Ned R. Baskin

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

IN THE ~1A TIER OF NED R. BASI(IN DOING BUSINESS AS HOLL y\VOOD FILM: STIJDIOS MODIFIED .order, OPINION, ETC., IN REGARD TO THE ALLEGED VIOLATION OF TI-IE FEDERAL TRADE COl\Il\IISSION ACT Docket 4902. Complaint, Feb. 8, 1943-Decision, May 10 1968 Order modifying a cease and desist order dated January 26, 1951, 47 F. C. 913, . which charged a Hollywood, Calif., mail-order seller of photo enlargements with certain false advertising practices by a.dding prohibitions against deceptively representing that customers will receive color enlargements without .added cost, will receive two enlargements forthwith and unconditionally, and that cash will be paid for using customer photos in advertising. CERTIFICATION OF RECORD REPORT, AND RECOl\fl\IENDATION OCTOBER 17 , 1967 This is a report, recommendation and certification of the record pursuant to order of the Federal Trade Commission dated December 30 1966 (70 F. 1851J, made in accordance with Section 3.28 (b) (3) of the Commission s R,ules of Practice efiective August 1 , 1963 1 and refelted to the undersigned on July 24, 1967. It deals with the question of whether or not the Commission s order to cease and desist, issued against respondent January 26, 19512 should be reopened and modified in the manner proposed.

This proceeding to reopen was commenced September 9 , 1966, by the Commission issuing its Show Cause Order as to why the original proceeding should not be reopened and the outstanding order modified by adding certain paragraphs that were set forth in the order of Sep- 1 Under rules effecth" e July 1 , 1967, 32 F. R. 8456, the pertinent section is ~ 3. 72 (b) (3). The rule ~ 3,28 (b) (3) reads as follows:

Whenever an order to show cause or petition to reopen is not opposed, or if opposed but the pleadings do not raise issues of fact to be resolved, the Commission, in its discretion, may decide the matter on the order to show cause or petition and answer thereto, or it may serve upon the parties a notice of hearing. setting forth the date when the cause 1\-ill be beard. In such a case, the hearing will be limited to the filing of briefs and may include oral argument when deemed necessar;\' by the Commission. \Vben the pleadings raise substantial factual issues, the Commission will direct such hearings as it deems appropriate, including hearings for the receipt of evidence by it or by 11 hearing examiner. Unless otherwise ordered and insofar as practicable, hearings before a hearing examiner to receive evidence shall be conducted in accordance with Subparts C. D, E and of these rules. Upon conclusion of bearings before a bearing examiner, the record and the hearing examiner s recommendations shall be certified to the Commission for final disposition of the matter, 2 47 F. C. 913.

Certification of Record 73 F. tember 9, 1966. On October 28, 1966 (70 F. C. 1131J, the Commission issued its order reopening the original proceeding and modifying the order to cease and desist in the respects indicated in that order for it appeared at the time that respondent had not responded to the Show Cause Order within the time specified. Later, the Commission determined from a telegl'alll from respondent dated X ovell1ber 9, 1066, that a response had, in fact, been made on September 22, 1966. The Commission, accordingly, treated respondent' s telegram as a request to reconsider its October 23, 1066, order rmc1 it thereafter vacated and set aside that order. Complaint counsel then filed his anwer on December 7 1966. The Commission by its December 30, 1966 (70 F. C. 1851J, order determined that hearings should be held for the purpose of receiving evidence in support of or in opposition to the question of whether or not the public interest requires that the Commission reopen its original proceeding and modify the issued order to cease and desist to read the same as the order proposed in the Commission Show Cause Order of September 9 , 196 The I-Iearing8 Hearings were held at Los Angeles, California, on August 10 and , 1967. Sheldon Feldman acted as counsel supporting the complaint and respondent Ned R. Baskin appeared on his own behalf, without counsel. In addition to respondent, complaint counsel called three witnesses to testify: Robert D. i\Iott (Tr. 125-146) 3 merchandising manager of the Los Angeles Better Business Bureau; Frank A. Orr United States postal inspector (Tr. 1~b7-154) ; and Don :Mark Hicks advertising representative for the T.V. Guide magazine (Tr. 157- 197). Twenty-seven exhibits were marked on behalf of complaint counsel, and two on behalf of respondent..

At the conclusion of the hearillg on August 11, 1967, both sides were given until September 18 , 19G~, to prepare and exchange proposed findings, conclusions and recommendations and until September 25, 1067 to serve and file with the hearing examiner sneh proposals and counterproposals (Tr. 217-220).

Complaint counsel submitted his proposals on September 13, 1967. R.es:pondent filed eonnterpl'opo::::als in the form of a letter dated Sep- All pl tember 20, 1967, "ith bTO testimonial letters as enelosures. 3 References are:

Tr. = Transcript page CX= Commission Exhibit RX= Respondent' s Exhibit CPF=Findings proposed by counsel supporting coill1)laint RPF=Findings proposed by respondent.

HOLL Y1,VOOD FIL~f STUDIOS 895 893 Certification of Record posals not adopted in ternlS or in substance are denied as irrelevant immaterial, or erroneous. . t the conclusion of the case for complaint counsel a motion to dismiss was made and argued (Tr. 203-10). Decision was then reserved (Tr. 210). The nlotion is now denied. Certification of Record The record herein consists of 220 pages of stenographic transcript attested by Kenneth R. Feick, the shorthand reporter, and twentynine exhibits bOlUld in accordance with the practice of the Records Section of the Commission. Such record as corrected by order of the hearing examiner dated September 14, 1967, and Proposed Findings are hereby certified to the Commission.

Basis for Recommendation This report, recommendation and certification of the record is based on the entire record and, while principal items of evidence relied upon are cited, no effort has been made to cite all references possibly applicable. Consideration also has been given to the demeanor of the witnesses in determining their credibility. The following findings of fact, conclusions, and recomlnendations are made accordingly: Findings of Fact 1. Respondent, Ned R,. Baskin, resides at 5847 North Corteen Place North Hollywood, California, and conducts his business as a photographer at 7021 Santa :ThIonica Boulevard, Los Angeles, California (Tr. 5).

2. Respondent, as sole proprietor, does business under the nmne lIol1ywood Film Studios (Tr. 5, 198), but in SOlne current advertisements he uses the name I-Iollywooc1 Enlargerllents and the address 7471 :Melrose Avenue, I-Iollywooc1, California ~ for the purpose of having ,certain mail deJiverec1 to the Dane Advertising Agency under an arrangement whereby the agency seeures 40 cents for every order in response to advertising it places. This permits the agency to cheek the amount of fees owed to it (Tr. 198-200). 3. Respondent makes enlargements of photographs or negatives has a, hand-eoloring serviee to tint black and white en largements~ and an arrangement to send color 'photographs to a photo finishing laboratory that speeializes in color (Tr. 6) 4. The principal source of respondent's income is mail-order business (Tr. G). He uses direct-mail solicitation and advertising in ne\,spapers 896 ;FEDERAL 'TRADE COMMISSION DECISIONS Certification of Record 73 F. and magazines (Tr. 6-7). ~Iagazines are now his prinoipal me,dilUll of advertising, but he uses some newspapers (Tr. 8). The nmgazil1es include movie magazines, i\lcFadden Publications and Ideal Publications ('II'. 7). At one time, he used other media, including matchbook covers and radio (Tr. 5. Respondent7-8).has been in the mail-order business for approximately 30 years (Tr. 6). Except for two periods, respondent has written the advertising copy or has overseen the writing of it, and in both case~ has had authority to change the advertising copy ('II'. 9). The first such period was from 1948 to 1959, when he left the business to work in Chicago ('II'. 23-24). The, second period was from December 1964 until September 10, 1965 (CX lob, Tr. 9 54), when Albert L. vVolins owned the business and gave full authority to his own advertising agency (Tr. 9) 6. In December 1964, respondent ,\yas adjudged a bankrupt and his business and equipment \yas purchased by Albert L. ,Volins ('II'. 9-10). The business was later repurchased by respondent, who had remained as manager during ,Yolins' ownership. ,Yolins still owns the equipment, uses it under an arrangement to ,pay for it in installments. He has been unable to keep up promised payments (Tr. 11-12). Respondent is now responsible for formulating the acts and practices of the business (Tr. 11-12).

7. Respondent employs 10 persons in the business and receives an approximate average of 1 500 responses to his advertisements each week (Tr. 12-13). The responses consist of one or h,o pictures and ten cents or twenty cents or no money at all ('II'. 63). The pictures may be negatives, color slides or positives ('II'. 13-14). 8. Respondent \yas recently visited by an attorney named R. Keith Van Hoff and had previously been visited by Gerald Rosenblatt, both from the Federal Trade Commission (Tr. 14--15, 38-39). I-Ie was also visited by complaint counsel during the \yeek preceding the hearing and was shown documents relating to a previous compliance hearing in federal court ('II'. 15 , 34).

9. During the period from January 1951 to November 1951 respondent and his attorney ,Yilliam A. Romanek had correspondence with the Division of Compliance of the Federal Trade Comlllission. The letters and other documents which passed between that divis,ion and respondent or his counsel are contained in Commission Exhibit 1. (See 'II'. 17- 34. CX 1 was received solely for the purpose of showing the correspondence and other documents that were passed back and forth and it has not been considered in making this recommendation for any other purpose. ) HOLLYWOOD FILM STUDIOS 897 893 Certification of Record 10. On July 5 1957, the United States District Court for the Northern District of Illinois Eastern Division issued an order holding respondent not in cOlnpliance with the cease and desist order of the Conllnission (CX 2B-F; see also Tr. 36-38 for lilnitation on receipt of exhibit and respondent's position regarding the saine). 11. During 1965, respondent supplied Gerald Rosenblatt of the Federal Trade Commission with copies of literature utilized by respondent at about that time. These copies were an envelope and a business reply card (eX 3A-C) ; a form letter from Hollywood Studios (CX 4A-B) ; a rush order blank, a self-addressed envelope, and a card (ex 5A-C) ; and a. form letter (CX 6). Respondent also supplied 1\11'. Rosenblatt with an advertisement (CX 7C-D; Tr. 44-48). This advertisement was used at the time and was placed by 1\11'. "'\Volins ' agency when he owned the business (Tr. 46). The advertisement appeared to be respondent' advertising, but respondent could not identify the nlagazine in which it appeared (Tr. 49; see explanation of hearing examiner at Tr. 54). 1:2. Respondent also identified a card that he had used in his business in the past but was not currently using (CX 8; Tr. 48). 13. On August 27, 1965, respondent sent to complaint counsel a letter regarding compliance in which he enclosed a notice of bulk transfer frolll 1\Ir. "'\Volins to himself (CX 10 A-B; Tr. 55). Respondent testified, ho\"\ever, that the statement he had made in his letter- "'\Ve are using the same advertising we have used the past 10 years -was incorrect (Tr. 55-57). The advertising is changed and has different pictures (Tr. 57).

14. Respondent supplied Commission s attorney I(eith Van Hoff with a current advertisement (CX 11), a form letter (CX 12 A-B), three form cards ( CX 13 .A... F), and a rush order blank (CX 14). These are currently in use (Tr. 60-61). ,Yhen a customer responds to the 12 A -advertisement (CX 11) he is sent routinely a form letter (eX and also a business reply card (CX 13 A-F without the handwriting; Tr. 57-67). Sometimes the customer also reeeives another form letter (CX 14; Tr. 68). If the picture cannot be made into fl, good enlargement, as determined later by the laboratory man, a form (CX 5C) is sent to the customer (Tr. 09-70).

15. Respondent admitted that he had recei,.ec1 a few complaints expressing surprise at the offer sent to sell coloring services ( Tr. 71-72) and that he had used the card (CX 8) in the distant past (Tr. 72). It was his recollection that the card had not been used "in many many could be used in eon-years" (Tr. 72). He agreed that the card (CX 8) nection with his current advertising (CX 11; Tr. 74-75). He argued that there was no reason to incorporate the information on Commission Certification of Record 73 F. C., Exhibit 8 into Commission Exhibit 11 for a fraction or one percent of the vie"wers that possibly don t have a third grade education and do not understand the advertisement (1'1'. 75). He added that "Lucky Strike don t tell you on television that if you buy their cigarettes, it may cause cancer. They just. tell you it. tastes good" (Tr. 75). 16. A bound volume of correspondence selected from the Commission s consumer complaint file by complaint colIDsel (CX 15) covering the period l\farch 5, 1951, through l\fay 24, 1967, was received, with re. spondent' s acquiescence, for the limited purpose of indicating the dates on which respondent' s advertisements and other forms were used and not for the truth of the statements of facts made by the complainants (Tr. 92).

17. Respondent estimated that about 50 percent of the persons who responded to his advertisements did not use the business reply card (eX 13 A -F) and that about 30 percent returned the ca.rds marked Do not color" (Tr. 93). There is presently a block or square on Commission Exhibit 13 A-F for the customer to check to permit respondent on payment of $100 each to use the pictures submitted, for advertising- (eX 13 A-F; Tr. 92). A number of customers check this block. A number of customers check this block, although they must write in "Do not Color." However, respondent does not feel it is necessary to put similar block or square for the customers to check if they do not desire to have the photographs hand colored (1'1'. 93). If customers do not send in the card with their pictures, they automatically get a black and white enlargement, usually within two weeks, although it could be thirty days (1'1'. 94-95). Respondent fell behind on one occasion when a camera breakdown occurred (1'1'. 95). If the consumer n1oves there also may be further delay (1'1'. 95).

18. Pictures entrusted to respondent are often irreplaceable (1'1'. 05- 96). Respondent offers two free enlargements to compete with the hundreds of thousands of drugstores (Tr. 97). Respondent claims that he gives to customers precisely what he advertises (1'1'. 97) and, in return for the free enlargements, all he asks is the privilege of sending the customer the information re.zarding: the hanel-coloring service that he offers (Tr. 98-99). He does not feel it is necessary to show in his adver., c, tisement how much the coloring service will cost (Tr. 98). 19. Respondent does not send out. pictures that have been hand colored unless the customer authorizes it in writing on a form like Commission Exhibit 13 A- , because of Post Office regulations (Tr. 94). I-Ie sends out two, three, or four hundred c. d. paekages with handcolored enlargements per week at his peak (Tr. 100) , and an average of 200 (Tr. 101). The price is $2. 50 per picture (Tr. 100). About 50 HOLLYWOOD FILM STUDIOS 899 893 Certification of Record to 100 people pay in advance to save c. d. charges (Tr. 102). About 10 percent of the persons who are sent hand-colored pictures c. reject thenl (Tr. 103), and respondent recalled that rejections had thnes run as high as 20 percent for various reasons ( Tr. 103-04). In case of a rejection of a c. , respondent returns the customer s original photographs and offers to sell the already produced hand-colored enlargements at a reduced rate (RX 1; Tr. 105-16). 20. Respondent testified that he did not intend to deceive his customers because a satisfied customer could be expected to return for many, many years (Tr. 105). He made changes in his ,advertisements because of the objections of the Division of Compliance of the Federal Trade Commission (Tr. 104).

21. The cost to respondent of making the "free" enlargements exceeds the handling charge in each case and where a negative has to be made the cost is greater than w he,n the customer submits a negative (Tr. 107-12) .

22. Respondent's literature (eX 12 B and also ex 15) has photographs of two children with a statement that they received $100 each. The business reply card(CX 13 A...c.F) contains a box that, when checked, grants permission to respondent to use the photographs sent by the customer for advertising if $100 is paid. The same photographs have appe,ared for many years and no one since that time has ever been paid $100 (Tr. 113-15).

23. Respondent's reply cards (like CX 13 A-F) contain a box to indicate by a check what color of free frame is desired. Respondent produced 3D cards where colored photographs were not ordered showing the use customers made of this card. Of 39 such cards 15, although not ordering hand-colored photographs, checked the box. One eard had Ifritten in handwriting No Color, No Frames . (RX 2; Tr. 118-22) .

24. The, Los Angeles Better Business Bureau evaluates complaints received and processes thmn by asking the company complained about for an explanation. Then, the Bureau reports to complainant (Tr. 126, 130-31). It also receives inquiries fro1n other better business bureans (Tr. 131). In the past two and one-half years, the Los Angeles Better Business Bureau received between 30 and 35 complaints, which are more than the uslUtlnumbe-r in cases involving mail-order houses that concerned the Hollywood Film Studios (Tr. 127); and it also received some inquiries fro1n other bureaus (Tr. 131). Primarily, these came from out of the state (TI'. 126). The pattern of the complaints received by the Bureau 'iyas: a response to an advertisement for a specific service, a notification frolll the company complained about 900 FEDERAL TRADE COMMISSION DECISIONS, :Certification of Record 73 F. T. of an additional offer of a service, a failure to respond to that offer and a failure to receive the initial service (Tr. 127, 129- , 133-34). The possibility exists that some of those complaints were because the consmners' failure to state their names (Tr. 138- 39) or because the consumers moved (Tr. 140). Some may also have been because of delay in the processing (Tr. 137-38). In the most recent case received by the Better Business Bureau, the complaint was concerning the quality of the color and the frame (Tr. 144-45). Although the withess for the Better Business Bureau originally testified that he uniformly received no response from the respondent (Tr. 134), later in his testimony, after looking at .his file, he stated that it had received unsigned responses (Tr. 136). He estimated that, on the basis of eases had in the past, the complaints received constituted only one or two percent of the persons who had complaints to make. (Tr. 128). Although he stated that the pattern did not vary in the case of Holly\,ood Film Studios (Tr. 133-34), the latest coll1plaint differeel from the pattern described in that it related to bad results (Tr. 144). Respondent in his ease-in-chief explained that if a poor picture was sent to him, he could not improve it, and he used his form letter Conllllission Exhibit G to explain that to the customer (Tr. 211).

25. The lTnited States Post Office De,partment has received 229 complaints about Hollywood Film Studios since January 1962 (Tr. 148). There is a pattern to these complaints (Tr. 148). The complainants thought that they were going to get free colored enlargements and free frames for the 20 cents they sent or that they were going to receive $100 for use of the pictures they sent in (Tr. 149). Other comp) paints "ere that the colors were not in oils; that the frames were not the same as indicated in the advertising; or that they were not able get back their negatives or to get the free enlargements promised by the advertisement (Tr. 149). 1\11'. Frank A. Orr, the experienced witness from the Post Office Department, estimated that there were about a hundred complaints that could be located, if all leads were developed for every unsolicited complaint received (Tr. 151). The Post Office Department on June 12, 1963, transmitted to the Federal Trade, Commission a letter of complaint, which included enclosures (Tr. 151-52; acquiesceneeex 16 A-G). This letter was received in evidence with the of respondent (Tr. 153). :Mr. 01'1' on questioning by respondent stated that he was sure respondent had authorization eards on file for all d. orders (Tr. 154) and that third-elass mail was not forwarded but destroyed in the absence of instructions (Tr. 153). 26. Respondent used T. V. Guide magazine on one occasion. It is a national publication with 79 regional editions in every major market HOLLYWOOD FILM STUDIOS 901 893 Certification of Record where there are television stations with different programming (Tr. 157-59) . A regional edition is circulated in the area covering the signal strength of the major television stations located there. Advertising is sold both nationally and by edition (Tr. 159-60). Similarly, there are two distinct sections of the book-one, the national editorial section and the other the local editorial and local programming section (Tr. 162).

27. Respondent through his advertising agency purchased space in four different regional editions of T. V. Guide (CX 17 A-D; Tr. 167- 68). The same one-eighth of a page advertisement (CX 18), with the exception of a department or key number indicating the location of the advertisement, was inserteel in the January 21st issue of T. Guide in the San Diego, California, Georgia, Iowa, and New Yark 1\fetropolitan Area editions (Tr. 189-92; ex 17 A- , ex 18). The total cost of the advertising was $823 (Tr. 192). The cost of the oneeighth of a page insertion differed in the New York area from the other localities o\ring to the size of the circulation (Tr. 193-94). 28. T.V. Guide magazine has a regular procedure of handling complaints received from persons who have responded to advertisements (Tr. 172). Complaints first go to the director of advertising services at headquarters for the magazine (Tr. 171). He then forwards the complaint to the T.V. Guide office involved with instructions to check it out and to get a satisfactory answer to complainant. At the same time, the director of advertising acknowledges the complaint. The eorrespondence is retained in the normal course until the complaint is satisfied (Tr. 172). About 20 complaints regarding respondent were referred to the attention of T.V. Guide s Los Angeles representative Don l\fark Hicks (Tr. 175). Commission Exhibits 19-24 are correspondence forwarded to 1\Ir. Hicks pursuant to the procedure above outlined (Tr. 172). These complaints were received in evidence as records kept by T.V. Guide in the regular course of business, not for the truth of the facts stated by the persons complaining, but for the fact that complaints had been made (Tr. 177-80). Following receipt of the documents, :Mr. Hicks took up the matter with respondent and with his advertising agency. 1\fr. Baskin told ~fr. Hicks that he had had equipment failure and that he would explain it to the complainants (Tr. 182). The T.V. Guide representative never received a copy of any letter of explanation and on one oecasion he got a second complaint from the same complainant (Tr. 176-77). It was brought out by respondent on cross-examination that he had told the T.V. Guide representative his camera had to be sent to the manufacturer in 1\1inneapolis and that it would take 30 days to get it back (Tr. 182). He also told the , 902 FEDERAL TRADE COMMISSION DECISIONS, Certification of Record 73 F.

1'epresentati ve about the volume of response and the length of time would take to get the material out (Tr. 183). Respondent had invited 1\'11'. Hicks, the T.V. Guide representative, to visit the plant, but although 1\11'. Hicks said he would try to come, he never did (Tr. 183). He explained that he did not believe anything would be accomplished by such a visit (Tr. 185) and that the breakdown of the equipment had no bearing on the complaints received (Tr. 184, 186). This was respondent' s first advertisement in T.V. Guide (Tr. 186 211), but T. Guide was aware that respondent was advertising in l\1cCall's magazine (Tr. 187). An advertisement in the l\1cCall's July 1967 issue which was substantially identical to Commission Exhibit 11 was identified by respondent and received in evidence (CX 26; Tr. 198). The representative for T.V. Guide recognized that it was possible, in eases where only one letter was received, that the person complaining later might have received all he was supposed to receive (Tr. 189). But lVIr. I-licks could not estimate what response was to be expected (Tr. 195-96) .

29. In his case-in-chief respondent testified that while he had had complaints frolll other publications, he had used such other publieations, leaders in their fields, for over 27 years without ever having an experience such as the one he had with T.V. Guide (Tr. 211-12). ,Vhen a communieation from the National Better Business Bureau to the Federal Trade Commission (CX 27) was drawn to his attention, the , respondent testified that he attempted to satisfy eomplainants by writing to them in handwriting and did not have time to send copies the T.V. Guide and to the better business bureaus, nor did he desire to incur the expense of hiring an additional typist to take care of (Tr. 215-16).

30. Respondent's advertising and the form letters and cards, which he has used during the past several years, have, except for changes not important here, followed the same pattern. (Compare CXs 3-7 Einclusive, with exs 11- , inclusive, and ex 18. Compare Tr. 73, lines 10 with lines 14-19. See also CX 15 received for limited purpose; Tr. 87, lines 11-20; and CPF pp. 11-12.

31. The basic plan through which respondent seeks to obtain responses is very similar to the plan found to be unlawful in the original proceeding. (See 47 F. C. 915- , 923-26.) References to motion picture stars have been eliminated, but the new scheme of holding out possible use of submitted photographs for advertising at a fee of $100 has been added (CXs 12 A- , 13 A-F).

, HOLLYWOOD FILM STUDIOS 903 :893 Certification of Record 32. Respondent's recent advertising and the form letters and cards which he used, are lllisleading in the following respects: (a) The advertisement-that is the initial contact with the prospective customer-is calculated to lead the customer to believe that he will obtain color enlargements free, although read literally the advertisement does not so state (CXs 11, 18). It states in large print "GET 2 FREE ENLARGEJ.\-IENTS of Your Favorite Photos, 5 x 7" Size." Then it asks for two color or black and white photos or snapshots and says State color of hair, eyes, clothes, for prompt information for finishing, in color with FREE frames." Respondent states that this means: you are to state this if you desire information. Readers, however, may well interpret it to mean: you are to give this information to us to use in finishing the free enlargements. The fact that color snapshots are solicited as well as black and white strengthens this impression. (b) The form letter that respondent. sends to the customer is also calculated to mislead. There is no l11ention at all of a charge on the face of the letter (CX 12 A). It merely asks for the return of the reply card enclosed and states If you do not wish your enlargements finished in color, mark card Do Not Color." On the face of the letter in a handwritten postscript, respondent refers to the reverse side, to " few pictures selected from our customers. These people received $100 for the use of their picture. Your picture may also be selected, so be sure to return the enclosed card. " This " " directs the customer s attention away from the first paragraph of the reverse side (CX 12 B). Even this paragraph, hmyever, does not state the charges, only "at very little cost" and "for the small charge we make." The size of type used by the respondent captures the, customer s interest and directs his attention to the photographs and testimonials on the reverse side. (c) The form of business reply caTCl (GX 13 A-F) enclosed with the form letter (CX 12 A-B) is lil;;:ewise calculated to direct the customer s attention away from the fact that he is authorizing a charge for $2. 60. In a box at the top of the card, in large print with ample space between lines, the statement appears: "YOUR PICTURE IS BEING CON- SIDERED TO BE USED IX OUR ADVERTISEl\IEl'\TS. YOU WILL RECEIVE $ 1 0 0 IF YOUR PICTURE IS SELECTED. CHECK BELOW\V AND RETURN." At the bottom of the card there is a box that if checked gives respondent permission to use the picture for $11. On the left in large type appears the word FREE" followed bv the headings "Frames with Colored Enlanre- . c.ments" and "Check Color You ,Vish." Then, follows a statement in smaller type that describes the frames, and below this are two boxes , ;;

Certification of Record 73 F. to be cheeked located opposite frame colors. All of these, pI us the statement in an arrow directing attention to the file number, distract the customer s attention from the real reason for the card, which is the statement: " ,?\Till Be Glad to Help with the Few Cents e. Fees as "'Yell as $2.60 ,Which Includes Artist's Labor for Each Oil Painting, Sent to me on Five Day Approval." This sentence in turn appe,ars 'after another sentence which reads: " I I-Iaye Checked the, Free-. Frame You Are to Include for the 'Deluxe: 5 x 7 Inch Enlargements That Yon Are Having Your Artist Hanel Color in N aturaI Oil Colol's. Thus, attention is directed a\\ay from the charge and toward the very dubious, possibility of a payment of $100 for use of the photographs submitted and toward the free frames.

33. Respondent had a number of compl.tints drawn to his attention and at one time he had a card prepared to explain his advertise.ment. This card was to be used when complaints were received (CX 8). Thus, respondent knew that the literature he was using was being misinterpreted by prospectiye customers. j)ioreover, in a number of cases, prospeeti,-e customers checked the free frame option when they did not order hand-colored photographs, 80 respondent could see that such customers had misunderstood the offer (Tr. 117-19). Respondenfs apparent reasoning may be gleaned from two statements he made during questioning by the Hearing Examiner. Respondent, after making a critical statement of Lueky Strike advertisements, saiel But as writing my advertising, I ainl it at the average intelligence, which is the masses, Rnd actual figures put out by mail order people. show the masses is less than fifth grade intelligence. (Tr. 87. ) In the other passage, after stating that he must give a bargain to get people to send their pictures all the way to California when they could go to a drugstore or supermarket, he claimed that his advertisement Iyas clear and that people got ,,"hat was advertised. Then he said" * * and thafs the reason In~ do the business that we do, because there certainly no shortage of drugstores across the United States and Canada" (Tr. 111-12). The impression created IYrLS that he was forced to use the type of advertising he did or he would not be able to get people to send their pictures to him rather than to the local drugstol and that anyone of fifth grade intelligence could understand the nature of his offer, so the fact that anyone else. might misunderstand ,yas unimportant.

CONCLUSIONS 1. The Federal Trade Commission has jurisdiction over respondent and the acts and practices herein described. Respondent's advertise- HOLLYWOOD FILlvf STUDIOS 905, 893 ,Certification of Record ments and the literature used in connection therewith hate been false' and misleading as those terms are used in the Federal Trade Com-, mission Act.

2. The changes in respondents practices made follo\Ying the decision of the Federal Trade COlllmission issued J annarv 26. 1951. have not been sufficient to remedy the misleading character of his practices., 3. Respondents current advertising and the current literature used in connection there\with are false and misleading within the meaning of Section 5 of the Federal Trade Commission Act. 4. It is immaterial that respondents business is not a profitable' one or that on critical analysis his ad\ ertising supplies what is specifica.lly offered, because the advertising and other literature used in connection therewith are misleading in character. 5. In order to prevent the misleading nature of respondent's. practices it is necessary and in the public. interest that the outstanding order of the Federal Trade Commission related January 26, 195L be reope.ned and modified to provide. more specifically against the misleading practices that are continuing.

6. There has been no competent evidence offered at the current hearings sufficient to establish the necessity for clauses (b) and (c) of paragraph 1 of the further order proposed in the Show Cause Order, dated September 9, 1966 (p. 5). Accordingly, such clauses should be deleted and paragraphs (a) and (d) combined. 7. It was contemplated by paragraph 4 of sa-id further order proposed by the order to show cause (p. 6) that other misrepresentations be prohibited. Accordingly, the misrepresentation in the aclvertise, ments utilizing the name Hollywood Enlargements and the misrepresentation by respondent that photographs sent free by him \'iere being considered for use in his advertisements should be specifically prohibited. ~Ioreover, the business reply card sent by respondent is so susceptible of misconstruction in its present form that its use should be prohibited unless it is recast in a form that will no longer be misleading.

8. The following recommendations should be adopted: R ecommenda tions It is recommended that:

(1) The Federal Trade Col1111lission reopen the proceeding against respondent concluded by decision dated January 26, 1951 (47 F. 913) and issue the order set forth in the order to, show cause, dated ~ 15 V. C. sec. 45.

41'8-345'-- 72- 906 FEDERAL TRADE CO:MMISSION DECISIONS Certification of Record 73 F. September 9, 1966, as in the public interest, with appropriate modification; and (2) The order as modified read as follows:

It is 0?'Cle1' That the respondent, Ned R. Baskin, an individual trading under the name of Hollywood Film Studios, or trading under any other name, and his agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, or distribution of plain or colored photographs or enlargements thereof, in commerce as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: (1) Representing, directly or by implication, that any photograph or enlargement, colored, or black and white, framed or unframed, will be made and delivered for a stipulated price unless such photograph or enlargement will in fact be made and delivered for the stipulated price without the imposition or attempted imposition of any condition not clearly disclosed in the representation.

(2) Representing, directly or by implication, that any offer is for a limited time only, when such offer is not in fact limited in point of time, but is made by respondent in the regular course of business.

(3) Using the words "free" or " given," or any other word or term expressly or impliedly importing a like meaning, in advertising, to designate, describe or refer to any article or merchandise which is not in fact a gift or gratuity or which is not given without requiring the purchase of other merchandise or the performance of some service inuring directily or indirectly to the benefit of the respondent.

(4) Using the name "I-Iolly"\yood Film Studios " together ,with pictures of motion picture celebrities, on letterheads or in advertisingmatter; or otherwise representing that the respondent has any connection whatsoever with the motion picture industry. It is f1.lTthe1' 0?'Cle1' That respondent Ned R. Baskin, an individual doing business as Hollywood Film Studios, Hollywood Enlargements or under any other name or names, and respondent's representatives agents and employees, directly or through any corporate or other device, in connection with the advertising, furnishing, offering for sale sale or distribution of photographs, photographic enlargements, photographic coloring or enlargement servic.es, or any other products or services in commerce, as "commerce.e" is defined in the Federal Trade Commission Act, do forth,,-ith cease and desist from: , HOLLYWOOD FILM STUDIOS 907 893 Certifica tion of Record (1) Offering to furnish any photograph or 'any enlargement of a picture, photograph, print, snapshot, negative, slide, color slide or similar article, either free of cost or for any stated amolUlt or compensation, unless the offered photograph or enlargement is in every instance furnished upon the request therefor when accompanied by the stated amount 01' compensation, if any, without first sending to the requesting person any form of communication offering to sell respondent' s coloring services or any other services. (2) Offering to furnish a black and white photograph or enlargement of a picture, photograph, print, snapshot, negative slide, color slide, or similar ,article, either free of cost or for any stated amount or compensation, unless in imnlediate conjunction with such offer, in letters of equal size and prominence, the disclosure is made that the offered photograph or enlargement is black and white.

(3) Requesting information for having any photograph, enlargement, or similar ,article colored, in any advertisement or in any form of communieation, unless in each instance in which such request for information is made:

(a) There is clear and conspieuous disclosure that forthcoming is an offer to sell respondent' s coloring services; and (b) There is clear and conspieuons disclosure of the full amount of respondent's charge for such eoloring services. (4) Falsely stating that photographs submitted to respondent are being considered for use as advertisements and that a fee of $100 each will be paid for those selected when sneh is not the ease. (5) Utilizing a business reply card for return by persons who have submitted a photograph or photographs for free enlargement unless such business reply card is rec.ast. to : (a) Delete all reference to consideration of photographs for use in advertisements except ' R simple statement with a you pay me $100. 00 each you box to check as follows: "0 If have my permission to use a copy of any of my pictures for your 'advertising.

(b) Delete all reference to free frames except the statenlent If you desire to authorize our charge of $2.60 (or other amount) for hand-eoloring service please check the color frame desired~' preceded by boxe, s opposite the frame colors available.

Opinion 73 F.

(c) Delete all other statements except the admonition to use the file number and blank for name 'and address. (d) Add statements (all of which must be in type of equal size to the largest used and in as prominent a position as any other statement on the card) to the following effect: (i) Return of this carel signed by you is an agreement to pay $2.60 (or other specified charges) for hand-coloring each photograph; and an agreement to pay the d. charges; and (ii) Identification of each photograph by enc.losure or reference to file number.

(6) lVIisrepresenting in any manner the terms of any offer or the services provided by respondent.

I t is f1.l1'thep opdered That the respondent herein shall, within sixty (60) days after service upon him of this order, file with the Commission a report in writing setting forth in detail the manner and form in which he has complied with this order.

OPINION OF THE COl\DIISSION l\IA Y 1968 By ~1A.cINTYRE Co77?,1nissionep:

The Commission, on September 9, 1966, issued an order requiring respondent herein to show cause why this matter should not be reopened and the Commission s order to cease and desist issued against respondent on January 26 19'51 (47 F. C. 913J, should not be amended in eonformity with the terms set forth in the sho"\v cause order.1 Thereafter respondent responded to such show cause order, and the Commission, in the circumstances and pursuant to its Rules of Practice, referred the matter to a hearing examiner for the purpose of receiving evidence in support of and in opposition to the question of w hethel' or not the public interest requires that the Commission reopen this proceeding and the modification of the order to cease and desist. ill the manner indicated.

The hearing examiner, on October 17, 1967, after holding the hearings conducted pursuant to the Commission s direction, certified to the Commission the record in the matter, his report thereon and his reCOJll- 1 The order to cease and desist contained in the show cause order is reproduced in Appendix attached hereto. The first part of such order, up to the asterisks separating' the two parts, is the original order to cease and desist. (See In the Natter of Ned R. Baskin 47 F. C. 913 , 928-929 (1951). ) The second part of such order constitutes the propospll modifica tion of the original order to cease and desist. , HOLLYWOOD FILM STUDIOS 909 :893 Opinion mendation. The examiner made express findings on the issues presented and he recommended that the Commission reopen the proceeding against respondent and issue .all order as set forth in the show cause order with "appropriate modification as in the public interest. This matter is now before the Commission for its findings and conclusions on the basis of the hearings held and for an appropriate order in the light thereof.

The Commission issued the show cause order in this proceeding because it believed the.re was reasonable doubt that the language of the order to cease and desist would as intended by the Commission, remedy all the misleading and deceptive advertising practices found to have been engaged in by the respondent. In particular, the Commission believed the order inadequate to prevent respondent from representing in an advertisement that it \yould furnish colored 5x7 enlargements for a nominal amount or no charge when, in fact, the purpose of such advertisement was to gain the opportunity to send sales literature to prospective customers to induce them to purchase respondent' photographic coloring and enlarging services. The Commission therefore indicated in its show cause order that it ,your c1 amend the order to cease and desist by adding provisions thereto which in part would require respondent to cease and desist from offering to furnish a photograph or enlargement unless he, in fact, furnisl1es the enlargement (or photo) upon the meeting by the customer of the terms of the initial offer and unless he returns simultaneously the negative, slide or photograph "\without the imposition or attempted imposition of any condition and without first sending to the requesting party a communication offering to sell respondents coloring services. The provisions to be added "\yould also include certain requirements as to disclosures in connection with the offering of a blaek and white photograph or enlargement and in connection yvith the request for information as to the supplying of coloring sen"iees. Finally, the new provisions would include a prohibition against misrepresenting in any manner the terms of any offer or sen"ices provided by respondent. Respondent engages in, and has engaged in, for many years, the business, \'\hieh it conducts by mail order in interstate commerce, of making and selling enlargements of photographs (or negatives or sli des) 811 applied by customers in response to his advertisements. Respondents pattern of doing business has not changed in any basic manner from that used at the time of the original proceeding herein. His principal advertising representations are now, and ha\"e been through 2 For the exact terms of the provisions to be added to the order to cease and desist under tbe sbowcause order, . see Appendix llttacbed hereto. ......

910 FEDERAL TRADE COM,lvIISSION DECISIONS Opinion 73 F.

the intervening years, essentially the same as those previously considered. The changes are primarily in the details as to the offer made and do not go to the substance of the scheme.

Current advertising materials of the. respondent were received into the record. These include a magazine advertisement (attached to the findings of fact as Attachment A), a form letter sent to the customer who responds to the advertisement (attached to the findings as Attachment B-1 and -2), and the business reply card (attac.heel to the findings as Attachments C and D).

A typic.al magazine or periodical advertisement of the respondent used at the present time, reads as follo\\s: Get 2 FREE EXLARGE~IENTS of your fa,orite photos. 5x7" size. Send 2 color or black and ",white photos or snapshots (returned unharmed). State color of hail', eyes. clothes, for prompt information for finishing, in color with FREE frames. Enclose 20c for handiing. Hollywood Enlargements, 7471 ?llelrose Avenue, Dept. 4069, Hollywood, California 90046. (eX 11, This advertisement states or implies that respondent \\-ill forthwith, upon rec.eipt or photos or snapshots supply free color enlargements upon the enclosure of 20 cents for handling and \without any further c.onclitions or consideration.3 The fact is, hO\yeTer, and the hearings clearly establish, that the ofter is not available unconclitionallv and the enlargements ,rill not be sent fortlnTith. The condition is that customers must first. receiye aclyertisinQ' literature essentially offerin!2,' respondents c.olol'ing services and seekin&!" the return of 11 bw~iness reply card filled out by the customer. It is not until after this further solicitation that a c.customer will rec.eive his enlargements. He~;pondent, although he appears to offer enlargements free and ,,-without. further obligation, something in the nature of a get-acquainted offer, is in reality ga.ining the opportunity to sell his coloring services. ,Yhile the delav for further solicitation may seem to he only a temporary inconvenience to the customer, it is more than that. The opportunity which is thus obtained by respondent is used as the occasion to further mislead and deceive his customers. The pieces of advertising literature attaehec1 to the findings of fact themselves testify to the possibility of confusion and deception from their use. See the examiner s findings, pages 90:2-904 of his c.ertific.ation, and the discussion below. l\tloreover, the testimony taken sho\\-s that responclenfs advertis- 3 While the ad instructs: " State color of hair, eyes. clothes, for prompt informn tion for finishing, in color with FREE frame!:' " this does not, on its face, purport to be a condition to the sending of the advel'tisrd enlargements. nor does it inclicnte deln.y in the receipt of the enlargements for the purpose of fnrtl1er solicitn.tioll, ::--Ioreo\'er, even if this sentence can be construed as suggesting the condition to the furnishing of the advertised items, it is ambiguous and has the tendency to mbleac1 and deceive. '.rhe representation as to furnishing colored photographs will be covered in the subsequent discussion. ... ), HOLLYWOOD FILM STUDIOS 91I 893 Opinion ing is misleading alld that it has the tendency and capacity to mislead, and decei ve.

The deception here is not lessened by the fact that respondent eventually sends the enlargements as offered without further cost to the customer even where the customer does not. return the business reply card. That is because the customer is not getting that which the initial advertising promises to give him the prompt and unconditional receipt of the enlargen1ents upon the meeting of the terms of the offer. Of. Federal T1'ade 0017'&17iission v. AlgO?na L'l.t1nber 00. 291 U. S. 67, 78 (1934) .

Respondent' s advertisements are other\\"ise false and deceptive, as the examiner found in his finding numbered 32. The initial advertisement appearing in a magazine or periodical implies, at least, that the cus-, tomer will obtain color enlargements. It requests the return of information as to color of hair, eyes and clothes for finishing in color, and it also lnentions submitting color snapshots. All of this could lead the unsophisticated and the credulous to believe that pictures to be furnished would be in color without further p:1yment. The form letter (Attachment B-1 and -2 of findings), as well as the business reply card (Attachments C and D of findings), has the capacity and tendency to mislead a customer into unknowingly or unintentionally ordering colored photographs for which he is authorizing a c.charge or $2.50. This is done, as the examiner finds, by the use of ambignous language and by the clever referring of the reader to other items in the advertising literature. The juxtaposition and prominent type of such statements as "Free Frames "\With Colored Enlargements Check Color You 'Vish" and other statements distract the. customer attention from the rea.l reason for the card, which is to sell respondent' coloring services. The emphasis on the claim that there is a possibility (not true) of receiving $100 for the use of the customer s pictures would tend to increase returns of the business reply card and the chances or the customer unintentionally ordering coloring sernees. oilRobert D. Mott, merchandising manager of the Los Angeles Better Business Bureau (tr. 124 et seq. ; Frank A. Orr, United States Postal Inspector (tr. 147 et seq, ; and Don Mark Hicks, advertising representative of TF Guide magazine (tr, 157, et seq. all testified concerning the general nature of the complaints receb-ed as to respondent' s practices and advertising. For instance, Frank 01'1' testified that " Generally, the complaints followed the same basic pattern. First of a11, we receive most of our complaints from people who say that they have answered an advertisement and they thought they were going to get photographs enlarged, and free frames and color, and subsequently, the;y receive photographs for which C. D. charges were asked * (tr. 149). "The letters the people have written to me indicate that tbe~' felt they were mislead (sic) because they felt that they were going to get this free colored enlargements, (sic) and free fr:lines, for 20 cents which they sent in, in answer to au advertisement in a publication. This is generally how they did feel they were mislead~ (sic)" (tr. 149-150)". 912 FEDERAL TRADE CO~IMISSION DECISIONS Opinion 73 F. T.

The likelihood of ordering by mistake is helped by the fact that the business reply card does not contain a box (( J) for checking off "Do not color." The recipient has to understand what is required of him and, if he is going to return the card, that he must specifically write thereon that he does not want the coloring services. Not all people will be so knowledgeable as to readily see through this device and realize that they do not have to order the eoloring services. Thus, the potential for deception is great. :J\ioreover, there would be the tendency in this advertising for the recipient to order the color photographs in the belief that this would be necessary to assure return of valued, and possibly irreplaceable, negatives or photos.

The precise issue before the Conlnlission is whether or not it is llec- ,essarv to modifv the order to cease and desist herein to effectivelv prohibit respondent's advertising misrepresentations and decepti\. practices. The Commission, as stated in its show cause order, issued in 1951 its order to cease and desist, which it believed was the most suitable remedy to correct the misleading advertising practices found to have been engaged in by the respondent. In view of all the circumstance~, including the fact that respondent is continuing today to advertise and to use some of the same representations and to engage in substantially the same advertising scheme which the Commission previously found to be misleading and to constitute unfair and deceptive acts and practices injurious to the public creates substantial doubt that the Commission s order issued in 1951 is adequate to correct. the illegality and to protect the public interest. (See, for comparison, the findings of fact and conclusions of the Commission In the ill Clue?' of JYed R. Baskin ) 5 47 F. C. 913 922-928.

It is concluded, therefore, that the public interest requires that the order to cease and desist issued herein on January 26, 1951, be modified. This is in accordance with the examiner s recommendation. The examiner, ho\\ever, proposed that the order to cease and desist contained in the Commission s show cause order be modified in certain respects in view of the evidence adduced at the hearing. First, in the second part of the order to cease and desist, he would eliminate subparagraphs 1 (b) and 1 (c) (see Exhibit .1\.., attached). These prohibit the offering "With reference to respondent's compliance '\\ith the Commission s order to cease and desist, the record contains, for the period from January 19051 to ::\oyember 1951 , correspondence between respondent and the Commis"ion s Diyision of Compliance, as well as a COm" of the July 5, 1957 , United States District Court, l\"orthern District of Illinois, Eastern Division, order holding respondent in viola tion of the Commission s cease and desi"t order, assessing a fine of a total of $900 and entering a permanent injunction. These documents were received not for the purpose of 8showing the truth of the facts contained therein but to show the existence of the documents and related materials. HOLLYWOOD FILM STUDIOS 913' 893 Opinion to furnish of a photograph or enlargement (1 (b)) 1111Ie8S the negative, slide or photograph forwarded is returned simultaneously with: the offered photograph or enlargement and (1 (c)) without the imposition or attempted imposition of any condition. The examiner concluded there was no competent evidence to show the necessity for these provisions. ,Ye disagre, As to the aforementionec11 (b), the evidence shows a pattern of complaints from customers asserting difficulties and delay in getting back their negatives and photographs. 1Yhile it appears that respondent eventually will return these items, along with the enlargements, this is only after a period of time has ela.psed or upon the receipt of the business reply card fro1~l the customer. The evidence further shows that the photographs entrusted to the respondent are often irreplaceable, and therefore treasured, items. Delay in their return is a matter of importance to the customer. It is not improbable, considering respondent' s method of ope.ra.tion, that he could engage in a variant his scheme by sending the finished enlargements and retaining the photographs (or negatives or slides) while making his solicitation to sell coloring services. In the circumstances we believe it is necessary to , make explicit in the order that the photographs, negatives or slides must be returned simultaneously with the enlargements. As to the aforementioned 1 (c), which prohibits the offering of any photograph or enlargement unless such is in fact furnished in every instance and "without the imposition or attempted imposition of any condition " this provision goes to the heart of the matter now before the Commission. The Commission here is considering the need for modifying the order in view of the fact that respondent did impose or attempted to impose a condition Le. the opportunity to sell his coloring services, which was not stated in the initial advertisement and which has misled or tended to mislead and deceive customers. Such a practice is specifically prohibited by 1 (d), but we believe it is also necessary to include a general prohibition against the imposition or attempted imposition of any other kind of condition. Accordingly, we believe that the subparagraph 1 (c) is justified. The hearing examiner also adds to the order two new provisions which he believed to be appropriate based on the evidence adduced in the hearing. One of these is the prohibition against the fa.lse representation that photographs submitted will be considered for use as advertisements a.nd that a fee of $100 will be paid therefor. The other' is a detailed prohibition which would attempt to "recast" the respondent:s business reply card.

Opinion 73 F.

Consideration will first be given to the latter. The recasting or rewriting or respondent's advertising literature in the detailed way recolllmenc1ed by the hearing examiner does not appear to be warranted in the circumstances of this case. Other prohibitions of the order would in effect require respondent to revise the language in the business reply card so that it will no longer contain the challenged misrepresentations. Furthermore, respondent will be subject to a prohibition against soliciting the sale of coloring services by the use or such a business reply card prior to the returning of the finished enlargements as advertised so that the business reply card will not hereafter be as likely to contribute to deception. It is preferable, we believe, that the order against respondent be a prohibition against deceptive practices, thus permitting respondent to choose its own advertising representations. Respondent, of course, pursuant to B 3.61 (c) or the Commission s Rules or Practice, may request and receiye advice as to whether any proposed course of action will constitute compliance under the order. that as The other new prohibition recommended by the examiner is to the $100 offer for use of the customer s pictures. The business re,ply card states in bold letters:

YOUR PICTURE IS BEING CONSIDERED TO BE USED IN OUR ADVER- TISEMENTS. YOU vnLL RECEIVE $100 IF YOUR PICTURE IS SELECTED. CHECK BELOW,V AND RETURN. (ex 13c.

Other references to this offer are made in the business reply card and in the letter. This is a come-on; an inducement to the customer to return the business reply card. It is cleverly phrased and positioned to create the illusion that the customer has some possibility or earning this $100. This representation substitutes for one used at the tilne of the original hearing, consisting of a free offer or a picture or a movie evidence that this offer is raise star. It is well demonstrated by the and deceptive.. According to the testimony of ~fr. Baskin, the. respondent, the current pictures have been used for many years and the cusreceive $100 and tomer' s supplying these photographs were the last to $100. 1\ioreover, the ,were possibly the only customers evel' receiving is that of respondent~ current picture appearing in magazines The offer or the $100 for use or the customer s picture, while raIsedaughter. and deceptive in and of itself, is ttlso an integral part of the whole scheme. It is contained in the advertising literature-both the letter and the business reply card-which is sent to the customer after the been received. It is part or customer s photographs or negatives have the inducement to the customer to return the business reply carel and , HOLLYWOOD FILM STUDIOS 915 893 Appendix A materially enhances the possibility that the customer will order the coloring services.

~lisrepresentation as to the $100 oifel' would be l)l'ohibitecl b;y the general prohibition against misrepresentation of the terms of nny offer or the services provided by respondent in the Commission s order (see paragraph 4 of the second part of the order in the Commission show cause order in Appendix A). Nevertheless, since this specific representation is used at this time, '\ve believe an appropriate prohibition as to its deceptive use is needed in the modified order. The order which we will enter will flatly prohibit any reference to payments for use of pictures in advertising because it does not appear that respondent has or ever had a bona fide program to make such use of customers' pictures. At the nlost he made, payment only in one or two isolated instance.es. If respondent in the future develops a regular program of this nature, he may request the modification of the Commission order to permit such representation.

The Commission s Findings of Fact, Conclusions and Final Order are attached hereto. The final order embodies the Commission s views :as expressed above.

APPENDIX A ORDER TO CEASE AND DESIST CONTAINED IX SHOW CAUSE ORDER It 18 ordered. That the respondent Xed R. Baskin, an individual trading under the name of Hollywood Film Studios, or trading under any other name, and his agents, representatives and employees, directly or through any corporate or other device, in con nection with the offering for sale. sale, or distribution of plain or colored photographs, or enlargements thereof, in commerce as "commerce" is defined ill the Federal Trade Commission Act, do forthwith cease and desist from:

(1) R.representing, directly or by il1lplica tioll. that any photograph or enlargement, colored or black and ","white, framed or unframed, will be made and delivered for a stipulated price, unless such photograph or enlargement will in fact be made and delivered for the stipulated price without the imposition or attempted imposition of any condition not clearly disclosed in the representation.

(2) Representing, directly or by implication, that any offer is for a limited time only, when such offer is not in fact limited in point of time, but is made by respondent in the regulnr course of business. (3) Using the words "free or "given " or any other word or term expressly or impliedly importing a like meaning, in advertising, to designate, describe, or refer to any article of merchandise which is not in fact a gift or gratuity or which is not given without requiring the purchase of other 916 FEDERAL TRADE CO:MMISSION DECISIONS Findings 73 F~T.

merchandise or the performance of some service inuring directly or indirectly to the benefit of the respondent.

(4) Using the name "Hollywood Film Studios," together with pictures of motion picture celebrities, on letterheads or in advertising matter; or otherwise representing that the respondent has any connection ,whatsoever' with the motion picture industry.

:01 It is Im'ther onlered, That respondent Ned R. Baskin, an individual doing' business as Hollywood Film Studios, or under' any other name or names. and respondent' s representatives, agents and employees, directly or through any corporate or other device, in connection with the advertising, furnishing, offering for sale, sale or distribution of photographs, photographic enlargements, photographic coloring or enlargement services. or any other products or senices in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Offering to furnish any photograph or any enlargement of a picture, photograph, print, snapshot, negative, slide, color slide, or similar article either free of cost or for any stated amount or compensation (a) unless the offered photograph or enlargement is in every instance furnished upon the request therefor, when accompanied by the stated amount or compensation, if any, and (b) unless the negative, slide or photograph forwarded pursuant to the offer is returned simultaneously with the offered photograph or enlargement, and (c) without the imposition or attempted imposition of any condition and (d) without first sending to the requesting person any form of communica tion offering to sell respondent' s coloring services or any other services.

2. Offering to furnish a black and white photograph or enlargement of a picture, photograph, print, snapshot, negative, slide, color slide, or similar article, either free of cost or for any stated amount or compensation, unless in immediate conjunction with such offer, in letters of equal size and prominence, the disclosure is made that the offered photograph or enlargement is black and white.

3. Requesting information for having any photograph, enlargement, or similar article colored, in any advertisement or in any other form of communication, unless in each instance in which such request for information is made (a) there is clear and conspicuous disclosure that forthcoming is offer to sell respondent' s coloring services and (b) there is clear and conspicuous disclosure of the full amount of' respondent' s charge for such coloring services. 4. Misrepresenting in any manner the terms of any offer or the servicesprovided by respondent.

FINDINGS OF FACT, CONCLUSIONS AND FINAL ORDER The Commjssion having reopened this proceeding and having issued its order of September 9, 1966 to show cause why the order to cease HOLLYWOOD FILM STUDIOS 917 893 Findings and desist issued on January 26, 1951 (47 F. C. 913), should not be Jl10dified; and the hearing examiner, pursuant to the Commission direction, having conducted hearings and having certified the record of said hearings to the Commission, together with his recommendation that the Commission reopen the proceeding against respondent and issue r~ modified ordel' ; and reasons stated in the The Commission having deternlined, for the accompanying opinion, that the public interest requires a modification of the Commission s order issued herein on January 26, 1951, in the respects described in the opinion, now enters its findings of fact, conclusions and final order.

FINDINGS OF FACT 1. Respondent, Ned R. Baskin, resides at 5847 North Corteen Place North Hollywood, California, and conducts his business as a photographer at 7021 Santa ~Ionica Boulevard, Los Angeles, California (tr. 5) 2. Respondent, as sole proprietor, does business under the name Holly-n' ood Film Studios (tr. 5, 198), but in some Cllrrent advertisements he uses the name Hollywood Enlargements and the address '7471 :Jielrose Avenue, Hollywood, California, an arrangement which permits the checking of incoming mail for the purpose of comp~nsating the advertising agency (tr. 198-200).

3. Respondent makes enlargements of photographs or negatives has a hand-coloring service to tint black and white. enlargenlents and an arrangement to send color photographs to a photofinishing laboratory that specializes in color (tr. 6). 4. The principal source of respondent:s income is mail-order business (tr. 6). I-Ie uses direct mail solicitation and advertising in newspapers and magazines (tr. 6-7). l\Iagazines are now his principal mediUlll of advertising (tr. 8). These include movie magazines :McFadden Publications and Ideal Publications (tr. 7). 5. Respondent has been in the mail-order business for approximately 30 years (tr. 6). He employs ten pe-rsons in the business and receives an approximate average of 1500 responses to his advertisements each week (tr. 12--13, 6. Responclenfs method of doing business is as follows: He publishes advertisements in magazines or periodicals. A typical recent ad states:

G!:'t 2 FREE E~LARGE::\IENTS of your favorite photos, 5x7" size. Send 2 color or black and white photos or snapshots (returned unharmed). State color of hair, eyes, clothes, for prompt information for finishing, in color with , , , Findings 73 F. T.

FREE frames. Enclose 20~ for handling. Hollywood Enlargements, 7471 Melrose Avenue, Dept. 4069, Hollywood, California 90046. (CX 11. See Attachment A attached hereto.

When a customer responds to such an advertisement he is sent routinely a form letter (CX 12-a b; see Attaclm1ent B- 2) and also a business reply card (CX 13-a-f; see Attachments C and D) (tr. 57-70). 7. The form letter includes this representation: S, On the reverse side are a few pictures selected from our customers. These people received $100 for the me of their picture. Your picture may also be selected, so be sure to return the enclosed card. (CX 12-a. The business reply card contains the following statements, among others:

YOUR PICTURE IS BEING CONSIDERED TO BE USED IN OUR AD- VERTISEMENTS. YOU 'WILL RECEIVE $100 IF YO-cR PICTURE IS SELECTED. CHECK BELOW AKD RETURN.

Yes, if you pay me $100 each, you have my permission to use a copy of any of my pictures for your advertising.

I have checked the free frame you are to include for the "Deluxe" 5 :x: 7 inch enlargements that you are having your artist hand color in natural oil colors. I will be glad to help with the few cents c. d. fees as well as $2.50 which includes artist' s labor for each oil painting, sent to me on five day approval. (CX 13- , -c.

8. Respondent estimates that about 50 percent of the persons who respond to his advertisements do not use the business reply card (CX 13-a b) and that about 30 percent returned the cards markecl " not color (tr. 93). If customers do not send in a card with theirpictures, they will get black and white enlargements eventually, after some delay. The delay may be thirty days (tr. 94-95). 9. Pictures entrusted to respondent are often irreplaceable (tr. 95-96) .

10. Respondent is using substantially the same advertising methods and certain of the same advertising representations at the pi'esent time that he was using on or before January 26, 1961, when the Commission issued its order to cease and desist. Respondents achrertising representations in the form letters and reply earcls which he has used during the past several years has, except for minor changes not going to the substance, followed the same pattern (CXs 3 through 7-d, inc.lusive: CXs 11 through 14, inclusive; CX 15 (received for a limited purpose) , CX 18; tr. 73) . Respondent testified to the effect that he has used the same -advertising for the past ten years, the only significant difference being that the current -advertising uses different pictures (tr. 57). Compare with findings of the Commission at 47 F. C. 922-927. HOLLYWOOD FILM STUDIO:::; 919 893 Findings 11. Respondent' s advertisement currently used in the magazines and periodicals (ex 11) states or implies, among other things, that (a) the customer will obtain free color enlargements and (b) the customer, upon enclosing 20 cents and a photo or snapshot, ,,-ill forthwith receive, without 'any further conditions or consideration, the enlargements offered.

12. In truth and in fact the customer (a) does not receive a color enlargement without additional payment and (b) does not receive two enlargements forthwith and unconditionally. Respondent does not supply colored enlargenlents unless the customer returns the business reply card sent to the customer aiter the receipt of the customer photographs and 'agrees to pay the c. d. fees, as well as $2.50. The condition to the receipt of the two enlargements is that the customer must first receive additional advertising literature from respondent seeking to senthe customer respondent's coloring services. It is only upon the return of the business reply card or upon the expiration of a period of time subsequent to the receipt of the advertising literature sent by respondent that the customer will receive the enlargements offered (tr. 57- , 126-127, 129-130, 133-136, 149-150, 175-177). 13. Respondent, in its advertising literature, has further represented that if the customer checks a box on the business reply card, the customer s picture will be considered to be used in respondent' s advertiselnents, for which respondent will pay the customer $100 (CXs 12-a 13-a-f) .

14. In truth and in fact the $100 offer is a spurious offer. Evidence shows that the currently used pictures have been used for many years and the customers supplying the photographs used in such pictures were the last to receive the $100 and were possibly the only customers ever receiving $100 (tr. 113-114). The picture used in the eurrent advertisement (eX 11) is that of respondent's daughter (tr. 60). 15. Aecordingly, the aforenlentioned scheme of adve-rtising and advertising r~presentations now used by respondent are false, misleading and deceptive, and they have the tendeney and capaeity to mislead and deceive the purchasing publiCo into the erroneous and mistaken belief that they were and are true, and into the purchase of respondent' products by virtue of these erroneous and mistaken beliefs (tr. 126-127 129-130 133-136 149-150) .

Final Order 73 F.

CONCLUSIONS 1. Respondent's acts and practices as herein found have been and are all to the prejudice and injury of the public and constitute unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. 2. In view of the findings herein there is a reasonable doubt that the order to cease and desist issued by the Commission against the respondent on January 26, 1951 (47 F. C. 913, 928), is an adequate remedy to correct the acts and practices found to be unlawful. 3. The public interest requires modification of the order to cease and desist of January 26, 1951, in accordance with the above findings of fact.

FIX AL ORDER It is 07'(lered That the, respondent, Ned R. Baskin, an individual trading under the name of Hollywood Film Studios, or trading under any other name, and his agents, representatives, and employees, directly or through any corporate or other device, in connection with the offering for sale, sale, or distribution of plain or colored photographs, or en largements thereof, in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: (1) Representing, directly or by implication, that any photograph or enlargement, colored or black and white, framed or unframed, will be made and delivered for a stipulated price, unless such photograph or enlargement will in fact be made and delivered for the stipulated price without the imposition or attempted inlposition of any condition not clearly disclosed in the representation.

(2) Representing, directly or by implication, that any offer is for a limited time only, when such offer is not in fact limited in point of time, but is made by respondent in the regular course of business.

(3) Using the "ords "free" or "given " or any other word or term expressly or impliedly importing a like meaning, in advertising, to designate, describe, or refer to any article of merchandise which is not in fact a gift or gratuity or which is not given without requiring the purchase of other merchandise or the performance of some service inuring directly or indirectly to the benefit of the respondent.

( 4) Using the name "Hollywood Film Studios " together with pictures of motion picture celebrities, on letterheads or in adver- HOLLYWOOD FILM STUDIOS 921 893 Final Order rising matter; or otherwise representing that the respondent has any connection whatsoever "with the motion picture industry. It 'is fl.t1'the7' 01'dered That respondent, Ned R. Baskin, an individual doing business as Hollywood Film Studios, or under any other name or names, and respondent's representatives, agents and employees, directly or through any corporate or other device, in connection with the advertising, furnishing, offering for sale, sale or distribution of photographs, photographic enlagrements, photographic coloring or enlargement services, or any other products or services in commerce, as "commeree~' is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Offering to furnish any photograph or any enlargement of a picture, photograph, print., snapshot, negati,- , slide, color slide or similar article, either free of cost or for any stated amount or compensation:

(a) Unless the offered photograph or enlargement is in every instance furnished upon the request therefor when accompanied by the stated amount or compensation, if any, and (b) Unless the negative, slide or photogra.ph forwarded pursuant to the offer is returned simultaneously 'with the offered photograph or enlargement, and (c) ,Yithont the imposition or attempted imposition of any condition and (d) ,Without first sending to the requesting person a.ny form of comn1unication offering to sell respondent' s coloring services or any other services.

2. Offering to furnish a black and white photograph or enlargement of a picture, photograph, print, snapshot, negative, slide" color slide, or similar article, either free of cost or for any stated amount or compensation, unless in immediate conjunction with such offer, in letters of equal size and prominence, the disclosure is made that the offered photograph or enlargement is black and w white.

3. Requesting information for having any photograph, enlargement, or similar article colored, in any advertisement or in any other form of communication, unless in each instance in which such request for information is made:

(a) There is clear and conspicuous disclosure that forthcoming is an offer to sell respondent' s coloring services, and 418-345-- 72---- Attachment 73 F.

(b) There is clear and conspicuous disclosure of the full amount of respondents charge for such coloring services. 4. Representing that photographs, including those made from submitted negatives or slides, received from customers are being considered for use as advertisements or that a fee of $100 or any other amount each will be paid for such use. 5. j\lisrepresenting in any manner the terms of any offer or the services provided by respondent.

I t is fui/'ther ordered That respondent, Ned R. Baskin, shall, ,within sixty (60) days after service upon him of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which he has complied with the order to cease and desist. Attachment A (PHOTO) Get 2 Free Enlargements of your favorite photos, 5x7" size. Send 2 color or black and white photos or snapshots (returned unharmed). State color of hair eyes, clothes, for prompt information for finishing, in color with FREE frames. Enclose 20~ for handling. Hollywood Enlargements, 7471 Melrose Avenue, Dept. 4069, Hollywood, California 90046 Attachment B- HOLLYWOOD FIL;\I STUDIOS 7021 Santa Monica Blvd., Hollywood 38, California (PHOTO) (PHOTO) Dear Friend:

Your pictures have just arrived. ,Ve feel certain they are pictures which you treasure very highly. That is why we are sure that you will want them given special attention and come hack to you a real work of art. As advertised we are sending you prompt information on having your one or two originals made into Deluxe 5x7 enlargements, beautifully finished in natural lifeclike ~olors and mounted in free frames.

WE HA. VE SOME WONDERFUL NEWS FOR Tau. Since the color of hair eyes and clothing was included, we will make a Deluxe professional 5x7 enlargement from each of your cherished photos or negatives and with your permission have our expert artist ACTUALLY HAND COLOR THEM IN NATURAL LIFE- LIKE COLORS. We will then mount them in beautiful Pearl Ivory or Opal Gray Lucite frames. These gorgeous oil-colored enlargements will be mailed promptly together with your originals.

THE UNFINISHED WORK * * * In any picture without color, however good, the "work" so to speak really remains "unfinished. " It is only "finished" when you portray a person as living (true, natural and life-like). In other words, you need color to transform a plain photo to a "finished" work of art. THE FINISHED WORK * * * Everyone knows that colored photography and COLOR movies are wonderful because they bring out people and surroundings so natural and life-like. 1'\OW, thanks to the magic touch of our expert artists in blending an array of beautiful colors, colors that have depth, transparency and never-fading qualities, your little snapshop becomes a beautiful work of art, one that you will cherish and keep forever.

HOLLYWOOD FILM STUDIOS 923 893 Attachment NATURAL COLOR * * * Color negatives, transparencies and color slides are finished in gorgeous natural color by Natural Process. Now you can enjoy the beauty of big pictures of your loved one in Color, in your own home, just as yon enjoy ,big pictures in color at the movies. We want to please you in every way and send your colored enlargements to you without delay. Be sure to check the card telling us the color of the frames you ",ish-the Pearl Ivory or Opal Gray Lucite-The 110stcnrd is addressed and stamped. Mail it today. Tlle sooner you mail the c.ard the i.;ooner you will get your. enlargements together with your originals.

Mail color order card NOW for prompt service. If you do not wish your enlargements finished in color, mark card Do Not Color. All originals are returned unharmed.

Sincerely yours ( S) X eel Ronald NED RON ALD Hollywood Film Stud..ios.

S. On tihe reverse side are .a few pictures selected from our customers. These people received $100 for the use of their picture. Your picture may also selected, so be sure to return the enclosed card. Attachment B- Expert quality hand coloring such as you get from the Holly,\'ood Jj"'lilm Studios for the small charge we make might cost as much as $10. 00 elsewhere. But because of our efficient and up to date methods, every home c.an no,y enjoy the advantages of this modern development, color in photography, at very little cost: "Then you recei,e your hand colored portrait enlargement we kno,,' you will. agree that this portrait of your loved one has become A thing of beauty." We Imow, too, tl1.at you will find it "A joy forever, THESE ARE CUSTO:\IERS' PHOTOS SELECTED To BE USED IN OUR ADVERTISING THESE PHOTOS RECEIVED $100. 00 EACH (PHOTO) (PHOTO) Submitted by SUbllli tted by ::\lrs. W. T. Overby :.\I1's, Harry Howryla WHAT OUR CUSTOMERS SAY ABOUT HOLLYWOOD FIDI STUDIOS World' s Best" Your Studios Ha,ve Them All Beat" Your photo work is the world' best. From now on it's Hollywood We received our pictures and cer- Film Studios. tainly were well pleased. I think your studios have them .all beat.

FRANK K. JR. MRS. GLENN J, C. N ashvWe, Tenn. Ely, Nev. .

Attachment 73 F.

Ord-ers Four :More WORTH $10.00" Enclosed pie a s e find one photo. The picture you made me is worth Please send 4 colored pictures. I have $10.00. Please make one of each ordered pictures before and have the enclosed five pictures. been e r y much pleased with your work on each one. OLGA. V. Rockwell St., CMcar;o, Ill. MRS. J. 'VILLIAM K., Ma-nltt~s, Ill. Finest Pictures A B~rthd-ay Gift" Ever Had-" These were the finest pictures we I have received the enlargement have ever had finished. Thanks to the which you sent me and I am so pleased Hollywood Film Studios and theirca-with your work. This is for a .birthday pable staff. gift. I plan to 11a ve more photo work done later. W. H. WOODSTOCK ELSIE E. S., Ill. Woka,nd-a" S. More Than ery Well Pleased-Tells Friends Sa-tisfactory I wish to take this opportunity to The work that I previously received tell you how well pleased I was with from you was more than satisfactorv my handcolored picture. I 11a ve shown I have told several people a.about your it to several of my friends and they excellent work and they, too, ",ill send commented on the wonderful piece their work to you. of work. MARJORIE S., GLADYS M. J. Albany, New Orleans La.

Senti-mental P'ict'/l.re- Jla-rvelous 1Vorl,;

Please make 5x7. Take care of this picture as it is of sentimental value.

The work you did on the other picture I sent you is marvelous. All friends said it was a wonderful piece of work. I know you will do the same on this picture.

ROBERT 1., Albany, BROOKLYN QUILTING CORP. ET AL. 925 893 Complaint Attachement C YOUR PICTURE Is BEI!\""'G CONSIDERED To BE USED IN OUR ADVERTISEMENTS. You WILL RECEIVE $100.00 IF YOUR PICTURE Is SELECTED. CHECK BELOW AND RETURN.

FREE FRAMES 'WITH COLORED ENLARGE)fENTS CHECK COLOR YOU WISH Choice of beautifu"i pearl ivory or opal grey frames with standing easel back, Frames are made of lustrous lucite .and make your enlargements "a thing of beauty nnd a joy forever," Check below color of frame you want. Pearl Ivory Frames Opal Grey Frames Always give file number pictures are filed .by number (632753). I have checked the free frame you are to include for the "Deluxe" 5 x 7 inch enlargements that you are having your artist hand color in natural oil colors. I will be glad to help with the few cents C. D. fees as well as $2.50 which includes artist' s labor for each oil painting sent to me on five day approval. Name__--__--------------, Address or RF.D.____ City ---------------------------------------- Sta te-------------------------