SURVEY OF RADIO AND PERIODICAL ADVERTISING 45 yearly for each publication, the frequency of the calls for each publication depending upon its circulation and the character of its advertisements. Through such systematic calls during the fiscal year, the Commission procured 1,733 editions of representative newspapers of established general circulation and 1,309 editions of magazines and farm and trade journals of interstate distribution. These periodicals included 236 issues of farm journals, 179 issues of trade journals and specialty publications, and 10 issues of domestic foreign-language publications. In these newspapers, magazines, and farm and trade journals, 398,711 advertisements were examined, of which 18,256 were noted as containing representations that appeared to warrant investigation as to the facts. Mail-order advertising.-The Commission procured mail-order catalogs and circulars containing an aggregate of 14,239 pages, examination of which resulted in 238 advertisements being marked as containing possibly false and misleading representations. Of the 102 mail-order houses included in the survey, 5 had combined annual sales in excess of $2,782,021,573. Radio advertising.-The Commission issued calls for commercial continuities four times yearly up to July 1943, twice yearly up to January 1, 1947, and thereafter three times yearly, from each individual radio station. National and regional networks respond on a continuous weekly basis, submitting copies of the commercial advertising parts of all programs wherein linked hook-ups are used involving two or more stations. Producers of electrical transcription recordings each month submit typed copies of the commercial portions of all recordings produced by them for radio broadcast. This material is supplemented by periodic reports from individual stations listing the identities of recorded commercial transcriptions and related data. The Commission received copies of 679,232 commercial radio broadcast continuities and examined 641,402. The continuities received amounted to 1,487,437 typewritten pages and those examined totaled 1,430,692 pages, consisting of 568,340 pages of network script, 833,352 pages of individual station script, and some 29,000 pages of script representing the built-in advertising portions of transcription recording productions destined for radio broadcast through distribution of multiple pressings of such recordings to individual stations. An average of 5,654 pages of radio script was read each working day. From this material 9,573 advertising broadcast statements were marked for further study as containing representations that might be false or misleading. Cooperation of radio and publishing industries. In general, the Commission has received the cooperation of the 4 Nation-wide network chains, 16 regional network groups, and transcription producers engaged in preparing commercial radio recordings; and of 898 commercial radio stations, 493 newspaper publishers, and 404 publishers of magazines, farm journals, and trade publications. It has observed a desire on the part of these broadcasters and publishers to aid in the elimination of false and misleading advertising. Analysis of questioned advertising.-Analysis of the questioned ad 46 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION, 1947 review, discloses that they pertained to 1,336 commodities in the proportions indicated below: Automobile, radio, refrigerator, and other equipment.... 2.0 Home study courses-. 1.1 Tobacco products-- 2.2 Miscellaneous, including apparel, fuels, house furnishings, building materials___. 12.5 19.2 100.0 Specialty and novelty goods_-_ Total Number of cases handled.-At the close of the year, 630 cases were pending as compared with 640 at the close of the previous fiscal year. During the fiscal year, 345 investigations were completed, and 335 new investigations were initiated, 212 of which were originated through the division's general survey of advertising, 107 through letters of complaint and 16 through reference by the Commission. Settlement by stipulation was recommended in 99 cases; issuance of complaint in 5 cases. Correspondence handled by the division totaled 2,505 incoming pieces of mail and 8,275 outgoing pieces. Procedure in advertising cases.-If it appears to the Commission that a published advertisement may be misleading, a contact letter is sent to the advertiser and request is made for a sample of the product advertised, if this is practicable, and the quantitative formula if the product is a compound. Representative specimens of all advertising copy containing all claims made for the product during a 6-month period also are requested. Upon receipt of these data, scientific opinions are obtained based upon the sample and formula. Then a list of the claims that appear to be false or misleading is sent to the advertiser, together with a statement based upon the scientific opinion theretofore obtained. The advertiser is invited to submit informally by letter, or in person, or by counsel any evidence he chooses in support of his claims. -If, after a consideration of all available evidence, including that furnished by the advertiser, the questioned claims appear not to be false or misleading, the division reports the matter to the Commission with the recommendation that the case be closed. If it appears from the weight of the evidence in the investigational files that the advertising is false and misleading, the matter is referred to the Commission with recommendation either that complaint issue or that negotiation of an appropriate stipulation be authorized, provided the advertiser should desire to dispose of it by such voluntary agreement to cease and desist from the use of the acts and practices involved. Industry-wide investigations.-Pursuant to the reorganization plan effective August 12, 1946, the Commission, through its Radio and Periodical Division, completed an industry-wide investigation of the I. COMPLAINTS UNDER FEDERAL TRADE COMMISSION ACT 47 mothproofing products industry which dealt with the advertising and promotional practices of 73 separate companies. At the close of the year the division was conducting industry-wide investigations with respect to the advertising and promotional practices of the simulated and cultured pearls industry, involving 122 separate companies, and the floor wax products industry, involving 107 manufacturers and distributors of all types of such products. DISPOSITION OF CASES BY STIPULATION Instead of disposing of cases by the formal complaint and trial method, the Commission under certain circumstances affords respondents the opportunity of signing a statement of facts and an agreement to cease and desist from most types of unfair methods of competition and unfair or deceptive acts or practices in commerce. The policy of the Commission with respect to stipulations of this type is set forth in its Statement of Policy. (See p. 119.) During the fiscal year the Commission approved 145 stipulations, of which 120 were negotiated through the Division of Stipulations after it was established on August 12, 1946. (See p. 65 for report of the Division of Stipulations.) FORMAL COMPLAINTS During the fiscal year the Commission issued 53 formal complaints alleging violations of the laws it administers. Of this total, 39 charged violation of the Federal Trade Commission Act; 9, violation of the Clayton Act; 3, violation of the Federal Trade Commission and Clayton Acts; and 2, violation of the Wool Products Labeling and Federal Trade Commission Acts. I. COMPLAINTS UNDER FEDERAL TRADE COMMISSION ACT A. PRICE-FIXING COMBINATIONS AND RESTRAINT-OF-TRADE PRACTICES In each of five complaints issued by the Commission competing manufacturers and sales organizations were charged with combining, through their trade associations and otherwise, to fix prices and restrain trade in the sale of their products. The products involved in these complaints were glazed facing tile (5467); brick (5468); vitrified sewer pipe (5483 and 5484) and corn products (5502). Complaints 5483, 5484, and 5502 also alleged price discrimination in violation of the Robinson-Patman Act. The Commission also issued four complaints (5495, 5496, 5497 and 5498) separately charging four producers of motion picture advertising films with unfair competitive practices through the use of exclusive dealing contracts with various motion picture exhibitors. B. FALSE ADVERTISING AND MISREPRESENTATION A total of 26 complaints charged false and misleading advertising. They may be classified broadly as follows, although some involved more than one classification: Five complaints alleged false and misleading representations with respect to the therapeutic properties of medicinal preparations and devices, and in some cases the advertisements also were alleged to be 48 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION, 1947 from the use of the products advertised; four charged misrepresentations concerning the properties of cosmetics; five, misrepresentations as to the origin, composition, condition, quality, ingredients, or price of the products advertised; five, misrepresentation as to results to be obtained through the use of products; two, misrepresentation as to business status; two, misrepresentation in connection with the sale of correspondence school courses; and three, misrepresentation in connection with making so-called special offers. C. MISCELLANEOUS COMPLAINTS Complaints issued under this heading alleged such practices as supplying and using lottery devices to promote the sale of merchandise; misrepresenting that the profits from the sale of merchandise go to charitable organizations; misrepresenting, in connection with the sale of advertising, that it will be published in a local telephone directory or other well established publications; and misuse of the names "Army" and "Navy" in connection with the sale of products. II. COMPLAINTS UNDER WOOL PRODUCTS LABELING ACT Two complaints alleged that wool products were misbranded in violation of the Wool Products Labeling Act of 1939 and the rules and regulations promulgated thereunder, in that they were not labeled so as to disclose the kinds and percentages of the different fibers of which the fabrics were made, including the respective percentages of wool, reprocessed wool, or reused wool, together with the identity of the manufacturer or distributor or reseller of the products. (5457 and 5489) III. COMPLAINTS UNDER CLAYTON ACT A. VIOLATION OF SECTION 2 (a) OF CLAYTON ACT, AS AMENDED BY ROBINSON-PATMAN ACT Three complaints alleged violation of section 2 (a) which prohibits discrimination in price when it may have adverse effects on competition. The complaints involved vitrified sewer pipe and other clay products (5483 and 5484) and corn products (5502). B. VIOLATION OF SECTION 2 (c) OF CLAYTON ACT, AS AMENDED BY Nine complaints alleged violation of section 2 (c), which prohibits the granting or acceptance of brokerage fees, except for services rendered, in connection with the interstate sale or purchase of merchandise. Seven of the complaints (5456, 5460, 5462, 5469, 5471, 5482, and 5494) involved food products; one (5470), women's apparel and accessories; and one (5501), men's clothing. C. VIOLATION OF SECTION 2 (d) OF CLAYTON ACT, AS AMENDED BY A company and its officers were charged with paying one of their customers for advertising and other services furnished by the customer while not making such payments available on proportionally equal terms to all of their customers who were competing in the sale of the respondents' products with the favored customer (5482). ORDERS TO CEASE AND DESIST The Commission during the fiscal year issued 56 orders to cease and desist from the use of unfair methods of competition and other viola 49 1. ORDERS UNDER FEDERAL TRADE COMMISSION ACT tions of the laws it administers. The following cases are illustrative of the orders issued: I. ORDERS UNDER FEDERAL TRADE COMMISSION ACT A. PRICE-FIXING AND RESTRAINT-OF-TRADE CASES National Retail Liquor Package Stores Association, Inc., New York, and others. This Nation-wide association, whose membership is composed of various State, county, municipal, and local retail liquor associations, was ordered by the Commission to cease and desist from entering into or continuing any agreement or conspiracy with any of its members to fix uniform retail prices; to compel manufacturers by threat of boycott to sell at prices fixed by the association; to compel manufacturers by threat of boycott not to sell to retailers who sell at prices less than those set by the association; or to compel manufacturers by threat of boycott to grant uniform discounts and allowances to all retail liquor dealers who are members directly or indirectly of the association (4168). Tag Manufacturers Institute, New York, and others.-This association of manufacturers and its members, who produce and sell 95 percent of the tags and like marking and pricing devices used in the United States, were ordered by the Commission to cease and desist from entering into or carrying out any conspiracy or planned common course of action to fix prices; to exchange information on present or future prices or conditions of sale; to take any action to secure compliance with any pricing policies; or to participate in any open price reporting plan which has the effect of injuring competition (4496). B. FALSE ADVERTISING OF FOOD, DRUGS, DEVICES, AND COSMETICS Langendorf United Bakeries, Inc., San Francisco.-The respondent, in connection with the manufacture and sale of Hollywood, Holsom and other brands of bread, was found to have deceived the public by falsely advertising the qualities and properties of its bread. For example, the baker made statements which misled the public into believing that by eating Hollywood brand bread as part of an effective reducing diet hunger would be prevented, and that the bread has greater reducing properties than ordinary bread. The Commission ordered the respondent to cease and desist from these and similar misrepresentations. The order also prohibits the respondent from representing it has been appointed official baker for the Dionne quintuplets (5250). Frontier Asthma Co., Buffalo, and others.-In the order in this case the Commission banned advertisements which represented that the respondents' medicinal preparations constitute cures or remedies for asthma or possess any therapeutic value in the treatment of asthma except that they may afford temporary relief from the paroxysms of the ailment (3935). Modern Home Diathermy, Los Angeles.-The inhibitions in this order were directed against representations that the respondent's device sold under the name of Vitatherm Short Wave Diathermy, when used by unskilled laymen in the treatment of self-diagnosed conditions, is a scientific, effective or competent treatment of, or |