, at which the particnlal' article is sold by Continental, both to retailers gnd to ultimate C011sumers, including firms buying for ultimate consumers. The coded price is substantially lower than the "Retail' price.

A typical retailer purchasing frmll Continental wOllld be a general store or similar ontlet in a remote community with little competition. Such retailer or outlet pays the coded price and sells at the "R.etail" price, or possibly something off that price. It may well keep the catalog on the counter, without carrying actual inventory (Tr. 1485: 1-6), and the customer-col1sumcr not knowing the code, pays what is asked. Another, and perhaps more recent, example of this type of outlet is a beauty shop (Tr. 1462) selling on the same general basis and under somewhat analogous conditions. Tho, retailer-user of the catalog as a "counter salesman" is historical in this type of catalog business going back to years when Continental dealt only with retajlers. Typical ultimate col1smners, or finns purchasing for such consumers-aU of whom pay the same coded price as a retailer-fau into various classes, some of which are descdbed in paragraph 2 of the answer herein; particularly the second sentence thereof: 2. Respondents admit that they have advertised, offen,d for sale, sold and distributed yarions items of merchandise including jewelry, cameras, typewriters hardware, sporting goods and appliances to retailers for resale. Respondents admit that they have sold and distributed said articles to indivl(lllul members oj the pu.buc, but allege that such sales have been confned to their Chicago" stores, to indiviruals buying from catalogs distributed to retailers, industrial concerns or otlwr companies, and to individuals who got Oll their mailng list through such prior llurcllases. '" * * (Our emphasis. Another class of non-retailers, testified to by respondent Earl "IV. Grawoig, one of Continental's princ.lpals and respondents' chief "it- , consists of cooperatives: purc11aslng for members. .i\ccording to him, banks also purchase merchandise from the Contjnental catalog to be given away as premiums for new deposits. FirmsaJso purchase said merchandise for incentive awards, or for gifts. Even law firms are solicited by Continental for its non-retailer business designed to place its merchandise in the hands of ultimate conSWl1crs.' That this type of business is in general, if not in every instance, regarded as directed to consumers, rather than retailers, who by definition sell to consumers, see L. A. Nayer8 00., Inc. 21 F. C. 434 (1935), and Leeds Travel1vear, Inc. 61 F. C. 152 (1962). The testimony of Mr. Grawoig is that 85 percent (Tr. 1380:9) of the catalog mailing list and of merchandise sales are to business firms. This, the examiner 111Ust rule at once, apart from the self-serving character of the testimony, does not support the utterly gratuitous CONTII\ ENTAL PRODUCTS) n ) ET AL. 367 361 Initial Decision conclusion, reiterated throughout respondents' proposed findings and brief, that the 85 percent figure relates to retailers. Actually, according to 3fr. Grawoig, Continental keeps no tabulation as to \which of its c.customers arc retailers and which rLl'e not, an orclel' is filled whether calling from a retailer or anybody else, and names for it.s mailing lists are ordered,d frolll professional name companies without f'v1Y specification whatever as to their being retailers.

l\:foreover, the Continental catalog contains direct and dramatic appeals, with -appropriate dr L',dngs, to ultimate consumers or iirms and other entities purchasing for distribution to ultimate consumers. The catalog also contains a fuJl explanation of how such conclu11ers may read the coded prices. The catalog, in the same pages devoted to this message, also refers to coded prices as a 'way in which consumers can buy at "wholesale.

31:1'. G-rawoig s further testimony, equally self-se.irving, also is that about 04 percent (Tr. 1371) of Continental sales are in cities with a population of less than 162 000 (Ft. 'Wayne, brought into the case by complaint counsel), and that Continental concentrates on towns under 100 000 (Tr. 1471) with an emphasis on commnnities much under 100 000. This again does not warrant, 01' add weight to, the conclusion that most of Continental's distribution is to retailers. In the examiner s opinion a catalog sent to a small town or community , for the recent years concerned here, just as likely, or more likely, to be sent to or for the ultimate consumer, than to a retailer, let us say, for instance, the one general store in a small, isolated C0111munity using the catalog a,s a counter-salesman.n. Fictitious Price System Highest PTices, National Prices The complaint herein alleges the dissemination of the Continental catalog and merchandise in various States of the United States. The complaint, Six, further alleges misrepresentation by the catalog s use of "Retail" prices in that they "are not the actual retail prices but in fact are in excess of the price or prices at which said mercha.ndise is generally sold at retail in the trade areas where such representations are made." It may be noted that the complaint refers to "the i The facts w!l he further detailed below, with page references to the record, under Buhcaptjon A Retail CataloIl.

i Mr. Grawoig at first testified the number was 50 000 and that the orders for names expressly excluded "anything beyond 50,000" ('Ir, 1349: 1- 3). 'The examiner requested him to produce orders with any number limltn.tion but none were produced ('Ir. 1472). 368 FEDERAL TRADE COMMSSION DECISIONS Initial Decision 65 F.

trade areas, which bears the meaning of all trade areas where such representations are made, namely all the areas in all the states where such representations are made, not merely the local trade area or one or more catalog readers.

Secondly, the complaint, Six, alleges misrepresentation in that the differences between respondents' said coded and ' Hetail' prices do not represent savings frolll the generally prcvajling reta.il price or prices but makes no stated reference to trade areas. There is no reference in the complaint to any specific trade area. Furthennore, there is no reference to areas or localities generally except for two uses or the ,words "trade areas" without further description. Thus, technically speaking, there was no necessary burden on complaint colu1sel to supply proof as to any particular areas, even though he did supply such proof for two or three citv areas following the practice established in numerous pre-ticketing misrepresentation cases, which are uniquely loca.l in nature. The complaint, Two, is direct.ed to "various articles of 111erchandise including jewelry, cameras, typewriters, hardware, sporting goods and appliances" (It may be noted at once here that complaint counsel's specific area retail proof at the hearing did not include jewelry and hardware, and for practical purposes did not include cameras, so that this proof is lin1itecl to three of the six product ljnes named in the complaint.

l1e complaint, Two, also alleges distribution to both "reta.ilers for resale" and to "individual members of the public. The complaint, Eight, alleges deceit of a substantial segment of the purchasing public ultimate consumers.

The main question in this case is whether the use of the word "Retail" in the catalog is a misrepresentation as charged in excess of the price at which the article of merchandise generally sells at retail. The alleged misrepresentation as to savings between the coded price (catalog s actual retail price) and the "Retail" price is secondary, TIm-ving out of the ma.in misrepresentation charged. Under the law as announced in the preticketing cases, in respect to the nature of a list price representation, there can be little doubt that each "Retail" price of the catalog herein is a. representation that it is the usual and customary price in the trade area where the representation is made. Clinton W"teh Co. v. Federal TTade Commission, 291 F. 2d 838 (7th Cir. 1961). The same rule has been announced in a case where the list price was advertised in the local District of Columhia newspapers. iJiatter of George s Had,to and Televuion Co-mpany, Inc. 60 F. C. 179 (1962). Giant Food, Inc. 61 F. C. 326 (1962). (Aff' June 13, 1963.

TINENTAL PRODUCTS , INC.) ET AL. 369 361 Initial Decision As for t.he Continental catalog, obviously national rather than local in circulation, in contrast to preticketing for instance, it also follows in the examiner s opinion, pa.rticularly as to nationfil brand products that each "Hetnil" price is a representation as to the usual and customary price throughout the country, or J110St of .it, not mercly in t.he area of a particuhtr catalog reader. Incidentally, it also follows that said price is a representation that there is substantially such a usual and customary price throughout the country, or 1110St of it. Of course, such a representation, if nlade, does not accord with fact as the Commission in its expertise knows and respondents themselves hardly deny.

Moreover, the evidence in this case clearly demonstrates that such is not and could not he the fact, since respondents' own expert, Dr. Boyd, testified-generally and irrespective of local areas, although specifically as to the lines of merchandise involved herein-that the manufacturer s suggested retail price, which is ContinelltaFs "R.etail" price is the highest retail price, charged by "some" retailers, and is set by the manufacturer high enough to top all other prices. Citations to the record are given below.

Dr. Boyd's testimony may be first considered in the light of certain testimony given, incidentally to be sure, by three iilwftukce retailers called by complaint counsel. This j)iilwaukee testimony is, of course :fairly local .in substance and context, but it has definite un(lertones as well as some express content suggesting a country-wide situation, at least in suffciently competitive areas.

One :Milwaukee retailer, Mr. Anderson, testified that he fixed his own retail prices by just looking at the various coded catalogs and charging $2 to $5 less than their "Retail" price (Tr. 944 :4 12). These catalogs included the Continental catalog (Tr. 945 :21), which he checked (Tr. 948 :5, 8), Majestic (Tr. 946 :7), Milway (Tr. 954 :7), and others. These catalogs all have basically the same "Retail" prices; as well as the same coded prices (Tr. 948 :23), at least "within a few pennies" (Tr. 972 :24), which the witness called "wholesale" prices (Tr. 950 :2 3).

Originally Continental and the other catalogs circulated only among retailers who alone knew the code (Tr. 951 :18-22). But the catalogs took over throughout the country (Tr. 952 :3), obviously as consumer catalogs. They encoura.ged people to give the names of their friends, and never checked who the latter were, nor did they care (Tr. 954:5-11). Thus the catalogs came to circulate among ultimate consumers (Tr. 956 :6-12).

8 See also the testimony of Mr. Needham, a Fort Wayne retailer, He testified to a bistorical mnrkup of 40% (Tr. 937: 21, for t:,pewrlters, which he felt was stil now reflected in Continentnl' s "Retail" price (Tr. 938: 15-25). 370 FEDERAL TRADE COMMISSIO DECISIOKS Initial Decision 65 F, The testimony of Mr. Anderson suggests that the "Retail" price of any of the coded catalogs, including Continental' , would be unrealistic not only in Milwaukee but also in other highly competitive centers. Another ylilwaukee retailer, Mr. Rohr, testified as to coded catalogs, although not specifically as to Continental. He keeps the various catalogs at his store (Tr. 1012 :2'1). People come in and say they can get a desired article at a stated price from one of the other catalogs (Tr. 1013 :12-16), and he would beat this price slightly. :\lr. Rohr testified that the catalogs of the diiIerent houses have a coded price which is explained right in the catalog itself (Tl'. 1014: 2--), and he would sell pennies below that price. He was asked if he was guided by the "Retail" price. His ans\ver was except that people ask him how much it retails for: "They perhaps "Want to know how much they are saving-they consider it a savings, you know; but ,it 'Jeally has no beat"ing, 1' early, on (Jhat you have to sell it f01' (Tr. 1014 :19- , our empbasis.

, \yas As to ,,,whether the "Retail", or manufact.urer s retail price charged by any store in the city or suburbs, :Jlr. Rohm' answered: " It is conceivable that there lllight be on8 black sheep floating around that is going to pay full price. I don t know for sure " (Tr. 1040 :1 16). A third Milwaukee retailer, Mr. Raynor, testifying as to coded catalogs generally, stated as to the "Hetail" price therein: ",V ell, the retail price doesn t mean very much these days" (Tr. 1074 :12), that it has not meant anything for three, four or five years (Tr. 1074 :19), and that no one woukl dispute this (Tl'. 1074 :24; 1075 :1). He also testified (sporting goods just happened to be the subject) that the retail price would be the same in different catalogs, and the coded price the same or a fe" cents off (Tr. 1076 :9-17).

Complaint counsel did also adduce from these and other witnesses some specific proof as to prevailing prices in l\Iilwaukee and Ft. ,Vayne, which will be referred to later. But the examiner, on the general testimony referred to above and on generally known facts, set forth in articles 7 on historic mark-ups alluded to by him at the hearing (Tr. 959 :11, 16), held that as a general matter, entirely apart !rom speciEc local areas, enough had been shown to indicate prima facie that the manufacturers' suggested retail prices, and therefore Continental' Retail" prices, are unrealistic (Tr. 1098 :3), and have been so since the advent of discount and other competition commencing in the 50' in any area having such modern competition (Tr. 1098 :5). He accordingly ruled that the burden of going forward shifted to the respond- 7llarkrader, Fictitious Pricing and the FTC, St. John s Law Review, December 1962 pp. 1 , 4, 5, 6, 16, 17: also various citations therein to Fortune and other business periodicals, CONTINENTAL PRODUCTS , INC. , ET AL. 371 361 Initial Decision ents to explain (Tr 1099 :3) or prove the contrary. On the following day the examiner also took offcial notice to the same effect (Tr. 1176), but expressly limited (Tr. 1176 :7) to the same result of shifting the burden of going forward (Tr. 1250 :1-17).

The examiner explained in detail the above picture, as to these retail prices, as he saw it (Tr. 1101-1104). Significantly, respondents' counsel apparently agreed, stating (Tr. 1104 :20-23) : l\JR ROTHSCHILD: In the first place, I think that your general description is probably accurate of the marketing situation in the large metrolJOlitan areas- 11 wI Bot supported by the evidence in this case. "' * .)0 Counsel's qualification as to lack of support by the evidence obviously related to his contention that the specific area retail evidence introduced by complaint counsel was insuffcient.

The examiner accordingly urged him to go forward with the facts through Dr. Boyd, respondents' proposed cxpert ('11'. 1099 :6-15), and through Mr. Grawoig, which he undertook to do (T1'. 1112 :1- 3). Both witnesses were not due to testify for several days due to the long weekend allowed to enable respondents to prepare their defense. Actually, as wil be seen, the expert dcfinitely testified that the suggested rctailpricBs are only the highest prices obtained by some retailers, under an outdated historic mark-up system. In died he thus stigmatized these prices as being unrealistic even without stating, at least explicitly, any limitation of this situation to la.rge metropolitan cities. lvIr. Gra,woig, incidentally, did not go into this general question although he did supply shttistics, above referred to, as to the catalog preponderating circulation in small communities, and among "firms (now equated with retailers) rather than individuals. The expert also testified, or attempted to testify, as to the consumer 11nderstanding of suggested retail or list price, namely, that it does not mean the usual and customary price in the area, that the consumer in competitive city areas is so subjected to list pricing that he does not compute any savings from it, and the like. However, the examiner refused to receive any such testimony, on the ground that the expert was not an expert on consumer understanding (Tr. 1195:23; 1256:6) 1101' had he conducted research 01' consumer interviewing on these matters (Tr. 1210 :25), and on the g;rouud that the expertise of the Commission as expressed in adjudicative cases must be regarded as superior to t.he expert's judgments on consumer preference (Tr. 1197:5; 1256 :14).

Dr. Boyd testified-quite generally and apart from any Tefercnce to specific local areas that the manufacturer s suggested retail or list price is "the price that the high cost retailer will charge, and that it is "more or less the upper limit which some retailers will charge" (Tr. 372 FEDERAL TRADE CO::L\IISSIO DECISIONS Initial Decision 63 P, 1188:14-18). He stated that this is so as to the price of a "national mar.ufacturer " (Tr. 1191 :22). Asked if this was so as to the price "retailers all over the country would be charging, he answered in the affrmative "speaking generally" (Tr. 1192 :1-4). Asked if they assumed it is "the highest retail price going, and "throughout the continental l,Tnitec1 States, he answered "Yes" to both questions (1.1'. 1192 :5-10). He gave as an example of a retailer obtaiuing this highest price, a "neighborhood drug store" ('II'. 1203 :19), apparently removed from the center of town competition, ilUd a " full service retailer" (Tr. 1203 :22) in a good-sized area (Tr. 1204 :20), apparently in the midst of competition. Another example would be a shop in a small isolated area.

Dr. Boyd testified that the manufacturers' suggested prices herein although prices of "integrity" (Tr. 1212:1), were based on historical markups (Tr. 1214-5) which were once realistic before the advent of discount houses and today s competition. He testified that the m:ukup might be, for instance, 30 to 35 percent for a high cost retailer of small a,appliances ('II'. 1215 :10) and up to 40 percent for high cost camera retailers (Tr. 1215 :20).

Dr. Boyd further testified that the manufacturer has coutinued with his historical markup, even though discount houses and others have come into the picture charging substantially less than the list price. He states (Tr. 1217 :18 to 1218 :10) as follows: Now, through time the manufacturer has been faced with a very serious problem, because into our economy has been injected the discount house. 'lhe manufacturer has continued with his suggested retail prices, because he sells through many different kinds of stores. He sells through the small store who has high margin. He sells through stores such as ones here in Chicago, discount homes. He sells through full service stores. He sells through catalog houses. So that a manufacturer is in this dilemma, using all different kinds of stores to sell his product, some high cost, some low cost; so that he has a problem of setting a lit price that wil accommodate the needs of the high cost retailers. In giving this testimony, Dr. Boyd explicitly referred to "manufacturers of the kinds of items that we are dealing with here" (Tr. 1217 :12).

Incidentally, Dr. Evans, another expert expressly relied on by respondents, has testified that there is no such thing as a usual and customary ret.ail price in today retail market apart from resale price maintenance. Of course, if this is true respondents are in violation for representing that there is indeed a usual and customary retail price. 8 "Usually forty per cent" is the historical retail markup according' to the St. John Law Review article (p. 4), Rupra.

9 RX 21. Transcript of his testimony (1089 :18; 1090 :13) in Majestio Electric Supply Company, Inc., D. 8449 (Jj'TC) (64 F.'.f.C. 11661. CONTINENTAL PRODUCTS, INC. , ET AL. 373 361 Initial Decision :N ational1y there is no resale price maintenance. Locally there is in various states but often not enforced or effectively policed by the sel1Cl' , as to which respondents here offer no evidence. Although much of Dr. Boyd's testimony as to list prices was given without reference to specmc products, it is clear that his testimony definitely comprehended the products in this case. He expressly testified that he had examined the prices in the Continental catalog (Tr. 1212 :12), with particular reference to list prices of the products involved herein, including the various brands of cameras, typewriters appliances (also shavers) and sporting goods (Tr. 1212:9-12). Moreover, on other occasions he made specific references in his testimony to products involved herein.

As already fully indicated, it is absolutely clear that Dr. Boyd was testifying as to the general retail market in the country rather than as to any specmc trade area. He did testify that as one gets farther away frolll the large city and closer to "semi-isolated comnlunities, there is "tendency to approach suggested list prices in actual sales (Tr. 1225 :6- 8). He also testified that "much" list pricing goes on iu small "isolated" towns, as to ,which, however, he did not know what percentage (Tr. 1225 :16) nor did he give any measure.

It thus seems tolerably clear, without more, that it has been proved in this case on general evidence, irrespective of specific local area evidence, that the respondents have misrepresented by their use of Retail" prices.

First, they have misrepresented that the "Retail" prices in the catalog are the prices at which the items of merchandise are "generally Bold at retail in the trade areas where such representations are made (Complaint, Six)-such representations being made wherever the catalog circulates throughout most of the states of the Union, as a consumer reader of the catalog in any particular area nlight well understand and be misled thereby. This is true where respondents deal directly, through the catalog, ,with ultimate consumers or, what amounts to the same thing, with purchrtsers for ultimate consumers. It is also true where respondents deal with retailers who actually obtaill the "Retail" price from ultimate eonsmTIers on the catalog Tepresentation, chargea,bie to respondents, that it is the price at which an item is geneml1y sold throughout al1 the areas of the United States in which the catalog circulates. On this false representation the consumers may be induced not to nlflke even an attempt to shop elsewhere or in a different manner, if only by writing to respondents find asking tl1BlTI to send a catalog dir tIy to them or writjng to other mail order houses which make -available to consmners the coded or lower price. Initial Decision 65 F.

Secondly, respondents have also misrepresented that their "Retail" prices are the prices at which the items are generally sold in any trade areas having the modern type of retail competition of today, including discount houses, in respect to such items. The items chiefly involved here are well knowllnational brands, so that they are obviously sold all over the LJnited States and must be sold in any number of trade areas having the modern type retail competition. These modern type trade areas would include not only cities of size but smaller communities, as it is well known that the "retail revolution, commencing in the 1950' , has pushed into all but truly remote and isolated 10catiolls. In this see,and aspect the misrepresentation is one made only to ultimate consumer purchasers directly.

It also follows, of course, and is equally clear, that it has been proved that respondents have misrepresented the a.mount of savings as being the difference between the coded price of the catalog and the Retail price thereof. This -again is true where respondents deal with ultimate consu1ners or purchasers for ultimate consumers. It is also again true where they deal with retai1crs, say country stores in isolated areas using the catalog as a cowltBrsalesman, but selling at something off the "Retail" price.

It should be emphasize.d that the dissemination of list or suggested retail prices is not held here to be illegetl per se, but that thc "Re.tai!" prices in this case etre ilegal bccetuse they constitute a false represen. tation as to the usual and prevailing pric.e-locally, l1nationally, or both-and as to there being a country-\'idc usual and prevailing price. The effect or Dr. Boy(rs testilTIOny, as above described, was not only to indicate definitely that respondents Hetair' prices are Ullrealistic but to keep the burden of proof from ,.hifting back to complaint counsel. Even ir his testimony is strictly construed to attest only to the likelihood, and not the fa, , that actual.J retail prices would genera.Jly be 10\'e1' than the catalog s "Retail" prices, the burden would by reason or his testimony still rcma,in with respondents to prove, that actually, ror some rea,son or other, the likelihood has not materialized, or could not reasonably materialize.

Respondents have not met this further burden by Mr. Gra,,' oig testllllOllY that most or their businc-ss is done with smaller communities, since this hardly means that list prices ate generally charged in Slllal1er communities or that the strong breath or modern competition has not reached these communities by reason or modern communication, including tho mn,il bringjng competing eatalogs. Nor have they met this burden by putting on the stand :!lr. Pillman who testified that, while he was an employee or respondents and ,arter getting instrnotions rrOn1 respondents' counsel (Tr. 1315: 3; 1314: 20), he one CONTINENTAL PRODUCTS) IXC., ET AI.. 375 361 Initial Decision day toured four small towns, each under 10 000 population, and received full list price quotations on various items of mercha,ndise contained in the catalog. He went to only one shop in each town (plus a camera shop in one town), not even trying the drug store (Tr. 1320: JIe never, so far as the record shows, told the salesman he could buy it for less frolll a specific source such as a. catalog, and in a llUlllber of places did not even say he could buy it for less (see Tr. 1302: 2, 3; 1300: 24, 5). IIe was identified at one shop, at least, as a professional shopper (Tr. 1326: 13). He testified to all the various prices lllll tag listings without notes (Tr. 1318: 4), saying he had kept notes but threw them away (Tr. 1318: 14).

, is The above result, reached here in part I of this decision consistent with the result reached in part II, below, holding that the specific area proof-as to ::filwaukee and Fort "Vn,ync, selected by c0111plaint counsel-is insuffcient to show that respondents' "l-etail" prices were not the prenliling prices in those areas. The specific a.rea proof, adduced by complaint counsel, is found to be insuffcient because of teclmieal (although altogether suhstantial) deficiencies-irrespective of a.ny prnbability that adequate specific proof is or is not obtainable.

, lends S0111e sup- Actually, the specific area. proof, as far as it goes port to the present part of the decision. 'This point is not being pre.ssed here, although it is being presented.

The specific area proof is reje.cted by the examiner for a number of reasons, which a.re fully developed in part II, and may be sul11narized here as follows:

First, the specific area proof is pretty well limited to each city proper. All of the retailer ,yitnc.ses as to ea.ch city were from the city proper. Complaint counsel offered no evidence as to actually'etail prices in the suhurbs of these cities, even though he himself had his witnesses testify that the trade area is the city plus extensive suburbs. Secondly, although the retailer witnesses testified that their retail prices were fixed by competition and compet.itive conditions, in most instances there 'ivas only one witness for a product, and the testimony in general fell short of 'what seems indicated in order to make an a.appropriate finding in refer.ence to prevailing rebtil prices-particularly in 0o.ch full trade area, as distinguished from the city proper. Thirdly, the specific area proof is limited to 49 possible items, actua.lly covering only three of t118 six lines of merchandise mentioned in the cOlnplaint. Although this coverage might under other circu111stallces be deemed sufcient, it seems ina.adequate in this case in view of a substantially larger number of ite, including an additional merchandise Ene, originally proffered by complaint counsel, and in 376 FEDERAL TRADE COMMISSION DECISIOKS Initial Decision 65 F.

view of the six lines mentioned in the complaint, which presumably figured in the Commission s finding of sufcient public interest. On this summary it seems fairly clear that ,the specific area evidence must be rejected by the examiner as inadequate. However, it also seems that with a little more evidence, probably not too hard to get, the result might be different.

Actually, respondents, except for challenging the technical suffciency of the specific local area evidence to prove a case in and of itself, do not seem to be seriously challenging the contention that their "Retail" prices are higher than those generally prevailing in cities like l\Iihvaukee or Fort 1Vayne, or in larger cities. Their general defense on the real merits rests rather on the theory, as has already been indicated, that most of the catalog s circulation and sales therefrom are in communities smaller even than Fort -Wayne, and they point out that their catalog circulation in 11ilwaukee, rut least, is very small. Accordingly it may be possible to regard the local area proof adduced by cOlllplaint coullsel as at least a sampling demonstration, considering the strong probabilities of the validity of the general testimony of Dr. Boyd and some of the retailer witnesses as to the unreality of responclents Retail" prices, or list prices. The sampling would be linlitec1 , of COUlse, to each city proper, Milwaukee (pop. 750 000) and Fort IVaJ'11e (pop. 180 000), and hy the more serious consideration that the aTca proof, strictly by itself, is helow the recognized standards of legal proof.

In the cxmniner s opinion the requirements of prouf, at least in connection ,with are.a, are somewhat different for a catalog case such as this than for the typical preticketing case. The diiIerence has been obscured perhaps, by the fact that preticketing cases have established the substantive law t11a.t list price, by prcticketing or othenyjse, is a. representa tion of prevailing price.

In a preticketing c tse the list price is, of course, a.ffxed to the merchandise or pu'ckaging itself. It is thus quite ruggedly local in meaning and application. In a catalog case, the list price is lodged in a catalog circulated across the country, and therefore as a representation of value to the reader it is national, or substantially national, in meaning, as well as local.

Accordingly, in the typical preticketing case specific local area evidence seems to be more or less of the essence in proving the general allelO whereas it may not be necessary in a cata-gations of the cOlnpla.int 10 See Raye:x Oorporation v. Federal Trade Oommission 2 C1r., ::Iay 7 , 1963, C. 'i 70 774, as to a strict statement as to local :lre:l proof, in a preUcketing case (7 S. & D. 690). (C. H. reference is to Trade Regulation Reports. CONTINENTAL PRODUCTS, I ET AL. 377 361 Initial Decision log case involving a representation of a country-wide price irre.spective of inevitable local area differentials in one place or the other. The general proof in the case at bar-su ppJemented, if necessary, by what local area proof there is-creates far more than a suspicion that the catalog s "Retaij" price is deceptive. It shows that the "Retaij" price is fictitious as an actual going price generally, as represented, and is deceptive in its essence.

A Retail Catalog It ma.y be appropriate at this point to say more about the retail nat.ure of responclent. ' catalog. A mail order catalog such as this, with a circubtion of 300 000 (Tr. 90: 23) outside IJJinois, and yet allegedly not designed for disselnination among ultimate consumers rather than retailers, seems to be a fairly strange animal. However, respondents able counsel for unc1ersta.nc1able reasons attempts to minimi%e the retail function of respondents' catalog. The picture he draws almost suggests that the c.atalog and its merchandise directly reach ultimate consnmers quite fortuitously or in such dribbles as to be of little sig11ificance for the purpose of regarding it as a catalog for consumers. Nevertheless, as a.already pointed ont, the nJ1swer (Par. 2) here itself admits the a.legntion of the complaint that both ultimate consumers and retailers are served, and tho anSiVer expressly includes as such consumers certain types of firms purchasing for consumers and not retailing to them. ::11'. Grawoig s testimony adds coopcrati\es as another type of pllrchfLser for consumers.

J\oreo, eI' , Dr. Boyd, respondents' expert, testijied ('11' 1259 :25) that Continental is ;;certninly similar to it discount seller at retail.:' lie agreed that it may be called a '; Jiscount catalog h011S0:: (1.1'. 1260 :2) and 9, "discount retailer (1.1'. 1260 :7). I-Ie agreed that Continental' compa.rati,-e pricing in its catalog '''as not sigllii1cant1y different. from that of "retaij stores " ('11'. 1211 :5-9). Of catalogs generally, including that of Continental, he declared that they provide a '; convenience ior some customers \\-ho ,vant to do some shopping from their homes" (1.1'. 1228 :7), and that they are "the equivalent of a, store in many cases ('11'. 1228:12). AII'. Gnnvoig, in his testimony, affrmed tlmt the Continental catalogs reach a lot of consumers. I-Imyever, he qualified this by stating: ';'ive. also reach a greatmrtny more dealers " (Tr. 1373:24), alt110ugh he "as not able to produce ligures on any retailers or dealers and stated tha,t the)' did not check on this ('11' 1470 :5-9). It is t.hus cleflT that at t.he very least the catalog has a dual aspect nd that its retail aspect as a direct vehicle to consumers is one at Jeast of definite substance. This means, of course: that a finding is justified 013-121--70-- Initial Decision 63 F.

that it is a retail catalog for the direct use of ultimate consumers even though it may also be a wholesale catalog for some retailers who use it and purchase from respondents at the same cadeu price as ultimate consumers, which is the one price at ,which respondents se.ll to anybody (Tr. 108 :1-11).

It is not without significance, too, that Continental sells directly to consumers at the coded price in its nine retail stores in the Chicago area (Tr. log :20-24)-even though this does not, of course, involve interstate conllnerce.

In circulat.ing catalogs, Continental orders names, say 100 OOO at a time, from concerns which sell lists of names (Tr. 13445). But does not ask for retailers (1'1'. 1457:21-23), that. is, names of retailer outlets as such, but buys all kinds of names. It does not investigate whether or not the names it gets are such retailers (Tr. 1470 :7). It prefers business concerns, or professional people-including lawyerswho could hardly be regarded as potential 1'etailers. Although M:1'. Grawoig testified that they do not order individuals, the extensive list of categories of nalnes ordered by Continental lists, among many others, "individuals" (RX 2Gb, line 5G).

1\11'. Grawoig also testified that Continental takes credit unions employees' organizations (Tr. 1457 :4-7). They also like premium and gift business (Tr. 1458:12), which is not uusiness with t retailer but with a concern dealing ,with its employees and making the merchandise available to employees for the coded price. Accordingly, even if fr. Grawoig s opinion were accepted as testified to, that 85% of the mailing list and me,rchanc1ise orders are from business finTIs and cooperatives, this hardly means that they are from 1'etaile1's.

rOreOVe1' , a,anyone who writes in for a catalog will get one, no matter who he is (Tr. 1352 :9-12). If he buys anything he will be put on the mailing list. If he adheres to a certain norm of purchases, which is hardly rigorous, he will be kept on the mailing list (Tr. 121 :10-13)." Complaint counsel produced as witnesses ultimate consumers of this type who received catalogs and purchased directly. Actually, the catalog setup is such as vividly to suggest to the examiner that it is designed to lure much ultimate consumer business by making prospective purchasers believe that they are somewhat craftily inducing Continental to give them a special status as trade customers to which they may strictly not be entitled. For instance, a one or two man business or professional concern may easily regard it as The test is tbe amo-unt bought, the number of times a customer buys, and tile Jast (late bought. An amount of $25 over the :rear may he acceptable (T\". 123: 7-19). , , :; CONTINENTAL PRODUCTS , INC. , ET AL. 379 361 Initial Decision a bonanza that each member may buy for himself or family use at wh..t seems to be ..tmde price.

The format of the catalog clearly demonstratcs its retail aspect as .. direct vehicle for ultimate consumers, as well as any w halesale aspect with full emphasis on the retail.

Taking the 1961 catalog (CX 1) and perusing az,nost all of its 646 p..ges, one might well assume that this is just.. wholesale catalog designed for the use of retailers, say, retailers using it as a countersalesman, with the code price kno\\' only to the retailer as the price. he wi-llpay, and the Re;tail price read by the consumer as the price, or about the price, he wi1 pay.

However, there a.re a number of yellow pages in the center of the catalog which scream for attention and which boldly bid for the business of the ultimate conswneT. These pages aIsa explain how the coded! price may be deciphered, how it is available for ultimate consumers nel how this "wholesale" catalog, as it is expressly called, is for the use of ultimate consumers or those buying for them. These yellow pages arc set np in high pressure style, with illustrations, color, and striking captions, so that there cannot be the slightest doubt that they are directed to ultimate consumers or to the members of non-retailer small firms who wjJ buy for themselves personally, or to firms who will permit their employees to buy through them or using their n..me, and the like.

The yellow p..ges open up with the caption "BIG 6 VALUE DIVIDE DS" (p. 351), and this is quickly explained as con.umer dividends" (our emphasis). The 15 000 items of t11e catalog are pre. scnted, it is stated for your every shopping need" (p. 351). Thc catalog is described asa "department store in a catalog your personal shopping center. " It is further stated: rhen you deal with Continen tal, you have thc same friendly feeling that you had when you shopped in thc oJc-fashioned 'General Store' " (p. 352). " You needn t stir from your desk or arn1 chair *" Again your department store in a catalog (p. 353) You shop in comfort, in privacy, and at leisure *" There is also a conditional money-refund guarantee (p. 356), obviously to the consumer, providing for "cash" refund if "for any reason you flre not completely satisfied. Intcrspcrsed with ajj the above are repeated refcrences to "wholesale catalog" and lowest wholesale prices " as well as "wholesale pricing policy -ajj calculated to represent to ultimate C01U",mers that they are getting the merchandise for wholesale.

The pitch to ultimate consumers is made absolutely cxplicit in .. detach..ble card (p. 366) captioned in bold type "confidential information for our customers\ explaining llow to re.ad the coded price, which Initial Decision 6;: F. is definitely stated to be the real price your cost." There are instructions alongside this detachable card stating "Please tear it out and hold in your files for reference.

On thc reverse side of the card is a statemcnt declaring that the coded prices are available to retailers and also to firms, agents, groups etc. LTltimate consumers as such are not expressly included in this state ment of 'availability, but the examiner regards the statement as a come- " to ultimate consumers to jump for the opportunity of buying under a purported trade status.

There are even solicitations for other consumer customers: "Your colleagues and friends will "Want to see Continental's catalogs. This is another announcement on the same page, p. 366, and detachable selfaddressed cards are provided there for them, requiring no postage. The 1962 catalog (CX 8), entitled "Fall 1961 through 1962", has comparable center pftges, although white in color (with red illustrations), and fewer in number than in the 1961 catalog. The pages contain less copy and illustrations, and no references to "wholesale. :' These center pages strtJ't with the confidential ca.rd making available the coded price, as ,,-ell as the e1f-a.dc1re sed cards for ': your business friends" and "interested associates ' to 'Iyhol1 catalogs are to be sent. The latest catalog (RX 22 A), 1962- " also has the explanatory pages, although in front, together with t.he detachable carel explaining the code and the self-addressed cards for "business friends" and "interested associates. " This is fol1owecl by a page display showing a man wife and child, with the caption "Your dollars are BIGGER at Continental." There is another page inyiting consume.rs to buy directly at the Continent.al catalog stores in and around Chicago. Even :Mr. Grawoig, after.r somewhat crudely asserting and reiterating (Tr. 1490-93) that these inserts are not appeals to ultimate consumers, finally seemed to admit to the contrary, conceding as to a representative excerpt that it was addressed to "ultimate, consumers concerns, reta,ilers " (1'1'. 1493: 16).

Incidentally, iiii'. Grawoig s prior a ertions that the contents of the inserts are not appeals to ult.imate eonsumers make it impossible for the examiner (see Tr. 1487: 13) to accept literally and at face value his other testimony, particularly the statistics produced by him, which were prepared by others '\yho did not a.appear at the hearing to be cross-examined.

It is true that the Continental caialog goes back to the 1920's (Tr. 1343) and jt ma.y well be, therefore, that the catalog originally concentrated almost entirely, as claimed by respondents, on retailers. But 'lye arc now dealing with the 1960's. In the 1930's Continental, except for U The allegations of the complaint, strictly speaking, do not coyer these 3'eals, , .

CONTINENTAL PRODeCTS , INC. , ET AL. 381 361 Initial Decision relatively fe\" items was not even in the general merchandise business but \yas the largest distributor in the United States of automnbile parts and accessories, sold directly to dealers (Tr. 1375-6). It was not until the 1940's that Continental got into generalm8rchandise as its main line. It was not until about 1D50 that a coded price, in place of an Ullcoded one, was used with the "Retail" price (Tr. 1343-4). It was not until about 1960 that the catalog included referral cards to send to friends or associates (Tr. 1352: 7). In other words, the Continental catalog, in its present form and function, seems to coincide, more at less, with the springing up of discount retailing in the United States commencing with the close of .World IV"r II. LOCAL ARL-\ EVIDEXCE As heretofore observed, the complaint herein, T\YO , spe.eiies six lines of merchandise i.e. various articles of merchandise, inc.uding jewelry, cru1lcras, typewriters, harch,are, sporting goods and appliances.

In his original presentation at the hearing, complaint counsel offered proof of only four of the six Jines, limiting his proof to cameras, typewriters, sporting goods and appliances, and thereby elirninating jewelry and hardware.

In his origina.l presentation, complaint counsel offered retail proof as t.o 89 items. These appear to have been selected from 266 items/ as to ,vhic11 the respondents prior to the i sllance of the complaint had been requested to slllJlnit detitiled information, as they did. (1'1'. 1396-7. ) In the original presentation, cOlnplaint counsel, as already noted pursued t formula, of simply caning one retail witness to testify as to tho price at ,which he sold an item in h18 area-without any further testimony or proof \''whatever, even as to whether t.he price was competitivc with other prices in the area.. This evidence ,vas clearly insllffcient, and eventually complaint counsel conceded tllat it "as insuffcient in his motion to reopen.

On the adjonrned d tte complaint counsel proceeded to present further t,l'stimony. IImycver, as to ;"0 of tile items H he never offered further p!'oof, and tlle examiner holds that by this fact alone he must be deemed to 11av8 failed in his proof as to the e items. ::101'oover, on rehearing he oifered proof as to only 4D itmns, of y, which 30 \were old items dealt ,within t.1C original presentation and 10 Iyere ne,y items. )J 118 on RX 16, 99 Oil RX 10 , and 49 all reopening-a total of 266 ns compilecl by respondents' counsel.

:; Computet. by the examiner tlJe oliflerence between 89 ancl 39 (Oil lclr€;-ring). _ _._____ . _._! .... . , ( . %, ; .... + gg __ _ \), _ ______._ . _ . Initial Decision 6.5 F. The examiner agrees with the respondents that it is the proof on the 40 items which should govern the proof thereon at the reopened hearing supplemented by any proof in the original presentation-astothe same 49 items 3D of them). \.c.cordingly, the examiner adopts respondents' tabulation of retail prices on these 49 items s110"Ylng the prices testified to both on the reopening and the original presentation. Complaint counsel, after being given full opportunity, has pointed out. no errors in this tabulation. The tabulation with some rearrangement and rewording of captions, is included in and made part of this decision. Tabulation of Retail PI'ice Testimony Fort Wayne witnesses :lIiwaukee witnesses Ue- Item Page tail" Coded QJ'ig- On reopening Orig- On reopenilJg list Price inal inal pnce No. No. No. 3 :Xo. No. 2 NO. 3 ::o. TYPEWRITERS Smith-Corona:

Sterling______._- 287 104. 70. 84. 89. 84. 75. 73. 79. (74. 95) Skyw!'iter___ 28T 78. 'j\l. 7.9. 62. 58. 57. 01.00 Galaxlc____ 287 148. 109. 139. 1119. 1'27. 115. 105. 105. 10,Royal: FutunL - 286142. 13 109. 95 125. 119. 60128. 00115. 00100. 00105. 00106. (9f1. 95) Royalite_____- 286 53. 11 48. 05 53. 149. 95- -- 49. 55. 47. 40.Rellin ton: QUId Ritcr_ 2851,"11. 119105. 119. 501'27. 00115. 00100. :llonnfclL- YO 7 % W. 90 S 89. ELECTRIC SHAVER Remington:

Lcktronic_ 316 35. 2285 23, 88 35. 95 29. 8;; 24. 22. 25. Auto-Home._ 316 28. 18. -J. 88 n 19. 1950 22. 23, ';0 Rol!- :YIatic_____----- 316 21j. ) 5 17. 17. 88 19. 88 2,". 17. 19. 21.80 10. ArPLlA CE' Sunbeam:

Grill__ 372 3!J. fl5 29. ;;0_------- 33. un 32. 30. Opener____- 378 25. HI. 30 -- 23. 88..- (15. 33) 20. 21.38 'loaster_ 382 29. 22. 16 i9. 25. 90- 23. 24. 61---- 1'lixrnaster (Chrome)_ as.! 59. 44. 35.- 47. 75 _n------___--- :Mixmaster(White)_ 384 48. 36. 96--_ 42. 99- m 39. 37. 85- (3.;. 12) Egg Cooker.__ 37B 17. 13. 25- 15. 17. .90---- Port lJleMixmaster (Chrome)__ 384 2-. 18. 13_- m 19. 19. 95.- Portable Mixmaster (Colors)- _n.n--.-- 384 22.,'i0 05- 18. 98.. 17. 17. 0.1- Fl'ypan Tilt-1\edhl1!L 3SG 24. 18. 46.-- --- 18. 19. 95_ Frypan Tilt-Large-- 386 28. 21. 42 un. 22. 28. 88--. _n__Westinghouse: Rotister-- 374 49. 3li. B' 39. 44. 95-General Electric: 29. 377 39, Blender-- ;J6 - 28, 95 34. 95 u_ 8;J Cllp C Maker_ 38G - 25. 23. 60+- 64 H_+unn..27 85 29, 99_ - Peek- Rrcw_ 380 19, 76 -- 17, 99 --.n--- 15. 95._-- 'loest- OveIl_ 383 34. 25, 81; -- - -- 31.99 -- -- 26. 50 31.95. - ---_u------ Portab:c !llixer VI' 384 18. 14. TO 16. 95 17 --- 15. \)5 18. Frypan_ 386 2EL90 21.55 21. 7D-- 19, 8iHlrpcner_ 378 11,21.:-1- 76- 17.99 - 19. Automatic Toaster- 383 2185 ll:i24- "- _--_um- 17. 95--_88. Kn:feShtirpener Attacl1ment.__._ 384 \)53. GG- 00 u_ ee footnole at end of table.

.__ ___ ___________ _ ,, _ . CONTIXEXTAL PRODUCTS , n.w. , ET AL. 383 361 Initial Decision Tab1tlation at Retan Price Testinwny-Continued Fort Wayne witnesses :lJilwaukeewitnesses Item Page tail" Coded Orig- On reopening Orii!- On reopening list Price inal iUfll pnce XO. Xo. No. NO. No. No. 3 Xo. SJ'ORT!KG GOODS Wilson:

Kramcr RackeL. 521 18, 11.99 15. 15. 14. ___--_a__ 3 Snead Woods--- 528 41.00 3Q. 9t! 35. 31.50 29. (30. 66) 8 Snead Jrons__- 528 75. 55. 56. 56. 52. (54. 49) 3 Berg Woods_ 528 41.00 30. 31. 31. 29. (30. 65) 2 Bcrg Woods.u. 528 27. 19. 21.00 21.00 21.90 S Berg Irons-- 528 47. 33. 35. 35. 32. 4 Snead Championship Woods_ 529 82. 57. 62. 62. 58. 3 Snead Championship Woods 529 61. 43. 46. 46. 43. 8 Snead Championship lrons 529 114. 79. 84. 84. 79. 4 Snead Signature Woods--_--- 529 104. 77. 78. 78. 72. (75. 69) 8 Snead Signature Irons.___----- 529 145. 107. 110. 110. 99. (107. 48) Snead Wedge- 529 14.!5 14. 10. 11.95 4PalmerWoods-- 528 68, 52.(9. DO89) 52. 49. 3 Snead Signature Woods 529 78. 57. 58. 58. 54. (56. 69) 5 Snead Championship Irons_ 529 85. 60. 89- 63. 59. 50--_ Graharn :Football- 516 79- 95...--_ Low Cut Football 8hoe8_ 516 14. lJ. 4!J_ _m- 10. High Counter FoottJall Shoc- 516 14. 49-- ----- 10, 95._ 8 Palmer Irons.. 528 9G, 72, 00--- ---------- G9. 50--_------..._ The price stated for a witne o is the llighegt price testified to by the witness for any of the years covered by him. (Some wituesscs testified to prices i.e. actual retail prices, 111 Ul60, 11161, and 1962; otners to such pncesin one or two of these years. Such stated price if also italic is the salle or approximately the sa.me as respondents Retail" or iist price (as can be checked by referring tu the " H.etail" list price column). If a coded price is foHuwed by another coded price in parenthesis tl:e latter indicates a changein respon-dents' coded price (actual retail pnce) while Its catalog ex 8 was 1:1 use. (See H.X 14. :':Iwaukec witness No. 2 as to appliances represents 2 witnesses from the same store. I Plus tax.

On reopening, complaint counsel also, as already noted, reduced the number of cities presented by hin1 in the original presentation from three to two, namely Milwaukee and Ft. 'Wayne. He dropped Gary, even though the reopened hearing was helel in nearby Chicago. explanation, he states in his submission papers that he wished to save expense to the Government and that proof of even one area 'would be, sllficient.

In explanation of his reduction of t.he items on reopening to 49 complaint counsel 2states in his sublnission that proof as to even ono item c:"mlcl be sui1cient to shm\ a deception practice 11e1'8-a content.ion yrhicll has altogether idarming possibiliUcs. Initial Decision OJ F.

This drop to 49 items is not only a serious matter a to nmnber of items but goes fr\l' beyond this. For instance, on reopening, complaint counsel c1eCl'Ca2ec1 his product lines to three one- half the l1UllUCl' specified in t.he compbint; he did this by dropping callCl'a.-: completely and limiting l1is proof to typewriters, sporting goods and appliance.s (including electric shavers). Ioreover, Spalding sporting: goods ))ere dropped completely by him.

For convenience, these three product Jines covered at the reopcning ,Y111 be considered here in the six follo\\ing categol'ie, covering all 49 items: (1) .Westinghouse appliances. (2) .Wilson sporting goods. (3) Sunbeam appliances. (4) GE appliances. (5) Electric slmvers. (6) Type,writers. As ,,ill be immediately 5ho\yn: there. \', ere eliminatlons on :,,:,opening "it-hin the three merchandise line.s retained apart from the complete dropping of camera::: (1) \Vestinghouse items were reduced !rom 6" items (2 Ft. 'Wayne, 4 51ilwaukee) to 1 item, and said ite,m limited entirely to jUilwaukee. (2) There was no evidence as to ,Yilson sporting goods from Ft. ,Yayne, such evidence (19 items) being limited to lilwaukce. (3) As to Sunbeam appliances only 5 items were covered in both of the two cities, although 10 items in "n. (4) As to GE appliances, only 3 items were covered in both of the two cities, aHhough 9 items "ere covered in all. (5) A.s to electric shflvers, only 2 items were c.covered in both cities, nnd only 3 items in all. (6) As to typewriters, there was a shmving as to 5 items as to both cities, and 7 items as to all ::loreo1,er, on reopening, counsel1argely continued with his original policy of one ,vitness per item of merchandise pel' city, except that he produced two or three witnesses for typewriters and sllavers. flowever as will Le shown below, he did definitely adduce testimony as to the. competitiveness of the retail prices testified to, in respect to the various items.

As to number of witnesses the situation is as follows: (1) As to Westinghouse appliances, there was one Milwaukee witness as to the one item (also testified to at the original hearing H ). (2) As tQ ,Vilson sporting goods, one )filwaukee witness testified as to 15 items (also testified to at the original hearing) as well as to 4 new items. (3) As to Sunbeam appliances, there was one witness from Ft. "\Vayne to 6 items (1 of them testified to originally) and one witness from Milwaukee as to 10 items (8 testified to originally). (4) As to GE appliances, there ,,-as one witness froln Ft. \Yayne on 5 items (2 testified to originally) and one from :Milwaukee on 7 items (4 test.i- "'Perhaps this should be 5 (with corresponding reduction in toe figures in IJlrenthesis). la ' f' witness horn the same city. Same (2) through (6), of this paragraph as to parenthetical material.

.:

CONTIXEKTAL PRODUCTS ) INC. , ET AL. 385 361 Initial Decision fied to originally). (6) As to electric shavers, there were two witnesses from Ft. 'Wayne as to 2 items (both testified to originally) and three witnesses from :\lilwallkee as to a11 3 items (a11 testified to originally). R.respondents apparently regard the number of witnesses in respect to shavers as respectable. (6) As to typewriters, there were two witnesses from Ft. 'Wayne and three from Milwaukee (a11 items testified to originally except one in each of two cities), with testimony from both cities as to 5 of the 7 items. Respondents apparently again regard the number or witnesses as respectable and there is no doubt that the typewriter evidence is the most substantial offered by complaint counsel.

:K ot only was complaint counsel's evidence on reopening limited to bvo cities, rather than three, but there was very little coverage of the actual.1 trade areas including suburbs. The witnesses came rrom the city area proper or each or the two cities. Complaint counsel himself care!ll11y adduced from them testimony that the trade areas Jar each city range from 20 or 25 miles to from 40 to 50 miles from each or the two cities (Tr. 725- , 756, 780 856: 16, 912: 11 986: 13 1031: 4).

:Moreover, the retail witnesses wit,h hardly any exception came from the very center of each or the two cities and the downtmvn shopping area-not from suburbs, the outlying areas, or the towns and vilJages comprehended in the trade areas as defined in their testimony. R.respondents' counsel was assiduous in adducing testimony 011 crossexamination as to the existence of many retailers of the particular items other than those who testified to them. This testimony was adduced on all six categories, although not too strongly on typewriters. The testimony covers app1ianc.es, to wit, 'Vestinghouse, Sunbeam and GE appliances (Tr. 621- , 658, 766- , 871-2), electric shavers (Tr. 538 621- 828-9), 'Wilson sporting goods (Tr. 599-601), and typewriters (Tr. 532, 081-2). There is litte doubt about the multitude of retail outlets. Appliances, including electric shavers, and even typewriters to some extent, can be bought in drug stores, and sporting goods need not be bought in sporting goods stores. Ioreover, all the 49 items can be bought outside the city limits of Milwaukee and Ft. 1Vayne, the two cit.ies concerned.

T11e retail witnesses had little, and nothing specific, to say about prices in outlying parts of the full trade area. At least four witnesses one from the large Ft. "'Vayne department store, expressly stated that they lmew nothing about prices in outlying districts (Tr. 876: 20-25; 036: 14-17; 1000: 7-10; 1039: 15-18). One from price-vigilant Gimbels, Milwaukee, admitted that the store s basic shopping is confined 386 FEDERAL TRADE CO :TMISSION DECISIO::S lnital Decision 65 F.

to the la.rge stores ('fl'. 762.: 1-4), and "although we flre aJl over town he said, "it ,\"uld be impossible to have somebody in every place all the time" (Tr. 762-3). The witness from thc Ft. Wayne large store said that in comparing the store s prices he was basically thinking or department stores such as we are ('11'. 831: 24; 882. : 13 j 8:33: 23). l'1:moreover, although respondents' counsel does not make a point of this, there is no evidence of the total dollar or total unit amount of the sales of any item by a retailer in the area, however defined, nor or the total clol1ar or unit amount of all retailers selling an item in the area at about the same price, nor of the total dollar or unit amount of all retail sales in the area of an item. Nor ,,as there any other evidence, except here and thore, on which one might determine even an approximate percentage relationship of sales at a retaDer s price to all sa.les of the Hem in the area.

Respondents' counsel docs argue strongly against the quality of the retail price testimony on reopening, and contends that the testimony does not differ much from the kind offered at the original presentation \vhieh showed merely the price at which one retailer sells an item even considering 8J1S\,ers e.licitec1 by complaint counsel that prices were determined by "competition, or that they were " competitive:' on the basis of shopping or reading advertisements. A meticulous analysis of the evidence, which "Will be made below, sustains this argument. The examiner "Will now discuss further, and decide specifically, the various points indicated above relating to the te,chnicaJ suffciency of the local area evidence.

U'lW1'ical Q'ullntity of Evidence First, the facts as to number of items and of lines of merchandise have been fully set forth ahove.

As to numher of items, respondents' position logically is that even the ent:re 49 items presented on rehearing would not be "many:' within the meaning of the complaint, Six. The examiner does not agree. The total number of items advertised in the catalog is not cont.rolling. A violation 'as to 49 items, and even less than 49 items, is a violat.ion as to "man:i' items. How many is " mani' is indeed a vexatious question. But considering that these are national brand items, in great demand and well known in our economy, 49 should definitely be regarded as many, particularly in proceedings designed to protect both competitors and consumers. l\ioreover, since they are national brand it.ems, it can easily be assumed that the violation practice probably extends to all or most of the fifty national brands admittedly featured by the catalog, embracing fl, countless 11lunber of items. The possible a,ssumption is iudulged in here only to illustrate the adequacy of 49 items, or even CONTr: mNTAL PRODUCTS , e,Tc. , ET AL. 387 361 Initial Decision less, for purposes of proof. It a.lo must be recognized thflt there are 80m8 praeticallimitations a8 to proof in respect to Dnmber of Hems and there must be a rule of reason. J\1oreoyer, if 49 are regarded as too few, 149 or 549 might also be regarded in the same- way. Nevertheless, inasmuch as complaint counsel originaDy undertook to prove a substantially brgcr number, selected from a stijj larger nwnber, the examiner cannot say that he is over-impressed by evidence of 49 at a maximum.

As to the number of merchandise lines presented at the reopening, and comprehended within the 49 items, the e.examiner is even less impressed, and is inclined to rule that the presentation is insuffcient by reason of insuffcient coverage of the various lines of merchandise. Only three of the six merchandise lines named in the complaint by the Commission, and presumably supporting its finding therein of suffcient public interest, are covered in the proof. An important brand like Spalding sporting goods is dropped completely, and proof as to 1Vilson sporting goods is confined to one city. Proof of 1Vestinghouse appliances is reduced to one item in one city. Complaint counsel not only fails to meet f,Ulldards of proof at least indicated in the complaint b); thc Commis ion, but. he fails even to me-et his own standards of proof indicated by him, a Commission attorney, in his original presentation.

There is also respondent' s further contention that., even if the nmnbel' of merc1uLldise items ancllines might in some sense be regarded as suffcient, nevertheless they are not representative of respondents entire operation." It is urged that there ,vas no showing as to randOln sclection and typicalit.y of items; that, indcod, they were national brand items exclusively and the most competitive items; and tllat most of respondents' business is in small communitics. The examiner rejects this contention. There is nothing in the complaint which requires the it.ems of merchandise to be representative desirable as it is that they should be. Moreover, as national br nd items they are representative, even if they are highly competit.ive. If, indeed most of respondents' business is in small communities, that does not excuse violations in larger communities, nor can it be held that competitive conditions are necessarily different in, say, the Ft. 1Vaync area than in smaller.r communities.

Secondly as to number of ,vitnesscs, the facts have also been fully set forth fL'bove. The examiner holds that the gcnerallimitation herein 17 In tllis connection respondents' counsel also points out tl111t, according to 1!'. Grawoig tcstirnon:r, the totr,l volume of Continental's sales in commerce' of an 49 items was I.JO OOO a yNIl" (Tr. 1428: 18), as against total sales in cornITCl'Ce of about $10 000 000. 388 FEDERAL TRADE COMMISSIOK DECISIONS Initial Decision 65 P.

of one retailer yritness to establish retail price, except for shavers and typewriters, serves to negate the value of the testimony, and does not accord with the kind of proof generally found acceptable in analogous cases. This is not because it is theoretiral1y impossible to prove by one retailer ",'itness that a list price is in excess of the price at which the merchandise is generally sold, presumably at or about the retailer price, but because it is so unlikely that it can be so proved. As will be shown below the testimony of witnesses herein was not too much more than what their own prices ,were, together vlith those of some of their competitors.

Full Trade Area Not Co.'ered Thirdly, not only are only two cities covered of the three originally presented, but, more importantly, there is no coverage of the actual trade. areas, including extensive suburbs as defined by the witnesses. Moreover, the proof submitted was supplied almost exclusively by retailers from the heart of each cit.y.

The most favorable conclusion, and the examiner is willing to make , is that, so far a.s concerns area, there ,yas suffcient proof as to the two cities, l\filwRllkce and Ft. ,;y aync, limited, however, to their st.rict geographical boundaries.

I-In,ving himself defined the trade areas through his own witnesses complaint cOllnsel should be bound by the definition. J-Iowever, the examiner docs not agree with respondents' counsel that two areas are not enough. The complaint does not speak of "mally ' areas or cities. A violation in a single trade area might, under proper circumstances, be, suffcient basis for establishing a violation and supporting a cease and desist order. Here 'Y8 have one fairly large and one small city. As already indicated, it is no defense here that respondents may be doing most of their business in smaller communities 15 although this may bear on the issue of public interest. Comparable competitive and pric ing conditions may well exist in smaller c.onn111mities. Furthermore, as pointed out above, no evidence has been supplied on which a determination Ina,y be made as to percentage re.1ationship of sales in the trade area-at or about the price testified to for an item-to total retail sales of the item in the area. The importance of such evidence is indicated in 81m Gold Indu8tJ'ie8 56 F. C. 1368, 1371 (1960). In the examiner s opinion the absence.e of the evidence is definitely fatal in the case at bar since the trade area is held to be the city plus suburbs, and the proof, whatever it is, essentially relates to the city area proper.

H SlOe l\fatter of Baltimore Luggage Comply1 IJ, 96 F. 2d GOS (4th Cir., 1961), affnning FTC Dockel: No. 7683.

, CONTINENTAL PRODUCTS , INC. , ET AL. 389 361 Initial Decision P"u;e Evidence QuaUtath'ely Insufficient Fourthly, there is the question of qualitative suffciency. The examiner rejects the retail price testimony as a.ffording a, reliahJe basis qualitatively for determining that respondents Retail" prices, or the identical manufacturers' list prices, were in excess of the prices at which the merchandise sold (even assuming the testimony covers the full trade area,s).

The testimony consists la.rgely of the particular retailer s own prices much as the testimony at the original hearing, except that in varying degrees it sho\\'s that the prices ,were in a general ,yay determined eompetitively" or by "competit.on." The strongest, or least unsubstan tial, of all this testimony is that in relation to the prices of 8i11bels- Schuster: :Milwaukee, but. this too is insuffcient. l\luch of the testinlony is from discount houses, ,which of itself is not invalidating, to be. sure but the testimony ImrcUy relates to the prices of other retailers generally.

In order to substantiate the qualitative suffciency of this "competitive" evidence as to prices, complaint counsel in his ansi\ering submission cites truly large number of page references in the record. In deference to counsel's earnestness, and in the interest of n complete factual foundation for making a determination, the examiner has conlpiled, mostly by quotation, all of the pertinent testimony on the cited pages, and some additional pages as well. The compilation, which is complete and definitive, is as follo1\s:

Gimbels (SchusteTS) Milwaukee. Leltding department store, :\1i- ,nLUkee. Their prices of appliances, set "by what is going on in the particular llmrkeC' (1'1'. 725: 13). "* ,!: somebody would advertise something in the nel1spaper. That is the price we ,\'ould put on it, or through our shoppers we ,"ould put the price on whatever the market is selling the thing for" (725 :18). IYhat determines your prices? ,Vell, competition entirely. In other words, \1e ,base our prices on what other people sen their things for. I am talking about department stores and other stores in the "Iilwaukee area. " (753 :10) As to sman appliances we also hane shoppers that go out and shop competition * * * we are jumping around with prices all the t.ime.:' (753: 22) "* '" * we will shop in :Milwaukee discount houses, we win shop other department stores, we win shop people that are near us. " (754 :11) YIost of the time we would meet thc price. " (7;) :19) VV11at determined your prices on electric appliances? "'" : * we did periodic shopping * * , making tours of the different competitors * * * (780: -)) V C "meet all of the prices that were sold in a similar type store in the city itself." (780: 9) , ;;: :: , 390 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 65 F.'r.

TI olj De88auer Fort Wayne. Large department store. How do you set your prices for electric razors? "Primarily the competitive position v:within the town." (824: 23) How do you ascertain other prices: \'ith an ad., competitive ad. or something of that nature: * or a price suggested as what will be the going price from sale.smen covering our territory." (825: 2) when you talk about meeting competition, are you talking about other department. stores? Yes, sir. (830: 2) Are prices of non-department stores the 2ame as yonrs? "'i, '" ell, we do competitive shopping from time to time, ':' they arc approximately the same or slightly higher. " (830: 0) Do you hop drug st.ores and hardware stores 1 N at as often as we would the department stores.:: (830: 10) ,Yhat determines your competitive price ' Through my personal shopping and through other c.ompetition advertiser,, " (855: 24) Principal competitors are Stillman s Department Store and the Haag Drug Store. But "'llyone who sells small a,ppliances has to be a competitor. " (856: 24) ",Ye check the variety stores chain stores, drug stores, plus other department stores in our area and the discount stores." (857: 5) 'Whose advertisements do you check? "Anyone .who advertises like merchandise that I am carrying. (857:11) Erlien Sons, Inc. Milwaukee. Iainly jewelry; typewriters and razors only 1 % of their business (892: 12) ; five employees (891: 11). How do you determine your prices of typewriters and razors 1 "well we go according to what the competition sells it for." (890: 9) How do you ascertain this ",Veil, we check prices in stores, catalogs and newspapers. " IVho is your competition 1 "Mainly department stores right now aud the catalogs." (890: 17) How do thc prices of competitors compare "Sometimes they are higher and sometimes they are lower, depending on the sale conditions and deals and so forth. (890: 21) Does any other type of business compete with you as to type"\yriters? '"IV ell, there is the discount stores now. :: (891: 17) Do you meet their prices 1 "Yes, I do." He does not know what percentage of the typewriter business is handled by the depal' tment stores (892: 7-9), or by hi3 store and major competitors. (892: 17-20) Do you ever do any store to store personal Sa,turda,y shopping'. " Occasionally." (892: 23) A couple of dozen stores handle typewriters. (893: 2) Do you shop all ofthem 1 "No."IVhy not! "I don t have the time." (893: (i) Do they all advertise? "I don t believe so." How many competitors do you have as to Remington shavers 1 "That I could not honestly answer because the shavers are h,mdled in all the drug stores and all over, so I wouldn' know exactly." (893: 15) "I know that Remington shavers are sold in drllg stores nnrl some c.clothing stores and I knmy t.hat they never meet , ? :: , : : ( , : , ;:: CONTINENTAL PRODUCTS INC; , ET AL. 391 561 Initial Decision the prices like some of the other stores do." (894: 14) They charge higher prices? Yes the smaller dealers usually charge higher prices ,', ,," (89'1: QO) Did you Bver lower your prices, on shavers and typewriters, to meet those of the large department stores? "Yes, sir, (908: 8 15) Needha/in s Type'tDTite1' C01npany, Fort ,Vayne. ,Yhat determines " (911: Q4) How doyour prices? "I would say basically competition. you determine competition? "In Fort 'Wayne this is not too diffcult; we even have an association '" , " not that we fix prices, but just everybody knows what everybody else sells for" (912: 1) 'What is your competition? "In Fort 'Wayne, typewriter stores, Sears & Roebuck department store, one probably, I would say basically that's competition." (912: Ii) How about the trading area? " , boy * * uearly every small town of approximately 5000 or over wil have a typ81uiter store ," ' ' *," (9H: QQ) In Fort 'Wayne propel' , a dealer is apt to handle only one type of type-writer everybody doesn t have every franchise." (913: 14-19) Are your prices on portable typewriters based on competition of typewriter stores ' I would say that I do not shop these stores basically" (914:24), but "I base my prices on portable typewriters with the knowledge in catalogs "which is an we see in Ft. \Vayne, there being no what we call discount houses that handle type"vriters :: ;:, ':: TIe would base our prices on being $10, 515 higher than a. catalog would offer the same machine at, roughly, because we feel that we have a little more to offer than they do. That' s all. I don pay too much attention to what other people are selling at, to be honest with you " (015: 1 10) "People will come in and Hop the page clown out of it catalog in front of us and say ' I can bl1Y it for t.his price; what'll you do.''' (917: 7) A?,t Andel'on ""ilwaukee. A discount house (978: 7 1O). How do you fix your price for razors? "\Vell, I usually establish what the going price is for the average ':: discount house that is in the competition area. " (941: 9) "I would sen them at just about their price or a little less. : (941: 14) "I alw!l,Ys charge maybe two or three per cent less than the going price in the area. : (941: :23) How do you ascertain this going price, I could, by looking at our catalog, like we have many catalogs in :Milwaukee, at department stores ::: and j list by general shopping around with other places of business that were similm' to me in nature. " (942: 3) "And advertisements in the newspapers." (943: 5) How did you determine your prices for typewriters? "I just looked at the individual catalogs and I charged them to 65 less than what the catalogs did" (944: 6) Were catalog companies your biggest competition? willey were my biggest competition yes." (944: 15) "Wen, I would say any catalog that came into the :

Initial Decision 65 F.

industry of Milwaukee was a competitor. " (945: 5) "I received Continental, but there were several others " (945: 21)-including Majestic (946: 7) . I would scan any catalog I had that was available, in imme. diate hand-reach" (948: 17), "because they all had basically the same wholcsalea.nd retail price in t.here." (948: 23) 'Were YOllr prices higher or lov.. er than Er1icn s? "Sometimes he wa.s higher and sometimes he was Jower." (977:25) Rom Je' well1' :\fiJwaukee. SeJJs portable typewriters. How do you determine YOllr prices? ",Vell, my competitors' prices in the downtown a.l'e, a were established, and then I \"Quld set my prices accordingly. (1011: 11) His competitors WCle catalog' hO\lses (1011: 19) and retaij establishments, mainly department stores (1011: 22.). \Were offce supply places compet.itors? "1 never cheeked into them. I never \\ol'riec1 about those places." (1011: 24) He keeps ajj the cahtJogs at his store (1012: 24), including' tlutt of .MiJJway and General :\Ierchandise but not Continental, although hc has heard of it. (1012: 10 , 14 , 19) If a customer quoted a catalog price the lower or coded price (1014: 2, 8) "you wouJdllmve to fact in Ene \with that particular price (1013: 16) and usually seJl "pennies below" thc price (1014: 12). Hc might also read a Gimbcls advertisement on shavers (1015: 6), o'r a customer might quote him an alleged Gimbels price on typewriters (1015: 12-15). What type of stores in Milwaukee sell typewriters? lVell, I would say, rnainly your * : '" department store. " (1015: 18) Deu;ey Sporting Goods 001npany, :Milwaukee. I-Iow do yon determine your prices? '"",Yell, we clet.ermine our prices by the competition. (1069: 20) ,Vhat is your competition? ",VeJl, our main competition is from these socalled discount houses, and discount catalog houses. (1069: 22) How about sporting goods compauies? ",VeJl, we have to compete with tU1em; if they adycrtise a certain price, we try to be within striking distance of it." (1070: 22) How many retail outlets for sporting goods are there "in :Milwaukee 'Yen, including small ones * * * maybe 25 or 30." (1071: 3) How do you determine your competitors' prices? " ,Ve hath shop them and we also watch their advertising aud check their catalog prices." (1071: 20) How much of the sporting goods business does your company and two Qlther companies (mUled) 'have of "Milwaukee trade area" business? "I would say around a third." (1072: 8) The discount houses and catalog houses lmve most of the balance (1072: 15), smaller stores having the rest. In competing \\ith catalogs he uses the lower or coded price (1074:4) ,wd charged "a Ettie lower" (1074:9). Customers "constantly" (1075: 9) bring up the catalog prices. As for the catalogs that a.lso "use them in conjunction with shopping some of the other stores" (1075: 22). The eat:aJogs they use have the same spotting , COKTINEKTAL PRODUCTS, INC. , ET AL. 393 361 Initial Decision merchandise and practically the same coded prices (1076: 16), but he has never seen Continental.

III WHOLESALE" PIUCES Respondents ceased using the "wholesale:: representations commencing midsummer 1961. R.epeated assurances have been given that they re \Tilling to bind themseh-es not to use them, for instance, at Dhe prehearing conference ('II'. 34: 20), and in Ir. Gra\Yoig s testimony (Tr. 1412: 12-14). N evertheJcss, respondent's counsel contends in his main submissions (see p. 47) herein N1at there is not suffcient proof to sustain the allegat.ions of the complaint as to the "wholesale representations, or to support a cease and desist order in connection therewith.

The lJertinent parts of the compla.int as to the use of the word wholesale" may be completely summarized as follows: Complaint, Four, quotes bhe references in the catalog to "wholesale cata.log lowest wholesale prices, and to "coded price respondents: actual retail selling price described in the catalog as "wholesale" (Five, first sentence.

Five also a.alleges that by means of such statements a.nd pricing methods respondents represent:

that they are wholesaler.s who sell a11 of their merchandise at wholesale prices; that the socal1ed coded prices, at \ybich the merchalldi e is offered for sale, are wholesale prices;

and Six alleges that this is misleading for the iollowing reason: In truth and in fact, respondents do not sell, or offer to sc11 , all of their merchandise at ,,,wholesale prices. To the contrary, the prices of many of their articles of merchandise are in excess of ,,-wholesale prices and the said coded prices of such articles are not wholesale prices but are in excess thereof. (Our emphasis. The following observations may be made as to these allegations in the complaint:

(1) There is no reference to areas, trade areas, or other bonndse. in conncetion with wllOlesale prices.

(2) The deception according to the first sentence of Six is that respondents do not sell their merchandise at wholesale. The deception according to the second sentence of Six is that the prices are "in excess of" wholesale prices. As will be set forth below, the examiner holds that for all practical purposes, so far as concerns ultimate consumers their not ohtftining the merchandise at wholesale (first sentence) is the same thing as ha.yillg to pay "in excess of: wholesale prices (second sentence) .

313-121--70-- 394 FEDERAL TRADE CO IMISSIOX DECISIONS Initial Decision 65 F.

un Six (second sentence) also alleges a. deception in respect to many items of merchandise, 30 that complaint COlllSe!'S proof must comprehend " many:' items.

Compla.int counsel produced his suppljer \\witnesses, as to wholesale prices, at the original prcsenta.tion-.the reopening being reserved, of course, for retail items. Accordingly, complaint. coullseFs proof as to wholesale prices did not go through any such process of reduction as took place 'with retail items, lines, or areas. Compl"int counsel devotes his ::in(h Propo,.ed Finding to the Iyholesale aspects of the complaints charges: (1)1-1e recit.es no areas in his proposed finding but in his comment thereon mentions the "areas of Illinois, Indiana. and "\Viseonsin where he refers to the testimony of wholesalers called by him as to their wholesale prices for items in the catalog. These state areas would include, of course, all three cities brought into this ca J\IihnLlkec Fort ,V yne, and Gary together with (their suburbs. (2) Comphint counsel ftclopts, in his Ninth Proposed Finding, the above quoted wording of the complaint, Six: but combines both sentences together.

(3) By adopting the wording of Six in his proposed finding, including it.s reference to " many" items, he recognizes his burden of wholesale proof as to "many" items, but of course no greater burden and he contends that he has met this burden. 1-Ie introduced evidence.e as to 80 items.

o are charged Tho supplier witnesses testified that the same prices by (their firms to all dealers, irrespective of the possibility that they Hiay be wholesalers, except that Eastman l\:odak gives a standard and modest quantity low net price to certified ,yholesalel's irrespecti \' of quantity (R. 193:25), and except that, although not testiied (0 Royal :McBee ma.y do the sam€ ,with its special wholesalers covering the R.ocky 1ountain area found not feasible 01' profitable to cover directly. (Tr. 169 :11-18) The supplier witnesoos, moreover, genendly defined a dealer as a retailer selling to ultimate consumers, and referred1 to Contincnta.l as it dealer. The suppliers represented by these witnesses in this particular testimony are Remington Rand (1'1' 136:6; 138 :22) ; Royal McDee (158 :5, 23) ; Eastman Kochtk (193 :3; 193 :14) : Spalding (221: 19, 22) : :J This revised llumber, 90, as pci. stipulation of counsel, June 13, 19G3. ''Typcwriters ('Ir. 139:6; 161 :20 25: 17T,:4-12)- Cameflls (Tr. 193ff, Eastman: 327 :18-21, Bell &. Howell)-Sporting goods (E. 223 :8, Spalding; 275, Wilson)-Appjianees (R. 47.J :21, Westinghouse: 499 :23, GE).

__ _ .._ . _ , CONTIXEK'rALPRODUCTS , IXC. ) ET AL. 395 SOl Initial Decision also, although not selling " to Conlinental, ,,' eotinghouse (471 :20) and GE (493 :8).

The suppliers represented by these witnosses are the manufacturers except as to General Electric (Tr. 4D8 :fj) and ,Ycsting-house (Tr. 470ft) they are wholly owned subsidiaries of the manufacturers. All these suppliers do their own distributing to retail dealers with the two lTRin exceptions alluded to above: Eastman l(odak seDs to certified wholesalers wholesale drug houses and 'ivholesale photo iinishers (Tr. 193 :14), and most drug ::stores buy through such inter mediate SOUTee (Tr. 197 :9). Royal IcBee, a rather lesser exception sells its typewriters (portable) to wholesalel'.' in Hocky l\Iount.ain area it finds not feasible or profitable not to coyer directly ('11' 1GD :11-18). There are also other exceptions: Smith Corona sells to dealers ome of whom apparently resell to retailers regularly (Tr. 184:16 1) and o:r course, a.ll suppliers sell to dealers who 1/W:l/ rsell to ToCtailers. COlnplaint counsel has presented a c1wrt cf the prices tc:-tifiec1 to by the suppliers. The chart has not been objected to by the respondents although ample opportunity has been afforded to them, and it is incorporated in this decision, although somclvhat rearranged for COllvel1ence.

Taonlation of Wholesale pJ'ice Testimony CX8 1901 196 catalog Coded page pnce Actual Hee. Actual Rec. I1rice page price page SPORTL.\"G Goons \Yilson s Sporting Goods:

Otto Graham rootbalL..-- 516 276 Footballhelmet_ 510 '277 2.7 FootbaUsl1ocs (low)- 51G '277 275 Football shoes (bigh)_._ 516 lio 277 2iJ '278 V. Leather basketball- 517 14, 10. 10. 278 Top notch basketball - 517 14. 4\J 10. 278 10. 219 Harvey Kuenn glo.c- - 518 6\) 10. 279.---- Nelson Foxglove- 518 17. 15. 219 13. 279 :'I'jckey Vernon glove- - 518 8. 8 280 280 Harwick flght racket. - 521 281 281 Zephyr racket._. - 521 281 282 Jaek Kramer pro racket.- 521 11.99 282 Sam Snead Blue Rid e a Woods- - 528 30. 20. 282 20. 282 Sam Snead Blue Ridge 8 Irons.-- 528 55. 37. 282 37. 283 Sam Snead Blue Ridge 6lrOll.--_ .528 41. '27 21! 27. 283 attyBerg3Wood:L_._ 528 30. O. 70 281 20. 284 Patty Berg 2 Woodsmu 528 19. 13, 284 13. 284 PmtyBerg 6 Irons_ 528 41.89 27, \10 284 27. 235 Sam Snead ChalJpionship 4 Woods-- 529 57. 40, 28;; 40. 2S6 Sarn Snead Championship 3 \Voods-- 529 43. 30. 286 aD. 286 Sam Snead Championship 8Iron8____ 529 79. 56, 280 56. 286 Sam Snead Signature 4 WOOd8_ 529 77, 52. 286 52. '287 Said Sl:ead SJgnature 8lrOI1-- 529 107, 72. 287 72. SamSncadWedg8-- 029 287 288 Hol-Higolfballs (dozcn)_ 530 (1. 288 21 The record indicates merely that these particular subs!lliaries of GE and Westinghouse do not supply Coutinental.

.___..__ .___ . _._____. __..__. .._. _____. . . . ;j:!\j,. 396 FEDERAL TRADE COM:\ISSIOX DECISIONS Initial Decision 6ri F, Tabulation of Wholesale P.rice Testi11'ony-Continued eX8 J861 1952 catalog Coded page pnce Actual Rec. Actual Hec. price page prce page SPORTJ G GOODs-continued spa ifn 516 222 222 John Arnett Jr. football_ 516 222 223 John Ullitas shoulder pads----_----------- SIr, 223 223 Ii:!" l' ro-bilt" basketball 51, 223 224 Speed win" basketball- 517 11.29 224 224 Davis cup racket._ ---------_u_- 'i21 15. IO. 225 IO. 2CJ 225 GOl1zales signature racket--_ 521 DiJ 225 225 Walter Burkemo 4 Woods- - - 529 33. 20. 0,; 225 20. 225 Walter BUIkem03\\'oods--- 529 :;. 35 IS. 226 18, 22G Walter Burkemo 2 Woods--_ S29 16, . 50 226 12. 126 WetHer Burkemo 8 Irons- 529 45, 34. 226 34. :!25 Walter Burkerno 5 Irons- 29. :;1.75 2:16 21.75 22G Walter Burkemo Wedgc-- 529 fL59 227 227 Walter Burkemo Putter -- 529 227 227 :Fay Crocker 3 \Voods_ 529 25. 18.75 227 18, 227 Fay Crocker 2 \Voo\1s_ 529 16, 12. 227 J2. 2'2 lY Crocker 7 Irons_ 529 40. 30. 227 30. 228 Fay Crocker 5Irons 529 ;;9. 21.75 228 21. 228 TYPEWRITERS Remington typewriters:

QUlet-nter_- 286 106. 78, 137 72. , 138 J.lonarc!L_ 286 79. 55. 138 59. 138 Ro:yaltypewriters:

Royalite__ 286 49, 9.' 39. 158 43. 159 Futura 80Q-- 286 lQ9. 88. 162 88. J03 Smith-Corona typewriters:

Sterling-- 28i 76. 59. 174 52. Skywriter_ 2S7 59. 4G. 175 48. 175 Galaxy.__ 287 109. 85. 176 85. 176 Pacemaker_ 287 149. 113. 178 113. 178 CI. JER.-S Eastman-Kodnk cameras' )'Iotor:natic_ 87. 73. J94 i3. j94 Retir.aRetJex_ ::138 199. 9() itis. 175. 20lJ Electric Eyc- 268 72. 59. 199 59. Jgg Retir:a Automatic IIL_ :!(jS jQ3. 86. 200 93. 200 504Projector_u--__----------- 271 75, (1) 66. 201 66, 20J Zoom 8 Reflex 15g. 143. 201 Zooms8Ium_ 273 87. 73. 201 73. 202 Srmn Projector__ 277 99. 83. 20S 83. 208 nrownie 50Q" I'rojector_ 277 74. !Jij (i1.43 209 61. 2m) Brownie " AIS" l'ro!ector_ 277 47. 33. 2QS 33. 209 BellInfallble& lI(1wellElectriccnmerns'Eyc- --_u_ 46. 34. 326 326 Duo-Power ;.oomatic (spool Joad)--_ 272 199. 151. 32G 145. 326 Duo-Power Zoomatic (magazineload)- 272 221.46 174. 4!J 327 158. 327 8:m Zoomatie (spool)_ 273 176. 141. 327 135. 327 5mmZoomatie (magazine)-- 193. 149. 328 155. 328 8mmZoom- 273 91.96 73. 328 i3. 328 8= Lumina ZOOil_ 276 155. 117. 329 l€mmcamera.__--_--------.-----. 277 289, 233. 329 233, 323 APPL:A1'CES Westinghouse appliances.

Spin jet cleaneL--.u.._----- 350 52. 51.95 481 51.95 482 :;lobile clcaner 350 49, 48. 482 48. 482 10 Quartroaster 374 36. 34. 483 35. 483 General Electric appliances:

Antomatiegril-waffer 372 16, 490 Hi. 77 490 2speed blender_ 377 29. 5fJ 27. 491 27. 491 Sl1arpener_ 378 14. 13. 492 13. 9 cup stainless coffeemaker 380 23. 2237 493 22. 493 Peck-a-brew- u-- --_u- 380 14. 13. 494 13. 494 Toast- oven-- 383 25. 24. 495 24. 49, Portablcmixer 384 14, 13. !J7 496 13. 495 COKTI TAL PRODL"CTS , I:\C. , ET AL. 397 361 Initial Dedsion The following may be stated generally as to the submissions of the respondents' counsel in respect to the proof as to the " Vholesale" representations: (1) No point seems to be made by him that area coverage as such is insuffcient. (2) The contention is made that the proof is insuffcient to show that respondents ' coded prices (i. their actual retail prices) have been in excess of all wholesale prices. (3) J'o point as such seems to be made that the number of items covered are not many for the purpose of wholesale proof. Accordingly, the only one of these three points to be resolved is (2), whether the proof is suffcient to show the coded prices are in excess of wholesale prices, or all wholesale prices. Respondents' counsel attacks this proof mainly because of the instances in which the supplier represented by the witness as only one of the suppliers (or wholesalers) to retaiJcrs. For instance, he stresses that the witness for GE and the witness for 'IV estinghouse " each testified that the wholly owned distributor company represented by him was only one of such distributing companies for the parent company. But the \Vestinghouse witness, after testifying to competition with other distributing companies of \Vestinghouse (476 :14), testified that the prices he had testified to for his company were the ';lnaximum prices" charged (477:G). And the GE witness testified that his was "the only company-owned distribution in this area." (Tr. 498 :25) The examiner accordingly is not swayed by the argument as to GE and 'Vestinghouse distribution. Respondents' counsel similarly stresses the sale by Eastman Kodak to wholesale drug houses and photo-finishers, through which the majority of drug stores get their merchandise. The examiner regards this a substantial factor to be considered-however, not too substantial since drug stores obviously do not carry the variety or stock of a department or camera store.

Respondent.s' counsel also refers to Royal :McBee s ,vholesale customers. However, these are the customers in the Rocky Mountain areas not feasible or not profitable to coyer directly. These obviously do not concern the area involved in this ease, in the examiner Opl11lol1.

Respondents' counsel also refers, by record page reference, to those Smith Corona dealers who apparently resen to dealers as a regular practice. The evidence on this is hazy and without details, but the examiner believes that it presents something substantial to consider in respect to the wholesale price situation.

"Resrwndcnts ' counsel also makes the stiltement that the "'estinghouse price on f'llch item is identical with respondents' coded price. This statement appelHs to be incorrect. See chart.

398 FEDERAL TRADE COMMISSION DECISIO Initial Decision Gf! F.'l. Hespondents ' counsel also cites ir. Gra' oig s testinlOl1Y (Tl.'. 1424- , vary their prices ac-2G) that GE di; tributors, at least in Chicago cording to vcuiol1s conditions (Tr. 1,12. 5 :15). In the eX;1m111c1' 8 opinion an that this testimony can Support is the conclusion that GE Chicago distributors ( wholesalers) will cut prices, in other words, that their prices would be lower, presumably, than those testified to by the GE witness herein. As such, they do not anect the \vholesale p::ice question in this case. It has already been noted that the GE \"itnc'3s s company is the only company+owned distribution in the area considered. Respondents ' counsel also asked ir. Grawoig the leading (IUestion as to ,, whether the GE situation os above testified to him applied to "'Vestinghol1se, Sunbeam, Remington, Smith Corona.. ' :.11' Gra\voig 8,ll :m-er "Ye:;, it is very competitive" (1426 :19) can, of course, be gil/cn no special weight.

Respondents' counsel also points out that )10 retailer called by complaint counsel testified as to wholesale cost to him, \yhic.h is true. 110\vever, although such evidence 'would have been desirable, the examiner does not rega.rcl it as indispensable. Hespondents' counsel keeps reiterating that the catalog is primarily for retailers, 85 pel' cent of its business being \with retailers. The examiner rejects this cOInplctely unsupported c.onclusion, as he has already flll1y made clear in the earlier part of his decision under the subcaption A Retail Catalog.

.. review of a1J the pertinent evidence leads the examiner to the fo1Joy\ing conclusions:

(1) The proof is suffce:mt as to local areas the proof re.lating to Illinois, Indiana and "'isconsin comprehends the full trade areas of , Grrater l\Iihvaukee, Fort '\Va.yne and Gary, with suburbs, here. (2) A finding is fully warranted, generally, that respondents do not sen to ultimate c.onsumers at wholesale prices, but at prices in excess of wholesale prices. The examiner holds that the meaning of wholesale price to a consumer is the price at which retailers regularly purchase an item in the area. As to the allegation in the second sentenee of Six of the complaint, that respondents' prices are " in excess of whole sale prices\ the examiner holds that this is simply (t more precise way, or another way, of stating, as the first sentence docs, that respondents do not sen "at wholesale prices." The consumer, told that he is obtain ing a wholesale price, expects to pay that price (what a retailer would have to pay), not in excess of it.

It is quite cjc"r on the evidence here that the price as to the bmnd items was generally uniform to all retailers, including respondents and that generally retailers could buy the items of merchandise herein at the prices respondents paid. There are some product weaknesses COXTIXENTAL PRODUCTS , Il\C' J E'!' AL. 399 361 Initial Decision in the evidence, notably as to Eastman cameras sold to drug stores via intermediate wholesalers, but in respect to most of the products presented this evidence is suffcient.

(3) A finding is also justified that "many:: of the prices arc not wholesale prices but arc in excc.ss of wholesale prices. The items are certainly ';many" if regarded as represent.ative of other national brand items in the catalog like them.

Accordingly, it is found that respondents' representations to ultimate consumers as to ",,,holesaIc:' price and "wholesale catalog ' have been proved 10 he false, and that they violate the Jaw, as epitomized in the Guides Against Deceptive Pricing, October 2, 1958, Par. VII , expressly pertaining by its wording to a whole.sale" IJrice, or other such expression, which represents or implies that the consuming public can purchase the article at the same price that retailers regularly do, * " "' QUESTIOXS AS 1"0 AN ORDER Respondents request that if an order is issued against them its euective date be postponed so that they win not be subject thereto unless operators of comparable catalogs are subject to similar orders. This request may have substantial merit. An order against. respondents in effect prohibiting them from publishing fl. dual-price catalog while their catalog competitors do, may well put them out of business 01' othenyise subject them to irreparable injury while these catalog competitors simply take over their trade, or a large part of it. Of course as foullcUn this decision, respondents have been violating the law. But so far as concerns consumers they have not been an altogether pernicious influence, and their coded or actual retail prices are after lower than going retail prices, even though not atlording the full saving from their "Retail': or list prices. They operate a high grade catalog, with hjgh grade products, auording an excellent distribution system to those customers in remoter and smaller localities. Although their netaiF' prices are fictitious under the adjudicated cases, and therefore the savings represented from "HetaiI': prices arc false, nevertheless it is true that the public is beginning to pay less attention to .such list prices. For this and other reasons the postponement of the effective date of the order need not bear so adversely on consumers as it would otherwise.

110,,e\'er, the question of postponement of the cilective date of the order is for the Commission proper to pass on, rather than the exa.miner. The hearing examiner s order is not effective in any event until approved by t11e Commission.

400 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 65 F.

There may be 11 question as to whether the individual respondents should be named individually in any order herein issued, or merely as offcers of the corporation. 1-Iowever, they are not. only the offcers, but as the amn\"cr admits, they formulate, direct and control the corporation s policies, acts, and practices. Furthermore, they together own all the stock of the corporation, as the evidence shows. The five individual respondents are two brothers, a son of each of them, and the son-in-law of one (Tr. 1341 2). This is thus just a family corporation, making it at least reasonably possible that any order herein could be circumvented by a transfer of ownership to or in behalf the individuals. Under these circumstances, it seems reasonable that respondents should be restrained individually just as they would be if they were members of a partnership owning the business. As to the contents of the order there is the question as to whether its application should be limited to national brand products as was the proof, instead of applying to merchandise generally. The ex. aminer thinks not. The catalog is largely composed of national brand products, as proclaimed in its pages. The respondents do not ask for a limitation to national brand products, and it is doubtful that they would be any more pleased or relieved with such a limitation than without it. ::101'cover an order Ileed not be limited to the exact items, or exact kind of items, proved.

There is also the question as to whether the order should e,xtend to the use of the word "wholesale, since respondents have discontinued this practice and state they will not renew it. J1OIveve1', they discontinued the practice only in 1961, after direct investigation began, and in a publication which would continue for some time to operate as a vehicle of the misrepresentation. )loreover, although respondents have stated t.hat they would not rene\v the practice, in their submissions after the hearing they actively defend it. The question goes to the di,cretion of the Commission, and the examiner definitely believes that the order should extend to the use of the word "wholesale. " See Spencer Gifts, Inc. v. Federal Trade Commission 302 F. 2d 267, 8 (CA 3d 1962), where discontinuance took place even prior to investigation. The examiner s ultimate Findings of Fact follO'Y immediately. Except as contained therein or found above all proposed findings of fact are hereby elisal1owed. The non-finding or disallowance of a pro posed finding of fact does Dot necessarily mean that the fact has not been proved as a fact in the general sense.

The Conclusions of Law follow thereafter, and then the Order proper.

CONTI:\TENTAL PRODUCTS , INC. , ET AL. 401 361 Initial Decision If there are, any pending motions or other questions they are decided only as may be consistent with the decision herein. Any undetermined quotations from the catalog, i. , other than those set forth in the admissibiliy of the evidence.

Complaint counsel in his proposed findings follOivs the wording of the complaint "almost literally except that he breaks up the paragraphs and assigns additional numbers to them-and except that he substitutes quotations flotil the catalog, i. , other than those set forth in the complaint.

The exalniner, after some deliberation and considering the extent of the factual findings in the decision proper, has also decided to follow the "'fording of the complaint, with slight changes, including some additions to the catalog quotations set forth in the complaint. However, the examiner retains the same numbering as in the complaint, although in Arabic form.

In addition, the examiner has added supplementary findings or finding material after each of the numbered findings follo,,-ing the ,yarding of tl1C complaint, whercver he has deemed this appropriate. FINDINGS OF FACT 1. Respondent Continental Products, Inc., is a corporation organized, existing, and doing business under and by virtue of the hlWS of the State of Illinois, with its offce and principal place of businoos located at 2030 South Michigan Avenue, Chicago, Illinois. Respondents Garrison Grawoig, Allen Grawoig, Enrl1V. Grawoig, Richard K. Grawoig, aud Paul :Yr. Mayer are individuals and officers of the said corporate.e respondent. They formulate, direct and control the policies, acts, and practices 'Of said corporate respondent, including those hereinafter set out. The address of each individual respondent is the same as that of the corporate respondent. These individuals are all of the same family, including respondent Paul I. l\layer, by marriage, and together they own all of the stock of the corporation.

2. Respondents are now, and for some time last past ha,ve been, e11gaged in the advertising, offering for sale, sftJe and distribution of various articles of merchandise, including jel\elry, cameras, t)'pewriters: hardware, sporting goods and appliances, (1) to retailers for resale and to (2) individual members of the public. The thrust of the. proof herein is as to sales to indi\ i(hm1 members of the. public, that is, to individual consumers and to firms, organizainc1ividl1a.l consumers\ or permitting tions, 01' others purcl1asing for there themseln s to he used as a conduit for such purposes. I-Iowever, )j .. 402 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 65 F.

are sales to retailers, for instance, in remote areas, ,,,ho resell at retail to ultimate consumers. Such retailers pay respondents exactly the same price as ultimate consumers or those buying for ultimate consumers. There was no proof in this case, whether general or specific, as to prices of jewelry or hardware. The types of merchandise as to which there was any proof ''\c1'e in all instances rather wen-known national brands. Respondents feature well-known national brands in their catalogs and circulars, through which they advertise their merchandisc. 3. R.e.pondents now cause, and for some time last past have caused their said merchandise, when sold, to be shipped from their place of business in the State 'Of 111i11018 to purchasers thereof located in various other Stat.es of the United States, and maintain and at all times mentioned herein have maintained, a substantial COUfse of trade in said merchandise, in commerce a,s "commerce" is defined in the Federal Trade Commission Act.

4. Respondents, in the course and conduct of their business and for the purpose or inducing the purchase or their n1erchanc1ise, have advertised the same by means of catalogs and circulars disseminated by and through the United States mails to prospective purchasers located in various States other than the State of Illinois. Among and typical but not all inclusive, of the explanatory statements appearing in respondents' catalogs and circulars are the following: '" '" * a wholesale catalog '" * '" at the lowest wholesale prices * '* ii a great department store in a catalog ." .; '" general wholesale merchandise Prices shown are retail prices established by the manufacturer or recommcnded by 11S. Your cost is hidden in the stock numbers. Confidential-Your Xct Low Cost is Hidden in the Stock Number-Retail prices ':' have been suggested by the manufacturer as list prices for dealers who are buying for resale. You pay only the coded price. 26-9537-1356 .. '" * Retail 22.

, '" 'Ve are offering our customers the greatest collection of values ever compiled in the pages of wholesale catalog '" '" '" * '" * that the prices listed are as low or lower than any other wholesale catalog.

2. Wholesale only (CX 1, order blank).

In addition, the catalogs and circulars contain other materialwording, illustrations, and solicitations-clearly indicating that respondents deiinitely appeal to ultimate con,sumers and the like purchase from them at the coded pric-e, supposedly designed for retailers.

5. Respondents, for each article of merchandise described in their catalogs and circulars, set forth two prices; one a so- lled coded price and the other', a higher price, designated as "Het.il. " By means of such pricing methods and the aforesaid quoted statements, and others CONTI EXl'AL PRODUCTS, I , ET AL. 403 361 Initial Decision of like ilnport not specifically set out herein, re.spondents represent directly or by implication, that they are wholesalers who sell all of their merchandise at wholesale prices; that the so-called coded prices at ,which the merchandise is offered for sale, are wholesale prices; that the prices designated as "R.etail" are the prices at which the merchandise is usually and customarily sold at retail; and that the difference between the coded price and the "Retail" price represents savings from the usual,land customary retail price in the trade areas where the representations are made.

The "Retail" price stated is the very same aa the list price 01' snggested retail price of the manufacturer of each of the national bmnd items of merchandise involved herein.

The representation that the coded price, respondents' actual selling price to consumers, is -a "wholesale" price or that respondents, when selling to 01' for consumers, are wholesalers, is the less important part of this case. Respondents have discontinued this practice, although only after they definitely knew the Commission was investigating. , it is Trade areas where the representations are made" constitutes hereby found, most of the states of the Union wherever the catalogs 'and circuhrs are distributed. In particular, the "Retail" prices of the national brand products are, as hereby found, represented to be substantially the prevailing retail prices in all these states. 6. In truth and in fact, respondents do not sell, or offer to selJ , all of their merchandise at wholesale prices. To the contrary, the prices of many of their articles of merchandise are in excess of wholesale prices and the said coded prices of such articles are not wholesale prices but are in excess thereof. The price.s designated as "Rotair' prices, for many of their articles of merchandise, are not actual retail prices but in fact are in excess of the price or prices at which said mercha.ndise is generally sold at retail in the trade areas where such representations are made. The differences between respondents' said coded and "Retail" price do not represent savings from the generally prevailing retail price or prices. The statements and representations set out in paragraph 4, and the implications arising therefrom, a.re therefore false, misleading and deceptive.

That the coded prices are not wholesale prices, or what for consumers is pract.ically the same thing, that they are not in excess of wholesale prices, was proved herein by complaint c01lel by specific area evidence comprehending the full trade areas of :\lilwaukee, Fort 'Vaync, and Gary.

The allegations as to "Reta.il" prices were not technically proved by complaint counsel on such specific local area evidence. The actual local areas, as testified to by complaint counsel's witnesses, were not 404 FEDERAL Tnade COMMISSION DECISIO: initial Decision l):: F. cm-cred, only the city areas proper, and then minus Gary. Only 49 items were covered, on rehearing, largely by Olle "itness for each and with technically insuffcient proof in connection ,with actual pre- "Failing price.

However, the examiner finds, on certain testimony of complaint counsel s TIitncsses and particularly on the testimony of respondents chief expert witness, that respondents Hetail" prices are fictitious that they are not even intended or designed to represent actual prevailing prices, and that, absent a contrary showing from respondents the prices cannot possibly represent actual prevailing retaij prices in a11 the states involved.

7. At all times mentioned herein respondents have been and are in substantial competition, in commerce, with corporations, firms and individuals in thc sale of merchandise of the same general kind and nature as that sold by respondents.

8. The nse respondents of the aforementioned false, misleading and dece.ptive statements, representations and practices has had, and now has, the capacity and tendency to mislead and deceive a. substantial portion of the purchasing public into the erroneous a,nd mistaken beEef that such statements were, and are, true, and into the pnrcha.se of substantial qua,entities of respondents' products because of said mistaken and erroneous belief.

CLUSION OF L.&.\ The aforesaid acts and practices or respondents, as herein found were, and are, all to the prejudice and injury of the public and of respondents' competitors and constitut.ed, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of Section 5 or the Federal Trade Commission Act.

ORDER I t is onlered That respondents Continental Products, Inc., a corporation, and its offcers, and Garrison Graw.oig, Allen Grawoig, Earl , Gra,yoig, Richard N. Grawoig and Paul I. 3Iaycr, individually and as offcers or said corporation, and respondents ' age,nts, repre, sentatives and employees, directly or through any corporate or other device in connt2ction ,,,ith the offering for sale, srtle or distribution of merchandise in commerce" as ': commerce ' is defined in the Federal Trade Commission Act, do iorth,with cease and desist from: (n) 1Jsing the word '; wholesale, 01" any other \ford or term of similar import or meaning, in connection ,yit.h t.he direct or indirect solicitation of sales to individual members of the public ;

COKTIXE TAL PRODUCTS , INC. , ET AL. 405 361 Opinion or other consumers, to describe a price 'Ivhich is higher than the usual and customary price at which the merchandise is sold by wholesalers to retailers in the trade areas I\here the representations are made.

(b) Using the word "retair' or any other Iyord or term of similar import or meaning to describe a price which is in excess of the generally prevailing price or prices at which the merchandise is sold at retail in the trade areas where the representations are made.

(c) Representing, directly or by implication, that any saving is afforded in the pure-hase of respondents' merchandise from the usual and c.customary retail price unless the price at which said merchandise is offered constitutes a. reduction from the price or prices at which saidmerchanclise is generally sold at retail in the trade areas \'11e1'e the representations are made. (d) )Iisreprescnting in any manner thc ,savings ilvaihblc to pnrcha,sers of respondents: merchandise or the amount by which the price. of merchandise has been reduced :from the price or prices at \which it is genera.11y sold at retail in the trade are-n.s 'ihcre the representations ate made.

OI'INTO:N OF THE CO)DIlSSION APIUL 23 , l!)G-f Respondents herein, a corporation and it.s officers ellgaged in the sale of merclw.ndise through catalogs, have been chftrged with yiolating Section 3 of the Federal Trade Commission Act by making b.Jsc and deceptive representations as to the prevailing retail prices of their merchandise and the savings afforded their customers and by falsely represent.il g that the prices at which they sell to the public are wholesale prices. The examiner heJel in his initial decision that these allegations had been sustained and included in his decision an order prohibiting the challenged practices. Both sjdes have appealed. Respondents have taken exception to the examiner s findings and conclusions and counsel supporting the complaint has appealed from the examiner Jailure to make certain findings. This matter is no", before us for reply-"Y As to the charge that respondents Retail" prices 'ivere deceptiyc the cxanlir:er in eiled found these prices were fictitious a,ncl not Cit intended or designed to represent actual pre\Tailing prices. III making this findiJlg the examiner appa.rently relied on the te 3timony or responclents 0\'11 expert as "supplemented by ,,-hat local a.rea. proof there is" t.o the effect that the manufacturer s suggested retail price. 406 FEDERAL TRADE COMMISSION DECISIOXS Decision 65 F.

which.h is COlltinental' s "Retail" price, is the highest retail price charged by "some" retailers but. is set high enough by the manufacturer to top all other prices. If the evidence supported the examiner sfinc1ing, the conclusion that respondents engaged in a fictitious use or the term retail price" ,vould follo\y even under' the Guides Against Deceptive Pricing issued J a.nuary 8 , 196.;J. I-Im-n ver, the Commission does not belim' c that therecord sufficiently supports the examiner s finding in this respect.

\Ve agree ,,,ith the hearing examiner, however, that the re.corel supports the fLlleg:ition that respondents have frtlsely and dec.ep6very represe,nted that the prices at which their merchandise was sold to the public -were ,vholesale prices. Although respondents now contend that the:.. have abandoned the use of the Iyord ;' wholesale" or similar terms in the operation of their business, we can find no satisfactory basis in the record for concluding that there may not be ,1 resumption of this practice.

To the extent indicated herein respondents' appeal will be granted and in all other respects it is denied. The appeal of the coumel supporting the complaint is denied. The initial decision ,,,ill be modified to conform with this opinion.

Commissione.r R.eilly did not participate for the reason that he did not hear oral argument.

DECISION OF Tl-IE COJDlISSIOX AXD ORDER TO FILE REPORT OF COl\IrLIAXCE H.respondents and counsel in support of the complaint having filed cross-appeals from the initial decision of the hearing examiner, and the matter having been heard on briefs and oral argument: and the Commission having rendered its decision granting in part and denying in part respondents' appeal, denying the appeal of counsel supporting the complaint, and directing modification of the initial decision: It is ordered That the initial decision be modified by striking therefrom the following portions:

The second full paragraph on page 365 beginning with the words "In a general way" and ending "ith the words "proved his case That part of the section entitled "FICTITIOUS PRICE SYSTEM" bc ginning on page 367 with the words "The complaint herein" and ending on page 377 with the words "deceptive in its essence All of that section entitled "LOCAL AREA EVIDENCE" beginning on page 381 with the words "As heretofore observed" and end- TINEXTAL Products, IXC. , ET AL. 407 361 Decision iug on page 393 with the words ': has never seen Continental" and Page 399 beginning with the section entitled "QUESTIONS AS TO AN ORDER" and ending on page 405 ..with the words "where the representations are made.

It 'tS .further ordered That the initial decision be modified by adding thereto the following:

The evidence is insuffcient to support the allegation in the com plaint challenging respondents' use of the term " Retail price. I t is further onlp-Tcd That the order to C8l1se and desist in the initial decision be modified to read as follo\\s:

ORDER It is ordered That respondents Continental Products, Inc. , n, corporation, ilnd its offcers and Garrison Gl'flwoig, ADen Grawoig, Earl ",V. Grawoig, Richard N. Grawoig and Paul :11. :lIayer, indi vi dually and as offcers of sai(1 corporation, and respondents agents, representatives and employees directly or through any corporate or other device, in connection with the offering for sale sale or distribution of merchandise to the ultimate consumer in commerce, as "commerce" is defined in the Federa.l Trade Commission Act, do forthwith cease and desist from representing directly or by implication that said merchandise is being offered for sale at wholesale prices.

It is further ordered That the allegations of the complaint that the respondents falsely and deceptively represented that the prices designated as "R.etail in their catalogs were the prices at which the merchandise referred to WflS usually and customarily sold at retail and that the difference between their coded price and " etail" price represented savings from the usual and customary retail prices in the trade areas where the representfLtions \"e1'e made, be, and they hereby ate, dismissed.

It is f"rther ordered That the initial decision, as modified, be, and it hereby is, adopted as the decision of the Commission. It is f"rther ordered That respondents shall, within sixty (60) days aiter service upon them of this order, file with the Commission a report, in writing, setting forth in detail the mallner and form in which they have complied with the order to cease and desist. Commissioner Reiny not participating for the reason that he did not hear oral argument.

408 FEDERAL TRADE COM:YIISSION DECISIQKS Complaint 5 F.'l.