Complaint.

FEDERAL TRADE COMMISSION

v.

HOLLAND PIANO MANUFACTURING CO.

COMPLAINT IN THE MATTER OF THE ALLEGED VIOLATION OF SECTION 5 OF AN ACT OF CONGRESS APPROVED SEPTEMBER 26, 1914.

SYLLABUS.

Docket 577.-September 8, 1920.

Where a corporation engaged in the manufacture and sale of pianos and piano players, at the request of its customer dealers and for the purpose and with the effect of permitting them to make radical and abnormal discounts to ultimate purchasers and still receive customary prices for such instruments, stenciled thereon abnormally and unreasonably high fictitious values, with the tendency and effect of deceiving purchasers and the public into believing that such stenciled prices represented resale values based on cost plus a reasonable profit and that the corporation required or intended its customers to observe the same; having the tendency thereby to impede or suppress competition:

Held, That such false stenciling, under the circumstances set forth, constituted an unfair method of competition.

COMPLAINT.

The Federal Trade Commission, having reason to believe from a preliminary investigation made by it that the Holland Piano Manufacturing Co., hereinafter referred to as respondent, has been and is using unfair methods of competition in interstate commerce in violation of the provisions of section 5 of an act of Congress approved September 26, 1914, entitled, "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," and it appearing that a proceeding by it in respect thereof would be to the interest of the public, issues this complaint, stating its charges. in that respect on information and belief as follows:

PARAGRAPH 1. That respondent is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Minnesota, with its principal office and place of business at the city of Minneapolis, in the State of Minnesota, and that respondent for more than one year last past has been and now is engaged in the business of manufacturing, selling, and shipping pianos and player pianos to, from, and among the various States of the United

States in direct competition with other persons, firms, and corporations similarly engaged.

PAR. 2. That with the purpose and effect of stifling and suppressing competition in the aforesaid interstate commerce in the sale and distribution of pianos and player pianos, respondent, in the regular course of its said business, stencils or causes to be stenciled on pianos and player pianos of its own manufacture resale prices which are calculated to deceive, and do deceive, the purchasing public and the public generally into the belief that purchasers and prospective purchasers derive greater benefits by purchasing pianos and player pianos manufactured by respondent than they would receive by purchasing pianos and player pianos of equal grade and quality manufactured by competitors of respondent, when in truth and in fact such prices so stenciled are not bona fide resale prices but represent values greatly in excess of values customarily received as resale values for pianos and player pianos of like kind, grade, and quality.

PAR. 3. That such prices are so stenciled on said pianos and player pianos by respondent in the regular course of his said business according to agreements with, or at the request of, customers of respondent, which customers are regularly engaged in the general business of merchandising and shipping pianos and player pianos to, through, and from the States and Territories of the United States; that such stenciled prices appearing on said pianos and player pianos are calculated to deceive, and do deceive, purchasers and prospective purchasers and the public generally into the belief that such stenciled prices represent bona fide resale values based on costs plus reasonable profits, and that respondent, as the manufacturer of such pianos and player pianos, requires, or intends, his said customers to demand or receive, from purchasers, or prospective purchasers, values equal to such stenciled resale prices; when in truth and in fact such stenciled prices do not represent bona fide resale values or values which respondent in any sense demands or intends his said customers to receive from purchasers, or prospective purchasers, but such stenciled prices represent abnormally and unreasonably high fictitious values so stenciled on said pianos and player pianos for the purpose of permitting respondent's said customers to make, and who in fact do make, radical and abnormal discounts therefrom, thus leaving the resale prices to be received, and which are received by said customers, far below such stenciled prices, yet equal to reasonable and full resale values usually received by said customers and other dealers and distributors for pianos and player pianos of equal quality, grade, and kind.

REPORT, FINDINGS AS TO THE FACTS, AND ORDER.

Pursuant to the provisions of an act of Congress approved September 26, 1914, the Federal Trade Commission issued and served a complainant upon the respondent, Holland Piano Manufacturing Co., charging it with the use of an unfair method of competition in commerce in violation of the provisions of said act.

The respondent having entered its appearance by its attorney, hearings were had, and evidence was thereupon introduced in support of the allegations of said complaint and on behalf of the respondent before an examiner of the Federal Trade Commission, heretofore duly appointed.

And thereupon this proceeding came on for final hearing, and the Commission, having duly considered the record and being now fully advised in the premises, makes this its findings as to the facts and conclusion.

FINDINGS AS TO THE FACTS.

PARAGRAPH 1. That the respondent, Holland Piano Manufacturing Co., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Minnesota, with its principal office and place of business at the city of Minneapolis, in the State of Minnesota, and that respondent for more than one year last past has been and now is engaged in the business of manufacturing, selling, and shipping pianos and player pianos to, from, and among the various States of the United States, in direct competition with other persons, firms, and corporations similarly engaged.

PAR. 2. That in the sale and distribution of pianos and player pianos, respondent in the regular course of its said business, from the date of its organization, in December, 1913, to and until the service upon it of the complaint in the proceeding on March 15, 1920, stenciled on pianos and player pianos of its own manufacture resale prices; that such prices were so stenciled on said pianos and player pianos by respondent in the regular course of its said business at the request of its customers; that such customers were and are regularly engaged in the general business of merchandising and shipping pianos and player pianos to, through, and among the several States and Territories of the United States; that such stenciled prices appearing on pianos and player pianos were calculated to deceive, and did deceive, purchasers and prospective purchasers and the public generally into the belief that such stenciled prices represented piano resale values based on cost plus reasonable profits, and that the respondent as the manufacturer of such pianos and player pianos required or intended its customers to demand or receive from pur

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chasers or prospective purchasers such stenciled resale prices; that in truth and in fact such stenciled prices did not represent bona fide resale prices or prices which the respondent in any sense required or intended its said customers to receive from purchasers or prospective purchasers; that such stenciled prices represented abnormally and unreasonably high fictitious values, so stenciled on said pianos and player pianos for the purpose of permitting respondent's said customers to make radical and abnormal discounts therefrom; that respondent's said customers did make radical and abnormal discounts from such stenciled resale prices, and received prices for such pianos and player pianos far below such stenciled prices, and said reduced prices were equal to prices usually received by said customers and dealers and distributors of pianos and player pianos of equal quality, grade, and kind manufactured by competitors of respondent.

PAR. 3. That the practice described in the preceding paragraph of these findings has the tendency to impede or suppress competition in the sale of pianos and player pianos in and among the various States of the United States.

CONCLUSION.

That the method of competition set forth in the foregoing findings as to the facts is, under the circumstances therein set forth, an unfair method of competition in violation of the provisions of section 5 of an act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes."

ORDER TO CEASE AND DESIST.

This proceeding having been heard by the Federal Trade Commission upon the complaint of the Commission, the testimony and evidence and argument of counsel, and the Commission having made its findings as to the facts with its conclusion that the respondent has violated the provisions of an act of Congress approved September 26, 1914, entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes":

It is now ordered, That the respondent, Holland Piano Manufacturing Co., and its officers, directors, representatives, agents, servants, and employees, do cease and desist from directly or indirectly stenciling or causing to be stenciled, or in any other manner marking or causing to be marked upon pianos and player pianos manufactured by respondent, fictitious or misleading prices grossly in excess of the

prices at which such pianos and player pianos are usually sold at retail.

It is further ordered, That the respondent, Holland Piano Manufacturing Co., shall, within 60 days after the service upon it of a copy of this order, file with the Commission a report in writing setting forth in detail the manner and form in which it has complied with the order to cease and desist hereinbefore set forth.