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Sweets Co. v. Federal Trade Commission.

January 29, 1940

SWEETS CO. OF AMERICA, INC.,
v.
FEDERAL TRADE COMMISSION.



Author: Hand

Before SWAN, AUGUSTUS N. HAND, and CLARK, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge.

This is a petition to review an order of the Federal Trade Commission entered on December 7, 1938, against Sweets Company of America, Inc. The petitioner is a manufacturer of candy engaged in shipping its product to retail dealers and jobbers throughout the United States.

The Federal Trade Commission made findings of fact which so far as they are pertinent to the isuses before us were the following:

"Paragraph Two: In the course and conduct of its business, * * * the respondent has sold various assortments of candy so packed and assembled as to involve the use of a lottery scheme when sold and distributed to the consumers thereof. One of said assortments is hereinafter described in detail for the purpose of showing the methods used by the respondent, but this description does not include all of the details of the several sales plans which the respondent has used in the distribution of its assortments of candy by lottery ro chance. Such assortment is composed of 150 small rolls or pieces of candy of uniform size and shape called 'Little Rolls', which are packed in a box together with 24 larger pieces of candy called 'Dinner For Six', packed in a separate box, which larger pieces of candy are to be given as prizes to purchasers of said small rolls or pieces of candy of uniform size and shape in the following manner:

"The majority of the said small rolls or pieces of candy of uniform size and shape in said assortment have the same color but a small number of a minority of said small rolls or pieces of candy have a different color. Said rolls or pieces of candy of uniform size and shape retail at the price of 1› each but the purchasers who procure one of the said rolls or pieces of candy colored differently from the majority of said rolls or pieces of candy are entitled to receive, and are given without charge, one of the said larger pieces of candy. The rolls or pieces of candy of uniform size and shape are individually wrapped in non-transparent wrappers and the color of the said pieces of candy is effectively concealed from purchasers and prospective purchasers until a selection has been made and the wrapper is removed. The said larger pieces of candy are thus distributed to the purchasing public wholly by lot or chance.

"Paragraph Four: Many dealers buy from respondent equal numbers of boxes of said 'Little Rolls' and said 'Dinner For Six'. Said 'Little Rolls' are contained in a box and the majority of said rolls which are of one color are separated by a partition from the minority of said rolls which are of a different color. There are no indications on the wrappers of said rolls as to the colors thereof. Many retail dealers who purchase said 'Little Rolls' and 'Dinner For Six' mix the said rolls of different colors and sell them for 1› each and give said 'Dinner For Six' pieces of candy as prizes to purchasers of said rolls of a different color than the majority of said rolls in accordance with the sales plan or method described in Paragraph Two hereof. The packing and distributing by respondent of candy in the manner above found is contrary to public policy. * * * "

After making a further finding to the effect that other manufacturers in competition with the petitioner do not sell their candies in assortments such as are above described and lose trade because consumers prefer assortments which involve the gambling feature, the Commission concluded that the above practices injure competitors and constitute unfair methids of competition.

The Commission thereupon made an order directing the petitioner to cease and desist:

"1.Selling and distributing candy so packed and assembled that sales of such candy to the general public are to be made or may be made by means of a lottery, gambling device or gift enterprise.

"2. Supplying to or placing in the hands of dealers packages or assortments of candy which are used or may be used to conduct a lottery, gambling device or gift enterprise in the sale or distribution of said candy contained in the said packages or assortments to the public.

"3. Supplying to or placing in the hands of dealers for sale to the public packages or assortments of candy composed of individually wrapped pieces of candy of uniform size and shape and of different collors, together with larger pieces of candy or any other merchandise, which said larger pieces of candy or other merchandise are to be or may be given as prizes to the purchasers procuring pieces of said candy of a particular color."

The order to "cease and desist" further provided that within sixty days the petitioner should file a written report setting forth in detail the manner and form in which it had complied with the directions of the Commission.

The petitioner argues that the words "or may be made" in subdivision 1 of the order; "or may be used" in subdivision 2; "or may be given" in subdivision 3, are such as to throw upon it all responsibility for the acts of any jobber or retailer who may reassemble candies, however they may have been packed, so that they are again placed in prohibited combinations. This seems a reasonable criticism, for any box of candies of identical sizes, containing chocolate-covered pieces of a variety of flavors, might be used for gambling purposes for a child buying some of the pieces might be given a prize if he happened to pick out a piece, the contents of which was of a particular flavor. The Commission does not intend to prohibit a manufacturer from making such a sale unless he has reason to suppose that the jobber or retailer who buys his candy will use it in connection with a lottery. This is shown by the statement in the brief of the Commission that their order is not applicable to "'stright candy', because ...


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