Sportempos, Inc.

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

IN THE MATTER OF SPORTEMPOS, INC.

ORDER, OPINION, ETC., IN REGARD TO THE ALLEGED VIOLATIO"i OF THE FEDERAL TRADE COMMISSION AND THE WOOL PRODUCTS LABELING ACTS Docket 8683. Complaint, May 1966-Decision Vov. 2.9 , 1,967 Order setting aside the initial decision and terminating the proceeding 'without dismissing the complaint which charged a Xe,,, York City importer of Italian mohair-blend sweaters \with misbranding sweaters in violation of the Wool Products Labeling Act on the grounds that since many other importers are involved tne problem can be handled better on an industrywide basis.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Wool Products Labeling Act of 1939, and by virtue of the authority vested in it by said Acts. the Federal Trade Commission having reason to believe that Sportempos, Inc. , a corporation, hereinafter referred to as respondent, has violated the provisions of said Acts and the Rules and Regulations promulgated under the Wool Products Labeling Act of 1939. and it appearing to the Commission that a proceeding by it in respect thereof would * For opinion of the Commission ar. d statement of Commissione,. MacIr. tyre in this case, sep consolidated opinion and statement In the MrLtteT of R. H. iVIa.C11 Co" Inc" Dockl' .Ko. 8650, pp. 894 , 947, g. () herein.

Complaint 72 F.

be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Sportempos, Inc. , is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York.

Respondent is an importer of wool products with its offce and principal place of business located at 1407 Broadway, New York New York.

PAR. 2. Subsequent to the effective date of the Wool Products Labeling Act of 1939, respondent has introduced into commerce sold, transported, distributed, delivered for shipment, shipped and offered for sale in commerce as "commerce" is defined in said Act wool products as "wool product" is defined therein. PAR. 3. Certain of said wool products were misbranded within the intent and meaning of Section 4 (a) (1) of the Wool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder, in that they were falsely and deceptively stamped tagged, labeled or otherwise identified with respect to the character and amount of the constituent fibers contained therein. Among such misbranded wool products, but not limited thereto were sweaters stamped, tagged, labeled or otherwise identified as containing 5070 Wool 45' Mohair, 5%, Nylon, whereas in truth and in fact, such sweaters contained substantially different amounts of fibers than represented.

PAR. 4. Certain of said wool products were further misbranded in that they were not stamped, tagged, labeled or otherwise identified as required under the provisions of Section 4 (a) (2) of the Wool Products Labeling Act of 1939 and in the manner and form as prescribed by the Rules and Regulations promulgated under said Act.

Among such misbranded wool products, but not limited thereto, were certain sweaters with labels on or affxed thereto, which failed to disclose the name of the manufacturer of the wool product or the name of one or more persons subject to Section 3 with respect to such wool product.

PAR. 5. Respondent with the intent of violating the provisions of the Wool Products Labeling Act of 1939 has removed or caused or participated in the removal of the stamp, tag, label or other identification required by the Wool Products Labeling Act of 1939 to be affxed to wool products subject to the provisions of such Act, prior to the time such wool products were sold and delivered to the ultimate consumer, in violation of Section 5 of said Act. SPORTEMPOS, INC. 953 951 Initial Decision PAR. 6. Certain of said wool products were misbranded in violation of the Wool Products Labeling Act of 1939 in that they were not labeled in accordance with the Rules and Regulations promulgated thereunder, in that the term ":l1ohair" was used in lieu of the word "Wool" in setting forth the required fiber content information on labels affxed to wool products when certain of the fibers described as "Mohair" were not entitled to such designation in violation of Rule 19 of the Rules and Regulations under the Wool Products Labeling Act of 1939.

PAR. 7. The acts and practices of the respondent as set forth above were, and are in violation of the Wool Products Labeling Act of 1939 and the Rules and Regulations promulgated thereunder and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commission Act. Mr. Thomas J. Kerwan and M,' . Edward B. Finch for the Commission.

Wald, Hm'lemde?' Roclee/elle,' Washington by Mr. Edwin S. Roclee/elle?' for respondent. INITIAL DECISION BY RAYMO"'D J. LYNCH , HEARING EXAMINER NOVEMBER 1 , 1966 PRELIMINARY STATEMENT The Federal Trade Commission issued its complaint against the respondent on the 18th day of May, 1966. The complaint charges the respondent with violations of the Wool Products Labeling Act of 1939 in connection with sweaters inaccurately labeled as to their fiber content, particularly their mohair and wool content.

The respondent on June 2, 1966, filed a Motion for a More Definite Statement and counsel supporting the complaint fied a reply thereto on June 13, 1966. On June 16, 1966 , the undersigned examiner issued an order denying respondent's Motion for a More Definite Statement and scheduled a prehearing conference for June 30, 1966, at 10 a. , in Room 7314 of The 1101 Building, Washington C, Counsel representing the respondent filed his answer to the complaint on June 27 , 1966 , admitting that the respondent is a corporation organized, existing and doing business under the laws of the State of ;.ew York with its principal offce at 1407 Broadway, :\cw York, ?\ew York, but stated that Initial Decision 72 F.

respondent is without knowledge suffcient to admit or deny the other allegations of the complaint and denies them. Pursuant to the examiner s prehearing conference order, initial hearings in the matter commenced on July 28, 1966, at 10 a. in Hearing Room D, Federal Trade Commission Offces, 14th Floor, 30 Church Street, Kew York, New York, and were concluded in Washington on August 4, 1966. Proposed findings of fact and conclusions of law were filed by the parties on September 9, 1966. Replies to the parties' proposed findings of fact and conclusions of law were filed on September 19 , 1966. This proceeding is before the hearing examiner to be considered upon the complaint, the answer, testimony and other evidence and the proposed findings of fact and conclusions of law filed by counsel representing the respondent and by counsel supporting the complaint.

Consideration has been given to the proposed findings of fact and conclusions of law submitted by both parties, and all proposed findings of fact and conclusions of law not hereinafter specifically found or concluded are rejected and the hearing examiner, having considered the entire record herein, makes the following findings of fact and conclusions drawn therefrom and issues the following order.

FI)lDJ)lGS OF FACT 1. Respondent Sportempos, Inc. , is a corporation organized existing and doing business under and by virtue of the laws of the State of Kew York. Respondent is an importer of wool products with its offce and principal place of business at 1407 Broadway, Kew York, Kew York. (Answer; CX 20.

2. Subsequent to the effective date of the Wool Products Labeling Act of 1939 the respondent imported from Italy and introduced into commerce, sold, transported, distributed, delivered for shipment, shipped and offered for sale in commerce as "commerce is defined in said Act, wool products as "wool product" is defined therein. (CXs 1 , 4 , 5 , 6 , 7, 12-19.

3. The wool products referred to in this proceeding were Italian made mohair-blend sweaters which will be discussed in detail later in this opinion.

4. The respondent, according to Commission Exhibit CX 7 purchased knit wearing apparel (mohair-blend sweaters) from Mfr. Confczioni DJEMME, s. FELICE. CX 7 is an invoice from Krieger, Ltd. , P.O. Box 185, Florence (Italy), 11 , Parione Str" dated September 16, 1963, covering the shipment of 55 boxes of , SPORTEMPOS , INC. 955 951 Initial Decision knit wearing apparel from the above referred to manufacturer to the respondent in this proceeding. The garments were shipped to New York via the steamship Excalibur, sailing from Leghorn on September 19, 1963. The invoice covers the shipment of 3 649 Style 705, V neck cable front pullover long sleeve (sweaters). The invoice discloses that the sweaters involved in the shipment contain 50 per cent wool, 45 per cent mohair and 5 per cent nylon. The exhibit referred to herein was secured by an investigator of the Federal Trade Commission from Mr. Levine, an employee of the respondent and there is no reason to doubt its authenticity. Mr. Levine admitted while testifying in this proceeding (Tr. 143-146) that the sweaters had been purchased as set forth in Commission Exhibit 7. Furthermore, that the sweaters had been delivered to the respondent at their orth Bergen, New Jersey, warehouse in the ordinary course of business. 5. During the year 1963, respondent imported from Italy 649 mohair-blend sweaters, among which were 16 000 Style 705 mohair-blend sweaters, (see CX 20 (C)) and of these at least 649 were represented as to fiber content by the Italian manufacturer as 50 per cent wool, 45 per cent mohair and 5 per cent nylon.

6, The definition of "commerce" as contained in the Wool Products Labeling Act of 1939 , is essentially the same as that contained in Section 4 of the Federal Trade Commission Act. The commerce question was settled by the Commission In the J11atter of Alscap, Inc. , et ai 60 F. C. 275 , wherein the Commission found that:

Insofar as it is contended on behalf of the respondents that they were not engaged in commerce, both the Federal Trade Commission Act and the Wool "0; ,- '" withProducts Labeling- Act of 1939 define commerce as being that foreign nations ,, " " or between * any state or foreign nation Both Alscap and Lopa caused the goods involved to he exported from Italy and imported into the United States. In addition, it appears that Alscap made at least three sales to purchasers outside of the State of New York. Consequently, the defense that the respondents were not engaged in commerce within the meaning of the Acts is overruled.

7. In addition to the fact that the respondent faJis within the jurisdiction of the Federal Trade Commission by virtue of its importation of wool products from a foreign country, the Commission also has jurisdiction in this matter by virtue of the respondent' s sale in commerce of 100 mohair-blend sweaters Style No. 705 to Loehmann, Bronx, !\ew York, on February 27, 1964 CX 6. While it is argued by the respondent that this sale did not Initial Decision 72 F.

constitute a sale in commerce as j'commerce " is defined in the Wool Products Labeling Act of 1939 because the shipment of goods involved in the above referred to invoice was picked up by Loehmann s at the respondent's North Bergen, New Jersey, warehouse, the sale ,vas made in interstate commerce. The record also discloses other sales in interstate commerce. CX 12 is an invoice by the respondent to Loehmann s Bronx, New York, store which includes 500 Style 705 mohair-blend sweaters. The invoice dated January 6, 1964, further discloses that the shipment was made via truck to the purchaser of the merchandise, Loehmann Sales of Style 705 mohair-blend sweaters were made by the respondent in interstate commerce to purchasers in K ew Orleans Louisiana, CX 11 , Lafayette, Indiana, CX 13 , and other areas throughout the Vnited States.

8. On :l1arch 26, 1964, Mr. Charles T. Rose (Tr. 66-119), an investigator for the Federal Trade Commission, purchased a sweater, CX 1, from the Chas. C, Loehmann Corp. , 2467 Jerome Avenue, Bronx 68, New York, for $6,98. In addition to the receipt CX 4, received by :l1r. Rose for the purchase of the sweater, :Ir. Rose also obtained a statement, CX 5, signed by Mr, Irving Saidel, :Ianager of the Loehmann Bronx store, which states: Sold to 1Ir. Charles T. Rose, Investigator, Federal Trade Commission 1 sweater at 86.98.

Tag (CX 4) sho\ving Code No. ZB represents sweater supplier Sportcmpos. No. 710005 represents Style Number 705.

CX 4 represents the sweater as "wool, mohair, nylon." The flber disclosure label in the neck of the sweater (CX 1) states "50% Wool, 457 Mohair, 5'! ;.ylon, Hand Knitted. " An examination of the physical exhibit (CX 1) also discloses that the manufacturer s label had been removed and that respondent Sportempos labels had also been removed, The original label removal win be discussed later.

9. After purchasing the sweater from Loehmann, Mr, Rose made a visit to the respondent's warehouse in North Bergen, 1\ 81,,, Jersey, and interviewed Mr, Isaac 1\1. Baker (Tr. 147-159), vice president of Sportempos, who supplied him with CX 2, which is a xerox copy of the tagging of a Style 705 sweater. The respondent' s tagging discloses that the garment was made in Italy exclusively for Sportempos and that it was hand knit and contained 50 per cent wool, 45 per cent mohair and 5 per cent nylon. Mr. Baker testified in this proceeding and stated that he recalled the visit of Investigator Rose and that he supplied him with CX 2. SPORTEMPOS, INC. 957 951 Initial Decision 10. Subsequent to the purchase of CX 1 by the investigator for the Federal Trade Commission, the sweater was sent to ACH Fiber Service. Inc., in Boston, :VIassachusetts, for a fiber analysis authorized by Section G (a) of the Wool Products Labeling Act of 1939. CX 1 was examined by ACH Fiber Service, Inc., in accordance with the standards prescribed by the American Society for Testing and Materials and the fiber content set forth on the label and the result of the fiber analysis test is as follows: Test result: Label reads:

ex 79';' \Vool ex 2U(F) and (G) 1 50% Wool 13%, Mohair 45% Mohair 8% Nylon 5% Nylon The above test result shows that CX 1 is misbranded under Section 4(a) (1) of the Wool Products Labeling Act of 1939. The original fiber content labels were placed upon thc e mohair-blend sweaters in Italy. (CX 20(C). A comparison of CX 7 and CX 1 reveals that the same fiber content information as set forth on the import invoice (CX 7) is set forth on the woven neck label in CX 1 and by noting the description as set forth on CX 7, and comparing this description with CX J , it will be seen that the description of the sweater on CX 7 is identical to that of CX 1. 11, Accepting the findings stated above requires an evaluation of the testing procedures and the qualifications of the experts who conducted the test in question. In this connection, it is noted that counsel for respondent and ollnsel supporting the complaint have entered into a stipulation covering the testimony and qualifications of said experts had they testified in this proceeding, (See CX 20 (A) thnJl.gh (C) (wd (E) th1'1Jqh (L).) In addition, see Transcript pages 178 through 181 encompassing further stipulations concerning portions of the transcript of proceedings in Docket No, 8650, R. H. Mac!! Compu. II!!, Iilc. (also see Tm. lIscl' ipt paqes 18,9 and 1,90), in which both respondent' s counsel and counsel supporting the complaint agreed to be bound by the results in the IVlacy case concerning testing procedures and authorities relied upon.

12, As a result of the above stipulation, it is found that ACE is generally considered b? the government agencies and importers concerned with the fiber content labeling of imported Italian mohair-blend sweaters to be a reputable, reliable and competent fiber testing laboratory; that its facilities and equipment are adequate: that its management and personnel are competent to supervise and perform the test with respect to which evidence Initial Dccision 72 F.

has been received in this proceeding; and that the procedures controls and checks employed by ACH in testing the sweater in evidence were properly designed and applied to deal with the practical problems involved in such test. It is concluded, therefore that the fiber analysis report which ACH made to the Federal Trade Commission with respect to the sweater (CX 1) in evidence is reliable within the range of engineering probabilities contemplated by established procedures.

13. The respondent, both in his proposed findings and during the course of cross-examination of Investigator Rose, endeavors to make an issue of the improper handling of CX 1. However, the record is clear that the sweater, CX 1 , was purchased by Mr. Rose in due course of business and that he exercised proper care and diligence in marking the exhibit and that the proper records were maintained from the time the sweater was purchased until it was received in evidence in this proceeding. 14. Certain of said wool products were further misbranded by respondent in that they were not stamped, tagged, labeled or otherwise identified as required under thc provisions of Section 4 (a) (2) of the Wool Products Labeling Act of 1939 and in the manner and form as prescribed by the rules and regulations promulgated under said Act.

15. Section 4 (a) (2) of the Wool Products Labeling Act of 1939 provides that the correct percentages of aji fibers present in the wool product must be set forth on the label required to be affxed to the wool product.

16. By a reference to the fiber content label affxed to CX 1 and to the test report of ACH Fiber Service, lnc" pertaining to this exhibit, more specifically set forth as CX 20 (F) it wil be noted that the correct percentages of aji fibers present in this wool product were not set forth on the label. Therefore, CX 1 is found to be misbranded under Section 4 (a) (2) of the Wool Products Labeling Act of 1939, 17. Certain of said wool products were misbranded in violation of the Wool Products Labeling Act of 1939, in that they were not laheled in accordance with the rules and regulations promulgated thereunder in that the term "mohair" was used in lieu of the word "wool" in setting forth the required fjber content information on labels affxed to wool products, when certain of the fibers described as mohair were not entitled to such designation, in violation of Rule 19 of the rules and regulations under the Wool Products Labeling Act of 1939.

SPORTEMPOS , INC. 959 951 InitjaJ Decisjon 18. Rule 19 is permissive in nature and relates only to the use of terms such as "mohair" on labels. One of the provisions of the Rule is to prevent the use of the name of a specialty fiber on a label without stating the percentage thereof. This means that since the Rule is permissive, a given percentage of mohair may be designated on the label so long as the wool product contains at least that designated percentage of mohair. It may contain more mohair than designated on the label. Here, however, respondent' s product contained more wool and less mohair than stated on the label.

19. Paragraph five of the complaint charges that the respondent with the intent of violating the provisions of the Wool Products Labeling Act of 1939 has removed or caused or participated in the removal of the stamp, tag, label or other identiication required by the Wool Products Labeling Act of 1939 to be affxed to wool products subject to the provisions of such Act, prior to the time such wool products were sold and delivered to the ultimate consumer, in violation of Section 5 of said Act. 20. The evidence discloses that the garments imported from Italy by the respondent were tagged by the manufacturer (CX 2). However, after CX 1 was received by the respondent and prior to the time of purchase by Mr. Rose, the respondent's and manufacturer s labels had been removed. Counsel supporting the complaint contends they were removed by the respondent. Counsel for respondent denies the allegation. The evidence of record as previously stated clearly shows that the original labels had been removed, However, whether they were removed by the respondent or by Loehmann is unclear. There is an inference that they were removed by the respondent on all garments received by Loehmann s. However, Mr. Saidel (Tr. 120-42) stated that if they had not been removed by respondent, Loehmann would have removed respondent's labels prior to ticketing and selling the garments. The evidence in the record is insuffcient to make a finding that the respondent removed the labels on CX 1 before it was shipped from North Bergen, New Jersey to Loehmann s in New York. Therefore, the examiner finds that Paragraph No. of the complaint has not been sustained and must be dismissed, 21. The acts and practices of the respondent as set forth above were, and are, in violation of the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder, and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commission Act. Initial Decision 72 F.

22. Respondent contends that prior to the commencement of this proceeding it has never been charged with violating the Wool Products Labeling Act and that Sportempos relied in good faith upon the fiber content set forth on the labels of the sweaters involved. Furthermore, that the labels were printed and attached to the garments in Italy and respondent had no reason not to rely upon the statement of fiber content. That in reliance upon the Italian sources the respondent conducted no tests of its own. Respondent also contends that the importation of mohair-blend sweaters was an isolated transaction and that respondent has not imported any further mohair-blend sweaters from Italy. The respondent states in the stipulation filed herein that it makes every effort to comply with all of the Commission s rules and regulations and that if any violations took place, efforts have been made to see that they will not happen in the future, Respondent' s actions are commendable but cannot be considered as a defense to the proved violations. The exercise of reasonable care to avoid mishranding does not constitute a defense under the Act, except in connection with unavoidable variations in manufacture not applicable here, CONCLUSIONS 1. During 1963 respondent imported from Italy and offered for sale and sold in this country substantial quantities of sweaters nylon. Clothwhich contained blends of wool and mohair and labels attached to these sweaters showing their fjber content were on the sweaters when they were imported by respondent. 2. Mohair-blend sweaters with cloth labels attached to them \vool or of mohairwhich falsely represent the percentage of of other fibers contained in the sweaters are misbranded wool products. The importation of such sweaters from Italy into this country constitutes the introduction and transportation of misbranded wool products in commerce within the meaning of the Wool Act. The importation of misbranded mohair-blend sweaters , accordingly. in violation of the Wool Products Labeling Act. 3. The record does not warant a conclusion that Rule 19 of the rules and regulations under the Wool Act, which permits " cannot reasonablyuse of the term "mohair " in lieu of "wool be applied to the labeling of mohair-blend sweaters. The diffculties involved in producing mohair-blend s\veaters with a uniform mohair content, and the lack of precision recognized by the standard engineering probabilities upon which the tests of these sweat- SPORTEMPOS , INC. 961 951 Initial Decision ers are based, constitute no justification for the very extravagant overstatement of the mohair content of CX l. 4. Paragraph Five of the complaint has not been proved by a preponderance of the reliable evidence and, therefore, must be dismissed.

5. It is concluded, therefore, that the acts and practices of the respondent, as set forth above, were and are in violation of the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder, and that they constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act, and that this proceeding is in the interest of the public.

ORDER It is ordered That respondent Sportempos, Inc., a corporation, and respondent' s offcers, representatives, agents and employees directly or through any corporate or other device, do forthwith cease and desist from introducing into commerce, or offering for sale, selling, transporting, distributing or delivering for shipment in commerce, \vool sweaters or any other wool products, as 'icommerce " and " wool product" are clefined in the 'Vool Products Labeling Act of 1939 1. Which are falsely or deceptively stamped, tagged, labeled or otherwise identified as to the character or amount of the constituent fibers contained therein.

2. To which are affxed labels wherein the term "Mohair is used in lieu of the word "Wool " unless the percentage of fibers designated as ":vohair" is set forth in the required fiber content information, and the fibers described as "Mohair" are entitled to that designation and present in at least the amount stated.

It is further onlered That respondent Sportempos, Inc. . a Corporation, and respondent's offcers, representatives, agents and employees, directly or through any corporate or other device in connection with the introduction into commerce, or the offering for sale, sale, transportation or c1eJivery for shipment, in commerce of any wool product as "\vool product" and "commerce " are defined in the Wool Products Labeling Act of 1939, do forthwith cease and desist from misbranding such products by failing to securely affx to or place on each product a stamp, tag, label . or other means of' identification sho\ving in a clear and conspicuous manner each Complaint 72 F.

element of information required to be disclosed by Section 4 (a) (2) of the Wool Products Labeling Act of 1939. It is furthe,' ordered That Paragraph Five of the complaint be and the same is, hereby dismissed.

FINAL ORDER This matter having been heard by the Commission upon respondent' s appeal from the hearing examiner s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and The Commission having concluded for the reasons stated in the accompanying opinion that the public interest does not require the entry of an order to cease and desist and that the initial decision containing such an order should be set aside and the proceeding terminated;

It is ordered That the initial decision be, and it hereby is, set aside.

It is further orde' That the proceeding herein be, and it hereby is, terminated without dismissal of the complaint.