Appendix — Fiumara v. Texaco, Inc.

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> INDEX TO APPENDIX

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Appendix **A"’ This Brief, Opinion ............-5-+: la

Appendix ‘*B’’, Final Order ..........----+.++55: —

Appendix ‘*C"’, Opinion of the Commission ........-. 7a

Appendix **D'* {Final Decree Enforcing Order to Cease

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Appendix ‘‘E"', Judgment of the Court ...........-. l3a

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APPENDIX ”"A”

” UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 16,912

Hetrros Watcn Compary, [Nc., ET AL., PETITIONERS

\ ‘ok v. “>

FeperaL Trape COMMISSION, RESPONDENT

Petition to Review and Modify Order of the

Federal Trade Commission

Decided November 29, 1962

Mr. B. Paul Noble for petitioners. Ns

Mr. Charles C. Moore, Jr., Attorney, Federal Trade Com-

mission, with whom Messrs. James Mcl. Henderson, Gen-

eral Counsel, and Frederick H. Mayer, Attorney, Federal

Trade Commission, were on the brief, for respondent.

Before Wiencr K. Murcer, Fany and Wricnt, Circuit

Judges.

Wricnt, Circuit Judge: Petitioners seek review' of a

final order of the Federal Trade Commission requiring

them, inter alia,’ to cease and desist from:

‘Representing directly or by implication :

« * : ce ° * . an 7 ° e

‘*(e) That certain amounts are the usual and regular

retail prices of respondents’ merchandise when such

amounts are in excess of the prices at which such mer-

138 Stat. 719 as amended, 15 U.S.C. § 45(d) (e) (g).

2 Petitioners were also ordered to desist from representing that

their watches contained ruby jewels and were shockproof, water-

resistant, and guaranteed for life. No appeal was taken from this

portion of the order. '

Za of

chandise is usually and regularly sold at retail, by the

. éla&s of retailers selling such merchandise, in the trade

areayor areas where the representation is made.”

Fictitious pricing in the form of false ‘*pre-ticketing’’ 1

the now wide spread. practice, particularly among, but by

no means limited to, manufacturers, of representing, usqal-

lv on the package or the article itself, a retail price sub-

stantially higher than the actual price to the consumer. Its

vice is its deception and the understandable ina)ility of the

price-conscious consumer to control his urge to make a

‘*vood buy.’*?

.

Petitioners do not dispute that fictitious pricing is ille-

gal. The only issue is whether the finding of the Com-

’See Murphy, The Ethics of Retail Price Advertising, 6 Anti-

trust Bulletin 419, 423 (1961) ; Comment, 39 Tex. L. Rev. 903, 906

(1961); Beer, Federal Trade Law and Practice, 387 (1942). The

Commission has issued certain guidelines for determining whether .

advertised prices are fictitious. See 2 Trade Regulation Reporter

© 7897. Compare the Automobile Information Disclosure Act, 72

Sfat. 325, 15 U.S.C. §§ 1231-1233.

‘ Fictitious prices are illegal even though it is obvious ‘to the

sophisticated that the price tag isonly a come-on. ‘*The law is not

made for the protection of #xperts, but for the public—that vast

multitude which includes the ignorant, the unthinking and the

etredulous, who, in making purchases, do not stop to analyze, but

are governed by appearances and general impressions.’’ Florence

Mfg. Co. v. J.C. Dowd & Co., 2 Cir., 178 F. 73, 75 (1910). See

ae Comm'n v. Education Society, 302 US. “gl (19373; Art

“ational Manufacturers Distributing Co. v. F.T.C., 2 Cir., 298 F.

476 (1962), cert. denied, 370 U.S. 939 (1962) ; Benkers Securt-

ties Corporation v. F.T.C., 3 Cir., 297 F. 2d 403 (1961) ; Baltimore

- Luggage Company v. PT-C., 4 Cir,, 296 F. 2d 608 (1961), cert.

denied, 369 U.S. 860 (1962); Clinton Watch Company v. F.T.C.,

_ 7 Cir., 291 F. 2d 838 (1961); Niresk Industries, Inc. v. F.T.C.,

7 Cir., 278 F. 2d 337 (1960), cert. denied, 364 U.S. 883 (1960) ;

Harsam Distributors, Inc. v. F.7.C., 2 Cir., 263°F. 2d 396 (1959) ;

_ Kalwajtys v. Federal Trade Commission, 7 Cir., 237 F. 2d 654

(1956), cert. denied, 352 U.S. 1025 (1957); Thomas v. Federal

Trade Commission, 10 Cir., 116 F. 2d 347 (1940).

An

oa

inission, that the retail price tag placed on the watches is

in excess of the usual and regular price at which the watches

sell at retail is supported by, substantial evidence upon

the record’ viewed as a whole. We conclude that it is,

Helbros manufactures two distinet lines of watches which

it sells to three classes of Juvers. It places a price tag

clearly visible te the ultimate purchaser, on all the watches,

and it is apparent that this price tag carries with it the

implication that the amount listed thereon is the usual and

regular price at which the watch sells at retails One line

of watches is sold exclusively to house-to-house canvassers

and ISne-term eredit jewlers.. These watches are + pre- .

ticketed at 400 to 500° per cent of cost. This market ac-

counts for about 30 per cent of Helbros’ business, *‘Helbros

sells an entirely different line, constituting the other 70

per cent.of its business, to two different groups. One

group, absorbing 40 per cent of Helbros’ total ‘sales, or

57.1 per cent of this particular line, i8 made up.of discount

stores and eaialog hotses. The balance of this line is sold

to jobbers and ordinary retail jewlers. This second line

is ‘pre-ticketed for both groups at 250 per cent of cost.*

Tlie. vidence as to the price actually paid by the ultimate

eAnsumer shows that the line of watches sold to house-to-'

house eanvassers and long-term eredit jewlers usually sells

at or near the pre-tiecketed price. The watches which are

sold to the discount stores and catalog’ houses, however,

constituting 40 per cent of total sales, of 57.1 per cent of

s

sales of that line, are regularly soldat about 50 per cent ,

{ . nw

{

55 U.S.C. § 1009(e) ; Universal Camera Corp. v. Labor Bd., 340

U.S. 474 (1951).

©

® The reason for the difference in mark-ups: is‘that the house-to-

house canvassers and long,term credit jewelers give credit and

guarantees. The larger mark-up permits the vendor to recoup this

expense while apparently rendering the service free.

7

ta ji * .

of the pre- ticketed price.” There is some evidence that the

jobbers and ordinary retail jew lers sell their watches at”

the pre-ticketed price.

{Petitioners first contend that a discount store or catalog

sale is not @ sale ‘‘at retail’? since’ by definition these busi-

“nesses selb at a ‘‘discount.’’ If .theSe sales are excluded,

there is no evidence that anv Helbros watch sells ‘‘at re-

~ tail’® below the pre-ticketed price, Petitioners’ argument

is ingenious but not persuasive. A retail sale is the trans-

action byowhich the merchandise comes into the possession

of the ultimate consumer, regardless of the title by which

the vendor may choose to denominate himself."

Petitioners also argue that the sales of the house-to-house.

canvassers and long-term credit jewlers must be included -

in determining the usual and regular_retail price. This too

‘is unsound. These sales are of a different line of watches,

selling in a different market, at a different pre-ticketed

price. In determining the usual and regular retail price,

it is necessary to consider only sales of like items in the

same market.® But even assuming the correctness of peti-

tioners’ argument, it would not impair the validity of the

™The knowledge or intent of the manufacturer is immaterial.

Gimbel Bros. v. Federal Trade Commission, 2 Cir.. 116 F. 2d 578

(1941), and cases cited therein. Moreover, the evidence shows that

’ petitioners knew of .the practice of the discount stores and catalog

houses to sell far below the pre-tickefed price and that, in fact,

petitioners supplied them with the price at which the watches

should actually sell.

***Retailer: * * ®© a merchant middleman who sells goods mainly

to ultimate consumers.’’ Webster's 3rd International Dictionary

(Unabridged 1961), p. 1938. See Clinton Watch Company v.

F.T.C., supra Note 4; Walling v. Consumers Co., 7 Cir., 149 F. 2d

626, 630 (1945).

® Baltimore Lugyage Company v. F.T.C., supra Note 4. See also

Murpiv, op. cit. supra Note 3, at 427. It should be noted that the

Comfhission order does not prohibit all pre-ticketing, but only that

which is fictitious. Helbros may continue to pre-ticket any watch

so long as the tag dees not misrepresent the usual and regular price.

;

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pricing.

ma. By Ke

* Commission's determination, This would still leave at least .

40 per cent of all sales at substantially less than the pre-

ticketed price. ~ This is sufficient to constitute fictitious

There being no error, the portion of the cease and desist ,

order appealed from is affirmed and shall be enforced.

So ordered,

APPENDIX “B”

UNETED STATES OF AM ERICA

BEPORE FEDERAL TRADE COMMISSION

COMMISSIONERS ;

Paul, Rand Dixon, Chairman

Sigurd Anderson

William C. Kern

Philip Elman

Everette MacIntyre’

Docket No. 6807

In the Matter of

Sn

Heueros Warcn Company, Ixc., a corporation, = °

.,

Wriuniam Heteer, Jack Diamonxnp, Nat Pricozer Larry

Pricgozex, Carn Avner, Jack Nape, individually and

as officers of Said corporation.

Final Order .

This matter having been heard by the. Commission upon

respondents’ appeal from the hearing examiner's initial

decision, and upon briefs and oral argument in support

thereof and in opposition thereto; and the Commission

having rendered its decision denying the appeal and di-

recting modification of .the initial decision:

Baltimore Luggage Company v. F.T.C., supra Note 4, at 611.

ba ,

‘ s : “ ;

Ir Is Orverep that the initial decision be modified by

deleting from the preamble 6f the order to cease and. desist

contained therein the name William Helbein, and by strik-

ing the last paragraph of the initial decision and substitut-

ing therefor the following:

“Er Is FurrHEr ORDERED that the complaint be, and

the same hereby is, dismissed as to respond: nt Wil-

Jiam Helbein.”’

Ir is Furtuer Orperen that as modified the initial deci-

sion herein be, and it hereby is, adopted as the decision of

the Commission.

‘ :

It Is FurtHer Orverep that the respondents 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 the order to cease and desist contained in the initial

deéision.

By the Commission, ‘Chairman Dixon and Commissioner

MacIntyre not’ pita ina in the issuance of the order at

this. time. - ; ee

*" (seat) | JoserH,W. SHea

oy —— Joseph W. Shea, . <

Secretary.

Issued: December 26, 1961 me ‘

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APPENDIX “C”

UNITED STATES OF AMERICA”

° BEFORE FEDERAL TRADE COMMISSION

-

te

COMMISSIONERS :

Paul Rand Dixon, Chairman

Sigurd Anderson :

William C. Kern > Rtg

Philip Elman

Everette MacIntyre

Docket No. 6807

In the Matter of”

Hetpros WatcH Company, INc., a corporation, et al.

. Opinion of the Commission

By Anderson, Commjssioner : na

The complaint in this matter charges respondents with

violation.of the Federal Trade Commission Act. The hear-

ing examiner in his initial decision held that the allegations

of the complaint were sustained by the evidenge and ordered

respondents (except for an individual respondent against

whom the complaint, was dismissed y to cease and desist -

from the practices feund to be unlaytul. Respondents

have appealed from this decision, — 3

In substance, “the complaint charges respondents with

misrepresenting the usual and regular retail prices of

watches sold by them to retailers and other distributors

and further alleges that respondents falsely represented —

that their watches contained ruby jewels, were shotk proof,

shock protected, water resistant and guaranteed for life.

Respondents argue on appeal that none of these allega-—

tions were sustained by the evidence and request that the

complaift be dismissed. They further contend that certain

of the practices have been abandoned and .that theghearing

examiner erred in failing to so find.

2

; da

We will consider first the argument that the record does

not support the holding in the initial decision that thf

amonnts set forth on tickets affixed to respondents’ watelfes

and appearing in price lists supplied by respondents to

theif customers are in excess of the prices at which such

watches are usually ,and regularly sold at retail. This

holding is based in part upon a showing by counsel sup-

porting the complaing, that certain dealers or distributors

in three market areas regularly sell respondents’ watches

at prices substantially below the amounts appearing on re-

spondents’ price tickets and price lists. Respondents point

out that all but one of these dealers or distributors were

catalog or’discount houses. They then argue that sales by

a discount house are made at a discount from retail prices ;

that such sales are therefore not Retail sales and conse-

quently do not tend to prove that the preticketed prices are

not the usual and: regular prices of respondents’ watches.

This argument is wholjly without merit and must. be re-

jected. The fact that a dealer sells ata lower markup than

that used by his supplier in arriving at preticketed prices

does not mean that the dealer is not selling at retail nor

d6es it mean that the dealer is selling at a discount from an

established price. The aforementioned eatalog and dis-

count houses were selling respondents’ watches to the ulti-

mate consumer and were, therefore, selling at retail. The

evidence establishing that these concerns regularly sold

respondents’ watches at prices substantially less than the

preticketed prices of such watches fully supports the hear-

ing examiner’s conclusion that the preticketed prices were

not the usual and regulag prices of respondents’ watches in

the trade areas under consideration.

Respondents further cantend that the eviglence adduced

in their defense shows that certain distributors, account-

ing for approximately 30%° of respondents’ total sales,

‘sell at the preticketed prices and that the inference should

be drawn from this showing that most of respondents’

watches,are resold at such prices. The record discloses in

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this connection that certain firms engaged in the sale of

merchandise on a long term eredit basis, including house-

to-hous¢ Canvassers and credit Jewelers, do, for the most

part, sell at the preticket@d prices. ? It appears, however,

that the sale of merchandise by these distributors is an

‘entirely different type of operation from that conducted by

retailers selling for cash or on a short term credit basis.

According to the testimony of respondents’ witnesses, the

‘ . . 3s .

_ operating costs of the house-to-house’canvasser and credit

jeweler are so much greater-than that of the conventional

retailer that it is necessary for such a distributor to sell

at a higher markup in order to make a profit. It is re-

spondents’ practice, therefore, to #pply a higher markup

(400% mcr in computing the preticketed prices of

watehes€sold through the house-to-house canvasser and

eredit jeweler than that (250% to 300% ) used in arriving

at the preticketed -prices of watches sold through other

distributors. The re¢ord also discloses that respondents

sell a diffrent line-of watches through the house-to-house

canvasser and credit*jeweler than that sald through other

dealers. Consequently, we are of the opinion that the evi-

dence presented by respondenfs that house-to-house ean-

vassers and credit jewelers adhere to preticketed prices

does not indicate that a different class of retailers. selling

a different line of watchese adhere to preticketed prices

computed on the basis of a different markup.

Respondents also contend that the Learing examiner

errer in finding that certain of their watches were not

ge Water resistant’’. This finding is based upon fhe testi-

mony of a witness who had tested several of respondents’

watches and found that they did not meet the standards

for water resistance specified in trade practice rules pro-

mulgated by the Commission.’ Respondents do not ques-

1Trade Practice Rules Respecting the Terms ‘‘ Water-Proof,’”’

‘*Shockproof,’’ ‘* N@nmagnetic,’’ and Related Designations, as Ap-

plied to Watches, Watchcases, and Watch Movements, promulgated

April 24, 1947.

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tion the reasonableness.of the testing standards specified

in the rules and, in faét, concede that they have been gen-

erally adopted-by the industry. They-have challenged the

qualifications of the witness who conducted the tests, how-

ever, and also suggest that the watches had been damaged

in some manner prior to testing. The hearing examiner

carefully considered both of these points in his decision,

and we find noihing in the evidence or in respondents’

brief to indicate that the tests had not been properly con-

ducted by a cOmpetent person or that the watches tested

had been impaired in some manner prior to testing.

The principal objection to this finding is that the hearing

examiner failed to give proper weight to the testimony of

an expert who had conducted tests of other watches made

by respondent and found them to be water resistant. Re-

spondents claim that this testimony completely rebuts the

evidence adduced by counsel supporting the complaint.

The hearing examiner deemed it unnecessary, however, to

determine whether respondents’ expert had properly tested

respondents’ watches for water resistaney, holding that

the showing that several watches selected at random were

not water resistant was sufficient to sustain the charge even

though another group of watches might be-found to be

water resistant. We find no-error in this ruling and agree

with the hearing examiner that since respondents have

undertaken to make an affirmative representation concern-

ing their watches, they must bear the responsibility of this

representation is not Frue with respect to a portion, of the

watches.

Other arguments presented in the appeal challenge the

sufficiency of the evidence presented in support of the

allegations concerning.respondents’ use of the terms ‘‘ruby

jewels”’ ; ‘‘shockproof’@ipd ‘‘shock protected’’ and the

representation that respondents’ watches are fully guar-

anteed. We are convinced from our examination of the

record that these allegations have also been sustained and

ff bef

that the hearing examiner's findings with respect thereto

are correct. The arguinent-pon these points are therefore

rejected. Respondents’ further argument that the prac-

tices covered by the aforementioned allegations have been

abandoned is without substance and is also rejected. The

fact that on another oecasion respondents had failed to

discontinue certain practices, after having assured the Com-

mission that they would do so, is sufficient reason in itself

for rMecting the present plea of abandonment.

Subsequent to the filing of the initial decision in this

proceeding, the Commission upon receiving notification of

the death of respondent William Helbein, by order of June

8, 1961, dismissed the complaint as to that individual. The

order %o cease and desist contained in the initial decision

will, therefore, be modified in conformity with such ordexy

Respondents’ appeal is denied and the initial decisron,

modified to conform with this opinion, will be adopted as

the decision of the Commission. . }

December 26, 1961.

12a

APPENDIX “D”

> Filed Jan. 10, 1963

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

| September Term, 1962

‘No. 16,912

Hfecpros Watcu Company, Inc., ef al., Petitioners,

vz.

FeperaL Trane Commission, Respondent.

Before Witsur K. Mrwer, Fany and Wricut, Circuit

Judges. : ;

Final Decree Affirming and Enforcing Order

P to Cease and Desist .

Helbros Watch Co., Inc., Jack Diamond, Nat Prigozen’

Larry Prigozen and Carl Avner, having filed in this Court

on March 8, 1962, a petition to review and set aside or

modify an order to cease and desist issued by the Federal

Trade Commission on December 26, 1961, in a proceeding

before it entitled ‘‘In The Matter of Helbros Watch Co.,

Inc., a corporation, William Helbein, Jack Diamond, Nat

Prigozen, Larry Prigozen, Carl Avner, Jack Nadel, individ-

ually and as officers of said corporation’’; and the matter

having been submitted to the Court on briefs and oral argu-

ment, and the Court having fully considered the cause and

having on November 29, 1962 rendered its opinion and

entered its judgment affirming the portion of the order be-

fore the Court for review, and directing the enforcement of

the order of the Federal Trade Commission; and it being

the opinion of the Court that the entire order was before it;

Now, THEREFORE, Ir Is Hereny OrpERED, ADJUDGED ANI»

Decreep that the aforesaid petition to set aside or modify

the order of the Federal ‘Trade Commission is hereby

denied ;

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Ir Is Heresy Ferrier Orpveren, Aprcocep axp Decrenp

that the order to cease and desist be and it hereby is af-

firmed, and petitioners Helbros Watch Co., Ine. Jaek Din

mond, Nat Prigozen, Larry Prigozen and Carl Avner, are

hereby commanded forthwith to obex and comply with the

terms of said order. o.*

By the Court: #, x

=a r ‘ ~

= Wiper K. Miner

s Cannes Fatty

s WJ. Skeuny Wrieutr

Circuit Judges.

APPENDIX "E”

Filed Nov, 29, 1962

UNPPED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1962

No. 16,912

Hecpros Warcn Cemepaxy, Exe., ef al., Petitioners.

<

v.

Freperar Trape ComMisstos, Respondent,

On Petition to Review and Modify Order of the Federal

Trade Commission.

Before: Witscr K. Mincer, FaAny and Wricut, Circuit

Judges.

‘ : nr

Judgment

This case came on to be heard on the reeord from the’

Federal Trade Commission, and was argued by counsel.

Ox Consiprratioy, WHEREOF, it is ordered andggel judged

by this court that the portion of the cease and desist order

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of the Federal Trade Commission on review in this case ts

afirmed, and the order shall be enforced.

Pursuant to Rule 38.1) the Federal Trade Commission

shall within 10 days hereof serve and file a proposed en-

forcement dgeree consistent with the opinion and judgement

of this court. oi

Per Crrecit Jcpoe Wren.

Dated: November 29, 1962.

APPENDIX "F”

1b USCA 45

Section 43. Unfair methods of competition unlawful; preven.

tion by Commission--Declaration of unlawfulness ;

power to prohibit unfair : :

(a) Unfair methods of competition in commerce, and un-

‘air or deceptive vractices in commerce, are declared un

lawful.

The Commission is empowered and directed to prevent

persons, partnerships, or corporations, except banks, com-

mon carriers subject to the Act to regulate commerce, air

carriers and foreign air carriers subjaet to chapter 9 of

Title 49, and persons, partnerships, or corporations sub- °

ject to sections, ] 81-203, 205-228 and 229 of Title 7, exeept as

provided in section 227 of Title 7, from using unfair meth-

ods of compet ition in commerce and unfair or deceptive acts

or practices in commerce.

Proceeding by Commission; modifying and setting

aside orders

(b) Whenever the Commission shall have reason to believe

that any such person, partnership or corporation has been

or is using any unfair method of competition or unfair or

deceptive act or practice in comme ree, and if it shall appear

loa

to the Commission that a proceeding by it in respect there.

of would be to the interest of the public. it shall issue and

serve upon such person, partnership or corporation a com- y

plaint stating its charges in that respect and containing

a notice of a hearing upon a day and at a place therein

fixed at least thirty days after the service of said complaint.

The person, partneryh - corporation so complained of

ehall have the righf to appear at the place and time so

fixed and show eatfse why an order should not be entered

, by the Commission requiring such person, partnership or

corporation to cease and desist from the violation of the

‘aw so charged in said complaint. Any person, partner-

ship or corporation may make application, and upon good

enuse shown may be allowed by the Commission to inter.

vene and appear in said proceeding hy counsel or in person.

The testimony in any such proceeding shall be reduced to

writing and filed in the office of the Commission. Hf upon

such hearing the Commission shall be of the opinion that

the method of competition or the act or practice in ques.

tien is prohibited by sections 44-46 and 47-58 of this title,

it shal] make a report in writing in which it shall state its

Bindings as to the facts and shall issue and cause to he

served on such person, partnership or corporation an order

requiring such person, partnership or corporation to cease —

afid desist from using such method of eompetition or such

act or practice. Until the expiration of the time allowed

for filing a petition for review, if no such petition has heen

duly filed within such time, or if a petition for review has

heen filed within such time then until the transeript of the

record in the proceeding has been filed in a cireuit court

of appeals of the United States, as hereinafter provided,

the Commission may at any time, upon such notice and in

cuch a manner as it shall deem proper, modify or set aside

in whole or in part, any report or any order made or issued

by it under.this seetion. After the expiration of the time

allowed for filing a petition for review, if no such petition

has been duly filgd within such time, the Connission may

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at any time, after notice and opportunity for hearing, re-

open and alter, modify, or set aside, in whole or in part,

any report. or ae made or issued by it under this section,

whenever in the opinion of the Commission conditions of

fact or of law have so changed as ‘to require such action

or if the public interest shall so require : Provided, how-

ever, That the said person, partnership or corporation may,

within sixty days after service upon him or it-of said re-

port oy order entered after such a reopening, obtain a

review thereof in the appropriate court of appeals of the

United States, in the manner provided in subsection (ce) of

this section.