Tri-State Carpets, Inc

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

IN THE MATTER OF TRI-STATE CARPETS, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND TRUTH IN LENDING ACTS Docket 8945. Complaint, Dec. 7, 1973—Decision, Oct. 15, 1974 Order requiring a College Park, Md., carpeting retailer, among other things to cease using bait and switch tactics and deceptive sales plans; disparaging merchandise; misrepresenting terms and conditions, guarantees, and limited or special offers; and in connection with the extension of consumer credit, to cease violating the Truth in Lending Act by failing to make such disclosures as required by Regulation Z of the said Act.

Appearances For the Commission: Everette E. Thomas, Richard F. Kelly & Michael E’. K. Mpras.

For the respondents: Ronald S. Goldberg, Silver Spring, Md. COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act, the Truth in Lending Act and the implementing regulation promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Tri-State Carpets, Inc., a corporation, and Michael J. Lightman and William R. Lightman, individually and as officers of said corporation, and Matthew Mintz, individually and as manager of said corporation, hereinafter referred to as respondents, have violated the provisions of said Acts, 1078 Complaint and the implementing regulation promulgated under the Truth in Lending 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 Tri-State Carpets, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Maryland, with its principal office and place of business at 10011 Rhode Island Avenue, College Park, Md. Respondents Michael J. Lightman and William R. Lightman are individuals and officers of the corporate respondent. Respondent Matthew Mintz is an individual and sales manager of the corporate respondent. Together they formulate, direct and control the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Their business address is the same as that of the corporate respondent.

All of the aforementioned respondents cooperated and acted together in the carrying out of the acts and practices hereinafter set forth. PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale, distribution and installation of carpeting and floor coverings to the public. COUNT I Alleging violation of Section 5 of the Federal Trade Commission Act, the allegations of Paragraphs One and Two hereof are incorporated by reference in Count I as if fully set forth verbatim. Par. 3. In the course of conduct of their business as aforesaid, respondents have caused, and now cause, the dissemination of certain advertisements concerning the aforesaid carpeting and floor coverings, by various means in commerce, as “commerce” is defined in the Federal Trade Commission Act, including television broadcasts transmitted by television stations located in the District of Columbia, having sufficient power to carry such broadcasts across state lines, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of respondents’ said merchandise.

In the further course and conduct of their business, as aforesaid, respondents now cause, and for some time last past have caused, their said merchandise, when sold, to be shipped from their place of business located in the State of Maryland, to purchasers thereof located in the Commonwealth of Virginia and the District of Columbia. Thus respondents maintain, and at all times mentioned herein have maintained, a substantial course of trade in said merchandise in commerce, as “commerce” is defined in the Federal Trade Commission Act. 575-956 O-LT - 76 - 69 Complaint 84 F.T.C.

Par. 4. In the course and conduct of their business, as aforesaid, and for the purpose of inducing the purchase of their carpeting and floor coverings, the respondents have made, and are now making, numerous statements and representations in advertisements by means of television broadcasts transmitted by television stations located in the District of Columbia, having sufficient power to carry such broadcasts across state lines and by means of oral and written statements and representations of their salesman to prospective purchasers with respect to their products and services.

Typical and illustrative of said statements and representations, but not all inclusive thereof, are the following: Imagine three full rooms of this beautiful nylon pile carpeting — up to three hundred square feet—for only $129—and that does include the padding and 48 hour installation! Hk co a cs ca * BS To prove that nobody can beat our prices, call in the next five minutes and we'll knock off another 10 per cent, bringing your cost down to $116. Ea Ea * % * Pa When you purchase our Dupont 501 nylon carpeting you'll get this deluxe. Hoover vacuum cleaner with all attachments for cleaning the deepest shag. Free Vacuum Cleaner Special Price - No Gifts 10 Year Guarantee Par. 5. By and through the use of the above-quoted statements and representations, and others of similar import and meaning but not expressly set out herein, separately and in connection with the oral and written statements and representations of respondents’ salesmen to customers and prospective customers, respondents have represented, and are now representing, directly or by implication, that: 1. Respondents are making a bona fide offer to sell the advertised carpeting and floor coverings at the price and on the terms and conditions stated in the advertisements.

2. By and through the use of the words “and that does include the padding and 48 hour installation” and other words of similar import and meaning, not set out specifically herein, that all of the carpeting mentioned in such advertisements is installed with separate padding included at the advertised price.

3. Purchasers of 501 Nylon carpeting, and certain other styles of carpet, receive a free vacuum cleaner.

1078 Complaint 4. Certain of respondents’ products are unconditionally guaranteed for various periods of time, such as ten (10) years. Par. 6. In truth and in fact:

1. Respondents’ offers are not bona fide offers to sell said carpeting and floor coverings at the price and on the terms and conditions stated in the advertisements. To the contrary, said offers are made for the purpose of cbtaining leads to persons interested in the purchase of carpeting. Members of the purchasing public who respond to said advertisements are called upon in their homes by respondents or their salesmen, who make little or no effort to sell to the prospective customer the advertised carpeting. Instead, they exhibit what they represent to be the advertised carpeting which, because of its poor appearance and condition, is frequently rejected on sight by the prospective customer. Higher priced carpeting or floor coverings of superior quality and texture are thereupon exhibited, which by comparison disparages and demeans the advertised carpeting. By these and other tactics, purchase of the advertised carpeting is discouraged, and respondents, through: their salesmen, attempt to sell the higher priced carpeting. 2. A substantial portion of the carpeting advertised by the respondents is not installed with separate padding which is included in the advertised price. To the contrary, a substantial portion of the advertised carpeting has rubberized backing which is bonded to the carpeting. 3. Purchasers of the said 501 Nylon carpeting, and certain other styles of carpet, do not receive a free vacuum cleaner. To the contrary, the cost of the “free” gift is added to and regularly included in the selling price of the merchandise sold to the customer. 4. Respondents’ carpeting and floor coverings are not unconditionally guaranteed. To the contrary, such guarantees as are available are subject to numerous substantial conditions and limitations. Par. 7. By and through the use of respondents’ television advertisements containing the aforesaid statements and representations, and others of similar import and meaning but not expressly set forth herein, respondents offer three rooms of nylon pile carpeting (up to 270 sq. ft.) for $129. An additional 10 percent reduction in price is offered to purchasers of such carpeting who telephone respondents within five minutes after the commercial is aired. As a further inducement, respondents’ advertisements offer a “free” vacuum cleaner to purchasers of certain nylon pile carpeting. By the audio and visual manner in which the “free” gift is presented in immediate conjunction with the offer of the featured low price carpeting, respondents have represented, and are now representing, directly or by implication, that purchasers of the low price carpeting are entitled to the “free” gift. Complaint 84 F.T.C.

Par. 8. In truth and in fact, the offer of the “free” gift does not apply to the purchase of the low price carpeting. To the contrary, the “free” gift applies only to the purchase of a much higher price carpeting to which the television advertisement makes only an inconspicuous and misleading reference.

Therefore, the acts and practices as set forth in Paragraph Seven hereof were and are false, misleading and deceptive. Par. 9. In the course and conduct of their business, and for the purpose of inducing the purchase of their products, respondents use the term “up to 270 sq. ft.” to indicate the quantity of carpeting available at the advertised price.

Par. 10. The unit of measurement usually and customarily employed in the retail advertising of carpeting is square yards. Consumers are accustomed to comparing the price of carpeting in terms of price per square yard, therefore respondents’ use of the square foot unit of measurement confuses consumers who compare respondents’ prices with competitors’ prices advertised on a square yard basis. Furthermore, respondents use of square foot measurements exaggerates the size or quantity of carpeting being offered, and therefore has the capacity and tendency to mislead consumers into the mistaken belief they are being offered a greater quantity of carpeting than is the fact. Therefore, the acts and practices as set forth in Paragraph Nine hereof were and are unfair, false, misleading and deceptive. Par. 11. In the further course and conduct of their business, and in furtherance of a sales program for inducing the purchase of their carpeting and floor coverings, respondents and their salesmen or representatives have engaged in the following additional unfair, false, misleading and deceptive acts and practices:

In a substantial number of instances, through the use of the false, misleading and deceptive statements, representations and practices set forth in Paragraphs Four through Six, above, respondents or their representatives have been able to induce customers into signing a contract upon initial contact without giving the customer sufficient time to carefully consider the purchase and consequences thereof. Par. 12. In the further course and conduct of their aforesaid business, and in connection with the representations set forth in Paragraph Four above, respondents offer carpet with padding and installation included at a price based upon specified areas of coverage. In making such offer, respondents have failed to disclose the material fact that the prices stated for such specified areas of coverage are not applied at the same rate for additional quantities of carpet needed, but are priced substantially higher.

1078 . Complaint The aforesaid failure of the respondents to disclose said material facts to purchasers ‘has the tendency and capacity to lead and induce a substantial number of such persons into the understanding and belief that the prices charged for quantities of carpet needed in excess of the specified areas of coverage will not be substantially higher than the rate indicated by the initial offer.

Therefore, respondents’ failure to disclose such material facts was, and is, unfair, false, misleading and deceptive. Par. 13. In the course and conduct of their aforesaid business, and at all times mentioned herein, respondents have been, and now are, in substantial competition in commerce, with corporations, firms and individuals in the sale and distribution of rugs, carpeting and floor coverings and service of the same general kind and nature as those sold by respondents.

Par. 14. The use by respondents of the aforesaid false, misleading and deceptive statements, representations, acts and practices, and their failure to disclose material facts, as aforesaid, 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 complete, and into the purchase of substantial quantities of respondents’ products and services by reason of said erroneous and mistaken belief.

Par. 15. The aforesaid acts and practices of 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 deceptive acts and practices in commerce in violation of Section 5 of. the Federal Trade Commission Act.

COUNT II Alleging violation of the Truth in Lending Act and the implementing Regulation promulgated thereunder, and of the Federal Trade Commission Act, the allegations of Paragraphs One and Two hereof are incorporated by reference in Count II as if fully set forth verbatim. Par. 16. In the ordinary course and conduct of their business, as aforesaid, respondents regularly extend consumer credit, as “consumer credit” is defined in Regulation Z, the implementing regulation of the Truth in Lending Act, duly promulgated by the Board of Governors of the Federal Reserve System.

Par. 17. Respondents, in the ordinary course of business as aforesaid, and in connection with their credit sales, as “credit sale” is defined in Complaint 84 F.T.C.

Regulation Z, have caused, and are causing, customers to execute binding retail installment contracts, hereinafter referred to as the “contract.”

Par. 18. By and through the use of the contract respondents, in a number of instances:

1. Sold ¢redit life insurance to be written in connection with its credit sales without obtaining a specific dated and separately signed affirmative written indication of the customer’s desire for such insurance. Failing to provide for authorization pursuant to Section 226.4(a)(5) of Regulation Z, respondent was required to include the cost of such insurance in the amount of the finance charge, and by failing to do so, respondent failed to disclose accurately the “amount financed” and the “finance charge” as required by Sections 226.8(c)(7) and 226.8(c)(8)(i) respectively, of Regulation Z, and thereby also failed to state the “amnual percentage rate” accurately, as required by Section 226.7(b)(6) of Regulation Z.

2. Failed to disclose the annual percentage rate accurately to the nearest quarter of one percent computed in accordance with Section 226.5(b)(1) of Regulation Z, as required by Section 226.8(b) (2), by reason of either understating the “annual percentage rate” by amounts ranging from .5 percent to .8 percent or by leaving the space provided therefor blank.

3. Failed to disclose due dates scheduled for the repayment of the customer’s indebtedness as required by Section 226.8(b)(3) of Regulation Z by leaving the space provided therefor blank. 4. Failed to use the term “amount financed” to describe the amount of credit of which the customer has the actual use, as required by Section 226.8(c)(7) of Regulation Z.

5. Failed to use the term “total of payments” to describe the sum of the payments scheduled to repay the indebtedness, as required by Section 226.8(b)(3) of Regulation Z.

6. Failed to disclose the sum of the cash price, all charges which are included in the amount financed but which are not part of the finance charge, and the finance charge, and to describe that sum as the “deferred payment price,” as required by Section 226.8(c)(8) (ii) of Regulation Z.

Par. 19. Pursuant to Section 103(q) of the Truth in Lending Act, respondents’ aforesaid failures to comply with the provisions of Regulation Z constitute violations of that Act and, pursuant to Section 108 thereof, respondents have thereby violated the Federal Trade Commission Act.

1078 Initial Decision INITIAL DECISION BY DANIEL H. HANSCOM, ADMINISTRATIVE LAW JUDGE JULY 8, 1974 PRELIMINARY STATEMENT By its complaint issued Dec. 7, 1973, the Federal Trade Commission charged respondents under Count I with unfair and deceptive acts and practices in the advertising, offering for sale, sale, distribution and installation of carpeting and floor coverings in violation of Section 5 of the Federal Trade Commission Act. Under Count II the complaint charged respondents with violations of the Truth in Lending Act through practices utilized to aid and promote credit sales. Count I of the complaint alleged in substance that respondents’ television advertising, which offered “three full rooms” of “beautiful nylon pile carpeting” up to “three hundred square feet” “for only $129,” and offered a 10 percent reduction if viewers telephoned respondents within 5 minutes after the commercial was aired, was not a bona fide offer to sell but was merely a device to obtain leads to persons interested in the purchase of carpeting who were then called on in their homes and subjected to “bait and switch” sales tactics. Count I of the complaint further alleged:

That the statement in respondents’ advertising “and that does include the padding and 48 hour installation” meant that the advertised carpeting was installed with separate padding at the advertised price, whereas in truth and fact the advertised carpeting did not have separate padding but came with rubber backing attached to the carpet. That the “free” vacuum offered with the purchase of dupont 501 Nylon carpeting was not a free “gift” but in reality was added to the selling price of that carpet. That the “free” vacuum offered with the purchase of dupont 501 Nylon carpeting was made in the audio and visual portion of respondents’ commercial in “immediate conjunction with the offer of the featured low price carpeting” so as to represent in a false, misleading and deceptive manner that purchasers of the “three full rooms” of nylon pile carpeting “for only $129” would get a free vacuum cleaner. That respondents’ advertising represented that the carpet offered was unconditionally guaranteed whereas in truth and fact respondents’ guarantees were subject to numerous and substantial conditions and limitations. The complaint further alleged that the unit of measurement customarily employed in the retail advertising of carpeting was square yards; that consumers were accustomed to comparing the price of carpeting in terms of square yards; and that respondents’ use of the square foot unit of measurement was confusing, and led consumers to compare respondents’ prices by the square foot with competitors’ prices by the square yard. According to the complaint, this advertising stratagem exaggerated the size or quantity of carpeting offered by respondents, and had Initial Decision 84 F.T.C.

the tendency and capacity to mislead members of the public into the mistaken belief that they were being offered a greater quantity of carpet than was the fact.

Respondents were also charged with failing to disclose in their television advertising, and through salesmen and representatives calling on the public, that the prices charged for carpet over and above the advertised area of coverage were substantially higher than for the area advertised. In other words, according to the complaint, persons responding to the advertising, and thereafter in communication with respondents’ salesmen and representatives, were not advised that if they needed more carpeting than the “three hundred square feet” advertised, the additional carpet was priced at a substantially higher rate than the advertised price.

Under Count II respondents were charged with violation of the Truth in Lending Act and its implementing regulation by: Selling credit life insurance without obtaining a specific dated and separately signed affirmative written indication of the customer’s desire for such insurance, and failing to include the cost thereof in the finance charge, and in this manner failing to disclose accurately the “amount financed” and the “finance charge.” Failing to disclose the annual percentage rate accurately by understating that amount or by leaving the space provided therefor blank. Failing to disclose due dates scheduled for the repayment of the customer’s indebtedness by leaving the space provided therefor blank. Failing to use the term “amount financed” to describe the amount of credit of which the customer had the actual use.

Failing to use the term “total of payments” to describe the sum of payments scheduled to repay the indebtedness.

Failing to disclose the sum of the cash price, all charges included in the amount financed but not part thereof, and the finance charge, and to describe that sum as the “deferred payment price.”

Answer Respondents Tri-State Carpets, Inc., Michael J. Lightman, and William R. Lightman answered denying all material allegations of the complaint and demanding “strict proof’ thereof. The answer further alleged that individual respondent William R. Lightman, although serving as an officer of respondent corporation, was “never active in the business,” and never played “any role in the promotion, advertising, or resale of carpets, or other floor coverings” by respondent corporation. William R. Lightman denied that he was “given any responsible work” which called for “decision making on any responsible level” in. the management of Tri-State.

Individual ‘respondent Matthew Mintz, although served with the complaint, failed to file an answer, did not attend any of the hearings TRI-STATE CARPETS, INC., ET AL. 1087 1078 Initial Decision although he had notice of them, and was ruled in default by the undersigned.

By order of May 2, 1974, the Commission authorized the filing of an initial decision with respect to Matthew Mintz at the same time as the initial decision was filed with respect to the other respondents. Proceedings A prehearing conference was held on Feb. 14, 1974, and hearings on the merits were commenced on Apr. 2, 1974. The were concluded on Apr. 5, 1974. Complaint counsel subpoenaed individual respondents Michael J. Lightman and William R. Lightman, the director of the Washington area Better Business Bureau, an expert in the marketing of carpet, the proprietor of respondents’ advertising agency, a former salesman of respondents and a substantial number of members of the public who had answered respondents’ advertising. A large number of documents were also offered and received in evidence. Respondents offered certain documentary material during the case in chief, but, when the time came to present the case in defense, counsel for respondents stated that the defense would “submit on the record” (Tr. 417). Although given an opportunity to submit proposed findings and a memorandum in support, and provided an extension of time until June 5, 1974, to reply to complaint counsel’s proposed findings and supporting authority, nothing was filed by respondents or their counsel by that date. Basis of Decision This initial decision is based on the record as a whole and on the observation by the undersigned of the witnesses and their demeanor. Proposed findings of fact and conclusions of law submitted and not included herein in substance, or in the language proposed, are rejected as erroneous or not in accord with the evidence, or immaterial or irrelevant. The following findings of fact and conclusions of law are made:

FINDINGS OF FACT Respondents and Their Business 1. Respondent Tri-State Carpets, Inc. (Tri-State) is a corporation which was organized and did business under the laws of the State of Maryland. Tri-State is a “close” corporation and an affiliate of Classic Carpet Center, Inc. (Classic Carpet) which did business as “Carpeteria” (Tr. 7, 51). Both Tri-State and Classic Carpet were “family” firms (Tr. 82, 98), being owned and operated by the Lightmans, William R. Lightman, his wife, and son, Michael J. Lightman. All of the stock of both corporations was held by one or another of the foregoing family mem- Initial Decision 84 F.T.C.

bers, who also served as officers of both firms. Although Tri-State is now “inoperative” it has not been dissolved (Tr. 7).! Individual respondents Michael J. Lightman, William R. Lightman and Matthew Mintz formulated, directed, and controlled the acts and practices of corporate respondent Tri-State.

2. Both Tri-State and its affiliate Classic Carpet were engaged in the retail sale of “wall-to-wall” carpet for home installation. The Tri-State method of operation was to obtain names of persons interested in such carpet by television advertising. Thereafter salesmen of Tri-State would call upon such prospective customers in their homes and attempt to sell them carpet.

3. Classic Carpet Center, Inc. (“Carpeteria”), was operated primarily by William R. Lightman and had been in business for several years before Tri-State was formed. Tri-State was started as an off-shoot so as to engage in the retail carpet business under another name “to make more money” (Tr. 15). As respondent Michael J. Lightman put it, “if you change your name, you can sometimes capitalize because of —people dissatisfied with the previous company may buy from a new company” (Tr. 15).

4, Tri-State’s office was in the family’s Classic Carpet Center, Inc. warehouse in Fairfax, Va. and its retail outlet was located in College Park, Md. (Tr. 80). Classic Carpet Center, Inc. (““Carpeteria”) and Tri- State were both operated out of the same office, William R. Lightman and Michael J. Lightman having adjoining desks (Tr. 111). Inasmuch as the business operations of Classic Carpet and Tri-State were conducted from the same office, customer folders were differentiated by different colors, one being used for Classic Carpet’s customers and a different color for Tri-State’s customers. The contents of the folders, however, were “made up identical” (Tr. 86).

5. Michael J. Lightman was president of Tri-State and his father was secretary-treasurer (Tr. 83-88). William R. Lightman oversaw the “expedition of all sold merchandise” for Tri-State, and arranged “for the purchase of all products for resale” by Tri-State (Tr. 75). He also acted as a trouble shooter handling “backlashes” from Tri-State customers who were dissatisfied or had problems (Tr. 84-85). Contrary to the answer, as secretary-treasurer William R. Lightman was a decisionmaker for Tri-State, as the following demonstrates (Tr. 83-84). Q. So you did carry out these responsibilities as Secretary-Treasurer? A. Yes. Let’s put it this way—the buck stops here because there has to be a boss over 1 Michael J. Lightman and William R. Lightman, at the time they testified herein, had become affiliated with’ TransAmericard, a firm understood to be engaged in the discounting of notes and instruments obtained by companies dealing with consumers (Tr. 3, 82, 103-104). TRI-STATE CARPETS, INC., ET AL. 1089 1078 Initial Decision someone * * * if anything went array [sic], the carpet wasn’t there, people weren’t there, whatever backlash, I would get into it * * * And further (Tr. 87-88):

Q. It was your decision whether the customer would get carpet installed, and this is a customer of Tri-State Carpets? A. Yes, sir.

In essence, as already indicated, the operation of Tri-State and Classic Carpet constituted a family business (Tr. 98): Q. During this period of time you were Secretary-Treasurer with Tri-State, you also held an office in Classic Carpets? * *: * * * * * A. * * * | was Vice-President. * * * It is all in the family. * * * Q. You viewed Classic Carpets as a family corporation? A. Yes.

Q. Did you view Tri-State as a family corporation? A. Yes.

6. Respondent Matthew Mintz managed the retail outlet of Tri-State located in College Park, Md. (Tr. 15-16, 79-81), having been recruited at the time Tri-State was formed by the Lightmans (Tr. 17). Mr. Mintz had previously been a carpet salesman. After being hired by Tri-State, he and Michael J. Lightman supervised the selling operations and salesmen of Tri-State (Tr. 32-33). Shortly before Tri-State ceased business operations (apparently because of the Commission’s investigation) respondent Matthew Mintz briefly functioned as president of Tri-State (Tr. 12).

7. Classic Carpet supplied the carpet sold by Tri-State (Tr. 83) and handled all installations in customers’ homes of all carpeting sold by Tri- State. Such installations were accomplished through subcontractors (Tr. 31). All labor and materials used by Tri-State were supplied by Classic Carpet, the cost thereof being billed as a bookkeeping matter to Tri- State (Tr. 31).

8. The sales volume of Tri-State at all times mentioned herein has been substantial, amounting to between $12,000 and $18,000 per week which is between $624,000 and $936,000 annually (Tr. 43). At all relevant times mentioned herein respondents have been engaged in “commerce” as commerce is defined in the Federal Trade Commission Act. Respondents have sold and shipped carpet to customers residing in Maryland, Virginia and the District of Columbia (CX 17-178). Bait and Switch 9. Respondents advertised heavily over television stations located in the metropolitan Washington, D.C., area. A local advertising agency Initial Decision 84 F.T.C.

known as Weitzman & Associates was utilized (Tr. 17, CX 5). The principal television station employed was WDCA-TV, Channel 20, although Mr. Michael J. Lightman testified that “at one time or another, we used all of the television stations that were presently in the Washington metropolitan area” (Tr. 44).

10. The contracts between Weitzman & Associates and Milton Grant, WDCA-TV’s vice-president and general manager, were for relatively large sums of money. For example, advertising during the period May 13, 1972 and Sept. 1, 1972 was at the rate of $2,025 per week for a total of $32,400 for the period (CX 7).

11. The advertisements of respondents consisted principally of “spot” commercials costing $40 each over WDCA-TV (CX 6(a) ).They were broadcast with considerable frequency, twenty of them being aired for example in the two day period of Apr. 8 and 9, 1972 (CX 6(a) ). Exposure of the public to the commercials in the Washington metropolitan area including suburban Virginia and Maryland, as well as the District of Columbia, was substantial.

12. The nature of the commercials of respondents was typical “hard sell” and their full flavor can only be appreciated from a viewing of the tape of the commercial which is in the record (CX 208). The commercial featured an announcer or salesman standing beside a rack or “waterfall” of carpet samples centered in a showroom with rolls of carpet against the walls. The entire setting resembled the “wall-to-wall” carpet and rug showroom of a department store or substantial retail outlet. The rack of carpet beside which the salesman stood consisted of what appeared on the television commercial to be high quality, if not luxurious, sections or samples of various types of carpet commonly used in the home for “wallto-wall” installation, shags, tip shears, plush piles, and so forth. During the commercial the announcer or salesman repeatedly put his hand on the top of the rack of samples indicating that the “three full rooms” of carpet being offered “for only $129” was contained in the carpet displayed in the rack, or was equal to it in quality and appearance. Although the audio portion of the commercial does not reveal the full impact of the representations and messages conveyed to the public, it is reproduced herein and reads as follows (CX 191, 205): Can you believe three rooms of carpeting for $129? Yes, if its Tri-State, because we and our affiliates have installed over 5 million square feet of brand name carpeting and it’s because of volume that we can give you quality shags, tip shears and plush pile carpeting at discount prices. Imagine three full rooms of this beautiful nylon pile carpeting—up to three hundred square feet—for only $129—and that does include the padding and 48 hour installation! When you purchase our Dupont 501 nylon carpeting, you'll get this deluxe Hoover vacuum cleaner with all attachments for cleaning the deepest shag. To prove that nobody can beat our prices, call in the next five minutes and we'll knock off another 10 percent, bringing your cost down to $116. Three rooms, up to 300 square feet, convenient 1078 Initial Decision shop-at-home service, all for $116. So call 345-4500 right now. Convenient budget terms available, so call 345-4500 now. [Emphasis in original] 13. Respondents also used testimonials from alleged satisfied customers of Tri-State. The audio portion of one of these is the following (CX 180):

Hi, I’m sitting here today with 2 of Tri-State Carpet Co.’s many satisfied customers. Mrs. Berard, what do you think of Tri-State Carpet? “The price on TV was so low we could hardly believe it—but our carpeting is beautiful and we’re more than satisfied.”

Well, thank you.

Mrs. Pierce, what do you think of Tri-State? “They’re great people to deal with. It was a pleasure to be able to shop in our own home and the budget terms they had made buying it so easy.”

Thank you.

You too can have 3 full rooms of this beautiful nylon pile carpeting—installed with padding—up to 300 square feet, for only $129. Who else could bring you such volume savings! And as a special bonus, if you call within 5 minutes you'll get another 10% discount—bringing the price down to an incredible $116 for 3 rooms of this beautiful carpeting. Or if you prefer to purchase our Dupont 501 nylon pile carpeting, you also get this deluxe Hoover vacuum with all the attachments! So call 345-4500 right now! That’s 345-4500 right now! 14. Neither Mrs. Berard nor Mrs. Pierce, however, had purchased the low priced carpet advertised in the foregoing commercial, although respondents’ commercial conveyed the impression that they had purchased such carpet—“you too can have 3 full rooms of this beautiful nylon pile carpeting * * *” Both had purchased entirely different and much higher priced carpet paying $212.16 and $900 for such carpet respectively (Tr. 215, 221).

15. A sample of the carpet taken by Tri-State’s salesmen to the homes of members of the public responding to the foregoing television commercials, and shown to them as the carpet advertised, is in the record (CX 218). It bears no resemblance whatever to the attractive carpet pictured and suggested in respondents’ television commercials (CX 208). On the contrary, it is cheap and flimsy carpet of poor appearance and transparently low quality which none of the witnesses who testified in this proceeding desired to have installed in their homes or apartments. The pile was skimpy and attached to a thin layer of rubber backing which served as “padding.” The mere exhibition of CX 208 to a prospective customer who answered respondents’ television advertisements hoping to obtain “three full rooms” of carpeting like that shown by the commercials over WDCA-TV “for only $129” was likely to be sufficient to dissuade such customer from any further interest in it. 16. Complaint counsel subpoenaed thirteen (13) members of the publie who had responded to the Tri-State’s commercials and had tele- Initial Decision 84 F.T.C.

phoned the number advertised. Without exception, these witnesses appeared to be responsible and sincere persons, who were motivated to answer the commercials by the attractive carpet shown and seemingly being offered by respondents, and the low prices featured. 17. Although the experience of those who answered the commercials varied, in general events took the following pattern: the person would telephone the number advertised in the commercial and would give his: or her name and address. In due time one of respondents’ salesmen would visit the customer. The customer would ask about the “three full rooms” of carpet advertised “for only $129.” At this point, display of the flimsy, low quality sample (CX 218) would usually be enough to discourage the prospective customer from any further interest in it. If not, overt or subtle disparagement was resorted to by respondents’ salesmen. Sometimes salesmen would avoid even showing CX 218, telling the customer that their homes were too nice for the advertised carpet, or that they would not be interested in the advertised carpet. Regardless of the manner in which it was done, respondents’ salesmen “switched” the householder’s interest to higher priced carpet, and often succeeded in selling such higher priced carpet to those who had responded to the television commercials seeking “three full rooms” of carpeting “for only $129.” Many such persons, instead of obtaining carpet for $129, obligated themselves to the extent of hundreds of dollars for much higher priced carpet.

18. The specific experiences of a number of witnesses who answered respondents’ commercials are summarized in the following paragraphs: Witness saw respondents’ advertisement on WDCA-TV, Channel 20, in Apr. 1972 featuring 300 square feet of carpet for $129. Witness thought the price featured very attractive and felt that 300 square feet would cover the areas he wished to cover. Witness made an appointment immediately to have a salesman come to his home. After the salesman arrived and laid out samples, witness and wife asked to see the advertised carpet. They didn’t like it at all. It was “very cheap construction” and the “quality was terrible.” Respondents’ salesman agreed that the advertised carpeting was inferior, and that it wouldn’t last in witness’ home. Witness and his wife ultimately bought much higher priced carpet, spending far more than they had intended. They purchased the higher priced carpet after the salesman stressed its virtues and told them that they had to decide right away or they wouldn’t get the free vacuum cleaner. Although they were told the carpet carried a guarantee, no terms or conditions thereof were specified or discussed. The contract was financed (Tr. 264-278, CX 214). Witness saw respondents’ advertisement on WDCA-TV, Channel 20, in Oct. or Nov. 1972. Witness stated that the commercial offered 300 TRI-STATE CARPETS, INC., ET AL. 1093 1078 Initial Decision square feet which would cover 3 rooms for approximately (as witness remembered) $120 or $115. Witness was attracted by the advertisement because she “thought it was a lot of carpet” and also got the impression that she would receive a free vacuum cleaner if she bought the carpet. Witness telephoned the number given, made an appointment and one of respondents’ salesmen came to her home. He first showed her more expensive carpet than that advertised saying that the advertised carpet would not fit her home. After witness asked, she was shown the advertised carpet. Witness thought it “wasn’t worth it,” that it looked “like the type you would buy at the 5 & 10,” and that it didn’t look like the carpet she had seen on television. The salesman told her that the advertised carpet “wouldn’t last” and that if she wanted it she would have to wait since they did not: have it in stock. Witness ultimately bought the best carpet respondents sold for $1600 financing the transaction (Tr. 285-291).

Witness saw respondents’ advertisement on WDCA-TV, Channel 20, in Mar. or Apr. of 1972 featuring 3 rooms up to 300 square feet of carpeting for $129 or $116, plus (witness thought) a free vacuum cleaner. Witness made an appointment and one of respondents’ salesmen came to his home. Witness inquired about the advertised carpet and the salesman said he didn’t think witness would want the advertised carpet, that witness had a much nicer home than the advertised carpet would be useful for. Salesman suggested that he might have some carpet at a good price which was left over from an “Embassy job” they had just done. He then quoted witness a price far more than witness could “even think about” at that time. Ultimately, however, salesman sold witness the better carpet, but for a smaller area than witness had originally intended to cover. The price was $965 including financing. Witness and his wife then reconsidered, and told the salesman they couldn’t afford the purchase. The salesman told them that if they would forego the vacuum cleaner he could get them 10 percent off. They agreed and the salesman wrote the contract for such lower price. They were told there was a guarantee, but the salesman discussed it only “vaguely.” “10 yr. guarantee” was put on the contract (Tr. 291-300, CX 62(f)). Witness saw. respondents’ advertisement on WDCA-TV, Channel 20, in Apr. 1972. Witness recalled that the advertisement featured 3 rooms of carpet for approximately $115. Witness telephoned for an appointment and one of respondents’ salesmen called at her home. He first started showing the dupont 501, but witness asked to see the advertised carpeting. The salesman said that it wasn’t really very good. Upon looking at a sample of the advertised carpet, it did not appeal to the witness at all. Witness found it “flimsy,” “thin” and “didn’t look like it was worth $119.” Ultimately witness purchased dupont 501 for approxi- Initial Decision 84 F.T.C.

mately $600. Witness was told that the contract could be financed if she put $29 down. The salesman told her there was a ten year guarantee on the carpet, and that the guarantee was in the contract. No guarantee was in the contract, however. Witness was later told that the guarantee was on the back of the carpet. When witness inquired about the “free” vacuum cleaner the salesman said she would have to call the company. She did so and was told that she would not receive a vacuum cleaner because she had been given a reduced price. After two months of calling regarding the guarantee without satisfaction, witness contacted the Federal Trade Commission. Witness received a written guarantee after contacting the Commission (Tr. 300-309, CX 24(a)). Witness saw respondents’ advertisement on WTTG, Channel 5, in Apr. 1972. In his recollection the advertisement offered 3 rooms of carpeting for approximately $116 including installation and padding. A vacuum cleaner was to “go along with” the carpeting. Witness was attracted by the commercial because he had planned to carpet 3 rooms and “figured what they said, 3 rooms, would cover what I had planned to cover.” He called for an appointment and one of respondents’ salesmen came to his house. The salesman showed him the advertised carpeting. Witness immediately said that it wouldn’t do for what he wanted it for, and that it didn’t look to him like what he had seen advertised. Witness “wouldn’t have bought it at any price.” The salesman then showed him other samples. Witness finally bought carpet for one bedroom for $312. He was told that the free vacuum cleaner came only with the “advertised” carpet (Tr. 312-321).

Witness saw respondents’ advertisement on WTTG, Channel, 5, in 1972, featuring 3 rooms of carpeting for $116 including installation and padding. Witness received the impression that a customer would receive a free vacuum cleaner with the carpeting. Witness was attracted by the fact that she “could get the carpet I wanted for what I needed, for such a low rate.” She thought the carpet advertised would cover the area she had in mind. She called for an appointment and two of respondents’ salesmen came to her home. The salesmen first showed her carpet different from that advertised. She asked to see the advertised carpet, and the salesmen told her she would not be interested in this type for her home. Witness’ husband mentioned that the advertised carpet “didn’t look like anything, nor did it look like anything that was on T.V.” After seeing other samples witness was attracted to dupont 501, and the salesmen stressed its quality. She purchased the 501 for $500, financing through Household Finance. Witness had been told she would receive a guarantee. The salesmen wrote on the contract that she would receive a written guarantee, but she did not. Witness inquired about the 1078 : Initial Decision vacuum cleaner. The salesmen told her that that would require an extra charge. She contacted the manager, and finally received the vacuum cleaner after the carpet had been installed (Tr. 322-339, CX 215). Witness saw respondents’ advertisement on WTTG, Channel 5. The advertisement featured 300 square feet or 3 rooms of carpeting for $129, with a 10 percent reduction from that price if a customer were to call within 5 minutes. The witness was “mostly induced by the price and it seemed like a good bargain” to call the company. He thought he could carpet the 3 areas he had in mind with the amount advertised. One of respondents’ salesmen came to the witness’ home. Witness asked to see the advertised carpeting. He decided against it immediately, thinking it “looked like maybe a good quality bath towel.” Witness looked at more expensive carpet and was quoted a price of $500. He thought that price too high and requested either a reduction or a vacuum cleaner. The salesman said he would give witness a vacuum cleaner. The salesman said a written 15-year guarantee would be mailed to the witness, and wrote on the contract of sale to that effect. However, the customer never received a guarantee (Tr. 341-349, CX 216-218). Witness saw respondents’ advertisement on WDCA-TV, Channel 20 in the summer of 1972, offering 300 square feet or 3-rooms of carpeting for around $129, with (witness thought) a free vacuum cleaner to come with the carpeting. The witness thought the offer was for 3 rooms of dupont 501 carpeting. According to witness’ recollection, there was to be a further 10 percent reduction if a customer would telephone within 10 minutes [sic]. The witness did so. One of respondents’ salesmen came to her house; measured the area the witness had in mind, and told her the advertised carpet would not cover it. Witness inspected the advertised carpet, and found it “very cheap, low-quality carpeting.” It did not look to her like the carpeting advertised on television. The television carpeting looked like the better grade carpeting the salesman showed her. Witness looked at other samples and ultimately signed a contract for dupont 501. No guarantee was mentioned. The next day, witness changed her mind and tried to cancel the contract. After telephoning respondents’ office several times she was eventually told by the “manager” that she could not cancel. Witness insisted on cancellation and Tri— State sued. Although apparently the suit was dismissed, witness’ credit rating was hurt because of the transaction (Tr. 350-358). Witness saw respondents’ advertisement on WDCA-TV, Channel 20, offering 3 rooms of carpeting for $116, including padding and installation and (witness believed) a free vacuum cleaner. Witness telephoned the company and one of respondents’ salesmen came to his home. 575-956 O-LT - 76 - 70 Initial Decision 84 F.T.C.

Witness asked to see the advertised carpeting and was disappointed; he thought the carpet shown on television was better and did not think the carpet he was shown was the same as the carpet advertised. The salesman told him he could pick out a better carpet. Witness ultimately bought carpet for $850 (Tr. 358-364, CX 219). Witness saw respondents’ advertisement on WDCA-TV, Channel 20, in Apr. of 1972. It featured 3 rooms of carpeting for $129, with a reduction if one were to call immediately. When respondents’ salesman first arrived at witness’ apartment, he showed her the dupont 501. When witness asked about the advertised carpet, the salesman told her it wasn’t very good quality, was not for her type of person, that it had no padding, and anyway would cost her more than the advertised price because the areas she wanted covered were too large. When witness saw the advertised carpet she thought it looked “cheap,” “real thin,” and did not look like what was advertised on television. She did not want it even at the low advertised price. She ultimately decided on dupont 501 carpeting, for which she signed a contract for $826. The salesman told her the carpet was guaranteed for 10 years. He also told her, in response to her question, that she could cancel the contract if her roommate did not agree on the transaction. Her roommate did not agree and witness tried vainly by telephone and letter to cancel the contract within the 3 days she had been told she could cancel. She was told the carpet had been cut for her apartment, and was told she would be taken to court. She then agreed to go through with the deal (Tr. 365-378). Witness saw respondents’ advertisement on WDCA-TV, Channel 20. It featured 3 rooms of carpeting for $119 or $129, and in witness’ recollection represented that, if one called within five minutes, one would receive a discount and a free vacuum cleaner. The witness described the salesman as a “con man.” When the witness asked to see the advertised carpet, “he showed me a piece of carpet I don’t believe anybody would want.” It did not appear to him to be the carpet he had seen advertised on television. The salesman said it was not worth putting down. Witness ultimately bought other carpet from Tri-State for one room for $170. He was told he had a 10-or 15-year “wear and tear” guarantee, but he never received it. He was also told that a vacuum cleaner would be sent to him, but he never received one (Tr. 375-380).

Witness saw respondents’ advertisement on WDCA-TV, Channel 20. The advertisement featured 3 rooms (witness thought) of dupont 501 carpet for $129. The price would be reduced to $116 for a customer calling immediately. The witness thought the advertised carpet would cover the 3 small rooms she planned to carpet, and was attracted by the low price and the additional offer, in her understanding, of a free 1078 Initial Decision vacuum cleaner. She called for an appointment. One of respondents’ salesmen then called at her home. When he showed her the advertised _carpet she noted that it was different from what she had seen advertised. The salesman stated “I did not think you would want this,” and told her the advertised carpet would not cover her 3 rooms. Witness finally chose dupont 501 carpeting for $707 and signed a contract. The salesman told her that there was a guarantee on the carpet, but witness does not remember his telling her any of its terms and conditions (Tr. 380-285).

Witness saw respondents’ advertisement on WDCA-TV, Channel 20, in Sept. of 1972. In witness’ recollection, the advertisement featured 3 rooms of dupont nylon carpeting at a low price plus a free vacuum cleaner. She made an appointment and one of respondents’ salesmen called at her home. Witness was shown the advertised carpeting and did not like it at all. She described it as “not good carpeting at all * * * very fuzzy, very skimpy.” The salesman then said he had other samples. The witness picked one she liked and was quoted a price of $9 per square yard. She thought this price was too high. Discussion brought the price down to $8.50 per square yard. A contract was written up and witness made a $100 cash deposit which the salesman told her was necessary. The salesman told her there was a 10-year guarantee on the carpet, and the witness made him write that on the contract. The witness believed the salesman said that the written contract would come in the mail, but she never received one. The salesman never explained the terms and conditions of the guarantee. The witness had forgotten to ask the salesman about the vacuum cleaner which she had supposed was free. She called respondents’ company and was told that the vacuum cleaner came only with the “advertised” carpeting. The carpet was not delivered on the day promised. When it was delivered, customer found it was not the same quality carpeting as that she had picked, and she refused — delivery. Respondents refused to return her deposit (Tr. 411-416). 19. As one of respondents’ salesmen succinctly testified, the cheap and flimsy sample of carpet shown to prospects as the advertised carpet helped sell carpet because (Tr. 238-39):

It is a piece of carpet to come off of to a better piece of carpet. In selling respondents’ carpet some salesmen used an alias (Tr. 247). 20. Respondents’ television commercials were false, misleading and deceptive in that they conveyed to the viewing public the impression that “three full rooms” up to “three hundred square feet” of attractive “beautiful nylon pile,” high quality carpet consisting of “quality shags, tip shears and plush piles” were being offered “for only $129” whereas the carpet exhibited to persons responding to respondents’ commercials Initial Decision — 84 F.T.C.

was not like that shown on television, but was cheap, flimsy and of poor quality and appearance.

21. Respondents’ television commercials were false, misleading and deceptive in that they held out to the public the offer of attractive quality carpet at bargain prices not in truth available. 22. Respondents’ advertising was false, misleading and deceptive in that it was not a bona fide offer to sell carpet at the price and on the terms and conditions stated, but was utilized for the purpose of luring members of the public into making appointments with respondents’ salesmen, so that such members of the public could be sold other carpeting than that advertised, at prices higher than those advertised. Between Apr. 7, 1972 and May 23, 1972, over 96 percent of respondents’ customer contracts represented sales of higher priced carpeting than that advertised (CX 17-178).

23. Respondents’ advertising and selling practices constituted an unfair and deceptive scheme by which members of the public, on being visited in their homes by respondents’ salesmen, were shown a sample of carpeting which was cheap, flimsy and unattractive in appearance, were told that such sample was the advertised carpet, although it bore little or no resemblance to that shown over television by respondents, such carpet was openly or subtly disparaged and, when prospective customers indicated disinterest in the exhibited carpet, attempts were made to sell them carpet much higher in price. Separate Padding 24. As quoted earlier herein respondents’ television advertising stated:

Imagine three full rooms of this beautiful nylon pile carpeting—up to three hundred square feet—for only $129—and that does include the padding and 48 hour installation! (CX 10, 191, 208; emphasis added).

You too can have 3 full rooms of this beautiful nylon pile carpeting—installed with padding—up to 300 square feet, for only $129 (CX 180; emphasis added). By and through the use of these statements, respondents represented that the carpeting advertised would be installed with separate padding included at the advertised price.

25. In truth and in fact, the advertised carpeting did not come with separate padding but was manufactured with a thin foam rubber backing which was bonded to the fabric (CX 213, M. Lightman, Tr. 54; Dunlap, Tr. 368). Respondents’ advertisements therefore were false, misleading and deceptive in this respect. , “Free” Vacuum Cleaner 1078 Initial Decision 26. Through the advertisements set out in Findings 12 and 13, and through oral and written statements of respondents’ salesmen to customers and prospective customers, respondents represented that purchasers of “Dupont 501 nylon carpeting” would receive a “free” vacuum cleaner. Respondents’ commercial, which was broadcast repeatedly over television, stated (CX 10, 180, 191, 208):

When you purchase our Dupont 501 nylon carpeting, you'll get this deluxe Hoover vacuum cleaner with all attachments for cleaning the deepest shag. Or if you prefer to purchase our Dupont 501 nylon pile carpeting, you also get this deluxe Hoover vacuum with all the attachments! 27. By the audio and visual manner in which the “free” vacuum cleaner was presented by respondents’ commercials in immediate conjunction with the offer of the featured low priced carpeting, respondents also represented that purchasers of the low priced carpeting were likewise entitled to the “free” vacuum cleaner (see tape, CX 208). The commercial features a salesman with “rapid-fire” delivery. The reference to the “free” vacuum cleaner and to “Dupont 501” as a specific type of carpeting is preceded and followed by references to the advertised low priced $129 carpet. There is no break in the delivery of the advertisement between the discussion of the $129 carpet, the mention of Dupont 501, the offer of a vacuum cleaner, and the offer of a 10 percent discount on the $129 carpet. The salesman states, “Imagine three full rooms of this beautiful nylon pile carpeting * * * for only $129 * * * ,” and goes on immediately to tell the public that “when” you purchase our “Dupont 501 nylon carpeting,” you'll get this “deluxe Hoover vacuum cleaner” (CX 208, 10). The impression conveyed is that the reference to “Dupont 501 nylon carpeting” refers back to the $129 carpet. There is no question whatever that viewers of the television broadcast would derive this impression concluding that all carpet references were to the same product, that Dupont 501 was the low priced featured carpet, and that the vacuum cleaner was included with it. The undersigned has viewed the tape of the commercial (CX 208) and finds that the commercial conveys the net impression that a free vacuum cleaner is offered with the purchase of the $129 carpet. This finding is verified by the statements of consumer witnesses in this proceeding. Eleven out of thirteen of these mem ers of the public were clearly under the impression that the free vacuum cleaner came with the advertised low price carpet. The following are examples:

At the time, they stated, in the commercial, if you called within 10 or 15 minutes to éall for an appointment, they would offer a vacuum cleaner free as a bonus gift, if you would call within a certain period of time, so we tried to call * * * [Tr. 258-259]. * * * * * * * Initial Decision 84 F.T.C.

The vacuum, I was under the impression, came with the purchase of carpet and at the same time they were talking about the advertised carpet and the vacuum, so the two sort of went together [Tr. 324].

* * * * * * * Q. Will you describe it [the commercial].

A. Advertised three rooms of carpeting for a very low price, around $129 I think, and a free vacuum cleaner with the carpeting [Tr. 351]. * * * * * * * * * * J ean describe what I seen. This fellow came out and said —he had his hand pointing to a carpet—“Three rooms of carpeting for 119” or “129”—now I can’t get that right. If I call within the next five minutes I would get a vacuum cleaner free. So I called * * * [Tr. 376).

* * * * * * * Well, by the way they explained it, I thought the carpet I was looking at was 501, all of this seemed like a lot for $116. This is the thing that made me call; the amount of the money and the vacuum cleaner being thrown in along with it [Tr. 384]. Ea * * oe * * * They were advertising carpet for three rooms for about $160.00 [sic]. I think it was 100 percent Dupont nylon, and they also said if you purchased carpeting, you were entitled to a Hoover Vacuum Cleaner (Tr. 412).

28, A free vacuum cleaner was not given with the purchase of the $129 carpeting. The president of the company, Michael J. Lightman, admitted this as follows (Tr. 66):

Persons that purchased the carpet advertised for $116 or $129, respectfully [sic], did not receive a vacuum cleaner.

Virtually no one was ever sold respondents’ low priced carpeting advertised “for only $129” in any event (CX 17-178; see Finding 22, supra). Not all purchasers, even of the dupont 501 carpeting, however, received a “free” vacuum cleaner. Some purchasers of dupont 501 were told that the vacuum cleaner was included only with the low priced carpeting (Tr. 305, 319-320, 414). Those who did receive a Hoover vacuum cleaner, moreover, did not in fact receive it “free.” In truth, no “free” vacuum cleaner or “free gift” of any kind was included in the purchase of any of respondents’ carpeting, notwithstanding the representations in respondents’ advertising. Although a customer who obtained a vacuum cleaner from respondents may have thought that he or she was receiving the vacuum “free,” under the “par” system! used by respondents such | Under the “par” system, for each type of carpet sold by Tri-State salesmen there was set a minimum sale price per square foot, the “par,” which a salesman would have to reach before he could obtain his minimum percentage rate of i The commission rate would increase on sales above the “par” price. When a vacuum cleaner was to be included with the carpet, the total cost of the vacuum cleaner would be divided by the number of square feet sold in that particular job, and the “par” or minimum price per square foot would be increased by that proportional amount of the vacuum cleaner’s cost. Therefore, respondents’ salesmen to draw their commissions would increase the price of the carpet accordingly, charging a higher price than they would have, had the vacuum cleaner not been included (Tr. 60-64). TRI-STATE CARPETS, INC., ET AL. 1101 1078 Initial Decision vacuum cleaner was included by respondents’ salesmen in the price the customer paid for the dupont 501 carpet. There was not, of course, even a pretense on the part of respondents or their salesmen (aside from the deception in their commercials) that a vacuum cleaner or “gift” of any kind came with the carpeting advertised “for only $129” (Lightman, Tr. 34, 63-64, 67-68; Robinson, Tr. 252).

29. Respondents’ advertising was false, misleading and deceptive in that it had the tendency and capacity to mislead, and misled, members of the purchasing public into believing that they would receive a “free” vacuum cleaner or “free” gift with the purchase of respondents’ carpeting when such was not the case.

Guarantees 30. Respondents, through oral and written representations of their salesmen to customers and prospective customers, represented that their carpet was unconditionally guaranteed. Consumer witnesses in this proceeding testified to the fact that respondents’ salesmen represented that the carpeting was guaranteed, without informing the prospective customer of conditions or limitations: A. He [the salesman] mentioned the fact that there was a 15 year guarantee on the carpeting and made a strong point stressing the wearability of it as far as the traffic I would have and it would not snag and things of this nature—that it would be very durable carpeting for our particular needs.

Q. Did he tell you the terms and conditions of the guarantee? A. Not in any detail no [Tr. 264-265; emphasis added]. * * * * * * * Q. Were you given a guarantee on the carpeting that you did buy from Tri-State? A. Yes. On my contract it is a 10 year guarantee. Q. Were the terms and conditions of that guarantee explained to you by the salesman? A. Vaguely. I would say he made some discussion about it but I couldn’t quote anything that he said related to that guarantee * * * I didn’t find anything in the contract other than 10 year guarantee. The conditions, it didn’t specify [Tr. 298-299]. * * * * : * * * Q. Did they [the salesmen] make any comments with respect to the other samples of carpeting? A. He told me the one I was buying was Dupont 501, and he did stress the fact we did not have a basement and our living room and dining room area required a lot of wear, that I would get a ten year wear warranty, guarantee from Dupont [Tr. 327-328]. * * * * * * * Q. Was the carpeting that you were buying, guranteed? A. Yes, we asked the salesman was it guaranteed, and he said, yes. * * * Q. Did he write anything on the contract about the guarantee? A. No, we asked him about the guarantee and he said it was in the contract. * * * But after reading the contract, I didn’t see any guarantee [Tr. 304]. * * * * * * * 1102 FEDERAL5 1 1 1 1 3 1153 255 121 26 95.890381 TRADES 1 1 1 1 4 1291 253 222 26 91.646973 COMMISSIONS 1 1 1 1 5 1539 249 191 26 91.646973 DECISIONS2 1 2 0 0 0 1243 329 769 35 -1 3 1 2 1 0 0 1243 329 769 35 -1 4 1 2 1 1 0 1243 329 769 35 -1 5 1 2 1 1 1 1243 339 85 25 96.816231 Initials 1 2 1 1 2 1343 338 122 25 96.585464 Decisions 1 2 1 1 3 1878 332 32 24 92.323769 845 1 2 1 1 4 1924 329 88 26 89.521370 F.T.C.2 1 3 0 0 0 700 396 1313 252 -1 3 1 3 1 0 0 700 396 1312 89 -1 4 1 3 1 1 0 716 396 1296 48 -1 5 1 3 1 1 1 716 414 28 30 93.088333 Q.5 1 3 1 1 2 761 413 63 24 95.715508 Was5 1 3 1 1 3 836 411 76 25 95.715508 there5 1 3 1 1 4 928 418 49 22 96.945160 any5 1 3 1 1 5 991 408 145 26 96.601997 discussions 1 3 1 1 6 1151 407 121 24 96.314461 between5 1 3 1 1 7 1286 413 50 23 97.006180 you5 1 3 1 1 8 1349 396 51 33 95.533386 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96.137154 ands 1 3 2 1 11 1505 485 21 24 96.322723 it5 1 3 2 1 12 1540 484 85 25 96.280373 would5 1 3 2 1 13 1643 483 33 25 96.868767 be5 1 3 2 1 14 1691 482 94 25 96.571243 mailed5 1 3 2 1 15 1801 484 28 22 96.149933 to5 1 3 2 1 16 1845 488 51 17 92.920052 me.5 1 3 2 1 17 1912 479 12 15 87.034111 *5 1 3 2 1 18 1941 479 13 14 87.034111 *5 1 3 2 1 19 1971 479 13 13 92.836800 *5 1 3 2 1 20 2000 478 13 13 92.912117 *3 1 3 3 0 0 717 519 1295 48 -1 4 1 3 3 1 0 717 519 1295 48 -1 5 1 3 3 1 1 717 537 28 30 93.049820 Q.5 1 3 3 1 2 764 536 48 24 96.787643 Did5 1 3 3 1 3 830 536 48 23 96.741844 Mr.5 1 3 3 1 4 895 533 87 25 96.733482 Millers 1 3 3 1 5 998 533 56 28 96.117371 [thes 1 3 3 1 6 1070 531 144 28 96.537422 salesman]5 1 3 3 1 7 1231 529 102 31 96.987526 explains 1 3 3 1 8 1351 528 52 25 95.693375 thes 1 3 3 1 9 1414 530 84 22 95.693375 terms5 1 3 3 1 10 1514 527 50 24 96.531471 ands 1 3 3 1 11 1581 524 147 26 96.580963 conditions5 1 3 3 1 12 1744 522 33 26 96.238533 of5 1 3 3 1 13 1789 522 46 25 96.370667 thes 1 3 3 1 14 1852 519 160 34 96.865723 guarantee?3 1 3 4 0 0 700 563 1313 85 -1 4 1 3 4 1 0 716 563 1297 40 -1 5 1 3 4 1 1 716 579 30 24 95.476501 A.5 1 3 4 1 2 766 578 40 24 96.961052 He5 1 3 4 1 3 819 575 152 26 96.797821 mentioned5 1 3 4 1 4 984 575 23 24 96.973480 if5 1 3 4 1 5 1017 581 65 18 96.593895 ever5 1 3 4 1 6 1096 573 10 24 96.975235 I5 1 3 4 1 7 1121 572 104 30 96.708626 moved,5 1 3 4 1 8 1237 572 45 24 97.017403 thes 1 3 4 1 9 1295 572 92 30 95.011063 carpets 1 3 4 1 10 1402 569 84 24 95.011063 would5 1 3 4 1 11 1500 569 32 24 96.751465 be5 1 3 4 1 12 1546 567 94 26 96.967476 moved5 1 3 4 1 13 1655 566 50 24 96.961395 ands 1 3 4 1 14 1719 564 122 26 96.932800 installed5 1 3 4 1 15 1857 566 28 22 96.965897 at5 1 3 4 1 16 1897 563 46 24 96.496452 thes 1 3 4 1 17 1956 569 57 17 96.496452 new4 1 3 4 2 0 700 618 256 30 -1 5 1 3 4 2 1 700 621 110 25 93.291878 address5 1 3 4 2 2 823 620 52 28 89.546066 [Tr.5 1 3 4 2 3 888 618 68 29 96.739769 345].2 1 4 0 0 0 785 654 1145 29 -1 3 1 4 1 0 0 785 654 1145 29 -1 4 1 4 1 1 0 785 654 1145 29 -1 5 1 4 1 1 1 785 670 12 13 82.962761 *5 1 4 1 1 2 973 667 13 13 81.871483 *5 1 4 1 1 3 1163 664 12 13 79.588242 *5 1 4 1 1 4 1349 662 12 14 82.451782 *5 1 4 1 1 5 1537 660 13 14 87.610367 *5 1 4 1 1 6 1726 657 63 18 43.809036 x.5 1 4 1 1 7 1917 654 13 14 86.219360 *2 1 5 0 0 0 698 706 1320 210 -1 3 1 5 1 0 0 718 706 798 44 -1 4 1 5 1 1 0 718 706 798 44 -1 5 1 5 1 1 1 718 719 28 31 93.182091 Q.5 1 5 1 1 2 765 719 49 24 96.835938 Did5 1 5 1 1 3 827 718 45 24 97.001579 thes 1 5 1 1 4 886 716 132 25 96.452339 salesman5 1 5 1 1 5 1031 723 48 22 96.979385 says 1 5 1 1 6 1092 713 131 31 96.516418 anything5 1 5 1 1 7 1235 713 80 24 96.493057 about5 1 5 1 1 8 1327 720 16 16 96.493057 a5 1 5 1 1 9 1351 706 165 40 96.496529 guarantee?3 1 5 2 0 0 698 745 1320 171 -1 4 1 5 2 1 0 717 745 1299 43 -1 5 1 5 2 1 1 717 761 31 24 96.260704 A.5 1 5 2 1 2 766 761 61 27 93.135033 Yes,5 1 5 2 1 3 845 759 13 14 91.409828 *5 1 5 2 1 4 877 758 13 15 91.409828 *5 1 5 2 1 5 910 753 15 19 91.018410 *5 1 5 2 1 6 943 765 31 17 95.901733 on5 1 5 2 1 7 991 757 46 24 95.901733 thes 1 5 2 1 8 1054 764 50 16 96.204773 ones 1 5 2 1 9 1123 755 10 24 96.204773 I5 1 5 2 1 10 1152 757 54 28 96.296066 got,5 1 5 2 1 11 1224 754 44 24 96.296066 thes 1 5 2 1 12 1285 753 105 24 96.447746 dupont5 1 5 2 1 13 1409 753 54 28 96.267639 501,5 1 5 2 1 14 1481 751 20 24 95.774307 it5 1 5 2 1 15 1518 758 54 16 95.774307 was5 1 5 2 1 16 1589 749 81 31 96.765335 going5 1 5 2 1 17 1687 751 27 22 96.845551 to5 1 5 2 1 18 1732 748 32 24 96.990875 be5 1 5 2 1 19 1782 749 44 22 96.502625 tens 1 5 2 1 20 1844 752 81 24 96.765808 years5 1 5 2 1 21 1942 745 43 23 95.160866 for5 1 5 2 1 22 2001 752 15 15 95.960999 a4 1 5 2 2 0 702 781 1313 52 -1 5 1 5 2 2 1 702 803 151 30 96.396057 guarantee,5 1 5 2 2 2 864 800 50 24 96.867279 ands 1 5 2 2 3 926 799 34 24 96.558533 he5 1 5 2 2 4 971 798 55 25 96.558533 said5 1 5 2 2 5 1037 797 23 24 96.260956 if5 1 5 2 2 6 1068 797 46 24 96.797241 thes 1 5 2 2 7 1124 798 94 29 93.033966 carpets 1 5 2 2 8 1230 796 9 23 96.820229 I5 1 5 2 2 9 1251 794 107 25 96.892296 decided5 1 5 2 2 10 1370 797 28 21 97.005508 to5 1 5 2 2 11 1410 796 53 28 95.473984 get,5 1 5 2 2 12 1473 793 22 23 95.473984 if5 1 5 2 2 13 1513 792 2 24 95.954498 I5 1 5 2 2 14 1526 799 65 17 95.954498 ever5 1 5 2 2 15 1601 790 96 25 96.686951 moved5 1 5 2 2 16 1708 797 30 17 96.316208 or5 1 5 2 2 17 1747 788 132 30 96.316208 anything5 1 5 2 2 18 1889 787 51 24 97.014435 likes 1 5 2 2 19 1950 781 65 39 96.222015 that,4 1 5 2 3 0 703 827 1315 48 -1 5 1 5 2 3 1 703 845 61 30 96.437401 they5 1 5 2 3 2 776 843 84 25 96.737350 would5 1 5 2 3 3 872 850 75 17 96.929703 comes 1 5 2 3 4 958 841 25 24 96.774834 in5 1 5 2 3 5 994 840 51 25 96.774834 ands 1 5 2 3 6 1057 839 62 25 96.806534 takes 1 5 2 3 7 1131 839 20 25 96.893372 it5 1 5 2 3 8 1164 847 34 23 96.660751 up5 1 5 2 3 9 1209 838 58 29 96.660751 and,5 1 5 2 3 10 1278 837 23 24 95.590408 if5 1 5 2 3 11 1310 837 9 24 91.585197 I5 1 5 2 3 12 1331 845 56 16 96.712860 was5 1 5 2 3 13 1400 836 51 25 96.533508 still5 1 5 2 3 14 1463 836 25 23 96.533508 in5 1 5 2 3 15 1499 834 45 25 96.554718 thes 1 5 2 3 16 1555 842 73 20 96.913910 area,5 1 5 2 3 17 1639 832 58 31 96.513298 they5 1 5 2 3 18 1708 830 89 25 96.956589 would5 1 5 2 3 19 1807 829 127 26 96.653641 reinstall5 1 5 2 3 20 1945 829 21 23 96.912170 it5 1 5 2 3 21 1970 827 48 31 96.981064 fora 1 5 2 4 0 698 880 457 36 -1 5 1 5 2 4 1 698 886 57 30 96.378387 free5 1 5 2 4 2 767 885 53 28 80.551895 (Tr.5 1 5 2 4 3 832 884 56 29 95.047768 369;5 1 5 2 4 4 902 881 134 32 96.650055 emphasis5 1 5 2 4 5 1050 880 105 29 79.389389 added].2 1 6 0 0 0 721 919 1295 92 -1 3 1 6 1 0 0 721 919 1295 92 -1 4 1 6 1 1 0 788 919 1144 29 -1 5 1 6 1 1 1 788 935 12 13 69.982834 *5 1 6 1 1 2 976 932 13 13 90.833961 *5 1 6 1 1 3 1166 929 12 13 75.070770 *5 1 6 1 1 4 1352 927 12 13 87.803955 *5 1 6 1 1 5 1540 925 13 13 71.301949 *5 1 6 1 1 6 1729 922 13 14 80.455811 *5 1 6 1 1 7 1919 919 13 14 91.461067 *4 1 6 1 2 0 721 967 1295 44 -1 5 1 6 1 2 1 721 984 13 15 81.518974 *5 1 6 1 2 2 746 984 13 14 81.518974 *5 1 6 1 2 3 772 984 13 13 84.996895 *5 1 6 1 2 4 797 983 48 24 95.880936 We5 1 6 1 2 5 856 982 68 24 95.880936 have5 1 6 1 2 6 938 989 15 16 95.499298 a5 1 6 1 2 7 964 980 72 31 95.499298 large5 1 6 1 2 8 1048 979 100 30 96.939590 family,5 1 6 1 2 9 1159 981 46 22 96.811600 tens 1 6 1 2 10 1218 977 123 29 96.755989 children,5 1 6 1 2 11 1353 976 50 24 96.945312 ands 1 6 1 2 12 1407 970 15 45 95.533989 a5 1 6 1 2 13 1444 975 36 24 95.533989 lots 1 6 1 2 14 1491 974 30 25 96.619789 of5 1 6 1 2 15 1530 974 56 24 97.012390 feet5 1 6 1 2 16 1598 972 115 30 96.714493 running5 1 6 1 2 17 1724 970 108 29 96.488541 around,5 1 6 1 2 18 1844 977 32 17 96.919044 so5 1 6 1 2 19 1889 969 10 24 96.904205 I5 1 6 1 2 20 1912 967 104 25 96.447998 wanted2 1 7 0 0 0 705 1008 1313 48 -1 3 1 7 1 0 0 705 1008 1313 48 -1 4 1 7 1 1 0 705 1008 1313 48 -1 5 1 7 1 1 1 705 1025 148 31 96.736107 something5 1 7 1 1 2 866 1026 93 29 96.384865 pretty5 1 7 1 1 3 973 1025 94 28 96.594093 strong5 1 7 1 1 4 1081 1020 50 25 97.006454 ands 1 7 1 1 5 1147 1019 90 31 94.997238 tough.5 1 7 1 1 6 1253 1019 9 24 94.997238 I5 1 7 1 1 7 1277 1018 77 25 96.777184 made5 1 7 1 1 8 1368 1017 53 24 96.615005 him5 1 7 1 1 9 1438 1016 75 25 96.879395 writes 1 7 1 1 10 1526 1016 60 24 96.993744 that5 1 7 1 1 11 1599 1014 77 25 95.689133 downs 1 7 1 1 12 1692 1013 25 24 95.689133 in5 1 7 1 1 13 1731 1013 45 24 96.444382 thes 1 7 1 1 14 1791 1013 121 23 96.018631 contracts 1 7 1 1 15 1926 1010 59 24 96.018631 that5 1 7 1 1 16 1998 1008 20 25 96.646667 it2 1 8 0 0 0 706 1068 871 108 -1 3 1 8 1 0 0 706 1068 871 108 -1 4 1 8 1 1 0 706 1068 305 28 -1 5 1 8 1 1 1 706 1069 82 24 96.958542 would5 1 8 1 1 2 802 1068 51 24 95.876755 lasts 1 8 1 1 3 865 1069 46 22 96.872475 tens 1 8 1 1 4 924 1073 87 23 96.895584 years.4 1 8 1 2 0 721 1099 856 41 -1 5 1 8 1 2 1 721 1110 29 30 92.170471 Q.5 1 8 1 2 2 769 1109 49 24 96.926170 Did5 1 8 1 2 3 832 1108 32 24 96.926170 he5 1 8 1 2 4 877 1106 105 31 96.827927 explains 1 8 1 2 5 995 1108 84 22 96.999260 terms5 1 8 1 2 6 1093 1104 50 24 96.965958 ands 1 8 1 2 7 1158 1103 146 25 96.965958 conditions5 1 8 1 2 8 1316 1102 30 24 96.993637 of5 1 8 1 2 9 1357 1101 46 24 96.864746 thes 1 8 1 2 10 1417 1099 160 32 96.275940 guarantee?4 1 8 1 3 0 723 1148 299 28 -1 5 1 8 1 3 1 723 1151 29 23 95.244492 A.5 1 8 1 3 2 772 1150 40 23 96.287048 No5 1 8 1 3 3 826 1149 52 27 96.390839 (Tr.5 1 8 1 3 4 890 1148 132 26 94.737282 413-414).2 1 9 0 0 0 707 1199 1321 1148 -1 3 1 9 1 0 0 707 1199 1314 254 -1 4 1 9 1 1 0 709 1199 1310 55 -1 5 1 9 1 1 1 709 1216 49 38 96.962021 By5 1 9 1 1 2 773 1214 126 40 96.404633 stating5 1 9 1 1 3 916 1211 118 41 96.861855 simply5 1 9 1 1 4 1051 1211 75 31 96.861855 that5 1 9 1 1 5 1142 1209 90 32 96.089722 theirs 1 9 1 1 6 1247 1208 156 40 96.924538 products5 1 9 1 1 7 1423 1216 88 22 96.867294 were5 1 9 1 1 8 1528 1202 252 43 15.709068 “syaranteed,”5 1 9 1 1 9 1797 1200 143 33 93.258774 without5 1 9 1 1 10 1955 1199 64 32 93.104874 dis-4 1 9 1 2 0 709 1249 1311 56 -1 5 1 9 1 2 1 709 1265 121 40 96.417747 closings 1 9 1 2 2 847 1274 65 29 96.953751 any5 1 9 1 2 3 931 1261 184 33 95.973732 conditions5 1 9 1 2 4 1132 1270 39 22 96.970703 or5 1 9 1 2 5 1189 1258 199 38 96.937958 limitations,5 1 9 1 2 6 1408 1255 221 41 96.945747 respondents5 1 9 1 2 7 1648 1251 146 41 96.820953 through5 1 9 1 2 8 1811 1250 92 33 93.291588 theirs 1 9 1 2 9 1920 1249 100 32 92.660927 sales-4 1 9 1 3 0 707 1300 1313 53 -1 5 1 9 1 3 1 707 1327 75 22 96.644402 mens 1 9 1 3 2 799 1325 89 22 96.255791 were5 1 9 1 3 3 906 1312 235 41 96.371475 representing5 1 9 1 3 4 1157 1310 75 32 96.840118 that5 1 9 1 3 5 1248 1310 57 31 96.406601 thes 1 9 1 3 6 1321 1307 230 33 96.761505 merchandise5 1 9 1 3 7 1568 1316 69 21 96.647423 was5 1 9 1 3 8 1655 1302 206 42 96.452446 guaranteed5 1 9 1 3 9 1881 1300 139 32 96.385788 without4 1 9 1 4 0 709 1350 1312 48 -1 5 1 9 1 4 1 709 1365 161 33 96.579887 conditions 1 9 1 4 2 886 1374 39 21 96.693680 or5 1 9 1 4 3 941 1362 182 31 96.634590 limitation.5 1 9 1 4 4 1140 1360 65 32 96.232346 Sees 1 9 1 4 5 1220 1359 234 39 96.270683 Montgomery5 1 9 1 4 6 1471 1355 99 32 93.285919 Wards 1 9 1 4 7 1585 1354 30 32 93.203117 &5 1 9 1 4 8 1633 1354 66 38 91.599983 Co.,5 1 9 1 4 9 1714 1353 78 37 91.613800 Inc.,5 1 9 1 4 10 1807 1352 40 31 93.248329 705 1 9 1 4 11 1864 1350 102 31 85.409035 F.T.C5 1 9 1 4 12 1982 1350 39 30 96.843079 524 1 9 1 5 0 709 1407 749 46 -1 5 1 9 1 5 1 709 1416 115 37 93.269577 (1966),5 1 9 1 5 2 838 1413 82 40 92.412941 affd5 1 9 1 5 3 937 1413 60 30 96.857948 3795 1 9 1 5 4 1013 1410 79 32 94.226791 F.2d5 1 9 1 5 5 1109 1410 60 31 96.714951 6665 1 9 1 5 6 1187 1408 69 37 95.913605 (7th5 1 9 1 5 7 1273 1407 65 33 96.874741 Cir.5 1 9 1 5 8 1357 1407 101 35 95.450439 1967).3 1 9 2 0 0 710 1447 1315 702 -1 4 1 9 2 1 0 748 1447 1276 54 -1 5 1 9 2 1 1 748 1466 49 30 96.800179 31.5 1 9 2 1 2 820 1463 86 32 96.946953 Such5 1 9 2 1 3 925 1459 289 42 96.502380 representations5 1 9 2 1 4 1233 1467 87 21 96.997391 were5 1 9 2 1 5 1339 1456 87 32 96.988632 false5 1 9 2 1 6 1444 1455 63 31 97.004555 ands 1 9 2 1 7 1526 1452 197 39 96.030167 misleading5 1 9 2 1 8 1740 1451 32 31 96.030167 in5 1 9 2 1 9 1790 1449 75 32 96.632874 that5 1 9 2 1 10 1885 1458 84 22 96.682449 none5 1 9 2 1 11 1987 1447 37 32 96.682449 of4 1 9 2 2 0 710 1498 1310 58 -1 5 1 9 2 2 1 710 1513 228 43 96.424828 respondents’5 1 9 2 2 2 958 1511 172 41 96.434921 carpeting5 1 9 2 2 3 1147 1520 71 21 96.894203 was5 1 9 2 2 4 1235 1506 276 39 96.150703 unconditionally5 1 9 2 2 5 1529 1502 206 43 96.570976 guaranteed5 1 9 2 2 6 1753 1502 55 31 96.892311 for5 1 9 2 2 7 1823 1511 68 28 96.566475 any5 1 9 2 2 8 1907 1498 113 41 96.341393 period4 1 9 2 3 0 710 1547 1315 52 -1 5 1 9 2 3 1 710 1566 36 31 96.986328 of5 1 9 2 3 2 757 1565 89 31 96.525894 time.5 1 9 2 3 3 862 1563 51 32 96.256821 On5 1 9 2 3 4 928 1562 58 31 96.256821 thes 1 9 2 3 5 1001 1563 166 36 96.677643 contrary,5 1 9 2 3 6 1185 1557 78 33 96.791168 such5 1 9 2 3 7 1278 1559 203 38 96.538223 guarantees5 1 9 2 3 8 1496 1564 88 21 96.399780 were5 1 9 2 3 9 1600 1552 133 39 96.413612 subjects 1 9 2 3 10 1747 1553 35 29 94.537529 to5 1 9 2 3 11 1798 1560 19 21 94.537529 a5 1 9 2 3 12 1831 1548 142 32 96.765030 numbers 1 9 2 3 13 1988 1547 37 31 96.371277 of4 1 9 2 4 0 711 1601 1310 45 -1 5 1 9 2 4 1 711 1614 180 32 96.462540 conditions5 1 9 2 4 2 908 1611 65 33 96.606621 ands 1 9 2 4 3 989 1610 193 31 96.980194 limitations5 1 9 2 4 4 1200 1610 58 29 96.521011 not5 1 9 2 4 5 1273 1605 163 33 96.383751 disclosed5 1 9 2 4 6 1452 1605 32 30 96.383751 in5 1 9 2 4 7 1500 1601 231 42 96.021454 respondents’5 1 9 2 4 8 1747 1601 186 39 93.249786 guarantees 1 9 2 4 9 1949 1607 72 29 92.904877 rep-4 1 9 2 5 0 711 1648 1313 49 -1 5 1 9 2 5 1 711 1662 222 33 91.970230 resentations5 1 9 2 5 2 957 1662 69 35 96.524063 (sees 1 9 2 5 3 1049 1659 59 32 96.141243 CX5 1 9 2 5 4 1133 1658 61 35 95.560432 11).5 1 9 2 5 5 1217 1656 65 31 96.469818 For5 1 9 2 5 6 1302 1654 160 40 96.439728 example,5 1 9 2 5 7 1483 1653 58 31 96.549034 thes 1 9 2 5 8 1561 1653 184 39 96.518982 guarantees 1 9 2 5 9 1768 1648 54 32 96.229568 did5 1 9 2 5 10 1844 1650 60 29 95.034470 not5 1 9 2 5 11 1925 1656 99 21 96.480911 cover4 1 9 2 6 0 712 1694 1310 58 -1 5 1 9 2 6 1 712 1712 170 40 96.956238 carpeting5 1 9 2 6 2 895 1721 42 21 96.986107 on5 1 9 2 6 3 955 1709 175 39 96.878296 stairways5 1 9 2 6 4 1145 1717 38 22 96.966232 or5 1 9 2 6 5 1198 1706 96 31 93.288353 others 1 9 2 6 6 1307 1704 144 32 92.981949 non-flats 1 9 2 6 7 1466 1702 158 32 96.614868 surfaces.5 1 9 2 6 8 1642 1700 88 37 96.774574 Also,5 1 9 2 6 9 1745 1697 169 32 96.421196 Tri-States 1 9 2 6 10 1929 1694 93 33 96.549034 could4 1 9 2 7 0 712 1748 1311 52 -1 5 1 9 2 7 1 712 1767 34 29 96.155327 at5 1 9 2 7 2 757 1764 43 31 95.178474 its5 1 9 2 7 3 811 1762 139 32 96.993423 elections 1 9 2 7 4 964 1760 110 40 96.488441 repairs 1 9 2 7 5 1085 1770 39 21 96.488441 or5 1 9 2 7 6 1133 1758 132 40 96.782623 replaces 1 9 2 7 7 1277 1758 114 38 96.612930 carpets 1 9 2 7 8 1404 1754 102 32 96.728661 found5 1 9 2 7 9 1518 1753 43 40 96.523140 by5 1 9 2 7 10 1573 1751 168 32 96.677643 Tri-States 1 9 2 7 11 1752 1752 35 29 96.868904 to5 1 9 2 7 12 1799 1749 42 31 96.922852 be5 1 9 2 7 13 1852 1757 94 22 96.346146 worn5 1 9 2 7 14 1957 1748 66 36 96.029373 out,4 1 9 2 8 0 712 1795 1311 53 -1 5 1 9 2 8 1 712 1813 63 32 96.903000 ands 1 9 2 8 2 789 1812 32 31 96.903000 in5 1 9 2 8 3 837 1812 79 31 96.993416 such5 1 9 2 8 4 931 1820 76 22 95.518898 cases 1 9 2 8 5 1022 1820 21 21 96.779427 a5 1 9 2 8 6 1056 1808 184 40 96.936356 purchasers 1 9 2 8 7 1254 1806 74 39 96.714485 only5 1 9 2 8 8 1342 1803 154 33 96.981766 received5 1 9 2 8 9 1511 1802 105 32 96.663956 credits 1 9 2 8 10 1633 1798 156 43 96.663956 prorated5 1 9 2 8 11 1805 1808 41 21 97.012924 on5 1 9 2 8 12 1863 1797 57 31 96.184692 thes 1 9 2 8 13 1934 1795 89 41 96.780197 price4 1 9 2 9 0 712 1846 1312 57 -1 5 1 9 2 9 1 712 1862 170 41 96.783310 originally5 1 9 2 9 2 897 1860 86 41 95.247215 paid.5 1 9 2 9 3 1000 1859 155 37 95.247215 Further,5 1 9 2 9 4 1173 1857 57 31 96.593018 thes 1 9 2 9 5 1246 1857 183 39 96.970886 guarantees 1 9 2 9 6 1445 1853 54 31 96.905357 did5 1 9 2 9 7 1516 1854 57 29 96.905357 not5 1 9 2 9 8 1588 1849 100 41 96.645058 apply5 1 9 2 9 9 1702 1851 36 29 96.729828 to5 1 9 2 9 10 1753 1848 142 39 95.291252 damages 1 9 2 9 11 1911 1846 63 31 96.533546 dues 1 9 2 9 12 1990 1847 34 28 96.726288 to4 1 9 2 10 0 713 1893 1311 59 -1 5 1 9 2 10 1 713 1911 146 41 96.636993 snagged5 1 9 2 10 2 877 1910 64 41 96.636993 piles 1 9 2 10 3 962 1909 37 32 96.770630 of5 1 9 2 10 4 1014 1910 116 37 96.935310 carpets 1 9 2 10 5 1147 1917 39 21 96.865074 or5 1 9 2 10 6 1204 1905 63 40 96.818222 piles 1 9 2 10 7 1285 1903 165 40 96.282158 crushing.5 1 9 2 10 8 1468 1902 69 30 96.710403 Thes 1 9 2 10 9 1555 1902 193 38 96.985435 guarantee,5 1 9 2 10 10 1766 1905 186 28 96.492767 moreover,5 1 9 2 10 11 1969 1893 55 33 96.848793 did4 1 9 2 11 0 712 1943 1311 59 -1 5 1 9 2 11 1 712 1965 57 29 96.898193 not5 1 9 2 11 2 790 1960 98 42 96.776123 apply5 1 9 2 11 3 910 1959 97 32 96.042465 when5 1 9 2 11 4 1028 1959 116 39 94.866081 carpets 1 9 2 11 5 1166 1965 71 22 94.866081 was5 1 9 2 11 6 1258 1957 57 29 96.586411 not5 1 9 2 11 7 1336 1953 63 32 96.815445 laid5 1 9 2 11 8 1423 1962 82 22 96.413673 overs 1 9 2 11 9 1525 1952 114 38 96.939705 carpets 1 9 2 11 10 1661 1947 153 41 96.376930 padding.5 1 9 2 11 11 1837 1945 64 37 96.950958 (As5 1 9 2 11 12 1922 1943 101 33 96.816521 found4 1 9 2 12 0 712 1992 1312 58 -1 5 1 9 2 12 1 712 2013 113 37 96.186905 above,5 1 9 2 12 2 844 2010 169 32 96.843475 Tri-States 1 9 2 12 3 1033 2007 176 40 96.737892 carpeting5 1 9 2 12 4 1228 2004 54 32 96.988632 did5 1 9 2 12 5 1302 2006 57 29 96.646225 not5 1 9 2 12 6 1378 2012 94 22 96.798035 comes 1 9 2 12 7 1492 2000 79 32 96.749481 with5 1 9 2 12 8 1591 1992 157 46 96.664200 separates 1 9 2 12 9 1768 1995 168 41 96.465912 padding.)5 1 9 2 12 10 1956 1993 68 31 96.993042 Thea 1 9 2 13 0 713 2043 1312 57 -1 5 1 9 2 13 1 713 2063 167 37 96.415764 warranty5 1 9 2 13 2 899 2058 132 40 97.003143 subjects 1 9 2 13 3 1049 2059 35 29 96.382652 to5 1 9 2 13 4 1102 2056 59 31 96.642868 thes 1 9 2 13 5 1181 2053 173 40 96.788826 foregoing5 1 9 2 13 6 1372 2050 183 33 96.913872 conditions5 1 9 2 13 7 1573 2048 64 32 96.241394 ands 1 9 2 13 8 1657 2045 202 38 93.254578 limitations,5 1 9 2 13 9 1879 2043 146 31 90.834915 further-4 1 9 2 14 0 713 2100 744 49 -1 5 1 9 2 14 1 713 2121 99 28 96.931084 more,5 1 9 2 14 2 828 2107 161 33 96.289543 excluded5 1 9 2 14 3 1006 2106 59 32 96.766846 “all5 1 9 2 14 4 1081 2103 136 42 96.936440 implied5 1 9 2 14 5 1233 2100 224 34 96.833076 warranties.”3 1 9 3 0 0 714 2139 1314 208 -1 4 1 9 3 1 0 753 2139 1273 55 -1 5 1 9 3 1 1 753 2160 47 31 92.558815 32.5 1 9 3 1 2 823 2159 49 30 96.655045 As5 1 9 3 1 3 884 2156 152 33 96.661667 testified5 1 9 3 1 4 1048 2158 35 29 97.003754 to5 1 9 3 1 5 1096 2154 44 40 96.939377 by5 1 9 3 1 6 1152 2153 59 32 97.006378 thes 1 9 3 1 7 1223 2151 170 41 96.586845 presidents 1 9 3 1 8 1408 2149 37 32 96.988991 of5 1 9 3 1 9 1453 2148 166 31 96.614243 Tri-States 1 9 3 1 10 1633 2145 64 32 96.621414 ands 1 9 3 1 11 1710 2154 62 22 96.610565 ones 1 9 3 1 12 1784 2142 38 32 93.205200 of5 1 9 3 1 13 1830 2139 196 34 92.321823 Tri-State’s4 1 9 3 2 0 714 2191 1313 57 -1 5 1 9 3 2 1 714 2211 172 37 96.498672 salesmen,5 1 9 3 2 2 902 2208 27 32 96.763191 it5 1 9 3 2 3 946 2217 68 22 96.763191 was5 1 9 3 2 4 1030 2206 58 32 96.641197 thes 1 9 3 2 5 1105 2204 145 41 96.641197 practices 1 9 3 2 6 1267 2205 57 29 97.000038 not5 1 9 3 2 7 1339 2205 35 28 96.997986 to5 1 9 3 2 8 1390 2199 141 34 96.911110 discloses 1 9 3 2 9 1547 2208 63 30 96.707237 any5 1 9 3 2 10 1627 2196 185 33 96.373604 conditions5 1 9 3 2 11 1828 2193 67 32 93.236023 ands 1 9 3 2 12 1911 2191 116 33 92.420982 limita-4 1 9 3 3 0 714 2241 1314 55 -1 5 1 9 3 3 1 714 2261 85 31 96.168587 tions5 1 9 3 3 2 812 2269 42 21 97.007187 on5 1 9 3 3 3 867 2258 89 32 96.726318 theirs 1 9 3 3 4 969 2259 212 37 96.502525 guarantees,5 1 9 3 3 5 1195 2253 111 31 96.692169 unless5 1 9 3 3 6 1319 2252 57 31 96.888664 thes 1 9 3 3 7 1389 2253 170 29 96.903587 customers 1 9 3 3 8 1570 2245 142 42 96.746689 pressed5 1 9 3 3 9 1724 2245 59 31 96.761353 thes 1 9 3 3 10 1795 2243 167 32 96.680191 salesman5 1 9 3 3 11 1975 2241 53 31 96.718781 fora 1 9 3 4 0 715 2294 1087 53 -1 5 1 9 3 4 1 715 2320 19 21 95.940018 a5 1 9 3 4 2 749 2309 132 32 95.872490 written5 1 9 3 4 3 898 2317 84 30 96.406586 copy5 1 9 3 4 4 998 2305 204 41 96.707138 (Lightman,5 1 9 3 4 5 1218 2302 52 31 94.807312 Tr.5 1 9 3 4 6 1286 2302 48 38 94.807312 74;5 1 9 3 4 7 1353 2300 198 36 96.462982 Robertson,5 1 9 3 4 8 1567 2297 53 31 96.737389 Tr.5 1 9 3 4 9 1638 2294 164 36 91.391068 245-246).2 1 10 0 0 0 755 2382 1234 55 -1 3 1 10 1 0 0 755 2382 1234 55 -1 4 1 10 1 1 0 755 2382 1234 55 -1 5 1 10 1 1 1 755 2400 68 32 96.896683 Uses 1 10 1 1 2 839 2399 38 32 96.333740 of5 1 10 1 1 3 890 2398 147 39 96.488022 “Squares 1 10 1 1 4 1055 2394 102 33 96.515411 Feet”5 1 10 1 1 5 1176 2394 32 31 96.354782 in5 1 10 1 1 6 1224 2391 292 33 96.539658 Advertisements5 1 10 1 1 7 1533 2398 36 21 96.500412 as5 1 10 1 1 8 1585 2397 19 22 96.781769 a5 1 10 1 1 9 1620 2386 118 31 96.447212 Means5 1 10 1 1 10 1753 2384 39 32 96.447212 of5 1 10 1 1 11 1805 2382 184 40 96.255608 Deception 1078 Initial Decision 33. In the advertising of their products, respondents used the term “ap to three hundred square feet” to indicate the quantity of carpet available at the advertised price (CX 10, 180, 191, 208). Square yards were not disclosed.

34. Over the years the retail carpet industry has sold “wall-to-wall” carpet by the square yard, and members of the purchasing public have become accustomed to evaluate prices and areas of coverage in terms of square yards. An expert in the field of retail carpet advertising, the editor of one of the industry’s leading trade publications, Floor Covering Weekly, testified that the standard unit of measurement used in the retail carpet industry to advertise quantities of carpet has been, and is, the square yard (Tr. 121). As he stated (Tr. 128): If you were to go into the carpet business tomorrow, you would buy carpet and sell it by the square yard. I say that without reservation. Everyone, every honest man in this country would do that * * *. That is the way it is. In his expert opinion, in view of the industry’s historic practice of offering carpet by the square yard, and the consuming public’s familiarity with that unit of measurement in the sale of “wall-to-wall” carpet, use of “square feet” in lieu of square yards had the tendency to deceive. He testified (Tr. 122):

* * * The only reason you could use square footage would be to deceive. If you had no other motive, I imagine you would sell carpet like every other legitimate retailer, by the square yard * * *, If you advertise it by the square foot—unless somebody could show me a good plausible economic reason for doing that, and honest one, of course, I see no purpose except to deceive somebody. Square foot must be divided by nine to get the square yard. The average person does not attempt to do that * * *. He further stated that to give both the square footage and the square yardage would be “incredibly honest” (Tr. 128). 35. Respondents’ use of square feet as the only unit of measurement in their advertisements had the tendency and capacity to mislead consumers into the mistaken belief that they were being offered a greater quantity of carpeting than was the fact. This is supported by statements of consumer witnesses in this proceeding who, on viewing the advertisements, were almost invariably under the impression that they would receive a “lot of carpet” that would certainly cover three rooms: At the time of the advertisement, they said 300 square feet, 3 rooms of carpeting—I assumed, at that time, that that would be enough to probably cover what we were figuring on covering, but, now, as I look back on it, I realize that 300 square feet is not the same as what he came up with, as 70 square yards, when he measured my apartment. At the time, I didn’t see the difference * * * [Tr. 271]. * * * * * * * Initial Decision 84 F.T.C.

Q. Did you think that the 3 rooms you saw advertised would cover these areas? A. Yes, I did * * * When they said 300 and some carpet, I thought it was a lot of carpet, you know [Tr. 287].

* * * * * * * | figured what they said, 3 rooms, would cover what I had planned to cover [Tr. 313]. * a * * * * * Iam in a town-house. * * * But from the way he was saying it on television, I assumed this would cover three bedrooms. (Tr. 382). See also Tr. 276, 325, 343.

Failure to Disclose Higher Rates for Greater Carpet Quantities than Advertised 36. In their advertising, respondents offered carpet with padding and installation included at a price based upon specified areas of coverage, ie., “three full rooms,” “up to 300 square feet” for $129 (CX 10, 180, 191, 208).

37. In making this offer, respondents failed to disclose that the prices stated for the specified areas of coverage were not applied at the same rate for any additional quantities of carpet needed, but such was priced substantially higher. For example, whereas the “beautiful nylon pile” carpet priced at 300 square feet for $129 cost the customer $3.87 per square yard for the first 300 square feet, or about $3.50 per square yard if the price were $116; for anything exceeding 300 square feet, respondents charged the customer a minimum of $7.02 per square yard, an almost 90 percent increase in cost per square yard (M. Lightman, Tr. 52-53; CX 190 “Par Sheet”).

38. That members of the public would have to pay almost 90 percent more per square yard for carpet needed in excess of the 300 square feet (38 1/3 square yards) advertised is a fact highly material to the decision of members of the public to answer respondents’ commercials. Had respondents disclosed the foregoing facts in their advertisements, members of the public who telephoned respondents in answer to the advertisements might not have done so. Anyone viewing respondents’ commercials would reasonably conclude that additional carpet in excess of the 300 square feet offered for $129, or for $116 if a call were placed within 5 minutes, could be purchased at an equivalent low rate. There was no reason to believe otherwise, and the failure of respondents to disclose the contrary was materially deceptive and misleading. Pressuring Customers to Sign Contracts in Haste 39. Through the use of the false, misleading and deceptive statements, representations and practices, respondents and their representa- 1078 Initial Decision tives induced customers to sign contracts upon initial contact without giving them time to consider carefully the purchase and the consequences thereof. All but one of the consumer witnesses who testified in these proceedings signed a contract on the initial visit of respondents’ salesman. The high pressure techniques employed by respondents’ salesmen are illustrated by the following testimony (Tr. 262): We asked him [the salesman] if there was a possibility of us talking it over and checking some more prices before we made up our minds whether to buy or not buy the carpet. At that time he said, well, I have to know today. This struck me funny. I said, what is the reason you have to know today? He said * *.* if you tell me yes or no today, then I can give you this vacuum cleaner. If you don’t give me the order today, then I can’t guarantee the vacuum cleaner will be thrown in on the deal. Furthermore, customers who, after signing a contract, reconsidered and . decided to cancel their order within three days were subject to frustration and further pressure by respondents as illustrated by the following testimony (Tr. 356-357):

** * The very next day I called and wanted to cancel; I talked to this girl * * * and she said we could cancel it. And I asked her her name and she wouldn’t give me her name, said I did not need it, and she hung up on me.

* * * * * * * T called back and asked to speak to the manager. * * * They said it would be Mr. Schwartz, he was in the warehouse and can’t talk to me right now. Q. Were you successful in canceling your order? A. No, they took me to court because I canceled my order. We did not put any money down. Mr. Schwartz called and said the credit went through and they would go ahead and lay the carpeting * * * Mr. Schwartz said we couldn’t cancel the order * * * Then two months later we get a summons in the mail because they were suing us * * * We went to court * * * and they just let us go; * * * but our credit is ruined now. Another consumer testified to a similar experience (Tr. 370-371): I have a room-mate—I said if she decided not to go through with the deal, could I get the contract canceled? He [the salesman] said I could, just call him. My room-mate was on leave. When she came back * * * she did not want it. So I wrote the letter that night because he said you have three days to cancel it. Then I called the next morning and asked to speak to Mr. Floyd. He was not in. I kept calling, he was never there.

The next day I went out there * * * I talked to some other man * * * He went on to tell me how good the carpet was and they could make other financial arrangements if she did not want to buy the carpet. :

* * * T did not want the carpet * * * He still wouldn’t let me out of the deal. We went through a little argument. * * * He said he would call the next day and said he had found another way to finance it and they would take me to court if I did not go through with the deal. I decided to go through with it. * * * He said they couldn’t let me out of the deal because the carpet had been cut for my apartment. * * * They did not deliver the carpeting for about two weeks. Initial Decision 84 F.T.C.

Such testimony, in conjuction with proof that contracts were typically signed on the initial contact with respondents’ salesmen, that customers uniformly purchased far more expensive carpet and spent far more money than they had originally intended, and that inducements were offered to make them purchase, reinforces the testimony quoted earlier that high-pressure tactics were used to cause prospects to sign contracts in haste. Truth in Lending 40. The record of this proceeding establishes that respondents in the offering for sale and sale of carpeting and floor coverings regularly arranged for “consumer credit” as defined in Regulation Z, the implementing regulation of the Truth in Lending Act duly promulgated by the Board of Governors of the Federal Reserve System (M. Lightman, Tr. 48-49; W. Lightman, Tr. 103-105; CX-189(a), 189(b), 189(c); see also Commission Exhibits cited in Findings 42 and 43 below). 41. In the ordinary course of business and in connection with their credit sales, as “credit sale” is defined in Regulation Z, respondents have caused customers to execute binding retail installment contracts (see Commission Exhibits cited in Findings 42 and 43 below). 42. In the drawing up of the aforesaid contracts, respondents have failed to obtain, as required by Section 226.4(a)(5) of Regulation Z, a specific dated and separately signed affirmative written indication of the customer’s desire for credit life insurance to be written in connection with its credit sales. Failing to provide for authorization pursuant to Section 226.4(a)(5) of Regulation Z, respondents were required to include the cost of such insurance in the amount of the finance charge, and by failing to do so, respondents failed to disclose accurately the “amount financed” and the “finance charge” as required by Sections 226.8(e)(7) and 226.8(c)(8)(i), respectively, of Regulation Z, and thereby also failed to state the “annual percentage rate” accurately, as required by Section 226.7(b)(6) of Regulation Z (CX 28(d), 25(c), CX 20(f), 36(), 70(c), 137(f), 117(e), 215).

43. In the drawing up of the aforesaid contracts respondents have failed, as required by the foregoing Act and regulation (1) to disclose the annual percentage rate accurately in accordance with Section 226.5(b)(1) of Regulation Z, as required by Section 226.8(b)(2), by reason of either understating the “annual percentage rate” by amounts from 5 percent and more or by leaving the space provided therefor blank (CX 20(c), 32(j), 43(d), 53(c), 54(d), 624), 68(c), 69(c), 69(g), 90(d), 91(e), 92(d), 95(h), 117(e), 126(e), 127(c), 128(d), 142(e), 147(f), 515(c), 153(e), 168(d), 214, 215; (2) to disclose the due date(s) scheduled for the repayment of the customer’s indebtedness as required by Section 226.8(b)(3) of Regulation Z, by leaving the space provided therefore blank (CX 23(d), 24(e), 1078 Initial Decision 26(c), 27(e), 28(d), 29(h), 30(d), 40(e), 43(d), 47(f), 53(g), 54(d), 55(g), 60(c), 62(i), 68(c), 69(c), 74(d), 75(f), 76(e), 78(d), 95(h), 97(f), 109(h), 117(e), 123(c), 125(f), 126(e), 129(e), 130(d), 189(e), 147(f), 150(d), 153(e), 215, 217; (8) to use the term “amount financed” to describe the amount of credit of which the customer has the actual use, as required by Section 226.8(c)(7) of Regulation Z (CX 32(e), 32(f), 53(c), 69(g), 69(h), 113(d), 127(c); (4) to use the term “total of payments” to describe the sum of the payments scheduled to repay the indebtedness, as required by Section 226.8(b)(3) of Regulation Z (CX 32(e), 32(f), 53(e), 69(g), 69(h), 113(d), 127(c); (5) to disclose the sum of the cash price, all charges which are included in the amount financed but which are not part of the finance charge, and the finance charge, and to describe that sum as the “deferred payment price,” as required by Section 226.8(c)(8)(ii) of Regulation Z (CX 20(f), 48(d), 68(c), 69(c), 84(c), 95(h), 117(e), 137(f), 145(f), 147(f), 168(d), 171(e), 215.

44. Pursuant to Section 103(q) of the Truth in Lending Act, respondents’ aforesaid fairlures to comply with the provisions of Regulation Z constitute violations of that Act, and, pursuant to Section 108 thereof, respondents have thereby violated the Federal Trade Commission Act. CONCLUSIONS 1. The Federal Trade Commission has, and has had, jurisdiction over respondents, and the acts and practices charged in the complaint, and involved herein, took place in commerce, as “ecommerce” is defined in the Federal Trade Commission Act.

2. Respondents, as demonstrated in the findings of fact set out earlier, engaged in false, misleading and deceptive advertising, and utilized unfair and deceptive acts and practices in the offering for sale, sale and distribution of carpeting and floor coverings. 3. Such false, misleading and deceptive advertising, and such unfair and deceptive acts and practices, had the tendency and capacity to mislead, and in fact misled, members of the purchasing public into the purchase of substantial quantities of respondents’ carpeting and floor coverings, and were to the prejudice and injury of the public and of respondents’ competitors, and constituted violations of Section 5 of the Federal Trade Commission Act.

4. In the course and conduct of their business, respondents have failed to comply with Regulation Z duly promulgated by the Board of Governors of the Federal Reserve System and, pursuant to Section 103(q) of the Truth in Lending Act, such failure constitutes a violation of the Federal Trade Commission Act.

Initial Decision 84 F.T.C.

DISCUSSION The Individual Respondent It is argued that the order, if any is to be issued in this case, should not be applicable to respondent William R. Lightman, individually. The contention made is that William R. Lightman, though a corporate officer, was “never active in the business,” never played “any role in the promotion, advertising, or resale of carpets or other floor covering,” had “no responsibility for the promotion or sale of carpets,” and did not engage in “decision making on any reasponsible level” in the management of Tri-State Carpets, Inc.

These contentions are unsubstantiated on the record as a whole and are rejected. William R. Lightman was intimately involved in the activities of Tri-State Carpets, Inc. Indeed, Tri-State itself was essentially an expansion of Classic Carpet Center, Inc., which William R. Lightman founded and had operated for the previous five years. Both were “family” corporations, owned and operated by the Lightman family. William R. Lightman was an officer of both firms. In fact, Classic Carpet Center, Inc., and Tri-State were family businesses to such an extent that William R. Lightman was even confused as to his technical position with each, as follows (Tr. 98):

I believe I was Secretary-Treasurer there. No, I was Vice-President. I got confused with Tri-State. I thought it was mentioned I was Vice-President, but as I say, it is immaterial. It is all in the family.

After Tri-State was established as an expansion of Classic Carpet Center, Inc., “to make more money” as Michael Lightman put it (Tr. 15), William Lightman served at various times as vice-president or secretary-treasurer of Tri-State, Inc. He oversaw the expedition of all merchandise sold for Tri-State, and arranged for the purchase of all products for resale. He was a general “trouble shooter”, handling all customer “backlash” problems, i.e., customer complaints that arose from Tri-State’s operation. In these areas his was the final decision; as he put it, the “buck stops here” (Tr. 75, 83-84, 90). It was he who initiated a meeting with salesmen to settle the question of how and when the “free” vacuum cleaners were to be distributed by Tri-State (Tr. 93-95). Similarly, he made decisions as to whether a customer would receive a guarantee on his purchase of carpet from Tri-State (Tr. 92). More generally, he personally handled serious problems involving Tri-State as they arose. For example, when a problem arose involving the finance company, TransAmericard (Tr. 104), with whom Tri-State dealt, William 1078 Initial Decision R. Lightman took over, and was successful in recovering funds allegedly owed Tri-State (Tr. 103-105). Further, although William R. Lightman claimed that he had nothing to do with advertising it was Michael Lightman’s recollection that William R. Lightman was present at the initial meeting with Tri-State’s advertising agency, when the Tri-State commercials were “brain stormed” (Tr. 24, 110). On that occasion, William R. Lightman participated in the discussion and evaluation of the commercials (Tr. 24-25). The two Lightmans shared the very same office in the Classic Carpet Center, Inc., warehouse; in fact, they had adjoining desks. Significantly, it was William R. Lightman who took over full management of Tri-State in Michael Lightman’s absence (Tr. 76-77).

From these facts, it is clear that William R. Lightman exercised substantial responsibility and control over Tri-State, was properly named as an individual respondent in the complaint, and must be bound personally and individually by the terms of the order issued herein. Furthermore, apart from his control] over Tri-State’s operations, William R. Lightman as proprietor of Classic Carpet Center, Inc., was essential to and supported the Tri-State operation. William R. Lightman, using Classic Carpet Center, Inc., was not only supplier of carpet (Tr. 83), but handled all installation of carpet sold by Tri-State (Tr. 31). Installation orders for Tri-State customers were written on Classic Carpet Center, Inc., i.e., “Carpeteria,” forms (Tr. 86). The very advertising of Tri-State leaned to a degree on Classic Carpet Center, Inc., in that it referred to Tri-State and its affiliates as having “installed over 5,000,000 square feet of brand name carpeting” (CX 208, Tr. 50). For any order in this case to be effective, it must be applied to William R. Lightman individually, and the undersigned has so found. Were it not, its purpose could be easily frustrated. William R. Lightman not only founded the business of which Tri-State was an offshoot but, indeed, founded Tri-State, as stated. He has been long involved in retail carpet operations. Without an order binding him, there would be nothing to prevent him from carrying on the same type of business as Tri- State under a new name, or through a newly formed or already established corporation, and continuing the false, misleading, deceptive and _unfair acts and practices proven in the record and prohibited herein. As the Commission stated in Coran Bros. Corp., 72 F.T.C. 1, 25 (1967): The public interest requires that the Commission take such precautionary measures as may be necessary to close off any wide “loophole” through which the effectiveness of its orders may be circumvented.

In Coran the Commission found that the individual respondent could have formed a new corporation and continued the business with “com- Initial Decision 84 F.T.C.

plete disregard for the Commission’s action against the predecessor organization.” 72 F.T.C. at 25. Considerations of public interest require similar precautionary measures in this case to ensure that its order will have its full intended effect. The authority of the Commission to name officers, directors and sole stockholders of corporate respondents to prevent evasion of its orders has long been established. Federal Trade Commission v. Standard Education Society, 302 U.S. 112 (1937); Rayex Corporation v. Federal Trade Commission, 317 F.2d 290 (2nd Cir. 1963); Standard Distributors v. Federal Trade Commission, 211 F.2d 7 (2nd Cir. 1954).

Deceptive and Unfair Acts and Practices “Bait and switch” sales tactics have long been held to violate Section 5 of the Federal Trade Commission Act. Advertising a “phony” bargain in order to obtain contact with a prospective customer for the purpose of selling another product at a much higher price is an ancient practice, but one of continuing effectiveness. It is oppressive and exploitive of the public, is deceptive and unfair, and has been repeatedly condemned. Tashof v. Federal Trade Commission, 437 F.2d 707 (D.C. Cir. 1970); Consumers Products of America, Inc. v. Federal Trade Commission, 400 F.2d 930 (8rd Cir. 1968), cert. denied, 393 U.S. 1088 (1969); Guides Against Bait Advertising, 16 C.F.R. §288 (1974).The “gimmick” utilized by respondents in this case consisted of cheap and flimsy carpet, far different in appearance from that shown over television, which was shown to prospects whose names had been obtained by respondents’ commercials. Exhibition of this carpet was typically sufficient to switch prospects to higher priced carpet. Actual verbal disparagement of the advertised carpet is not essential to a finding of bait and switch sales tactics, Tashof v. Federal Trade Commission, supra, and was not often necessary, although were required that tactic was resorted to by respondents, as described.

With respect to the “free” vacuum cleaner, it is plainly deceptive to represent that something is “free,” if the cost of the “free” item, unknown to the purchaser, is added to what would otherwise have been the price of the merchandise advertised. Sunshine Art Studios, Inc., v. Federal Trade Commission, 481 F.2d 1171 (1st Cir. 1973); Federal Trade Commission v. Mary Carter Paint Co., 382 U.S. 46 (1965); see also Guide Concerning the Use of the Word “Free” and Similar Representations, 16 C.F.R. 251 (1974). Moreover, there was not even a pretense of giving a “free” vacuum cleaner to the few who did purchase the advertised carpet for $129 or $116, although respondents’ commercials 1078 Initial Decision led viewers to believe that a “free” vacuum cleaner would be provided with such purchase.

Respondents and their salesmen consistently represented that their carpet was “guaranteed” without advising customers of applicable limitations or conditions. Representation that a product is guaranteed without saying more constitutes a representation that it is unconditionally guaranteed. Montgomery Ward & Company, Inc., 70 F.T.C. 52 (1966), affd., 379 F.2d 666 (7th Cir. 1967). It is an unfair practice to offer an unconditional guarantee when in reality there are undisclosed conditions in the terms of the actual guarantee. Benrus Watch Co., v. Federal Trade Commission, 352 F.2d 313 (8th Cir. 1965), cert. denied, 384 U.S. 939 (1966); Parker Pen Co., v. Federal Trade Commission, 159 F.2d 509 (7th Cir. 1946). , Expert testimony introduced by complaint counsel established that the retail carpet industry has over the years consistently sold carpet exclusively by the square yard. Under circumstances where members of the public have long been accustomed to an industry practice which advertises carpet in commercials by the “square yard,” use of the “square foot” measure, without also stating the square yards offered, tends to create the impression that a larger quantity of carpet is being offered at the price quoted than is the case. Under such circumstances use of square feet to denote the quantity of carpet offered, without stating square yards, has the tendency and capacity to mislead and deceive, and is an unfair trade practice. Actual deception of the public is not necessary for a violation, a tendency and capacity to deceive being sufficient. Feil v. Federal Trade Commission, 285 F.2d 879 (9th Cir. 1960). The Federal Trade Commission Act was not intended to protect “sophisticates,” Giant Food Inc. v. Federal Trade Commission, 322 F.2d 977 (D.C. Cir. 1963), but the unthinking and credulous who do not stop to analyze but are governed by general impressions. Helbros Watch Company, Inc. v. Federal Trade Commission, 310 F.2d 868 (D.C. Cir. 1962), cert. denied, 372 U.S. 976 (1963).

Where the price for additional carpeting beyond the quantity advertised is substantially higher per square yard than the advertised carpet, such increased price is a fact material to the advertised offer. It is therefore unfair and deceptive not to disclose such fact in the advertisements. Federal Trade Commission v. Colgate-Palmolive Co., 380 U.S. 374 (1965).

It is, furthermore, an unfair trade practice to manipulate a prospective customer by high pressure tactics. Household Sewing Machine Co., Inc., 76 F.T.C. 207, 242-248 (1969); see also Trade Regulation Rule, Cooling—Off Period for Door-to-Door Sales, 16 C.F.R. 429 (1974). And, 575-956 O-LT - 76 - 71 Initial Decision 84 F.T.C.

it is obviously deceptive and misleading to advertise carpet in such a manner as to convey the impression that “separate padding” is included. (CX 10, 180,.191, 208) when the “padding” consists of thin rubber backing affixed to the rear side of the carpet. The Remedy In the “Notice Order” attached to the complaint, and in the order issued herein, there is included a provision requiring respondents to disclose clearly and conspicuously, by means of a blackbordered notice in all their advertisements, the fact that they have been found to “engage in bait and switch advertising.” This provision is necessary to end with certainty the deceptive and oppressive practices disclosed by this record, and to prevent their resumption at some other time, either in the sale of carpet or floor coverings or of some other product or service. Respondents’ violation of Section 5 of the Act was flagrant. The use of bait and switch was an integral part of their misleading and unfair selling operation, which was harsh, deliberate and sophisticated. Thirteen consumer witnesses testified that they were uniformly “taken in” by respondents’ deceptive advertising and selling techniques. Clearly there were hundreds more who were similarly bilked by respondents’ methods, but who did not appear in this proceeding. The consumer warning provision therefore is not punitive. Rather, it is designed to prevent the recurrence of the unfair practices that respondents utilized. It is no longer open to question that the Commission, as part of its remedial powers, has the authority to require respondents to take affirmative action. American Cyanamid v. Federal Trade Commission, 401 F.2d 574 (1968), cert. denied, 394 U.S. 920 (1969). An order requiring disclosures and disclaimers that detracted greatly from the “image” of the advertiser was recently upheld in La Salle Extension University, 78 F.T.C. 1272 (1971), affd. No. 71-1648, 7th Cir., Oct. 23, 1973 (unreported). The only qualification on the Commission’s broad discretion in framing an order is that the remedy be reasonably related to the unlawful practices found. Federal Trade Commission v. Ruberoid Co., 343 U.S. 470 (1952). In the opinion of the undersigned, the provision in question clearly meets this qualification. By its very nature the practice of bait and switch can be done so skillfully that few customers, especially the unsophisticated and trusting, realize at the time what is happening to them. The proposed warning is the only effective means of alerting members of the public that such unfair practices may be perpetrated on them in their own homes. Such a warning arms prospective customers in advance. Aware of such prac- 1078 Initial Decision tices, the member of the public will be in position to recognize bait and switch tactics if utilized an to end the sales presentation. Additionally, the provision serves as an incentive to respondents as well as to their salesmen to abide by the terms of the order. It is true that the requirement for inclusion of this warning provision may detract somewhat from the effectiveness of respondents’ advertising. However, even if that is the necessary result of the order, such detriment to the respondents must be balanced against the benefit to the public in being protected by such a warning. In the opinion of the undersigned, the public interest in being protected from the deceptive and oppressive sales tactics of respondents clearly outweighs any hardship to respondents, if such there is. The Commission has rejected the argument that an otherwise necessary and proper order cannot issue because its effect would be to hinder respondent in the conduct of its business. S. Dean Slough v. F.T.C. 396 F.2d 870, 872, cert. denied, 393 U.S. 980 (1968). As a consequence of the foregoing, and of the findings of fact set out earlier herein, the following order is entered: ORDER I It is ordered, That respondents Tri-State Carpets, Inc., a corporation, its successors and assigns, and its officers, and Michael J. Lightman and William R. Lightman, individually and as officers of said corporation, and Matthew Mintz, individually and as a manager of said corporation, and their agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, or as an official or employee of any firm or corporation, in connection with the advertising, offering for sale, sale or distribution of carpeting and floor coverings, or of any other product, merchandise or service of whatever nature or description, in commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from, and do forthwith cease and desist from contributing to, or aiding or abetting in any manner whatever, any firm or corporation in: 1. Using, in any manner, a sales plan, scheme, or device wherein false, misleading, or deceptive statements or representations are made in order to obtain leads or prospects for the sale of carpeting or of other product, merchandise or service. 2. Making representations, directly or by implication, orally or in writing, purporting to offer any product, merchandise or service for sale when the purpose of the representation is not to sell the offered product, merchandise or service but to obtain leads or Initial Decision 84 F.T.C.

prospects for the sale of another product, or merchandise or service, at higher prices.

3. Disparaging in any manner, or discouraging the purchase of any prodyct, merchandise or service which is advertised or offered for sale.

4. Representing, directly or by implication, orally or in writing, that any product, merchandise or service is offered for sale when such offer is not a bona fide offer to sell such product, merchandise or service.

5. Failing to maintain and produce for inspection and copying, on demand by the Federal Trade Commission or its representatives, adequate records which reveal for every advertisement published in print or broadcast media, for three years from the date of its publication:

a. the volume of sales made of the advertised product, merchandise or service at the advertised price; and b. the net profit from the sale of each advertised product, merchandise or service at the advertised price. 6. Representing, directly or by implication, orally or in writing, that a stated price for carpeting or floor coverings includes the cost of separate padding and the installation of such padding, unless in every instance where it is so represented the stated price for floor coverings does, in fact, include the cost of such separate padding and installation.

7. Misrepresenting in any manner, the prices, terms or conditions under which separate padding and installation is provided in connection with the sale of carpet and floor coverings. 8. Representing, directly or by implication, orally or in writing, that the purchaser of any advertised product, merchandise or service will receive a “free” vacuum cleaner or any other “free” merchandise, gift, service, prize or award unless all conditions, obligations, or other prerequisites to the receipt and retention of such merchandise, service, gift, prize or award are clearly and conspicuously disclosed at the outset in close conjunction with the word “free” wherever it first appears in any advertisement or offer.

9. Representing, directly or by implication, orally or in writing, that any merchandise or service is furnished “free” or at no cost to the purchaser of any advertised product, merchandise or service, when, in fact, the cost of such merchandise or service is added to what would otherwise have been the selling price of the advertised product, merchandise or service.

TRI-STATE CARPETS, INC., ET AL. Lil Initial Decision 10. Representing, directly or by implication, orally or in writing, that a “free” offer is being made in connection with the introduction of any new product, merchandise or service offered for sale at a specified price unless it is planned, in good faith, to discontinue the offer after a limited time and to commence selling such: product, merchandise or service separately at the same price at which it was sold with a “free” offer. .

11. Representing, directly or by implication, orally or in writing, that any product, merchandise or ‘service is being offered “free” with the sale. of a product, merchandise or service which is usually sold at a price arrived at through bargaining, rather than at a regular, previously established and published price, or where there ° may be a regular, previously established, and published price, but where other material factors such as quantity, quality, or size are arrived at through bargaining.

12. Representing, directly or by implication, orally or in writing, that a “free” offer is available in a trade area for more than six (6) months in any twelve (12) month period. Note: After one “free” offer is made, at least thirty (30) days shall elapse before another such “free” offer is made in the same trade area. No more than three such “free” offers shall be made in the same area in any twelve (12) month period. In such period, sales of respondents, or any of them, in that area of the product or service in the amount, size or quality promoted with the “free” offer shall not exceed 50 percent of the total volume of sales of the product or service, in the same amount, size or quality, in the area.

13. Representing, directly or by implication, orally or in writing, that any product, merchandise or service is being given “free” in connection with the purchase of any other product, merchandise or service, unless the stated price of the product, merchandise or service required to be purchased in order to obtain said “free” product, merchandise or service is the same OF less than the regular price at which the same product, merchandise or service required to be purchased has been sold separately, for a substantial period of time in the recent and regular course of business of respondents, or any of them, in the geographic market or trade area in which the “free” offer is made. .- 14. Representing, directly or by implication, orally or in writing, that a product or service is being offered as 4 “oift,” “without charge,” “bonus,” or by other words or terms which tend to convey the impression to the consuming public that the article of merchan- 2410 FEDERAL TRADE COMM ISSION. DECI SIONS third day, excluding Sundays and legal holidays, after the date of execution.

19. Failing to furnish the buyer with a fully completed receipt or copy of any contract pertaining to such sale at the time of its execution, which is in the same language as that principally used in the oral sales presentation, and which Shows the date of the transaction and contains the name and address of the seller, and in YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.

TRI-STATE CARPETS, INC., ET AL. 1117 1078 Initial Decision 20. Failing to furnish each buyer, at the time he signs the sales contract or otherwise agrees to buy consumer goods or services, a completed form in duplicate, captioned “NOTICE OF CANCEL- LATION,” which shall be attached to the contract or receipt and easily detachable, and which shall contain in ten point bold face type the following information and statements in the same language as that used in the contract:

NOTICE OF CANCELLATION (enter date of transaction} (Date) YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLI- GATION, WITHIN THREE BUSINESS DAYS FROM THE ABOVE DATE. IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU UNDER THE CONTRACT OR SALE, AND ANY NEGOTIABLE INSTRU- MENT EXECUTED BY YOU WILL BE RETURNED WITHIN 10 BUSINESS DAYS FOLLOWING RECEIPT BY THE SELLER OF YOUR CANCELLATION NOTICE, AND ANY SECURITY INTEREST ARISING OUT OF THE TRANSACTION WILL BE CANCELLED.

IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE SELLER AT YOUR RESIDENCE, IN SUBSTANTIALLY AS GOOD CONDITION AS WHEN RE- CEIVED, ANY GOODS DELIVERED TO YOU UNDER THIS CONTRACT OR SALE; OR YOU MAY IF YOU WISH, COMPLY WITH THE INSTRUCTIONS OF THE SELLER REGARDING THE RETURN SHIPMENT OF THE GOODS AT THE SELLER’S EXPENSE AND RISK. , IF YOU DO MAKE THE GOODS AVAILABLE TO THE SELLER AND THE SELLER DOES NOT PICK THEM UP WITHIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OF THE GOODS WITHOUT ANY FURTHER OBLIGATION. IF YOU FAIL TO MAKE THE GOODS AVAILABLE TO THE SELLER, OR IF YOU AGREE TO RETURN THE GOODS TO THE SELLER AND FAIL TO TO SO, THEN YOU REMAIN LIABLE FOR PER- FORMANCE OF ALL OBLIGATIONS UNDER THE CONTRACT. TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE, OR SEND A TELEGRAM, TO [Name of seller] , AT [address of seller’s place of business] _, NOT LATER THAN MIDNIGHT OF :

(Date) I HEREBY CANCEL THIS TRANSACTION.

(Date) (Buyer's signature) Initial Decision 84 F.T.C.

21. Failing, before furnishing copies of the “Notice of Cancellation” to the buyer, to complete both copies by entering the name of the seller, the address of the seller’s place of business, the date of the transaction, and the date, not earlier than the third business day following the date of the transaction, by which the buyer may give notice of cancellation.

22. Including in any sales contract or receipt any confession of judgment or any waiver of any of the rights to which the buyer is entitled under this order including specifically his right to cancel the sale in accordance with the provisions of this order. 23. Failing to inform each buyer orally, at the time he signs the contract or purchases the goods or services, of his right to cancel. 24. Misrepresenting, directly or by implication, orally or in writing, the buyer’s right to cancel.

‘25. Failing or refusing to honor any valid notice of cancellation by a buyer and within 10 business days after the receipt of such notice, to (i) refund all payments made under the contract or sale; (ii) return any goods or property traded in, in substantially as good condition as when received by the seller; (iii) cancel and return any negotiable instrument executed by the buyer in connection with the contract or sale and take any action necessary or appropriate to terminate promptly any security interest created in the transaction.

26. Negotiating, transferring, selling, or assigning any note or other evidence of indebtedness to a finance company or other third ° party prior to midnight of the fifth business day following the day the contract was signed or the goods or services were purchased. 27. Failing, within 10 business days of receipt of the buyer's notice of cancellation, to notify him whether the seller intends to repossess or to abandon any shipped or delivered goods. 28. Advertising the price of carpet, either separately or with padding and installation included, for specified areas of coverage without disclosing in immediate conjunction and with equal prominence the square yard price for additional quantities of such carpet with padding and installation needed.

Provided, however, That nothing contained in this order shall relieve respondents, or any of them, of any additional obligations respecting contracts required by Federal law or the law of the state in which the contract is made. When such obligations are inconsistent, respondents, or any of them, can apply to the Commission for relief from this provision with respect to contracts executed in the state in which such different obligations are required. The Commission, upon showing, will make such modifications as may be warranted in the premises. 1078 Initial Decision Il It is further ordered, That respondent Tri-State Carpets, Inc., a corporation, its successors and assigns, and its officers, and Michael J. Lightman and William R. Lightman, individually and as officers of said corporation, and Matthew Mintz, individually and as manager of said corporation, and respondents’ agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, or as an official or employee of any firm or corporation, in connection with any extension of consumer credit or advertisement to aid, promote, or assist directly or indirectly any extension of consumer credit, as “consumer credit” and “advertisement” are defined in Regulation Z (12 C.F.R. 226) of the Truth in Lending Act (Pub. L. 90-321, 15 U.S.C. 1601, et seq.), do forthwith cease and desist from, and do forthwith cease and desist from contributing to, or aiding or abetting in any manner whatever, any firm or corporation in:

1. Failing, in any credit transaction, to include and to itemize the amount of premiums for credit life and disability insurance as part of the finance charge, unless the amount of such premiums is excluded from the finance charge because of appropriate exercise of the option available pursuant to Section 226.4(a) (5) of Regulation Z.

2. Failing to disclose accurately the “amount financed,” and the “finance charge,” as required by Sections 226.8(c)(7), and 226.8(c)(8)(i), respectively, of Regulation Z. 3. Failing to disclose the “annual percentage rate” accurately to the nearest quarter of one percent, computed in accordance with the provisions of Section 226.5(b)(1) of Regulation Z, as required by Section 226.8(b)(2) of Regulation Z.

4, Failing to disclose the number, amount and due dates or period of payments scheduled to repay the indebtedness, as required by Section 226.8(b)(3) of Regulation Z.

5. Failing to use the term “amount financed” to describe th amount of credit extended as required by Section 226.8(c)(7) of Regulation Z.

6. Failing to use the term “total of payments” to describe the sum of the payments scheduled to repay the indebtedness, as required by Section 226.8(b)(8) of Regulation Z. 7. Failing to disclose the sum of the cash price, all charges which are included in the amount financed but which are not part of the finance charge, and the finance charge, and to describe that sum as the “deferred payment price” as required by Section 226.8(c)(8)(ii) of Regulation Z.

Initial Decision 84 F.T.C.

_8. Failing in any consumer credit transaction or advertisement to make all disclosures determined in accordance with Sections 226.4 and 226.5 of Regulation Z at the time and in the manner, form and amount required by Sections 226.6, 226.8 and 226.10 of Regulation Z.

It is further ordered, That each of respondents forthwith cease and desist from disseminating, or causing or contributing to the dissemination, or aiding or abetting the dissemination of, any advertisement or solicitation for any product, merchandise or service, by means of newspapers or other printed media, or by television or radio, or by letter or communication, or by any other means in commerce, as “commerce” is defined in the Federal Trade Commission Act, unless such respondent clearly and conspicuously discloses in each advertisement or solicitation the following notice set off from the text of the advertisement or solicitation by a black border:

The Federal Trade Commission has found that we engage in bait and switch advertising; that is, the salesman or representative makes it difficult for you to buy the advertised product, merchandise or service and he attempts to switch you to a higher priced item or service.

One year from the date this order becomes final or at any time thereafter, unless at the time this order becomes final respondents, or any of them, have ceased engaging in the offering for sale, sale or distribution of carpeting or floor coverings, or of any other product, merchandise or service, in which circumstance one year from the date such respondent or respondents, again engage[s], directly or indirectly, in such business, such respondent or respondents, upon showing that the practices prohibited by this order have been discontinued and that the notice provision is no longer necessary to prevent the continuance of such practices, may petition the Commission to waive compliance with this order provision.

It is further ordered, That each of respondents shall maintain for a period of one (1) year following the date this order becomes final, unless at the time this order becomes final such respondent has ceased engaging in the offering for sale, sale or distribution of carpeting or floor coverings, or of any other product, merchandise or service, in which circumstance one year from the date such respondent again engages, directly or indirectly, in such business, copies of all newspaper, radio and television advertisements and solicitations, direct mail and in-store advertisements and solicitations, and any other such promotional material utilized for the purpose of obtaining leads for the sale of carpeting or floor coverings, or of any other product, merchandise or service, or utilized in the advertising, promotion or sale of carpeting or floor coverings, or of any other product, merchandise or service. 1078 Final Order It is further ordered; That each of respondents shall provide, for a period of one (1) year from the date this order becomes final, unless at the time this order becomes final such respondent has ceased engaging in the offering for sale, sale or distribution of carpeting or floor coverings, of any other product, merchandise or service, in which circumstance for a period of one (1) year from the date such respondent again engages, directly or indirectly in such business, each advertising agency utilized by such respondent and each newspaper publishing company, television or radio station, or other advertising medium, which is utilized by such respondent to obtain leads for the sale of carpeting or floor coverings and of any other product, merchandise or service, with a copy of the Commission’s news release setting forth the terms of this order. It is further ordered, That respondents notify the Commission at least thirty (80) days prior to any proposed change in the corporate respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of this order.

It is further ordered, That respondents shall forthwith distribute a copy of this order to each of their operating divisions. It is further ordered, That each of respondents deliver a copy of this order to cease and desist to all their present and future employees or personnel, engaged in the offering for sale, sale or distribution of any product, consummation of any extension of consumer credit, or in any aspect of the preparation, creation, or placing of advertising, and that each of respondents secure a signed statement acknowledging receipt of said order from each such person.

It is further ordered, That each individual respondent named herein shall promptly notify the Commission of his present business or employment, of the discontinuance of such business or employment, and of his affiliation with any new business or employment. Such notice shall include each individual respondent’s current business address and a statement as to the nature of the business or employment in which he is engaged as well as a description of his duties and responsibilities. It is further ordered, That each of respondents herein shall within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. FINAL ORDER This matter has come before the Commission on its own motion, for consideration of the question whether the consumer warning provision ordered by the administrative law judge should be adopted as part of Complaint 84 F.T.C.

the Commission’s cease and desist order. The Commission has determined that this matter is indistinguishable from the matter of Wilbanks Carpet Specialists, Inc., et al., Docket 8933, inasmuch as the record presents insufficient evidence that a consumer warning is a necessary or appropriate means for the termination of the acts or practices complained of or for the prevention of their recurrence. Having declined to order a consumer warning in the Wilbanks matter, the Commission has concluded that the same disposition is warranted herein. Accordingly, the initial decision issured by the judge should be modified in accordance with the foregoing views of the Commission, and, as so modified, adopted as the decision of the Commission: It is ordered, That the initial decision issued by the administrative law judge be modified by striking therefrom the following: Those portions of the conclusions of law which concern “consumer warning” relief (at pp. 45-47 [pp. 1112-1113 herein], sub nom. “THE REMEDY”); and the second “FURTHER ORDERED” paragraph of the order to cease and desist issued by the judge (at p. 57) [p. 1120 herein].

As so modified, the initial decision is hereby adopted.