Carter Hawley Hale Stores, Inc

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IN THE MATTER OF CARTER HAWLEY HALE STORES, INC., ET AI,.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C 2677. Complai,nt June lfjJ5- Decision Jn1'lR lX, 1,975 Consent order requiring a Los Angeles, Calif., parent and five of its depart.ment store operations located in Califomia, Texas and New York, among other things to provide charge customers having credit balances with periodic statements setting forth credit balances, no less than three t.times in a six-month period following creation of the balance; to notify charge account customers with credit balances of their right to a cash refund of the balance; to stop deleting credit balances of $1.00 or more from a customer s account before making a cash refund or an offsetting purchase ha.-; been made; to automatically refund amounts of unclaimed credit balances after a period of account inactivity; and to refund an unclaimcd credit balances more than $1.00 created since June 30 1972.

Appeara,nces For the Commission; Alan D. Refjkin, J?Jtin Dingfelder and Howard F. Daniels.

For. the respondents: Bingham B. I"everich, Covington Burling, Wash., D.C.

COMPLAINT Pursuant to the provisions of the Federal Trade Commssion Act and by virtue of the authority vested in it by said Act, the Feder-ll Trade Commission, having reason to believe that Carer Hawley Hale itsStores, Inc., formerly Broadway-Hale Stores, Ine., a corpor-ltion, divisions, Broadwa.f Department Stores, Emporium Capwell, Weinstock' , Neiman-Marcus, and its wholly-owned subsidiar, Bergdorf Goodman Inc., a corporation, hereinafter sometimes refeITcd to as respondents, have violated the provisions of said Aet, 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 Carer Hawley Hale Stores, Inc. is a corporation organied, existing and doing business under and by viue of the laws of the State of California with its principal offce and place of business located at 600 S. Spring St., Los Angeles, Cali. Respondent Carter Hawley Hale Stores, Inc. has the legal authority to formulate control and direct the policies, acts and pmctiees, including those hereinafter set forth, of its divisions, Broadway Deparment Stores L-l'dtlI'l'l tll-VVLd"' J tl1U,!'-, bIV/i!', , U'OV. III / 1116 Complaint Emporium Capwell, Weinstock's and Neiman-Marcus, and has the power to elect the board of directors of its wholly-owned subsidiary Bergdorf Goodman Inc.

Respondent Broadway Deparment Stores is a division of Carer Hawley Hale Stores, Inc. Its principal offce and place of business is located at 3880 N. Mission Rd., Los Angeles, Calif. Respondent Emporium Capwell is a division of Carter Hawley Hale Stores, Inc. Its principal offce and place of business is located at 835 Market St., San Francisco, Calif.

Respondent Weinstock's is a division of Carer Hawley Hale Stores Inc. Its principal office and place of business is located at K St. at Twelfth, Sacramento, Calif.

Respondent Neiman-Marcus is a division of Carter Hawley Hale Stores, Inc. Its principal office and place of business is located at Main and Ervay St., Dallas, Tex.

Respondent Bergdorf Goodman Inc. is a corporation organized existing and doing business under and by virue of the laws of the State of New York with its principal offce and place of business located at 754 Fifth Ave., New York, N.

PAR. 2. Respondent Carer Hawley Hale Stores, Inc., through operating divisions, operates and controls a number of retail deparment stores in Caliorna, Arizona, Nevada, and Utah. These department stores are operated under the trade names tbe Broadway, the Emporium Capwell' , and Weinstock's. Re)'pondent Carter Hawley Hale Stores, Inc., also operates and controls retail specialty stores through its division Neiman-Marcus and its wholly-owned subsidiary Bergdorf Goodman Inc.

Respondent Bergdorf Goodman Inc. operates a retail specialty store in New York.

PAR. 8. Respondents sell and distribute merchandise in commerce by operating and controlling retail deparment and specialty stores in a number of States and by causing merchandise to be shipped from their warehouses and from the places of business of their varous suppliers to their warehouses and retail deparment and specialty stores for distribution to and purchase by the general public located in States other than those from which such shipments originate. By these and other acts and practices, respondents maintain, and at all times mentioned herein have maintaned, a substantial coure of trade in merchandise and services in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 4. In the ordinar coure and conduct of their aforesaid business, respondents permit customers who qualify for credit to charge purchases in accordanee with the terms of" charge account 1110 1'1Jl.D1\l"u 1 n.1"1.I" vV1YllHI001\J.l'j VC,vh:..tul'1..') Complaint 85 VT.

agreements executed between said customers and respondents. On occasion a customer s charge account balance represents an amount of money owed to the customer by a respondent, rather than an amount of money owed to a respondent by the customer. Ths credit balance is the result of, among other things, overpayments by the customer or credits tor returned merchandise. - PAR. 5. Respondents customarly provide each customer having a charge account credit balance a montWy statement setting forth the amount of the credit balance, at the end of the billing cycle during which the credit balance is created and at the end of each subsequent biling cycle during which the credit balance has not been cleared from the customer s account and a transaction on the customer s account occurs. Of all respondents, only Emporium Capwell and Neiman- Marcus furnish charge account customers with additional monthly statements setting forth their credit balances, at the end of" number of biling cycles during which the customers transact no business on their charge accounts. A customer of Emporium Capwel! is furshed such monthly statement at the end of each of five consecutive billng cycles following the billing cycle of the customer's la.st transaction. A customer of Neiman-Marcus is furshed such a monthly statement at the end of each of eleven consecutive billing cycles following the billing cycle of the customer s la.st transaction.

If a customer with a credit balance on his charge account does not specifically request that the respondent c(jncerned pay him the amount of his credit balance but purcha.ses merchandise or services on his charge account, the respondent for a limited time applies the amount of the credit balance to reduce or eliminate the customer s obligation created by the purchase of merchandise or service. If the customer does not request a refund in cash of the amount of the credit balance or make a purchase within a period of time allowed by respondents for activity to occur on the customer's account, the respondents, with the cxception of the Broadway Deparment Stores Division, through bookkeeping entries, clear the amount of the credit balance from thc customer's charge account. Tbe Broadway Department Stores Division engaged in this practice through 1971. No casb payment to the customer is made at the time of the clearg of his credit balance from his charge account. Subsequent periodic statements are not mailed until a later purchase is made. The outstanding credit balance that was previously reflected on a periodic billng statcment is not applied to any purchase occurng after the credit balance has been cleared from the customer s account.

At no time is thc customer informed of his right to receive a cash refund nor do respondents voluntarily refund cash representing v.n U1. H J.J..1 .nJ. V.1 , U 111/' Decision and Order outstanding credit balances without a specifc customer request. Respondents have through such acts and practices eliminated substantial dollar amounts of credit balances as aforesaid from cust8mer accounts in a substantial number of instances. PAR. 6. By failing to notify customers with charge account credit balances' that they have the right to request and receive casb payment of the amounts of their credit balances; by failing to fursh customers at the end of each and every biling cycle durng which credit balances remain outstanding, monthly statements reflecting the amount of their credit balances; by ddeting outstanding credit balances from accounts without refunding such amounts and by providing billng statements for subsequent purchases which do not reflect such outstanding credit balances, respondents have caused a substantial number of their customers to be deprived of substantial sums of money rightfully theirs. Therefore, the acts and practices described in Paragraph Five above were and are unfair.

PAR. 7. The acts and practices of respondents set forth in Paragrphs Five and Six above were and are to the prejudice and injur of the public and constitute unfair acts and practices and unfair methods of competition in commerce in violation of Section 5 of the Federal Trade Commission Act.

DECISION AND ORDER The Commission having heretofore -determined to issue its complaint charging the respondents named in the caption hereto with violation of the Federal Trade Commission Act, and the respondents having been served with notice of said determination and with a copy of the complaint the Commission intended to issue, together with a proposed form of order; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, ard- admission by the respondents of all the jurisdictional facts set forth in the complaint to issue herein, a statement that the signing of said agreement is for settement purpses only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint and waivers and other provisions as required by the Commission rules; and The Commission having considered the agreement and having provisionally accepted same, and the agreement containing consent order having thereupon been placed on the public record for a period of sixty (60) days, and having duly considered the comments fied thereafter pursuant to Section 2.84(b) of its rules, now in further conformty with the procedures prescribed in Section 2.84(b) of its Decision and Order 85 F.

rules, the Commission hereby issues its complaint in the form contemplated by said agreement, makes the following jurisdictional , findi,!gs, and enters the following order: I. Respondent Carter Hawley Hale Stores, Inc. is a corporation organized, existing and doing business under and by viue of the laws of the State of California, with its principal place of business located at 600 S. Spring St., Los Angeles, Calif.

2. The Federal Trade Commission has jursdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondent Carter Hawley Hale Stores, Incorporated, its divisions Broadway Deparment Stores, Emporium Capwell Weinstock' s and Neiman-Marcus, and its wholly-owned subsidiary Bergdorf Goodman Inc., a corporation (hereinafter collectively referred to a.., respondent), their successors and assigns and their representa tives, agents and employccs, directly or through any corporation subsidiary, division or other dcvicc, in connection with the handling of credit balances on retail consumer open end credit accounts or other retail consumer charge accounts (including, but not necessarily limited to thiy (80) day charge accounts) created incident to the business of selling consumer merchandise and servces at retail, in the United States or any of its territories, in commerce, as "commerce" is defined in the Federal Trdde Commission Act, do forthwith cease and desist from:

I. Failing to provide each charge account customer having a credit balance created after the date of entry of this order with a periodic statement setting forth such credit balance, no fcwer than three times during the six month period following the creation of the credit balance. 2. Failing to notify each charge account customer having a crcdit balance created after the date of entry of this order of the right to request and receive a cash refund in the amount of such credit balance such notice to be accomplished by a clear and conspicuous disclosure on or enclosed with each periodic statement and accompaned by a selfaddressed return envelope. Such disclosure may be in the following terms; ''We owe you . Your balance will be refunded on request. Mter 6 months it will be refunded automatically, except if $1.00 or less, it will not be applied to purchases or refunded unless requested." If such form of disclosure is not used, respondent shall make a disclosure which shall be consistent with but need not be the same as the following:

,--,rtl\. J I.n llrl n l.D l .11"l r-, ,")llll\,1'.: , 1.1"\.". IIt:1 lU6 Decision and Order NO PAYMENT REQUIRED The Credit Balance shown on l this J lthe enclosed J statement represents money we owe you. You may obtain a refund by mail by presenting your statement at our store or by returning the top hal of your statement in the enclosed envelope. If you do not charge against this credit or request a refund, a cbeck will be mailed to you automatically after six months, except a credit balance of one dollar ($1.00) or less will not be refunded unless specifkally requested, and it will not be credited against future purchases after this period. Such disclosure need not be made by any store in the event it is that store s policy to refund automatically and without request a1l credit balances regardless of amount. In such case the following disclosure or a disclosure which provides at least the following information must be made in a clear and conspicuous manner:

For refund send back top half of statement or we wiJ send check in 6 months. 8. Writing off or deleting any credit balance of more than one dollar ($1.00) created after the date of entry of this order from a customer's account before the respondent has made a cash refund or the customer has made a fully offsetting purchase, unless such credit balance is not in fact owed to the customer, or unless respondent has complied with the requirements of Paragraph B below.

4. Failing to refund to each charge account customer with a credit balance of more than one dollar ($1.00) created after the date of entry of this order the full amount of said credit balance no later than thirtyone (81) days from the end of the sixth consecutive biling cycle durng which the credit balance exists and the customer neither transacts any business on his account nor requests a reftmd nless such credit balance is not in fact owed to the customer. A. It is further ordered That with respect to each credit balance owed a customer in the amount of more than one dollar ($1.00) which was created at any time since June 80, 1972, and which bas not been refunded to the customer as of the date of entry of the order respondent shall refund to each such customer the full amount of such credit balance, unless such credit balance is not owed to the customer or the customer makes a fully offsetting purchase within the period for compliance herewith; Provided, however That nothing contained herein shall prevent respondent from makg such refund by giving a credit certificate(s) in the full amount of the credit balance which shall be redeemable, at the customer's option, in merchandise or cash. Such a certificate(s), or an accompanying notice attached to the certificate shall clearly and conspicuously disclose that it is redeemable for cash if the customer so requests in person or if the customer returns the certificate(s) by mail with a request for cash redemption. Respondent 1122 FEDERAL TRAD COMMISSION DECISIONS Decision and Order 85 FTC. shall comply with the provisions of this paragraph no later than three (8) months after the date of entry of this order, and the report required , by P"ragraph F of this ordor shall address itself specifically to the steps taken to comply with this paragraph.

B. It is further ordered That each refund shall be given to the customer either in person or by mailing a check (or a credit certificate(s) in the case of credit balances existing prior to the date of entry of this order) payable to the order of tbe customer at the la.,t known address shown in respondent's records for said customer. Each periodic statement sent pursuant to the terms of this order shall be mailed to the customer at the last known address shown in respondent's records. In the event that any such statement or cbeck (or credit certifcate) is returned to respondent with a notification to the effect that the addressee is not located at the address to which it was sent respondent then shall make one remailing of the check (or credit certifcate) or statement with an address correction request. If a remailed check (or credit certificate) or statement reflecting a credit balance in excess of twenty-five dollars ($25.00) is returned, respondent shall reinstate the full amount of the credit balance on the customer's account to be retained for one year from the date on which the remaled check (or credit certifcate) or statement was returned, so that offsetting purchases can be made; PrO'Jid, luever That in lieu of the preceding, respondent may seek to obtain a curent mailing address by either contacting a local credit bureau or employing an independent contractor reguarly engaged in the business of skip-locating. If a remailed check (or credit certificate) or statement reflecting a credit balance of twenty-five (25) dollar or less is returned, respondent shall not be rcquied to take any of the additional actions. set forth in the preceding sentence. Thereafter, respondent sball be relieved of any furher obligation to send any additional statement and/or any refund with respect to the credit balance in question; l'ravid, however That in the event said customer should subsequently request a refund of any such credit balance owed the customer, respondent shall make such refund or provide a wrtten explanation pursuant to the term of Paragraph C.

C. It is furthe orred That if a customer requests, in person or by mai, a refund of a credit balance in any amount which has been reflected at any time on such customer's account, respondents shall within thirty (80) days of receipt of such request, either refund the entire amount requested, if owed, or furnish the customer with a written explanation, with supporting documentation when available, of the rea.,on(s) for refusing" to refund the amount requested. D. It is furthe ordered That a credit balance shall be deemed to be _ un.., L' '.. H'''''' '-'V.

1I2:J Decision and Order created at the end of the billing cycle in which the credit balance is first recorded on a customer s account and at the end of the billing cycle in which the recorded amount of an existing credit balance is changed due to a customer s use of the account. Whenever the recorded amount of an existing credit balance is changed, respondent's obligations under this ordet. with respect to the credit balance existing prior to such change shall automatically be replaced by its obligations under this order with respect to the new credit balance created by said change. E. It is further ordered That notwithstanding the foregoing, the provisions of this order shall not be applicable to credit balances on accounts administered by third paries.

F. It is furthJ!r ordered That respondent shall, witbin sixty (60) days after the entry of this order, fie with the Commssion a report in wrting setting forth in detail the maner and form in which it has complied with this order.

G. It is furthJ!r ordered That respondent notify the COmrssion at least thirty (80) days prior to any proposed change in the corporate respondent such a. dissolution, assignment or sale resulting in the emergence of a successor corpration, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order. H. It is further ordered That respondent shall forthwith distribute a copy of this order to each of its retail operating divisions and subsidiaries.