American Chinchilla Corporation

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Ix THE :vATTER OF AMERICAN CHINCHILLA CORPORATION, ET AL.

ORDER, OPINION, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 8774. Complaint, March 1969-Decision, December, 1969 Order adopting the decision of the hearing examiner which prohibits the corporate respondent and three individuals from making various misrepresentations in the sale of chinchila breeding stock and dismissing the complaint as to respondent John C. Green, Jr. COMPLAIN'f Pursuant to the provisions of the Federal Trade Commission , and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that American Chinchilla Corporation, a corporation, and Lowell Thomas Paire and John C. Green, Jr., individually and as offcers of said corporation, and Robert V. Fudge, individually and as a former offcer of said corporation, and Gardner F. Tinnin, individually and as a salesman for said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent American Chinchila Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Tennessee, with its principal office and place of business located at 4010 Clarksville Highway, Nashville, Tennessee, 37218. The corporate respondent's principal offce and place of business was formerly located at 1153 Broad Street, Nashville, Tennessee, 37203.

Respondent Lowell Thomas Page is an individual and offcer of American Chinchilla Corporation. He is the sole stockholder of AMERICAN CHINCHILLA CORP. , ET AL. 1017 1016 Complaint said corporation and alone formulates, directs and controls the acts and practices hereinafter set forth. Respondent Robert V. Fudge is an individual and former offcer of American Chinchilla Corporation. Respondent Robert V. Fudge was the sole stockholder of said corporation and alone formulated, directed and controlled the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Respondent John C. Green, Jr., is an individual offcer and salesman for the corporate respondent. Respondent Gardner F. Tinnin is an individual and salesman for the corporate respondent. Respondents Green and Tinnin cooperated in and effectuated the acts, policies and practices of the corporate respondent, including the acts and practices hereinafter set forth. The address of respondent Lowell Thomas Page is the same as that of the corporate respondent. Respondent Robert V. Fudge address is 18th at Clarksville Highway, Nashvile, Tennessee. Respondent Gardner F. Tinnin s address is Cross Plains, Tennessee. Respondent John C. Green, Jr.'s address is 882 Glendale Lane Nashville, Tennessee.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of chinchila breeding stock to the public. Respondent Robert V. Fudge is no longer engaged in the advertising, sale and distribution of chinchilla breeding stock to the public. He was engaged in the aforementioned activities at the time the acts and practices hereinafter set forth occurred. PAR. 3. In the course and conduct of their aforesaid business respondents caused, and for some time last past have caused, and respondents Lowell Thomas Page and American Chinchilla Corporation continue to cause, their said chinchilas, when sold, to be shipped from their place of business in the State of Tennessee to purchasers thereof located in various other States of the United States, and mainbin, and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce, 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 obtaining the names of prospective purchasers and inducing the purchase of said chinchilas, the respondents made, and reapondents Lowell Thomas Page and American Chinchilla Corporation continue to make, numerous statements and representations by means of television and radio , .

Complaint 76 F.

broadcasts, direct mail advertising, ne,vspaper publications, and through the oral statements and display of promotional material to prospective purchasers by their salesmen, with respect to the breeding of chinehilas for profit without previous experience, the rate of reproduction of said animals, the expected return from the sale of their pelts and the training assistance to be made available to purchasers of respondents' chinchilas. Typical and illustrative, but not all inclusive of the said statements and representations made in respondents' television and radio broadcasts and promotional literature, are the following: CHINCHILLA INVESTMEXT POTENTIAL. Persons of sound business judgment "\vilJ easily recognize this potential when considerin (sic) the following statements: 1. There is a shortage of good Quality Chinchilas. * * * 2. Demand for good quality Chinchilla pelts normally exceeds the sup1"Jly. 3. Low overhead is one of the most distinct advantages. In most instances time required is only about five minutes per pail' per day. Feeding costs should not exceed $3. 00 per animal per year, on a large herd basis. * * * 4. Chinchilla breeding as a full time occupation or as a "part time profitable business is bringing a source of enjoyment and important financial return to increasing numbers of persons. '"

RAISING CHINCHILLAS PROFITABLE (sic). Q. Is the raising of Chinchillas pl'ontal)le? A. We are in the business of producing the most expensive fur in the world and look fonvard to getting a high price for that article. Our thoughts are concurred in by the various Fur Auction people whom we have contacted on this subject. Q. Can Chinchilas be a sound investment? A. We feel that here (sic) is no other known industry which wil sho\v such tremendous and continued earning po\ver. \Ve consider Chinchilla farming more profitable, when properly conducted, than most investments or other Jines of business. " * * Q. If I buy Chinchillas, does your interest continue in my \velfare? A. To purchasers of our breeding stock, we offer an advisory service 'which includes: (1) assistance in planning the proper types of pens to house their animals, (2) scientific diets which have been worked out over a period of many years, (3) the privilege of \writing us at any time with respect to any problems encountered, and the benefit of our experience throughout the years.

PEL TI)JG. .. * * Priming and pelting stations, staffed by experienced personnel, are available at a nominal charge per animal. SERVICE. When the new rancl1er is accepted under the American Chinchilla Corp. program, he is taught the business of raising chinchilas profitably. Service calls are made periodically at each ranch for a period of at least onc year. A staff is always available to advise the American Chinchila rancher at no cost to the rancher.

BREEDING. The gestation period of the chinchila is 111 days and the Jitters range from 1 to 5 bahies. * * * The parents in most instances can and wil breed back 18 to 24 hours after littering and females are known to have produced 7 8 and even 9 continuous litters every 111 days. * * * PROPAGATION. * * On a basis of t"\vo litters per year and two babies AMERICA CHINCHILLA CORP. , ET AL. 1019 1016 Complaint per litter and the sex breaking even and barring any unforseen (sic) and unpredictable casualties, one female could IJl'oduce sixteen females over a three year period, of \which these sixteen on the above basis \vauld produce 64 offspring a year. You can readily ' see ho,," this pyramids as the rears go by. * * * * * * it is quite apparent that there is a long period of growth ahead and almost unlimited possibilities for the sale of pelts and ;ood breeding stock. Fortunate is the man or woman who owns a herd of these animals, for all the \varld 'wants chinchilla and only AmCl"ica produces it. * '" " PAR. 5. By and through the use of the aforesaid statements and representations and others of similar import and meaning, but not expressly set out herein, separately and in connection with statements and representations made by their salesmen and representatives, respondents represented, and respondents Lowell Thomas Page and American Chinchila Corporation continue to represent directly or by implication, that:

1. Jt is commercially feasible to breed and raise chinchilas from breeding stock purchased frolll respondents in homes, basements, garages, or spare buildings, ano large profits can be made in this manner.

2. The breeding- of chinchilas from hn,eding- stock purchased from respondents, as a commercinlly profitable enterprise, requires no previous experience in the bl'eecting, caring for and raising of such animals.

3. Chinchilas are hardy animals, and are not susceptible to diseases.

4. Purchasers of respondents' breeding stock receive pedigreed or top quality chinchilas.

5. Each female chinchila purchased from respondents and each female offspring 'Ivil1 produce at least foul' Jive offspring per year.

6. Each female chinchila purchased from respondents and each female offspring wil produce several successive litters of from one to five live offspring at 111 day intervals. 7. The offspring referred to in Paragraph Five subparagraph (6) above will have pelts seJJng for an average price of $30 per pelt, and that pelts from offspring of respondents' breeding stock generally sell from $15-$65 each.

8. A purchaser starting with six females and two males of respondents' chinchilla breeding stock wiJI have an annual income of $10 000 from the sale of pelts in the fifth year. Complaint 76 F.

9. Chinchilla breeding stock purchased from respondents is unconditionally guaranteed to live, breed and litter. 10. The respondents wil promptly fulfill a11 of their obligations and requirements set forth in or represented directly or by implication to be contained in the guarantee applicable to each and every chinchilla.

11. Purchasers of respondents ' breeding stock receive service calls from respondents' service personnel four times a year for the first year after purchase of the animals. 12. Purchasers of respondents' breeding stock are given guidance in the care and breeding of chinchillas. 13. Purchasers of respondents' breeding stock can expect a great demand for the offspring and for the pelts of the offspring of respondents' chinchilas.

14. Respondents will purchase any or a11 the chinchila offspring raised by purchasers of respondents' chinchila breeding stock, without distinction as to the quality or condition of such offspring, for $30 to $75 per animal.

15. Respondents maintain facilities for and provide priming and pelting and marketing services to purchasers of their chinchila breeding stock.

16. Through the assistance and advice furnished to purchasers of respondents' breeding stock by respondents, purchasers are able to successfully breed and raise chinchilas as a commercial11y profitable enterprise.

PAR. 6. In truth and in fact:

1. It is not commercial11y feasible to breed or raise chinchilas from breeding stock purchased from respondents in homes, basements, garages, or spare buildings, and large profits cannot be made in this manner. Such quarters or buildings, unless they have adequate space and the rcquisite temperature, humidity, ventiation and other necessary environmental conditions are not adaptable to or suitable for the breeding or raising of chinchilas on a commercial basis.

2. The breeding of chinchilas from breeding stock purchased from respondents as a commercial11y profitable enterprise requires specialized knowledge in the breeding, caring for and raising of said animals much of which must be acquired through actual experience.

3. Chinchilas are not hardy animals and are susceptible to pneumonia and other diseases.

AMERICAN CHIKCHILLA CORP. , ET AL. 1021 1016 Complaint 4. Chinchilla breeding stock sold by respondents is not of pedigreed or top quality.

5. Each female chinchnla purchased from respondents and each female offspring will not produce at least four live offspring per year, but generally less than that number. 6. Each female chinchilla purchased from respondents and each female offspring wil not produce several successive litters of from one to five offspring at 111 day intervals, but generally less than that number.

7. The offspring referred to in subparagraph (6) of Paragraph Five above will not produce pelts selling for an average price of $30 per pelt but substantially less than that amount; and pelts from offspring of respondents' breeding stock wil generally not sell for $15-$65 each since some of the pelts are not marketable at al1 and others would not sell fQl $15 but for substantially less than that amount.

8. A purchaser starting with six females and two males of respondents ' breeding stock wil not have an annual income of $10 000 from the sale of pelts in the fifth year but substantially less than that amount.

9. Chinchilla breeding stock purchased from respondents is not unconditionally guaranteed to live, breed and litter but such guarantee as is provided is subject to numerous terms, limitations and conditions.

10. Respondents do not in fact promptly fulfill all of their obligations and requirements set forth in or represented directly or by implication to be contained in the guarantee applicable to each and every chinchila.

11. Purchasers of respondents ' breeding stock do not receive the represented number of service calls from respondents' service personnel but generally less than that number. 12. Purchasers of respondents' breeding stock are given litte if any, guidance in the care and breeding of chinchilas. 13. Purchasers of respondents' breeding stock cannot expect a great demand for the offspring of and the pelts from respondents chinchilas.

14. Respondents seldom, if ever, purchase any or all the chinchilla offspring raised by purchasers of respondents breeding stock for $30 to $75 per animal.

15. Respondents do not maintain facilities for and do not provide priming, pelting or marketing services to purchasers of their chinchi1 " breeding stock.

1022 FEDERAL TRADE COMMISSIO!\ DECISIONS Co;nplnj;lt 76 F.

16. Purchasers of respondents' breeding stock are not able to successfully breed and raise chinchillas as a commercially profitabJe enterprise through the assistance and advice furished them by respondents.

Therefore, the statements and representations as set forth in Paragraphs FOllr and Five hereof were, and are, false, misleading and deceptive.

PAR. 7. In the course and conduct of their business, and at all times lnentioned herein, respondents have been in substantial competition, in eommcrce, \with corpol'ations, firms and individuaJs in the sale of chinchilla broeding sL,c1, of the same general kind and nature as those sold by respondents. PAR. 8. 'rhe use by respondents 0 f the aforesaid false, misleading and deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations were, and are, true and into the purchase of substantial quantities of respondents ' chinchilas by reason of said erroneous and mistaken belief. PAR. 9. The eJoresaid acts and pl".cices of the respondents, as herein alleged, were and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and no\v constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce, in violation of Section 5 of the Federal Trade Commission Act. Mr. Charles W. O' Connell supporting the complaint. No appearance entered for any respondent. INITIAL DECISION BY WALTER K. BENNETT HEARING EXAMINER JULY 17 , 1969 PRELIMINARY STATEMENT On March 6, 1969, the Federal Trade Commission, having determined that a proceeding in the above-entitled matter would be in the public interest, issued its complaint charging the respondents with violation of the Federal Trade Commission Act and setting April 28, 1969, as the date for the initial hearing. The complaint was duly served by registered mail on three of the respondents on or before March 18, 1969, and served on the lem(:i, :' CJI:,CJI1LLA COIn' , 1-1' AL. 1023 1016 Initial Deejsion remaining hvo respondents, who could not be reached by regjs tered Dlail, on April 24, 1969 , by 1-J81'SOnal service. Thus the complaint was not se,' ved on two of the respondents in time to allow 30 days to answer the complaint before the scheduled initial hearing. Therefore, on April 9 , 1969, the hearing examiner' cancelled the initial hearing' to be reset at a later date. On April 30 , 1969, the undersigned, under the impression that all respondents had been served by April 22 , 1969 , issued an order for a hearing to be held May 26, 1969, It was contemplated that defaults would be established as to respondents who failed to answer and that a prehearing conference 'ivauld be held with respect to those who did answer. At the hearing held May 26, 1969 counsel supporting the complaint that stated two respondents had not been served until April 24, 1969, and that they therefore had all of the day of :llay 26, 1969, in which to interpose an answer. Accordingly, on motion of (0111)laint counsel the hearing examiner by order dated JVfay 2G, 1969 , reset the initial hearing fol' June 11 , 1969 , and ordered that sllch order be served personally on the two respondents who had been served personally with the complaint.

On June 4 , 1969 , complaint counsel requested an extension of time to serve personally the order of May 26, 1969, on the two respondents who had been served personally \with the complaint. The extension of time was granted by order dated June 4, 1969 and the initial hearing was rescheduled to July 14, 1969. On the same date (June 1, 1969) respondent, John C. Green Jr., wrote a letter to the Secretary of the Commission stating that he had not been engaged in the Chinchila business since November of 1967; that he was not associated with and did not know Lowell Thomas Page; and that he ,vas a salesman with American Chinchilla for less than 6 months. He also claimed inability to afford counsel.

This letter from Mr. Green wos treated as an answer by the Secetary of the Commissil1l (,nd as an application to open the default by the undersigned, On June 10, 1969, the lOndersigned ordered that respondent Green might appear personally 01' by counsel at the hearing' scheduled for July 14 , :1969, to show cause wby his default should be opened and why the facts stated in his letter of June 1 , :1969, should be established by proof), 1 This case was oJ'ig-inally assigned to the HOIl. Lei1n R Groce Uil lti1'Tr:;i 6 , 1980. It was reassigned to the undersignn! on AjHij 10 , 106!i 1024 FEDERAL TRADE CO:VIMISSION DECISIONS Initial Decision 76 F.

Thereafter, at the hearing of July 14, 1969, complaint counsel established that the complaint had been served on all respondents and that more than 30 days had elapsed without any respondent having filed an answer. At the hearing, respondent Green neither appeared personally nor was represented by counsel to move to open his default. Accordingly, after having ascerbined from complaint counsel that the investigation completely supported the allegations of the complaint, the undersigned granted complaint counsel' s motion to note respondents' default. Pursuant to Rule 3. 12 (c) of the Rules of Practice for Adjudicative Proceedings of the Federal Trade Commission, the hearing examiner has determined that each of the respondents has waived his right to appear and contest the allegations of the complaint and that the hearing examiner is authorized without furher notice to respondents or to any of them to find the facts to be as alleged in the complaint and to enter his initial decision containing such findings, appropriate conclusions, and an order. Accordingly, the undersigned makes the following findings of fact as alleged in the complaint and the following conclusions and order.

Fmdings OF FACT AS ALLEGED IN THE COMPLAINT PAR. 1. Respondent American Chinchilla Corporation is a corporation organized, existing and doing business under and by virtue of the Jaws of the State of Tennessee, with its principal offce and place of business located at 4010 Clarksvile Highway, Nashvile, Tennessee, 37218. The corporate respondent' s principal offce and place of business was formerly located at 1153 Broad Street, Nashville, Tennessee, 37203. Respondent Lowell Thomas Page is an individual and offcer of American Chinchilla Corporation. He is the sole stockholder of said corporation and alone formulates, directs and controls the acts and practices hereinafter set forth. Respondent Robert V. Fudge is an individual and former offcer of American Chinchilla Corporation. Respondent Robert V. Fudge was the sole stockholder of said corporation and alone formulated, directed and controlled the acts and practices of the corporate respondent, including the ads and practices hereinafter set forth. Respondent John C. Green, Jr. , is an individual, offcer and salesman for the corporate respondent. Respondent Gardner F. Tinnin is an individual and saiesman for the corporate respondent. Respondents Green and Tinnin cooperated in and effectuated AfilERICAN CHINCHILLA CORP. , ET AL. 1025 1016 Initial Decision the acts, policies and practices of the corporate respondent, including the acts and practices hereinafter set forth. The address of respondent Lowcll Thomas Page is the same as that of the corporate respondent. Respondent Robert V. Fudge s address is 18th at Clarksville Highway, Nashville, Tennessee . Respondent Gardner F. Tinnin s address is Cross Plains, Tennessee. Respondent John C. Green, Jr.'s address is 882 Glendale Lane, Nashvile Tennessee.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of chinchila breeding stock to the public. Respondent Robert V. Fudge is no longer engaged in the advertising, sale and distribution of chinchila breeding stock to the public. He was engaged in the aforementioned activities at the time the acts and practices hereinafter set forth occurred. PAR. 3. In the course and conduct of their aforesaid business resjJondents caused, and for some time last past have caused, and respondents Lowell Thomas Page and American Chinchilla Corporation continue to cause, their said chinchillas, when sold, to be shipped from their place of business in the State of Tennessee to purchasers thereof located in various other States of the United States, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce, 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 obtaining the names of prospective purchasers and including the purchase of said chinchillas, the respondents made, and respondents Lowell Thomas Page and American Chinchilla Corporation continue to make, numerous statements and representations by means of television and radio broadcasts, direct Inail advertising, ne'\Yspaper publications, and through the oral statements and display of promotional material to prospective purchasers by their salesmen, with respect to the breeding of chinchillas for profit without previous experience, the rate of reproduction of said animals, the expected return from the sale of their pehs and the training assistance to be made available to jJurchasers of respondents' chinchilas. Typical and illustrative, but not all inclusive of the said state- Initial Decision 76 F.

ments and representations made in respondents' television and radio broadcasts and promotional literature, are the following: CIII:\CHILLA INVESTl\E!\ T POTENTIAL. Persons of sound business judgment will easily recognize this potential when considerin (sic) the following statements: 1. There is a sllortage of good Quality Chinchillas. * * * 2. Demand for good quality Chinchila peUs normally exceeds the supply. 3. Lo\v overhead is one of the most distinet adva11tages. In most instances, time required is only about five minutes per pair per day. Feeding costs should not exceed $3.00 pel' animal1 per year, on a large herd basis. * * * 4. Chinchilla breeding as a full time occupation or as a part time profitable business is bringing a source of enjoyment and important fmancial return to increasing numbers of persons. 8 * ';'"

RAISI'\G CHI:-CHILLAS PROFITABLE (sic). Q. Is the raising of Chinchillas prof'1table? A. We are in the business of producing the most expcnsive fur in tlle world and look fonvard to getting a high price for that article. Our thoughts are concurred in by the various Fur Auction people whom wc have contacted on this subject. Q. Can Chinchillas be a sound investment? A. \Ve feel that here (sic) is no other known industry which \,,-ill show such tn: mendous and continued earning power. \Ve consider Chinchilla farming more profitable, \"hen properly conducted, than most investments or other lines of business. : * ., Q. If I buy Chinehi1as, does your interest continue in my welfare! A. To purchasers of our breeding stock, we offer an advisory senice which includes: (1) assistance in planning the proper types of pens to house their animals, (2) scientif:c diets which have been worked out over a period of many years, (3) the privilege of writing us at any time with respect to any problems encounlered, and the benefit of our experience throughout the years.

PEL TI Priming and pelting stations, staffed by experienced per- G.sonnel, arc available at a nominal charge pel' animal." SERVICE. \\Then the new rancher is accepted under the American Chinchila Corp. program, he is taught the business of raising chinchilas profitably. Service calls are made 11el'iodical1y at each ranch for a period of at least one year. A staff is always available to advise the American Chinchilla rancher at no cost to the rancher, BREEDING. The gestation period of the chinchila is 111 days and the litters range from 1 to 5 babies. " .. * T11C parents in most instances can and wil breed back 18 to 24 hours after Jittering and females arc known to have produced 7-8 and even 9 continuous litters every 111 days. " * 8" PROPAGATIOX. * On a basis of two litters per year and two babies per litter and the sex breaking even and balding any unforseen (sic) and unpredictable casualties, one female could lnoduce sixteen females over a three year period, of which these sixteen on tile above basis would produce 64 oifslJring a year. You can readily see how this pyramids as the years go by. * , "8 * * It is quit.e apparent that there is a long period of growth ahead and almost unlimited possibility.ies for the sale of pelts and good breeding stock. Fortunate is the man or woman who owns a herd of these animals, for all thc wodd wants chinchilla and only America produces it. * * *" AMERICAN CHINCHILLA CORP. , ET AL. 1027 lOlC) Initial Dccision PAR. 5. By and through the use of the aforesaid statements and representations and others of similar import and meaning, but not expressly set out herein, separately and in connection with statements and representations made by their salesmen and representatives, respondents represented, and respondents Lowell Thomas Page and American Chinchilla Corporation continue to represent, directly or by implication, that: 1. It is commercially feasible to breed and raise chinchilas from breeding stock purchased from respondents in h01nes, basements, garages, or spare buildings, and large profits can be made in this manner.

2. The breeding of chinchilas from breeding stock purchased from respondents, as a COmn1€lTially profitable enterprise, requires no previous experience in the breeding, caring for and raising of such animals.

3. Chinchillas are hardy animals, and are not susceptible to diseases.

4. Purchasers of respondents' breeding stock receive pedigreed or top quality chinchilas.

5. Each female chinchilla purchased from respondents and each female offspring wi1 pl'duce at least foul live offspring per year.

6. Each female chinchilla purchased from respondents and each female offspring will produce several successive litters of from one to five live oiIspring at 11 J day intervals. 7. The offspring referred to in Paragraph Five subparagraph (6) above wil have pelts selling for an average price of $30 per pelt, and that pelts fronl offspring of respondents ' breeding stock generally sell from $15-$65 each.

8. A purchaser starting ,,,jth six females and hvo males of respondents' chinchilla breeding stock \viii have an annual income of $10 000 from the sale of pelts in the fifth year. 9. Chinchilla breeding stock purchased from respondents is unconditionally guaranteed to live, breed and litter. 10. The respondents will promptly fulfill all of their obligations and requirements set forth in 01' represented directly or by implication to be contained in the guarantee applicable to each and every chinchilla.

11. Purchasers of respondents ' breeding stock receive service calls from respondents' service personnel four times a year for the first year after purchase of the animals. Initial Decision 76 F.

12. Purchasers of respondents' breeding stock are given guidance in the care and breeding of chinchillas. 13. Purchasers of respondents' breeding stock can expect a great demand for the offspring and for the pelts of the offspring of respondents' chinchillas.

14. Respondents wil purchase any or all the chinchilla offspring raised by purchasers of respondents' chinchila hreeding stock, without distinction as to the quality or condition of such offspring, for 330 to 375 per animal1.

15. Respondents maintain facilities for and provide priming and pelting and marketing services to purchasers of their chinchila brceding stock.

16. Through the assistance and advice furnished to purchasers of respondents' brceding stock by respondents, purchasers are able to successfully hreed and raise chinchillas as a commercially profiable enterprisc.

PAR. 6. In truth and in fact:

1. It is not commercially feasible to breed or raise chinchillas fr01Tl breeding stock purchased from respondents in homes, basements, garages or spare buildings, and large profits cannot be made in this manner. Such quarters or buildings, unless they have adequate space and the requisite temperature, humidity, ventilation and other necessary environmental conditions are not adaptable to or suitable for the breeding or raising of chinchillas on a commercial basis.

2. The breeding of chinchillas from breeding stock purchased from respondents as a commercially profitable enterprise requires specialized knowledge in the breeding, caring for and raising of said animals much of \which must be acquired through actual experience.

3. Chinchillas are not hardy animals and are susceptible to pneumonia and other diseases.

1. Chinchilla breeding stock sold by respondents is not of pedigreed or top quality.

5. Each female chinchilla purchased from respondents and each female offspring will not produce at least four live offspring per year, but generally less than that number. 6. Each femaJc chinchilla purchased from respondents and each female offspring will not produce several successive litters of from one to five live offspring at 111 day intervals, but generally less than that number.

AMERICAN CHINCHILLA CORP. , ET AL. 1029 1016 Initial Decision 7. The offspring referred to in subparagraph (6) of Paragraph Five above wil not produce pelts selling for an average price of $30 per pelt but substantially less than that amount; and pelts from offspring of respondents' breeding stock wil generally not sell for $15-$65 each since some of the pelts are not marketable at all and others would not sell for $15 but for substantially less than that amount.

S. A purchaser starting with six females and two males of respondents' breeding stock wil not have an annual income of $10 000 from the sale of pelts in the fifth year but substantially less than that amount.

9. Chinchila breeding stock purchased from respondents is not unconditionally guaranteed to Jive, breed and litter but such guarantee as is provided is sub.iect to numerous terms, limitations and conditions.

10. Respondents do not in fact promptly fulfill all of their obligations and requirements set forth in or represented directly or by implication to be contained in the guarantee applicable to each and every chinchila.

11. Purchasers of respondents ' breeding stock do not receive the represented nUTI1ber of service calls from respondents' service personnel but generally less than that number. 12. Purchasers of respondents' breeding stock are given litte if any, guidance in the care and breeding of chinchilas. 13. Purchasers of respondents' breeding stock cannot expect a great demand for the offspring of and pelts from respondents chinchillas.

14. Respondents seldom, if ever, purchase any or all the chinchila offspring raised by purchasers of respondents breeding stock for $30 to $75 per animal.

15. Respondents do not maintain facilities for and do not provide priming, pelting or marketing services to purchasers of their chinchilla breeding stock.

16. Purchasers of respondents' breeding stock are not able to successfully breed and raise chinchilas as a commercially profitablc enterprise through the assistance and advice furnished them by respondents.

Therefore, the statements and representations as set forth in Paragraph Four and Five hereof were, and are, false, misleading and deceptive.

1030 FEDERAL TRADE CO:vMISSION DECISIONS Initial Decision 76 F.

PAR. 7. In the course and conduct of their business, and at all times mentioned herein, respondents have been in substantial competition, in commerce, with corporations, firms and individuals in the sale of chinchilla breeding stock of the same general kind and nature as those sold by respondents. PAR. 8. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said statements and representations \were, and are, true and into the purchase of substantial quantities of respondents' chinchilas by reason of said erroneous and mistaken belief. PAR, 9. The aforesaid acts and practices of the respondents, as herein alleged, were 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 decepthl€ acts and practices in comnlerce, in violation of Section 5 of the Federal Trade Commission Act. CO'-CLUSIONS 1. The Federal Trade Commission has jurisdiction over the respondents and over the sub.i ect matter of this proceeding which is in the jJublic interest, 2. Respondents were engaged in interstate commerce, and the acts and practices hereinbefore found were unfair and deceptive acts and practices in COll1merce in violation of Section 5 of the Federal Trade Commission Act.

3. The follmving order should issue:

ORDER It 'is ordered That respondents American Chinchila Corporation, a corporation, and its offcers, and Lowell Thomas Page and John C. Green, Jr" individually and as offcers of said corporation, and Robert V. Fudge, individually and as a former offcer of said corporation, "nd Gardner F. Tinnin, individually and as a salesman for said corporation, nd respondents ' agents, represcntativf;,c; and employees, directly or through any corporate or other deYlce, in connectiol1\with the advertising, offering for sale sale or distribution of chincbill8. breeding stock or any other AMERICAN CHINCHILLA CORP. , ET AL. 1031 1016 Initial Decision products, in commerce, as Hcommerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A. Representing, directly or by implication, that: 1. It is commercially feasible to breed or raise chinchilas in homes, basements, garages or spare buildings or other quarters or buildings unless in immediate conjunction therewith it is clearly and conspicuously disclosed that the represented quarters or buildings can only be adaptable to and suitable for the breeding and raising of chinchilas on a commercial basis if they have the requisite space, temperature, humidity, ventiation and other environmental conditions.

2. Breeding chinchilas as a commercially profitable enterprise can be achieved without previous knowledge or experience in the breeding, caring for and raising of such animals.

3. Chinchillas are hardy animals or are not susceptible to disease.

4. Purchasers of respondents' chinchila breeding stock wi1 receive pedigreed or top quality chinchilas. 5. Each female chinchila purchased from respondents and each female offspring will produce at least four live young per year.

6. The number of live offspring produced per female chinchilla is any number or range of numbers; or representing, in any manner, the past number or range of numbers of live offspring pl'duced per female chinchila of purchasers of respondents ' breeding stock unless in fact the past number or range of numbers represented are those of a substantial number of purchasers and accurately reflect the number or range of numbers of live offspring produced per female chinchila of these purchasers under circumstances similar to those of the purchaser to whom the representation is made. 7. Each female chinchilla purchased from respondents and each female offspring will produce successive litters of one to five live offspring at 111 day intervals. 8. The number of litters or sizes thereof produced per female chinchilla is any number or range thereof; representing, in any manner, the past number or range of numbers of litters or sizes produced per female chin- Initial Decision 76 F.

chila of purchasers of respondents' breeding stock un- Jess in fact the past number or range of numbers represented are those of a substantial number of purchasers and accurately reflect the number or range of numbers of litters or sizes thereof produced per female chinchila of these purchasers under circumstances similar to those of the purchaser to whom the representation is made. 9. Pelts from the offspring of respondents' chinchila breeding stock sell for an average price of $30 per pelt; or that pelts from the offspring of respondents' breeding stock generally sell from $15 to S65 each. 10. Chinchilla pelts from respondents' breeding stock wil sell for any price, average price, or range of prices; or representing, in any manner, the past price, average price or range of prices of purchasers of respondents hreeding stock unless in fact the past price, average price or range of prices represented are those of a substantial number of purchasers and accurately reflect the price, average price or range of prices realized by these purchasers under circumstances similar to those of the purchaser to whom the representation is made. 11. A purchaser starting with six females and two males will have, from the sale of pelts, an annual income earnings or proflts of $10 000 in the fifth year after purchase.

12. Purchasers of respondents' breeding stock wil realize earnings, profits or income in any amount or range of amounts; or representing, in any manner, the past earnings, profits or income of purchasers of respondents breeding stock unless in fact the past earnings, profits or income represented are those of a substantial number of purchasers and accurately reflect the average earnings, profits or income of these purchasers under circumstances similar to those of the purchaser to whom the representation is made.

13. Breeding stock purchased from respondents is guaranteed or warranted without clearly and conspicuously disclosing the nature and extent of the guarantee the manner in which the guarantor will perform thereunder and the identity of the guarantor A:YIERICAN CHINCHILLA CORP. , ET AL. 1033 1016 Initial Decision 14. Respondents' chinchilas are guaranteed unless respondents do in fact promptly fulfill all of their obligations and requirements set forth in or represented directly or by implication, to be contained in any guarantee or warranty applicable to each and every chinchilla.

15. Purchasers of respondents ' chinchila breeding stock wil receive service calls from respondents' service personnel foul' times a year for the first year after purchase of the animals or at any other interval or frequency unless purchasers do in fact receive the represented number of service ealls at the represented interval or frequency.

16. Purchasers of resjJondents' chinchila breeding stock are given guidance in the care and breeding of chinchilas or are furnished advice by respondents as to the breeding of chinchillas unless purchasers are actually given the represented guidance in the care and breeding of chinchillas and are furnished the represented advice by respondents as to the breeding of chinchillas.

17. Chinchilas or chinchila pelts are in great demand; or that purchasers of respondents' breeding stock can expect to be able to sell the offspring or the pelts of the offspring of resjJondents' chinchilas because said chinchillas or pelts are in great demand. 18. Respondents will purchase all or any of the offspring' raised by purchasers of respondents ' breeding stock for from $30 to 375 per animal or for any other price or prices unless respondents do in fact purchase all the offspring offered by said purchasers at the prices and on the terms and conditions represented. 19. Respondents maintain facilities for or provide their purchasers with priming, pelting, or marketing services; or misrepresenting, in any manner, their facilities or services.

20. The assistance or advice furnished to purchasers of respondents' chinchila breeding stock by respondents wil enable purchasers to successfully breed or raise chinchillas as a commercially profitable enterprise. 1034 FEDERAL TRADE COMIIIISSION DECISIONS Initial Decision 76 F.

B. 1. JVIisrepresenting, in any manner, the assistance training, services or advice supplied by respondents to purchasers of their chinchila breeding stock. 2. Nlisrepresenting, in any manner, the earnings or profits to purchasers or the quality or reproduction capacity of any chinchilla breeding stock. C. Failing to deliver a copy of this order to cease and desist to al1 present and future salesmen and other persons engaged in the sale of the respondents' products or services and failing to secure from each such salesman or other person a signed statement acknowledging receipt of said order. It is further 01'dered That the respondent corporation shall forthwith distribute a copy of this order to each of its operating divisions.

OPINION OF THE COM),!ISSION DECEMBER 23, 1969 BY .JONES Commissioner:

On .July 17, 1969, the hearing examiner entered his Initial Decision and Order in this case on default. Service of the order was completed on August 1 , 1969. No notice of appeal was filed by any party. In order to enable it to fully consider this matter, the Commission stayed the finality of that order and initial decision by order dated August 28, 1969.

The complaint named as respondents the American Chinchila Corporation, a Tennessee corporation with principal ollce and place of business in ;\ashviJe, Tennessee, and four individual respondents: Lowell Thomas Page and .John C. Green, .Jr. as individuals and as offcers of the corporation; Robert V. Fudge as an individual and as a former corporate offcer; and Gardner F. Tinnin as an individual and as a salesman. AI1 of the individual respondents apparently reside in the KashviJe, Tennessee area. The respondents were charged with violation of Section 5 of the Fedmisleading eral Trade Commission Aet for having made false, and deceptive representations, written and oral, to prospective purchasers of chinchila breeding stock which respondents offered for sale to the public.' The alleged misrepresentations related to 1 :FTC Rules of Pradice and Proredure, Rule 3. 51 la). "Complaint, paragraph 4.

, A:vERICAN CHINCHILLA CORP. , ET AL. 1035 1016 Opinion the investment and profit potential in the sale of chinchilas and the care and know-how required to breed and raise chinchilas. The notice of hearing served with the complaint scheduled the hearing on the complaint to be held in Washington, D. , on April , 1969. None of the respondents answered the allegations of the complaint within the time allowed, and on April 25 complaint counsel moved for a default order against Green, Fudge and Tinnin:' By the hearing examiner s order of April 30, 1969, this motion was heard on May 2q, 1969, and an order of default was entered by the examiner at the conclusion of that hearing, establishing the default of respondents Green, Fudge and Tinnin. On June 4 , 1969, respondent Green addressed a handwritten letter to the Commission on the back of the hearing examiner May 26th order which read as follows: ' DOCKET 8744 AMERICAN CHINCHILLA CORPORA TION, et al (sic) Dear Sir:

I have not been engaged in the chinchila business "inee Nov. of 1967. I was not associated with a Lmvell Thomas Page, nor do I even know him. I was a salesman with the American Chinchila for a period of less than six months.

I am not in a position to afford legal council (sic) in this matter, but I have not kntnvingly broken any laws of the Commission. Yours respectfully, /s/ John C. Green The Secretary of the Commission marked the letter as an Answer to the allegations of the complaint and forwarded it to the hearing examiner. The examiner treated the Jetter as a motion to reopen the :YIay 26 default hearing and on June 10, entered an order allowing Green to appear "personally or by counsel at the Complaint, paragraphs 1- . Respondents Gteen, Fudge and Tinnin were rill served with copies of the complaint, notice of hearing and proposed onler, by registered mail On :''larch 17; the corporate respo!;dent and age were personally served 01; April 24, Therefore, under the Commission s Rules, which allow respondents 30 days from the date of ervice within which to answer the complaint Green, :Fudge s and Tinnin ci answers were duf' by April 16: Ameri s and Page s Were due by May 2, "' At the May 2(i, 1969, hearing- which es abIished the default of Green, Fudge and Tinnin, comvlaint counsel moved for a hf'aring on the default of Ame 'ican and Page. The hearing examiner s May 26th o 'der scheduled f tearing, which was ultimately h",ld on ,July 14 , 1969 for the purpos", of determining whcrh"". Amerccan tend Page were in ddault, and if they were not for the vurpose of receiving evid",nce in support. of the complaint." The record inri:catcs that G,' een harl received copies of complaint coun el' s motion for default and the hearir.). examiner s order on 1\1ay 16 , ten dars prior to the cheduled hearing on default.

.

Opinion 76 F.

hearing now scheduled for July 14, 1969 and (toJ show cause why his default should now be opened and set aside * * *" and allowing Green to show why evidence should be taken "by his sworn testimony or such other proof as he may care to offer on should bethe issue as to whether or not any order against him entered, Green did not appear in Washington, D. , at the July 14, 1969 hearing, and the examiner at the conclusion of that hearing granted complaint counsel's motion to note the default of all respondents.

The record establishes that all of the respondents were properly served.' With the exception of respondent Green, none of the respondents ever communicated with the examiner, entered an appearance, or answered. As to these respondents, the Initial Decision and Order of the examiner have correctly disposed of the issues in this case, and it is our opinion that they should be therefore, adopted as the Opinion and Final Order of the Commission.

, however The letter addressed by Green to the Commission places Green in a different position from the other respondents and raises questions which must be separately considered and disposed of. Green s Jetter in essence denied his liability and claimed a lack of financial ability to afford counsel. The hearing examiner treated the letter as a motion to reopen the default and immediately scheduled a hearing on the motion. His order provided an opportunity for Green to attend the hearing in person or with counsel to respond to the merits of the complaint. The language of the order is ambiguous as to whether it \vas also intended to permit Green to offer evidence with respect to his implied claim of indigency.

Which ever view is taken of the examiner s order, we do not believe that merely setting the matter down for a rehearing was , The examiner, in his Initi",! Decision . made the following statement about this hearing: * " at the hearing of July 14 , 1969, complaint oDnse1 est;-b1ished that the complaint had been served on all respondents and that more than 30 days hril! elapsed without any respon!knt having fded an answ!;\", At the hearing, respondent GrC'ol appeared neither penonaliy nor was represented by counsel to move to open his default, According-Jy, after having ascertained from complaint counsel that the investigation omj)letely support:.ed the alleg-C\tions of the complaint the undersigned grimted r.ompldnt counsel's n1otion to note 1"csponucnts' default. Pursuant to Rule 3. 12 (e) of the Rules, the hea i)1g examiner has determined that each of the respondents has waived his rights to appear and COD lest the allegations of the complaint (ID p. 1024).

The Initial Decision (at 1024) so states, aml the record contain1S the proof of service. ReslJondents Green, Fudge and Tinnin were served hy reg;s crcd mail; American rend P;Jgc were IJersonally served by a Commission attorney. AMERICAN CHINCHILLA CORP. , ET AL. 1037 1016 Opinion a suffcient response. We read Green s letter as going beyond a mere denial of the complaint' s allegations. His letter clearly constitutes both an assertion of poverty and a request for the appointment of counsel. Weare of the view that under the circumstances of this case, the examiner did not suffciently protect the rights of respondent Green and that it would, therefore, be improper for us to adopt the hearing examiner s order against him. We have no doubt that in a proper case where an adequate showing of financial inability is made out, a respondent is entitled to counsel. We can think of nothing Jess conducive to fairness and due process in administrative procedures than to pit the power of the State, armed with all of the panoply of the legal machinery (funds, investigatory resources, staff or skiled attorneys, etc. against a single individual and then to deny that individual the right to counsel when he denies the allegations and specifically asserts that he cannot afford counsel"

In Adkins v. Dupont Co. 335 U. S. 331 (1948), the Supreme Court stressed the fundamental principle which should guide the Commission in cases of this nature when it made the statement that "no citizen shall be denied an opportunity to * * * defend (himselfJ * * * solely because (ofJ his poverty. * " ,'," (P. 342. An added factor of unfairness in this case is the fact that the hearing was held some 700 miles away from the residence of this respondent. The round trip to Washington by plane would have cost Green $88. , and by bus $47.00 and over eighteen hours in travel time each way. Clearly an impoverished respondent who cannot afford a lawyer cannot be realistically expected to travel to Washington to represent himself no matter how many times that opportunity is offered him The examiner s response to Green s letter-an order scheduling another hearing which constituted no change from the May 26th hearing which had provoked Green s letter--ould hardly have been construed by him as anything other than a total rejection of his June 4th letter.

In our view elemental fairness and concern for the rights of the litigants who appear before the Commission require that the Commission see to it that any respondent who requests counsel on grounds of indigency is accommodated. Such requests should be 9 As the Supreme CAurt said in Hannah v. lATche 3R3 U. S. 420 , 442 (1960): f\VJhen governmental flgencies adjudi ate or make binding" determinations which directly affect the legal rjght of individuals it is imperative that those agencies u.se the prucedures which have traditionally been associated with the judicial jJl' oce88, (Emphasis added, Opinion 76 P.

addressed to the hearing examiner, who should thereupon satisfy himself as to the reasonableness of the request and where appropriate take such steps as are necessary to make counsel available to such a respondent. In this connection, the examiner or the respondent may obtain counsel on request of either a local bar association or a local legal aid agency. If counsel cannot be obtained in this manner the examiner should then direct complaint counsel on behalf of the Commission, to petition the appropriate United States Court of Appeals for the appointment of counsel. lnder the circumstances of this case, we have determined not to remand this matter to the hearing examiner for further proceedings, but instead to dismiss the complaint as t respondent Green. We are convinced that the public interest will be adequately protected in this instance by issuing the order against the corporate respondent and the individual respondents Page, Fudge and Tinnin.

ORDER No appeal from the initial decision of the hearing examiner having been filed, but the Commission having stayed the effective date of the initial decision by its own Order of August 28, 1969 in order to determine whether said initial decision constitutes an adequate disposition of this case; and The Commission having concluded that, as to respondents American Chinchila Corporation, Lowell Thomas Page, Robert V. Fudge and Gardner F. Tinnin, the initial decision entered by the hearing examiner on July 17, 1969, adequately disposes of the issues in this case; and The Commission having further concluded that, as to respondent John C. Green, Jr., the proceedings which led to the entry of the initial decision of the hearing examiner did not suffciently protect the rights of respondent Green and that, therefore, as to him the complaint should be dismissed;

10 In determining the financial condition of the respondent, the examiner should be mindful of the .supreme Court s decision in Adkins v. D1lPont Cu. SltjJTiJ and the IJ!' aciice followed in 11theThefedcJ'alCourtseourtsof Appealsunder theirappearcontro'lingto have juri.,;d;ctionstatute on thisunuel"point,the28AllU. WritsC. S 1815.Act, 2(; B. S 16.'1 (a), since the appOt!JtmfCnt of counsel would be protective of its appellate juri djction. Sec FTC v. Dean Foods Co., 384 U. S. 587. 603-605 (1066). S;nce the absence of cOlln el " would otherwise mean that the case would not be adjuriil,..ted on jg merits and thendol"e could not he reviewed" by a Court of Appeais, such Ii pdilion would also meet the te..,ts of the Dean dissenters. (fd. at 625.

AMERICAN CHP;CHILLA CORP. , ET AL. 1039 1016 Opinion It is 01'dcred That, as to respondents American Chinchila Corporation, Lowell Thomas Page, Robert V. Fudge, and Gardner F. Tinnin, the initial decision of the hearing examiner be, and it hereby is, adopted as the decision of the Commission. It is further ordered That, as to respondent John C. Green Jr., the complaint be, and it hereby is, dismissed.