National Housewares, Inc.

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IN THE ~i.~ TTER OF NATIONAL HOUSE'YAR.ES, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\DIISSION ACT Docket 8733. Complaint JIar. 3, 1DG" Decision, Feb. 12, 1968 Consent order requiring a Salt Lake City, Utah, distributor of appliances and other merchandise to cease representing falsely that it conducts surveys and contests, that its prospective customers will receive prizes or free mercl4'1ndise, that its customers are especially selected, and that the prices of its vrodncts are special or reduced.

CO::\IPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority yesteel in it by said Act, the Federal Trade Commission, having reason to believe that N ational Housewares, Inc., a corporation, and Easy Pipella, Keith Bigler, David Bigler, :Michael Pipella and Edward Gilson, individually and as officers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it. a ppenring to the. Commission that a proceeding by it in respect thereof \yould be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. R.respondent N national Housewares, Inc. , is a corporation organized, existing and doing business under and by virtue of the lawsof the State of Utah, with its principal 1 office and place of business located at 1260 East Vine Street, Salt Lake City, L"Jtah. Responelents Easy Pipella, I\.::eith Bigler, David Bigler, :Michael Pipel1a and Ed\varel Gilson are officers of said corporation. They formulate, direct and control the acts and practices of the corporate respondent, ineluc1ing the. acts and practices hereinafter set forth. Respondent ~iichael Pipella s business address is 3645 Tenth Avenue 288 FEDERAL TRADE COML\lission DECISIONS Complaint 73 F. T.

South ) Great Falls, ~fontana. Ed\Vard Gilson s address is 1624 west Anaheim, Harbor City, California. The address of the other officers is the same as that of the corporate respondent. PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of household appliances, books, tools and other merchandise to dealers who in turn resell such items to the public. PAR. 3. In the course and conduct of their business, respondents 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 Utah and from their suppliers, located in various States of the United States, to their dealers located in various States of the United States and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said products in conllllerce, as commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of their aforesaid business, and for the purpose of inducing the purchase of their said products by the consuming public, respondents supply printed sales presentations. and promotional sales materials including broehures, form lette-rs, questionnaires, cards, and other oral and printed information, to said dealers for distribution and for their use in making oral sales presentations, all of which they use, in promoting the sale of said products to the consuming public.

Based on the information and suggested representations and other data contained in the aforesaid sale presentations and promotional sales material, said dealers and their salesmen are enabled to represent, and do represent. to their prospective customers, among other things: 1. That the dealers selling respondents' merchandise to the public are conducting surveys and that the prospective customers' names will be entered in a. drawing or contest to be held in connection 'Tith the surveys.

2. That prospective customers have ,yon prizes in the dra,ying or contest and must make an appointment ,with one of the dea.lers representatives in order to receive such prizes. 3. That customers are especially selected in order to promote the sale or respondents' prod~lcts handled by saiel dealers. 4. That customers of the aforesaid dealers are receiving reduced prices or a. special introductory offer in order to promote the trade names of the merchandise sold by respondents and that savings are thereby afforded to purchasers from respondents' regular prices. NATIONAL HOUSEWARES, INC. , ET AL. 289 287 Complaint 5. That customers making an initial purchase from the aforesaid dealers may thereafter purchase respondents' merchandise at a 50 percent discount from the dealers' regular prices. 6. That when customers purchase one item from the aforesaid dealers, other items are awarded to such customers as a gift or "at no extra cost" or that they are "free.

PAR. 5. In truth and in fact:

1. The aforesaid dealers are not conducting surveys and the prospective customers' names are not entered in a drawing or contest to be held in connection "\with said surveys01 or otherwise. Said dealers are only seeking information about prospective customers' appliance needs and credit ratings which is used as a basis to determine whether an attempt shall be made to sell such customers merchandise. 2. Persons do not win prizes at drawings or any other type of contest but are so notified because such persons appear to be good prospects for the sale of merchandise and this means is used to induce prospective customers to make an appointment with one of the dealers sales representatives.

3. The aforesaid dealers' customers are not especially selected. On the contrary, said merchandise is available to anyone with the money or credit rating to take advantage of it.

4. Customers of the aforesaid dealers do not receive reduced prices or a special introductory offer but are offered the same prices at which said dealers sold respondents' merchandise in the past and savings are not thereby afforded to such purchasers.

5. Customers making purchases from the aforesaid dealers will not thereafter be able to buy merchandise at a 50 percent or any other substantial discount from dealers' regular prices. 6. Customers of the aforesaid dealers do not receive merchandise as a gift or "at no extra cost" or "free," but the price of any additional items of merchandise is included in the price that such customers pay for the item sold by said dealers, and the item required to be purchased has never ben sold separately in substantial quantities at such prices. Therefore, the statements and representations set forth in Paragraph Four hereof are false, misleading and deceptive. PAR. 6. In the course and conduct of their business as aforesaid, and for the purpose of inducing the purchase of their merchandise by the consuming public, said respondents supply the dealers who handle their merchandise ,,-ith leaflets and other data containing retail pric.ing representations.

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Complaint 73 F.

Typical and illustrative of the aforesaid representations are the following:

"\V ALTHAM, Sea Fall, Value $69.

(Picture of the watch) Air-way Sanitizor 88, Value $295.

(Picture of the assembled machine and the separate parts) 7" HEAVY DUTY POWER SA"\V (Picture of saw) Value $59.

PAR. 7. Through the use of the aforesaid representations, and others similar thereto but not specifically set forth herein, and for the purpose . of effecting their retail pricing policy, respondents have represented and placed in the hands of said dealers the means and instrumentalities for representing, directly or indirectly, that said stated prices, acc.ompanied by the wol'd "VALUE" are not appreciably in excess of the highest prices at which substantial sales of such merchandise have been nlade in the recent regular course of business in the trade area where suc.h representations are made.

PAR. 8. In truth and in fact:

The aforesaid stated pric.es accompained by the word "VALUE" are appreciably in excess of the highest prices at which substantial sales or such merc.handise have been made in the recent regular course of business in the trade area where such representations are made. Thererore, the statements and representations set forth in Paragra phs Six and Seven hereor were and are false, misleading and deceptive.

PAR. 9. By reason of the aforesaid praetic.es respondents place in the hands of others means and instrumentalities by and through which they may mislead and deceive the public. as to the prices, methods of sale and other praetic.es followed in offering ror sale and in selling their said merchandise.

PAH. 10. In the conduct of their business, at all times mentioned herein, respondents have been in substantial competition, in COlllinerce with corporations, firms and individuals in the sale of products of the same general kind and nature as those sold by respondents. PAH. 11. The use by the respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had and now has, the capacity and tendency to mislead members or the purchasing public into the erroneous and mistaken belief that sH.id state- .

NATIONAL HOUSEWARES, INC. , ET AL. 291 287 Decision and Order ments and representations were and are true and into the purchase of substantial quantities of respondents' appliances, books and other merchandise.

PAH. 12. The aforementioned acts and practices of respondents as herein alleged, "'ere, and are, all to the prejudice and injury of the public and of respondents competitors and constituted, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the F(~cleral Trade Commission Act.

DECISION .,\.ND ORDER The Commission having issued its complaint in this proceeding on i\Iarch 13, 1967, charging the respondents named in the caption hereo~ with violation of the Federal Trade Commission Act, and the respondents having been served with a copy of that complaint; and Upon motion of respondents and for good cause shown, the Commission, having on October 2-:1: , 196'L pursuant to ~ 2. 3-:1: (d) of its Rules withdraw,yn the matter from adjudication and gl'antedrespondents opportunity to negotiate, under Subpart C of Part :2 of its Rules, a settlement by the entry of a consent order; and Respondents and counsel supporting complaint having thereafter executed an agreement containing a eonsent order, an admission by respondents of all the jurisdictional facts alleged in the complaint, a statement that the signing of the agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint., and ""'livers and other provisions as required by the Commission ~s Rules: and The Commission having considered the agreement and having accepted same, and the agreement containing consent order having thereupon been placed on the public. record for a period of 30 days, now in further conformity ,with the procedure prescribed in ~ 2.34 (b) of its Rules, the Commission hereby makes the following jurisdictional findings, and enters the follo,,-ing order to cease and desist in disposition of the proceeding:

1. Respondent Kational1-Iouse,yares, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Utah, with its office and principal place of business located at 1260 East Vine Street, in the eitv of Salt Lake. State of Utah. Hespondents Easy Pipella, Keith Bigler, Da,-ic1 Bigler, ~lichael Pipella and Edward Gilson are officers of said corporation. Respondent Edward Gilson s address is 24100 South Vermont Avenue, Harbor Decision and Order 73 F.

City, California. Theacldress of the other officers is the same as that of the said corporation.

2. The Federal Trade Commission has jurisdiction of the subject 11latter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is O'l'del'ed That respondents National Housewares, Inc., a corporation, and its officers, and Easy Pi pella., I\:eith Bigler, David Bigler, ~1:ichael Pipella and Edward Gilson, individually and as officers of said 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 household appliances, books, tools, or any other articles of merchandise in commerce" as "conllnerce" is defined in the Federal Trade Commission Act do forthwith cease and desist from:

A. Representing, directly or by implication, or furnishing any dealer, distributor, retailer, franchisee, licensee, agent, employee or others with any means, instrumentalities, directions or instructions which, directly or by implication, represent the things hereinaf,ter set forth or by 'and through ,yhichsuch person 11lay mislead or dec.ei ve the public, in the manner or 'as to any of the things hereinafter set forth:

1. That they are conducting a survey, drawing or contest in connnection with the sale of merchandise. 2. That prospective, customers' names will be entered in a drawing or contest held in connection with a survey. 3. That prospective customers have ,,'on prizes or "free Inerchandise: P'l' o1)icled, howeve?' That it shah be a defense in 'any enforcement proceeding instituted ;hereunder f0'r respondents to establish that such customers have in fact 'yon prizes or free merchandise in a bona fide contest or drawing. 4. That prospective purchasers of any merchandise sold by respondents or their dealers are especially selected. 5. That any offer or price constitutes an introductory offer or pric.e; or representing that any price is a special or reduced price: PTo'vicled hO1.ueVeT That it shall be a defense in any enforcement proceeding instituted hereunder for the respondents to establish that such price constitutes a significant reduction from the price at which.h such merchandise has been sold in substantial quaIltities or oftered for sale in good faith for a reasonably substantial period of time, by respondents in the recent, regular course of their business. NE\V CENTURY ENTERPRISES, INC. , ET AL. 293 287 :Syllabus 6. That customers making initial purchases from respondents or their dealers or others will thereafter be able to buy merchandise from respondents or such dealers or others at a 50 percent discount or at any other substantial discount frolll respondents' dealers' or others' regular prices. 7. That any item of merchandise which is sold or offered for sale in conjuction or combination .with other merchandise is a gift or without extra cost or is free. B. Falsely representing, in any manner, that savings are. a.vailable to purchasers or prospective purchasers of respondents 11lerchandise or misrepresenting in any manner the amount of sav1l1gs available to purchasers or prospective purchasers of respondents' merchandise at retail.

C. 1. Using the word "value" or any 'YOI'd or words of similar import to refer to any amount which is a.ppreciably in excess of the highest price at ,Which substa.ntial sales of such merchandise have been made in the recent regular course of business in the trade area where such representations are made; or othenyise misrepresenting the price at which such merchandise has been sold in the trade area where such representations are made. 2. Furnishing any denier, distributor, retailer, franchisee licensee, agent, employee or others with any means, instrumentalities, directions 01' instructions "'hereby the public. may be misled or deceived as to any of the matters or things prohibiteel by Paragra,ph C. 1. of this order.

It is fu?'the?' 0 rde'7'e d That the respondents herein shall, within sixty (60) days after service upon them of this order, file "\with the Commission a report in writing setting forth in detail the manner and f~rm in which.h they lmve complied with this order.