Central Carpet Corporation, Inc

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IN THE MATTER OF ;N'rRAL CARPET CORPORATION . INC., ET AL.

CONSgNT ORDER, ETC., IN RI GARD TO ALLEGED VIOLATION OF THE FEDERAL TRAng COl\iMISSIOH ACT Docket 8980. Complaint, July, 1974- Deci, i()n, June, 1.975 Consent order requiring a Bradbury Heights, Md., seller, distributor and installer of carpeting and floor covering', among other things to cease using bait and switch tactics and other deceptive sellng practices. Appeararu;es or the Commssion; Everette E. Thol1s, Richard F. Kelly, M. McGill, Alice KellehJ!r, Alan L. Cohen. For the respondents: Jeremiah D. Griesemer Wash., D. C. 1022 Complaint COMPLAINT Pursuant to the provisions of the Federal Trade Commssion Act and by virtue of the authority vested in it by said Act, the Federal Tmde Commission, having reason to believe that Central Carpet Corporation), Inc., a corporation, and .James A. Taylor, individually and as an offi er of said corporation, hereinafter sometimes referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PAR. 1. Respondent Central Carpet Corporation, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Maryland with its principal offce and place of business located at 4407 Southern Ave., Bradbur Heights, Md. Respondent ,j ames A. Taylor is an officer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

PAR. 2. Respondents are now, and for some time la.,t past have been engaged in the advertising, offering for sale, sale, distribution and installation of careting and floor coverings to the public, PAR. 8. In the course and conduct of their business as aforesaid respondents. now cause, and for some -time "?t 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 various other States in the United States and the District of Columbia and 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. PAR. 4. In the course and conduct of their aforesaid business, and for the purose of inducing the purchase of their carting and floor coverings, the respondents have made, and are now making, numerous statements and rcprescntations by repeated advertisements inserted in newspapers of interstate circulation, and by oral statements and representations to prospective purchasers with respect to their products and services.

Typical and ilustrative of said statements and representations, but not all inclusive thereof, are the following; $109 3 Rooms NYLON PILE CARPET Quality Wall to WaIJ Complaint 85 F.TC.

up to 270 sq. ft.

Free 38 Piece Oven ware Set When you purchase 3 rooms of our Deluxe .501 Nylon Carpet Call Now 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 forth herein, separately and in connection with the oral 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 careting and floor coverings at the price and on the terms and conditions stated in the advertisements.

2. Purchasers of the said Dupont 501 Cart receive a "free" a8piece ovenware set.

PAR. 6. In truth and in fact:

1. Respondents' offers are not bona fide offers to sell carting and floor covcrings at the price and on the terms and conditions stated in the advertisements. To the contrary, said offers are made for the purose of obtaining leads to persons interested in the purchase of carting. Members of the purchasing public who . respond to said advertisements are called upon in their homes by respondents salesmen, who make 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 careting or floor coverings of superior qualty and texture are thereupon exhibited, which by comparison disparges and demeans the advertised carpting. By these and other tactics, purchase of the advertised carpting is discouraged, and respondents' salesmen attempt to sell and frequently do sell the higher priced carting. 2. Purchasers of respondents' Dupont 501 Caret do not receive a free 88-piece ovenware set. To the contra, the cost of the "free" gift is added to and reguarly included in the sellng price of the merchandise sold to the customer.

Therefore, the statements and representations as set forth in .L-' lll.AL vah.II' vVItrVf\AIIV1-. 11'1\.J. 1\1':;) 1022 Complaint Paragraphs our and Five hereof were and are false, misleading and deceptive.

PAR. 7. In the furher course and conduct of their business, and in furtberance of a sales program for inducing the purchase of their careting .and floor coverings. respondents 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 signng a contract upon initial contact without giving the customer suffcient time to carefully consider the purchase and consequences thereof. Therefore, the acts and practices as set forth in Paragraph Seven hereof were and are unfair and false, misleading and deceptive acts and practices.

PAR. 8. In the furher course and conduct of their aforesaid business and in connection with the representations set forth in Paragrapb Four above, respondents offer carpet with padding and installation included at a price based upon specifed area., of coverage. In making sucb offer respondents have failed to disclose the material fact that the prices stated for such specifed area., of coverage are not applied at the same rate for additional quantities of cart needed, but are pricedsubstantially higher. 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 cart needed in excess of the specifed areas of coverage will not be substantially bigher 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. 9. In the furher coure 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 carpting available at the advertised price.

PAR. 10. The unt of measurement usually and customary employed in the retail advertising of carpt is square yards. Consumers are accustomed to comparng the price of cart in term 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. Furhennore, respondents' use of square foot measurements exag- Initial Deeision 85 F.

gerates the size or quantity of carpeting being offered, and, therefore has the capacity and tendency to mislead consumers into the mistaken beJiM they are being offered a greater quantity of carpet 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 aforesaid business, and at all times mentioned herein, respondents have been, and now arc, in substantial competition in commerce, with corporations firms and individuals in the sale and distribution of rugs. careting and floorthosecoveringssoldand servicesby respondents.of the same general kind and nature as PAR. 12. The use by respondents of the aforesaid false, misleading and deceptive statements, representations, acts and practices and their failure to disclose material facts, as aforesiad, 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. la. 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 unfai and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act.

INITIAL DECISION BY ALVIN L. BERMAN, ADMINISTRATIVE LAW JUDGE APRIL 17, 1975 PRELIMINARY STATEMENT The Federal Trade Commission issued its complaint in this proceeding on July 8, 1974, charging respondents Central Cart Corpration Inc., a corporation, and James A. Taylor, individually and as an officer of said corporation, with having engaged in unfai and deceptive acts and practices and unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act.

More specifically, respondents were charged with (1) having engaged in bait and switch tactics in the advertising and sale of carting, (2) c;j)falsely representing that customers would receive a "free" git. utilizing the aforesaid acts and practices to be able to induce a customer 1022 Initial Decision into signing a contract upon initial contact without giving him suffkient time to carefully consider the purchase and the consequences thereof (4) failing to disclose the fact that advertised prices for stated areas of coverage are not applied to additional quantities required, but that the rat."s for such additional quantities are substantially higher and (5) offering carpeting for sale in terms of a price for a number of square feet up to 270 sq. ft.," and so (a) confusing customers who attempt to compare respondents' prices with those of competitors who advertise on a square yard basis (the usual and customar unit of measurement employed in retail advertising of carpets) and (b) exaggerating the size or quantity of carpeting offered. Respondents. who at the time were being represented TYo se James A. Taylor, were granted an extension of time for fiing an answer to thc complaint. Respondents filed their answer on Sept. 26 1974, admitting the complaint in part but denying the allegations of violation.

After, on two separate occasions, allowing respondents additional time to respond to complaint counsel's request for admissions, hearngs were scheduled to commence on .J an. 6, 1975. While respondents were in default in responding to the request for admissions, upon an appearance of counsel for respondents on Dec. 28, 1974, and upon motion of that counsel, a tardy response to the request for admissions was allowed to be tled and hearings were scheduled to commence on Jan. . 1975. Hearings were held on Jan. 20, 1975 through Jan. 23. 1975, at the conclusion of which the record W3-S closed. Proposed findings were filed by the parties on Feb. 24, 1975, and respondents fied a reply on Mar. 12, 1975.

This initial decision is based on the record as a whole and upon a consideration of the demeanor of the witnesses who gave testimony in this proceeding. References to particular pars of the record are frequently cited as examples only. Proposed findings of fact and conclusions of law submitted by the paries have been given careful consideration and to the extent not included herein in the language proposed or in substance are rejected as not supported by the record or as immaterial or irrelevant. I , Rd"renc"s to the record are d forth in parel1thcses,,md c rtain abhr",'iati"n . ,;l forth twlnw, are u"",j A"s. - R,'spondenb ' an w"r to the complaint RPF - Propos,'d findings of ractubmiued by rC-"lxmrlents, followed by th.. pag.' bting referenrl' Hit B - Reply brief submitted hy respondent, followed by page being referenced ex - Cnmmission s exhibit, followed by number of cxhibit being ref"rcn""d RX - Res()mdents' exhihit, followed by number of e hihit being ref"rcnN.d RHA Respond,'nts ' rel'ly to request for a,hnis ions, fon"w,..J by num!""r "f the reply b(.ing rff,'r"nc..d . Offiri:d tran""ript of the fon"al hearing,;, follow..d by the page number !",ing referetl"",1 'Inri pr,'c"d,,(j by the I\"me of the v,'itnf',;swh"slt.estim()nyi,hein('refl'renCl'rt _.__._ _. .. ...

,u'- Initial Decision 85 F.

FINDINGS OF FACT 1. Respondent Central Caret Corporation, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Marland, with its principal place of business and offce located, at 4407 Southern Avenue, .Bradbur Heights, Md. (RRA 1- Ans.; Taylor, Tr. 7).

2. Respondent James A. Taylor is an individual and an offcer of the corporate respondent Central Caret Corporation, Inc. His business address is the same as that of the corpr,lte respondent. Mr. Taylor is the president and sole shareholder of Centml Carpet Corpration, Inc. He formulates, directs and controls the acts and practices of the corporate respondent and has at all times done so. He formulated directed and controlled the acts and practices of Centra Cart Company, the predecessor to the corpomte respondent. Centml Cart Company started doing busines on Jan. 5, 1978. The business was taken over by Central Caret Corporation, Inc. when it was incorprated on May 1, 1978. Mr. Taylor was the only salesman employed by Centra Carpet Company. He was the only salesman for Centra Cart Corporation, Inc., until Oct. 5, 1978 (RRA 10, 11, 18; Taylor Tr. 54, 58 , 8(6).

8. Respondents are now and for some time last past have been engaged in the advertising, offering for sale, sale and distribution and installation of careting and floor coverings to the public. Their gross sales for 1978 were close to $200 00. At all relevant times mentioned herein, respondents have maintaned a substantial coure of tmde in merchandise in commerce as "commerce" is defined in the Federa Tmde Commission Act, in that they now sell and ship, and for some time last past have sold and shipped, caret from their place of business located in the State of Marland to purchasers located in Maryland Virginia and the District of Columbia. Respondents, moreover, are engaged in commerce by virtue of their extensive advertising in Washington area newspapers which circulate in interstate commerce (RRA 12 45-74; Ans.; Taylor, Tr. 8, 57- , 82, S: 4. Respondents at all relevant times mentioned herein have been, and now are, in substantial competition in commerce with corprations firms and individuals in the sale and distribution of rugs, carpting and floor coverings and servces of the same geneml kind and nature as those sold by respondents (An.; Taylor, Tr. 18). 5. Respondents advertised heavily in Washington area newspapers for the purpose of obtaining leads for, and inducing the purchase of their carpeting and floor covering durng the period from Jan. 7, 1978 to Oct. 6, 1974. At present, they advertise weekly in the TV Guide Section , 1022 Initial Decision of the Washington Star-News (Taylor fr. 88, Bll; RRA 26). The record contains 18 Cental Carpet advertisements placed in the Washington Star-News by, or at the direction of, the respondents between .Jan. 7 1973 and Oct. 6, 1974, which are representative of all advertising placed by respondents during the relevant time period for the purose of aucing the purchase of their careting and floor covering (CX 251- 268; RRA 45-70).

6. CX 251 , the earliest of respondents' advertisements in the record, appeared in the Washington Star and Daily News on Jan. 10 1978, Identical advertisements appeared in that newspaper on .Tan. 7. 14 and 21, 1978 (RRA 45, 46). It reads as follows: Quality Wall to Wall FREE ROOMS NYLON PILE CARPET SHOP-AT-HOME DECORATOR SERVICE Up to 270 Sq. Ft.

PRICE INCLUDES $109 SEPERA TE (sic) Call Anytime 'til CUSHION-EZE PADDING 11 PM AND INSTALLATION! For Free Home Demonstration 7. CX 252 featured the same representations as CX 251 with the addition of an offer of a "Free :J Piece - Ovenware Set" with the purchase of 8 rooms of Delux 501 Nylon Caret. The availabilty of other carpets was also noted. Ths advertisement appeared in the Wa.,hington Sunday Star and Daily News TV Magazine on Mar. 4 1973. Identical advertisements appeared on Jan. 28, 1978, Feb. 4, 11, 18 and , 1978, Mar. 11, 18 and 25, 1978 and Apr. 1 and 18, 1978 (RRA 47, 48).I t reads as follows: , 1030 FEDERAL TRADE COMMISSION DI'CISIONS r nitial Decision H5 F.

FREE Shop-At-Home decorator servce :1 ROOMS Easy Terms NYLc5N PILE CARPET to fit QUALITY WALL TO WALL $109 your budget UP TO 270 Sq. Ft.

CALL M~; NOW ASK ABOUT THESE OTHER PRICE FREE BEAUTIFUL CARPETS INCLUDES 38 PIECE Shag SEPARATE OVENWARE SET Dupont 501 CUSHION-EZE When you purchase Indoor-Outdoor PADDING 3 Rooms of Our Runners and instaJiation Deluxe 501 Nylon Mil Ends, Etc. Car:t. Cab Now ALL SIZ,;S AND COLORS Custom Tackless Installation 8. CX 253 contained representations identical to those of CX 252. It appeared in the Washington Sunday Star and Daily News TV Magazine on Apr. 15, 1978. Identical advertisements appeared on Apr. 22 and 29 1978, and May 6 and 18, 1978 (RRA 49, 50).

9. Respondents' advertisements appearing on May 20, 1978, and thereafter changed the offer of "8 Rooms" to "Any 8 Areas" or "Up to 8 Areas" of Nylon Pile Carpet (CX 245-68; RRA 51-69), and added a parenthetical " (80 Sq. Y ds.)" after the offer of "270 Sq. Ft. . The "free free - any siz up to 12 xgit" was changed to that of one room carted 10 with the purchase of 3 rooms of Deluxe 501 Nylon Caret in CX 258 and 259; and ag-din changed to an offer of "free" draperies for one window, with the purchase of three rooms of Deluxe 501 carting in CX 260 and 261. After Fcb. 8, 1974, respondents' advertiscmcnts contained no representations as to any "free" git (RRA 58-65). Of respondents' advertisements appearing after Aug. 19 , 1978, several gave the price charged for additional yardage over the advertised 270 square feet (CX 257, 258, 260-62; RRA 56-59, 62-67). 10. Throughout respondents' advertising. though changed as set forth above, certain themes remain constant. The most arresting feature in each of the advertisements is the highlighted price of $IOJ focusing the consumer s attention on the dominant representation that 3 rooms" or "areas" of "quality" nylon pile carpting are being offered for $109 (Findings 6- supra). The words up to 270 sq. ft. " read in the context of the entire advertisements, do not detract from or limit the dominant representation that 8 rooms of quality nylon pile carpet may be had for $109. Indeed. those words could reasonably lead the consumer to believe that 270 square feet is thc amount that would adequately cover the average three rooms, thus making it logical for 1022 Initial Decision the advertiser to advertise in tenns of "rooms." Visual inspection of respondents' advertisements in the record by the undersigned as well as consumer testimony compel the conclusion that " roonu:;" of quality" nylon pile carpet for $109 was in each instance respondents dominant offer. The testimony of consumer witness .J ohn Smith, on cross-examination by respondents' counsel, is instructive on this point: Q. Do you reraJJ seeing in the advertisement in the TV Guide a statement that you should can Central about their other carpts, shags, Dupont ;)01 , indoor-outdoor, runners et cetera'?A No sir, I don t remember seeing that. If it was there I overlooked it because this type carpeting was run on a special price that I was interested in and I focused all my attention on that (Tr. 254).

(And see Mylechraine, Tr. 183-84; Kirtley, Tr. 21: 14; Felder, Tr. 240- 41; Lewis. Tr. 256).

11. By and through the use of the above-described typ advertisements (Findings 6- supra ), respondents have represented and are now representing that they were and are making a bona fide offer to sell the advertised careting and floor coverings at the price and on the terms and conditions stated in their advertisements, and that the carpeting was suitable for the uses for which advertised (Ans. Taylor, Tr. 9).

12. In truth and in fact, respondents' advertisements did not constitute bona fide offers to sell the advertised carpting on the term and conditions stated in the advertisements, and the cating was not suitable for the uses for which advertised. To the contray, the advertisements Were used primarly for the.purse of obtaining leads to persons interested in purchasing in order to sell such catingpersons more expensive carpeting (Findings 18- infr). 18. Consumers who responded to respondents' advertisements were called upon in their homes by respondent James Taylor or another salesman of respondent Central Cart Corporation. The salesman would exhibit what was represented as the advertised cart 2 (CX 249 RX 2, 8 or 4). Far from being "quality" cart, the advertised cart was of such poor appearance and condition that it wa.s virtually selfdisparagig and was frequenty rejected on sight by the prospective customer. Respondent Taylor himself admitted that the carting (CX 249) was "at the low end of the spectrum of cart offered byrespondents or anyone" (RPF, p. 3); that while "the looks of the cart (RX 2 and 8) is extremely better, (t)hc wear is not that much better" and that RX 4 is "possibly better" (Tr. 822-28). Albert Wahnon editor of Floor Covering Weekly, the leading trade publication in the , ex 249 is the ""rJ)(ti,'Rold as the "ad'"crti carpting from ,Jan- 5. 197:J through appr() ifTat..ly Ju"e !974 y)"r, Tr- :J22-21;; RRA j.,j. ex 2!0 is the aecumpanying "eushion-i''' '' padding- Respondent sub tituh_..j RX 2 :\ or 4 fur ex 249, selling them "" thl' '.ad ""..t " IK'ginning- in mid- !97-1, s()m"time selling th..m concurrent.ly (Taylur, Tr :n:J-2R_ 1032 FEDERAL TRADE COMMISSION m:CISIONS Initial Decision 8fi F.T. f100r covering industry and one which reguarly reviews advertisements in that industry, qualied as an expert witness in carpting and caret advertising (Wahnon, Tr. 409-15; RPF, p. 2). He too was of the opinion that the caret (eX 249) was at the low end of the spectru; that "it could not withstand too great wear * * * you could not walk over it too many times with shoes." (Wahnon, Tr. 428). The reaction of the consumer witnesses who testified in this proceeding, upon being shown the advertised careting, supports respondent Taylor's and Mr. Wahnon s assessment of the careting. Witness Mar Young's testimony was typical:

Q. What did the careting sample look like? A. It was just cheesy, real thin, and looked like it had been washed and everything.' (Young, Tr. 172) (And see Mylechraine, Tr. 185; Beck, Tr. 202-08; Kiley, Tr. 215- 16; Hu, es, Tr. 225; Felder, Tr. 242; Smith, Tr. 205; Lewis, Tr. 299). 14. Not only was the appearance ofthe advertised careting shoddy and patently unsuitable, but in some instances, Central Cart salesmen openly disparaged the advertised carpting and drew unfavorable comparsons with the higher priced lines. For example witness Mylechraine testified as follows:

Q. Did Mr. Taylor make any remarks to you about the (advertised)caret?A. He said it was, more or less, for people that were going to be moving and that they would just leave it behind. (Tr. 185) Mrs. Eleanor Lewis testified similarly:

Q. What happened when the salesman came into your home? A. Well, he had a sample of the cart and he showed me what was on the ad. He told me by having children it was no good, it wouldn t last. Q. What did that advertised sample look like? A. A piece of cheesecloth.

Q. Then what happened after the salesman said this to you about that sample? A. He showed me better, he told me that was a better cart, that it would last. (Tr. 258) Respondents' own witness, Mar E. Lewis, testified to respondent James Taylor s comments on the advertised as follows: cat Q. What did he say about the cart he was advertising? A. He said the caret he was advertising was you know, he showed me the threads and everyhing in it, and he said it would not hold up too long. (Tr. a02) (And see Hughes, Tr. 226; Smith, Tr. 251). Respondent Taylor himself testified that he always told and tells his customers that the advertised , This is similar to the r..action of the unrlersigned to his "examination of ex 249 1022 Initial Decision careting will last only one to three years, while the higher priced Dupont 501 wil last 20 to 80 years (Taylor, Tr. 151-52). All carpets other than the advertised $109 grade are represented as being longer lasting. The time period represented has varied from five year to the 20 to 80 years for the Dupont 501 quality (Taylor, Tr. 151-52; Mylechtafne, Tr. 18.'5-86; Hughes. Tr. 226; Eleanor Lewis, Tr. 258; Epps Tr. 889).

Stil another drawback to, or limitation of suitability of, the advertised carpet was the fact that it was available only in from two to four colors, whereas each of the other carts displayed by respondents came in six or seven colors (Taylor, Tr. 88; Hughes, Tr. 225; Smith, Tr. 250).4 As respondent Taylor explained, when he goes into a house he takes and displays seven different carts, including tbe advertised $109 caret. While he shows the $109 cart IITt, he tries to ascertain what color the prospective customer is interested in (Taylor, Tr. 847). 15. Upon rejecting the advertised carting, customers are shown better quality carting by their Centra Cart salesmen which, by comparison, further serves to disparage the advertised carting. (See Young, Tr. 172; Mylechrane, Tr. 185-86; Beck, Tr. 208; Kiley, Tr. 216; Hughes, Tr. 226; Smith. Tr. 251).

16. Under these circumstances and by these tactics, respondents are able to push their higher priced lines of carting to the viual exclusion of the low-priced advertised c t. Respondents made very few sales of the advertised carting at the price and on the term set forth in the advertisements. There are in the record copies of customer contracts and charge tickets which reflect all sales of cating by respondents, except those made by James A Taylor whie working for other Imns, namely Sir Cart and Marland Cart Company, between .Jan. 7, 1978 and Oct. 5, 1978 (CX 110-24; CX 126-29, 181-24; RRA 40). SALES OF THE ADVERTISED cart (CX 249) can be identifed on contracts and charge tickets as "nylon pile" o nylon cut pile" (RRA 18; Taylor, Tr. 67). An examination of the exhibits reveals that only two contr.lcts (CX 110 and 28) out of a tota of 187 salesJor this period were for the sale of the advertised cat. Of these saes only one (CX 110) was at the sale price of $109, and that was to cover a living area" only; the other (CX 28) was for the substantially higher cash price of $881 for living room, dining room and bal. Therefore, less than one percent of Center.u Caret' s sales, for the only period for . Custnm..r Hughes, for example.., was shown two colon; of tho' adverti""d carpt (Hughes 'f- 22).Customer Smith was shown th..e (Smith, Tr- 25).

5B9- 7g9 0 - 75 - G(;

1034 FB;DERAL TRADE COMMISSION DECISIONS Initial Decision 85 F.

which complete records are in evidence, was for the sale of the advertised carpet at or less than the advertised price. Over 98 percent of the total sales were for more than $109.'; Approximately 100 sales, or more than 73 percent of the total sales in evidence, were for more than $400, excluding tax and finance charges. Approximately 54, or nearly 40 percent, were for over $500. Nearly 22 percent were at prices greater than $600. Five percent of total sales in the record were for prices greater than $800, exclusive of tax and finance charges, and three customers made purchases of over $1000. 17. The representations set forth in Findings 10 and 11 supra were false, misleading and deceptive and had the tendency and capacity to deceive members of the purchasing public.

18. Respondents' advertisements, as set forth in Findings 7supra have represented furher that purchasers of the Dupont 501 carpet receive a "free" :38-piece ovenware set or other "free" gift. 19. In truth and in fact, purchasers of respondents' Dupont 501 carpet did not receive a "free" 38-piece oven ware set. Respondents have no regularly established selling price for their carpet on which a free" offer could be based (Taylor, Tr. 61-62). Moreover. the cost of the ovenware set was regularly included by respondents in the selling price of the caret sold to such customers. Respondents state that they cared the cost of each ovenware set in their advertising budget from March through September 1978 (RPF. p. 4). It is irrelevant where they carried" this cost. Respondent .J ames Taylor himself testified that he included the cost of this "free" git in calculating the price of his carpeting (Taylor, Tr. (;1) (And see RRA 48). Moreover, he admitted that at times he has reduced the price of a customer's purchase on condition that the customer forego the "free" git (Tr, 108-01" 188; CX 121, 156, 158, 179; RPF, p. 4).

20. Since purchasers of respondents' Dupont 501 did not in fact receive a "free" gift of oven ware with their purchase of carpeting, respondents' representation as set forth in Finding 18 is unfair misleading and deceptive, and has the tendency and capacity to deceive members of the purchasing public.

21. During the period between Jan. 7, 1978 and May 18, 1978 respondents advertised carpeting in terms of square feet only (CX 251 252 258; Findings 6- supra), using the phrdSe "up to 270 sq. ft.". Mter that date, they added a parenthetical "(30 sq. yds.)" to the "270 sq- ft." Respondent Taylor admitted that this change was made in response to , The situatio" may rl'alisticaHy be viewed a. no "advertised les having- been made. The un" ;;le or th" anvertis"d quality of carpet at $109 "' to cover one room The new paper offer ..preseJlted that three rooms or ar,'aH ",ould bfeovO'rPr for$Ioj(Finrting 1O, "'''pro). . There we.., two ,ales of I'icccs of carpet.ing -other than the adverti'l'd carpting- at le that" $109 \.. .., ), area.. Url H.o VUH UHr1 U"" "V. 1022 Initial Decision T.C. displeasure" (RPF', p. 2); that he was "nudged a litte" by the Federal Trade Commission (Taylor, Tr. 187). 22. Mr. Albert Wahnon, the expert in the field of retail caret advertising (Finding 1 supra. testified that the customar and, in fact. standard unit of me"",urement employed by caret retailers in tneir advertisements is the square yard (Wahnon, Tr. 424-25). Respondents themselves admitted that, except for certain carpet dealers who advertise quantities of carpet in terms of a number of rooms for a stated price, the unit of measurement usually and customarily employed in the retail advertising of caret is the square yard (RRA 89).

. Since the unit of measurement customarily employed in the retail advertising of carpet is the square yard, consumers are accustomed to comparing prices of careting in terms of 'cpricein persquare yard. Respondents' use of "square feet" alone their advertisements inhibited an accurate comparison, tended to exaggerate the amount of caret being offered, both absolutely and in comparison to competitors who advertised in term of square yards, and thus had the tendency and capacity to mislead and deceive consumers into believing they would get more carpeting for their money than was the fact. This tendency was bolstered by other representations in the advertisements that the offered carpting would be sufficient for three rooms" or "3 areas" wall to wall. Moreover, testimony in the record indicates. that consumers were in fact deceived into thinking that the offered amount of 270 square feet would cover the areas they desired to carpet, when in fact those areas were much larger (Mylechraine, Tr. 188; Kirtley, Tr. 214; Hughes. Tr. 224-25; Felder. Tr. 243).

24. Between Jan. 7, 1978 and Aug. 19, 1978, respondents offered their featured advertised careting in terms of a set quantity-270 square feet or 80 square yards-for $109. This is an effective rate of approximately $8.63 per square yard (Findings 6- supra). In making such offers, respondents failed to reveal the material fact that. for additional quantities of the carpeting over and above the stated amount customers would be charged, varously $5.99 or $7.00 per square yard (RRA 21; Taylor, Tr. 92-98). Beging with September 2: , 1978 several of respondents' advertisements supplied the information that quantities of the advertised carpeting over and above 270 square feet would cost the purchaser $5.99 per square yard (CX 257, 258, 260-6.'1; finding 9 supra). Respondents admitted that this change in their advertisements w,," made as a result of " C. displeasure, that they were "nudged by the Federal Trade Commission" into making the change (RPF 2; Taylor, Tr. 885).

10:J6 FF:DERAL TRADE COMMISSION DECISIONS Initial Decisiun 85 F.

25. Respondents' failure to disclose thc aforcmentioned material fact had the tendency and capacity to deceive consumers into believing that prces charged for quantities of carpeting in excess of the featurcd , area' would be at a rate identical to, or at least not substantially higher than, that indicated for the specifed area. 26. Through the use of the unfair, false, misleading and dcccptive statements, misrepresentations and practices found above, respondents and their salesmen have been able to induce customers into signng contracts upon initial contact, without giving them time to consider carefully the purchase and the conscquences thereof. Ninety-nine percent of respondents' sales leads are from newspaper advertisements featurng the $109 caret (Taylor, Tr. 811). The consumer witnesses who tcstifed in this proceeding were almost uniorrly. attracted to respondents' offer of carpeting for $109; yet they and practically all of respondents' customers signed contracts on the initial contact for more expensive carpeting in amounts costing substantially more than the fcatured $109 (Findings 10, 16 supra). Respondent Taylor testifcd that "99.44 percent" of his sales were consumted on thc initial visit to the customer's home (Tr. 158).

DISCUSSION Individual Liability of James A TaylOl:

Respondents make no argument aganst holding James A Taylor liable in his individual capacity for the acts and practices that may be found unfair and deceptive. It is settled that to prevent erosion of its orders, the Federal Trade Commssion has thc authority to name individually, offccrs, directors and the stockholders of corprations when they have participated in or controlled the challenged acts or practices. Federal Trade Contmission v. Stand.'rd Education Society, 02 U. S. 112 (1987); Rayex Corortion v. Federal Trad Comm.ission 817, F.2d 290 (2d Cir. 1968); Standard Di"trilndors v. Federal Tra Cmnmission 211 F.2d 7 (2d Cir. 1954). As the individual solely responsible for evcry facet of Central Caret Corpration, Inc.'s operations, .James A. Taylor is unquestionably liable for the acts and practices found herein.

The Unfai and Deceptive Acts and Practices Bait and Switch"

Bait advertising is an allurng but insincere offer to sell a product or servce which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise in order to sell something else, usually at a higher price or on a basis more advantageous to the advcrtiscr. The primar aim of a bait advertisement is to obtain leads as to persons interested in buying 1022 Initial Decision merchandise of tbe type so advertised. Guides Against Bait Advertising, 16 C. R. 923.0 (1957). Bait advertising and the practice of bait and switch whereby the customer responding to the "bait" is switched" to a higher priced item have been repeatedly condemned by the Commission and the courts. Tashof v. Federal Trad Commission 413 F.2d- 707(D.C. Cir. 1970); ConsuinRrS Products of America, Inc. Federal Trade Commission 400 F.2d 980 (8rd Cir. 196), cert. denied 898 U. S. 1088; Guides Against Bait Advertising, 16 R. 9288. (1975). Factors evincing bait advertising and a bait and switch scheme include, among others, the use of an offer using statements or illustrations that create a false impression of the grade, quality or usability of the offered product such that on disclosure of the true facts. the purchaser might be switched to another product; and the discouragement of the purchase of the advertised aricle by refusing to show it, disparaging the product by acts or words, or showing of a product which is defective, unusable or impractical for the purose represented or implied in the advertisement. Guides, supra 9288.2(a), 288.8(a), (b), (e).

In light of the above, it is clear that respondents' advertising and sellng practices constitute a bait and switch scheme. The "bait" here which successfully caught the attention of consumers, is low quality, inferior and very unattractive careting, limited as to colors in which available, advertised and offered as "quality" Ilwall to wall" carting in amounts sufficient to cover three rOOII or three areas at a very low price. In no way could this be considered a Dona fide offer. The term of the offer could not in fact be filled, because the product referred to was in fact not quality with all that the word implies in terms of durability and attractiveness no was it suitable for wall to wall installation nor would the amount offered usually cover three rooms or three "areas." The offer was patently a means of obtaing leads to persons who wanted careting. l"xhibition of the advertised caret was generally sufficient in itself to switch the prospective customer to higher priced careting-it was a self-disparaging product. The record here is devoid of some of the more outrageous examples present in other cases of salesmen s efforts to disparage their product and discourage its purchase, although even bere, respondents' salesmen did point out all the sbortcomings of their featured caret. As discussed above, the poor appearance of the carpt, together with the few colors in which it was available, made it unnecessary for the salesman to do more than merely exhibit the carpt to disparge it. At any rate, it is not essential to show evidence of actual dispargement of the advertised product to find "bait and switch." It may be inferred that customers were "switched" from the advertised product by IO:JR FEDERAL TRADE COMMISSION D;;CISIONS Initial Decision 85 F.

evidence of bait advertising, present here, and minimal sales of the advertised product. Tashof v. Federal Trad Commission, supra , 709-19; see also National ead Co. v. Pediral Tra Commission 227 2d 825, 8:i2 (7th Cir. 1955), rev d on other ground 852 U.S. 419 (1957). Only one sale of the advertised carpeting at the advertised price is in the record-representing less than 1 percent of respondents' total caret sales in evidence (Finding 16 supra). This is certainly "minimal" sales: The great number of sales of higher priced careting shows the success of the "switch.

Respondents argue that they never refused to show or demonstrate the advertised caret and that they were always willng to sell it (RPF 8). The undisputed fact remains that the appearance of tbe advertised carpet alone could and did "switch" customers to higher priced carpeting. Respondents argue further that their salesmen were merely tellng the truth in pointing out the advertised carpet's shortcomings (RPF 8; RRB 8). Clearly, however, the law is violated if the f"rst contact with a customer is secured by deception, as here in the form of respondents' advertisements. Guidis supr, 928.2(b). An integral par of respondents' business operation, therefore, consisted of "baiting" the consumers with misleading advertisements of inexpensive capeting, and subsequently "switehing" them to higher priced carting through demonstrating and comparing the inferior careting with better quality goods. Respondents' purpose was accomplished, though it was unnecessar for them to resort to some of the egregious tactics employed in other "bait and switch" schemes.

Use of the Word "Free To represent that merchandise or servces are offered "free" in connection with the sale of other merchandise or .services, there must have been an established reguar price on which to base the "free Cmnmission v. Mary Carte laint Co., 882 U. offer. Fediral Tra 46 (1965). it is plainly deceptive to represent as was done by these respondents that an ovenware set is "free" if its cost, unknown to the purcha.ser, is included in the price of the advertised carpeting. Sunshing Art Studios, Inc. v. Federal Trad Commission 481 F. 1171 (1st Cir. 1978); Mary Cartr Paint Co., supr; Guidi Conerning Use of the Word "Free" and Similar Rerrresentat-ons Hi C.F. R. 251 (1975).

Use of "Square Feet" and Undisclosed Rates 1 The fact that for th,' only period ror which there is do"um('nt.ary evidence . advcrti ('d carpt sales rO'prpscnted leso than 1 percent "faHsal,, te",h al best, lo, ast.louUt on the arpur:ey of responde"t Taylor s recollection that for all of !97:\anrl 19745al"softheadvertis.,dearptamuuntedto7 perce ntofalJearpetsolrlbyreopondents. MoreovO'r sales of the artvertised ml'rchanrtise dol's not preclude existence of a " bait and witeh" geh('mc- it ha. l""en df'tO'nnined that, on orcasion . this is a mere incidental by-product of the fundamental plan ami i intended to provide an aura of legitimacy to the uverall operation G"ide.. To nail Ad"rrlisi1lg,""I'm , vl'.L'IIH.f\l vl\tlt'r.l v\Jlt.tU.fl\llV.L'I l.LH_ LV,):! 1022 Initial Decision In consideration of the fact that the unit of measurement customarily employed in advertising carpeting is by the square yard, the advertising of carpeting in terms of square feet, without disclosing the equivalent in square yards, is unfair and deceptive because (1) it i,?hibits,m accurate comparison of respondents' prices with those of competitors, and (2) because. it tends to exaggerate the amount of caret being offered.

Furher, it is an unfair trade practice to fail to reveal any relevant and material facts concerning representations in an advertisement where such information might be important to the prospective customer in making his decision as to whether to purchase the product advertised. Federal Trae Commission v. Colgate-Palrrlive Co., 880 S. :374 (1965); Spiegel, Inc. v. Federal Trrnl Commission 495 2d59 (7th Cir. 1974). Therefore, respondents' practices of advertising carpeting in terms of square feet only and of failing to disclose the higher rates charged for quantities of carpeting beyond the advertised amounts are unfair and have the tendency and capacity to deceive the public. It is of no matter that customers were informed of the true facts concernng respondents' offers before they made their purchases. The harm was done on initial contact in that these practices tended to enhance the "bait" quality of respondents' advertisements. Exposition Press, Inc. v. Federal Trad Commission 295 2d 869, 878 (2d Cir. 1961), cert. denied 870 U. S. 917(1962); CarfJ!r Products, Inc. V. Fedel Trade Commission 186 2d 821, 824 (7thejr. 1951). Respondents argue that there was no evidence presented that persons responding to advertisements of respondents were misled by the failure to specify the cost of additional yardage and that no evidence was presented that such persons were misled by the use of square feet into thinking that they were being offered a greater quantity of carpeting than was the fact (RPF 5, 7). To the contrary, the record does establish that customers received the impression that greater amounts of caret were being offered than was the fact (Finding 23 supra). In any event, evidence of actual deception of the public is not necessar to a finding of violation, a tendency and capacity to deceive being sufficient. Feil V. Federal Trad Commission 285 F. 879 (9th Cir. 1960); Montgomry Ward CO. V. Federal Trad Commission 879 F.2d 666 (7th Cir. 1967). The Federa Trade Commission Act was not intended to protect only the sophisticated, but the unthinking and credulous who do not stop to analyze but are governed by general impressions. Giant Food, Inc. v. Federal Tra Commission 332, F.2d 977 (D.C. Cir. 196); Helbros Watch Cmnpany, Inc. V. Federal Trade Commission :no F.2d 868 (D.C. Cir. 1962), cer. denied 872 U.S. 976 (196). Therefore, in the context of all representa- 1040 FEDJ-RAL TRADE COMMISSION DECISIONS Initial Decision H5 F.

tions made, upon his own examination of the advertisements as well as the other pertinent portions of the record, the undersigned concludes , that. tpe use of square feet and the failure to disclose higher rates on quantities above the advertised amounts have the tendency and capacity to deceive the consumer. J.B. Williarr", Co.v. Federal Trad Com.mission 881 F.2d 884 (6th Cir. 1967).

Cooling Off Period In view of the facts that (1) respondents are able to secure entry into potential customers' homes by virtue of advertisements that stress the availability and suitability of inexpensive carpeting, (2) the actual sales made are almost invariably of a much higher priced caret and for a substantially greater expenditure than that indicated in the advertisements and (8) these sales are practically always made upon the initial visit of the salesman, it is clear that respondents' customers require the protection of a "cooling off" period of the type enunciated in the Commission s Trade Regulation Rule Cooling Off Period For Door-To- Door Sales 16 C. R. Section 429 (1975).' Such protection will be afforded by the order.

The Remedy The Commission is vested with broad discretion in determning the type of order necessar to ensure the discontinuance of the unlawful practices found. Federal Trad Commission v. Colgaw-Palrrlive Co. 880 U.S. 874 (1965). The Commssion s discretion is limited only by the requirement that the remedy be reasonably related to the unlawful practices. Jacob Siegel Co. v. Pederal Trad Commission 827 U. 608 618 (1946); FedJ!ral Trad Cornmisson v. Ruberoid Co., 848 U.S. 470 (1952). It is also settled that the Commission, as part of its remedial powers, has the authority to require respondents to take affrmative action, or make affrmative statements in advertising. Federal Trad Commission v. Colgate-Palrrwlive, supra; Am.erican Cyanamid Co. v. Pederal Tmde Comrr,;.Bsion 401 2d 574 (6th Cir. 19(8), cert. denied a94 U.S. 920 (1969).

The order is reasonably related to the unawful practices found and has been devised to bring about cessation of such prdctices. In addition to proscribing the unlawful acts and prdctices found and variations of those practices, the order is also directed at certain aspects of the unlawful practices which played an integrl par in their execution. For . It is of no moment that the re"lrd does not contain "dual evidence of instances of hard prc%ure tad;"s. The very fact that individuals who invite resp.ondenl. into their homes to display an arlvertiscd in"xj""nsive carpting are snmehl!w prevailed upon, on the vet) first cans, to contract for much more expensive carpting oemon,;t....tes that respondenl ' customer: require a .' cooling off" period to reconsider what th.,y h"vr' obligated thO'msclves to rto 1022 Initial Deeision example, numbered paragraphs 14, 15 and 16 of tbe order are directed at specific aspects of the bait and switch that helped make the practice work. The inclusion in the advertisements of references to carpeting for "3 rooms" or "3 areas" or l4up to 3 areas . regardless of how qualified, tends to infer that three rooms or areas will be careted. As an integral part of the bait, such advertising should be proscribed unless the rooms or areas referred to will be fully covered at the price advertised. Similarly, featurng carpting which, for all practical puroses has limited suitability or availabilty because of a limited number of colors or short life expectancy under normal or not unusual conditions of use has also been an integral par of the bait. Such advertising should be proscribed unless the limitations are disclosed. Respondents argue that since they have discontinued any offer of a free git" and have added the square yard mea.,urement to their advertisements, an order addressed to those matters is no longer necessar (RPF, p. 8). It is settled that discontinuance or abandonment of a practice does not prevent the issuance of a cease and desist order directed to such practice. Giant Food. Inc. 61 F. C. 826 (1962). This principle is particularly applicable to situations where the discontinuance was not entirely voluntar but occurred only after the Commission had begun an investig"dtion into such practices, where respondent continues in the same line of business and where there is no guarantee that the practices may not be resumed. Coro, Inc. 68 F. 1164, 1201 (1968), nwdified and affd., Coro, Inc. v. Fedel Trad Commission 888 F.2d 149 (lst Cir. 196); cer. denied 880 U.S. 954 (1965). Respondents discontinued their "free git" offer, and added square yards" to their advertisements long after the :first investigational hearing of March 20, 1978. Respondent Taylor himself admitted that he made the changes of adding "square yards" and disclosing the cost of careting over the specifc advertised quantity only as a result of being "nudged" by the Commission (Findings 21, 24 supm). should be noted that Mr. Taylor is still engaged in the same retai carpt business and there is no reason to believe he wil not continue in that business. Under such circumstances, an order directed to the aforementioned prdctices is most appropriate and necessary. Without an order, the public has no def"mite assurance that the unlawful practices wil not be resumed in the future. In the "Notice Order" attached to the complaint, and in their proposed order, complaint counsel have included a provision requiring respondents to disclose clearly and conspicuously, by means of a blackbordered notice in all their advertisements, the fact that the Commission has found that they "engage in bait and switch ad vertising.

Initial Decision 85 F.

Despite the wide leeway granted the Commission in framing orders the undersigned will not adopt such a proposal in this case. Jn four recent cases Wilbanks Carpet Specialists Docket No. 8933 (Sept. 24 1!J74 l84 F.TC. 510)); Tri-State Carpets, lru;. Docket No. 8945 (Oct. 15 1974184 F. C. 1078)); Theod(rre Stephen Co., lru;. Docket 894 (.Jan. 28 1975 (85 F. C. 152)); and Sir Co:rpet, Inc. Docket 8981 (Feb. 6, 1975 (85 F.TC. 190)), the Commission has struck similar warning provisions from orders issued in the initial decisions. The Commission held that the records in those cases presented insufficient evidence that a consumer warning was a necessary or appropriate means for the termination of the acts or practices complained of or for the prevention of their recurrence. The record in the instant matter presents no stronger evidence in this regard and complaint counsel's' request is rejected.

CONCLUSIONS OF LAW 1. '!'e F'ederal Trade Commssion has had, and now has, jurisdiction over respondents, and the methods of competition and acts and practices charged in the complaint and found herein took place in commerce as "commerce" is defined in the Federal Trade Commission Act.

2. Respondents have engaged in false, misleading and deceptive advertising, and used unfair methods of competition and unfair and deceptive acts and practices in the offering for sale. sale and distribution of carpeting and floor coverings. . The aforesaid methods of competition and acts and practices of respondents were and are to the prejudice and injur of the public and of respondents' competitors and constituted and now- copstitute unfai 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.

ORDER It is ordered That respondents Central Caret Corpration, Inc-. a corporation, its successors and assigns, and its officers, and .J ames A- Taylor, individually and as an officer of said corporation, and respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale, distribution, and install"tion of carpeting and floor coverings, or any other aricle of merchandise, in commerce, as "correrce" is defined in the Federa Trade Commission Act, do forthwith cease and desist from; Iv 1:1' 11\1"1..v1"1\l- 1.1 VV1\.J. Jl\l1J.J.VJ.' J.nv. 1022 Initial Decision 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 other merchandise or services.

2. Making representations, directly or indirectly, orally or in Wrting, purporting to offer merchandise or services for sale when the purpose of the representation is not to sell the offered merchandise or servces but to obtain leads or prospects for the sale of other merchandise or servces at higher prices.

8. Disparaging in any manner, or discouraging tbe purchase of any merchandise or servces which are advertised or offered for sale. 4. Representing, directly or indirectly, orally or in wrting, that any merchandise or services are offered for sale when such offer is not a bona fide offer to sell such merchandise or services. 5. Failing to maintain and produce for inspection and copying for a period of three (B) years following the date of publication of any advertisement, adequate records to document for the entire period during which each advertisement was ru and for a period of six (6) weeks after the termination of its publication in press or broadcast media:

a. the cost of publishing each advertisement including tbe prepartion and dissemination thereof;

b. the volume of sales made of the advertised product or service at the advertised price; and c. a computation of the net profit from the sales of each advertised product or service at the advertised price. 6. Representing, directing or indirectly, orally or in wrting, that any price amount is respondents' regular price for any aricle of merchandise or servce unless said amount is the price at which such merchandise or service has been sold or offered for sale by respondents for a reasonably substantial period of time in the recent, regular course of their business and not for the purse of establishing fictitious higher prices upon which a deceptive comparison or a "free" or similar offer might be based.

7. Representing, directly or indirectly, orally or in wrting, that any merchandise or servce is furnsl:ed "free" or at no cost to the purchaser of advertised merchandise or servces, when, in fact, the cost of such merchandise or servce is reguarly included in the selling price of the advertised merchandise or servce.

S. Representing, directly or indirectly, orally or in wrting, that a free" offer is being made in connection with the introduction of new merchandise or servces offered for sale at a specified price unless the respondents expect, in good faith, to discontinue the offer after a Initial Decision 85 F.

limited time and commence selling such merchandise or service separately, at the same price at which it was sold with a "free" offer. 9. representing, directly or indilectly. orally or in wrting, that merchandise or servce is being offered "free" with the sale of merchandise or service which is usually sold at a price arved at through bargainig, rather than at a reguar price, or where there may be a regular price, but where other material factors such as quantity, quality, or size are arved at through barganing. 10. Representing, directly or indirectly. orally or in wrting, that a free" offer is available in a trade area for more than six (6) months in any twelve (12) month period. At least thirty (80) 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, respondents' sales in that area of the product or servce in the amount, size or quality promoted with the "free" offer shall not exceed 50 percent of the total volwne of sales of the product or servce, in the same amount, size or quality, in the area.

11. Representing, directly or indirectly, orally or in wrting, that a product or service is being offered as a git/' "without charge bonus " or by other words or term which tend to convey the impression to the consumng public that. the article of merchandise or service is free, when the use of the terr "free" in relation thereto is prohibited by the provisions of this order. 12. Advertising the price of cart, either separately or with padding and installation included, for specifed areas of coverage without disclosing in immediate conjunction and with equal prominence the square yard price for additional quantities of such cart with padding and installation needed.

18. Advertising any careting or floor covering using square feet as the unt of measurement, unless square yards is also employed as the unit of measurement in immediate conjunction therewith and with equal prominence or using any term or terms which tends to exaggerate the siz of quantity of carpting or floor covering being offered at the advertised price.

14. Advertising the price of carpt, either separately or with padding and instalation included, in terms of an area or areas unless the area or areas will be fully covered at the price advertised. 15. Featurng in an advertisement any cart for use in wall to wal installation which caret is not suitable for use in heavy tr.ufic, in a household having children or over a particular nwnber of individuals or which may not reasonably be expected to last at least five (5) year without conspicuously disclosing any of such limitations. CENTRAL CARPET CORPORATION, INC. 1045 1022 Initial Decision 16. eaturng in an advertisement any caret which is available in five or less colors without conspicuously disclosing the colors in which caret is available.

i 7. Contracting for any sale whether in tbe form of trade acceptance, conditional sales contract, promissory note, or otherwse which shall become binding on the buyer prior to midnight of the thid day, excluding Sundays and legal holidays, after the date of execution. 18. Failing to furnsh the buyer with a fully completed receipt or copy of any contract pertaining to such sale at the time of its execution whicb is in the same language Spanish, as that principally used in the oral sales presentation and whicb shows the date of the trasaction and contains the name and address of the seller, and in immediate proximity to the space reserved in the contract for the signature of the buyer or on the front page of the receipt if a contract is not used in bold face type of a minimum size of 10 points, a statement in substantially the following form:

YOU, Tile 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 ;:XPLANATION 0;' THIS RIGHT.

19. Failing to fursh each buyer, at the time he signs the sales contract or otherwse agrees to buy consumer goods or servces from the seller, a completed form in duplicate, captioned "NOTICE OF CANCELLATION", which shall be attacheil to tbe 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 Spanish, as that used in the contract:

NOTICE OF CANCELLATION lentel dafp. of transaction) YOU MAY CANCEL THIS TRANSACTION. WITIlOUT ANY PENALTY OR OBLIGATION, WITIIN 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 INSTRUMENT 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 RECEIVlm. ANY GOODS DELIVERED TO YOU UNDER THIS COMPLY WITH THE CONTRACT OR SALE; OR YOU MAY IF YOU WISH. INSTRUCTIONS OF THE SELLER REGARDING Tile RETURN SHIPMENT OF TH~; 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 WITIIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLA- TION, YOU MAY RETAIN OR DISPOSE OF Tile GOODS WITHOUT ANY Initial Decision 85 F.T.C. nJRTHER OBLIGATION. IF YOU FAIL TO MAKJ- THE GOODS AVAILABLJ- TO Tile SELLER, OR IF YOU AGR,:E TO RETURN THE GOODS TO THE SELLER AND FAIL TO DO SO, THEN YOU REMAIN LIABLE FOR PERFORMANCE OF . ALL ()JJLIGATIONS UNDER THE CONTRACT. TO CANCEL THIS TRANSAC. TION MAIL OR DELIVER A SIGNED AND DATED COPY OF TIIS CANCELLA. TION NOTICE OR ANY OTHER WRI'IEN NOTICE~: , OR SEND A TELEGRAM TO (Na' me ofSellerj, AT (address oiselle;'s place of bu"o.iness NOT LATER THAN MIDNIGHT (date).

I HEREBY CANCEL TilS TRANSACTION.

(Date) (Buyer s signature) 20. i'"ailing, before furishing copies of the "Notice of Cancellation to the buyer, to complete both copies by entering the name of thc 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. 21. 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. 22. Failing to inform each buyer orally, at the time he signs the contract or purchases the goods or servicjes, of his right to cancel. 28, Misrepresenting. directly or indirectly, oraly or in wrting. the buyer s right to cancel.

24. 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 "-, goodcoI)dition as when received by the seller; (iii) cancel and retur any negotiable instrument executed by the buyer in connection with the contract or sale and take any action necessary or appropriate to termnate promptly any securty interest created in the transaction.

25. Negotiating, transferrng, selling. or assigning any note or other evidence of indebtedness to a finance company or other third pary prior to midnight of the f"th business day following tbe day the contract wa. signed or the goods or servces were purchased. 26. Failing, within 10 business days of receipt of the buyer's notice of cancellation, to notify bim whether the seller intends to reposses or to abandon any shipped or delivered goods.

Provided, however That nothing contaed in this order shall relieve respondents of any additional obligations respecting contracts required by federdl law or the law of the state in which the contrdct is made. When sucb obligations are inconsistent, respondents can apply to the 1._ l" lliJ-l v./u\.r.r I lJVl\..tVll.J-liv.L'I , l1'1v. 1022 Final Order 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. shall make such modifications as may be waranted in the premises.

It is further ordered That respondents shall maintain for at least a ohe (1) year period, copies of -all advertisements, including newspaper radio and television advertisements, direct man and in-store solicitation literature, and any other such promotional material utilized for the purose of obtaining leads for the sale of careting or floor coverings, or utilized in the advertising, promotion or sale of careting or floor coverings and other merchandise.

It is further ordered That respondents, for a period of one (1) year from the effective date of this order, shall provide each advertising agency utilized by respondents and each newspaper publishi,lg company, television or radio station or other advertising media which is utilized by respondents to obtain leads for the sale of carpting or floor coverings and other merchandise, with a copy of this order. I t is further ordered That respondents deliver a copy of this order to cease and desist to all present and future personnel of respondents engaged in the offering for sale, sale of any product, consunation of any cxtension of consumer crcdit or in any aspect of preparation creation, or placing of advertising, and that respondents secure a signed statement acknowledging receipt of said order from each such person. It is further ordered That the respondent corporation shall forthwith distribute a copy of this order to each of its-operating divisions. It is further ordered That respondents notify the Commssion 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 corpration which may affect compliance obligstions arising out of this order- It is further ordered That the respondent James A. Taylor promptly notify the Commission of the discontinuance of his present business or employment and of his affiliations with a new business or employment. Such notice shall include 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- FINAL ORDER The administrative law judge fied his initial decision in this matter on Apr. 17, 1975, finding respondents to have engaged in the acts and practices as alleged in the complaint and entering a cease and desist order against respondents- A copy of the initial decision and order was Complaint 85 F.

served on the respondents on May 9, 1975. No appeal was taken from the initial decision.

The Commission having now determined that the matter should not bc placed on its own docket for review, and that the initial decision should become effective as provided in Section 8.51(a) of the Commssion s Rules of Practice It is ordered That the initial decision and order contained therein shall become effective on the date of issuance of this order. It is furthir ordered That respondents shall, within sixty (60) days after service of this order upon them, fie with the Commission a report in wrting, signed by such respondents, setting forth in detail the manner and form of their compliance with the order to cease and desist.